May Day

“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.

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?

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.

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

Works for me.

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.

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?

@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.

“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?

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

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.

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

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.

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.

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: 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.

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.

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?

“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.