The U.S. Wealth Machine: In Reverse

In times past, North America enriched itself via skilled ex-European workers benefiting from cheap resources, energy, and transport.  Government protected industrialization but otherwise left it alone while encouraging agriculture, mining, and transportation with cheap land.  Opportunity was magnified by the diverse social classes and cultures that, tossed together, freed people of old-world rigidities that had limited opportunity.  Wealth was created like never before in human history.

But like the unfortunate King Midas, America planted the seeds of its own destruction.  Midas couldn't live; his golden touch deprived him of food and water.  As for America, while free-market capitalism produces wealth beyond any other system, it doesn't equably distribute that wealth.  Great wealth lies at the fringes of the distribution of human abilities, resulting in envy across the spectrum and suggesting that democratic societies can't tolerate free-market capitalism for long.

Centuries ago, that inequality of wealth distribution was magnified by the displaced people.  The rise of cities and industry plus the Civil War displaced masses of struggling people receptive to Progressive politicians' promises to use federal power to help them at the expense of "the rich." That suggests not only that democratic societies will reject capitalism, but also that they have a predilection toward socialism.

The social factors that helped produce American wealth thus also triggered the political reversal now stripping that wealth from middle America.  The downtrend shows in 34 Signs That Point To A Rapidly Shrinking American Middle Class.  The data include:

From 1969 to 2009, the average wage of men aged 30 - 50 dropped 27%, adjusted for inflation. There were 72 million middle income jobs in 1980; that has dropped to 65 million while population has increased and the number of low income jobs has increased 10%. In 1969, 95% of men 25 - 54 had jobs; now it's 81%. The average income of the bottom 90% by wealth is $31,224. Credit card debt has risen to 8 times what it was in the 1980s, much exceeding population growth. 50% of all workers earn $505 per week or less.

This is not recent; middle-class wealth was disappearing in the 1970s, when a single worker couldn't support a family anymore.  We paid little attention; technology provided new labor-saving gadgets and lots of entertainment to distract us while feminists encouraged the trend, considering it freedom for women.

Once, the middle class worked its way through college if the family couldn't afford it, so government stepped in to make college more widely available.  Since then, tuition has risen so much that students are burdened with loan debt instead.  Since 1978, tuition has risen 900%.  And we have 17 million college grads working jobs that don't require a degree, throwing into question what students are buying with their burdensome borrowing.  Money thrown at some situations ends up as poison; in this case, that poison is depriving the middle class of the value of the college education that once served to separate it from the blue-collar workers.

These are some results of the reversal in government policy.  Industrialization was subsidized and encouraged; now we see industrial flight from the country to escape government-imposed regulation and wage costs that preclude competition from the United States.  That deindustrialization is clear in the graph below, which shows the decline in durable goods manufacturing even as population has increased.

The U.S. has dropped to fifth from its longstanding lead in world competitiveness according to the World Economic Forum.  And as the Wall Street Journal reports, Census data show a continuing decline in household income.

Unemployment has increased Medicaid use; food stamp users are up from 26 million in 2007 to 46 million.  The future is no help; high-wage industries have 40% of the layoffs but only 14% of new job-creation.  To cap this, government transfer payments now depend significantly on borrowed money, an unsustainable source.  Those will have to be reduced with no visible alternative, accelerating impoverishment.

Who benefits from the remaining U.S. wealth production?  Not the poor, and decreasingly the middle class; only the top 5% of incomes can keep up with housing costs, and 40% of U.S. wealth is owned by the top 1%, while the poorest 80% own only 13% of the wealth.  Wall Street and corporate CEO earnings in the millions annually are taken for granted; not long ago, they would have been shocking.

America's wealth machine has been throttled by government regulation, protection, and anti-business policy presented as environmentalism; it has also been diverted from producing for the middle class toward benefiting the wealthy.  A few will have more; many more will get by with less, just as in the failed Soviet Union and for the same reasons.  Edward N. Wolff definitively documented the trend in his "Recent Trends in Household Wealth in the United States: Rising Debt and the Middle Class Squeeze."  The income trend is clear in this graph of U.S. Census data:

Courtesy: Business Insider

Looking at what this will likely provide Americans may be useful.  First, America now has a dependent population.  Over 18% of personal income is now government transfer payments, up from 12% in 1980.  Kids enter dependency at school with meals, supplies, and, in many cases, extra services.  The great majority of U.S. workers depend upon employers whose continuing operations today are so regulated that their normal functions depend upon continuing government approval.  When any of those fail, most expect the government to help them; the same is true when some natural calamity affects the usual standard of living.  The American Dream was a product of the "Can Do!" American, but both the dream and the optimism behind it have faded.  From pioneering, independent, self-sufficient, and ambitious stock, we have made a proletariat.

