American productivity versus wages over the decades

Richard Wolff has been a professor of economics at the University of Massachusetts since 1981. Media Education Foundation has just released a new video of Wolff, offering his opinions on the current economic crisis. Here's the trailer, which offers some dramatic motion-graphs illustrating wage stagnation versus productivity in America. Here's the blurb from MEF:

Professor Richard Wolff breaks down the root causes of today's economic crisis, showing how it was decades in the making and in fact reflects seismic failures within the structures of American-style capitalism itself. Wolff traces the source of the economic crisis to the 1970s, when wages began to stagnate and American workers were forced into a dysfunctional spiral of borrowing and debt that ultimately exploded in the mortgage meltdown. By placing the crisis within this larger historical and systemic frame, Wolff argues convincingly that the proposed government bailouts, stimulus packages, and calls for increased market regulation will not be enough to address the real causes of the crisis, in the end suggesting that far more fundamental change will be necessary to avoid future catastrophes.

I haven't viewed the entire video, only the trailer, but even the trailer presents important context for our current economic crisis. I do hope that, in the full video, Wolff puts blame not only on the profit-makers but also on American consumers, who have clearly made quite a few terrible decisions in their attempts to live beyond their means. Not all of that accrued individual debt was for the purpose of buying essentials such as food, housing and health care. There is a LOT of blame to go around: my targets include the greedy and corrupt financial sector and many irresponsible consumers. Not that all businesses are greedy, nor all consumers irresponsible. With this caveat, though, I did want to link to this video trailer because the graphs are mind-blowing. Further, MEF has put out terrific videos that offer clarity regarding many of our country's most contentious issues. One example is the MEF production, War Made Easy.

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Obama will jettison Bush’s accounting fraud

This from the NYT:

For his first annual budget next week, President Obama has banned four accounting gimmicks that President George W. Bush used to make deficit projections look smaller. The price of more honest bookkeeping: A budget that is $2.7 trillion deeper in the red over the next decade than it would otherwise appear, according to administration officials.

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Framing the Energy Issue

Do you remember Dubya's "Clear Skies Initiative"? It was an plan to relax air pollution standards. His "Healthy Forests Initiative" was a timber industry clear-cutting plan. I recently saw an ad for EnergyTomorrow.org. As near as I can tell, it follows Sarah Palin's policy of "Drill, drill, drill!". Apparently, long term energy security depends on using up our petroleum reserves as quickly as possible. And moreover to direct its use as fuel, rather than conserving it for producing plastics and fertilizer. I suppose that they mean "tomorrow" in the sense of as soon as possible. But the ad and the site is framed to look "green". As if.

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We’re making our own gifts and cards, and we’re better off for it.

We're making our own gifts and cards, and we're better off for it. More was not better. Consider this article by the NYT, titled "Days of Wine and Roses are over this Valentine's." Here's an excerpt:

Long-stemmed roses are being replaced by homemade cards. Theater tickets are being replaced by Netflix. Personal jewelry is being replaced by personal poems.

And even some preparing to propose on Saturday are seeking a bargain approach: on Yahoo, searches for “cheap engagement rings” are “off the charts” compared with a year ago, according to Vera Chan, a trend analyst for the company. Other searches that are up over last year include “cheap lingerie,” “free Valentine’s Day cards” and “homemade Valentine’s Day gifts.”

Consider, also, this wonderful anecdote:

Creative, personal and experiential have become the key words. Chadd Bennett, 30, of Seattle, and his wife are forgoing their traditional getaways and jewelry this year, and will instead camp out in their living room and build a fort, harking back to their childhood.

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The real problem with the economy

I'm not an economist, yet I know that the most vocal economists these days are not shooting straight with us. You can see it in their faces and you can hear it in their voices. Niall Ferguson is a professor of history and a professor at the business school at Harvard. His analysis of our economic problems rings true to me. He starts with the premise that we are in hock up to our eyeballs and we are in massive denial that this is the real problem:

The harsh reality that is being repressed is this: the Western world is suffering a crisis of excessive indebtedness. Many governments are too highly leveraged, as are many corporations. More importantly, households are groaning under unprecedented debt burdens. Average household sector debt has reached 141 per cent of disposable income in the United States and 177 per cent in the United Kingdom. Worst of all are the banks. Some of the best-known names in American and European finance have balance sheets forty, sixty or even a hundred times the size of their capital. Average U.S. investment bank leverage was above 25 to 1 at the end of 2008. Eurozone bank leverage was more than 30 to 1. British bank balance sheets are equal to a staggering 440 per cent of gross domestic product

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