Home > economics, political-economy, politics > Some (more) thoughts on Barack’s economic plan…

Some (more) thoughts on Barack’s economic plan…

N. Gregory Mankiw

N. Gregory Mankiw

We have been thinking about some of the reasoning which goes into the Party of Washington’s approach to this crisis and what their approach says about you.

From what we can tell by our admittedly superficial reading of the most recent economic literature – we are not fans of economists and rate them on the food chain somewhere just above fungi and lawyers, and considerably below plankton – surprisingly, Barack and his economic team think their approach will work because you are most probably destitute, impoverished, lacking any significant means of subsistence – such as food and shelter – and all resources which might be used to acquire or produce those means – insolvent.

Of course, you don’t think of yourself this way: You likely hang that meaningless label on your social status, middle class, but, were you to lose your job today, in a matter of months you would be a resident of some homeless shelter, and subsisting entirely on charity.

Were you to receive a tax cut from Washington, you would likely blow it in a month or two.

Whatever increase in your income you receive from your paltry wages quickly gets spent on basic necessities of life, or, servicing the mountain of debt gathered as unpaid bills on your kitchen table.

While your more successful peers have worked diligently and honestly – adding to the wealth bequeathed to them by their millionaire grandparents (who acquired those means from their millionaire slave-owning grandparents – its wonderful what centuries of unpaid labor can do for a portfolio) – you can’t touch a dollar without immediately trying to spend it on the latest gadget – like food, cell phones or 42 inch, high-definition, wide screen, plasma televisions, which, interestingly enough, began rolling out just as Washington mandated digital television to replace the old analog system, and which new technology promises amazing video images of the best reruns cable has to offer.

You are, in a phrase, dirt poor, by any useful definition of that term. If you looked up the term, penniless uneducated fucking hillbilly, in a dictionary, the definition would not only include your picture, but also your social security number, address, and phone number.

In economic theory, the term, penniless uneducated fucking hillbilly, goes by the more obfuscating term, rule of thumb consumer – a concept introduced into economic literature in a paper N. Gregory Mankiw prepared for the American Economic Association, in January 2000.

Greg, citing earlier research, concluded:

If we exclude home equity on the grounds that it is not always liquid, the mean [net worth] for this group falls to a negative $10,600, indicating that debts such as credit cards balances exceed financial assets. Net worth is zero or negative for 18.5 percent of households; excluding home equity, the number of households in the red rises to 28.7 percent.

Stated in ordinary American, Greg concludes a good 28 percent of American families don’t have a pot to piss in, nor a window to throw it out. They, like you, probably, are devoid of any resources to survive the loss of their jobs, or the slightest reduction in their wages. And. like you, they stand on the edge of financial disaster, hoping the wind doesn’t blow the wrong way.

And, boy did the wind blow the wrong way in 2008: 2.6 million jobs lost and counting, manufacturing employment falling for 23 months in a row, even service jobs getting swallowed up in the financial implosion on Wall Street.

(We might note: Greg’s insight, significant as it is, did not so much add to the body of human knowledge , as it did simply concede to Karl Marx what he had asserted some 150 years ago, when he wrote that capitalism would produce a, “mass of propertyless workers – the utterly precarious position of labour – power on a mass scale cut off from capital or from even a limited satisfaction and, therefore, no longer merely temporarily deprived of work itself as a secure source of life…,” however, we might simply be accused of nitpicking.)

The upshot of Greg’s insight into you as an economic category, is that you are completely reliant on selling yourself into slavery in order to eat, and feed your family.

If your wages fell, you would likely respond by working harder, longer – even taking on a second or third job – and, it is pretty unlikely you would ever see a wage increase which would allow you to work less – you are tied to your job by the constant threat of starvation.

And, from what we can see, there is nothing which says you have to be completely penniless: just that you should be so relatively hard up that you might, for example, be inclined to work longer hours whenever the opportunity presented itself, or, when you hit that credit card to repair your transmission, or, are suddenly faced with balloon payments on your alt-A mortgage.

Washington knows this about you, and, they know they can pretty much manipulate economic events which compel you to work longer hours, for less pay, as you drown in debt.

Hence, when Barack declares,

And above all, I will ask you join in the work of remaking this nation the only way its been done in America for two-hundred and twenty-one years – block by block, brick by brick, calloused hand by calloused hand.

He knows he really doesn’t have to ask: it is not exactly like you have a choice in the matter.

  1. Rick Wolff
    January 9, 2009 at 7:37 pm

    Actually, “It’s the System, Stupid”
    by Rick Wolff
    At the capitalist system’s core lies its central conflict. On one side, corporate boards of directors pursue ever more surplus extracted from productive workers. On the other side, workers seek ever more wages and benefits and better working conditions that reduce the surplus available to employers. Perpetual class conflict results between capitalists and workers over the size of that surplus. The conflict’s form varies from hidden to open and from mild to violent.

    Boards of directors continually find ways to reduce wages. Yet they complain when consumers whose wages fall cannot then buy all the commodities that capitalists need to sell to them. Indeed, insufficient consumption often contributes to causing or worsening a recession. The contradiction here is one that many capitalists seem unable to see, let alone trace to the class structure of capitalist production and its resulting conflict.

