Home > Uncategorized > Ten years after the crash (8 charts)

Ten years after the crash (8 charts)

from David Ruccio     

“. . . ten years on, U.S. capitalism has created the conditions for
renewed instability and another, dramatic crash.”

The economic crises that came to a head in 2008 and the massive response—by the U.S. government and corporations themselves—reshaped the world we live in.* Although sectors of the U.S. economy are still in one of their longest expansions, most people recognize that the recovery has been profoundly uneven and the economic gains have not been fairly distributed.

The question is, what has changed—and, equally significant, what hasn’t—during the past decade?


Let’s start with U.S. stock markets, which over the course of less than 18 months, from October 2007 to March 2009, dropped by more than half. And since then? As is clear from the chart above, stocks (as measured by the Dow Jones Composite Average) have rebounded spectacularly, quadrupling in value (until the most recent sell-off). One of the reasons behind the extraordinary bull market has been monetary policy, which through normal means and extraordinary measures has transferred debt and put a great deal of inexpensive money in the hands of banks, corporations, and wealth investors. 


The other major reason is that corporate profits have recovered, also in spectacular fashion. As illustrated in the chart above, corporate profits (before tax, without adjustments) have climbed almost 250 percent from their low in the third quarter of 2008. Profits are, of course, a signal to investors that their stocks will likely rise in value. Moreover, increased profits allow corporations themselves to buy back a portion of their stocks. Finally, wealthy individuals, who have managed to capture a large share of the growing surplus appropriated by corporations, have had a growing mountain of cash to speculate on stocks.

Clearly, the United States has experienced a profit-led recovery during the past decade, which is both a cause and a consequence of the stock-market bubble.


The crash and the Second Great Depression, characterized by the much-publicized failures of large financial institutions such as Bear Stearns and Lehman Brothers, raised a number of concerns about the rise in U.S. bank asset concentration that started in the 1990s. Today, as can be seen in the chart above, those concentration ratios (the 3-bank ratio in purple, the 5-bank ratio in green) are even higher. The top three are JPMorgan Chase (which acquired Bear Stearns and Washington Mutual), Bank of America (which purchased Merrill Lynch), and Wells Fargo (which took over Wachovia, North Coast Surety Insurance Services, and Merlin Securities), followed by Citigroup (which has managed to survive both a partial nationalization and a series of failed stress tests), and Goldman Sachs (which managed to borrow heavily, on the order of $782 billion in 2008 and 2009, from the Federal Reserve). At the end of 2015 (the last year for which data are available), the 5 largest “Too Big to Fail” banks held nearly half (46.5 percent) of the total of U.S. bank assets.


Moreover, in the Trump administration as in the previous two, the revolving door between Wall Street and the entities in the federal government that are supposed to regulate Wall Street continues to spin. And spin. And spin.

median income

As for everyone else, they’ve barely seen a recovery. Real median household income in 2016 was only 1.5 percent higher than it was before the crash, in 2007.


That’s because, even though the underemployment rate (the annual average rate of unemployed workers, marginally attached workers, and workers employed part-time for economic reasons as a percentage of the civilian labor force plus marginally attached workers, the blue line in the chart) has fallen in the past ten years, it is still very high—9.6 percent in 2016. In addition, the share of low-wage jobs (the percentage of jobs in occupations with median annual pay below the poverty threshold for a family of four, the orange line) remains stubbornly elevated (at 23.3 percent) and the wage share of national income (the green line) is still less than what it was in 2009 (at 43 percent)—and far below its postwar high (of 50.9 percent, in 1969).

Clearly, the recovery that corporations, Wall Street, and owners of stocks have engineered and enjoyed during the past 10 years has largely bypassed American workers.


One of the consequences of the lopsided recovery is that the distribution of income—already obscenely unequal prior to the crash—has continued to worsen. By 2014 (the last year for which data are available), the share of pretax national income going to the top 1 percent had risen to 20.2 percent (from 19.9 percent in 2007), while that of the bottom 90 percent had fallen to 53 percent (from 54.2 percent in 2007). In other words, the rising income share of the top 1 percent mirrors the declining share of the bottom 90 percent of the distribution.


The distribution of wealth in the United States is even more unequal. The top 1 percent held 38.6 percent of total household wealth in 2016, up from 33.7 percent in 2007, that of the next 9 percent more or less stable at 38.5 percent, while that of the bottom 90 percent had shrunk even further, from 28.6 percent to 22.8 percent.

So, back to my original question: what has—and has not—changed over the course of the past decade?

One area of the economy has clearly rebounded. Through their own efforts and with considerable help from the government, the stock market, corporate profits, Wall Street, and the income and wealth of the top 1 percent have all recovered from the crash. It’s certainly been their kind of recovery.

