Yanis Varoufakis, I fear, is yet another voice drowned out by the deafening cacophony of voices from the socially positioned, privileged, entitlement minded “free-market” capitalists (the neoliberals).
This article, from which I derived the quote below, is a must read for anyone remotely interested the root causes of economic disparity. Although he is writing to the economic crisis in Europe, his words ring out a warning to all capitalist nations, especially the U.S. and Britain. Liberals and progressives, in reading the article, need keep in mind his reason for not offering a radical change at this time. Remember the old adage; The only way to eat an elephant is one bite at a time.
Here is the ever widening gap of economic disparity in the United States:
The Benevolent Thou 
Feb 18, 2015 @ 16:06:04
Very interesting. I am currently trying to open my mind to all ideas. Ever since I left Christianity I realized how much a person can believe things without ever studying the topic. I’m a blank slate when it comes to economics. It’s a humbling experience to say ‘I don’t know’, but it’s the only way to learn.
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Feb 19, 2015 @ 18:40:21
Thanks for your input and your candor. I had a lengthy reply all typed out giving some substance to the economy, why it is sluggish, why the Republican Great Depression of 1929 and the Republican Great Recession of 2008 happened, but then I hit the wrong key and it all vanished. I’ll try again tomorrow.
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Feb 20, 2015 @ 16:31:40
Ah I hate it when that happens!! I had it happen to me recently.
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Feb 21, 2015 @ 11:11:13
Okay, sit back, have a beer/wine/coffee, and here is my view of the economy:
I don’t recall if I mentioned to you that I, too, am a person who evolved from religion to reason. Back when I was religious, I was even a Nixon republican and before that, a George Wallace supporter. I found that one’s depth of religiosity often lays one open to the emotional rhetoric of self-serving politicians.
In any case, here are some basic facts to understand about the economy and why the conservatives and liberals are so divided:
I’m sure that you already know the most basic aspect of an economic system–demand and supply. The second basic idea is that only labor creates value. A piece of wood is a piece of wood until someone carves out an ax handle to sell or to use as an attitude adjustment for one’s spouse. 😀
The simple creation of a useful item will not benefit anyone on a mass scale (creating wealth) unless there are people who labor to produce that item. The more productive the laborers/workers become, the more value is produced. Basic economics would say that if a person produces more, he would benefit from his production of more value.
Here’s the rub:
Supply-side economics (trickle-down Reaganomics) –
Conservatives believe the neoconservative mantra that if you make wealthy people wealthier, they will create jobs and all boats will rise (worker income and the income of the wealthy). Under certain conditions, this would have some effect. Those conditions, however, do not exist and conservatives don’t want them to exist. For example, if corporations would not be allowed to build factories in ultra-low wage, sweat-shop nations such as China, and/or if having produced goods in China at low cost and shipped them back to America under high tariffs, AND they were not allowed to hide their profits in foreign banks, then they would build more factories in the U.S. and more jobs would be created.
Yes, goods would cost more, but if corporations were forced to pay a living wage to workers, and forced to do so with parity (worker productivity increases value 5%, income for management/ownership rises 5%, then wages must rise 5%). Conservatives, however, would call this, “communism.”
As well, if corporations were to be forced to pay a living wage (above poverty level) to workers (same hourly wage for part time as for full), then the government would not have to supplement their income with health insurance and the middle class would not pay higher hospital bills to cover workers didn’t make enough money to pay ER bills. (This is a relevant subject but too broad to cover here)
So, since corporations are not forced to parity, but workers are producing more value at the same hourly wage, then the greater income goes to the already wealthy.
Free Market ideology:
The simple concept of Supply-side economics, then, without proper safeguards, is a poverty generator. Because there is no incentive for corporations to pay a living wage, they don’t. This, of course, is greed. Why should they pay more since the taxpayer will pick up the bill for all necessary expenses the workers can’t afford? But to force them to pay a living wage, again, the conservatives call “communism.” Many liberals run away from such name calling because it stimulates many Americans, who do not understand the concept, into voting against them–purely out of emotion.
Deregulation is a major part of the “free market” push. The idea, of course, is that if regulations are removed (they rarely name any particular regulation), the market will be self-policing, produce more, and the economy will rise. The “self-policing,” however, does not work. Note what happened when no oversight and a lack of regulation was applied to BP’s Deep-Water Horizon. Even today parts of the gulf coast is suffering a huge loss of income, business have gone broke, and thousands suffer from chemical induced illnesses, and BP has not been forced to pay for most of it. There are many other problems as well, but then, you get the picture.
Recall during the Cheney-Bush Administration the lack of oversight in the food industry? Recall the rise in the number of food poison outbreaks? These things are what we get from industry’s self-policing.
Now, directly affecting the economy is the devastating effect of deregulation in the banking industry.
What led to the Great Depression? Supply-side economics. It created the “Gilded Age”–the Age of the Robber Barons. Workers got little to nothing for increasing productivity, and banks were allowed to act as “investment companies” speculating with their assets (worker’s deposits). If a bank over speculated and lost, then the workers lost their savings. Banks were speculating (betting) on profitability from anything of value, including mortgages–bundling them together and selling them to bigger banks and foreign investors. Banks began lending on the cheap, knowing that once the interest rate rose, common folk would not be able to pay their mortgages and the bundled mortgages (toxic derivatives) would become worthless. But if they had sold them, then they thought they would be scott free of liability. But when the crunch came in 1929 (the derivatives market went bust), the larger banks could not pay their bills, and failed–ergo the domino effect took out even smaller banks. Everybody lost.
