Central banks: boom or slump?

Three of the major central banks met and raised their policy interest rates yet again in the so-called ‘fight against inflation’.  Interest-rate levels are now at 15-year highs.  But the financial markets took the comments of the central bankers as signalling that their policies were working and inflation was falling.  And it would fall sufficiently for the central banks to stop raising rates soon and so avoid an economic slump.

This is wishful thinking.  The bank chiefs made much of the apparently less worse levels of economic activity in recent real GDP data.  But this again is wishful thinking or white-washing. 

The IMF is now predicting no slump this year and raised its growth forecasts (slightly).  It now reckons global growth in 2023 will be 2.9% from a previous forecast of 2.7%, but that’s still well below the 3.4% the IMF estimated for 2022.  And the new forecast for 2023 is really based on a pick-up in growth in China and India, with two countries providing more than 50% of global expansion this year.  The major capitalist economies are not expected to manage more than 1% or so. 

Nevertheless, the IMF chief economist pushed out the boat of optimism. Pierre-Olivier Gourinchas, IMF chief economist, said 2023 “could well represent a turning point”, with economic conditions improving in subsequent years. “We are well away from any [sign of] global recession,” Gourinchas said, striking a sharp contrast with remarks by managing director Kristalina Georgieva last month that recession would hit more than a third of the global economy.

The US reported an annualised growth rate of 2.9% in Q4 2022 and and that led to a chorus of economists firmly dismissing a slump this year.  But this annualised measure is misleading. In Q4 2022 US GDP was up only 1% compared to Q4 2021.   More significant, inventories (ie stockpiling goods) contributed over half that 2.9% annual rate in Q4.  Sales to Americans (consumers and producers) were virtually flat, while business investment rose at under a 2% rate. Real spending by consumers was relatively strong at 2.1% but that depended on previous fiscal handouts from government in the last year being spent.  US real GDP growth has slowed from 5.4% yoy in Q4 2021 to just 1.0% yoy in Q4 2022.  The US economy is moving towards a recession.

US real GDP growth has finally returned to its pre-pandemic trend rate but only after three years of recession and below trend growth. And now it could turn down again.

It’s similar story for the Eurozone.  The Eurozone economy grew just 0.1% in Q4 2022 and if the ludicrous 13% GDP growth figure recorded for Ireland is discounted, Eurozone output fell by 0.1%.  The reason the Irish GDP growth rate is so high is because it includes the booking of multi-national corporate profits in Ireland as a tax haven.

Indeed, major EZ economies like Germany and Italy contracted in Q4, while France just escaped contraction.  And outside the Eurozone, both Sweden and the UK contracted.

As for the UK, the economy is heading down fast.  The economy contracted in Q3 2022 and was probably flat in Q4.  But even the BoE admits contraction is likely this quarter and beyond.  Indeed, according to the IMF, there is only one economy out of 30 it reviewed that will have a slump this year – and that is the UK.

It’s true that headline inflation is coming down in most economies as food and energy prices which drove the rates up last year have begun to fall back – although they are still much higher than at the beginning of 2021.  It is worth remembering that falling inflation does not mean that prices have fallen – just that the rate of increase has slowed.  Indeed, in the US, prices have risen 15% in the last two years, while wage increases have been half that rate.

One measure of the impact on average households in the major economies is the so-called misery index.  This an aggregation of the unemployment rate and the inflation rate – the twin devils for working people.  Official unemployment rates have stayed near post-war lows (I won’t discuss now the validity of this data) but the huge rise in inflation rates has taken the misery index to highs not seen for 35 years.

Headline inflation rates may be falling but what is called core inflation remains ‘sticky’.  Core inflation rates exclude food and energy prices and they show little sign of dropping much.

This is what worries central banks.  And what it also shows is that interest-rate hikes have little effect on reducing inflation, which rose because of food and energy prices, something central banks cannot control and are now falling for reasons nothing to do with central banks.  Instead, central bank rate hikes are increasing the cost of borrowing to spend for households and invest for companies. Indeed, as ECB chief Lagarde said at her press conference, monetary tightening was being ‘very efficient’ in squeezing the real economy.  As I have argued in a previous post, profits are now being squeezed as price inflation abates.  And rising interest rates are squeezing companies at the other end. 

Sure, if consumer spending and business investment slumps, then core inflation will eventually fall, but only as economies drop into recession.  Even then, the major economies may enter a slump in production and a rise in unemployment this year, but still have inflation rates well above the levels of two years ago – the worst of all possible worlds.

28 thoughts on “Central banks: boom or slump?

  1. “This an aggregation of the unemployment rate and the inflation rate – the twin devils for working people. Official unemployment rates have stayed near post-war lows (I won’t discuss now the validity of this data) but the huge rise in inflation rates has taken the misery index to highs not seen for 35 years.”

