When Have We Seen this Before?

Fifty years ago, global capitalism came to a crossroads. The enormous costs of the US’s long, costly Asian war produced great debt and pressure on the gold-backed US dollar. The imperialist alliance with Israel brought a disruptive, unprecedented boycott on the part of the oil-producing nations resisting Israel’s occupation of Arab territories. Intense competition between the dominant US economy and the resurgent Euro-Asian economies was shrinking profit margins. Traditional macroeconomic tools failed to meet the challenges of this new situation. The ensuing crisis came to be called the era of stagflation-- stagnant economic growth coupled with persistent, intractable inflation.

Stagflation persisted through most of the decade and ended with shock therapy-- a radical dose of deregulation, privatization, and market fetishism, a regimen of austerity now prescribed by all mainstream parties.

The crisis of the 1970s bears some similarities with today’s turmoil.

The pandemic, like the oil crisis, has shocked the global economy. The US economy and subordinate economies have been running on the fumes of fiat money and central bank stimulation, exposing remedies that are losing their effectiveness. Despite the lack of even phantom existential threats, the US has conjured costly foreign adventures and an extraordinarily wasteful and large military budget and “security” spending, crowding out social spending and amplifying national indebtedness. Commodity scarcity generates rising prices. And both slow growth and inflation are now reappearing and promise to continue.

Does this mean that we are bound to relive the crisis of the 1970s? Are we seeing a replay?

Maybe, maybe not. Time will tell. But we would be foolish not to study the 1970s to distill the lessons that might apply to today.

Despite the admonitions of the central bankers and financial gurus, inflation seldom self-corrects. It rarely runs its course. Instead, inflation tends to gather momentum because all the economic actors attempt to catch up and get ahead of it.

In the 1970s, it was popular with the capitalist media to blame workers who were demanding cost-of-living adjustments (COLAs) to ward off inflation. “Greedy” unions, welfare, senior, and disability advocacy organizations were claimed as the causes of inflation’s persistence and deepening.

Cynically, all were asked to sacrifice equally, while it was monopoly corporations that were raising the prices that constituted the core of inflation. They were using “catching up” as an opportunity to “profit up.” Under the guise of responding to inflation, dominant corporations raised prices beyond their growing costs to expand their profit margins.

Unlike monopoly corporations, small businesses were limited in their ability to raise prices because of intense competition. They were caught in a profit squeeze between their need to remain competitive and the grinding increases in their costs of doing business. They are especially victimized by inflation.

At the same time, inflation cheapened the value of debt, especially corporate debt, while choking new consumer debt with high interest rates.

Today, rising prices are eating up workers’ gains just as they did in the 1970s. Let the Bureau of Labor Statistics (BLS) explain it: “From April 2020 to March 2021, the 12-month changes in real average earnings were all increases, between 4.0 percent to 7.4 percent. Prior to that, from January 2017 until March 2020, the over-the-year change in real average weekly earnings ranged from −0.5 percent to 2.0 percent.” But: “Real average weekly earnings of employees on private nonfarm payrolls decreased 1.6 percent from October 2020 to October 2021. In every month from April 2021 to October 2021, the 12-month changes in real average weekly earnings have been decreases, ranging from −0.8 percent to −2.6 percent” [my emphasis].

In other words, real average weekly earnings exploded with the labor shortages induced by the pandemic, but they were wiped out by the five months of over 5% inflation culminating in the 6.2% rise in October, a 31-year high.

It is not workers’ wages that are driving inflation, but something else.

In a revealing article, The Wall Street Journal exposes the real cause of escalating inflation. Inflation Helps Boost Profit Margins: Companies seize rare opportunity to increase prices and outrun their own rising costs [print edition] tells that “[n]early two out of three of the biggest U.S. publicly traded companies have reported fatter profit margins so far this year than they did over the same stretch of 2019… Nearly 100 of these giants have booked profit margins-- the share of each dollar of sales a company can pocket-- that are at least 50% above 2019 levels” [my emphasis]. The authors note: “Executives are seizing a once in a generation opportunity to raise prices…”

It is apparent from this candid article that monopoly capitalism is leading this profiteering. And it is important to recognize that this profit-taking has and will continue to fuel inflation. Once again, the commanding heights of the US economy-- the monopoly corporations-- are using the excuse of catching-up to profit-up.

If history’s repeat is not to be farcical, the workers’ movement must avoid the mistakes of the 1970s. It must fight against monopoly price increases and not join the purveyors of common sacrifice, like the silly WIN (Whip Inflation Now) campaign of that period.

The workers’ movement must not follow its false partner, the Democratic Party, down the road of wage and benefit restraint. The inflation-directed restraint of the 1970s gave way to the give-backs of the 1980s and 1990s.

Workers must understand that inflation is not a self-inflicted wound, but a feature of the capitalist system, especially in its finance-dominated, monopoly stage. And it must be contained by attacking the profit-taking that spurs the inflationary spiral.

Further, the working class must bring this understanding to the frightened petty bourgeoisie who feel threatened and are threatened by the scourge of inflation, a stratum that otherwise turns in great numbers to the extreme right for answers.

