A JARGON-FREE Overview of the Crisis from Richard Wolff

[Runcible Spoon]

Students of socio-linguistics and attentive citizens know that complex and specialized terminologies are effective ways to restrict access to information, thus preserving the dominance those "few in the know" have. Economics is no different, of course. There is a lot of misinformation going around DU in regards to the economic crisis and the attendant bailout strategies. I don't think it's responsible for DUers to continue to cut and paste arguments and defend these perspectives they don't fully understand.

Luckily for those without advanced degrees in economics, this article is refreshingly jargon free and does a great job laying out the fundamentals behind the crisis, including a fairly detailed historical analysis.

A few caveats:

Wolff slaughters a few sacred cattle that might not go over well with some here at DU.

First, he points to the movement of women into the labor force as a critical factor in the stagnation of wages. This makes sense, because a sudden influx of workers with no other adjustment in compensation is going to equal more hours worked for the same or less pay. Of course, the real culprit here is not women working, it's businesses not paying the same rates for labor. And we as a people did not adjust our culture to allow for men to stay home with the kids; in essence women's work DOUBLED.

Second, he doesn't hold the New Deal up as the magic bullet that slayed the Great Depression. He partially credits WWII. This does NOT mean he advocates war as a sane policy for fixing our stumbling capitalistic system; probably the opposite considering the vast privatization of large sectors of our armed forces, especially in management.

Third, he doesn't think re-regulation will work without replacing the ENTIRE management structure in failed corporations. This is because those rewarded the most are those who occupy the highest echelons of corporate hierarchy, and they got there PRECISELY because they were genius at evading, re-writing, and twisting regulation standards. Or to get into bed with regulatory agencies and seduce them into writing disingenuous regulatory policy in the first place. Leaving people like this in management is basically daring them to find ways around regulatory policy.

I hope everyone will read past these to get to his larger picture, and his eventual suggestion: restructure enterprise so that the workers have a direct stake in the companies and to support alternative management structures, which he credits to the sustained growth of many tech companies.

http://www.mediaed.org/assets/products/139/transcript_139.pdf

EXCERPT:
"What else did they do? They began to go through an orgy of something that’s called
mergers and acquisitions. They bought each other. Companies had huge amounts of
money and bought other companies. Are you annoyed by a competitor? Buy them. Are
you troubled by a foreigner who is stealing your market? Buy them. And you had the
money to do it.

What else did they do? Interesting. They put their money in the bank. And the banks
suddenly discovered wild amounts of money coming in from corporations. Deposit it in
the bank. That’s what you do with your profits while you’re figuring out what else to do
with them. You put them in the bank. And the banks became repositories of enormous
amounts of money. And then the corporations and the banks, about the same time,
discovered a remarkable thing that they could do with these profits.
And if I can get this across, I think you will see and be able to hold in your mind the
touchstone of the new American economy, which is now collapsing. Banks and large
companies discovered a very profitable way to use their new, huge profits. They would
lend them to the employees. That is the way the employees could raise their consumption
when their wages didn’t go up anymore was to borrow the money that their frozen wages
made possible to their employers.

To understand the American economy in the last thirty years, then, amounts to this.
Employers no longer raised the wages of their workers. Instead, they leant them the
money. That’s why it’s an employer’s fantasy come true. Instead of raising my worker’s wages,
I lend him the money, which he has to pay me back with interest. Isn’t that better
than paying them wages? This is nirvana, or as close as business gets to nirvana. So the
American business community became excited that the money they got from the wages
they didn’t have to pay could now be doubled. We not only got more output from the
worker without paying him, but we could lend him at high interest on top of it. And we
had a working class desperate to borrow. Perfect. We’ve got the money to lend. They’re
desperate to borrow. A marriage made in heaven."

[tabatha]

1. I would like Thom Hartmann to respond to this.

He already debunked the women working myth on the air.

Please do so, Thom, if you read this board.

[Runcible Spoon]

2. Well I did warn that a few parts were controversial and certainly be argued.

I don't think it takes away from the overall validity of the piece.

