Friday, March 14, 2008

It's the consumers that make the world go round, friend

Or why we may be headed for another depression. Unorthodox economic theory of the Keynesian Marxian variety says that one of the reasons that the Great Depression happened was that capital had accumulated to a great degree without giving workers the basic income to afford the goods that it produced. Because the tendency of capital was to push wages down this created a situation where the ability of capital to support itself became very precarious, and caused the whole thing to collapse when shaken.

In today's world we have the United States on one side and the third world on the other. Capital and business has moved its manufacturing capacity to China, Mexico, and Southeast Asia, where people make almost nothing compared to in the U.S. This creates a lot of cheap goods that are then bought by U.S. consumers, thereby giving the capitalists a good profit since the cheapness of the goods in the U.S. is still a significant markup from the actual costs of production in Asia and Mexico. Our cheap goods are even cheaper to produce than we think. So U.S. elites take home an enormous amount of money. But the goods that support them aren't bought by people in mansions. They're bought by working class and lower middle class folks in the U.S.

And there's the rub. Business wants to keep on slashing wages in the U.S., using things like increasing part time positions to get around having to give people benefits or, horror upon horrors, overtime. They don't want the good, high paying jobs, to stay in the U.S. But who exactly is going to buy all these cheap goods once the decent jobs are gone?

Even though it's a neo-colonial relationship, U.S. elites still need some sort of economic equality within the U.S. itself for their money making ventures in the Third World to work. Without that production and sales go down and they're left with overcapacity and no way to utilize it.

This is a structural issue that just pumping money into the economy won't solve. If the U.S. consumer base is still knocked out thanks to the flight of jobs and the downward pressure on wages that companies exert an economic stimulus package will run its course, leaving us back in the same position that we started in.

The solution for the U.S. is a social democratic, unionized, commonwealth, where there are comprehensive measures for social equality. This does not necessarily imply a full socialist state, but rather something more like what exists in Europe in the present day.

The solution for the rest of the world, particularly the countries that allow elites to prosper while subsidizing cheap goods for increasingly poorer working class consumption, is the same. The U.S. has to start building up its own manufacturing base once again so that it itself isn't dependent on other countries for economic stability and other countries aren't put in a position of being subordinate to the U.S. for their own economic development.

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