Robert Reich has this fascinating quote on his blog from FDR’s fed chief:
As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth — not of existing wealth, but of wealth as it is currently produced — to provide men with buying power equal to the amount of goods and services offered by the nation’s economic machinery. Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.
It’s an interesting repudiation to supply-siders and seems somewhat inevitable. To make an economy work you always have to have a balance between captialism and a view more oriented towards the commons. I think the Clinton administration was decent at this. It found a balance, but by embracing some of the dogma of supply-side they cemented it into the public’s mind as fact. And now we’re stuck with a tanking economy because very few people want to discuss whether this wealth equation is completely out of balance. It’s interesting too, because unlike in the 1920s most of the “robber barons” have not been asking for the tax cuts and regulatory cuts that have made them into these capital vacuums. It’s coming from the Republican middle-class who are essentially giving away their money. Giving away their quality of life, and schools, and roads. I don’t know how we’re going to fix this. Thoughts?
You can read the whole post here.