Despite the rah-rah about the “ownership society” and the best economy ever, the sobering reality is very few Americans are able to get ahead, i.e. build real financial security via meaningful, secure assets which can be passed on to their children.
As I’ve often discussed here, only the top 10% of American households are getting ahead in both income and wealth, and most of the gains of these 12 million households are concentrated in the top 1% (1.2 million households). (see wealth chart below).
Why are so few Americans able to get ahead? there are three core reasons:
A provocative essay, Don’t Blame the Robots, makes the bold claim that “Housing Prices and Market Power Explain Wage Stagnation.” (Foreign Affairs) In other words, the stagnation of the bottom 95% of wages isn’t caused by automation or offshoring, but by the crushingly high cost of housing:
“Yet recent academic work in macroeconomics suggests that current wage stagnation has less to do with robots and more to do with real estate and market power.
Real wage growth is a function of two things: changes in productivity and changes in the share of national output attributed to labor. If the share of GDP going to workers doesn’t change, then real wages simply track productivity.”
The market power argument is straightforward: as competition declines, cartels and quasi-monopolies scoop up a larger share of the national income, leaving relatively less for labor.
The high housing costs crush wages argument is more nuanced.
The list of pundits jostling for air time to add their two cents to discussions of hot-button issues such as immigration is endless. The airwaves and social media are overflowing with people wanting to comment on hot-button social issues, but when it comes to the the one truly critical dynamic that will shape the future–everyone’s strangely silent.
The reason nobody dares address this problem is that it has no solution within the current mode of production, i.e. the status quo. The problem is an oversupply of labor.
The 2% target is low enough that the household frogs in the kettle of hot water never realize they’re being boiled alive because the increase is so gradual.
A comment by correspondent David C. suggested the importance of demonstrating the impoverishing consequences of central banks reaching their 2% inflation target. David observed: “That central bankers aren’t all hanging by their necks from lamp posts everywhere is a testament to how scarce are those who grasp exponents and compounding.”
While the general population is aware something is seriously wrong, people remain extremely confused about the root of the problem. This is because what’s happening all around us isn’t socialism and it isn’t free market capitalism. It is actually a return to something much more ancient and much more oppressive. It is a return to serfdom, neo-fedualism and oligarchy…
Read the rest here.
What if all the low-hanging fruit of outsourcing jobs and financialization have already been plucked by Corporate America?
The connection between soaring corporate profits and stagnant wages is both common sense and inflammatory: common sense because less for you, more for me and inflammatory because this harkens back to the core problem with the bad old capitalism Marx critiqued: that capital dominates labor and thus can extract profits even as the purchasing power of wages declines.
(What Marx missed because he was early in the cycle was capital’s dominance over the central state’s political machinery–a topic covered here in The Purchase of Our Republic.)