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Crisis. What Crisis? Profits Soar!

jmh423

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The James Petras website

"While progressives and leftists write about the “crises of capitalism”, manufacturers, petroleum companies, bankers and most other major corporations on both sides of the Atlantic and Pacific coast are chuckling all the way to the bank."

08.14.2010


"From the first quarter of this year, corporate profits have shot up between twenty to over a hundred percent, (Financial Times August 10, 2010, p. 7). In fact, corporate profits have risen higher than they were before the onset of the recession in 2008 (Money Morning March 31, 2010). Contrary to progressive bloggers the rates of profits are rising not falling, particularly among the biggest corporations (Consensus Economics, August 12, 2010). The buoyancy of corporate profits is directly a result of the deepening crises of the working class, public and private employees and small and medium size enterprises. With the onset of the recession, big capital shed millions of jobs (one out of four Americans has been unemployed in 2010), secured give backs from the trade union bosses, received tax exemptions, subsidies and virtually interest free loans from local, state and federal governments.

As the recession temporarily bottomed out, big business doubled up production on the remaining labor force, intensifying exploitation (more output per worker) and lowered costs by passing onto the working class a much larger share of health insurance and pension benefits with the compliance of the millionaire trade union officials. The result is that while revenues declined, profits rose and balance sheets improved (Financial Times August 10, 2010). Paradoxically, the CEO’s used the pretext and rhetoric of “crises” coming from progressive journalists to keep workers from demanding a larger share of the burgeoning profits, aided by the ever growing pool of unemployed and underemployed workers as possible “replacements” (scabs) in the event of industrial action. The current boom of profits has not benefited all sectors of capitalism: the windfall has accrued overwhelmingly with the biggest corporations. In contrast many middle and small enterprises have suffered high rates of bankruptcy and losses, which has made them cheap and easy prey for buyouts for the ‘big fellows’ (Financial Times August 1, 2010). The crises of middle capital has led to the concentration and centralization of capital and has contributed to the rising rate of profits for the largest corporations."
 

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The James Petras website

"While progressives and leftists write about the “crises of capitalism”, manufacturers, petroleum companies, bankers and most other major corporations on both sides of the Atlantic and Pacific coast are chuckling all the way to the bank."

08.14.2010
the concentration and centralization of capital and has contributed to the rising rate of profits for the largest corporations."
Just another example of the rich getting richer while the middle class is not.
 

TurtleDude

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Just another example of the rich getting richer while the middle class is not.
how do you create a situation where the rich would not get richer but the middle class would?
 

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how do you create a situation where the rich would not get richer but the middle class would?
In a few years, no one will have to worry about it. There won't be a middle class. But at least we know what doesn't work: trickle-down tax cuts.
 

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In a few years, no one will have to worry about it. There won't be a middle class. But at least we know what doesn't work: trickle-down tax cuts.
The middle class is shrinking? By what measure?
 

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The middle class is shrinking? By what measure?
By the 22 measures in this article:

The rich are getting richer and the poor are getting poorer at a staggering rate. Once upon a time, the United States had the largest and most prosperous middle class in the history of the world, but now that is changing at a blinding pace.

So why are we witnessing such fundamental changes? Well, the globalism and "free trade" that our politicians and business leaders insisted would be so good for us have had some rather nasty side effects. It turns out that they didn't tell us that the "global economy" would mean that middle class American workers would eventually have to directly compete for jobs with people on the other side of the world where there is no minimum wage and very few regulations. The big global corporations have greatly benefited by exploiting third world labor pools over the last several decades, but middle class American workers have increasingly found things to be very tough.

The reality is that no matter how smart, how strong, how educated or how hard working American workers are, they just cannot compete with people who are desperate to put in 10 to 12 hour days at less than a dollar an hour on the other side of the world. After all, what corporation in their right mind is going to pay an American worker ten times more (plus benefits) to do the same job? The world is fundamentally changing. Wealth and power are rapidly becoming concentrated at the top and the big global corporations are making massive amounts of money. Meanwhile, the American middle class is being systematically wiped out of existence as U.S. workers are slowly being merged into the new "global" labor pool....

What has developed is a situation where the people at the top are doing quite well, while most Americans are finding it increasingly difficult to make it. There are now about 6 unemployed Americans for every new job opening in the United States, and the number of "chronically unemployed" is absolutely soaring. There simply are not nearly enough jobs for everyone.