I would certainly like to see how an influx of cheap labor into a market without wage adjustment could be argued away.

[tabatha]

4. No, wages went stagnant from the start of the Reagan era.

There is a difference between controversial and making statements based on faulty logic.

[Runcible Spoon]

6. Please read the article.

Women joined the labor force in the 70's; wages stagnated in the 80's. I don't see why this is contrary to the argument.

I'M NOT ARGUING AGAINST WOMEN IN THE WORKPLACE. I AM ARGUING AGAINST BUSINESSES' NON-ADJUSTMENT OF WAGES AND OUR CULTURE'S STUBBORNNESS TO ACCEPT MEN IN DOMESTIC ROLES.

Have women's wages EVER caught up to men's? That's really all the evidence you need.

[tabatha]

9. Women did not join the working force in the 70s (for the first time).

There were women working long before that.
My mother, MIL, and their peers were working in the 40-50-60s, many in the WWII effort.
I know of many female friends, relatives, etc who went to work before the 70s.
It was just accepted - get educated and go get a job after that.

Women did not suddenly join the work force in large numbers in the 70s.
The Vietman War was horribly expensive, and most of the high taxation and high interest rates were a result of that.
In fact, many women had to work to enable a family to buy a home.
I think the cart is being put before the horse.

[Runcible Spoon]

13. Those were all temporary.

They were taking over a certain sector of jobs that were held by men, and were returned to men for the most part. As such, there was no fundamental shift in the working force. Remember, we are NOT looking at the gender make-up of the labor force: we are looking at the proportion of general population to working population.

I don't know why you're fighting me on this. We're on the same side-the WORKER'S side. Women being able to go after whatever career they choose is certainly vital to equality, but it was NOT matched by the business community as they did NOT step up and STILL haven't stepped up to support women as equal workers, and have gamed the system to the point where two incomes are needed to support the same standard of living.

[tabatha]

16. Many of them were not.

Take, for instance, the cases of Barack's grandmother and mother. They did not stop working.

So, I read the article, which I think is pretty good - and think that your original post and heading are highly misleading.

There was one small mention of women working in the 14 page article, and hardly worth mentioning in a summary. What would have been a better summary would be the issue of credit. The reason I jumped on the working women remark was because a right-winger tried to blame everything on the fact that women worked - and that is NOT the case.

I was struck by this remark:

"So what is a possible solution? Imagine the difference if a new system of regulations, say
passed by Mr. Obama, were to confront a different organization of production, one in
which not a board of directors responsible to shareholders ran the business, but instead
the people who worked in every business ran the business? Because they all have to live
with the consequences, then you’d have people on the inside of every business
partnering with the government to make sure that the point of the regulations was
realized, rather than a group of people who would function to undo and thwart the
whole point and purpose of the regulations."

This is one of the basic premises of the book "In Search of Excellence" written by Tom Peters and Robert H. Waterman Jr.

[Runcible Spoon]

18. Anecdotal evidence does not cover up the statistics.

If you have hard data by all means post it, I would love to see it. The 1950's were a pretty violent reaction to the idea of women in the workplace and the social pressures were very high to keep women home. 1 in 3 worked in the 50's as opposed to 2/3rds today, almost half the workforce.

I posted the caveats precisely to avoid this tangent but oh well whatever.

I am glad we have finally come around on this. I'm sorry you don't find my commentary adequate; my intention was not to summarize but to pick out a few salient points, to anticipate problems people might have that would stop them from reading the whole thing, and to introduce it.

[JackRiddler]

15. Actually wages stagnated from the early 70s forward...

and it started with the economic crisis and early neoliberal reaction of that time...

[tabatha]

3. Women working is incredibly important for numbers of reasons.

If they are married to abuse husbands, they have no alternative but to remain with them.

The countries with the most progressive societies are those where women work.

If you listened to Thom Hartmann's show he played a clip of Ronald Reagan before he sold out to the Republicans, explaining exactly why wages of workers stagnated. It has to do with corporate greed and NOT women working.

