A Reply To jacob Richter - Part 2

The Iron Law of Disproportionate Immiseration:

"In the “trickle-down” best of times, workers’ incomes do not rise as rapidly as the incomes of those above them, and while immiserated further by interest on the growing but hidden consumer debt slavery that supports this disproportionate immiseration, they can be subject to the disproportionately immiserating effects of inflation;"

There are many problems with this. Firstly, it assumes that “workers” are some homogenous group, all of whom face exactly the same conditions all of the time. That is quite clearly not the case. The position of young workers will not be the same as that of older workers. The position of workers in London, or other high housing and living cost areas, will not be the same as that of workers elsewhere in the country, where housing and living costs are only a fraction of that. The position of workers in high unemployment areas, or industries, will not be the same as that of workers in new, low unemployment areas, or in new, dynamic and profitable industries. For example, during the 1930’s alongside the devastating unemployment that afflicted some areas like the North-East, there were new emerging industries like consumer electronics beginning to be developed, particularly in the South-East. Workers in these industries tended to do very well, especially as they faced lower prices for wage goods, and new methods for house building were also beginning to make house purchase possible. In fact, during the 1930’s, for those in stable employment, things were not that bad, because wages did not fall as much as prices. I’ve detailed some of that in previous posts, particularly in The Truth About The Economy.

A good illustration of that is your comments about the immiserating role of debt interest and inflation. If we look at the period of the post-war, Long Wave Boom, then we find a large number of workers, for the first time, becoming home-owners. Of course, many also remained rent paying tenants either to private or Local Authority landlords. If we take the period from the early 1960’s onwards, in particular, then what we see is that those workers who had decided to buy their homes were not at all immiserated by the debt burden they had taken on, nor by the inflation that gradually rose. On the contrary, these workers obtained considerable affluence as a result! Although, the mortgages they took out, on these properties, to many, seemed burdensome at first – though they would have only been for a fraction of the multiples of income permitted today – rising wages soon made the repayments appear much smaller. The rampant inflation of the 1970’s from the “Barber Boom” onwards simply inflated away the debt. In fact, it inflated away the debt so much that, for many of these houses, which cost £1,000-£2,000 for a new semi detached house in 1960, it was as though they had simply been given away to the workers who bought them. Even those who bought towards the end of that boom benefited. My sister bought her new three-bedroom semi in 1972, for £2,000. As both she and her husband have always had low paid jobs that would have seemed a lot of money. But, after the inflation of the 1970’s and early 80’s, even for low-paid workers, £2000 seemed an insignificant sum. At the same time, the inflation had the opposite consequence for those workers who had not bought. It meant that where the first group of workers now had essentially no housing costs – because you could pay off your mortgage – these other workers saw their housing costs soar with rising rents. The fact that such a large number of workers DID buy their houses during that period, and the gross variation in house prices – and consequent effect on rents – between London and much of the rest of the country is of considerable consequence.

In fact, contrary to your argument here, inflation always has this consequence for debt. Its why Governments have always used inflation to deal with debt, and why its likely, as I’ve argued elsewhere, they will use it again to deal with the current high levels of Public and private debt.

This had other consequences too. Freed from housing costs, which formed a large proportion of household expenditure, such workers were able to save money, and contribute to Pension Schemes, where they became available through the companies they worked for, and at the same time acquire other assets. Again the consequences should not be underestimated. For one group with disposable income and savings, it becomes possible to buy cars, consumer durables etc. out of savings. For the other, lacking such savings, buying such goods often does require going into debt, often at extortionate rates of interest on HP. Nor should we underestimate the role, during the 1980’s, but even going back to the 1970’s, of a growing financial services industry, selling financial products now to workers that once would have been the preserve of the rich. I remember, for example, in 1975, being offered a job with Hambro’s Bank, selling such products. But, by the 1980’s, most workers had got used to the idea of owning shares, if not directly, then via, Unit Trusts, and PEP’s. Those older workers, who had essentially been given the houses they lived in for free, were well placed to accumulate considerable amounts in such funds, which again, with inflation, and a rising rate of profit, during the late 1980’s and 1990’s, increased considerably in value.

Its no wonder then that it is estimated that by 2012, 30% of Britons will be dollar millionaires, a figure which must include a considerable number of workers. I read somewhere that around 5 million Briton’s now own property in Spain, and more own property elsewhere, whilst 1 Million live at least part of the year in Spain. And, whilst the figures for personal indebtedness appear horrific, it has to also be remembered that the number of people with such net debt is actually a minority, if I remember correctly less than 20%, whilst the average net savings is estimated at around £30,000.

