How we got here
By now you’ve probably seen the chart that Tod Kelly put up showing corporate profits headed for the moon amidst the continuing post-crash lull in the rest of the economy. Similar information is out there showing that over a time span of the past few decades productivity kept shooting up as usual while compensation stagnated, and CEO pay even far outpaced the profits that were supposed to be the reason for their pay. Meanwhile, unemployment remains high. It’s rather bad on several counts, we can see the numbers.
Usually what follows pointing out such are remarks about how this is the result of a free market allowed to run out of control, and the answer is carefully thought out government intervention. Well, I see the Ongoing Capitalist Crackup as something else entirely: the logical outcome of an economic structure intended to concentrate wealth. I’ll explain…
Time was, for labor the holding of the means of production were an open question. Relax, I’m not going Marx on you. I refer instead to syndicalist impulses within the organized labor movement, think “Wobbly”. Somewhere along the line — after an extended period of workers being arrested or murdered for their activities, a form of consensus arose involving business, labor & the state, by where labor organization was funneled into mainstream partisan politics & cut off from the kind of questions it had previously asked, in exchange for the New Deal-era safety net & job security for the ones who were working. This is the “devil’s bargain” I referred to when discussing this with CK Macleod.
At the time, and by some even now, this was seen as an unqualified success. That the working class came to treat their employers as subsets of the state (which they had a point about in another aspect, due to the extensive assistance that business obtained from the government) and were lulled into Consume-and-STFU? Minor detail I guess.
Of course, that which is given can also be taken away. See the spot on that EPI chart where productivity continues a 45 degree angle & compensation falls through a crack in the floor? That’s where the old agreement started to unravel. Continuing productivity gains no longer met with reward for job well done, and the costs of living went onward unfazed. Keep in mind as well that the housing market has been subsidized out the wazoo by government all this time, and credit later opened up. When most people can’t save, and what they make doesn’t keep pace with what they need (and on a macro level, what they’re expected to have to keep the whole thing rolling), debt is the only answer, and all that leverage needs to go somewhere…
When you look at a breakdown of the top 1% that the Occupy crowd keeps talking about, notice how much of it is people wrapped up in the commanding heights of finance? This is one major reason. The less that the average person has any hope of saving their own money, the more borrowing that takes place, the more that the gains in an economy are measured as interest and penalties rather than wages. The Federal Reserve and its symbiotic relationship with the largest of banks looms large as the other part of this: loose money for them does not necessarily mean loose money for you. This has been a particular thorn in my side for a reason.
From there, high finance started taking that debt they got because of us having to leverage ourselves to death and betting each other on it, leveraging themselves even harder, until finally the whole damn mess started to collapse…and here we are.
Despite this being a problem that built up over a long time akin to cancer, there’s the inevitable talk about quick fixes. It’s no surprise that people go for that kind of thing, and it’s in the self interest of the formal part of our ruling class to offer them. Yet, in my view unless we have a substantial increase in labor power sufficient to snap that crack in compensation back in place while also allowing the average person to actually save money and make centralized finance largely irrelevant, a breakup wave in banking including the Federal Reserve itself, and above all patience enough not to expect the same types that shuffled us into this situation in the first place to somehow care whether we get out, we’re screwed.
It took a long time to create this bubble-dependant rigged mess we call an economy. It’s going to take a lot to unravel it.
Note: I describe primarily the U.S. because it is what I know, though as a global focal point our structure and its failings are clearly contageous.