Capitalism update

Sign up for myFT Daily Digest and be the first to learn about capitalist news.

“Pay them more.”President these three words Joe Biden To summarize the most surprising result of the pandemic: due to widespread labor shortages, workers seem to have the upper hand in front of employers. Although this feeling is strongest in the United States, reports of companies trying to find employees can also be heard in most parts of Europe.

We should not surpass ourselves. Millions of people are still unemployed or enjoying government-sponsored vacation programs. The anecdote of salary pressure does not equate to a systematic and sustained high salary growth rate. The surge in industry prices is related to supply chain bottlenecks, not wage costs.

So the current view of labor shortage may be this. However, if there is evidence that workers are placing higher demands on employers than before, the importance of this change will be far-reaching.

The fact that no one predicts it is important in itself. We are still scrambling to understand what is happening. Reports of labor shortages coincide with difficult reports, especially among low-wage workers.Even within a single department-for example Some British hospitality industry -When others urgently need more manpower, many employers let employees take time off.

These mismatches may be the pain of the transformation of a major economic restructuring, and remote work will continue to exist. However, workers seem to suffer less than this transformed agent. This is in stark contrast to the labor market reorganization of the past 40 years, which was mainly caused by workers rather than driven by them.

During the pandemic, stories of workers determined to refuse work abound. They used to quit their jobs and insisted on doing better things. This is not just an anecdote. A new study found that more than one-fifth of American workers — and 30% of those under 40 — Seriously consider changing careers Since the beginning of the epidemic.

This looks like a return of what has been banished from centrist policy debates and mainstream economic analysis for decades: class conflict and its economic consequences. To be precise, we may be witnessing the manifestation of two outdated concepts: the relative power of the economic class changes the macroeconomic results; the macroeconomic policy tilts this relative power.

The third novel idea is also being tested: strengthening “employees’ bargaining chips”[s]”As Biden said, if employers expect strong demand growth, they can encourage employers to increase labor productivity and output.

Traditional economic thinking has almost no room for these possibilities. In the standard model, when workers get their marginal contribution to production, the supply and demand of labor will match. If they demand more and better—or the government does it on their behalf—the result will be unemployment and inefficiency, because companies are more willing to reduce production.

Contrary to these models, can a fully-employed economy be compatible with a series of wage transactions between business owners and employees, depending on their relative power? Can the productivity of the enterprise cope with the pressure of high demand? If so, can the government’s “vigorous push” simultaneously increase wages, employment, and productivity growth, while inflation is rising but under control? The great experiment of Bidenomics may give us answers to these questions.

If the answer is yes, they will overturn a series of not only economic assumptions, but also political assumptions. They will face fierce competition.

Every economic downturn rekindles interest in John Maynard Keynes. This should attract the attention of Keynesian contemporary Michal Kalecki (Michal Kalecki).In his 1943 article “The political aspect of full employment”The Polish economist not only offered a succinct argument for fiscal stimulus, but also discussed why business interests might oppose full employment policies, including those who paradoxically stand in a high-demand growth system to earn more profits. entrepreneur.

Kalecki offered three reasons.Business owners may not like this kind of government activism, because “Once the government learns the skills to increase employment through its own purchases, this powerful control method [of making employment depend on business confidence] Loss of effectiveness”. They may not like public investment because they worry that it will leave less room for private gains. Even if they accept the need to end the economic downturn, they may oppose policy maintain Maximize employment because it will change the balance of power in the workplace.

It is not necessary to be a Marxist economist to see the risks of politically motivated reasoning. If Biden’s economics succeeds, fiscal activism that improves workers’ bargaining power will also be strongly supported and maintained during the boom. Kalecki warned: “In this case, a strong alliance between big companies and rentiers is likely to form, and they may find that more than one economist declares that the situation is clearly unreasonable.” This sounds like. It should be familiar.

A better desire is what Kalecki calls “full employment capitalism.” This will depend on an enlightened view that promotes the self-interest of capital owners: class conflict is far from a zero-sum game, and productivity incentives from greater worker power can also increase profits.

[email protected]

Sign up for Martin Sandbu’s free lunch newsletter at ft.com/Newsletter