America is Regressing into a Developing Nation for Most People

By Lynn Parramore, Senior Research Analyst, Institute for New Economic Thinking. Originally published at the Institute for New Economic Thinking website

you’ve probably heard the news that the celebrated post-WW II beating heart of America known as the middle class has gone from “burdened,” to “squeezed” to “dying.”  But you might have heard less about what exactly is emerging in its place.

In a new book, The Vanishing Middle Class: Prejudice and Power in a Dual Economy, Peter Temin, Professor Emeritus of Economics at MIT, draws a portrait of the new reality in a way that is frighteningly, indelibly clear:  America is not one country anymore. It is becoming two, each with vastly different resources, expectations, and fates.

Two Roads Diverged

In one of these countries live members of what Temin calls the “FTE sector” (named for finance, technology, and electronics, the industries which largely support its growth). These are the 20 percent of Americans who enjoy college educations, have good jobs, and sleep soundly knowing that they have not only enough money to meet life’s challenges, but also social networks to bolster their success. They grow up with parents who read books to them, tutors to help with homework, and plenty of stimulating things to do and places to go. They travel in planes and drive new cars. The citizens of this country see economic growth all around them and exciting possibilities for the future. They make plans, influence policies, and count themselves as lucky to be Americans.

The FTE citizens rarely visit the country where the other 80 percent of Americans live: the low-wage sector. Here, the world of possibility is shrinking, often dramatically. People are burdened with debt and anxious about their insecure jobs if they have a job at all. Many of them are getting sicker and dying younger than they used to. They get around by crumbling public transport and cars they have trouble paying for. Family life is uncertain here; people often don’t partner for the long-term even when they have children. If they go to college, they finance it by going heavily into debt. They are not thinking about the future; they are focused on surviving the present. The world in which they reside is very different from the one they were taught to believe in. While members of the first country act, these people are acted upon.

The two sectors, notes Temin, have entirely distinct financial systems, residential situations, and educational opportunities. Quite different things happen when they get sick, or when they interact with the law. They move independently of each other. Only one path exists by which the citizens of the low-wage country can enter the affluent one, and that path is fraught with obstacles. Most have no way out.

The richest large economy in the world, says Temin, is coming to have an economic and political structure more like a developing nation. We have entered a phase of regression, and one of the easiest ways to see it is in our infrastructure: our roads and bridges look more like those in Thailand or Venezuela than the Netherlands or Japan. But it goes far deeper than that, which is why Temin uses a famous economic model created to understand developing nations to describe how far inequality has progressed in the United States. The model is the work of West Indian economist W. Arthur Lewis, the only person of African descent to win a Nobel Prize in economics. For the first time, this model is applied with systematic precision to the U.S.

The result is profoundly disturbing.

In the Lewis model of a dual economy, much of the low-wage sector has little influence over public policy. Check. The high-income sector will keep wages down in the other sector to provide cheap labor for its businesses. Check. Social control is used to keep the low-wage sector from challenging the policies favored by the high-income sector. Mass incarceration – check. The primary goal of the richest members of the high-income sector is to lower taxes. Check. Social and economic mobility is low. Check.

In the developing countries Lewis studied, people try to move from the low-wage sector to the affluent sector by transplanting from rural areas to the city to get a job. Occasionally it works; often it doesn’t. Temin says that today in the U.S., the ticket out is education, which is difficult for two reasons: you have to spend money over a long period of time, and the FTE sector is making those expenditures more and more costly by defunding public schools and making policies that increase student debt burdens.

Getting a good education, Temin observes, isn’t just about a college degree. It has to begin in early childhood, and you need parents who can afford to spend time and resources all along the long journey. If you aspire to college and your family can’t make transfers of money to you on the way, well, good luck to you. Even with a diploma, you will likely find that high-paying jobs come from networks of peers and relatives. Social capital, as well as economic capital, is critical, but because of America’s long history of racism and the obstacles it has created for accumulating both kinds of capital, black graduates often can only find jobs in education, social work, and government instead of higher-paying professional jobs like technology or finance— something most white people are not really aware of. Women are also held back by a long history of sexism and the burdens — made increasingly heavy — of making greater contributions to the unpaid care economy and lack of access to crucial healthcare.

How Did We Get This Way?

What happened to America’s middle class, which rose triumphantly in the post-World War II years, buoyed by the GI bill, the victories of labor unions, and programs that gave the great mass of workers and their families health and pension benefits that provided security?

The dual economy didn’t happen overnight, says Temin. The story started just a couple of years after the ’67 Summer of Love. Around 1970, the productivity of workers began to get divided from their wages. Corporate attorney and later Supreme Court Justice Lewis Powell galvanized the business community to lobby vigorously for its interests. Johnson’s War on Poverty was replaced by Nixon’s War on Drugs, which sectioned off many members of the low-wage sector, disproportionately black, into prisons. Politicians increasingly influenced by the FTE sector turned from public-spirited universalism to free-market individualism. As money-driven politics accelerated (a phenomenon explained by the Investment Theory of Politics, as Temin explains), leaders of the FTE sector became increasingly emboldened to ignore the needs of members of the low-wage sector, or even to actively work against them.

America’s underlying racism has a continuing distorting impact. A majority of the low-wage sector is white, with blacks and Latinos making up the other part, but politicians learned to talk as if the low-wage sector is mostly black because it allowed them to appeal to racial prejudice, which is useful in maintaining support for the structure of the dual economy — and hurting everyone in the low-wage sector.  Temin notes that “the desire to preserve the inferior status of blacks has motivated policies against all members of the low-wage sector.”

Temin points out that the presidential race of 2016 both revealed and amplified the anger of the low-wage sector at this increasing imbalance. Low-wage whites who had been largely invisible in public policy until recently came out of their quiet despair to be heard. Unfortunately, present trends are not only continuing, but also accelerating their problems, freezing the dual economy into place.

What Can We Do?

We’ve been digging ourselves into a hole for over forty years, but Temin says that we know how to stop digging. If we spent more on domestic rather than military activities, then the middle class would not vanish as quickly. The effects of technological change and globalization could be altered by political actions. We could restore and expand education, shifting resources from policies like mass incarceration to improving the human and social capital of all Americans. We could upgrade infrastructure, forgive mortgage and educational debt in the low-wage sector, reject the notion that private entities should replace democratic government in directing society, and focus on embracing an integrated American population. We could tax not only the income of the rich, but also their capital.

The cost of not doing these things, Temin warns, is incalculably high, and even the rich will end up paying for it:

“Look at the movie, Hidden Figures: It recounts a very dramatic story about three African American women condemned to have a life of not being paid very well teaching in black colleges, and yet their fates changed when they were tapped by NASA to contribute to space exploration. Today we are losing the ability to find people like that. We have a structure that predetermines winners and losers. We are not getting the benefits of all the people who could contribute to the growth of the economy, to advances in medicine or science which could improve the quality of life for everyone — including some of the rich people.”

Along with Thomas Piketty, whose Capital in the Twenty-First Century examines historical and modern inequality, Temin’s book has provided a giant red flag, illustrating a trajectory that will continue to accelerate as long as the 20 percent in the FTE sector are permitted to operate a country within America’s borders solely for themselves at the expense of the majority. Without a robust middle class, America is not only reverting to developing-country status, it is increasingly ripe for serious social turmoil that has not been seen in generations.

A dual economy has separated America from the idea of what most of us thought the country was meant to be. 

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  1. Disturbed Voter

    I like to think that the future of a country is determined by its character, by its spiritual values. That people count, not just the other resources. One can debate the character of the American people. But I do know that when a minority of a community decide that the majority are no longer “with us”, the national character is on life support. Even if the US were only a traditional agricultural economy of 200 years ago, the trajectory of a society which has denied “community” as applying to all, is grim.

    1. Lewis

      Good God. The movie, Hidden Figures, is a complete fabrication. This has been discussed in a number of places. Also corroborated by my uncle who was there atvthe time in NASA and was involved in the work the movie references. It’s not dramatic license. It’s a fabrication.

      1. Disturbed Voters

        I am sure the “oh my god!” aspects of segregation misogyny were real. Wasn’t that the point of the movie? Other than that, of course Hollywood always takes license, even with The Right Stuff.

        I am sure there are smart women out there … there is always a high sigma part of any population. But don’t ever expect low sigma folks, of either gender, to be rocket scientists.

        Narrative control has been on full lockdown, since Frank Capra in 1942. We have always been at war with Eastasia.

      2. justanotherprogressive

        Read the book, then. Yes, the movie was a very “condensed” version of what happened and some facts were changed, but you cannot deny the message of the book or the movie……

      3. DH

        The key part that was fabricated in the movie was the omission of the start of the black women computers in WW II. That was actually the key period for people like Dorothy Vaughan and Mary Jackson to start their careers. Black women math graduates from black colleges were typically school teachers for segregated black schools. WW II meant that the US was desperate enough for trained mathematicians that they would hire them as “computers”. NAACP viewed this as a major opportunity and made sure that the black community was kept well-apprised of these opportunities through highlighting them in black newspapers while the white community paid no special attention to the opportunities. That is why black women were able to provide a significant number of computers.

        Since women were generally not permitted to be engineers, there was little chance that the black women computers would rise above their designated station in life, since the white women were also generally segregated from the men in a separate computer group. So there were two simultaneous segregations going on: women mathematicians were used for computing equations given to them by the male engineers housed in different buildings; and black women were segregated from white women in “East” and West” areas.

