Why There’s a Bull Market for Stocks And Bear Market for Workers

[Glia]

Author, pundit and former Secretary of Labor Robert Reich dropped by Santa Rosa a few weeks ago to explain this -- and more -- to us, to our great enjoyment and edification.


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<header> Why There’s a Bull Market for Stocks And Bear Market for Workers
https://robertreich.org/post/44639598939</header>
Author: Robert Reich

Tuesday, March 5, 2013

Today the Dow Jones Industrial Average rose above 14,270 – completely erasing its 54 percent loss between 2007 and 2009.

The stock market is basically back to where it was in 2000, while corporate earnings have doubled since then.

Yet the real median wage is now 8 percent below what it was in 2000, and unemployment remains sky-high.

Why is the stock market doing so well, while most Americans are doing so poorly? Four reasons:

https://static.tumblr.com/po0tfwd/9pJktzci5/portrait.jpgFirst, productivity gains. Corporations have been investing in technology rather than their workers. They get tax credits and deductions for such investments; they get no such tax benefits for improving the skills of their employees. As a result, corporations can now do more with fewer people on their payrolls. That means higher profits.

Second, high unemployment itself. Joblessness all but eliminates the bargaining power of most workers – allowing corporations to keep wages low. Public policies that might otherwise reduce unemployment – a new WPA or CCC to hire the long-term unemployed, major investments in the nation’s crumbling infrastructure – have been rejected in favor of austerity economics. This also means higher profits, at least in the short run.

Third, globalization. Big American-based corporations have been expanding and hiring around the globe where markets are growing fastest – even while the U.S. market is lackluster. Tax policies and trade policies have encouraged them.

Finally, the Fed’s easy-money policies. They’ve pushed investors into the stock market because bond yields are so low. On Tuesday, the yield on the 10-year U.S. Treasury note was just 1.9%.

All of this spells widening inequality in America, because the people who invest the most in the stock market have high incomes. Those who rely most on wages have lower incomes.

Corporate profits are claiming a larger share of national income than at any time in 60 years, while the portion of total income going to employees is near its lowest since 1966.

As my colleague Immanuel Saez recently found, all the economic gains between 2009 and 2011 (the last year for which data were available) went to the richest 1 percent of Americans. The bottom 99 percent has continued to lose ground.

And yet the tax code continues to give preference to capital gains over ordinary income — a huge boon to investors.

The sequestration is likely to make all this worse, since it will slow the U.S. economy and keep unemployment higher than otherwise.

It will also hurt the most vulnerable. Some $1.9 billion in low-income rental subsidies are being eliminated, affecting 125,000 people. Cuts to the Department of Agriculture will eliminate rental assistance for another 10,000 low-income rural people. Meanwhile, 100,000 formerly homeless Americans are likely to be removed from their current emergency shelters.

More than 3.8 million Americans receiving long-term unemployment benefits will have their monthly payments reduced by as much as 9.4 percent, and lose an average of $400 in benefits over their period of joblessness.

The Department of Education’s Title I program, which helps schools serving more than a million disadvantaged students, will be cut $715 million, and $400 million will be cut from Head Start, the preschool program for poor children. And major cuts will be made in the Special Supplemental Nutrition Program for Women, Infants, and Children, which provides nutrition assistance and education.

The health of an economy is not measured by the profits of corporations headquartered within it or the value of its stock market. It depends, rather, on how many of people have jobs and whether those jobs pay decent wages.

By this measure, we are a long way from economic health. Rarely before in American history have public policies so blatantly helped the most fortunate among us, so cruelly harmed the least fortunate, and exposed so many average working Americans to such widespread insecurity.

[CSummer]

Good article - thanks much for posting it, Glia.

For me, it brings into clearer focus how ridiculously unjust and ultimately unworkable an economic system is when the means of production are owned by private or investor-owned corporations. I think that in a sane, functional system, everyone would want increased productivity, as it means we can work less and get more for our efforts. But when higher productivity results only in more profits due to lower labor costs, those profits do not go to everyone involved. They go primarily to the owners and investors or to expand the business through advertising and research. I'm reminded of a game of musical chairs, but in this case, the players are the workers and the corporation works hard to keep eliminating the chairs (jobs) so as to lower costs.

So in a system that funnels profits to the owners and investors, their wealth becomes so incredibly disproportionate that they can have anything they want - including politicians, government agencies, university research departments and private guards. Even the nation's military is put at their disposal, thanks to the close alliances extreme wealth and power have built. There was never anything democratic about private or investor-owned corporations, and as their power and influence infiltrates our political systems, any semblance of democracy becomes little more than a historical anomaly.

Yet I don't advocate trying to overthrow the existing economic order; indeed, I think it's silly to think we could! As Buckminster Fuller said: "You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete."

There's really only one alternative to hierarchical systems that concentrate wealth and power, and that is cooperative organizations. And there is only one way to make cooperative organizations work well: by building communities in which people come to know, trust and care about each other and learn to share resources and power, make decisions and work together as equals.

Mr. Reich speaks of the health of the economy, and I'm reminded of a bumper sticker that reads: "If you think the system is working, ask someone who's not." Of course, if you ask someone whose assets are some astronomical amount, they might say it's working wonderfully! To me, this points to the lack of any well-defined or commonly understood and accepted purpose for the dominant economic system. Without that, saying a system is working or not working becomes rather meaningless. (The guillotine worked quite well, if your purpose was to lop off people's heads.)

To me, a rational economic system is one that supports and empowers everyone to take responsibility for creating a livelihood or way of life that works well for them. It supports cooperation and the sharing of vital resources, both natural and human-made (e.g., knowledge, skills, tools and machines). Rather than exploiting our wounded psyches and dividing us into the extreme polarities of enormous wealth vs poverty and vast power vs powerlessness, it embodies the human qualities of caring and compassion and elicits our creative talents and collaborative nature. If we want a society and economy that values all humans as the purpose for its existence, we will need to buy out of the one that views and treats us as disposable pawns in a game made for and played by the most wealthy and powerful. And this is the first function of a cooperative community: to support each other in believing that we can work and live together - and meet all of our real needs (including many that go unmet in the dominant culture) - in harmony with each other and the natural world.

CSummer



Author, pundit and former Secretary of Labor Robert Reich dropped by Santa Rosa a few weeks ago to explain this -- and more -- to us, to our great enjoyment and edification.