Cutting wages, solving (economic) contradictions and workers against the Bolsheviks

This blog is going to be a mixed bag. Some may say, as usual and they would be right! However, this is going from Paul “I’m a Keynesian” Krugman against Keynes on cutting wages, via solving Economic Contradictions, to worker resistance to Bolsheviks. The first is important now, in our resistance to austerity, while the history of Russian labour protest is all about learning from the past.

This blog is going to be a mixed bag. Some may say, as usual and they would be right! However, this is going from Paul “I’m a Keynesian” Krugman against Keynes on cutting wages, via solving Economic Contradictions, to worker resistance to Bolsheviks. The first is important now, in our resistance to austerity, while the history of Russian labour protest is all about learning from the past.

Neo-liberalism, with its inequalities and worship of “the Market”, got us into the current crisis. There was a time when it looked like there was an opening for alternative perspectives on economics and solutions to our problems. How it appears that has to have passed. In the UK we have a Tory government (with Lib-Dem aid) set on imposing austerity and continuing the Thatcherite/Blairite privatisation mantra (although covered with invocations of “progressive”, “fair” and even “mutualism”!). In America, the so-called “Tea Baggers” have been the focus of much of the anger felt at the results of three decades of neo-liberalism – anger demanding more neo-liberalism, more inequality (and all funded by propertarian billionaires and helped by Faux News).

Why? Well, there are many very rich people who have spent lots of money framing the debate (thanks to “think tanks” and such like). Then there is the awkward fact that neo-classical economics is so predominant. It may have no relation to reality, but its conclusions are so boss friendly that it skews (as intended) the whole debate. Even those who question aspects of it are caught up in its assumptions. This can be seen when Paul Krugman, almost, but not quite gets it right as regards cutting wages as a cure for unemployment. He discusses this in a blog posting entitled Wages and Employment, Again (Wonkish):

“I occasionally mention here that recognizing the reality of wage stickiness is a key part of demand-side economics, but I’ve also argued a number of times that cutting wages now would probably make the slump worse, not better.”

Okay, the first part of that sentence is not Keynesian – if we take “Keynesian” to mean “what Keynes argued.” Keynes was very clear that he took wage flexibility as his starting point — the notion of "wage stickiness" was added after his death by certain neo-classical Keynesians to squeeze Keynes’s into the orthodoxy. The second part IS correct, which was why Keynes took the notion of perfect wage flexibility as his starting point. He argued that if wage were cut, then this would shift the supply curve for labour as well as the real-wage and so not have the impact planned. I’ve discussed this in both An Anarchist FAQ and in an article written for Anarcho-Syndicalist Review and (in edited form) Black Flag: Would Cutting Wages reduce unemployment?

Indeed, the whole notion of a “labour market” is questionable as labour is simply not like a commodity, like say steel, TVs or beans – although embracing that fiction ensures that we get paid beans… Anyway, back to Krugman:

“The point is that making wages somewhat more flexible, as opposed to perfectly flexible, is not a good thing. And this in turn means that people arguing that what we need right now is more wage flexibility are actually pushing for a policy that would make things worse.”

And this from the world’s so-called leading Keynesian! Keynes argument was premised on the prevailing orthodoxy (flexible wages will produce full employment) and showing why it was wrong. In fact, he postulated that wages not being perfectly flexible was a good thing as it stabilised the system. However, this insight of Keynes was lost when he was squeezed into neo-classical economics – which he tried to escape from, but only partially. Krugman is, as I’ve noted before, one of the better neo-classical Keynesian but he is still stuck in the orthodoxy and so the ideal is, of course, “perfectly” flexible wages…

His conclusion is right, though, in-so-far as attempts to cut-wages will cause more problems… although “eventually” things may get better… But as Proudhon rightly noted:

“The economists admit it: but here they repeat their eternal refrain that, after a lapse of time, the demand for the product having increased in proportion to the reduction of price, labour in turn will come finally to be in greater demand than ever.

