Yesterday, I wrote about The Glory and The Dream, William Manchester's narrative account of America during the middle years of the 20th century. Beginning with the routing of the BEF by "Dugout" Douglas MacArthur, Manchester moves on to an overview of that horrid year, 1932, with a glance back at the previous three-and-a-half years of Depression. One of the points Manchester makes on the roots of the Depression is something that should make us all sit up and think.
Part of the problem that resulted in the almost complete collapse of industrial capitalism in the United States was a refusal on the part of government or society to demand higher wages from employers at a time of increasing productivity. The 1920's were boom years for industry (although certainly not for farmers, as drought and over-farming destroyed much of the arable land in the middle part of the country), but the rapid increase in productivity, spurred by technology, was not matched with a rapid increase in wages. Indeed, wages during the 1920's were flat, much as they have been for a generation, even as we go through another technological revolution increasing productivity. Stagnant wages combined with increased productivity led to a flourishing of credit, from individual consumers to corporations. Once the notes started to come due - the Crash of 1929 was only the first brick to fall - there was simply not enough cash in the system to stop the liquidity failure. Firms were left with huge inventories no one could buy because there wasn't enough money left. Thus began the spiral that left from a quarter to a third of America unemployed.
As we are in the dying phases of another round of market fundamentalism, perhaps it would be incumbent upon us to digest these facts. After a brief uptick during the Clinton years, wages (in constant dollars, for those who care) have continued to stagnate, reducing purchasing power. This reduction in purchasing power has led to the explosion of credit with which too many of us are saddled. While there are all sorts of mechanisms in place to catch a precipitous collapse of the credit system, it is all too easy to understand what would happen should it become clear that liquidity shortage is a serious problem. No computerized trading halt, no bank holiday, no influx of cash from the Federal Reserve can stop the second death of American capitalism should notes come due. That we are in the midst of some strange stock market bubble right now does not decrease, but actually increases, my fear that things can only get worse.
It would seem, then, that it might be important to demand higher wages all around as part of a general policy of increasing the available cash in the system usable for consumers. Rather than offering credit, a labor policy that focused on the social dimension of corporate wages, and what happens when that dimension is ignored in the name of some kind of strange, abstract ideal known as economic laws, would be most congenial to cushioning whatever blow will come - and come it will. An entire economy riddled with debt, not enough present or future cash in the system to buoy up the slowly sinking boats - it's all there. One little spark could set it all ablaze.
1932 was a bad year. We could have worse, though, if we fail to act.
Virtual Tin Cup
