The Private Sector Is The Problem
President Obama got into trouble several weeks ago while explaining his thoughts on the economy, saying "the private sector is doing alright". The implication was that the private sector has seen growing payrolls over the last three years while the job cuts are coming from the public sector, but Romney and the GOP pounced on the gaffe. The reality is much more complicated because at one level, the private sector is doing very well, and at another level, its excesses of recent decades are the root of our problems and the reason we're not likely to reverse them anytime soon.
For the last three decades, incomes and benefits for American workers has stagnated and even declined. Yet at least for the first two and a half decades of that period, the economy has still seen growth because of cheap credit and financial industry gimmicks that made the middle class and working class feel richer than their paychecks indicated. Whether it be the advent of the 401K era, the tech bubble, or the housing bubble, workers have continued to be prolific consumers, borrowing against their overvalued assets to artificially boost purchasing power. And all the while this happening, the capitalists in our economy have pocketed 100% of the real-world economic growth over that time period, although you'd never know it based on how aggrieved, persecuted, and enraged these people feel even after eating the lunch of everybody below them on the totem pole economically for a generation and a half.
But on September 15, 2008, the Reagan era finally ended. The false growth economic model we had plodded through for more than 25 years was no longer sustainable. The financial industry gimmicks were exhausted, the proletariat's credit cards were maxed out, and the house of cards was tumbling. It was going to be back to basics from that point forward, and the supply-and-demand curve could return only with restored purchasing power for the workers who were flat on their backs. But there's been one major problem with that transformation. Four years later, and we still haven't gotten around to telling the "job creators" that times have changed. They still think they can and should have it both ways, continuing to hold wages down at the lowest percentage of GDP since the Great Depression while still growing their customer base despite it being flat broke.
The economic stalemate we're facing is a consequence of that cognitive dissonance on the part of the private sector. There is no shortage of capital in the American business sector, which is sitting on more than $2 trillion in idle cash, whining about "uncertainty" as a reason that the "job creators" are not creating jobs. Somebody needs to have the political fortitude to inform the business community that they will not be able to keep 100% of economic growth for themselves for the next three decades as they have in the last three decades. They either need to increase compensation for the economy's consumer base or cease to exist. It's really that simple.
And I'm sure the laissez faire ideologues will fire back with the retort that employee pay is determined by market forces. I agree. And market forces are keeping would-be consumers sitting at home and the shelves in your businesses full in the current economy. If you wish to clear that inventory and restore the rewarding economic feedback loop of the past, you have to raise wages.
Do I expect this happen? Absolutely not. Politicians are so petrified about scaring off the "job creators" that they will continue to coddle them no matter how counterproductive their economic practices continue to be. And even as their share of the economic pie has soared in recent decades, the capitalists are in an endless purple-faced fury believing they are the victims rather than nihilists responsible for the American economy breaking down....and have the nerve to bemoan the expansion of an entitlement culture that is the direct result of private-sector stinginess, with government being the only entity capable of plugging some of the holes left behind by a private sector that is habitually undercompensating its workers.
That's where the business community is now, blaming government for relieving a smidgen of the financial tension imposed on a bankrupted working class. The capitalists don't even have the sense to realize that this paltry level of financial relief is the only thing keeping their businesses from experiencing even less economic activity. So the business community will not let go of their three-martini status quo without an epic fight, having grown entitled to the concept of unlimited financial reward without shared prosperity. Their blood pressure soars at the mere suggestion of limiting economic inequality and simply refuse to make the connection between a sufficiently compensated consumer base with purchasing power and actual economic activity that will be good for their businesses.
Bottom line: the American business community has no intention of raising anybody's wages anytime soon, and plan to allow wages as a percentage of GDP to slump still lower than their already historic levels while they sit on piles of cash and complain that the real problem with our economy is food stamps and unemployment benefit extensions by evil government. This is why nobody should expect an economic recovery even if an otherwise ideal opening for growth comes along. The unrestrained gluttony of the pampered "job creator" class is destroying America in the most tangible way in recent history, but they don't think they're doing a damn thing wrong.
