“They who give have all things; they who withhold have nothing”
—Hindu proverb
Note: This post is not so much directed at my peers in the DKos community as it is meant for the independents, “free-market conservatives,” and general drinkers of the kool-aid. The oligarchy have proven themselves incapable of looking beyond their own short-term interests. As for the Tea Party, what the hell can you say to a tree stump?
de·sert·i·fi·ca·tion \ di-ˌzər-tə-fə-ˈkā-shən n (1974) : The transformation of arable or habitable land to desert, as by a change in climate or destructive land use.
We stand here on the shores of a vast Dead Sea and marvel at how so much life-giving water could slip away into the sands without so much as a bush or tree to shade the withering sun, leaving only salts and trace minerals in the sand. How does all that bubbling, clear, cool water that gave life to a river valley only kilometers upstream become brack and mire and ultimately disappear with no hope for any life that dares to venture here?
How does a Garden of Eden become a Death Valley?
Or, more to the point, how does a vibrant, leading economic market become a stagnant financial black hole, consuming ever greater resources, money, and, ultimately, human lives?
It turns out, in the funny way that universal laws (some call them kismet or karma) apply, that arable land becomes desert in much the same ways that prosperous markets become moribund. Call it the Law of Give-and-Take.
All streams flow into the sea, yet the sea is never full. To the place the streams come from, there they return again.
—Ecclesiastes 1:7
We are stranded in the bottom of a dry hole of economic progress from which there is no discernible path upwards because we have worshipped at the altar of supply-side economics for more than 30 years now. It is a philosophy of greed and short-sighted avarice that has left us both morally and economically bankrupt.
It is said that supply-side economists take the view that demand is limitless and therefore it is the job of society to manage the supply that makes all growth possible. This is the world in which the U.S. has lived for these past three decades.
Demand-side economics says that the reverse is true. It is supply which is limitless and demand which must be managed for growth to occur. One honest glance at our out-of-balance balance sheets affirms the truth that resides in this view.
We are not wanting for supply. We are awash in TV shopping channels, e-commerce portals, trade marts, shopping malls and big box stores. We have vacuum cleaners and mutual funds and mobile devices by the score. All of this supply lies piled up and waiting a home while nary a word gets said by the Very Serious People about demand. Moving supply in the absence of demand is like pushing on a string.
An AP report published Friday called out this striking disconnect between supply and demand.
"I've never seen labor markets this weak in 35 years of research," says Andrew Sum, director of the Center for Labor Market Studies at Northeastern University.
Wages and salaries accounted for just 1 percent of economic growth in the first 18 months after economists declared that the recession had ended in June 2009, according to Sum and other Northeastern researchers.
In the same period after the 2001 recession, wages and salaries accounted for 15 percent. They were 50 percent after the 1991-92 recession and 25 percent after the 1981-82 recession.
Corporate profits, by contrast, accounted for an unprecedented 88 percent of economic growth during those first 18 months. That's compared with 53 percent after the 2001 recession, nothing after the 1991-92 recession and 28 percent after the 1981-82 recession.
[boldface is my emphasis]
Publicly-held corporations in the U.S. are sitting on an estimated $1.9 trillion in cash. They have the means.
And yet the one-note wonders that we all sent to Congress as our representatives are even now insisting that balancing our federal budget cannot be done by effectively raising tax rates for our big economic engines, lest the investment supplies be cut off and the economy dashed!
The truth is that our Very Serious People in Washington and New York do not understand that this free market capitalistic system they worship requires a balance of supply and demand, of give and take. Their myopic view that what is good for the “producers” of this economy is what is good for everyone fails to understand how value, like a river or a tide, must ebb and flow from producer to consumer and back again.
It is this morally bankrupt world of take, take, take that has drained the life-giving swamps, burned the forests and left a barren desert for the consumers, the labor pool, the middle class, the market demand that they crave, to wither and die on the crusty sands.
Any charity you give is for your own good. Any charity you give shall be for the sake of GOD. Any charity you give will be repaid to you, without the least injustice.
—Transliteration of the Holy Qur’an Sura 2, verse 272
The near-sighted captains of our economy have forgotten what every decent farmer has understood since the dawn of agriculture: if all you do is take, take, take from the fields, eventually you will have a collapse of the soil’s nutrients, leaving you with worthless dirt. Sustainable harvests require a rotation of crops, sometimes leaving fields fallow to “rest,” and other times plowing decaying plant material and fertilizers back into the soil.
But a sustained and systematic exploitation of the labor force through liberalized trade policies resulting in increased economic globalization, as well as aggressive restraint of salary increases while simultaneously accelerating productivity, has resulted in a collapsing middle class and a growing populace in poverty with homelessness on the rise.
