Wed Jul 11, 2012, 05:09 AM
Ichingcarpenter (29,450 posts)
Sado-Monetarism The Role of the Federal Reserve System in Keeping Wages Low
Authorís Note: My book The Invisible Handcuffs of Capitalism (Monthly Review Press, 2011), from which this article is adapted, tells the story of how orthodox economists have systematically excluded all consideration of work, workers, and working conditions from mainstream economic theory, as well as the damage created as a result of that distortion. Neoclassical economists are concerned about the workersí transactions with capital, but they care little about the workers themselves or their working conditions. Workers merely accept a wage bargain, go to work, and finally collect a wage. What happens at the workplace is irrelevant. The wage bargain is presumed to be voluntary, agreeable to both workers and their employers. In fact, the relationship between labor and capital is anything but voluntary. Capitalism uses a variety of weapons to make labor conform to its needs. The book compares this control to a Procrustean bed. According to Greek legend, Procrustes was an innkeeper who made his guests fit into an iron bed. He stretched the short ones and amputated the tall ones until they were the proper dimensions. Monetary policy is a Procrustean weapon. What follows is adapted from the book. It tells the story of how the Federal Reserve System sadistically wields monetary policy to keep wages low.
Economist Edwin Dickens has written a series of significant articles analyzing the minutes of the meetings, dating back to the 1950s, of the Open Market Committee of the Federal Reserve Board. (The Committee is the main policy-making body of the Board.) Dickensís research shows convincingly that the Federal Reserveís partisan behavior is designed to tilt the economy in the direction of the wealthy by making workers more compliant.
Dickens reported numerous occasions when participants voted to tighten the money supply just before major union contracts were about to expire. The minutes indicate that the specific intent was to force employers to be less generous with their wage offers during contract negotiations.1
A recent study formalized Dickensís work by attempting to distinguish whether the policy actions of the Federal Reserve were responses to inflation or to low unemployment. The study concluded that ďa baseless fear of full employment,Ē rather than the prevention of inflation, was the guiding principal of the Federal Reserve.2 The conclusion of this study should come as little surprise to people familiar with the Federal Reserveís obsession with the danger of high wages.
Defenders of such policies justify the temporary restriction of job creation, contending that the Federal Reserve is merely trying to curb excessive growth. According to this school of thought, the Federal Reserve is simply preventing the kind of excesses that lead to severe recessions or depressions. Slowing down growth today may be necessary to provide for a higher sustainable growth rate in the future. Most economists argue that the cumulative effect of even a fairly small increase in growth rate can be substantialómore than enough to compensate for a temporary slowdown........
Long well researched article: Don't miss what Volker had in his pocket at all times
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Response to Ichingcarpenter (Original post)
Wed Jul 11, 2012, 07:22 AM
fasttense (15,050 posts)
1. I've always thought the Fed hated workers
And now I know it's true.
Workers need to fight back. But instead they seem willing to accept any and all crap being thrown at them. The war was won by the uber rich with barely a whimper from workers.
"Nobel Laureate Paul Samuelson told a conference sponsored by the Federal Reserve Bank of Boston that ďAmericaís labor force surprised us with a new flexibility and a new tolerance for accepting mediocre jobs.Ē"