dagblog - Comments for "What Happened to America's Economy"

Yeah. It's bizarrely exactly

Doctor Cleveland — Thu, 09 Sep 2010 20:39:25 +0000

In reply to One of the things that has

Yeah. It's bizarrely exactly the way Marx said it would be: beliefs and world-views shaped by economic interests.

Despite all the many, many things Marx was wrong about (and despite the evils done in the service of different versions of Marxism) that observation is still, well ... right on the money.

One of the things that has

DF — Thu, 09 Sep 2010 20:29:58 +0000

In reply to Thanks, DF. I'm not an

One of the things that has struck me in studying economics is how well the different paradigms line up with interests. The supply-side view is much more beneficial to the investing class than it is to the working class. They focus entirely on interest rates because they're concerned about the state of the creditors and no one else. On the other side, you have people who are primarily concerned about unemployment and the well being of debtors rather than creditors. Every interest has a theory it would seem, but one group is much larger, albeit much less wealthy, than the other. Frankly, it smells like class war to me.

It's pretty clear I was using

acanuck — Thu, 09 Sep 2010 20:02:40 +0000

In reply to Yes, it's an

It's pretty clear I was using the wide brush there. Also the blackest paint. But the trend is real, and it's disquieting. Trust me, as your biggest trading partner, Canadians depend on the U.S. continuing to make and export stuff. Your success is our success.

Thanks, DF. I'm not an

Doctor Cleveland — Thu, 09 Sep 2010 19:18:00 +0000

In reply to Decent write-up, Dr. C. Of

Thanks, DF. I'm not an economist, obviously, but I'm trying to get my head around these things.

And yes, the problem is that the "Treasury view" is wired into too many brains. At the moment I'm feeling like the most important economics book for our current situation is Kuhn's Structure of Scientific Revolutions. It's not so much that no one's smart enough to figure out these problems, but that they're too deeply committed to specific paradigms of economics. And the fact that a paradigm is contradicted by evidence doesn't kill it off.

Being able to speak the words "jobless recovery" with a straight face is a sign of allegiance to a particular paradigm ... where the growth of GDP makes continued unemployment nearly irrelevant. That model clearly can't be sustained.

Yes, it's an

Doctor Cleveland — Thu, 09 Sep 2010 19:10:25 +0000

In reply to Argh! While I agree with you

Yes, it's an oversimplification. "Not manufacturing enough" and "not exporting enough" doesn't mean not manufacturing or exporting.

That trillion dollars is big. It's too bad the economy (and the imports) are bigger.

Argh! While I agree with you

DF — Thu, 09 Sep 2010 14:45:30 +0000

In reply to "Why would the American

Argh! While I agree with you here, it really bugs me when people say that the U.S. doesn't manufacture anything anymore because it's so completely off the mark. Yes, the U.S. has a smaller manufacturing sector now relative to GDP compared to, say, 40 or 50 years ago, but we're still one of the top exporting nations in the world. We still make LOTS of stuff compared to almost any other nation on the planet, we just make less than we used to (as a share of GDP) in recent history. Sorry if that seems pedantic, but over a $1T in exports per anum isn't anywhere close to nothing.

Decent write-up, Dr. C. Of

DF — Thu, 09 Sep 2010 14:41:37 +0000

In reply to What Happened to America's Economy

Decent write-up, Dr. C. Of course the paradox of thrift is what is necessary to explain the nature of the present economic contraction, but you go a long way to explaining the longer standing issue, which is essentially that workers have not enjoyed the benefit of increased productivity over the past several decades. Modern macro theory places the blame for sustained economic growth squarely at the doorstep of technological innovation specifically due to the increases in productivity. If workers don't enjoy any of this benefit, then income inequality is sure to follow, which will in turn lead to a bunch of idle capital.

But you can't see any of this if your brain is still wired to the treasury view.

I'm playing around with HTML

Ellen — Tue, 07 Sep 2010 14:39:34 +0000

In reply to Dream on! "They" are 5 or 10

I'm playing around with HTML tags to see how dagblog uses them. Mott's strike.

Dream on! "They" are 5 or 10

Ellen — Tue, 07 Sep 2010 14:16:09 +0000

In reply to Thank you very much for your

Dream on!

"They" are 5 or 10 -- sometimes 10 or 20 -- senior executives in a company whose pay packages rise whenever costs are reduced. Think of it as the Paradox of Cost Containment if you will.

As long as unemplyment (U6 @ 16.7%) remains high, competition for jobs will allow senior executives to pad their compensation on the backs of workers -- and they most assuredly will.

Thank you very much for your

Beetlejuice — Tue, 07 Sep 2010 12:08:50 +0000

In reply to What Happened to America's Economy

Thank you very much for your detail opinion Doctor C...it reads well and connects many dots. I'm making a copy of it so I can print it out and pass around to friends...and yes, I'll include Dadblog's url on it.

As for the content, it's obvious the business side of the scale has been tipped in their favor for years. So much so, their profit motives have nearly vanquished the consumer base necessary for their survival. And without an active consumer base for their products, there's no profit to be made. Oh what a tangled web they wove!

As for what to do now, I can't help but think about that old adage...An ounce of prevention is worth a pound of cure.

Because they dismissed nurturing prevention by not letting salaries, wages and benefits float with profits as they rose, the pound of cure now looks like they may have no choice but to bring those salaries, wages and benefits close to parity with profits to breathe life back into the economy so as to stimulate consumers to actively participate again. That means their profit and growth expectations for a number of years will be a virtual flatline until the consumers regain their confidence. And that means the stakeholder has to take the hit. After all, it was their greed of ever increasing shareholder equity that drove the beast in the first place.