Many of those who are able to get jobs are finding that they are making less money than they used to. In fact, an increasingly large percentage of Americans are working at low wage retail and service jobs.

But you can't raise a family on what you make flipping burgers at McDonald's or on what you bring in from greeting customers down at the local Wal-Mart.

The truth is that the middle class in America is dying -- and once it is gone it will be incredibly difficult to rebuild.


Read more: 22 Statistics That Prove The Middle Class Is Being Systematically Wiped Out Of Existence In America
 

phattonez

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So what? Everyone there has increased their holding in stocks.

61 percent of Americans "always or usually" live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.
2 problems. First, this is a small sample size; you're only looking at the years during a recession, we would expect things to improve during a boom but not so much during a bust. Furthermore, this is purely an opinion poll. Living paycheck to paycheck has no rigorous definition. If people feel that they are living paycheck to paycheck, then they just say it, even if they are spending their money frivolously.

66% of the income growth between 2001 and 2007 went to the top 1% of all Americans.
This is meaningless. We need to know about relative growth. This is just a misleading statistic.

36 percent of Americans say that they don't contribute anything to retirement savings.
Many people expect social security and other government programs to take care of them. Also, this said nothing about whether or not this number is shrinking or growing over time. If the middle class were shrinking, then this number would be growing, but we are given no information about how this stat changed over time.

A staggering 43 percent of Americans have less than $10,000 saved up for retirement.
Same issue as the previous one.

24% of American workers say that they have postponed their planned retirement age in the past year.
Again, small sample size since this is only looking at the recession years. Also, people are getting healthier and living longer, so we would expect retirement age to increase with this in mind.

Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008.
Once again, only looking at the recession years. Also I looked at the chart for this slide and to reveal useful information it should talk about per capita bankruptcies. Also, are the bankruptcies to be blamed on shrinking incomes or people trying to live above their means?

Only the top 5 percent of U.S. households have earned enough additional income to match the rise in housing costs since 1975.
A very misleading statistic. Anything that uses income in terms of US households is really trying to obscure something. First, recognize that the average US household is shrinking over time. Also recognize that young people are working less and less because they don't have to anymore. Then recognize that there is great class mobility, so the top 5% is not permanent. A highly misleading statistic which many people easily buy into.

Still going through this misleading list. I'm on #9 now.
 
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how do you create a situation where the rich would not get richer but the middle class would?
We can't change human nature, so we are very unlikely to be able to do it in the private sector. It can be accomplished by a little fine tuning of our government though.

First, we need to reduce corruption in office. As stated above, we can't eleminate coruption because corruption is a "human element", but there are certain steps we can take to reduce it. Term limits is probably the biggest factor in reducing elected official corruption, but I am sure we can do some more fine tuning with campain reform and limits on lobbiest groups.

Making our progressive tax system more progressive, and to stop giving special breaks to the rich, such as taxing income from investments at a lower rate than we tax income from working, would be a start. Of course there is my beloved death tax also.

We could certainly do some fine tuning of our educational system and add a little more financial literatcy education in high school. Educational oportunities should also be year round, the concept of school only being during the cooler months has been obsolete for decades.

Elemination of labor unions, and particularly of public sector labor unions may actually serve this purpose also.

On the other end, we need more incentive for the lazy and/or stupid. Eliminating most ALL forms of entitlements and "safty nets" would be a good start. Reducing tax levels on the middle class would be another. Expanding public service options for recent high school graduates would create a wonderful opportunity for youth to get their stuff together.

Nothing radical here, just some tweeking of what we already have. Allow everyone a reasonable opportunity to succeed by remoing barriers to success, but guarantee no one any success that they did not personally earn on their own merit regardless of race, religion, heritity, or socio-economic status.
 
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That's because this recession killed home values like none other that we can remember. And we know that Americans were living above their heads in way too much debt. This graph is indicative of other problems, not of shrinking income.

In 1950, the ratio of the average executive's paycheck to the average worker's paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one.
The statistic "average" is highly misleading when you have a population that is not normal (and executive compensation is very much skewed to the right, bringing the average way above the median). Much more indicative of most of the population would be median, mode, trimmed means, etc. So this statistic doesn't bother me. The average is not enough to make a valid conclusion about how the difference in salaries has changed over time.



First off, this doesn't show change over time, which is the only way to show that the middle class is shrinking. Also, since the lower classes have a ton of debt and are living above their means and hold most of their wealth in their home, cars, and other things, it would make sense that they would have less in terms of liquid assets. Once again, that's a problem of debt, not of shrinking income.

