[FONT="]“Aftershock” by Robert B. Reich[/FONT]
[FONT="]In the very beginning of the book, Reich introduces readers to Marriner Eccles (1890-1977) who was a wealthy self-made banker, businessman, and economist and Roosevelt’s pick to be the Chairman of the Federal Reserve where he served from 1934 to 1948, seeing the country through its deepest depression ever. Despite his vast wealth, Eccles saw the need to increase the earnings of average people in order to fuel economic growth, and he’s credited with guiding the federal government’s economic policies in response to the Great Depression because, prior to Eccles, those policies hadn’t really changed that much since Hoover was in office. Eccles was not a detached academic. He was a very experienced businessman who was ahead of his time in his economic philosophy which he came by through practical experience.[/FONT]
[FONT="]Reich wrote this book in 2010 during the aftermath of the financial meltdown of 2008. Hence the title. His book is partially a look at what led to the near financial collapse, but more than that, it’s a book that examines many of the similarities of the American economy prior to both the Great Depression of 1929 and what’s now commonly referred to the Great Recession of 2008. More specifically, Reich examines how the national income was distributed prior to both periods of economic upheaval. [/FONT]
[FONT="]Despite how some people like to minimize the importance of the OWS movement and their collective claim of being members of the 99%, it might interest people to know that the top 1%’s share of the national income reached a zenith of 23.5% in 1928 right before the stock market crash AND in 2007 just before the financial meltdown. On a graph, the years in between 1928 and 2007 are represented by a U with the years 1929-1973 representing a decline in the top 1%’s share of the national income (because relative incomes were rising for everyone else) and the years 1978 onward representing an increase in the percentage of the national income for the top 1%, which resulted in real wages falling for everyone else.[/FONT]
[FONT="]I’ll oversimplify a little bit here, but Reich’s contention is this: The reason our economy got into trouble is because as average Americans’ real wages were falling over a 30 year period from the late 70’s onward (for a variety of reasons), average Americans were forced to work harder, longer hours and borrow money in order to maintain an overall rising standard of living. And why were real wages falling over this period? It was happening because wages and salaries remained flat despite the fact that productivity rates continued to rise. This was a change from previous periods when wages rose as productivity rates increased. Put another way, average Americans were not sharing in the greater wealth that was being created by these rising productivity rates. Instead, the greater national wealth being created was increasingly flowing to the top instead of being more equally spread out among all Americans which ultimately meant that average Americans were unable to afford the very goods and services they produced which is exactly what had kept our consumer economy humming for decades.[/FONT]
[FONT="]To make a long story short (actually, the main text of the book is only 146 pp long), Reich states that in order to put things right again in the American economy (which is a consumer driven economy, after all), the trend of the last 30 years must be reversed in order that average Americans again share a greater portion of the national wealth and can then spend that money which will, in turn, fuel job creation and economic growth. Reich has a few ideas about how to attain these goals, but I won’t go into any detail about them because I can understand how some people could view some of the ideas as income redistribution (which, frankly, has been happening in reverse for decades). But that kind of criticism misses the point. If Americans don’t have the disposable income with which to fuel demand and, hence, job creation, then policies like tax cuts for the wealthy is little more than tinkering around the margins in the scheme of trying to fix our ailing economy.[/FONT]
[FONT="]“Aftershock” is a worthwhile read if for no other reason than to have a better historical understanding of our economy has (and hasn’t) worked over the last 80 years.[/FONT]
[FONT="]In the very beginning of the book, Reich introduces readers to Marriner Eccles (1890-1977) who was a wealthy self-made banker, businessman, and economist and Roosevelt’s pick to be the Chairman of the Federal Reserve where he served from 1934 to 1948, seeing the country through its deepest depression ever. Despite his vast wealth, Eccles saw the need to increase the earnings of average people in order to fuel economic growth, and he’s credited with guiding the federal government’s economic policies in response to the Great Depression because, prior to Eccles, those policies hadn’t really changed that much since Hoover was in office. Eccles was not a detached academic. He was a very experienced businessman who was ahead of his time in his economic philosophy which he came by through practical experience.[/FONT]
[FONT="]Reich wrote this book in 2010 during the aftermath of the financial meltdown of 2008. Hence the title. His book is partially a look at what led to the near financial collapse, but more than that, it’s a book that examines many of the similarities of the American economy prior to both the Great Depression of 1929 and what’s now commonly referred to the Great Recession of 2008. More specifically, Reich examines how the national income was distributed prior to both periods of economic upheaval. [/FONT]
[FONT="]Despite how some people like to minimize the importance of the OWS movement and their collective claim of being members of the 99%, it might interest people to know that the top 1%’s share of the national income reached a zenith of 23.5% in 1928 right before the stock market crash AND in 2007 just before the financial meltdown. On a graph, the years in between 1928 and 2007 are represented by a U with the years 1929-1973 representing a decline in the top 1%’s share of the national income (because relative incomes were rising for everyone else) and the years 1978 onward representing an increase in the percentage of the national income for the top 1%, which resulted in real wages falling for everyone else.[/FONT]
[FONT="]I’ll oversimplify a little bit here, but Reich’s contention is this: The reason our economy got into trouble is because as average Americans’ real wages were falling over a 30 year period from the late 70’s onward (for a variety of reasons), average Americans were forced to work harder, longer hours and borrow money in order to maintain an overall rising standard of living. And why were real wages falling over this period? It was happening because wages and salaries remained flat despite the fact that productivity rates continued to rise. This was a change from previous periods when wages rose as productivity rates increased. Put another way, average Americans were not sharing in the greater wealth that was being created by these rising productivity rates. Instead, the greater national wealth being created was increasingly flowing to the top instead of being more equally spread out among all Americans which ultimately meant that average Americans were unable to afford the very goods and services they produced which is exactly what had kept our consumer economy humming for decades.[/FONT]
[FONT="]To make a long story short (actually, the main text of the book is only 146 pp long), Reich states that in order to put things right again in the American economy (which is a consumer driven economy, after all), the trend of the last 30 years must be reversed in order that average Americans again share a greater portion of the national wealth and can then spend that money which will, in turn, fuel job creation and economic growth. Reich has a few ideas about how to attain these goals, but I won’t go into any detail about them because I can understand how some people could view some of the ideas as income redistribution (which, frankly, has been happening in reverse for decades). But that kind of criticism misses the point. If Americans don’t have the disposable income with which to fuel demand and, hence, job creation, then policies like tax cuts for the wealthy is little more than tinkering around the margins in the scheme of trying to fix our ailing economy.[/FONT]
[FONT="]“Aftershock” is a worthwhile read if for no other reason than to have a better historical understanding of our economy has (and hasn’t) worked over the last 80 years.[/FONT]
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