3 Lessons from the Great Recession

Think back to 2008. It was an election year in the US, with then-Senator Barack Obama and Senator John McCain trading blows on the debate stage. Off the campaign trail, we were living through the Great Recession, watching the economy in seeming freefall thanks to a collapse in the US subprime mortgage market that quickly infected the entire global financial sector and wiped out more than half the value of the Dow Jones Industrial Average in just 18 months.

The echoes to our present moment are hard to miss. Not only are we staring at another monumental US presidential election this fall, but with COVID-19 killing thousands daily and the global economy hurtling toward the worst recession since World War II, all the failings and inequities of our current system are laid out for all to see.

What 2008 didn’t have, of course, was weeks of protests forcing racial injustice into the headlines and conversations across the planet, with millions of white Americans finally waking up to the reality of white supremacy and racism that people of color have lived with for centuries.

What 2008 also didn’t have was a clear and growing public consensus that we have to act boldly to slash fossil fuel emissions and make a just transition to clean energy, not just around the world but in the US too.

Together, they add up to a moment when – just as in 2008 – millions are looking critically at the system that got us here and asking if we can do better. And if history has anything to teach us, it’s that if we don’t look at the thousands dying every day and millions out of work as a sign that normal wasn’t working and act boldly, we’re setting ourselves up for even greater catastrophe down the line.

Fortunately, history and the Great Recession do have more to teach us. Maybe it’s time we listen.

Lesson One: Federal Investment Works

With 20.5 million Americans unemployed as of the end of May, it’s not a question of whether we need a massive federal recovery effort, but what kind.

The good news is that large-scale government investment can not only help get working Americans back on their feet, but also help cut greenhouse gas emissions in a big way and start us heading toward a more equitable society.

In fact, we saw it with the American Recovery and Reinvestment Act of 2009, which made the single largest investment in clean energy and efficiency ever, directing more than $90 billion to investments and tax incentives to create jobs and support low-carbon technology. Along the way, experts estimate that these investments supported 900,000 job years (a full-time job for a year) directly in clean energy technology from 2009–2015 (and many more indirectly in communities).

The success story goes beyond jobs alone. The Act also supported the Department of Energy’s Weatherization Assistance Program, which trained thousands of workers to make over 1 million low-income homes more energy efficient. The result: families saved more than $3,000 on their utility bills over the lifetime of the equipment and helped prevent the annual emissions equivalent of 17.7 million cars.

Another key part of the recovery was the Energy Efficiency and Conservation Block Grant Program (the feds really know how to make something roll off the tongue). The idea was pretty simple: provide a $3.2 billion pool of money to encourage cities, counties, and communities to develop a plan for reducing emissions that works for them – and then give them the funds to get it started. It wasn’t just the actual dollars that were critical here, but the incentive for many local leaders who hadn’t thought much about climate action on their own turf to get serious.

These are just two examples of many, but the key takeaway is that by investing big in a just and green recovery, we can create jobs and build an economy that works for all Americans. All while slashing emissions and helping stop rising temperatures in their tracks.   

Lesson Two: The Stakes Are Generational

There is a moral imperative to stimulus efforts and the recovery ahead. Because without a real just recovery effort, we could see the COVID recession cripple entire generations and communities of color already facing decades of institutional neglect and racism.

Just ask Millennials. This isn’t their first recession rodeo, after all.

When the Great Recession cratered the job market for millennials just entering the workforce or struggling through entry-level jobs, it didn’t just hurt their ability to get by week-to-week.

Researchers have found that people entering a job market with high unemployment – such as during the Great Recession – typically suffer a 10 percent income hit in the first year. Research finds that more than half of wage growth between 18 and 46 comes before the age of 30, meaning this loss is keenly felt with the result that the impacts of an economic crisis early in one’s career can take as long as 20 years to recover from. In fact, nearly half of millennials (46 percent) say they’re still recovering from the Great Recession.

As Annie Lowrey writes in the Atlantic:

“Put it all together, and the Millennials had no chance to build the kind of nest eggs that older generations did—the financial cushions that help people weather catastrophes, provide support to sick or down-on-their luck relatives, start businesses, invest in real estate, or go back to school.”

For Millennials just getting back on their feet, the prospect of another once-a-generation recession is devastating. For members of Generation Z just graduating college and starting their careers, the threat is existential. And that’s before we even get to the climate crisis that will shape their future.

There is a strong equity component here too. Most Americans suffered during the Great Recession, but people of color suffered the most. While overall unemployment peaked at 10 percent during this time, Black unemployment hit 16.8 percent and Latinx unemployment hit 13 percent. While white households lost 24 percent of their wealth, on average, Black and Latinx households lost a staggering 48 and 36 percent, respectively, and have not fully rebounded since.

Compounding the economic threat of a COVID-induced recession is the fact that these are the same communities who are already suffering the most from the disease itself. Black people comprise 13 percent of the US population yet comprise 23 percent of COVID-19 deaths, dying at a rate more than 1.5 times their share of the population.

The bottom line here is that we need to focus recovery on those who are already being the hardest hit by the disease and economic fallout and those with the most to lose: people of color, poor communities, and younger generations.

Lesson Three: Emissions Will Keep Rising without System Change

Remember all those beautiful images of city skylines and mountains finally emerging as pollution levels dropped around the world under lockdown? For a month or at least a minute, there seemed to be a wistful line of commentary wishing that maybe, just maybe the lockdown would also magically take care of the greenhouse gas emissions pushing us headlong toward climate catastrophe.

Yeah, no.  

Again, the Great Recession gives us a pretty good guess at what happens next if we continue without real system change. In 2009, the economic carnage of the recession  led to a 1.5 percent drop in global emissions.

Just as now, scientists and commentators were calling for the world to take a real look in the mirror and move from the recession to embrace the kind of systems change that would turn the emissions curve around – permanently. The Guardian for example, wrote “it would be a catastrophe if countries continued with business as usual,” quoting Fatih Birol, the head of the International Energy Agency, outlining how “We need an energy and environment revolution. Business as usual would increase temperatures by 6C.”

So what happened? Many countries did largely continue with business as usual as they emerged from the recession. Emissions started rising and this May, NOAA confirmed that levels of heat-trapping carbon dioxide in the atmosphere have now exceeded 417 parts per million. The highest in human history.

In 2020, we saw emissions fall thanks to the lockdown and analysts predict a 4–7 percent drop in emissions overall for the year. But with states and countries beginning to re-open, they’re shooting back up – fast.

The clear lesson is that a temporary pause and all the pain it brings isn’t going to halt rising temperatures and solve the climate crisis for us. What we need is not to pump the brakes on the fossil fuel economy for a minute, but to change the engine entirely. To make a just transition to clean energy and leave dangerous oil, coal, and natural gas behind and build a truly sustainable economy.

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