[From Rick Marken (2011.10.2.2220)]
Martin Lewitt (2011 Oct 2 15:55) –
Rick Marken (2011.10.02.1100)]
Martin, your "ideas" have no interest to me as long as they are
based on nothing more than your imagination. In my previous post
I asked you a question, based on actual data, and (just as I
thought) you change the subject here. To refresh your memory, we
were discussing the data presented here:[http://www.nytimes.com/imagepages/2011/09/04/opinion/04reich-graphic.html?ref=sunday](http://www.nytimes.com/imagepages/2011/09/04/opinion/04reich-graphic.html?ref=sunday) You said it was Fed policies, not Reagan's policies, that
started the economic decline in the US that started in ~1980. So
I asked what the Fed was doing right from 1947 to 1979 that
produced those good results. I got no answer.
What economic decline?
The one show in the graphs.
Your graph was about the way wage increases
tracked productivity changed in 1980, that is different than an
economic decline, growth continued, household income continued to
increase as women entered the workforce, and profits were
increasing.
Well, let’s call it something other than economic decline, then, like “a great regression”. So you are now saying that there is no problem here?
ML: We would have
been better off with free market policies, because we are better off
producing more than producing less
But the graph shows that that’s not true. There was a 120% increase in productivity in the 32 years from 1947-1979 and an 80% increase in the 32 years from 1980-2010. But there was a 72% increase in wages from 1947-1979 and only a 7% from 1980-2010. It looks like trickle up economics to me.
RM: What evidence do you have that this [improvement in the economy with free market policies] would be
the case?
ML: Because wages started to increase due to market forces several
times, and each time the Federal Reserve tightened policy again.
So the Fed was consistently doing this post 1980 but not pre-1980?
And if this is the case, it seems like the period from 1947-1979 proves that non-free-market policies work great as long as the Fed is not doing their wage suppression thing. Before I would even consider letting free market policies be implemented I would want to see clear evidence that such policies produce better results, in terms of income gains overall and in different income groups, than those seen from 1947-1979.
RM: Were the policies from 1947 - 1979 more free
market than those from 1980 to the present? Was Reagan actually
leading us away from free market policies?
ML: Reagan improved the tax and regulatory situation so those free
market policies were better, the Federal Reserve repeatedly
exercised tighter control purposely slowing the economy and wage
growth, so it is difficult to say what the net effect was relative
to the time frame you are obsessing on.
So your story is that non-free market policies prevailed from 1947-1979 and wages and productivity increased substantially because the Fed didn’t interfere. Then Reagan came in with free market policies that would have made everything even better but at exactly the same time the Fed started working hard to suppress wage growth, and this continued from slightly before Reagan’s inauguration until the present. I’d believe it is you presented data showing the “control” exerted by the Fed from 1947-2010. As with the wage data there should be a marked discontinuity at around 1980. There is a spike in the discount rate that starts in about 1979 and lasts until about 1984. But other than that 4 year period the Fed rates pre-1979 and about the same as those post 1984. Was it that 4 year period of high Fed rates that prevented the miracle of the free market form making it’s appearance? Seems very unlikely to me. But even so it seems like the period from 1947-1979 was pretty darn nice economically. How much better could things get with a free market?
RM: What evidence to you have that the data completely or even partially
contradicts the idea that free market policies would be anything but
disasterous?ML: Well it is pretty complex, perhaps you have an answer as to whether
it was more free market in the period you are obsessing with or the
period since? Were any other factors different?
The period I am obsessing about is the one shown in the data: 1947-present, approximately the same period that I have been in this world. The data show quantitatively what I experienced as a member of US society. From 1947-1979 there was a much fairer distribution of the the wealth created by the US economy. Things changed dramatically in 1980; productivity continued to increase but most of the wealth created by that production went to the top, making it harder for people in the middle and bottom to support their families. The big change in 1980 was the Reagan revolution, which was bringing “free market” economics to America: less government regulation,union busting, reduced taxes, particularly on the wealthy (now known as job creators). Many things were changing during this time period, but they came and went. The main systematic change that occurred in 1980 that is relevant to the economy was the change to “free market” economic policies – policies that have prevailed through the entire time period since 1980. This was a sea change from the socio/economic climate that prevailed when during my youth – 1947-1979. During that time there seemed to be a consensus that the New Deal policies implemented by FDR – policies that involved large government investment in education, research and infrastructure – was responsible for the prosperity that existed at the time.
So, yes, I explain the change in wage and compensation growth on the change to free market economic policies that occurred in 1980. I think that graph is very strong evidence that those policies were a success only in terms of their being a windfall for the wealthy. Unless you are wealthy, I think you are a fool to support such policies.
RSM
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–
Richard S. Marken PhD
rsmarken@gmail.com
www.mindreadings.com