When
US Person gave a speech at the Longshoreman's Union hall, his theme was "Downhill since Nixon". As he explained to the 100 or more people gathered there to support a Democratic presidential candidate, the middle class has been loosing economic ground since Richard Nixon unleashed the twin devils of currency devaluation and debt financing by taking the United States out of the post-war Breton Woods agreement. The salient fact is that since 1973 the year the gold standard was ended, real incomes of 90% of Americans--the great middle class--has increased less than 10%. The top 1% of Americans, who derive most of their incomes from investment, has tripled. In the period 2000-2006 the average family income for the bottom 90% decreased by 4% while the top 1% experienced a 22% increase
excludingcapital gains! These astounding statistics represent a wage stagnation which has profoundly altered social conditions in America. The middle class share of the "American dream pie" is shrinking. Over 37 years, middle class Americans used consumer debt to get the things they wanted because inflation made them ever more expensive. Consumer debt is at crippling high levels. Middle family incomes are today two person incomes that are increasingly spent on necessities such as mortgages, child care, interest expense and health insurance. These charts tell the story:
The wage peonage in which most Americans have put themselves is not entirely their fault. They were encouraged to consume, so capitalists could continue to make profits not only on the goods but from financing consumer purchases at lucrative interest rates. This unequal situation was made crystal clear when the Charlatan was asked what ordinary Americans could do in response to the terrorist attacks of 2001. He replied with words to the effect: go shopping. Borrowing was made relatively cheap by government fiat, and consumers used their major asset, their home, as collateral. Now 25% of homeowners are underwater. The debt hole they dug is a deep one indeed:
US household debt is up 120% approaching $20 trillion or 130% of GDP. Personal savings has dropped from $20 trillion to $8 trillion. The social effects of all these negative changes in the relative economic well being of the American middle class was reported by the
Financial Times. What the newspaper found were hard working Americans (the ones still employed) who are living in an increasingly stratified society, and who are becoming more pessimistic about their ability to move up--the end of the American Dream.
Think about this fact: fewer than 1/10th of Americans belong to unions. People in Canada and Europe are subject to the same forces of globalization and technology, often blamed for wage stagnation, yet they belong to collective bargaining units in greater number and their health care is publicly funded. Americans often equate socialism with economic stagnation. But Germany, a
socialist state that mandates worker participation in company management
[1], is making the so-called US recovery look bad (France's unemployment rate is similar to ours):
[top charts: www.marketoracle.uk.com]
[1] Thomas Geohegan in his Harper's article points out that the foundation of Germany's social democracy are the works councils, the co-determined boards and regional wage bargaining institutions. All of which depend on worker participation. And the Germans still make good cars--imagine that!
