May Day

by John Quiggin on May 1, 2010

One of the benefits of living just west of the date line is that we in Oz get first crack at celebrating anniversaries and holidays of all kinds. Here’s a May Day post from my blog, with a bit of Oz content, but hopefully of broader interest. As with most of my posts recently, it’s not a well-worked exposition of firm conclusions, but a set of ideas that I think need to be explored.

I’ve been arguing for a while that, after a long defensive struggle, the left/labour movement needs to start thinking about how to respond to the opportunities created by the intellectual collapse of the right and the economic failure of market liberalism. In a lot of areas, such as those of the welfare state, and community services, the defensive struggle was reasonably successful, and the question now is how best to move forward.

That’s not true of worker and union rights, where the left has lost much ground over the past few decades: drastic declines in union membership, a declining wage share, and the expansion of managerial power and managerialist ideology. On May Day, the traditional day of celebration of the trade union movement it’s natural to focus on the question of how best to push back against these forces, and where we should be going. I don’t have a lot of answers, but I’ll throw in a few points (not all that well worked out) and open up for discussion.

Among the recent successes of the worldwide labor movement, the ACTU’s “Your Rights at Work” campaign was one of the most notable, not so much for its concrete achievements (which included a significant contribution to the defeat of the Howard government, and the partial repeal of its anti-worker laws) but for the way it turned the debate around. It was entirely successful in posing a rights-based argument that workers do not (or should not) have to trade away their human rights for a job. The government’s “WorkChoices” rhetoric proved utterly unappealing to most Australians. And, while the Rudd government has disappointed in many respects, it not only scrapped the worst of WorkChoices (following some backdowns under pressure by Howard), but pushed forward with initiatives like parental leave[1].

It seems to me that this is the right way to go. The old-style politics of class (with the working class represented by male manual workers, gathered in large, naturally solidaristic workplaces) is no longer relevant to the great majority of Australian workers. That doesn’t mean that class has ceased to matter, but it does mean that workers experience class and power relationships more in terms of individual experience than as collective interactions between classes. So, in particular, unions need to be seen more as mutual aid associations that protect their individual members against exploitation and unfair treatment than as vehicles for the mobilisation of the working class. The kinds of legal changes sought to reverse the generally anti-union trend of past decades needs to reflect this orientation.

We also need to go beyond national perspectives in responding to a globalised economy. Big business has been globalised for decades, and labour has been slow to respond, but the Internet has evened things up to some extent. Organizations like LabourStart do a great job, but we need a lot more.

More May Day thoughts from Mark Bahnisch.

fn1. Opposition leader Tony Abbott’s opportunistic attempt to outbid the government will make it difficult for any future Liberal government to reverse this advance.

{ 39 comments }

1

Peter Nunns 05.01.10 at 9:46 am

Pedantically speaking, New Zealand gets the first go. Insert joke about Aussie arrogance / Kiwi insecurity here.

On the topic of labour movements, every once in a while I find it fruitful to browse to OECD Statistics and look at the statistics on trade union density. While unionisation has remained high in the Scandinavian countries, Britain and several of its offshoots (particularly NZ and Aus) had comparably high rates of union membership until 1980 or so. Until their neoliberal turns, each of these places appeared to have Keynesian social-democracies with strong union backing. But the drastic union declines in the 80s and 90s showed that strength to be an illusion.

What happened?

I suspect that it has a lot to do with the Westminister model of governance, which essentially turns the majority party into an “elected dictatorship”. The party in office can essentially do what it wants, sometimes without any electoral punishment due to first-past-the-post voting. In NZ, for example, the 1991 Employment Contracts Act – which I have heard described as “the most vicious piece of anti-union legislation ever enacted in a democracy” – led to a halving of union density within three or four years. (This was one of a string of unpopular policy decisions that led to the implementation of MMP voting after the 1993 elections.) I think something similar happened in the UK under Thatcher. Australia seems to be slightly different – experiencing a long slow decline in union density rather than a sharp drop after draconian legislative changes – possibly as a result of its bicameral parliament.

