In the 1890s, industrial capitalism had reached the point where the pain inflicted on workers in search of private profits by the industrialists reached a point where the workers could no longer tolerate it and they started to realise that in unity they had strength. This was a period of major industrial disputes and a burgeoning of trade union growth beyond the previously restrictive craft union base. The development of broad-based unions and their move into the political domain to give further voice to the concerns of workers marked a turning point and fostered social democratic political movements and the spread of welfare state capitalism, which lasted until the 1970s. The neoliberal period has seen many of the gains made by workers during that period wound back and now we are witnessing the consequences of that retrenchment – massive real wage cuts, profit gouging and central banks determined to further undermine the well-being of workers as they attempt to push up unemployment, in the name of fighting inflation. An inflation that is persistent only because corporations are using this period to solidify the shift in income distribution towards profits at the expense of wages. It is also apparent that the trade union movement has become co-opted and now collaborate with government and corporate bosses to oversee the deliberate cuts in real wages of their members. This is another turning point in history, where the workers’ own representatives give their support to policies that support those cuts, under the pretense that they have to be responsible. Responsible to whom? We are in a defining period at present in the class struggle and it seems that the labour side has swapped teams.
Last week, the New York Times published the latest Paul Krugman article on inflation (which is behind its paywall). It is syndicated elsewhere and you can access it here at The Berkshire Eagle (April 13, 2022) – Paul Krugman: Inflation is about to come down – but don’t get too excited. I wondered whether the author had offered his services cheaper to the NYTs and elsewhere given his concern for inflation, and, apparently, his assertion that wages are a critical factor in sustaining it. What this article highlights is mainstream New Keynesian macroeconomics – the dominant paradigm in our teaching, research and policy circles. What it also highlights is how different the mainstream is to Modern Monetary Theory (MMT), despite characters like Krugman and his fellow New Keynesians trying to tell the world that there is nothing particularly different about MMT and the way they do economics. It also provides another chance for me to add nuance to the Job Guarantee.
With Russia now invading Ukraine and adding to the already highly disrupted supply chains linking products and nations, and the price fixers in OPEC and OPEC+ having a picnic on the uncertainty, inflationary pressures will continue to rise for the time being. Many commentators keep falling into the trap of saying that history is repeating itself – meaning that it is the 1970s over again. I maintain my position that this is not akin to what was going on in the 1970s although there are similarities – energy price rises accompanying war, etc. And if we make the same mistakes that were made in the 1970s now, then not only will the inflation persist but millions of workers will lose their jobs and their incomes.