March 7, 2013--How Now, Dow Jones

So during the reign of Barack Obama the Dow Jones average is at an all-time high. Amazing what those socialists can accomplish.

But the celebrating is muted in progressive circles. Yes, it is wonderful to think that those who hung in there after the housing bubble and stock market collapsed in 2008 are again "whole"--especially 401(k) accounts of those fortunate enough to have them. But to cite the macroeconomic cliché--ours has been a "jobless recovery."

Why might that be? Shouldn't things be better for everyone? According to those who believe in the corrective power of the free market--

The government backs off and allows various corporate and individual tax breaks to continue so that those who make a lot of money will create job when their fortunes improve. The "makers" make lots of money and in the process double-down on investments and form businesses which in turn hire people.

So what's going on this time? Where are the jobs?

To begin, the Dow Jones average does not measure the state of the economy--it measures, to some extent, the state of big-corporation American. And big-corporation America is doing quite well--bottom lines, actually profitability, for most of the Fortune 500 companies are at all-time highs. Thus the Dow.

But not thus the overall economy, which still languishes.

The reason is that these now soaring companies have in part improved their profitability by laying off workers and/or converting many of their full-time employees to part-time, benefitless status. So by doing nothing but this, they are making more money.

Further, thanks to the Fed they have been able to borrow money at very love rates. The rates are so low that in effect they have been pocketing "free money" and thereby have been able to pad their balance sheets.

In addition, continuing to invest in information technology even manufacturing operations in the U.S. have become more productive--the workers that are still on the payroll (at generally reduced hourly wages) are more "productive," and their employers as a result are raking in bigger and bigger profits.

It has also helped that our government has virtually abdicated its traffic-cop role--it no longer makes sure that the rules of the economic and taxation game are fair and enforced. Rigged regulation and tax polices have contributed mightily to the growth of corporate profitability.

Then, of course, there is globalization. American companies are not just out-sourcing many forms of work to lower-wage countries (this continues apace), but they are also finding more customers for U.S. goods and services, which also, by expanding markets in this way, has contributed additionally to bottom lines.

The condition of the current economy may then be more than the result of cyclical forces. If it were so all we would need is more time for the larger economy to recover from the Great Recession. But what we are seeing--reflected on Wall Street-- may be structural.

Something fundamental may have changed which has created an all-new economic ballgame.

Automation, IT, government policy, and the globalization of production and markets may be making it permanently possible for rapidly-consolidating companies to figure how to do more with less and thereby dramatically increase profits.

And all while this has been going on--for 40 years or more since at least the time of the Nixon presidency and then accelerated by all subsequent administrations, Democratic as well as Republican, the middle class has slipped further and further behind.

No wonder so many people are inchoately frustrated and angry.