(Roughly) Daily

“A fair day’s-wage for a fair day’s work: it is as just a demand as governed men ever made of governing.”*…

As low-wage employers struggle to find workers, it seems as that labor– which has been left behind over the last several decades, as the economic benefits of growth have flowed to executives and owners– may be about to have its day. But will it? And what might that mean?

In her first statement as Treasury Secretary, Janet Yellen said that the United States faced “an economic crisis that has been building for fifty years.” The formulation is intriguing but enigmatic. The last half century is piled so high with economic wreckage that it is not obvious how to name the long crisis, much less how to pull the fragments together into a narrative. One place to start is with the distribution of national income between labor and capital (or, looked at another way, between the wage share and the profit share of national income). About fifty years ago, the share of income going to labor began to decline, forming a statistical record of the epochal collapse of working class power. Episodes of high employment in the 1990s and the late 2010s did not reverse the long-term pattern. Even today, with a combination of easy money and fiscal stimulus unprecedented since World War II, it is unclear what it would take to reverse the trend in distribution.

Few would seriously dispute that hawkish Federal Reserve policies have played a direct role in the decline of the labor share since the 1970s. This is the starting point for thinking about monetary policy and the income distribution, but many questions remain. Today’s expansionary program extends beyond monetary policy to include fiscal stimulus and even industrial policy, but the first sign of an elite rethinking was the Fed’s dovish turn around 2016. (The Fed chair then was Yellen, whose current tenure as Treasury Secretary has been marked by close coordination with her successor, Jerome Powell.) In a fundamental sense, the entire Biden program hangs on the Fed: low interest rates made possible a reevaluation of the cost of massive government debt, which has in turn opened new horizons for a would-be activist government. 

If the age of inequality was the product of a hawkish Fed, could a dovish central bank reverse the damage? Today, there is more reason to speak of a “pro-labor turn” than perhaps at any time over the last half century. But history is not so easily reversed. The new policy regime is not a simple course correction to decades of misguided neoliberalism. There is evidence that the current experiment was made possible by a recognition that workers had suffered a secular defeat—specifically, that they had lost the ability to increase or even defend their share of the national income. What would happen if labor became stronger?…

Tim Barker (@_TimBarker) explores: “Preferred Shares,” in Phenomenal World (@WorldPhenomenal).

On a related note: “The economics of dollar stores.”

[Image above: source]

* Thomas Carlyle

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As we re-slice the pie, we might send acquisitive birthday greetings to Claude-Frédéric Bastiat; he was born on this date in 1801 (though some sources give tomorrow as his birthday). An economist and writer, he was a prominent member of the French Liberal School. As an advocate of classical economics and the views of Adam Smith, his advocacy for free markets influenced the Austrian School; indeed, Joseph Schumpeter called him “the most brilliant economic journalist who ever lived”… which is to say that Bastiat was a father of the neo-liberal economic movement that’s been central to creating the situation we’re in.

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