THE BLOG
09/18/2013 04:52 pm ET | Updated Nov 18, 2013

New Stats Confirm -- Capitalism Was Bailed Out and All We Got Was This Lousy T-Shirt

The bubble burst. Kingpins toppled. And the global financial system suffered a sickly wobble.
September 14, 2008 was the disaster's fountainhead. The New York Times called that bloody Sunday "one of the most dramatic days in Wall Street's history." The wreckage of the financial system was epic. The nation's oldest money fund, Lehman Brothers, imploded with an unprecedented bankruptcy. And American International Group (AIG), teetering under staggering loses, stabilized only after absorbing a $182 billion bailout. The contagion spread across the entire economy and around the globe.

Almost no one escaped unscathed. But the biggest hits and deepest descents were imposed on those at the bottom of the income pyramid -- the nation's poor, near poor, and middle class. And little has changed.

Yesterday, the Census Bureau released the annual update for poverty conditions in the U.S. As the chart demonstrates, poverty soared and there's been no recovery on this key metric. At best, the downward spiral has only just now stabilized. Finally at least poverty is no longer rapidly growing. However, neither the number nor the incidence rate of poverty seems to be budging despite Gross Domestic Product growth, soaring corporate profits, and some modest increases in total jobs and declines in unemployment.

2013-09-18-USPopulationinPovertyandRate.JPG

The income statistics reported yesterday, in fact, further highlight that malaise for the poor, near poor, and middle class continues. 2012 median household income nationwide was $51,017. That is down a full 9 percent from the inflation adjusted peak of $56,080 in 1999. Most people had no gains since the economic trough of 2009. Some groups are doing even worse than the average, however. Men working full-time, for example, had a real median income in 2012 of $49,000, barely higher than their comparable figure of $47,000 in 1970.

What tow truck can pull us out of the ditch and on to a higher road? Let's do a quick SWOT analysis of three leading contenders.

Federal Government Action: Monetary policy, according to many, has run its course. Some are already calling for the Federal Reserve's foot to pull up from the accelerator despite acknowledging that the recovery is at best anemic. Fiscal policy, after a burst of stimulus action way back at the start of the first Obama term, is tied in knots. Most simply now hope to avert further disasters than for helpful action. And anti-poverty programs may be the area of least opportunity. Food stamps (Supplemental Nutrition Assistance Program) use increased markedly since 2007 due to poverty and under and unemployment. Last year, the government committed just over $78 billion for SNAP (half the bailout to AIG). This investment in child health and family nutrition has long enjoyed bipartisan support. Today, it is a lightning rod with demands for deep cuts and some support for massive overhaul.

Nonprofits and Philanthropy: In a recent Chronicle of Philanthropy article, Georgetown University's Pablo Eisenberg, noted a troubling reversal of trends:

In the last decade or so, nonprofits have stopped caring about the plight of the poor. Back in the 1980s and 1990s, nonprofits jointed together when cuts in social safety net program were proposed.... Today, matters of poverty seem to be off the radar screen of nonprofits.

Beyond "voice," nonprofits are also in the midst of a budget squeeze -- again prompted and worsened by the Great Recession. Total giving to nonprofits and causes as reported by Giving USA declined sharply due to the recession and is yet to recover. This may be the second-slowest "giving recovery" from a recession since 1971. At the current trajectory, a decade or more may slip by before the ground lost to date is regained. Pleading "lack of resources" by individual, philanthropy and other givers would not comport with the real potential. But that potential is hard to tap for this precise purpose. As Phil Buchanan, President of the Center for Effective Philanthropy noted in a recent Chronicle article:

But the data suggest that the bulk of giving goes to activities not focused on leveling the playing field. Yes, some of the dollars directed to religious and educational institutions - the two biggest pieces of the pie, might be allocated to alleviate poverty or create upward mobility, but most is not.

But there are some interesting developments from the sector as well. REDF, a venture philanthropy expanding beyond its California base, combines the tools of nonprofits and businesses to expand economic opportunity. Youth and adults who otherwise face bleak prospects get employment at enterprising nonprofits that generate products or services in demand in the marketplace. At the Annie E. Casey Foundation and others in the Mission Related Investment movement, approaches are being developed and deployed to engage the corpus of endowments (potentially many times greater than annual grants budgets) directly into investing in jobs and expanding economic opportunity for communities and people in poverty.

Private Sector and Business: Philanthropy and nonprofit leaders often view business as the problem across a range of issues -- inequality, environment, social justice, and etc. They see irreducible limits in what business firms will do without the compulsion of legislative prompting, regulatory action, and/or judicial enforcement. That in fact may be true for a large segment of the business world. At the Hitachi Foundation, however, we note that there is great potential and huge gains that may be mined from engaging the power, resources, and will of the for-profit world.

For example, there are encouraging signs from a national survey of employers of lower-wage workers conducted by AP/NORC for the Joyce and Hitachi Foundations and released earlier this year. Almost all employers (88 percent) invest in skill development and training for their lower-wage workers. They are motivated to do so for business gains (a durable purpose) such as: improving quality (69 percent); retaining current workers (69 percent); and meeting current skill needs (61 percent). A full half of employers are extremely or very confident that they will be able to invest in training current lower-wage workers to keep up with new technologies and skill requirements. This is doubly important because employers have the lion's share of the resources dedicated to skills and talent development. In 2011, US employers committed $156 billion to employee learning -- far outstripping the $18 billion across the plethora of federal training and skill-building programs.

The Hitachi Foundation also extracted lessons from close examination of 90 firms in manufacturing and health care. They were under our microscope precisely because they generate great business by actions and investments that also yield significant earnings gains and career advancement for lower-wage, frontline workers. That demonstrates that some successful models yield the "greater good" double-bottom line gains that our economy and country so desperately need now. More recently, Hitachi Foundation President and CEO Barbara Dyer launched the first in a series on the "Laboratories of Capitalism" to continue and extend the discussion of how and why some firms are making a huge difference while making great profits.

Blog posts reflect the views or opinions of the author, and not necessarily the Foundation Board, Hitachi, Ltd., Hitachi America, Ltd., or any Hitachi company affiliate.