        It is interesting that most of the computers post-WWII were black women because the white women left their wartime jobs and become housewives, as the culture expected. However, the black women computers were doing well-paid professional jobs that were generally unavailable to blacks of either gender, so they stayed on with the support of their community. Katherine Johnson showed up in the 1950s after most of the white women had left.

        In the movie, scenes regarding availability of women colored bathrooms were “re-allocated” to different characters. However, this was a federal facility in segregated Virginia, so they were dealing every day with many of the same issues that the sit-ins and marches in the 50s and 60s were about. The international context of the Soviets using America’s treatment of blacks to make propaganda inroads into many countries, especially “colored” countries, at the same time they were beating the US into space was an interesting discussion in the book.

        So the movie compressed 20 years of actual history into about 4 focusing on Sputnik to Glenn orbiting the earth. The movie skipped the whole WW II and Korea thing. I presume that is why it was not marketed as a documentary.

    2. Crazy Horse

      Fortunately there is still one pathway to upward mobility open to the unprivileged lower class in America. Functioning in the high stress roles of stock trader, plastic surgeon, corporate lawyer, arms dealer etc. that grants entry into the professional class that constitutes the lower 19.9% of the ruling class requires an endless supply of cocaine and designer drugs. Were it not for the opportunities to rise from lowly street dealer to distributor and international importer that this demand creates there would hardly be any upward mobility at all.

      The drug economy has benefits that cascade throughout all of society. An expanded insurance industry to compensate for higher levels of theft, larger police forces whose salaries get spent on beer and donuts, politicians who have an alternative to taking all their bribes from the military industrial system, social workers who administer and institutionalize abandoned children, bankers who make their living laundering money, real estate brokers who sell condos in Miami— the list is nearly endless.

      As a matter of fact, were it not for the endless demand from the drug economy the entire society might collapse.

      For a historical perspective read William J. Chambliss’ 1978 classic, “The Political Economy of Smack”


      1. LT

        Or is it the rat race itself, which fuels the stresses and tensions, that will cause the economy to collapse?

        1. OpenthepodbaydoorsHAL

          Economists in the 40’s and 50’s insisted that rapid productivity gains would mean by now we’d all be living lives of total leisure like the Jetsons (yes, George worked at Spacely Sprockets but only seemed to work a few hours per week).

          Instead however we got captured by the Keynesian cargo cult, the geniuses who decided that our money buying less and less every year was somehow a good thing and not a complete disaster to be avoided at all costs. So the rats can never get ahead of the race.

          We evolved past blood letting, child slavery, and human sacrifice, time to put the stupid and destructive notion of inflationary money in the dustbin of history where it belongs. When you produce more of a good or service for the same amount of work, you can do less work (or you can expand the number of people in the society who own surplus wealth). But if the money representing your work required no work to create, and so gets created in quantities far exceeding the amount of work done…it should be no surprise that the rat on the treadmill can never catch his tail.

          Recoupling money to work isn’t perfect and there are other ways to regulate its value than quantity scarcity. But the world has arrived and re-arrived at this method over centuries and millennia because every other method turned out to be worse.

          1. skippy

            I don’t think you can ascribe anything neoliberal to Keynesian, especially the cargo cult identifier. Firstly you have the American neo-new Keynesian camps which are more neoclassical than the across the pond Keynesian’s and post Keynesian. Next problem is Keynesian anything stopped when neoliberalism became dominate in the 70s, don’t see many Keynesian’s getting Freedom and Liberty medals from the Libertarian temples.

            Not to mention the whole economic libertarian meme of making the pie bigger trope, which imo seems more indicative of the cargo cult identifier.

            disheveled… quite bizarre watching some completely rewrite history in their head to conform to biases post facto…

            1. ambrit

              Oy mate! In that last “sentence” you’ve describes all history, bar none; and done with paper and pencil too, not just “in the head!”
              I’m all for a new “downward mobility” is good for us “profession,” of faith.

      2. Oregoncharles

        When I lived at the Oregon coast, back in the 70’s, good friends of mine were glass artists. Once a year, they packed as much of their product as possible and drove to Florida, to show in a couple of art festivals there. They said it was all cash business, sometimes in very large amounts. They came back flush. That trip across the entire diagonal length of the country enabled them to operate.

        Where do you suppose all that cash came from?

      3. DH

        The “War on Drugs” is United States’ Exhibit A in the United States’ inability to learn from history. Before Prohibition, crime was disorganized. During Prohibition, organized crime emerged with deep cancerous connections into the politicians and police. Crime became normalized as a business.

        Today we have two parallels: the “war on Drugs” incarcerating millions; and undocumented workers, hired by corporations and wealthy individuals. In both cases, having wealth and connections means you are innocent and being poor and disenfranchised means you are guilty.

        Legalizing marijuana and jailing pharma executives, doctors, and pharmacists that are hooking people on legal opiods would probably go a long way to eliminating much of the damage the War on Drugs is causing.

        Prosecuting people and companies who hire undocumented workers would eliminate the market for their labor and the number in the country would shrink dramatically as many are here for the jobs. Not confirming Cabinet secretaries who hired undocumented workers would also be a good start.

        If you eliminate the underground market and make it unpalatable for the wealthy to participate, then market forces will probably look after the vast majority of the issue over time. However, the wealthy and powerful don’t like hearing that free markets apply to them too.

    3. Edward

      As far as “national character” is concerned, I think it is mostly determined by television, Hollywood, and marketing, which are owned by big business. The internet is an independent influence.

    4. Temporarily Sane

      when a minority of a community decide that the majority are no longer “with us”, the national character is on life support.

      It’s not only the character of the national community that’s on life support…it’s the very existence of a unified national community itself that is under threat. A huge part of neoliberal ideology is the dissolution of the nation state…Margaret Thatcher’s “there is no such thing as society” is a guiding principle. A nation requires common values and a shared commitment to the idea of a national community and the well being of all citizens in that community. This is already becoming a quaint notion of times past.

      There is a lot of suffering out there among the “forgotten” people. And a lot of anger. Anger that has people talking of violence and civil war. It may sound like hyperbolic nonsense to privileged folks but as a nation we are playing with fire in so many ways. On one hand we are pursuing an absolutely unhinged fantasy of America dominating all of humanity while at the same time busily destroying our own nation from within…it’s madness. How do people think these things end?

  2. jackiebass

    Isn’t this the result of neoliberal economics and neocons pushing world dominance? Both work together to promote inequality. So called cheap money sustained for a while the feeling many people had that they were part of the middle class. Their so called wealth was phony wealth because it was based on debt. Debt is just another form of slavery.

    1. skippy

      Money is debt.

      Now if you want to discuss how economic libertarians aka neoliberals and neocons use it to forward their agenda then we might talk about agency and not accounting identities.

      1. OpenthepodbaydoorsHAL

        I have a gold coin in my hand but for the life of me I can’t figure out to whom I owe a debt for it.
        And I can (now) exchange it for goods and services using my phone…but I can’t figure out whom the recipient then owes a debt to.
        Am I missing something?

          1. flora

            Yes. And any profit on the sale – difference between purchase price and sales price – will be taxed like profit on sales of art work. i.e. at 30% +/-. That’s a higher tax rate than applied to commodities, which, imo, is what the catagory a precious metal belongs in. But the govt has reasons which reason knows not.

            1. skippy


              Still not applicable to the topic of what money – is – tho’… albeit a gold coin is not an unprocessed commodity and like you allude too, more a form of – art – than something that sustains life or is a building block to something productive.

              Still that does not address the monetarist or quasi monetarist machinations wrt fiat i.e. does Milton’s 2% quasi gold standard a true reflection of fiats intrinsic nature or the bastardization of its poetical.

              disheveled… seek the human out before ascribing mythical qualities too stuff methinks….

          2. Paul Greenwood

            Money is Legal Tender issued by a Monetary Authority everything else is on the Liquidity Spectrum with Barter as the ultimate illiquid transaction mode and Scrip as the mid-point.

          3. The Rev Kev

            That may be true. However, it is worth remembering that there has been several hundred currencies in history only of which a fraction still exist nowadays. Confederate dollars come to mind here which isn’t worth a zac nowadays.
            By the same token, a gold or silver coin dug out of the ground from Sumerian, Greek or Roman times still carries its worth and still has value. This is true of every country in the world i.e. it has universally recognized value irrespective of whatever economic or political system is in vogue.

            1. diptherio

              {Sigh}…that Sumerian coin has commodity value for the precious metal it may or may not be made of, but the majority of its value comes from its antiquity. The value of a Sumerian coin in Sumerian times was that you could pay your taxes to the government of Sumer with it. The value today is that a museum will give good money to add your find to their collection.

              There is a load of difference between something being valued as a monetary instrument and something being valued for it’s use or rarity value. Just because people still place a value on antique typewriters, you could, by your logic, argue that typewriters are somehow “universally valuable”…and you’d be just as wrong.

              1. The Rev Kev

                Not buying it. Gold always has value and I am not talking about the face value.That Sumerian coin still has value whether it is intact or whether it has been melted down to its base gold. An antique typewriter would not retain it’s value if it was melted down as it would be worth just a few cents of scrap metal – at most.
                As a demonstration of what I am talking about, during the hyperinflation of currency in Germany in the 1920s, children were given BLOCKS of currency to play with as so little was its value. On the other hand, I remember reading of how one woman survived starvation during that time by selling her gold necklace – one link at a time!
                Reflect too that if gold did not have value, why did the American government confiscate all publicly held gold during this era for an undervalued price and make it a criminal offense to own it? Even now, Russia, China and other countries are stockpiling all the gold that they can. They seem to think that it has value. And so does the west. That is why they swiped the Ukrainian and Libyan gold reserves during their ‘revolutions’.