[Runcible Spoon]

5. You're misinterpreting the point.

I ADDRESSED that already. It's not the actual fact that women are working, it was the influx of a cheap and relatively vulnerable population of workers without any sort of adjustment on the part of businesses to compensate them equally. This led to falling wages for ALL.

The other problem is that we as a culture largely did not and do not allow for men to take over domestic responsibilities. As a result, women's work doubled and domestic labor needed to be outsourced to other, more vulnerable workers, like immigrants, who are paid even less and have NO protections.

[Hannah Bell]

20. Supply & demand. Increasing the supply of labor without increased demand

decreases wages & increases profits to capital.

You're missing the poster's point. Wages started leveling off in the mid-70s. 1973 was the peak of workers' wage power.

The bottom 50% of men have seen *absolute* declines in their earning power since the 70s, while women's earning power in the bottom 50% has never regained the levels of the 70s for men. Household incomes haven't kept up at the bottom of the income distribution; in the middle, they've *just* kept up. This means that in terms of the distribution of income & free time, the women's movement was a bust for the bottom 50% of the population.

"Corporate greed" is a constant. It doesn't explain discrete historical events.

[Runcible Spoon]

23. Excellent breakdown.

Thanks for weighing in here. I'm a big fan of your posts on poverty.

[newfie11]

7. I would have loved to stay home and take care of my children.

In fact I did just that, for 8 years when my kids were small, until my husband was laid off. No money, one bread earner. That was enough, I went back to my profession.

In a perfect world it is a great idea for those that want to do it but it is not always a perfect world. Husbands die and some have no life insurance, some don't make enough to support a family without the wife working.

[Runcible Spoon]

8. I really wish the discourse hadn't gotten de-railed to this.

It's not women working, it's forcing households to have double incomes. It really doesn't matter if it's the husband or the wife working/staying with the kids.

My anger is directed at the pigs who use up people and lives like commodities.

[tabatha]

10. Basically yiou are saying that the work of women did not cause the flat-lining of income.

[Runcible Spoon]

12. The article argues that a huge influx of cheap labor contributed to the stagnation of wages.

It has nothing to do with the fact that they were women, except to the point that they were (AND ARE) more economically marginalized than men and as such were cheaper and more vulnerable for a myriad of reasons.

This does NOT mean I think women should be back in the home, but they SHOULD have a choice to stay home and rear kids, and we should accept men in that role too. No judgment either way.

I am merely decrying the necessity for double income to support the same standard of living.

[sendero]

44. I would not dismiss the argument Wolff makes..

... but I don't think it's really that simple.

Yes, the workforce increased dramatically. But so did the consumption.

With women working, they needed cars, they needed more clothes, they needed to let the family eat out more often.

Was the rise in consumption commensurate with the rise of workers? Well, that would be hard to determine.

So what do you have? You have the same household that had one breadwinner now having two. Did wages drop by half? No, I don't think so. Consumption rose as everyone's "standard of living", i.e. cars, pools, bigger houses, electronics, etc. How did Americans pay for that stuff? Well, largely with credit. Did someone hold a gun to their head to make them live beyond their means (if you buy a tv on credit, you are living beyond your means) - No.

Americans at all levels have engaged in a drunken orgy of spending and now the hangover is here. To me, it is as simple as that.

[Two Americas]

42. you keep misunderstanding

No one is arguing that wage stagnation is the fault of women, nor that women should not be in the workforce.

[terisan]

11. You tried. I believe wholeheartedly in every woman's right to work and for equal pay

but i am going to read to get to the essence of what he is saying.

[Runcible Spoon]

14. As do I.

I have gone blue in the face trying to explain how this is NOT a rejection of the women's rights movements, but the corporate world's capitalization on cheap labor.

[galloglas]

21. My sincere expression of sympathy

You introduced a valid thread of logic for us to discuss. Then, because of one person's single-minded interest in a single aspect of that, the incessant sniping and yammering removed the issue from the possibility of decent discourse.

