Right now Wall Street and the rest of the financial, insurance, and real estate (FIRE) sector is trying to impose austerity on the US at every level and throughout the Western World. They argue that our out-of-control spending must stop and they claim to know how to make it stop. However, their view misunderstands the macroeconomics of our situation. We must spend enough to buy all that we produce. All that we produce is divided into various incomes which represent claims on that aggregate product: wages and salaries, rents, interest, profits, royalties, and so forth. Those incomes enable spending which purchases all that has been produced: so long as all that is received in income is spent either directly or through financial intermediation. If the spending does not equal what is produced, we slip into recession. If we slip into recession, we experience declines in incomes, declines in spending, declines in production, declines in employment: all in a vicious circle.
So when someone receives an income, we need that income either spent, loaned directly to another spender, or loaned through an intermediary such as a bank to another spender. If this does not happen, the economy does not continue functioning properly. Whether we receive income from wages and salaries, rents, royalties, interest, profits or however, we must either spend that income ourselves or we must find someone else to loan our funds and let them spend our income instead (real aggregate savings rates need to essentially zero out over any extended period). However, as the concentration of wealth and income becomes so perverse as it is in the US today, some receive incomes so enormous they could never spend those incomes themselves. If we made them spend all of their income it would be cruel and unusual punishment; it is that enormous. They therefore save much of it on an ongoing basis or otherwise inject it into the financial sector so that others can borrow it. The necessity of this permanent financial intermediation implies that we must have larger and growing debt to fuel our economy. The only other way around this large and growing debt is to somehow address the wildly perverse distribution of wealth and income in the US (or force the super-rich individuals and corporations to spend against their will).
Attacking the public sector, undermining unions, rendering minimum wage laws ineffective, requiring welfare mothers to enter the workforce to force down wages: these austerity measures cannot solve our debt problems. They merely exacerbate our problems because the force those working to retain even more meager portions of the net value of their own work and consequently those who amass those residual net revenues receive even more income far beyond their spending abilities.
So we cannot solve our debt problems by creating even more privilege in the US and greater concentration of wealth and income. These measures championed by the financial sector and their corrupt servants in government only exacerbate our problems. In our commercial economy, the specific regime of ownership and control of wealth creates the conditions for greater concentrations of income and therefore greater concentration of wealth and power. The very few elites in the FIRE sector look at our problems and think we need to be beaten into submission through austerity measures. Take away our unemployment compensation – so they think – and we will be forced into servitude no matter how meager our wages, how degrading the working conditions, and how spirit-crushing our economic circumstances become. In fact, like the slave owner elites that preceded these FIRE sector elites, they believe that all our economy needs is a few cracks of the whip and we will be back on track, producing endless wealth for the FIRE sector elites. To them it is the attempt to institute equitable government which makes workers unwilling to giver their lives to these financial elites. They may be correct, but the purpose of government is not to force the masses to devote their lives to Wall Street.
No amount of austerity or any other measure which further concentrates wealth can solve our economic problems: those ‘solutions’ only make matters worse. Since the FIRE sector always identifies the problem as a lack of wealth and income condensing in their hands, their solution requires we re-instill a slave mentality in every last American so that they will be content not merely producing to sustain themselves but producing to build pyramid schemes for these FIRE elites. If we want to avoid the slave mentality, instead, we must find a way to reinvigorate the US workforce by placing wealth and the conditions to improve our lives back into our own hands – with both power and wealth dispersed far more evenly than it is today.
This economic transition initiative is a comprehensive plan to do just that: to place the means to produce into our hands and strengthen our republic at the same time. It also reverses the current situation so that, rather than seeing how workers can be subdued and serve the insatiable desires of the FIRE sector for more and more wealth, we establish the conditions where enterprise, finance, insurance, money, commerce, and government all serve our general welfare needs instead.