Capital and Labour

Capitalism sowed the seeds of its own demise because the benefits of a decade-long boom accrued to capital, with nothing flowing to labor. Telling workers who hadn't had a decent pay raise for years to tighten their belts once the good times ended proved disastrous.

Click on the link above to access Mark Gilbert's article from Bloomberg entitled: "Granddad, Tell How Capitalism Committed Suicide".

As you know I always look for the just the right articles to set the pitch for these posts. The comment about labour and capital is a critically important one. It invariably underlies the difference between a real economic expansion aka 1945-1965 and a monetary expansion aka the nineties and noughties. In a real expansion the value of labour increases and the purchasing power of consumers rise through increased income. This is a sustainable expansion. In a monetary expansion, which has just ended, the purchasing power of consumer rises through increased access to debt and is driven by gearing not productivity and wealth.

...and that folks is why what we going to witness in the next few years will be a repeat of the 1930's and not the 1970's.

-Prem