So, in partial rejoinder to your suggestion that the labour movement needs to broaden its horizons, I think that this history suggests that states have a crucial, sometimes-symbiotic, sometimes-antagonistic relationship with organised labour. (Or, really, with organized anything.) In some respects, the first horizon for unions should be the state, as a good law will strengthen their hands just as surely as bad laws have, in the past, eliminated what appeared to be well-entrenched movements.

2

gray 05.01.10 at 12:41 pm

“created by the intellectual collapse of the right and the economic failure of market liberalism.”

I’m all for dancing on the grave of right wing ideology and economics but I don’t see that they all that dead yet. Perhaps in the academic world, but in the real world where the UK Tories look to take become at least the senior partner in a coalition, the US GOP will comeback somewhat in November and the Canadian Tories could gain a majority should an election be called, I really can’t see an “opportunity” for progressive forces.

3

Joshua Holmes 05.01.10 at 1:28 pm

Furthering gray’s point, the right-wing is dead, but there are still two stupid land wars in Asia being conducted and massive torture factories open, the surveillance state is being strengthened and expanded, the insurance companies will now have subsidized & coerced customer bases, and Wall Street is still making massive profits off govenrment bail-outs. The ring-wing has a cough; calling the coroner seems a bit premature.

4

James Kroeger 05.01.10 at 2:13 pm

On May Day, the traditional day of celebration of the trade union movement it’s natural to focus on the question of how best to push back against these forces, and where we should be going. I don’t have a lot of answers, but I’ll throw in a few points and open up for discussion.

There is a reason why you (et al.) do not have a lot of answers for the working poor, John.

It should be clearly apparent to any ‘labor economist’ that labor unions have no negotiating leverage when unemployment is substantial and employers enjoy a ‘buyer’s market.’ Without leverage, the unions are not able to provide their members with the kinds of gains that make them a popular option.

Labor economists have frequently lamented the failure of wages to keep up with inflation over the past few decades, but they never recommend any kind of policy initiative that would provide unions with the kind of leverage they need. What would provide them with the leverage they need? Answer: a sustained labor shortage, created by a large increase in government spending on REAL ECONOMIC INVESTMENTS (e.g., infrastructure & human capital).

These economists do not propose increasing worker’s wages through increased demand for labor, because they have swallowed—hook, line, and sinker—the irrational reasoning of the inflation hawks who work for Wall Street firms and the financial industry in general. They accept the unfounded notion that inflation is one of the worst economic ills that could ever beset an economy, even though there is no evidence available that supports that contention.

Now a good economist who actually cares about the welfare of those struggling in the working class would bother herself to read up on the research of:

Gerald Epstein
Professor of Economics and
Co-Director, Political Economy Research Institute (PERI)
University of Massachusetts, Amherst

…who wrote in 2003:

there is a great deal of evidence that moderate rates of inflation, inflation up to 20% or more, has no predictable negative consequences on the real economy: it is not associated with slower growth, reduced investment, less foreign direct investment, or any other important real variable that one can find.

You can check it out here…

http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_51-100/WP62.pdf

Why was this research ignored? I don’t know. What’s your guess, John?

5

Patrick S. O'Donnell 05.01.10 at 4:11 pm

6

Anderson 05.01.10 at 4:17 pm

Inflation lowers the value of debts, and thus is contrary to the interests of creditors, who are the ones running the show.

I had always thought that was the sufficient, if not the public, explanation, economic illiterate tho I be.

7

geo 05.01.10 at 4:35 pm

Seconding James @3: Yes, why not return try to return full employment to the center of political debate? It used to be: eg, the Humphrey-Hawkins Full Employment Bill in the 1960s. Even in 1988, the unfairly maligned Michael Dukakis (like Gore, too intelligent and serious for the Beltway commentariat) campaigned (or tried to) on the slogan: “Good Jobs at Good Wages.”

Seconding also John’s suggestion for organizing labor internationally. Maybe a slogan (does May Day activate a proclivity to think in slogans?) like: “Globalization: If It’s Good Enough for Business, It’s Good Enough for Labor.”

8

alex 05.01.10 at 5:40 pm

Workers of the world unite, you have nothing to lose but your mortgages?

Works for me.

9

Phil 05.01.10 at 10:40 pm

That doesn’t mean that class has ceased to matter, but it does mean that workers experience class and power relationships more in terms of individual experience than as collective interactions between classes.