    I’ve recently heard from an American that the American people in general doesn’t care that much about unemployment because that doesn’t affect the wages of those who are employed, but inflation is a huge taboo for them because it affects everybody — even those who are employed.

    I found that rationale weird because rising unemployment does put downward pressure on wages because it rises the industrial reserve army, but then I remembered the USA is a special case because of the Dollar Standard. In such case, it is easy to see why Americans compartmentalize unemployment from inflation: when a crisis happens and unemployment rises, inflation doesn’t automatically has to rise because of the USD; in this scenario, it is very comfortable for the average employed, middle class American to rationalize the unemployed as simply the “losers”. Inversely, inflation is a taboo, because, from the point of view of this same middle class employed American, it can be easily rationalized as a “violation of the rules of the game [of the Free Market]”.

    Well, now the Americans will finally experience the double whammy of rising unemployment (or, whatever, of precarious employment) and rising inflation, because the American hegemony is waning and the Dollar Standard is getting more and more disrespected. They will be all in this together for the first time in their history.

    1. It was of course the universal hatred of the “middle class employed American” for inflation that fueled the enormous Red tsunami that swept the Republicans into complete control of both house of the legislature. It was the mass media which is owned by rich people and sells audiences to rich people and is commanded by very high income upper class (not “middle class” ) that was convinced hyping the crisis of inflation would terminate Bug Out Biden’s presidency. I’m not sure vk’s informant is reliable. The employed SPD workers were pretty hostile to the KPD’s unemployed leagues in the days before Hitler was selected for Chancellor, as far as I can tell. The role of the industrial reserve army in dividing the workers is long-standing and not unique to the filthy American rabble, so far as I know.

      Also I know vk is always enthralled to expound on the depravity of the rich American masses, in contrast to the natural nobility of whole nations (across classes too?) in the Global South. But to be completely fair I simply do not see the Brazilian working classes being quite that outraged by the existence of favelas, the concentration camps of unemployment, impelled into steadfast solidarity in struggle. Generally it seems to me the role of unemployment in forcing outmigration to the nearest land of remittances tends to get ignored. Maybe I’m just unfamiliar with the untranslated literature and party programs?

      The insistence that inflation is the prime enemy is an old one. Gold bugs, who most certainly still are with us, are still sure that inflation is the great destroyer of civilization, starting with the glorious Roman Empire. The academic economists, who are mostly in various strata of the petty bourgeoisie (the elite verge on outright working bourgeois—-is Larry Summers in any meaningful sense a middle class American?) share this ideological opposition to soft money/budget deficits/government securities that don’t provide the liquidity for fictitious capital. Perhaps the “middle class” American should notice asset inflation but the business press strongly pushes the idea this is growth of wealth. Again, I don’t think the punishment of the whole population of the US is the road to a happier planet.

      1. “Also, I know vk is also enthralled…..”

        I think you have been carried away by vk’s rough tone (though it is sober enough in this comment).

        What he says here (like always in dealing with the exceptionalism of the US) is not prejudice against the historically privileged US working class, but simply historically contextualized truth.

        I think that it’s also true that, since 1944 or so, the US–carrying along the rest of otherwise defunct ex-colonial states– has lived by murderous, often genocidal, “cold” war and piratically profitable chaos. It’s also true that about 85% of the global working class is located in the targeted and more or less ravaged ex-colonially created states.

        … Needless to say, most western “marxists” (incuding some who comment on this blog) could care less about “all that”….and “them”.

        …..On the other hand, I really believe vk expresses (within an historical materialist context) real empathy for US workers (which [I hope] would include the ancient last of the priviledged pensioned ones like myself).

      2. I left out “targeted” before “the privileged pensioned like myself”: i.e. targeted by Inflated prices on wage goods, negative interest for small savers and inflated taxes on small property owners (i.e. homes). I’m not personally happy to “targeted” of small saving and home, but I am happy at the inkling of an awakening of class consciousness here in the racist belly of the beast.

      3. Insert “out” after “targeted” and “my” before “small savngs” in the last sentence.

      4. The phrase “historically privileged US working class” is doing an awful lot of work here. The higher standards of living typical through most US history is first of all, not precisely a “privilege.” The franchise is a privilege. The legal ability to buy unlimited advertising for politicians is a privilege. Being able to attend the local public school is a privilege. The US Postal Service is a privilege. Perhaps the phrase should be, “liberties, privileges and immunities?” Advantages in life are not the same thing as privileges. Perhaps it is better to be poor in a rich country, at least in purely material terms? But it is not at all clear how this can be blamed on the poor. (Plus, worse, the advantages may be more asserted than real.) I’m not an Adam McKayist, I don’t think the problem with capitalism is the rich are awful people. So I don’t think curing imperialism means getting rid of the awful rich, aka Americans.

