washington, dc

The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

How Weak Economic Growth Serves the Wealthy…and the GOP

Jeff Spross’s “You know who likes lackluster economic growth? The rich” at The Week explains why “many economic elites actually have a vested interest in anemic job growth and a slack labor market.” This is the kind of unflinching analysis that drives Republican meme-mongers crazy, for they depend to a great extent on the public embracing wholesale one of their most treasured economic myths — that the super-wealthy want shared prosperity for everyone.
After all, the argument goes, the mega-rich have to live in the same world as the rest of us, right? More to the point, broadly-shared prosperity is good for the wealthy too, isn’t it, since they will benefit when consumers have more money to buy their products, correct?.
“Not so fast,” writes Spross. “A dark and unpleasant truth is that many economic elites actually have a vested interest in anemic job growth and a slack labor market.” Spross adds:

To many observers, this probably sounds crazy. Tight labor markets — when the demand for workers has caught up with the supply — are part and parcel of a booming economy. And a bigger pie benefits everyone!…Tight labor markets — when the demand for workers has caught up with the supply — are part and parcel of a booming economy. And a bigger pie benefits everyone!
But this leaves out the crucial issue of worker bargaining power. When labor markets are as tight as they can get — a.k.a. full employment — workers can quit jobs they don’t like and find ones they do like with ease, while owners of business and capital become ever more desperate for adequate labor. This gives workers much more leverage to demand wage increases, so they claim a bigger share of all the income generated in the economy. Which means, by definition, the elite’s share must shrink.

Spross observes, further that “after 1970, full employment disappeared, and inequality took off. The one exception was the boom in the late 1990s — for that brief period, the incomes of the top 5 percent of households, the bottom 20 percent of households, and everyone in between, rose in lockstep.
However, explains Spross, “The main channel is the flow of money through individual companies. Higher wages mean the costs of labor go up, so profit margins shrink and businesses have to operate on much tighter finances. Conversely, after full employment went away, corporate profits boomed. Companies obviously prefer the second scenario. It also means the CEOs, management, shareholders, and investors who own stakes in companies get much bigger payouts from those capital gains.” And,

Full employment also takes power over the business away from owners and management and gives more of it to workers instead. Unions grow and labor movements ferment. Workers suddenly can demand all sorts of stuff, from paid leave to ergonomic work stations to different schedules to better treatment and conditions and on and on. The people at the top lose a fair amount of creative control over the nature and direction of the enterprises they view as theirs. Pride is a thing with human beings, and there’s a reason unions are so hated in certain quarters of our society.
Finally, there’s a lifestyle issue at play. If the incomes of everyday workers go up, then elites’ real incomes must go down. The labor they’re buying is more costly. This completely changes where and how the elite can spend their money, and what they can and can’t consume. The rising “servant economy” rests on a wide relative gap between high and low incomes. Again, we’re talking about sinful, fallen, prideful humans here, who like being able to buy bigger, hipper, posher stuff than everyone else, and who like being able to go to high-end cultural events and work creative jobs and eat nice food while other people do the shopping and cleaning and cooking and driving and child care. Full employment and its impact on inequality has a profound effect on the fabric of our shared lives as they’re actually experienced.

Spross cites key “data signals for gauging the tightness of the labor market. Wage growth is still flatlined at around 2 percent annually, when it should be at least 3.5 percent. Labor force participation is way down, and underemployment is still quite high.” Even more significantly, says Spross,

But maybe the best metric is the percentage of the prime-age work force — too old to be students and too young to retire — that’s employed. That number still hasn’t recovered to where it was before 2008, and that peak was still below where it was before the 2001 recession. The late 1990s boom, while better, was also less impressive that what went on mid-century.

This decline, he argues “is the primary tool by which the American elite gobbles up ever more wealth and power from everyone else. Recessions in the last few decades have been the inflection points for ratcheting up that effect…The supply of work is a collective accomplishment, driven by the feedback loop between consumers and businesses. It’s a question of ecological stewardship and managing aggregate demand, and it implicates macroeconomic policies from monetary policy to taxes to the welfare state to unions.”
Republican economic policies, therefore, are designed to serve their elite contributors who really want “to slow the supply of jobs to a trickle” and keep workers “desperate and forever on the ropes.”
Of course, elaborates Spross, “Elites obviously don’t want to completely tank the economy. But it certainly works for them if it stays modestly stagnant, maximizing the growth of the pie while minimizing worker bargaining power.”
“It’s the Goldilocks principle, concludes Spross. “Don’t run the economy too hot or too cold. Run it just right.”
For the Republicans, cultural wars provide a convenient distraction from this cynical economic strategy. Confuse the public about who the elites really are with peripheral “issues,” so they won’t focus on the GOP’s grand economic strategy, which is to enrich the already wealthy even further by screwing working people of all races. It has served them well and they can not be expected to give it up.
Every election is important to the GOP for consolidating the gains of their strategy. But 2016 looms as a particularly critical watershed year for them, and for America. If they carry the day, they will be able to lock up the Supreme Court for decades, disempower unions and workers even further and elevate the privileges of the wealthy to ever-increasing heights, while expanding the misery index for everyone else. This is why Democrats must unify and bring their ‘A’ game in 2016 — or there won’t be much of a middle class to talk about in 2020.

Leave a Reply

Your email address will not be published.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.