How do you respond to this statement? My hunch is that the decrease in real wages is not fully offset by lower prices of consumer goods and services. Meanwhile, the wealthiest Americans see large real gains in their incomes.

In the long run, money is a veil and trade is barter; imports can only be paid for with exports of real goods and services. This implies a migration of workers from sector to sector within our borders (as we play to our comparative advantages), but not unemployment. Isn’t the real problem the US trade deficit? Could we be in the fix we’re in without that flood of paper money issuing from our shores? Isn’t all that dollar liquidity sloshing around the world doomed to vaporize someday (since it isn’t going to be spent)?

Also, don’t the deficits, immigration policies, and scare mongering about demographic meltdown all have the common element of allowing elites to put public assets (assets in the very broadest sense) into their private pockets?

After reading your very impressive analysis of the economic forces at work in our world right now I felt like sending you something I wrote on the subject recently. Your comment or criticism would be welcomed.

Fueled by the Industrial Revolution the capitalist system broke the brutish shackles of feudalism on the people of the day. If the economic system was a fresh young pup in that historic epoch, it today looms over humanity as a rabid nuclear-armed beast that will either be put down or destroy human life on this planet.

Time has seen the United States of America emerge as capitalism’s favorite son and sharpest instrument. During its formative years American capitalism actually encouraged a Civil War victory for anti-slavery forces. Later, in a time of severe crisis called the Great Depression, it saved itself with New Deal reforms and rose up to militarily defeat its fascist European and imperialist Japanese capitalist rivals.

The most serious attempt ever to build a socialist state after the Russian Revolution and the fleeting erratic effort in China after 1949, touched off a brief period challenge and uncertainty but American capitalism steeled itself throughout the Cold War and emerged with possibilities for world domination most immediately grasped by the so-called Neo-cons. So since the election of Ronald Reagan in 1980 has the US has accelerated toward a failsafe point, a Rubicon of sorts.

There is no turning back now! Unchecked by a revolutionary struggle based on the idea of sharing the world’s resources, capitalism will by its very nature turn the Earth into a giant slave labor camp. Even at that, the system will then stare into the eyes of one of its fatal contradictions. Slaves can not buy the products they produce. A Brave New World? Only for a handful at most.

Capitalisms appetite for profit simply can not be satisfied! For example U.S. oil corporations realized world record profits last year and this year as gasoline prices race past $3.00 a gallon they will increase that profit margin. But unless these entities make even greater profit into the indefinite future they will whither and die. There is only so much technology can boost production or wages can be depressed until a slave system must be created.

Capitalism has now armed itself with doomsday weapons and created an immune system for itself. It influences culture and controls the mass media and education across a growing part of the world, places its servants in seats of political and military power, and creates philosophy and myth to glorify its own existence. Much like the human body’s white blood corpuscles, the capitalist system can call on an army of economists from M.I.T. or the University of Chicago to repel threats to its lifeblood, profits.

Time grows short.

Thank you for your comments. They are a real pleasure and inspiration to read.

I sense a concern about the broader economic implications of eroding wages and incomes. This shows up in Luna Didi’s and Doug Page’s questions about what will happen to house prices and who will buy what gets produced. This concern is absolutely right, and I have a piece that I will be posting ten days from now on this subject.

One thing I must emphasize is that I believe we must resist becoming an “exclusionary” society. That means resisting ugly temptations to turn on those who have not. There is an “inclusionary” solution that can make the global economy work for all. Articulating that solution and building political support for it is a major goal of this weblog.

To turn on the have nots will take us down the political path of the 1930s. Such a path will not produce prosperity and happiness, and will only produce hate and the destruction of democratic and open society.

In solidarity,

Tom Palley

Economic theory predicts that there will be an overall gain in utility from trade — they just don’t discuss who is going to get that utility.

Well, it is going to go into profits, here. Clearly.

So, the ultra-rich are going to buy all those cheap products.

I don’t see any reason why the full application of the Stolper-Samuelson theorem to the real world today would result in a depression. Just a very unequal distribution of the gains of trade.

So, the poor would be working hard producing luxury goods and services for the consumption of their bosses and their bosses’ wives and children. Producing goods like beautiful vacation homes and elaborate restaurant meals and services like nannies’ work, maids’ work and so on.