You’ve heard economics called a “dismal science.” Is that fair? Economics encompasses every human activity – a gadget or algorithm or business scheme dreamed up in Palo Alto, Mumbai, São Paulo, Lagos, or Dacca; a food fad fused together by a chef in Guadalajara or Tulsa or Oslo; an industrial process for faster, cheaper, better car parts or solar panels. A productive employee. An attentive shopkeeper. A prolific playwright.
Economics tries to describe the whir and hum of work. Walt Whitman did perhaps a better job of it when he listened to America at work and heard it singing. If politics is how we manage ourselves, economics is what we put our shoulder into, devote our time to, risk, invent, buy, or sell. How dismal is that?
In a Monitor cover story, Mark Trumbull profiles the most powerful person in the world of economics, the new chair of the Federal Reserve, Janet Yellen. This is an accomplished individual, a diligent and self-aware student who dived deeply into economics and was a crucial influence on economics policy as the No. 2 to former Fed chair Benjamin Bernanke.
Dr. Yellen, it is safe to say, knows how to work the knobs and levers of central bank policy. She has considered the varied theories about how to manage the world’s biggest economy. She has lived through the cycles her predecessors managed and taken lessons from them.
If the economy were a person, its modern résumé might read like this: Born in 1945 from the ashes of world war, it built up its strength through the 1950s. In the ’60s, it was vibrant and expansive but also careless, consuming cheap energy and wasting resources. By the ’70s, it was sputtering and drifting, racked by inflation. It found its footing with the monetary discipline instilled by Fed chair Paul Volcker. Under his successor, Alan Greenspan, the economy became prosperous, then more so, then positively giddy. And then the music stopped.
Millions lost their jobs. Dr. Bernanke applied unprecedented measures to keep the Great Recession from becoming a depression. This included pumping an extraordinary amount of money into the banking system. Where are we now? Some economists believe 2014 will be the year that the economy finally reverts to normal. If so, Yellen’s job will be to take central bank policy from extraordinary back to ordinary.
She’ll be careful at that. She’s known to be a hawk on unemployment, well aware of the individual and collective tragedy of joblessness, especially long-term joblessness. “These are not just statistics to me,” she said in a speech last February. “We know that long-term unemployment is devastating to workers and their families. Longer spells of unemployment raise the risk of homelessness.... When you’re unemployed for six months or a year, it is hard to qualify for a lease, so even the option of relocating to find a job is often off the table. The toll is simply terrible on the mental and physical health of workers, on their marriages, and on their children.”
Like a conductor, a Fed chief wields power through both direction and persuasion. The economy is vast and varied, a place where millions of workers are singing. The new Fed chief’s job will be to help us hear voices that have been silent for too long.
John Yemma is editor of the Monitor. He can be reached at email@example.com.