Our friend, New Deal Democrat, has written about the empoverishment of the American middle class, noting that wages have been stagnant at 1.5% growth in the past year or so. As NDD rightly observes, even mild inflation of 2% will produce a decline in demand.
As has been noted frequently here and on other sites, even that DFH Henry Ford recognized that you had to put money back in the hands of the labor force if you wanted your markets to grow. It is this grasp of the obvious that eludes the current crop of Wall Street executives and Washington politicians.
Give, and it will be given to you. They will pour into your lap a good measure -pressed down, shaken together, and running over. For by your standard of measure it will be measured to you in return.
—Luke 6:38
And so faced with drying fields and withering crops, our elected leaders want to divert away more of the river. Yes, that’s the ticket! Let’s hold back the waters for the big landowners while hoping that the rains will come.
As usual, Paul Krugman has made some particularly salient observations about the train wreck currently underway in Washington as it pertains to our drought of demand.
“[N]ow trickle-down economics — specifically, the idea that anything that increases corporate profits is good for the economy — is making a comeback.
On the face of it, this seems bizarre. Over the last two years profits have soared while unemployment has remained disastrously high. Why should anyone believe that handing even more money to corporations, no strings attached, would lead to faster job creation?
He continues:
“How can anyone imagine that lack of corporate cash is what’s holding back recovery in America right now? After all, it’s widely understood that corporations are already sitting on large amounts of cash that they aren’t investing in their own businesses. …
It wouldn’t, of course; claims that a corporate tax holiday would create jobs, or that ending the tax break for corporate jets would destroy jobs, are nonsense.
So here’s what you should answer to anyone defending big giveaways to corporations: Lack of corporate cash is not the problem facing America. Big business already has the money it needs to expand; what it lacks is a reason to expand with consumers still on the ropes and the government slashing spending.
What our economy needs is direct job creation by the government and mortgage-debt relief for stressed consumers. What it very much does not need is a transfer of billions of dollars to corporations that have no intention of hiring anyone except more lobbyists."
[boldface is my emphasis]
Supply will be extended when demand is apparent. No less than those pinko Commies at the U.S. Chamber of Commerce said as much July 11 when they released a study of small business owners that stated that nearly two-thirds, 64 percent, would not be hiring in the next year. Economic uncertainty and lack of sales (in other words, lack of market demand) were the #1 and 2 reasons given for why there would be no more jobs this year.
All the cuts in corporate taxes in the world can’t overcome the withering drought that is sweeping over our economic landscape.
Heather Boushey, a senior economist for the Center for America Progress Action Fund, in testimony May 12 before the Senate Committee on Health, Education, Labor and Pensions, made the following pointed observations:
“Supply alone does not create growth; it must be balanced by demand. Supply-side policies have led us to where we are today: unbalanced growth and a crisis-prone economy.
It is demand for goods and services, backed up by an ability to pay for them, which drives economic growth. The hollowing out of our middle class limits our nation’s capacity to grow unless firms can find new customers. …
My generation lived through a great experiment in supply-side economics. The result? Our nation experienced more growth in income inequality than any other developed nation. For years we were told this was okay, that having more rich people wasn’t taking away from the rest of us; it was a reward for the best and the brightest, who would then reinvest in our economy.
What we now know is that a strong middle class creates stable markets for businesses to invest. The decline of America’s middle class entails real hardships for families and limits opportunity. But it also appears that the demise of our middle class is a part of what ails our economy overall.”
We live in a world that is dynamically interconnected. We breathe on this side of the pond and they sigh on the other. Our markets can benefit all to the extent that we choose to participate in them, provided that we all have the opportunity and the means to access.
Regardless of the precise details that will emerge from the deficit talks in Washington, the die has already been cast and the damage done. We will constrain demand further while protecting the entitlement mentality that pervades our corporate owners.
But we have the opportunity in 2012 to limit the damage. My plea is to all who consider themselves an advocate of free market capitalism. If you want to preserve and sustain the dynamic forces of economic growth and prosperity that you cherish, elect representatives who will support a more balanced view of supply and demand. Big corporations have had a wide, unfettered run for most of the past 30 years. Let’s give the thirsty lands of our middle class markets a chance to restore demand and see what fields will green.
I’ll leave you to ponder that alternative as you view the following amazing video of a project that literally greened the Dead Sea desert. This is a model for both sustainable agriculture and the allegory for sustainable economics.
“You can fix all the world’s problems in a garden.”
--Geoff Lawton, Permaculture Research Institute of Australia
Originally posted to BlueBoyinRedState.com.