I posted this on a website on 01/01/2009, and have been reminded of it every one of the 6 days that Donald Trump has been USA President.
Here is what I wrote:
It’s simple, really. Since World War II, Western society has been based on Capitalism. That’s the idea that wealth is privately owned, rather than given to the state so that it can run smoothly. Since the 1950s, the gap between the “corporate” world and the “labour” world has been increasing. People in management have been given higher salaries, and then bonuses on top of that, despite the fact that very few of them work harder than the people than they’re employing. Corporations have vast sums of money, compared to people who are necessary to society, like doctors & nurses, teachers, fire fighters, police officers, paramedics and so on.
The people with the money needed to spend it on something, and a lot of it was on clothing, jewellery, cars, yachts, and so on. But the asset that did the damage was property. Property investors, and people buying land and homes and then selling them for profit drove up the prices of these goods. Real estate agents were instrumental in making certain that prices of these commodities rose, because they were given a commission on the sale. So the majority of people couldn’t afford to buy their own homes, finance children’s education, or get adequate health care.
At the beginning of the 20th Century, America was the giant of the Western economy, mainly because it was producing so many goods, and so much profit was available for executives. Then America invaded Iraq. It was an unprovoked attack, so ethically there were many problems, but the biggest problem was the amount of money that was diverted to the war effort. Necessities of the state, health care, education, essential emergency services weren’t funded to the levels they should have been. Suddenly the majority of Americans found the price of these necessities growing.
In need of money, vast numbers of Americans got loans from their banks. The banks were happy to give these loans because they charged high levels of interest, and so would get a lot more money back. But because the majority of Americans weren’t paid enough money in their jobs, they couldn’t pay back the loans. So suddenly a lot of debt had to be written off by the banks. And suddenly there wasn’t enough money to loan to other people, or money to pay back the loans that the banks themselves had made. The banks needed a sudden influx of cash, otherwise they too would go bankrupt. Large corporations suddenly found that people weren’t buying their goods because there wasn’t enough money to do so. So the government poured money into the banks and companies like AIG and General Motors, in order to keep these large companies afloat.
And while all this was happening, the corporate executives were still taking away their huge bonuses given to them for “performance”, except this time, the bonuses were taken out of the money that the company said was “desperately needed” before they went bankrupt.
Average workers were made redundant, or their wages froze. But the managers kept their jobs.
Basically, the recession happened because of greed. Simple.
Your Common Sense Apple A Week 