Capitalism Not to Blame for Middle-Class Plight
WWII Created Unsustainable Expectations.
American industrial base enjoyed twenty-five years of monopoly power after WWII because Great Brittan, Germany, and Japan had to replace their industrial base. This resulted in U.S. workers enjoying extraordinary income and fringe benefit growth.
The next twenty-five years period began with extremely high inflation that began with excess aggregate demand government debt to fight the Vietnam War and this inflation was reinforced when the OPEQ cartel substantially raised oil prices. This caused a sizable lowering of nonunion middle-class employees and retiree living standards.
About this time U.S. companies faced newly developed industrial technology from Japan, German and Great Brittan. International competition increased competition for America’s older industrial base. American executives maintained company profits and their high salaried jobs by cutting worker wage. They also cut product quality making competing with high quality foreign competition more difficult. Union’s leaders also wanted to keep their high paying jobs so they got union members who also wanted to keep their high paying jobs to accept buybacks and to allow newly hired workers to earn lower wages and fringe benefits. Financiers also faced more competition from foreign banking and cheap Internet trading and increased demand for their services with exotic products such as derivatives and Credit Default Swaps caused problems.
U.S. Consistently Produce
Borrowing Keeps Living Standards High.
Worker adjusted to stagnant wages by using credit cards to increase living standards. Then banks changed the name of home improvement loans to home equity loans and homeowners increased their standard of living by spending equity savings.
Politicians continued to buy votes with deficits. These deficits increased the well-being of both worker and retirees. Politicians also tried to help average earners buy homes by encouraging the financial community to make mortgages easier to obtain. The real estate industry and banks took many shortcuts to speed up mortgage processing and make loads of money. Bank and Politicians did not realizing they had creating the massive liquidity problems which caused the Great Recession.
Many Americans are better off. Most Older Americans have been pulled out of poverty by SS, Medicare and the accumulation of wealth that has occurred since WWII. Children are better off because childhood diseases such as polio have been cured, seat belts and bike helmets are now required, school transportation safety has been increased and they have wealth grandparents to spoil them. Many baby boomers received an inheritance that was much larger than that received by their parents. Many baby boomers also have company retirement plans and they have enjoyed society's vastly improved safety net which also helped the poor.
Dissatisfaction with capitalism, politicians, educators and business exists because people compare present economic well-being with the unsustainable fifty-year period occurring after WWII. The last time similar events occurred was after WWI and the resulting balance sheet recession caused the Great Depression which was ended by the substantial industrial activity and debt required to fight WWII.
solved the problem of Fascism but left us with equally feared Communism and more
debt than we have today and unlike today’s debt, it was not for things that made
Current fear that slow economic growth will make current debt refinancing expensive has people apprehensive. So does the expense of future expenditure commitments for society’s safety net. Slow growth will eventually require restructuring which will hurt many. Is a post WWII relative debt reduction possible? Can we continue cheap refinancing and generate the production necessary to continue funding an expensive social net?
A return to the Great Depression after WWII was predicted by many. It never happened because rapid growth caused by pent-up consumer demand caused by WWII rationing. Economic production created by the needs of the large baby boomer generation added much aggregate demand as did increased demand from government spending on the Marshal Plan and the national highway system. Where will growth come from?
Fracking has begun to lower energy cost and make U.S. based production more competitive. Millennial having grown up in the Digital Age may be able to create the U.S. monopoly power required to rapidly expand the economy and lower the relative cost of debt. The United States is better equipped to succeed in a Flat Robotic World than anyone.
What happens if growth is delayed or doesn’t happen? Politicians will not act until the expense of carrying an ever increasing debt hurts them poetical. Thankfully this will not happen quickly because the dollar will remain strong because the economies backing the Euro and Renminbi. will not be able to compete with the dollar any time soon. But it may eventually happen. Voters are receiving many benefits from annual deficit and want to discontinued or lower only government expenditures that helping others.
What Makes Me Nervous
A disastrous rollout of Obama Care increases cost much more than expected and creates such a doctors shortage that Republicans gain control of Congress and cut back dramatically on the social safety net. Unemployed college graduates join with dissatisfied poor people and cause social unrest not seen since the 1960's; a time when people were not nearly as spoiled as they are today!
After Tax Income Went Up for the Middle
Those at the Bottom Got Less