08 March 2010

This Way to the Egress

I'm always amused when folks (not necessarily due to stupidity or cupidity) make long essays about what happened and how to fix it, when the cause (and its concomitant solution) is quite simple: beginning with Reagan and Thatcher, western governments set in motion an historic shift of income and wealth from the many to the few.

In the US, the top 1% went from 8% of national income in 1980 to 24% in 2008. Anyone who bothers to review economic history will see that shifts of such magnitude *always* lead to depressions. The first major one in American industrial economy was the Gilded Age following the Civil War, and was the Panic of 1873.

The Right Wing then complains that Government is AntiBusiness, and should reduce taxes and regulation still further, all the while complaining that "there is no demand for our goods and services". Well, yeah Idiot; the Middle Class has been destroyed and has no income. Reducing income to labour only strengthens the downward spiral: give aways to capital do nothing to restore demand. The reason the bailouts and stimulus haven't engendered inflation (which the Right Wingnuts have been complaining about) is that all that money didn't go to people who can consume goods and services. The only aspect which has kept some semblance of demand, and thus not collapsing altogether, is unemployment insurance payments. Right Wingnuts are willfully ignorant of the consumption multiplier. Even if the "stimulus" did not create one job by direct hiring, the consumption multiplier saves or creates half a dozen. But the Right Wingnuts won't admit that, since the fact doesn't support their zealotry.

So: the only way out is to reverse the flow of national income, and send it back to the middle class. It makes no difference how that is done, overtly or covertly work equally well.

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