Over the past few decades, political leaders have been keen to promote individualism because it serves the interests of the class they serve. Margaret Thatcher denied the existence of society. John Major, who put her in charge of the Conservative Party and pressured Britain to join the EU in 1990, claimed there was a society, but he would make it “classless” so that everyone had a chance to shine according to their talents. In the Conservative tradition, David Cameron actually paved the way for the UK to (eventually) leave the EU by clumsily telling people “there is such a thing as a society; it’s just not the same as a country” , and pledged to create a “big society” in which we all work together to provide volunteerism and public service as a charity. On the Labour side, in 1999 Tony Blair clarified all these claims of classlessness by declaring that “the class war is over”. Class struggle is dead. We are all on the same side now. All share in the community we create together. I remember a BBC show I saw at the turn of the century and it declared that the “class system” was dead and we were all middle class together.
‘Please forgive me when I kiss the sky (Jimi Hendrix – purple haze – 1967).
It must be so.
I must have been so far away from it over the years that I missed something.
On September 28, 1999, British Prime Minister Tony Blair spoke at the annual Labour Party conference in Bournemouth and laid out a rather remarkable vision for C21 Britain (and the world).
in his – speech – He declared that his government was laying the “foundations of a new Britain” and that we gave up “the power of the people” and instead celebrated the virtue of “the power of every man”.
Then he announced:
The class struggle is over.
He believes that the struggle between capitalism and socialism is also over. Capitalism has won.
He claims that businesses (as a group) now see the benefits of sharing the bounty, rather than the old conservative approach of keeping workers down.
Of course things didn’t go the way he wanted.
The Financial Times published an article on Tuesday (7 June 2022) – class warfare > rate hike – This reminds me of all the bunks about the disappearance of the class system.
This post discusses a Fed research paper I wrote about earlier in this blog post – US Federal Reserve Bank Economists Take Marxism on Us (30 May 2022).
This is an extraordinary article in that it essentially abandons the “monetary” view of central banks and inflation, and places inflationary pressures between labor and capital competing for nominal value generated at any point in the economy In the struggle for real income share in income.
The conjecture is based on the Marxist construction of labor and capital, which strives to gain the upper hand in the process of production and distribution.
In other words, the mainstream went crazy.
The Financial Times article underscores this, as its readers say:
…The effects of the “Volcker shock” were greatly exaggerated, and the inflation of the 1970s was addressed through de facto class warfare and the degradation of the union movement rather than monetary policy.
In other words, all the stories about Paul Volcker as Fed chairman using rate hikes to stifle inflation in the 1970s
There is no evidence.
The idea of Milton Friedman and Robert Lucas Jr was rejected in a paper — not from heresy (many papers over the years have addressed the same rejection ignored by the mainstream) — but by researchers within the US central bank .
As I pointed out in the blog post I cited above, none of these ideas are new.
For decades, Marxists have written about the role that class struggle plays in determining the trajectory of an economy, including any inflationary pressures, and it is at the heart of progressive inflation theories — including Modern Monetary Theory (MMT).
Inflation disappeared in the 1980s and 1990s due to the “collapse of workers’ bargaining power since the 1980s”.
The FT article adds to the scrutiny of monetary authorities who believe their one tactic – raising interest rates – will tame any inflationary episode.
This article also reinforces my thesis (which is increasingly rejected by mainstream economists – which I think is a good sign) that the inflationary phase we are currently in is temporary.
I’ve seen people claiming that Larry Summers was right because he predicted that inflationary pressures would increase.
Well, he’s right about the latter, but for the wrong reasons it means he’s wrong.
He claimed that inflation was the result of what he believed to be excessive fiscal stimulus.
In fact, inflation has little to do with the conduct of fiscal policy during the pandemic.
The Financial Times’ conclusion is accurate:
If persistent inflation stems from class struggle, the chances of the current round taking hold again are extremely low.
The working class no longer exists as a cohesive social force. Businesses can safely protect their profits, and as real wages fall, the burden of inflation will fall on the workforce. As supply shocks from the pandemic and war subside, real spending power is eroded, and sustained price increases will eventually subside.
Class struggle is dead. Long live the class war.
This is exactly where we are now.
Supply shocks have already created cost impulses on the economy.