The bottom 50 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.
But how much of the debt do they own? How has this rate changed over time? How has standard of living changed?

Average Wall Street bonuses for 2009 were up 17 percent when compared with 2008.
This has NOTHING at all to do with whether or not middle class incomes are shrinking or growing.

In the United States, the average federal worker now earns 60% MORE than the average worker in the private sector.
Once again this has NOTHING to do with whether or not middle class incomes are shinking or growing. This is a statistic that is reserved for another debate.

The top 1% of U.S. households own nearly twice as much of America's corporate wealth as they did just 15 years ago.
So what? I thought that we were discussing wealth in general, not specifically corporate wealth. This is another misleading statistic.

In America today, the average time needed to find a job has risen to a record 35.2 weeks.
Another statistic that is due to the recession, not a general trend in middle class life.

More than 40% of Americans who actually are employed are now working in service jobs, which are often very low paying.
This is a statistic that economically-illiterate conservatives use. These jobs are low paying compared to what? More importantly, it tries to get around the fact that there is no statement here about income rising or falling. Yes, this statistic implies that because the service sector has increased that incomes are falling, but this statistic does not actually say that! Another very misleading statistic.

For the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.
This is partly due to the recession; this statistic also makes no reference to per capita growth. Also, have food stamp benefits increased so that more people are eligible than before? What about demographic changes that could be responsible? Another statistic that implies that incomes are falling, but does not actually prove it.

This is what American workers now must compete against: in China a garment worker makes approximately 86 cents an hour and in Cambodia a garment worker makes approximately 22 cents an hour.
SO WHAT?! This doesn't mean our incomes have fallen. In fact, it makes our goods cheaper, meaning that standard of life increases!

Despite the financial crisis, the number of millionaires in the United States rose a whopping 16 percent to 7.8 million in 2009.
This has nothing to do with middle class incomes and has everything to do with class envy. This is an argument against corporatism, but is completely unrelated to whether or not middle class incomes are shrinking.

Approximately 21 percent of all children in the United States are living below the poverty line in 2010 - the highest rate in 20 years.
That would be a useful statistic, if the poverty line was static! The poverty line increases all the time so that the quality of life of the average person at the poverty line has increased with time.

Approximately 21 percent of all children in the United States are living below the poverty line in 2010 - the highest rate in 20 years.
So what? The pie is not a static thing, it grows with time. Just because a certain group gets a larger share of that pie does not mean that you are getting less pie.

Are we done now? That was a stupid page full of stupid, misleading statistics.
 

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Nothing radical here, just some tweeking of what we already have. Allow everyone a reasonable opportunity to succeed by remoing barriers to success, but guarantee no one any success that they did not personally earn on their own merit regardless of race, religion, heritity, or socio-economic status.
The only radical thing was making the progressive tax system more progressive. Taxing the rich means that they have less to save and invest which means less capital goods which means less jobs and less growth for all of us. A low, flat tax is much more effective for growth and much more efficient.
 

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The only radical thing was making the progressive tax system more progressive. Taxing the rich means that they have less to save and invest which means less capital goods which means less jobs and less growth for all of us. A low, flat tax is much more effective for growth and much more efficient.
Is it really radical? We already do it, what's radical about doing more of something we already do?

Not having a progressive income tax system means that we have to increase taxes on the not-so-wealthy. Taxing the middle class more means that they have less to save and invest which means less capital goos which means less jobs and less growth for all of us. A low, flat tax would only lead to increased wealth for the wealthy, every dollar that a wealthy person owns is a dollar that a middle class person can't own, every dollar that a middle class person doesn't own is a dollar they can't invest in either a direct economic investment or in the quality of life for their family.
 

phattonez

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Is it really radical? We already do it, what's radical about doing more of something we already do?

Not having a progressive income tax system means that we have to increase taxes on the not-so-wealthy. Taxing the middle class more means that they have less to save and invest which means less capital goos which means less jobs and less growth for all of us. A low, flat tax would only lead to increased wealth for the wealthy, every dollar that a wealthy person owns is a dollar that a middle class person can't own, every dollar that a middle class person doesn't own is a dollar they can't invest in either a direct economic investment or in the quality of life for their family.
No, the middle class's contribution to savings and hence capital goods is insignificant compared to what the rich contribute.
 

