Archive for January 19th, 2011

I couldn’t believe my eyes this morning when I read the mainstream/left of center David Leonhardt probing the true causes of our jobless recovery- it’s class, stupid. Specifically, capital is stronger than labor, so as productivity rises, capital profits, and labor languishes. We have both stagnating wages and employment.

Why? One obvious possibility is the balance of power between employers and employees.

Relative to the situation in most other countries — or in this country for most of the last century — American employers operate with few restraints. Unions have withered, at least in the private sector, and courts have grown friendlier to business. Many companies can now come much closer to setting the terms of their relationship with employees, letting them go when they become a drag on profits and relying on remaining workers or temporary ones when business picks up.

Just consider the main measure of corporate health: profits. In Canada, Japan and most of Europe, corporate profits have still not recovered to precrisis levels. In the United States, profits have more than recovered, rising 12 percent since late 2007.

For corporate America, the Great Recession is over. For the American work force, it’s not.

Of course, a class analysis of the recovery can also inspire one to think about the crisis in terms of class. While employment was doing okay in the buildup to the crisis due to the housing bubble, wages were still stagnating. And, finally, one might ask if the labor-free recovery might create another crisis of effective demand. In the absence of stimulus, one wonders how long even capital can accrue its gains. Mainstream economists should remember that workers are consumers, consumers are workers. If workers don’t have power, consumers can only keep things going for so long. I think many economists are aware of this, but are restrained from probing the root cause of it all by a general aversion to talk about labor and power. Kudos to Leonhardt for chipping away at that aversion.

Update: One of my favorite bloggers, Ezra Klein, touched on this issue today as well. He rarely talks about organized labor, but I was glad that even as he has become mainstream, he was willing to aver, “I consider myself extremely pro-organized labor.” He then makes a micro, macro, and political argument for unions. Unfortunately, he doesn’t have any good advice to wonk out on. Instead,

If anything, the reverse seems to be happening: As labor loses ground, it becomes more reviled. People stop thinking about what a union could do for them and begin resenting what it’s doing for others. You’re seeing some of this with the anger at public-employee unions right now….

I don’t write about the issue more because I have nothing new to say about it. “Labor: Still important, still in bad shape, and still with no obvious savior in sight” isn’t a very interesting blog post. But as I look around at the economy and the political system, I certainly don’t think the working class needsfewer powerful advocates.

Sad, but true. What we need is a rebirth of labor consciousness. I thought the crisis would bring it, but as Klein points out, it’s done the opposite if anything.


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