At Bloomberg Opinion Barry Ritholtz tries to explain why we have a two-track economy:
Which of these two scenarios describes the U.S. economy?
No. 1. The economy is better than ever: The stock market is near a record high, wages are rising, there are more job openings than applicants, household wealth has hit a record, gross domestic product is growing briskly, house values have recovered from the bust, and consumer confidence is back — and so is America!
No. 2. Real Americans are suffering: Inflation-adjusted wages are stagnant or even declining, economic mobility is nonexistent, gasoline is getting expensive as oil prices rise, labor force participation rates are stuck at levels not seen since the late 1970s, health care is brutally expensive and getting more so, and rents have been rising. There is a looming retirement crisis coming, as households have too little savings, and pensions are underfunded — the average American is getting crushed!
As he notes, they’re both true depending on who and where you are. Read the whole thing.
He offers four potential explanations:
- The credit crisis changed everything
- Unions declined
- Capital was rewarded instead of labor
- The vast American middle class was a historical aberration
which I find variously wrong, inadequate, or dependent variables. Let me offer a single umbrella explanation.
In a global managed economy whatever is subsidized flourishes and whatever is not subsidized languishes. By “global managed economy” I do not mean an economy that is managed globally but a global economy in which all of the competing parties manage their economies. The Powers That Be take active steps to exploit weaknesses in other economies while ensuring that their own circumstances continue to be treated favorably.
That single understanding explains the credit crisis, the decline in the influence of private sector unions (public sector unions have never had it so good), rewarding capital, and stagnation of middle class incomes. To that I would only add that culture matters. Why should we be surprised that our culture increasingly comes to resemble that of Mexico?
A point I haven’t seen made is the questions of what Feinstein planned to do with Ford’s allegation. She’s maintained that she did not leak the info and that she intended to respect Ford’s request for privacy. If that is true then the logical conclusion is that Feinstein intended to allow Kavanaugh to be confirmed knowing that a somewhat credible claim of sexual assault existed.
I find that very hard to believe.
Whoops, wrong post! I’ll repost on the correct one – feel free to delete these two.
Perhaps my situation resembles your scenario. My pension fund , Central States, is scheduled to be out of money in five years. The major cause was the de-regulation of the trucking industry in Reagan years. Trucking firms were heavily unionized in 1980. But today, of the 50 biggest then, only two have survived deregulated non union competition. But all of the retired Teamsters still alive receive checks from that dwindling fund, the firms they worked for would have had to make the fund whole under the contract, but they are bankrupt. I understand the argument in favor of deregulation, competition, lower costs for consumers. But for us, this is disastrous, and is the fruit of a Government decision to change the rules midstream in our careers. A comparison in public unions would be school vouchers, and everyone would say no one deserves more protection than our hard working, self sacrificing public school teachers, and their pensions are sacrosanct. Interestingly, none of this is unprecedented as I recall soldiers in the war for independence were paid in IOU’s, later exchanged for newer issue IOU’s, which were later deemed worthless.
So thankyou, thankyou, and then, who are you anyway?
” a Government decision to change the rules ”
To be clear, a Republican government. One of the characteristics we see with GOP policy is that old jobs are destroyed or old pensions bankrupted and the response is that is the result of creative destruction. It will just create more jobs in the long run. OTOH, and this is true of both parties, if something happens which hurt she wealthy, you can be pretty sure steps will taken to bail them out. Make sure they maintain their bonuses and golden parachutes.
Steve
Ok. So what do you do about a global economy? It of course would be immoral to keep down third world economies. And a fools errand to attempt to dictate to developed world economies anything other than playing by the rules. (Like the hated Donald Trump is attempting). And how do you change human nature and self interest?
I’ve been accused of being a small government nut here for suggesting that the only solution is to minimize the power vested in government and the lobbyist bribed politicians. So now what? I’m not sure I know of a Democrat who doesn’t support a government program to supposedly cure some social ill. And these days, I know of precious few Republicans not on the same path. How’s that been working out?
As an aside. Just how do you propose to alter the relative returns to capital and labor? I’m in the business of accumulating and deploying capital. I know first hand how fast it will go elsewhere if attractive.
A functional trade system is supposed mean capital-rich countries export that capital to poor countries, which use it to acquire the goods needed for economic development. Poor countries get wealth, rich countries get employment. The neoliberal paradigm has inverted this.
Poor countries, like China or Thailand or Mexico, work to make things they then sell to rich countries, to acquire the capital needed to buy interest-bearing assets in rich countries. In classical economic terms the system has been perverted by the incentive to seek rent, what John Stuart Mill described as income gained while one is sleeping.
When you’ve got a system controlled by a tiny group of elites, whether they’re corporatists, neoliberals, communists or fascists, they will move quickly to shape a mafia economy for their own benefit.
Here’s a question I believe we should be thinking about: what would an economy in which rents have been eliminated, as the classical liberals advocated, look like? How would it be different that what we have today?
The American people have become the developing (or maybe de-veloping) peasants in the globalized inverted economy.
Everyone has the right to do every legal thing they can to better themselves, even organize to bargain wages and work rules. Quote from the late, great, Sam Walton: “People don’t accomplish things, teams do.”
Even though he was death on unions he would have organized one if he found himself in his workers shoes.
That said, in a global economy. unions can’t do much about wages, but do help by limiting duties and hours and enforcing pay scales in an environment where managers are incentivized to shave hours and paid days off and any other perk that cuts into the bottom line.
All of that said, if you find yourself in the bottom half of the economy like me, remember;
1. Nothin’s easy.
2. Money in your wallet is what you traded days of your life for. Hold it dear.
3. Somebody’s always gonna have more money than you. Don’t let it bother you.
4. Smile and remember to enjoy what you DO have.
That is where the decline of the international labor movement has injured American workers. It used to be that unions weren’t simply instruments for increasing the pay of their membership but stood for something greater. An international labor movement would be demanding that our trade with China, India, Pakistan, and so on be contingent on their adopting better working conditions and environmental standards.
Agree on unions. We we were working awful hours in pretty dangerous conditions (I got stabbed, got shot at) which were just tolerated until we joined the Teamsters (1099). Besides the better working conditions we even got paid for overtime, which they had not been doing before the union came along (which was probably illegal but who was going to enforce it?).
Steve