With a twinkle in his eye, former neo-robber baron, safety slasher/multiple murderer, and U.S. Treasury Secretary John W. Snow tonight offered the pithiest, purest statement I’ve ever seen of the central claim of our market totalitarian overclass and its bi-partisan political puppets.
To see it, click here, navigate to the video for October 11, 2010, and view the minute from 7:40 to 8:40.
This is indeed, as Snow says, “the theory.” It is the innermost dogma of supply-side economics, which is business investors’ unwavering self-worshiping insistence, the facts be damned. In this context, Snow is relating it to the Federal Reserve’s policy, but “the theory” rules all spheres of economic policy in this age, the White House distinctly included.
The great point of falsity, of course, resides in the phrase “lots of people’s household wealth.” What percentage of the population bases its spending levels on the value of stocks? Infinitesimal, because an infinitesimal percentage owns enough stocks to matter at this level. And the few who do? They save and reinvest a huge share of the income gains they constantly receive.
Alas, all decrepit, outdated ruling classes have long since grown incapable of distinguishing their own circumstances and interests from those of everybody else.
I have reluctantly concluded that voting for candidates* has become meaningless in the market totalitarian, one-party United States. The equivalence and mutual venality of the two brands comprising the reigning Business Party duopoly is now complete, as is their eager “bi-partisan” participation in the surrender of all political discourse to the inherently irrational form of television advertising.
And the amount of money flowing into the whole sham is, of course, as always, setting new records. All without a single, solitary policy matter seriously at stake from either “side.”
Inevitably and intentionally, meanwhile, what passes for campaigning now is corporate television saturated with the most cynical, dishonest, and insubstantial bullshit blips you could imagine.
As Republicans run Orwellian ads combining supply-side government bashing with feigned upset at cuts to Medicare, here is the stuff of Democratic Congressbots’ “politics”:
“I’m (fill in the name), and I’m working in Congress so people with good ideas can grow and expand [interesting contrast here!] their businesses. That’s why** the tax breaks I passed help entrepreneurs create high tech jobs.”
Among the rules described by Herman and Chomsky is the one that says, to rise to a position of power in our market-totalitarian society, you either have to be a moron, or unfailingly pretend you are one.
Want proof? Consider the answer Christina Romer, the recently departed Chair of the President’s Council of Economic Advisers, provided to Bloomberg Business Week when it asked why unemployment is “higher than expected”:
BBW: Why do you think that is?
Romer: My guess is the main reason has to do with…the fact that [the recession] was caused by a financial crisis. Since it was such an unusual event, firms may have reacted more forcefully than was usual out of a fear of the unknown. Also, firms that couldn’t get credit may have had to lay more people off than normally.
What an absolute crock. First of all, Romer, a supposed world-class scholar on this very topic, wants you to believe that the current Great Depression III is the cause, rather than the consequence, of the widening gulf between economic production and employment.
Worse, her proffered explanation is a meaningless cloud of farts covering an exceptionally simple and powerful fact: Between 1990 and 2008, U.S. businesses tripled their computer investment/labor spending ratio. Computers are used for administration and communication, but they are also the core means of automating production processes. So, the simple fact is that capitalists are continuing to be capitalists. Their system works, for them. Over time, it employs fewer and fewer people per unit of output.
Being too stupid to track (or too well-trained to mention) this elementary process is the kind of thing that gets you the Presidency and the American Economic Association and a seat in the White House.
Reality has gotten harsh enough to compel even the professional addlers to peek behind the curtains:
Many companies are focusing on cost-cutting to keep profits growing, but the benefits are mostly going to shareholders instead of the broader economy, as management conserves cash rather than bolstering hiring and production. Harley, for example, has announced plans to cut 1,400 to 1,600 more jobs by the end of next year. That is on top of 2,000 job cuts last year — more than a fifth of its work force.
As companies this month report earnings for the second quarter, news of healthy profits has helped the stock market — the Standard & Poor’s 500-stock index is up 7 percent for July — but the source of those gains raises deep questions about the sustainability of the growth, as well as the fate of more than 14 million unemployed workers hoping to rejoin the work force as the economy recovers.
“Because of high unemployment, management is using its leverage to get more hours out of workers,” said Robert C. Pozen, a senior lecturer at Harvard Business School and the former president of Fidelity Investments. “What’s worrisome is that American business has gotten used to being a lot leaner, and it could take a while before they start hiring again.”
And some of those businesses, including Harley-Davidson, are preparing for a future where they can prosper even if sales do not recover. Harley’s goal is to permanently be in a position to generate strong profits on a lower revenue base.
In some ways, the ability to raise profits in the face of declining sales is a triumph of productivity that makes the United States more globally competitive. The problem is that companies are not investing those earnings, instead letting cash pile up to levels not reached in nearly half a century.
“As long as corporations are reinvesting, the economy can grow,” said Ethan Harris, chief economist at Bank of America Merrill Lynch. “But if they’re taking those profits and saving them, rather than buying new equipment, it hurts overall growth. The longer this goes on, the more you worry about income being diverted to a sector that’s not spending.”
“There’s no question that there is an income shift going on in the economy,” Mr. Harris added. “Companies are squeezing their labor costs to build profits.”
The trend is hardly limited to Harley. Giants like General Electric and JPMorgan Chase, as well as smaller companies like Hasbro, the toymaker, all improved their bottom lines despite slowing sales in the second quarter. Among the S.& P. 500 companies that have reported second-quarter results, more than one in 10 had higher profits on lower sales, nearly twice the number in a typical quarter before the recession, according to Thomson Reuters.
“Whole industries are operating at new levels of profitability,” said David J. Kostin, chief United States equity strategist at Goldman Sachs. “In the downturn, companies managed to maintain higher profit margins than ever before.”
Profit margins — the percentage of revenue left over after expenses — crumble in most recessions, as overall sales fall but fixed costs like infrastructure, commodities and rent remain the same. In 2002, during the recession that followed the bursting of the technology bubble in addition to the Sept. 11 attacks, margins sank to 4.7 percent. Although the most recent downturn was far more severe, profit margins bottomed out at 5.9 percent in 2009 and quickly rebounded. By next year, analysts expect margins to hit 8.9 percent, a record high.
[Source: The New York Times, July 26, 2010]
The New York Times, of course, implies that all this is some kind of anomaly, rather than still more evidence that corporate capitalism works as it is intended to work — it puts the rich first in any and all situations.
The truth is that the basic institutional logic of the system was explained in 1966 by suppressed Harvard and Stanford men Paul Baran and Paul Sweezy. Take a look at that book, plus Harry Braverman’s sequel, Labor and Monopoly Capital, and see if the above reportage conveys anything that ought to be surprising.