Monthly Archives: December 2008

Economic Crisis Erodes Community

Most view the current global economic crisis as simply an economic crisis, but the secondary effects may be much broader. As noted in my blog post “Social Loss for Job Loss,” loss of social capital (empowerment from participation in community and civic affairs) tends to follow job loss in early or mid-career. The unemployed person loses social capital, not so much from the community being weaker, but from personally dropping out of participation in community.  

            Sociological research among 99 randomly selected small towns in Iowa found that loss of social capital not only results from loss of jobs, but also a variety of other negative economic shocks. These economic crises in small towns may include a plant closing, a school closing, toxic environmental contamination, or a natural disaster.

            Sociologists Terry Besser, Nicholas Recker, and Kerry Agnitsch of Iowa State University studied nearly 100 small towns in 1993 and again in 2004. The results of their study were published in the academic journal Rural Sociology in December 2008 (73, 4, December, pp. 580-604). They documented the loss of social participation, and social capital more broadly, tended to follow negative economic shocks. Furthermore, they found that the loss of social capital was greater the greater, the stronger and more frequent the shocks.

            Besser, Recker and Agnitsch also found that economic crises were more detrimental when the shock exposed differences of values within the community regarding appropriate economic response. Examples of value conflicts include using tax incentives to attract a controversial factory or termination of welfare benefits for a given class of citizens. Perhaps most remarkable was their finding that a series of small shocks produced as much damage on a town’s social quality of life as did a single, large shock.

            Some make folk-wisdom claims that “hardship builds character” and “failure offers the foundation for success.” This occasionally may be true for individuals, but this research does not provide evidence that financial crises helps communities.

            What we face now is a gigantic national and global economic shock. This shock is a jolt of such mammoth proportions that the social effects may be best described as a sociological disaster or social tsunami. That does not mean that we cannot learn a great many things from it. Hopefully economists and political leaders will remember the implications of the current financial crisis for many generations to come.

Social Loss from Job Loss

One of the most important scientific findings by sociologists is that people who lose their jobs during the prime of their careers end up also losing a lot of social capital (less involvement in their communities). Such a loss is tragic not only for those unintentionally unemployed, but for their communities and societies as well.

            In my last posting, I asked the question: “Where are the sociologists in a time of financial crisis?” I found a major study that shows the type of research that can be done by sociologists to help us evaluate the full impact of the current economic crisis.

            Jennie Brand, assistant professor of sociology at UCLA, earned her PhD at the University of Wisconsin and carefully analyzed data from the Wisconsin Longitudinal Study. In her article with Sarah Burgard, which was published in the September, 2008 issue of Social Forces, she confirmed that job loss produced major drops in social capital, that is, the ability to use ties to other people to help them and others function more effectively.

            Specifically, this loss of social capital meant that people displaced from their jobs in early or mid-career became less likely to be able to network to get another job, but also to get and give social support in general.

            Jennie Brand’s study involved workers during the period of 1975 to 2004, so it does not include those unemployed during the 2008 economic crisis. And it also was limited to high school graduates, but despite these limitations, the study gives very generalizable findings because it was based upon systematically following and re-surveying many people for many years.

            The crisis in community involvement is more sociological than psychological. It consists of changes in people’s inter-connectedness to other people. Think of it as rips in the social fabric.

            During the past year, 1.9 million Americans lost their jobs, with 533,000 losing them last month. That is the largest loss of jobs in any one month since 1974, according to the BLS report. The percent underemployed now is 12.5%. The underemployed are those who are unemployed or working part-time but seeking full-time work, but not including those unemployed but no longer looking for work. Another way of looking at the situation is that one in eight American workers is partly or fully displaced from their jobs.

            The principal conclusion from all of these data is that not only will the period ahead be one of financial crisis but one of social crisis as well.

Where are the sociologists in a time of financial crisis?

During the past year 1.9 million Americans lost their jobs, with almost a third of those losing them last month. When the U.S. Bureau of Labor Statistics (BLS) released these numbers this week, one of the Bureau’s commissioners said the report was probably the most negative report in BLS’s 124 year history.  

          Meanwhile this year over 2 million houses went into foreclosure. Many of those losing their homes did not lose their jobs; they were at least somewhat fortunate. But the firings and foreclosure together affected over 3 million workers.

          In the past year while the stock markets fell by nearly 50%, my retirement savings dropped 25%. I would imagine that most sociologists felt equivalent personal financial losses this year. Even those putting their savings in “fixed income” retirement funds have lost money because of the collapse of the bond markets.

          Despite the huge magnitude of this economic trauma, sociologists appear to be silent about the financial crisis. The American Sociological Association’s newsletter, Footnotes, has not mentioned the crisis nor is it a special topic of the forthcoming annual convention. It is even scarcely mentioned in Contexts magazine’s blogs. Isn’t there a big enough hurt yet to talk about?

          This month, after economists have begun comparing our current financial crisis to the great depression, the government finally admitted that the United States economy was in a recession. Ironically, they also added that we had been in a state of economic recession for 12 months.

          Sociologists, like the American government, have not told the public anything about the financial crisis. Wait, isn’t that criticism a bit unfair? After all, it takes at least a year or two, if not three, to conduct a thorough study. But have we not learned what social effects resulted from previous economic recessions and depressions? Maybe. It is difficult to find discussions in the sociological literature on this topic.

          About the only one discussing the sociological effects of the current recession is David Brooks, a journalist who writes Op-Ed Columns for the New York Times. Last month in “The Formerly Middle Class”, he wrote that those on the low rungs of the middle class are those for whom the recession is the most catastrophic. “Recessions breed pessimism,” he wrote, and he claimed that millions of Americans, to say nothing of the billions in the developing world, are “facing the psychological and social pressures of downward mobility.”

          Career reversals and job loss yields serious self-doubt, he argued. For the formerly middle-class, housing reversals mean returning from suburban dream homes to run-down apartments, to paraphrase David Brooks’ message.

          Brooks’ most interesting theories have to do with social capital and social identity. Quoting Robert Putnam, he argues that economic depression yields social isolation because people have to stay home more and their community bonds break up. In fact, the history of our great depression shows that suicide rates and divorce rates went up while birth rates went down.

          These predictable trends yield alienation and social protest, and therefore Brooks predicts that the next big social movements will start from the formerly middle class.

          Much of this analysis is conjecture, but isn’t it more relevant than any other sociological topic these days? Economic forecasters share the hunch that the economy will continue to worsen for at least a year. It is very likely that most of us in the middle class will have lost half of the value of our assets before the recession is over. Few will not face sacrifices, struggles and maybe even suffering during the years ahead. What can sociology say now, not next year, to help us understand better what is happening so that we can get through this with greater understanding, and compassion for ourselves as well as for others?