I can’t remember a time when a real debate about the state of the economy was offered. I’ve come to realize that there are two economies in the United States. I call these the Elite Economy and the Real Economy. True, these economies are interdependent, but the Elite Economy is the default definition when pundits and commentators refer to “the economy.”
Whenever we hear about the economy in the news it’s the Stock Market, or the Federal Reserve or GDP. Really, these are more significant to the elite economy than they are in the real lives of working people. Yes, they are important to know and understand, but the state of the economy cannot be understood just by looking at these variables. The state of elite members of our society maybe, but not for average Americans.
To understand the real economy we must use variables such as unemployment, poverty, wages. I was always a big critic of the famous Clinton economy. When talking about the nineties we describe the time as prosperous to the point where it is a truism. Yes, times were relatively good (compared to the 80’s and compared with today) but the real economy wasn’t much to brag about. For instance, whereas the unemployment rate dropped to historic lows, falling about 60% during the Clinton administration, the poverty rate only declined about 15%. What does this mean? It means that many of the people who were “employed” were working dead end, low wage jobs. But the neoliberal euphoria of the nineties distracted us from the larger debate–should working people in the United States be allowed to suffer in poverty?
Since the 2000 recession again our focus was primarily on the Stock Market and what the Federal Reserve was doing and what the GDP looked like. The vast majority of stock is held by the top ten percent of the population, the Fed has always been driven by free market ideology and the GDP is a ridiculous measure from the start. To give an idea of how ridiculous GDP is one must understand that a person who is diagnosed with cancer while they are involved in a nasty divorce that started after the house was burned down actually improves the GDP! The Stock Market? If you own a Fortune 500 company and you want to improve your stock value…that’s easy, fire a thousand employees!
In the meantime, people have been working harder, GDP having increased by about 20% since 2000, but wages have been stagnant, poverty and unemployment has been growing and prospects for the future are virtually non-existent. It was only a matter of time before this shaky structure folded like a rusty door hinge.
The elite ec onomy operates based on different rules than the real economy. But the elite economy cannot hide from the real economy for long. The focus of the elite economy is to concentrate wealth in the hands of the elite. The focus of the real economy is to produce and keep wealth moving. If these characteristics of the economy are balanced through government policy, the economy runs fairly smoothly. When the elite economy is the focus of state policy, vast stores of wealth gather at the top echelons.
This is a zero sum game. The more wealth that is accumulated at the top, the less there is for everyone else. Yes, productivity might increase as individuals are coerced into working harder (becomeing more productive) because of competition for fading resources. But the elite economy cannot accumulate wealth if it is not being produced and moved at the real level. At least not in any real sense. Variables like stock prices and securities, for instance, are not measures of real value, but rather measures of perceived value.
When those toiling in the real economy can no longer move wealth through the system it is only a matter of time before the perceived value associated with the elite economy must collapse.
This is why economic gaps happen and why such gaps invariably lead to economic collapse. When the media ignores the real economy, and the elite do nothing to ensure the movement of wealth through the system, they are setting up the very house of cards that was built in the 1920’s, established its foundation under Reaganomics and has come to fruition in the 21st century.