Thursday, January 5, 2012

The Legacy of Driving Down Wages is the Collapse of Consumer Demand

For the last thirty years, the most powerful corporations in the nation have followed a strategy of paying top management huge salaries to ruthlessly trim labor costs, either by moving operations abroad, or keeping wage rates of the domestic labor force low. Walmart, the nation's largest employer, symbolizes this strategy, paying its CEO
$16,000 an hour while offering a starting salary of $6.50 an hour for new employees.

In the short run, this has worked well for individual companies, but in the long run, it has destabilized the American economy by crippling consumer demand, which could only be sustained by various forms of debt-ranging from credit cards, to second mortgages on homes, to student loans. Now, as the first two of these strategies for sustaining consumption has collapsed- with the student loan bubble coming next- where is the buying power of the American public going to come from? Half of this country is either living in poverty, or on danger of falling into it. How can you sustain a healthy market economy when the wages of the majority of the population can't sustain a middle class standard of living? You can only do so through developing a huge, off the books alternate economy, participation in which is increasingly becoming a necessity for many Americans who were once proud of their status as workers and taxpayers. Not a pretty picture. But it's a logical consequences of the greed and the shortsightedness of those rulers of the American economy that Occupy Wall street has dubbed "The One Percent."

January 5, 2011

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