Yes Virginia, the Rich are Different
Ian Welsh tries to explain the real reason why the rich see America’s problems differently. There is much of this essay I find interesting especially the close:
Policies that enrich them could enrich everyone. There are policies and economies that help everyone. From 1945 to around 1970 the rising economy made everyone better off equally – the rich, the middle class, the poor. Everyone prospered together. It can be that way, but it doesn’t have to be. You can make the pie bigger – or you can make your slice larger. Over the last thirty years Americans have fought over the pie. Warren Buffett once noted that if there was a class war then his class was winning. There is a class war and the rich are indeed winning – and it is one of the things that is slowly destroying the United States. Everyone can be prosperous. But everyone can’t be rich. Choose what sort of society you want – or have others choose for you.
But can I quibble about one thing?
When the domestic economy does badly, but corporate and general investment profits are up – the rich do fine because the cost of things they want (like servants) goes down as supply goes up. Those few people they do deign to employ cost less.
Weak economies indeed allow employers to pay less for workers but to suggest profits move counter-cyclically is odd. I was taught years ago that profits are quite pro-cyclical. Is Ian reacting to the fact that the capital share has increased over the past few years as overall growth has been rather anemic? Perhaps – after all, corporate profits in 2006 were 82.5% greater than they were as of 1999 while nominal GDP was only 42.4% higher. But even during the last recession, profits initially declined.