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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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

Continue ReadingThe real problem with the economy

States don’t have to wait for stimulus payments

What with the Congress mulling over plans for stimulating the American economy, there is an even more critical role to be played by the states in delivering aid to those hardest hit by our current economic crisis. States are where the tires hit the road, and states can act much more efficiently and quickly to meet the specific demands of their citizens. Even after the states have taken action, Congress can support these actions with direct funding and augment the strained budgets the states face with declining tax revenues in our recessionary economy. I’ll use an example from Missouri. We have just elected a Democratic Governor after four years of a GOP Governor who spent his time giving tax breaks and favors to corporations and contributors and left the State of Missouri with a budget shortfall of over $300 million. We have a GOP lead legislature in both chambers of our bicameral legislature. So far, everyone has promised “bi-partisanship” and all are looking at ways to make up the differences in funding because Missouri, like all states, has to have a balanced budget. Regardless of responsibility for why revenues are down, the Governor apparently will have to cut the budget in the current fiscal year to make ends meet. I say apparently because of that pesky requirement we balance or budget each and every year. So how does a state government fully fund priorities when immediate cash revenues keep that from being done? Here’s how . . .

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Toward ever-greater debt and dependency

Bill Moyers sat down with history and international relations expert and former US Army Colonel Andrew J. Bacevich, who has authored a book entitled:  "The Limits of Power: The End of American Exceptionalism." Bacevich has identified three major problems facing our democracy: the crises of economy, government and militarism.  These…

Continue ReadingToward ever-greater debt and dependency

Step One: Don’t call it a “bailout.”

I don’t always agree with Ron Paul, but what he stated on October 3, 2008 to the U.S. House of Representatives, about the alleged “bailout” bill, rings true to me:

Madame Speaker, only in Washington could a bill demonstrably worse than its predecessor be brought back for another vote and actually expect to gain votes. That this bailout was initially defeated was a welcome surprise, but the power-brokers in Washington and on Wall Street could not allow that defeat to be permanent. It was most unfortunate that this monstrosity of a bill, loaded up with even more pork, was able to pass.

The Federal Reserve has already injected hundreds of billions of dollars into US and world credit markets. The adjusted monetary base is up sharply, bank reserves have exploded, and the national debt is up almost half a trillion dollars over the past two weeks. Yet, we are still told that after all this intervention, all this inflation, that we still need an additional $700 billion bailout, otherwise the credit markets will seize and the economy will collapse. This is the same excuse that preceded previous bailouts, and undoubtedly we will hear it again in the future after this bailout fails.

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Continue ReadingStep One: Don’t call it a “bailout.”