You more patience than I, my friend.

[Runcible Spoon]

22. Oh wells lol.

I thought it was a really easy-to-follow, pretty straightforward and progressive treatment. Serves me right for expecting DU to, well, read things :evilgrin:

[leftstreet]

17. Why raise wages when they can loan us money!

Excellent basic summary of how this got fucked up.

Thanks for posting.

[Runcible Spoon]

19. Exactly.

It's even worse, with secured debt and forced private health care forcing practically everyone to die penniless and indebted, with their bereaved having to field the vultures off. Sick.

Sorry, tangent :(

[tabatha]

24. This was a mirepresentation:

"First, he points to the movement of women into the labor force as a critical factor in the stagnation of wages."

Critical factor. No, it was one of four reasons according to him. (And, according to Thom Hartmann it was not.)

"And the fourth reason why wages go down is the wave of immigration that begins there.
Massive immigration, particularly from Central and Latin America, but globally. The
women, the immigrants, more people looking for job. The computer and moving abroad,
less jobs for them to look for. Perfect recipe every time for wages that don’t go up any
more. For everybody."

I apologize if I made a big deal of this distortion - but according to the article, it was one of at least four factors, after which he introduced more. And from my direct observation, women have always worked. If it was 1/3 at one time, and 2/3 now, it did not go from 1/3 to 2/3 suddenly in the 70s.

[Runcible Spoon]

25. I said A critical factor not THE critical factor.

I pointed it out and not the other 3 factors because I knew people would probably jump on it and rail that he is criticizing women's movement etc. You chomped on to it even though I was pointing out why he mentioned it at all.

It's not a DISTORTION because you say so. YOU have chosen to distort what I said and ignore the actual point of the article.

On edit: as for the "jump"...yes women in the workplace jumped the fastest during the 1970s. Yes women have always worked. I'm not putting a value judgment on women working PER SE, only on the fact that they and all workers in fact were not compensated in proportion to how many more workers joined the workforce.

I don't understand why it is provocative to point out the obvious which is that the 1970's movement resulted in many more women in the marketplace. :shrug:

http://74.125.95.132/search?q=cache:AX8m7aqRz_YJ:www.bls.gov/opub/mlr/1999/12/art1full.pdf+Labor+force+participation:+75+years+of+change,+1950-98+and+1998-2025&cd=1&hl=en&ct=clnk&gl=us&client=firefox-a

[Hannah Bell]

26. the numbers:

Female paid workforce participation rate:

1950: 33.9%
1960: 37.7% (+3.8)
1970: 43.3% (+5.6)
1980: 51.5% (+8.2)
1990: 57.5% (+6.0)
2000: 61.5% (+4.0)

Total 1960-1980: +13.8
Total 1980-2000: +10.0




Women as a % of the workforce

1950: 29.6%
1960: 33.4% (+3.8)
1970: 38.1% (+4.7)
1980: 42.5% (+4.4)
1990: 45.8% (+3.3)
2000: 47.5% (+1.7)

Total 1960-1980: +9.1
Total 1980-2000: +5.0


Women in the workforce:

1950: 18,389,000
1960: 23,240,000 (+4,851,000)
1970: 31,543,000 (+8,303,000)
1980: 45,487,000 (+13,944,000)
1990: 57,230,000 (+11,743,000)
2000: 66,670,000 (+9,440,000)


The decade with the biggest increase of women in the workforce was 1970-1980. This increase was mostly in women born in the US, mostly preceding 1980s changes in to immigration policy.

http://books.google.com/books?id=F9gwBesn1FoC&pg=PA85&lpg=PA85&dq=female+workforce+participation+1960+1970+1980&source=bl&ots=5YVRIWnITt&sig=v5v3NNtudU29F_rmqDtOeeomfhQ&hl=en&ei=zWPJSdiQIYnYsAPzp8XtBQ&sa=X&oi=book_result&resnum=3&ct=result

[tabatha]

27. I did some research, too.

Edited:

See THIRD graph in article below.



