Why American Workers Are Not Getting a Raise

This is an important article because it shows many of the problems with the concentration of wealth that naturally occurs in capitalism:

Why American Workers Aren’t Getting A Raise: An Economic Detective Story

The funny thing about the whole article is that it only needs to be 2 paragraphs long. Here are his first two paragraphs:

For the past few months, I’ve been trying to solve an economic puzzle: why are wages growing so slowly despite a growing economy and a booming stock market?

Workers are productive and helping the economy grow, yet unlike previous economic expansions, we are hardly seeing big increases in wages. Instead, companies are sitting on their cash or giving it back to their shareholders through dividends and share buybacks.

He poses a question, then he answers it. Why aren’t wages growing? Because companies are keeping the money for themselves. I would add that companies are also giving executives giant pay packages. That’s another place where the money is going.

What the author is missing is that capitalism is an absurd system designed to concentrate wealth, backed by an immense amount of propaganda to convince people that capitalism is OK. Therefore, the remainder of the article is a verrry long exploration of why the “invisible hand” is no longer working the way he believes it should. He comes to this place in his thinking:

Something has indeed gone very wrong with capitalism.  In a competitive market, if a company is making a lot of money, other companies will get excited by the prospects of high profits and will enter the industry and compete. Eventually margins decline as more competitors fight each other. That is how dynamic, capitalist economies should be. Something is profoundly broken with capitalism if corporate profit margins do not revert to the historical mean.

He blames our current problems on “rising industrial concentration”, and he does have a point. The thing that the author is missing is that the fundamental principles underpinning capitalism are absurd. You can see the absurdity in the quote. As he explains it, capitalism is a Rube Goldberg machine of rules that are supposed to lead to good outcomes, but in reality they usually do not. In his thinking, here is how one part of the Rube Goldberg machine is supposed to work:

  1. If a company is making a lot of money…
  2. Other companies will enter the industry to compete…
  3. The competitors fight each other (those are his exact words!)…
  4. And eventually margins decline

This is an explanation of how the “invisible hand” is supposed to work. His problem is simple: He expects this Rube Goldberg machine to work properly. He is ignoring the fact that it is a terrible Rube Goldberg machine, because he has been convinced by propaganda that the machine should work.  In his best case scenario, this Rube Goldberg machine all operates according to plan, and eventually we get the result that we want.

Think about how stupid it is to base the worldwide economic system – a system that 7.5 billion people depend on for their food, housing, healthcare, etc. – on a set of rules that involves “competitors fighting each other”, especially when incumbents have gigantic baked-in advantages, and especially when the desired outcome is not guaranteed.

The actual result of this idiotic system called capitalism – this idiotic set of Rube Goldberg rules – is that billions of people on our planet are suffering in profound ways. Simply look at the world that we actually live in, the world that capitalism has wrought:

71% of the world’s population lives on less than $10 a day…  Globally, the majority of people live on about $3 a day. [ref]

This is how capitalism works. This is what happens when we let a Rube Goldberg machine drive the bus. America experienced a minor, short-lived bubble of time (1950s to 1970s) where the natural course of those rules was briefly suspended because of a very special set of circumstances related to WWII. A middle class did develop in that bubble, but since then the middle class is being systematically crushed in a death-by-a-thousand-cuts process. Since the bubble burst in the 1980s, Americans have been sliding downhill toward what most of the rest of the world is experiencing through the rules of capitalism. 70% of humanity makes less than $10 per day. Think about how insane this is. If America’s oligarchs and plutocrats have their way, the same will happen in America. Just look at the recent tax cut.

This is why we need a new economic system for planet Earth – a system that is not based on a Rube Goldberg machine whose real purpose is to concentrate wealth. In this new economic system, everyone benefits, not just the 1%. All of the idiocy baked into capitalism is gone. Start learning about this new economic system by clicking here.



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