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.”Tweet