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Are banks too big to jail?

From Salon.com
Wednesday, Jan 23, 2013 10:09 AM PST
PBS Frontline's stunning report shows how the Obama administration undermined the rule of law
By David Sirota

Are banks too big to jail? (Credit: AP/Pablo Martinez Monsivais)

PBS Frontline’s stunning report last night on why the Obama administration has refused to prosecute any Wall Streeter involved in the financial meltdown doesn’t just implicitly indict a political and financial press that utterly abdicated its responsibility to cover such questions. It also — and as importantly — exposes the genuinely radical jurisprudential ideology that Wall Street campaign contributors have baked into America’s “justice” system. Indeed, after watching the piece, you will understand that the word “justice” belongs in quotes thanks to an Obama administration that has made a mockery of the name of a once hallowed executive department.

The Frontline report is titled “The Untouchables,” a tongue-in-cheek salute to how that term once referred to those heroes who fought organized crime and yet now appropriately describes those doing the criminal organizing. Rooted in historical comparison, it contrasts how the Reagan administration prosecuted thousands of bankers after the now-quaint-looking S&L scandal with how the Obama administration betrayed the president’s explicit promise to “hold Wall Street accountable” and refused to prosecute a single banker connected to 2008′s apocalyptic financial meltdown.

The piece by PBS reporter Martin Smith looks at how Obama has driven federal prosecutions of financial crimes down to a two-decade low. It also documents the rampant and calculated mortgage securities fraud perpetrated by the major Wall Street banks, who, not coincidentally, were using some of the profits they made to become among President Obama’s biggest campaign donors.

As we see, that campaign money didn’t just buy massive government bailouts of the banks, a pathetically weak Wall Street “reform” bill or explicit reassurances from Obama’s campaign that the president would refrain from criticizing bankers. Frontline shows it also bought a Too Big to Jail ideology publicly championed by the white-collar defense lawyer turned Obama prosecutor Lanny Breuer.

In the single most damning part of the PBS report, we learn that Breuer, fresh off a lucrative stint defending Moody’s and Halliburton, was appointed by President Obama to head the Justice Department’s criminal enforcement division and was soon sculpting this unprecedented ideology and embedding it into the department’s mission. As Frontline shows, he bragged to his colleagues in the legal profession that as the United States government’s chief criminal prosecutor, he is not primarily worried about lawbreaking in the financial world, but about whether prosecuting financial crime will harm the criminals, their accomplices and their industry.

As this excerpt from Breuer’s 2012 speech to the New York City Bar Association shows, that characterization of Breuer’s declarations is not an overstatement (emphasis added):

To be clear, the decision of whether to indict a corporation, defer prosecution, or decline altogether is not one that I, or anyone in the Criminal Division, take lightly. We are frequently on the receiving end of presentations from defense counsel, CEOs, and economists who argue that the collateral consequences of an indictment would be devastating for their client. In my conference room, over the years, I have heard sober predictions that a company or bank might fail if we indict, that innocent employees could lose their jobs, that entire industries may be affected, and even that global markets will feel the effects.

In reaching every charging decision, we must take into account the effect of an indictment on innocent employees and shareholders, just as we must take into account the nature of the crimes committed and the pervasiveness of the misconduct.

I personally feel that it’s my duty to consider whether individual employees with no responsibility for, or knowledge of, misconduct committed by others in the same company are going to lose their livelihood if we indict the corporation. In large multi-national companies, the jobs of tens of thousands of employees can be at stake. And, in some cases, the health of an industry or the markets are a real factor. Those are the kinds of considerations in white collar crime cases that literally keep me up at night, and which must play a role in responsible enforcement.

Save for the intrepid Marcy Wheeler and now Frontline, this speech received almost no news media attention despite being arguably one of the most important statements to come from a top law enforcement official in recent history.

The highlighted parts of that speech are what is so significant. In them, Breuer is saying that enforcing the law should not be — and no longer is, in the Department of Justice — prosecutors’ chief priority. Rather, he says listening to Wall Street’s economic arguments about the alleged cost of stopping and/or punishing lawbreaking should be.

Before you say that Breuer is just being a kind, compassionate guy, remember that the foundational notion of equal justice under the law is not supposed to be kindness or compassion. It is supposed to be blindness — specifically, blindness to a person’s stature and station, regardless of whether that person is a single human or a corporation. Even though that principle has never been applied perfectly (to say the least), the government is supposed to at minimum rhetorically honor its ethos.

Yet, here you have the Obama administration via its chief prosecutor setting the precedent for exactly the opposite: namely, a government that brags that when it comes to Wall Street, justice is not — and should not — be blind. Instead, as Breuer demands, prosecutors should be “kept up at night” worrying primarily about how an enforcement action will affect bankers who break laws and harm millions of Americans.

That’s not nice or compassionate, that’s a corporate defense attorney paying back the banking industry whose campaign contributions installed his boss in the White House and, consequently, him at the top of the Justice Department.

To understand how revolutionary a notion the Obama administration’s Too Big to Jail is, do the mental exercise of switching out the pinstriped Wall Street criminals and replacing them with your mental image of the leaders of drug cartels. They, too, head multinational businesses involving scores of front companies and, thus, thousands of people who may not even know that they are participating in an illegal enterprise. If Breuer applied the very same Too Big to Jail ideology to those cartel leaders, he would be effectively arguing that we shouldn’t prosecute Pablo Escobars because that would result in an unacceptable loss of wages for those kingpins’ secretaries, messengers and secondary workforces.

If such a hideous legal argument about drug cartels was ever even whispered by any official in Washington, you would expect it to be grounds for congressional hearings, if not full-on impeachment proceedings accusing said official of jeopardizing U.S. national security. And in many cases it would be — except, of course, if the drug dealers in question were somehow connected to the financial industry’s profits. After all, it was Breuer who sculpted the Obama administration’s settlement with megabank HSBC after the bank admitted laundering money for drug cartels and terrorist organizations.

In that decision not to criminally prosecute any HSBC executive who had enabled such laundering, Breuer explicitly cited the same radical Too Big to Jail principle aired in the PBS Frontline report. He said: “Our goal here is not to bring HSBC down, it’s not to cause a systemic effect on the economy, it’s not for people to lose thousands of jobs.”

