How the Financial Industry Makes US Workers Uncompetitive
Executive Summary
- Keep Those Wages Low
- The Nike Apple Model
- The New Slavery
- Michael Hudson Quotation
Introduction
Michael Hudson’s points on financialization are that what the US and other countries are going through is the takeover of the finance sector of a greater and greater proportion of the national output.
Keep Those Wages Low
Often discussed by concentrated power and property owners is the importance of keeping wages low so that they are competitive with other countries as we live in a global economy. This is because the debate on issues in this country is framed by the powerful, and the property owners-employers want to constantly beat down wages. The model of our economic system is to break work down into small pieces and pay the lowest possible wages for that work while charging the highest possible rate.
The Nike Apple Model
The end state is the Nike model, where a giant company is managed by a relatively small administrative staff in Beaverton, Oregon, while all of the work is done at slave wages in third world nations. This is what is meant by the term “staying competitive.” Competitiveness is code by the wealthy for keeping the distribution of income going to the top. The inconsistency of this model is made plain by analyzing how the powerful in this country and others have increasingly financialized the economy. That is they have increased the take from the economy by the rather useless financial sector.
Michael Hudson Quotation
Michael Hudson points out that the load of the financial sector is now so high that reduces American competitiveness internationally, not that you will hear a word about this on the conventional news outlets.
This policy cannot work. One constraint is the balance of payments. The competitive power of U.S. exports of the products of American labor is undercut by the fact that housing costs absorb some 40% of labor’s family budgets today, other debt 15%, FICA wage withholding 12%, and various taxes another 20%. U.S. labor is priced out of world markets by the economy’s FIRE sector overhead even before food and essential needs of life are bought. The “solution” to the financial sector’s negative equity squeeze thus threatens to create even larger problems for the “real” economy. Ms. Bair appropriately concluded her written testimony by commenting that the context for the present discussion of financial reform should be the fact that
“our financial sector has grown disproportionately in relation to the rest of our economy,” from “less than 15 percent of total U.S. corporate profits in the 1950s and 1960s … to 25 percent in the 1990s and 34 percent in the most recent decade through 2008.”
While financial services “are essential to our modern economy, the excesses of the last decade” represent “a costly diversion of resources from other sectors of the economy.”
This is the same criticism that John Maynard Keynes levied in his General Theory, citing all the money, effort and genius that went into making money from money in the stock market, without actually contributing to the production process or even to tangible capital formation. In effect, we see finance capitalism autonomous from industrial capitalism. The problem is how to restore a more balanced economy and rescue society from the financial sector’s self-destructive short-term practices. – Michael Hudson
References
https://michael-hudson.com/2010/01/wall-street’s-power-grab-the-financial-crisis-inquiry-commission-hearings/