6 and1/2 years into the “recovery” but little has been recovering except corporate profits and incomes for the 1 percent.
from David Ruccio
The United States is six and a half years into the current “recovery” but little has been recovering except corporate profits and incomes for the 1 percent.
That’s because spending—both consumer spending and business investment—have basically stopped growing. And, within capitalism, when spending slows down, the economy as a whole stops growing and threatens, once again, to falter.
Consumer spending isn’t growing because, face it, most people’s incomes (whether measured in terms of real wages or median incomes) are stagnant. Whatever spending they are doing (e.g., on cars and higher education) is fueled by taking on more and more debt.
What about investment? While profits (especially from domestic sources) continue to grow, corporations are using those profits not for investment, but for other uses, including stock buybacks, mergers and acquisitions, and CEO salaries.
To put it in other words, the surplus is growing but the handful of large corporations that manage to appropriate most of the surplus are using it to reward themselves and their accomplices.
And, for the economy as a whole, that’s a real problem. It may make a lot of sense for each corporation to keep wages low, profits high, and investment spending down—but it makes no sense for the economy as a whole, including their own long-run profitability.
That, as it turns out, is a contradiction that is central to capitalism.
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Real-World Economics Review Blog 
There have been 23 decades in the United States history. In that time span there is only one decade that has had GDP growth in the 40% range — the 1940s (as measured by per capita real GDP; real GDP factors out inflationary growth and per capita data factors out the effects of population increase). There are only two decades in our history with GDP growth in the 30% range — the 1960s at 35% and 1790s at almost 33%. All the other decades are somewhere in the 20% range or lower. The 1980s were 25% — 40% lower than the 1960s; and, the 1990s were around 21%, almost 70% lower than the 1960s. The decade of the 2000s were 10% and the present decade, after five years, is 5%.
You are right. Growing is impossible if spending is stagnant. That was J.M. Keynes said to Roosevelt that he had to spend (investments), during the 1930 crisis. Unhappily states are afraid of inflation. I mean banks too. And States are afraid of banks.
I think there is plenty of investment taking place, but it goes into the speculative financial system for high returns and relatively low risk, at the present time. That explains why financial institutions are making record profits while the productive economy is in the doldrums.
to the author and all: no mention of the unemployment rate at 5%, has come down from the “official” rate of 9% or so at the peak of the 2008-2009 troubles. Of course the labor participation rate has changed much, is near historic lows…but still, how do you answer the system’s defense of the 5% rate which is surely going to be the theme of Ms. Clinton, in part…
should be” labor participation has not changed much…”
I t appears that the 5% unemployment rate has largely been the result of part time workers. This can be seen by looking at a chart of an index of the “Nonfarm Business Sector: Hours of All Persons” published by the Federal Res. Bank of St Louis. It shows only the slightest increase in hours from the year 2000 to today.
Link: (https://search.stlouisfed.org/search?&client=Research-new&proxystylesheet=Research&site=Research&output=xml_no_dtd&num=30&getfields=*&q=nonfarm%20business%20sector:%20hours%20of%20all%20persons)
John, thanks. That’s the first time I’ve heard that qualification. A lot of the reporting has been cheerleading, no depth. I’ll keep silent on the “mood” of the country, which hardly seems “euphoric,” because I know economists don’t like that type of reflection.
graccibros, wow, now it is my turn to thank you for your helpful comments and wealth of links.
Oops. Sorry graccibros, my reply was suppose to be for your comments about a different post than this one. The post titled “Greenhouse-gas emissions: current level, proposed level and level needed to avoid calamity.”
That’s ok John, I figured that’s what you meant. Thank you just the same.
The neoliberal model promotes profits, not investments (cf. Nicolaus Kowall).
Alternative economics would give us new priorities and new policies like reducing working hours, protecting the rights of nature, emphasizing person-oriented work and labor-intensive investment, shriveling the financial sector, closing tax havens and expanding the public sector and qualitative growth.