    Workers continually seek to improve their incomes, benefits, and job conditions. Yet they confront employers who respond by outsourcing jobs to cheaper or more subservient workers or by eliminating jobs through automation, even at the cost of jeopardizing commodity sales to workers, leading to or worsening recessions. The contradiction here — workers who achieve gains risk losing their jobs — underlies another of capitalism’s systemic conflicts. As discussed further below, were workers to become their own collective boards of directors, they would not likely reduce wages or outsource jobs. Workers appropriating their own surpluses would accompany automation with serious job retraining and transitional support to displaced workers — rarely done when capitalist boards of directors automate.

    Conflict between corporate directors and productive workers helped to produce both the wage stagnation of the last 25 years and the resulting surplus bubble that swelled and then burst in 2008. Class conflict has always contributed to capitalism’s systemic instability. Figure 1 below, prepared by the Center on Budget and Policy Priorities, records the many post-1945 US recessions. Capitalism’s instability was a constant, even though national politics and culture changed repeatedly after 1945, as the Cold War flared and ebbed. Capitalism’s class structure kept hammering its rhythm of boom and bust cycles into our lives.

    Each recession since 1948 cost millions of lost jobs that hurt the workers involved, their families, neighbors, and communities (including their employers). Large portions of productive capacity (machines, equipment, offices, stores) were idled: output worth billions that might have been produced never was because of recession. Had that output been produced and used to alleviate social problems (poverty, homelessness, inadequate childcare, deteriorated infrastructure, etc.), we would be living in a very different country. Recessions always cut revenues for local, state, and federal governments, forcing reductions in public education, health care, and so on. Recurring instability mocks as well as invalidates all that noise about “capitalist efficiency.”

    It would be reasonable to identify, investigate, and publicly discuss every possible cause of such instability. The goals would be to offset, moderate, or eliminate its effects or, better yet, the instability itself. But a taboo blocks consideration of one such cause, namely capitalism’s class structure. For the last half-century, analyses and policies debated by most business, political, academic, and even labor leaders avoided connecting economic instability to capitalism’s class structure. Instead, many faulted politicians (blaming Democrats or Republicans), unions, or big business. Others focused on human weaknesses (“greed,” “irresponsible” borrowing, etc.). Still others blamed inadequate state “regulation” of private business. With most analyses blind to class structure as a cause, change in the class structure of production rarely figured in proposed solutions for capitalist instability.

    The policies actually debated are all variations of (1) US state responses to the 1930s Great Depression and (2) Japanese state interventions in its long post-1990 recession. Proposed state actions in today’s global recession include “bailouts” of selected industries (especially finance); (re)regulations of enterprises and markets; central bank reductions in interest rates and expansions of money supplies; and federal tax cuts and “stimulus” spending. Such interventions sometimes helped the US through past recessions. They never solved the basic problem of recurring recessions.

    Class struggles often provoke capitalism’s cyclical booms and busts. The more severe recessions bring state interventions and regulations to help capitalists survive capitalism’s convulsions. Once the immediate economic crisis is past, capitalists proceed to undo state interventions again. So long as capitalists appropriate surpluses, they always use them to evade, weaken, or destroy state interventions that constrain them. Meanwhile they try to keep public debate and policy away from systemic solutions to recurring recessions.

    And so, capitalist cycles recur. Each economic cycle imposes huge painful social costs. In a parallel ideological cycle, most politicians, mass media, and academics swing ridiculously between hyped celebrations of deregulation and (re)regulation as “the solution to our economic problems.”

    Capitalism’s instability is systemic. To address it without considering systemic change is to continue the history of failure to “solve” that instability. Capitalism’s core class conflict between workers and boards of directors was never fundamentally changed by state bailouts, (re)regulations, or monetary and fiscal policies. Capitalism’s class structure is likewise not systemically changed even if we replace boards of directors privately elected by shareholders with boards of state officials instead. State capitalism (USSR), too, not just private capitalism (USA), displayed instabilities driven by class conflicts between surplus producers and appropriators. Notwithstanding differences between the instabilities of state and private capitalism, both still yielded inefficiencies and wastes that each so assiduously documented in the other.

    One possible systemic change eliminates capitalist class conflict by reorganizing enterprises to position productive workers as their own collective board of directors, thereby removing one key cause of capitalist instability. Such post-capitalist boards’ decisions (about technical change, capital accumulation, wages, and so forth) would differ markedly from capitalist boards’ decisions. Post-capitalist boards of directors would differ from capitalist boards in their relations to the state as well. A systemically post-capitalist economy would have its instability problems, but they too would differ from capitalism’s.

    The point is not that this systemic change is the only one that could (or could alone) seriously address capitalism’s instability. The goal here is to expose the widespread — and politically self-defeating — refusal, even on the left, to acknowledge such systemic causes. The center and the right will forever debate and oscillate between non-systemic causes and policies (bailouts, regulations, stimuli, etc.). The left’s unique contribution could and should be to insist that systemic solutions — e.g., changed class structure of enterprises — be part of public discussion and public policy.

    Rick Wolff is Professor of Economics at University of Massachusetts at Amherst. He is the author of many books and articles, including (with Stephen Resnick) Class Theory and History: Capitalism and Communism in the U.S.S.R. (Routledge, 2002) and (with Stephen Resnick) New Departures in Marxian Theory (Routledge, 2006). Be sure to check out the video of Rick Wolff’s lecture “Capitalism Hits the Fan: A Marxian View”: .
    URL: mrzine.monthlyreview.org/wolff311208.html

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