Thread by @jwdwerner

This was an important column from @RanaForoohar, making an essential link between economic dysfunction and populist politics, though the reversal of cause and effect means the solutions offered don’t really confront the problem. 1/
ft.com/content/99a3cf…

The central idea is that wealth (NB: defined as asset values, not the economy’s production of use-values) has decoupled from growth, which is another way of saying that investment is creating bubbles rather than going to productive ends. 2/

It’s a significant advance that mainstream thinking is coming to accept the distinction between productive and unproductive investment. But the McKinsey analysis (which Foroohar accepts and extends to the effect on consumption) gets things backward: 3/

It’s not that low interest rates increase real estate valuations, driving up the cost of housing and thereby reducing consumption—a chain of reasoning still very much stuck in neoliberal forms of thought. 4/

Quite the reverse, the problem is that consumption has stagnated because labor has been squeezed for decades. 5/ oecd.org/g20/topics/emp…

This dynamic is exacerbated by extreme inequality among workers, which is a result of both rising wage inequalities within countries and the devastating inequality between the Global North and Global South. 6/
ilostat.ilo.org/topics/labour-…

With the large majority of workers weak and global consumer markets therefore unpromising, capital is chasing its own tail driving up asset prices—expanding nominal value rather than competing to raise the productivity of goods and services. 7/

Unfortunately, the artificial scarcity created by inequality and lack of productive investment is experienced on the ground as intense competition among different occupations, races, ethnicities, and nationalities, providing fertile ground for reactionary politics. 8/

So solving this core problem of inequality between labor and capital and between the rich and poor countries is the key to both getting the global economy back to “healthy” growth and to defusing the threat of violent ethnonationalist and international conflict. 9/

Expanding the supply of affordable housing, which Foroohar suggests, is a key part of the politics we need but it doesn’t get us very far unless it’s coupled with a global strengthening of labor and a major increase in global development investment. /10