And here is someone else's opinion:

" Why Are Married Women Working So Much? " joint with Rodolfo E. Manuelli and Ellen R. McGrattan.

"This paper studies the large observed changes in labor supply by married women in the United States over the period from 1950 to 1990, a period when labor supply by single females has hardly changed at all. We investigate the effects of changes in the gender wage gap, technological improvements in the production of non-market goods and potential inferiority of these goods on understanding this change. To this end we use a dynamic general equilibrium model which distinguishes between single and married households. We find that small decreases in the gender wage gap can explain simultaneously the significant increases in the average hours worked by married females and the relative constancy in the hours worked by single females, as well the invariance of male hours over the 1950-1990 period.

The two main features of the model that account for the ability of changes to the gender wage gap to match the hours data are:
endogenous specialization among married couples and human capital accumulation. We also find that technological improvements in the household have ---for realistic values--- too small an impact on married female hours and the relative wage of females to males. Some specifications of the inferiority of home goods do match the hours patterns, but have counterfactual predictions for wages and expenditure patterns."

http://www.econ.umn.edu/~lej/familyecon.html

(see third graph)

[Hannah Bell]

28. What is it you wish to direct my attention to?

You understand the significance of the word "model," yes?

Do you dispute the numbers I posted from the Bureau of Labor Statistics?

[tabatha]

31. No, I don't dispute the numbers.

But a graphical representation is easier to grasp the numbers.

And the graph is important because it shows the numbers for not only women, but

a) single women
b) married women
c) single men
d) married men

[Hannah Bell]

40. which graph? oh, never mind, i see you said "3rd".

"To the right, you see a figure showing a COMPARISON BETWEEN THE MODEL & DATA from the U.S. economy over the 1950 to 2000 period when the 'Wage Gap' between men and women is exogenously narrowed following what happened in the data. Shown are the time paths for labor supply from the model for Women and Men, both Single and Married, along with a host of other PREDICTED RELATIONSHIPS FROM THE MODEL."


I don't have time to look at the details, but i will when i get back. My first impression is the graph doesn't show what you might think it does.

[Runcible Spoon]

29. All your link says is that a lot more married women entered the workforce

while the rates for single women remained stable.

And? :shrug:

[tabatha]

30. Yes, why did they enter the workforce.

Because there was a need.

So, the need came first before the women went out to work.

That is why I think the article has the cart before the horse.

[Runcible Spoon]

34. "Because there was a need."

Why was there a suddenly a need for double income?

And we're back to square 1, please read the article.

[tabatha]

38. How can you square?

a need for women to work because their husbands were not earning enough
with
the influx of women into the labor force resulted in the decrease in wages

It is a circular argument.

[Runcible Spoon]

43. Not circular...

it just indicates multiple factors. Most simply, companies were not paying enough to compete with cost of living and purchasing power went down as dollar dropped because of inflation. The article goes into a lot of detail; he blames computerized replacement of labor, newly competitive and restructured Asian and European markets, immigration, and the necessity for a double-income household. Many women joined the workforce to compensate; the flux into the marketplace was not matched by proportionate wages. As a result, things got pretty ugly in the 80's. :evilfrown:

These trends didn't occur in succession; they occurred recursively and with accumulated change as they reacted to one another.

Edited to fix my evilfrown

[tabatha]

45. Ok, I Iike that first sentence much better

I had to go to work - no choice - with a small child. It was not easy.

[tabatha]

32. Also, absolute numbers can be misleading if not normalized

as a percentage of the population.

I will probably, for fun, do the normalization for myself.

I have a right-winger to counter with facts.

Thanks for the statistics.

[Runcible Spoon]

36. "I have a right-winger to counter with facts." Who?

