Here's the lesson I want people to learn: we had 40+ years of stagnant real wages (overall; there are exceptions). What happened in the pandemic was:
1. People realized going into an officce to work was unncessary and even anachronistic for many jobs;
2. Employers like employees in the office as a form of control;
3. Employers made short-term decisions to lay off huge amounts of people (even after taking PPP loans for the purpose of preventing this);
4. After 1-2 years of suppressed demand, companies weren't equipped for the increased demand and couldn't hire back their staff at the same rate;
5. As always, there are no labor shortages, only under-market wages;
6. The pandemic created a situation where a lot of people could (and did) get their first real increase in wages in decades.
7. Much of those real wages have been eroded by inflation.
Take all this together and you realize that policymarkers consider labor movements an existential threat to profits. Suddenly it's increased wages that are responsible for inflation.
And then you have ideas (as in this post) where the only way of reining in inflation is by increasing borrowing costs, which hurts a lot of individual borrowers.
Why isn't corporate taxation being used to control the money supply? It would have the same net effect except that it would fund the government rather than lenders. Several countries have imposed windfall profits taxes.
We saw this last week with the averted rail strike. Those workers could face consequences for taking off unpaid sick days for themselves or their family. To give them all 15 paid sick days a year would cost 3.5% of the industry's profits (~$680m/year IIRC for 125,000 workers). Not revenue. Profits.
This system wants to keep you in debt, low-paid (just sufficient to service your debt) and have limited other options. Then you'll show up to work and not make trouble by asking for raises.
That underpins all the policy decisions around inflation, interest rates and the looming recession.
I will admit that to me this pandemic was eye opening in several different ways. One thing that surprised me is how lazy both management and propaganda machine in US is these days. They ( management ) have gotten so used to the idea that all they have to do is to hint at layoffs and people will immediately be motivated to do the work that they forgot how to do anything else ( the phrase I heard used to describe the situation was "I had to throw away my toolkit for WFH" ). As a result, WFH exposed management class as clearly coasting for the past few decades in terms of motivation skills alone.
But as bad as management is, having watched OWS downfall, I did not expect propaganda effort for fighting WFH to be so downright awful. I still remember the initial batch of articles claiming commuting to work is my zen time. It felt so ridiculously bad that even people, who would normally accept any advertisement at face value kinda asked:"The fuck?" since it is so at odds with their daily experience.
And now policy makers are openly discussing saying "Lets crash the economy so that companies can keep their leverage." I was always mildly cynical, but I found it ridiculously sad that "We are in this together." slogan is just a slogan the moment the sacrifice has to be shared by the ruling classes.
And as always, the sacrifice hits the poor the most.
I think the only reasonable objection here is whether individuals listed below could be considered policy makers, but the pattern seems relatively clear to me. Note that economy is weirdly connected to how a person feels. Just hearing that recession is just around the corner could potentially set it off ( not completely unlike say.. shortage after hearing something is about to be no longer accessible or run on a bank after finding out it is about to under ). And not surprisingly, the same decision process also applies to CEOs[9].Edit: And of course, it helps when all the platforms sing the same song nearly in concert.
Snippets indicating thought process from various government officials and their assorted influencers can be found with basic google search[1]("Some commentators argue that the US needs a recession to bring inflation down.") Those tend not to be some random bloggers with an idea, but rather a person with agenda in mind sometimes sending trial balloons into ether. Now those commentaries are much more careful now after initial outcry of some poorly chosen words, but Bloomberg in April[7] reported that "Labor demand is poised to ease, which will help the Federal Reserve tame inflation with less risk of triggering a recession." ( see also: "The Fed view is that when there's too much of an imbalance between labor demand and supply, you get a dysfunctional market with too much turnover and pay increases that lead to a unacceptable level of inflation.")
If you follow Powell's original comments that raise all that recent ire, you could see how those could be easily construed as "Lets crash the economy" ( "There’s too much demand. For example, in the labor market, there’s more demand for workers than there are people to take the jobs, right now, by a substantial margin. And, because of that, wages are moving up at levels that are unsustainably high and not consistent with low inflation. And so what we need to do is we need to get demand down, give supply a chance to recover and get those to align.")
Note that the May 2022 interview[8] comments are much softer as a result of pushback to some of the previous comments ( "And we need to get back to 2% inflation, that’s the main thing. The main lesson is we must do whatever, you know, what we need to do to get inflation back to 2%. And we have the tools to do that. And we will." || "I will also say that the process of getting inflation down to 2% will also include some pain, but ultimately the most painful thing would be if we were to fail to deal with it and inflation were to get entrenched in the economy at high levels, and we know what that’s like. " ||
"Ryssdal: What keeps you up more at night: the prospect of inflation sticking around? Or the idea that you’re going to cause a recession?
Powell: Well, look, I think it’s a very challenging environment to make monetary policy. And we certainly, our goal, of course, is to get inflation back down to 2% without having the economy go into recession, or, to put it this way, with the labor market remaining fairly strong." ||
"The main lesson is we must do whatever, you know, what we need to do to get inflation back to 2%. And we have the tools to do that. And we will."
Naturally, with few exceptions, few current officials ( say from FED or current Biden administration ) will put themselves on record by saying something like this, but former officials[4] have some reasons to do it regardless ("“Almost certainly there will be a full-blown recession. If we’re not in one yet, I think we will be in the next 12 months,” Dudley, the former president of the New York Federal Reserve, told CNN in a phone interview.").
