I’ve learned waaaay back in ’90s when i entered the workforce to never count on my social security for retirement. It’s easier to actual plan for future if you don’t include imaginary income that’ll never materialize.
As always a gem of an article from Prof. Mead.
Well, again and again we keep running into the inequality problem, don’t we? We’ve engineered, over the last 30 years, a financial gutting of the middle class to benefit the wealthiest 1%. The symptoms are everywhere, and WRM just keeps adding them up.
What do you say when people haven’t had a real pay increase in 30 years, while the incomes of the wealthiest tripled? How DO you expect people to engineer a financially viable society, with retirement, education for children, good housing, healthcare, etc., when the family budget is turned over to hedgefund managers for plunder? Anyone care to explain this?
We COULD hike taxes on the wealthy, eliminate the ‘carried interest’ deduction, etc. After all, if the US had the same income distribution profile 1975-2005 it did 1950-1975, median income would not be $50,000, it would be
Anybody think a middle class income 60% higher than it is now would make a difference?
Did you adjust for inflation?
Actually yes. The basis is 1980.
“Well, again and again we keep running into the inequality problem, don’t we?”
When all you have is a hammer, every issue looks like a nail.
Yeah all we’re talking about is middle class economics, right?
This is at worst simply a side-effect of the post-industrial model – the same economic productivity but with fewer employees.
I disagree. If that were true we’d be seeing rising wages in areas where productivity was low, as people needed to hire more employees to increase production. But wages and employment have been relatively stagnant
The TRIPLING of income among the 1% in the last 30 years suggests that the business model has become one where a small group of wealthy investors has the power to enrich themselves without rewarding middle class efforts. Our Gini coefficient is among the worst in the western world.
They aren’t hiring employees to increase production because everything is increasingly automated and/or streamlined by IT. Human hands aren’t required to increase productivity anymore, hence the stagnation of real wages while the economy is still growing.
Productivity increases haven’t been shared as income with the middle class.
Productivity has increased.
Income of the 1% has tripled
Income of the middle class is stagnant.
So there IS income being generated. In the US the 1% is, literally, taking it ALL.
Yes, because the “middle class” is vanishing due to a lack of employment. If there are no more middle-class jobs, it’s obvious that wages will stagnate.
The 1% own the machines and computers that cause the increased productivity, which is why those people are being enriched. Why wouldn’t the 1% take it all if they are “doing all the work” with the equipment that they own? Should they create unnecessary jobs to artificially create a middle class?
The 1% took ALL of income increases over the last 2 years. 100%. Healthy for a society? Francis Fukuyama has written on the effects of inequality on societal stability. You arguing for the US becoming a 3rd world country?
And where’s the proof the 1% ARE ‘doing the work”? This right wing talk radio view of our society is rancid. When John Thane and John Paulson between them took home 6 billion in 2007 from Goldman Sachs as the economy tanked, what did they contribute to the economy?
The wealthiest 25 hedgefund managers make more than all 85,000 NY city school teachers. As Paul Volcker has asked, what did Wall Street contribute to our economy 1997-2007? Answer:
There’s NO proof the 1% do ANYTHING to help the economy grow besides taking ALL the income growth
But if you think Somalia is a model for America, go ahead make the argument
I think Marie Antoinette tried that first. How’d it work out?
I think you misunderstand my point of view – I’m simply relating how things are, not implying any approval. Regardless, I’m not sure there is any solution.
And where’s the proof the 1% ARE ‘doing the work”?
It’s in the pudding.
Let’s take an easy example – automobile manufacturing.
Our hypothetical car company employs 100 000 people and makes a profit of 5 billion dollars a year. Thanks to advances in robotics, they automate most of their workforce – they now employ only 1000 people, but make 10 billion dollars in profit.
Objectively the company is now “better”, but 99 000 people have lost their jobs. The 1000 that remain now each make far more money than they did before.
How do you solve that problem? Force the company to keep 99 000 “useless” employees on their payroll?
what did Wall Street contribute to our economy 1997-2007? Answer: Nothing.
