Is Global Recession Increasing U.S. Engagement?

(Flickr photo by jam343)

Typically and historically the effects of a great recession or significant levels of unemployment have been greater civic disengagement.

There have been interesting studies on this:

• The classic study of the sociological effects of a great recession was in Marienthal by sociologists Jahoda, Lazarsfeld, and Zeisel. They examined the effects of the Great Depression on a tiny Austrian town, 20 m SE of Vienna, in 1931-1932, that captured the psychological costs for individuals exposed to prolonged unemployment, thrown into a vicious cycle of reduced opportunities and reduced aspirations to the point where they didn’t fully pursuing available opportunities.  Many workers were unemployed following the closing of town flax mill that affected nearly every Marienthal family; 2 years after closure in 1931, only one in five families had one or more wage earners with regular work and 75% of families were dependent on unemployment insurance.  Despite increased free time, people joined less, read library books and newspapers less, the public park fell into disrepair, and the once popular theater club was shuttered. The only organizations that benefited were those providing a direct financial benefit to individuals (e.g., the cycling club which offered insurance to members and the Social Democratic cremation society)  The unemployed men in a demonstration of their lower self-esteem and lack of purpose actually slowed down their walking speed and stopped more often.
• Bob Putnam in Bowling Alone (2000) Figure 8 (p. 54) charted the civic patterns over the last 100 years through the aggregate market share of 32 civic pillars (e.g., the Boy Scouts and Girl Scouts, Rotary, Red Cross, PTAs, etc.). The biggest single rapid decline in the last 100 years was in the Great Depression. A number of groups lost half of their members in 3-4 years in the 1930s.
• A 2008 study by Brand and Burgard using long-term panel data from the high school graduating class of 1957 in the state of Wisconsin showed that spells of unemployment have a permanent effect in depressing civic engagement.  Overview at http://newsroom.ucla.edu/portal/ucla/bowling-alone-because-the-team-55041.aspx .   Jennie Brand and Sarah Burgard.  “Effects of Job Displacement on Social Participation: Findings over the Life Course of a Cohort of Joiners.” Social Forces. (September 2008). The reasons for this long-term impact are not well-known but may also be psychological.
• Cristobal Young, a graduate student rising star in Princeton’s Sociology Dept., has a forthcoming thesis with a chapter on the time effects of unemployment showing that the big increase in the unemployed is time spent alone (up by about 160 minutes a day), controlling for standard socio-demographics. Time spent with family increased by 2.25 hours a day and time spent with friends increased by about 45 minutes, but both were actually lower than the increase in time spent with families and friends on a typical weekend day.  (This may be part psychological and wrapped up in self-confidence or shame, but clearly also partly a coordination issue with the schedules of friends and family members who often work weekdays and also may not want to socialize on weekday nights for that reason.)

The short answer is that we won’t know until a year or two from now when we have reliable large-scale data, but history is chastening on this score.  Obviously in this business, as the mutual funds warn, past performance is not necessarily indicative of future success.

But Annie Gowen of the Washington Post examines some tea leaves in “In Recession, Some See Burst of ‘Neighboring’; Tough Times May Be Helping Build Stronger Communities in D.C. Suburbs” (5/4/09) and asserts hopeful early signs.  She asserts that due to technology, governmental leadership and an active youth generation, this global recession is currently increasing engagement.

My own take is that in all likelihood there is clearly a positive impact of President Obama, who comes from a community organizing background and fully understands the importance of engagement.  He ran a campaign that mobilized scores of new voters into the political process and built up an e-mail list of 13 million supporters who expressed their hunger in staying involved.  He was a participant in our Saguaro Seminar, and early steps of his administration, like renewal and expansion of the national service legislation, and his volunteering on Martin Luther King day and organizing an effort to help others do so clearly provide a conducive backdrop to those with inclinations to serve.  Moreover, Bob Putnam and I have written about the 9-11 Generation, and this will certainly help bolster the country’s civic engagement, aside from the effects of the recession.

It could well be that the economy will be having a negative influence on civic engagement, but that some, and maybe all of this may be countervailed by the Obama effect and the 9-11 Generation.

In any event, the evidence Gowen of the Washington Post musters is fairly anecdotal:

– In Montgomery County (MD), for example, the number of new neighborhood groups has doubled

– “… in hard-hit Manassas (VA), active groups jumped from five to 20 in the past two years.”

–  Keith N. Hampton, an asst. prof. at U. Penn.’s Annenberg School, runs i-neighbors.org, a web site for neighborhood groups with 50,000 members. Hampton says that i-neighbors’ communication  is up 25% this spring over last spring.