“Undoubtedly, WITH TIME, the equilibrium will be restored; but, I must add again, the equilibrium will be no sooner restored at this point than it will be disturbed at another…”

And I should also note that neo-liberalism has been busy making wages flexible DOWNWARDS… any rise in wages has been meet with raising interest rates to maintain the “natural” rate of unemployment and so push wages down… To quote AFAQ:

“So while this attack on the wages, working conditions and social welfare is conducted under the pre-Keynesian notion of wages being ‘sticky’ downwards, the underlying desire is to impose a ‘flexibility’ which ensures that wages are ‘sticky’ upwards. This suggests a certain one-sidedness to the ‘flexibility’ of modern labour markets: employers enjoy the ability to practice flexpoilation but the flexibility of workers to resist is reduced.”

Compared to the neo-classical (and Austrian) perspective (namely, blame the workers first, last and always), Krugman is on the side of the Angels but that does not excuse a Keynesian ignoring Keynes arguments! Ah, it will be objected, economics is a “science” and so its conclusions just appear consistently anti-worker. Well, it must be the only “science” which ignores reality in favour of postulating the various assumptions required to justify the desired “just-so” story required to defend the wealthy! Science, well, of class warfare! After all, what else can you conclude when a “science” proclaims that the problems caused, in part, by a vastly unequal society is to cut the wages of those doing the actual work so increasing inequality?

I would also suggest that Krugman does not stress another of Keynes great insights enough, namely the importance of uncertainty. So it would also help if he framed the whole state welfare benefits, etc., in terms of reducing uncertainty by maintaining demand for goods and services and so giving firms more of a reason to invest. State intervention in terms of funding investment projects also reduces uncertainty by ensuring that such work is done and so workers have money to spend and companies have firm orders (not to mention the much more important issue of meeting needs which exist but not expressed in the market due to lack of money). But invoking uncertainty is something neo-classicals rarely do (something else, like time and production they abstract from). The issue of uncertainty is one I’ve discussed in relation to (libertarian) communism and it is an important one, one which is rarely stressed in radical economics (some on the right do, namely the Austrians, but as I’ve noted in AFAQ they fail to think through the implications of their lip-service to it).

It could be asked why is an anarchist providing arguments for state intervention? Well, first off I don’t see the job of libertarians as one of making things worse for people – that can be safely left to the ruling class, their politicians and their ideological defenders. The whole “the worse, the better” perspective is one I object to – if it were true, America would have the biggest radical labour movement in the world! Second, the politicians are not going to actually implement any social investment unless forced to by outside pressure by the people, pressure from below. Third, the underlying premise of modern politics is austerity for the masses, state aid for the elite. It would be remiss for us not to explain why this makes things worse. If cutting wages is a bad idea, cutting what is called “the social wage” (the various welfare measures won from previous struggles) is just as bad. It does not mean, of course, that we forsake building our own alternatives to those actually useful services and goods which the state (and capitalist) firms provide nor think that we can leave reforms to politicians to mess-up and/or water-down for us.

Of course, the state/government is the enemy of the people. It exists to maintain capitalism, the current class system. It is a body external to the mass of people and governs it in the interests of itself and the economic elite. What the conservative/propertarian right oppose is any government action beyond this — sorry, beyond defending/imposing capitalist property and property rights (and usually, but not always, “traditional” morality – funny how “big government” is not an issue when telling women what to do with their bodies, or what people do in their beds, etc.). And the modern state does more than just defend property – due to many factors (public pressure, need to maintain both society and economy, and so on) it can and usually does provide some socially useful services and goods (along with many which benefit the elite).

An obvious example, the NHS here in Britain — only a particularly clueless libertarian would be supporting the Thatcherite/Blairite/Cameronite attempts to privatise it (note for US readers, over here politicians drum up support by arguing the Tories wish to create a US-style private health system). Yes, we aim for a genuine socialised health system rather than the current nationalised one but that does not mean that a government-corporation imposed privatisation is closer to our ideal! At the very least, as anarchism is anti-capitalist as well as anti-state, we are against privatisation just as much as we are against nationalisation.

Equally, anarchists argue that capitalism is an enemy of the people, that wage-labour (like the state) is exploitative and oppressive. That does not mean that we oppose attempts to make wage-labour less oppressive and exploitation. Far from it, we should be fighting for better pay and working conditions. The same applies to the state — it is an oppressive and exploitative institution of class rule but we can and should try to make it less oppressive and exploitative. That is, surely, commonsense?

