Stock Tip: Be Worried. Workers are Consumers. - RobertReich

[WillyT]

Stock Tip: Be Worried. Workers are Consumers.
Robert Reich
FRIDAY, AUGUST 19, 2011

<snip>

Repeat after me: Workers are consumers. Consumers are workers.

We’re slouching toward a double dip, and the stock market is imploding, because consumers – whose spending is 70 percent of the economy – have reached their limit. It’s not just the jobless who can’t spend. It’s mainly people with jobs. Median wages continue to fall. Weekly wages in July for Americans with jobs were 1.3 percent lower than eight months before.

America’s median earners are now earning less (adjusted for inflation) than they earned ten years ago. Every CEO of every company that continues to squeeze payrolls (Verizon, are you listening? Ford?) needs to understand they’re shooting themselves in the feet. Where do they expect demand for their products and services to come from?

They’re doing the reverse of what Henry Ford did back in 1914 – paying his workers three times what the typical factory employee earned at the time. The Wall Street Journal called his action “an economic crime” but Ford knew it was a cunning business move. With higher wages, his workers became his customers, snapping up Model-Ts and generating huge profits.

Many on Wall Street are scratching their heads, trying to understand why the stock market is plummeting. After all, they tell themselves, corporate earnings are still near record highs. But it’s becoming clear those earnings can’t be sustained. Corporate earnings are the highest they’ve been relative to worker wages and benefits since just before the Great Depression. And the richest 1 percent of Americans are getting a higher percent of total income since just before the Great Depression.

Get it? It was only a matter of time before the boom on Wall Street turned into a bust. Economic booms cannot continue without American workers participating in them.

<snip>

More: http://robertreich.org/post/9142270982

:shrug:

[marmar]

1. It seems so obvious......

..... but not to the corporations, their stockholders and their politician-servants.

[gkhouston]

19. They don't live in our world. It's hard for them to understand

that no wages or crappy wages means no disposable income.

[mod mom]

21. Do they really want to live in a place with rampant crime due to unemployment

And poverty? I don't get it.

[Butch350]

25. They don't live in us reg-la people neighborhoods.

[awoke_in_2003]

47. as soon as we have rampant crime...

the Blackwater folks will be brought back from Iraq. We are heading toward a banana republic.

[mod mom]

61. Yep..it's one of the reason they are privatizing prisons.

:mad:

[bluerum]

2. I hate that he is right all the time.

[Hawkowl]

40. I've followed him since 1987

He has been right EVERY SINGLE TIME. He is one of my most fundamental economic theory influences.

[bluerum]

43. I have loved the guy since he was with the Clinton administration. Really really

wanted to see him win the MA governor office. Oh well.

[girl gone mad]

3. Reich is right..

as usual.

[WinkyDink]

4. My post from another thread: People cannot spend what they do not have. And they will not have

without jobs.

[Hydra]

5. Should be interesting when this house of cards falls

Since the Greed is unlikely to be reigned in by an FDR this time.

Socialism anyone? Compared to this, we can all live like kings :p

[DJ13]

7. Socialism anyone?

It wont be socialism that we end up with.

Think more like Mussolini's Italy.

[Hydra]

8. Oh, I know

But if we weren't so scared of sharing, we wouldn't be staring down the barrel of naked Fascism.

[jwirr]

24. And when that happens we will have to get rid of it the same way

the South Americans use to get rid of there unwanted governments. And it will not be fun or easy. Once elected they (fascists) will not change on their own. They may allow us to have elections but they will all be rigged.

[awoke_in_2003]

49. they are rigged now...

in order to run, you have to have a lot of campaign money. They are all bought and paid for, and we go to the polls and try to figure out whether we want a shit sandwich or a double shit sandwich.

[jwirr]

54. Sure but not enough people see that to have a good old fashion

coup.

[awoke_in_2003]

59. No, they don't...

because for 30 years we have been brainwashed into believing that people that don't hold our own opinion sacred are the enemy. Opinions differ, and intelligent people should be able to hash it out. The way things are today, if someone disagrees with you, they are enemies to be destroyed.