        Second, the historically higher standard of living in the US has been largely to the perpetual impossibility of simply replicating the old order. No matter how much they wanted, the new wealthy could not ape their equivalents in the Old World. The relative labor shortage resulted a higher standard of living, or at least, eating. But the US workers have always been exploited.

        Thirdly, the proposition that imperialism somehow pays needs to be demonstrated. Empire is a cost. In a class government, the real costs are borne by the masses, essentially the working class and the benefits accrue unequally to various members of the ruling class. But they are not money making propositions, not like the first days of the East India Companies. That’s why actually running the colonies was turned over to the government, so the costs could be shouldered by the masses. The joke is, socialism for the rich, which like the best jokes, is true enough to be funny. Decolonization was about not being able to afford the money-losing burden. The great crusade against Communism wasn’t about making money, it was a crazed ideological campaign in defense of property, the wealth the rulers already had, not about making more money. They would have paid for the wars themselves if they were profitable.

        Fourthly, the fight against inflation is not class struggle, it’s consumerism. That is, it is in the US. vk is correct in talking of the US dollar standard, but it’s primary role in regards to inflation is I think when in global recessions/depressions, capital flight undermines the currencies of other weaker capitalist countries. There the crisis presents as a sharp rise in the cost of living, aka inflation, as in Sri Lanka. The notion that the US working class benefits from the depreciation of the Sri Lankan currency strikes me as peculiar, to be generous. Unemployment really does divide the working class, but fighting inflation unites workers with the bourgeoisie, both great and small. Inflation hurts the creditors in the long run and devalues wealth, hence the resentment of the big bourgeois. Equating inflation and unemployment is just wrong politics and poor economics so far as I can tell.

        The belief the US working class really does have an objective interest in imperialism would explain vk’s apparent hostility to all Americans regardless of class. To me it seems like vk is hostile to the entire population. That I guess is why vk unreservedly endorses the leaderships of the BRICS, as objective enemies of the exploitative American people, regardless of class. The rising threat of full capitalist restoration in the PRC doesn’t matter because this objective enmity between the American people and the decent part of humanity will force them Chinese capitalists into opposition. Presumably vk thinks that free of the threat the really human part of the world will naturally and inevitably grow over into socialism. That’s why a Bolsonaro wasn’t an issue for the glorious future of a “multipolar world” or why Modi—possibly the man most likely to genocide at the moment!—isn’t an issue now.

    2. Let’s track the twists and turns of VK’s erudition:

      First he says, “Well, now the Americans will finally experience the double whammy of rising unemployment (or, whatever, of precarious employment) and rising inflation, because the American hegemony is waning and the Dollar Standard is getting more and more disrespected. They will be all in this together for the first time in their history.”

      Fact: inflation and unemployment have been coincident at multiple periods in US history, and therefore “finally experienc[ing] the double whammy” is inaccurate since the two have been experienced before.

      When challenged on his statement, “They will be all in this together for the first time in their history”, VK counters that this coming double whammy will be the first under “the Dollar Standard” (circa 1971) and that he recalls no inflation during the 1980-1982 recession.

      I produced the inflation rates for the double dip 1980-1982 recession, and of course I could produce inflation rates for the 1973-1975 recession. Regardless, VK makes a distinction between the “dollar-gold” standard, and the dollar standard, as if that makes any difference to his mistaken assertion that a forthcoming double whammy will be the first time .

      Now he tells us that there’s evidence that it takes a certain amount of time, (until the end of the 70s,) supposedly for enforcement of the dollar standard to take hold. For what to take hold? The establishing of the US dollar as the currency for international settlements. Nope. That existed. The US dollar as the prime currency for use in international trade? Nope. That existed.

      Enforcement? The agreement that most conforms to an attempt at enforcement post 1971 is the so-called Plaza Accords of 1985– an attempt to bring about depreciation of the US dollar, in response to trade deficits, and the impact of the strong dollar on US manufacturing exporters. This much ballyhooed agreement was pretty much a failure. Two years later, in 1987, the Louvre agreement terminated the efforts at depreciation.

      VK’s first time must is caused, he claims, by “American hegemony is waning” as reflected in the “disrespect” shown the “dollar standard. ” Well, the only disrespect I can find regarding the dollar is a decline in its use as a currency reserve by other countries– declining from 72% of the total in 2004 to 60% of the total 2023. BUT, the dollar has been below 65% of the total since 2008. So why now?

      The connection between foreign reserves and inflation+ unemployment has never been established, especially when the dollar accounts for 80% of the transactions in the foreign currency exchange markets; 50% of international cross-border loans; 50% of international securities denominations; 50% of all international trade invoicing (see https://www.bis.org/publ/qtrpdf/r_qt2212x.htm#:~:text=Approximately%20half%20of%20global%20trade,(see%20CGFS%20(2020)).

