Saturday, September 06, 2014

Someone has noticed a conflict between capital and labor

I had the opportunity this morning to watch a video from Moyers and Company featuring Elizabeth Warren - it's only 15 minutes so check it out. In that video, Warren runs through the factors leading up to the Great Recession, years before it happened - the video was shot in 2004. Yes, she too, predicted the Great Recession. As a professor at Harvard University specializing in bankruptcy law, she had seen the trends first hand. Laws are written to solve problems and hoo-boy, she saw the problems coming.

Warren isn't the only one who saw the Great Recession coming. Dean Baker is an economist who was giving us warnings about the collapse of the housing bubble for years prior to it happening. Even Rebecca Schoenkoph, the "Commie Girl" of the OC Weekly saw signs of a Great Rcession coming when she pointed out that the payment on a jumbo mortgage would rise by more than $1000 a month for every percentage point increase. This is what she wrote in 2006:
I tried to argue: this market is going to crash, I said, probably no later than 2007 (when the first wave of interest-only loans' balloon payments come due), and all those people who have interest-only loans—one-third of the loans that were opened last year were interest-only—are going to suck it, which is the scientific term. You know when the last time was that interest-only loans were as popular as they've been in the past two years? In the 1920s, so there's a little food for thought.
Ok, so she was off by one year, but that's pretty close.

Unfortunately, you won't see much of Warren on any private television network talking like this. None of the major private networks are willing to air this kind of reporting because that would make their sponsors look pretty bad, but at least PBS is willing to do it. This is what public broadcasting is for: broadcasting not for the profit, but for the benefit of the public.

Anyway, Warren makes a fascinating point in the interview: the average down payment on a house before Reagan was 18%. In 2004, it was about 3%. You can still get a loan with 3% down. Warren also points out that for the previous 30 years, the average wage for full-time working men had moved only 1%. 1%! It's moved a bit more for women, but that's because more women were completing their education despite the unequal pay between men and women and the rising costs of education. Even then, that's more debt.

What we are seeing here is the effects of having an upper class that is unwilling to pay more to the middle class to get the real work done. Seems that the upper class is quite content to loan a higher standard of living to the middle class, especially with stagnating wages and government insurance on the loans. Remember the bailouts? Yeah, that's government insurance, and no, that didn't help the middle class. But, boy, those bailouts worked wonders for executive compensation!

Capital isn't worth a damn without labor. You can buy property, but if there is no labor, there is no value. I know, it's a love-hate thing. Even if you could replace labor with robots, you would still need people to buy what the robots make and those people would still have to work for money to pay for it.

Yet, what we are seeing is just like Warren said, an assault on the middle class like nothing we've seen before. We have an upper class that is so completely obsessed with what has been taken from them in taxes that, rather than being grateful for the gifts they have received, they have waged a 30-year war to tear away any semblance of prosperity from the middle class.

When you own capital, it comes with the expectation that it will not only gain value, but it will pay rents, dividends and royalties. All of that value comes from labor. Where else is it going to come from? The magic words of Alan Greenspan? No. When you own capital, that means other people are working when you are not - they're working for you. That's what capital is all about. I guess that would make capitalism a disease.
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