Newsletter #53: The Fight Over Inflation Is the Fight of Labor Against Capital, w/ Tim Barker
by Benjamin Feldman
In an effort to tame persistently high inflation over the past two years, the Federal Reserve has increased interest rates at a historically rapid pace. While allowing that supply constraints have played a role in this inflationary period, the Fed sees a tight labor market (an increase in wage workers’ leverage) and “excess savings” (an obfuscatory term suggesting that poor and working-class people are violating some iron law of economics by having a little money in the bank) as the primary drivers of increased costs. Limited in the tools that they have determined are available to them, the Fed has vowed to continue its restrictive monetary policies until the labor market has been tamed, poor people have exhausted their meager savings, and inflation has returned to the arbitrary ideal of 2 percent annually.
The Dig’s two-part interview with historian and writer Tim Barker begins with a premise which is clearly shared by the Federal Reserve, financiers, and the business press: that monetary policy is more about social relations than about questions of easy or hard money, and thus that debates over how to respond to inflation are fundamentally struggles between labor and capital.
In a wide-ranging conversation, Barker begins by defining inflation, then surveys recent efforts to determine its causes, touching on the relative merits of arguments from economic stimulus, defense spending, supply constraints, and corporate profiteering. These questions are not merely academic. Once it is understood that, as Barker notes, “inflation is a distributional struggle between workers and capitalists,” it becomes clear that understanding where inflation comes from is essential to figuring out how to respond to it in ways that protect or even expand labor’s power.
For example: if pandemic stimulus is widely accepted as a chief cause of inflation, capitalists will respond by impoverishing low-wage service workers in order to bring down costs; the Left, meanwhile, might counter with the demand for direct services, rather than for cash payments which are then handed over to for-profit healthcare and pharmaceutical interests. To determine the role played by corporate profiteering, organized labor might negotiate for access to corporate pricing decisions.
Shining a light onto the degree to which price increases outstripping cost increases have contributed to inflationary pressures might help to push policy makers to embrace price controls. If supply constraints — whether on semiconductors or housing — are pushing costs up, we might look for ways to increase supply rather than trying to curb demand. These kinds of practical tools could be at the heart of a left response to inflation that doesn’t harm the working class.
Noting that these problems may be insoluble under a system which produces for profit rather than for use, Barker says that asking these questions can lead us to better interrogate our political economy, helping us reconsider the role played by a central bank in maintaining a “healthy” economy and tease out which elements of our financial system are essential to its functioning and which are wasteful or parasitic.
In the second interview, Dan and Tim pose these and other questions through a critique of historian Robert Brenner’s thesis that economic stagnation since the 1970s has been the result of a fall in the rate of profit caused by persistent economic overcapacity. Barker suggests that investigations into modern capitalism demand an assessment of trends in profitability in order to determine whether or not the rate of profit is actually falling, and to better understand how capital has been restructured over the past half century. Here, as with his discussion of inflation, Barker is guided by Marxism as a method of analysis (rather than as a series of inerrant predictions): If we are going to succeed in transforming capitalism into a more decent system, we need to analyze and understand these and other questions of investment, production, and distribution, and how they reflect existing social relations — both in the United States and internationally.
Further Reading For a more thorough introduction into the historical politics of inflation in the United States, check out The Dig’s interview with Barker from July 2021 as well as his June 2021 essay in Phenomenal World and his 2019 essay on the Volcker shock in n+1. For more of Barker’s writing on twentieth-century history and twenty-first-century political economy, subscribe to his Origins of Our Time Newsletter. His recent essays engage with Brenner on the profit rate and with Brenner and sociologist Dylan Riley on “Political Capitalism”.