by Ingo Schmidt
This article by Ingo Schmidt lays out some of the debates within labour movements, in the past and today, about economic alternatives. It raises the question of how North American labour movements can begin a process of struggle to form alternative solutions after years of setbacks at the very hands of neoliberalism and financial markets. It follows with two contributions towards such a process. One is an open letter from labour scholars that suggests to union leaders and rank-and-file activists that there is a need to prepare for a struggle against lay-offs, wage concessions and cuts in pensions and public services that will be promoted once the crisis on the financial markets impacts the rest of the economy. The second is a resolution promoting such action and the educational activities necessary for its success that was passed by the Vancouver and District Labour Council at its October 2008 meeting.
For three decades after the Second World War, the ideas of British economist John Maynard Keynes provided the intellectual backbone of trade unions in Western developed countries like Canada. Unionists maintained their affinity with Keynes, despite his declaration that “class war will find me on the side of the educated bourgeoisie.” This affinity remained intact even during the dark ages of neoliberalism that superseded the postwar era of enlightened welfare capitalism.
In the context of the current crisis, with bankers and bosses abandoning their neoliberal beliefs and flocking to large-scale state intervention, union economists who never gave up on Keynes see their chances again. They hope that Keynes' defense of union activity against liberal and neoliberal anti-union attitudes will find more of an audience than it did when the belief in free markets reigned supreme. The rationale for such hopes is provided by the collision between neoliberal postulates and the need for state intervention in the context of the current crisis. The theoretical attraction that Keynes holds for trade unions is his argument that wage cuts are not, as liberal and neoliberal economists suggest, a remedy to overcome crisis.
The Keynesian Case Against Wage-Cutting in Crises
According to Keynes, lower wages may lead to lower prices because companies are under severe competitive pressure. As a result, buyers will expect future price reductions and thus postpone their purchases, reducing aggregate demand and therefore employment. To the extent that wage cuts do not translate into price cuts of the same magnitude, however, they lead to lower real wages, lowering the purchasing power of working class households. The effect is the same either way: decreases in aggregate demand and employment can turn a cyclical recession into a depression with devastating social consequences.
The political implications of this analysis are clear: wage cuts must be avoided if the desire is to prevent locking in conditions that will generate a downward spiral of wages, prices, aggregate demand and employment (a point that Karl Marx had also earlier made). Unions are the social agent capable of performing a stabilizing function by resisting wage cuts. In Keynes words: “Every trade union will put up some resistance to a cut in money-wages, however small.” Those seeking to avoid a deterioration of recession into depression by means of maintaining wages, however, would also support government spending to overcome the lack of aggregate demand that caused the recession in the first place. Keynes devoted almost all of his General Theory of Employment, Interest and Money (1936) to making an argument for the use of fiscal policies as a remedy for economic crisis.
The Limits of the Keynesian Case
Politically, Keynes' suggested strategy rests on trade unions that are able and willing to resist wage cuts in times of crises and governments that are willing to use deficit spending as a means of raising the economy out of a slump. None of these conditions holds today. Canadian unions, like their counterparts in most other developed countries, were on the defensive from neoliberal policies of wage restraint and fiscal austerity long before the crisis hit. Struggling with hostile employers – whose anti-union repertoire includes shutting down locations where workers are involved in organizing drives, to back-to-work legislation against public sector strikers, the re-organization of work processes and the deployment of organizational forms that are resistant to the control of industrial and craft unionism – unions were pushed back and forced to accept concession bargaining. Thus, they may not be in a position to successfully resist employers' pressure for wage-cuts.
Recent union organizing drives, such as those of the SEIU and UNITE-HERE or living wage campaigns such as that of the HEU in British Columbia, valuable and important as they are, haven't generated enough successes to allow unions to negotiate the kind of sectoral wage agreements that would be essential to a Keynesian counter-crisis strategy. Such negotiations are further hampered by the extremely fragmented bargaining structure that exists in Canada. Even significant membership gains wouldn't change the fact that collective bargaining is conducted in myriads of bargaining units among which there is little or no cooperation. Such cooperation, via centralized or pattern bargaining, would be required to negotiate wages for workers in Canada in such a way that labour's share of national income could be defended or increased at the expense of the share going to corporate profits.
Generating sufficient bargaining power is not simply a question of increasing union membership, cooperation and re-organization. It also depends on the engagement of the rank-and-file. Certain layers of the working class (and this is more true for unionized than non-unionized workers), are not only workers but also stakeholders. They own houses, have access to consumer credit and have their retirement savings invested in stock markets. While they are small fish compared to big money, it is precisely for this reason that they are suspicious of any economic policy that might endanger their stakes, however small. Consequently, they are open to those who promise to defend these stakes. Ultimately, the question these workers are facing is whether they believe their future will be better secured by doing what is necessary to remain members of the diminishing group of small stakeholders that allies itself with the propertied classes or by making common cause with the property-less workers who have a great deal to gain from unionization and increased social protection.
