A few thoughts on the eventual tipping point of our economy...

I recently found this video on Flora.tv. Which is a great resource for all sorts of academic lectures. This lecture by David Harvey and accompanying animation has done a fantastic job of illustrating what has happened to cause the financial crisis. It also explains the fundamental flaws in democracy and capitalism that prevent any crisis from ever truly being solved.

It's pretty wonderful. I suggest viewing it a few times to understand it. I have watched it several times myself. The embedded video below cuts it off at 10 minutes, so watch the full programs at Flora. It's actually only 11 minutes total.

Oh, and welcome to my new blog.



What I'd really like to discuss about the video today is the time-line that he lays out concerning Reaganomics and the steady decline of wages since the 70's. We are in this time-line now, follow is logic further to see where we are going.

There is a continual problem here, David states that "capitalism never solves it's crisis problems, it just moves them around geographically". There has continued to be financiers approaching each problem to come up with a way to repackage and "circumvent the barrier"; never actually solving anything. I love how he says, "each crisis is defined by how we handled the last one", or something like that.

These ideas first occurred to me during my undergraduate study at the University of Utah. I was walking home from a finance class and walking through these very nice neighborhoods. I had been studying real-estate and could deduce the different ages of the homes I passed. Through casual anthropological observation I noticed that the older homes had newer homes between them and figured that the original owners had sold their land to someone who would then build on it and get the benefits of the established neighborhood. Whatever their personal reasons for doing this, they were cashing in on their assets to raise capital. Now this capital wasn't earned traditionally, through hard work or ingenuity, it was acquired by cashing in on the capital accumulation of their assets.

I then thought, "What will the next generation do to supplement their income?".  This was before the housing bubble burst and advertisements for home equity lines of credit were being broadcast constantly from every forum. This was the beginning of my fear for our system and my future. Since then, I have learned more and more, without finding anything but madness to comfort my fears.

Anyone who has toasted a drink with me a few times, may have noticed my occasional dedication, "To the coming Marxist revolution", which will get a smile or a chuckle now and again. I'm not so much recycling my jokes, but rather cementing the idea in my mind that change is inevitable. A specific change. This economic cycle that we are in is much larger than a couple of election terms. The politics of it, span multiple generations and parties in power. So much momentum that keeps building on itself, and it only takes casual interest in Washington now to see that legislating a smooth transition towards a better, more secure system will be impossible. IMPOSSIBLE! The roots of the current system is like a tumor that has grappled the heart of the body, and to remove it would be it's death.

Hahaha! Why so serious? Well, I'm occasionally prone to dramatics. However, I'm kinda off point here. Wages have declined steadily in the past 40 years. We have dealt with it by taking on more and more debt, publicly and privately. We have also successfully lowered the cost of living by outsourcing labor and becoming more efficient. Oh, and through household innovations, we have been able to send the wives in mass into the workforce. An interesting note here, a triumph of feminism to surpass that glass ceiling and successfully enter the world of business. However, now it's difficult and rare for a family to sustain itself on one income alone. Interesting comedy of errors punishing our hubris I think.

We are approaching something soon, because as you look closely at each crisis and it's "solution" and you understand how these things compound on each other, I really feel like we are playing the last of our cards and have painted ourselves into a corner. We cannot increase wages. For starters, unemployment is too high to justify that, and second it would cause inflation (especially following the monetary policies of the last several years). We cannot sustainably take on any more debt, try asking the Tea Party about that one, or try calling your credit card company. I think that we have nearly maximized our efficiencies through technology and outsourcing. Finally, unless I can take on another wife, I think that our household wage earners max out at 2.

There are other solutions out there I am sure, radical new technology, etc. I know that my analysis is fairly limited, but it at least outlines my concern; justifies my sense of concern. My true feelings are excitement though, I would like to see how this all plays out.