[raccoon]

64. YOu got that right. nt

[awoke_in_2003]

48. we are a mixed economy...

we socialize the risk, and privatize the profits :(

[LaurenG]

6. Who would have thought that corporations would crash and burn the economy

by greedily sucking up as much money as possible and shipping all the jobs to some other country. :sarcasm:

It's infuriating that we can't do a damn thing about it either.

[Amonester]

20. Yes you can (try to) do something about it (support it, inform all you know).

I call it The American Autumn, the occupation of Freedom Plaza in D.C., beginning on October 6.
If you can't be there in person, you can support online.

Read all about it at: http://www.october2011.org

[kestrel91316]

9. Er, um, news flash: Workers USED TO BE consumers.

[lonestarnot]

10. +

k & r

[hifiguy]

11. Bob Reich has more horse sense than just about anyone.

I guess it's no surprise why the Current Occupant has no interest in what he has been saying for so long.

[AdHocSolver]

12. The biggest fraud in economics is the premise that the stock market drives the economy.

If the stock market disappeared tomorrow, we could still have a vibrant economic system.

The belief in the importance of the stock market assumes the validity of supply side, trickle-down economics.

The main purpose of the stock market for "insiders" is to get the members of the middle class ("outsiders") to use their savings to buy stock as an "investment". This "demand" drives up the stock price. Periodically, insiders sell (dump) their shares at a profit. This sell off drives the price down at which time the "insiders" repurchase shares at a lower price and start the process over again.

The endgame, once the pool of potential "investors" dries up, is an Enron style collapse. When this collapse is widespread, the result is called a depression.

The collapse occurs when unemployment is so high, that there are not enough "investors" with money to spend. When there are no longer enough "investors" to ensure "capital gains" profits, the corporatists "take their toys and go home". That is they fire a lot of people, but they still retain control of the businesses and the means of production.

The business assets are still available to restart the economy, but the wealthy corporate class refuses to use them, because it is not profitable for them, and if they cannot get extreme profit, they will let the country collapse.

The evidence that demonstrates what I have just described lies in the fact that, when the banks were given billions of dollars in bailout money, instead of lending that money to businesses to restart production, the bankers sat on the bulk of the bailout, after giving themselves hefty bonuses.

It is precisely the machinations of the moneyed investor class that CAUSES depressions. Catering to their desires with the expectation that they will restart the economic system without outside pressures is absurd. This is why a Roosevelt style New Deal (with government providing stimulus spending AND imposing regulations like the Glass-Steagall Act on corporations) is the ONLY SOLUTION to our economic crisis.

[larwdem]

13. I agree

[Kaleko]

15. Well said.

[WobegonGal]

18. Great post AdHocSolver

I have often thought that one reason that the GOP and corporations have pushed so hard to privatize Social Security and drive more and more workers to 401-K plans was to force all workers to have some 'skin' in the Stock Market game. One may be less enthusiastic to call for control and sanctions to be applied to big business if your retirement funds are tied up in their success or failure. It makes it a lot harder to vote with one's feet. Plus, it just adds more funds to the Wall Street traders, who will gamble with people's retirements just like Enron gleefully played the power grid to maximize profits.

The scheme has the added benefit of letting Congress off the hook (they don't have to repay the money that continues to be borrowed from the 'unlocked' Social Security lockbox). Plus it becomes a great cash cow for Wall Street. It's like the great military industrial complex--self-serving and self sustaining on the backs of the middle class, while providing riches to a few, well-connected people.

I find it rather sad that the media and Wall Street seem so 'astonished' that the market has taken such a wild ride lately. Well...duh! If the US consumer cannot afford to purchase your cheap crap from China, there is nothing they can do about it. If more and more people are out of work, underwater in their mortgages, or having to face paying more for their children's education after massive cuts in Pell grants, excuse us for no longer 'contributing' to your greedy bottom lines. Like AdHocSolver said, we need government to provide stimulus spending AND we need to reign in the power of corporations on our politics and overall economy. Do I see this happening? Not any time soon with the current climate in Washington DC. They fiddle while the rest of the US burns.