For pure adversarial and investigative journalism horsepower, the PBS Frontline piece rivals Bill Moyers’ epic PBS indictment of those charlatans who enabled the Bush administration’s march into the Iraq War. It is a must-watch in the truest sense of the overused term because it so powerfully explains how Obama’s campaign motto of “change” meant something entirely different than what many thought. In the case of financial crime, it meant the embrace of a radical Too Big to Jail ideology, one that creates a moral hazard, encourages exactly the same kind of crimes and therefore makes it more likely that another financial meltdown will happen.

UPDATE: A mere hours after the PBS Frontline piece aired, Lanny Breuer just announced he is resigning his post at the Justice Department. Meanwhile, PBS reporter Martin Smith just reported that in response to his report, the Obama White House has decided to block access to Frontline reporters in their future reporting.

David Sirota David Sirota is a nationally syndicated newspaper columnist, magazine journalist and the best-selling author of the books "Hostile Takeover," "The Uprising" and "Back to Our Future." E-mail him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website
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Friday, October 5, 2012

So the news today is all about how job creation has picked up. In fact I saw two job postings today, one at my local cafe and one outside Toys R'Us. Happy days are here again, right? Jeff Madrick points out the inconvenient truth: all we're creating is bad jobs.
The reason that the economic recovery is coinciding with middle class decline is increasingly clear. America is creating jobs, but they are bad jobs: retailing, food preparation, and table waiting, for example—in other words, jobs that don’t pay much. Economists like David Autor of MIT and Larry Mishel of the Economic Policy Institute have been talking for years about the hollowing out of middle-level jobs in offices and manufacturing.

Annette Bernhardt of the National Employment Law Project did the hard empirical work recently and found that most of the job losses from 2008 to early 2010 were in the middle-income category, jobs that pay from roughly $14 to $21 an hour. What is disturbing is that in the job turnaround since then, only one in five such jobs came back. Instead, very low-end jobs, paying $7.70 to $13.80 an hour, accounted for most new employment. This is a stark continuation of the hollowing out.

The mystery, then, is not what is going on in the economy but what to do about it. And neither candidate has a satisfactory plan. Romney is offering a repeat of the George W. Bush approach, which involves mostly large tax cuts for upper income “job creators.” Even before the devastation of 2008, job growth was slower under Bush than under any other postwar president.
Our Crisis Of Bad Jobs (New York Review Of Books)

But a job's a job right? As a comment to this article put it, "The job, along with what is our much of our present politics are creations of the industrial era; to look at the jobs that have been “created” in America in the last four decades and then to make part of you political platform the “need for more jobs” – both Dems and Reps cry! – is dumbfounding. We need a lot better thinking, but it shows how comfortable we become with our shackles, especially if they come with a little padding...People didn't have jobs prior to industrialism, they were farmers, shopkeepers, hunters. The “job” which your piece is about, not work, is an industrial creation."

UPDATE - Via The Guardian:
Buried in the Friday's jobs report is evidence that a disturbing trend continues: the creation of more part-time jobs, many of them low-wage, taking the place of solid middle-class careers. Positions in sectors like manufacturing continued to decline last month, replaced by new jobs in the healthcare, warehousing and retail industries. A lot of these jobs don't allow workers to rack up enough hours to earn healthcare benefits – let alone break out of poverty.

 The key data in the new report can be found in a table called "A-8". It shows that more workers are in stuck in part-time jobs because their hours were cut back or they're unable to find full-time positions. The number of workers in this category shot up to 8.5 million in September – an increase of 581,000 from last month. This month's figure is nearly double what it was in September 2007, the eve of the recession.

It's distressing to think that after 20th-century labor struggles won the battle for the 40-hour work week, the 21st-century struggle is a fight for enough working hours to make a living wage. That's not what I'd call progress.

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Social Services [via The Hipcrime Vocab]

Thursday, September 27, 2012

This short article about why Greece’s far-right Golden Dawn party is so popular is telling:
Basically, the Golden Dawn, as I learned when I was in Greece, operates as a kind of quasi services mafia. If you're an (ethnically Greek) old lady worried about getting robbed when you go to the ATM, a menacing Golden Dawn thug will escort you.

According to a source in Greece we heard from today, the Golden Dawn will also perform rent collections on behalf of landlords. The Golden Dawn even distribute free food and have opened up a Grocery store for Greeks only.

With the public sector hobbled and unable to provide what it used to to the citizens, the Golden Dawn has been able to step into a vacuum.... what's key is how the Golden Dawn has positioned itself as an aid to many Greeks at a time when other institutions are decaying.
http://www.businessinsider.com/popularity-of-golden-dawn-2012-9#ixzz27gYDowqy

When central authority declines, those who can step in and provide financial security and stability for the average person take over. This dynamic has been repeated throughout history down through the present day. The warlords that stepped in after the fall of the Roman Empire became the European nobility for millennia. Dmitry Orlov has often written about how street gangs and former KGB became the de facto authorities in the immediate aftermath of the fall of Communism. In the Middle East, groups like Hezbollah provide social insurance, schools, pensions and meal programs (widows whose husbands are killed fighting are taken care of for life). In Pakistan, Afghanistan, Somalia and elsewhere tribal warlords rule in the absence of central authority. Will we see that exact same dynamic in the West as capitalism breaks down? In America, I imagine it will be the evangelical mega-churches which will fill this role (and have a similar far-right agenda as GD). Orlov puts forward drug gangs, which already rule much of Mexico.

Libertarians often say that government is bad and we need to rely on each other instead. But this is where that often leads, and the results aren't pretty.

More and more it seems to me like the centralized authority of the empire or nation-state is a transient phenomenon in human history. Perhaps we’re just not wired to cooperate on that level.

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The Underclass [via The Hipcrime Vocab]

Monday, September 24, 2012

Two quick hits:
The United States is caught in a vicious cycle largely of its own making. Rising income inequality is breeding more inequality in educational opportunity, which results in greater inequality in educational attainment. That, in turn, undermines the intergenerational mobility upon which Americans have always prided themselves and perpetuates income inequality from generation to generation.

