Thursday, January 14, 2021

In his first book-length work, John Maynard Keynes, Minsky analyzed what he called “big government” capitalism. His goal was two-fold. First, he sought to re-interpret Keynes by distinguishing the so-called hydraulic Keynesianism of the postwar era from the author’s actual written work. He argued that postwar governments which boosted inflation through private profits contradicted Keynes’ original system. Keynes believed that the state should facilitate long term economic development by directly planning economic activity, including the distribution of investment over the long run. Postwar American policymakers, however, created a policy that protected private sector profits during downturns. The United States government did not create the structures which could sustain the production of a baseline basket of goods and services from market instability during upswings. Instead, it pumped up aggregate demand via employment in the military-industrial complex and its attendant investment goods.

The second goal of the book was to warn about the inflationary tendencies of this approach. Government was forcing “overinvestment” in capital intensive industries like auto manufacturing and aerospace. While this created good jobs, it also meant that workers would have more money to spend on things made by less capital intensive, nondurable consumer goods industries. Wage inequality between these two sectors caused increasing industrial conflict. In the United States and Western Europe, a pattern emerged in which managers made wage concessions to the most highly productive workers to keep at bay demands for greater union participation in company decisions, thereby further increasing the demand for consumer goods.

Because returns to capital intensive goods were high, the investment capital needed to expand capacity in consumer goods was scarce. With rapidly increasing demand, the price of these goods began to rise, leading to a wage-price spiral. In industries with no anticipated profits, capitalists had no incentive to expand capacity. Consequently, output remained stable while prices rose. In the labor market, some workers held on to their jobs while others were relegated to chronic underemployment.

My father called it the bourgeoisification of the working class.

In the United States and Western Europe, a pattern emerged in which managers made wage concessions to the most highly productive workers to keep at bay demands for greater union participation in company decisions, thereby further increasing the demand for consumer goods.

My arguments haven't changed. 

2010 

Henry Farrell asks: "Why Is Economic Inequality Higher in English Speaking Industrialized Democracies?"

Earlier he asked: "What Produced the Inequality Boom?" 

2002

There's a real tragedy in the story of the American left. It no longer has any peasants or workers, only priests and dilettantes. My father used to refer to what he called "the bourgeoisification of the working class". Give them enough color TVs and a new car every 2 years and they'll shut up. Marx made the same complaint about the British. He blamed it all on backyard gardening. 

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