So, I’m arguing for a dual approach based on a recognition of reality is called for – along with the recognition that social change does not happen overnight and requires strategic thinking. Chomsky gave a good analogy, arguing that social struggle is like a Chess game and that too many radicals get annoyed when they discover they cannot checkmate the King in their first move! Now, I cannot find were I read that so if anyone goes have a link to that article or interview, please let me know!

And, anyway, capitalism has always been marked by state intervention – from the start. Having people who defend that system witter on about the evils of “state intervention” (i.e., social welfare measures) stinks of hypocrisy.

As far as Keynes goes, there is a good paper by post-Keynesian economist Paul Davidson entitled Real World Macroeconomics: Financial Market Liquidity and Money Contract Obligations (pdf) The other conference papers (including one by Steve Keen – pdf) can be found here. I would also be remiss for not mentioning my previous discussions on Krugman’s economics and politics.

And talking of economics, This is good: A code of ethics doesn’t go far enough For example, “The whole body of mainstream economics needs to be trashed” and “Many of their models are internally inconsistent (for example, all those that deal with income distribution and production) and none really stack up against empirical realities.” Not to mention:

“I think a call for a code of ethics should be broadened for a major closure of economics programs around the world and a new approach to the study of economics . . . incorporating sociology, psychology, anthropology, and a more reasoned view of firm-based operations in the context of a class-based economy – where workers want to work less and be paid more and bosses want them to do the opposite.”

It mentions the Cambridge Capital Controversies which refuted marginal productivity theory and how this, and neo-classical economics in general, was in response to the rise of Marxism. I’ve added a comment about over-egging the influence of Marx, pointing to both Proudhon and the British Ricardian socialists as more pressing concerns for the founders of neo-classical economics. But, then, I would… 🙂

And talking of Proudhon, I’m sure that everyone is on the edge of their seats waiting for Property is Theft! to be published (well, I know one person other than myself is!) The situation is that the final proof-reading is going on and I’ve been asked to do a short biography of Proudhon (part of the whole “definitive” thing). I’ve done that now, and sent it off to someone for comments (that one other person!). The book should be out next month. The biographical sketch is doubling-up as a justification of what I’ve included in the book, plus a summary of works I missed – namely War and Peace and The Social Revolution Demonstrated by the Coup d’État of Second of December 1851 as these are particularly misrepresented. I’ll make an announcement when the book is out – once the biographical sketch has been sent to AK Press I’ll post it on the Property is Theft! webpage.

I’ve also included a few interesting quotes as well. Regarding General Idea I’ve included a bit from a letter which states it was “the scientific and positive conclusion which System of [Economic] Contradictions was only the preamble.” (Correspondance, vol. 3, p. 377) And in that book he argues that workers’ associations “furnish the solution of two important problems of social economy, that of collective force, and that of the division of labour.” I’ve also included a couple of quotes from a page of Justice in the Revolution and in the Church (Oeuvres Complètes, vol. 22, p. 264) which sum up things well – particularly the reference to “contradictions” within society and economics (contradictions which express themselves in regular crisis inequality, poverty, exploitation, etc):

“Thus labour, reconciled by its free nature with capital and property, from which wage-labour banished it, cannot cause a distinction of classes any more, which breaks the vicious circle and puts society, as well as [economic] science, safe from any contradiction.

“Then, add the innovators, the ideal dreamed by the first economists can be carried out:

“The land to those who cultivate it;

“The profession to those who practice it;

“Capital to those who use it;

“The product to the producer;

“The benefit of the collective force to all those which contribute to it, and wage-labour changed by participation;

“Parcellaire labour combined with the plurality of trainings in a series of promotions;”

This passage is very suggestive, although not as strong as I would prefer (wage-labour “changed”/”altered” rather than, as he suggests elsewhere,  “abolished”, labour and property “reconciled” rather “re-united”). It does sum up things very well, in that it shows labour would be self-managed and workers would control both the means of production used and the product of their labour. That way, the “collective force” would remain in the workers’ hands rather than appropriated by employers. This solution, of course, fits exactly into his analysis of 1846 in System of Economic Contradictions (hence the “safe from any contradiction” – as I suggested in my recent review of that work). As Proudhon put it in one of its sketches:

