want fries with that ponzieconomy?

[Hannah Bell]

ratio of wages to national income

http://2.bp.blogspot.com/_Whzugz3HHQ4/TGMn9bXnA7I/AAAAAAAAACU/93FMyRMW42E/s320/Wage+to+Capital+Ratios.jpg



Lately, there's a refrain from some corners that real wages have risen over the last couple of years, so this isn't really a recession to be worried about, etc, etc. The chart (above) from Richard Green's excellent blog, suggests a very different story.


It shows that the ratio of wages to national income peaked around 1970, and has been falling ever since.


Unless you want to argue that the marginal productivity of the average American has been declining for 40 years, there's something very wrong with this picture. It lends credence to my argument (and Robert Reich's) that Americans didn't just overleverage themselves because they're venal and greedy - but, rather, because, if they wanted to tread water, they had to. It lends credence to the argument that what we don't need is more "labour market flexibility", but a radically more efficient labour market structurally.

In the big picture, what it suggests, in no uncertain terms, is a Ponziconomy: one where value is appropriated from workers, by the gears of the other components of national income - like, for example, corporate profits. You can't have a working economy where the average worker's earning less for doing more - because, of course, the incentives for investment and education dry up, the returns to human capital collapse, and savings rates implode. That's the kind of prosperity only a sucker would accept - a false prosperity in every sense of the word - one which is just a game of musical chairs.

http://www.bubblegeneration.com/?a=a&resource=musicrisk1

[TroglodyteScholar]

1. k/r

:kick:

[T Wolf]

2. I just hope that their greed IS their downfall. With their infinite capacity for avarice, maybe

there is hope that they will screw themselves by going too far.

[TheKentuckian]

3. Crystal clear and quite insightful