New York University economist Nouriel Roubini caused a bit of a kerfuffle a while back when he told the Wall Street Journal that Karl Marx might have gotten it right.
"Karl Marx had it right," said Roubini, who snagged global notoriety when, in 2006, he predicted the 2008 housing-bubble bust and economic collapse. "At some point, capitalism can self-destroy itself. That's because you cannot keep on shifting income from labor to capital without not having an excess capacity and a lack of aggregate demand. We thought that markets work. They are not working."
Kerfufflepalooza. God forbid anyone suggest not cleaving to right-wing Norquistian uber-supply-side dogma.
Republicans, with their rabid commitment to dismantling government and eliminating regulation, with their fervent passion for slashing taxes on corporations and the very rich, have catapulted the global economy toward Marx's capitalist end game by removing the referee that kept the world's giant Monopoly game going.
Republicans simply couldn't comprehend and wouldn't accept that government wasn't separate from the marketplace, but was part of the marketplace. Remove the government governor from the economic engine, and money flowed out of the marketplace and into supply-side oblivion.
Clinton Labor Secretary Robert Reich, in his book Aftershock, went to Marriner Eccles, Fed chairman from 1934 to 1948, as Noel Pearson described in the Australian:
Eccles wrote in his memoir, "As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth - not of existing wealth, but of wealth as it is currently produced - to provide men with buying power equal to the amount of goods and services offered by the nation's economic machinery.Poker or Monopoly, when one, or, in the global context, very few, accumulate all the chips and money, everybody else becomes testy and surly, and the cards or gaming pieces get angrily shovelled back into their boxes and everyone goes off to watch the Red Sox and the Yankees on the tube. In the global context, tossing the game box back onto the shelf equaled Marx's end of capitalism.
"Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth.... By taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants.
"In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped."
As Roubini told the WSJ, businesses weren't, "doing pacts because there is excess capacity, and not hiring workers because there's not enough final demand, but there's a paradox and a Catch 22."
"If you are not hiring workers," Roubini said, "there is not enough labor income, there is not enough consumer confidence, there is not enough consumption, there is not enough final demand."
"And, the last two or three years, we've had actually worse than this because we had the massive redistribution of income from labor to capital," Roubini said, apparently channelling Eccles. "The marginal propensity to spend of a household is greater than the marginal propensity to spend of a firm....So, that redistribution of income and wealth makes the problem of excessive lack of aggregate demand even worse."
Which, of course, is why, in dicey economic times, government, as the consumer of last resort, must step in and increase spending to stimulate the economy, instead of slashing spending - as Republicans always demand - and depressing the economy.
But, that, clearly, wasn't enough. There was one more piece, and here, the American people were way ahead of the curve around the ol' Monopoly board.
Poll after poll revealed Americans wanted the rich to pay more in taxes. 72% wanted folks making $250,000 or much, much more a year to pay higher taxes to shore up Medicare and Social Security. 66% wanted to increase income taxes on upper income Americans to reduce the federal deficit.
We're not talking about adjusting depreciation write-off schedules for corporate jets here. We're talking about real revenue reform that could bust up the massive accumulation of wealth into the hands of the very few, where it basically sits and rots in arcane financial instruments. 84% of America's massive wealth was concentrated into the hands of 20% of the richest Americans. It didn't take a massive amount of imagination to work out that you couldn't operate the free world on 15% of America's wealth. Just more imagination than Republican greed zombies possessed.
As we learned in Hello Dolly, money was like manure: it didn't do any good unless you spread it around.
While Republicans and Norquistian Tea Party zealots had an aneurysm screaming that you must never, never raise taxes in dicey economic times, bear in mind that Republicans and Norquistian Tea Party zealots screamed you must never, never raise taxes in good economic times either, or, for that matter, in so-so economic times, before lunch, after lunch, overnight, on Tuesdays, on rainy days, on sunny days, on cloudy days, when there's a ballgame on the tube, or whenever 15-year-old boys were horny.
Republicans and Norquistian Tea Party zealots simply couldn't be right in all those instances, or, perchance, never.
Reich, describing the great American economic boom of the fifties and sixties, when taxes on upper incomes got up into the 70% and even 90% range, wrote "contrary to what conservative commentators had predicted, the high tax rates did not reduce economic growth. To the contrary, they enabled the nation to expand middle-class prosperity and fuel growth."
"During the three decades from 1947 to 1977, the nation implemented what might be called a basic bargain with American workers," Reich said. "Employers paid them enough to buy what they produced. Mass production and mass consumption proved perfect compliments."
Then, the Republicans' sainted Ronald Reagan became President, and the supply-siders took over.
"Government could have enforced the basic bargain, but it didn't," Reich said. "It slashed public goods and investments, whacking school budgets...reducing job training...allowing bridges, ports and highways to corrode. It shredded safety nets...."
Reagan did all that so the very wealthy could enjoy tax rates slashed from 70% to 35%, or 15% on capital gains. Wealth accumulated in the top tiers. Middle class income stagnated. Low taxes encouraged mergers, acquisitions, layoffs, outsourcing and offshoring so corporations and the rich could literally capitalize and enjoy the tax-free profits. All those tax-free profits helped pay for more lawyers and lobbyists to bust up unions and make sure the rich got ever more and greater tax cuts, tax breaks, and tax subsidies.
Everyone had to borrow to stay afloat and keep the economic engine humming. They used their homes as ATMs through cash-out refinancing.
And then, the great consumer engine became exhausted. Karl Marx took the Monopoly box down off the shelf, began sweeping the little plastic hotels off Boardwalk and Park Place, and started tossing the race car and the top hat and the little Scottie dog back into their compartments.
As economies tanked, Roubini warned that unrest could spread.
"Recent popular demonstrations, from the Middle East to Israel to the UK...are all driven by the same issues and tensions: growing inequality, poverty, unemployment, and hopelessness," Roubini said. "Poor and desperate people whether in the Middle East or the UK tend to riot."
Bottom line, government must divert wealth from accumulating in those arcane financial instruments where it just sits and rots.
"How are we going to fill the fiscal gap without raising taxes?" Roubini asked.
Or, Americans can vote a populist, right-wing, pay-to-play, Norquistian Republican from Texas into the White House, and Karl Marx can get on with sweeping all the little houses and hotels and Chance cards back into the Monopoly box.