Beneath the surface signals of an eternally
rising stock market and expanding GDP, we all sense something is deeply,
systemically wrong with the U.S. economy...
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Beneath the surface signals of an eternally rising stock market and
expanding GDP, we all sense something is deeply, systemically wrong with the
U.S. economy. These nine structural dynamics generate secondary dynamics, all
of which are toxic to social mobility, sustainable prosperity, accountability
and democracy:
1. The financialization of the economy, which transformed services, credit,
risk and labor into commodities that could be traded globally. Financialization
generates enormously asymmetric returns: those with access to low-cost credit,
global markets and expertise in finance collect the lion's share of gains in
income and wealth.
2. The technological transformation of the economy, which has placed a
substantial scarcity premium on specific tech/managerial/communication skills
and devalued ordinary labor and capital. As a result, the majority of gains in
wealth and income flow to those with the scarce skills and forms of capital,
leaving little for ordinary labor and capital.
The first two dynamics drive three other dynamics that have hollowed
out the productive economy:
3. The end of cheap fossil fuels. The fracking boom/bubble has obscured
the long-term secular trend: the depletion of cheap-to-access and process oil.
As many analysts have observed (Nate Hagens, Gail Tverberg, Richard Heinberg,
Chris Martenson et al.), the global economy only grows if energy and credit are
both cheap.
4. Globalization, which transformed the developing world into the
environmental dumping ground of the wealthy nations and enabled the owners of
capital to offshore waste and labor.
5. The destructive consequences of "growth at any cost" are
piling up. "Growth" is the one constant of all existing
political-economic systems, and none of the current Modes of Production (i.e.
the structures that organize production, consumption, the economy and society)
recognize that "growth" is not sustainable.
6. The dominance of debt-funded speculation as the means of
"getting ahead"as opposed to producing products and services of
intrinsic value that serve the core needs of communities.
7. The economy's gains in income and wealth are concentrated in the
very top of the wealth-power pyramid: the top 5%--entrepreneurs, professionals and
technocrats, etc., and within this class, most of the gains go to the top
1/10th of 1% --the existing owners of wealth, and financiers/speculators with
access to cheap credit.
The net result is the bottom 95% have few opportunities to "get
ahead" outside of gambling in the asset bubbles du jour: the stock and
housing market. While the average middle class household may be able to borrow
enough to speculate in the housing bubble, two factors limit the odds of
success for ordinary investors/gamblers:
A. The gains in housing are concentrated in
specific markets; outside these hot markets, gains are modest.
B. Asset bubbles eventually pop, leaving those
still owning the assets with losses. The risks are thus intrinsic and high. The
average investor/gambler lacks the experience needed to recognize the bubble
has stopped expanding and exit the market before ll the other speculators rush
for the narrowing exit.
8. The devaluation of ordinary labor and capital means the bottom 60%
of the economy that lacks the requisite skills with a scarcity
premium in the Emerging Economy have lost easy access to the ladder of social
mobility.
9. The concentration of wealth and power in the hands of the
self-serving few corrupts the economy and democracy. The U.S. economy
is dominated by insider and elite rackets, skims, scams and
cartels/quasi-monopolies, all of which corrupt the economy by creating perverse
incentives for exploitation and gaming the system to benefit the few at the
expense of the many.
This corruption in service of maximizing private/personal gains at the
expense of the system itself also corrupts the mechanisms of governance, which are now
little more than cloaking devices that protect insiders and elites from
scrutiny and consequences.
The 20% above the bottom 60% may appear to have some access to
social/economic mobility, but this is largely an artifact of the bubble economy
since 2009. Once the bubble deflates, the illusion of social mobility for the
"middle class" between the bottom 60% and the upper 20% vanishes.
The "upper middle class" between the bottom 80% and the top
5% is being squeezed by the over-production of elites, i.e. the
over-abundance of those with college degrees and the relative scarcity of
secure jobs within the top 5%. As a result, credential inflation is rampant,
with Masters Degrees replacing Bachelors Degrees as the default for a
white-collar job, and PhDs replacing Masters diplomas as the new default for
positions that lack security and upward mobility.
In other words, the number of people who qualify for and desire a slot
in the elite class (top 5%) far exceeds the number of slots available. As Peter Turchin
has explained, this competition generates social disorder at the top of
economic heap as the top 20% fight over the few positions open in the top 5%.
The disgruntled, frustrated losers far outnumber the relatively few winners.
These nine dynamics are mutually reinforcing, meaning that each
dynamic strengthens one or more of the others, reinforcing each other so the
sum of the nine is far more powerful than a mere addition might suggest.
The New
Aristocracy (the top 9.9%) (The Atlantic)
See Chart: How Systems Collapse
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