Skip to main content

A single graph proves that the birth of neoliberalism coincides with a dramatic loss of power for the working class


The following graph depicts the radical divergence between productivity and compensation of a typical American worker after 1973. It essentially proves that the upper class has been overwhelmingly benefited during the last four decades or so, at the expense of the working class:



As described by the source, the hourly compensation of a typical worker essentially grew in tandem with productivity from 1948 to 1973. After 1973, these series diverge markedly. Between 1973 and 2014 productivity grew 72.2 percent, or 1.33 percent each year, while the typical worker’s compensation was nearly stagnant, growing just 0.22 percent annually, or 9.2 percent over the entire 1973–2014 period. Further, nearly all of the pay growth over this 41-year period occurred during the seven years from 1995 to 2002, when wages were boosted by the very tight labor markets of the late 1990s and early 2000s.

This divergence of pay and productivity has meant that the vast majority of workers were not benefiting much from productivity growth; the economy could afford higher pay but was not providing it.



Costas Lapavitsas, professor in economics at the University of London School of Oriental and African Studies, explains analytically how the working class has lost dramatically with the rise of financial capitalism and the accompanying neoliberal ideology during that period depicted in the graph above:

Finance is a sector of the economy in mature countries which has grown enormously in terms of size relative to the rest of the economy, in terms of penetration into everyday lives of ordinary people, but also small and medium businesses and just about everybody, and in terms of policy influence. Finance clearly influences economic policy on a national level in country after country. The interests of finance are paramount in forming economic policy. So that is clear. Finance has become extraordinarily powerful. And that, in a sense, is the first immediate way in which we can understand financialization. Something has happened there, and modern mature capitalism appears to have financialized.

Financialization is basically a profound historical transformation of modern capitalism that began in the 1970s, and it's now been running for about four decades.

What's happened to big business is very interesting. Two things have happened to it. First, big business has become increasingly capable of financing investment out of retained earnings. It retains its profits, and on a net basis it finances investment pretty much out of that. Of course, it still uses banks, but it doesn't rely on banks on a net basis to finance investment. That gives it a certain degree of independence from banks. In addition to that, big business has made so much in retained profits - currently US big business is sitting on piles of cash - that it can use those funds to play financial games, to engage in financial transactions and financial activities on its own account. So big business has financialized. Large enterprises have acquired some of the character of financial institutions, have become bank-like, and they engage in these transactions, and they change the structure of their own organization as they do that.

Second economic change, and very, very important, too, relates to banks. If big businesses is doing that, banks must do something else to make profit. They lend less to businesses for investment and so on, and they play more games in the financial markets. They become transactors in financial assets, and they make profits increasingly not from lending, but from fees, commissions, and trading. They become traders in financial assets. At the same time, banks have also turn households. Households have become a very profitable activity of banks, a new activity. This is a new phenomenon in the development of capitalism.

The third change has to do with households, workers, ordinary people. And what we see there in the last three to four decades is that ordinary people have been drawn into the financial system like never before. Households have become financialized. Finance has become a fundamental part of household life.

Why is that? Partly because wages have been stagnant. Wages have been absolutely flat in [the US] for decades. Partly because of that, people have turned to debt.

The financialization of everyday life, of households, is a bit of a complex story. What is actually happening is not simply that you borrow in order to consume. That also happens. What is actually happening is people need access to health, education, housing, and a variety of other needs. Every country has systems of provision for these things. These modes of provision have historically, traditionally, incorporated public provision, some methods of public provision. What we've witnessed the last three to four decades is a retreat of public provision. Public provision has retreated, private provision has taken its place. As this is happened, finance has emerged as the facilitator of that. So we turn to private provision to solve our housing needs, our health needs, our education needs, and finance makes profits out of that, basically, without having any skills in doing these things.

At the same time, we've had changes in institutions and in ideology. The changes in institutions are very clear. We've had wave after wave of deregulation. Labor market has become more deregulated, and financial markets have become more deregulated. And in addition to deregulation what we've had is the rise of the ideology of neoliberalism. Deregulation goes hand in hand with neoliberalism, the idea that the market is good, the state is bad. In [the US], this is a very powerfully held idea, more powerfull here than anywhere else. It's extraordinary how powerful this perception is and how a lot of social issues are understood in this way.

What have we got after four decades of this? These changes, seen very clearly in the United States, have created, firstly, a deeply unequal country, a deeply unequal society. Financialization is fundamentally about inequality. We see this inequality in terms of income, where the top 10 percent and the top 1 percent draw an extraordinary proportion of income annually, but we see it in terms of the functional distribution, the distribution of income between capital and labor. Labor has lost dramatically during the last three to four decades in [the US] and in just about every other mature capitalist country that has financialized.