They generated capital. High-speed trading is almost fully automated but it’s brutally efficient. Who else would gain from that “productivity” but those who own the computers?
Wall street didn’t SUPPLY capital, they DRAINED it out of the economy. The recent study finding that when the financial sector hits 40% of GDP, GDP starts to DROP was done before our current economic crisis…and when the financial sector hit 40% of GDP.
The financial sector drained our economy of capital that could have been used for more productive purposes. So the FAILURE of Wall Street to employ capital in a PRODUCTIVE manner led to millions out of work
Any reason the middle class should sit back, unemployed, bailing out the wealthy, all the while being told by Greg Mankiw that the rich are genetically superior and we should just shut up?
I’m actually with you on the idea that our financial sector is too big, but last I looked into it, as a percentage of GDP it was closer to 25% than 40%. Could you cite a reference for the 40% number?
40% sounds more like the UK (with City of London, etc) than the US.
I think the economic system of this country could be dramatically improved by breaking up Citigroup and other too-big-to-fail banks.
Too bad we can’t count on the Democrats to do anything like that — they’re just interested in taking over the system and implementing a lot of very bad pet ideas, rather than doing anything effective to fix anything.
It;s actually 40% of corporate profits rather than 40% of GDP. And the breakup of the banks is an EXCELLENT idea. We’re taking ALOT of risk by allowing 5 or 6 banks to hold over half the assets invested in this country.
The GOP is fighting ANY banking regulation (see their view of Elizabeth Warren and the CFPB); but the dems, especially Obama, have been cowardly in not sending any bankers to jail
You can’t send a banker to jail who hasn’t broken any laws.
Obama tried, had the best Government lawyers in the Treasury dept. look into it. It simply wasn’t legally possible to prosecute anyone, or deny contactual bonuses. Those who did not receive them would have sued in court and won and the bonuses would have had to be paid no matter what. Unless you think Government can just change contracts between two parties at will?
Who cares if 40% of corporate profits is from Wall Street trading?
Dammit, no matter how bad things get socially the democracy does not have a right to tell a business how to make money, where to invest money, or even to invest money at all!!!
If you want State Run Companies that are run “for the people” then move to China.
An example of the Golden Rule. Those with the gold make the rules. 10 trillion was sucked out of our economy….legally. Millions were put out of work, legally.
They legalized theft on a scale that would have flabbergasted Al Capone.
No, that “10 trillion” you cite is a FAKE NUMBER. THAT MONEY NEVER EXISTED.
Why? Because that number is based on home values which were always overblown and had no relation to the true economic value of that asset.
I don’t care if the appraiser tells you your home is worth $200k for tax purposes, if the most anyone wants to give you is $100k, then in reality your home is only worth 100k!! You didn’t lose 100k in wealth, you never had it in the first place.
That 10 trillion in wealth the “middle class” supposedly owned was never real, and they didn’t lose anything. They just fooled themselves into beleiving they were wealthier than they were and now you and the rest of them are pining for your “lost wealth” that never existed in the first place.
Laughable. No one stole anything. If you can’t find a job in this economy it is because you are an economically useless piece of crap no one needs in the new brutally efficient workplace.
Credit default swaps, not inflated home values, blew up the economy. They increased by a factor of 20,000% (no, that’s not a typo) between 1997 and 2007. Wall street took the keys to the economy and ran it into a ditch.
Funny, however, isn’t it, that the middle class came out of it with reduced home values, lost jobs, but the 1% actually INCREASED their share of national income…after being bailed out by the middle class….
And conservatives say we’re genetically inferior.
No, I don’t think you are genetically inferior but the persistent liberal moral/intellectual superiority complex makes me sick to my stomach.
What did those “Credit Default Swaps” consist of?
Bundles of bad loans forced on banks by the US Government in order to expand home ownership levels regardless of ability to pay.