      Falling profits, declining rates of profits, overproduction, can and have led to simultaneous inflation and unemployment. You can trace this in individual sectors of capitalism– think shale oil 2014-2016; and/or entire systems- think Mexico, Latin America and the lost decade of the 1980s.

      As for “They will be all in this together for the first time in their history.”– that’s just ________(insert barnyard epithet). The whole point of inflation, unemployment, contraction is in making the working class and the poor pay. VK reproduces the junk propaganda of every bourgeois politician, mouthpiece, and hack and calls it “Marxism,” which makes him the perfect social democrat.

    3. I can’t address the multiple points you make. Generally I agree with you, but Modi and Bolsonaro are creatures of the neoliberal stage of imperialism, whereas Xi and even Putin are targeted off-springs of revolutions against an earlier stage of imperialism. You apparently miss my necessarily weak moral and ideological (including anti-racist) argument in support of the victims and intended victims of wars initiated by the US/NATO imperium.

      Regarding my use (or misuse) of the term “exceptionalism” I was referring to the post WW 2 dollar in all its economical and political ramifications. A personal confrontation with a particular Mexican landscape worker will serve to exemplify the point I was trying to make.

      In Sacramento, “city of trees”, you can grow almost any variety, from elms to red woods and palms. Most homeowners in our neighborhood of cottages seem to vie with one another in keeping the typical little patch of green out front leafless (like the big lawns in upscale neighborhoods a few block east of us). A few of us like leaves, use a rake or leave the leaves alone. The weapon of choice for leaf-hating owners is a two cycle smelly engine sending a torrent of wind out of a nozzle, which, when strapped to the worker’s back, can send leaves, like “pestilence-stricken multitudes” into large piles of the dead. These burdensome engines are bad on the ear drums, lungs, and backs of those workers (mostly Mexican immigrants) who employ them. For me the arrival of the leaf blowers is like an invasion. Nevertheless I sympathize with them. It’s miserable, last chance, gig-labor work, unless yor can affort to buy the bazooka, like the older Mexican I confronted one Saturday morning, when the invasion and the thunder of the traffic war on the nearby freeway frayed my last nerve. I strode across the street….

      The old man quietly listened. to my reasoned, sympathetic, leftist plea, then quietly replied: “Would you like it better if I broke into your house and stole enough to feed myself and family, here and in Mexico?”

      …Turning out to both being “marxists”, we shook hands on that ….and spending our exceptional “Yankee dolla..” me from what you might call luck and he from hard necessity.

      1. I’m not sure if this is addressed to me, apologies in advance if I’m so vain…

        It’s really hard to keep track but I’m pretty sure my belief Ukraine is fascist and Russia has the right of self-determination after eight years of Ukrainian fascists making war on ethnic Russians/Russians speaking are both rejected and offensive. My belief that China is no more “capitalist” yet than NEP Soviet Union is more congenial as such to Michael Roberts maybe, but my belief that bourgeois democracy is not going to create socialism in the PRC is much less maybe.

        As to American exceptionalism, the belief that everybody has is overtaxed, over regulated and has a career that will result in a higher estate when they die I think is not a real exception that justifies the current system. I think it is what is promoted, not very successfully if voter turnout is included as a marker. I think in reality, the vast majority of people in the US are underpaid, underserved by the government, has a job and the “death tax” will never be a problem when they die. I do believe a lot of immigrants do hope to start a business, ascending into the petty bourgeoisie (which is getting ever pettier.) This should be obvious in the case of brain drain.

        As to whether vk is empathetic to US workers, which really seemed to me to be the point of your comments, vk has had opportunity to clarify that better than I can.

  2. “Well, now the Americans will finally experience the double whammy of rising unemployment (or, whatever, of precarious employment) and rising inflation, because the American hegemony is waning and the Dollar Standard is getting more and more disrespected.”

    For those readers unfamiliar with US history, as VK clearly is unfamiliar, unemployment and inflation were simultaneous in post WW2 US recessions of: 1953-54; 1957-58; 1969-70; 1973-75; and the double dip 1980-82.

    1. 1953-54; 1957-58 and 1969-70 are pre-Dollar Standard (1971). 1973-1975 was still not truly a Dollar Standard crisis because it took some years until it started to generate the desired effects (that is, there was a latency period).

      1980-82 there was no rising inflation, if memory doesn’t fail me.

      1. “1953-54; 1957-58 and 1969-70 are pre-Dollar Standard (1971). 1973-1975 was still not truly a Dollar Standard crisis because it took some years until it started to generate the desired effects (that is, there was a latency period).