Comments

Popular posts from this blog

Panicked neoliberal tools attempt to trigger a war of generations against AOC's progressive counterattack

globinfo freexchange
We were slightly surprised to see such an article title in one of the primary info tools of the global neoliberal regime and financial capital. But the subtitle immediately clarified everything.
When we read the title “Alexandria Ocasio-Cortez and the Revenge of the Millennials” of the article in Bloomberg, we thought that we might be in front of a small miracle. We thought that the time has come for some people inside the core of the establishment apparatus to admit that the younger generations have lost dramatically from this brutal system. And so, the time has come to overthrow it, take their 'revenge'.
But no, it was too good to be true.
The subtitle immediately revealed the trick: “The Democrats’ major economic initiatives tend to favor the young at the expense of the old.”
Then, inside the article we read: “Almost every major new economic initiative proposed by Democrats — the Green New Deal, Medicare for all, debt-free college — has a common feature: Un…

Κυβέρνηση Σαμαρά: Πιο νεοφιλελεύθερη και από την Τρόικα!

Ο πρόεδρος της επιτροπής για θέματα ανταγωνισμού του Επαγγελματικού Επιμελητηρίου Αθηνών, Γιώργος Φλωράς, αποκάλυψε στην εκπομπή του δημοσιογράφου, Νίκου Χατζηνικολάου, ότι η έκθεση του ΟΟΣΑ, με βάση την οποία συντάχθηκε το τελευταίο πολυνομοσχέδιο, είναι ουσιαστικά δημιούργημα του ΙΟΒΕ!
Ανέφερε χαρακτηριστικά ότι:
Οι προτάσεις αυτές δεν είναι του ΟΟΣΑ, αλλά του ΙΟΒΕ και της Επιτροπής Ανταγωνισμού, δηλαδή κυρίως των Χατζηδάκη και Στουρνάρα και ότι η κυβέρνηση στην ουσία χρησιμοποιεί την Τρόικα για να περνάει τις θέσεις των πολυεθνικών, μεγάλων αλυσίδων σούπερ μάρκετ, κ.λ.π.
Ο κ. Χατζηδάκης, τονίζει συνεχώς σε ότι έλεγε ότι 'εμείς χρησιμοποιήσαμε τον ΟΟΣΑ γιατί είναι αντικειμενικός, έχει την αξιοπιστία, έχει τη διεθνή εμπειρία κ.τ.λ.' και γι'αυτό βγήκε και ένα κονδύλι 936.000 ευρώ για να γίνει αυτή η έκθεση. Η έκθεση ξεκινάει αναφέροντας στη σελ. 2 ότι οι θέσεις μέσα σ'αυτή δεν εκφράζουν απαραίτητα τον οργανισμό.
Η έκθεση αυτή δεν είναι του ΟΟΣΑ, είναι μια οργανωμένη απάτ…

Canada has been trying to destabilize Venezuela at least since 2004

globinfo freexchange
Paul Jay, editor in chief at The Real News, gave some very interesting information - some based on personal experience - about Canada's total alignment with the US on its imperialist missions against Venezuela and other countries:
Mexico was part of the Lima Group, but now with the new leadership - with AMLO now taking office in Mexico - Mexico is not going along with this plan to recognize Juan Guaido. And Mexico is not the only country of the region. Many, many countries of CARICOM have come forward and have said they do not support this plan. So, the corporate media is trying to make this sound like the whole region is on board with this scheme.
For months, Canada has been playing a leading role in preparing for - according to the Canadian newspapers - for exactly what happened, the recognition of Juan Guaido.
And Canada has been into this scheme for months. And the rationale is supposedly that the election of 2017 was not a legitimate election because people w…

It seems that Bernie Sanders got it all wrong again, this time regarding the situation in Venezuela - very disappointing

globinfo freexchange
In an unfortunate series of tweets regarding the situation in Venezuela, Bernie Sanders exposed his weak spot again on foreign policy matters.
Sanders tweeted:
The Maduro government has waged a violent crackdown on Venezuelan civil society, violated the constitution by dissolving the National Assembly and was re-elected last year in an election many observers said was fraudulent. The economy is a disaster and millions are migrating. 1/3 — Bernie Sanders (@SenSanders) January 24, 2019
The United States should support the rule of law, fair elections and self-determination for the Venezuelan people. We must condemn the use of violence against unarmed protesters and the suppression of dissent. 2/3 — Bernie Sanders (@SenSanders) January 24, 2019
But we must learn the lessons of the past and not be in the business of regime change or supporting coups—as we have in Chile, Guatemala, Brazil & the DR. The US has a long history of inappropriately intervening in Latin Amer…

Former Pentagon official confirms: Trump prepares for war with Iran

globinfo freexchange
Right after Trump's sudden announcement that he will withdraw the US forces from Syria, we had some mixed reactions. Some liberals reacted angrily, but most of the reactions from the liberal machine were rather moderate, or at least not as intensive as someone would normally expect.
On the other hand, Trump's supporters and all those who had enough of the pro-war neoliberal establishment, felt a kind of vindication, as it appeared that Trump would eventually keep its promise for an 'anti-interventionist' policy.
But the blog wrote immediately a 'not so fast' article to explain that most of the Americans and all those who are tired of the US endless wars, should not rush to celebrate. We estimated that Trump's move is probably a sign that he is going to re-organize troops and go after the big target called Iran.
Indeed, shortly after the move, Trump, suddenly again, announced that he will also pullout troops from Afghanistan.
And then, about…

