Wednesday, October 8, 2008

Another member LOE on the economic crisis: "Stock market is not the economy"

This letter comes from Alliance supporter Mary Lynn Cramer in Massachusetts, and was published by the Arlington (MA) Advocate; a slightly shorter version was published by the Boston Globe. Mary wrote a related article for Counterpunch; you can read it here.

In the midst of bursting financial bubbles, it is important to acknowledge the underlying economic crisis we have been experiencing for quite sometime. The stock market is not the economy! With regard to the economy, the real income and wages of working people have been declining since the early 1970s. The same could be said of the profit rate of leading U.S. industries, which decreased over the same period of time, prior to the invasion of Iraq. Due to inflation, direct wage cuts, lay-offs, and longer workdays, the real value of workers incomes has continued to shrink.

Cuts in production in major industries, plant closings, and lay-offs beginning in the 1970s continue to date. This real economic crisis preceded the current crises in speculative investments, inflated financial instruments and fraudulent loan practices. These bogus operations attracted money that would otherwise have been invested in real economic production, had equally profitable opportunities existed for investment in real economic expansion. From the “.com’s” to the “AIGs,” their inflated value existed only on paper and represented no increase in real material wealth or economic production.

It may relieve our anxiety to point fingers at the “bad guys” on Wall Street, and the supporters of “deregulation” (beginning with Clinton); but what is needed is an understanding of the ongoing economic crisis underlying the bursting of empty financial bubbles. We need to face the reality that in times of deep, prolonged economic crisis, historically war, inflation, financial speculation and government intervention have been the tools used to redistribute economic resources away from “consumers” and into the hands of corporations in an attempt to make economic production profitable again. Bursting bubbles are the sexy foam that distracts us from the underlying material economic reality.

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