I have an article up on Al Jazeera this week. It may be the last journalistic article I write for some time as I start a new job next week. But this one deserves some brief discussion because the material it deals with is hugely important to the politics of the moment.
In the article I discuss a joint report by the ILO, the OECD and the World Bank. The ILO have clearly spearheaded this one. It has their fingerprints all over it. The ILO are pretty fantastic really. They are one of the only large-scale economic institutions that are talking sense today. Indeed, in the report the authors make a properly Post-Keynesian case for why the economy is stagnant: that is, it has to do with skewed income distribution and a low marginal propensity to consume among those in whose favour distribution is skewed in.
The problem, however, is that, like the trades unions that they represent, the ILO fundamentally buys into the deficit-scaremongering stories. They reflect the party line that we see in social democratic governments across the world: deficits are a Bad Thing and governments should be aiming at winding down their supposedly dangerous debt-to-GDP ratios.
It is ridiculous that center-left political parties, trade unions and the ILO often take this as their official line. Almost everyone I meet from these organisations know that it is a pile of silliness. So, why do they spout it in public? Honestly, I think it has to do with appearing as a Very Serious Person in public. There is still a taboo in place that requires people in public to pontificate on the Evils of government debt. Even though a lot of people don’t believe in this moral tale, they have to do it regardless.
After the Second World War the taboo was that no government official would be taken seriously who said that full employment was undesirable. In order to be taken seriously in public politicians and economists had to say that the primary economic problem was unemployment. Any scheme that was seen to generate unemployment was not taken seriously.
The question now is how we get back to that. Earlier this century it required a war. If the Great Depression and the current stagnation have taught us anything it is that capitalist democracies do not respond to problems of unemployment through their in-built institutional mechanisms. Even with very high rates of unemployment — say, 10%+ — the people that are unemployed do not make up a large enough voting constituency to force parties to adopt full employment policies. What is more, lacking leadership, this constituency are not all that sure what they should be voting for as they do not understand the nature of the problem.
Meanwhile, the left-wing and the workers’ organisations are weighed down by the stagnation of ideas to which they have succumbed. The left-wing, still believing that the early 20th century working class make up their key constituency, aim their rhetoric at anyone making upwards of £50,000 or £60,000 a year — when it is these people that they should be trying to win over. Indeed, the left-wing should just shut up about anyone earning less than about £120,000 if they want to sort out their electoral strategy. They would also do well to recognise that income distribution is not so much today to do with salaries as it is to do with asset holdings (CEOs paying themselves in stock options etc.).
In the meantime the labour unions have become over bureacratised and subject to ‘educated elite’ opinion through their hiring practices. Their ideology is the one derived from marginalist economics and typically has a vision of the union representative — now typically a well-heeled type from a major university who comes equipped with an economic degree — representing workers in a supposedly monopsonistic labour market. Yes, you can thank those lefties that bought into marginalist economics for much of the malaise in the ideology of today’s workers’ movement. Thanks boys!
Anyway, I rarely talk politics on this blog but these are the issues that we have to deal with if we want to get back to the old norms. Oh, and never trust a New Keynesian working in any nominally left-wing institution… ever. They do far more damage than you can possibly imagine. You only have to attend a few leftie trade union economic meetings to get a grip on that very quickly indeed.
Here is my article: