Productivity, Compound Interest and Poverty
Posted in the Minneapolis Forum
Saint Paul, MN
#1 Feb 11, 2013
Michael Hudson is Distinguished Research Professor of Economics at the University of Missouri, Kansas City and president of The Institute for the Study of Long-Term Economic Trends (ISLET). This is the first chapter of his book “Finance Capitalism and its Discontents,” published by ISLET in November 2012.
Suppose you were alive back in 1945 and were told about all the new technology that would be invented between then and now: the computers and internet, mobile phones and other consumer electronics, faster and cheaper air travel, super trains and even outer space exploration, higher gas mileage on the ground, plastics, medical breakthroughs and science in general. You would have imagined what nearly all futurists expected: that we would be living in a life of leisure society by this time. Rising productivity would raise wages and living standards, enabling people to work shorter hours under more relaxed and less pressured workplace conditions.
Why hasn’t this occurred in recent years? In light of the enormous productivity gains since the end of World War II – and especially since 1980 – why isn’t everyone rich and enjoying the leisure economy that was promised? If the 99% is not getting the fruits of higher productivity, who is? Where has it gone?
Under Stalinism the surplus went to the state, which used it to increase tangible capital investment – in factories, power production, transportation and other basic industry and infrastructure. But where is it going under today’s finance capitalism? Much of it has gone into industry, construction and infrastructure, as it would in any kind of political economy. And much also is consumed in military overhead, in luxury production for the wealthy, and invested abroad. But most of the gains have gone to the financial sector – higher loans for real estate, and purchases of stocks and bonds.
Loans need to be repaid, and stocks and bonds receive dividends and interest. For the economy at large, people are working longer just to maintain their living standards, which are being squeezed. Women have entered the labor force in unprecedented numbers over the past half-century – and of course, this has raised the status of women. Mechanization of housework and other tasks at home has freed them for professional life outside the home. But on balance, work has increased.
What also has increased has been debt. When World War II ended, John Maynard Keynes and other economists worried that as societies got richer, people would save more. For them, the problem was to keep market demand high enough to buy all the output that was being produced.
And indeed today, markets are shrinking in many countries. But not because people are saving out of prosperity. The jump in reported “saving” in the National Income and Product Accounts (NIPA) in recent years has resulted from repaying debts. It is a negation of a negation – and hence, a statistical “positive.”
Paying off a debt is not the same as building up liquid savings in a bank. It reflects something that only a very few economists have worried about over the past century: the prospect of debts rising faster than income, leading to financial crashes that transfer property from debtors to creditors, and indeed polarize society between what the Occupy Wall Street movement calls the 1% and the 99%.
Read more at http://www.truthdig.com/arts_culture/item/pro...
Saint Paul, MN
#3 Feb 12, 2013
People like Smart Liberal want all our country's assets concentrated in the hands of a few.
#4 Feb 12, 2013
Did he tell you this in one of your out of body Psychotic Episodes?
You Sheeple get scarier and scarier as you manifest your Victimhood!
#5 Feb 12, 2013
Brought yo you by DELICIOUS PhillipKs VodKa and a deep love for her "partner"...Funny, don't men speak for themselves, bytch ?
#6 Feb 12, 2013
Brought to you by DELICIOUS PhillipKs VodKa and a deep love for her "partner"...Funny, don't men speak for themselves, bytch ?
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