        1980-82 there was no rising inflation, if memory doesn’t fail me”

        For those readers unaware of monetary history, as VK is so clearly unaware, the “dollar standard” was established in 1944, not 1971, by the Allied nations meeting at Bretton Woods. At that meeting it was agreed that the countries would maintain convertibility of their currencies to US dollars, and the US dollar would maintain a fixed rate of convertibility with gold, set at $35 dollars per ounce. The dollar had parity with gold as the monetary standard for international settlements. The meeting also established the IMF and the IBRD (now World Bank) which would conduct their operations in dollars.

        In 1971, Nixon cancelled the fixed rate of convertibility. Despite that, the dollar remains the currency for international settlements.

        In 1980-1982, annual inflation rates per the Fed were 13.5, 10.3, and 6.1 percent respectively.

      2. Before 1971, there was the Dollar-Gold Standard. The Dollar Standard as we know it nowadays was officially enforced in 1971, but there’s good evidence it took until the end of the 1970s for its effects to be felt globally.

  3. “Inflation” is the immediate worry for central banks such as the Fed, but their concern in particular is that workers are made to bear the entire burden for the Fed’s counter to the tendency of the capitalist system towards disequilibrium, endemic to this system.

    Hence today’s robust US jobs report comes as “bad news” for the Fed and finance capital. The Fed will have to jack rates even higher than they perhaps expected, until the working class feels the pain. It is even possible that a Volcker II -style rate shock, in relative terms, has appeared on the event horizon.

    When that event came to pass at the end of the 1970’s, it gave us Reaganite reaction. If that happens again, it will give us a far right political dictatorship under present political conditions.

    Even at present, though, the Fed having to do more will already be very bad for the UK economy, already in the worse shape in living memory, as the BoE will have to also raise rates, or it will face the same situation as what caused the speedy fall of “PM Head of Lettuce” recently, the fall of pound sterling and an exodus of finance capital from Britain, the only substantial “industry” left standing in that “independent” but sorry country.

  4. Your “core inflation rates” chart is year over year. You note that “This [the still-high y/o/y figure] is what worries central banks.” However, recent months have seen significantly milder inflation, at least in the U.S. – suggesting that supply lines are getting straightened out and that the bank “worry” is an excuse to keep pummeling labor.

  5. Before anyone describes whole strata in the USA as a labour aristocracy check your facts. Median household income is below levels last seen in 1973. Male median wages are way way below that. Whole sections of the US working class were brutally uprooted in the 1980s (the rust belt era). I saw that with my own eyes, Ohio looked like the Ukraine on a bad day. (Don’t forget recessions destroy more means of production than wars, as the President of Hitachi acknowledged after Japan’s lost decade in the 1990s) US workers were forced South into states where union activity, if not banned was suppressed. Anti-capital can add more flavour to this than I can.

    Today 64% of the US population live from paycheck to paycheck. Car repossessions are approaching 2009 levels, and ask any US worker what is more important, their car or their house. Tens of millions are in arrears with their energy bills. Blackrock, the biggest US landlord, in order to appease its investors demanding their money back, is evicting thousands of its tenants. In many US classrooms pupils have to swim to their desks when it rains. And so on and so forth. On the other side of the coin, the $1.34 trillion global luxury goods market, you know the one holding back productivity growth, grew by over 15% last year.

    1. Living “from paycheck to paycheck” is merely another term for simple reproduction. And that’s an essential feature without which capital cannot exist: the working class must always be in simple reproduction, M – C – M. If the working class was in amplified reproduction, then capital would have a direct competitor within itself, which is impossible.

      So, while capital is in amplified reproduction M – C – M’, its variable capital, labor, must necessarily be in simple reproduction M – C – M. Savings (by the working class) is merely an euphemistic term to designate that the worker deprives itself of a portion of C in order to reserve for itself more M, that is, this is a case of simple accumulation. Marx made this very clear in Das Kapital.

      Therefore, what the Americans call “living from paycheck to paycheck” is merely the normal state of capitalism, not its degradation. It tells us nothing about the state-of-the-art of capitalism. The fact they think this is extraordinary only evidences the fact it is (or was), indeed, a textbook case of labor aristocracy.

      1. Comments like this are provocative to me because I tend to think as a Marxist, maybe erroneously.

        Jumping to the end, if the US working classes (and lumpen and lower petty bourgeois et al.) are the “normal state,” then they are not simultaneously imperialist parasites on the oppressed Global South. Hence presumably the parenthetical “was” a labor aristocracy. The problem with this caveat, it’s not clear when this labor aristocracy declined; when it arose; how aristocratic it was; who was in it. Add in the possibility the middle classness of the average American is a propaganda construct that doesn’t reflect economic reality, aiming to falsely conflate the working class with the ruling class. Agreeing with the movies and TV and Americans are all rich just doesn’t seem sensible.