Jeremy Corbyn + Brexit = UK's liberation from the EU neoliberal barbarism

With Tories in power Brexit would be meaningless
globinfo freexchange
As has been mentioned in previous article, Brexit could play a much more critical role in the future course of Europe, apart from being treated just as a result of national pride - wounded Britons alarmed by the sirens of patriotism.
While the Brussels-Berlin axis will seek to implement all the conditions of the Greek experiment inside the EU, the Labour party under Jeremy Corbyn could become an example against this dark future. While the Greek PM, Alexis Tsipras, suffered a heavy defeat as went unprepared in the battle with the ruthless neoliberal priesthood, Corbyn should go to the battle with the neoliberal regime after a good preparation and a well-constructed plan.
Costas Lapavitsas explains why only outside the EU, the UK will have a chance to turn left - with a Labour government under the Corbyn leadership - in order to implement progressive policies for the benefit of the vast majority:
The European Union has bec…

Pompeo's special tweet potentially indirect threat against those who won't follow the orders on Venezuela

globinfo freexchange
After John Bolton indirectly threatened Venezuela with that 'accidental' revelation of about 5,000 US troops to be sent to Colombia, it was Mike Pompeo's turn.
In a peculiar tweet, the other major Trump warhawk essentially sent a clear message to those countries (mostly under the US influence) that refused to recognize Washington's puppet, Juan Guaidó, as the legitimate president of Venezuela.
Pompeo named one by one the countries that obeyed to Washington's orders: “We applaud Austria, Belgium, Croatia, Czech Rep., Denmark, Estonia, Finland, France, Germany, Iceland, Latvia, Lithuania, Luxembourg, Macedonia, Netherlands, Poland, Portugal, Spain, Sweden & UK for supporting Venezuelan people by recognizing @jguaido today as Interim President.
And then he placed a map, colouring the obeyed countries and the US with the same intense color.
We applaud Austria, Belgium, Croatia, Czech Rep., Denmark, Estonia, Finland, France, Germany, Iceland, Latvi…

Government shutdown, Venezuela: Donald Trump evolves into the best propagator of neoliberal fascism that tends to become a norm

by system failure
Even before the 2016 US presidential election, this blog supported that Donald Trump is a pure sample of neoliberal barbarism. Many almost laughed at this perception because Trump was being already promoted, more or less, as the 'terminator' of the neoliberal establishment. And many people, especially in the US, tired from the economic disasters, the growing inequality and the endless wars, were anxious to believe that this was indeed his special mission.
Right after the elections, we supported that the US establishment gave a brilliant performance by putting its reserve, Donald Trump, in power, against the only candidate that the same establishment identified as a real threat: Bernie Sanders.
Then, Trump sent the first shock wave to his supporters by literally hiring the Goldman Sachs banksters to run the economy. And right after that, he signed for more deregulation in favor of the Wall Street mafia that ruined the economy in 2008.
In 2017, Trump bombed Syria f…

#HandsOffVenezuela: Brave Italians show us the path of resistance against the European branch of the neoliberal beast

globinfo freexchange
According to RT, Italy vetoed EU recognition of Venezuelan opposition leader Guaido. As RT reported:
Rome has effectively derailed an EU statement meant to recognize Juan Guaido as Venezuela’s interim leader if President Nicolas Maduro fails to set up snap elections, a Five Star Movement source confirmed to RT.
Italy announced the veto at an informal meeting of EU foreign ministers that started on January 31 in Romania, the source said. The statement, which was supposed to be delivered by EU foreign affairs chief Federica Mogherini recognized Guaido as interim president if snap elections were not held.
The European Parliament is the first European body to recognize Guaido “as the only legitimate interim president of the country until new free, transparent and credible presidential elections can be called in order to restore democracy.
The parliament urged the EU to follow suit but the effort stalled due to internal discord.…

EU parliament drops final leaf, recognizes Washington's puppet Juan Guaido in Venezuela

globinfo freexchange
The European branch of the global neoliberal fascism did what was expected: obey to the orders of the US imperialist empire and recognize Washington's puppet Juan Guaido as the 'legitimate' president of Venezuela.
As Al Jazeera reported:
The European Parliament has recognised Venezuela's self-declared interim president Juan Guaido as de facto head of state, heightening international pressure on the OPEC member's socialist President Nicolas Maduro. EU politicians voted 429 in favour to 104 against, with 88 abstentions, at a special session in Brussels on Thursday to recognise Guaido as interim leader.
Meanwhile, the EU parliament wouldn't even think to 'dare' to challenge the legitimacy of Emmanuel Macron in France, even with all these people protesting in the streets. At the same time, the establishment media try to direct the public attention from the Yellow Vest movement towards the situation in Venezuela.
It doesn't matter that N…