Which is to say, I guess, that class relations are alive and well, but class consciousness has been dismantled and needs to be rebuilt.

10

jdw 05.01.10 at 11:10 pm

re # 7: These sound like good ideas, as far as they go. However:

This was supposed to be about overall vision/direction as a bearer of conviction in support of change. So while full employment and more transnational union-organizing would be desirable types of change, these don’t answer the questions: Full employment doing what; and transnational union relationships in support of what? For instance, you don’t want full employment on the basis of a beefed-up military-industrial sector; or transnational union relationships based on Japanese-style industrial unions (company unions), do you?

It seems that when asked what it’s supposed to be all about, there is a tendency, nowadays at least, to default to a quantifiable feature of some kind, which is then assumed to be an index or indicator of a desirable set of ideals or objectives, which for some reason never do get articulated.

If there are quants and anti-quants, then for sure it is the quants that are in the driver’s seat at the moment.

11

James Kroeger 05.02.10 at 1:36 am

Anderson, 6:

Inflation lowers the value of debts, and thus is contrary to the interests of creditors, who are the ones running the show.

The creditor class has actually never been opposed to inflation, when it is their incomes that have been inflated at the expense of others.

One important thing that left-leaning economists have missed is the fact that different income groups can experience different rates of inflation.

During the years of Republican rule, the disposal incomes of rich people were driven up dramatically, which resulted in the predictable: a boom in the prices of those markets that serve the rich: luxury and asset markets. “Bubbles” appeared.

At the same time that rich people were experiencing this period of robust price inflation, the rest of the economy was experiencing disinflation, and for some sectors, even deflation. Primary cause: outsourcing and immigration.

The only inflation that bothers rich people is inflation that affects the incomes of hourly workers, which translates into an increase in their costs.

12

geo 05.02.10 at 2:40 am

jdw@10: True enough, they’re pretty modest, even mindless, demands. But after three decades of relentless Republican reaction, full employment plus progressive taxation plus universal health care plus publicly funded campaigns plus cuts in the defense budget would almost seem like utopia. Perhaps we could get there first and then lift up our eyes and hearts and look to the Promised Land?

13

R Schnetler 05.02.10 at 4:20 am

This whole blog entry and the comments seems to me like people caught in a time warp. Like old folks that always talks about the good old times.

The world has moved on. Capital is invested in countries where people wants to work at low rates (relative to the rest of the world) and withdrawn from the ones where it is relatively expensive (UK, Ireland, US). This means that the workforce in countries like US, UK, Ireland, Spain etc. will work less in manufacturing jobs (higher tendency of unionization) to more service sector jobs (more casual work/lower unionization).

14

alex 05.02.10 at 7:49 am

@12: no they’re not modest, though they might well be mindless: they are potentially at least counter-productive at a number of levels. I think the points about demanding full employment have several dimensions that need addressing:

Who are you ‘demanding’ full employment from, and what kind of relationship are you positing between ’employers’ and ’employed’?

How will you overcome the tendency of almost all forms of worker organisation to take the short-term interests of their particular membership as overriding any longer-term and broader solidarities?

What, as has been asked above, do you want full employment to do? Will work have a goal that is socially-organised and aligned with international solidarity and sustainability, or will anything that feeds families do, and hang the consequences?

As @13 points out, trying to do any of this in a genuinely constructive way is futile without a first thorough reorganisation of the global economy, and economic thinking, as it functions today; so how is that going to happen?

You may choose to interpret these questions as coming from some rightist scumbag. They actually come from a green anarchist, who is perpetually cheesed-off with ‘socialists’ who don’t even have halfway decent answers that don’t veer off suddenly into hints of violent revolution – unless, of course, people are going to go round the block of arguing again that I’m the one with the violent fantasies, and they’ve got it all worked out, but they just won’t tell me the magic answer.

15

Jack Strocchi 05.02.10 at 7:59 am

Pr Q said:

The old-style politics of class (with the working class represented by male manual workers, gathered in large, naturally solidaristic workplaces) is no longer relevant to the great majority of Australian workers.

The working class “politics of the shaking fist” (Bernstein?) is gone, but not forgotten. Its a great pity because the experience of communal unity-in-adversity is worthwhile in itself, quite beyond any utilitarian benefits derived from industrial pressure.

