tag:blogger.com,1999:blog-1509187841033628660.post2164748819245442847..comments2024-03-28T22:28:39.087-07:00Comments on Medicine and Social Justice: "Wall St. Smarts"? Maybe the smart people should be doing something productiveJosh Freemanhttp://www.blogger.com/profile/10248920527894775520noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-1509187841033628660.post-56944863599940817432009-10-24T19:34:37.805-07:002009-10-24T19:34:37.805-07:00Why did the economy fail? The common explanation a...Why did the economy fail? The common explanation ascribes it to bad investments, short sighted risk taking on the part of big banks, hedge funds, and all that.<br /><br />But that's only a part of the story. Since the early 1970s the real wages of workers were flat. Then with the new century, employers went beyond that and actually cut real wages. Most Americans had less and less money to spend.<br /><br />But the well being of the economy depends on the consumer market. How could consumption be kept up if working Americans earned less and less? Simple, the banks offered to lend them the money--at usurious rates to boot.<br /><br />Today many families of hardworking, responsible citizens owe more money than they earn in one year. There's no way they can pay that back. The whole system was bound to collapse.<br /><br />This story shows that the problem is not merely lack of bank regulation or lack of ethical back bone on the part of bankers and investors. The problem is inherent in the economic system.<br /><br />In pursuit of profit, employers cut wages. Once wage earners have less money they buy less. The economy produces more than consumers are able to buy and the economy implodes.<br /><br />The same thing happened in 1929. Since then economists told us that they had figured out how to prevent this sort of collapse by "fine-tuning" the economy. Funny no economist has said that lately.<br /><br />Richard Schmittrichard_schmitt@charter.nethttps://www.blogger.com/profile/08196321164877963757noreply@blogger.com