                1. skippy

                  As YS points out gold is an asset class like – any – other, those that by it like your example of Russia or China is just an addition to a basket of assets they hold. As far as buyers with large investment portfolios goes 10% allocation is industry norm, as a hedge.

                  I think you need to understand the broader historical and monetary implications behind the period of hyperinflation you use. Germany was on the hook for WWI reparations, it was to say the least debilitating debt.


                  To be blunt, money is what the law says – it – is whether bimetallism or fiat.

                  Now some seem to forget back in the gold standard days a new found source of significant volume of gold enviably lead to a crash in price, as well, as wild up swings in fear based trading during a calamity quickly followed by a crash shortly after.

                  disheveled…. trade is productive…. money is just a token of exchange that enables the aforementioned, hence gold does not encourage neither.

                  1. The Rev Kev

                    Hmmm. Agree to disagree? Gold may be regarded as an asset class but it is never that simple. The next time the SHTF, gold will no longer be an asset but will revert to what it has been for most of it’s history – a store of value. Like in judging stock market movements, you have to look at it for a long time span to capture a truer picture of what is actually going on.
                    I believe that things went to crap for the world economy when fiat currencies were cut loose from the gold anchor back in the seventies. This allowed currency to be simply created out of thin air. What is the current world debt at the moment? Isn’t it $217 trillion dollars on a $50 trillion dollar world economy and climbing? Clearly there is no connect with even simple economic reality and there is going to be the devil to pay – and him out to lunch!
                    Yes there were market reactions to new discoveries of gold but that was when new continents were being opened up for exploration and exploitation. Now we have run out of continents. How does this compare with the multiple hard crashes we have had over the past 20 years such as the crash and the 2005 crash which never really went away? We have these crashes more frequently these days.
                    Also, what you say about Germany’s hyperinflation may be true but it did not have to be that way. Just think about the Wörgl Experiment ( as to how it could have been relieved.
                    Look, I am not married to gold but you have to anchor a currency to something of value whether it be gold, silver, platinum. Christ, I would even accept peanut butter if it did not deteriorate. Try this for a quick thought experiment. Imagine the present world economy but one that never gave up that anchor. It would be smaller but more stable. And you wouldn’t have an ocean of fiat cash sloshing around the world pushing up real estate prices and the like and perhaps the Naked Capitalism site would be no longer so vitally needed.

                    1. skippy

                      What I’m saying is some are want to oversimplify complexity for the convenience of forwarding a preference.

                      I think you will find more of and more destructive bubbles and crashes say in the 1800s under the gold standard, up too the 1907 panic, which was the precursor to the FED. During this period you have the state bailing out the private sector and the next the private sector bailing out the state. Seems gold had little to do with it considering the repetitive nature and scope during just this 100 year plus period.

                      Even under a gold standard you have ex nihilo creation of credit [money] all the time E.g. the gold standard does nothing to stop the creation credit, because its just what humans have done since time immoral. Hell historically one of golds first anchors in parity of weight was a few grains of wheat vs. a flake of gold. In the store of value trope that would mean golds anchor was a perishable that sustained life resulting from productive enterprise.

                      This is the thing, gold was not a store of value at inception, it was a means to enable taxation due to the complexity of storing livestock and perishables. So how do you get the value into gold.

                      Just for the sake of brevity on a topic that spans epochs and has more ideological trip wires I would suggest focusing on the the time period between post WWII and the dominate economic thought wrt neoliberalism in the 70s. Just the divergence of wages from productivity and the how low can you go limbo bar wrt credit risk.

                      Same goes for GDP, its non directional, yet you have over 450 billionaires in America now, all whilst the unwashed are bulldozed into the gig sharing economy.

                      Do you really think the – store of value – works the same for everyone wrt distributional vectors with that many billionaires roaming around.

                      disheveled…. this is why the term money crank is used, that all of humanities woes are the direct result of money and not more fundamental drivers that proceed the use of money and the human tool user problem.

        1. cnchal

          Check the hall mirror out next time you walk by.

          That’s a magic phone if it can take the coin in your hand, stuff it through the wires to the recipient to purchase, let’s say a hammer, and have the recipient send the hammer back the same way.

          Used as a medium of exchange or savings, it’s no different than cash or any other form of money, and it’s value is based on what everyone else but you, believes at that moment.

        2. Paul Greenwood

          Don’t fighter pilots get issued with a couple of gold coins for emergency landings ?

      2. skippy

        Rhetoric based on deductive methodology does not refute millennia of histrionics. Anywho both Bimetallism and Fiat have positive and negative qualities as a medium of exchange, yet, at the end of the day you have a human tool user problem and not one of intrinsic qualities which – force – humans to utilize them as they do.

        Hence there seems to be a much more fundamental driver of agency… than the status of what is used for exchange.

        disheveled…. but yeah… its all moneys fault… one for the psychology dept methinks…

    2. financial matters

      Yes. Consider the GI Bill versus student loans. Both could be said to be spending money on education.

      One is an investment in our future and the other is a burden on our future.

      1. Paul Greenwood

        I don’t see that since both are redeemable only by an Accredited Educational Institution with its inflated costs base and ideological bias. It is who redeems the payment rather than who makes it

        1. financial matters

          Definitely the other side of the coin. As with single payer also, the cost and quality are also important aspects.

        2. skippy


          “I don’t see that since both are redeemable only by an Accredited Educational Institution with its inflated costs base and ideological bias.”

          Sorry, but that is such a broad sweeping statement that it is victim of its own categorical error.

          Education costs are primary due to effects laid out in say ‘Science Mart’ and runing them like corporations and not education facilities, this is also the driver behind health costs.

          disheveled…. Ideological bias is confirmed but not well identified in your statements.

  3. allan

    My only question is: are we really talking about a 20/80 split? I haven’t read Temin’s book (but it’s now on my list). But (continuing the discussion from yesterday’s Watercooler) going down to the 80th percentile on many stats takes you well into the class of people who are struggling.
    The rounded 80th percentile of household income in 2015 was $117,000, and most people earning that much probably live in at least moderately expensive urban/suburban areas.
    After accounting for the expenses detailed in the post, a couple with 1.7 children, two cars, student loans and a mortgage is going to be hurting. Not hurting as bad as the 50%, 30% or 10%, but not facing a pretty future.
    For people at the 20%, the post’s

    … The citizens of this country see economic growth all around them and exciting possibilities for the future. They make plans, influence policies, …

    is aspirational, not operational. The split is more like 5/95 (with gradation of desperation among the 95% of course).

    Maybe it’s 20/80 among MIT employees.

    This chart of the correlation between income and wealth is fascinating. There are basically two very different curves, with the two Americas glued together at about the $1 million wealth mark.

    1. DanB

      “… The citizens of this country see economic growth all around them and exciting possibilities for the future. They make plans, influence policies, …” In my view, the world has reached the end of real economic growth -which is based upon the availability of cheap natural resources, primarily oil. Simultaneously, a central facet of the neoliberal order is that those at the top of the economic pyramid will continue to prosper at the expense of those below them. This prosperity looks like growth but it is really various forms of exploitation, i.e., debt, low wages, and so forth. I expect that, as many commentators on empire and neoliberalism have pointed out, those experiencing the benefits of this faux “growth” -which is unsustainable because of natural resource constraints- will continue to shrink as long as the neoliberal ideology holds sway. This is why, I think, there is so much mainstream and government concern with fake news, invasion of privacy, refusal to face the obvious need for single payer. These are attempts to control collective interpretations of the public to political and economic events.

      1. Moneta

        I don’t think it’s necessarily control. It has been shown that to be mentally healthy, humans need to be deluded… so the vast majority are clinging to destructive ideologies in the name of sanity.

        Unfortunately, reality will rear its ugly head for a growing number of individuals, leading to depression for some and ever greater delusions for many more.

        1. Charger01

          Solar (and renewables in general) are not a pancea for our electricity needs. Until we have a WPA-style infastructure program with baseload fossil fuel generation, pumped storage/next gen batteries, and redundant local grids, I don’t believe we’ll be able to ween ourselves from large fossil fueled generation plants 30 years down the road. Stability is the name of the game- and the sun doesn’t shine and the wind won’t always blow when you want it to.

          1. Knot Galt

            Our society has been conditioned to consume. Renewable energy can meet our needs if conservation were to become a part of our social conscious. But the ramifications of conservation and what is ‘reasonable’ would kill the FTE economy.

            Above all else, that CAN’T happen. Because markets.

            In an economy based on exploitation and waste, ideas of sustainability and resilience cannot be tolerated by those in the FTE class? This is the part of Charger01’s argument that is FALSE; “not a pancea for”,” I don’t believe”,”we’ll be able to ween ourselves”, the sun doesn’t shine”,” the wind won’t always blow”. In the future, if there is a future because we change our ways in time, these attitudes expressed by Charger01 will be seen like we see the Flat-Earthers of Christopher Columbus’es time.

            Yes, there are challenges and hurdles that need to be overcome. But hedging, saying “can’t” or “won’t”, and sticking your head in the sand will only become a self fulfilling prophecy as long as deniers and 1% continue to control power?

          2. DH

            Pumped storage can be developed with increased capacity of reservoirs to accommodate droughts. However, those are different departments, so will require major rethinking of government and industry to accomplish.

        2. HBE

          Please tell me that was Sarc. Tell me how solar and wind etc are going to support the energy needs of 14 billion, how about 20?

