While you look at these two St. Louis Fed graphs of historical corporate profits and wages paid while having a WTH moment, let me explain how capitalism is supposed to work.
Capitalism is not simply a business or group of businesses, it’s an ECOSYSTEM. More on that later.
The deal is simple – investors find a problem in society to be solved through a business and they invest money in that business with the justifiable requirement for a strong return for their investment and risk-taking.
Workers help to solve the problem in question by making or delivering goods and services sold by that business as part of the mission to solve this problem. In return, these workers are paid a fair wage so they can also buy goods and services within the ecosystem. These workers should also be able to save money in case they may decide to become business owners and investors one day.
Governments at various jurisdictions ensure that workers and businesses do not screw each other, but governments also encourage the growth of new businesses and industries through research, tax breaks and other incentives.
Looking at middle class incomes remain flat or decline over the past 30 years while household expenses continue to increase [PDF] tells me two things – that arguing about whether blue or red guys caused this crisis is pointless, and that policymakers and businesses had better get a clue about how capitalism works.
Which brings up the ecosystem I mentioned. Ecosystem imbalances can be more dangerous and expensive than addressing the root cause—which in this case means creating prosperous workers…
song currently stuck in my head: “don’t give up on me baby” - the dynamic superiors