Missing from almost all discussion of America's dizzying rate of unemployment is the brute fact that hourly wages of people with jobs have been dropping, adjusted for inflation. Average weekly earnings rose a bit this spring only because the typical worker put in more hours, but June's decline in average hours pushed weekly paychecks down at an annualized rate of 4.5 percent.
In other words, Americans are keeping their jobs or finding new ones only by accepting lower wages.
Meanwhile, a much smaller group of Americans' earnings are back in the stratosphere: Wall Street traders and executives, hedge-fund and private-equity fund managers, and top corporate executives. As hiring has picked up on the Street, fat salaries are reappearing. Richard Stein, president of Global Sage, an executive search firm, tells the New York Times corporate clients have offered compensation packages of more than $1 million annually to a dozen candidates in just the last few weeks.
We're back to the same ominous trend as before the Great Recession: a larger and larger share of total income going to the very top while the vast middle class continues to lose ground.
And as long as this trend continues, we can't get out of the shadow of the Great Recession. When most of the gains from economic growth go to a small sliver of Americans at the top, the rest don't have enough purchasing power to buy what the economy is capable of producing.
America's median wage, adjusted for inflation, has barely budged for decades. Between 2000 and 2007 it actually dropped. Under these circumstances the only way the middle class could boost its purchasing power was to borrow, as it did with gusto. As housing prices rose, Americans turned their homes into ATMs. But such borrowing has its limits. When the debt bubble finally burst, vast numbers of people couldn't pay their bills, and banks couldn't collect.
Each of America's two biggest economic downturns over the last century has followed the same pattern. Consider: in 1928 the richest 1 percent of Americans received 23.9 percent of the nation's total income. After that, the share going to the richest 1 percent steadily declined. New Deal reforms, followed by World War II, the GI Bill and the Great Society expanded the circle of prosperity. By the late 1970s the top 1 percent raked in only 8 to 9 percent of America's total annual income. But after that, inequality began to widen again, and income reconcentrated at the top. By 2007 the richest 1 percent were back to where they were in 1928--with 23.5 percent of the total.
We all know what happened in the years immediately following these twin peaks--in 1929 and 2008.
Yes, China, Germany and Japan have contributed to America's demand-side problem by failing to buy as much from us as we buy from them. But to believe that our continuing economic crisis stems mainly from the trade imbalance--we buy too much and save too little, while they do the reverse--is to miss the biggest imbalance of all. The problem isn't that typical Americans have spent beyond their means. It's that their means haven't kept up with what the growing economy could and should have been able to provide them.
A second parallel links 1929 with 2008: when earnings accumulate at the top, people at the top invest their wealth in whatever assets seem most likely to attract other big investors. This causes the prices of certain assets--commodities, stocks, dot-coms or real estate--to become wildly inflated. Such speculative bubbles eventually burst, leaving behind mountains of near-worthless collateral.
The crash of 2008 didn't turn into another Great Depression because the government learned the importance of flooding the market with cash, thereby temporarily rescuing some stranded consumers and most big bankers. But the financial rescue didn't change the economy's underlying structure -- median wages dropping while those at the top are raking in the lion's share of income.
That's why America's middle class still doesn't have the purchasing power it needs to reboot the economy, and why the so-called recovery will be so tepid--maybe even leading to a double dip. It's also why America will be vulnerable to even larger speculative booms and deeper busts in the years to come.
What I have found is the greed seems to delude people into thinking there is no future after they die, they are not committed to an improved world for their children or posterity, only concerned with "living for today" without any consideration for the expense to protect the future from recurrences or to ensure justice among all people.
http://www.huffingtonpost.com/ellen-brown/how-brokers-became-bookie_b_643350.html
I said to them, " I thought we were Capitalists!"....
Now the greed is back....well guess what, trouble is quickly brewing again. And this time it won't be so pretty.
The financial system collapse was merely the most recent and most egregious evidence of what America has become. Like a forest that’s been clear cut, our nation’s economy lies in ruin having been raped by the economic elite . . . and now they’re suddenly so fiscally responsible.
A trillion dollars in bail outs, another trillion on wars to open and protect new markets, and now . . . oops, we’re out of money. They tell us we can’t add anything more to the deficit, unless it’s by lowering taxes. What they’re really saying is, “Welcome to the new America” — the Republican America.
The powers behind this treachery are the very same thieves who cut taxes for the rich, sent our jobs overseas, and consistently fight to reduce wages and benefits. This is by design and they will not rest until they’ve destroyed the last vestiges of the New Deal and the labor movement. Welcome to the harvest of capitalism without democracy.
There’s one way back to prosperity for the middle class — raise taxes on the rich and invest in energy and infrastructure.
They'll be back again, mind that. They'll take their time just as they did back in the XIX century after Jackson, and again in the XX century with the creation of the FED, and subtly end in control of the money supply and thus Government. We also need to start thinking on a long term solution.
What appears to be happening is a "leveling of the bottom" in these expanded trade areas. So people whose primary income is based on their own labor is leveling. At the same time, people who control equity blocks now do so over a vastly expanded trading area with more players, more trades and more activity - so the tendency for ownership to pool upwards is amplified too.
With the baseline dropping and the topline lifting, funneling savings into meaningful ownership is becoming undoable, for big reasons that policy can soften but not stop. The old middle is gone, pegged at upper-low.
So what can we in the silicon slums do? Make life more hospitable for a new class of "middle-low" knowledge workers who'll never enjoy a fully ownership-based income: pool resources we do have in 21st C co-ops maybe? Envision a new mutually-backed secure "nouveau pauvre" society?
Trying to hammer the new world back into the old may be futile.
I think not. The Industrial Revolution gave birth to the Robber Barons of that time, and now the new global economy has created its own Boomer Barons. The last time around came to a climax with the Great Depression; this time it’s the Great Recession. The response in the 1930s was to invest in America, and that investment created the middle class we now see slipping away.
The middle class is now living on life support after 30 years of a disease known as movement conservatism. What we need now is a healthy dose of the same medicine that killed off the immoral germs the last time around — raise taxes on the rich and invest in America. We need jobs and the only way to create them in this economy is through government investment in energy, infrastructure and education.
By raising taxes on this group, we would be able to invest in creating an environment that can support full employment. Also when taxes were 90%+ on the highest incomes, more wealthy people invested into starting new businesses that create jobs then today, when wealthy people just accumulate income and invest in market bubbles where returns are taxed at low rates.
However back to Niel's point, we also need to have tariffs in place to avoid a global race-to-the-bottom. If we had tariffs that accounted for lower production costs due to environmental damage and lower wages paid in producing countries, jobs would return. Since America is traditionally the worlds' consumer, other countries' industries would see incentives to raise wages and environmental standards (perhaps after an initial trade war or two). We also can't afford "free" trade anymore.
U.S. citizenry, in mass, responds only to crisis. There are but four potential crisis ahead:
(1) Extended unemployment of a much larger number of people; an unemployment rate in the range of 15 - 20% perhaps. (2) Hyperinflation, as the dollar is superseded as the reserve currency of the world. (3) The chaos that will result from “peak oil”. (4) The chaos that results from global warming.
There is an interim period of time before either or all of these events transpire. The only plausible way to materially change from becoming an even stronger Plutocracy, or the full development of Fascism, is if a Warren Buffett or a George Soros and others of their ilk steps forward in support of the premise outlined in Ralph Nader’s book, Only the Super-Rich Can Save Us.
Other than that, in the mean time, looking for the leadership that could reverse the trend from the mid-’70’s will probably result in the same level of success as had the blind man, who, during the night in an unlighted room, was looking for his black cat that wasn’t there.
The size of the counterparty risk to BP's CSO's (Credit Synthetic Obligations) likely pales the size of Lehman' Brothers' CDS's & CDO's that intertwined the bank with the rest of the international financial system and helped bring about the (last) crash. BP is a 100 + year old company with House of Rothschild roots and more tangible assets then Lehman ever even claimed, meaning BP's credit was priced as low risk and sold everywhere. This means a downgrade could result in a credit event that forces counter-parties to pay funds they never had (think Goldman demanding payments from AIG), causing a massive systematic failure.
Many global corporations have been function without regulation of impunity for many years. If BP doesn't blow up, someone will. When they do, the banks are even bigger, the bad bets are now intertwined with nations as well as the whole financial system, the derivatives market is now estimated at 1.2 QUADRILLION $'s, over 20 times the whole worlds' GDP, bets are leveraged, banks are still using Lehman-like repo swaps to pad their assets, and no one's got money left to bailout nothing.
Have faith. It just takes a spark.
but the Bankster are just using it to gamble amongst themselves.
Outlaw all derivatives,
force investmnet back to main street.
outlaw political contribution,
bring democracy back to the USA.
Unfortunately the serfs believe liberalism is bad, and conservatism is good.
Thus all is lost.
This conclusion implies that the rich and SuperRich will suddenly realize the evil of their ways? They will change direction when they see it's implications for society as a whole? -- This is fantasy and I think the author has wrapped himself in some gauze of academia or illusion that is all too common. The rich getting richer and the poor getting poorer is no new academic insight: it's so commonly known it's a cliche. -- it is fueled somewhat by more overwhelming greed than perhaps the author can imagine. It's the type of greed that sells meds for diabetes, hiding the fact that it substantially increases the rate of heart attacks. It's the type of greed of BP. It's the greed of all our war profiteers, from Halliburton to Blackwater (or whatever names they now use). It's the greed that allows money to so dominate our politics, who votes for what and who gets elected (cash lobbying is just bribery). It's the type of greed that holds no one accountable for anything: torture, wars started with deliberate lies. bank scams, mortgage fraud, subsidizing the oil industry, subsiding sending jobs overseas, you name it....I'll still vote but we're in a deep swamp.
I find myself increasingly thinking that maybe the best tack for liberals is to just cease and desist. Were it not for the liberal voice, the conservatives would have what they truly want, with no excuses — a free market without democratic intervention. Corporate profits would soar and wages would plummet. Those lucky folk who still had jobs would find no protection and no benefits. The U.S. proper would become like our commonwealth in Saipan.
It would likely happen very fast, and just might be enough to wake up all the Fox fans who drink their cool-aid and regurgitate their nonsense. It just might make Robert Reich’s “far worse” alternative evident to even the most evangelized conservative cult followers.
One would think that the 8 years of Bushdom that culminated in the great Wall Street rip-off would have been enough, but like all cults, the political right blocks the flow of information from the outside and isolates its followers. Democratic acquiescence and unfettered Republican rule would end their con and likely bring on real revolution.
If we're gonna have a revolution, we're gonna need the south.
Everything, and I mean EVERYTHING you have proposed worked DISASTROUSLY in the Soviet Union, East Germany, and Communist China. China is going in EXACTLY the opposite direction from what you suggest so that they can pull their people OUT of poverty. Let me say that a different way: the Chinese have abandoned "equality of outcomes" so that many of it's people can prosper as opposed to continuing to do what you propose so that all will be equally poor.
The only way to put American's back to work, at all, is create a situation where the American worker is as productive on a $ in/$out basis as the Chinese, Indians, Singaporeans. There is nothing NOTHING the government can to do prevent the slide in US real-wages. There is no way to force anyone to sell to us, buy from us, or employ us.
If we would enforce that trade policy, you'd see those jobs returning to US soil because these corporations, as powerful and wealthy as they are, cannot afford to give up the US market.
We need some politicians with the courage and intergraty to propose this and make it stick.