Eleven years again Kevin Phillips published Wealth and Democracy, a book in which he argued that increasing concentration of wealth at the top was undermining the structure of American democracy. The evidence in support of his thesis continues to accumulate as shown in this Pew report:
There are two reasons this is a major concern. One is economic and one is political. In a society whose economy depends on consumer spending, concentration of wealth acts as a break on growth. In a society whose political system is firmly founded on representative democracy, concentration of wealth awards greater political power to the rich.
American dependence on credit financing enhances this effect: wealth tends to flow from borrowers to lenders. As wages have remained flat for an extended period, people have come to rely on credit to finance their lifestyles. Personal indebtedness has risen dramatically. Total U.S. consumer debt as of May 2011 was $2.43 trillion.
For those at the top the recession is over, but for those further down it looks to be permanent. One person pointed out that the United States is beginning to resemble a feudal society with an elite at the top, a strong military, and a majority oppressed and subservient. That is perhaps too extreme, but a comparison worth thinking about.
This is why, as middle-class, blue-collar workers, my husband and I have been frugal. We are both 46 and have had our mortgage paid-off for years. We have savings for emergencies. If we must use a credit card, we pay it off when the bill comes. We do have a loan on a car, but we are paying that off as fast as we can. We live frugally, but we are not stingy. We are not mindless consumers. Peace of mind is much more valuable to me than going to the mall.~ Melinda
You are very wise to live as you do. The peace of mind that comes from being debt free and having savings is a truly valuable thing.
You write exactly as I see it. We either have to get rid of excess labor (peope) or find mechanisms to distribute wealth. Is there a just answer? Depends on which side of the fence one stands. The problem remains.
So why are conditions so bad?
The point is that conditions are not so bad at all—in fact they are quite good. The GDP has passed its high before the recession, meaning there has been a full recovery. That recovery has taken place without providing jobs for all those who want them. Our economy no longer needs all the people who want to work. Automation and outsourcing to other countries have made a large segment of the workforce redundant. Our economy is much more efficient now and produces the same amount of goods and services as before with a smaller workforce. That's the way capitalism makes progress. It is not the obligation of a capitalist economy to provide jobs for all—that's a socialist notion.
Taxes are at historic lows and the stock market is at historic highs. It doesn't get any better than this—unless you change to an economic system not devoted entirely to free market fundamentalism. However, many in this country would consider that treasonous.
I agree with your assessment that capitalism has no obligation to provide jobs for all. With a surplus of labor, a growing gap between those who have and have not, with growing failing infrastructures of bridges, railroads, highways, etc., and because private enterprise does not see it profitable to take on these expenditures, why does not government do it? The wealthy benefit by these assets as much, if not more than poor folks who do not have enough money to maintain a decent lifestyle?
The problem, as I see it Roger, is that capitalism's purpose is to protect property. They successfully weaken labor unions, get tax breaks, send their money off-shore, and the people who perform wage labor pay taxes for the costs of government. Warring pulls more money out of wager earners, even as it fills coffers of owners of capital.
Capitalism works best when there is low unemployment, workers have money to buy houses, cars, health care, education, and retirement savings. Everyone prospers.
The weakening of the labor movement began with the break up of traffic flight controllers, and the beginning of the end of labor unions. Workers worked harder, produced more, and their wages stayed flat as owners of capital took larger and larger shares of profits. It is rather easy to follow this trend. I first noticed it when I bought my first computer in the early 1980s and had a statistical analysis package. I observed the gap between rich and poor begin to widen, and then grew exponentially to the present day. Most people didn't know it was happening, and I could see it as clearly as night and day.
As productivity went up hourly wages stayed flat, USA, 1890-2010.
Sorry, I don't understand your ideas.
No, you do understand my ideas, what you do not understand is my position vis-a-vis those ideas. My position is that pure free market capitalist economic policies will not provide the necessities of life for everyone.
What is required then is a dash of socialism added to the mix. In our current situation that might be readily achieved by having the government undertake a large multi-year program of infrastructure repair and replacement financed by tax increases. That would provide a large number of jobs, improve our roads, bridges, and schools, and boost the economy.
I agree with you Dr. Allan.
What you fail to realize is that the government is broke
Evidence for this assertion?
That is estimated total debt—federal, state, municipal, business, and personal. It represents the combined debt of every institution, business, and individual in the country.
This is your basis for the claim that the United States is bankrupt, so presumably you mean to say that the federal government, all 50 state governments, every business, and every individual in the United States is bankrupt—an absurd claim on the face of it.
Note also that your figure counts no assets against that debt, so that a person with $50 million in investments by your count is bankrupt if he owes the coffee fund at work $10. Anyone with sufficient assets to handle their debt is not bankrupt.
Here's a puzzle for you. Consider two homeowners with annual incomes of $50,000, both of whom have mortgages with $250,000 outstanding on their homes. Homeowner A's house is worth $300,000 at current estimate but Homeowner B's house is worth only $200,000. One has net assets of $50,000 and the other has net debt of $50,000. Both have sufficient income to meet their monthly mortgage payments, but neither has other assets sufficient to pay off their debt. Who is bankrupt and why?
Roger, you accurately define the need of people for access to food, clothing, housing, etc.
What happens if the nation needs 10 workers to provide all the work, and there are 100 workers needing work?
1. Redistribute money so everyone has access to basic livings needs.
2. Use a welfare system to support those who can't support themselves and pay for it out of the wages of labor.
3. Incentivise charity to provide basic needs.
4. Start a war to employ all the unemployed.
5. Start a Civilian Conservation Corp to employ the unemployed.
Which process do you choose?
The fact is, capitalism is not the system that provides basics for all it's people. Especially when our Republic is bought and paid for by wealthy, at the expense of working people.