Where have all the assets gone?
by David Atkins
I’ve written at length before about ideological battle between those who want to increase asset values, and those who want to see wage growth. To make a long story short, a variety of forces, the strongest of which are globalization and increased access to an endless supply of cheap labor, have conspired to depress wages. Rather than do the hard work of fixing the system to help a globally connected world synchronize in harmony with broad-based wage growth, policy makers chose to disguise the lack of wage growth by maximizing asset growth, and attempted to push as many people as possible away from wage orientation and into asset orientation, specifically stock investments and housing.
Some of the decision to do this was simply a question of taking the lazy way out of the problem. Some of it was a craven desire to help plutocratic campaign donors steal away more wealth. And some of it was ideological fervor, as with Ronald Reagan, who said in 1975:
“Roughly 94 percent of the people in capitalist America make their living from wage or salary. Only 6 percent are true capitalists in the sense of deriving income from ownership of the means of production…We can win the argument once and for all by simply making more of our people Capitalists.”
All of American policy was designed to cheapen the price of goods, to extend credit, and to maximize the prices of assets in attempt to create more Capitalists and hide the fact that wages were declining against inflation, and that non-bubble-related jobs were disappearing.
The problem, of course, is that asset prices are volatile and prone to speculative bubbles. When the bubbles inevitably burst, it wasn’t just speculators who got hurt this time: it was everybody who had been suckered into the asset-based con. When the recoveries from the speculative bubbles did belatedly show up, they tended to be increasingly jobless recoveries–just as one might have expected from a society where both boom and bust depend on quick-buck speculation rather than productive long-term investment.
But the problem doesn’t end there. There’s also the fact that regular Americans don’t have remotely enough wealth to buy into the asset-based ponzi scheme in the first place:
The attempt to disguise wage stagnation and decline with asset growth has been a marked failure on many levels, not least of which is the obvious fact that not enough Americans have access to enough wealth to make the model work. Cheap, easy access to homeownership was supposed to be the main fix for that. But that blew up just a few years ago, taking the entire economy with it. 401Ks were supposed to be another fix, but people have lost confidence in those too, as those who own substantial enough 401Ks to retire never know just how big their nest egg will be from year to year, while those without significant 401Ks or union pensions don’t have much retirement at all beyond Social Security.
But no one in a major role on a public policy level is even talking about the problem or looking toward new solutions. As I said before:
Whether they can articulate it or not, what has most progressives most incensed about the Obama Administration’s domestic policy is that it has ultimately hewed to the same asset-based economic model. When the Administration could be progressive on cutting costs or ensuring equality without negatively impacting assets, it did so. That’s what the ACA, the Ledbetter Act, the repeal of Don’t Ask Don’t Tell and numerous other left-leaning Administration moves were designed to do. But the Administration has been very reticent to take any actions that would negatively impact the value of assets.
That’s not meant to be a knock on the Obama Administration alone. Almost no one in government is really talking much about this problem, which lies at the root of so many others. Certainly not Republicans who are just fine with the system and would like to slash the safety net while expanding asset inflating policies, and scarcely any Democrats, either. Certainly not the pundits who, when they can be bothered to talk about it at all, either celebrate the trend (Thomas Friedman) or figure that a simple combination of infrastructure spending and redistributive taxation can solve it (Paul Krugman.) Not even much of the progressive movement, which is stuck either in issue silos or railing against “corruption” and the influence of the one percent, as if all the country’s greedy villains had somehow gotten the people’s votes and assembled into Washington D.C. solely for the purpose of self-enrichment while pretending to fight one another.
The problem is systemic and broad-based. The entire country–and, indeed much of the rest of the industrialized world–looked at the threat posed by global labor competition and decided to jump into a razor blade-filled pool of asset speculation. The Right celebrated its victory, and the Left went neoliberal and decided to roll with it while the bubbles inflated, creating a fleeting mirage of universal prosperity. When the bubbles popped, the Right went off an ideological cliff to defend its position, and the Left was sent scrambling to find its soul again. Neither side has quite regained control of its senses or its moral center.
That’s not surprising: after all, it’s hard to find a solution to a problem that one cannot even identify. It’s no wonder that the majority of the country that has born the brunt of asset-bubble recessions without much partaking in the froth of the bubbly frenzy sees villains lurking in every shadow, regardless of political ideology. They don’t know who the criminals are. Heck, they don’t even know what the crime is, really. But they do know that somebody is going to pay for the loss of their standard of living.
But whoever the scapegoat is, they won’t get their assets back to bubble highs unless they’re part of the elite rich. And given legislators’ priorities of the last 30 years and more, they’re certainly not going to get their wages back, either.
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