Ten years ago this month marked the bottom of the worst stock market decline the United States has seen since the Great Depression. In the 17 months leading up to March 2009, the value of all U.S. stocks dropped from a peak of $22 trillion to $9 trillion, a staggering loss of wealth.
At Duke University, where I teach, most of the undergraduate students are too young to have been meaningfully impacted by the financial crisis, or even remember it. But ten years ago, college seniors were about to enter the worst job market in over 70 years. Considering that graduating during a recession can result in a lifetime earnings loss of $60,000 to $100,000, those graduates will feel the financial consequences of the crisis for the rest of their lives.
Thankfully, a strong labor market awaits the class of 2019. And given the stock market has recovered all its crisis-era losses and then some – and now ranks as the longest bull market in history – today’s students may fairly wonder why the crisis is so important and worthy of study.
While these students may not feel the impact of the crisis directly in their pocketbook, they are about to begin their careers in a world that continues to be shaped by what happened in in 2008 and 2009.
Take our current political climate. The bank bailouts that were initiated by the Bush administration and continued under the Obama administration gave rise to the Tea Party Movement, which emerged as a formidable political force in 2009. Much of the Tea Party’s rhetoric and policies were adopted – some might say co-opted – by presidential candidate Donald Trump, who frequently criticized Wall Street excess on the campaign trail and even called for a return of the Glass-Steagall legislation that had separated commercial and investment banking for over sixty years after the Great Depression (upon taking office President Trump quickly did an about-face and embraced Wall Street).
On the left, frustration over the financial crisis and the government’s response fueled the emergence of the Occupy Wall Street movement. While the Occupy movement was less successful than the Tea Party in terms of electoral gains, its ideology lives on in the high-profile presidential candidacies of Sen. Elizabeth Warren and Sen. Bernie Sanders, who have both called for breaking up the big banks.
In many European countries, the financial crisis and the austerity policies that followed paved the way for new, or resurgent, nationalist and populist political parties. And of course the Brexit debacle is a direct result of economic anxiety triggered by the financial crisis.
Wealth inequality is one of the defining issues of our time, and it too has been profoundly influenced by the financial crisis. Because the lower and middle classes hold a higher proportion of their wealth in housing compared to the rich, who hold a higher proportion in stocks, the precipitous decline in home prices during the crisis and the subsequent rebound in stock prices led to what researchers at the University of Bonn have referred to as “the largest spike in wealth inequality in postwar American history.”
The financial crisis also fanned the flames of the opioid epidemic. Communities hardest hit by the recession saw the biggest jump in opioid abuse. The Department of Health and Human Services found that from 2006 to 2016, a 1 percentage point increase in a county’s unemployment rate was associated with a 5.1 percent increase in the opioid-related hospitalization rate.
If young people today truly want to “change the world,” they must understand the forces that shaped the world they seek to change. For the most pressing problems confronting our society today, there is no greater force than the financial crisis. Let us learn from history, so that we not only don’t repeat it, but use it to make the future a bit better.
Ten Years from the Bottom
Duke University is hosting a one-day conference on March 20 that will reflect upon the lasting impact of the financial crisis. The conference is free and open to the public, and will feature discussions with leading figures in business, banking, finance, and government.