A Tale of Two Economies

Anterevolution, France was pre-industrial, feudal, and broke.  Broke because its wealth (wealth that had been derived from the labor of serfs at home and slaves in her colonies, and the exploitation of indigenous peoples) had been wasted by its government and aristocracy on wars and extravagance.  By 1789, wars and lifestyle had bled the country dry; the French economy was no longer capable of producing and equitably distributing the requisite goods and services. The French Revolution was indeed much about bread.

From the late 1930s until the early 1970s, the American economy was doing its best-ever job of producing and equitably distributing the requisite goods and services, and of distributing wealth.  

Requisite, and a good bit more.  During these years, a highly productive America became very wealthy with, for the first time, a large working-class middle class sharing in this wealth from production.  

Why only between the late 1930s and early 1970s?  

By the late 1930s:

• American unions had grown large enough to demand a fair share of the returns from production for labor.  Finally, after 250 years, we got it right
• WWII needed lots of soldiers and lots of labor.  During the war, millions of well-paid union workers were able to accumulate wealth.  
• Following the war, there was a huge pent-up demand for goods here and abroad. 

These years of high production employing lots of well-paying union workers built America’s fabled middle class.  

There were three major reasons the early 1970s marked the end of this era In America.

• By then, post WWII Japan and Europe had rebuilt their industries.  Nations that had been markets became competitors. · · · America was no longer manufacturer to the world.

• By then, off-shoring in the pursuit of cheap labor had sent significant portions of America’s industrial production abroad.

• The third turned out to be by far the bigger.  By the early 1970s,  the end of the Industrial Age was nigh and the beginning of the Digital Age, aka the Information Age, was well underway. Millions of transistors were being grouped to form integrated circuits and microprocessors (microprocessors are a form of integrated circuit).  Powered by the power of these microprocessors, automation was proceeding at an astounding pace. Henceforth, producing and equitably distributing the requisite goods and services would require ever less labor.

The American economic model used from the late 1930s to the early 1970s, the one that had worked the best ever, the one that was the genesis of the ‘American Dream’, the one where the wealthy put up the capital for the means in return for a fair return and labor got a fair share in return for their labor, was being tossed on the ash heap of history by changing world markets, off-shoring production, and the Digital Age.  

Capital still needed some labor, but less and less going forward.  The major means of distributing the wealth from production via the workers, the one that had taken so long to get right, was no longer.

Time to invent new Big Lies — Cue Milton Friedman and the University of Chicago

For forty-some years the wealth from production had directly or indirectly fueled the national, state, and local economies; funded the federal, state, and local governments; funded worker retirement plans; etc., etc.  This mostly via wages paid the working class.   Where was that money to come from now?

Cue financialization (Kevin Phillips). The investor class, including all levels of government, turns to financialization for funding.  Instead of corporate pensions funded by profits and employee contributions, there would be 401Ks.  There would be junk bonds and leveraged buyouts. There would be financial instruments based on financial instruments.  There would be financial instruments based on student loans.  There would be Enron.  Student loans would fund city halls. 

If it all sounds like sharecropping or tenant farming, that’s because it is.  Next up — crypto-currency — of course.  

America continues to create real wealth.  But, most financialization is smoke and mirrors.  A lot of it is about squeezing the last drop of blood out of the working class, and the wealth created during the mid-twentieth century.  “We know that $50 Trillion moved from the bottom 90% to the top 1% between 1981 and 20211”. Heather Cox Richardson.

Since the early 1970s, the wealthy (investment class), retirement plans, etc., etc. are taking more and more of what was once labor’s share.  Because they can.  Because Corporate CEOs work for the investor class, not the workers.  As a consequence, as in pre-revolutionary France, the American economy is being sucked dry.

Financialization’s most devastating effect has been on the working class (some 40% of Americans don’t make enough to live on).  But, 401Ks did make a lot of Americans shareholders in the means of production.  Expanding on this concept could provide a much-needed solution for going forward in the Digital Age.

America could (any nation could) create a national basic income trust fund funded by a percentage of all corporate/business profits,  A corporate charter could require that a percentage of shares, of returns, go to this basic income fund.  Every citizen would own an equal number of shares.  This would make everyone in America, a shareholder in each corporation. The workers in the corporation would also be shareholders. They get part of the returns from production for their labor and part of the returns from just being citizens.  

This would also be a way of funding Social Security, a national retirement plan, going forward.

https://en.wikipedia.org/wiki/Financialization

https://en.wikipedia.org/wiki/Kevin_Phillips_(political_commentator)
https://www.youtube.com/watch?v=D7cKOaBdFWo  @44:50