If I was the CEO of a banking institution and my CFO came in screaming and showing me how these bad loans by ghetto hookers, crackheads and other miscreants were going to destroy my company, you are damn right I will bundle that stuff up and sell it to the first sucker who would buy it.
There wouldn’t have been a collapse if every homeowner had done what they were supposed to do which is not default on their loans.
If you make 20 bucks an hour and lose your job, then it is your resposibility to go and get TWO JOBS MAKING 10 AN HOUR or WHATEVER YOU HAVE TO DO.
Sitting around watching your mortgage blow up around you because you are too good to get two jobs at two different mcdonalds flipping burgers instead of stamping widgets on the factory floor is unacceptable.
If you can’t find a job making the money you used to, then you’ll just have to work 2 menial wage jobs and increase your hours.
Greg Mankiw says we’re genetically inferior and I’m sure he’s not alone. The persistant arrogance of the failed right wing, and its war on the middle class sickens me to my stomach
Credit default swaps weren’t ‘force’ on anyone since they were simply a great way to make money. And subprime mortgages NEVER went above 10% of all mortgages until 2004, when the GOP had BOTH the House AND the presidency.
Moreover, your right wing mythology can’t stand up under the sun of the facts
The FACT is that home ownership varied, over 30 years, between 64-68%. So THAT could NOT have caused the blow up
What DID cause the blow up was Wall Street’s greed in taking credit default swaps from 320 BILLION in 1997 to
SIXTY TWO TRILLION in 2007…more than the GDP of the ENTIRE PLANET. That level of greed is staggering and it was enabled by right wing supply side economics…which turned our economy into a supernova.
Now turn off Rush and quit listening to fairy tales. You’re incapable of understanding what’s going on.
Corporate profits determine which companies expand. Concentrating profits in the hands of a few geographically and intellectually constrained areas dramatically reduces the breadth of ideas that will receive the funding they need to grow this economy.
Bankers in New York are totally incompetent when it comes to adequately assessing the value of property in California, in places that have seen breathtaking collapses in “value”. They are no more competent to judge the potential of new businesses in fields they do not understand because they’ve been busy banking instead of working in whatever field they are (ill equipped at) judging.
That’s why it’s a very, very bad idea to have bankers run your country. “Legality” as a concept has nothing to do with it.
As far as correcting the problem goes, breaking up the banks is the solution. At the very least, it will increase the number of decision-makers. It will also allow those decision-makers to become more familiar with the fields they are investing in. At best, it will broaden the pool of potential investors beyond just banks, and into other fields, where you inevitably will find people with a larger breadth of experience than you will in Citibank’s boardroom.
People like George Will (and if I recall correctly, Thomas Sowell) were actually advocating bank breakups while the Dems were contemplating regulatory takeovers.
The Democrats don’t want to destroy any power center they could instead control.
The GOP has been fighting the breakup of the banks, saying this is regulatory overreach. Conservatives are quite happy with power in the hands of the financial sector. As Nobel Prize winner Joseph Stiglitz said, conservatives want to privatize reward and socialize risk.
All those who talk incessantly about stagnant incomes, always forget to mention that the prices of almost everything has collapsed over the past few decades, thanks to the same process of globalization. The houses of the bottom 10 % are now stuffed with goodies like microwave, washing machines and refrigerators and what not, all of which were considered luxuries a generation ago.
Really? We have better healthcare availability than we did 20 year ago? Better education availability? Uh…no, we don’t. And the right is determined to keep it that way.
So why do you think schools in Texas are doing better than in California ? It is the red states in the US, which are moving up the economic pecking order, attracting industries and jobs. It is the deep blue states which are stagnating and starting to rot.
No.1 is MA. Strong unions. Again, the anti union people have alot of explaining to do. And TX is a 3rd world country, filled with minimum wage jobs, high poverty and people w/o health insurance.
We can’t hate all the boomers? Too bad.
One of the certifiable whackos in the climate hysterics camp was one of the biggest publicists of the Population Bomb nonsense: Paul Ehrlich, of the “Lying for Justice” philosophy. His lack of credibility on any prediction he’s ever made appears never to have added a scintilla of humility to his ravings.
