September 10, 2012 04:26 PM UTC

Arriving at a contemporary economic GUT - Why things suck

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• by: parsingreality

GUT: Grand Unified Theory (of everything), the holy grail of physicists.  Newtonian, relativity, quantum physics, light, gravity, all in agreement.

But what about economics?  Or, to narrow it down, modern American average folk economics over the last 30 or so years?  Economists of every political stripe recognize that sometime in the 1970’s, expectations of things getting better for Americans stalled.  (“What are we going to do with all our leisure time in the next generation?” thinking.) Buying power became stagnant for the first time in 200 years.

The typical American family found themselves on an economic treadmill just to maintain a consumer lifestyle they were accustomed to.  Debt soared.  Bankruptcies followed what used to be life’s minor glitches.

I offer two videos that I think are the GUT of modern American economics.  In two hours you will understand why your stress is up, savings are down (mostly, to zero), and economic disaster is still coming tomorrow for thousands of hard working American families.

First, a Harvard professor named Elizabeth Warren – yes, THAT Elizabeth Warren – in 2007.  She spent years mining Department of Commerce data, getting them to provide custom queries, and generally, seeing the forest that we usually can’t see as we exam the trees.  Talking before The Second Great Republican Depression, she explains why we have no family safety net anymore.  She examines the costs over the years of things like housing, cars, food, education, etc.  Her observations and conclusions will astound you. I’ll give you one for a teaser, paraphrased:

“The education required to attain middle class used to be high school.  Twelve years of education, all paid for by the taxpayer.  Now, it requires at least a college education, and perhaps an advanced degree to attain a middle class lifestyle.  One third to one half of that education is now paid for by the student and not the public.” (And, I’ll add, means most students graduate with huge debts.)

“The Coming Collapse of the Middle Class”  http://www.youtube.com/watch?v…

Professor Warren doesn’t delve into the reasons for the collapse very deeply.  She confirms that yes, things really do suck and here are some proofs. She lays no blame on any particular party’s feet.  Richard Wolff does:

The video is at http://www.bing.com/videos/sea…

Forget the sponsor, the International Socialist Review.   Don’t shoot the messenger!  Wolff’s great speech – sans any notes – begins at 7 minutes.

Here is the economic why things things suck, as Dr. Warren points out.   An explanation of how things have worked for two hundred years, how things changed during the 1970’s, how the 1 percenters STOLE the 99 percenter’s working stiff’s increases of productivity.  How the labor of the average Joe and Josephina went to the wealthiest instead of into their own pockets.

I’ve been aware of this for quite some time.  What Richard Wolff points out, is that as the typical American family reacted to the reduced wages after the 1970’s with spouses going to work to make them up, is that not only did the CEO’s, etc. not give us the wages we deserved, they then loaned us the money and charged us interest on it to keep up a lifestyle!

Wolff points out one of my favorite economic, unpopular memes: labor is a commodity; the value of labor increases or decreases in line with demand and supply.  When you have many people entering the workforce, whether it’s ex-stay-at-home moms entering the workforce, or high rates of immigration, the value of labor goes down. Both started increasing greatly in the 1970’s, as families used the labor of the (usually) wife to keep income up, and as the 1965? new immigration law kicked in, reversing forty years of limited immigration.  The end result is that the (usually) male sole income provider’s wages also went down.

I found these videos profound, informative, and fact laden.  I hope you do, too.