Video: “Why Trickle-Up Economics Won’t Work”
The “Crisis of Distribution” Myth and its Political Implications –
MHI presented this talk by Andrew Kliman, author of The Failure of Capitalist Production: Underlying Causes of the Great Recession and Reclaiming Marx’s “Capital”: A Refutation of the Myth of Inconsistency, in New York City on Sept. 12, 2012. Discussion followed the talk. A shorter version of this talk was given at Free University on Sept. 21; Kliman also spoke on The Failure of Capitalist Production at Free University on Sept. 19.
A video of the meeting is below.
Below the video are the charts and graphs discussed in the talk.
Here is how the meeting announcement described the talk:
Rising inequality. Stagnant pay for workers. The bifurcation of the U.S. into “the 99%” and the “1%.” These notions greatly influenced much of the Occupy movement and they continue to influence liberal and left politics. They’ve even fueled talk, by Naomi Klein and others, that the U.S. is not in an economic crisis, and that we have a crisis of distribution instead!
Andrew Kliman has spent countless hours examining the facts. He will share some of what he has learned, and will also suggest that the myth that we have a distribution crisis is rooted in the belief that “there is no alternative” to capitalism: “If greater equality within the existing system is the best realistic alternative, you want to say that the wealth is there to spread around, and that the system can afford to spread it around, even at a moment of crisis in which a big chunk of the wealth is being destroyed.”
Kliman will discuss how the degree of income inequality varies greatly from measure to measure. And he’ll explain why it’s wrong to assume that rising inequality means that income has been redistributed from workers’ pay to profit; that actually didn’t occur in the decades preceding the Great Recession! “In order to understand what’s been going on,” he says, “we need to make many more distinctions than people realize. There’s no such thing as ‘income’–only many different things.”
He will also take on claims that the recession and the continuing malaise were caused by redistribution of income to the rich, and that trickle-up policies—based on redistribution in the other direction—can fix the problem. The evidence instead suggests that the actual causes are falling profitability, which led to a slowdown in the growth of productive investment, which in turn led to slow economic growth, slow growth of income, and rising debt burdens. And government policies lessened the effects of all this for decades, but at the cost of making the debt overhang that continues to plague the economy and make conditions more intractable.
Take the test!
After you have heard the talk and read the charts and graphs, you can take a test entitled “What is Wrong with this Picture of the Current Economic Crisis?” It presents quotes from several radical economists and asks you to identify their factual errors, misleading claims, and false inferences.
Click here to view a handout from the meeting.
Audio recordings of the discussion following Kliman’s talks at Free University:
What is Wrong with this Picture of the Current Economic Crisis?
A Test by Andrew Kliman
The following statements are contained in “Radical Economic Theories of the Current Economic Crisis,” prepared for the URPE-Occupy Summer Conference, August 2012 (available at thenextrecession.files.wordpress.com/2012/07/crisissummaries.pdf).
Can you spot the factual errors, misleading claims, and false inferences? Send your answers to us at email@example.com In a few weeks, we will post the answers here, and will award a prize to the person who has identified the most errors, misleading claims, and false inferences!
1. David M. Kotz: “All of the institutions of neoliberal capitalism contributed to … a rising gap between profits and wages ….. This encouraged accumulation but simultaneously produced a problem of realization — who could buy the growing output of an expanding economy? In neoliberal capitalism this problem was resolved by growing consumer spending financed by household borrowing. Despite stagnating or falling real wages, consumer spending rose from 62% to 70% of GDP from 1979 to 2007.”
2. Arthur MacEwan and John Miller: “After an era of relatively less income inequality in the middle of the last century, we have returned to conditions of the late 1920s. Now, as then, the highest income 1% of the population is getting more than 20% of all income.”
3. Arthur MacEwan and John Miller: “The government—that is the Federal Reserve Bank (the Fed)—recognized that with the incomes of most people stagnant or near stagnant, buying power would weaken and threaten economic growth. So the Fed did what it could to keep interest rates low, encourage debt build up, and thus keep people buying.”
4. Fred Moseley: “US workers are working harder today than they did 40 years ago, but their real wages have not increased and their benefits have been cut.”
5. Fred Moseley: “the recovery of the rate of profit (such as it has been) has come almost entirely by increasing the intensity of exploitation of workers … [by means of] this decades-long stagnation of wages.”
6. Fred Moseley: “An important consequence of this decades-long stagnation of wages is that workers became more and more in debt in order to buy a house or a car or or send your kids to college or even basic necessities. “
7. Thomas I. Palley: “After 1980 the virtuous circle Keynesian model was replaced by a neoliberal growth model that severed the link between wages and productivity growth and created a new economic dynamic. Before 1980, wages were the engine of U.S. demand growth. After 1980, debt and asset price inflation became the engine. … The new model created a growing ‘demand gap’ by gradually undermining the income and demand generation process. The role of finance was to fill that gap.”
8. Anwar Shaikh: “Reagan and Thatcher ushered in a new era at the beginning of the 1980s with their successful attacks on labor. As I show in Figure 3 of my paper called ‘The First Great Depression of the 21st Century’ (Socialist Register 2011), the resulting stagnation of real wages and acceleration of productivity converted a steadily falling rate of profit into a merely stagnant one.”
9. Richard Wolff: “US capitalism changed in the 1970s. … Capitalists no longer needed to raise real wages. Since the 1970s, they paid workers the same while computers raised labor productivity: what workers produced for capitalists to sell kept increasing.”
10. Richard Wolff: “[since] they paid workers the same while … what workers produced for capitalists to sell kept increasing[, … [s]urplus value (and profits) soared (stock market boom, rising financial sector, etc.) while the wage share of national product/income fell.
“By making these changes, US capitalism confronted a classic contradiction. It paid insufficient wages to enable workers to purchase growing output.”