Organizing the unorganized, coordinated or centralized bargaining and coalitions with activists who work in the lowest rungs of the working class are not the only prerequisites to successfully pursue Keynesian reform policies but also more radical policies necessary to address underlying distributional and class inequalities. Such policies also require a labour presence in the political arena. At this time, there is little of such presence in existence. Admittedly, many union leaders and members (certainly not by all) see the NDP as labour's representation in parliament. During elections, many politicians employ a rhetoric that makes them sound very progressive.
However, neither hopes for the NDP [New Democrats -- Canada's left-liberal electoral party] nor all-party appeals to hard working people can conceal the fact that labour has hardly any stakes in the existing political-economic system. Workers in the Soviet empire were told that five-year-plans in their centrally planned economy would bring them closer to a workers' paradise. Workers in the empire of capital are told that tax breaks and balanced budget will pave the way to a stakeholder paradise in which differences between bosses and workers evaporate. Though the credibility of such neoliberal promises has been damaged by the current crisis, they still impact economic policies.
Thus, breaking away from the neoliberal ideas that have achieved the status of a popular religion since the 1970s, when the political and propertied classes abandoned their postwar deal with trade unions, social democracy and Keynesianism is difficult for everyone, from the boardrooms of the rich and powerful to the street corners where the downtrodden congregate. From this angle it could be argued that today's question is not so much whether Keynes will have a comeback after the neoliberal age, no matter how inspiring his ideas are intellectually, but how to get people involved in a collective search for ideas and policies to stop efforts by big capital to shift the burden of the current crisis onto the shoulders of the working class and the poor.
The Comeback of Marx’s Ideas
Regarding the unfolding struggle over the distribution of the crisis burden, another author who is having a comeback these days might offer some guidance. Karl Marx, whose main work Capital (1867) [available on the Marxists.org website] finds more readers by the day, has much more to say about the conflict of interest between capitalists and workers, including the subsections of either of these classes, than Keynes. The latter was well aware of the existence of social classes. In order to maintain capitalism during times of severe crisis, such as the Great Depression, he considered a deal between the working class and the capitalist class necessary; a deal that would create jobs and secure wages for workers and profits for capitalists. In order to strike such a deal, Keynes, who also had served in the field of economic diplomacy, focused on class cooperation more than on class conflict. Not so Marx. A political émigré in Britain who mostly lived on money that his bourgeois friend Friedrich Engels donated to him, he had not much to lose and was therefore free to think about ways to win a world.
In doing so, he made clear that only during economically good times the conflict over wages, working hours and working conditions on one side and profits and capital accumulation on the other could be tamed. Such conditions were envisioned by Keynes in the 1930s and became true, in parts of the world, after WW II. However, the moment of prosperity and welfare capitalism was already passing in the 1970s. It was replaced by a thirty year period of slower real economic growth, unemployment, shifts from wages to profits and an explosion of debt and paper wealth. The current crisis marks the end of this period.
In order to save at least parts of the wealth illusions that financial markets produced before the crisis, enormous quests for tax dollars were recently made and approved by rich countries' governments. So far, this bailout money is largely a government promise to shareholders, particularly the big ones, to compensate them for their speculative loses. But the bills for these bailouts will certainly be presented to the working class. Further cuts in public services, higher taxes on low incomes and maybe even inflation to destroy all financial illusions until wealth is only represented by land and the physical means of production are means to achieve this goal. The owners of these means, who see their profits declining in the course of the crisis, will join governments' onslaught on the working class with lay-offs for some workers and speed-ups along with wage cuts for those who can keep their jobs. If things are heading in this direction, it may be a good idea to look up some of Marx's ideas instead of those of Keynes.
Marx not only explained why the pursuit of profit doesn't lead to general prosperity, but also why it leads to economic crisis and social devastation. He also took a close look at the making and unmaking of working classes. Any time that workers in a particular industry had found ways to improve their conditions, Marx noted, capitalists operating in these industries would either re-organize work, seek government support to lower legal standards and/or put their money into different locations or industries to restore profits. Thus, the working class has always been in flux, no matter that some images of banner-carrying and fist-raising workers suggest otherwise.
Today's difficulties of finding effective ways to organize are not new: they are a recurrent theme in the history of labour and socialist movements. They go hand in hand with the search for ideas, policies and campaigns that will advance the class struggle and address inequalities in the present, while building workers' collective capacities for self-development for the future. These struggles are essential to setting out a vision of feasible alternative social orders, indeed the remaking of socialism as a viable political project, to the financial and economic turmoil we have again been so violently subjected to.
Ingo Schmidt is a Vancouver educator and labour activist.