Increased Poverty is No Surprise
As lambert reported earlier today, poverty in the "richest country in the world" is up, a lot. Why? Wealth inequality is greater now than before the 1929 crash. 1% owns 1/3 of the country. The upper 10% owns 2/3 of it. I can't insist too much on how important those numbers are or their ability to explain where we are and how we got here. They did not just happen. They are the result of 30 years of sustained assault on the middle class and the basic institutions of government and society by our elites, the wealthy, and corporations.
It really began under Carter. Paul Volcker, yes that Paul Volcker, used draconian interest rate hikes to wring inflation out of the economy. There was a recession and then recovery. The recovery did not benefit Carter but his successor Reagan. There were two important things that came out of the Carter years. To accommodate Volcker's high interest rates, usury laws were repealed. Inflation, or more accurately fear of inflation, hereafter became the number one excuse to suppress wage growth.
Under Reagan, tax rates on the wealthy were cut, unions were weakened, and deregulation became the order of the day. Like Bush, Reagan ran large deficits. As we all know, this is only a problem when Democrats do it. Under Reagan, the great transfer of wealth from the middle class to the rich began. It had various names, supply side economics, or less charitably trickle down economics. What it was was theft and class warfare. But they are never called such when the rich steal from the poor rather it becomes God's plan and the natural order of things.
In short, the rich "earn" their wealth. Labor on the other hand is always overpaid. There were various explanations for what was happening to labor. Women were entering the workforce, some by choice, some from necessity. Over time, it was just taken as a truism that the new norm was the two wage earner family. But also over time, necessity, i.e. the stagnation in workers' wages, pushed this into becoming the norm. As more and more unionized jobs were lost, we were told that unions got in the way of productivity. They were corrupt. They violated an individual's God given "right to work". As manufacturing declined we were told this was a natural transition. We were becoming a service economy. Those old, solid, good paying jobs in manufacturing could be done better by someone in the South, then Mexico, and eventually China. Free trade, globalization, outsourcing, offshoring, it is surprising under how many brands this schlock was sold under.
What was actually happening was that the wealth that was being stolen or transferred to the rich needed somewhere to go. This too had its lingo. We were moving from a labor based to an investor based economy. This began back in the 70s with the influx of petrodollars. The fear back then was that oil rich Arabs would buy the country. A similar fear was expressed years later about the Japanese. What was curious was while the nationalism card was played, the protectionist saber was rattled, inflation just wasn't the concern it was when labor was invoked.
The investment based economy was a myth. Instead what we got was the paper economy, the world of securitization and financialization. The real economy became an inconvenient adjunct to this. The rich really weren't into investing in this. They could make so much more money blowing bubbles and gaming the political process. Indeed their efforts had the effect of pushing companies to disinvest and go for short term profits. The CEOs had no problem with that: bigger bonuses for them. The long term didn't matter. It was all IBG, YBG.
But they didn't stop there. They used their great wealth to buy academia and the media. These were their two great tools to convince ordinary Americans not to believe their lying eyes or to ignore the massive looting in which the rich and the elites were engaged or to pay attention rather to that bright object over there, which was almost always some combination of guns, God, and gays. Greed knows no bounds. There is never enough. But the potent alliance of the rich, the elites, and the corps held all the levers.
Whether you want to call it crony casino capitalism or corporate kleptocracy, we had entered a system of "Heads they win, tails you lose." Even when the bubbles burst, they the smart money hit the exits leaving the retail saps or the big slow movers, like pension funds, to hold the bag. And even when things got really out of hand as they did in 2007 and 2008, those we call the MOTU, the PTB, the TBTF pulled out their ace in the hole.
They used the government itself to bail themselves out. All that money that went to bail out their frauds, their cons, their greed and stupidity was money that did not go to the real economy, jobs, homeowners, state budgets, the disappearing middle class or the burgeoning poor.
And that brings us to today's news of a spike in poverty and in foreclosures. Of course, this happened. It could not but happen. We live in a system of institutionalized theft. Call it confiscation, redistribution, or restitution. Until the wealth inequality in this country is reversed and those who created it and facilitated it are gone, all of the fundamentals of the economy in which 90% of us live will continue to deteriorate, and we will have crash after crash after crash.