Friday, February 21, 2014

The amazing historical ignorance of US business leaders

The Obama administration has boasted that it has brought discretionary spending to its lowest level as a share of the economy since Dwight D. Eisenhower was President. Meanwhile, corporate profits and free cash flow are at historic highs.

This is the economic environment most business leaders and establishment economists tell us is what is required for sustained economic prosperity. But it doesn't seem to be trickling down. Since the financial crash of 2007-2008, America’s wealthiest 1 percent captured 95 percent of economic growth, while the bottom 90 percent got poorer.

There is no economic recovery for working Americans. When will there be? Or, to put a sharp point on the question:

If the all time lowest is not low enough, how much lower must discretionary spending as percent of GDP go?

If the all time highest is not high enough, how much more profit and free cash flow do companies need?

If the most lopsided is not lopsided enough, how much more income inequality do the rich need?

It all reminds me of what I read a month or two ago in Sam Pizzigati's excellent book, The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970
"I have never seen," J.P. Morgan Jr. ... exulted, “any president who gives me just the feeling of confidence in the country and its institutions, and the working out of our problems, that Mr. Coolidge does.”

 ....The 1926 tax triumph complete, the 1920s could now roar. America’s corporate movers and shakers had everything they claimed they needed to make American prosper. No powerful union presence. No “regimentation” by regulation. No “confiscatory” taxes. No government spending of any significance that might generate budget deficits. Business leaders had been warning Americans for years not to take any action that could undermine “business confidence.”  Government had now done everything that business claimed necessary to restore their confidence.”

....Chester Bowles, a Madison avenue advertising executive who would become governor of Connecticut in 1949, and would serve President Kennedy as Under Secretary of State, then as Ambassador to India.... wrote in a 1946 book, Tomorrow Without Fear, “that prosperity cannot continue unless enough income is being distributed to all of us—farmers and workers as well as businessmen.”

....The plutocrats had had their opportunity, and they had blown it. America had given them everything they desired. The freedom to do whatever they wanted. The power to bend others to their will. And ever-grander fortunes as both incentive and reward. Americ choked on those fortunes. A maldistribution of income and wealth that severe the American economy simply could not swallow.

“Even with the most business-minded administration in our history, even with falling taxes and a government surplus, even with everything that businessmen thought they needed to insure continued prosperity,” Bowles reflected, “we could not duck that basic issue for more than a few tinsel-decorated years.”

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