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Interlude- Wherein I Get On My Soapbox

April 10th, 2008 · 2 Comments

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I think that this article from the NYTimes should be required reading for everybody.

Forget the complexities of credit crunches and subprime mortgage loans, if you want to know why our economy is in the situation it’s in, all you need to do is read the article and view the accompanying graph.

The bigger problem is that the now-finished boom was, for most Americans, nothing of the sort. In 2000, at the end of the previous economic expansion, the median American family made about $61,000, according to the Census Bureau’s inflation-adjusted numbers. In 2007, in what looks to have been the final year of the most recent expansion, the median family, amazingly, seems to have made less — about $60,500.

This has never happened before, at least not for as long as the government has been keeping records. In every other expansion since World War II, the buying power of most American families grew while the economy did. You can think of this as the most basic test of an economy’s health: does it produce ever-rising living standards for its citizens?

The point I want to make here, is that we are where we are because we’ve been suffering through an entire generation of economic and political thinking that has devalued the worker. This blog consciously pitches itself to the average American worker, because that is what I care about.

The thing that gives me juice about what I do for a living is the thought that I am helping average people get better jobs, make more money, and get ahead in life.

But I think I’m not alone in feeling more and more that our society cares less and less about what people do for a living, and cares even less again about whether or not they get ahead in life.

More than anything else — more than even the war in Iraq — the stagnation of the great American middle-class machine explains the glum national mood today. As part of a poll that will be released Wednesday, the Pew Research Center asked people how they had done over the last five years. During that time, remember, the overall economy grew every year, often at a good pace.

Yet most respondents said they had either been stuck in place or fallen backward. Pew says this is the most downbeat short-term assessment of personal progress in almost a half century of polling.

Being pro-the-average-American-worker is not something that is anti-capitalist. On the contrary… it’s basic economics to understand that an economy is a two-way street. You have a vibrant and functioning economy only when the CONSUMER side of the economy is as healthy as the PRODUCER side of the economy.

Remember the example of Henry Ford paying his workers a high wage so that they could afford to buy the very cars they made? (History buffs… yes, I am aware that that canard is slightly apocryphal… Ford had to pay high wages because the work conditions were atrocious and turnover was worse. Still, it’s a useful metaphor.)

How much longer can we continue to put corporations and moneyed interests ahead of the interests of the American worker? It’s downright blindness and amnesia to forget that workers are A COMPONENT OF corporations and moneyed interests. At the very least, workers are the flip side of the economy… the other half that keeps things going… and so, at the very least, there should be a balance between the interests of the two.

After all, if I can’t afford to buy one, you can parade all the flat screen tvs in the world in front of me, and I still won’t open my wallet to save your company’s share price.

The causes of the wage slowdown have been building for a long time. They have relatively little to do with President Bush or any other individual politician (though it is true that the Bush administration has shown scant interest in addressing the problem).

The slowdown began in the 1970s, with an oil shock that raised the cost of everyday living. The technological revolution and the rise of global trade followed, reducing the bargaining power of a large section of the work force. In recent years, the cost of health care has aggravated the problem, by taking a huge bite out of most workers’ paychecks.

Real median family income more than doubled from the late 1940s to the late ’70s. It has risen less than 25 percent in the three decades since. Statistics like these are now so familiar as to be almost numbing. But the larger point is still crucial: the modern American economy distributes the fruits of its growth to a relatively narrow slice of the population. We don’t need another decade of evidence to feel confident about that conclusion.

In the mainstream discourse of this country, sticking up for the worker is not just labeled anti-capitalist, it is very often labeled un-American. Sticking up for the worker can get you labeled as a class-warrior, or, worse, an old school welfare state fan that is anti-business. I cannot understand why this is.

Again, I go back to the notion that an economy is only healthy when all boats rise at the same time. We’ve endured a generation where only one tiny sub-section of the boats have risen. The rest of us has been treading water.

It’s not class warfare to point out that a few companies and people have gotten very rich in spite of, and, perhaps, on the backs of, the rest of us. It’s not anti-American to point this out or be angry about this. It’s not an issue of Red State/Blue State, or even a matter of politics.

It’s a matter of common sense.

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Tags: Finance

  • Willy

    The salary figure has little meaning unless it is accompanied by a statistic on whether people are working more or less over the same period.

    There’s a solid chance that people are happy with their income level, and are responding by working less (or not working more).

    It seems to me like the Times has cherry picked some numbers, and not put them in context.

    The total effective tax rate for people at the median has also fallen from almost 17% to about 14% over that period of time. Looks like the Bush administration has addressed the problem quite well…

  • Dee

    Great post. It seems that the workers’ well-being isn’t high on the list of the government’s or corporations’ priorities.