Secondly, I think there is every reason to believe that in the “ best of times” periods, which I would refer to as the Long Wave Boom periods, the incomes of workers probably DO rise faster than the incomes of those above them, particularly within the ranks of the petit-bourgeoisie, but probably within the bourgeoisie too, though not necessarily at the beginning of such periods. I think that its necessary to distinguish here, between the “incomes” of the bourgeoisie and “profits”. As Glyn and Sutcliffe showed in “Workers and the Profits Squeeze”, during the last Long Wave Boom, workers incomes did rise relative to profits. As, during such a period, the need to maintain rates of accumulation continues, its likely that a greater proportion of this profit, which can still be bigger in absolute terms, even whilst being “squeezed” by wages, will go to accumulation, leaving less to be distributed as income to Capitalists. The consequences of that can be seen later in terms of relative inequality. Inequality levels have risen more recently, and that is almost certainly due to the weaker position of workers during the Long Wave downturn of the 1980’s and 90’s, whereas inequality did seem to diminish after the Long Wave Post War Boom.

“When rates of industrial profit fall during recessions and otherwise, workers’ incomes are fully subject to the disproportionately immiserating pressure coming from elsewhere in the “freely” and “socially” exploited labour market – namely from the reserved armies of the unemployed – and specifically unprotected workers’ incomes are fully subject to the disproportionately immiserating effects of inflation;”

It simply is not possible to speak, in mechanical terms, of the rate of profit falling during recessions. Recessions, in periods of Long Wave downswing, will be different, in character, to those in periods of Long Wave Boom. During the former, as with the character of such a Long Wave Phase in general, it is, on the contrary, more characteristic to see rates of profit rise. That is what was witnessed during the last downswing of the 80’s and 90’s. And, although it is clearly the case, that during these periods, the Reserve Army of Labour does act to put downward pressure on wages, it is important to look at this empirically rather than simply to conclude that real wages, for all workers, must fall. Keynes and other economists recognised this fact, and spoke about wages being “sticky” in a downward direction. As I said above, during the 1930’s, wages for those in employment fell less than the fall in prices. Rather than inflation, during such a period, being relatively immiserating, therefore, the deflation had the opposite effect.

And, during the 1970’s, it was the closing stages of the Post-War Boom and onset of the downswing, which saw profit rates squeezed the most, because the residual strength and militancy of workers, built up during the Boom, enabled them to resist attempts by Capital to reduce wages. I agree that those who suffer most are those not in work.

”3) When rates of financial profit fall during recessions and otherwise, much of workers’ incomes are diverted to consumer and mortgage debt payments, while still fully subject to the disproportionately immiserating pressure coming from reserved armies of the unemployed and, for unprotected workers’ incomes, the disproportionately immiserating effects of inflation;”

I have no data to confirm or deny your first statement, but I would expect that again it would be different in different recessions. For one thing, it will depend upon the extent to which workers’ real wages rise or fall during the recession, the amount of disposable income available for paying off debt, the rate of interest, and the rate of inflation and expectations in relation to these. As I have stated, the role of the Reserve Army applies at a high level of abstraction, but in order to see its actual role it is necessary to drill down to the real workers at any one time. As Lenin said, “The truth is always concrete.” Again I would agree that those without work, those in temporary or casual employment etc. will be the worst affected. In part, I think this is part of the problem with much of the Left’s analysis, which focuses on this Minority (if, especially during the Long Wave downturn, and first stage of the upswing, a sizeable Minority) and its condition, and takes it as being the condition of the working class as a whole.

“4) During depressions, the absolute immiseration of workers’ incomes towards subsistence levels is in full effect.”

But, in actual fact, that clearly is not the case! As Hobsbawm says, in “Industry & Empire”, even during the 1930’s, workers were, on average, only out of work for a few months. It was only in specific areas where there was chronic and persistent unemployment. In those areas, the full weight of the reserve army could press down on local wages, but could have little effect on National wage rates, or in those areas where new dynamic industries were being developed – especially as during the 1930’s it was even less practical for workers to “Get on their bike”. Consequently, even during the 1930’s, workers incomes were not driven down to subsistence levels. Compared with today, they were pretty abysmal, but that is not comparing apples with apples. By the same token, real wage levels in the 1930’s were not driven down to anything like the levels that applied even during relatively prosperous periods of the 19th century. Nor, during the Second Slump of the 1980’s and 90’s, were wages driven down to anything like those of the 1930’s or even the 1950’s, or early 60’s.