          “green energy” is anything but, and it is the ultimate magic bullet.

          “No need to control population, no lifestyle changes needed, carry on as you are, solar panels (or some magical wunderenergie) will save us.”

          Yeah, that’s going to work out so well. /S

          1. Oregoncharles

            What makes you think there will ever be even 10 billion people, let alone 14 billion?

            1. ambrit

              Agreed. Even now, in the so called “first world,” the strains are showing. We live in a decaying/vibrant mid sized metropolis. I’ve heard three gun shots tonight. “Things” are going downhill in our supposedly “stable” college town. What do we think is happening in the truly “downscale” population centres?
              I’ve always said that if someone cannot find a “legal” way to feed the family, the resort to “illegal” methods is rational.
              Population levels above some level depend for maintenance on a properly managed system. “Libertarian” anarchism is not organizationally capable of the task.
              On the principle that popular games, as more of a collective than authority driven enterprise, reflect the zeitgeist, the “Greater Good” versus the “Empire” from the “Halo” universe shows the underlying dynamic. Even in games, entropy is a “player.”

        3. UserFriendly

          Cheap and plentiful solar power is coming soon.

          Spoken like someone who has no clue what it would cost in terms of Money, Resources, or Energy to build out solar and wind power to the extent needed. Let me guess, You want to shut down all nuclear plants too? It takes over a full year of operation before that solar panel you built has produced more energy then it took to make it.

          One side has their fingers firmly in their ears going la la la no such thing and the other side pretends it’s as simple as flipping a switch. This planet is beyond family blogged.

        4. Paul Greenwood

          Without China subsidising solar panel production below production cost would it be an attractive proposition ? In Europe it requires subsidised Chinese dumping prices to buy hardware and inflated retail energy costs to make the whole system viable. I heard one utility exec state it was economic for a German to climb on his roof at night with a sunlamp run off the mains to generate solar energy given the input prices from solar to the utility

        5. crittermom

          I’m jumping in very late (literally) here and still catching up on articles and comments.
          As this particular blog entered into discussions about renewable energy, I just have to join in, tho’ I realize none may read it due to the late hour.

          I lived off grid for 20 years while still in my home, and loved it.
          I believe in renewable energy combined with conservation.

          Both solar and wind are advancements, yet each has drawbacks.

          I contend we need to widen our thinking in pursuit of renewable energy, as well. Could there be more than just wind and solar? Perhaps.

          My dad, a tool and die man, was one to ‘think outside the box’ and became a successful inventor, patenting a new deburring tool.
          He pursued other interests, as well.

          He built an electric toy car my brother could drive on the sidewalk in 1952 or ‘3. (Home movies)

          He built an electric (street legal) car (fiberglass kit with gull-wing doors we referred to as the ‘Batmobile’) for personal use in the 70’s.

          He had converted a gas engine to run on magnetic power only, in the 1980’s before he passed away. I remember him showing it to me when I visited my folks in CA at the time. He had hooked it up to run the backyard landscape lighting but was still fine-tuning it, as it would only run for 3 days before stopping.
          Oh, how I wish I hadn’t lived out of state so that I could have learned more about/been involved in that creation!
          I still remember how he had positioned magnets positive/negative around the flywheel of the engine but can offer no more knowledge than that basic concept he was working on.

          Gravity is a constant source, never changing.
          Could it offer yet another choice of energy? (My dad apparently believed so)

          Conservation and a mixture of renewable energy sources may be required to save the planet.
          Anyone here know more about magnetic energy, utilizing the earth’s gravity?

    2. RabidGandhi

      What a curious chart. I was under the impression that nearly a fifth of US households have negative net worth, but this does not show up on the chart (which bottoms out at 0). Also it should be noted that on the graph $1 is the same distance from $10 as $1M is from $1B, because showing the true distance would be impossible. While necessary, this nevertheless visually distorts just how far separated the super-rich are from the bulk of the population, with this distortion increasing as one moves up the chart.

      That said, I agree with your point from yesterday about those hurting/struggling in the lower part of the top 20%. I know of no revolutions that occurred without this economic subset becoming radicalised (eg, Argentina 2001, Iran 1979, Russia 1917, France 1789…). This Quisling Class is always the crucial mechanism for elites to exercise control, so it is our task to convert it, not alienate it.

      1. Indrid Cold

        On some back brain level, our archonic sociopathic overlords understand this. Thus the endless media hype about Russian plots, Korean nukes, drug panics…

        I know many in the comfy percentile and their anger about elite corruption and the hollowing out of western civilization is always being channeled by Rachel Maddow into anger at Trump, who is all symptom and no cause.

      2. allan

        Good point about the chart not showing negative net worth.
        (Or for that matter, negative net income, which good accountants can arrange for a price.)

        But I think that’s a function of the chart being log-log: negative numbers don’t have logarithms
        and so points with negative values of either variable don’t have anywhere to go.
        The row of dots along the bottom (below the $1 wealth level) probably represents
        people with negative wealth.
        Notice that some of those have incomes up to about $60,000 –
        lucky duckies treading water in America is Already Great™.

        There are also dots along the left edge, representing another kind of lucky duckies.
        Think Paris Hilton.

      3. Grumpy Engineer

        You are correct. Nearly 20% of Americans have negative net worth. That’s a group composed primarily of recent college graduates (with excessive student loan debt), people who overpaid during the housing bubble (and are *still* underwater on their mortgages), people who’ve mismanaged their credit cards, and unlucky small business owners whose businesses went belly up.

        Another 5% or so have zero net worth. Primarily young children and the homeless.

        Only at the 25th percentile or so do people start having positive net worth. And it takes a LOT of them to cancel out all that negative net worth. Periodically you’ll hear stories about the “richest 10 Americans having as much net worth as the poorest 45% of Americans combined”, but the sadder commentary is that a newborn child has as much net worth as the poorest 40% of Americans combined. Too many people in our country are becoming debt slaves.

        1. sd

          “mismanaged their credit cards” sounds like a spending spree. Speaking for myself, my credit card debt crept up as work became unreliable, irregular and unstable while dealing with health issues affected the spouse also impacting employment.

          1. Grumpy Engineer

            I pretty much had “spending spree” in mind when I wrote the comment, but your comment is a fresh reminder that there’s a fifth category of people with negative net worth: Those forced into desperation borrowing by an unfortunate change in life circumstance. Given that I know multiple people in similar circumstances, I should have included it the first time around. My apologies. It’s my hope that you were using the past tense when describing the health and employment difficulties, and that you have better days ahead.

  4. michael hudson

    Amazing what is left OUT of Temin’s account: The rise in debt. There is no mention of how it polarizes economies as it builds up, separating creditors from debtors.
    Finance is linked to technology — as if the rich make money by raising productivity, not by predatory extractive means as rentiers (real estate, natural resources, monopolies and banking).
    The solution — more domestic than military spending — is not likely to be taken, as there is no anti-war movement.
    The analysis is an ALTERNATIVE to classical political economy, rejecting its categories (such as unearned incomes, rentiers, etc.)

    1. Sound of the Suburbs

      So many things become obvious after reading “Killing the Host”.

      Wilful ignorance is the only thing stopping any improvement.

      More people are getting on the right track, but its still the few versus the many.

      You may be interested in the following:

      “Classical and neo-classical economics, as dominant today, has used the deductive methodology: Untested axioms and unrealistic assumptions are the basis for the formulation of theoretical dream worlds that are used to present particular ‘results’. As discussed in Werner (2005), this methodology is particularly suited to deriving and justifying preconceived ideas and conclusions, through a process of working backwards from the desired ‘conclusions’, to establish the kind of model that can deliver them, and then formulating the kind of framework that could justify this model by choosing suitable assumptions and ‘axioms’. In other words, the deductive methodology is uniquely suited for manipulation by being based on axioms and assumptions that can be picked at will in order to obtain pre-determined desired outcomes and justify favoured policy recommendations. It can be said that the deductive methodology is useful for producing arguments that may give a scientific appearance, but are merely presenting a pre-determined opinion.”

      “Progress in economics and finance research would require researchers to build on the correct insights derived by economists at least since the 19th century (such as Macleod, 1856). The overview of the literature on how banks function, in this paper and in Werner (2014b), has revealed that economics and finance as research disciplines have on this topic failed to progress in the 20th century. The movement from the accurate credit creation theory to the misleading, inconsistent and incorrect fractional reserve theory to today’s dominant, yet wholly implausible and blatantly wrong financial intermediation theory indicates that economists and finance researchers have not progressed, but instead regressed throughout the past century. That was already Schumpeter’s (1954) assessment, and things have since further moved away from the credit creation theory.”

      “A lost century in economics: Three theories of banking and the conclusive evidence” Richard A. Werner

      You mention Steve Keen and Steve Keen mentions you.

      Professor Werner’s field is money and I see you have moved forwards in “J is for Junk Economics” on money.

      There are many areas that are wrong, you can either go deep or along, I have been going along.

      You, Steve Keen, Professor Werner and Richard Koo have different stories to tell and have gone in deep in specific araes

      Richard Koo is actually a neoclassical economist, but he learnt from Japan’s experience and sheds useful light on austerity.

      Today’s problems are wilful ignorance.

  5. Benedict@Large

    It’s not a competition between military vs. domestic spending. We can clearly do both. The problem is that the federal government has abdicated its duty as the employer of last resort. Until we treat jobs (and in turn wages) as an essential component of federal provision, the middle class is effectively finished.