This dynamic all but guarantees a permanent underclass. Indeed, the process is already under way: An American child’s future income is already more dependent on his or her parents’ income than a child born in most other developed countries.
Income Inequality and Educational Opportunity (Economix, NYT)

And for this cohort, trapped in poverty, their life span is actually shrinking:
Researchers have long documented that the most educated Americans were making the biggest gains in life expectancy, but now they say mortality data show that life spans for some of the least educated Americans are actually contracting. Four studies in recent years identified modest declines, but a new one that looks separately at Americans lacking a high school diploma found disturbingly sharp drops in life expectancy for whites in this group. Experts not involved in the new research said its findings were persuasive.

The reasons for the decline remain unclear, but researchers offered possible explanations, including a spike in prescription drug overdoses among young whites, higher rates of smoking among less educated white women, rising obesity, and a steady increase in the number of the least educated Americans who lack health insurance.

The steepest declines were for white women without a high school diploma, who lost five years of life between 1990 and 2008, said S. Jay Olshansky, a public health professor at the University of Illinois at Chicago and the lead investigator on the study, published last month in Health Affairs. By 2008, life expectancy for black women without a high school diploma had surpassed that of white women of the same education level, the study found.

White men lacking a high school diploma lost three years of life. Life expectancy for both blacks and Hispanics of the same education level rose, the data showed. But blacks over all do not live as long as whites, while Hispanics live longer than both whites and blacks.

“We’re used to looking at groups and complaining that their mortality rates haven’t improved fast enough, but to actually go backward is deeply troubling,” said John G. Haaga, head of the Population and Social Processes Branch of the National Institute on Aging, who was not involved in the new study.
Life Spans Shrink for Least-Educated Whites in the U.S. (NYT)
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The Hollowing Out [via The Hipcrime Vocab]

Thursday, July 19, 2012

Long, in-depth piece by Thomas Edsall in the New York Times: The Hollowing Out (NYT):
It has become a campaign ritual. Immediately after the release of unemployment figures on the first Friday of every month, Democratic and Republican spin shifts into high gear.

“Our mission is not just to get back to where we were before the crisis. We’ve got to deal with what’s been happening over the last decade, the last 15 years — manufacturing leaving our shores, incomes flat-lining — all those things are what we’ve got to struggle and fight for,” Obama declared at the Dobbins School in Poland, Ohio.

Romney took the opposite tack in Wolfeboro, N.H.: “This is a time for America to choose whether they want more of the same; whether unemployment above 8 percent month after month after month is satisfactory or not. It doesn’t have to be this way. America can do better and this kick in the gut has got to end.”

Both candidates are only tinkering at the edges of the most important issue facing the United States: the hollowing out of the employment marketplace, the disappearance of mid-level jobs.

The issue of the disappearing middle is not new, but credible economists have added a more threatening twist to the argument: the possibility that a well-functioning, efficient modern market economy, driven by exponential growth in the rate of technological innovation, can simultaneously produce economic growth and eliminate millions of middle-class jobs.
This informative chart is included:

On his blog, McAfee explains the graphic:
Since the Great Recession officially ended in June of 2009 G.D.P., equipment investment, and total corporate profits have rebounded, and are now at their all-time highs. The employment ratio, meanwhile, has only shrunk and is now at its lowest level since the early 1980s when women had not yet entered the workforce in significant numbers. So current labor force woes are not because the economy isn’t growing, and they’re not because companies aren’t making money or spending money on equipment. They’re because these trends have become increasingly decoupled from hiring — from needing more human workers. As computers race ahead, acquiring more and more skills in pattern matching, communication, perception, and so on, I expect that this decoupling will continue, and maybe even accelerate.

This view is controversial — especially McAfee’s argument that the decoupling of jobs from other positive economic developments “will continue, and maybe even accelerate.” In other words, the downward employment and jobs spiral will keep going, driven by structural forces. Policies to ameliorate the process – a shorter work week, a massive investment in education (for example, at the community college level), the disaggregation of complex tasks into simple functions that could be executed by mid-skill workers — may only slow the decline, not stop it. This is a deeply pessimistic vision.
The article continues:
On July 5, McAfee held the attention of an audience of young researchers and prospective entrepreneurs here at Singularity University. For over an hour after his lecture, students met with McAfee to explore the consequences of his argument.

The students’ questions:

How much can wealth accumulate for a small slice of the population at the top, while large numbers of people are forced to work for ever lower pay or to drop out of the workforce altogether? For such a future society to function, would wealth need to be (coercively) redistributed from the top to those below, in order for the mass of the jobless population to survive? Who would have power and how would tax and spending policies be determined in such a radically bifurcated, automated, workless society?

… Brynjolfsson, who is more optimistic, said in an interview with The Times, “we are hopeful that that (job growth) will happen, but there is no guarantee of it. There is no economic law that says everyone benefits from technological improvement.” He also pointed out that the surge in inequality driven by rising incomes at the very top of the distribution suggests strongly that the benefits of digitization have not been widely spread.

“The problem is not tech stagnation,” as some have argued, “but the opposite,” Brynjolfsson contends.

“Technology is rushing ahead faster than humans can adapt.” The difficulty of human adaptation is, in turn, likely to get worse, he added, because technological innovation — as in Moore’s Law (predicting a doubling of computer capacity roughly every two years) — grows exponentially in scope. The total number of non-farm jobs in the country is now 5 million less than in January, 2008. The 3.7 million jobs added to the economy have not been enough to make up for the 8.7 million jobs lost in 2008-9.
“We are hopeful job growth will happen.”  Isn’t it nice to base an economy on hope? At least they have a clue unlike the other economists cited in the piece, who believe that things in the future will always be like the past. Nice “science” huh? Note that male unemployment has never recovered, as they continue to be displaced from the jobforce by women:


What this chart shows is that male unemployment has never recovered from recessions! Gee, do you think this might have something to do with single mothers and declining marriage rates? Oh that's right, men and women are the same, aren't they? That also squares with the overall labor force participation rate:


Other aspects of the job situation are accurately described in a recent  New Yorker piece summarized by Dave Pollard:
This week’s (July 9/16) New Yorker has a terrific one-page summary by James Surowiecki of why so many job vacancies are left unfilled “for want of any sufficiently qualified candidates” while so many people (especially young people with university degrees) are unable to find work. It’s behind a pay wall, so here’s a synopsis:

•Unemployment is high not because businesses are shedding jobs but because no one is hiring (in one case cited, a company had 25,000 applicants for a standard engineering job, and rejected all of them).