        Reverting to the M-C-M of simple reproduction of the working class? I think the circulation circuit of the working class was C-M-C’. (The production process for labor power is partly outside the capitalist production process, in the form of the family.) The first C is labor power, the M is wages and the new C is consumption commodities. As a class workers do not accumulate money capital. Counting deferred wages as capital accumulation is nonsense so I hope that wasn’t meant. The notion that expanded reproduction in an economy requires that the workers don’t increase in numbers or standard of living is also incorrect. It’s true the extraction of surplus value in the production process is always a zero-sum game for the capitalists, but the sphere of circulation redistributes value, including the value to reproduce the labor power. M-C-C’-M’, again the first C is labor power means labor power tends to be purchased at its price of production, a fair exchange by bourgeois standards. The funny thing is, it’s not clear to me that a true capitalist economy can do simple reproduction, in defiance of the general law of accumulation.

      2. So if the entire US working class is a “textbook case of labor aristocracy,” that must include African-American workers, Latina/o/x workers, and women workers. The influx of these workers, particularly women workers, has been a key source of profits for US capitalism, much more than the supposed looting of the Global South. These workers have incomes 20-40 percent below the “median,” and because they are paid on average less than the average, also contain the highest concentrations of poverty, death in childbirth, infant mortality and all those other things that are NOT characteristics of an “aristocracy.”

        If VK wants to argue that the maternal mortality rate, as high as it is for African-American women, is less than it is in Congo for African women AND that the US mortality rate is a “privilege” based upon the rates of African women, all we can say is:
        A) show us the circuit of capital that bequeaths the privilege on the African-American women
        B) Please account for, during what you call the period of the dollar standard and US hegemony which contain increases in US direct investment in the “looted” global south, the worsening living conditions and working conditions for US workers.

        It’s a very cute trick VK pulls with his abstract faux-analysis of what it means to live “paycheck to paycheck.” In the abstract it’s just the “normal condition” of the working class. But the abstract ignores the concrete– that is to say the real attack on the most vulnerable and more recent entries of the working class. Doesn’t fit with the narrative of labor aristocracy? Exactly. That narrative is junk Marxism. The narrative is just another attempt of the little capitalist to deny there’s such a thing as class struggle in the “advanced” countries.

      3. @ Anti-Capital

        That’s the point of immigration to the USA, isn’t it? You don’t observe the reverse movement: from the USA to LA or Africa.

        Unless you’re assuming all of these African and Latin American immigrants see themselves as frustrated billionaires, the only logical conclusion is they’re immigrating to the USA to work, i.e. pertain to the American working class. But they already were of the working class in their home countries, so the only logical conclusion to take from here is they’re aiming to pertain to a superior working class.


        @ stevenjohnson

        You’re confusing two completely different categories.

        Class is all about sociometabolic system. It refers to the relations of production.

        Wage is merely the monetary payment to the worker in exchange for his or her labor force sold in the market.

        The American working class was always a working class. That has never changed. What changed was the fact that, for a short period of time, they received wages that were, on average, way above their level of subsistence. That was possible because, during the Postwar Miracle, the so-called First World accrued “superprofits” from the so-called Third World, thanks to the cheap commodities bought from the latter in exchange for manufactured goods from the former. This “superprofit” ended with the oil crisis of 1975, when the era of extremely cheap commodities from the Third World ended, and the rapid advancement of manufacturing in the First World demolished its profit rate.

        Even when a working class receives wages way above their subsistence level for a very long time, they will always be regulated socially by simple reproduction. And here Marx’s genius is once again in display. I just mentioned that the wage above subsistence was a collateral effect of a historically high inequality in OCC between different countries. High OCCs generate above subsistence level working classes. But high OCCs also signify high levels of fixed capital relative to variable capital. The higher the rate of fixed capital relative to variable capital, the more a worker or group of workers has to save in order to ascend to the capitalist class, because this movement implies that fixed capital rises on a faster and higher rate than variable capital, even when the latter is growing and is doing so above the working class’ subsistence levels.

        So, we have a dialectical endgame for what the liberals call “the middle class” (working class aristocracy): in order for said middle to arise in capitalism, OCC has to rise faster than this middle’s wages. But that makes becoming capitalists farther, not nearer, because initial capital M rises faster than wages. Meanwhile, unemployment must grow and the profit rate tends to fall. This results in a “flight of Icarus” scenario, where the destiny of the working class aristocracy is always to fly close to the Sun, only to fall in an spectacular fashion (i.e. crisis). The greatest obstacle to the working class aristocracy is the working class aristocracy itself. The establishment of stock markets may delay, but doesn’t stop the process.

      4. Don’t know what a “sociometabolic” system is, regardless of any relations of production. I believe a capitalist system is one where the division of labor is, like most class societies, based on property but this one is mediated by the exchange of commodities in markets, labor power in labor markets and capital in capital markets and the contradictions of the system are resolved in crises of general overproduction relative to the surplus value being extracted in the production process. The exchange value offered by capitalist for labor power of people who have none therefore is a relation of production and cannot be put in opposition to that as a “mere monetary payment.”

