Maeve Higgins: Contradictions of capitalism mean that workers must stay weak

Vice president Kamala Harris and House speaker Kevin McCarthy listen as US president Joe Biden delivers his State of the Union address, during which he said that US inflation is falling while take-home pay has gone up. Picture: Alex Brandon/AP

When it comes to the US economy, multiple facts are true at once. Those facts often contradict each other. 

The unemployment rate can be at a record low like it is now, but workers can still lose their jobs any day. Corporations can make massive profits and still go on firing sprees, dumping thousands of employees, like the plans Disney announced this week. Workers’ pay can grow at a solid pace, as it has for the past two years — faster than at any time in the past 20 years — but inflation can outpace those gains.

And despite inflation, the extra money we earn can help many of us to keep spending — despite the higher prices, which is happening now too.

During his State of the Union address last week, president Joe Biden touted economic growth with seemingly no cost to the workers, saying: “Inflation is falling every month for the last six months, while take-home pay has gone up.”

Now let’s add this following fact to the mix. It is, as Americans say, a doozy: today, the median American male worker earns less in real terms than what he did in 1973.

According to a new Pew Research Center poll, the economy is the number-one issue for US voters, and we’re still being warned that there could be a recession heading our way.

It may seem confusing, but there’s a logical throughline to capitalism that is the truest fact of all, and that is as follows: workers (most of us) need to be weak so that the economy can be strong.

Take this quote — “unemployment serves as a worker-discipline device”. 

You’re not wrong if you hear this as a simplistic Marxist theory. But actually, treasury secretary Janet Yellen is the one who said it.

In fact, she spelled it all out in black and white. You can read her words for yourself in an amazing memo she wrote to Alan Greenspan back in 1996.

Yellen was a member of the Federal Reserve Board of Governors at that time, and went on to become chairwoman, and she wrote the memo to then-Fed chairman Alan Greenspan.

Historian Tim Barker found and published the memo using the Freedom of Information Act. Journalist Jon Schwarz picked up on the memo, titled ‘Job Insecurity, the Natural Rate of Unemployment, and the Phillips Curve’, and wrote: “Anyone who wants to understand how the world works should read it.” 

It certainly does clear up a lot of confusion.

Another source of clarity is the economist Clara Mattei, author of recently published book, The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism. 

She looks at the history and present-day uses of austerity by various governments. She argues that forcing a recession or cutting social welfare is not really about budgets and debt. This so-called “economic pain” is inflicted deliberately to make the labour force feel insecure and to stop demanding better conditions.

When we spoke, Mattei explained that every capitalist society needs accumulation at the top and labouring at the bottom to keep growing, which is the entire point — to grow. There is nothing natural or predestined about this system, which is why it must be imposed and guarded carefully by economic policies.

'Unemployment as necessary'

“The experts in power who actually run the economy, at the Fed and the Treasury, perceive unemployment as necessary to preserve monetary stability,” she writes. This preserves the fundamental class relations at the core of our capitalist economy, and society, especially in times of social change.

She continues: “In this, I think, it’s something very interesting because it happens in a moment in which the strength of the workers is higher than it’s been in the United States for a long time.”

Union membership has not recovered since the heyday of organised workers in the 1950s, but unions have revitalised from a grassroots level in the past few years. Workers at Amazon, Starbucks, and many other retailers have unionised. 

The public broadly supports unions, according to Cornell University’s School of Industrial and Labor Relations, which reports that strikes were up by 50% in 2021-2022. Last month, New York nurses went on strike for three days and leveraged that to raise their salaries by about 19%.

This is all great stuff, wouldn’t you think?

That our society is fair to workers? That nurses and baristas will not struggle to make it to the end of the month?

Again, I remind you that actually, no, according to capitalism, it’s not ideal. For the US economy to remain strong, workers have to be weak.

So back to the State of the Union, and President Biden claiming that he can somehow lower inflation and keep employment levels high. What did Clara Mattei make of that?

“I think what Biden is saying is wishful thinking because, actually, he gives us a sense that capitalism is harmonious and it will work for the good,” she says.

“But we know that that’s not how the system works, and the experts in power know it too. They know there’s going to be winners and losers.”

She continues, offering a stark choice we have faced since the earliest days of capitalism and the tradeoffs we make to live within this economy every day.

“These are the limits of the system. So either we find a way out of this, or this is what we’ve got to accept for the system to function.”