Joe Weisenthal presents the following two charts to illustrate how government is coping with falling manufacturing wages:
You’ve probably seen this chart many times, which shows wages declining as a percent of GDP over the last few decades.
But things look a tad different when you look at wages PLUS government transfer payments (predominantly entitlement programs) as a share of GDP.
What the writer fails to recognize is that lifting government welfare payments is not a solution. It is part of the problem. Increasing transfer payments encourages welfare dependancy and hinders the adaptive process that allows capitalism to adjust to new challenges.
Eventually the tail begins to wag the dog, with welfare dependents voting themselves increases. Economic stagnation evolves into economic deterioration, hindering new capital formation with excessive red tape and a rising welfare burden.
…..The road to hell is paved with good intentions.
via Matt Busigin On Peak Capitalism – Business Insider.
I would describe myself as a free market socialist. I believe the objectives of economic upliftment, universal education and universal healthcare — which centrally planned socialist economies have proved themselves incapable of sustaining — are best achieved through the use of free market forces in a capitalist economy. While recognizing that regulation and basic services delivered by government are essential for a thriving economy, I believe many of our current ills are caused by government meddling in the adaptive processes essential for the efficient functioning of a capitalist economy. We need to avoid throwing the baby out with the bath water. Rather than increasing the role of government we need to strip away as much destructive intervention as possible and return to the simple formula — the creative destructive process of capitalism — that has done more to uplift human society in the last century than any other system achieved in the entire history of the human race. And resist the urge to tinker (with the system).
It doesn’t matter whether the cat is black or white, as long as it catches mice. ~ Deng Xiaoping
Wonderful chart series …
One notices that the only recovery since the early 60’s and when LBJ took over the Presidency after Kennedy’s assassination happened under Bill Clinton … all the other Presidencies presided over weakening real wage value …
The flip side was the growth in Federal debt over that 50 year period, and on an equal footing – the explosion in the capitalisation of the DJIA … again debt related …
From this chart alone … one can assume that a defining equinox is coming … even bigger than the GFC …
I don’t think Clinton should take credit for the Dotcom bubble.
Agree.
The problem was and is falling real wages in the US. To keep pace consumers used their houses as ATMs, drawing down their equity to pay bills, until house prices fell. While debt forgiveness might “clear the books” it won’t kick start the consumer driven US economy, only a lift in real wages can do that.