        When I was eighteen, in Econ 101, I asked the instructor—being a stupidly linear thinker—whether the workings of the laws of supply and demand meant that as physical capital accumulated, the price of this factor of production—aka, profit—would decline. Prof. Jenab told me I was a Marxist. I was too shocked to absorb his refutation, sadly. But to my knowledge this is the only time anyone has ever accused me of understanding Marxism. I suppose I should give up, accept that vk surely knows who vk deems a class enemy (myself and my loved ones,) and that I am unalterably opposed to the real Marxists, which presumably includes Michael Roberts, ucanbpolitical, Anti-Capital and mandm. Not quite that frustrated yet, so to press on?

        There is a decidedly empirical question here. Without denying there is such a thing as superexploitation (indeed, unlike vk, I think it so real it happens in the US itself,) the massive destruction of capital in WWII, both physical and financial; the more physically productive capital investments in the rebuilding of Europe; the increase in the effective size of the world market due to the ascendancy of the dollar to parity with gold; the stabilizing effect of a non-cyclical portion of the world economy (the USSR) meliorating the industrial cycle; the effects of decolonization in making capitalist exploitation of workers in those countries more effective, which is to say, cheaper, explain the supposedly glorious thirty years more precisely than attributing it to, what seignorage? John W. Perkins style financial manipulation? The US worker aristocracy=the people of the US eating the people of the South. And I still think those years weren’t all that glorious either. Absent the statistical skills (a reason I read this blog is Michael Roberts has those skills!) there’s no moving forward.

        As for the general picture of the labor aristocracy ascending into the bourgeoisie? I was pretty sure the general picture is fragments of the bourgeoisie descending, first in the petty bourgeoisie, and the petty bourgeoisie descending into what might be called a labor aristocracy and so forth. As some individuals descended into the lumpenproletariat, a tinier number ascended ever more stratospheric heights of the bourgeois class. If you could somehow graph class position against population (x-axis for class proxy,) then the result would be a caricature of an armadillo (facing left,) with a small head, then a high arched back, then a grotesquely long, thin tail extending far, far to the right. What it would not be is a bell curve. If you imagine that, then it’s not so weird to imagine an “average” American who superexploits everybody in the Global South. But I think it’s just bad math. Good math would call for more attention to the difference between mean, median and mode, for a start. I think you believe all Americans are imperialists because you don’t see the modal American. And I’m not sure you don’t somehow blame them personally for the higher OCC!

        My view of how the so-called middle classes (SES I think should be the term of art!) is replenished by descending fractions of the bourgeoisie/petty bourgeoisie, or regenerated by the effects of concentration and centralization of capitals (which creates new spheres, geographical and industrial, that furnish new kind of petty bourgois,) is I suppose my understanding of one aspect of Marxist immiseration. But the notion the working class is in some sort of Malthusian bind seems to me to be decisively refuted by the economic history of capitalism as a whole. For a historical epoch, capitalism could raise populations and standards of living for the large majority…and the Marxism is for one thing realizing that it can’t any more and has to be replaced. vk I think believes that US imperialism, the US people ultimately, has to be done away with so that socialism can peacefully transition over the centuries. This strikes me as both utopian and reformist. So despite the many common points between vk and me, we don’t agree. I imagine vk might see this as a confession of class enmity?

      5. VK: ” What changed was the fact that, for a short period of time, they received wages that were, on average, way above their level of subsistence. That was possible because, during the Postwar Miracle, the so-called First World accrued “superprofits” from the so-called Third World, thanks to the cheap commodities bought from the latter in exchange for manufactured goods from the former. ”

        In this case, as in most others, VK repeats a trope and doesn’t provide particulars. So we might ask first the limits of this “short period of time, they [the US working class] received wages that were, on average, way above their level of subsistence.”

        From when to when? I would think we wouldn’t go any longer than the 1951-1973 period, since two singular events herald the US bourgeoisie’s offensive against workers– Pinochet in Chile, and OPEC’s embargo resulting in accelerating inflation and unemployment.

        Then we would ask some detail on the superprofits based on the exchange between the “Third World” and, in this case the US (and since the US is/was the “hegemon” it’s certainly reasonable to let the numbers for it stand as a proxy for the entire “First World’s.”

        We could then inquire of a number of sources… but my personal favorite is the archives of the Statistical Abstract of the United States, searchable and by year at the Census Bureau website: https://www.census.gov/search-results.html?q=Statistical+Abstract+of+the+United+States&page=1&stateGeo=none&searchtype=web&cssp=SERP&_charset_=UTF-8

        And we would ask– just what percentage of US exports did the “Third World” countries absorb? We can ask what is the size of the surplus accruing to those US exports over imports? We can compare the elements of growth in the export minus imports and do all sorts of things– like see if that growth outpaces the growth in the same calculation made a)with advanced countries b) the US net receipts for trade as a whole.