•The idea of a “skills gap” (the unemployed don’t have the skills hirers are looking for) is a myth. The truth is that companies want to hire the most experienced and successful people already working at competing companies, so they’ll hit the ground running, so there’s no training cost, and so there’s no risk they won’t work out. “When companies complain they can’t find people with the right ‘skills’”, Surowiecki writes, “they often just mean they can’t find people with the right experience”.

•This is a direct consequence of the fact that large corporations have slashed internal training budgets as a short-sighted means of cost cutting. The argument, says Surowiecki, is that “job tenure has shrunk, so why spend time and money training somebody who may soon go to work for your competitor”. With the loss of benefits and the disinterest of employers in investing in their employees, employee loyalty has understandably plummeted, creating a vicious cycle that big corporations themselves are to blame for.

•In a weak economy, “companies worry less about getting every possible dollar of new business than they do about keeping costs down”. The unwillingness of big corporations to invest in genuine domestic production (in lieu of outsourcing and offshoring every possible job) is a direct contributor to that weak economy. But it also reflects the fact that big corporation CEOs realize the economy is on the verge of collapse, and they’re hoarding cash and slashing costs to prepare for that eventuality.
So we see, workers will continue to blamed for their own plight. The "workers don't have the right skills" meme, the "need more education" meme, the "they're having babies before marriage" meme and the "there are plenty of jobs in North Dakota" meme have all been trotted out to explain how the deterioration of capitalism is the workers' fault. Sigh.

And see Dean Baker in The Guardian: Technology doesn't cause inequality – deliberate policy change does. In fact, it's both working in tandem. And as for the much-touted, "service economy," well, here's Yglesias again:
According to the BLS, about 2 million more people were working last month than were working a year ago. But we have 10,000 fewer people working in general merchandise stores. We have 20,000 fewer people working in electronics and appliance stores. We have 17,000 fewer people working in "sporting goods, hobby, book, and music stores." Now the overall BLS retail trade category includes other stuff including things like health and personal care stores that seem healthy. But the point is that over the course of a year in which the level of economic activity has clearly risen, certain major categories of big box retail have shed jobs. Given a few months in a row of torrid overall growth, presumably some of that would stabilize. But I think you have to see this as a part of the economy that's facing a persistent decline driven by e-commerce, a decline that should only accelerate since a ton of people are going to get their first smartphone in the next 12-18 months.
 The End Of Retail (Slate)

And the outlook for the next generation is grim:
A recent report published by the Young Invincibles think tank investigated the levels of youth unemployment. The results portray a dark future for young workers and students.

The report, titled “No End In Sight,” begins by stating that unless “trends change dramatically, there is a real danger that the youth labor market will never recover from the recession’s blow.” This is not mere idle speculation. Youth unemployment in the United States had still not fully recovered from the 2001 dot-com crash at the time of the financial meltdown. Since 2007, youth unemployment has skyrocketed by 141 percent and shows no signs of abating. In 2010, the Bureau of Labor Statistics reported that youth employment would never regain its 2007 level. The bureau estimates that even by 2020, there will be two million fewer jobs available for young people than before the crash.

Today, the official unemployment rate for individuals between the ages of 16 and 24 remains at 17 percent. For individuals between the ages of 16 and 19, the rate is 21 percent. The rate for youth minority groups is also considerably higher than the overall figure—approximately 20.5 percent of Latino and 30 percent of African American youth are currently unemployed. In major cities the situation is even worse. The youth unemployment rate in New York City, for example, has remained above 30 percent for three years in a row.
Widespread coverage on the report by major news sources suggests a growing fear within the American ruling class of social upheaval like that which has erupted in Egypt, Spain, Greece, Chile and numerous other countries since the onset of the crisis.
Globally, the epidemic of youth unemployment is mounting. On July 10, the Organization for Economic Cooperation and Development (OECD) warned that the high jobless rate threatened a permanent “scarring effect” on the prospects of the young generations as they come into adulthood with a long gap in their work history and training. In the 34 countries of the OECD, 18.6 percent of young people were neither in school nor employed. As these youth age and raise their own children, the impoverishment created by their early loss of work may pin them as well as their future offspring to low wages, unemployment and all the social miseries bound up with financial distress.
Report details desperate conditions confronting US youth (WSWS)

Of course, they may be the lucky ones: Job Insecurity: It's the Disease of the 21st Century -- And It's Killing Us (Alternet)
Across America, freaked-out employees are coping with sweat-drenched nights and heart-pounding days. They’re reaching for the Xanax and piling on the work of two or three people. They’re running the risk of short-term collapse and long-term disease.

The hell created by three grinding years of 8 percent-plus unemployment brings us plenty of stories of what people suffer when they lose their jobs. But what about the untold millions who live in chronic fear that tomorrow’s paycheck will be their last?

Research shows that the purgatory of job insecurity may be even worse for you than unemployment. And it's turning the American Dream into a sleepwalking nightmare. From young temporary workers to middle-aged career veterans, Americans are being pushed to their physical and psychological limits in what has the makings of a major national public health crisis. 
So it seems you're choices are to be unemployed of stressed out, both of these taking a toll on your health. Welcome to the world of labor in the twenty-first century. And this dystopian vision is being echoed by more and more experts every day. The last word goes to Damien Perrotin:
It is no wonder either that everybody’s political programs focus on how to create jobs. The communists want to create jobs by making everyone a civil servant of sorts. The socialists want to create jobs by subsidizing them, but they presently can’t because they don’t have the money. The moderate right wants to give more money to those who already have a lot of it in the hope that it will somehow trickle down, not that it matters very much if it doesn’t. The National Front wants to hunker down behind barbed wires, which should somehow create jobs. Muslim people need not apply.

As for the Greens, they want to create green jobs, a lot of them, preferably through generous state subsidies. Make no mistake, those green jobs do not involve growing green things. The group the Greens represent, namely the enlightened upper middle class, wants reasonably well paid and prestigious jobs, and herding sheep in central Brittany definitely doesn’t qualify.

Jobs are remarkably close to niches in a non-human ecosystem, which is hardly surprising since human societies basically work like simplified ecosystems in which the dominant species, as well as some of its parasites/symbionts/commensals, can assume a high number of roles.