Note:  Gowen doesn’t mention this in her article but there is clearly strong evidence (more related to the young generation of Americans) about big increases in interest in national service programs, like Teach for America, City Year, etc.  This is probably a consequence of 2 intersecting factors, the declining job opportunities for graduating seniors at universities, and a 9-11 Generation (those in H.S. or college at the time of the September 11 attack) that has been more interested in volunteering and politics than the generation that came before.

Another journalistic article that also stresses the positive impact of recession on volunteering is “Many who lose a job find a joy: Volunteering” (Atlanta Constitution, by Gracie Bonds Staples, 5/19/09)

Economy dangling by the thin thread of trust

from leonardosam, Flickr

These are unprecedented times for our economy (at least since the Great Depression). No one would have predicted several years ago that we’d see the federal government forced to take over the two largest mortgage holders (Freddie Mac and Fannie Mae), the largest worldwide insurer (AIG), and 3 of the 5 largest investment banks forced either to sell at bargain-basement prices, declare bankruptcy or get government assistance (Merrill Lynch; Lehman Brothers; Bear Stearns, respectively).

Underlying the well-working of the whole economic system both at the micro and macro level is trust. Other scholars have written about this before, most notably James Coleman in his 1988 discussion of Jewish diamond merchants in New York (“Social Capital in the Creation of Human Capital“); the merchants’ interconnecting networks and interpersonal trust allowed them to freely lend diamonds to each other for examination and ensure that the bags were honestly returned.  The social networks helped ensure that any short-term gains to be made through dishonesty would be swamped by being shunned in the future when one’s poor reputation spread through these networks.

But at the macro level, our economy also depends on trust:  Trust that the banking systems will continue to work. Trust that the U.S. government will be in a position to pay back all the money it borrows for Treasuries. Trust that stocks will go up or are a good place to park retirement assets. Trust that one’s money market fund that has nominally had an unguaranteed $1 per share price will continue to be so valued.  Trust that funding will be available in the future at reasonable rates.

When trust starts to dry up, these well-oiled financial systems can become remarkably rusty and liquidity and access to capital can dry up amazingly fast.  At the same time on Tuesday that AIG was trying to get billions pumped into their operations, they had a remarkably hard tapping credit;  the benchmark inter-bank LIBOR rate (used to peg many variable rate mortgages) literally nearly doubled in one day.

One of the spectacular ways in which one sees trust underlying our economy is in bank failures. While some bank runs are driven by fraudulent activity by the bank that suddenly cause everyone to question whether their assets’ security, normally we live with the fiction that our assets are there for us.  In reality of course, our bank deposits aren’t sitting in the bank, but the bank has lent out our money to make more money and to be able to pay us interest, meet their expenses and make a profit. The banks keep some small reserves to cover the expected levels of daily withdrawals, but these are desperately inadequate when we all decide to do this at the same time and the banks can’t get our cash back fast enough from borrowers. As “It’s A Wonderful Life” styled it, ‘Don’t Look Now, but there’s Something Funny Going on at the Bank, George.’

There was an interesting commentary on bank panics by Jane Kamensky (Brandeis) and this one (LA Times Op-Ed) and a talk show where she discusses the importance of trust to banks.

The FDIC tried to help create trust after the Great Depression by insuring our deposits up to $100,000, hoping that this would avoid runs on banks, although we are learning that this too depends on trust. There is some mounting evidence that the amounts FDIC maintains are not really adequate for a big financial meltdown. The FDIC used up one sixth of their total reserves just paying out to IndyMac depositors when that bank went under this summer. While the FDIC can raise premiums that banks pay for this insurance, at some point they run the risk that these higher payments will in turn make more banks unprofitable and force them to liquidate as well.

The economy is becoming like the veritable sausage axiom, don’t pay too much attention examining how it’s produced.

[For good background on what is going on with the economic woes, see “Diamond and Kashyap on the Recent Financial Upheavals”, these NY Times posts, or “Worst Crisis Since ’30s with No End Yet In Sight” (WSJ), likening crisis to doctors treating a patient in intensive care.]

Note: HybridVigor has an interesting post that concludes from the financial meltdown in 2008 that “Markets depend on trust, but self-interested egoists don’t engender trust.”  More specifically, “When it comes to social trust, free markets are freeloaders. Free markets are most efficient when a high degree of social capital exists, but the “flaw” Greenspan alludes to is simply the friction between egotism and trust. It turns out that trust, not egotism, is what keeps a market in check. But markets today encourage risky, self-centric, and flamboyant behavior. The Laws of Relation predict that relationships set up in this way result in everyone being worse off.”

Note also that David Brooks has a related article 4-5 months after this post called “An Economy of Faith and Trust” (1/16/09)