That is: but what happened to the West? The question refers to the gap between promises and results. About fifty years ago, the promise of Western systems was that anyone who studied hard and then worked hard would have access to the so-called "middle class" status.
If we now compare the results with the expectation, we discover that things went differently: after 50 that the younger generations slip into the assembly line of the middle class, sacrificing their existence (or at least most of the time available) to this process, the result is that the middle class no longer exists and the economy is taking a feudal form.
On this come the financial scoundrels (like MMT, and others) to say that "it would be enough to print money" and that "every small nation must have its own small currency and be free to devalue or revalue depending on the market".
And it is precisely this, according to the detractors of the Euro, that is hurting us.
Too bad things aren't quite like that. Here's something we can think about:
As you can see, since 1948 (when, after the war, the Bretton Woods agreements were made), productivity and wages have grown together. These were the “swing” years of the economy and growth, when the first really robust middle class of the last century (which then did in 1968) was created.
But you can see that the problem eventually starts in 1973. Long before the euro. Clearly it is enormously visible today, because the gap between productivity and income has become HUGE, but it has begun to open since 1973.
What happened? It happened that the companies produced more but continued to pay the same salary. Consequently, the gains were concentrated in a few hands.
This trend has continued since 1973: as you can see, wages have grown very little since then in relation to inflation and the cost of living, while productivity has literally exploded.
What does it mean in detail? It means that to go back to the swing times, EVERYONE's salaries would have to be multiplied more than twice .
To realign ourselves to growth and rebuild the so-called "social elevator" we should adapt wages not to inflation, but to the rate of productivity. In this sense, the ECB's mission is wrong because it uses rigid parameters: its objective should be to keep the inflation rate not equal to a conventional random number, but equal to the increase in the productivity rate.
But the ECB is a secondary problem, since in 1973 the euro did not yet exist and the EU was called the EEC, and had only a small fraction of its present weight.
But what happened then in 1973? What does this date represent? Which asteroid fell on the planet so that all the entrepreneurs together stopped increasing their salaries?
In December 1971, the Group of Ten met at the Smithsonian in an attempt
to build a new international monetary system. The Smithsonian Agreement> led to the devaluation of the dollar from $ 35 to $ 38 per ounce of gold.
However, because US expenditures and current account deficits were
continuing, this devaluation did not stop the speculation against the dollar.
In 1972, the devaluation of the dollar reached $ 44 per ounce of gold. Clearly,> whatever remained of the Bretton Woods system couldn't be rescued. In
February 1973, the US and other industrialized countries let their
In practice, it happened that the countries that had been destroyed by the Second World War had rebuilt, the US did not export us as much as before, and as if that were not enough these rebuilt countries had started selling to the USA. American companies, which had grown without competition (and therefore without innovation) in the postwar period suddenly found themselves under pressure. The government had made a lot of debt, and the dollar had collapsed.
As a result, the US came out of Bretton Woods, and from that moment the value of the coin was pegged to the cost of production. The equilibrium returned to stable, but the costs of production (including labor) did not rise anymore: consequently, as technology progressed, incomes stabilized while productivity increased.
This alone should shut the mouth of anyone who says that having lots of coins floating freely is good. As soon as this happens, (as we can see from experience) the equilibrium value aligns with the cost of labor, and incomes do not grow while productivity increases.
How does it come out?
- Another international monetary system with fixed exchanges is created. Impossible, Trump doesn't hear it, the Chinese want to devalue, etc. With dozens and dozens of coins at stake it would be impossible.
- Producers are forced to multiply wages by ~ 2.5. It would be impossible to do this on a global scale. Bocciata.
- In countries that want to solve the problem, industries are taxed and the delta is redistributed. Interesting, but it implies a constant tax burden of around 60%.
All three are infeasible, but the last of the three is the least infeasible. It does not mean that it is feasible, but there are already countries that have tax rates of around 60% (typically Scandinavian states) and have a substantial middle class.
Raising taxes is also something that states like to do, and therefore the problem will only be to break a taboo.
But the solutions aside, the problem is that those who propose the monetary solution, or other nonsense based on printing money, did not understand the point.
- From what we observe, since 1973 the currency has fluctuated leaving the purchasing power of the income unchanged. If you print more, there is no inflation: there is only a worsening of the conditions of the workers.
- From what we observe, the possibility of fluctuating and devaluing is not the solution, for the simple reason that it is the cause.
So no, this superstition that you can solve the economic problem by acting on the currency is stupid and silly, because from what we observe , since they were left free to oscillate, the oscillation has had the effect of leaving constant (or almost ) the purchasing power of personal income.
And so the solution changes everything, but not the problem we wanted to solve.
So I don't want to hear about monetary solutions to current economic problems. The only known solution that can be implemented is a tremendous increase in taxation on the rich.
Whether you like it or not, sooner or later the estate arrives. The incomes accumulated with the growing gap between productivity and work must go back into circulation, otherwise a very simple thing will happen.
People will stop working, or they will stop looking for work.
Which is what's happening. Remember the NEETs?