And they’ve recovered in large part because everyone else has been left behind. The vast majority of people, the American working-class, those who produce but don’t appropriate the surplus: they’ve been forced, within desperate and distressed circumstances, to shoulder the burden of a recovery they’ve had no say in directing and from which they’ve been mostly excluded.

The problem is, that makes the current recovery no different from the run-up to the crash itself—grotesque levels of inequality that fueled the bloated profits on both Main Street and Wall Street and a series of speculative asset bubbles. And the current recovery, far from correcting those tendencies, has made them even more obscene.

Thus, ten years on, U.S. capitalism has created the conditions for renewed instability and another, dramatic crash.


*In a post last year, I called into question any attempt to precisely date the beginning of the crises.

  1. April 11, 2018 at 12:51 am
  2. Craig
    April 11, 2018 at 3:56 am

    President Obama was a person of apparently sincere graciousness. That I give him, and that is far more than the current occupant of the white house has. However, he was an “empty suit” when it came to economic theory, and even if he had understood unorthodox and leading edge economic theory he would not have been able to create REAL change that lasted. The only kind of change that lasts without being regressed or undone is paradigmatic change.

    And that is why economists need to begin thinking paradigmatically instead of about mere reform.

    • robert locke
      April 11, 2018 at 8:42 am

      Paradigmatic change?

      You won’t find enough of it going on here in the blog. Tore Hoie, who writes about Nordic Management emailed me:

      “A theme in Ethical Management is that US management education is not looking for alternatives. I can understand that, in my youth Norway was helped by the Marshall Plan, and we got a horrible expert from GM who wanted to help our nation. Our status then was war-torn and poor. I saw that even in the 1960s as a builder for our Military in the North. The region was burnt down 100% by German troops fleeing the Russians.

      That Germany and Nordics today may have alternatives to USA is not easy for academics to swallow, you have already outlined difficulties. But the US has been asleep for long and needs awakening as seen by its currents policies. Its reluctance to understand Japan’s success is already a fact, important for Japan was quality, hardly a US priority.

      The hibernation of US is reflected in our local Business School. They ignore any initiatives that are not from the USA, and following current paradigms. But now even The Economist rebels, and the Norwegian Oil Fund finds new ways. The Oil Fund owns more than 1% of world share value and its ideas become Financical Times front page, one is ethical risk.

      One conflict with US is standards, a strong influence is Germany. EU now introduces improved privacy laws, big US companies are reluctant, to put it mildly. Big Tech also want to dominate health applications, but with no privacy a direct conflict is likely.

      Perhaps you can help me write an article for rwer? Better is if you can describe my book and my ideas to that community. I think I am too far away from their ideas to be accepted. Yes, I acknowledge rwer as an independent body, but they have kept some mainline economic thinking and that makes it difficult to introduce new ideas. This is my eight book, one of the earlier is on computer security, a usefull skill, but very far from rwer discussions.”

      Rwer is too orothodox in that it frames its discussions mainly in nomethetic terms, to criticize them usually, but not to set them aside. Spender’s point is that in the theory of the firm, the marketplace is not the operative point, but his point is not taken up in discussions. Mine in the recent rwer is that we don’t have to go through nomothetic science to get to the real world, to skip the science and go directly to the firm-centric real world. Leave the scientists out as a reference point and then you’ll have a paradigmatic change.

      • Craig
        April 11, 2018 at 8:57 pm

        @ Robert Locke

        Yes, I’ve noticed that RWER Blog is too orthodox as well. They’re undoubtedly well intentioned, I’m not disputing that, but they lack the the characteristics necessary for true paradigmatic thinking which are not only iconoclasm, but also integration of opposing truths and finally the ability to step COMPLETELY outside of the current paradigm and visualize the new one.

        I’m surprised no one here has done a study of paradigm changes and their signatures some of which I have posted about here recently. You would think that would be a great topic for discussion here because paradigm changes are so deep, broad, permanent, historically progressive and agreed upon changes.

        I readily admit I stand on the shoulders of giants, but I have always enjoyed integrating and innovating ideas and patterns, and my adult intellectual studies just happen to be wisdom traditions, human consciousness itself and their pragmatic expression, and that is exactly what paradigm changes are, the integration of new ideas and patterns, new realizations regarding them and their expression in the temporal universe.

      • Prof James Beckman, Germany
        April 12, 2018 at 2:23 am

        Craig, right on. For 20 years I have not tried to be publlshed in the mainline econ journals, especially as I introduce other disciplines like engineering systems & anthro. Yes, Scandinavia works, although I had to turn down an appointment to the Copenhagen Business School as I couldn’t pay my bills as a full prof. It then took two academic salaries.
        So perhaps American academics are spoiled by their economic rewards & therefore don’t want to look towards Europe.

