Why is it that moist of the richest people in this country spend so much of their time and resources holding down the middle class and exterminating the poor.
For some unimagined reason, the rich, or at least most of them, don’t seem to see that in crushing the middle class, they are setting the table for their own destruction. It has already started.
Between 1990 and 2007, in a desperate scramble to shove every crumb of profit into their gaping maws, Wall Street and the corporate structure of this country did their best to destroy the middle class. It happened in a lot of ways; credit card debt, the entire structure of the housing industry and the way banks gambled with mortgage debt. Wall Street banks, no longer divided into banking and investing endangered the entire financial structure by gambling with deposits and then short selling against their own gambles. All of it was destructive to our financial and social structure and all of it paid off in the only way greed like that can pay off. We are now trying with only marginal success to struggle out of a depression.
But believe it or not, that wasn’t the worst atrocity that the corporate structure inflicted on this country. The worst thing they did and have been continuing to do since the 1970’s, has to do with their suppression of the middle class.
After WWII the country experienced a huge boom. The Great Depression was over, the necessities of the war had created jobs and we had learned about merchandising. Entrepreneurial lords of industry understood that in order to sell your product you had to have a market for it. Henry Ford paid his workers more than the going rate and encouraged his employees to buy Ford cars with their excess cash – and they did, big time.
I remember my father, who worked for Ford, explaining to me, after I had made a complimentary comment about a Cadillac, that there was only one car worth buying and it was a Ford and I had better get that fact lodged firmly in the front of my brain if I liked eating.
But the entrepreneurs are gone, replaced in most businesses by the managers, those business school grads who have seen the light and discovered that the best way to wealth is to create it on the backs of their workers. I guess the business schools don’t teach the need for demand any more, because right now, their graduates, the ones leading a large portion of industry are trying illogically to choke off demand by underpaying their employees on a calamitous scale.
The formula is a simple one, so simple that one would think that even the most brain locked of the managing class would have been able to work it out by now.
Businesses, (not Wall Street) make money by selling product. In order to sell product they have to manufacture product. In order to manufacture product they have to hire people to do the work. If they pay those people too little, those people will not be able to buy the product that they and others have manufactured and the companies that manufactured the products will fail.
On the other hand if the manufacturer pays its employees just a little more than they need to survive, they will have excess cash to buy their and other company’s products. The company will thrive, hire more employees and the result will be more people with more money to buy more of the company’s product and that will enable them to hire even more people and the circle will expand. Get the picture? Yes, it’s a circle and one that works the same way in the other direction. If you don’t pay your employees enough they can’t buy your product… or anyone else’s and everybody suffers.
Did you know that most of the people on some kind of government assistance are on food stamps? And did you know that almost 70% of those on food stamps are employed? What, you say, impossible!
On the contrary, very possible and in fact, factual.
The largest practitioner of this kind of business is Walmart, which is, I believe, the largest retail operation in the country. The Walton family each take down a couple of billion bucks a year and they do it by paying a wage that doesn’t allow their employees to eat without the help of food stamps. That means you and I are subsidizing the biggest retail company and the richest family in the world and encouraging them to buy products overseas so that they can remain competitive with what few competitors they have left.
Walmart got where they are by using a simple formula. Buy cheap and sell cheaper. People, who shop in Walmart, and this is not a put down, despite the charming fashion pictures that are all over the Internet, usually have limited means. That means that they have to buy the cheapest product available regardless of its functionality. It’s part of the cycle that keeps people in poverty. Instead of being able to buy something for $10 this year that will last for 10 years, they buy the same kind of thing for $5 but it only lasts for 2 years. So it costs them $25 over 10 years for the same product they could have bought for $10, if they’d had the $10. But because they’re poor they only have the $5, and barely that.
And why are they poor? Because Walmart and many others are buying in China instead of the US and paying their US sales staff lower than humane wage so they can’t buy the good stuff from other companies because they work for Walmart.
But this kind of program can only play for so long and it has already been playing in this country long past the “sell by” date. That’s one of the reasons that we have massive unemployment. Industry doesn’t want to hire anyone because there is no one out there to buy their product. The middle class has been so underpaid for the last thirty years that it is no longer the middle class. It is now the working poor. It now takes two parents working full time, to bring home just a little less than it used to take with only one parent working
How did this happen? Well, the Walmart’s of the world had something to do with it but so did every sector of industry that worried more about its dividends than it did its employees. So did every CEO, COO or CFO who decided that he needed a billion dollar bonus at the end of the year even if his employees couldn’t afford Christmas presents for their kids. What the hell do you do with a billion bucks? I know, support your local lobbyist.
At this point industry has painted itself into a corner. Wages are so low that no one can afford to buy anything, so they can’t expand, despite the fact that there are a couple of trillion bucks out there looking for a good investment. The answer, at least temporarily, lies in government investment in infrastructure, education and research. Forget the deficit and spend. Solve the immediate problem, jobs, and they will solve the debt. If the government creates jobs, those holding those jobs will become consumers and provide demand for products that industry can supply. This will create exactly the same progression described above; the only difference being that the government will be the initial mover instead of industry. The result will, however, be the same, a surging economy.
Forget austerity. It killed Japan, it’s killing Europe and Britain. The only reason anyone even talks about it is that the conservatives don’t want to admit that they have been wrong for fifty years.
Don’t forget, even millionaires went out windows in 1929. It can happen again. It almost did in 2007. If no one has the money to buy their products, even the best businesses will have their CEO’s taking fifty story nosedives. After all, they have more to lose. It would be a shame if they had to learn about parity that way.