Letter 2 America for August 25, 2010

Dear America,

It has been some months since the experts announced that the recession is over, and now those same experts are warning of the possibility of a "double dip recession." But when I consider all I hear on the news, all I see all around me, how I feel and the news in general, I fail to see the difference between the recession, the recovery from the recession and the prospect of a double dip recession. You may be experiencing the same disparity between your understanding of what you are being told and what is actually happening in the world as you know it. The reason is simple: the experts speak to us only in code, and in the end, they don't really mean what they seem to be saying.

A recession is classically defined as two or more consecutive quarters of a year in which the gross domestic product (GDP) shrinks rather than grows. That makes sense. If the economy is "receding" rather than "proceeding," defining such an advent as a "recession" makes sense. But what does it mean if the GDP shrinks? What is the GDP anyway? That is where the experts deceive us. It is by glossing over the manner in which GDP is calculated that the Republican conservative complex (Rcc) and the plutocrats convince us that we are all suffering when in fact, we are but they aren't. There are three accepted means of calculating GDP, but none of them reflect the world we ordinary people see, which is why the term recession means nothing for us. What we experience is "hard times," and they've been going on for two or more years regardless of what the experts say about "the recession."

The three means of calculating GDP are the "expenditure approach," the "product approach," and the "income approach." Two of the three constitute measures of wealth among those who control production of goods and services, and the third is based on total expenditures on goods and services, but it also includes expenditures by governments-- state, local and federal-- venture capitalists and the rich, who are having a hay day right now. Let me be more specific.

In totaling expenditures under the expenditure approach, consumption is added to investment, government spending and net exports, that is exports minus imports. Consumption is what we spend, but it is also what the owners of the manufacturing plant in this country spend, to which is added what they invest in their own businesses, what the government spends, which is being increased dramatically during this period of economic distress by the financial recovery act, and exports, which we never see the money from-- manufacturers get it directly. Thus, under the expenditure method, what we are all earning and thus spending is a minor part of the picture. Then there is the product approach in which the total value of the goods and services produced is the measure of GDP. But that figure-- the value of what we produce-- is no reflection of what we get for the labor we gave to produce it. It only reflects the amount that the owners of the manufacturing facilities in this country are going to get for what we produced, which includes not just what they pay us, but the profit they take as well. And the third approach is the income approach: that is the income received by all producers is counted-- producers, not workers.

In the final analysis, it comes to this. The amount we earn dictates the amount we can spend without borrowing. But the GDP is not a reflection of what we earn. It reflects what we buy with our earnings plus what we buy with borrowed money, plus what the owners of the factories in which we work buy, not just to consume but to expand their assets, and hence their wealth with, plus what they invest in each other's businesses, and what the government pays them to buy what they produce too. The GDP does not reflect our well being America, it reflects the well being of American business and industry and the people who own it. So why is that significant?

Well, it has come to light in the past month that "mergers and acquisitions" are booming. That means that companies are buying other companies like crazy, all while money is supposedly scarce. That is where the GDP issue comes in. Our money is scarce, not theirs. It turns out that business has more capital than it can use, hence the mergers and acquisitions, but no new jobs. It is cheaper to buy someone else's company than to expand your own it seems. So business, which the Rcc touts as the savior of us all, business to which the Republican Party wants to give extended tax cuts, is not really saving us. It's saving only its money. When it could be creating jobs with the proceeds of our GDP, it is only creating more wealth for itself. That is why our lives are not getting better. It is not some mystical and intractable force. It is no mystery at all. Those with money are sitting on it. Business and its owners are hoarding the wealth we produce with our labor. It's that simple, and it's that Republican.

Your friend,

Mike