Sunday, May 06, 2012

Such Exquiste Timing

I doubt that Stephen Harper reads anything that Robert Reich writes. But, as a trained economist, the prime minister might take a look at Reich's latest blogpost. Reich writes that the most recent American job numbers signal that the American economy has stalled:

Most of the job gains in April were in lower-wage industries – retail stores, restaurants, and temporary-help. That means average wages continue to drop, adjusted for inflation – continuing their long-term decline. Most of the new jobs that have been added to the U.S. economy during this recovery have paid less than the jobs that were lost during the downturn.

What does all this mean? Together with other recent data showing slower economic growth during the first quarter of this year, it’s safe to say the economy has stalled.

The reason that things have flatlined, writes Reich, is income inequality:

Widening inequality is the underlying culprit here. As long as almost all the gains from economic growth continue to go to the top, the vast middle class doesn’t have the purchasing power to boost the economy on its own. And rich Americans spend a much smaller portion of their incomes than does the vast middle class. Their marginal satisfaction from additional spending falls off. The second yacht isn’t nearly as much fun as the first.

Reich's argument is bolstered by recent data on executive pay:

 Income inequality between CEOs and workers has consequently exploded, with CEOs last year earning 209.4 times more than workers, compared to just 26.5 times more in 1978 -- meaning CEOs are taking home a larger percentage of company gains.
That trend comes despite workers nearly doubling their productivity during the same time period, when compensation barely rose. Worker productivity spiked 93 percent between 1978 and 2011 on a per-hour basis, and 85 percent on a per-person basis, according to the Federal Reserve Bank of St. Louis. 

Which brings us back to Mr. Harper. Just as the American economy is tanking, he is applying the austerity solution. And part of that solution will be to pay foreign workers 15% less than the prevailing wage, thus lowering all Canadian wages.

The Harper budget is being sold as a blueprint for economic prosperity. So much of what comes out of Stephen Harper's mouth is simply Orwellian double talk. But, even more to the point, this prime minister will be remembered for doing exactly the wrong thing at the wrong time.


Tossing Pebbles in the Stream said...

It seems worker increased productivity's fed wage increased to the top rather than sharing with the workers.

The French and the Greek electorate this morning are letting their ruling parties know what they think of the austerity route to economic improvement. Ordinary people no longer are willing to be the one's to pay the price under this process.

Owen Gray said...

It's pretty obvious who has benefited over the last thirty years, Philip.

European politicians are finally beginning to pay the price for serving their masters.

The question is, how long will it take before Canadians deliver the same verdict about their politicians?

Fightfordemocracy said...

Canadians have already sent the same message as the European voters but in a system without proportional representation it doesn't make any difference. Over 60% of Canadian voters voted against Harper! In Europe that would mean something. Harper got only 39.6% of the votes; his majority is only 6,000 votes and those are questionable because of the robocalls. It is interesting that Hitler got 44% of the votes in 1933. I think it is perfectly valid to compare Harper in 2011 to Hitler in 1933; it does not imply any comparison whatsoever after 2011 and 1933 as I can't read the future. Harper has far cleverer technology at his disposal than Hitler ever did and will no doubt use it effectively.

Owen Gray said...

What Canadians should remember, Demo, is that Hitler was elected. He did not stage a military coup.

A skilful demagogue can manipulate the voting system. Only a wise electorate and an effective opposition can make sure that a demagogue is stopped in his tracks.