Monday, October 10, 2011

Economics and the Meaning of Life.

Getting at the bottom of existence has been a question for thinkers for 2000 years! When the collapse of the financial system occurred in 2008 'existence' is sharply defined as a relationship between material things and survival. When the economy is stable and functioning, 'existence' is driven by popular notions of life mystified.

The United States had a brand of capitalism that Europe did not have. It was unique. America attracted people from all over the world because employers were paying higher wages. American employers had to grapple with the problem of constantly raising wages to keep workers on the payroll less they move to buy property and become new found rich people elsewhere. Immigration created a labor abundance. There was no shortage of labor for a period covering 1900 to 1978. Economic stability and life in America function very well while real wages rose that there is no evidence to suggest real wage increases could not restore prosperity. From this perspective it is easy to understand why Republicans have a punitive answer to immigration less it would cause a rise in real wages restoring the problem of worker retention and a return to worker prosperity in America should political power be captured by the Left and the working class.

Reversal of all the policies currently in place that favor the business community would mean grave consequences for the business community, is a life and death matter for the Right wing.

However, the essential question remains one of philosophical debate and that is what is the purpose and meaning of life on which to base a new economic paradigm?

The two things that changed the labor abundance was the advent of the computer and American corporations soon discovered it was profitable to move production out of the US on a scale as never before with the advent of the computer. Wall Street and Main Street stopped raising wages and salaries. An increase in the average real rate of wages was never a fact before, became a fact of life hitherto from 1978.

More work hours became the next best way to increase wage income for American workers. Labor hours worked on a per capita basis increased from 1978 to the present. Americans worked more hours of labor, 20% more or a week than any other labor force in all of the wealthy capitalist country in the world.

A binging spree substituted the flat wage rate, borrowing and overwork stressed Americans out and the debt became an object of speculative investments for the financial sector. The end of the line would be when the working class could no longer pay its debts.


Is it entrepreneurial genius that justifies the zoom of salaries and bonuses for CEO's from a prior 40 to 1 ratio to a whopping 400 to 1 ratio?

Robert Putnam, wrote "Bowling Alone" a book about American workers en mass withdrew from any social and political participation in life in society. They took their eye of the ball. Tired, worn out. While the Left and the working class withdrew from politics the Right and the business community got involved in politics. This social reaction happened at the same time as the advent of hedge funds were invented by the business community sitting on mountains of cash. They invented a kind of stock that paid a share on all the debts. The working class arose 30 years in reaction to the flat wage rate too late and the financial sector invented the debt hedge fund 30 years too late. Paying a percentage to the shareholder against mortgage debts was risky at the end of its cycle of activity and repayment ratio. Who would buy them with the risk of default so close to the edge? A solution came from Warren Buffet, who owns Moody's rating agency. Moody's assessed these new financial instrument with a triple A rating making them more attractive to buyers.

Problem solved but how can these shares be marketed? Speculative boom was a proven method, showing these bonds made money and to make it more attractive an insurance policy on these instruments removed the risk. World governments bought these instruments investing millions of pensions and personal savings made investment houses richer and CEO's responsible for their creation and wizardry that went into the money scheme justifies their higher compensation.

AIG did not want to call these instruments insurance policies as a business classification. AIG started as an insurance company and became an investment house. AIG called them; Credit Default Swaps. After the government threw an unspeakable amounts of money into financial markets and when banks stopped transacting with one another due to lack of trust. The Democrats and Republicans used the Federal Reserve to print money. The government bought and borrowed the worthless securities at their former price and with the new money printed it urged bankers to lend the money out to people. Bankers looked at the politicians and called them crazy! They had a point! The working class is busted and corporations don't have any customers anymore. It would be irresponsible to lend the bail out money out to anyone!

How the Democrats and the Republicans arrived at this measure to bail out the banks came from the insane notion that "Banks are too big to fail ', and had to be rescued because they were too big to fail! So the two parties agreed via Congressional approval to merge the banks making them bigger than before. Thinking it would fortify reserves in banks is indeed, an irrational policy.  But for the EU banks it is not an irrational policy for less cash rich governments in Europe and the IMF. To order banks increase their assets makes sense for Europe not for the US. The US government can afford to bail out banks whereas Europe's governments cannot afford it.

The US government became the insurer of bad securities and formed monopolies of banks permitted to survive when it should have printed more money after nationalizing the banks still standing from the crash of 2008 when millions could not pay their credit cards, mortgages, debts and the federal deficit ballooned. Nationalization of the financial sector would have left the politicians with the only choice to have paid down the deficit through a massive infusion and restructuring of the housing market and labor market.

Democrats pay the price for a down spiraling economy and the business community behind the Republicans ceaselessly work to control the political process as the only way in which to make permament a flat wage labor market. Their virulent political agenda with countless attacks on the working class is reflected in the political campaigning for president and right wing state's rights agendas that now confronts the working class itself as a verified 'class struggle'.


The movement of Occupy Wall Street, that is quintessentially multi-vocal represents the first time the Left and the working class carries the banner of popularism since the 1930's. For the period of rising wages from 1900 to the crash of 1929 the Democrats took the mantle of popularism and from FDR to now the Republicans took the mantle with the rise of the evangelical right wing.

The movement to occupy Wall Street provides a critique of the political system as a whole the other parties cannot do. The movement is multi-cultural and gives voice to many who form the working class, it can provide a new vision for a society that goes past electing the latest hot new politicians or accumulating money for the sake of accumulating money, a new economy as long as Democrats and Republicans do not get their hands on the movement it will remain unco-opted! As a movement it must provide answers to the age-old question of the meaning and purpose of life.

No comments:

Post a Comment