The Economist is openly surprised to find out why there such widespread discontent these days:
IF YOU need an explanation as to why political discontent is so widespread on both sides of the Atlantic, take a look at figures compiled by Dhaval Joshi of the hedge fund RAB Capital. This recovery has benefited companies a lot and workers not at all.
The funny thing is that the Economist seems surprised by this, given that this is exactly the expected and desired result of the policies they have successfully been pushing for the past decades...
In the US, Joshi calculates that, in cash terms, national income has risen $200 billion since the depths of the recession in March 2009. But corporate profits have risen by $280 billion over that period, while wages are down by $90 billion. One would have to go back to the 1950s to find profits outperforming wages in absolute (cash) terms, and even then it was on a much smaller scale. In Britain, national income rose $27 billion in the last two quarters of last year. Profits were up £24 billion and wages just £2 billion.
So, in other words, profit growth is now larger in absolute terms than value creation. I've been writing about "wealth capture not being wealth creation" and here we have figures that unambiguously show that at least one third of current profit growth is pure parasitism, coming from changing how the pie is shared rather than from a growing pie.
The "recovery" is not making things better - it's still making them seriously worse. Booms are typically periods of rising inequality, as people tolerate that better when it looks like they're gaining too. But this is the first time in a boom and bust cycle that the bust doesn't at least bring some respite to the growing inequality trend. The boom was really for a happy few, and the bust is now even worse as these happy few continue to gorge at everybody else's expense, adding on to the overall pain.
In the boom times, wage stagnation was dissimulated by increasing debt and apparent rising personal equity (through higher home prices). Now that these fig leaves are largely gone, there is nothing to hide the fact that all the wealth creation that has been propagandised is nothing but wealth capture by corporations and those who have access to their profits.
Feeding off the beast only works as long as you don't kill it. The beast (being the Western midle classes) is seriously weakened already... Will it start rumbling before it's too late to recover? Will the elites anticipate that movement? Or will some rightwing populist capture the mood and offer an even worse outcome, as in 1930s Europe?
with a hat tip to chris cook in the Salon