Tuesday, December 07, 2010

How The Wealthy Elites Stole Our Prosperity

Those seeking profits, were they given total freedom, would not be the ones to trust to keep government pure and our rights secure. Indeed, it has always been those seeking wealth who were the source of corruption in government. No other depositories of power have ever yet been found, which did not end in converting to their own profit the earnings of those committed to their change ~ Thomas Jefferson (4/13/1743 to 7/4/1826) 3rd President of the United States (3/4/1801 to 3/4/1809). He was the eponym of Jeffersonian democracy and the co-founder and leader of the Democratic-Republican Party, which dominated American politics for 25 years.

Alan Greenspan served as Chairman of the Federal Reserve of the United States from 1987 to 2006. This period of time covered the presidencies of Ronald Reagan, George H. W. Bush, Bill Clinton and George W. Bush. As Fed chairman, Greenspan worked to advance the interests of the upper-class at the expense of the interests of the rest of the nation.

During the Clinton years the economy boomed. Business did well and the real wages of workers began to rise. This worried the investor class. If wages continued to rise it would affect their profits. Sure, they'd still go up, but they deserved a BIGGER piece of the expanding pie. In early 1997, the sixth year of economic expansion, Alan Greenspan made a statement before the US Senate Committee on Banking, Housing, and Urban Affairs meant to reassure the business community that he knew how to keep wages low.

Greenspan said that, while "the performance of the U.S. economy over the past year has been quite favorable", there was nothing to worry about because "workers fear of losing their jobs restrains them from seeking the pay raises that usually crop up when employers have trouble finding people to hire" (Wall Street Journal 1/27/1997). And Greenspan saw one of his main responsibilities as Federal Reserve Board Chairman to be to maintain "a high-enough level of worker insecurity [so] employees wouldn't demand pay raises and benefit increases" ("Screwed: The Undeclared War Against the Middle Class" by Thom Hartmann, p.48-49).

Fed chairman is an influential and prestigious position. People listen to the top economist in the land, so when the Maestro advised that, in order to ensure continued good times, we needed to go after "wage inflation", the President and Congress listened. Under Greenspan the federal government abandoned previously held pro-labor positions. When businesses violated laws on illegal strikebreaking and hired permanent replacement workers, the agencies responsible for the enforcement of these laws declined to intervene (citations issued by the The International Labor Organization attest to this fact).

Immigration laws were inadequately enforced and people willing to work for less diluted the labor pool. Companies were encouraged to, and rewarded for, sending American jobs to low wage countries. Various "free trade" treaties were championed by both Republican and Democratic presidents and ratified by their respective Congresses. ("Power in The Global Arena", Lecture by Noam Chomsky, 5/1998).

The strategy worked. Profits soared (along with upper-class incomes) while pay for the middle class and the working poor remained flat (or went down). Throw the bush tax into the mix and it's easy to see why the economy is in the dumper. Economist Ravi Batra explains that, "a healthy economy requires that there is a balance between supply and demand. Here supply means the production of goods and services offered to entire society, and demand means society’s demand for such things. Thus, economic balance requires that [supply equals demand]. Without this balance, there is either high unemployment or high inflation".

In other words, Supply side economics and anti-wage inflationary policies lead to unemployment and recession. Because The average citizen (who is still employed) can no longer afford to purchase what is being produced (especially after they've mortgaged their home to the hilt and maxed out their credit cards).

I made this point on another message board in a recent discussion with an "Independent Moderate". I claimed that the solution to the problem we now face is for our elected officials to take steps to "ensure" wages rise. The Independent Moderate's incredulous response was to ask, "how do you ensure that people's wages increase? The government... not unless you're talking about the old East Germany... can't do that".

Does Willis Hart (the aforementioned Independent Moderate) think I was expressing my desire that the government step in and dictate to business what they pay their employees? If that is the case I'm surprised he didn't cite a Communist country as his example. The reason I wrote this post was to explain how, while remaining a democracy, our government can take steps to ensure that wages rise. Just as the adherents of "Greenspan-nomics" enacted policies ensuring wages remained low, polices can (and should) be enacted to ensure the exact opposite.

Progressive radio talk show host Thom Hartmann agrees that it is possible. According to Mr. Hartmann, "Government can set the rules of the game of business in such a way that working people must receive a living wage, that labor has the power to organize into unions just as capital can organize into corporations, and that domestic industries can be protected from overseas competition. When these rules are combined with a democratic form of government, a strong middle class will emerge. The middle class vanishes and we return to the con's Dickens-era form of economics, where the rich get richer and the working poor are kept in a constant state of fear and anxiety so the cost of their labor will always be cheap" (Screwed, p.50).

The cure for our economic ills is to re-adopt pro-labor, pro-middleclass policies and dump the Conservative policies that favor the wealthy. Repealing NAFTA, raising tariffs and penalizing corporations for shipping jobs overseas will encourage corporations who want to sell goods in America to hire Americans. This will bring jobs back to our country.

Passing comprehensive immigration reform backed up by a program like E-verify will drastically reduce unemployment. That and the passage of the Employee Free Choice Act will cause "worker insecurity" to evaporate and allow more workers to negotiate for higher pay. Throw in health care for all - by way of a public option - and the result will be increased prosperity for a majority of Americans instead of a select few.

For 40 years and counting the economic elites have been inflating their pay by depressing worker compensation. It's a transfer of wealth that has left 20% of the population holding 85% of the nation's wealth. This was not an accident. It was by design, and in my mind amounts to nothing less than thievery.

During the previously mentioned discussion with the Moderate Independent I asserted that the wealthy are "overpaid". The Hartster's response was to claim that I was "casually foisting" my value judgments on everyone else (Republicans and other Moderates like him, presumably). Willis conclusion was that was "ballsy" of me. No Willis, there is nothing "casual" about my conclusions.

I've done my homework on the matter and come to my conclusions based on an investigation of the facts. Actually I think you're the one who is "pretty ballsy" to suggest Liberals have reached their conclusions based on jealously and class envy... instead of a love of country and a desire to do what's in the best interest of a majority of it's citizens.

SWTD #57


  1. I concur with your premise WD. Had our economy grown by gradually increasing wages, keeping up with inflation, instead of via debt we'd be suffering no more (IMO) than a garden variety business cycle recession now.
    As you wrote, the Fed chief exercises great influence, almost like a stern parent giving kids "the look" without needing to raise his or her voice.

  2. I'd meant to add that if only the Fed wasn't "regulatory captured" they might have kept to their mandate rather than working at cross-purposes. They really do have a lot of power.

  3. w you are very intelligent and a terrific writer, you need to talk to BoomerBob and blog where he does at Open Salon(I hope I have that right) He is on my bloglist, do you know him? He blogs there and gets alot more readers and comments than at his regular blog. Check it out.


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