Looking Backwards -- and Forwards....

Though it is clear that we need -- and will likely continue to need -- some significant government spending in order to avoid the direst of potential consequences, that is at best a medium term fix. What really needs to be repaired (at least once we get past neglcted bridges and tunnels and roads and schools and all the rest) is the way the fruits of labor are distributed within our society.

Consider the loud, triumphant headlines much of the past decade, for example: "Productivity rises again!" "Corporate profits up!" Now step back for a moment and consider what this really means. We'll start with productivity. Let's see. When productivity rises, it means that more "stuff" is produced for a lower cost. Naturally, some of this can be attributed to the efficiencies created by investments in technology, but almost certainly not all.

No, there's something else at work here. 

Real wages have effectively remained static at best over the course of the last several decades -- all during a time when the economy, in aggregate terms, has grown rather significantly. Even worse, the "real wages" mentioned above are aggregates themselves; for many within our society, to have kept up -- or even close to it -- would have been a great improvement.

Now what has increased greatly over that time? Two things, mostly: Asset values in general (even when you take the last several months into account, for example, the overall price of housing in real terms has increased greatly). The kinds of things that enable the kind of class mobility that is so loudly and often said to be at the root of the "American Dream", things like healthcare, college tuition and the like.

No wonder we're leveraged to the hilt as a society -- and no wonder the blip in home values has brought us down so low, so fast.

It's really simple. When an ever larger proportion of the overall income of a country is placed in ever fewer hands it can't all go back into the economy. So it goes into assets, raising the demand for same, and hence raising their relative valuation. Since homes are the one kind of such asset that a significant percentage of people own -- and the only thing that kept up with the expansion of the overall economy (as opposed to wages) -- people will tap that asset to maintain a lifestyle. And then....

"Creative destruction" is the oft-heard term, something that is important for a capitalist system to keep on developing. And it's true. But, just as it is healthy for the growth of aggregates within an economy, the insecurity it produces among people is destructive. And, at a moment like this one, where unemployment rates are rising, the natural (and correct) inclination is to rein everything in, which, of course feeds upon itself. Given the dominant business philosophy of the recent decades, one where labor is a necessary evil at best, all this is unsurprising.

There's plenty of work to be done. Increasingly, there are plenty of people to do it. Unless and until those people find themselves in a situation where there's some reasonable confidence that they can make ends meet, put a little away and be able to do so on a consistent basis, every little bump in the road has the potential of turning into a large-scale calamity.

It's time to renew that American Dream -- again for the many, not just the few.