U.S. and international monetary policy now supports an unsupportable fiction: namely, corporations and governments know best. You and I know better. Part 3 of 3.
WASHINGTON, August 17, 2015 – In today’s finale, we’ll take a look at how the left’s phony progressivism has actually served to downsizing the real opponents of Marxism—America’s vanishing middle class—by turning this country’s increasingly underpaid worker bees and scads of illegal aliens into a vast, permanent and hopeless underclass that will likely vote to maintain a failing system they no longer understand.
This ultimate endgame is an audacious development that beggars belief. That’s because it’s the product not of a new dictatorship of the proletariat as Marx, Lenin and most other actual Communists fervently believed. Instead, it’s the creation of wealthy oligarchs and technocrats who loudly proclaim their phony leftist virtue while destroying everyone else, en route to creating a bizarre, 21st century version of feudalism instead.
Today, we shift focus somewhat to some interesting passages we discovered at Bawerk.net, a rather obscure but interesting site whose anonymous author or authors (perhaps allied with the anonymous writers as ZeroHedge) have taken on the mantle of 19th and early 20th century economist Eugen von Böhm-Bawerk, a strongly anti-Marxist Austrian economist.
Today’s “Bawerk” explores in detail how today’s economic disaster actually evolved after its machinery was inadvertently set in motion by Lyndon Johnson’s ham-handed attempt to win love from the electorate. As we indicated in our earlier pieces, Johnson attempted to accomplish this by borrowing and giving away America’s treasury to the poor via his “Great Society” programs while simultaneously printing even more money to cover his disastrously mismanaged Vietnam War.
The result: He was forced to bow out of the 1968 election campaign, ultimately leaving the field to a rehabilitated Richard Nixon, who won the election that year over Johnson’s affable, genuinely liberal (in the good sense) Vice-president, Hubert Humphrey.
Economically, Nixon was confronted by an economy that was in a shambles due to Johnson’s reckless spending on social programs as well as on waging a full scale war.
Since the Bretton Woods currency agreements signed on to by most civilized countries in the aftermath of the Second World War, America, like other nations, had locked itself and its currency onto a gold standard. The aim was to establish mutual currency stability, aided by a strong, gold-backed dollar that would serve as the reserve currency of a largely economically destitute world.
But with Johnson’s reckless spending and indebtedness, Nixon and his advisers realized staying with the gold standard was making the indebtedness and inflation Johnson had ignited far worse. And so, this most un-conservative of modern Republicans made the bold, unilateral move of cutting the U.S. dollar loose from the gold standard. With dollars no longer able to be redeemed for the gold that had formerly backed them, Nixon immediately moved the U.S. to a more malleable, manipulable fiat currency, liberating it from its direct linkage to gold.
The result was predictable—even more inflation. And then “stagflation” as prices increased while wages did not. The resulting fiscal and social damage caused by the dollar’s essential devaluation was ongoing and incalculable, but not easily grasped at the time.
Undertaken perhaps in desperation as the only conceivable means of paying for Johnson’s popular Great Society programs, the transformation of the dollar into a fiat currency—essentially, a currency backed by nothing but a handshake—caused a huge dilemma for America’s essentially consumer-driven society which could no longer maintain its accustomed lifestyle on one salary as wage increases were insufficient and prices were increasing.
The not-so-subtle solution: under the guise of feminism and equal opportunity, women were encouraged—and at times economically forced—to go to work outside the home. Regardless of the perceived social and psychological benefits of this mass-movement of women into the workforce, it was increasingly a necessity for many if not most families, as the heretofore traditional male “breadwinner” could no longer sustain a desired middle-class lifestyle on his increasingly inadequate salary.
Families that used to get by reasonably well on one salary now absolutely needed two salaries to keep economic advantages they thought they’d already won.
The paychecks of middle-class and lower-class American workers were rapidly and permanently devalued by 50 percent. It’s something that has never been much remarked upon by historians. The only classes of people this massive, underhanded pay cut failed to touch, of course, were the wealthy upper classes and the politicians they supported, an issue that has finally become glaringly obvious in 2015.
This is where Bawerk.net picks up the story:
“[In an earlier installment], we showed how the US labour market changed dramatically from the 1970s on back of excess money printing which allowed Americans to buy tradable goods on the international market, hollowing out its own manufacturing base, and essentially creating an unsustainable consumer driven economy where the broad masses get their employment within service sector.
