The Crisis of Capitalism, Connect the Dots?

The Crisis of Capitalism
The Crisis of Capitalism

The Crisis of Capitalism, Connect the Dots?

Reading the business news and political commentary over time clues you see certain controversies over and over again. In time, you begin to see the relationships between those controversies. Below are listed six links to stories about the economy. They cover different subjects in different ways sometimes in different formats. For instance the lead article on median household income is a statistics based economics analysis, while the second item is a professional discussing what attitude he should take in encouraging his students to pursue higher education. Nevertheless, they all tie together. They tie together evidencing the crisis of capitalism. And by this I mean capitalism as practiced in the United States. Let me explain how. ( The essay will pick up after the six links.)

Middle-Class Death Watch: The Median Household Is Now Poorer Than in 1984

American Dream Fraud: Confession of a Stupid Idealist

The Frightening Growth of Suburban Slums

Is There Any Way That Weak Employment Numbers In Europe Might Bolster Concerns That Most Economists Are Right About Government Stimulus

Wall Street Has Raked In Almost A Billion Dollars Helping Companies Move Overseas To Dodge Taxes

Think everything on a dollar menu costs a dollar? Think again.

Median Household Wealth Falls.

The first story is a economic tragedy, an incredible one. The middle class wealth of Americans has fallen below the level of 1984. And it didn’t fall a little bit, it is twenty percent less, one fifth.

Let me put this in perspective for you. The Gross National Product in 1984 was a little more than four trillion dollars. As of 2012, it was sixteen and a half.

That means that this nation increased the amount and value of its good and services roughly by a factor of four and during that time of growth, the middle class actually lost ground. Where did all that money go? And why did the bedrock producers of wealth, the American worker, get less and less of it?

Currently the one percent hold 38% of the nation’s wealth. Their income rose from 1979 to 2007 at a rate of 275%.

Well obviously, it must be that the one percent produce enormous economic gains while what workers produce is worth less and less. Do they really? Between 1979 and 2007, worker productivity in the United States went up 240 percent. American workers more than doubled their productivity and were rewarded by declining income.

So, from the first story we can conclude that the middle class is becoming poorer while the wealthy accumulate more and more wealth.

Is College Worth It?

The second story is by Larry Strauss.  He’s a teacher and he begins the essay talking about his family coming to America in years past believing in the American dream and through hard work and brains made it into the middle class. But now he finds himself in a quandary. Is a college education a road to the middle class for his economically disadvantaged students? It’s hard to encourage a student from that background to take on an incredible amount of student loan debt on a promise of economic advantage when the job market is so hideous and whole idea of economic advancement may be questionable. His students from four or five years back talk abut owing massive student loans while being lucky if they can find any job at all. Some have moved back in with their parents.

He is confronting with courage and commitment a new conundrum of our age. While college becomes more and more expensive while becoming more and more a corporate form based on profit and dubious numbers, the promise of upward mobility may be overblown if not a mirage. It is entirely possible that large groups of Americans will in the future be permanently consigned to the class they were born in.

Poverty in Suburbia

A new phenomenon, the urban slum, is appearing all over America. First reported during the burst, by about the year 2000, there were significant numbers. But now their population outnumbers those in the inner city slums. Poverty has moved from the underclass to the middle class.

If the news that urban poverty had increased dramatically wasn’t bad enough, that it is in the suburbs is a human tragedy in itself. An inner city can get services to people easily by comparison with an urban environment. In an inner city, you can walk from one place to another, public transportation is common and facilities such as soup kitchens, government offices, etc., can be centralized for greatest access. The urban landscape was designed around the automobile. Housing developments were laid out between broad sweeping roads with access to home with lots of parking and big garages.

Poor people have trouble keeping cars and if they have a car, the cost of maintenance, insurance and fuel will often make it unusable. So, the urban often go without food and government services. And the scattered community and its implied culture of success makes the support of neighbors and even friends difficult. It’s hard to maintain self-respect in a culture which even in the darkest of economic times blames unemployment and poverty on defects of character.

The Intellectual Poverty of the Ruling Class

The response of the government in the United States and Europe to the greatest economic calamity since the Great Depression was austerity. This was an odd response. The great body of economic thought in both the United States and Europe was that in a time of economic calamity the government should step in and stimulate economic activity while alleviating the suffering of the people. This was ignored. A handful of economic studies and a privileged band of economists gave credence to the idea that austerity promoted growth. It was a bizarre theory now and after its continued disastrous failings, even more bizarre now.

Look at the problem from the perspective of the people. The collapse was caused by a relatively small group of banks on Wall Street. Once this catastrophe happened, millions of people lost their jobs and the businesses that served those people perished as well. They suffered while having no responsibility for what happened, and when it might be expected that the government well aware and having aided and abetted the actions of these investment bankers would take some pity on their plight, they were thrust from the concerns of the government, abandoned to the invisible hand of the market which was intent on preserving and maintaining their suffering. Many unemployed people felt that it was strange that the banks did not suffer while they were considered to have failed in a fundamental way, that if only they were more ambitious, more careful and displayed more grit, they could lift themselves out of the economic crisis, and thus shift from “takers to makers.”

