So, Kyle Kulinski recently covered a story about how the fed is intentionally trying to cause a recession to get the inflation under control, and how this is a terrible idea. Considering how this story really touches on some things that are right up my alley in terms of my own political philosophy, I decided to comment on it too.
Basically, the federal reserve is trying to "bring the pain" by increasing interest rates in an effort to raise the unemployment rate and reduce inflation. And Kyle kind of touches on how sociopathic this is.
As we've discussed before, this bout of inflation is NOT normal. Most inflation can be attributed to the phillips curve. There's an inverse relationship between unemployment and inflation, where higher inflation means lower unemployment, and vice versa. But...sometimes inflation violates this principle. This happened in the 1970s, and was one of the reasons we did away with New Deal era Keynesianism, because that philosophy heavily depended on the phillips curve in order to function and with that not working in the unique situation of the 1970s, neoliberals used the crisis to replace Keynesianism with their ideology. Well, this time around, we're in ANOTHER bout of inflation that violates the general principle of the Phillips curve. While most inflation is caused by abnormally low unemployment, abnormally high worker bargaining power, and a wage price spiral in which higher wages means higher prices means higher wages means higher prices, this isn't true right now. The phillips curve doesn't necessarily apply.
We've discussed inflation previously on this blog. And it seems to be, based on my research, mostly due to supply chain shortages and corporate price gouging. The video also mentioned the war in ukraine, which is also true, especially for our abnormally high oil prices. This is a lot like what happened in the 1970s. In the 70s, the inflation was largely driven by OPEC restricting the oil market and driving up prices. Nowadays, the War in Ukraine, sanctions against russia, and shifting demand for oil away from Russian sources toward other sources are straining the supply of oil, which causes significant inflation throughout the economy as our entire economy is run on fossil fuels (another reason to abandon the stuff ASAP in favor of green energy).
But, for some reason, the fed keeps pushing this dangerous narrative that worker bargaining power is the problem and we need to bring workers to heel. This is, kind of messed up. And even Kyle kind of touched on something that I've known about for a while, and want to highlight. He pointed out that it seems like for capitalism to function there needs to be an underclass, a group of people without jobs being screwed over by the system in order to bring price stability for all.
And you know what? HE'S RIGHT. I've been saying this since 2016 on this blog, and since 2014ish in general. Literally one of my first posts on here was about how our economy is a giant game of musical chairs. It doesn't work if everyone has a chair. The economy functions optimally when most people have a chair (job), but a handful of people don't. But then we keep bully and shaming people into taking jobs, many of which are exploitative, and shaming them when they can't find one, or have the dignity to not accept bad ones. Our economy functions basically by the force of poverty and desperation driving people into bad jobs they can't live on.
When the fed talks about bringing on the pain and raising interest rates, here's what they're doing. They're slowing down job creation. They're reducing the number of jobs available, by making it harder to borrow money in order to fund new business ventures. They might even be driving some businesses to bankrupctcy. This causes an economic crisis, and that causes mass layoffs and unemployment, driving the economy into a recession. And then, finally, demand will meet supply in the economy again.
We have major supply issues due to the complexities of the global economy. We shut everything down with covid, and then reopened it, then got into a war in ukraine with rippling economic consequences, and businesses decided to exploit the situation by driving prices even higher to pad out their incomes. What the fed is doing will ensure that the demand will meet the new supply, but in doing so, it will make workers POORER. People will be laid off, demand will plummet, jobs will be more scarce, we'll be back to the great recession with half the people being laid off and the rest being told to work twice as hard and that they're lucky to have a job. Basically, we'll go back to wage slavery and a return to the old normal.
I'm not saying our current inflation is good. Quite frankly, it isn't, and it is excessive. But given it isn't primarily labor forces driving it, this solution seems unnecessarily cruel. And I just want to point out, this is why we've had stagnating living standards since the 1970s and 1980s. Because the fed is so inflation conscious that they'd rather keep the economy under the boot of austerity, where worker bargaining power doesn't exist, people are enslaved, and the rich get richer and the poor get poorer. All in the name of "price stability."
