==== beginning of my Part 2, continued from Part 1 above ====
Minimum wage? Encouraging unions again? Trade protectionism? You claim that none of these impact the economy.
Huh? All of these things impact the economy--in a negative way.
The policies themselves are neutral. The impact of changing them depends on the conditions in the economy when the changes are made.
Once again, these are policies that the supply siders changed to intentionally suppress wages. They effectively lowered the minimum wage by not keeping it up with inflation, they intentionally suppressed the unions to under cut the workers' negotiating power and they passed trade treaties that fully exposed the wages in this country to competition from low wage countries.
It is definite that these changes did damage the economy, they increased income inequality. This is what we are discussing. You can have too little income inequality, you You said that the income inequality came from the market forces, not the intention on their part to increase the income inequality in the country, to increase the funds available for investment and thereby increase the amount of business investment and economic growth.
There is no doubt that they failed to increase investment and growth, both declined. But the policies that they changed supported wages in the economy, changing them would lower wages and increase profits. as they knew that they would. Increasing the income inequality wasn't a goal of the program, it wasn't an unintended consequence of the program, it was the only way that the program could work.
Or didn't these things actually happen? Perhaps you slept through the 1980's or you hadn't been born yet and this is all news to you?
And what changed the market forces?
What changed the market forces is that the automation costs money--a lot of money.
Lets look at my former employer. When I started there there was no real automation. Some machines did their job with a minimum of human intervention but they applied no intelligence to the process. (Example: A big belt sander. The clearance was preset, anything that went through it would have it's top sanded until it was of the set thickness. Purely mechanical, just a set of belts of different grits.) I do not know the price tags of such equipment, I would be surprised at numbers over $10k.
We got into automation in a heavy way. Off the top of my head (almost certainly a low estimate as I only paid attention to pieces of equipment I had to talk to) I'm aware of ~10 machines we bought well up there in the 5 figures, two that we built basically from scratch that I'm sure cost us at least that much, two more in the low 6 figures, one at $500k and one upwards of a million dollars. In addition there was a few hundred $k in computers/networking and three of us who did nothing but computers. There were also two guys who did nothing built build/maintain the automation and one who was a mix of the two.
That's several million dollars the company spent on automation instead of several hundred jobs. Why in the world should the profit from that automation go to the workers that weren't working any harder? It went to those of us employed with the automation and to the companies we bought that automation from.
The factory workers were making more than they were before (inflation) and most of them had an easier job. They lost nothing to the automation, it's just we didn't hire as many as we would have had we not automated. The half dozen of us who dealt with it got paid well above what the factory workers did and the owners profited. Since I can't see a victim I can't see how you are arguing that this is unfair.
Wouldn't the high costs of automation discourage the application of it?
If you are going to discuss these matters you have to understand that you are talking about the whole economy and how it operates and how it reacts. It is different than an individual operates and reacts in the economy. That we are talking about not just you. Or me. Or just your company.
There are I believe nine paradoxes of the macroeconomy. Things where the reactions of the macroeconomy are completely different, polar opposites, to the reactions of individual economic actors. The most famous of these is the paradox of thrift, that saving is good for the individual but bad for the economy as a whole because savings reduces spending. Another is the paradox of (the national) debt, that it is also the national private savings and can never be reduced except by reducing private savings, which means that it can never be reduced because it would cause a massive depression that would increase the debt. Another is the paradox of stability that the financial markets are inherently unstable and the more money in the market the more unstable it is. Of course, the opposite is true of individuals.
These are counterintuitive for someone like you who has to consider and talk about the economy as it affects you.
The answer to your question is that the whole economy is the victim. I am the victim. You are the victim. Your company is the victim. Even the rich are victims. The income inequality robs the economy of its main driver of aggregate demand by lowering aggregate wages, the labor share of the GDP, to increase the returns to capital, i.e. profits.
This reduces employment, growth, investment and economic activity. It increases unemployment, private debt, poverty, crime, drug use, financial market instability and the frequency and intensity of recessions caused by financial crises. These things are always bad for the economy and society. The only good that it produces is lower inflation, because the excessive profits from wages don't have any measurable impact on the economy.
It does increase the value of the stock market. The Dow Jones stock index has increased an astonishing 2300% nominal since 1980 compared to 290% for the cost of living and 300% for the median personal wage. This inflation in the prices of stocks we have defined as a good, by casting it as "capital gains." The same is true of home prices, inflation in the housing market is called "capital gains" too and a good too.
It isn't about what is fair or who earned what. These are not absolutes, they vary based on the different viewpoints. Beyond this consideration, they are irrelevant.
We all need an economy that is sustainable. That is stable and not marching in lockstep toward economic and social disaster all of the time.
A capitalistic economy in which there isn't intentional redistribution of income from the highest earners to the rest of the people is one in which the income and the wealth is going to be concentrated in progressively fewer hands all of the time. This not sustainable in the long term. We have had to learn this repeatedly over the last two hundred years.
The most recent and current destabilizing elements are the supply side economic policies that tilt the playing field toward the wealthy. I would be complaining equally as strongly if we were threatening the stability of the economy by adopting policies to tilt the field too far the other way.
We need profits to keep the capitalistic mechanism running. They power the machine. But they are part of the costs of capitalism, part of the overhead of capitalism.
But they aren't the reason that the machine is running.
We threaten the machine either when everyone receives the same or when the when a few receive all of the surplus. That there is a middle point where the machine runs the best between these two extremes. It isn't based on what is fair, it is based on stability of the economy itself and in turn, society itself.
There can be no better proof that we are too far toward over-rewarding capital than the recent election of our proto-fascist president. The workers are restless, they know that they are being screwed. They don't know how or by whom. They made the wrong choice, but honestly neither one would be the savior of the working class. It is just that Trump has promised to continue to screw them more than Clinton did.
The current economy is not stable, the financial sector is once again setting off to try to find some way to get their hands on the almost unbelievable amount of idle cash that the rich have accumulated over the last thirty five years. The last time that they came up with an innovation to claim part of this cash for themselves it was sub-prime mortgage backed securities, and aided by idiots who believed that Wall Street would self-regulate, they came really close to destroying the entire world's economy.
==== end of my Part 2, Part 3 continues below ====
