Monday, September 09, 2013

piggly wiggly.

A Moment of Clarity.


WORDS.

"In the struggle between capital and labor, capital is winning — and that’s hurting the feeble economic recovery. To simplify slightly: Labor (wage-earners and consumers) can’t spend, and capital (businesses and shareholders) won’t spend. Without a powerful growth engine, the economy advances haltingly.

...Labor’s shrinking share curbs consumer spending. The economy will then falter if the recipients of capital income don’t offset the weakness with increased spending on buildings, equipment, research and new products. Unfortunately, this doesn’t seem to be happening.

Corporate America is husbanding its profits. It invests mainly in the safest projects. From 2007 (the previous business cycle peak) to 2012, domestic corporate profits climbed 35 percent while investment in plants and equipment rose only 2.6 percent. U.S. companies have accumulated a huge cash hoard of $1.8 trillion as of the end of 2012.

A well-functioning economy is a circular process by which one person’s spending becomes another person’s income, which is then spent again. Today, there’s a damaging disconnect between capital’s rising share and its subsequent spending. So the economy sputters.

...The economy seems stuck in a self-defeating cycle: Weak consumer spending rationalizes weak investment spending; this keeps economic growth low and unemployment high, while putting downward pressure on labor’s income share.

We need to break this cycle.

...What would improve the odds is more exuberance from the custodians of capital. CEOs seem content to sit on their profits and invest only when the needs and the returns are indisputable. Careless capital, which fostered the financial crisis, has given way to ultra-cautious capital, which is making a lackluster economy self-fulfilling."

THE WASHINGTON POST: Capitalists wait for the recovery, while labor loses out

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