Andrew Leonard: Consumers vote with their wallets.
Several interesting things here, especially a quote from James
The Great Depression was the consequence of a massive shift of
income shares to profits, away from wages and thus consumption, at the
very moment -- the 1920s -- that expanded production of consumer
durables became the crucial condition of economic growth as such. This
shift produced a tidal wave of surplus capital that, in the absence of
any need for increased investment in productive capacity (net
investment declined steadily through the 1920s even as industrial
productivity and output increased spectacularly), flowed inevitably
into speculative channels, particularly the stock market bubble of the
late 20s; when the bubble burst -- that is, when non-financial firms
pulled out of the call loan market in October -- demand for securities
listed on the stock exchange evaporated, and the banks were left
holding billions of dollars in "distressed assets." The credit freeze
and the extraordinary deflation of the 1930s followed; not even the
Reconstruction Finance Corporation could restore investor confidence
and reflate the larger economy.
Leonard adds, underscoring the key point:
Livingston does a much better job of unpacking that dense paragraph
than I can, but the essential point is that in the decade leading up
to the Great Depression, the profits from a growing economy did not
get recycled back into worker wages, but were diverted into
speculative activity. Just so, in recent decades, we have witnessed
enormous increases in productivity and huge corporate profits, but
wage growth for most Americans has barely kept up with inflation.
This expresses something I've long suspected: that a big part of
the growing inequality gap is really just hot air, nothing more than
a speculation-fired inflation of asset prices that have no relationship
to real (or even normative) values. In saying this, I don't mean to
disparage anyone upset over growing inequality, which regardless of
its lack of economic substance has been damaging politically, and
threatens to get much worse. But this argues for something even more
basic: that wealth not based on labor is ultimately illusory, and
that our fascination with such wealth is ultimately disrespectful
and derogatory to the labor that actually keeps the world working.
Moreover, this disrespect of labor threatens to undermine the world
working, to an extent that we can hardly conceive of.
It is very important that we recognize how critical labor is to
our well-being. If there is a silver lining to our current economic
collapse, it's the growing suspicion that capital isn't anywhere
near what it's lately been cracked up to be.