Separately, sometimes for their own reasons, various executives from private sectors feel the need to weigh in [5]( Stephen Ross in June predicted that “employees will recognize as we go into a recession, or as things get a little tighter, that you have to do what it takes to keep your job and to earn a living.” Later that month, Intuit CEO Sasan Goodarzi told MarketWatch that “the power is shifting to employers,” and as “people move from hiring to now cutting jobs, and a possible recession, you might see more of a move back to work.”) on future recession and its impact on WFH.
And just to add a little spice to this, I wanted to add my favorite relatively recent opinion piece[10], where author gleefully notes tech jobs will finally stop being cushy ("The chief executives of Meta Platforms Inc. META, +1.18% and Alphabet Inc.’s GOOGL, +0.26% GOOG, +0.21% Google have warned employees of tough times ahead — with Mark Zuckerberg telling employees on the last day of the second quarter that the company faced one of the “worst downturns that we’ve seen in recent history” —and Microsoft Corp. MSFT, -0.09% is slowing hiring in some groups and eliminating a few jobs. Even the world’s most valuable company, Apple Inc., AAPL, +2.51% reportedly plans to scale back hiring and spending, after profligate spender Amazon.com Inc. AMZN, +0.91% signaled cutbacks earlier this year.")
We can then move to state officials, who stand to gain/lose from RTO/WFH. For example, NY Adams governor[6] ( "Adams has in recent weeks mounted a major advocacy push for private businesses in the city to order their employees back to their offices, arguing that the economy at large is hampered by telework policies popularized during the pandemic" || “I’m trying to fill up office buildings, and I’m telling JPMorgan, Goldman Sachs, I’m telling all of them, ‘Listen, I need your people back into office so we can build the ecosystem.’).
Naturally, after several recorded conversations that indicated that type of thinking, PR campaign began to claim that it was never the case[3]("We're not trying to have a recession, and we don't think we have to,"||"That's what we're trying to achieve and we continue to think there's a path to that. We know that path has clearly narrowed… and it may narrow further.") and FED is actually trying really hard not to say stuff out loud[2] (“They’re trying to slow down the overall economy, and that would include firms’ appetite to hire, without ever saying that out loud,” ).
Perception is reality and it looks to me like more than just policy makers are involved in creating this particular scenario ( recession ). All this while the job market remains stubbornly strong.
> If you follow Powell's original comments that raise all that recent ire, you could see how those could be easily construed as "Lets crash the economy"
Sure, I can see how it can be construed that way. I think a broader reading of what Powell is saying would lead you to "let's bring inflation under control, even though it means crashing the economy". That's quite different from "Lets crash the economy so that companies can keep their leverage."
I think the Powell comments you quote later indicate that he'd prefer to get inflation under control without crashing the economy, if possible.
The comments from business leaders don't impress me. Of course they want businesses to go back to having the leverage.
Corporate taxation is a great tool for managing inflation but our legislature is gridlocked and taxes are not popular. It's a shame because they would be particularly effective right now w/ rate raises.
I think corporate taxation is the only way out of this mess. Tax the profits, take money out of the system. It makes extra sense given that most of this money was injected into the system in 2020 anyways. It's not like it was 'earned' even in the traditional neoliberal capitalist sense. It was an economy-wide bailout and now that it has served its purpose, it's time for the money to return to where it came.
Trying to tackle inflation by suppressing wages is both immoral and silly. How is that a 'free market' solution? It's the equivalent of price controls. I am glad that the Fed has taken that as their position, only because it seems to have made people across the political spectrum realize that there is a real antagonistic relationship between the architects of the system and those living within it.
I agree, but interest rates have to return to a natural level (where risk is priced correctly), and thus reset asset prices (to better reflect their true returns).
1. People realized going into an officce to work was unncessary and even anachronistic for many jobs;
2. Employers like employees in the office as a form of control;
3. Employers made short-term decisions to lay off huge amounts of people (even after taking PPP loans for the purpose of preventing this);
4. After 1-2 years of suppressed demand, companies weren't equipped for the increased demand and couldn't hire back their staff at the same rate;
5. As always, there are no labor shortages, only under-market wages;
6. The pandemic created a situation where a lot of people could (and did) get their first real increase in wages in decades.
7. Much of those real wages have been eroded by inflation.
Take all this together and you realize that policymarkers consider labor movements an existential threat to profits. Suddenly it's increased wages that are responsible for inflation.
And then you have ideas (as in this post) where the only way of reining in inflation is by increasing borrowing costs, which hurts a lot of individual borrowers.
Why isn't corporate taxation being used to control the money supply? It would have the same net effect except that it would fund the government rather than lenders. Several countries have imposed windfall profits taxes.
We saw this last week with the averted rail strike. Those workers could face consequences for taking off unpaid sick days for themselves or their family. To give them all 15 paid sick days a year would cost 3.5% of the industry's profits (~$680m/year IIRC for 125,000 workers). Not revenue. Profits.
This system wants to keep you in debt, low-paid (just sufficient to service your debt) and have limited other options. Then you'll show up to work and not make trouble by asking for raises.
That underpins all the policy decisions around inflation, interest rates and the looming recession.