Un-Marxist gloom for the future
I am not a fan of Karl Marx, whose economic model was flawed, in part due to the state of economics when he was writing, but according to Paul Krugman the capital-labor struggle might be the new story of the economy. Now, before you write me off as some crazy Marxist (I am not, I don’t think the government should own the means of production), let’s hear what Krugman has to say:
“While it’s true that the finance guys are still making out like bandits — in part because, as we now know, some of them actually are bandits — the wage gapbetween workers with a college education and those without, which grew a lot in the 1980s and early 1990s, hasn’t changed much since then. Indeed, recent college graduates had stagnant incomes even before the financial crisis struck. Increasingly, profits have been rising at the expense of workers in general, including workers with the skills that were supposed to lead to success in today’s economy.”
There is clearly an inequality gap in the economy where the top earners are getting most of the earnings for, well, at least a decade, although maybe longer (Henry Blogdet at Business Insider has been all over this). Profits are at record levels and so are wages (in a bad way, at record lows as a percentage of the economy as a whole). What happened to the flying cars that the were supposed to have?
I kid about the flying cars, but John Maynard Keynes, the masterful economist who vanquished Hayek, argued that productivity would rise and we would all be working 15 hour weeks by now. In the story I linked to, Marketplace said that a big part of that is that we are consuming a lot more now than we did “back in the good old days”. There is something there (
to please sponsors) that the economy does need to produce a lot more to sustain us (they didn’t have iPods in the 1930s), but there is more than that.
Since 1980 the economy has grown a lot and productivity gains have accounted for some of that. But what is really notable from Blodget’s charts of profits and wages is that any surplus has been absorbed entirely by the wealthy. Some of that is the geniuses that created Google, and Amazon and the other things that make us waste more time with our phones than people in the 1980s could have thought possible. But a lot of it is just the capture of a greater share of the total profits by the wealthy, through tax cuts or defeating efforts to raise the minimum wage, union busting, or just old fashion exploiting monopoly power.
That type of entrenchment of wealth is unhealthy to the economy as a whole because it lowers the purchasing power of the majority of people (who make up a majority of the total spending that powers 70% of the economy) and because broadening the number of people who are born poor with no prospects for improving their state even if they work hard leads to discontent (and if you, unlike me, subscribe to Marx, actual warfare between the classes).
Returning to where we are now, it is becoming increasingly clear that the Republican ideal (and even the Democratic concession to Republicans) over the last few decades is not working. Wages stagnating, employment growth stagnant (look at the 1991 and 2001 recoveries, the 2008 one was different because it followed a financial crisis) and tell me that the current situation is Obama’s fault with a straight face, even if the last recession was a ‘garden variety’ instead of a generational financial crisis.
We’re fucked up right now, not because we’re not working only 15 hours a week to create what we need, but because the surplus benefits from increased productivity has been entirely appropriated by the wealthy over the last 30 years.