Krugman, Klein, Twinkies, and the Dragon of Inequality

Ezra is so good at explaining things:

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Executive Summary: The American Way of Business — increase profits by squeezing employees and suppliers to lower cost — amounts to an economic death spiral. See also “How Obamacare Affects Bad Business Practices.”

Paul Krugman:

Along the way, however, we’ve forgotten something important — namely, that economic justice and economic growth aren’t incompatible. America in the 1950s made the rich pay their fair share; it gave workers the power to bargain for decent wages and benefits; yet contrary to right-wing propaganda then and now, it prospered. And we can do that again.

Can’t say that often enough.

17 thoughts on “Krugman, Klein, Twinkies, and the Dragon of Inequality

  1. What Krugman doesn’t talk about – and I’m afraid it’s the flaw in his argument – is how the world of the 1950s was very different from today. America was the victor of World War 2, with its manufacturing base intact, and its economy far more advanced than anybody elses. Krugman needs to couch his argument in the present day context, where the world is awash in excess labor, and Asia simply has a much lower cost base than we do, and as a result, they’re eating our lunch.

  2. moonbat,
    Krugman does address the issue of our continued success, long after Germany, Japan, and Europe had recovered. I’m hoping this link brings you to the right blog post.

    If not, click on maha’s Krugman link on the left, under ‘a. pros,’ and scroll down to November 19th in the morning to find it.
    He’ll explain it much, much better than I ever could.

  3. Yes, let’s lower the taxes for the owners and CEO’s while they reward themselves with bonuses and salary hikes – even when their companies are heading down into a death spiral – and lower the take-home pay of labor, to the point where Twinkies are a high-en luxury item (if they were to survive, that is):
    That’ll mean a booming economy!

    Earlier this year, I went to WalMart for one of my very, very, very rare visits (to find out about their diabetic supply policy for my Mother), and noticed there was no more “Greeter!” When I asked, they told me the store had eliminated that position. Now, I can’t speak for other WalMart stores, and whether that was a local, or regional, or national decision – but, there goes every old-timer’s retirement plan – to subsidize their income by working part-time at the stores, greeting shoppers.

    In their slavish devotion to maximize profits, their own salaries, and share-holder value, does it NEVER occur to these Galtian feckin’ idjit’s, that if no one can earn a decent salary, or retire without living off of cat-food, no one can affort the sh*tty sh*t they make and sell?

    Isn’t Henry Ford’s idea about paying his employees well enough so that they could buy his product, taught at business schools anymore?
    And if it isn’t – WHY THE FECK NOT!!!
    What does MBA stand for? Moronic Boob’s and @$$holes?

  4. A recent study came to the conclusion that a raise in Walmart employee pay would end up increasing the total profits to the corporation. It’s Henry Ford’s old answer to his fellow nabobs on their questioning of why he paid his employees a fabulous $5.00/day – “so they can buy my cars.”

  5. Here’s an idea for taxing people – it’s called “The Wealth Tax:”

    And, if we can’t have than, what about a graduated tax, not on income received, but on income PAID.
    In other words, the more a company and its executives pay their low-level employees, and the better the benefits, the lower the taxes for them and their shareholders.
    You want to run a minimum wage sweatshop, retail store, or fast food joint? Ok, you get taxed the maximum amount – whatever that may be. I’m no mathematician or economist, so I’ll leave the addin’, subtranctin’, multiplyin’, dividin’, and “guzinta’s” to those who have a clue.

    Now, maybe this is an idiotic idea – but maybe someone can tweak it, and make it into something realistic.

  6. Hmm, who’s in trouble, or at least claims to be? Papa Johns, a Denny’s franchisee, and Hostess. I’d agree with the wage-squeezing practices as a common denominator, but also “unhealthy crap products” which don’t have the market share they used to. So long, Wonder Bread, you could wipe up countertop spills like nobody’s business.

  7. joan,
    My Mom always used to tell the story about how my sister and I, when were kids, begged her to buy Wonderbread – obviously their commercials worked on the young or weak-minded (or, in my case, I repeat myself).
    She used to tell us the faces that we made when we first tried this supposedly great, vitamin-enriched bread. I almost spit it out, she tells me. She threw the rest of it out, and we never asked for it again. Mom was a wise woman – she gave us what we wanted. It taught us a lesson – commercial caveat emptor!
    We were raised on good Slavic breads – pumpernickle, rye, potato bread, etc. We also had the Balducci bakery two blocks away, so we had access to cheap and great Italian breads, too. After eating that great stuff, who wanted to eat a tasteless albino sponge?

  8. Isn’t Henry Ford’s idea about paying his employees well enough so that they could buy his product, taught at business schools anymore?

    The difference is that Henry Ford was a capitalist. Someone like Mitt Romney (to take a random example), for all that he’s seen as a great champion of capitalism, really isn’t a capitalist at all but a speculator. Or maybe not even a speculator but a scavenger.

