Alan Greenspan is not your friend
by Jean Hay
If you are a working stiff, then Alan Greenspan is not your friend.
Greenspan, head of the Federal Reserve Board, is the guy who has been orchestrating several increases in the prime interest rate the past few months. The soundbite associated with these increases is that the Fed wants to ward off inflation.
Substitute "pay raises" for "inflation" and you’ve got what’s really going on.
The unemployment rate is down. Productivity is up. Business owners are getting more output per hour from their workers than at any time in history. As a result, profits are up. Way up. Business owners are happy. Shareholders, along with bankers, are happy raking in so much of what the IRS refers to as "unearned income."
However, working people, those whose income is indeed earned, are not happy. Why? Because, except in a few industries like high tech, wage increases have not kept pace with productivity. Adjusted for cost of living (and sometimes not even adjusted for cost of living), ordinary wages are lower now than they were 20 years ago. The workers who are inordinately productive are not getting their fair share of the profits.
In what keeps being called a "booming economy," Greenspan sees low unemployment as threatening inflation because business people might need to offer better wages to fill the job openings they have so they can keep making the big profits those workers bring them. Productive workers who haven’t gotten raises lately might be tempted to bolt to those higher-paying jobs at another company. Companies who don’t want to lose their productive workers might be tempted to offer them pay raises to keep them from bolting. And we would have what Greenspan would see as a vicious cycle.
In Greenspan’s world, workers shouldn’t benefit from their own labors. They should be happy they have jobs.
Conventional wisdom has it that if business people have to pay their workers more money, they have to turn around and raise the cost of whatever those workers produce, in order to break even. That’s how Greenspan equates wage increases to inflation. In his view of the world, inflation is all the fault of the greedy workers who want to be fairly compensated for a job well done.
But what Greenspan doesn’t want you to know is that that’s not what’s been happening lately.
In a lot of cases lately, particularly in big companies, there is no reasonable correlation between wages and profits. In those companies, paying higher wages might reduce some of the obscene profits for those at the top, but it wouldn’t put the companies into bankruptcy. Not by a long shot. The profits would just not be so astronomical. Prices would not have to rise, even a little. (Nike shoes that sell for $150 cost less than $5 to produce in some third-world countries. Nike could double the pay of those workers and not even feel it. But that would send the wrong message to the workers of the world. You understand.)
The problem is that investors like those high profits. They like all that "unearned income," of having their money work for them while they sleep. Their income is more important than your income, because it’s theirs. They think they deserve it, even if they didn’t earn it.
So the economy is booming, profits are soaring, wages are low, and workers are finally waking up to the inequities in the system. Therein lies Greenspan’s problem – how to make a good show of balancing the needs of workers, business people, stockholders, bankers, and investors, while holding dear to his own warped sense of economic justice. Under these circumstances, while mouthing platitudes to Congressional committees, Greenspan has repeatedly decided it is best to tip the scales so the money goes into the hands of the people who really deserve it, his friends who thrive on that unearned income.
His solution is simple – raise the prime interest rate. That sends profits, which business people might be tempted to divert to the workers, into the hands of the big investors, who of course would do much more productive things with all that cash than the workers, who would only order pizza on Friday night with their pay increase, or go out and buy a new truck. After all, the thinking at that level says, Porsches are more important in the scheme of things than pick-ups.
Every time Alan Greenspan announces an interest rate hike, he is telling workers that they must sacrifice their paychecks to the gods of inflation. And they must do it in two ways – by not getting a pay raise, and by paying higher interest rates on everything from car loans to home mortgages. Therein lies the double-whammy for workers.
For some reason Greenspan does not share Henry Ford’s concept on wage workers – that you make the economy go round by paying your workers well enough so they can afford to buy the cars they are building, and a few other things along the way.
Hopefully at some point the wage workers of the world will wake up and start to ask loudly why Alan Greenspan does not think giving them a raise is a good idea. They will start to ask why the Federal Reserve Board is conspiring to put even more of their hard-earned money into the pockets of non-working investors.
Notice we’re not talking about taxes here. We’re talking about cash in hand.
Once the workers understand how they are just pawns in the big banking machinery designed to put lots of money into the hands of investors who didn’t earn it but are convinced they deserve it, then the revolution will truly begin.
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