The federal government faces borrowing and printing money to sustain spending until the dollar fails, or else reducing spending to save the dollar.  A failed dollar will destroy wealth and cripple the systems of exchange by which most obtain necessities.  Reducing spending sufficiently to re-balance the economy will risk public tranquility, as the government clientele will be dispossessed of entitlements while others will face reduced resources.  It's likely that politicians, reluctant to face severe public reaction, will muddle on with their attempts to postpone what's happening and to deflect blame.  While such methods may delay the ultimate dénouement, they will do so only briefly, and only at the price of worsening the inevitable end.

That federal planners worry about this (or something) is evident; the U.S. Army has reorganized, adding NorthCom, the North American Army Command, for operations inside the United States.  Locations have been established for gathering and securely housing large numbers of people in many parts of the country.  Congressman Ron Paul recently acknowledged the ongoing preparations for social violence to a reporter in Iowa.

Major disorders are one question; looming larger is the nature of U.S. society as it settles into impoverishment enforced by government policy.  The Soviet precursor for this broke from its restraints, but its successors have never, in spite of great resources, been able to move toward historical American wealth production.  Nor has anyone else.

Any reversal of the hundred-year trends that brought us to this point will need time; the near term will be ongoing impoverishment.  Downhill goes faster than up, and it's harder to steer.  In the longer term, with no moral structure independent of government replacing fading Christianity, only power remains to provide order.  That's not a situation likely to preserve individual freedom.

We've sold off Christianity along with capitalism for politicians' promises now run out.  Now, at long last, our enjoyment of the fruits of that bargain is about to be tested.

In times past, North America enriched itself via skilled ex-European workers benefiting from cheap resources, energy, and transport.  Government protected industrialization but otherwise left it alone while encouraging agriculture, mining, and transportation with cheap land.  Opportunity was magnified by the diverse social classes and cultures that, tossed together, freed people of old-world rigidities that had limited opportunity.  Wealth was created like never before in human history.

But like the unfortunate King Midas, America planted the seeds of its own destruction.  Midas couldn't live; his golden touch deprived him of food and water.  As for America, while free-market capitalism produces wealth beyond any other system, it doesn't equably distribute that wealth.  Great wealth lies at the fringes of the distribution of human abilities, resulting in envy across the spectrum and suggesting that democratic societies can't tolerate free-market capitalism for long.

Centuries ago, that inequality of wealth distribution was magnified by the displaced people.  The rise of cities and industry plus the Civil War displaced masses of struggling people receptive to Progressive politicians' promises to use federal power to help them at the expense of "the rich." That suggests not only that democratic societies will reject capitalism, but also that they have a predilection toward socialism.

The social factors that helped produce American wealth thus also triggered the political reversal now stripping that wealth from middle America.  The downtrend shows in 34 Signs That Point To A Rapidly Shrinking American Middle Class.  The data include:

From 1969 to 2009, the average wage of men aged 30 - 50 dropped 27%, adjusted for inflation. There were 72 million middle income jobs in 1980; that has dropped to 65 million while population has increased and the number of low income jobs has increased 10%. In 1969, 95% of men 25 - 54 had jobs; now it's 81%. The average income of the bottom 90% by wealth is $31,224. Credit card debt has risen to 8 times what it was in the 1980s, much exceeding population growth. 50% of all workers earn $505 per week or less.

This is not recent; middle-class wealth was disappearing in the 1970s, when a single worker couldn't support a family anymore.  We paid little attention; technology provided new labor-saving gadgets and lots of entertainment to distract us while feminists encouraged the trend, considering it freedom for women.

