Real economy

Readers' Views No 237, May 2003
OECD Observer

Your series on the future (40th anniversary edition, OECD Observer No 235) raises interesting views about models for prosperity, growth and recovery. But a view from the ground paints a less optimistic picture.

Currently my wife and I are working in Manhattan, we own an apartment and are expecting our first baby. I work in IT and have lived well since the new economy boom. But the war along with the effects of the past few years since 9/11 have made us and many others rather apprehensive about what lies ahead, not only for this city, but for the economy in general.

Many companies in the New York area have been shedding staff at an alarming rate and there seem to be few new jobs on offer. A number of friends have been out of work for a while; I don’t think it occurred to many of them that they would still be looking for work after so long. Quite a far cry from the new economy days! Today, most companies are more interested in “productivity” increases than expanding staff. Some friends have managed to find work, but for far less money than they were capable of earning before.

One friend, an investment bank recruiter, has been out of work for almost two years. His area of work in the financial sector has shrunk by, in his estimate, a fifth since 9/11. Many of the companies in the financial sector are simply not hiring. Merrill Lynch recently announced layoffs. The city government of New York is set to release some 3,800 employees with a further proposed 3,200 in the works. Community and social services are being cut to the bone, affecting the quality of life in New York. Even the fire department, the “heroes” of 9/11, are expecting to close half a dozen firehouses in the city.

It is because of such uncertainties that people like my wife and I must rely on the low interest rate-fed real estate bubble for security in what are still uncertain circumstances. Yet, that means more debt, which many people here have to deal with. And maybe that bubble will burst too. Trying to feel confident when the stock market is in trouble or after recent corporate scandals is not easy. And not everyone is sure the tax cuts you highlight will deliver, what with projections for large budget deficits and the as yet unknown price tag of the war in Iraq.

These underlying economic issues have been pretty much ignored by the mainstream media and public in general during the war in Iraq. But the weak economy is still with us, which may explain the hesitant stock market, despite the fall of Baghdad.

—Eugene Clarke, New York City, United States

©OECD Observer No. 237, May 2003

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