“It is the tendency of the social burdens to crush out the middle class, and to force society into an organization of only two classes, one at each social extreme.”— William Graham Sumner
Authored by GoldFix ZH Edit
What makes the spending stop? Looking at the 1970s again for a similarity, here is what was found:
One of the things that forced the government to end the social-spending and war-debt monetization of the 1970s was when corporate America’s capital actually went on strike. This eventually forced on the austerity concept of neokeynesianism as we couldn’t spend anymore. Capitalism went on strike. That is what happened.
Capitalists Go On Strike in the Late 1970s
When Capital finally threw in the towel, union demands and government debt monetization had to start backing off because capital simply stopped investing in US.
The ROC on capital had shrunk too much while ROL Return on Labor had gotten too big. Efficiencies in production were ignored as everything was just price raised, added on, and passed through (wage-price spiral) until it could no longer continue due to Capital going on strike and just parking itself in 10% CDs domestically or going overseas.
That’s what stopped the wage-price spiral: Capital going on strike and govt credit running out.. they couldn’t keep the ponzi going, so they called in Volcker.
Unfortunately, we are a long way from that this time. One reason is that this time, the government spending is wisely targeting the industries they want to grow, and not just social programs. Worse, we have a shit-ton more debt going into this one.
Economist Mark Blyth touches on how Capital went on strike in the late 1970s here…
Biden is Bribing Corporations to Give Unions Slack
The other is they are likely tying union demands to government spending promises somehow yet unknown. Why else would companies just accept strikes and preemptively bump pay?
Whoever is doing this has a plan to not repeat the 1970s by keeping both corporates and unions happy. (A tenet of corporatism, the grandfather of fascism btw)
This time capital may not go on strike because they are guaranteed to have earnings shortfalls covered somewhat. As long as the govt subsidizes their losses due to union demands and eventual earnings shortfalls. So the govt planned to make sure capital didn’t strike this time, smartly. But what did they not plan for? Because something always breaks the cycle of self reinforcing largess. As long as capital doesn’t go on strike and is kept satisfied they can keep raising salaries for unions.
The Current Middle Class Gets Crushed Some More
As long as government can spend tax money (earned or not) on those companies to entice capital to not go on strike like it did i nthe 1970s, this can keep going. And that means more than ever: this will be a crushing weight on productive non union people in the USA. Specifically, small businesses and big business non union employees.
Darwinistically speaking.. ok. It’s the cycle turning again. A new middle class is already being born. Just not in the USA yet anyway.
White collars will get destroyed. (Just like blue collars post 1970s). There will be no 2nd generation mom and pop storefront insurance salesmen, or bakers who service executive corporate parks. It has to happen and will happen soon as govt pulls rug on banks who will then pull rug in their employees. A classic corporatism triumph.
If the above is correct… run away from US white collar finance biz that will not benefit from this new regime policies.
This is all because of some teenager screaming about carbon being bad and it being sworn as gospel.The west is headed towards impoverishment unless (American and other) ingenuity can stop idiotic ideologists from causing self destructing. On the other hand.. global wealth will rebalance, just as domestic wealth will (amongst the non elites)
Otherwise we are going to raise pay without raising productivity. Which will first bankrupt the middle class and then destroy the economy if they don’t succeed in transitioning it back to manufacturing
Addendum: the US government has gotten corporate America to be complicit with increase spending as long as they get a piece of the pie spent. Effectively corporate America is on the dole, and has been bribed to continue, pretending to be capitalist while letting their own productivity decrease.