[RC]

42. +10

[Cali_Democrat]

14. K&R!!

[scarletwoman]

16. Rec'd. Reich is one of the few clear thinkers out there.

Naturally, the political class wants nothing to do with him or his ideas.

[bhikkhu]

17. K&R - spot on

Its not even more jobs we need (the percentage of the population which is working is actually pretty high) its jobs that pay the bills adequately and support economic activity. If you consider how few working people can afford health care these days, the disparity is huge compared to twenty years ago, and that alone throws a whole lot of doubt and uncertainty into one's life.

[kentuck]

22. Reich is like a voice in the wilderness...

He knows history. He understands basic economics. I always read his articles, even though he is like a remnant of a Party that no longer exists. On workers and wages, he makes a lot of sense.

[rhett o rick]

23. You cant ask the greedy to back off. It wont work. THat seems to be the Pres strategy.

Even when it is smart to back off the greed a notch, they cant. Unregulated capitalism is like a disease. We are in the final throes of American capitalism. America is headed to be a colony of the international financial cabal.

The Revolution is Waiting.

[netgui68]

32. You are right

It is a systemic disease and the only cure is to burn itself out. No worries though, the fuel is becoming less and less that feeds it. I suggest the end of the madness is near and the depression will make a believer out of this amoral group of scavengers.

[scribble]

26. Reich is not all good ...

Robert Reich is an economist. He writes books about Economics that you can actually READ, and that people actually BUY.


So why didn't Robert Reich say this stuff FIFTEEN YEARS AGO? Or ten? Or five?

He certainly knew it. He is an Economist.

=-=

If he had spoken up; important people would have listened. They would have changed the policies that we are all stuck with today. We would have saved many of those fifteen million jobs we have lost today.

He didn't speak up.

This makes Dr. Reich part of the problem and not part of the solution.

... even if he IS a nice man who writes good books.

This is a show-stopper for me.

sc

PS Yes; many of us WERE speaking up then. ... on Usenet; on some websites; to our Economics teachers, our political leaders; to policy makers in business. These words were dangerous words. Reich could have helped us. Again; that problem with silence. ... and Krugman was almost as bad.

[xxqqqzme]

28. Noise from the cheap seats.

is deafening these days.

[rhett o rick]

34. It's not like we are electing him to office. He is speaking truth to power where many arent. nm

[Populist_Prole]

38. Plus he's virulent globalist

Try to place blame on trade policy and he turns third way on a dime.

OK, he's spot on here, but he's not saying anything that progressives weren't saying before.

[bluerum]

44. That's funny. Really. It is absurd.

[awoke_in_2003]

50. hard to speak up when no one is listening...

hell, the only place he gets any air time is on Current TV

[WinkyDink]

62. Reich, July 30, 1995:

http://articles.latimes.com/1995-07-30/opinion/op-29477_1_minimum-wage

[TwilightGardener]

27. Reich doesn't acknowledge that they don't need American citizens

as much anymore, in terms of buying products. They're no longer worried about our buying power, which was debt-fueled anyway.

[RegieRocker]

29. I'll say it again. One day don't buy anything.

Just one day to send a clear message.

[rhett o rick]

36. So wouldnt people make up for it the next day or two? Wouldnt it average out? How about dont consume

for a day. Excepting food of course.

[RegieRocker]

37. It would be a statement. We then could take it further to focus

on individual corporations. Bring them down one at a time. Show them who is in control. Anything Koch related would be a good start. One must break free from the chains that bind them.

[rhett o rick]

58. We need to be better organized. But I am willing. nm

[bluerum]

45. That would include no water, electricity, heat, gasoline, food etc. By buy, do you

really mean consume? Cause we consume so much without giving it any thought at all. Water and electricity come to mind.

