“Falling Wage Rates” de Jerry O’Driscoll (Think Markets)
Many analysts, myself included, argue that economic recovery will involve a switch to a lower consumption path. In the process, proportionately more resources will be devoted to production of goods for rest of the world. New savings will be needed to finance that transition. But much accumulated savings have been lost due to capital misallocation. In order to be competitive in the global economy, the U.S. must become a country of lower wages. And we are witnessing that painful adjustment in real time.
The reflationists (whether monetary or fiscal) conflate cause and effect. Falling wages rates are the consequence of prior bad policies and decisions. They are not the cause of current problems. Moreover, fiscal and monetary stimulus cannot restore the lost capital. Printing money or redistributing income does not create real wealth.
Falling real wages and declining living standards put flesh on the skeleton of macroeconomic policy debates. They are the real-world consequences of bad macroeconomic policy: easy money, politically directed investment and regulatory capture. All those bad policies are being continued or enhanced. Only further misery will flow from them.