Enough is (never) enough (for some)

Michael Moore makes pretty good documentaries. Not everyone's cup of tea because he makes them from a distinctly socialist perspective.

His first effort was called Roger and Me. It was about General Motors who back in (I think) 1989 closed a few factories made thousands of Americans redundant and turned Moore's hometown of Flint Michigan into the ghost town it remains today. Michael wanted to interview the ceo of GM and ask "why?"

This is ancient history nowadays. So some of you. Knowing where GM is now may think it was an act of necessary, survivalist, desperation. A few jobs sacrificed to preserve the many.
But. At the time GM had announced its best ever results. It had just become the biggest company in the world.
Moore was puzzled. So perhaps are you. He never got an answer.

The answer is simple. The shareholders wanted more.

End of story.

Well sort of. Because in many ways that was the beginning of the current crisis!

This was the flexing of muscles by financiers that led to the crash.
Hyperbole? Well let's see.

No one surely can dispute that since the emasculation of the Unions that the providers of labour don't have much influence on management. No one disputes that customers do. But at GM in 1989 customers (especially the sort of americans they were making redundant - more on that later) were happy. If they weren't the results wouldn't have been so good. And the company wouldn't have become the biggest in the world. But. Thousands of jobs were shifted to cheaper labour markets so that shareholders could get more.

Since 1989 the share of National Wealth represented by wages has fallen. Every single year in the west. In the past five years it has even fallen in china!

This is wage repression. Labour, once emasculated, has no power to resist being given a relatively smaller and smaller share of the pie of success. Indeed if you add fear of redundancy to the equation you quickly see that labour is asked to be grateful just to have a job at all! So whatever has happened since 1989. Let's not blame the providers of labour.

So these days - if you want to get rich as an employee you need unique skills. Rare skills. Marketable skills.

Of course everyone thinks its OK to reward smarter people and not dumber people. Unless of course those dumber people have cash. No matter how dumb you are if you have money; if you can become a provider of finance and not a provider of labour then the same society that thinks smart people should get more than dumb people thinks that you should get more than anyone.

But one of the effects of wage repression was the fact that there was much less cash in the population to buy all those goods and services made by clever people for the benefit of the financiers.

Much less

Its never popular to quote Marx. But Bozo is rarely popular anyway. So here goes. Karl said "capitalism cannot abide a limit". (I know what he means - I worked at HSBC when a senior exec sued the bank because they only paid him £3.3 million!)

And wage repression was limiting demand for products. So.
Finance. The great engine of economic growth. Came up with a solution. They lent everyone the money to buy the stuff! In US/UK since 1990 personal debt tripled. Wage inflation ? Oh 2-3%. But personal debt. Tripled. Risky huh? Lending all that money to people whose wages aren't gonna go up? No. Because of all that equity in their houses! Remember home ownership in US/UK is 70%. In Switzerland its 22%. Poor Swiss were so unlucky. They couldn't borrow nearly as much as us!

So surely credit is limited by the value of houses?

Well it would have been. But capital cannot abide a limit. And the two limits causing problems were the limits on bonuses and the limits on creating credit. So finance comes up with a genius idea. Let's create more home owners! And let's make it risk free by telling everyone that unlike every other market the market for property only ever goes up.

Well we know where that thinking got us.

Society finds it easy to say to a worker and his trade union. "Be reasonable. Accept reasonable settlements. Think of the company. Think of the country's economy and the dangers of inflation".

Society finds it hard to say to finance:
" Be reasonable. Accept reasonable dividends. Think of the country's economy"

You see when unions start trying to negotiate higher deals the media and the government will worry -Rightly- About the effect of wages on inflation.
But not bonuses?
Wages. As a share of GDP I fallen in real terms every year for 20 years.
If you want to worry about inflation dude. Look somewhere else.

There's been a crash. So we have to accept that times will be tough. And it is clear that overall the poor have got poorer since spring 2008. It is clear that lots of people lost their jobs. Funny then. That the rich. As usual. Have got richer.

Back in 1989 the shareholders of GM wanted more. They didn't want reasonable.

Oh and all those thousands of Americans whose jobs went to Mexico. Whose jobs went to wherever. They stopped being loyal GM customers.

And look at GM now

So that worked well then.
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