Saturday, October 18, 2014

# 17 October 18 204. There are (very) faint signs that some major corporations are beginning to realize that depressing the wages of the Middle Class is bad for business—because people with no money don’t buy things. Low demand results in low growth. What do they teach in business schools that this basic fact seems to have eluded them for so long? So are they raising wages at last? No.




On numerous occasions in the past, I have pointed out that the current American Business Model is not only broken, but unsustainable—not to mention grossly unfair as far as the majority of Americans is concerned.

On the other hand, the media, and those they like to interview, are—generally speaking—putting out the notion that since unemployment is dropping, the stock market is fairly healthy, and corporate profits are at or near an all-time high, we’re getting back to normal—and all is nearly well again.

This is pure drivel, media manipulation, and the kind of behavior which makes people regard the media with such suspicion (a great pity because there is some fine journalism out there)—which many people seem to be accepting—largely, I suspect, because it is more palatable that facing the facts. And I guess ignorance is making no small contribution.

Let me turn to Nobel Laureate Joseph E. Stiglitz for some moral support. The following is an extract only.

NEW YORK -- Two new studies show, once again, the magnitude of the inequality problem plaguing the United States. The first, the U.S. Census Bureau's annual income and poverty report, shows that, despite the economy's supposed recovery from the Great Recession, ordinary Americans' incomes continue to stagnate. Median household income, adjusted for inflation, remains below its level a quarter century ago.

It used to be thought that America's greatest strength was not its military power, but an economic system that was the envy of the world. But why would others seek to emulate an economic model by which a large proportion -- even a majority -- of the population has seen their income stagnate while incomes at the top have soared?

The recent economic downturn eviscerated the wealth of many. In the U.S., even after the stock market recovery, median wealth fell more than 40 percent from 2007 to 2013. That means that many of the elderly and those approaching retirement worry about their standards of living. Millions of Americans have lost their homes; millions more face the insecurity of knowing that they may lose theirs in the future.

These insecurities are in addition to those that have long confronted Americans. In the country's inner cities, millions of young Hispanics and African Americans face the insecurity of a dysfunctional and unfair police and judicial system; crossing the path of a policeman who has had a bad night may lead to an unwarranted prison sentence -- or worse.

The report by the International Commission on the Measurement of Economic Performance and Social Progress (which I chaired) emphasized that GDP is not a good measure of how well an economy is performing. The U.S. Census and UNDP reports remind us of the importance of this insight. Too much has already been sacrificed on the altar of GDP fetishism.

Regardless of how fast GDP grows, an economic system that fails to deliver gains for most of its citizens, and in which a rising share of the population faces increasing insecurity, is, in a fundamental sense, a failed economic system. And policies, like austerity, that increase insecurity and lead to lower incomes and standards of living for large proportions of the population are, in a fundamental sense, flawed policies.

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