Steve Perry interviews Doug Henwood about the American recession and its causes:
We’ve seen for the last 30 years or so that debt was used by a lot of people to compensate for very weak income growth. The real value of the hourly wage in the US peaked in 1973, declined into the mid-90s, picked up a bit in the late ‘90s, and now has been flat to declining ever since. In the face of stagnant incomes, people worked harder. More people from families went to work. They worked longer hours. But they also borrowed very aggressively. So one reason we saw this tremendous growth in debt over the last couple of decades was to compensate for those deficiencies in the real economy–the weakness of real wages for most people.
What are we going to do about that? We can work off all the debt we want, and the banks can do all the write-offs they want, but if we still have very weak income growth–and, as we’ve seen through the 2001-2007 expansion, very weak employment growth (the weakest labor market income growth we’ve ever seen in a post-WWII expansion)–then you still have a fundamental problem. And I don’t think going through this financial exercise of restructuring the banks is going to do anything to solve that underlying fundamental problem.
In other words, the roots of the current crisis go back decades and have their origin in the succesful push back of capital against America’s workers. Since 1973 real wages have steadily decreased for the majority of American workers, but this trend has been masked first by the increase of double income households, then by families eating into their capital by drawing credit on the value of their house. Through boom and bust this trend has hold steady, with the only real exception being during Clinton’s second term, thanks to some lingering Democratic concern for the working classes.
It’s no wonder then that Doug Henwood is pessimistic about a quick resolution of the current depression, as long as this underlying reality isn’t addressed and the chances of that aren’t great, even with Barack Obama in the White House. What we’ve seen with the crisis so far is that governments worldwide are hellbent on saving capital, but not so much in safeguarding jobs. The danger is that when the crisis will be declared over in a year or two, the economy will be picking up again but with only the stockbrokers and shareholders profiting and the working classes, which is most of us, still in the hole.