Let’s not forget about killer bees. They will subjugate our post apocalyptic asphalted planet. And they will be cruel masters indeed.
” in many countries we now see exploding numbers of elderly people resting on a smaller base.”
Simply saying “my investments will save me” doesn’t help you, when the performance of those investments relies on that same shrinking next generation. Plenty of money is no use if there’s nothing that money can buy.
On a more hopeful note — How do productivity gains among that smaller base of workers affect the equation here? If the Boomers didn’t make babies, maybe they could make robots.
No one should underestimate the scale on which such a solution would have to be taken, though, and lining up sustainable incentives and logistics is not going to be any easier than it was during the social dislocations of the Industrial Revolution. (In other words, communism won’t work any better now than it did then.)
Yes, there are demographic problems… but turning to the easy outlet of immigration will just exacerbate the issues and set off a death cycle.
Malthusian projection assumes that current conditions can be extrapolated into the future and depending whether you are an optimist or pessimist you can be seriously blindsided by reality. Malthus got blind sided by the huge jump in agricultural productivity in the 19th century. As Galbraith pointed out his father produced more grain in 1 year than his grandfather did in a lifetime. And the increase in efficiency in Agriculture by the 1950s meant that 2% of the US population produced our food as opposed to 50% in the 19th century. Now half a percent produces our food. Similarly, Peak Oil folk got surprised by the shale boom. Demographically the US looks like it is going to become much more Hispanic. It remains to be seen if that group practices birth control to the extent their Anglo brothers and sisters do. And how they will vote in the long term. And what if something like fusion based energy production is developed? Any unknown unknown, good or bad, could radically disrupt the extrapolations of our apocalyptic fantasies.
Half a percent produces our food — which is why food consumption can be effectively subsidized without undue pressure / dislocation in the rest of our economy.
Keeping mortal human frames (especially of the aged) from going the way of all flesh, on the other hand, can take up an ever-greater amount of our time and productivity, making it very bad policy for the government to promise fully subsidized medicine.
Yes, as a Dr friend of mine says “you can spend 150% of GDP on healthcare because there is always more you can do”. I agree there is a trap there and with old people you reach the law of deminishing returns much more quickly than with agriculture. Still I think costs can be controlled. Living in Australia where we have slightly better health outcomes than in the US we spend about half of what the US does on healthcare. The fact is we have a two tier healthcare system. Public and private. You often have to wait in the public system and the medical decision you get may be different. Not exactly ‘death panels’ but public system is quite good at not unrealistically extending life at hugh cost. I’ve found if you want the best quality of life it is good to be in the private system where you are more likely to get optional life extending treatment before it it is too late. Still I know someone who is pushing 80, and has had both knees and hips replaced as well as been successfully treated for prostate cancer. His big mistake, unlike mine, was growing up on a farm and sticking to it.
“Not exactly ‘death panels’ but public system is quite good at not unrealistically extending life at hugh [huge and high?] cost.”
I simply don’t trust the politicians of the US not to promise absolutely everything to everybody. We’d hit 150% of GDP in no time.
“The size of the population is changing, its age distribution is changing, and the relationship to the workforce is changing in…. Add this to the reality that life expectancy has soared while the retirement age has risen slowly if at all, and it’s clear that there are more and more people out of work whose expenses need to be financed by the shrinking pool of people in the labor force.”
WRM, the issues entwined in essay are numerous: it bespeaks of a very poor political system (many causes are discernible but a general cause is simple political neglect). Forthright confrontation of many issues inferred in essay is prevented by various forms of political blockage endemic to our system – Apres nous, le deluge. There is present, as inferred in essay, a dynamic configuration (almost anything can happen) centering around unsolved domestic social problems…. Where to begin (American Meme: core attitudes and assumptions; social capital and subsidarity; reciprocal standards and expectations of conduct; allies-in-common???) is what essay brings to mind.