Wednesday, December 31, 2014
Let The Bad Times Roll
Since we know that significant policy changes are determined almost exclusively by the preferences of a narrow economic elite in the United States, and that for this segment of the population profits are healthy, the stock market is booming, and, as Thomas Piketty has demonstrated, returns to capital far outstrip returns to labor (or in symbolic terms r>g), it would seem that the ruling capitalist class is benefiting from the economic hard times faced by the larger population. Therefore, there is no reason to expect any change in the political-economic status quo.
There is also a Marxian rationale for labor hardship translating into benefits to the capitalist class through the labor market mechanism of the reserve army of labor as measured by the size of the un- and underemployed. On supply and demand grounds alone, this would keep wages low and reduce the bargaining power of workers. Both of these are currently operating in the US economy. The Keynesian retort would be that capitalists would benefit from higher incomes that would stimulate demand for the products they sell. The more conventional view is simply that all parties have an interest in rising profits and growth and incomes – they are mutually beneficial.
Thoughts about these issues was stimulated by a recent piece titled “Profit from Crisis: Why capitalists do not want recovery, and what that means for America” at the London School of Economic blog presenting a paper by Shimshon Bichler and Jonathan Nitzan. From a social class power and conflict perspective, they argue:
Now, if you look at capitalists through the lens of relative power, the notion that they should love growth and yearn for recovery is no longer self-evident. In fact, the very opposite seems to be the case. For any group to increase its relative power in society, that group must be able to strategically sabotage others in that society. This rule derives from the very logic of power relations. It means that capitalists, seeking to augment their income-share-read-power, have to threaten or undermine the rest of society. And one of the key weapons they use in this power struggle –sometimes conscientiously, though usually by default – is unemployment.
The following chart is provided:
This chart does not sit well with received wisdom. Mainstream economics tells us that the two series should be inversely correlated; that the capitalist income share should rise in the boom when unemployment falls and decline in the bust when unemployment rises. But that is not the case in the United States. In this country, the correlation is positive, not negative. The share of capitalists moves countercyclically: it rises in downturns and falls in booms – exactly the opposite of what economic convention would have us believe. The math is straightforward: for every 1 percent rise in unemployment, capitalists can expect their income share three years later to jump by 0.8 percent. Needless to say, this equation is very bad news for most Americans – precisely because it is such good news for the country’s capitalists.
In their conclusion:
The old slogan “what’s good for GM is good for America” now rings hollow. Capitalists seek not utility through consumption but more power through redistribution. And they achieve their goal not by raising investment and fueling growth, but by allowing unemployment to rise and jobs to become scarce. Clearly, we are not “all in the same boat.” There is a distributional struggle for power, and this struggle is not a mere “sociological” issue. It is the center of our political economy, and we need a new theoretical framework to understand it.
This is important work, and strikes at the heart of the political economic dynamics and contradictions plaguing US capitalism. I am looking forward to reading their work in more detail, including their book Capital as Power: A Study of Order and Creorder available for free at http://bnarchives.yorku.ca/259/