After WWII America created a mass-consumption economy which depended heavily on the purchasing power of the masses. (contrast this with say the Chinese economy which relies more heavily on exports to foreign markets. The American economy, more than any in world history, requires high levels of domestic consumer spending)
When the masses have money to spend: the economy booms, and the capitalist has an incentive to invest, innovate, and add jobs.
The 64,000 Question: what creates high levels of purchasing power?
From the 1940s-1973: purchasing power was created by high wages, benefits, subsidized education & public transportation, entitlements, and a host of programs, regulations, and laws which kept the cost of living affordable. All of these things put more money in middle class wallets, and when there is money in middle class wallets, business does everything possible to capture it. This is why the postwar economy - during a time of high taxes and high wages - grew more than any other in American history: because the New Dealers made sure consumers had massive amounts of money (…unlike 3rd world consumers who were paid pennies a day)
Put another way, the financial gains resulting from rises in productivity were not channeled to a small group of global investors, but broadly shared with working consumers. An unstated contract between capital and labor formed: business would pay workers enough to consume the cars they built.
BUT… eventually business got tired of the tax and regulatory obligations they had to the postwar mass-consumption economy. They wanted cheaper operating conditions - lower taxes, less regulations, and cheaper labor. They were sick of paying exorbitant middle class labor & entitlement costs. They were sick of anti-trust laws which subject their investments to the rigors of competition. They were sick of having to protect drinking water. They were sick of the universe of compromises they had to make in order to put more money in middle class wallets. So they started investing heavily in the Republican Party … and they waited for the right moment.
1973-1980: Oil Shocks & Stagflation: the staggering economic growth of the postwar years finally came to end. Business FINALLY had their moment, so they started heavily funding the "supply side" movement and investing in a skilled mouthpiece, Ronald Reagan, who was sent to Washington to convince America that tax breaks, deregulation, and cheaper labor costs would, by boosting profits, trickle down to jobs, benefits, & cheap prices, i.e., purchasing power. Reagan also said we needed to end entitlements and publicly subsidized education/transportation because these things resulted in higher taxes on the job creators. And while you're at it, we need to get rid of anti-trust laws because we don't have to worry about mega-mergers, consolidation, and too-big-to-fail monopolies. In short, "trust business to regulate itself and make us all richer. This will work! Don't worry, it's not going to result in a system which creates a few billionaires while impoverishing everyone else. Trust the job creators".
So we listened to Reagan and got rid of all the postwar supports for mass-consumption. We replaced government regulators (charged with protecting consumers) with businessmen (intent on creating corporate-friendly rules). We lowered labor costs (by reducing wages and benefits across industries). And [behind the scenes] we gave capital more & more mobility to seek cheaper labor overseas. We made cuts to publicly subsidized education, transportation, and a whole host of middle class programs . . . all for the purpose of giving tax cuts to the job creators. We completely divested in the middle class consumer, and invested in business (w/subsidies galore). We were told these things would trickle down to mass consumption. "You just wait, the middle class will have solid jobs and sufficient cash to keep our consumption economy afloat".
("Oh, and by the way, we're going to financialize the economy and move investments from productivity & manufacturing to financial services. Trust us. This won't become a derivative ponzi scheme. It won't become a speculative casino with bailout insurance. We're the job creators!")
Solid jobs trickling away. Consumption slows. Enter Credit Card Nation: when the Reagan trickle-down failed to result in better jobs, higher wages, and increased purchasing power for the middle class - when American jobs went to China in droves - the mass-consumption economy was put at risk.
With solid jobs disappearing, where would we get the consumer demand promised by the Reagan Revolution? Answer: Master Card, Visa, American Express, and no-money-down! Starting in the 80s, Americans received 3 credit-card-offers a week. Household debt exploded to the point where we spent $1.27 for every $1. America went on a 30 year spending orgy. "Morning in America" was subsidized by a straightforward expansion of credit, i.e., debt.
2008 Meltdown: The end of debt-based consumption If you try to sustain consumption and living standard with debt, eventually you hawk everything in sight, including the last asset left: your home. Now we are stuck in the biggest ditch ever. Consumers don't have the wages/jobs to support mass-consumption, and they can no longer borrow at near the levels necessary to keep the economy afloat. Game over.
The job creators have access to all the world's labor and consumers - they don't need the American economy, they can go to whichever economy has solvent consumers. They are sitting on more cash than at any time in history. More importantly, they won't invest a dime in American job growth until they have consumers. Unfortunately, starting in the 70s, they got rid of the support system for mass-consumption. And in 2008, they're risk mismanagement destroyed the credit market - and now they can't even lend American consumers enough money to buy their stuff. Worse: because of all the cash stuck on top, Wall Street has an unmanageable surplus of investor demand, all demanding high returns - which has lead to the invention of asset bubbles and ponzi schemes.
