It Results From a Shortage of Consumption, Stupid!
By Kermit C. Moss
Mercy me, sakes alive, and carrot coffee! What is the cause of the current great depression, that some pundits say may last for another 15 or 20 years? To posit the situation using a similar term made popular by former President Bill Clinton, it results from a shortage of consumption, stupid!
In an article entitled
How to End the Great Recession by Robert B. Reich, published on September 2, 2010, he states, “This promises to be the worst Labor Day in the memory of most Americans. Organized Labor is down to about 7% of the private work force. Members of non-organized labor - most of the rest of us - are unemployed, underemployed, or underwater. The Labor Department reported on Friday that just 67,000 new private sector jobs were created in August, while at least 125,000 are needed to keep up with the growth of the potential work force”.What we have been doing is not working “because the real problem has to do with the structure of the economy, not the business cycle”!
Further, Reich notes that “the median male worker earns less today, adjusted for inflation, than he did 30 years ago”! “ by the late 1990s, more than 60 percent of mothers with young children worked outside the home, while in 1966, only 24 percent did”! “In the late 1970s, the richest 1 percent of America families took in about 9% of the nation’s total income; by 2007, the top 1 percent took in 23.5 percent of the nation’s income”! “The rich spend a much smaller proportion of their incomes than the rest of us. So when they get a disproportionate share of total income , the economy is robbed of the demand it needs to keep growing and creating jobs”!
Now, what needs to be done? In the 1930s, to get us out of a similar mess, President Franklin D. Roosevelt almost completely restructured the American economy, and it appears now, to this writer, that we need to do it again. In fact, we must do it again! The concentration of American wealth at the top is so great that there is not enough consumer demand to produce enough jobs to take care of the many, many unemployed. It has been reported in earlier writings that in 2007, the top 10 percent owned 80 percent of the wealth, with the remaining 90 percent of the people owning the remaining 20 percent! And this concentration has been continuing at a much faster pace since 2007. Almost every day the news media reports new purchases or mergers, resulting in the layoff of thousands of workers, and too often, $50 million salaries for top administrators! As has been pointed out before, that amounts to $25,000 per hour for a normal year!
Here it again appears wise to include the definition of
economics. It is defined as one of the social sciences dealing with the production, distribution, and “consumption” of goods and services. It is emphasized here to indicate its relative importance in the equation. If the good or service is not consumed it will no longer be produced, and if there was not a good indication that it would be bought and consumed, it would not have been produced in the first place! Thus it is that consumer demand is the job creator! Investors invest to make money from dividends, interest, growth, or perhaps political control, but not to create jobs. Entrepreneurs produce goods and services to sell at a profit in the marketplace, not to create jobs. And the consumer consumes to meet his or her needs and/or wants, but it is the final step in job creation!Thus it is that we find ourselves in the greatest economic downturn since the great depression, with plenty of capital and labor available, but with so much wealth accumulated at the top by the investor class that there is not enough money left in the hands of potential consumers to create the jobs needed by so many people. They limit their consumption to basic needs because of two basic fears: (1) bankruptcy due to catastrophic illness, or (2) unemployment.
We must eliminate these fears! As understood here the new health law will take care of the catastrophic illness, and to satisfy the other, it is hereby proposed that governments do away with unemployment insurance and start supplying jobs to all who become unemployed. I do not recommend that we do away with or limit free enterprise, but capitalism is noted for booms and busts, and during the busts many people are hurt.
Furthermore, with the two basic economic fears out of the way, consumers would return to their regular consumption habits, thus creating much more free enterprise opportunity! And why, in the name of heaven, can’t we at least try this during the bleak 15 or 20 years that stretch out before us?
The people can and will take just so much, before resorting to violence.
This suggested plan might avoid the violence, and help preserve the greatest nation the world has ever known!
Further, as soon as possible, we need to begin the reconstruction of our economy. By law, we need to eliminate all the firms that are too big to fail, and to regulate the size of firms such as to create many more firms and magnify the number of employees needed. Also, corporate CEO and other administrative salaries are now disgraceful, and need to be regulated in accordance with just plain common sense. And by that I mean the common sense of the ordinary citizen, and not the common sense of these administrators! The tax laws need to be changed to assure enough funds to run this great nation in a fair and efficient manner, and it seems here that much more should be paid by the wealthy, the top 10 to 20 percent, as we proceed to reverse the flow of wealth into their hands!
This, of course, would represent a radical change! Is it what I would prefer? I would prefer an American society so imbued with honesty and integrity, and devoid of human greed, that the economy would fairly regulate itself; but I would say that anyone who thinks that would happen now needs to see a good head doctor!
Kermit C. Moss
PO Box 1136
Monticello, Arkansas, 71657-1136
PH 870-367-2486 - office
870-367-7034 - home
December 7th , 2010
