Shades of Herbert Hoover
"I cannot help but raise a dissenting voice to statements that we are living in a fool’s paradise, and that prosperity in this country must necessarily diminish and recede in the near future."
— E.H.H. Simmons, President, New York Stock Exchange, January, 1928.
Tell me if this sounds familiar:
Modern industry had the capacity to produce vast quantities of consumer goods, but this created a fundamental problem: Prosperity could continue only if demand was made to grow as rapidly as supply. Accordingly, people had to be persuaded to abandon such traditional values as saving, postponing pleasures and purchases, and buying only what they needed. “The key to economic prosperity,” a General Motors executive declared in 1929, “is the organized creation of dissatisfaction.” Advertising methods that had been developed to build support for World War I were used to persuade people to buy such relatively new products as automobiles and such completely new ones as radios and household appliances. The resulting mass consumption kept the economy going through most of the 1920s.
But there was an underlying economic problem. Income was distributed very unevenly, and the portion going to the wealthiest Americans grew larger as the decade proceeded. This was due largely to two factors: While businesses showed remarkable gains in productivity during the 1920s, workers got a relatively small share of the wealth this produced. At the same time, huge cuts were made in the top income-tax rates. Between 1923 and 1929, manufacturing output per person-hour increased by 32 percent, but workers’ wages grew by only 8 percent. Corporate profits shot up by 65 percent in the same period, and the government let the wealthy keep more of those profits. The Revenue Act of 1926 cut the taxes of those making $1 million or more by more than two-thirds.
As a result of these trends, in 1929 the top 0.1 percent of American families had a total income equal to that of the bottom 42 percent. This meant that many people who were willing to listen to the advertisers and purchase new products did not have enough money to do so. To get around this difficulty, the 1920s produced another innovation—“credit,” an attractive name for consumer debt. People were allowed to “buy now, pay later.” But this only put off the day when consumers accumulated so much debt that they could not keep buying up all the products coming off assembly lines. That day came in 1929.
The only thing that saved the capitalists from themselves was Franklin Delano Roosevelt, who put the brakes on Capitalism As Cancer and put government to work for the people, not just for war profiteers and office-seekers. But over the last few decades, the Republican ascendancy has led to the systematic and planned destruction of Roosevelt’s safeguards, just so a tiny minority of extremely greedy and amoral people could benefit.
Because of this recent greed-is-good amorality, we’re now seeing a rerun of the runup to 1929:
The non-rich majority being encouraged to spend money they didn’t have to prop up the whole edifice, until they lost their jobs and couldn’t even begin to pay back the huge debts their "betters" had all but ordered them to rack up.
Oh, and even as the house of cards collapses one domino institution at a time (Lehman, Bear Stearns, AIG, etc.) , the people behind the whole scam are sending out their mouthpieces to put a happy-talk spin on everything, to the point where they mock those people who’ve been the first ones smacked around by the bow wave of the coming crash as "whiners".
Bush’s and McCain’s minders were hoping that Bernanke and Paulson could forestall the collapse until after the election. It looks like that might not be possible. This is one bullet they won’t be dodging.