This is the most important graph you are going to see in the next decade.
Whatever its cause – and historians and economists have much to explain – the gap between rises in productivity and hourly compensation that started in 1973 meant that an increasing proportion of national income has gone to the owners of assets, not the workers. Maybe capital needed to make more money; maybe the workers were making too much: I am unqualified to say. Certainly the Reagan regime did much to restore the profitability of capital.
Yet in that simple graph we can see why Trump found support to deal with a perceived problem. Perceived by whom, you ask? Perceived by the people who do not know or subscribe to the New York Times or the Atlantic magazine. Perceived by the people whose children don’t have jobs and who know people who have died from fentanyl overdoeses, people from towns where the mill has been shuttered for thirty years. Where they used to make things. Not perceived by people who work from desks and computers. No perceieved by people whose jobs have not been affected by COVID.
Nuxon went to China in 1972, thus splitting the Communist world and starting the process whereby jobs left the United States for China and places abroad. I am not asserting a directly causal relationship here between diplomatic recognition of China by the US and the off-shoring of US industry.
Nixon went off the gold standard in 1972, This meant we entered upon the world of fiat currencies, where government declares that money is worth something unrelated to the stock of gold. As many now understand, a consistent undervaluation of one’s currency can suck indistry towards the low cost producer. Is that the cause of US jobs bening leeched out of the United States?
Watch this video and see if you agree.
Whatever the cause of the growing gap in the rates of productivity and hourly compensation – I wish I knew – its existence engenders a vast retinue of consequences
The above linked video was uploaded on Dec 8, 2020 and at https://youtu.be/bgPDW0ZpgJU?t=416
“…. from 1971 on US has never run a surplus….”
https://www.thoughtco.com/history-of-us-federal-budget-deficit-3321439
2001 – $128.2 billion budget surplus
2000 – $236.2 billion budget surplus
1999 – $125.6 billion budget surplus
1998 – $69.3 billion budget surplus
Just one of many erroneous facts and assertions.
I am always interested in your views, Arran G. I would be more interested in your general appreciation of the whole thrust of the argument about fiat cirrencies rather than factual errors of this sort, however important they seem. If you could engage on a general level of ideas, we would all benefit. Are fiat currencies the malignant force that the video says they are? And what do you think, if anything, about the gap shown in the graph between growth in productivity and growth in hourly compensation? YOu probablhy have better informed ideas than almost anyone.
First off, I couldn’t help but notice that in the post below this the waiter bears an uncanny resemblance to Nixon who is the subject of this post.
The big problem with the Gold standard is that there is more Gold above ground than there is below ground. As the economy grows so should the money supply. Essentially what you are saying is that going forward you will constrain the economy. The fiat currencies already have a built-in correction mechanism, print too much and you get Zimbabwe.
What is the alternative? Cryptos are in a way similar to fiat currencies in that they aren’t backed with anything but do constrain the supply. If you are willing to constrain the economy in a manner analogous similar to constraints on the growth of crypto coins like Bitcoin, by all means, use that.
As for the “gap shown in the graph between growth in productivity and growth in hourly compensation.” That has flummoxed economists for a while now with several theories as to why that is the case. I think the two most likely reasons are, increase in automation and globalization of production. With the latter, you would expect the wages around the world to gravitate toward rough parity. The former will become more prominent as automation moves from mechanical automation to the introduction of AI and the subsequent decimation of white-collar jobs. This is why you see so many X-equality, where X can be race, gender, etc, warriors because these people really cannot be employed in any other way. Also, see https://en.wikipedia.org/wiki/Bullshit_Jobs
In a free market, people can also create their “gold standard”. If you think that your currency is going to underperform you can purchase Gold and only convert it to a fiat currency when you chose.
Where is there a free market? To me, gold’s use is as a hedge against disaster. Gold prices are a fiction created in the futures markets. It’s price should reflect the anxiety in the world, but the futures market is financed through naked shorts and the crypto currencies tap off much of that sentiment. Who knows what it’s actual price on a free market would be?
Similar things are true with the other factors of production. What is the value of labour on a global ‘free market’? Land? What is the true value of labour in today’s ‘global’ world?
Is there ever a point where the pursuit of profits isn’t an infallible guide to prosperity?
We are in a post-capitalist world, where the corporate world and the political world are merging and separating themselves from the electorate. What appears ‘in politics’ is increasingly theatrics created to grab eyeballs, while the big policy changes take place behing closed doors, and without publicity.