On June 12, 2012, Robert Reich, Chancellor’s Professor of Public Policy at the University of California at Berkeley and Secretary of Labor in the Clinton administration, answers:
“The answer is in front of our faces. It’s because American consumers, whose spending is 70 percent of economic activity, don’t have the dough to buy enough to boost the economy – and they can no longer borrow like they could before the crash of 2008.
“If you have any doubt, just take a look at the Survey of Consumer Finances, released Monday by the Federal Reserve. Median family income was $49,600 in 2007. By 2010 it was $45,800 – a drop of 7.7%.
“All of the gains from economic growth have been going to the richest 1 percent – who, because they’re so rich, spend no more than half what they take in.
“Can I say this any more simply? The earnings of the great American middle class fueled the great American expansion for three decades after World War II. Their relative lack of earnings in more recent years set us up for the great American bust.”
The third industrial revolution that is driving the U.S. economy and world economies, if not addressed, will result in further degradation of the earning potential of ordinary Americans, while the gains will continue to go to the top 1 percent. The third industrial revolution is the product of globalization and automation consisting of revolutionary new ways to produce products and services sans human labor. This is being accomplished by employing technological innovation and invention in the form of machines, superautomatoin, robotics, digital computerized operations, etc––the non-human factor of production owned by a tiny minority. What this has meant to the ordinary American is a downward spiral on medium wages with consistently slower and slower job growth for the majority. No longer can households afford or obtain loans collateralized by home equity because home values have plummeted and banks are not lending to support household consumption. In a nutshell, family median net worth has fallen and continues to fall.
Ordinary Americans have always had access to jobs, but because of the tectonic shifts in the technologies of production, the mixture of labor worker input (jobs) and capital worker (ownership) input has been rapidly changing at an exponential rate of increase. As a result, job creation in the number and quality of earning potential will never again be able to meet the population demand. Americans sense this and are less confident about how much income they can expect in the future, but are essentially powerless to accumulate any significant savings for their future retirement.
What is needed is a fundamental reform of the structure of financing mechanisms that frees economic growth from the slavery of “past” savings, while creating a domestic source of new asset-backed, interest-free money and expanded bank credit to finance new capital formation repayable out of future savings (earnings). This is not an immediate short term solution but it is the only solution that in the long term will put us on a path to prosperity, opportunity, and economic justice based on the principal that every citizen has the opportunity to produce and not become dependent on the redistribution of income after it is produced. Thus, we must ensure that ALL Americans, especially those who are “propertyless” or without productive capital ownership or under-capitalized, participate as future owners and share in the gains from economic growth.
To achieve this goal, ordinary Americans must wakeup! They must elect political representatives that will get BIG MONEY and corporate lobbing influence out of government and deliver us a government that enacts policies that promote its responsibility for the health and prosperity of the economy––not discharge its responsibility through coerced trickle-down and through redistribution achieved by the rigging of labor prices, by taxation to support redistribution and job “creation,” or subsidization by inflation and by all kinds of welfare, open and concealed. We need government that is founded on the principal that economic power has to be universally distributed amongst individual citizens and never allowed to concentrate.
http://robertreich.org/post/24974761785
