It used to cost $75 to fill up the cargo van I haul my wares in. Now it costs nearly $100, and sometimes a bit more.
Yet, official government statistics show that inflation is cruising along at a mild 3.87% annual rate.
It's a big lie.
What we need is a study that takes some product or service, like a dozen eggs, or a full-size Chevy sedan, or the cost of a college education, and shows how many hours of average wages are required to purchase them. The result, I'm certain, would show that inflation since the financial crash has been at least three or four times worse than the official statistics suggest. The exercise would also show that that working class and middle class earnings in America have done more than merely stagnate - they have collapsed precipitously.
At the beginning of June, I relayed the news that the trade journal for the advertising profession had declared America's middle class dead. As Sam Pizzigati sub-headlined an article, "The American middle class, concludes a new study from the ad industry’s top trade journal, has essentially become irrelevant. In a deeply unequal America, if you don’t make $200,000, you don’t matter."
More news filters in confirming the long-term economic destruction of the American peoples' income and earnings. Mike Konczal picked up a Wall Street Journal article on Proctor & Gamble shifting its focus to developing and marketing "lower-priced goods":
For generations, Procter & Gamble Co.’s growth strategy was focused on developing household staples for the vast American middle class. Now, P&G executives say many of its former middle-market shoppers are trading down to lower-priced goods—widening the pools of have and have-not consumers at the expense of the middle.As Konczal notes:
That’s forced P&G, which estimates it has at least one product in 98% of American households, to fundamentally change the way it develops and sells its goods. For the first time in 38 years, for example, the company launched a new dish soap in the U.S. at a bargain price….The world’s largest maker of consumer products is now betting that the squeeze on middle America will be long lasting.
“It’s required us to think differently about our product portfolio and how to please the high-end and lower-end markets,” says Melanie Healey, group president of P&G’s North America business. “That’s frankly where a lot of the growth is happening.
Instead of developing new, innovative products, P&G, the major trendsetter for a large part of what Americans buy, is going to focus on taking its existing base of products and make shoddier, cheaper versions of them. Versions better suited to fit an hourglass distribution of income.Konczal then points to a report on Wal-Mart's recent annual shareholders meeting, by Joe Weisenthal, who captured this slide from the meeting:
What all this points to is that what economists call "aggregate demand generation" is suffering because of rising income and wealth inequalities. Franklin Roosevelt's Federal Reserve chairman, Marriner Eccles, fixed the blame for the First Great Depression squarely on this problem. Economist Thomas Palley has laid out the problem a number of times, including in February 2008, just as the financial crisis was reaching a climax:
America's economic contradictions are part of a new business cycle that has emerged since 1980. The business cycles of Presidents Ronald Reagan, George H.W. Bush, Bill Clinton, and George W. Bush share strong similarities and are different from pre-1980 cycles. The similarities are large trade deficits, manufacturing job loss, asset price inflation, rising debt-to-income ratios, and detachment of wages from productivity growth.For over three decades now, USA elites have been unwilling to face the structural economic problems of inequality caused by the new economic paradigm of conservative "neo-liberal" shock doctrine free trade, free market economic theology. That has forced many citizens to take their grievances out into the streets. It started in Madison, Wisc., and now, last night, OccupyOakland carried out a general strike which succeeded in shutting down the sixth largest maritime port in the country. But there is no sign yet that elites are getting the message.
The new cycle rests on financial booms and cheap imports. Financial booms provide collateral that supports debt-financed spending. Borrowing is also supported by an easing of credit standards and new financial products that increase leverage and widen the range of assets that can be borrowed against. Cheap imports ameliorate the effects of wage stagnation.
This structure contrasts with the pre-1980 business cycle, which rested on wage growth tied to productivity growth and full employment. Wage growth, rather than borrowing and financial booms, fueled demand growth. That encouraged investment spending, which in turn drove productivity gains and output growth.