I remember standing shoulder-to-shoulder with the workers at both MUA picket lines (Webb Dock & Port Botany) during the great lock-out of 1998. Every one had a ball, facing off the riot squad, cursing scabs & singing old folk songs, even though their jobs hung in the balance.

But the dockers were all pretty old codgers by then, looking to go out with one last spasm of working class solidarity before they hung up their boots. Once they are gone there are no more dinosaurs to roam the earth.

the ACTU’s “Your Rights at Work” campaign was one of the most notable… for the way it turned the debate around. It was entirely successful in posing a rights-based argument that workers do not (or should not) have to trade away their human rights for a job.

True, but the rights that the ACTU were relying on had already been won over many years through common law judicative and commonwealth legislative action. They were not created by judicial fiat on the basis of some arbitrary Bill of Rights.

That means more of the mobilizing slack has to be taken up by securing rights under the “braces” of the industrial award, rather than the “belt” of organized work-place action.

Pr Q said:

workers experience class and power relationships more in terms of individual experience than as collective interactions between classes.

The post-modern workforce is much more amenable to HR, casualised, diversified and feminised. Not very good fodder for big battalion industrial action.

Pr Q said:

We also need to go beyond national perspectives in responding to a globalised economy. Big business has been globalised for decades, and labour has been slow to respond, but the Internet has evened things up to some extent. Organizations like LabourStart do a great job, but we need a lot more.

One can see how social networking sites can facilitate communal activity.

Workers of the World unite. On Facebook.

16

Tim Worstall 05.02.10 at 9:17 am

“economic failure of market liberalism”

What?

The last 30 years, that period usually identified as the period of market liberal triumphalism, has seen the greatest reduction in absolute poverty in the entire history of our species. It’s also seen the decline of global inequality (whether one uses Milanovich’s Concept 2 or Concept 3 definitions).

This is failure?

17

Barry 05.02.10 at 11:29 am

Tim, it’s seen a steady decline in the economic growth in the developed countries; your backers wouldn’t notice that, since they’ve been getting a greater share of the income and wealth, but the rest of us have.

R Schnetler “Capital is invested in countries where people wants to work at low rates (relative to the rest of the world) and withdrawn from the ones where it is relatively expensive (UK, Ireland, US).”

Have you actually looked at the world? The US is still a destination of capital, and the UK/Ireland were definitely so, until the recent crash.

18

jdw 05.02.10 at 12:54 pm

geo @12: Can you articulate what it is that makes those particular aims cohere as part of a single, attractive program?

19

geo 05.02.10 at 5:07 pm

jdw: They’re all measures that are readily intelligible, widely popular, easily attainable (given the political will), and would all make an enormous positive difference in the lives of most Americans. I hope that’s coherence enough.

alex: I see your point, but I’m a gradualist tactically, though quite radical in how far I’m willing to go. (Probably all the way to green anarchism with you, for example. I’m constantly recommending Ernest Callenbach’s Ecotopia, for example, as the best political book of the last fifty years.) I just feel strongly, as I said in another thread, that we have to engage people where they are, with the language they themselves use and the goals and values they themselves espouse. And of course, if it turns out that these short-term goals are unattainable given the political and intellectual constraints they (and, provisionally and for the sake of argument, we) accept, then we should be prepared to explain why and propose a way around or over those constraints.

20

Jack Strocchi 05.02.10 at 9:08 pm

Tim Worstall@#17 said:

The last 30 years, that period usually identified as the period of market liberal triumphalism, has seen the greatest reduction in absolute poverty in the entire history of our species. It’s also seen the decline of global inequality…

That is failure?

Thats true and bears remembering before we all pile onto capitalism in its many shapes and forms. Ever since 1980 when Deng gave the order to let the free market rip the better part of the developing world (China, India) have absolutely smashed all growth records, lifting almost two billion people out of absolute poverty. Chinese capitalist imperialism is doing the same thing, albeit more inequitably, in Africa.

Since lifting the multitudes out of absolute poverty is on Pr Q’s wish list of Left-wing goodies perhaps he might give capitalism a sporting round of applause for its achievements in this area.