      • April 12, 2018 at 8:32 am

        Robert and Craig

        Totally agree on RWER not escaping economic orthodoxy, including its “nomothetic science”. Robert however still talks as if I had said nothing here on Kuhn’s key to understanding paradigm change, i.e. the difference between revolutionary and normal science. Craig, too, seems not to understand that a paradigm is a way of doing things – a Baconian taking things to bits to find out how they work, not just a Humean denial of right and wrong or a Hegelian way of reconciling opposites. You are both right, there is not enough talk going on here about what I’ve been saying for years about revolutionary science and paradigm change.

        So Robert’s letter is about his and J C Spender’s articles in RWER 83. These are both about business management, JC’s proposing this as a more appropriate paradigm for economics than [Humean] science:

        “Given our cultural commitment to science and its ability to reveal Nature’s simple rules (such as e=mc2 or pv=K), many hope for computable models of firms and managing. This is odd – for history shows we have been researching firms and managing them for centuries without finding either simple rules or evident progress towards them.”

        Splendid. But not seeing the paradigmatic inversion that has taken place: from computable models to firms as computers, or more accurately data processors which have to be taught to say no and thereby acquire some freedom; not seeing economic control changing from the on-off switch enforced by the data processing of managers to control largely automated by the pre-programming of routines.

        Robert (also spendidly) points out the traditional and logical German alternative of programming active workers rather than automating their work. But not how the logic of abduction (abstraction of everything) retroduces (reverse engineers) evolution “to reveal Nature’s simple rules”, including control by redirection and guidance of motion rather than “divide and rule”, and control of reactive redirection by “counting ten”: ie waiting for emotions to subside.

        The paradigm changes have already occurred: those willing to take computers to bits to see how they work can see they operate by guidance of motion rather than enforcement of rules. Economists don’t talk about this because, blinkered by their computer screens and out-of-date text-books, they still don’t see it; they even hardly notice how their “markets” depend on the availability of transport. “Normal” scientists don’t recognise communication science either, being too busy “doing” their own bit of science.

        Descartes was a “revolutionary” scientist. Sad that, being so much in advance of computer technology, he saw a ghost rather than a program operating his human machine.

  3. Helge Nome
    April 11, 2018 at 3:57 am

    I suspect that the folks behind the scene are planning to avert the coming crash by engineering a trade war to be followed by a shooting war as has been done in the past.

    The obscene financial wealth created out of nothing can then be applied to the creation and consumption of war materials followed by a post war rebuilding program.

    Thus, balance can be restored between financial wealth and real wealth.

  4. April 11, 2018 at 5:17 am

    Helge, this would only be a valid analysis if humanity survived another world war. And that is an unlikely outcome.

  5. David Harold Chester
    April 11, 2018 at 12:31 pm

    Only another 8 years until the next crash, according to the Georgist School theory. Its been shown to occur every 18 years, see “Boom-Bust” by Prof. Mason Gaffney and Fred Harrison.

    • Prof James Beckman, Germany
      April 12, 2018 at 2:25 am

      David, I can’t subscribe to such a mechanistic model, as we now have three economic giants in the global market place. All three have powerful banking & excellent R&D systems.

  6. Prof James Beckman, Germany
    April 11, 2018 at 6:56 pm

    Helge, I doubt there will be much of a trade war. A tariffed US would produce largely for a domestic market, with much higher prices. We see this in parts of Latin America. The logic is for US firms to also depart their country for Europe/Asia where they can both produce/sell. China will attempt to open production sites in US, just for America. The firms should do quite
    well between limited market US & rest of world. In fact, this model would make the US #3 in economic size, way behind China & EU within a dozen years. What’s not to like? (As I was raised in Silicon Valley, but have lived in Europe for 16 years, I smile at the logic of wiseacre Trump in disregarding the explicit advice of icons Adam Smith & Milton Friedman, among others, to expand markets.)
    Perhaps the most unacknowledged aspect of global firms is that they can have legal, productive & sales’ presence in many different parts of the world simultaneously.

  7. Helge Nome
    April 11, 2018 at 8:56 pm

    In response to economicref and James: What troubles me is that Trump is essentially a song and dance man acting on behalf of vested interests that have not changed, or changed tactics, over the last century.

    Their way of dealing with economic problems created by the system that exists for their benefit is to encourage conflict when things go out of whack as is happening today.
    Rising economic barriers between nations lead to increased frustration levels within nations.

    I know, from direct reports, that the Chinese are VERY worried about present developments as they are now being seen as a challenge to world hegemony by our vested interest “friends”.

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