    1. hemeantwell

      It’s not a competition between military vs. domestic spending. We can clearly do both.

      Yes we can, but only in a very abstract sense. Military Keynesianism is both tremendously inefficient — aside from tech benefits which could be acquired through pure research, I’ll take China’s forlorn but usable empty condos for aircraft carriers any day — and it also contributes to a domestic and international politics distorted by institutionalized aggression. (I wish Keynes had not been so flippant — I’m thinking of the burying money in mine shafts line — about using public works to support demand.)

      1. paul

        Keynes did strongly qualify that example:

        If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is.

        It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.

        General Theory,book three, part 6

    2. John Wright

      I don’t believe we can clearly do both military and domestic spending.

      The USA and the world in general need to realize that climate change is limiting ALL options.

      The petrochemical family “joules” that humans have access to, as in units of energy, need to be spent wisely by all nations given already occurring climate change.

      From an energy consumption standpoint, the profligate US military only pulls the effects of climate change forward.

      It IS a competition for the world’s resources as nations try to preserve a viable climate while maintaining their lifestyles.

    3. mpalomar

      As others note below for reasons involving the environment (US military machine uses more oil, 100 million barrels annually than any institution) and economic efficiency there is indeed a problem with military v domestic expenditure.

      Beyond that there is the evidence of the negative impact of inordinately large military and imperial projects on, not only the imperial nation and its inhabitants (ptsd, addiction, casualties and death) but other large regions of the world, the inhabitants of nations affected by US military aggression.

      After watching the results of the 9/11 chapter in American military supremacy why would anyone want to try to do both?

    4. Paul Greenwood

      So “Guns and Butter” is a feasible strategy ? It has certainly been the story of postwar USA accelerated since 1965 but surely that is because the US operated a devalued reserve currency until 1971 and after 1973 created a Dollar-Backed-Oil-Deficit System with OPEC whereby oil producers recycled financial surpluses into oil importer debtor FIRE sectors.

  6. oho

    It’s death by 1,000 cuts from 1,000 different vectors.

    And it’s not PC, but it’s naive to not mention unskilled migration or mercantilism, nor the pan-racial culture breakdown of families (ie education, crime, drugs, single parenthood, out-of-wedlock births), debt! (as Hudson points out) etc, etc, etc.

    PS, the 1960’s seems to ground zero for a perfect storm between technology (credit card processing), finance/law (barriers to consumer debt broken) and culture (self-actualization—-everyone turning “aspirational” via corporate brand consumption)

    1. John Wright

      For a while America has been able to calm the population with “aspirational” fumes.

      While I don’t look to the Times’ David Brooks for wisdom, I archived an old column of his from January 12, 2003.

      The column is titled “The Triumph of Hope Over Self-Interest”.

      Brooks wrote of the 2000 election:

      “People vote their aspirations.”

      “The most telling polling result from the 2000 election was from a Time magazine survey that asked people if they are in the top 1 percent of earners. Nineteen percent of Americans say they are in the richest 1 percent and a further 20 percent expect to be someday. So right away you have 39 percent of Americans who thought that when Mr. Gore savaged a plan that favored the top 1 percent, he was taking a direct shot at them.”

      Now this was written over 14 years ago, but the residue and media promotion of this “everyone can be rich” sentiment may still be an important part of the American psyche, making real change difficult.

      1. Norb

        Your observation about the American psyche rings true. The change in emphasis from rewarding frugality and self-sufficiency to an ethic of seeking riches by any means will take some large catastrophes to bring back into line.

        The slow motion catastrophe engulfing the working class in America will only be reversed when more individuals realize that worshiping the rich directly leads to their own impoverishment. This whole notion that it is virtuous to live a life of idle, individual over-consumption, is the root cause of the current predicament.

        A psychological shift must be made in the minds of working people. The focus must be brought back to the health and needs of the community, and not individual businesses or corporations. Business should be in service to the community, not the other way around.

        That is the genius of the neoliberal order. To convince a laboring person that the fruits of their labor are dependent on the good graces and well being of the elite. It strips agency of any potency, from the workers perspective. It makes real change impossible.

        1. Carla

          My local public library recently announced that they have changed the name of National Library Week, and it will henceforth be known, in our community, as “Customer Appreciation Week!” I wrote a letter of protest, informing the library director and board that I find being called a “customer” of my public library offensive and inaccurate, since the relationship is not a commercial one. Before sending it, I circulated it to a dozen local friends, all of whom said they wanted to sign it as well.

          Here was the director’s response, in part:

          “Regarding your preference for the term ‘patron’ over ‘customer’ when library staff are referring to library users, this issue has been debated among library professionals as far back as the early 2000s, and continues to be debated, with no consensus in sight…

          We prefer the term ‘customer’ and will continue to use it because it reflects the equal footing of each person who walks in our doors: they do not all have library cards (i.e. they are not all ‘members’), they do not all live in our community and therefore do not necessarily pay taxes (as the term ‘patron’ implies in this context). We feel the term ‘customer’ reflects the service and respect due to each individual encountered by each staff person.”

          One of the signers of my original letter sent me this link in response:

          It’s a good piece, but I would change the title to “Customers or Patrons? How you look at your library’s users affects how you serve the public”

          So anyway, the rationale behind this ramble is that before we can turn back the neoliberal tide, I think we’re going to have to do the hard work on the ground of reclaiming our public institutions — which really form part of the infrastructure of democracy. Cause, man. When you lose the public library, you lose A LOT.

          P.S. On the bright side: my economically stressed inner ring suburb has never failed to support a library levy, and recently passed a hefty one.

          1. tongorad

            Customers may only buy what they can afford, and what they can afford is based on their merit in the marketplace. Sounds like paradise, doesn’t it? Pull-yourself-up-from-your-own-bootstrapsville, aka Hooverville/Clintonvillage/Obamatown.

            I cringe every time my school superintendent talks about students and parents as customers of public schools.

            1. Carla

              Thanks. Being called a “healthcare consumer” also rankles big time. As does the constant use of “taxpayers” instead of citizens.

          2. Norb

            Thanks for sharing Carla.

            Did you follow up on the director’s response? I just checked my local library’s webpage and they too use “customer” when describing available services. I have never considered myself as a “customer” of library services. I am exercising my rights as a taxpaying citizen. In the same way that I don’t consider myself a customer of fire or police services. I don’t begrudge the local fire department funding in the event that I never use their services. It is part of civic duty that is lost when framed in a business context.

          3. downunderer

            My thanks for your efforts, Carla. This newspeak has also arrived in the south seas neolib colony where I live, and it tastes just as bad here.

            I find that our local household water supplier now calls some people “customers” because they buy their metered water from municipal pipes, and it put those of us who use rainfall tanks at a (never before experienced) disadvantage during a drought by categorizing us as non-customers. This despite being “customers” of its wastewater treatment. This despite the fact that their physical facilities were built and maintained equally by our local property taxes (called “rates” here) back when they were simply part of our local government’s infrastructure.

            However – a neolib central government decided to expand Auckland into a “Supercity”, with no vote and no public consultation. So I’m living in a conquered colony and paying taxes to a distant entity.

            I used to live about a 45-60 minute drive from Auckland’s city limits, but I now live that far on the *inside* of its nearest city limit line. And I’m still in the same house! But now “local” government is no longer so local, and our votes out here count for very little.

            And what *was* the property of we-the-people who made the decisions and built the facilities is now the property of “Watercare Services Limited”, a so-called “council-controlled organisation”. This despite the fact that the elected council has *very* little control over it. Two of my old friends are elected Auckland City Councilors, so I’m reporting more than just a disgruntled citizen’s opinion.

            Next step: when Auckland’s debt has skyrocketed even farther, and its needs for cash become sufficiently desperate, we know how the funds will be raised, don’t we? We’ve seen it all before with New Zealand’s Airline, railroads, electricity supply, etc.

            Somehow I’m now hearing Pete Seeger’s old song’s even older question: When will they ever learn? . . . [though I tend to hear the Kingston Trio’s voices, or Marlene Dietrich’s “Wann wird man je verstehen?”]

          4. Paul Greenwood

            Then libraries should cease to be taxpayer-funded and operate a true fee-based lending service whereby Customers pay for libraries directly and the output can be Market-tested

            1. downunderer

              Not so, Paul Greenwood.

              Democracy relies on the knowledge and judgment of the citizenry. Schools and libraries are fundamental.

              Subjecting these cornerstones of community life to the supposedly “free” market is a device to destroy democracy.

  7. screen screamer

    Had the large financial institutions been prosecuted with the zeal that low level drug dealers have in the recent past, the story may well be different. However, the illicit activity carried out by these people has been green lighted which of course exacerbates the present condition of those at the lower rungs of society.
    It is not an exaggeration to say the present economy is set up as an asset stripping operation in which no one is excluded.
    Loretta Lynch speaks at Harvard. I can’t figure if she is talking about the good old days when she refers to the rule of law.

  8. Matt Alfalfafield

    Good read overall, but one major quibble: the uncritical use of the terms “developed” and “developing”. I know these terms are commonplace, but they’re deeply ideological. They imply a teleological order to the world, a natural and inevitable progression from less to more civilized (with mostly white nations at the top of the hill, naturally). The terms come out of the technocratic liberalism of the 1950s, and particularly from a school of thought called modernization theory, which posited that given the right inputs, nations could become “developed” into a matter of years. It assumed that all “developing” countries wanted and needed essentially the same thing – development into Western-style economies – and that this process would mostly consist of investment and policy changes. Obviously this didn’t work out, though that doesn’t stop people from trying to sell this old school notion of development (see: Bono). In modern parlance, “development” has of course become a front for neoliberalism and neocolonialism, another way to extract wealth and resources from low-income nations.

