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m_d_hI started reading an article in the latest New Left Review (I'm a paid subscriber) and quickly realized (by the third paragraph) the entire article was based on incorrect descriptions or assumptions of US economic data. A major premise of the article is that the US economy began a long decline after 1980, such that politics in the US has become a more brutal zero-sum game.
In the US, inflation-adjusted GDP per worker has increased 73% since Reagan took office and the US turned decisively toward a lower-tax higher-deficit federal regime. That's not a long decline. Every decade since 1980 has seen an increase in US productivity per worker.
What has declined since 1980? The federal minimum wage, which is down 28% after inflation. Productivity per worker up 73%, minimum wage for that worker down 28%. That's crazy. Average hourly pay for nonsupervisory workers is up only 16% after inflation over these past 40 years. Better than the minimum wage, but if productivity per worker is up 73%, why is average hourly pay up only 16%?
It's not the economy that began a long decline after 1980, it's the status of the working class in the US that began a long decline. Minimum pay is down, average pay has increased by only 0.3-0.4% per year for decades. Where is all that extra productivity going if not into our paychecks?
Corporate profits -- up 313% after inflation. Stock market -- up 2144% after inflation, WTF.
It's not the economy that has done poorly under neoliberalism over the past 40 years. It's the working class. As workers have become significantly more productive, nearly all of the resulting extra income and wealth has gone to the ownership class.
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One of the persistent myths believed by the Left is that "all the manufacturing jobs" have moved overseas, leaving the US a sort of barren shell. This isn't true. The US became much more productive over the past 40 years. Sure, some jobs have left the US, but many more US jobs have replaced them. Workers complain that the new jobs don't pay as well -- and this is true! The problem is that worker pay has stagnated, not that jobs have moved away or disappeared. Blaming the stagnating pay on jobs moving overseas is scapegoating -- a type of scapegoating that Trump has used for his personal political benefit -- blame China, not your corporate bosses. Meanwhile, Trump cut taxes for those corporate bosses, and the stock market is hitting new highs as his term ends, even in the midst of this pandemic recession.
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Corporate profits -- way way up. But how is it the stock market has gone up even more than profits have? More than 6x profits?
Well, another way of looking at it -- the stock market values profits more than it used to. Back in 1981, the stock market valued $1 of annual profits at about $6-7. Now the stock market values $1 of annual profits at about $34 (Shiller PE Ratio). (Unless you're Tesla, then the stock market values $1 of your annual profits at $1,145.)
It's this valuation of profits that I refer to when I say the US stock market is currently inside its second-largest-ever bubble. Profits have increased so much over the past 40 years, that we have an expectation of profits going up even more in the future, so we're willing to pay much more for $1 of profits than we used to.
This is tied in with the massive global bond market bubble -- largest bond market bubble in human history. With government bonds so overvalued, stocks seem like a relative steal. Right now, $1 of interest income on a long-term US Treasury Bond is valued at $109. Back in 1981, $1 of interest income was valued at $7 -- about the same as $1 of corporate profits back then.
Future income is valued way more highly now than it was 40 years ago, when the neoliberals took power. Another way to think of this -- investors perceive significantly less risk for their investments than they did 40 years ago. They are certain corporate profits will grow faster than inflation, they are certain the working class has been politically defeated, they are certain that government bonds are a safe place to store wealth, even as the federal deficit & debt approach WW2-maximum levels.
Our federal government is fighting a WW2-style total war not against fascism, but against the working class. Its weapons have been deregulation, tax cuts, and union busting.
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The Left needs to understand reality if it's going to come up with effective strategies for fixing our problems. We aren't stuck inside a zero-sum game, we're stuck inside a game that is rigged for the ownership class. Our workers are more productive than ever, but the ownership class is keeping all the gains for itself.
In the US, inflation-adjusted GDP per worker has increased 73% since Reagan took office and the US turned decisively toward a lower-tax higher-deficit federal regime. That's not a long decline. Every decade since 1980 has seen an increase in US productivity per worker.
What has declined since 1980? The federal minimum wage, which is down 28% after inflation. Productivity per worker up 73%, minimum wage for that worker down 28%. That's crazy. Average hourly pay for nonsupervisory workers is up only 16% after inflation over these past 40 years. Better than the minimum wage, but if productivity per worker is up 73%, why is average hourly pay up only 16%?
It's not the economy that began a long decline after 1980, it's the status of the working class in the US that began a long decline. Minimum pay is down, average pay has increased by only 0.3-0.4% per year for decades. Where is all that extra productivity going if not into our paychecks?
Corporate profits -- up 313% after inflation. Stock market -- up 2144% after inflation, WTF.
It's not the economy that has done poorly under neoliberalism over the past 40 years. It's the working class. As workers have become significantly more productive, nearly all of the resulting extra income and wealth has gone to the ownership class.
-----
One of the persistent myths believed by the Left is that "all the manufacturing jobs" have moved overseas, leaving the US a sort of barren shell. This isn't true. The US became much more productive over the past 40 years. Sure, some jobs have left the US, but many more US jobs have replaced them. Workers complain that the new jobs don't pay as well -- and this is true! The problem is that worker pay has stagnated, not that jobs have moved away or disappeared. Blaming the stagnating pay on jobs moving overseas is scapegoating -- a type of scapegoating that Trump has used for his personal political benefit -- blame China, not your corporate bosses. Meanwhile, Trump cut taxes for those corporate bosses, and the stock market is hitting new highs as his term ends, even in the midst of this pandemic recession.
-----
Corporate profits -- way way up. But how is it the stock market has gone up even more than profits have? More than 6x profits?
Well, another way of looking at it -- the stock market values profits more than it used to. Back in 1981, the stock market valued $1 of annual profits at about $6-7. Now the stock market values $1 of annual profits at about $34 (Shiller PE Ratio). (Unless you're Tesla, then the stock market values $1 of your annual profits at $1,145.)
It's this valuation of profits that I refer to when I say the US stock market is currently inside its second-largest-ever bubble. Profits have increased so much over the past 40 years, that we have an expectation of profits going up even more in the future, so we're willing to pay much more for $1 of profits than we used to.
This is tied in with the massive global bond market bubble -- largest bond market bubble in human history. With government bonds so overvalued, stocks seem like a relative steal. Right now, $1 of interest income on a long-term US Treasury Bond is valued at $109. Back in 1981, $1 of interest income was valued at $7 -- about the same as $1 of corporate profits back then.
Future income is valued way more highly now than it was 40 years ago, when the neoliberals took power. Another way to think of this -- investors perceive significantly less risk for their investments than they did 40 years ago. They are certain corporate profits will grow faster than inflation, they are certain the working class has been politically defeated, they are certain that government bonds are a safe place to store wealth, even as the federal deficit & debt approach WW2-maximum levels.
Our federal government is fighting a WW2-style total war not against fascism, but against the working class. Its weapons have been deregulation, tax cuts, and union busting.
-----
The Left needs to understand reality if it's going to come up with effective strategies for fixing our problems. We aren't stuck inside a zero-sum game, we're stuck inside a game that is rigged for the ownership class. Our workers are more productive than ever, but the ownership class is keeping all the gains for itself.