Honestly, understanding that this is how the economy works, is a HUGE reason I'm for basic income. I understand that there will never be a society in which everyone can have a job, let alone one that is fulfilling and pays well. Kyle is right, our system is designed to require an underclass to function. For all the talk of full employment, and jobs programs and guarantees, it will never happen. Because if we had an ecoonomy full of jobs paying $15+ an hour and no one was unemployed, it would lead to massive inflation in the rest of the economy.
Even in the 1960s the so called golden age of capitalism, where in 1968, we achieved the most income equality we've ever had, we had a strong middle class, and the left looks back at that era like the good old days before the trend started reversing itself, things weren't perfect. In 1969, a presidential commission on poverty under Richard Nixon basically came out and said that despite all of these gains, this is the best we can do under normal means, in order to truly solve poverty under capitalism, we need to implement a UBI.
Yeah.
And now you wonder why my politics are like they are. This is why I tend to transcend the normal left wing line on jobs and unions and labor and socialism. None of that is the solution. If everyone has a job, you get a wage price spiral. if everyone doesn't have a job, you ensure that people don't have their needs met. You can't have a society without poverty under capitalism....unless you implement a UBI.
I admit, even a UBI wouldn't be perfect. But, we could guarantee a society where there is no poverty. And while some might use the situation to not work, well, we cant guarantee work for everyone anyway, so who cares? Why keep up this facade that we all have to work when this is fundamentally not true? Our society literally relies on people not working to function. it is our selfishness, our rugged individualism, the idea that we all have to earn our own way, that is central to why poverty exists. If we had a system where a percentage of everyone's income was contributed to a common pool and redistributed back to everyone equally, we would see a net transfer from the top 25% to the bottom 75% mathematically. Under my own UBI, anyone under $80k would benefit, anyone over would pay (this being individual income, for household income the threshold would be much higher).
From there, we then let the fed handle interest rates to ensure the same goal of as close to full employment as we can get, without causing a massive inflationary crisis. We figure out how many people want jobs after they get a UBI, and we set the interest rates to ensure that the unemployment rate stays at the same 4-8% it always does. It should be noted, with a UBI, worker bargaining power would increase, as people could withdraw from the labor force entirely if they desired, but I see that as a feature, not a bug. No one should be a slave to the economy. We need to ask ourselves, for whom does the economy work? Do we work for it, or does it work for us? Being a human centered capitalist, or humanist capitalist, the answer should be obvious, it works for us. If we are mere slaves to capital, as we are under the current iteration of the system, in which we are reduced to a number, and forced to work unpleasant jobs for bad pay or face starvation, then society is fundamentally unjust. A human centered economy requires that it works for us, and that means we should get a UBI, and we should get the ability to say no to the economy as we desire. Honestly, human centered capitalism, taken to its logical ends, should really lead to a discussion about the nature of work in our society and its involuntaryness. And we should change our culture around it to accomodate a new kind of freedom under left wing principles. And that being the freedom to say no.
You might wonder if this freedom to say no contradicts what I said about the economy requiring an underclass and people not being able to find jobs. But to drive that point home and make it clearer, I don't think it does. Rather, I acknowledge the reality of the situation, I support the implementation of a basic income. Again, we give people their freedom, and then modify the interest rates to achieve the proper amount of job creation to ensure we hit the unemployment targets we always do. The difference here is, that everyone will be taken care of, employment will be more voluntary, and workers would not be exploited. We would merely be distributing jobs among actually willing participants. And this in itself would remove a lot of mistreatment that exists in the modern workplace. Bosses would no longer be able to push people around, or rely on their desperation to stay. Rather, they would have to treat them well. And while pay would effectively be capped at the same sustainable amounts it always is, having a UBI on top of that would be a massive game changer as no one would be poor, and people who work jobs would always have a living wage between their UBI and their wages
Basically, I'm saying that UBI would remove poverty and coercion from the economy, and then we could use the fed to set interest rates to spur the right amount of job creation around people who are actually willing to still participate in the economy. And while involuntary unemployment would still exist, the stakes would be lower for the unemployed, and employers would still have to treat workers fairly to keep them working.
And that's how my idea of the economy would actually work, and be a superior model to what exists now. Beats having a system in which we have to choose between runaway inflation and a system full of crushing poverty, wage slavery, and their needs not being met.
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