RICHARD WOLFF
Wolff is author of the new book Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It.
He said today: “Since the 1970s, U.S. employers stopped paying their workers rising real wages even as worker productivity kept rising. Over the previous century, U.S. workers’ real wages had risen together with their productivity. …
“Workers had two choices: give up the [American] Dream of sending kids to college, buying good health care, enjoying retirement, living decently, or else borrow to pay for those things. Desperate to live the dream, to be ‘successful,’ to do what every advertisement advised, U.S. workers went on a 30-year borrowing binge. First they borrowed with the collateral of their homes (if they owned homes). When that was not enough, the credit card industry arose to make unsecured (no collateral) consumer loans. By 2006, U.S. workers’ families had multiple members working multiple jobs and staggering under mortgage, auto, and credit card loans that their stagnant incomes could no longer sustain. What collapsed in 2008 was an American economy built in good part on a house of credit cards because employers stopped paying rising wages for rising worker productivity.
“First, credit card companies took advantage of stagnant wages to push credit cards way beyond what working families could sustain. Today, credit card companies are cutting back consumer credit and raising fees to save themselves from financial ruin. The economic crisis whose recovery requires more spending on goods and services (that provide jobs) is thus worsened by credit card companies whose actions reduce spending. Meanwhile, real wages are not rising to once again relieve workers of the need to borrow. So unemployment worsens, foreclosures grow, and the underlying causes of the economic crisis go unattended.”
Wolff is professor emeritus of economics at the University of Massachusetts, Amherst. He is currently a visiting professor in the Graduate Program for International Affairs at the New School University in New York City.
For more information, contact at the Institute for Public Accuracy:
Sam Husseini, (202) 347-0020; or David Zupan, (541) 484-9167
