We are accustomed to classifying disruptive events as crises – the Mexican debt crisis in 1982, the Latin American debt crisis in the 1980s, the East Asian financial crisis in 1997-98, the global financial crisis in 2008 and beyond, and then since 2020. of the pandemic crisis. Meanwhile, firefighters are dealing with major fires from Portugal and France to Crete; the UK is about to experience 40C; Australia is dealing with a series of major floods; It is used for the most vulnerable in our society, there is no logical link between policy and perception issues, other than a deep recession that stopped fraud; countries considered to be “middle income and rising” are now lining up behind Sri Lanka to see who will Be the next country to be largely anarchic and unable to feed its population; housing shortages wreaking havoc almost everywhere; employment quality has declined dramatically (job security, worker agency, etc.), unions are a pale imitation of the past; More selfish than ever; thousands of people are still dying every day from this pandemic, but our leaders insist that we are now “living” with Covid (more like dying with Covid) .The reality is that all of these events are interconnected and are what some might call Plural crisisCapitalism has failed, and the institutions we created to tame capital’s raw profit greed – the state, unions, etc. – have been damaged to such an extent that they are either no longer effective or act as agents of capital instead of Mediation of labor conflicts. Pluralistic crises require fundamental change. But that’s the dominance of the mainstream that’s causing this crisis, and we’re getting pretty much everything. This means that the eventual solution will be more painful and destructive, and will spark fires as human civilization collapses during this period.
After “social democracy” provided the conditions for reducing income and wealth inequality in the decades following World War II, the strategy of capital planning drove the pluralism crisis to increase its ability to extract more real income from the distribution system. Power and capacity, better access to jobs, increased access to public health, education, and transportation systems, increased workers’ ability to receive real wage growth consistent with productivity growth through stronger union institutions, and more.
Capital clearly felt the threat of these developments and the late 1960s, and even before the 15-year-long 15-year run of inflation triggered by rising OPEC oil prices (which was only really ended by the recession of 1991), various employers and industry groups demanded that the government Increase unemployment to suppress workers’ ability to enjoy wage growth.
My colleague Victor Quirk documented Australia’s development in this regard in his 2004 working paper – The problem of a full employment economy – This is part of his PhD work.
He documented how senior industry leaders had “publicly urged” the Australian government to “increase unemployment”. He quoted a reporter at the time covering a major speech by “a central figure in Australian business”:
Sir Colin warned that the government’s action to curb over-employment would be “very unpleasant” but the role of businessmen should be to support the unpopular steps the government has had to take.
This will be very unpleasant. All consequences of deflation are.
On the global stage, we see so-called— Powell Manifesto — This is a strategy document titled “Attack on the American Free Enterprise System,” written by a U.S. attorney at the U.S. Chamber of Commerce.
The memorandum was an important turning point in the way the corporate sector approached the political system.
Nixon appointed him to the U.S. Supreme Court shortly after his memo was published, and history tells us that he (ab) used his position as a Supreme Court justice to put highly far-right ideological beliefs into practice.
Before assuming the role, Powell represented the tobacco industry on a number of occasions.
Clements, J. and Moyers, B. (2012) Companies are not people: Why they have more power than you and what you can do about itSan Francisco, Berret-Koehler Publishers – worth a read in this regard.
I wrote about Powell’s memo and the strategic shift it sparked in this blog post – The Right Wing Strikes Back – 1971.
Those who frame these types of events and transitions are accused of being conspiracy theorists, a devalued and often associated belief that “little green men came to Earth on a steel-disc-shaped aviation contraption.”
However, the evidence is there.
History tells us that ruling groups (the capital of this era) are strategic in the way they maintain their hegemony—through networking, lobbying, and other means—to ensure they get what they want.
The era of social democracy was a flash in the pan, and workers had more power to ease the excesses of capital.
The policy crisis shows that the gains for workers are limited and have been steadily diminishing as capital reconfigures the state to serve its interests rather than becoming more “social” players.
Major economic institutions created after World War II, ostensibly to help achieve social-democratic goals, such as the International Monetary Fund and the World Bank, under pressure from business and governments, have morphed into neoliberal attack dogs, beholden to business.
Based on its performance alone, the IMF should be abolished.
But because it is a totem of corporate power on the world stage, it maintains its own voice and influence.
Last week (16 July 2022), the G20 Finance Ministers and Central Bank Governors met in Bali.
The Director of the International Monetary Fund addressed the panel – IMF Managing Director Kristalina Georgieva urges G20 leaders to deal with ‘extraordinarily uncertain’ global outlook.
