this is Richard Wolffe with another
response to an ask prof wolf question
coming from our patreon community and
this one comes from Robert Thompkins and
Robert asks about the behavior of the
large banks in the United States
particularly and he wonders whether the
stagnation of workers incomes that
starts in the 1970s and has never
stopped a situation that means if you
adjust the money wage workers get for
the prices workers have to pay then the
real wage that's what that means in
terms of what the wage can actually buy
is not much different today than what it
was in the late 1970s an amazing end of
a hundred and fifty years of rising real
wages where the wages you got enabled
you to buy more and more things all of
that stopped real wages stagnated since
the 1970s and Robert Thompkins asks is
that when banks started doing other
things investing their money much more
in in much more risky ways leading to
the very instability etc that we suffer
now well I think the best honest answer
to the question is you're half right
and you're half not so right but you're
mostly right and let me explain when the
American working classes
real wages stopped rising in the 1970s
it comes to them as a shock very
important to understand and it's a shock
for a good reason
the American working class for the one
hundred and fifty years before the 1970s
had experienced decade after decade
rising real wages yes prices went up but
the wages they earned went up more so at
the end of each ten-year period working
class families were able to buy and
consume more
then they had at the beginning of each
decade genuine rising real incomes real
consumption was one of the best records
any working class in any capitalist
country between 1820 and 1970 could show
and it led to Americans believing they
lived in a charmed country
American exceptionalism that somehow God
smiled on the United States to give the
working class a rising standard of
living and it was a factor that blunted
sometimes not always the appeal of
socialism and other criticisms of
capitalism because the capitalist could
and did come back by saying to the
working class
you don't need socialism you don't want
socialism you don't need labor unions
you don't want labor unions because look
your standard of living is going up
didn't work all the time as it shouldn't
have but it was an argument all of that
stopped in the 1970s and the banks did
react to the end of rising real wages
and their reaction took a particular
form they made the determination that
the American working class was being and
would continue to be traumatized by the
end of rising real wages shocked that
they would blame themselves that their
wages didn't rise rather than talking
about a system that had broken down for
them but they didn't by that time the
Socialists left in the United States had
been largely destroyed by McCarthyism by
the Cold War and so on so working class
families were kind of left on their own
what did they do when their wages didn't
go up did they give up on the American
dream of a rising standard of living no
they did not so they did two things
number one if your wages per hour don't
a lot two more hours working men and
women took on more hours of work a
second job apart our job a weekend job
you understand but the second thing is
where the banks come in the second thing
the American working class family was
willing to do and this was with great
difficulty they set aside the traditions
of thrift of saving that had been
preached in every American church
synagogue that had been taught to
children in school save your money don't
spend everything always put aside for a
difficult time for a rainy day don't
spend it all it's unwise the American
working class put that advice aside was
difficult was frightening but they did
and you know what they were willing to
do with enormous promotion from the
banks they were willing to go into debt
so yes the banks responded to stagnating
real wages but they did so in a way that
was good for them they went to the
working class with a vengeance and said
we have what you need a credit card we
will give you loans just use the card go
into the store and hand them your card
and in the moment that they put the card
in the little machine a loan is
organized that's what it is
the merchant you're buying from is
immediately given a sum of money that is
added to your personal debt which you
find out about at the end of the month
on this statement the banks went into
what is euphemistically called consumer
services it's called ripping off the
public taking advantage of the
working-classes desire to hold on to the
American Dream the only way that
was left to them when their wages didn't
go up and that was by borrowing and over
the last 40 to 50 years banks have made
a fortune off of this let's be honest
enforced lending debt of the working
class first they gave them all credit
cards then they gave them all loans to
buy their cars then they gave them all
loans to pay for the education for their
children debt debt debt debt debt and
then the banks came up with clever ways
to package the debts into a new kind of
security called a derivative to let
investors get in on the action of
fleecing the working class because you'd
stopped raising their wages yes banks
went into very risky maneuvers on top of
a mound of profitability found in the
debts of the working class
once again capitalism figured out how to
take advantage of the working class to
produce mountains of profit and along
the way huge vulnerabilities - crashes -
costly bailouts we're living through
those but that's how capitalism works so
yes Robert Tompkins the banks did become
more risk takers but they did so on the
backs of the mass of the working class
who had to go into debt to even
fantasize the ability to give themselves
and their children the American Dream
they had been promised
this is Richard Wolff for ask prof. wolf
in appreciation of our patreon community