Taughannock Falls

Taughannock Falls
from: althouse.blogspot.com

Wednesday, February 9, 2011

Plutocrats are living in a fool's paradise

Robert Reich explains
how the recent rise in corporate profits and stock prices has really only benefited the affluent. Just like in the 1920's, the giddy good times won't last. Even the rich need a more broad-based prosperity to be restored, to sustain their own fortunes.

We have two economies. The first is in recovery. The second remains in a continuous depression.

The first is a professional, college-educated, high-wage economy centered in New York and Washington, that’s living well off of global corporate profits. Corporations continue to make money by selling abroad from their foreign operations while cutting costs (especially labor) here at home. Wall Street is making money by taking the Fed’s free money and speculating with it. The richest 10 percent of Americans, holding 90 percent of all financial assets, are riding the wave. And their upscale spending has given high-end retailers and producers a bounce.

The second is most of the rest of America, and it’s still struggling with a mountain of debt, declining home prices, and job losses. In coming months most Americans will also be contending with sharply rising prices of food and fuel.

Our representatives in Washington see and hear mostly the first economy. The business press reports mainly on the first economy. Corporate and Wall Street economists are concerned largely with the first economy.

But the second economy will determine our politics in 2012 and beyond.

And not even the first can be sustained permanently on its own. Corporate profits cannot continue to rise on the basis of foreign sales (which are slowing as Europe adopts austerity and China raises interest rates), the purchases of the richest 10 percent of Americans (which are dependent on a rising stock market), and cost-cutting measures at home (which are necessarily limited). Without a strong and broadly-based middle-class recovery, America’s big money economy will fall in on itself. A major stock market “correction” is a certainty.


mlee33 said...

You know what we need Ulysses? We need a lot more strikes and boycotts. People need to wake up and demand change before it's too late!

Cletis L. Stump said...

Isn't it ironic, Ulysses? We have SOCIALISM for Wall Street with none of the real risks of CAPITALISM and we have brutal CAPITALISM for Main Street with fewer and fewer of the safeguards of SOCIALSIM.

Mlee33, I agree with you. There is a storm rising.

Ulysses said...

The trend has indeed been to socialize risk and privatize profits for the fat cats. Meanwhile, those of us in the bottom 90% work harder for less, or starve in the streets. Dr. Martin Luther King, Jr. often pointed out that racism pushed many working class white people to side with folks who were also oppressing them. Not much has changed in that regard.