NEW YORK — “It’s Not a Roar,” read the first-edition headline for the New York Times business article published January 27, “but the Global Economy is Finally Making Noise.”
A death rattle, perhaps?
Try as they may, the mainstream media simply cannot prepare for public viewing the gaping wound to the head that murdered the U.S. economy. Never mind the Dow, the Fed Funds rate, or Apple’s latest earnings report, the cause of death is really quite simple: work is underpaid.
If we are to raise the economy from the dead, the American worker needs a raise.
For all intents and purposes, when adjustment is made for inflation, workers in the private sector haven’t had a pay increase in nearly 30 years. That’s not just a problem for wage-earners who find they have too much month left at the end of their paycheck, but for an entire global economy that depends on consumer demand in the U.S.
With our paychecks shrinking, the workforce in the U.S. has resorted to borrowing more and more money — to buy a new car, fix a broken tooth, or finance the kids’ college education — to make up for the loss in buying power. Such forced borrowing, at the interest rates typically charged by lenders, only deepens the consumer cash crunch.
Poor and getting poorer
Said Jane, who raises chickens with her husband at their central Texas ranch: “Everyone I know is poor and getting poorer.”
As we struggle to pay down the mountains of credit-card debt, monthly insurance premiums, car loans, or skyrocketing utility bills, we spend less and less on new stuff.
Rosa Luxemburg called this cycle “underconsumption;” more modern economists call it debt deflation. What it all means is that Laura of New Jersey makes very few new purchases these days. The monthly premiums on the state exchange she, her husband and two sons enrolled in increased last month from $1,750 to $2,350.
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Well actually, that’s not quite true. It would’ve cost that much had she and her husband continued with the same plan but, with college tuition for their second son bearing down on them, they decided to downgrade to a less expensive plan, which costs only $2,000 a month. And that’s only for catastrophic coverage; they have a $6,000 deductible — and, even when coverage does kick in, it only pays for half their health care costs.
“So we send our kids to the doctor,” Laura told MintPress. But she and her husband “do not go.”
When her oldest son went off to college four years ago, he was fortunate enough to receive scholarships that paid about half of the $50,000 annual bill, leaving Laura and her husband to foot the rest. Her youngest son starts college in the fall, and they are looking at adding possibly another $60,000 in annual expenses.
“Most of our woes came from the economic crash of 2008,” she said, when her husband lost his job in publishing. “We just never recovered.”
Only creditors have. Since onerous debts triggered the 2008 meltdown, households, businesses and governments have merely borrowed 43.8 trillion more dollars, Sonja Gibbs, Senior Director of Global Capital Markets for the Institute for International Finance, told MintPress.
Happy days are here again – for whom?
The New York Times and other mainstream media outlets have joined President Trump in his State of the Union Speech in cuing up “Happy Days are Here Again” because their high-rolling advertisers and constituents are heavily invested in restoring consumer confidence — if not income levels — and encouraging more shopping sprees to grease the wheels of a dried-up demand economy. The contradiction is that the mainstream media have consistently been a cheerleader of the very policies that have robbed American consumers of their buying power. Despite their proclamations to the contrary, the country has never recovered from the financial ruin of 2008 that was triggered by the collapse of an overpriced real estate market.
It is true, as the Obama Administration claimed, that many banks had become “too big to fail,” although he failed to mention that that development was the result of laissez-faire government enforcement of antitrust and anti-monopoly regulations. But rather than force banks to accept a “haircut” or write down the loans on their balance sheets to help jumpstart consumer spending, Obama’s Treasury department did just the opposite — effectively pouring gasoline on a fire by loaning the banks billions in low-interest loans to re-inflate the asset bubble that popped in 2008.
The result is the best-of-times, worst-of-times quality that characterizes the relationship between the country’s wealthiest 1 percent and everyone else, with stock market indexes — and poverty rates — at or near historic highs.
The plutocrats rearrange the financial universe
What’s important to note is that the dispossession of workers in the U.S. is a man-made catastrophe, and is the culmination of the plutocrats’ concerted 45-year effort to undo the stagflation crisis of 1973, and, if possible, ensure that it never happened again. At the heart of the crisis was inflation, caused by pay hikes for the U.S. workforce, that was running as high as nine percent year-over-year at that time. Workers, generally, don’t mind moderate levels of inflation because they have more cash in their pockets — and indeed, poverty levels in 1973 were at an all-time low. Conversely, creditors consider inflation a type of financial fraud in which they loan a borrower $100 but get only $95 back.
“It is clear to me,” David Rockefeller wrote in 1971 to his fellow Chase Manhattan board members, “that the entire structure of our society is being challenged.”
As many labor historians — most notably, Kim Phillips-Fein – have documented, today’s savage inequalities are rooted in that epoch when labor unions were strong, factories were humming, oil prices high, and wages were causing inflation to climb. Over a period of 40 years, capitalists like Rockefeller, Walmart, the Koch Brothers, and Amazon founder Jeff Bezos have completely rearranged the financial universe, all but eradicating inflation, which hasn’t increased by more than 3 percent annually in nearly 30 years.
But, as theorists as diverse as Hegel and Luxemburg have noted, this reversal of fortune is a case of Wall Street biting its nose to spite its face. As the Marxist economist Richard Wolff notes in describing Hegel’s master-slave dialectic, an employer reflexively moves to pay his workers as little as possible, and yet his prosperity is wholly dependent on workers earning enough money to buy his products and services.
With workers’ buying-power in decline, big business has had to resort to smoke-and-mirrors to generate profits. Stock prices for companies such as Apple, for example, aren’t skyrocketing because of robust sales, but because the company is borrowing money at low-interest rates to repurchase its own stock and drive up the price.
One great economic house of cards
In his latest book, The End of Normal, University of Texas Economics Professor James Galbraith — the son of the great Keynesian economist John Kenneth Galbraith — asserts that the 2008 crisis wasn’t just part of a normal macroeconomic cycle but the culmination of a political economy that lost its way beginning in the 1980s. Galbraith told MarketWatch last month:
I think there are really major changes in the structure of the economy going forward. The share of business investment has been quite low, share of construction has been very low, and that means the economy is being driven increasingly by the consumer. The consumer is dependent upon the access to debt, auto loans, consumer loans and student loans. Those things will build up over time until such time as there is a crack and households decide that they no longer wish to access the credit — at which point this phase of the expansion will end.”
It might, in fact, be time to ask the New York Times the question that a reporter for Fortune Magazine, Bethany McClean asked Enron’s Chief Financial Officer in March of 2001. Suspecting that the now-discredited energy-services firm was cooking its books, McClean — according to the 2005 documentary on Enron, The Smartest Guys in the Room — asked the chief financial officer in a telephone call a question he could not answer, setting in motion a chain of events that revealed that the whole enterprise was a house of cards:
“How exactly does Enron make its money?”
Top Photo | A worker steams out wrinkles on an American flag before President Donald Trump arrives to speak at H&K Equipment, Jan. 18, 2018 in Coraopolis, Pa. (AP/Keith Srakocic)
Jon Jeter is a published book author and two-time Pulitzer Prize finalist with more than 20 years of journalistic experience. He is a former Washington Post bureau chief and award-winning foreign correspondent on two continents, as well as a former radio and television producer for Chicago Public Media’s “This American Life.”
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