Where are the real job creators? They're waiting for the return of something essential to mass-consumption; they're waiting for something that truly is too-big-to fail: the middle class consumer.
American Economy R.I.P.
1945-1973
When the masses have money to spend: the economy booms, and the capitalist has an incentive to invest, innovate, and add jobs.
The 64,000 Question: what creates high levels of purchasing power?
From the 1940s-1973: purchasing power was created by high wages, benefits, subsidized education & public transportation, entitlements, and a host of programs, regulations, and laws which kept the cost of living affordable. All of these things put more money in middle class wallets, and when there is money in middle class wallets, business does everything possible to capture it. This is why the postwar economy - during a time of high taxes and high wages - grew more than any other in American history: because the New Dealers made sure consumers had massive amounts of money (…unlike 3rd world consumers who were paid pennies a day)
Put another way, the financial gains resulting from rises in productivity were not channeled to a small group of global investors, but broadly shared with working consumers. An unstated contract between capital and labor formed: business would pay workers enough to consume the cars they built.
BUT… eventually business got tired of the tax and regulatory obligations they had to the postwar mass-consumption economy. They wanted cheaper operating conditions - lower taxes, less regulations, and cheaper labor. They were sick of paying exorbitant middle class labor & entitlement costs. They were sick of anti-trust laws which subject their investments to the rigors of competition. They were sick of having to protect drinking water. They were sick of the universe of compromises they had to make in order to put more money in middle class wallets. So they started investing heavily in the Republican Party … and they waited for the right moment.
1973-1980: Oil Shocks & Stagflation: the staggering economic growth of the postwar years finally came to end. Business FINALLY had their moment, so they started heavily funding the "supply side" movement and investing in a skilled mouthpiece, Ronald Reagan, who was sent to Washington to convince America that tax breaks, deregulation, and cheaper labor costs would, by boosting profits, trickle down to jobs, benefits, & cheap prices, i.e., purchasing power. Reagan also said we needed to end entitlements and publicly subsidized education/transportation because these things resulted in higher taxes on the job creators. And while you're at it, we need to get rid of anti-trust laws because we don't have to worry about mega-mergers, consolidation, and too-big-to-fail monopolies. In short, "trust business to regulate itself and make us all richer. This will work! Don't worry, it's not going to result in a system which creates a few billionaires while impoverishing everyone else. Trust the job creators".
So we listened to Reagan and got rid of all the postwar supports for mass-consumption. We replaced government regulators (charged with protecting consumers) with businessmen (intent on creating corporate-friendly rules). We lowered labor costs (by reducing wages and benefits across industries). And [behind the scenes] we gave capital more & more mobility to seek cheaper labor overseas. We made cuts to publicly subsidized education, transportation, and a whole host of middle class programs . . . all for the purpose of giving tax cuts to the job creators. We completely divested in the middle class consumer, and invested in business (w/subsidies galore). We were told these things would trickle down to mass consumption. "You just wait, the middle class will have solid jobs and sufficient cash to keep our consumption economy afloat".
("Oh, and by the way, we're going to financialize the economy and move investments from productivity & manufacturing to financial services. Trust us. This won't become a derivative ponzi scheme. It won't become a speculative casino with bailout insurance. We're the job creators!")
Solid jobs trickling away. Consumption slows. Enter Credit Card Nation: when the Reagan trickle-down failed to result in better jobs, higher wages, and increased purchasing power for the middle class - when American jobs went to China in droves - the mass-consumption economy was put at risk.
With solid jobs disappearing, where would we get the consumer demand promised by the Reagan Revolution? Answer: Master Card, Visa, American Express, and no-money-down! Starting in the 80s, Americans received 3 credit-card-offers a week. Household debt exploded to the point where we spent $1.27 for every $1. America went on a 30 year spending orgy. "Morning in America" was subsidized by a straightforward expansion of credit, i.e., debt.
2008 Meltdown: The end of debt-based consumption If you try to sustain consumption and living standard with debt, eventually you hawk everything in sight, including the last asset left: your home. Now we are stuck in the biggest ditch ever. Consumers don't have the wages/jobs to support mass-consumption, and they can no longer borrow at near the levels necessary to keep the economy afloat. Game over.
The job creators have access to all the world's labor and consumers - they don't need the American economy, they can go to whichever economy has solvent consumers. They are sitting on more cash than at any time in history. More importantly, they won't invest a dime in American job growth until they have consumers. Unfortunately, starting in the 70s, they got rid of the support system for mass-consumption. And in 2008, they're risk mismanagement destroyed the credit market - and now they can't even lend American consumers enough money to buy their stuff. Worse: because of all the cash stuck on top, Wall Street has an unmanageable surplus of investor demand, all demanding high returns - which has lead to the invention of asset bubbles and ponzi schemes.
Where are the real job creators? They're waiting for the return of something essential to mass-consumption; they're waiting for something that truly is too-big-to fail: the middle class consumer.
American Economy R.I.P.
1945-1973
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