Then one might claim that demand will have to adjust downward as supply is disrupted.
Unless that would require mass unemployment and increased poverty.
This is exactly what the central bank is currently designing when raising rates.
They fail to admit it – claiming that the labor market is in good shape and people have a savings buffer that protects their consumer spending from rising prices (in other words, allowing inflation to erode their wealth portfolio, not their spending flow ).
But that’s exactly what they’re going to do – create a demand shock to address a supply shock.
This is exactly the worst thing for them.
As the FT article points out, because workers are unable to impose wage increases on businesses, there is no danger of a wage price spiral that could sustain a supply shock beyond its initial impact.
Trade unions are weak and have limited coverage.
For decades, neoliberal governments around the world have legislated to make it difficult for unions to function and achieve better wage outcomes for their dwindling membership.
So businesses can pass on rising costs and “protect their profits,” meaning all the burden falls on workers.
This means that supply shocks can introduce an inflationary impulse into an economy, but cannot really gain traction beyond the impulse because one or two pricing groups in society (labor and capital) are incapable of defending their real wages or profit margins.
In a situation where workers’ bargaining power is weakened, inflationary impulses are simply transmitted widely through prices, and real wages fall.
Exactly what is happening now.
Once supply factors ease, inflation eases.
When will that be?
Who knows when Covid will become a non-issue.
Who knows when Putin will end his attack on Ukraine.
I was in a radio interview yesterday and I was asked if, in the context of the NSW public service strike, these workers should take more responsibility instead of imposing higher costs on people who are suffering from a supply shock. struggling company.
I say that it would be unwise to force a group of workers to bear the burden if they can get rid of the burden through industrial action, just because the rest of the workforce cannot.
Placing one part of the working class with another misses the point.
Class struggle is about workers collectively against capital.
Clearly, capital is winning.
Last week’s National Accounts data (reviewed in this blog post – Australian National Accounts – slowing growth but wage share below 50% (1 June 2022)) – shows that Australia’s wage share fell again in the March quarter and is now below 50 per cent.
It used to be around 60%.
Winner – Profit.
The data showed that productivity growth was relatively strong.
what does that mean?
Productivity growth means that workers work harder, longer and/or more intensely – to achieve higher output per unit of labor input.
This means that unit costs are falling, providing non-inflationary headroom for real wage growth (based on a markup pricing model).
The fact that productivity has grown but workers are unable to defend their real wages tells us that the ability of the working class to protect itself is severely weakened.
This is also the conclusion of the Financial Times article.
This means that inflationary pressures will “eventually subside” – that is, temporarily.
The last thing policymakers should do now is to exacerbate cost-of-living pressures by creating job losses.
The Australian Bureau of Statistics has released the following latest figures – Australian Labour Disputes – March 2022 quarter, today (June 9, 2022).
They produced this rather stark graphic that helps reinforce the narrative presented here.
This decline in labor disputes is the result of public policies designed to weaken unions, making it easier for bosses to sue unions involved in labor action.
By the way, even progressives don’t have a good understanding of class.
Some so-called “leftists” have used the pandemic to turn their noses up at workers in professional occupations who were able to escape the worst of the Covid-19 pandemic by working from home because of their special work environment.
Apparently, these lucky workers are the “awakened ones” who allow lockdowns and vaccination rules to be imposed on workers who have actually lost their jobs.
This division of workers into sober and genuine workers reflects a misunderstanding of class.
Classes have nothing to do with career structure.
Of course, some workers have more discretion and independence from their bosses.
Some people earn more.
Fortunately, some people can work from home to gain more “freedom” in their day-to-day time management.
The fact that there is no real sense of community among workers across the occupational divide does not negate the concept of class.
It is clear that capital is operating as a class and making huge profits, while exploiting the vulnerable position of workers as a collective.
in conclusion
The idea that the class war is over is just an idea put forward by those who want to advance the interests of capital and pretend the working class is gone, we are all heading towards a classless nirvana where your background doesn’t matter and who your parents are doesn’t matter , the rest of the bunks are irrelevant.
With profits rising and real wages falling across the board, it’s easy to see that class remains a powerful force.
Enough for today!
(c) Copyright 2022 William Mitchell. all rights reserved.
