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Title: Neoliberalism as the new Mercantilism Author: Anarcho Date: March 15, 2005 Language: en Topics: neoliberalism, United Kingdom Source: Retrieved on 28th October 2021 from http://www.anarkismo.net/article/192
Like all good capitalists, in the face of the possibility that workers
may get above their position, the CBI is calling on the state to bolster
its power. By raising interest rates, they hope to drive weaker firms to
the wall and, consequently, increase unemployment and so scare the
remaining workers into keeping their heads down and work harder for
longer.
---
At the end of February, the CBI prompted fresh speculation in the City
about a spring increase in interest rates. It did so by reporting that
strong demand for labour was adding to inflationary pressures in the
economy. As its members were struggling to fill vacancies, the bosses’
organisation said it expected borrowing costs to rise this year. Its
chief economist said that “the economic outlook for 2005 and 2006
remains healthy, but the economy is now having to learn to live with
full employment, and the risks of a pick-up in core inflation are
rising.”
You would think that full employment would be a good thing, being (of
course) the equilibrium position of the labour market. And as anyone who
studies economics is told, equilibrium is what the market is constantly
approaching. So why the CBI’s concern? Simple. What capitalist economics
ignores is power (some pro-free market economists even argue that
economic power does not exist!). As unemployment falls, workers’
bargaining power increases and, consequently, they start to claw back
some of the (surplus) value they produce from the capitalists who
appropriate it. This is done via increased pay, better terms and
conditions and simply relaxing at work as the anxiety and fear of
unemployment loosens. In other words, “labour” (no matter how much
capitalists wish or try to turn it into) is not a commodity. It is
people. And when subject to oppression and exploitation, people resist
and full employment helps this.
Little wonder the CBI is concerned. And, like all good capitalists, in
the face of the possibility that workers may get above their position,
it is calling on the state to bolster its power. By raising interest
rates, they hope to drive weaker firms to the wall and, consequently,
increase unemployment and so scare the remaining workers into keeping
their heads down and work harder for longer (particularly to pay off the
higher mortgages and debt repayments required to live under this
system).
There is even a theory about this. It is called the “non-accelerating
inflation rate of unemployment,” or NAIRU. This is a clumsy term, but it
simply means the unemployment rate below which the inflation rate begins
to rise. The basic idea goes back to Milton Friedman. In 1967 he argued
that low rates of unemployment would lead to accelerating inflation. He
called this the “natural rate of unemployment theory” yet he made it
clear there was nothing natural about it, emphasising that by using the
term “natural” rate of unemployment, he did “not mean to suggest that it
is immutable and unchangeable. On the contrary, many of the market
characteristics that determine its level are man-made and policy-made.
In the United States, for example, legal minimum wage rates ... and the
strength of labor unions all make the natural rate of unemployment
higher than it would otherwise be.”
It is this idea that was subsequently developed by macroeconomists into
the term NAIRU. That there was no way of knowing what the NAIRU was and
how it changed over time did not stop it driving government policy
across the world.
So, since the 1970s, government policy has been based in guessing where
a moving, invisible value which may, or may not, exist is. Friedman’s
quote shows why. What he termed the “natural rate” was simply a code
word for the bargaining strength of working class people, as shown
through their ability to organise themselves protect their pay and
conditions and establish a livable wages. The raising of interest rates
is, in other words, state action which skews the labour market in favour
of the bosses.
Unsurprisingly, the 1960s and 1970s were a time of labor militancy,
relatively strong unions, a relatively high minimum wage and a marked
increase in labor’s share in national income. The 1980s and1990s have
been a time of relatively weak unions, a relatively low minimum wage and
a decline in labor’s income share.
Which shows why neo-liberalism is better called neo-mercentalism.
Mercentalism was the system which created capitalism in the first place.
State action was an essential feature of it, used to bolster the ruling
elite by pursuing policies which increased their power on the market.
Domestic manufacturers were given privileges and patents. Duties were
levied on imports in order to protect local industry and provide revenue
for the government. The state exercised much control over economic life,
chiefly through corporations and trading companies. And, of course, it
created the modern working class by enforcing capitalist property rights
and enclosing common lands as well as banning unions and such like.
This system came to an end when the rising bourgeoisie grew tried of the
limitations mercantilism placed on their actions. Liberating themselves
from the old state required revolutions to create their own, just as
centralised states. These would have the task of aiding the elite in a
more “hands-off” way, such as maintaining and protecting capitalist
property rights and skewing the labour market in favour of the
bourgeoisie. This policy of limited state action was termed
“laissez-faire.”
In the 1970s, a similar process occurred. The bourgeoisie turned against
post-war social Keynesianism because, as with mercantilism, it was
limiting their actions and they embraced the ideas of Friedman. State
action remained, but very much in the background skewing the market in
favour of the wealthy. With the (predictable and predicted) massive
economic collapse that resulted in applying Friedman’s Monetarist ideas,
unemployment rose and, as a result, the power of workers fell. Inflation
fell with it and profits and inequality rose. Social Keynesianism was
replaced as the de facto state religion by neo-liberalism, a combination
of “laissez-faire” and military Keynesianism. The poor, in effect, were
replaced on the welfare rolls by corporations.
The NAIRU was used to justify economic policies designed to weaken the
power of labour and strengthen that of the bosses. Inflation, in this
schema, is the fault of the workers who refuse to take the pay and
conditions their employees would like them to have. So much for the
market always being right! Of course workers do not actually raise
prices. When they sold their liberty to their bosses, they also sold the
product of their labour. It is up to the bosses whether to raise prices
or reduce profit margins. Unsurprisingly, they pick the former (and
blame the workers for their own actions). So inflation need not rise if
workers were simply allowed to take the larger share in the national
income they produce, but do not own, that the market indicates.
Yet this solution is poison to capitalism (and will never be achieved
this side of a revolution). Which means, as the CBI shows, even if
capitalists benefit from full employment, they will not support it. Full
employment threatens their control over the workplace, the pace and
direction of economic activity, and even political institutions. Hence
the importance of unemployment to capitalism and the need for state
action to achieve it. It is a key instrument to maintain capitalist
power and profits and stop developments towards genuine economic
liberty, workers’ self-management.