And as you know, the maximum number of niches a given ecosystem can support depends upon the energy inflow it gets from its environment...
(There ain’t no) green jobs (EB)

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This Is Collapse In Progress

This video offers a critical analysis of the effort of the City of Philadelphia to collect over a billion dollars in outstanding criminal court fees, fines, costs and bail forfeitures from an estimated 400,000 people. Failure to pay may result in the seizure of assets, a denial of public benefits, an inability to obtain an expungement or pardon, and even incarceration. The fairness of the program, however, is called into question by its impact on debtors who are poor, unemployed, or underemployed; the nonexistence of prison records pertaining to pre-1991cases; the lack of documentation substantiating some debts; and the common failure of correction authorities to arrange for prisoners to make court appearances which led to bail forfeitures.
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By John Aravosis on 5/28/2012 07:00:00 PM

Krugman says we're still in a classic Depression.

Paul Krugman on Bill Maher:

We are in a depression. We are actually in a classic depression. A depression is when nobody wants to spend. Everybody wants to pay down their debt at the same time. Everybody is trying to pull back, either because they got too far into debt, or because if they’re a corporation, they can’t sell because consumers are pulling back. The thing about an economy is that it fits together. My spending is your income. Your spending is my income, so if we all pull back at the same time, we’re in a depression. The way to get out of it is for somebody to spend so that people can pay down their debt, so that we don’t have a depression. So that we have a chance to work out of whatever excesses we had in the past, and that somebody has to be the government.

We ended the Great Depression with a great program of government spending for an unfortunate reason. It was known as World War II…but when the war broke out in Europe, and we began our buildup that Great Depression that had been going on for ten years. People thought it would go on forever. Learned people stroked their chins and said there are no quick answers. In two years, employment rose 20%. That’s the equivalent of 26 million jobs today, the depression was over. We had full employment, and it never came back, or it didn’t come back until 2008, because people managed to pay down those debts, and we had a durable recovery.
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http://www.huffingtonpost.com/2012/05/25/ally-financial-gmac-mortgage-screwups_n_1546777.html?ref=topbar
Ben Hallman
Posted: 05/25/2012 6:31 pm Updated: 05/26/2012 11:25 am

Trying to count the number of bank screwups during the foreclosure crisis is a little like guessing the amount of change in a huge jar: You can see that the answer is "an awful lot," but without breaking the jar and counting by hand, there's no way to know for sure.

On Thursday, however, just how much homeowner misery Ally Financial may be responsible for came to light after the Federal Reserve released a letter that details exactly how many borrowers' cases may have been mishandled.

Ally, formerly an arm of General Motors, needed a $17.2 billion bailout to survive the mortgage crash. It repaid about $5.5 billion, meaning taxpayers own 74 percent of the bank. Earlier this month, the bank sought Chapter 11 bankruptcy protection for ResCap, its residential mortgage unit.

The letter dated Feb. 1 is from the bank's mortgage servicing unit, GMAC Mortgage, to PricewaterhouseCoopers, the accounting firm it hired to review troubled loans as part of a 2011 agreement with federal regulators. It puts a number on some of the mortgages the bank may have handled incorrectly. Some highlights:

  • GMAC started foreclosure proceedings on 1,270 borrowers who were in some stage of the bankruptcy process, and thus should have been protected from foreclosure.
  • GMAC carried out foreclosure sales on 1,577 borrowers who were awaiting a decision about a loan modification. This is known as "dual tracking" and is one of the biggest complaints of homeowners and their advocates.
  • The mortgage servicer hired a law firm that was subsequently "delisted" to process 30,235 foreclosures. The names of the firms are redacted, but presumably include several of those accused of forging documents as part of the robo-signing scandal.
  • The mortgage servicer denied 50,030 borrowers for a government-run Home Affordable Modification Program, and then offered no alternative modification.

GMAC says in the letter that the number of borrowers subject to the review -- those whose homes were in some stage of foreclosure in 2009 or 2010 -- is 232,132. That's a small share of the estimated 4.5 million borrowers whose loans were handled by one of the 14 mortgage servicers who signed consent agreements with the federal Office of the Comptroller of the Currency and other regulators in early 2011.

Those agreements with federal regulators require the servicers to reform how they manage troubled loans and also set up the Independent Foreclosure Review. The latter is a program that allows borrowers who think their servicer made a mistake during the foreclosure process to submit a claim for review. As The Huffington Post previously reported, most eligible borrowers so far haven't applied, though they have until the end of July.

The deals also required the servicers to hire an outside accountant to review loans with a greater likelihood of having been mishandled. The newly released document is the "engagement letter" between GMAC and PricewaterhouseCoopers, which is acting as an "independent consultant," not an auditor.

The court agreements require an review of every loan in some instances, including situations where a home was foreclosed on while the borrower was protected by bankruptcy law. In other cases, the bank is required to have just a small sample evaluated for possible errors or misconduct.

Referring a loan for review because it meets certain specifications doesn't necessarily mean that the bank acted unlawfully. An Ally spokeswoman did not immediately return a request for comment Friday afternoon.

It's not clear when the reviews by GMAC and the 13 other servicers will wrap up, or whether they will finally answer some basic questions about the extent of the foreclosure crisis. One of the great mysteries of the five-year ordeal is that no one really knows how often banks or other mortgage servicers screwed up a loan modification, made a costly accounting mistake, or illegally foreclosed on a homeowner. Anecdotal evidence from thousands of homeowners, and information from a few limited audits, suggest widespread misconduct, but the financial institutions that service mortgages have fought a true accounting.

Ally is also one of five banks that recently agreed to a $25 billion mortgage fraud settlement with the federal government and the attorney's general of 49 states.

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How Bad Is It?

From The New Inquiry
May 26, 2012
By George Scialabba

Pretty bad. Here is a sample of factlets from surveys and studies conducted in the past twenty years. Seventy percent of Americans believe in the existence of angels. Fifty percent believe that the earth has been visited by UFOs; in another poll, 70 percent believed that the U.S. government is covering up the presence of space aliens on earth. Forty percent did not know whom the U.S. fought in World War II. Forty percent could not locate Japan on a world map. Fifteen percent could not locate the United States on a world map. Sixty percent of Americans have not read a book since leaving school. Only 6 percent now read even one book a year. According to a very familiar statistic that nonetheless cannot be repeated too often, the average American’s day includes six minutes playing sports, five minutes reading books, one minute making music, 30 seconds attending a play or concert, 25 seconds making or viewing art, and four hours watching television.