:shrug:

[tabatha]

37. Someone I know.

From the person who provided the statistics, as a percentage of the workforce, employment of women increased as follows:

1950-1960 by 3.8%
1960-1970 by 4.7% (the largest increase)
1970-1980 by 4.4%
1980-1990 by 3.3%
1990-2000 by 1.7%

so it has been increasing slowly from 1950 to 2000. There is NO large jump - by which I would assume 10% or more - starting from 1970.

You could actually say from those numbers that after 1970, the %INCREASE started decreasing.

[Runcible Spoon]

39. *phew* I thought you meant me

I was about to get nuclear on your ass :evilgrin:

Please take a gander at my charts in the post above; it breaks it down by age which is significant and some groups DID experience a spike of more than 20% 1970-1980 and all groups of women saw a jump of at 8%. When you weed out the women 45+, every other age group spiked at least 10% which is very considerable.

edited to put in chart so you don't have to fish around for it:
http://www.bls.gov/opub/mlr/1999/12/art1full.pdf.

[tabatha]

41. That pdf is great. Thanks.

I'll download it so that I have the numbers ready.
I was talking about the overall numbers of women, because that is what counts.
But, I do find the fact that the numbers of married women increased so much, actually tells a story.
Women with children would always prefer not to work.

I don't think that anyone other than trolls, post on DU.
But there are lots of people with opinions all over the map.

[Hannah Bell]

46. Feminine Mystique = 1963. NOW founded 1966.

Women as a % of the workforce

1950-1960: 33.4% (+3.8)

1960-1970: 38.1% (+4.7)
1970-1980: 42.5% (+4.4)

+9.1

1980-1990: 45.8% (+3.3)
1990-2000: 47.5% (+1.7)

+5.0


Women in the workforce: absolute numbers

1950: 18,389,000
1960: 23,240,000 (+4,851,000)

increase as % of 1960 population = 2.7% (x2 = 5.2)


1960-1970: 31,543,000 (+8,303,000)
1970-1980: 45,487,000 (+13,944,000)

increase as % of 1980 population = 9.8%


1980-1990: 57,230,000 (+11,743,000)
1990- 2000: 66,670,000 (+9,440,000)

increase as % of 2000 population = 7.5%


Here's a graph: % of women in the labor force <25% 1890-1930. Bump starts 1940, steepest curve = 1940-1980, biggest 10-yr jump = 1970-1980.

http://books.google.com/books?id=-YAMIKD5DXAC&pg=PA27&lpg=PA27&dq=women+labor+force+participation+rate+1930+1940+1950&source=bl&ots=Zk1bJvEnAQ&sig=zkIVKHpewOSVp7LV_Lksl7FcfdM&hl=en&ei=IMXJSe-eA4G0sAOcgdXnBw&sa=X&oi=book_result&resnum=1&ct=result


As for the "single women/married women" thing, something else happened 1960-1980. Reduced % of married women in every cohort but the 65+ group; likely r/t the social changes of the period. So looking at the data through the single/married lens doesn't yield comparable results.

http://books.google.com/books?id=bM0G500mypsC&pg=PA128&lpg=PA125&ots=hebc3Mtz7W&dq=women+labor+force+participation+rate+1930+1940+1950

[many a good man]

33. Great article (until the end)

I completely agree with the vast majority of his history and analysis. I've even said many of the same things here over the years. IMO his analysis is neither right or left, liberal or conservative. It's non-ideological, rational, and true.

I can understand why he thinks re-regulation won't work this time around, but I think he's being entirely too pessimistic. Of course regulators will always have their hands full keeping up with the cheaters. That's a problem of will, a problem of politics that must be overcome. His alternative solution is vague and squishy. He doesn't dive into any detail.

We are at the point where if we don't make major changes, major changes are going to be forced on us. This generation is pivotal. We need to define the solution and steer ourselves on the path not taken. (See, I can be vague and squishy, too!)

[Runcible Spoon]

35. I agree it's vague.

I would like to see something more fleshed out, but he suggests these models are already in use as alternative structures in existing sectors.

Thanks for weighing in!

[leftofthedial]

47. The whole fucking country is a company town

thanks to raygunism