Robert B. Reich has interesting take on the causes of the recent financial woes is less to do with banking systems and more to do with lies in the increasing concentration of wealth in the hands of the richest Americans (and other elites in their respective countries), while stagnant wages and rising costs have forced the middle class to go deep into debt.
This also explains why marketers are now targeting the bottom and top of markets whilst missing out the middle. The stagnation of the middle classes earning power over the past three decades was concealed by three coping mechanisms:
- Women went into work to compensate for the stagnation of male earning power
- Workers worked longer hours to compensate for lower pay
- Families used debt based on rising house values to subsidise their spending to plug the gap
The problem wasn’t money being earned but the way that the it was distributed with the top one percent of the population earning a proportion of the wealth out of balance with the rest of the economy. The margin is very similar to what existed just prior to the great depression. Reich implies that this will bring economic and social turbulence moving forwards.
The mechanism that caused this disruption in the 1970s were technological changes:
- Containerisation of the global supply chain
- Process automation
- Information technology
The early 20th century had seen similar disruptive changes:
- Increasing productivity of farms
- Internal combustion engine
- Modern roads and railways
The fruits of productivity increases in both cases were not shared throughout society.