Commentary on Political Economy

Sunday 28 August 2011

Gold and Labor Standards - Part 3

The difference between Gold and Labor Standards should become clearer by now, after our previous discussions, and so also should be the reason why the capitalist bourgeoisie (the "conservative" wing of it) prefer the Gold Standard to the Labor Standard. The reason is simple. The Gold Standard is very inflexible and represents a much more "biting" constraint on national bourgeoisies to discipline their workers whenever their "wage costs" fall out of line with both "productivity" and "competitivity" - which means "profitability" - as well as with "investor confidence", that is the political "displeasure" that global corporations might feel at the "direction" taken by a government on specific questions (mining, nuclear power, tax policy, and so on).

The Labor Standard has a few very negative features for capitalist because it is tendentially "inflationary" for the reason that it allows governments "to yield" to wage demands by simply expanding money supply and purchasing power (most powerfully in the "helicopter drop" simile). The net effect of this very dangerous Standard is that the entire question of the relationship between "prices" and "values", of the "reward" for capital investment and the "reward" for workers' living labour - this entire "question" becomes immediately political, because the "exchange" between capital (dead labour) and workers (living labour) is no longer determined at the level of each individual capitalist and his workers but is rather determined at the global national level!!

So we can see now how the Gold Standard has the tendency to make the "exchange" - the equal exchange! - between dead labour and living labour seem to be "equal and natural" (natural!) - for the simple reason that it takes place at the "factory" or "workplace" level, in terms of the individual "competitivity" and "profitability" of single capitalist employers! Whereas instead the Labor Standard has the god-forsaken (for capitalists) tendency to politicise the whole "exchange" between us and them!!

You will recall that below we mentioned Michael Woodford (formerly of the Fed, now at Columbia Uni) as an exponent of the "New Neoclassical Economics", which is a take from Wicksell's classic work on Interest and Prices (indeed, his major work bears the same title!). Woodford we discussed in connection with his latest article in the FT, and we are glad to report that Clive Crook in today's FT thoroughly demolishes (not theoretically because he only addresses the policy) Woodford's arguments against QE3. Here is Crook's article:

No comments:

Post a Comment