It has long been my view that most of the seeds of the West’s ills were sown in the 1970s: that was the decade when Western consumerism began to be sated by Chinese imports, and Arab oil, and the decade when America cut the link between the dollar and gold sparked the first flames of the great Keynesian debasement bonfire. Richard Nixon and Henry Kissinger were the chief architects, of all three of these innovations, and the internationalisation of the dollar as the global reserve currency.
In the 80’s, the United States’ trade balance flipped over and the U.S. became a net debtor, sending more and more dollars and debt out to the world as the free lunch got bigger and bigger. But something odd happened from the 70s onwards, as demonstrated by our graphic of the day:
Robert Reich claims that this stagnation began in 1979, but I think it’s obvious from the graph that the wage stagnation began earlier. Ever since Kissinger and Nixon’s innovations wages have been stagnant, while productivity, imports, corporate profits, government debt, the price of gold have all soared.
The reality is that ever since the 70s government policy, and the shape of global infrastructure and industry has favoured the rich over the poor, has favoured the monied over the moneyless, and favoured the powerful over the powerless.
That’s why we get skyrocketing corporate profits:
And no progress on employment:
And even when the policy debate shifts to helping the poor, the great Keynesian experiment has meant that money can easily be printed, and figures massaged instead of tackling the underlying challenges posed by globalisation, and the changing shape of the world.
The answers could be provided by government, or they could be provided by the free market, or both. What matters is that Western nations, increase their energy and food independence, and improve their infrastructure, and supply chains, and that individuals can find work which they are fairly rewarded for, not how that happens.
Of course, we are being held back by vested interests. From Alan Moore:
This is not even capitalism any more. Capitalism employs a rough and ready Darwinian survival of the fittest. The banks have become like monarchies. They are too big to fail, too big to punish. They are above parliament. Banks are treating themselves as if they were a new class of fiscal royalty. The kind of royalty they most resemble is Charles I. He was above parliament and not accountable for his lavishness. He put the pinch upon the country to the point where the poor people simply starved.
But — in truth — the global financial system is not too big to fail: it is too big not to fail. The system will rupture and crack again, possibly in the next few years.