How do you see the U.S. economy right now?

Notes on historical contingency: Recession, pandemic, and the return of the labor movement

[Painting by

April Burke

]

“How do you see the U.S. Economy right now?”

I was asked this, kindly, in a DM on Substack recently—how I see the U.S economy right now, in terms of inflation, the market, etc.

It’s an interesting question, given the open-endedness of it, the focus on the U.S., and the immediacy of the words “right now.”

In my view, the economy as it is right now is contingent on things that cannot really be understood without global, historical context—context at least as broad in scope as the neoliberal era of capitalism: the last half century or so which is defined by a fundamental change in our society’s economy and dominant politics; subsequently, I would consider the context of the Great Recession since ‘08; finally, the crises caused by the pandemic on productivity, consumption, and supply chains.

The neoliberal era of capitalism is characterized by deregulation and international free-trade policies, policies which were implemented as a response to prior economic crises, and I think of the crisis of ‘08 as a culminating event of that era.

Historical contingency in the neoliberal era

The profit rate of any era of capitalism is defined by a certain set of contingencies pertaining to the relation between labor and capital. In the U.S. economy of the neoliberal era prior to the Great Recession, this set of contingencies included the displacement of workers with outsourcing of factory production to countries where there were fewer labor regulations and unionization, attacks on domestic unions, and the resultant precarity and thus exploitability of the remaining workforce, resulting in stagnant wages simultaneously with steadily increasing productivity. This all came to a head in finance within the housing market.

When banking reached a point at which its growth rates were maintained on finance for housing in circumstances in which a significant portion of consumers receiving the loans couldn’t afford to pay them back through the value of their real wage incomes—when the amount of defaulted loans reached a point where the banks couldn’t function and therefore collapsed—was a moment when a limit within the composition of the actually existing capitalist economy had been reached.

The neoliberal deregulation policies of banking are what enabled the limit to be reached in the spectacular manner in which it was, but the limits to growth which were shown in that moment were there to be reached in a real form regardless; when profit rates are based on decades of stagnant wages and increasing productivity, such limits would be reached one way or another. On the other hand, if people’s real wages had been increasing over those decades, then they would’ve been able to afford homes without such precarious loans.

However, in the end, it was the banks that were bailed out, while millions of working-class people had their homes foreclosed. So, that fundamental problem hasn’t been resolved by any means; rather it’s no doubt worse, all the while capital is seeking new avenues to exploit—ways to more or less alter the current composition of the economy. The same old game: how do we increase the contingent of unemployed people relative to the employed workforce? Displace workers through automation and A.I.; advocate for increased reproduction rates by promoting ideologies like “natalism.” 

Recession, pandemic, and a labor movement

I think we're at a sort of ongoing inflection point—there are many tensions within the economy which have come to the surface.

In the last couple of years or so there’s been tendencies of unemployment falling and wages rising—this shouldn’t be surprising as the two factors are typically correlated. There’s a lot of factors that could contribute to low unemployment, but here’s a few considerations:

During the pandemic, millions of workers from the late baby boomer generation retired, while a lot service industry workers became fed up with the work conditions and left those industries altogether. Those who remained have recognized more than ever their exploitation and working-class position, and thus, we've seen large segments of this industry succeed in forming unions.

But which way will things go from here?

A lot of pain and misery remains and grows in the economy. As capital in the wake of successive crises seeks alternative ways to keep profit rates up, a massive portion of profits since the beginning of the pandemic have come from price gouging hidden by the veil of inflation which came from the interruptions in the economy. Price gouging is paid from the pockets of the working class, a large portion of which consists of people working multiple part-time jobs, with no benefits, and on which they’re trying to raise families, while those who slip into poverty are being handled via criminalization. The five richest billionaires have doubled their wealth since the pandemic began while the majority has gotten poorer.

Meanwhile some of these billionaires have expressed interest in reproduction rates, I think for fundamentally economic reasons: more competition on the labor market enables wages to fall and thus profits to rise. The fearmongering some of these figures partake in in the media about immigrants dangerously exploits the misery of working-class people displaced by the very economy that’s made such figures insanely rich.

We’ve seen some recent pro-labor policies implemented at the federal level as well as in states like Michigan, which seem to mark, at least to an extent, a sort of break from neoliberal policies. Biden’s CHIPS Act, for example, has added hundreds of thousands of manufacturing jobs within the U.S. economy. These kinds of moves could help bolster the growing labor movement, which is where hope lies—such a movement could be a platform for making a better world.

Whether the pro-labor policies are a result of a recognition that the neoliberal composition of economy has largely run its course or a recognition that Americans no longer accept the narrative of “trickle down” economics on which such policies are based—or a recognition of both (it’s probably both)—they might signal a more labor-oriented era of capitalism ahead, maybe in some ways akin to the Keynesian-inspired policies of FDR. However, there is also the potential in the air for politics that turn toward more authoritarianism, or even some modern form of fascism, built on deportations and state repression.

One way or another, change is ahead, as capitalism cannot be sustained on price gouging—you need a population who can not only produce commodities but also afford to buy them. And skyrocketing wealth and power of billionaires naked in the face of stagnant or even falling standards of living is not something people are willing to stand for long.

Regardless, it's a hopeful sign that the neoliberal moment is apparently coming to a close, if not already over, and good to see labor-oriented policies on the table as a new labor movement is forming and growing.

Such conditions are ripe for working toward a better world.