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October 24, 2008



If you go back in history a little, I think that you'll find that this coupling of income to productivity came from General Motors.

Following WWII, GM developed a compensation package that was directly related to productivity increases. GM was such a big player in the US economy that this became the model that others had to follow.

With the decline of GM, this linkage was broken.

I suppose you could take it back to Henry Ford and his paying $5/hr.

We've moved from an industrial economy to a finance economy, with the results we're seeing today.

James Bowery

"The American" actually goes further back than Ford of course to Jefferson's Yeoman Farmer. The reason the Yeoman is the source of wealth should be clear from the fact that that Yeoman is the recipient of his own creativity in the form of, first and most vitally, children -- and then wealth. He has every incentive to be inventive and hardworking because he, and his posterity, captures the fruits of his own labor as well as the land rents of his subsistence acreage.

As what might properly be called "The American Clearances" proceeded during the 20th century, there were a few patriotic industrialists that saw the need to replace the Yeoman's land with a suitable annuity -- but once deprived of his source of economic ground rent, the Yeoman was too vulnerable to the conflict described by Ford as:

"...the two forces, Industry and Finance, are in a struggle to see whether Finance is again to become the master, or creative Industry."


John,you hit it square on the head! One of your best post on this subject. Ship all the good paying jobs overseas and give the people lots of credit and they will make the fatal error of using credit as INCOME! But the bill always comes due one way or the other.

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