    The specious nature of the development metaphor becomes obvious in examples like this article – can you undevelop a photograph? Can an adult undevelop into a child? Can a skyscraper undevelop into a pre-gentrified neigjbourhood of one- and two-storey buildings? How then can a “developed” nation suddenly revert to beimg merely “developing”? Even the headline portrays this change as a “regression”, as though there was ever anything inevitable about the way things were.

    Large parts of America are coming to resemble a middle income country. This process is no more inevitable – and no less political – than their previous high-income status was.

    1. Yves Smith Post author

      You are quibbling with well accepted and widely used nomenclature. The word “labor” means “work” as well as “giving birth”. Are you going to argue with that too? How about the use of the term “growth” which is also organic, to refer to an increase in size of a business or economic activity of a country?

      The terminology is not “developing” versus “mature”. It is “developing” versus “advanced”. So the imagery is skill level, not physical growth.

      And the leadership and citizens in developing economies do overwhelmingly want to become advanced economies.

      1. RabidGandhi

        And the leadership and citizens in developing economies do overwhelmingly want to become advanced economies.

        Do you really mean this? As seen by the recent changes in government in South America, the elites have returned to power and are markedly de-industrialising their economies in order to return them to the previous agro-exporter model: export raw materials and import finished products. The traditional leadership benefits from this mercantilist model at the expense of the impoverishment of the vast majority, and this is why the oligarchs seek to squelch economic development.

        Yes the citizens want to become advanced economies; the leadership, not so much.

        1. craazyboy

          The elites do have a vested interest in the balance of trade. When they pay their domestic workers to produce a domestic surplus for export, they are dependent on the local currency to maintain value for some reasonable period of time, so workers perceive they got some value in the deal. The elites then export to convert their share of labor (now in goods) to hard foreign currency. Then, and only then, you can buy a BMW. YMMV.

        2. Alejandro

          “El subdesarrollo no es una etapa del desarrollo. Es su consecuencia…”
          ( “Sub-development is not a phase of development. It’s its consequence.”) …

          “…Nuestra derrota estuvo siempre implícita en la victoria ajena; nuestra riqueza ha generado siempre nuestra pobreza para alimentar la prosperidad de otros: los imperios y sus caporales nativos. En la alquimia colonial y neocolonial, el oro se transfigura en chatarra, y los alimentos se convierten en veneno.”
          ( “…Our defeat was always implicit in the victory of others; our wealth has always generated our poverty by nourishing the prosperity of others : the empires and their native overseers. In the colonial and neocolonial alchemy, gold changes into scrap metal and food into poison.” )

          ― Eduardo Galeano, Open Veins of Latin America: Five Centuries of the Pillage of a Continent

    2. Paul Greenwood

      Having lived in the USA I was puzzled how having been fed a diet of US technology and cities on TV I encountered wooden telegraph poles carrying overhead electric cables to wooden houses and primitive bank branch systems and Farm to Market roads and so much that seemed as if huge swathes of the US East Coast were “developing nation” in infrastructure terms

  9. witters

    You guys are on the big down slide for the vast majority, with your own comprador [FIRE] elite. Hope you don’t take us all with you.

    1. different clue


      The way you say “you guys” makes me think you may be living in another country other than America. If so, are the people of your country doing anything to “airgap” themselves either individually or collectively from the big down slide you see America taking?

      1. AbateMagicThinking but Not money

        The air-gap is mostly in the heads of those who’ve swallowed the idea that American civilization is exceptional and perfect, and who uncritically accept the advice of its experts – hook, line and sinker.

        Well, hopefully not sinker.

  10. Moneta

    If the planet can only support 1 billion living our energy and resource intensive lifestyle, isn’t it logical to assume this 1 billion would get redistributed across the entire planet?

    1. Yves Smith Post author

      No because some places have more resources of the material and human sort. Europe allegedly moved ahead in economic development as the result of comparative ease in producing surplus calories (hospitable to the raising of animals like pigs and cows and sheep) plus having a dense network of rivers that facilitated transport.

      You aren’t going to see that billion well represented in the back of the beyond parts of Australia for instance.

      1. Moneta

        In no way do I believe there will be an even redistribution. However, I do believe we will continue seeing a move out of North America and Europe. Chances are countries like Haiti or Venezuela will not get a bigger share but if India, China keep on developing, it will mean less for us… we better start increasing our energy efficiency soon… but my intuition tells me we will have a lot of failed cities before we see much change. The disappearing middle class is a sign of a forced global energy and resource redistribution and a failure to adapt.

      2. vladimir

        From long time perspective, Europe did move ahead thanks to the climate and geographical factors, but then came crisis of 14th century and Black Death wiped out half of its population anyway.
        However, I’m always wondering how much from its unprecedented rise from early modern period on could be contributed to the discovery of Americas, African slave trade and of course colonial empires.

        1. Mike Mc

          The book ‘1493’ makes the case that the discovery of the Americas – and critical new foods like corn/maize and potatoes – kept Europe from starving in the aftermath of the Black Death, which decimated the farm laborer population.

          Well worth a read since it also discusses the African slave trade and colonialism. The more we know about our world’s history, the better equipped we will be to survive ourselves.

  11. Joe B

    I am surprised that there is no mention of protectionism vs. the globalization which has certainly reduced income and employment in the US. I have tentatively supported out-sourcing only because the US refuses to grant significant foreign aid to the most desperate elsewhere, but well-managed foreign aid with domestic income security would probably work better for everyone.

    Had the US granted massive foreign aid rather than subverting social democracies since WWII, it would have lifted the poorest half of the world from poverty. But the greedy here preferred to suppress socialism at home by suppressing it abroad, and cared for no one and nothing but themselves.

    1. oho

      the author works for a Soros-seeded think tank, Institute for New Econ. Thinking. I doubt that even modest forms of protectionism fits into their narrative. —but I’m cynical.

    2. Paul Greenwood

      Half US foreign aid goes to Israel and it has provided the highest standard of living ever attained in the region

  12. David, by the lake

    Another aspect to this phenomenon is that of the general arc of imperial ascent and decline, not only for the US but also for Western industrialism generally. The US is in many ways simply the current leader of the latter (following on Britain). The broad system dynamics of overreach and decline suggest the emergence of the very things we are describing here and seeing around us — reduced resource availability, the elites seeking to retain their standards of living which results in even less for everyone else, infrastructure that can no longer be maintained, excessive investment in a bloated military machine to defend elite interests, etc. This will continue to play out over the coming decades. Our best investment, I’d argue, is to work to build local communities that have some ability to operate in a post-imperial and post-industrial world.

  13. jefemt

    I’ve had more 4 O’clock in the morning nights in the last 100 days than my previous rolling average (as a trouble-weaving middle aged disaffected formerly middle class white male- and that’s saying something!) Anyway, after this latest week of Agent Orange, I had to google Failed State, couldn’t help myself.
    First Hit :
    Failed state
    “A failed state is a state perceived as having failed at some of the basic conditions and responsibilities of a sovereign government. Common characteristics of a failing state include a central government so weak or ineffective that it has little practical control over much of its territory and there is a non-provision of public services. ”

    Yes, I am in Montana, I do not shoot either Prairie Dogs nor Richardson’s Ground Squirrels. They fill a purpose, and not a freezer.
    I am mighty tempted to go out and look for some out-of state carpetbagging meddlers while the cover is still down in late winter dormancy, before things green up too fully!!

  14. Paul Greenwood

    The US fell behind the USSR in terms of engineers and scientists so expanded tertiary education apparently to compete after Sputnik and Yuri Gagarin; yet soon those campuses were turned over to liberal arts instead of technology and the only employer for liberal arts graduates was Big Government and Great Society. Campuses were great places to defer draft enrolment into Vietnam which was the beginning of Corporate USA needing never-ending war to keep the dividends flowing.

    1. Moneta

      North American society tends to value those studies that lead to energy intensive activities and environmental exploitation. Had liberal arts been more valued, maybe there would be less consumerism and better redistribution today.

      1. Larry

        Liberal arts education is more about learning class signifiers than it is about learning how to have a functional human society. I attended Brown University, which has no core curriculum. The students while in college would seem to care about many social causes and even be somewhat progressive, but they’re all caught up in the same old rat race of maintaining status and wealth. A vast majority jump to Wall St., elite consulting, or law school. Whatever values they may get from a brush with Plato or Dickens are easily forgotten once they land at Goldman Sachs and get their first bonus payment.

        1. Moneta

          But that just goes to prove my point that we don’t value liberal arts. If we did, the degree and the system would be different.

      2. Moneta

        A lot of our GDP are policy choices based on consumerism. The same number of people involved in the production, distribution and sale of this juicer could have been hired as philosophers debating the future of the US, sparing us from another resource wasting consumer good. Do we really need another juicer to improve our lives?

        It is a perfect case of someone looking to make money by using the methods that our system promotes: approaching investors with alluring sales projections whether or not the product really adds to quality of life. And funding is always easier with hard goods.

        But imagine if we went to these investors and said: instead of the juicer, how about you invest the same amount of money for a group of philosophers who will determine what the US needs to improve the lives of Americans?

        The question will be: how will I get returns on that?

        The answer would be, well if you have more people talking while getting paid and less stuff being made, there will be more demand for the existing stuff getting produced. Prices will go up and all your other investments where stuff is getting produced will go up.

