“Well, we have done over the past 30 years is to build a creditor’s paradise of positive real interest rates, low inflation, open markets, beaten down unions and a retreating state, all policed by unelected economic officials and central banks that have only one target to keep such a creditor’s paradise going in such a world. Why would you ever get a pay rise? Indeed. Is it any wonder that inequality is everywhere an issue now?” Joining us is Mark Blyth.
I know I must sound like some liberal do-gooder. I’m not. I’m not making a moral argument that economic inequality is wrong. What I am arguing is that rising economic inequality is stupid and ultimately self-defeating. Rising inequality doesn’t just increase our risks from pitchforks [as in the French Revolution], but it’s also terrible for business too. So the model for us rich guys should be Henry Ford. When Ford famously introduced the $5 day, which was twice the prevailing wage at the time, he didn’t just increase the productivity of his factories, he converted exploited autoworkers who were poor into a thriving middle class who could now afford to buy the products that they made. Ford intuited what we now know is true, that an economy is best understood as an ecosystem and characterized by the same kinds of feedback loops you find in a natural ecosystem, a feedback loop between customers and businesses. Raising wages increases demand, which increases hiring, which in turn increases wages and demand and profits, and that virtuous cycle of increasing prosperity is precisely what is missing from today’s economic recovery.