And the fact that billions of the poorest of the poor in the PRC & IND have got richer at a faster rate (10% cumulative) than the richest of the rich implies an overall reduction in global inequality. Which is another item ticked off in Pr Q’s grab-bag.

Its starting to look like global industrial capitalism is a Left-wing movement!

Although the brand of capitalism that the PRC markets is not exactly “liberal”, what with strict capital controls, under-valued currency and massive state owned enterprise sector. Not to mention the considerable pains the CCP takes to make sure that no political dissidents rocks the boat.

The phrase “market liberalism” is too a vague term for the ills that sail under the flag of the free market. It would be better to focus on the real culprit, which is financial liberalism, that “great blood-sucking vampire squid” which has wrapped itself around the global industrial capitalism.

Financial liberalism, the gospel of free-floating share market value, has given the money changers an unholy amount of power over people who actually work for a living. These past 30 years it has been an engine of inefficiency, instability and inequity. Employing hordes of pixel shufflers in counter-productive transaction churn, amplifying gut-wrenching fluctuations in the business cycle and transferring massive income to well-connected insiders.

And more-over, using that financial power to force governments and corporations to bend to its will across a massive array of dubious social utility, from privatization, out-sourcing and casualisation.

But lets not throw out the capitalist baby with the financialist bathwater.

21

Peter Nunns 05.02.10 at 9:47 pm

@16: Actually, I seem to remember Milanovic as saying that international inequality (i.e. differences between nations’ per capita income) had increased, not decreased, since 1980. That same period saw growth fall off for most “middle-income” countries, except a couple in East Asia (South Korea, Taiwan, Hong Kong, Singapore, etc), and the situation get totally hopeless for much of sub-Saharan Africa. According to Milanovic’s analysis, much of the developing world was “downwardly mobile”, slipping further away from the ranks of the OECD during this period.

Furthermore, his measure of world income distribution, for which data was available only in the 1990s, don’t indicate any large reduction in global inequality in that period. Unless I seriously misread Milanovic, your conclusion is plain wrong.

The only growth success that has played a major role in lifting large numbers of people out of poverty over the last three decades has been China’s state-led industrial development… hardly a triumph for free-market capitalism.

22

jdw 05.03.10 at 12:37 am

geo @19: Xenophobic measures can also be “readily intelligible, widely popular, and easily attainable (given the political will)”.

23

geo 05.03.10 at 2:49 am

jdw: Will xenophobic measures “make an enormous positive difference in the lives of most Americans”? That was also, you’ll remember, a criterion.

24

John Quiggin 05.03.10 at 3:40 am

I replied to the China and India point (made by the same commenters, I think) in my book, which is available at zombiecon.wikidot.com. I don’t think it has any bearing on the relative merits of market liberalism and social democracy in developed countries.

25

Jack Strocchi 05.03.10 at 4:14 am

Peter Nunns@#21 said:

his measure of world income distribution, for which data was available only in the 1990s, don’t indicate any large reduction in global inequality in that period. Unless I seriously misread Milanovic, your conclusion is plain wrong.

Milanovic’s work, based on “data…available only in the 1990s”, is probably out of date, as it does not account for the phenomenal industrial growth in the PRC and IND over the late nineties through late noughties. Not to mention the GFC which certainly put a damper on the rich man’s party. Thats up to two billion people lifted out of “absolute poverty”, nearly one-third the population of man-kind, which has surely attenuated global inequality.

Peter Nunns said:

The only growth success that has played a major role in lifting large numbers of people out of poverty over the last three decades has been China’s state-led industrial development… hardly a triumph for free-market capitalism.

Its true that “China’s state-led industrial development [is] hardly a triumph for free-market capitalism”. But it is a triumph for state-capitalism, or forced market statism if you prefer. And please, lets not forget India, which has also embraced a form of market liberalism that has undoubtedly promoted the growth of a middle class.

There is not a lot for there for either Left-liberal social democrats or Right-liberal free-marketeers to cheer about.

26

Peter Nunns 05.03.10 at 6:00 am

Jack Strocci @25 said:

Milanovic’s work, based on “data…available only in the 1990s”, is probably out of date, as it does not account for the phenomenal industrial growth in the PRC and IND over the late nineties through late noughties.