“We will now take that a step further and look at what this has meant for the US worker. As our first chart shows, non-supervisory real wages stagnated in the early 1970s and has essentially remained flat ever since….
“The American middle class, i.e. the non-supervisory workers, managed to grow their consumption in the midst of stagnating wages through
– moving to two income households (women constitute almost 50 per cent of the labour force today)
– by increasing debt”
The columnist links the macro-economic consequences of this massive social readjustment to the essential economic dislocation of salaries caused by the massive movement of women into the workforce in the 1970s and beyond.
That said, as women were essentially forced to go to work to maintain an appropriate income level for their families, the workforce effectively doubled, putting a permanent—and to the oligarchy a supremely useful—cap on wage increases for the foreseeable future.
Bawerk.net picks up this thread (bold text below as it appears on the website):
“It should be clear that when the share of women in the labour force has reached 50 per cent and further leverage of a shrinking household income has become counterproductive the end-game has started. The only way to increase living standards from here will be the old fashioned way; consume less than you produce and productively invest the surplus.
“…the end-game will be one where global manufacturing powerhouses such as China, Japan and Germany will discover their overexposure to exports to the same extent that the US is overexposed to its service sector. As Americans start to save more, invest it domestically and rebuild their manufacturing base global exporters will be forced to do the opposite. Needless to say, this change will not come voluntarily, but through recession, financial crisis and necessity. Excesses must be liquidated at some point, no matter.”
Making matters worse: the adoption of a counterproductive globalism by the U.S., under the guise of free trade. Free trade is indeed a laudable aim that encourages a freer exchange of goods around the world as well as more competitive pricing of those goods.
However, as implemented in the U.S., “free trade” has eviscerated the American manufacturing sector—formerly a key source of high-paying middle class jobs for those who chose not to enter college—and weakened the ability of the average blue collar or white collar employee to bargain for a reasonable wage, given that he or she is now competing against foreign workers that would be thrilled to earn half as much for the same work.
“But why did US wages stagnate? Simple, through a Faustian bargain they [the industrialists and the government] traded highly productive jobs in the manufacturing sector for low productive jobs in the service sector. While it felt great at the time – we are all amazed to see the convenient lifestyle Americans live – it came with long term consequences.
“As the US employment changed toward part-time, low benefit, low paid service sector jobs the quality in the overall labour market deteriorated. We have made a job quality index to depict just this. Unsurprisingly, this index, along with so many, peaks right after Bretton-Woods collapses. And the really scary thing is how it has completely fallen off a cliff in the period after the financial crisis [of 2008].”
Which brings us to where we are today. After an initial, almost panicked reaction to smooth out the terribly inflationary effects of Johnson’s failed Great Society and War on Poverty programs, successive U.S. governments have doubled down on the problem without solving it. America’s political and business leadership,on both sides of the aisle has systematically lied to and betrayed the American for over 50 years, resulting in.
- a diminished, under-trained labor pool working at fewer full time jobs at ever lower wages
- a business-led push, endorsed by both established political parties, to allow a tsunami of legal and illegal (and above all, unskilled) aliens to wash over the existing U.S. labor market with the clear intent to permanently depress the already stagnant American wage base
- a political class that has destroyed Constitutional government as we know it by allowing the Executive branch and unelected agency hacks to evolve into a soft dictatorship; by permanently transforming Congress into an feckless, unrepresentative and dysfunctional representative branch; and by transforming the courts into highly-politicized rubber stamps that legislate socialism from the bench, liberating legislators from having to take the responsibility for such actions and losing office as a result
- A Blob-like government that grows exponentially at breathtaking speed, scooping money out of business and individual economies and hollowing out the entrepreneurial core that once made this country a great nation.
The U.S. is at the point of fiscal and moral collapse, something best exemplified by the vast market upheavals that mark August 2015 and likely beyond. America’s ongoing decline and fall, the culmination of fifty years of failed economic policies and crony-capitalist politics, has finally reached the point of no return.
Election 2016 is crucial. If the Senate, House and President who assume power in 2017 does not start representing the people who elected them, the U.S. economy and indeed its unique and laboriously constructed social fabric will collapse.
It’s time for the electorate to step up and decide whether the last seven years of collapse and desperation have been just fine; or − to paraphrase the ringing words of “Network’s” fictional newscaster, Howard Beale − whether this country’s all-too-silent majority will finally stand up and declare that they’re “as mad as hell, and we’re not going to take it anymore.”Click here for reuse options!
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