Once, the middle class worked its way through college if the family couldn't afford it, so government stepped in to make college more widely available.  Since then, tuition has risen so much that students are burdened with loan debt instead.  Since 1978, tuition has risen 900%.  And we have 17 million college grads working jobs that don't require a degree, throwing into question what students are buying with their burdensome borrowing.  Money thrown at some situations ends up as poison; in this case, that poison is depriving the middle class of the value of the college education that once served to separate it from the blue-collar workers.

These are some results of the reversal in government policy.  Industrialization was subsidized and encouraged; now we see industrial flight from the country to escape government-imposed regulation and wage costs that preclude competition from the United States.  That deindustrialization is clear in the graph below, which shows the decline in durable goods manufacturing even as population has increased.

The U.S. has dropped to fifth from its longstanding lead in world competitiveness according to the World Economic Forum.  And as the Wall Street Journal reports, Census data show a continuing decline in household income.

Unemployment has increased Medicaid use; food stamp users are up from 26 million in 2007 to 46 million.  The future is no help; high-wage industries have 40% of the layoffs but only 14% of new job-creation.  To cap this, government transfer payments now depend significantly on borrowed money, an unsustainable source.  Those will have to be reduced with no visible alternative, accelerating impoverishment.

Who benefits from the remaining U.S. wealth production?  Not the poor, and decreasingly the middle class; only the top 5% of incomes can keep up with housing costs, and 40% of U.S. wealth is owned by the top 1%, while the poorest 80% own only 13% of the wealth.  Wall Street and corporate CEO earnings in the millions annually are taken for granted; not long ago, they would have been shocking.

America's wealth machine has been throttled by government regulation, protection, and anti-business policy presented as environmentalism; it has also been diverted from producing for the middle class toward benefiting the wealthy.  A few will have more; many more will get by with less, just as in the failed Soviet Union and for the same reasons.  Edward N. Wolff definitively documented the trend in his "Recent Trends in Household Wealth in the United States: Rising Debt and the Middle Class Squeeze."  The income trend is clear in this graph of U.S. Census data:

Courtesy: Business Insider

Looking at what this will likely provide Americans may be useful.  First, America now has a dependent population.  Over 18% of personal income is now government transfer payments, up from 12% in 1980.  Kids enter dependency at school with meals, supplies, and, in many cases, extra services.  The great majority of U.S. workers depend upon employers whose continuing operations today are so regulated that their normal functions depend upon continuing government approval.  When any of those fail, most expect the government to help them; the same is true when some natural calamity affects the usual standard of living.  The American Dream was a product of the "Can Do!" American, but both the dream and the optimism behind it have faded.  From pioneering, independent, self-sufficient, and ambitious stock, we have made a proletariat.

The federal government faces borrowing and printing money to sustain spending until the dollar fails, or else reducing spending to save the dollar.  A failed dollar will destroy wealth and cripple the systems of exchange by which most obtain necessities.  Reducing spending sufficiently to re-balance the economy will risk public tranquility, as the government clientele will be dispossessed of entitlements while others will face reduced resources.  It's likely that politicians, reluctant to face severe public reaction, will muddle on with their attempts to postpone what's happening and to deflect blame.  While such methods may delay the ultimate dénouement, they will do so only briefly, and only at the price of worsening the inevitable end.

That federal planners worry about this (or something) is evident; the U.S. Army has reorganized, adding NorthCom, the North American Army Command, for operations inside the United States.  Locations have been established for gathering and securely housing large numbers of people in many parts of the country.  Congressman Ron Paul recently acknowledged the ongoing preparations for social violence to a reporter in Iowa.

Major disorders are one question; looming larger is the nature of U.S. society as it settles into impoverishment enforced by government policy.  The Soviet precursor for this broke from its restraints, but its successors have never, in spite of great resources, been able to move toward historical American wealth production.  Nor has anyone else.

Any reversal of the hundred-year trends that brought us to this point will need time; the near term will be ongoing impoverishment.  Downhill goes faster than up, and it's harder to steer.  In the longer term, with no moral structure independent of government replacing fading Christianity, only power remains to provide order.  That's not a situation likely to preserve individual freedom.

We've sold off Christianity along with capitalism for politicians' promises now run out.  Now, at long last, our enjoyment of the fruits of that bargain is about to be tested.