It has been a hard few weeks for those looking for the new day dawning with the election of Joe Biden. True, he has accepted the burden of recognizing the American defeat in Afghanistan (while, of course, asserting that the original mission of fighting terrorism was, as George Bush bragged 19 years ago, accomplished). But lest we think this might mean a loss of military appetite, the administration is busy planning to beef up its armed response to the “Chinese threat,” with a military budget request exceeding that in Trump’s 2020 budget by 1.7 percent. There’s going to be money for hypersonic missiles, space war, and other gadgets, along with “nuclear modernization” (building “improved” nuclear weapons). And Biden plans to increase troop strength in Germany, to counter the Russian threat. Meanwhile, the administration has maintained the Trump policy of stocking non-self-deactivating landmines, declaring them “a vital tool in conventional warfare.”
Closer to home, while tens of thousands of Central American children accumulate in Texas holding pens, there has been much celebration of the American Jobs Plan, promoted by the president as the largest public investment since World War II. Compared to the approximately half of GDP poured into constructing and using the machinery of mass killing and destruction after 1942, Biden’s spending plans—if they make it through the legislative grinder—are actually pretty thin gruel: 2.25 trillion dollars to be spent over eight years amounts to less than 300 billion dollars a year, less than half of the Pentagon budget alone for 2020. It has been widely noted that the spending proposed to combat climate change under the proposed infrastructure bill is about one eighth (or one tenth) the generally estimated minimum necessary to counter the worst effects of the damage already done to the environment.
Spending even this small amount is controversial, of course. For one thing, the money has to come from somewhere, and at this point some of it—if only to pay the interest on borrowing—has to come from the pockets of rich people. But rich people can hardly be expected to like this, however enthusiastic about “fixing America” they may be. The plan to raise the corporate tax rate a little, from 21 to 28 percent (it was 35 percent before the 2017 tax cut) has a direct impact on them, because personal wealth now features the ownership of stock, whose prices corporations use their untaxed income to boost. What the Richest Man in the World, whoever it is this month, actually owns is not-so-much money as stocks, bonds, and various items from the zoo of securities—and commodities-based derivatives. (The assumption is that these can always be turned into money, but as we know that’s not always true—look at the sad fate a few weeks ago of the hedge fund Archegos, which, along with the collapse of the Greensill Capital, took down a desk or two at Credit Suisse with it, thanks to the evaporation of four or eight putative billions.) This is why taxes were cut; the people we’re talking about want to be as close to all the money as they can get, because in today’s world of hyper-concentrated wealth, the game is “Go Big or Go Home.”
The various Biden plans, that is, represent only the latest form of the cleft in which American capitalism (and indeed global capitalism) has been stuck for some time: On the one hand, the decline in profitability and therefore in investment since the mid-1970s, resulting in a steady growth of individual, corporate, and national debt as the basis for continued economic functioning, suggests naturally that the central role of national governments should be safeguarding the welfare of the most successful businesses as the basis of economic “growth.” On the other hand, this means a declining availability of funds to manage the growing social misery caused by declining investment and to maintain the public goods on which private enterprise depends, such as roads, bridges, energy grids, health, or even breathable air and drinkable water. As capitalism continues its decline, requiring succor from a public-spirited state, it is unable to give the state the fiscal means required, as this would only speed its decline. Since 2008, the miraculous generation of money from nothing managed by the Federal Reserve Bank and other major central banks has injected enough credit into the financial system to keep it humming; but this does not fix America’s 10,000 collapsing bridges and tunnels or quell the advancing seas. Hence the political paralysis in which (in the US) Democrats and Republicans play the roles, respectively, of rational mobilizers of state resources to make up for the failures of the market system, and the spoilsports who point out that growth of the public sector hastens the demise of the private-property economy. They are damned if they do and if they don’t.
An interesting aspect of this paralysis, for those attached to the critique of political economy, is its effect on economic ideology. Not so long ago, as human civilizations go, there were dueling schools of economic theory. The Keyenesians promised to end the business cycle and “fine tune” economic growth; since they articulated a rationale for the economic activities of the state during the Depression and the war, and since the long crisis of 1929–1946 produced the conditions for a new prosperity, they had the upper hand in academia and policy circles until the postwar Golden Years came to an end with the stagflation of the 1970s. This debacle opened the way to the return of the old-school believers in the free market, whose ideas explained the importance of subordinating the state to the needs of private capital. But then the rationality of the market lost its luster with the onset of the Great Recession in 2008. Interestingly, the current situation, in which one might have expected the supplanting of both these schools by Modern Monetary Theory, with its assurance that central banks can print money indefinitely without unpleasant consequences, has led instead to the general abandonment of any serious attempt to explain and predict the functioning of the economy.1 Instead, economists of all stripes either predict the imminent arrival of galloping inflation, without much theoretical warrant beyond the invocation of “overheating,” or assure us that we shouldn’t worry about that because it’s more important to hand out money and keep the collapsing economy alive.2 As almost always, economic practice comes before theory, but today the practice is just as clueless about what to do as theory is.
