Where Did the Money Go?

Ever since I learned about the Law of Diminishing Marginal Returns in Economics 101 at Rockford College, I've been trying to understand the economy -- with only occasional success.

For instance, I often indulge in Robert J. Samuelson, hoping he'll write something that reminds me of the work of his father, Paul, the 1970 Nobel laureate in Economics. Alas, Robert thinks conventionally and writes dully. I find more gratifying the fiery prose of Joseph Stiglitz, and the gutsy campaign, by Paul Krugman to battle almost singlehandedly against the onslaughts of Lafferism, Gilderism, Thatcherism, Hayekism, Social Darwinism, and other ruthless forms of dog-eat-dog economics that threaten to turn the Golden Rule into a sarcastic epitaph on the gravestone of the American middle class.

But though I admire Stiglitz and Krugman, both Nobel laureates, I find it hard to translate their analyses for people who've been either dazzled or numbed by the austerity fad and trickle-down drivel that have trapped America's political class in an oxymoronic spiral of Puritan plutocracy.

However, there is relief from economic abstruseness -- in Harold Meyerson, who writes about economics, without a Nobel Prize, for The Washington Post. Regularly, Meyerson unearths nuggets of data that illustrate starkly and often without need of elaboration, the problems and prospects of our economic status.

Last month, Meyerson cited a Wall Street Journal report noting that among Standard & Poor's top 500 companies, cash reserves have increased 49 percent since 2007, "in large part because they're neither hiring in the United States nor boosting their workers' incomes." But here's the number that kicks you in the teeth. Meyerson quotes the WSJ:

In 2007, the companies generated an average of $378,000 in revenue for every employee on their payrolls. Last year, that figure rose to $420,000. But workers are seeing none of that increase in their pay.

Now, of course, among the S&P 500 are such companies as Walmart and Tyson Foods, whose rank-and-file wage-earners, scraping by at $9 an hour, aren't close to running up $420K each in productivity. But the list also includes high-tech companies like Qualcomm Inc. (Nasdaq: QCOM) and Oracle Corp. (Nasdaq: ORCL), energy giants, and the cream of the financial industries. Here, surely are legions of white-collar professionals who've contributed to that 38 percent productivity leap without seeing anything close to a 38 percent boost in income.

Indeed, as Ed Schultz, another of my favorite non-economists notes every week, the inflation-adjusted growth in income for most American workers making less than $250,000 a year, has flat-lined since 1980. By contrast, the latest figures show that the average corporate CEO today makes 343 times as much as the average US worker. The disparity in 1980 was only 42.

Presumably, some of this expanded productivity not going back to the actual flesh-and-blood "producers" is getting doled out to a vast underworld of shadowy kvetchers called "shareholders" -- who are frequently invoked by CEOs, who… wait a minute! Don't CEOs often get extra pay in the form of shares?

Luckily, one answer to "Where's the money?" emerged from last week's $2 billion fiasco at JPMorganChase . We've heard that big companies, instead of investing in growth and hiring workers, are "sitting" on trillions of dollars. Well, as it turns out, these companies have been squirreling this cash away at joints like JPMorgan, turning too-big-to-fail banks into the equivalent of a coffee can buried in the garden.

However, rather than just "hold" these trillions -- the fruit of American workers' unparalleled productivity -- for all those S&P 500 Scrooges, Jamie Dimon's minions at JPMorgan decided to, well, roll a few dice and spin a few wheels. I'll quote Felix Salmon, another non-Nobel financial analyst whose insights are easy to grasp:

Rather than lending out that money and boosting the economy, Jamie Dimon decided to simply play with it in financial markets, just as a hedge fund would… And the $2 billion loss is really just a symptom of what happens when banks get too much money, and don't really know what to do with it all.

So there, fellow workers, is where the money went -- and where it's gonna keep going.