Of course, this task would be made easier if we had a robust Communist movement in all of the capitalist countries.

Greg Godels
zzsblogml@gmail.com

Bad Ideas

History is a corrective of ideas, serving as a reality check on intellectual inflation. Sometimes it takes years, decades, even centuries for big, even not so big ideas to be properly deflated.

I remember fondly many heated arguments with the late Fred Gaboury, a former union logger from the Northwest, who became an organizer for Trade Unionists for Action and Democracy, editor of Labor Today, and World Federation Trade Union representative to the United Nations. Fred was a serious thinker in ways that many of his contemporaries missed.

When the Eurozone-- the European monetary union-- was about to be established, I argued that between nationalism and uneven European development, a common currency was not sustainable. Posthumously, I conceded to Fred. But, today, there is plenty more reason to doubt the Eurozone’s future sustainability. History has yet to speak definitively.

As a retired worker, Fred followed trends in production and distribution closely. Me, not so much. When business writers began to herald modularization and just-in-time inventory production, Fred saw it as the next big thing, a profit-driven structural adjustment set to change the course of global capitalism.

With my usual knee-jerk skepticism, I argued that it was just a passing gimmick, something for the TV pundits to talk about. In any case, I argued, it would prove to be unworkable and ultimately disruptive to the production process.

Decades later, it seems that I was both wrong and, possibly, right. 

Wrong, because just-in-time distribution became a dominant mode with global supply chains. Virtually all production and distribution organized by monopoly capitalist enterprises moves product through their processes with none of the traditional back-up supply. There are no full-to-capacity warehouses filled with widgets for “just-in-case” scenarios or unanticipated short falls. That thinking has been rendered obsolete.

For the most part, the system works well, saving monopoly capitalism billions in costs. It works… until it doesn't!

History is speaking.

The pandemic brought the “efficient” system to its knees, demonstrating just how fragile this big idea actually is. The disruptive factor of massive layoffs, consumption declines, volatile production, and unanticipated imbalances today make lean production and instantaneous distribution look like genuinely bad ideas.  

Just-in-time has been replaced with never-in-time, as bottlenecks, late arrivals, and displacements choke off consumption. 

Shortages abound. Capitalist markets respond to shortages with higher prices. But it is not only material commodities, but also labor “commodities” that are in short supply and commanding higher “prices.” Labor costs rose by 8.3% in the 3rd quarter of 2021 (reflecting a 2.9% increase in hourly compensation and a 5% decrease in labor productivity, due largely to longer hours from the existing workforce). 

Workers sent home over the pandemic have been reluctant to return to work, whether it is from fear of infection, withdrawal from the rat race, or a sophisticated understanding of the gains possible from the withholding of labor. The result is a competition for labor, with capital offering bonuses, benefits, and higher wages to entice a shrunken labor market.

Labor compensation is now breaking through imagined barriers that restricted hourly wages to near flat growth for nearly half a century in the US and sapped the political will to advance the minimum wage.

One can only hope that the complacent, risk-averse labor leadership will learn a valuable lesson about the advantages of workers withholding their labor, a grand idea that deserves to be revisited.

While it is true that union workers are also on strike for better compensation (though with a frequency and volume well below that of a few years ago), it is clear that labor’s top leadership is cheering union militancy from the sidelines. 

Despite the assurances of those who believe that inflation is a thing of the past, manageably through Central Bank manipulation, rising prices have returned, and returned with a vengeance. 

After a long period of rescuing deflated financial values with central bank purchases of overvalued assets, after a lengthy regimen of ultralow interest rates designed to provide nearly free money to reviving risky or marginal investments, funding mergers and acquisitions, initial public offerings, and open-ended SPACs, and generally overcoming post-crisis inertia, the central banks have seemingly overshot their targets.

They have overloaded a deflated and deflationary economy. October’s inflation rate of 6.2% reached a thirty-one-year high, topping 5% for the fifth straight month.

Put simply, the effort by central banks to energize a sluggish economy has created inflation, amplified by supply shortages and a labor force growing at a snail’s pace.

Those living below the highest quintile-- the home of the bourgeoisie and the petty bourgeoisie-- are seeing any material gains from worker’s advantages in the labor market erased by higher prices. And, of course, those on fixed incomes-- the poor and elderly-- are hurt the most.

More bad ideas coming home to roost.  

It’s safe to say that the Democratic administration, through its own courtship of monopoly capitalism, finds itself caught between the sharp blades of a scissors. On one hand, the party has pledged to provide a constantly shrinking, minimalist, but sorely needed relief package to a major section of its base. 

On the other hand, promiscuous spending on managing the empire-- military and security services, foreign meddling, corporate giveaways, reflating or isolating capitalist flotsam and jetsam, and the tax coddling of the rich-- result in the risk of any future essential spending on human needs becoming inflationary. Crowding out relief for the masses while partnering with monopoly capital is the signature of state-monopoly capitalism.

The return of inflation has quieted the idealist-left’s infatuation with Modern Monetary Theory (MMT), the notion that spending on peoples’ needs could come at no cost to the bourgeoisie, its minions, and the bloated capitalist state.

