In case you’ve been wondering about your paycheque lately, no, it isn’t your imagination.
According to the latest data from the St. Louis Fed., two important (and related) trends are continuing to set records. As a percentage of the total economy (GDP), corporate profits just hit an all-time high while wages, again, sunk to new lows.
These two facts paint a very different picture of our “struggling economy” than we are usually shown. Some people, obviously, are doing pretty well right now, despite the ongoing effects of the worst economic collapse since the Great Depression. Now, just as in the 30s, those who’ve managed to stay rich are doing pretty well for themselves. With competitors failing and plenty of bailouts, many actually gained from the market meltdown. The rest of us, obviously, haven’t fared so well.
Recessions, like most calamities, tend to be felt most at the bottom of social hierarchies, among those who are already most vulnerable. Poor, racialized communities will be hit harder than wealthier white ones, and in those communities, women, children and the elderly will likely suffer the most. Those who are “higher ups” can easily pass on costs to those “below” them, while the opposite rarely has a chance to happen. The same happens in times of war, natural disasters and “prosperity” – that’s the nature of life in a ranked society.
What the growing distance between profits and wages tells us, much like other rapidly growing forms of inequality over the last 40 years, is that wealth is a poor measure of general “prosperity”. Contrary to the myths of “trickle-down economics”, the rich can get much richer without any direct benefit to those around them. Decades of policies which attempted to fix the economy by stimulating businesses only widened the gap between them and everybody else. The role of “Reaganomics”, in the end, was more rhetorical than anything else, drawing attention away from the obvious source of these corporations’ new wealth.
This statistic in particular is important because of the terms it uses: wages vs. profits. While discussion of the “1%” focus on individuals, it tends to draw attention away from the systems which allow one percent of the population to amass so much wealth. While CEO bonuses are indeed outrageous, they’re still only a very tiny fraction of the money involved. Much larger sums are spent on the corporation itself – on bureaucracy, advertising, marketing, financing and investment. The cost of such bureaucracy has exploded in the past few decades, also afflicting the public and non-profit sectors. Often the corporations themselves are owned by large groups of shareholders who, in turn, own many others, so it makes little sense to look at any CEO or corporation in isolation. Capital, in general, is the issue here. It can just as easily move between investors as it can between companies or nations, but as a share of the total economy it’s been growing both in size and influence, to the point where many find it indistinguishable from the economy itself.
Ignoring the distinction between capital and the rest of the economy was the mistake that allowed nearly all mainstream economists and business writers to miss the obvious signs of an impending economic collapse in the last decade. Because they measured success in stock prices, everything seemed to be booming. In reality, as investment revenues grew wildly out of proportion with the rest of society, they inflated prices for any and every investment, creating a massive bubble which couldn’t help but burst. All the major solutions (bailouts, austerity, tax cuts etc) have followed the same logic – giving trillions to banks and large corporations and inflicting harsh cuts on everybody else.
Pumping more of what little money we have available to us into investment capital will not revive our economy – at best it will put off the inevitable. Bailouts, tax cuts, “quantitative easing” and other forms of stimulus and subsidy all have their costs, which of course fall on the rest of us. These infusions of money can drive up speculation for a while, but if the underlying economy is losing funding, that will catch up with markets soon enough. In the long run, these kinds of imbalances are never sustainable.
This growing inequality isn’t just a nasty-side effect of the problems we’re facing, it is the issue. These catastrophic “bubbles” wouldn’t have been possible had investors not had enough cash on hand to drive markets all over the planet into delirium. People would not have needed sub-prime mortgages if they hadn’t been excluded from normal housing markets (by income, race and geography) and of course, we wouldn’t have trouble spending money or making loan payments if we could earn a decent wage. Capitalism, by definition, is rule of the economy by investors – a form of control ultimately based on inequality and disparity. Poverty and recession aren’t the result of mistakes or failures – they’re the product of this system functioning exactly the way it’s supposed to. Until we acknowledge that, we’ll continue to be mystified by this process and the results, but once we do, it all starts to make a frightening sort of sense.