lies, damn lies, and the conventional wisdom

LI likes to read the econ blogs when times get all roller-coastery. One thing that the blogs share with the thumbsuckers in the papers is that Americans will generally have to get used to lowering their standard of living. This has become the truism du jour, and it goes along with the other truism, which is that Americans have been living way past their standards of living.

Of course, that is all nonsense and lies. There is one and only one cause of our present discontents, which is that Americans – by which I mean the bottom 80 percent – have been horribly underpaid for the last thirty years. It is always and everywhere good to remember that wealth comes only from the bottom. Wealth creation simply doesn’t happen at the top – licitly. Of course, we’ve watched wealth creation happen at the top for years, but a close look at it shows that it is merely the piling of one fiction on top of the other. What the top does, at the limit, is administer and manage. For this function, it has succeeded in rewarding itself with the lion share of the wealth created over the past thirty years – by the bottom 80 percent. When one reads stories, such as the much commented upon story in the NYT about the Diane McCleod, the woman with two jobs, earning 45, 000 per year, who had accumulated debts of around $280,000, including her home, an asset that is probably worth around $160,000 in today’s market, the first thing I thought is that she should probably be making 80 to 90 thousand a year working those jobs. She would be, if wages had risen as they rose in the seventies. But here’s what happened: to arrest the falling profit margins, the political and business establishment decided to smash that rise in the wage rate. They did so under the cover of a story that is universally repeated, and so now, simply assumed. That story is that wealth comes from the top. It is a fairy tale for babies, but it has nicely succeeded in blunting the progressive tendency in taxation as well as arousing the general public’s support for programs designed to cut the general public’s throat. Of course, the guilt machine turns on automatically to make the whole thing go down like sugar. Turns out McCleod liked purses, and purchased many expensive purses on her credit cards. Is that shameful or what? She actually wanted something she considered beautiful in her life. How disgusting.

Or... no. This is what is shameful:

“GE Money Bank, which levied a 27 percent rate on Ms. McLeod’s debt and is part of the GE Capital Corporation, generated profits of $4.3 billion in 2007, more than double the $2.1 billion it earned in 2003.”

In 1979, a 27 percent rate would be illegal.

The U.S. is experimenting with a unique blend of robber baron capitalism and consumerism. The barons depend on the consumer, while at the same time, they chisel down the amount the consumer takes home until, of course, relative to the robber baron the consumer’s income sinks below the horizon. To make up for the logical gap here, the robber baron extends credit at 27 percent to the consumer. To make it, the consumer takes two jobs, thus robbing the day of any moment in which to be simply human. The consumer responds in the classically mammalian way when the lab environment turns hostile, by rushing to the bowl for sweets. In the labs, the rats die and they jack out the kidneys to examine the stress effects. In the suburbs and traffic jams, the consumer’s humanity turns to a peculiar mixture of glucose and methane, while the wallets are jacked out for other charges as they may apply. Outside the window, the world is upside down and the Whore of Babylon has lofted a bright, shiny sword.