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The only radical thing was making the progressive tax system more progressive. Taxing the rich means that they have less to save and invest which means less capital goods which means less jobs and less growth for all of us. A low, flat tax is much more effective for growth and much more efficient.
Realistically not much of a problem in the US though.


It is not like the rich in the US have not been becoming far more wealthy then the middle class over the last 20 years
 

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Are we done now? That was a stupid page full of stupid, misleading statistics.
Well, no. At least I'm not. I've been spending a fair amount of my leisure time lately with Fantasy Football and found that link on the fly before heading to work. Upon reflection, it appears a bit hyperbolic, and I agree that it doesn't stand up to scrutiny as "proof" of anything. But I'm not flinching in my belief that "free trade" and globalism are contributing to the stress felt by middle class families in the United States. Here's a more academic treatment of the subject:

In this paper we explore the possibility that globalization has caused the most distributional stress for what we commonly refer to as the “middle class”, the large group of households that are neither wealthy nor poor, but that form the backbone of both the market economy and of democracy in most advanced societies.

Stuck In The Tunnel: Is Globalization Muddling The Middle Class?
 

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how do you create a situation where the rich would not get richer but the middle class would?
Nobody wants that situation.

What you want to 'create' (for lack of a better word) is a situation where wealthy people create enough jobs to sustain a healthy middle/working class.

What you want to prevent is the middle class shrinking and the lower class growing.

The other thing you really want to avoid is the Poker Game where one person accumulates most of the chips. This forces the others to play on credit, then eventually drop out of the game. The poker game came to an end in 1929.
 

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Well, no. At least I'm not. I've been spending a fair amount of my leisure time lately with Fantasy Football and found that link on the fly before heading to work. Upon reflection, it appears a bit hyperbolic, and I agree that it doesn't stand up to scrutiny as "proof" of anything. But I'm not flinching in my belief that "free trade" and globalism are contributing to the stress felt by middle class families in the United States. Here's a more academic treatment of the subject:
I already found the flaw in the abstract of that study. "genuine distributional stress for middle-income households" Emphasis on households mine. You can't measure income by household becuase the size of households has generally declined over the years and less people in the household are working now. Furthermore, a study on middle class incomes also has to recognize the fact that the population of any definition of middle class is not rigid. People go in and out of the middle class all the time. What may be a middle class family one year may be a rich family next and a poor family the year after.
 

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Nobody wants that situation.

What you want to 'create' (for lack of a better word) is a situation where wealthy people create enough jobs to sustain a healthy middle/working class.

What you want to prevent is the middle class shrinking and the lower class growing.

The other thing you really want to avoid is the Poker Game where one person accumulates most of the chips. This forces the others to play on credit, then eventually drop out of the game. The poker game came to an end in 1929.
We never had that situation. People of all classes are tend to grow richer and richer all throughout American history.
 

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We never had that situation. People of all classes are tend to grow richer and richer all throughout American history.
We never had what situation?

And just because the lower class has a better quality of life now than 20, 50, 100 years ago, doesn't make them 'richer'.

And the middle class has more debt than ever before. How does that make them 'richer'?
 

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One thing about the middle-class becoming poorer, I feel, get's ignored a lot, is that the fact that: we have more products on the market to consume. Desktop computers, laptop computers, cellphones, internet, cable, advanced cable, all-in-one mp3/video/internet handheld devices, console systems, etc etc. There is simply even more to consume in the digital age and a lot of pressure to own them, as well. This doesn't have to do with actual wages made but the spending headroom those wages allow, though.
 
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phattonez

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And the middle class has more debt than ever before. How does that make them 'richer'?
Just because you have less debt doesn't mean you are richer. It's a tradeoff between quality of life and debt, and wealth can be improving even if debt is increasing.
 

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I already found the flaw in the abstract of that study. "genuine distributional stress for middle-income households" Emphasis on households mine. You can't measure income by household becuase the size of households has generally declined over the years and less people in the household are working now.
The authors of the study adjusted for household per capita income.

Furthermore, a study on middle class incomes also has to recognize the fact that the population of any definition of middle class is not rigid. People go in and out of the middle class all the time. What may be a middle class family one year may be a rich family next and a poor family the year after.
It does. There's a whole section on class mobility, and it comes to the following conclusion:

In short, even where the transition to markets and to globalization has brought absolute income gains for middle-income households, and upward mobility in relative terms, it has also brought downward mobility for some and increased risk of downward mobility for many. Rags to riches stories are possible, but so are middle to rags stories.
 

