‘The big education for me is that civilisation is fragile and can be destroyed in a heartbeat' - Jeremy Brade, former peacekeeper in Sarajevo.

Wednesday, July 14, 2021

The self-destroying economy, by Paddington

One of my old friends once told me how an accident saved his life. He slipped in his driveway, and the subsequent CAT scan uncovered a growth on his kidney. That discovery gave him a number of extra years of life.

In a similar way, the pandemic has made issues with our country readily apparent, rather than causing them: access to health care, lack of sick leave, a weak safety net, and the imbalance in the economy.

Forty years ago, a person could work really hard at a union job, and support a family. I read this morning how some celebrity's first job was sweeping up in an Iowa factory, at $12 per hour. Today, that same job would probably earn about the same, even though the total inflation since that time has been something like 400%

Starting in about 1980, a large proportion of GDP has been the banking sector, now reaching 40% Realize that banking, while necessary, is essentially parasitic. Not coincidentally, 40% of the gains of the economy go to 1% of the population, most of whom are in banking and investment. If one looks at gains in the stock market, 92% go to the 10% of the richest.

We have created an unsustainable economy, and not in the way that conservatives would have us believe. In the past 250 years, the Scientific, Industrial and Agricultural Revolutions brought plenty to the wealthy nations, and that plenty has now been sequestered by a handful of largely non-productive individuals.

At some point, the average people will earn too little to keep the system running. If too few people have good health insurance, then the medical system will not do research or treatment, because there won't be enough money in the system. Likewise for energy, information, and all other industries.


Sobers said...

"Forty years ago, a person could work really hard at a union job, and support a family. "

Thats the point, half the workforce was at home looking after that family. Once you send/allow women to join into the workforce, wages are going to drop, same amount of work to be done, double the labour to do it. The average family has a better standard of living today than 40 years ago, its just that both adults have to work to achieve it.

We could say that married women can't work anymore, and must stay home to look after their family, and guess what? Male wage rates would go through the roof and suddenly a man could support his family on his single wage. But I doubt the feminists would approve..............

Paddington said...

@Sobers - I don't know where you are, but here in the MidWest 40 years ago, most wives did work. Salaries are seriously depressed because a lot of those jobs vanished with automation and outsourcing. Then, add in the squeeze that the hedge fund owners put on growth, which translates into depressed wages.

Sobers said...

"here in the MidWest 40 years ago, most wives did work."

Well in that case your original point is incorrect - 40 years ago a man couldn't keep a family on the average working wage, because his wife had to go out to work as well to help pay the bills.

To be honest I think the problem with all this mythologizing of a Golden Era of economic activity when a man could buy a house and pay for a family on the wage he earned in a bog standard factory job is comparing an anomalous period of history with what is actually the norm. That is to say I would posit that the period 1945 to 1975 (ish) was the anomaly - in WW2 there had been massive destruction of physical and human capital, and as a result the decades afterwards are not really comparable with all the ones before or after. The USA in the 50s and 60s up to the oil price hike was pretty much the only game in town globally. It was the only industrialised nation that wasn't flattened by WW2, indeed it came out stronger than it went in. And there was massive demand for its products. On top of that a huge amount of the worlds labour was kept behind bars in the Eastern Bloc, Communist China and in India, which was practising autarky. Of course that fed through into better wages for US workers. But as the rest of the world reindustrialised, and started producing consumer goods themselves, and opened up for trade, that massive increase in available productive capacity affected the ability of US labour to maintain its anomalously high wages.

I think it has always been the case that the average man will find it hard to make ends meet and households will always need more than one full time income. The post war period is the odd one out here, not what one should expect.

PasserBy said...

@Sobers -
The problem with your assessment is that if the Post War Anomalous Period (PWAP) was the anomaly, then the society and political systems that were built on it are also anomalous.
Thats dangerous ground.

Personally I reject your assessment in favour of a harsher critique of the broader Financialisation of Everything beginning in the 1980s in the West.

Its not inequality per say that is the issue but the capture of government, regulation and policy making by large financial interests that have caused these problems. This sort of thing is responsible https://www.politico.eu/article/ireland-gdp-growth-multinationals-misleading/

Ireland looks to be one of the richest countries in human history but has a massive problem with homelessness. Homeless with a 80k per capita GDP!
Thats right there is the definition of an anomaly.

Paddington said...

@Sobers - now you have some real points. An additional couple to make the 1950's a 'golden age' for the average person: 1. Regular men returned from WWII with a strong sense of equality, as had happened after WWI, 2. The US had picked up most of Britain's capital (which it had stolen over 400 years of Empire), and intellectual properties, including much of the work on the atomic bomb.