Austerity isn’t going to rejuvenate the economy. The world economy depends on demand, consumption; without it businesses have no option but to do whatever it takes to remain as profitable as possible and not sacrifice market share in the light of flat-lining or decreasing revenue. Rich is not synonymous with job creator or employer and the longer we dance about waiting for supply-side economics to kick in the longer we, as a nation, stagnate.
The graph above shows the truth of our situation. Wages have stagnated or tended downward since 1982~, about 30 years. Human workers are being replaced by technology as technology becomes more capable and ever-more pervasive. This hits the working-class doubly hard for it is the moderately and least skilled jobs, occupied by those the bottom of the meritocracy, that technology is most quickly to diminish or remove the need for. Further the middle class is forced into lower wages because there is a large supply of labor in the market (capitalism relies on unemployment to temper rising labor costs). The reason wages rose consistently for decades was because America endured a persistent labor shortage, which we remedied with slavery and immigration. Furthermore one must remember that America had no competition economically after World War II until the 1970s and 1980s.
When we ran into serious foreign competition we responded with corporate welfare, free trade, outsourcing, information technology and running up credit. We made it cheaper for businesses to operate, but we did it in such a way as to un-tether them from America as it were. (Don’t forget that during the Cold War American corporations were quite happy to pay higher taxes to be shielded from the Soviet threat. When the Red Menace disappeared supply-side economics came to the rescue – that is it was invented). Free trade means that the American government negotiates trade deals with other governments that include dirt cheap prices on foreign land, labor and capital on behalf of corporations. Outsourcing is essentially producing goods wherever it is the cheapest to do so, regardless of the home address of the enterprise in question. IT makes business more efficient but also weakens the force that had so consistently bolstered the American working-class, labor shortage. When wages began to decline and stagnate, demand declined accordingly. The government responded by selling the Chinese (private and public sector) U.S. Treasury bonds and then gave that money to businesses to lend to the working-class (at interest of course). Instead of raising wages we lent out the difference.
Now that we have run out of people to lend to (even the poor, a.k.a. the subprime borrowers) and the middle class has bad credit, the rich want their wealth hoarding aided, abetted and subsidized by the government in the name of property rights. Yet there is a finite amount of money and resources in the economy and hoarding it at the top necessarily means there is less to circulate below. (Can’t they see their right to property comes at the diminishing of that right for others?) Saving and investment are worthy goals, but there is no shortage of investment capital, the shortage is with respect to investment opportunities. Giving tax breaks to the rich may create incentives to trade debt back and forth, which admittedly does create some additional tax revenue, but it doesn’t create the types of jobs that augment social mobility.
I fear that rising wages and standards of living may be gone for a few decades; America may well produce a “lost generation.” We, as a nation and especially the Left, must begin to seriously consider more than just giving capitalism a nice, more humane face or simply pushing for more equality. Equality is a noble and praise-worthy aspiration but it’s high time that we take seriously the idea of equality of opportunity. It is not possible for those at the bottom of the meritocracy to form the ambitions of those above them for they do not have the same quality of opportunity. No one can choose their parents but it truly is the right of every poor child to be afforded the same quality of education as their privately educated counterparts. (If education is not truly a birth right then at least admit that either people get what they deserve or that “deserve” is an empty notion.) Let us not forget that our generation are the first that may have less education and a lower standard of living than their parents. Who is to blame for this?