The economic news is bleak. Dean Baker warns that we are very close to a second Great Depression. Tim Duy says that the economy is “circling the drain.” Doug Henwood observes that while the US economy used to be a “brutal but dynamic place” for workers, now it’s just brutal. If employment growth continues at May’s pace (a rate typical of post-financial-crash economies), it will take us a decade just to gain back the jobs lost in the Great Recession. Back in 2008, many weighed the relative likelihood of deflation or hyperinflation. Today’s via media is stagflation. Commodities are becoming dearer, and consumers feel the squeeze, whatever the mathemagicians behind inflation stats say. We have entered a “great stagnation,” and our political leaders are content to utter platitudes about “expansionary austerity” or “innovating our way” to “win the future.” How either strategy will save the 22 to 29% of US jobs that are offshorable remains unclear. Since nobody likes an unhappy ending, a boomlet of “soft landing” stories has emerged, explaining why (as Tyler Cowen puts it) “we’ll feel better” eventually. I want to take a look at a few of these, discuss why I think they’re implausible, and turn our attention to what the real stakes of the crisis are.
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As the ubermenschen of New York’s FIRE industries (finance, insurance, & real estate) continue to erode rent-stabilized space in Manhattan, many conflicts are occurring. One of the most dramatic is the Economakis family’s efforts to convert the 60 rooms of 47 E. 3rd St. (once the home of at least 20 tenants) into a single family home: Under the law, landlords have the right to terminate the leases of rent-stabilized tenants if they plan to use the space for themselves. They must notify the tenants at least four months before their leases expire. . . . Andrew Scherer, the author of “Residential Landlord-Tenant Law in New York” (West Group, 2005), said: “The size of the space that somebody claims they intend to live in must pass what lawyers call the ‘giggle test’ – the notion that the claim is believable and will not cause a judge to start to giggle. The idea that someone would take 15 units with 60 rooms as a primary residence is absurd.” Scherer made that observation in 2005, but by 2008 a state court in New York (perhaps influenced by MTV’s Cribs series) didn’t giggle and approved the Economakises’ plans. As the NYT reports, “Now that the Court of Appeals has sent the case back to housing court, lawyers estimate a resolution could still be two years away.” Some of the apartments in the building will simply be converted to empty air above the planned mansion’s palatial living room; others will form a “guest room”–leaving one to wonder if the “personal use” exception could countenance just about any building design. The tenants have a website, and according to the Times claim that “the home the Economakis family envisions is exactly what threatens the character of the neighborhood they claim to love.” I personally don’t find this “cultural” argument convincing; New York neighborhoods change all the time. But the class dynamics are compelling, and starkly illuminate the “buying power externality” that is a hallmark of ever-increasing inequality. Commentator Neil DeMause’s view here is worth re-printing: