The Dow Jones Industrial Average hit 13,338 Tuesday, its highest since December, 2007. The S&P 500 added 16 points. Wall Street will remember May 1 as a great day.
But most of these gains are going to the richest 10 percent of Americans who own 90 percent of the shares traded on Wall Street. And the lion's share of the gains are going to the wealthiest 1 percent.
Shares are up because corporate profits are up, and profits are up largely because companies have figured out how to do more with less.
Payrolls used to account for almost 70 percent of the typical company's costs. But one of the most striking legacies of the Great Recession has been the decline of full-time employment -- as companies have substituted software or outsourced jobs abroad (courtesy of the Internet, making outsourcing more efficient than ever), or shifted them to contract workers also linked via Internet and software.
That's why most of the gains from the productivity revolution are going to the owners of capital, while typical workers are either unemployed or underemployed, or else getting wages and benefits whose real value continues to drop. The portion of total income going to capital rather than labor is the highest since the 1920s.
Increasingly, the world belongs to those collecting capital gains.
They're the ones who demanded and got massive tax cuts in 2001 and 2003, on the false promise that the gains would "trickle down" to everyone else in the form of more jobs and better wages.
They're now advocating austerity economics, on the false basis that cuts in public spending -- including education, infrastructure, and safety nets -- will generate more "confidence" and "certainty" among lenders and investors, and also lead to more jobs and better wages.
None of this is sustainable, economically or socially.
It's not sustainable economically because it has resulted in chronically inadequate demand for goods and services. That's meant anemic growth punctuated by recessions. Without a larger share of the economic gains, the vast middle class doesn't have the purchasing power to buy the goods and services an ever-more productive economy can generate.
It's not sustainable socially because it has resulted in rising frustration over the inability of most people to get ahead.
Austerity economics in Europe is fanning the flames, as public budgets are slashed on the false crucible of fiscal responsibility. In the United States, an anemic recovery and plunging home prices are taking a toll: a large portion of the public believes the game is rigged, and no longer trusts that the major institutions of society -- big business, Wall Street, or government -- are on their side. In Europe and America, 30 to 50 percent of recent college graduates are unemployed or underemployed.
Inequality is also widening in China, where the scandal surrounding Bo Xilai and his family is serving as a public morality tale about great wealth and official corruption. Students in Chile are in revolt over soaring tuition and other perceived social injustices.
It's a combustible concoction wherever it occurs: increasing productivity, widening inequality, and rising unemployment create tinder-box societies.
Public anger and frustration can ignite in two very different ways. One is toward reforms that more broadly share the productivity gains.
The other is toward demagogues that turn people against one another.
Demagogues use fear and frustration to advance themselves and their own narrow political agendas -- scapegoating immigrants, foreigners, ethnic minorities, labor unions, government workers, the poor, the rich, and "enemies within" such as communists, terrorists, or other conspirators.
Be warned. The demagogues already are on the loose. In Europe, fringe parties on the right and left are gaining ground. In America, politics has turned especially caustic and polarized. (The right is even accusing people it doesn't like of being communists.) No one knows where China is heading, but reformers and ideologues are battling some of it out in public.
May 1 may be a good day for the Dow Jones Industrial Average, but the future depends on the job prospects and wages of the average worker.
Robert Reich, Chancellor's Professor of Public Policy at Berkeley and former
Secretary of Labor, is the author of Beyond Outrage. His widely-read blog can be found at www.robertreich.org.
Follow Robert Reich on Twitter: www.twitter.com/RBReich
When are you going to talk to Obama and Biden about their engaging in class warfare against the rich?
But most of these gains are going to the richest 10 percent of Americans who own 90 percent of the shares traded on Wall Street. And the lion's share of the gains are going to the wealthiest 1 percent."
Why is this a surprise? The more money you have to invest, all things being equal, the more you stand to make. If Joe invests $1,000,000 into an investment with a 10% rate of return and Fred invests $10,000 into the same investment and realizes the same rate of return who is going to make more money, Plus you have Bill and Mack and Buddy who don't trust the stock market and invest exactly 0. How much can they expect to make? Lot's of people whine and complain about a game they won't even play.
But the reality is, there is no real use for the legions of self-actualizing ethnic and gender identity degrees we turn out in such abundance. If you major is such nonsense you make the CHOICE to have no meaningful job, and that means no meaningful pay.
Now do you challenge any of those FACTS?
Because they are easy enough to prove. And yes, worthless majors - such as gender identity studies - absolutely DO cost us money to support as taxpayers and absolutely do encourage kids to go deeply in debt for a degree that is economically worthless and educationally questionable. To the extent that contributes to the unemployment and underemployment of college graduates and to the high cost of education and the burgeoning student loan debt, it ought to be addressed.
You Nihilistic sarcasm may give you personal joy, but it does nothing to address real problems. Grow up.
http://www.newsmax.com/ErnestIstook/Obama-Regulations-Killing-Jobs/2011/09/02/id/409593
The list goes on and on and on.
Reminds me of the equally widespread rightwing myth that health care costs are escalating because of illigal immigrants and malpractice insurance.
Mexican immigrants are now returning to Mexico in GREATER numbers than their arrival rate and malpractice insurance is one half of one percent of doctors' incomes.
And then another of their myths are the nefariousness of Unions, which represent 7% of the current workforce vs. 30% a few decades ago.
So much for fairness, Democracy and Capitalism. They are obsolete.
The reapeal of Glass-Steigal allows investment banks to raid peoples savings accounts and gamble the money on their own bets. If they won, they get to keep the money. If they lose, they turn it over to the FDIC for payment.
Approving NAFTA allowed US corporations to pit the wages of American workers in a direct price war with low cost labor pools. Most Favored Trading Status for China made it even worse. US corporations even get tax breaks to offshore their plants and import back in duty free. American workers are told to lower their wages or their job ships overseas. A rigged game.
Nothing will improve the situation, though a few more perp walks, prosecutions and more oversight could help
Lobbyists and banks and Republicans will stand in the way however.
No Robert. We on the right accuse people who obsess over economic class and wealth inequality and want to appropriate the legally-obtained private property of others in the name of "fairness" as communists. Isn't that what communists advocate?
The Right has never done anything domestically nation that has been widely celebrated. There have been some Republicans who have done a few decent things but they were not seen as right-wing initiatives.
The Right is interesting because it tries to collapse its worldview into the Republican Party. For the past 15 years they have mainly succeeded but even in the Reagan Administration there were lots of things the RIGHT lost in policy debate
REMEMBER AMNESTY for undocumented workers? The Right hated it.
Name a policy that the Right has championed that was widely embraced and appreciated.
I do agree that we seem to have entered an era of politics of resentment.