Contrary to popular opinion, America's postwar inflation cannot be blamed on either the ''energy crisis'' or on its principal victims, American workers, whose productivity has risen steadily over the past century. Nonmanagerial workers' real disposable income has risen less than 3 percent between 1967 and the present, falling in real terms from a peak in 1973. During this same period, productivity per hour worked in manufacturing has risen 45 percent, somewhat less in the service sector. Since the mid-1950s the absolute level of, and the rate of increase in, nominal hourly wages have both been less than that for the nominal value added per worker hour to total production.
Declining real aggregate income means declining demand for what is produced. This decline has been accelerated by two factors other than inflation:
The national tax burden has been shifted over the past 35 years from corporate earnings to individual income. At the end of World War II, one-third of federal tax collected came from corporations; today less than half of that proportion comes from corporate earnings. The difference is paid by individual taxpayers, the ''big consumers'' in our culture of consumption.
A second factor is that the national income distribution is becoming increasingly skewed. The rich are getting richer and the middle-income and poor are getting poorer. This has led to markedly declining demand for those things our economy has been most committed to producing: food, shelter, clothing, and consumer durables.
For all these reasons things go unsold, profits decline, unit costs rise and are, in our noncompetitive market, passed on to the consumer, who naturally buys less. Workers are laid off. Demand falls further and faster.
The collapse of this vicious circle has been staved off at deceptively high cost by massive creation of a new kind of credit. New-style credit (unlike old-fashioned credit based on savings and lending of real earnings) is money that has never been earned but is simply created by the banking system, added by a few tricks of accounting to the national money supply, and used to finance transactions for which there would otherwise be no means of settlement or payment. The costs of this new kind of credit have become a rapidly rising proportion of total business cash flow and a major component of postwar inflation.
While the federal government gets the prize for being the fastest growing debtor in the economy, it still accounts for less than one-third of total new debt, which has grown threefold from about one-fifteenth of GNP in 1960 to one-fifth today. Total outstanding debt (old plus new) of the public and private sector now exceeds the entire annual GNP by several hundred billion dollars.
In 1979 the Federal Reserve Board began seriously to restrain bank-created credit. Economic events which would probably have taken about a decade to realize were achieved within a couple of years. Even as the economy lumbered along at two-thirds of full ''capacity,'' the vicious circle was shrunk by a sharp increase in the cost of further indebtedness for use in propping up demand and financing continued overproduction. The result has been of course a sharp drop in consumer demand and a sharp rise in unemployment and business failure.
All this took place just at the time when international economic competition was growing in a world economy that is showing no real growth, despite the legerdemain of expanding national accounts. Worldwide demand is stagnating, just as more and more powerful economic suppliers enter the international market. The result both domestically and overseas is a shrinking absolute market share, especially for our domestic manufacturers.
Irony is added to misfortune when we realize this growth of foreign competition has been fed by United States finance capital that has sought investment opportunities in nascent industries overseas. Among the major banks of the US, almost all of them now have a greater quantity of money (read ''line of credit'') on loan outside the US than they have on loan domestically.
Our finance has fled overseas, and we lack real investment opportunities here at home. These problems will not be solved until we undertake to plan and control investment and business enterprises for the commonweal. Current government tax and investment policy exacerbates these problems - to wit, by lowering the weight of taxes on corporate earnings while increasing them for poor and middle-income individuals; allowing finance capital to be invested in any way it pleases, anywhere; and by increasing spending on counterproductive enterprise, military hardware.
The US (among many other nations) embarked in a mood of confidence and euphoria on a foolhardy tack: perpetual economic growth. We have so far failed to see that growth of capitalist economy, unlike that of an organism, is not centrally planned and timed. Imbalances in growth can kill the whole body.
We have a supply-side crisis - not the one the White House speaks about but its contrary: scarce, nonrenewable resources being guzzled in the debt-fueled, competition-driven growth of economic production, gone wildly beyond the bounds of any reasoned conception of human need or want.