Agreed – the data needs to be updated to reflect those developments. However, Milanovic’s work does show that the first decade of global free-market capitalism had at best a mixed record of poverty reduction.

Not to mention the GFC which certainly put a damper on the rich man’s party.

Britain’s not the world, but Britain’s richest saw their fortunes increase by 30% last year, in spite of the recession. As many have noted, it’s an event which is hitting the bottom levels of the income distribution hardest. In the US (2009Q4), the unemployment rate among the $150k and up income group is 3.2%, while those in the $12.5k and under group are experiencing Great Depression levels of unemployment.

There is not a lot for there for either Left-liberal social democrats or Right-liberal free-marketeers to cheer about.

Agreed. Partially, I think, because each “side” of that argument – “development through states!” vs “development through markets!” – takes only a partial view of the problem of growth (or economic life in general). It’s easy to deconstruct the narrative of the free-marketeers by pointing out all of the many instances where state actions (whether capital investment, regulatory policy, primitive accumulation, whatever) were used to jump-start or accelerate capital accumulation. Conversely, it’s not hard to argue (based on a mound of evidence) that markets, in some form or another, are also a necessary component of that process. Arguing that only one or only the other is necessary is an exercise in stupidity.

This ties back into my suggestion, in my first post here, that the “first horizon” for the trade unions should be the state. Historically and theoretically, governments are semi-autonomous entities that serve to balance (sometimes with consent, sometimes with violence) competing claims from different segments of society. Currently, they’re much more willing to uphold claims made by businesses and the rich than to go to bat for unions or working people. (This is, in essence, David Harvey’s theory of neoliberalism as state capture by the capitalist class, which requires a new round of “accumulation by dispossession” to guarantee its profit margins.) This has undoubtedly had adverse consequences for income distribution within most, if not all, individual countries. (This includes China, where the rural-urban divide has widened and inequality has increased at an accelerating pace (pdf) since liberalisation.)

As you’ve suggested, whether the neoliberal shift has resulted in poverty reduction or not depends, basically, upon what’s been happening in India and China. But even if that has been going in the right direction, there’s still a lot of ground to be made up by the working class on a world scale.

27

Tim Worstall 05.03.10 at 9:14 am

Well, my copy of Milanovich, using that 90s data, shows that using Sala i Martin’s Concept 2 there’s been a definite decline in global inequality (C2 being country average incomes weighted by population size). With Concept 3 (looking at the entire global distribution) there have been times when inequality fell and when it rose. The rises coinciding with India growing strongly, the falls with India stumbling.

Given that since the 90s we’ve seen India growing very strongly (as with China) a reasonable assumption would be that C3 inequality has continued to fall.

Of course, Concept 1 has grown but then I think we’d all agree that using purely country based, with no population weighting, figures doesn’t really work. 50 odd data points for 900 million people in Africa and two for 2.5 billion in China and India….well, that’s Sala-i-Martin’s point, isn’t it?

28

jdw 05.03.10 at 10:47 am

geo @23: That was my point, namely that your criteria boil down to relying solely on economics, with no moral component at all. By the same criteria someone could argue for the economic stimulative effects of starting up another war somewhere, and you would be left arguing over the whether on balance this would be a “better for most Americans”. But I can see this is not going to be a productive discussion.

29

Tim Worstall 05.03.10 at 2:58 pm

“The rises coinciding with India growing strongly, the falls with India stumbling.”

Apologies, vice versa of course.

30

geo 05.03.10 at 4:01 pm

jdw: your criteria boil down to relying solely on economics, with no moral component at all.

I’m puzzled. I mentioned several measures that seemed feasible, beneficial, and easily explained. Whether some measure makes “an enormous positive difference in the lives of most Americans” is a moral question, isn’t it? Or do you mean: couldn’t something (like harsh immigration controls) be good for Americans but bad for non-Americans? Yes, certainly, good point; but how does that apply to the five measures that I actually did suggest?

31

chris 05.03.10 at 7:14 pm

I’m all for dancing on the grave of right wing ideology and economics but I don’t see that they all that dead yet.

They’re dead, but they’re not taking it lying down, hence the title of John’s book.

