Foreclosure in the United States today is in fact a classic example. Over the last thirty years, we have faced a phenomenon we never had before in the history of the United States. We have had rising real wages in America, roughly from the beginning of our history, up until the 1970s. If you worked hard, you got more money in your wage envelope at the end of the week. That was true for 150 years, that was really amazing, and no other country did that.
It stopped in the 1970s, because of computers replacing people, because of American companies moving abroad so they could pay lower wages, because of a mass movement of women into the labor force, immigration, and we went from a country with a chronic labor shortage to a country with a chronic labor oversupply. Employers no longer had to raise wages to keep workers working, to keep them happy, and keep them employed.
And as result, the American working people went into a kind of prolonged psyhic shock. Their wages weren’t rising any more. And so what they did was they turned to another source of money to realize the American Dream that they had been culturally developed to hope for, to expect, to promise to their kids.
They borrowed money like crazy. And the business community of the United States saw in the borrowing of the American working class a fantastic market to go after. You know in the 1970s, in the beginning, the only people who had a credit card were wealthy people or folks on business expense accounts. Starting in the 1970s, we gave credit to the mass of Americans. Everybody gets a credit card, and everybody can go to the bank to borrow to buy a home. Mortgage debt, credit card debt explodes.
It was a money-making extravaganza. We saw all the wealthy come together and get involved in this money. Bulding houses, lending workers at huge interest rates the money with which to buy the new and expensively built homes. Wealthy people poured their money in to companies that built these homes, furnished these homes, decorated these homes, and you had a literal explosion of profitability.
But of course. You can’t keep lending to working people if their underlying economic situation isn’t improving. So it was only a matter of time until the extra borrowing reached the limit of the underlying frozen, stagnant wages.
That was hit in 2007. Millions of Americans could no longer afford the houses that they had borrowed to buy. The foreclosure crisis represents the rage and anger of the wealthy class. If the underlying people they lent money to can’t pay for them, they’re going to take those houses back, throw those people out of their homes, and try to find another way to make money. Here’s a perfect example of the profit motive creating a housing boom that becomes a bust, and that now to recoup the money of the minority who invested in it, requires millions of people, the majority, to literally lose their homes, producing in the United States in 2010 and 2011, a society that has millions of empty homes, side by side with millions of homeless people. [++]