Monday, March 10, 2014

The Price Of Conservatism

Robert Reich writes that, in the three decades after World War II, the United States created the largest middle class the world has ever seen:

During those years the earnings of the typical American worker doubled, just as the size of the American economy doubled. (Over the last thirty years, by contrast, the size of the economy doubled again but the earnings of the typical American went nowhere.)  

In that earlier period, more than a third of all workers belonged to a trade union — giving average workers the bargaining power necessary to get a large and growing share of the large and growing economic pie. (Now, fewer than 7 percent of private-sector workers are unionized.)

Then, CEO pay then averaged about 20 times the pay of their typical worker (now it’s over 200 times).
In those years, the richest 1 percent took home 9 to 10 percent of total income (today the top 1 percent gets more than 20 percent).

During that period, the national tax structure was radically different than the one Americans now live under:

Then, the tax rate on highest-income Americans never fell below 70 percent; under Dwight Eisenhower, a Republican, it was 91 percent. (Today the top tax rate is 39.6 percent.)

Consider what those taxes bought:

In those decades, tax revenues from the wealthy and the growing middle class were used to build the largest infrastructure project in our history, the Interstate Highway system. And to build the world’s largest and best system of free public education, and dramatically expand public higher education.

Then came the Thatcher-Reagan Revolution and the Great U Turn. And now, citizens have forgotten their former prosperity. Reich pulls no punches:

The collective erasure of the memory of that prior system of broad-based prosperity is due partly to the failure of my generation to retain and pass on the values on which that system was based. It can also be understood as the greatest propaganda victory radical conservatism ever won.

Conservatism has triumphed. But the United States has paid a terrible price.

This entry is cross posted at The Moderate Voice.


Lorne said...

Unfortunately, Owen, under the present regime, Canada has accelerated its 'progress' down the same path.

Owen Gray said...

Some consider imitation flattery, Lorne. But in this case, it's stupidity.

Anonymous said...

Reagan's opponents called Reaganomics 'trickle down economics', David Stockman, Reagan’s then budget director lauded this theory, which is really laissez faire or supply side economics, he later became skeptical about it. George H.W. Bush, during his bid for the Rebulican party presidential nomination in 1980, called it ‘voodoo economics’. In the 1890’s it was called the ‘horse and sparrow theory’ because if you fed the horse enough grain some will pass along to the sparrow. Typical policy recommendations of supply-side economists are lower tax rates and less regulation. Harper is guilty of implementing ‘voodoo economics’ even though it has been proven wrong by today’s state of affairs after practicing it for the last thirty years, worse still he is also implementing austerity which we know takes its worst toll on those in the bottom then in the lower middle to middle, barely touching the upper middle and leaving the top unscathed and with more opportunity and more to gain at the expense of everyone else. Joseph Stigliz calls austerity a ‘suicide pact’ and likens it to the medevil practice of ‘bloodletting’ that left the patient sicker than before the act. Stigliz states that there is no instance of a large economy growing through austerity. “Austerity leads the economy to perform more poorly. It leads to more unemployment, lower wages, more inequality.” -Joeseph Stiglitz.

“Trickle-down economics is the greatest broken promise of our lifetime - The richest 85 people in the world have as much wealth as the poorest 3.5bn. That should be a wake-up call to the deepest sleepers” by Alex Andreou, Monday 20 January 2014 - Exerpt from article:

“It is not so much that the supply-side principle "if you build it, they will come" is no longer true. It is more that we appear to have passed a tipping point, where so much wealth has been concentrated at the top, they no longer need bother to "build" anything. In short, it has become more economically efficient to buy countries' economic policy than to create value in order to sell it on. If one can control government to favour the richest, while raising barriers for new entrants, thus increasing their share of the pie exponentially, what is the incentive to grow the pie?…

…by the creator of The Wire, David Simon: "That may be the ultimate tragedy of capitalism in our time, that it has achieved its dominance without regard to a social compact, without being connected to any other metric for human progress."

Buy a countries economic policy? Its cheaper to hire Harper as he is already brainwashed to believe ‘voodoo economics’ and ‘bloodletting’ are extremely valuable tools and is more than willing to make a ‘suicide pact’ for those Canadians not already in the top 15%. Before the 85% wake-up they may well bleed to death and if they do wake up it may be because they can no longer afford beer, hockey tickets, cable TV or the internet, that’s austerity.


Anonymous said...

Link for the Guardian article:

Trickle-down economics is the greatest broken promise of our lifetime


Owen Gray said...

Your comment covers all the bases, Mogs. Stiglitz is right. Supply side economics is a suicide pact.

The Mound of Sound said...

America's post-war middle class was half a century and two world wars in the making. The foundation was created in the pre-WWI progressive era that continued, more or less, until the outbreak of WWII.

During WWII the labour shortage passed real power from capital to labour (the constant struggle)which led to the post-war labour movement. The industrial base that America forged during the war years enabled the country to emerge as the factory for the world which fostered the industrial and trade union movement. It was unionism that enabled the rise of America's middle class.

Rightwing governments and neo-conservatism have spent the past three decades dismantling it all.

I think there's some chance of a popular revolt in the U.S. if the far right ever loses control of the narrative. Without that, the country's decline is inevitable.

Owen Gray said...

As long as the Right can continue to sell the lie that wealth creates jobs, Mound, the nation is doomed.

Unless a light bulb goes on -- and Americans understand that customers create jobs -- the nation is doomed.

e.a.f. said...

because people hve not been reduced to the poverty which was prevelant prior to WW II, people hve not revolted. The elites have also been able to drive a wedge between the "middle-class" and the "working class" or the "poverty class". What people tend to forget, their salaries rose to a "middle class" state, but they are truly the "working class". If you work, you're "working class". Now the middle-class might be better described as "middle-class values" as the head to lower class incomes.

Once people have used up their inheritances, savings, and credit, they will see what has truly happened to them. Not until that happens will society in general realize what has happened to the mass of Canadians.

Owen Gray said...

And by the time that happens, e.a.f., it will be too late.