Among high-school seniors surveyed in the late 1990s, 50 percent had not heard of the Cold War. Sixty percent could not say how the United States came into existence. Fifty percent did not know in which century the Civil War occurred. Sixty percent could name each of the Three Stooges but not the three branches of the U.S. government. Sixty percent could not comprehend an editorial in a national or local newspaper.

Intellectual distinction isn’t everything, it’s true. But things are amiss in other areas as well: sociability and trust, for example. “During the last third of the twentieth century,” according to Robert Putnam in Bowling Alone, “all forms of social capital fell off precipitously.” Tens of thousands of community groups – church social and charitable groups, union halls, civic clubs, bridge clubs, and yes, bowling leagues — disappeared; by Putnam’s estimate, one-third of our social infrastructure vanished in these years. Frequency of having friends to dinner dropped by 45 percent; card parties declined 50 percent; Americans’ declared readiness to make new friends declined by 30 percent. Belief that most other people could be trusted dropped from 77 percent to 37 percent. Over a five-year period in the 1990s, reported incidents of aggressive driving rose by 50 percent — admittedly an odd, but probably not an insignificant, indicator of declining social capital.

Still, even if American education is spotty and the social fabric is fraying, the fact that the U.S. is the world’s richest nation must surely make a great difference to our quality of life? Alas, no. As every literate person knows, economic inequality in the United States is off the charts – at third-world levels. The results were recently summarized by James Speth in Orion magazine. Of the 20 advanced democracies in the Organization for Economic Cooperation and Development (OECD), the U.S. has the highest poverty rate, for both adults and children; the lowest rate of social mobility; the lowest score on UN indexes of child welfare and gender inequality; the highest ratio of health care expenditure to GDP, combined with the lowest life expectancy and the highest rates of infant mortality, mental illness, obesity, inability to afford health care, and personal bankruptcy resulting from medical expenses; the highest homicide rate; and the highest incarceration rate. Nor are the baneful effects of America’s social and economic order confined within our borders; among OECD nations the U.S. also has the highest carbon dioxide emissions, the highest per capita water consumption, the next-to-largest ecological footprint, the next-to-lowest score on the Yale Environmental Performance Index, the highest (by a colossal margin) per capita rate of military spending and arms sales, and the next-to-lowest rate of per capita spending on international development and humanitarian assistance.

Contemplating these dreary statistics, one might well conclude that the United States is — to a distressing extent — a nation of violent, intolerant, ignorant, superstitious, passive, shallow, boorish, selfish, unhealthy, unhappy people, addicted to flickering screens, incurious about other societies and cultures, unwilling or unable to assert or even comprehend their nominal political sovereignty. Or, more simply, that America is a failure.

That is indeed what Morris Berman concludes in his three-volume survey of America’s decline: The Twilight of American Culture (2000), Dark Ages America (2006), and Why America Failed (2011), from which much of the preceding information is taken. Berman is a cultural and intellectual historian, not a social scientist, so his portrait of American civilization, or barbarism, is anecdotal and atmospheric as well as statistical. He is eloquent about harder-to-quantify trends: the transformation of higher (even primary/secondary) education into marketing arenas for predatory corporations; the new form of educational merchandising known as “distance learning”; the colonization of civic and cultural spaces by corporate logos; the centrality of malls and shopping to our social life; the “systematic suppression of silence” and the fact that “there is barely an empty space in our culture not already carrying commercial messages.” Idiot deans, rancid rappers, endlessly chattering sports commentators, an avalanche of half-inch-deep self-help manuals; a plague of gadgets, a deluge of stimuli, an epidemic of rudeness, a desert of mutual indifference: the upshot is our daily immersion in a suffocating stream of kitsch, blather, stress, and sentimental banality. Berman colorfully and convincingly renders the relentless coarsening and dumbing down of everyday life in late (dare we hope?) American capitalism.

In Spenglerian fashion, Berman seeks the source of our civilization’s decline in its innermost principle, its animating Geist. What he finds at the bottom of our culture’s soul is … hustling; or, to use its respectable academic sobriquet, possessive individualism. Expansion, accumulation, economic growth: this is the ground bass of American history, like the hum of a dynamo in the basement beneath the polite twitterings on the upper stories about “liberty” and “a light unto the nations.” Berman scarcely mentions Marx or historical materialism; instead he offers a nonspecialist and accessible but deeply informed and amply documented review of American history, period by period, war by war, arguing persuasively that whatever the ideological superstructure, the driving energy behind policy and popular aspiration has been a ceaseless, soulless acquisitiveness.

The colonial period, the seedbed of American democracy, certainly featured a good deal of God-talk and virtue-talk, but Mammon more than held its own. Berman sides emphatically with Louis Hartz, who famously argued in The Liberal Tradition in America that American society was essentially Lockean from the beginning: individualistic, ambitious, protocapitalist, with a weak and subordinate communitarian ethic. He finds plenty of support elsewhere as well; for example in Perry Miller, the foremost historian of Puritanism, according to whom the American mind has always “positively lusted for the chance to yield itself to the gratification of technology.” Even Tocqueville, who made many similar observations, “could not comprehend,” wrote Miller, “the passion with which [early Americans] flung themselves into the technological torrent, how they … cried to each other as they went headlong down the chute that here was their destiny, here was the tide that would sweep them toward the unending vistas of prosperity.” Even Emerson and Whitman went through a phase of infatuation with industrial progress, though Hawthorne and Thoreau apparently always looked on the juggernaut with clearer (or more jaundiced) eyes.

Berman also sides, for the most part, with Charles Beard, who drew attention to the economic conflicts underlying the American Revolution and the Civil War. Beard may have undervalued the genuine intellectual ferment that accompanied the Revolution, but he was not wrong in perceiving the motivating force of the pervasive commercial ethic of the age. Joyce Appleby, another eminent historian, poses this question to those who idealize America’s founding: “If the Revolution was fought in a frenzy over corruption, out of fear of tyranny, and with hopes for redemption through civic virtue, where and when are scholars to find the sources for the aggressive individualism, the optimistic materialism, and the pragmatic interest-group politics that became so salient so early in the life of the nation?”

