excessive lending was the only way to maintain the living standards of the vast bulk of the population at a time when wealth was being concentrated in the hands of an elite.
The amount by which the elite has benefited is startling, and illustrates the problem with lightly regulated free markets: the rich get much richer while the rest do not get richer at all. According to Société Générale economists, the inflation-adjusted income of the highest-paid fifth of US earners has risen by 60 per cent since 1970, while it has fallen by more than 10 per cent for the rest. As was recently pointed out in the New York Review of Books, the Walton family, of Wal-Mart fame, is wealthier than the bottom third of the US population put together – about 100m people.It does appear that the US has chosen to follow the Latin American socio-economic model of great income disparity, rather than the European model, which provides some modicum of social equality. I think we used to follow the European model after World War II, partly as a result of everyone serving in the military together, rich and poor. The Korean War was probably the beginning of the end of that model. I remember my dad stayed in the National Guard after WW II, and he was called up for Korea. But the well connected social elites who stayed in and were the colonels and generals were not called up. Then the Vietnam War put the nail in the coffin of social homogeneity, if it needed one. Basically only the poor and uneducated served, with a few exceptions that proved the rule. We've seen some of the exceptions run for President without success: Gore, Kerry, McCain. The veterans all lost to those who did not serve in Vietnam. Of course, all three have become fantastically wealthy and have more in common with the Waltons than with the 100m in the bottom third of the US.
But, the op-ed is interesting in positing that the growth in debt among the lower classes helped keep the lid on social unrest as these great changes have been taking place in American society. We are not back to having slaves and serfs, yet, but we may be on the way to that in a generation or two. Tennessee Ernie Ford sang, "I owe my soul to the company store," in "Sixteen Tons." Now it's, "I owe my soul to Visa," or Bank of America or CitiBank, or whoever. The lower classes are losing their independence, and with the loss of financial independence comes loss of political independence. So far this change has taken place like the proverbial frog placed in a pot of water brought to a gradual boil; he never knows what's happening to him before he dies. But as this change becomes more apparent, perhaps as the "stimulus" phases out to prevent inflation, perhaps there will be some kind of political awakening. Then the test will be whether the American system can suppress the uprising, as Iran is suppressing its uprising today, whether the political/economic system will reform enough to release these pressures, or whether they will be expressed through violence.
If America follows the traditional Latin American model, it will let inflation run wild. The wealthy elites won't care, because they will own land, gold, commodities, art and other capital assets and tangibles that will increase in value along with inflation, while wages will probably lag inflation, although periodic wage increases may keep the working classes happy for a while.
No comments:
Post a Comment