User:Woozle/blog/2011-04-28 2130 how to fix the economy

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how to fix the economy
2011-04-28 2130

I've been saying this for a little while now, and I just saw a documentary which put some numbers to it. Here's the story:

Since 1890:

  • real wages (adjusted for inflation) rose more or less steadily (at a low exponential rate) until about 1975. After that, they began stagnating slowly.
  • business productivity has increased steadily -- on a similar curve with wages until 1975, and then continuing on upward exponentially as wages stagnated, leading to absolutely staggering profit margins for the largest companies.

Why did this happen? Several forces are at work. Offshoring is one, of course; presumably we can fix that through changing the tax incentives, but it's not any more significant than women joining the workforce (beginning in the 1960s) and people working extra jobs to pay the bills (leaving fewer jobs for everyone else).

The major force behind this change is automation. It takes fewer workers now to produce the same amount of product -- which the owners sell for more money, due to higher productivity. But they have fewer workers to pay, so they get to keep a lot more of that money.

So where does this leave things, then? The employers have all the employees they need. They're still making enough food, clothing, shelter, and other basic necessities to go around -- but since they don't have to pay as many people, they've got all this extra money. What to do with it?

Two things.

First, if there are any annoying competitors cutting into their bottom line -- buy up the competitors. (Remember how suddenly everyone was buying everyone else, starting in the 1980s? This is why.) Now they don't have to worry about being the best, because there is only one real player, and its subsidiaries, for every market.

Second, they loan us the money that we could have been earning if they needed us to work for them. If we can find a way to get money to pay them back, great; if not, they get our houses or other assets when we go bankrupt.

Those businesses should be using most of their profits to pay for the health, education, and welfare of every person whose job has been automated (or offshored) out of existence, and who hasn't been able to re-train for some other work.

The irony? The problem is that it's *too easy* to produce everything we need. We should be living a life of leisure, with loads of extra time and no worries about housing or paying bills.

This has to change. Can someone phone the Tea Party and explain this to them? I'd think they would want to know how badly they're being screwed.


1: this is a 4.5-minute trailer for the documentary I was watching (for sale here, but not available for download), in which Richard Wolff summarizes his argument, with graphs... and here is Thom Hartmann interviewing Wolff.

2: A chart in the New York Times agrees closely with Wolff's data. It seems to be part of some other story, but I don't have a link to that.