Who gains when the economy implodes?

By Dr. Julianne Malveaux —

The United States economy is cruising for a bruising. Inflation keeps ticking up thanks to, among other things, rising inflation. The job market is not performing as expected, and unemployment rates are ticking up. Private sector employment shed 22,000 jobs last month, while forecasters thought that private sector employment would increase. The government shutdown will cost jobs, and that man who lives in the House that Enslaved People Built (HEPB) says he will lay off or fire more people each day that the government is shut down. And health care costs are rising, which is one of the reasons Democrats held firm on dealing with health care as a condition to keeping government open. Bottom line, our economy is precarious.

Implosion may be a strong term. Economic indicates suggest we might experience stagflation, which means economic stagnation, combined with inflation. We might experience a mild recession, which means two quarters of negative economic growth. We might experience a deep recession or even a depression. But we know that the economy will not generate growth, stable inflation and rising employment unless something changes. That means that the majority of us will suffer. People will lose jobs and perhaps also their homes, businesses will close, and wealth will disappear. Uncertainty will make it challenging for both individuals and businesses to make decisions.

Even in recession, though, there are winners, people who find opportunity in economic distress and maximize it. During the 2008 recession, I remember meetings some young men in an Atlanta suburb who made thousands by packing and storing the belongings of evicted people. During COVID I met women who started catering businesses after they lost their restaurants. There is opportunity everywhere, though many have neither the resources nor the resilience to take advantage of those opportunities. Structurally, there are always “high rollers” who are gainers. This is important because we should look at these structural gainers as possibilities for taxation, not exploitation. In other words, if you are going to benefit from other people’s pain, you should have to pay for it.

Who are some of the winners when the economy implodes? The greatest gainers are those who are cash rich. People or corporations who used advantageous tax policies to stack cash in the past. It’s now cash they can invest in hard times. They can buy up foreclosed homes, distressed businesses, abandoned assets and more. They can even steal assets as those who leave property or resources on the table are not always legally equipped to protect their stuff. While this Congress is not likely to protect these people, especially given the near shuttering of the Consumer Finance Protection Bureau (CFPB) and the current hostility to government regulation.

Economic instability benefits the wealthy. It also benefits speculators, who short stocks, bonds or currencies and profit when markets lose value. Further, there are the hedge fund investors called “vulture investors” who buy the debt of a failing business and then benefit when the business recovers. They are called vultures for obvious reasons – they thrive on the death, or failure, of some businesses.

The others who benefit are those who are politically well-positioned. Banks lobbied for their bailouts during the 2008 recession, and they got them because they were perceived as “too big to fail”. This administration, the man who lives in THEB is notorious for self-serving double-dealing economic policy. Count on him, and his grifting family, to figure out ways for them to gains when the rest of the country loses. Consider their dealings in bitcoin and cybercurrency as an example of their perfidy.

When America has a cold, Black America has a fever, so while many will be affected by an economic implosion it will hit Black America most severely. The wealthy, the powerful, and the well-positioned gain, while those already on the margins, particularly Black communities, pay the steepest price. Indeed, recession-induced instability is partly responsible for the rapid gentrification of some Black communities after the 2008 recession. In addition to job losses, then, there are also housing losses that reshaped communities.

Black women, backbones of the Black community, are especially hard-hit. The much-reported fact that Black women lost more than 300,000 jobs in the past several month trickles down to students whose tuition may be unpaid, families who spiral down to instability, and communities in crisis,

Economic crisis benefits some people. We must do whatever we can to help those who have been further marginalized, but from a policy perspective, we must also target the winners and demand that they do their part to ameliorate the pains that economic implosion causes.