Dean Baker sees the upside of the recession:
You probably didn’t see this in the newspapers, but real wages rose at an incredible 14.8% annual rate over the last three months. The basic story is straightforward. While nominal wages have continued to grow at a modest 3.2% annual rate, prices have plummeted, hugely increasing the value of the paycheques of those workers lucky enough to still have a job…
The real lesson that the public should learn from recent experience is how the income of one segment of society is a cost to others. The wealthy understand this point very well…
If they can get low-paid workers to tend their gardens, serve them meals in restaurants, paint their homes and serve as nannies for their children, it raises their standard of living…
In the same vein, when the rich lose wealth it is a gain to everyone else. In short, they have our money.
This doesn’t feel right to me. Yes, it’s true that the working classes saw their standard of living stagnate during the years when the income and wealth of the rich was soaring. But it’s also true that the single event which most soured working-class Americans on Republican pro-rich economic policies was not the rich getting richer but rather the rich getting poorer when the stock market plunged in October.
What’s more, it’s not easy to come up with examples of any country where the poor have seen a sustained increase in their standard of living as the rich have gotten significantly poorer. And if you’re a low-paid waiter or painter or nanny, you’re unlikely to feel better off when you’re fired by your formerly-rich patron.
Baker’s solution to this last problem is simple:
This just points to the urgency of a large government stimulus package. We need to replace the consumption of stockholders and homeowners with some other form of demand. The government has the capacity to spend enough money to replace this demand (as Fed chairman Ben Bernanke said, we can always print more money).
This obviously isn’t a permanent solution, and I wonder whether it’s feasible even on a temporary basis. Does anybody have a ballpark number for how much the consumption of the rich has declined? I suspect that the drop-off in real-estate consumption alone is greater than any stimulus plan which we’re likely to see.
But the real gain of the workers at the expense of the wealthy will come only if rents start declining. I’d love to see some numbers on the average rent paid by non-homeowners: does anybody collect that data?
Update: An email correspondent sends in some historical perspective:
In the US and much of Western Europe 1950-1980 the rich stagnated while the real standard of living of the rest improved.
In Revolutionary France the seizure of the assets of the aristocracy and the church and the elimination of many tolls, the emancipation of remaining surfs, and ending of the oppressive tithe system improved the standard of living of the middle and poor at the expense of the rich, at least those who did not die as cannon fodder.