        For those who think the devil is in a different detail, namely US export of “capital”–which of course the commodity is, and embodies– what about US private direct foreign investments in the “Third World” and does the rate of growth in those investments exceed the rate of growth of total FDI?

        Anybody interested can find the necessary raw data in Part 11 of the 1973 abstract, beginning somewhere around page 700 (I thini). Back in the day when the US was still printing the SA annually, I did just that and if “superprofits,” generated by the terms of trade with the “Third World” were indeed financing above subsistence level wages, it must have been on the very down-low and US capital had to be falsifying numbers, and falsifying numbers for years.

        I don’t doubt the dishonesty of the bourgeois class– but I don’t think it has the steadiness to be completely consistently dishonest regarding a subject of where it puts its own money for so long a period

    2. Another angle is, what is the marker of a petty bourgeois? Not so long ago historically a petty bourgeois owned enough property * to afford a home (and maybe a summer home,) a carriage (horseless in more recent times,) a wife who didn’t have to work outside the home, servants to work in the home, education for the children (if desired,) a fairly secure prospect of a sufficient retirement income, the ability to pay for whatever passed for quality health care, and—perhaps most controversially—sufficient property to make the children attractive mates for other bourgeois. And at the end, they leave an estate to perpetuate the class status of the family. (This I think is what Thatcher meant when denying there is only society, only families.)

      If you look at these markers, the petty bourgeois is in parlous shape. The remuneration to labor bureaucrats in trade unions operated on a business model (forcibly installed in the post-war purges of the left, by the way) is but a handful of labor lieutenants of capital. Working class people getting an education and enough income to purchase a home was a program post-war fairly consciously meant to fight the appeal of socialism. Plus of course, the GI Bill and FHA mortgages were something in the nature of a payment for services rendered, a payment the bourgeoisie could not deny given the balance of class forces (that weak position was the urgent need filled by “McCarthyism,” I think.) I believe you should think of the mortgage interest deduction as a genuine privilege partly aimed at creating a home-owner class. There’s never enough money of course, so economists have wanted to do away with this deduction for decades. (I’ve never had enough income to justify itemization/risk an audit myself, so I’m a little shaky on details…for all I know, the economists have succeeded in doing away with this “loophole.”)

      I think from the scatter shot reading of statistical news over the decades the number of petty bourgeois is declining, the numbers of “temporarily embarrassed millionaires” has steadily increase, and the gulf between petite and haute bourgeois is like the cosmological dark energy, expanding the social universe faster and faster. And, what we might entertain thoughts of as an aristocracy of labor, has declined with the power of unions. mandm may see some sympathy for US workers in vk’s comments but I think vk is relatively indifferent to class, seeing nations as units and the world divided up into good and bad nations.

      *The professions, which are historically the clergy, the law and medicine are notable for, again, legal privileges, the most genuine kind, objectively ascertainable. In the case of the clergy, they may not have legal establishments any more but in the US they have tax privileges and broadcast privileges as well. The de facto use of clergy as ostensibly non-class figures in political contexts is harder to judge. Lawyers and physicians have partial control over who gets to be a lawyer or a physician, thus the Bar and the AMA are not labor organizations. The general notion of the “PMC” the Professional/Managerial Class, is a nonsense term. Formally, a shift manager at a MacDonald’s is PMC. Not every clergyman or lawyer has a megachurch or wheels and deals for giant corporations. And the managers who really count are deliberately paid enormous sums, including in property (which stock options are a claim on,) to bring them into —a generally lower level—of the bourgeoisie proper. But people who talk about PMC never (not in my experience) draw such distinctions and they always (in my experience) attribute conspiratorial powers to this undefined and amorphous group of usually nameless people. It is another supposed common sense notion tacitly meant as an alternative to genuine class analysis. Genuine class analysis is not particularly partisan in a narrowly organizational way, but it always blends in with Marxism.

      1. Zuchman & Co do the best analysis. They calculate up to 84% of society are wage earners. They are describing advanced capitalist countries. Capitalists are 1% the rest senior managers, small capitalists, those at the top of their professions, senior military and civil servants etc make up the rest.

        On another note I would not rely on migration to substantiate a labour aristocracy. Most of the impulse to migrate is not attraction but repulsion from countries wrecked by imperialism. We just have to look at what has been done to central American countries by the CIA, the Pentagon and the US State Department.

      2. US IRS allows mortgage interest deduction on the “first” $750,000 of a mortgage when a couple files jointly (375,000 for singles)– not that I could ever afford to carry a mortgage, but I do have to file taxes on income so I try to familiarize myself with all deductions, even the ones I’m glad I don’t have. Easy enough to find at the IRS website.

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