Part 3 We reached the limits of the kinds of capitalism this society can endure.
Turning, now, to the big business community, the last thirty years have been spectacular. Everything about the working class, with the introduction of computers, U.S. workers became more and more productive. We had a thirty-year period of rising labor productivity. Each year the worker produces more, and the wages stayed the same.
The gap between what the workers produce for their employer and gets paid and what the owner takes for the product is profit. As the productivity of workers go up and the pay stays the same, the wealth gap grows.
Nobody could quite understand what happened. Like the 70s, the 80s, and the 90s came and went, the wealth gap widened.
First, the owners began paying themselves high levels of salaries and bonuses. Large corporations paid their people tens, hundreds of millions of dollars, in annual salaries. From where did that money come? From the increased productivity and increased hours worked by wage-worker.
Second, owners began to do what is called mergers and acquisitions. They bought each other out. Companies had massive amounts of money and bought other companies. A company who was annoyed by a competitor bought it out.
Third, owners put their money in the bank. The banks discovered vast amounts of money coming in from corporations. That’s what you do with your profits while you’re figuring out what else to do with them. You put them in the bank. The banks became repositories of enormous amounts of money.
Fourth, the corporations and the banks discovered what they could do with these profits. Banks and large corporations could lend money to the employees. Thus, employees could raise their consumption when their wages didn’t go up by borrowing the money that their frozen wages made impossible. Employers no longer increased the salaries of their workers.
The U.S. business community took the money they received from the unpaid wages, and they could double its value with investments PLUS, they could loan money to the workers who paid interest on the loans.