Inter Franklin Delano Roosevelt and the Democrats.
In 1933, Congress passed and FDR signed the the Glass-steagall Act. The major effect was to drive a wall between the banks and investment companies. Banks could no longer speculate with their assets and Investment companies could no longer be banks. This act, along with massive government spending in programs such as CCC camps (putting Americans to work on massive public projects) and then advent of WWII, brought us out of the Republican Great Depression, and, with the continuing power of liberals instituting wage controls and other regulations, we realized about 40 years of relatively steady economic growth.
With the rise of labor unions fighting for parity in wages, a robust middle class developed and workers found that a man could support a family, send kids to college, and still buy an automobile and take vacations.
All this began to slide downhill with the election of Reagan and the empowerment of the neoconservatives (former disgruntled young democrats, newly schooled in Leo Strauss’ Machiavellian political philosophy of having their desired ends justify their means of obtaining them, a Nietzschean will-to-power should be their primary motivating force, and Ayn Rand’s Objectivism: a philosophy advocating that one’s actions were rational only when one’s self interest benefited over the interest of others). I think most conservatives have now adopted this neocon world view.
In 1999, the conservative Congress passed the Gramm-Leach-Bliley Act. This act gutted the Glass-Steagall Act, removing the wall that prevented banks from being investment companies as well. Predictably, banks once again began to speculate with their assets (your money), once again various instruments, such as bundling sub-prime mortgages into toxic derivatives, selling them to on a world market, and betting on their failure. It was a new Gilded Age. The result was predictable. Interest rate rose, low wage workers could not pay their mortgages, big banks went bust, followed by smaller banks, people lost jobs, more foreclosures (the banks actually liked the foreclosures, sometime even foreclosing on folks who were not behind payments at the contract’s critical point–Bank of America was big on this).
Finally came the Republican Great Recession of 2008. Since then the Republicans have blocked virtually every bill that might put people back to work, but the Democrats under Obama have certainly been able to improve the economy despite conservative intransigence. The worse the economy is, the more votes they get because they blame their actions on Obama.
And after the Democrats passed the bill about three years ago that prevented the Wall Street banks from socializing their losses, the last omnibus spending bill that passed congress contained a conservative amendment that, once again, made the public liable for bank losses (privatizing the profits but socializing the losses).
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I hope I have helped a little and not made it worse.
The economists I follow is Paul Krugman and Elizabeth Warren. I consider myself a democratic socialist who believes in a well regulated market for the benefit of the people.
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Feb 21, 2015 @ 16:37:15
This was incredibly helpful to me Max. I’ve been very overwhelmed with the amount of empty rhetoric and anecdotal evidence on economic issues, at least from the right. I’ve been desiring for people to shoot straight on these issues. I’ve grown up heavily entrenched in conservative ideology so I’ve been wary of where to go to learn about the liberal point of view. Of course I don’t want to create what I would call a ‘rebound bias,’ where I accept everything contrary to my old beliefs only because they are not my old beliefs, and not because I feel convinced. Thankfully, I’m learning better how to recognize bias and work around it.
One thing that is useful however is to notice general trends. One such trend I have observed is that intelligent, educated atheists seem to almost always be liberal. That doesn’t alone make it the correct ideology, but from a probabilistic angle, when people who are critical thinkers, who I agree with so much, seem so unanimous on politics, it is wise to investigate it, and even lean in that direction.
I’m looking forward to checking out Krugman and Warren. I’ll need to do a lot more reading on the subject to get a firm grasp of the arguments. But this was a fantastic primer that makes a lot of sense. Thank you! 🙂
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Feb 21, 2015 @ 20:29:24
I truly appreciate your interest and your compliments. Glad I could help.
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Feb 21, 2015 @ 20:33:34
PS, folks like you are uncommon. You, as I, are a seeker of objective truth and we are both on the same highway in life. We accept the evidence without fear, no matter where it takes us. Be well.
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Feb 24, 2015 @ 04:24:57
Glad you posted this. I read it in the Guardian, and it deserves as much distribution as it can get.
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Feb 24, 2015 @ 07:27:22
Thank you Ellen (masked bandito? 😀 )
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Feb 24, 2015 @ 15:45:05
Some say that the owners and managers of capital make more money than workers because they are worth it — the market is always right — but it’s really because they have the power to take all the profits without sharing with the workers who make those profits possible.
Right now in the US, because of big money funding campaigns, Government is more hostile to workers than in the middle of the last century.
And it’s not good for the country. In fact, a lot of companies are losing profits because people don’t have enough money to buy their stuff.
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Feb 27, 2015 @ 17:33:10
Sorry for the belated reply.
I completely agree. I have begun working on a post concerning social justice, a very misunderstood term on the right (what isn’t misunderstood on the right?). I will be taking a Rawlsian position, beginning with his “Veil of Ignorance” as a means to determine the very root of a just society. I’m trying to shorten it as much as possible so that eyes won’t glaze over.
Have a wonderful weekend.
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