Stagnant Wages

11 posts / 0 new
Last post
DurangoKid's picture
DurangoKid
Status: Silver Member (Offline)
Joined: Oct 25 2008
Posts: 174
Stagnant Wages

I just watched a video that pointed out an underlying cause of the debt explosion of the last 30 years.  Briefly, over the past 150 years the notion that our standard of living would always increase has been internalized so completely that when the growth in wages went flat in the 1970's Americans turned to debt to maintain their growth in consumption.  Even with more than one member of a household selling their labor, buying power for households has stagnated.  There is basically not enough labor per household to sell to keep up with the expectation of increasing material wellbeing.  Concurrently, the flat wage curve meant an era of unprecidented profits for corporations.  Productivity increased, which simply means employers pay less for more commodities to sell for higher profits.  Some corporations turned to lending these profits for even still greater returns.  The average for unsecured or credit card interest rates is 18%.  Mortgages to fuel a housing bubble were another route for profits to lent to the workers.  What it ammounts to is rather than pay higher wages, the capitalists lend the workers the money at interest to continue the growth in the economy.  But, just as there is a limit to borrowing, there is a corresponding limit to lending.  The answer has been to seek out new borrowers that couldn't previously get credit.  Now there are millions of borrowers whose ability to repay the loans is suspect.  What happens when they cannot pay?  They default.  Once the defaults start, the value of the notes in question and the assets as collateral loose value.  Insurance on these instruments also founders as the rate of leverage is way out of proportion to the risk.  What results is a hole in the supply of money.  That's what the government is trying to fill with the bailouts and stimulus.

This is one reason debt based currency is a disaster waiting to happen.  Currency issued as value is never lost.  The abolition of fractional reserve lending,leveraged insurance deals, etc. would also prevent currency from falling into a black hole, so to speak.  Currency created as value would be free to circulate unleaveraged, without cost or risk.  The downside of this is that it would be difficult to make money with money.  All people would have to sell their labor to make a living.  There would be no wealth without work and the attendant social parasitism.  Unearned income such a rents could be taxed such that lessors would be on par more or less with lessees.

I would be remiss not to mention the possibilty that the latest credit debacle has been carefully engineered.  This is another weakness in a debt based monetary system.  This is especially true when private concerns such as banks have the power to issue, and more importantly, the power to withhold.  Private control of the power to issue is inherently undemocratic and unjust.  It puts millions of people at an extreme disadvantage through no fault of their own.  Ultimately, it is the millions of people at the mercy of the bankers who will pay with their labor and reduced circumstances.

I would also point out that the expectation of ever an increasing standard of living has been cultivated by a sophisticated propaganda apparatus.  The message to expect ever more is repeated from cradle to grave.  To expect less is unthinkable.  To stand still is to fall behind.  If the message had been to save, our situation would be quite different.  But the message has obviously been to spend all you have and borrow still more.  Both the government and the working class are under the thumb of the bankers.

Neither a borrower nor a lender be.  -Shakespeare

S Schauermann's picture
S Schauermann
Status: Bronze Member (Offline)
Joined: Jan 21 2009
Posts: 34
Re: Stagnant Wages

In a nutshell, Durango. Well done. Lest they forget,"A hungry mob is an angry mob."

SamLinder's picture
SamLinder
Status: Diamond Member (Offline)
Joined: Jul 10 2008
Posts: 1499
Re: Stagnant Wages
DurangoKid wrote:

If the message had been to save, our situation would be quite different.

 

Durango,

Your major premise is interesting. However, I see a problem with your above statement. Japan has been, and continues to be, a nation of savers. Yet, they had the "Lost Decade" in the 90's and now are suffering once again. How do you account for that?

VeganDB12's picture
VeganDB12
Status: Platinum Member (Offline)
Joined: Jul 18 2008
Posts: 757
Re: Stagnant Wages

Durango

What a precise and well thought out thesis.  I wonder how the entry of many more women into the work force (often cheaper labor) factored into this process?  As I recall from those days that change was supposed to improve the standard of living for everyone. How sad if the banking corporations just saw that as an opportunity to get cheaper labor and a whole new league of debtors with which to line their pockets.  Women went from being tied to their Bendix washers to being tied to interminable debt and servitude to the banks! Along with their husbands, sons, boyfriends, etc....

 

Thank you for your analysis

Denise

ceci1ia's picture
ceci1ia
Status: Bronze Member (Offline)
Joined: Feb 7 2009
Posts: 79
Re: Stagnant Wages

Probably the entry of so much cheap labor masked the effect of
stagnant wages. The wage-earner only saw the household income increase
and thought hey, we must be richer.

I believe someone on this
site has already commented about our education system which does not
produce critical thinkers, but only followers. A critical thinker would
have asked why are prices going up but my wages are not? Why am I
working harder to stay in the same place or fall behind? Why didn't our
household income double when a second person started working? Why do I
feel it's so important to go only in one direction with my wages and
career?