        That obviously won’t go over very well so government would need to institute this job creation.

        But millions want smaller government.

        1. Disturbed Voter

          “But millions want smaller government.”

          Us vs Them, inside national borders … even if there were no immigration at all.

        2. Paul Greenwood

          I think of the Chinese or Vietnamese girl making a pittance to produce designer jeans or an electronic/electric gadget. The Value-Added is parked in Cook Islands or Grand Cayman Invoicing Centre then the minimum wage retail assistant sells it to the Fireman on unionised pay and benefits or the Corporate Lawyer.

          I like to envisage the Value-Added Chain and how it could be taxed to bring more onshore and reduce Supernormal Rent

      3. Disturbed Voters

        We would have many more gurus sitting on top of peaks in the Rocky Mountains, teaching many more of us to contemplate our navels ;-) New Age Boulder CO would be our capital.

        Yes, wisdom is better than wealth and power. That is why the poor and powerless value it so highly. The social contract can only redistribute what is produced; if we produce less (and this means energy intensive activities and environmental exploitation) there is less to redistribute per capita, unless the decline in population is faster than the decline in production.

        Much of the current maldistribution are of FIRE assets, much of which only have a fictional paper value. If we properly value things, then basic daily human needs are all that we need. Unfortunately we can’t even get that right.

        1. Oregoncharles

          I’ve been to Boulder, for a wedding. Beautiful town, but there is more than plenty of consumerism there.

        2. Paul Greenwood

          FIRE “Assets” are basically Legal Claims. Why gambling debts are not legally enforceable but FIRE debts done without proper credit assessment are, is a peculiarity of who controls the Legislature

    1. justanotherprogressive

      Absolutely! It is a very long book, very data driven and a hard read for some, but it is a very important book.

  15. Chris

    It’s interesting to look at the descriptions here in terms of what people are saying about “Shattered” too. The summary critiques you’ll hear on CNN and the like are that the Clinton campaign was too focused on the data and not enough on the people. To which any person who’s been reading and watching stats for the past decade should reply, “What data were you watching?!?!”

    The first Case-Deaton studies were out long before the 2016 season ramped up. The problems with the “precariat” were NPR fodder for years. The unaffordability of housing in the places that provided services and life styles people wanted to live have been well documented for years. The problem with underemployment and lack of wage growth are also well documented. None of what the author is saying in this article should be the least bit surprising to anyone who has been paying attention or who has ever visited places in Tennessee, Kentucky, west Texas, Arizona, West Virginia, the area outside of Boston, the areas outside of Pittsburgh, Buffalo… the list goes on and on and on. And yet it seems until JD Vance decided to write something no one in power in this country knew anything about the current state of affairs for a majority of the people in the USA. Madness!

    1. Disturbed Voter

      Devolution by design. This has been a master plan, starting with Bill Clinton. Since Bill Clinton, the Democrats have been triangulating (aka controlled opposition) … hence the kabuki government theater. And no, people like the Clintons have no desire to press the flesh with the great unwashed … they are American royalty.

      1. Paul Greenwood

        WJC Clinton has a peculiar background and stranger background as Rhodes Scholar with trips to Moscow from Oxford. His connections at Mena and the CIA airline servicing Pablo Escobar make one wonder just how far back CIA links have been instrumental in putting candidates into the White House and just how “organised” and “administered” the US Media-Political System is.

    2. justanotherprogressive

      I was unimpressed by “Shattered”. Besides giving us some gossip tidbits, it really didn’t tell us anything that we didn’t already know. And an the end, the authors tried to give more importance to Mook and external events than they deserve. All of those external events were created by the Clintons, including what Mook did. (BTW, look up the word “mook” in google….wonder if that was put there recently…..)

      Hillary was a BAD candidate who purposely locked out any other viable candidate who could run against her, expected others to come up with her “vision”, purposely divided her campaign staff into silos, and refused to accept blame for her own behavior. We all knew that before “Shattered”.

    3. Michael Fiorillo

      We moved passed just having a Precariat, and now have a rapidly expanding Unnecessariat, people who, according to our current model, are economically redundant. Apparently the Overclass doesn’t even want them as potential consumers.

  16. galeano

    Excuse faults in my writing, my English was always quite bad.
    “What can we do?” asks the brave Peter Temlin to stop and reduce the
    dual economy in the USA?
    I think that there is before all very important to get a good analysis of the capitalistic crisis in the USA, bad pervasive of the entire globe.
    Such an analysis got we in Germany by the great neo-marxistic analyst and philosopher Robert K u r z , to read in his books “The Colaps of Modernisation”,
    “The Worldcapital” , “Wars Of Ordering The World New”(German title: “Weltordnungskriege”, “Money Without Value” and so on.
    The main-thesis of K u r z is, that the global surplus-value is irreversibly
    vanishing in consequence of microchipsrevolution, digitalisation of work, roboterisation, because by this development of the machinery (Marx:”constant capital”) the producents of surplus value, the workers are in the total reduced .
    Therefore the capitalists go to the Börsen to speculate for bigger Renditen.
    But this “fiktives Kapital” has the reality of bubbles without real value, produced by “abstract work” (labor?) and always must e x p l o d e and generate more and more financial crisis.
    Therefore its not only the middle class which is by these development vanishing,but the capitalism itself in a terrible crash if the amercans dont begin to create a new and better form of society and economy.

    1. Paul Greenwood

      That would work if you view the Inflation in Anglo-America after the Smithsonian Agreement 1971 as perverting the system towards “Supernormal Financial Returns” and that once Volcker brought inflation down the only way to generate such Investor Returns was easy credit which Greenspan facilitated.

      Kohl slipped the deflationary bias of BUBA during Unification and basically inflated corporate profits by subsidising spending in the former GDR thus inflating prices of infrastructure but funding it through Payroll Taxes such as FICA making labour costs too high which led Schroeder into Agenda 2010 forcing through Hartz IV to give Capitalists headroom to benefit from the Euro in 1999 which stopped the D-Mark from revaluing out of the ERM and had forced Italy and UK out of ERM in 1992 and the introduction of a +/-15% band in 1993 to prevent French Franc being forced out by German failure to Revalue upwards

  17. perpetualWAR

    The book is mistitled.
    It should be “The Vanished Middle Class.”
    14 million unlawful foreclosures happened.

    1. Vatch

      I’m only as far as page 40 of the book, but so far, I think it’s pretty good. Since I’m easily distracted, and I already am in the middle of several other books, it could be a while before I finish it. Here’s the author’s definition of “middle class”, from page x, and his summary of its reduction:

      “The middle class, defined as households earning from two-thirds to double the median American household income, went from earning over three-fifths of total national income in 1970 to earning only just over two-fifth in 2014.”

      A chart on page xi shows that the middle class’s share went from 62% to 43% in that time period. The upper class went from 29% to 49%, and the lower class went from 10% to 9%.

      The middle class still exists, but we no longer earn a majority of the nation’s income.

  18. craazyboy

    …Clinton campaign was too focused on the data and not enough on the people. To which any person who’s been reading and watching stats for the past decade should reply, “What data were you watching?!?!”


    I’ve heard some theorize that statistics can be used to either promulgate or over weight a narrow scope of “observed data”. My hypothesis is it went like this:

    “We need a platform for Hill to run on. Our backers say it’s best not to say anything about issues, being impossible to spin anything in a favorable light.”

    “Hmm. Misogyny, then?”


    “So we count how many citizens in flyover America wear cowboy hats and baseball hats? The raw data yielding whatever insights it might into statistical analysis of the thinking of the voter base? That seems scientific?”

    “Sure. Either way they like American apple pie too much or too little. It’s perfect!”

    1. craazyboy

      Dunno what happened, but this was supposed to be a response to:

      April 22, 2017 at 11:11 am

      Without the context, it may look like crazy babble.

  19. Susan the other

    The Russians are saying that we in the US can’t come to an agreement. But not coming to an agreement is a political decision too and we do seem to be unanimous on that one. It’s funny that in a country so obsessed with a free market of innovation we have such a stalemate. It is catch-22 for financial capitalism; no matter which way it turns it finds it has blocked its own way. I agree the problem is more financialism than capitalism; the current cure is to let the Fed be the defacto government. All finance all the time; no recognition of social capital except to suggest that the poor all go out and inherit some money so they too can invest. I think when Yellen said that it was a veiled reference to how much money the boomers have saved and the windfall that will come to their children. But the underlying politics is a standoff – must be an operating assumption that, given enough time, social capital will emerge with the help of this boomer stash and on its own create a livable society without harming the profits of the current oligarchs. Otherwise the decision to put money into society would be uncontested. And no Fed Chair would make such a ridiculous comment. This divided society is policy. It’s called austerity and the one useful tool is to keep the currency stronger than other currencies by keeping social spending down, killing inflation and maintaining a sterling credit rating. It’s a one trick pony. I think it is dangerously obsolete in a world of pending disasters. And the paranoia of the boomers who fear they will run out of money.

    1. Moneta

      Something like 2/3 of boomers have less than 100k saved up with most net worth in their homes.

      But with a lack of cash flow, they will understand how much of their housing stock is not wealth but a decaying money pit.

      It’s amazing how many leaders still cling to this idea of intergenerational wealth transfer without looking at quintiles.

    2. Paul Greenwood

      There is no real Wealth. It is all Claims on some paper title. Unless the credit flows prop up the paper titles the Claims are worthless simply by re-hypothecation. The system is Ponzi as everyone knows but none will acknowledge. Bill Gates think UK taxpayers should spend £14 bn on Foreign Aid yet UK Voters do not and have just voted for BreXit over £18 bn gross (£10bn nett) payment to EU.

      Gates Foundation is marginal without having a sovereign state providing $22bn annually in co-funding and buying a few decision-makers is a cheap way of diverting sovereign taxpayer funds in areas Voters would not agree. The value of the Gates Foundation is enhanced by capturing taxpayer funds and making Claims on taxpayers by Statute Law to fund projects.

      Every interest group seeks to entrench Claims against others to provide value to its Debt Obligations and create as Asset on the other side of the double-entry book

  20. dbk

    Good post, good comments. And I’ll try to read Temin’s book as well. I’ve just finished a tangentially-relevant article by Lisa Pruitt, which provides a good literature review (scholarly articles, books) of the white working class and the urban/rural divide. Pruitt argues for a recognition of (a) finer distinctions by the credentialed/professional coastal elites of the rural / semi-rural population, (b) respect for these population groups, and (c ) an acknowledgement that the core problem of rural America is that jobs which formerly provided a middle-class living (qualified, but still, middle-class) have largely disappeared.

    To return to this post and the comments: the top 5% or 10% or 20% needs to realize that their own jobs will eventually either vanish or become precarious or be downgraded to survival-level wages, and join forces with those whose work has already suffered this fate. But for this to happen, the coastal professional “progressives” have to awaken to the fact that they too are in danger, and join forces with the rural working classes.

    A small but telling detail: Pruitt notes the hostility of some coastal elites to expanding broadband into isolated rural communities, a high-investment, low-return initiative which could make a very big difference for rural communities. This is an infrastructure project which makes sense, but which has been alarmingly neglected in the U.S. I live abroad (Greece), and am always amazed and disturbed at the speeds of broadband even in the suburban/semi-rural area I call home. On the other hand, our new Secretary of Education is gung-ho for online education (cyber-education) in sparsely-populated regions of the U.S. where it’s not sufficiently profitable to open charters and vouchers (including, I’m sorry to say, Native American reservations). Huh? Duh.

    Pruitt is a contributor to a site I first became aware of through nc’s links; it’s called legalruralism, and I can’t recommend it highly enough.

  21. Altandmain

    What is really happening is that the top 0.1% have extracted economic rent from the rest of us and are slowly destroying us.

    There really is no other way to say it. They didn’t outsource jobs to other nations for foreign aid – they did it to enrich themselves. Same could be said about big finance.

    The US seems to have gone through the empire phase and is now in the decline phase, where the rich are trying to enrich themselves. It’s like the aristocrats of Ancient Rome. The internal contradictions of the US are leading to serious problems.

      1. DH

        Organized labor became a big business of its own. That meant it took its eye off its reason for existence. Organized labor effectively has three roles: negotiate a safe, healthful work place; negotiate good living standards for its members; and help the corporation thrive so that it can provide the workers with good jobs and pay.

        Instead, it started featherbedding job roles and got fat. Then it got slaughtered and its membership laid waste.

  22. Gman

    For some, labour is ‘just’ another expendable resource, more so than ever in developed economies.

    The difference being of course is that it’s not exactly wise to say as much because said ‘resource’ currently still has something pretty potent and of value to those who begrudgingly seek and need it ie a vote, under the increasingly inconvenient to some, ‘anachronistic’ principle of universal suffrage.

    Portraying globalisation as a progressive phenomenon allows those who are its primary beneficiaries to paint those who oppose, or are suffering because of it, as anti-progressive, often times racist, small-minded laggards simply intent on throwing grit in the gears of civilisation’s inevitable ‘glorious’ advancement. 

    Is it any wonder that we’re seeing ever more ‘liberals’ quietly questioning this fundamental principle and the hard won right of those who have the temerity to use their vote that runs contrary to their ‘liberal, open minded, progressive values’?

    If ‘these people’ are either too dumb or uneducated to understand the consequences of their actions then why the f*ck do you continually, cynically and perversely engineer a system that prices them out of your precious ‘free’ market and deliberately keeps them this way?

    As ever in life, eventually you reap what you sow, or don’t as the case may be.  

  23. Sluggeaux

    Madness it is. The “data” before us provides conclusive proof that Hill and Bill are certifiably insane. Let’s not kid ourselves: the Clintons are as completely out of touch with the experience of most Americans as Ronnie and Nancy Reagan. If the little Texan with the big ears hadn’t shown up to split the traditional GOP vote in ’92 and ’96, Bill would have been another clueless historical footnote and not a two-term plurality-vote president who was able to destroy the Democrats as a majority party by trying to out-Reagan the Reagan-ites. Hill wistfully remembers her first date with Bill was crossing a picket-line in order to scab in exchange for the opportunity to navel-gaze at a bunch of cold and socially-irrelevant Rothko color patches.

    Nearly half the eligible voters haven’t bothered to cast a presidential vote since Nixon resigned. That doesn’t count the people rendered ineligible to vote by the War on Drugs. They know that we’ve been living under a hostile oligarchy at least since the fall of Saigon. If that is a Haitian level of resignation, I don’t know what is.

  24. Adam Eran

    Here’s a little exercise for NC readers. First access Wikipedia’s article on government spending.

    Notice the table of nations about midway through the article, it ranks taxes and spending as a percentage of GDP, so it normalizes for the size of the economy. Notice two things: 1. you can sort by clicking the headers, and 2. the sources are Wall St. Journal and Heritage…hardly tree huggers.

    Now sort the spending from high to low. Notice the U.S. ranks 46th, between Argentina and Luxembourg.

    But the U.S. spends much more than any nation on “defense.” … so if you normalize spending and reduce that spending as a percent of GDP by 11% (still spending plenty more than the Chinese), the U.S. is between Bhutan and Namibia.

    Wonder why we’re enjoying Namibian infrastructure? Wonder no more.

    1. Synoia

      The Namibian Infrastructure is pretty good considering the size of the population.

      House prices there are low too.

  25. Patrick Donnelly

    USA and Canada are following the South America model: familes own everything, but they are limited in number. Everyone else rents their life from these families. The Monroe Doctrine was about globalization, confined to the Americas.

    Now, it is spreading all over the world through corruption and cronyism as Yves has consistently identified. All corporations are eventually bought up by these rich families. The almost perfect manipulation of stock exchanges and commodity prices is not just an indexation ploy. As soon as the employee pension funds have been stripped, the collapse in asset prices will begin in EARNEST! These families will then buy up the land etc., to ensure that the entire world rents their life from them.

    Government will eventually have to tax those families and this will mean transparency of ownership. This is one of the reasons for Brexit: EU has surrounded Switzerland. The City exp[ects big moves in their favour and exposure to taxation is off their agenda. Countries will end up owning zombie banking but refuse to investigate money laundering until that happens.

    In the meantime, get used to the worst from South and Central America arriving in every city and town. There is no chance of avoiding this deterioration for about a decade, even if matters are somehow reversed immediately. That will end the CONsumer society.

    The only chance for resurrection of a middle class will be that disappearing thing, common sense. The greed has been worse than seen before the French Revolution. It is tempting to suggest the remedy will also be worse? But this will be so long drawn out ….

  26. nothing but the truth

    no mention of extortion by healthcare?

    We are seeing sectoral extortion by FIRE and healthcare sectors.

    The rest of the economy is unable to cope with the greed.

  27. Sound of the Suburbs

    What’s going wrong?
    Technocratic experts aren’t going to help much if they are experts in bad economics.
    This is exactly what we have experienced.

    Why is economics so bad?

    You are never going to get anything working if you don’t understand money and debt.

    Today’s mainstream monetary theory is “financial intermediation theory”, we were never going to get anywhere with that.

    If you don’t understand the most fundamental of all fundamentals in the capitalist system you are wasting your time trying to put a functioning economy together.

    This leads to a whole host of problems.

    1) Not understanding how bank credit creates the money supply.
    2) Not understanding the relationship between the money supply and the functioning of the economy.
    3) Not realising the dangers of austerity shrinking the money supply
    4) Not realising how a shrinking money supply leads to debt deflation
    5) Allowing bank credit to be used for financial speculation.
    6) Not realising the importance of using bank credit for productive investment in business and industry.
    7) Not realising how debt based consumption is only a short term solution and can never work over the longer term.

    All of these problems have presented themselves to today’s technocrats, but they didn’t know what was going on as they didn’t understand money and debt. Their “financial intermediation theory” didn’t allow them to see these problems.

    Debt based consumption has been used to keep things running and has lead to today’s inequality, in the longer term it also leads to the collapse of the system due to lack of demand.

    A sustainable system needs higher wages to maintain demand without debt.

    There is a huge difference between wealth creation and wealth extraction, but today we have no idea of even the concept of wealth extraction.

    “Income inequality is not killing capitalism in the United States, but rent-seekers like the banking and the health-care sectors just might” Nobel-winning economist Angus Deaton

    Well, one of our 21st Century Nobel prize winning economists has just realised the problem.

    The Classical Economists of the 19th Century were only too aware of the two sides of capitalism, the productive side where wealth creation takes place and the parasitic side where wealth extraction takes place.

    Understanding the two sides of capitalism allowed Classical Economists to see a brighter future where capitalism worked for all.

    Again we have created a whole raft of problems by losing this knowledge and built ourselves a dysfunctional system.

    1. Sound of the Suburbs

      Missed one and a very important one with today’s ubiquitous real estate booms and busts ….

      8) Not realising the positive feedback effects of real estate booms and busts on the general economy, often leading to debt deflation

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