Friday, 24 October 2008

Essential contradiction of consumer capitalism – keep wages low but keep spending high

Below is a brilliant must-read exposure by Ondine Green of the irrational world of financial speculation and how the bursting of the biggest bubble in history will impact on us in New Zealand. The financial markets are on the verge of complete systematic failure. The kings of finance want us to fall on their swords. As Ondine Green argues, we need to urgently put forward concrete demands which connect with the fears of ordinary people and opens up pathways to a more rationally controlled economy. Henry Ford's genius was to get workers to buy into the system as consumers, by using mass production to make consumer goods affordable. Wages at Ford's factories were set to make sure that a worker could buy one of the cars they made within a reasonable amount of time. However, by introducing the contradiction that the health of capitalism was dependent on workers' purchasing power, the system was made less stable in the long run. The Great Depression was a cycle of attempts to restore profits by cutting wages, thus depressing demand, thus reducing profits. Only massive public works – including rearmament for WW2, especially in USA and Germany – broke the cycle.

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