Apparently, kvetching about income inequality is the new black. Over at zero hedge there’s a guest post complaining, mostly, about the financial sector:
Capitalism is supposed to be an economic system in which the means of production and distribution are privately owned and operated for profit; decisions regarding supply, demand, price, distribution, and investments are not made by the government; Profit is distributed to owners who invest in businesses, and wages are paid to workers employed by businesses. The American economy is in no way a free market capitalistic system. It has become a oligarchic consumer capitalist society that is manipulated, in a deliberate and coordinated way, on a very large scale, through mass-marketing techniques, to the advantage of Wall Street and mega-corporations.
To be honest I agree with a lot of that. The body of the post itself is full of interesting charts and graphs which serve as an excellent demonstration of how to lie with statistics. So, for example, the chart labelled “Pay Per Worker in the Financial Sector, etc.” fails to consider the enormous run-up in the DJIA that took place from 1982 to 1998. Of course financial workers will benefit from such a run-up. Lots of people did. And that’s where nearly all of the great increases in the incomes of financial service workers took place.
In the total economy there are sectors that are winners and those that are losers, sometimes from an absolute standpoint and sometimes just from a relative one. You could draw similar charts for other “winner” sectors.
Nowhere in the post are there any figures or charts that show real totals. We see, for example, that in the middle Aughts the financial sector racked up a whopping 40% of U. S. business profits. Is that because financial sector profits were going up or profits in other sectors were going down? There’s no way to tell from the post itself.
I agree that we’re enormously over-built in the financial sector and that keeping those assets tied up in financial services when that sector really needs to contract is a drag on the economy. Unfortunately, the policy that we’ve seen for the last couple of years has been specifically targeted at preventing that sector from shrinking, not what we should be doing.
The post presents no prescriptions. As such it is a lament. I do that occasionally around here but you’ll also notice that I have affirmative prescriptions as well.
A final word on the post cited above. I found the comments unintentionally humorous. My guess is that there are precious few farmers or coalminers commenting at zero hedge. Practically every commenter is probably involved in indirect production in one way or another. And yet for some reason they denounce other sorts of indirect production while apparently considering their own efforts as direct production. Odd, that.
I bang this drum a lot. At the small and mid-sized business level, I think we can and still do, act like a market economy. At the big business level, and especially in the finance sector, we do not. I think a part of that problem, not the only part, is that too much wealth among a small number of people is concentrating our decision making among this same small group of people. They do this not only through mass marketing, but also by buying influence in government. They also do it subtly through the media, shifting the debate to terms friendly to their POV.
Steve
Anybody who considers America to be a capitalist system is a dolt. It is a corporatist system. The only thing I’d add to the above post it that not only to benefits large corporations, but also the politicians. The ball really got bouncing on this during the 1930’s.
The 20s.
Steve
No Steve, the ball really got bouncing with the Supremes reinterpreting the Commerce Clause. Pretty much gave congress to regulate just about everything you do in the name of interstate commerce.