Years ago, Marriner Eccles, chairman of the Federal Reserve from 1934 to 1948, explained that the Great Depression occurred because the buying power of Americans fell far short of what the economy could produce. He blamed the increasing concentration of wealth at the top. In his words:
“A giant suction pump had by 1929-1930 drawn into a few hands an increasing portion of currently produced wealth. As in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.”
The wealthy of the 1920s didn’t know what to do with all their money, while most Americans could maintain their standard of living only by going into debt. When that debt bubble burst, the economy sunk.
History is repeating itself....
Sunday, June 27, 2021
Robert Reich — Why So Much Wealth at the Top Threatens the US Economy
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Unions are not the answer.
The story here is that blue-collar wages rose steadily during the 70s, peaking at annual growth of 9 percent in 1980. During the start of the 1981-2 recession, wages grew about 7 percent, and even by the end of the recession wages were rising about 4 percent. After that, wage growth went up and down but always stayed within a healthy range of 2-4 percent. Add it all up, and blue-collar wages increased 226 percent through the end of the Bush administration. The total blue-collar wage increase through today amounts to 600 percent.
Does this seem likely to you? If you lived through this era it sure doesn’t. You don’t remember huge wage gains in the ’70s or in the 1981-82 recession, which was the most brutal recession since the Great Depression. And if this is a story you tried to tell—big wage gains during the Nixon/Ford/Carter era, followed by big wage gains during the 1981-82 recession, and then settling down to about +3 percent wage gains for the rest of the decade—you would be badly embarrassed for a good, long time.
Here, then, is the same chart but with inflation factored in:
(chart here)
This looks quite a bit different. Wages went up and down in the 70s, but by the end of the decade hourly wages were a dollar lower than they had been at the beginning. In 1979 wages began to plummet, not getting back to positive growth until 1982. The rest of the decade is something of a train wreck for blue-collar workers, with wages mostly declining throughout the entire Reagan/Bush administration and not finally going positive until the middle of Bill Clinton’s administration. In reality, real hourly wages declined from $21.08 at the start of the Reagan era to $19.61 at the end of the Bush administration. That’s a loss of about $3,000 per year, or close to $6,000 per year in today’s money. If you add in the ’70s, it’s even worse: blue-collar wages dropped from $22.42 to $21.94. That’s a loss of $1,000 per year, or a little over $3,000 in today’s money. Put all this together, and blue-collar workers lost the equivalent of $9,000 in modern dollars, which represented a 13 percent decline in blue-collar wages over the course of a couple of decades. The entire period of the ’70s and ’80s was a catastrophe for blue-collar workers.
source: Did Workers’ Wages Skyrocket During the ’70s? Not When You Figure In Inflation.
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