'Intelligent discontent is the mainspring of civilization.' -- Eugene V. Debs

Sunday, October 10, 2010

The Man With No Name 

Blue Texan has a good post over at firedoglake today, one about the extreme concentration of wealth in the US economy. He cites a salon.com article that highlights confirmation of a 2005 study by Citigroup:

In 2005, three Citigroup analysts -- Ajay Kapur, Niall MacLeod and Narendra Singh -- answered yes. They explained: Plutonomies have occurred before in sixteenth century Spain, in seventeenth century Holland, the Gilded Age and the Roaring Twenties in the U.S ... Often these wealth waves involve great complexity, exploited best by the rich and educated of the time. According to the Citigroup experts, a plutonomic economy is driven by the consumption of the classes, not the masses: In a plutonomy there is no such animal as 'the U.S. consumer' or 'the UK consumer,' or indeed the 'Russian consumer.' There are rich consumers, few in number, but disproportionate in the gigantic slice of income and consumption they take. There are the rest, the 'no-rich,' the multitudinous many, but only accounting for surprisingly small bites of the national pie. The Citigroup analysts speculated that a plutonomic world economy could be driven by the spending of the world’s rich minority, whose ranks are swelling from globalized enclaves in the emerging world.

The data support their analysis. According to Moody’s Analytics, the top 5 percent of American earners are responsible for 35 percent of consumer spending, while the bottom 80 percent engage in only 39.5 percent of consumer outlays. Meanwhile, the top 20 percent received nearly half of all income generated in the U.S. -- 49.4 percent -- and the ratio of the income of the top 10 percent of Americans to the poor has risen from 7.69-to-1 in 1968 to 14.5-to-1 in 2010.

The author of the article, Michael Lind, a well known advocate for a progressive populism in the US, then explains the perils of such a concentration by invoking the famous New Deal department store owner, Edward Filene:

At the same time, however, the top 10 percent of earners received 50 percent of all income, while they accounted for only 22 percent of spending. Where did the rest of their money go? Much of it went into speculation in the two waves of the bubble economy between the late 1990s and 2008. Had more of that money been in the hands of the bottom 50 percent, more of it would have been spent on consumer goods, including manufactured products, and far less would have gone to gambling on condos in Manhattan and Miami and trendy stocks.

One was Edward Filene. With his brother Lincoln, Filene had sought to implement the principles of welfare capitalism in their Boston department store, where they established a company union, an employee thrift plan, an insurance plan, a free health program, and a cafeteria. Filene became a spokesman for the credit union movement in the U.S. and a champion of progressive causes. Among his legacies are the Century Foundation and Filene’s Basement, a discount clothing store.

In his book Successful Living in This Machine Age (1932), Filene argued that the drive for lower wages and the privileging of investment over consumption had produced chronic overcapacity: At a time when more buying was the need of the hour, [capitalists] were still calling upon the masses to refrain from buying goods, and to invest their savings in more production; and when industries languished from want of customers, they advised reducing wages, a process which must result in a further falling off of sales. As in the stock bubbles of the 1990s and 2000s, financial experts in the 1920s urged ordinary Americans to emulate the rich by gambling in stocks. According to Filene, financial experts recommended that ordinary people hould better themselves by investing their savings and drawing either interest or dividends, instead of having to depend forever upon the wages which they might receive from week to week.

Uh, I could be mistaken, but wasn't there someone who figured out almost all of this 60 to 70 years before Filene published his book? Someone who wrote extensively on the subject, and recognized that capitalism would invariably generate overcapacity? Someone who theorized on everything that Filene describes, with the possible exception of the encouragement of the middle class to select investment over purchasing goods and services? Apparently, Lind had to substitute Filene for him in order to avoid breaking the taboo against acknowledging he had said anything that was actually validated by subsequent experience.

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