The limited outlook has not stopped newly ascendant liberals from celebrating Biden as “Our F.D.R.” (Jonathan Alter, in the Times) and “radical” (Ezra Klein, idem.). The idea of the Biden Plan as a second coming of the New Deal has even brought with it a wistful wish for the revival of labor unions—though not for anything as radical as raising the federal minimum wage to 15 dollars over the next five years. Whether this fantasy solution at once to the “problem” of income inequality and to the growing militancy of workers will survive the abject failure of the Retail, Wholesale, and Department Store Union (RWDSU) to win a representation election at the Bessemer, Alabama Amazon warehouse cannot be known. The RWDSU campaign seems to have been a case of the “labor movement” at its purest, with the union promising no more than representation (and dues collection), with nary a specific word about working conditions or wages. The idea that Amazon’s victory was due to the efforts at intimidation the company undoubtedly practiced is ridiculous, given the history of successful union drives in the 1930s and ’40s in the teeth of armed (and shooting) police and murderous company goons. Whatever the thinking of the Bessemer workers, only half of whom bothered to vote, it is as if they understand that present conditions are very different from those of the great union drives of the past, which responded not only to the particular character of industrial mass production as it then existed, but to a multitude of historically specific factors, both political and economic. It should be remembered that, despite a certain degree of support from the Roosevelt government, the throwing of vast resources into organization drives, and the militancy of tens of thousands of workers, results for the new Congress of Industrial Organizations unions (the American Federation of Labor unions were barely hanging on) were decidedly mixed until preparations for war began, when, as one historian puts it:
[The] results of the defense prosperity were reflected in union growth: CIO membership jumped from 1,350,000 in 1940 to 2,850,000 in 1941. … [O]nly under wartime conditions, which brought increased government spending and consequently greater influence in labor relations, did independent unions defeat company unions and become firmly established in the mass-production industries. Eager to profit from war production and facing a labor shortage, capitalists finally began to accept the cornerstone of the present labor relations system, the written contract covering a corporation’s or industry’s entire workforce, not just voluntary union members.3
That cornerstone has been largely worn away in the last 50 years; by 2019 only slightly more than 10 percent of the workforce was unionized, with the majority in the public sector. The disappearance of the productivity growth that marked the post-war period rules out the possibility of increased wages, even as it necessitates worsening working conditions. This has not put an end to worker self-defense, as the strike actions of groups as different as public school teachers and coal miners demonstrate, but there is little place for unions to insert themselves as brokers and profiteers of labor peace. At the same time as the Bessemer workers demonstrated their disinterest in unionizing, striking miners in central Alabama voted 1,006 to 45 to repudiate the pathetic contract negotiated for them with the owners of Warrior Met Coal by the United Mine Workers of America.
The decline of unionism is part of the same phenomenon as the crisis of political representation experienced in all countries, as the various factions of the political class find themselves at a loss to elaborate policies other than the austerity necessary to shore up the collapsing economy, and capitalism itself, even while they fear the response of immiserated masses. In the words of “Global Trends 2040,” just issued by the US National Intelligence Council, “Large segments of the global population are becoming wary of institutions and governments that they see as unwilling or unable to address their needs.” The problem is that “at the same time that populations are increasingly empowered and demanding more, governments are coming under greater pressure from new challenges and more limited resources,” so that there is “a growing mismatch between what publics need and expect and what governments can and will deliver.” The constant recourse to images drawn from the glorious past of capitalism, from fascism to the New Deal and the war economy, suggests that the ruling classes are unable to conjure up exciting futures apart from (for a select few) travel to Mars or, in the nearer future, the construction of artificial island refuges from rising oceans.4
The rest of the Earth’s population likewise seems to have no idea of a viable alternative to the existing social system. But very many, at least, understand that the current state of affairs is not tenable, as is shown by the riots, strikes, and demonstrations that come ceaselessly in and out of social reality around the globe, like the quantum fluctuations that physicists tell us bring recurrent existence to elementary particles and forces even in what seems the vacuum of empty space. So long as people and the earth remain, this recurrent will for life suggests the possibility of a future decisively different from the past.
The failure of this theory to break out of its marginal status—despite its appeal for Bernie Sanders and Elizabeth Warren—is probably because MMT, as a cranky variant of Keynesianism, did not have sufficient academic or think-tank implantation before its moment came. For a clarifying discussion, see Jamie Merchant, “The Money Theory of the State,” https://brooklynrail.org/2021/02/field-notes/The-Money-Theory-of-the-State-Reflections-on-Modern-Monetary-Theory.
Some prefer to take no position. Olivier Blanchard, former chief economist for the International Monetary Fund, declared: “I have no clue as to what happens to inflation and [interest] rates, because it is in a part of the space we have not been in for a long time.” Lawrence Summers, former Treasury Secretary: “I think there’s a one-third chance that inflation expectations meaningfully above the Fed’s 2 percent target will become entrenched, a one-third chance that the Fed will bring about substantial financial instability or recession in order to contain inflation, and a one-third chance that this will work out as policymakers hope.” (New York Times, March 27, 2021.)
E. Jones, “The CIO: From Reform to Reaction” (https://libcom.org/library/cio-reform-reaction). This brilliant article is highly recommended to readers seeking an introduction to the history of industrial unionism in the U.S.
As columnist Jamelle Bouie rhapsodized in the New York Times, “the New Deal remains a lodestar for liberals and the left alike, from Joe Biden to Alexandria Ocasio-Cortez. It is a model, it is an aspiration, it is a live part of our political imagination” (April 19, 2021).