Adherents saw the massive spending on resuscitating crisis-ridden capitalism with no apparent serious effect on prices and concluded that the same kind of spending could support social welfare programs with no inflationary consequences. 

They overlooked the context. Massive Federal Reserve spending took place to address a profoundly deflationary systemic crisis. 

From the MMT perspective, it is not necessary to curb insane military spending or tax the rich. Waving the magic wand of MMT will permit solving all of capitalism’s irrationalities and injustices, while meeting the people’s needs through deficit spending. Candide’s best of all possible worlds is in the MMT theorist’s grasp.

The harsh reality of inflation upends this utopian dream. Another bad idea dashed. 

If it seems like the US left is addicted to bad ideas, it’s because most of the think-tankers, academic gurus, and labor polemicists that influence the broad left deny that gains for the majority come from a zero-sum game-- the wealthy and powerful must lose for the rest of us to win. They pretend that there are roads to social justice that pass through regions of social harmony and equitable sacrifice, a long-held principle that keeps people in the Democratic Party orbit. They look for shortcuts that will avoid a direct confrontation-- class struggle-- while still challenging capitalism’s privilege to dictate human affairs. When, in fact, we must challenge its very existence.

This misguided approach guarantees that bad ideas steeped in idealism will dominate-- ideas that promise success, without pain or confrontation.

MMT will not magically solve the problem of inequality; a chain of coops will not defeat monopoly capital; and two-party theatrics will not establish real democracy.

We need bigger and better ideas for those tasks.

With a near future of a crippling price rise motivated by exploding profits, a do-little political stratum obsessed with fund-raising and securing the approval of the rich and powerful, and a murderous, gangster foreign policy motivated by service to global capitalism, we can’t afford the luxury of toying with bad ideas.  

Greg Godels

zzsblogml@gmail.com

Rabble! An Exhilarating Novel of the Paris Commune

Karl Marx wrote about the short-lived Paris Commune of 1871: “Working men's Paris, with its Commune, will be forever celebrated as the glorious harbinger of a new society.”

This year, 2021, marks the 150th anniversary of that singular event. For far too many in our moment, the Commune remains only a harbinger and not a reality. The setbacks to Marx’s vision at the end of the last century continue to cast a gloomy cloud over the prospects for the new society.

Nonetheless, the inspiration of the Paris Commune, the daring example of working people taking power, the sacrifices and martyrdom of the most committed of the Parisian workers is one of those timeless stories that will again and again awaken the minds of working people to the possible.

Now we have that account retold in the impressive new novel by Geoffrey Fox, a US fiction writer, essayist, and union activist.

Rabble! A Story of the Paris Commune (Matador, 2021) is a twenty-first century screenplay waiting for a worthy producer and director. Fox recounts the events leading to the declaration of the Commune on March 18, 1871 through the bloody week ending the Commune two months later.

We see the events unfold through the actions of real Communards like Élisabeth Dmitrieff, Nathalie Lemel, Eugène Varlin, Jules Vallès, Louise Michel as well as through the eyes of credible fictional figures that carry the narrative forward. Fox principally employs the constructs of a young bookbinder, Étienne, in awe of Varlin, who he once saw speak, and his co-worker and partner, Rose. Various other fictional workers populate the account that Fox offers, adding dimensions and texture.

A thoughtful police commissaire, an aspiring singer, and an opportunistic journalist provide a political counterpoint to the awakening workers.

While Fox is clearly a partisan of the Commune, he neither patronizes nor romanticizes the story, highlighting both the heroics and the tragedy.

Most impressive is Fox’s command of details, creating a remarkably accurate picture of life in Paris in the 1870s: the process of bookbinding, the patois, the dress, the geography, etc.

While the Commune’s politics were varied, Fox underscores the vital role of both the Blanquistes-- the followers of the left Communist, Auguste Blanqui-- and the Internationalists-- the followers of the International Workingmen's Association (1st International). Both political tendencies advocated for a tight organizational approach and aggressive military action, though they were in the minority in the Commune’s leadership.

Rabble! captures a growing sense of the possible with the workers of Paris, without understating the uncertainty, fear, vacillation, and indifference of many. Revolution is not a choreographed romantic adventure, but an audacious leap into untrodden terrain, foretelling equally liberation or tragic failure.

In the case of the Commune, it was a tragedy, but a tragedy that continues to inspire many to cast off cynicism and defeatism, to seek even a small role today-- a perhaps, one day, forgotten role-- in la lutte finale.

Fox’s novel closes with the bloody week-- la semaine sanglante-- in which the overthrow of the Commune is capped by the ruthlessness of the victors, the retribution of France’s rich and powerful through the agency of its traitorous military.

One can dream that an imaginative, daring film producer would assign a sympathetic director-- of the integrity of Leigh, Sayles, or Loach-- to turn Rabble! into a wonderful movie. Given the cesspool that passes as the film industry today, that will likely remain only a dream.

In the meantime, a worthy option is encountering Geoffrey Fox’s intelligent novel, Rabble!

Greg Godels

zzsblogml@gmail.com