In the United States, the cash strapped local and state governments cuts services, while the President created a stimulus package half the size of what was necessary. After that the President began making cuts joined by Congress. Nevertheless, the United States has done better than the European Union which intent on punishing the “unworthy” imposed draconian cuts on its weaker members, many of which have suffered terrible economic losses. Meanwhile, the so extravagantly promised wonder growth from austerity has failed to materialize.

Why did a doctrine contrary to basic economic theory gain such traction? It was convenient. In the United States, the “very serious people” as well as the economic elites had wanted to cut benefits such as social security for many years. They wanted to impose discipline on the people. Newspapers, in particular the Washington Post and to a lesser extent the New York Times provided (and still do) a constant diet of horror stories about deficits and the costs of benefits. For elites, disaster, catastrophe, human suffering, even calamities caused by or enabled by their actions are opportunities to enact their agendas. And they saw the economic disaster as an opportunity. So, on fragile but well publicized evidence, they proceeded to impose austerity. Their actions produced human suffering on a vast scale while crippling the recovery.

Facts, evidence and expertise are not important in Washington. When facts and evidence prove inconvenient, they are ruthlessly attacked. The attacks often verge on the hysterical.

The ruling classes in the United States place little importance on objective evidence and reasoning when creating public policy. Their disregard has produced great human suffering and bodes ill for the continued existence of the middle class.

The Wages of Sin are almost a Billion Dollars

The next story concerns the movement of American companies’ headquarters overseas to avoid taxes. It’s called inversion. A large American company purchases a small foreign company and then takes on their tax identity and from then it does the same things it did before just without paying taxes in America.

Here we have corporations, created in the United States, its employees trained in American institutions, its rights protected by the laws of the United States, moving to  foreign country not actually but symbolically – just enough to avoid taxes. Millions of Americans have suffered and died for this nation. Millions more have paid taxes to support the legal and physical structures (like roads and schools) that made these corporations possible. Their profits are often subsidized by government contracts and by a myriad of laws that support established businesses.

And yet they abandon any responsibility to the United States, to simple morality and the demands of patriotism.

This is a tragedy, perhaps in a real way, the first direct evidence of nation in the throes of self destruction. But the greater tragedy right now, is that no one is going to do anything about this. There has been a bill submitted to Congress to end the practice but it is dead on arrival in the House of Representatives. No one is going to do anything about this, the people who are evading these taxes are more important than the interests of the American people.

Right now, a compliant press is busy churning out pro-tax evasion articles. Because no matter what a business does in the United States, it has stalwart defenders in the press if only in the business press.

A Dollar Menu, it depends how you count.

Many workers in the United States make little money. A full time worker on minimum wage gets 290 dollars a week. The United States has the highest proportion of low paid workers in the developed world. Seventy-three percent of those on food stamps are working Americans. And of these working Americans a good number work in fast food. Since their salary is insufficient to support a family they have to resort to state and federal aid. This is in a real way a subsidy paid by the taxpayer to companies paying the minimum wage. If the workers had little chance of meeting basic human needs while working at one of these places, they are hardly likely to stay. Fast food businesses as well as big box retailers are able to maintain their work force through federal and state benefits for the poor and their children.

So, what does a dollar hamburger cost? And what would it cost if the worker were paid enough and given enough hours to not need benefits to have a decent life?

Summing Up

Those are the stories I found in one day on the web

Here are the factors we seen in the stories:

1. The middle class has been denied a share of the growth in production and profits from 1984 to the present time.

2. The traditional route of social and economic advancement, education, is losing its capacity to generate social mobility, and the crushing burden of student loans calls into question, whether or not higher education is worth pursuing.

3. The traditional middle class environment, the suburbs, once a symbol of economic success, are now suffering the same blight as the inner city.

4. The governing elites no longer concern themselves with issues related to the population at large but focus their concern on the “wealth producers.” And in that pursuit, facts and ideas that contradict their goals are simply ignored.

5. The corporate movement to avoid taxes is organized, profitable and continuing.

6. Many corporations are paying such low wages that government benefits are necessary to provide basic necessities to their workers, and that this constitutes a massive de facto transfer of money from the government to these corporations.

This adds up to a bleak picture of the future. We have a middle class declining in numbers and wealth while the means of upward mobility increase in expense while becoming less useful. The leadership we have is unconcerned with these problems and in fact, these kinds of issues are peripheral to their interests. Corporations are no longer content with their privileges and power but have abdicated all responsibility for participation in an organized society. These organizations now live by the philosophy, “It’s just business.” And that justifies any crime and any breach of duty with the nation that sired you.

In conclusion I believe that the crisis of capitalism is upon us. I believe that capitalism as practiced in the United States is concentrating wealth and income among a very small group of people while diminishing wages and opportunities gradually diminish the middle class resulting in a huge permanent underclass locked into permanent income insecurity.

2 thoughts on “The Crisis of Capitalism, Connect the Dots?

  1. Under Poverty in Suburbia, I think you meant, “A new phenomenon, the suburban slum …”

    In another blog, I ran across the theory that the plutocrats are demonizing Putin so they have someone else to blame when the house of cards crashes down. Other than themselves.


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