[RegieRocker]

60. Buying is not consuming.

I'm not talking about fasting.

[WinkyDink]

63. I ran it up the DU flagpole:

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=439&topic_id=1574963&mesg_id=1575080

[greymattermom]

30. google maps

In the days of the internet and satellite maps, anyone can figure out where these people live. Enough people go out, and they will be prisoners in their mansions. Gates halt traffic in both directions.

[netgui68]

31. What comes around goes around

I have been declaring this for years, if these companies insist on their cheap labor and anti benefits they are killing their own customer base, who is going to buy their expensive crap when everyone is broke..ding ding ding..correct answer Nobody. It is a spiral down the drain and we are speeding to the bottom. Congrats to the greedy swine, you screwed the dream up for everyone, now you will pay too as the dollar crumbles and businesses go under because there is no customers...enjoy what you have sowed.

[DU GrovelBot]

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[blkmusclmachine]

35. 100% Obvious. Seems DC wants it to go this way:

And that includes most (if not all) of our so-called "Democrats."

[Populist_Prole]

39. What's all this "consumer" stuff anyway?

Why is it ( especially and increasingly over the past 20 years ) that whenever pols or the media refer to the public, it's always as consumers and never workers or heaven forbid, citizens? Always the focus on spending power, never earning power. Like consumers exist in a vacuum? This same talking head establishment would honestly have you believe that being underemployed ( even unemployed ) is preferable to making increased wages if they can buy cheap shit at Walmart.

[Enthusiast]

41. Just wait until they cut

social security and medicare. They think the stock market is dropping now they have seen nothing yet.

[awoke_in_2003]

46. I think the fat cats...

are counting on China's and India's middle classes to start taking off soon. Those are both vast markets. We will become the China of the 21st century.

[hollowdweller]

51. The raking in huge profit at the top bubble has burst.

It was good while it lasted for them while the rest of us soldier along on reduced salaries and credit but in the end the inequality in the share of the GDP has become unsustainable.

[socialindependocrat]

52. It's like "stall speed" in an airplane

They must figure that people have money to spend as long as they are earning more than $24M per family.

I would suggest that the stall speed for the economy is a bit more than $24M a year.

Add the fact that people are scared thay won't be able to retire before they die on the job and
you'll understand why people have been jolted into sudenly realizing the importance of saving for retirement.

The idiots miscalculated and they killed the golden goose.

They don't have a grasp on the term "WELFARE STATE" - WATCH!!!!

It's like a junkie who just found out that the heroin he just bought is uncut.

For those of you who are unfamilliar - it means the shot he just gave himself is going to kill him.
(emphasis on "WOOPS!!")

What ya going to do to jump-start the economy now MR. SMARTY PANTS ??????

[upi402]

53. the reason why I thought Reich was nuts for supporting NAFTA

Mia culpa, I suppose.

[JCMach1]

55. Public Sector cut-backs as a result of the 2010 elections are really starting to bite now

This is the tea party recession!

[HughBeaumont]

57. What is it, something like 300,000 state and local govt jobs lost since the 2010 Fascist Wave?

Drags those jobs numbers down, for sure . . .

[HughBeaumont]

56. "Peak Capitalism"

No demand, no business.

Lower the TMTR/corporate tax rate to zero. Doesn't matter. There'll still be layoffs and offshoring and CEOs will just pocket the cash and get richer while the rest of us get ever poorer.

Business is NOT going to happen unless customers walk through the door, and you don't get business by firing people, under-employing them, stressing and squeezing every drop of "productivity" out of remaining workers or sitting on CASH. You don't have to be a damned economist to figure that one OUT!!!!

End your numerous wasteful turkey shoots, tell the greedy rich that their taxes are going to be raised, tell GE and the Kochs that they're getting NO MORE corporate welfare and repair your infrastructure.

Oh, I forgot, that would take a non-corporately-compromised Washington to do that.