Process
Status Items Output None Questions None Claims None Highlights Done See section below
Highlights
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Phase one: stability
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People go to work, make and sell things, their bosses keep some as profit and pay a wage from the rest.
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Phase two: impulse
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Real shortages in key commodities, the cost of which enter the production of many others, lead to a price shock.
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Phase three: pass-through
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Firms protect their profit margins from the increased cost of inputs by raising their own prices
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phase four: conflict
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Employees fight for higher wages to compensate for losses in purchasing power, which means an increase in costs for companies, which in turn increase prices. Yet by no means is this a conflict on a level playing field, since employees are merely trying to compensate for previous losses in their real wage. In every collective bargaining round, moreover, they’re forced to listen to some economist lecturing them
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The fact that companies can so easily pass on cost shocks, while employees suffer real losses to their purchasing power, attests all the more to the weakness of unions and the strength of capital.
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What do minimum wages, corporate taxes, carbon prices, and interest rate hikes have in common? All these measures are policy goals that imply rising costs for the firms inhabiting the private sector.
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If many firms can pass on the immediate costs that social democratic economic policy imposes on them (minimum wages, corporate taxes, carbon prices and taxes, interest rates), then there’s a troubling possibility that such policy will have either no effects at all or will be entirely self-defeating.
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What’s the point of raising the minimum wage if the price level rises at the same clip? Leaving inflation fighting to central banks, and the technocratic ring-fencing of distributional conflict that goes along with it, is likewise ineffective if companies can pass on higher borrowing costs down the line.
✏️ Focusing on fixing wages isn’t the full answer. You can raise wages, but that doesn’t stop capitalists from raising prices. It’s a pointless endeavor in that respect. 🔗 View Highlight
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“Bargaining for wages” thus presents itself as an illusion, as the market power of corporations ultimately determines the purchasing power of workers.
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real wages are structurally determined by the pricing power of firms — that is, by the relative strengths of big business, unions, and state institutions in the labor market. Put differently, real wages depend on the state of the class struggle
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breaking up monopolies, strengthening unions, skimming off excess profits through windfall taxes, and maintaining strategic reserves of critical inputs.
✏️ How to address things from the capitalist end 🔗 View Highlight