Top Menu

Volume 58, Issue 01 (May)

The Household Debt Bubble

It is an inescapable truth of the capitalist economy that the uneven, class-based distribution of income is a determining factor of consumption and investment. How much is spent on consumption goods depends on the income of the working class. Workers necessarily spend all or almost all of their income on consumption. Thus for households in the bottom 60 percent of the income distribution in the United States, average personal consumption expenditures equaled or exceeded average pre-tax income in 2003; while the fifth of the population just above them used up five-sixths of their pre-tax income (most of the rest no doubt taken up by taxes) on consumption.1 In contrast, those high up on the income pyramid-the capitalist class and their relatively well-to-do hangers-on-spend a much smaller percentage of their income on personal consumption. The overwhelming proportion of the income of capitalists (which at this level has to be extended to include unrealized capital gains) is devoted to investment.

The End of Retirement

An esteemed colleague read three paragraphs of news clip on employer pensions before he realized it was from the satirical newspaper The Onion. The tip off was the interview with an eighty-seven-year-old machine shop worker struggling with widowhood, high stress, and early stage Alzheimer’s at General Electric. Early stage Alzheimer’s was the first clue, not the eighty-seven-years of age. Satire writers must have a holy grail of seconds before the earnest reader starts chuckling; my colleague’s delay might be a record. It takes three seconds to know “Cindy Sheehan loses second son in Katrina” is a lampoon. The reason it took so long to laugh at a news story that GE was adopting a new policy of “lifetime” jobs and a new forty-five-year vesting period for their pensions is that it is credible; the signs of the end of retirement are all around

Trouble, Trouble, Debt, and Bubble

The questions regarding U.S. macroeconomic policy these days come down to whether the country can keep borrowing. Can consumers keep spending by increasing their debt level? Can the federal government keep running a large budget deficit without serious problems developing? Can the U.S. current account deficit keep growing? Will foreigners keep buying government bonds to cover this growing debt? If the answer is no to such questions, we can expect serious trouble and not just for the United States but for the rest of the world, which has grown used to the United States as the consumer of last resort. The United States buys 50 percent more than it sells overseas, enough to sink any other economy. In another economy, such a deficit would lead to a severe devaluation of the currency, sharply inflating the price of imports and forcing the monetary authorities to push interest rates up considerably

The Neoliberal ‘Rebirth’ of Development Economics

velopment economics, as a branch of economics that attempts to show how the world’s poor economies can develop, had its origins in the 1940s and 1950s. One of its earliest ideas was that the economies of the less developed countries were mired in a cycle of poverty and needed a “big push” to develop. This push was seen as a large boost in investment, helped by the state’s infrastructural and social spending, as well as by private foreign capital spending and aid from the governments of the developed nations

Capitalism Is Rotten to the Core

Immanuel Ness, Immigrants, Unions, and the New U. S. Labor Market (Temple University Press, 2005), 230 pages, cloth $59.50, paper $21.95.
Howard Karger, Shortchanged: Life and Debt in the Fringe Economy (Berrett~Koehler Publishing, 2005), 252 pages, cloth $24.95.

The widening and deepening of capitalism, which many economists misname globalization, has had traumatic impacts on workers. Sped up by what has been called neoliberalism (basically, the political program of modern global capital), the growing penetration of capitalist production and consumption relationships around the globe has literally pitched workers from pillar to post. For example, the North American Free Trade Agreement (NAFTA) has forced hundreds of thousands of Mexican peasants and wage workers to abandon their home country and migrate to the United States. Similarly, government austerity and “free market” programs—curbing food and health subsidies to the poor, closing and selling state enterprises, suppression of worker and peasant protests, and the like—in countries like India and China have deprived many workers of what security they had attained and pushed peasants from their land into cities