One would think we’re back in the early 1970s, when people were talking about the need to create higher unemployment to control current inflationary pressures.
First, let me just say that we should celebrate the low unemployment rate due to the way the government initially responded to the pandemic.
I get a lot of emails attacking my refusal to admit that inflationary pressures are the result of “excessive fiscal and monetary stimulus”.
I wrote about this in these blog posts (amongst others):
1. http://bilbo.economicoutlook.net/blog/?p=49480 (28 March 2022).
2. Central banks are fending off inflation scare hype from financial markets – so we’re better off (December 13, 2021).
With a highly constrained supply side and severe sectoral imbalances (rising demand for goods and collapsing spending on services early in the pandemic), inflationary pressures will clearly emerge, especially when companies have the market power to drive up profit margins and use it regularly.
Does this indicate too much demand (spending)?
On the one hand, yes.
But think about the situation.
No one knows what 2020 will bring as the pandemic unfolds. We don’t know what to expect from this disease, and the worse is scary.
The government has had to intervene through income support measures and bond market discipline (through central bank bond-buying programs).
Otherwise, the eurozone will collapse and unemployment will soar everywhere.
All the problems that go along with rising unemployment will become acute—poverty, disease, foreclosures, etc.
So saying the government should impose more fiscal constraints in 2020 and 2021 tells me that proponents of the idea have a distorted view of priorities, especially when inflationary pressures are clearly coming from supply sources and when supply catches up will dissipate quickly.
If the government tries to limit the demand side to make up for the supply shortfall, we will face mass unemployment once the supply constraints are eased.
That would be extremely disruptive and counterproductive.
Of course, when policymakers deal with the pandemic in 2020, they have no idea that the Saudi-led OPEC cartel will enter fraud mode in 2022, or that Putin will attack Ukraine and dare the West to retaliate (assuming Putin knows he controlled energy in Western Europe).
The reason for the low global unemployment rate is that governments make fiscal decisions to maintain revenue.
We should celebrate this.
Now?
The boss of the International Monetary Fund reverted back, saying “the global economic outlook … has dimmed markedly and uncertainty is unusually high”.
This is a statement I agree with.
But what is known is that there are more workers on the job now.
Threatening the state due to supply constraints and other issues beyond the government’s control (Putin) will only add more uncertainty.
But, of course, the IMF only thinks in a linear fashion.
They are now asking the government to:
…do whatever they can to bring down inflation…the good news is that central banks are stepping up.
and:
Fiscal policy must help – not hinder – central bank efforts to curb inflation…so fiscal policy needs to reduce debt.
Can anyone tell me how to reduce public debt through fiscal austerity, the only way to achieve it under current orthodoxy, will increase factory output in China, reduce the number of escalating coronavirus disease worldwide, bring OPEC to its knees, and convince Putin Is his war not in the best interest of the world?
We know what austerity will do – increase unemployment and poverty.
Rising interest rates and fiscal tightening will eventually lead to a recession.
This in turn will force businesses to stop fraud.
That would reduce OPEC’s willingness to push oil prices higher.
But it won’t stop the war or Covid.
So we’re not going to fix inflationary pressures, we’re just going to do more damage.
The Poly crisis will worsen.
The last thing the government should do now is to pursue policies that will exacerbate the recession.
Inflationary pressures do not trigger wage explosions.
Long-term expectations have yet to see entrenched inflation.
We should address what’s causing the stress – reducing Covid-19 infections, supporting those with Covid-19 to ensure spread is suppressed, funding better public transport systems to reduce reliance on OPEC oil, tightening housing construction regulations to reduce carbon use, encourage more local production to reduce reliance on complex supply chains, and so on.
We should not deliberately create unemployment.
Why doesn’t the IMF ask companies to stop profiteering?
Why doesn’t the IMF ask governments to do more to reduce coronavirus infections, such as providing free vaccines to Africa?
Why doesn’t the IMF ask OPEC to act on its own?
The answer is because it is part of the problem.
“We cannot ignore the most stressful crisis of all: climate change”, the IMF chief’s final comment to the G20.
indeed.
And “expanded financial resources” are needed. Except the IMF boss was referring to financial markets rather than public finances.
The reality is that the multivariate crisis will worsen if financial markets take over the sources of funding for the transition.
in conclusion
I am writing a manuscript on the rise of the current poly crisis.
I’ll have more to say later, but I’m hoping to publish a new book later this year or early next year.
Enough for today!
(c) Copyright 2022 William Mitchell. all rights reserved.