    I mean, the idea with capitalism is that it’s supposed to make everyone richer, right? That’s always the justification for trickle-down policies, anyway. So why aren’t we justified in saying that a form of economic activity that is actually making most people poorer isn’t capitalism?

    Isn’t a capitalist supposed to be somebody who builds something? You borrow money and use it to build a company, thus enriching the whole community. Mitt Romney’s career was based on taking companies that other people had built and turning them back into money. That’s a pretty significant difference.

  9. Oh, how true Mr. ‘Gulag. When I was a kid ( oh f…, I sound like a geezer now), we were so poor that we couldn’t afford Wonder Bread, twinkies, or that drink the astronauts drunk “Tang”. We did eat quite a bit of baloney and hot dogs, but we did not have those dang “no pest strips” hanging around. We had Captain Crunch once, but I hurt my mouth on that crap and went back to the county relief supplied “rolled oats”, and ate the powered milk dry with a spoon ( tasted better than when “mixed” with water). Do you remember those glow in the dark Hostess “snowballs”? we never had them. And Fritos, rare at best. Once in a while I’d trade an apple or a peach for a mini bag of Fritos. I remember throwing one in the pond and watching the oil slick, gotta be great for your innards, no wonder most of my classmates have succumbed to cancer.The blue gill seemed to enjoy the Fritos.I hope they didn’t get cancer.

  10. My dad was very picky about his bread. We kids fell for the Wonder Bread advertising too, but after one try, he flat out banned the stuff.

    A year from now, will anyone miss Hostess? Really? And we haven’t had a Denny’s in my town for more than 25 years… no one ever mourned.

    I think this is the “free market at work” that the Ayn Randies speak of. Sometimes it really does weed out the losers.

    • Just look for the red, yellow and blue balloons printed on the package.

      Amazing how that stuff gets imprinted into your head and never really goes away.

  11. erinyes,
    Once, when I was about 30, on my way back to work from lunch, I stopped off at a bodega to buy a pack of cigarettes. I saw “Snowballs” at the counter, and, feeling nostaligic for my youth, I bought a package and ate it as I was was nearing work.
    No sooner did I get there, than I felt sick. REALLY SICK! I had to run to the bathroom where I was so dizzy and nauseous, I threw-up on myself, as well as the floor. I never made it to a stall. My Manager didn’t really want to buy the “Snowball” story – this was back in the day when you could have a few martini’s or other adult beverages at lunch. I told him, well, then, I must have had a lunch of chocolate cake, creme-filling, pink marshmallow’s, and coconut sprinkles – and washed it down with a lot of vodka. When he looked at what was on my pants, he believed me. I went home early, and on the walk home to my apartment, I threw up on the sidewalk a few more times.
    Sometimes, nostalgia ain’t all it’s cracked up to be…

  12. It’s Henry Ford’s old answer to his fellow nabobs on their questioning of why he paid his employees a fabulous $5.00/day – “so they can buy my cars.”

    There’s a similar (probably apocryphal) story from the 70s. The head of the UAW and the CEO of a major automaker were touring a factory inspecting a new line of welding robots.
    “Wondering how you can get them to join the union?” joked the CEO.
    “No, I’m wondering how you’re going to get them to buy cars,” he replied.

  13. C O N S U M P T I O N – That drives the economy. The vast majority of economic activity is you and me buying stuff.

    J O B S – That’s the last resort for a capitalist – to meet more demand than he can handle with the work force he has, he hires – grudgingly and as few as he can.

    P A Y R O L L – You think the capitalist ‘pays’ you? Do you really think that your employer is the guy who separates you from starvation? No capitalist pays more than the first few payrolls. After that – it’s the C U S T O M E R who is paying you. Your employer is just the middleman handling the accounting. Want proof? Take away all the customers and see how long your job lasts.

    Here’s the bottom line – economic growth does not start with the rich guy investing in a factory or store. The smartest businessman who starts a factory or opens a store has anticipated a ‘market’ and that means he has sniffed out what the consumer – you and I – will pay for. He deserves his profit when his instincts are right, but he knows it’s the consumer who made him rich. CONSUMERS create economic growth.

    So how do you grow the economy – which means encourage you and me to buy more? Give us more money. The more money you feed consumers at the bottom, the more you raise all the boats, figuratively speaking. Why do I specify the bottom half? Because ‘extra’ money fed to people who are doing well doesn’t turn into consumption. They save – or invest – or put it in an account in Switzerland. Where it does nothing to increase consumption.

    Here’s the schism between liberals and conservatives in economic theory. The argument for a lower tax rate for ‘unearned’ income is that the activity in the stock market or hedge funds or cap gains is money that creates activity that creates jobs. Which is to me (as a liberal) a basic fallacy. All the frickin’ spending I do (consumption) is what supports the economy – lower tax rates on any economic activity that is not DIRECTLY TIED TO CONSUMPTION is just a con game.

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