For the last three decades, incomes and benefits for American workers has stagnated and even declined. Yet at least for the first two and a half decades of that period, the economy has still seen growth because of cheap credit and financial industry gimmicks that made the middle class and working class feel richer than their paychecks indicated. Whether it be the advent of the 401K era, the tech bubble, or the housing bubble, workers have continued to be prolific consumers, borrowing against their overvalued assets to artificially boost purchasing power. And all the while this happening, the capitalists in our economy have pocketed 100% of the real-world economic growth over that time period, although you'd never know it based on how aggrieved, persecuted, and enraged these people feel even after eating the lunch of everybody below them on the totem pole economically for a generation and a half.
But on September 15, 2008, the Reagan era finally ended. The false growth economic model we had plodded through for more than 25 years was no longer sustainable. The financial industry gimmicks were exhausted, the proletariat's credit cards were maxed out, and the house of cards was tumbling. It was going to be back to basics from that point forward, and the supply-and-demand curve could return only with restored purchasing power for the workers who were flat on their backs. But there's been one major problem with that transformation. Four years later, and we still haven't gotten around to telling the "job creators" that times have changed. They still think they can and should have it both ways, continuing to hold wages down at the lowest percentage of GDP since the Great Depression while still growing their customer base despite it being flat broke.
The economic stalemate we're facing is a consequence of that cognitive dissonance on the part of the private sector. There is no shortage of capital in the American business sector, which is sitting on more than $2 trillion in idle cash, whining about "uncertainty" as a reason that the "job creators" are not creating jobs. Somebody needs to have the political fortitude to inform the business community that they will not be able to keep 100% of economic growth for themselves for the next three decades as they have in the last three decades. They either need to increase compensation for the economy's consumer base or cease to exist. It's really that simple.
And I'm sure the laissez faire ideologues will fire back with the retort that employee pay is determined by market forces. I agree. And market forces are keeping would-be consumers sitting at home and the shelves in your businesses full in the current economy. If you wish to clear that inventory and restore the rewarding economic feedback loop of the past, you have to raise wages.
Do I expect this happen? Absolutely not. Politicians are so petrified about scaring off the "job creators" that they will continue to coddle them no matter how counterproductive their economic practices continue to be. And even as their share of the economic pie has soared in recent decades, the capitalists are in an endless purple-faced fury believing they are the victims rather than nihilists responsible for the American economy breaking down....and have the nerve to bemoan the expansion of an entitlement culture that is the direct result of private-sector stinginess, with government being the only entity capable of plugging some of the holes left behind by a private sector that is habitually undercompensating its workers.
That's where the business community is now, blaming government for relieving a smidgen of the financial tension imposed on a bankrupted working class. The capitalists don't even have the sense to realize that this paltry level of financial relief is the only thing keeping their businesses from experiencing even less economic activity. So the business community will not let go of their three-martini status quo without an epic fight, having grown entitled to the concept of unlimited financial reward without shared prosperity. Their blood pressure soars at the mere suggestion of limiting economic inequality and simply refuse to make the connection between a sufficiently compensated consumer base with purchasing power and actual economic activity that will be good for their businesses.
Bottom line: the American business community has no intention of raising anybody's wages anytime soon, and plan to allow wages as a percentage of GDP to slump still lower than their already historic levels while they sit on piles of cash and complain that the real problem with our economy is food stamps and unemployment benefit extensions by evil government. This is why nobody should expect an economic recovery even if an otherwise ideal opening for growth comes along. The unrestrained gluttony of the pampered "job creator" class is destroying America in the most tangible way in recent history, but they don't think they're doing a damn thing wrong.
posted by Mark at 4:11 PM
0 Comments:
Post a Comment
<< Home