One missed paycheck from mental health crisis

A new piece inĀ The Atlantic examines the relationship between mental health and long-term unemployment. As they point out, it is a chicken-and-egg problem- does long-term unemployment cause more mental health problems, or are long periods without work a symptoms of existing illness?

That’s a tough relationship to investigate, but it does relate to issue that people with mental illness can have- a much lower tolerance for stress and loss. Losing a job is hard for everyone, but it can trigger a serious episode for someone living day-to-day with schizophrenia or bipolar disorder. Even two years of constant stability have not created any kind of illusion. I am still walking on eggshells. A very stressful set of situations, a few days without access to medication, these things can be the difference between being in recovery and being in crisis.

This piece also brings up another component of mental illness- economic hardship impedes growth and recovery. It’s not just those that work losing their job. Millions living with a diagnosis are on disability or otherwise living on a fixed income. The squeeze is bringing plenty of people to the brink, but mental illness just adds a whole set of other complications.

Every stressor that exists has its own extra, sinister side. And in an America that’s in year eight of a recession with no broad recovery for the most vulnerable, the stressors are many, multiplying, and always just a few wrong turns away.

For sale, office space, never used

The long recession has led to a discussion on economic statistics. In particular, what is evidence of a recovery and what is not. The Dow Jones index isn’t a reflection of the national or international economy, just the health of thirty large companies. And employment statistics as usually reported in the media aren’t useful- the U3 rate doesn’t count “discouraged workers” who leave the labor force due to the economy being too bad to look for work. The rate can go down in a very good economy (more jobs), and a very bad economy (so few jobs people don’t bother to look). And in the event of the latter turning around, the rate spikes as people get back into the labor force. Oy.

When I went to see prominent socialist economist Richard D. Wolff speak two years ago, he recommended a metric reported by the Federal Reserve every month. Called “industrial production and capacity utilization,” it measures how much capital, land, office space, etc. is actually being used to create goods, and how much is standing idle.

Capacity utilization rates over time

The above graph shows the difference between what is being produced and what can be produced at that point in time. The production measurements are set at 100 during the highest level of production- right before the 2007-08 recession. At that time, actual capacity was about 125% of current output. The bottom graph shows the percentage of capacity being used. Historically it’s around 80% in America, but it fell to 66% after the economy cratered. It’s still weak- even a couple percentage points below average is a massive amount of capital and land- and thus a massive amount of jobs.

My anecdotal evidence to support this comes from office space in Silicon Valley. After the economy crashed and credit dried up, many companies based in the Bay Area either went under or contracted dramatically. That led to whole office buildings- big ones, often new- being vacant with large signs advertising bargain-basement space. In 2013, a lot of these buildings have tenets, but rarely are they full on all floors. It’s clear that there is still capacity available- you could expand your business quite a bit without having to actually build anything- but conditions are not what they were before the crash.

It seems that unemployment is more explainable though this than the often contradictory unemployment figures. If a large amount of space, land, tools, inventory is still sitting idle from five years ago, that leads to a corresponding gap in labor use versus capacity.

Now, there are good reasons that capacity utilization is never 100%. Businesses are failing all the time, even if the economic climate is good. Just because you have tools doesn’t mean they’re good enough to compete with. And running machines 24/7 causes wear and requires expensive replacement- which may not be ready. It’s also clear that putting people to work is not a question of physical stuff- it’s also about competition, and how a corporation works. Just because you could employ more people and fill up all that cheap office space doesn’t mean it’ll be more profitable. It’s why economists who advocate for infrastructure projects have a point- some useful employment doesn’t fit into a business model. Capital is sometimes used because of government incentives and subsidies, rather than a calculation by the finance department.

As time goes on, the unused machinery will become obsolete, and the buildings will become dilapidated. Getting little use out of them just makes the investment for the future all the more costly.

When an economy sinks a revolution

(credit Civil-Military Fusion Centre)

The revolutionaries who ousted long-time President Hosni Mubarak demanded bread and social justice, but after two-and-a-half years of military and Muslim Brotherhood rule, the government has made little progress towards those goals.

Al Jazeera English has a comprehensive feature on the economic problems that Egypt has faced in the aftermath of the 2011 revolution. The issues are myriad, mostly rooted in bad debt and low international confidence in the Egyptian pound or their ability to pay back loans. It does raise the question of how a political revolution can keep itself intact, given that some economic hardship is guaranteed.

Economist Ahmed Ghoneim sums up the issues when he says “[Morsi’s administration] was only thinking of politics, not the economy.” While the Muslim Brotherhood had persisted as a political entity for over eighty years, they were unable to address fundamental problems and have ministers that were both loyal to the Brotherhood and skilled at their job. Ultimately that political support begins to dry up, as the unemployment rate, GDP per capita growth rate, and currency value begin to worsen.

Revolutions like those in Egypt also suffer from what could become a self-fulfilling prophecy. The chaos and danger of large-scale protests, police and military action, and political upheaval can be deadly to tourism and foreign financing. The feature describes the shop owners, travel agents, and museum guides without clients, and large loans from the IMF and other Islamic countries being difficult to secure due to risk and a lack of backing from large banks. If there are economic roots in the 2011 upheaval, they are difficult to solve in the aftermath. Cutting corruption and getting new diplomatic ties can help, but it may not be enough.

I think of how many Latin American and African revolutions have been reversed when economic progress was promised, then not delivered. While a lack of democracy and civil rights are a key reason that revolutions happen, demand for bread and jobs are just as powerful reasons- if often implicit.

The lack of focus and direction in Egypt’s post-revolution economy was where Morsi’s political skills withered. The kind of things a good economic minister does are not politically popular. They are not the things you win elections running on- tax increases, harsh adjustments to please foreign lenders- but they are how you solve systemic problems. Hopefully a new administration will understand that.

There is a quote attributed to various great leaders, that a society is three missed meals away from anarchy. Ultimately it comes down the basics. If it gets bad, it doesn’t matter who’s in power, or what they believe or promise.