By the mid-nineteenth century, the predominance of commercial interests in American politics was unmistakable. Berman’s lengthy discussion of the Civil War as the pivot of American history takes for granted the inadequacy of triumphalist views of the Civil War. It was not a “battle cry of freedom.” Slavery was central, but for economic rather than moral reasons. The North represented economic modernity and the ethos of material progress; the economy and ethos of the South, based on slavery, was premodern and static. The West — and with it the shape of America’s economic future — was up for grabs, and the North grabbed it away from an equally determined South. Except for the abolitionists, no whites, North or South, gave a damn about blacks. How the West (like the North and South before it) was grabbed, in an orgy of greed, violence, and deceit against the original inhabitants, is a familiar story.

Even more than in Beard, Berman finds his inspiration in William Appleman Williams. When McKinley’s secretary of state John Hay advocated “an open door through which America’s preponderant economic strength would enter and dominate all underdeveloped areas of the world” and his successor William Jennings Bryan (the celebrated populist and anti-imperialist!) told a gathering of businessmen in 1915 that “my Department is your department; the ambassadors, the ministers, the consuls are all yours; it is their business to look after your interests and to guard your rights,” they were enunciating the soul of American foreign policy, as was the much-lauded Wise Man George Kennan when he wrote in a post-World War II State Department policy planning document: “We have about 50 percent of the world’s wealth, but only 6.3 percent of its population … In this situation, we cannot fail to be the object of envy and resentment. Our real task in the coming period is to devise a pattern of relationships which will permit us to maintain this position of disparity … To do so, we will have to dispense with all sentimentality and day-dreaming; and our attention will have to be concentrated everywhere on our immediate national objectives … We should cease to talk about vague and … unreal objectives such as human rights, the raising of the living standards, and democratization. The day is not far off when we are going to have to deal in straight power concepts. The less we are then hampered by idealistic slogans, the better.”

As a former medievalist, Berman finds contemporary parallels to the fall of Rome compelling. By the end of the empire, he points out, economic inequality was drastic and increasing, the legitimacy and efficacy of the state was waning, popular culture was debased, civic virtue among elites was practically nonexistent, and imperial military commitments were hopelessly unsustainable. As these volumes abundantly illustrate, this is 21st century America in a nutshell. The capstone of Berman’s demonstration is a sequence of three long, brilliant chapters in Dark Ages America on the Cold War, the Pax Americana, CIA and military interventions in the Third World, and in particular U.S. policy in the Middle East, where racism and rapacity have combined to produce a stunning debacle. Our hysterical national response to 9/11 — our inability even to make an effort to comprehend the long-festering consequences of our imperial predations — portended, as clearly as anything could, the demise of American global supremacy.

What will become of us? After Rome’s fall, wolves wandered through the cities and Europe largely went to sleep for six centuries. That will not happen again; too many transitions — demographic, ecological, technological, cybernetic — have intervened. The planet’s metabolism has altered. The new Dark Ages will be socially, politically, and spiritually dark, but the economic Moloch — mass production and consumption, destructive growth, instrumental rationality — will not disappear. Few Americans want it to. We are hollow, Berman concludes. It is a devastatingly plausible conclusion.

An interval — long or short, only the gods can say — of oligarchic, intensely surveilled, bread-and-circuses authoritarianism, Blade Runner- or Fahrenheit 451-style, seems the most likely outlook for the 21st and 22nd centuries. Still, if most humans are shallow and conformist, some are not. There is reason to hope that the ever fragile but somehow perennial traditions and virtues of solidarity, curiosity, self-reliance, courtesy, voluntary simplicity, and an instinct for beauty will survive, even if underground for long periods. And cultural rebirths do occur, or at any rate have occurred.

Berman offers little comfort, but he does note a possible role for those who perceive the inevitability of our civilization’s decline. He calls it the “monastic option.” Our eclipse may, after all, not be permanent; and meanwhile individuals and small groups may preserve the best of our culture by living against the grain, within the interstices, by “creating ‘zones of intelligence’ in a private, local way, and then deliberately keeping them out of the public eye.” Even if one’s ideals ultimately perish, this may be the best way to live while they are dying.

There is something immensely refreshing, even cathartic, about Berman’s refusal to hold out any hope of avoiding our civilization’s demise. And our reaction goes some way toward proving his point: We are so sick of hucksters, of authors trying — like everyone else on all sides at all times in this pervasively hustling culture — to sell us something, that it is a relief to encounter someone who isn’t, who has no designs on our money or votes or hopes, who simply has looked into the depths, into our catastrophic future, and is compelled to describe it, as Cassandra was. No doubt his efforts will meet with equal success.
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With U.S. home values falling by nearly 25% since peak in 2007, many homeowners are now underwater in their mortgages, meaning they owe more than their home is worth. Search our interactive map to discover what percentage of homes in your county or ZIP code are in negative equity, based on Zillow's first quarter 2012 data.

http://www.zillow.com/visuals/negative-equity/

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Welcome to
the_recession!


Welcome visitors, members one and all! I hope you find this community as informative, useful and entertaining as we do!

If you haven't done so already, please take a moment to review the couple of guidelines we have in place by clicking on the community profile. From the main profile page you can also familiarize yourself with the many websites and resources members have recommended since this community started. Some of our personal favorites include Calculated Risk, Economic Cycle Research Institute & Jeffrey Frankel's Blog.

You may also want to participate in our LiveJournal Global Economic Poll - "The Economy Around The World: A Real Live Journal Global Poll" .

As the economies around the world teeter once again, with many already having slipped into "Growth Recession" if not outright technical recession, and with many more looking at the real possibility of outright recession in 2012 and 2013, "the recession" in 2011 was seeming mild by way of comparison to what could be lurking just around the corner.

Will "Recession 2012" look as bad as "The Great Recession" of 2007-2009? Could we skirt by this time without a full-on economic death spiral? Will the economy get better by election day? Or will Obama lose the election for economic reasons? (Presidential elections are usually won or lost for base economic reasons in this country, after all).

Stay tuned. I think it's fair to say that it is going to continue to be a pretty wild ride for the world economy for some time to come. Recession 2013? Recession 2014? Did the Great Recession ever really end in the first place? Many think not!









Give Yourself a Raise!

There are several home business tax tips that could save you money, even if you do not yet have an established home-based business.

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ECRI Weekly Leading Index

Has a moderate lead over cyclical turns in U.S. economic activity. Data begins in 1967.


