Wheat from the Chaff

An analysis of the US economy by Robert Reich

I would encourage you to download this speech by Robert Reich. [Right-click on the link and choose "Save Link As" or "Save Target as".] It's a cogent Keynesian analysis of America's current economic situation, except that it's also a near-perfect Marxian analysis, too, aside from the Keynesian interventionist strategies. Reich's key argument is that inequality is bad for business, and unless America can address this fundamental challenge, all of the secondary problems will be insoluble. The irony is that, in the end, Reich copies much of David Harvey's Marxist analysis of the fundamental contradictions of capital accumulation. The only real difference is that Reich wants to save capitalism, while Harvey has no such allegiance.

One interesting contribution by Reich is his discussion of the "three coping mechanisms" that the average American household has been using over the past 30 years to compensate for the effective decline in wages:

1. moving women into the workforce
2. making men work more overtime (a great source of "improved" US productivity)
3. borrowing money against home equity

Reich asserts that these mechanisms have, up to now, allowed Americans to ignore the problems of inequality. However, these mechanisms are now spent, and it's time American politicians own up to the fundamental problem: the engine of the American economy - the average consumer - is no longer capable of spending the money that makes economic growth possible.