@13: Nobody *wants* to work at low wages. You seem to be assuming that there’s no alternative to a wage and/or regulatory race to the bottom, but isn’t that unduly pessimistic?

32

R Schnetler 05.04.10 at 11:24 am

@31: I did not say wants to work at low wages, I said:

wants to work at low rates (relative to the rest of the world)

In China factory employment in the cities attracts millions of migrant workers from rural China because of higher salaries and better access to education, healthcare and other social services (http://www.china-labour.org.hk/en/node/100454). So as far as the Chinese migrant worker is concerned he or she wants to work in a factory at an hourly rate far less than what a worker in Australia/Ireland/Spain/US or UK is willing to work for.

33

chris 05.04.10 at 1:25 pm

So as far as the Chinese migrant worker is concerned he or she wants to work in a factory at an hourly rate far less than what a worker in Australia/Ireland/Spain/US or UK is willing to work for.

I think this requires a fairly strange definition of “wants”. They prefer working at lower pay to not working at all, but the same might be true of workers in the industrialized countries if they were faced with the same set of alternatives. But they’re not, because of those countries’ tech base and institutions.

Assuming that peak oil isn’t going to drive up shipping costs to a sufficient degree to reverse globalization, the world is probably going to converge on one model or the other. It would be better for pretty much everyone for the world to converge on the industrialized high-productivity, high-wage equilibrium than on the Third World low-productivity, low-wage equilibrium. So the important question (IMO) is how to make it happen? Assuming the inevitability of the low-productivity, low-wage outcome seems useless at best, counterproductive at worst.

34

James Kroeger 05.04.10 at 6:05 pm

jdw, 18:

Can you articulate what it is that makes those particular aims cohere as part of a single, attractive program? (geo: …full employment plus progressive taxation plus universal health care plus publicly funded campaigns plus cuts in the defense budget would almost seem like utopia.)

The single, attractive program would be for the Government to use the powers at its disposal to provide its citizenry with an unprecedented optimal level of economic security (employment security, purchasing power security, health care security, educational security).

Full employment doing what? 1. Teaching (quadrupling the number of teachers and classrooms would provide a dramatic improvement in the quality of education that children receive, and in average test scores.). 2. Building new highways to relieve congestion and modernizing existing highways and bridges. 3. Replacing the nation’s current sewerage systems with modern, state-of-the-art projects. 4. Cleaning up the environment, from litter to polluted waterways. 5. Various mass transit projects. 6. Many more inspectors in the oversight agencies.

Progressive taxation is the magical means to getting all of this work done. It is ‘magical’ because it raises the revenues needed in way that does not deprive the wealthy of any of their purchasing power. They are able to provide the state with the money it needs to make all these improvements, but at the same time they’ll continue to enjoy their privileged status at the top of the economic ladder.

Yes, their disposable incomes would drop dramatically, but then the price of all the luxury items they are accustomed to buying would simply drop to a price that they could afford. It’s the beauty of the marketplace. They’d lose nothing in terms of their purchasing power, but they’d gain dramatically from the improvements that are made in the nation’s infrastructure and from the dramatic drop in ‘idleness.’ How nice to have an underclass that is happy and busy and productive and no longer in need of a handout?

If organized Labor were to define itself around this economic ‘vision’, it would be able present it as two different agendas to two different audiences. To the rank and file, Labor would be able to present it as THE economic agenda that ideally serves the needs and interests of the poor and working class, because it would indeed be all of that.

In a labor shortage economy, the hourly worker would be in the best of all possible economic worlds: with more jobs available than there are people who could fill them, employers would find themselves so desperate for new employees, they just might start to treat them with respect, to induce them to stay. Labor unions would also have the best of all possible economies, for they would always come away from the negotiating table with desirable concessions.

But at the same time, Labor could also present this economic vision as THE economic agenda which would ideally serve the interests of the upper classes, because it would indeed be all of that. Rich people would discover that they had not really lost any of the purchasing power that they once had, back when they all had much higher disposable incomes. The scarcest goods and services would still go to the highest bidders, and they would still have the highest disposable incomes in the land.

