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It means that the bulge in workers' wages from 1930 through 1975, pretty much cancels the stagnation since 1975... and we're right back on to the trend-line from 1860 to 1930.
Ok, I understand what you did now. But why do believe the 1.32% increase is normal? Per capita GDP has been 1.9%, and a deviation from that results in an imbalance. In 1930 it was enough to collapse the economy (excess "investment" relative to consumer buying power). The 1930 to 1975 period was almost a return to nominal.
Plus wages have declined the last 2 years, after failing to acheive the high set in 2000. And this is supposed to be a booming economy! The trendline of 0% gains for the last 40 years appears to be holding.
Perhaps the utility of labor has dropped while the costs have matched inflation whereas the cost of US labor substitution has had its utility increase from technology or substituted for increasingly cheaper automation?
Or perhaps labor market participation has been plummeting for men since the late 60's from the high 80's to below 70 while female participation has risen from the low 40's to right around 60 percent. If we factor in the often cited female wage gap at 30% then it could be a labor mix of 50% more low paid workers and 20% fewer high paid workers.
Gutting of unions, deficit trade, and high illegal immigration are some of the factors directly affecting men's wages.
But none of that is the real "reason". We were lucky in the past. Oligarchs in consumer-capitalist economies *had* to support policies that would increase wages in step with economic growth. If they took a larger share of the pie, the system would eventually collapse. That's why we enjoyed such robust middle class prosperity for so long. But ~1980 they got creative, and hatched a scheme (via fiat currency, deficit trade, and debt escalation) whereby they could take nearly all the productivity gains, and the economy still keeps chugging along.
...But why do believe the 1.32% increase is normal? Per capita GDP has been 1.9%, and a deviation from that results in an imbalance. In 1930 it was enough to collapse the economy (excess "investment" relative to consumer buying power). The 1930 to 1975 period was almost a return to nominal.
I won’t presume to have any right to declare what’s normal, let alone what’s fair. But if we artificially take, for the sake of discussion, the period from 1860 through 1930 as being “normal”, then we’re led to conclude that the subsequent two periods – that of the first 40 years, and the second 40 years – largely cancel out, the former being abnormally prosperous and fecund for workers, the latter being abnormally threadbare and barren.
One plausible explanation is that for most of human history, most societies were highly stratified. Most of the gains flowed to the top. Even as late as well into the 20th century, most nations were governed by aristocratic regimes, which even if democratic in name, were in reality government of the many by the few. This changed owing to the two World Wars and their associated dislocations. But in recent decades there has been something of a return to the norm. The new ersatz aristocracy is – well, whatever it is, by whatever pejorative name we chose. Underneath it is the class of professionals and other persons with remunerative jobs and ample capacity to save and invest. And underneath them, everyone else. Nothing here presumes that the aggregate quality of life can’t keep climbing. Indeed, I’m convinced that it is climbing, for nearly everyone everywhere. But it is climbing more for some than for others. This inexorably leads us back to the 1860-1930 period.
Whether this increased stratification is good or bad, depends on a couple of core points. The first is whether such stratification is the price that we pay for aggregate prosperity. In other words, if we were more equal, would we also overall be less prosperous? I don’t know. But I am willing to concede, that it is better for me to go from having one cow, to having ten, even if my neighbor goes from having 3 cows, to having 300. It might be lovely for us to each have 155 cows, but is this practical? If not, then give me my 10 cows! I’d not wish to revert to having just one cow, if that’s the inherent price of equality.
Second, does psychological satisfaction matter more than material satisfaction? If we all do somewhat better, but some do better yet, would I be consumed with envy, and cry “Injustice!” If so, then perhaps it would be better for us all to have materially less, so that we’d feel psychologically better, that the other guy doesn’t have more. If not, not. Again, I don’t know what is proper or what is just; I merely wish to point out the tradeoff.
Another thing that baffles me, is why stocks are expected to grow at say 5% annually (averaged, of course), adjusted for inflation. That is, if price/earnings ratios hold constant, corporate earnings are supposed to grow much faster than GDP growth, or wage growth – the latter even in its best historical periods. Doesn’t this mean that eventually ALL prosperity will flow to corporate profits? And if that’s the wrong conclusion, well, doesn’t the alternative necessarily mean that the historically-expected rate of growth for stocks is unsustainable?
