Blog Credo

The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.

H.L. Mencken

Wednesday, July 2, 2014


This piece in Tiger Beat on the Potomac has generated a lot of discussion.  Probably because lines like this are true and discomfiting to the CW of the 1%.

Which is why the fundamental law of capitalism must be: If workers have more money, businesses have more customers. Which makes middle-class consumers, not rich businesspeople like us, the true job creators. Which means a thriving middle class is the source of American prosperity, not a consequence of it. The middle class creates us rich people, not the other way around.

This is the basic understanding that arose from the Great Depression.  I just finished reading John Kenneth Galbraith's analysis of the Crash of '29 and it's pretty apparent that the Crash of '08 was it's close cousin.  The fact that the Depression of '08 was short was precisely because of better policy outputs like TARP and the Stimulus and policy stablizers like the Federal Reserve, Unemployment Insurance and so on.  

But the fundamental flaw in the economy of 1928 and 2007 is wealth inequality.

Read this and tell me it's not true:

The thing about us businesspeople is that we love our customers rich and our employees poor. So for as long as there has been capitalism, capitalists have said the same thing about any effort to raise wages. We’ve had 75 years of complaints from big business—when the minimum wage was instituted, when women had to be paid equitable amounts, when child labor laws were created. Every time the capitalists said exactly the same thing in the same way: We’re all going to go bankrupt. I’ll have to close. I’ll have to lay everyone off. It hasn’t happened. In fact, the data show that when workers are better treated, business gets better. The naysayers are just wrong.

How can the data be ignored so strongly?  Because there is a powerful incentive to do so.

The most insidious thing about trickle-down economics isn’t believing that if the rich get richer, it’s good for the economy. It’s believing that if the poor get richer, it’s bad for the economy.

Hanauer here lays the wood.  Trickle down is killing the average American.

Here is a somewhat easy to understand example of why trickle down is wrong.

We rich people have been falsely persuaded by our schooling and the affirmation of society, and have convinced ourselves, that we are the main job creators. It’s simply not true. There can never be enough super-rich Americans to power a great economy. I earn about 1,000 times the median American annually, but I don’t buy thousands of times more stuff. My family purchased three cars over the past few years, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. I bought two pairs of the fancy wool pants I am wearing as I write, what my partner Mike calls my “manager pants.” I guess I could have bought 1,000 pairs. But why would I? Instead, I sock my extra money away in savings, where it doesn’t do the country much good.

The problem of course is that he's not "saving" his extra money, he's creating bubbles in equity markets.

Our current system is broken, but we're a wealthy enough country to fend off the consequences for awhile.  But not forever.

My only worry is that Hillary Clinton is an unlikely venue for the sort of radical economic revision of America that we need.  And that's why Elizabeth Warren remains so many people's first choice for President, even though she won't run (and probably wouldn't be a good president.)

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