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Is your state essentially in expansion or recession?
Lt Green-Dark Green: Growing-Faster.
Gray: No growth.
Pink-Dark Red: Contracting-Faster.


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What is the
definition of recession?


According to the laypress, and even many economists, a recession is defined as two consecutive quarters of negative GDP (Gross Domestic Product). While this very simple definition is usually the case during recessions, it is not always so.

Most experts now acknowledge that GDP alone is an insufficient determinant of recession.

For one, GDP is often revised several quarters - even years - later, as more complete information becomes available that changes the components of the earlier, initial GDP estimates in what can be very substantial ways.

For another, not all serious downturns exact as serious a toll on GDP. Often, the decline is much more pronounced in GDI (Gross Domestic Income) and/or employment. If the income or employment of a nation is undergoing a pronounced, pervasive and prolonged decline even if for whatever various reasons its GDP may be holding up, is it not foolish to deny that a recession is underway?

For these reasons and others, the NBER (National Bureau of Economic Research), the official arbiter of recessions and expansions in the United States, determines whether or not the US has fallen into recession using a much more holistic approach.

As the NBER explains it:
Q: The financial press often states the definition of a recession as two consecutive quarters of decline in real GDP. How does that relate to the NBER's recession dating procedure?

A:
Most of the recessions identified by our procedures do consist of two or more quarters of declining real GDP, but not all of them. In 2001, for example, the recession did not include two consecutive quarters of decline in real GDP. In the recession beginning in December 2007 and ending in June 2009, real GDP declined in the first, third, and fourth quarters of 2008 and in the first quarter of 2009. The committee places real Gross Domestic Income on an equal footing with real GDP; real GDI declined for six consecutive quarters in the recent recession.

Q: Why doesn't the committee accept the two-quarter definition?

A:
The committee's procedure for identifying turning points differs from the two-quarter rule in a number of ways. First, we do not identify economic activity solely with real GDP and real GDI, but use a range of other indicators as well. Second, we place considerable emphasis on monthly indicators in arriving at a monthly chronology. Third, we consider the depth of the decline in economic activity. Recall that our definition includes the phrase, "a significant decline in activity." Fourth, in examining the behavior of domestic production, we consider not only the conventional product-side GDP estimates, but also the conceptually equivalent income-side GDI estimates. The differences between these two sets of estimates were particularly evident in the recessions of 2001 and 2007-2009.

Q: How does the committee weight employment in determining the dates of peaks and troughs?

A.
In the 2007-2009 recession, the central indicators–real GDP and real GDI–gave mixed signals about the peak date and a clear signal about the trough date. The peak date at the end of 2007 coincided with the peak in employment. We designated June 2009 as the trough, six months before the trough in employment, which is consistent with earlier trough dates in the NBER business-cycle chronology. In the 2001 recession, we found a clear signal in employment and a mixed one in the various measures of output. Consequently, we picked the peak month based on the clear signal in employment, as well as our consideration of output and other measures. In that cycle, as well, the dating of the trough relied primarily on output measures.

Q: Isn't a recession a period of diminished economic activity?

A:
It's more accurate to say that a recession–the way we use the word–is a period of diminishing activity rather than diminished activity. We identify a month when the economy reached a peak of activity and a later month when the economy reached a trough. The time in between is a recession, a period when economic activity is contracting. The following period is an expansion. As of September 2010, when we decided that a trough had occurred in June 2009, the economy was still weak, with lingering high unemployment, but had expanded considerably from its trough 15 months earlier.









What is a
"Double Dip Recession"?


In the most general sense a Double Dip Recession occurs when an economy falls back into contraction for at least a couple of months (usually at least six) after a relatively brief expansion.

By this definition, the recession of 1981-82 which followed a year-long expansion after the very short, two quarter's long 1980 recession, seems to qualify. Also by this broad definition, the 1937 recession that occurred four years after the end of the 1929-1933 recession also qualifies. While each of those were technically "new" recessions, they happened so soon after their predecessors that many people tend to think of the separate 1980 & 1981-82 recessions as one nasty, long recession. Similarly, most people think of the 1929-1933 & 1937 recessions as encompassing "The Great Depression."

Another definition of a "Double Dip Recession" would be that of a recession which technically has not ended, and was only punctuated by a quarter or twos worth of head-fake rise in GDP. Many recessions throughout history have had such false hopes, only to swoon back down into contraction, until they finally came to an end.


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List of Recessions:
Post-1900 US Recessions

Mo/Yr Started Duration
Sep 1902 - 23 Months
May 1907 - 13 Months
Jan 1910 - 24 Months
Jan 1913 - 23 Months
Aug 1918 - 7 Months
Jan 1920 - 18 Months
May 1923 - 14 Months
Oct 1926 - 13 Months
Aug 1929 - 43 Months
May 1937 - 13 Months
Feb 1945 - 8 Months
Nov 1948 - 11 Months
Jul 1953 - 10 Months
Aug 1957 - 8 Months
Apr 1960 - 10 Months
Dec 1969 - 11 Months
Nov 1973 - 16 Months
Jan 1980 - 6 Months
Jul 1981 - 16 Months
Jul 1990 - 8 Months
Mar 2001 - 8 Months
Dec 2007 - 18 Months


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What is
Gross National Happiness (GNH)?


An alternate measure of a nation's wealth was conceptualized several decades ago as a means of cutting through the overemphasis on materialism of traditional wealth measures, and seeing the bigger picture.

According to GNHUSA.Org

  Gross National Happiness (GNH) is an indicator developed in Bhutan in the Himalayas, based on the concept elaborated in 1972 by the then King Jigme Singye Wangchuck. Since then, the kingdom of Bhutan, with the support of UNDP (UN Development Program), began to put this concept into practice, and has attracted the attention of the rest of the world with its new formula to measure the progress of a community or nation.

GNH is based on the premise that the calculation of "wealth" should consider other aspects besides economic development: the preservation of the environment and the quality of life of the people. The goal of a society should be the integration of material development with psychological, cultural, and spiritual aspects - all in harmony with the Earth.

The Four Pillars of GNH

  • the promotion of equitable and sustainable socio-economic development
  • the preservation and promotion of cultural values
  • the conservation of the natural environment, and
  • the establishment of good governance.



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