If you look at the chart below you'll see that labor's share of the economy was pretty steady for the 40 years from 1940 to 1980.
Then came Reagan and "trickle down" economics. That's when labor's share of national income started to drop precipitously.
Corporate profits, on the other hand, rose slowly, but steadily from 1940-1980. When Reagan took office corporate profits started to surge and with the exception of the recent, short, correction during the Great Recession, corporate profits have been skyrocketing while labor's share has been plunging.
What is the explanation for this? It is simply, that the Reagan era ushered in massive deregulation, assault on social programs, huge tax cuts for the rich, outsourcing and union busting, all of which decimated the real earnings of the working class.
While corporations have gotten a greater and greater share of national income and wealth, workers have seen their portion stripped away. All by design.
What's REALLY interesting, though, is how extreme this trend has become under Obama. We have never seen a period of such rapid wealth accumulation by the corporate sector and such rapid wealth destruction of the working class as we have under Obama. This again suggests that claims Obama is "anti-business" are completely hollow.
Reagan's administration coincided with the beginning of the end of the labor movement in this country. He and Thatcher launched a transatlantic attack on labor, and it worked.
ReplyDeleteIf you destroy worker bargaining power, ownership and their executive flunkies are going to claim a larger share of the pie, with nothing really in place to stop them other than the self-destructive economy-wrecking of their own greed.
This is why we can't get upper income "liberals" to support a full employment program, unionization or other efforts to support working bargaining power and income. The affluent own financial assets, which funnel them income enhancements created by the laboring of others; and they benefit from the low consumer prices on all the toys they devour, prices made possible by a captive laboring class, a significant share of whom are kept in a state of continued unemployment.
A lot of the liberals have been out in full force to attack the Chicago teachers. The message of modern knowledge class liberals to working America is "You suckers work for us now. So shut up and do your jobs!"
Reagan and Thatcher reigned over the demise of the unions but the world labor supply expanded drastically around this time as women joined the domestic workforce and Asia industrialized. I don't really see how organized labor could have helped in Asia as people flooded from farm to city but perhaps they could have helped here in the USA. Europe where unions were strong certainly was not a panacea for workers.
ReplyDeleteEconomists should have done a better job educating the workers, government and voters about which policies, fiscal and otherwise would be required to make productive use of the domestic labor given the glut of world labor. Domestic labor didn't have to be decimated by cheap overseas labor. The message proclaimed even today that "You better get educated or you will be left behind" remains a gross fallacy of composition.
You're right...domestic labor didn't have to be decimated by cheap, overseas labor.
ReplyDeleteGreat post Mike!And even cheap labor and neo-feudalism in US! Watch this!Chris Hedges: Touring U.S. Economic Disaster Zones in New Book
ReplyDeletehttp://www.youtube.com/watch?v=7ZHE0dmqcx4&feature=plcp
Mike,
ReplyDeleteAlso, I believe that the decline started with Carter, particularly his appointment of Volker, and the total misinterpretation of the cause of the 1970's inflation. Also, his non action after the Supreme Court gutted the state enacted Usury Laws - the challenge to them coming after the Volker hike of interest rates. That was the one of the first dominoes to fall, which ultimately led the the gutting of all banking regulation
Right, that all got blamed on the unions, which redounded against the Democrats, due to corruption and overreach of union bosses. It was a political reaction rather than one based on actual economic reasons. It was supported by voters for two reasons, the first being the obvious corruption, and the second being that non-union workers were not sharing in the benefits. So it was pretty easy to demonize unions when things turned south. That trend is still in play with unionized government workers now the target.
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