What is the lack of investment in workers: Salon calls it the 'final nail in the supply side coffin'

Trouble is brewing in the world of supply-side economics, also known as practical capitalism (to me, at least, at this moment, while I am reflecting on my view of the article I've just read). It is not dead, but socialistic approaches seem to be more appealing to more people than I can recall in my brief, four-decades-and-change life so far. Barack Obama, a harbinger of American progressivism, which is a step toward socialism, was elected, after all. People seem to love those European democratic socialist nations these days, even now, while some of them aren't doing well at all.

The obviously liberal/leftist/statist/progressive Web publisher Salon recites portions of the clearly more conservative (thus inherently greedy and hateful to the workers and disadvantaged, in Salon's world view) Wall Street Journal's consideration of problems since the start of the recent Great Recession, with their own irritating progressive spin. In reviewing the factors, despite one's politics, it seems that one's wallet, and one's friends and family's wallets, needs to be paid more attention to with regard to our approach to everyday economics. There is only so far that President Obama's fuzzy approach to economics, or Congresss' unwillingness to agree, can take us as a nation. Gridlock on Pennsylvania Avenue and on Main Streets everywhere are going to really, really ruin a lot of people's ability to get by if we keep sticking our thumbs in our mouths about job creation, and how that is achieved. 
 
If companies large and small continue to suck in large profits -- those who are doing this -- yet refuse to give employees raises, provide impetus for skill development, refuse to expand through sensible hiring (as opposed to putting boilerroom pressure on their workers -- it is an employers' market), refuse to explain why they are hanging onto their money, there is going to be one of those backlashes that even very "pro-business" people will go along with. This, because there's a sense, even among happy capitalists, that business is being too tightfisted. Right now many profitable companies are either very frightened of Obama and Congress being divisive and sloppy (or, socialist) with regard to economic strife, or, selfishly, businesses are happy to collect money to dole out to only executives and shareholders, screwing their employees with a cheap, wooden pole. Is that fair? I don't know. Not all are doing it, but there seems to be a lot of it going around these days. 

Share the wealth: rewarding employees, not through big government redistribution of profits from the private to public welfare. Do it for the love of people, society, benevolence, and capitalism. To hell with the government! Think about your employees, for goodness sake. The more you go cheap on your people, the worse things are going to be. 

Yes, that is ranting. But it isn't anything like this, from Salon:

From early July: 

The final nail in the supply side coffin

Broken recovery: Taxes are low and corporate profits are high, but nothing is trickling down to the American worker

 
The theory of supply-side economics tells us that if you cut taxes on rich people and corporations, the newly liberated moguls and businessmen will take their windfall and invest it, creating jobs and accelerating the rate of economic growth. The benefits of a light hand on the upper class, therefore, will "trickle down" to the working man and woman.

Ever since Ronald Reagan first attempted to make supply-side economics a reality and proceeded to inaugurate an era of persistent government deficits and growing income inequality, it has become harder and harder to make the trickle-down argument with a straight face. But we've never seen anything quite like the disaster that's playing out right now.

The Wall Street Journal reported on Tuesday that corporate profits are looking quite strong for the second quarter of 2011. Even the Journal can't sugarcoat the basic facts:

While the U.S. economy staggers through one of its slowest recoveries since the Great Depression, American companies are poised to report strong earnings for the second quarter -- exposing a dichotomy between corporate performance and the overall health of the economy.

But that's just the tip of the nightmare. A newly released study from the Center of Labor Market Studies at Northeastern University, "The 'Jobless and Wageless' Recovery From the Great Recession of 2007- 2009," lays out some extraordinary statistics. (Hat tip: The Curious Capitalist.)

In the first quarter of 2011, aggregate U.S. GDP -- the total value of all the goods and services produced in the United States -- was higher than the peak reached before the recession began in 2007. During the six quarters since the recession technically ended in the second quarter of 2009, real national income in the U.S. increased by $528 billion. But the vast majority of that income was captured as profit by corporations that failed to pass on their happy fortunes to their workers.

Over this six quarter period, corporate profits captured 88% of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1% of the growth in real national income. The extraordinarily high share of national income (88%) received by corporate profits was by far the highest in the past five recoveries from national recessions ... In the first six quarters of recovery from the 1990-91 recession, corporate profits experienced no growth whatsoever, and they generated on average only 30 per cent of national income growth during the recoveries from the 1981-82 and 1973-75 recessions.

What makes this "recovery" so different? Perhaps the simplest answer is that labor has been broken as a force that can put pressure on management, so there's little incentive for employers to turn profits into wage hikes or new jobs. Instead, employers are squeezing more out of the workers that they've got, and investing in equipment upgrades and new technology instead of human assets -- labor productivity has risen sharply since the end of the recession.

Globalization also plays a potent role -- and not just as a source of cheap labor to undermine the bargaining power of American workers. The Journal notes that many companies "are benefiting from demand from emerging markets, where they are deriving an increasing share of their sales." Job creation is probably following the sources of new demand. If the Chinese and Brazilians and Indians are the ones buying American goods and services, then it makes sense to staff up overseas. But with American consumers still shell-shocked by the economic crash and dutifully obsessed with paying down their debts while trying to hold on to their homes, domestic demand is hardly a force to be catered to.

Wages are moribund, unemployment is stuck at 9 percent, and the corporate bottom line is doing just fine. You could be excused for thinking that if ever there was time to put the stake through supply-side economics, it would be now. Wall Street and big corporations are doing just fine, but absolutely nothing is trickling down. And yet Republicans are still pushing the same old song and dance, passionately holding the entire creditworthiness of the United States hostage in return for even lower taxes on corporations, adamantly refusing to countenance even the slightest revenue increase to help cushion the hard times for the Americans who are getting a raw deal out of the current recovery.

Democrats come in for their share of the blame, too. The worst economic recovery for American workers in history has happened on Obama's watch, and he appears remarkably oblivious to it. He may live to regret this oversight.

- jR (@AirFarceOne on Twitter)

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