At the same time, they would be enjoying the vision of a fully productive nation, one that is producing real wealth at a rate that cannot be exceeded. Real economic investment levels would be at cyclical highs. With all those [formerly] idle poor people working, they would have much less to fear from class discontent. Crime rates would drop to new lows.

Tax rates would be high, but informed taxpayers would understand that it’s not how much you’re taxed that matters; it’s how much money you have left after taxes, compared to everyone else. If everyone else in your income class is taxed just as heavily, then you have lost nothing in real terms, in terms of lost purchasing power. Your smaller pile of cash will still buy you the same quantity/quality of stuff that your bigger pile of cash used to buy you.

Your disposable income’s purchasing power will not change if all those who had smaller pre-tax incomes than you STILL have smaller disposable incomes than you after taxes (and all those who had more pre-tax income than you still have more disposable income than you). That is precisely the outcome you end up with when taxes on ALL forms of income are taxed at graduated/progressive rates. The marketplace does the rest (forces prices down to affordable levels).

Yes, it is possible to eliminate unemployment with the wrong kind of spending, like building battleships and financing wars, but that is really another discussion entirely.

35

geo 05.05.10 at 1:06 am

James, that is absolutely brilliant. Where can I sign up?

36

geo 05.05.10 at 1:08 am

On second thought, it can’t really be brilliant, can it, because if it was, someone (probably an economist) would have thought of it already?

37

R Schnetler 05.05.10 at 3:54 am

@33: I will break it down in six statements:

1. Chinese migrant worker wants to work in the city because he/she gets a higher salary than what he/she will get in the rural areas. The want is not ambiguous, fairly strange or vague.

2. However, that salary is still a lot lower than what an American worker in a factory in Cleveland OH will get.

3. Let us say that manufacturing company in Cleveland OH moves production to China.

4. The Cleveland factory workers lose their jobs. If they where unionized the union lose members.

5. This bring me full circle to:

This means that the workforce in countries like US, UK, Ireland, Spain etc. will work less in manufacturing jobs (higher tendency of unionization) to more service sector jobs (more casual work/lower unionization).

6. Fin.

38

Tim Worstall 05.05.10 at 9:54 am

“So the important question (IMO) is how to make it happen? Assuming the inevitability of the low-productivity, low-wage outcome seems useless at best, counterproductive at worst.”

As Paul Krugman points out, average wages in an economy are determined by average productivity in that economy. (In “Ricardo’s Difficult Idea”). So, as the Chinese (or anywhere else) economy becomes in general more productive in its use of labour wages will rise.

There will be convergence: convergence on the high wage, high productivity result.

As Marx alluded to, the thing which could derail this is monopsony among capitalists, the ability to appropriate the increased productivity into capital profits rather than competition for labour resulting in the productivity gains going to said labour.

Make sure you don’t allow the creation of either monopoly or monopsony and the end result of increasing productivity is convergence on the high wage high productivity economy.

39

James Kroeger 05.05.10 at 10:27 pm

Geo, 35 :

Where can I sign up?

Well, Geo, I don’t think we have a table set up for that purpose. :)

But if you’d like to hear some economists debate the merits of this pro-Labor agenda, you might first have to find some left-leaning economists who would be willing to oblige your requests for a ‘professional opinion’ of the agenda I’ve spelled out. That way, you will become more fully informed re: the flaws that others would perceive in the idea.

I wish you luck in such an endeavor, Geo. After all, John Quiggin is just such an economist, who asked his readers just the other day for ideas on a “vision” that might inspire some hope in those who generally identify with left-wing politics. For some reason, he seems to have not noticed the comment I left in that thread in which I made reference to the very same agenda that you found inspiring.

Do you suppose he might respond to a direct request from you, a curious observer, for his professional opinion of the ‘vision’ I’ve spelled out? I don’t know. John’s a busy man. He may not have any time to spare for ‘grand ideas’ that were not penned by any of the members of his club.

I don’t know if you’ve read any of the following links, but they provide answers to a lot of the questions any good economist would ask about my conceptualization of an ‘ideal pro-labor economic agenda.’

http://nontrivialpursuits.org/printer_friendly_unemployment.htm

http://nontrivialpursuits.org/printer_friendly_tax.htm

http://nontrivialpursuits.org/investment_incentives.htm

Good luck, Geo!

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