The chairman of Citigroup attempts to express sympathy for the Wall Street protestors by insulting their intelligence! by Bill Gee
Wednesday, October 19, 2011
In a brief op-ed on Bloomberg View, Peter Orszag, the chairman of Citigroup, attempted to express sympathy and solidarity with the Wall Street Protestors by expressing his opinion as to why he believes that the protests are justified. As the movement continues to gain strength, the intrepid CEO is obviously trying to avoid the noose that he must be feeling begin to tighten around his neck by evoking the "facts" of a debunked economist and then deflecting Wall Street’s share of the blame on nebulous uncontrollable factors.
Orszag begins his column with the following:
In Economics 101, students learn that the share of national income received by labor stays roughly constant with the share received by capital. This is the first of "Kaldor’s stylized facts," articulated half a century ago by the Cambridge economist Nicholas Kaldor.
First of all, I’ve been teaching Economics for three years and I’ve never heard of this man, so giving the Citigroup chair the benefit of the doubt, I looked him up. This so-called "fact" was introduced by Kaldor in 1957, and he himself recanted it towards the end of his life in the 1980s & 1990s. In fact, this notion that the increase in the share of corporate income by labor is proportional to the increase in national income has been debunked so many times that Kaldor’s Facts have been expunged from current Economics textbooks. Had Mr. Orszag attended an Economics 101 class in the last 20 years, he would have known that.
Technology & Globalization
To his credit, Mr. Orszag acknowledges that the Kaldor promise has not held true to the facts, which is why he feels as though he understands the plight of the unemployed in Zuccuitti Park. After all, when we are promised that individual incomes should rise with national income, people are justified to feel anger and resentment when that turns out to be untrue. He then postulates that the reason why wages have not kept up with national income. He believes that it has nothing to do with people like him, but it has more to do with Technology & Globalization of the economy.
Again, his argument hinges on the flawed reasoning that Kaldor was somehow correct, and that it was productive efficiency via new technology and global competition that were somehow responsible for this growing disparity in incomes. He ignores the fact that global corporate executives actively sought cheaper sources of labor and sought greater productive efficiency so that they could keep more of the profits for themselves while at the same time increasing competition among workers, which drives down equilibrium wages. (How’s that for Economics 101?) Technology & Globalization made that process easier for Wall Street, but they were certainly not causes in and of themselves!
We won’t get started on the role that fiat money played into all this, but suffice it to say that access to an endless source of counterfeit currency also played an important role in the increasing wage gap between the rich and the poor, which had nothing to do with either technology nor Globalization!
Painting a Bleak Future
In the end of his column, Peter Orszag offers nothing in the form of solutions to pacify the growing anger of the protestors. On the contrary, he does the opposite while at the same time attempting to place the blame on forces outside of his control. That by admitting that as global markets continue to expand and technology continues to advance at a rapid pace, he can absolve himself and his fellow Wall Street executives from any blame for the Greater Depression that is sure to come.
No wonder the frustrated Wall Street protesters lack any specific proposals for change: We are effectively missing $500 billion a year in wages, and no one has a credible set of ideas that would bring it back.
Translation: "Sorry guys. If somebody stole $500 billion from me, I’d be pissed off, too but there is no way I’m going to say or do anything that’ll address your grievances because I’m very happy with the money I stole from you. Just please don’t kill me when you storm my office with torches and pitchforks. I just had the carpets cleaned."
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Posted By: Walt
Date: October 19, 2011 12:28:11 PM
I thought Caldor's was a bankrupt chain of Northeastern department stores that went belly-up in 1999. Oh wait! You said, "Kaldor", not "Caldor". My mistake.
Seriously though, this Kaldor fellow seems an odd source for a big banker to quote. He must be feeling really desperate to dig that corpse up. Better tell the carpet cleaners to get ready for a return visit.
I think your rebuttal is spot on, although I don't see how we can leave fiat money out of the picture, given it's where Orszag's ability to lend other people's money comes from in the first place. After all, it's not just an endless source of money to lend. It's also a way to transfer all the risk for that lending away from Orszag and his fellow bankers and put it squarely onto the depositor and the taxpayer instead, all for the purpose of making those self-same depositors and taxpayers go deeper into debt to, among other things, have a place to live they can call their own.
The problem is if you give money to a CEO (or Wall Street) to create employment, he can just give a part of it (any size he wants) to himself, use another part to add to profits - to keep shareholders satisfied, and a small portion to create a few cheap jobs.
The money that Gov adds to the economy needs to be diffused at the grassroots, so companies have to battle it out to win it. Only THEN they will employ more people, and capable, well paid people...in order to win this money. THAT would be when wages rise as a result of money infusion. Pretty much the only option for the Gov is to locate gaps in public services and add money to fill those in. Throwing money at Wall Street and Corporate Executives is sham economics, and good labor will further lose relevance and see its share of the National Income only decline further. The natural result is #OWS, what else?