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The authors of the study adjusted for household per capita income.
Is there a difference between per household per capita and just per capita? Also, what about the idea I threw out there that less people are now working in the household (teenagers these days seem to be working less and less).

It does. There's a whole section on class mobility, and it comes to the following conclusion:
Is this the same approach to class mobility that sees it as a long-term equalizer of wealth? That same invalid definition?

EDIT: The source for that claim came from "New markets, new opportunities? by NANCY BIRDSALL and CAROL GRAHAM (eds). (Washington, The Brookings Institution, 2000, pp. 331)", but I can't even get an abstract for that paper. It would be nice to see that paper to see if there are any flaws in their methodology.
 
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A good, short paper about following trends in income.

Thomas Sowell said:
Income Confusion

Anyone who follows the media has probably heard many times that the rich are getting richer, the poor are getting poorer, and incomes of the population in general are stagnating. Moreover, those who say such things can produce many statistics, including data from the Census Bureau, which seem to indicate that. On the other hand, income tax data recently released by the Internal Revenue Service seem to show the exact opposite: People in the bottom fifth of income-tax filers in 1996 had their incomes increase by 91 percent by 2005. The top one percent -- "the rich" who are supposed to be monopolizing the money, according to the left -- saw their incomes decline by a whopping 26 percent. Meanwhile, the average taxpayers' real income increased by 24 percent between 1996 and 2005.

How can all this be? How can official statistics from different agencies of the same government -- the Census Bureau and the IRS -- lead to such radically different conclusions? There are wild cards in such data that need to be kept in mind when you hear income statistics thrown around -- especially when they are thrown around by people who are trying to prove something for political purposes. One of these wild cards is that most Americans do not stay in the same income brackets throughout their lives. Millions of people move from one bracket to another in just a few years. What that means statistically is that comparing the top income bracket with the bottom income bracket over a period of years tells you nothing about what is happening to the actual flesh-and-blood human beings who are moving between brackets during those years. That is why the IRS data, which are for people 25 years old and older, and which follow the same individuals over time, find those in the bottom 20 percent of income-tax filers almost doubling their income in a decade. That is why they are no longer in the same bracket. That is also why the share of income going to the bottom 20 percent bracket can be going down, as the Census Bureau data show, while the income going to the people who began the decade in that bracket is going up by large amounts.
Emphasis added mine.

Townhall - Income Confusion
 
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Is there a difference between per household per capita and just per capita?
The authors are looking at per capita income among households divided into quintiles. I'm not an economist, but I presume the authors did this because it's more useful than just looking at overall per capita income. For example, if we had ten two-person households during a given year, with each one earning $20,000, per capita income that year was $10,000. In total, the households in the sample earned $200,0000. Now, if ten years later one household increased its income to $300,000 while the other nine saw their incomes drop to zero because the breadwinners all lost their jobs, overall per capita income increased by 50% to $15,000 and we can now conclude that everyone is more prosperous, right? Or, is it more useful to say that one household is more prosperous because its per capita income increased to $150,000 while the other nine are under stress because per capita household income in those households declined by 100%? I realize this is an extreme example, but it's just used to illustrate a point.

Also, what about the idea I threw out there that less people are now working in the household (teenagers these days seem to be working less and less).
What about it? Back when I was a kid, lots of kids and teens worked. Many of my friends had paper routes so they could buy skateboards, bubble gum, and baseball cards. Later on, they cut grass or worked at McDonald's so they could take Karate lessons or buy a used car. Their dads paid for pretty much everything else--the mortgage, food, insurance, clothing, and the car note on the new Chevy or Pontiac. Moms didn't usually work. They didn't have to. And if they did people assumed Dad was a poor provider and the family was under financial stress.

Is this the same approach to class mobility that sees it as a long-term equalizer of wealth? That same invalid definition?
Kind of a loaded question, isn't it? Here's what they wrote:

Our objective in this paper is to assess how middle-income groups are faring with the global turn to the market. We suggest some simple measures of the middle—the size and income shares of households around the median (75/125%)—and their income status relative to wealthier counterparts. Our results point to genuine distributional stress for middle-income households, as well as public perceptions of such stress. They also suggest the need for new measures to capture distributional trends that are masked by aggregate measures. We posit that the fate of those in the middle merits new attention, as their political support and economic participation are critical to sustainable, market-oriented growth and poverty reduction in the long-term.
 
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