Whether this increased stratification is good or bad, depends on a couple of core points. The first is whether such stratification is the price that we pay for aggregate prosperity. In other words, if we were more equal, would we also overall be less prosperous? I don’t know.
Don't fear, you have it backward. With less disparity aggregate prosperity is increased. Consumer-capitalism is most efficient when the consumer's share of the pie is large. When demand is robust, there is never of shortage of investment capital. Even though the means of evening out the wealth was woefully inefficient (and it usually is) the 1930-1975 period was the US's best by far.
But it doesn't maximize the oligarch's wealth, and they are the ones who matter.
Look at it this way. If high disparity maximized aggregate prosperity, the most successful countries (which all happen to be consumer-capitalist) would all be highly stratified. The opposite is the case.
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Another thing that baffles me, is why stocks are expected to grow at say 5% annually (averaged, of course), adjusted for inflation. That is, if price/earnings ratios hold constant, corporate earnings are supposed to grow much faster than GDP growth, or wage growth – the latter even in its best historical periods. Doesn’t this mean that eventually ALL prosperity will flow to corporate profits? And if that’s the wrong conclusion, well, doesn’t the alternative necessarily mean that the historically-expected rate of growth for stocks is unsustainable?
Look at it this way. If high disparity maximized aggregate prosperity, the most successful countries (which all happen to be consumer-capitalist) would all be highly stratified. The opposite is the case.
We have to think globally. If you’re right about equality leading to prosperity, then a prosperous America but a poor India and China are inimical to global wealth. An America that’s less rich, and an India and China that are richer, would make the whole world more prosperous. Beheld thus, the great anomaly was the outstripping by America of everyone else, and more broadly, the outstripping by the West of the Rest (to paraphrase Niall Ferguson). This means that for an American working-class wrench-turner to see income stagnation, but for the Chinese peasant to now be able to afford meat, vaccines and a bicycle, is in aggregate a good thing.
I am not at all convinced that greater equality is concomitant with greater aggregate prosperity. But if this is so, then a more equal world, is an overall richer world.
This is, to put it mildly, more of a conjecture than an explanation. And even as conjecture, it's convoluted. Was his point, that perennial excess gains of stocks over GDP, would collapse if investors were to cash-in their dividends... or precisely the reverse, that the whole thing would collapse, if investors were to perpetually buy-and-hold?
My view is that stock markets are a relentless machine that rewards good companies and punishes bad ones, but it does so in an asymmetric way: good companies are rewarded, more than bad companies are punished. Investors who buy into an index therefore disproportionately gain. Why? Because only the stronger companies make it into an index, and those who become weak, get kicked out. GDP growth meanwhile is the sum of some businesses gaining, and some businesses losing. The losing-businesses are disproportionately small ones, which never attain enough size to ever get listed on a stock-exchange, before they collapse.
the great anomaly was the outstripping by America of everyone else, and more broadly, the outstripping by the West of the Rest (to paraphrase Niall Ferguson). This means that for an American working-class wrench-turner to see income stagnation, but for the Chinese peasant to now be able to afford meat, vaccines and a bicycle, is in aggregate a good thing.
I am not at all convinced that greater equality is concomitant with greater aggregate prosperity. But if this is so, then a more equal world, is an overall richer world.
The only time the US "outstripped" the rest was in that 1930-1975 period. And I don't think it's a fair comparison because of the effects of WW2. Since 1975 we've lost ground against much more "socialist" countries.
A different country is a different system. I'm talking about whether aggregate prosperity in a consumer capitalist country is better or worse if it's less stratified.
But since you brought it up, the oligarchs have made fortunes transferring wealth from the middle class of developed countries to poorer ones, but it hasn't had a positive effect on GDP growth. Rather the opposite.
Interesting link with more links to look at relative wage rates in Europe in dealing with scarcity issue (i.e. plague) or increased productivity (industrial revolution). Also relative disparity between France and England.
No, it wasn't, and then there was that little Vietnam thing going on. The world was pretty sane until about 1963, and then it began to drastically change, and not for the better.
Yes, and wide spread illict drug use started about 50 years ago too.
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