Chris M. is so right to talk about turning off the TV.
"In the Absence of the Sacred: The Failure of Technology and the
Survival of the Indian Nations" by Jerry Mander looks at what happens
to native communities when TV is introduced to the culture. Another
book he wrote is, "Four Arguments for the Elimination of Television."

I
think TV is part of the problem, but there is also some driving,
goal-oriented force in American culture that is so pervasive, we don't
see it. It helps to go to another country and look at us through
someone else's eyes. It's amazing to see America from the outside.

Reuben Bailey's picture
Reuben Bailey
Status: Silver Member (Offline)
Joined: Mar 17 2008
Posts: 138
Re: Stagnant Wages

Sam,

Didn't they have a bubble leading up to that "lost decade"?  They are also suffering now because they are tied into our debt-based, fiat system.  They may be a nation of savers, but their economy is based in part on exporting to nations that are not, who are suffering and no longer buying quite so much as they were.

Just my guess.  Keep in mind how much you paid for it....Smile

All the best,

Reuben

SamLinder's picture
SamLinder
Status: Diamond Member (Offline)
Joined: Jul 10 2008
Posts: 1499
Re: Stagnant Wages
Reuben Bailey wrote:

Sam,

Didn't they have a bubble leading up to that "lost decade"?  They are also suffering now because they are tied into our debt-based, fiat system.  They may be a nation of savers, but their economy is based in part on exporting to nations that are not, who are suffering and no longer buying quite so much as they were.

Just my guess.  Keep in mind how much you paid for it....Smile

All the best,

Reuben

 

Reuben,

You are absolutely correct. I was just commenting that being a nation of savers didn't help Japan so I don't see how it would have helped us. From a world-wide perspective, I think we're all screwed.  Frown

DurangoKid's picture
DurangoKid
Status: Silver Member (Offline)
Joined: Oct 25 2008
Posts: 174
Re: Stagnant Wages
SamLinder wrote:

Japan has been, and continues to be, a nation of savers. Yet, they had the "Lost Decade" in the 90's and now are suffering once again. How do you account for that?

 

There are two things that happened in Japan that left a rather large hole in their economy.  One was the collapse of a real estate bubble that crashed a lot of debt instruments and boiled off a lot of equity.  Another was a long term process.  Part of Japan's recovery from WWII was the production of inexpensive consumer goods for export.  This was similar to China's current role as the world's workshop.  In the past couple of decades Japan has been supplanted by other cheap labor markets, notably China, but also Vietnam, Indonesia, Brazil, Mexico, etc.  Even the US is a source of labor for Japanese products.  Japanese car manufacturers have imported subassemblies to the US for final assembly to evade tariffs.  The prospects for growth in Japanese exports aren't quite as bright as they used to be.  Go to the discount houses and compare the numbers of Japanese products versus other exporting countries.

As far as the Japanese being prodigious savers, that fits.  If the Japanese spent every yen and then borrowed more, their economy would be awash with debt-money, also.  The fact that they don't spend like Americans means the rate of growth in Japan is more in line with the physical limits to growth.  However, I imply no correlation. 

At some point,  the down hill side of the peak in Peak Oil will bring all economies down.  As the capacity to do useful work diminishes, growth will be impossible.  This is just basic physics.  No energy, no transformation of resources into commodities save that which can be accomplished by direct human labor.  Productivity will plummet. 

On the flip side, as this process works it's way out, there will be a great demand for touch labor to replace inanimate labor from fossil fuels.  One big sector will be agriculture and horticulture.  In past centuries the ratio of farmers to non-farm workers was about 10:1.  If through scientific management that ratio can be dropped to 5:1, the US will need 60 million people returning to the land.  It may be possible to delay this massive reallocation of productive effort by diverting fossil fuels from other uses and dedicating them to growing and processing food.  Trades that have been forgotten will likely reemerge, too.

Japan's slow rate of growth is just a whiff of what lies ahead.  The press clucks its tongue at Japan's plight.  Just remember that the press represents mainly elite opinion.  For the social parasites, the growth we make is what they feed off.  They should be scared.  They have a lot to loose.

Cloudfire's picture
Cloudfire
Status: Diamond Member (Offline)
Joined: Sep 29 2008
Posts: 1813
Toxic Television

.

SamLinder's picture
SamLinder
Status: Diamond Member (Offline)
Joined: Jul 10 2008
Posts: 1499
Re: Stagnant Wages
DurangoKid wrote:

Japan's slow rate of growth is just a whiff of what lies ahead.

DurangoKid,

Thanks for that explanation. I agree with a lot of your points.Your quoted comment above is definitely an understatement!

ceci1ia's picture
ceci1ia
Status: Bronze Member (Offline)
Joined: Feb 7 2009
Posts: 79
Re: Stagnant Wages

c1oudfire, I understand. I, too, turned off the TV about that time and I'm happy I did. I love listening to the radio and reading the newspaper. My friends are puzzled how I stay so informed without TV.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments