The Wages of Greed

According to Andrew Sum of Northeastern University, corporate officials have acted more selfishly during the last two years than at any other time since the end of World War Two.

Professor Sum's estimates, part of his work as director of the Center for Labor Market Studies, form the subject of a commentary today on the Op-Ed Page of our Pravda-on-the-Hudson, the New York Times.  "The recession officially started in December 2007," writes the journalist Bob Herbert, assuming the reader is aware that the word 'officially' signifies two consecutive quarters of contraction in the economy,

From the fourth quarter of 2007 to the fourth quarter of 2009, real aggregate output in the U.S., as measured by the gross domestic product, fell by about 2.5 percent.  But employers cut their payrolls by 6 percent.

As a consequence of this (you might say) throwing of workers under the bus, Sum writes in a study released by his Center -- but not available for link (the Center's website appears to be as out-of-date as anything posted by the Pacific Green Party -- gotta sympathize with that) -- "[this period] has seen the most lopsided gains in corporate profit relative to real wages and salaries in our history."

Both the professor and the journalist are hyperventilating here.  For Andrew Sum, the period since World War Two seems interchangeable with "our history"; for Bob Herbert, the news comes as "A Sin And A Shame" (the headline on his column).  In cold sober fact, however, this pattern is exactly what has been happening in our economy for the entire last generation, since in Ronald Reagan's day we were informed that "Greed Is Good."

Here is a graph, compiled from the Federal Reserve Bank statistics, comparing the growth of productivity to the development of real wages, not during the recent recession, when economists expect the bulk of productivity improvements to be taken by management, but during the ten years of economic growth prior to the recession.  In a recession, productivity increase go primarily to employers; during a time of prosperity, the gain in productivity is supposed to be shared with employees.  Here, then, is the period of prosperity preceding the current slump.

Note the increase in productivity, versus the lack of growth of real wages.

The rise in productivity, minus the compensation of the employees, is the profit of the owners of the enterprise.

Corporate profit, in other words, rather dominated the picture from the year 2000 to the year 2008.  Oh, it's gotten worse in the last year, you say?  We really didn't need a claim that it was worse than "any time in our history" to know that the United States is being run for the benefit of the wealthy.  Take a look at the real wages -- the following graph came from the website of an economist at Harvard -- in the entire period between World War Two and the year 2000.  The big picture is, while the national economy more than quadrupled in size, and tripled on a per-capita basis, real wages stayed the same.

After 1972, through Democratic and Republican Administration alike, the real wage -- the earnings, per hour, of an average worker -- declined steadily until the second Clinton Administration.  At the time, President Clinton made a big deal about telling the public that the real wage was increasing, for the first time in a generation (in over 20 years).  We can see, it did increase, until about 2001, after which it stayed the same (the segment on the right of this chart dovetails neatly with the entire previous chart, from a different source).

Now, with this historical perspective, let us attempt to look beyond the faux outrage -- the false sense of betrayal -- that characterizes so much of progressive discourse (and the contributions of Messrs Sum and Herbert in particular).  It is not a "sin" that the owners have deprived the workers of the profits that have resulted from the downsizing of the Great Recession; nor is it something unprecedented.

Rather, our society has in large measure realigned itself to reward the owners of the enterprises at the expense of those who work in them.  It has been a major realignment, and it has taken place over forty years.  It is definitely a bad thing for the stability of our society, not to mention the well-being of the majority of the members of the community.  But crying "Shame!" is rather pointless, even . . . counterproductive.

A well-informed consciousness of the true state of affairs, and a grassroots, broadly-based organizing around the cause of social and economic justice, as a consequence of said well-informed consciousness, is the appropriate response.

Vote Green Party.