“Well! I am willing. The remedy for competition, in your opinion, is to make competition universal. But, in order that competition may be universal, it is necessary to procure for all the means of competing; it is necessary to destroy or modify the predominance of capital over labour, to change the relations between employer and worker, to solve, in a word, the antinomy of division and that of machinery; it is necessary to ORGANISE LABOUR: can you give this solution?”

I also liked this being based on labour’s “free nature”, namely that labour by its inherent features as an expression of an individual’s self-activity should manage itself and so needs free access to the means of life to do so (that feeds into my comments on liberty as being the basis for anarchist analysis in my last blog).

I discovered this passage I was looking through Robert L. Hoffman’s Revolutionary Justice: The Social and Political Theory of P-J Proudhon while looking for material for the biographical sketch. But, then, I’ve discovered quick a few important letters and articles by following up references in other works (sometimes just passing references – such this 1849 letter to Pierre Leroux which came to my attention via an end note in a book on the history of the syndicalist IWA). I feel sometimes people did not appreciate the importance of some of the works they quote!

I must state that I’ve tweaked the translation a bit to make it more readable and less likely to be abused and misused. I’ve translated “Le capital à celui qui l’emploie” (etc.) as “Capital to those who use it” rather than the literal “Capital to the one who uses it” Why? because the literal sounds very posh and, more importantly, I don’t want some clueless Marxist proclaiming Proudhon favoured ownership of “small-scale” industry run by “one” person! I’m sure some Marxist would do that, in spite of the reference to “collective force” in the same extract and Proudhon’s support for co-operatives. After all, abolition of “la salariat” (wage-labour; wage-workers) was a constant theme of Proudhon’s works which makes Marx’s proclamation in 1847 that Proudhon’ “whole system rests on the labour commodity, on labour which is trafficked, bought and sold” an utter distortion. As Proudhon put it:

“Either competition, — that is, monopoly and what follows; or exploitation by the State, — that is, dearness of labour and continuous impoverishment; or else, in short, a solution based upon equality, — in other words, the organisation of labour, which involves the negation of political economy and the end of property.”

And talking of exploitation by the state, someone forwarded me these couple of good (related) pieces by Simon Pirani on the Bolshevik regime and labour protest against it. The first is a reply to a review in the SWP’s “theoretical” journal and the second is a pdf of further information referenced in the reply. Both are well worth reading. Pirani  was a Trotskyist (maybe still is? Maybe still a Marxist?) but when the soviet block collapsed he wanted to rethink what had happened, went right back to the post-civil war period and found some interesting material. His book The Russian Revolution in Retreat is good – I read it a few years back and I referenced it in AFAQ in its discussion of working class protest under Lenin.

A big flaw is that it concentrates on the period 1921 onwards because, to be honest, the repression (as Pirani does notes in the ISJ) did start long before – within a month of the start of the civil war the regime was a de facto one-party state, although the writing on the wall was clear months before that. But what he does uncover in the early-NEP period is important. He is good in that the Bolsheviks did have a choice – they could have been more inclusive in 1921 but party orthodoxy (party dictatorship as essential aspect of any successful revolution) played it part and, of course, any collective resistance put the party’s rule in question. Thus the party helped create the atomisation which its latter-day fan-boys use to justify its rule.

As such, his work supplements works like Maurice Brinton’s The Bolsheviks and Workers’ Control. Brinton’s account is excellent and essential reading. It is in the AK Press anthology For Workers’ Power – and excellent anthology which I reviewed ages ago (and, I think, the first article I submitted to Anarcho-Syndicalist Review). I would urge anyone who has not read either book to do so. Brinton’s work is amongst the very best libertarian (socialist) writings around.

In terms of The Bolsheviks and Workers’ Control, it is very good on the ideas and debates of the times, showing that the rise of state capitalism in Russia started under Lenin and flowed from Bolshevik ideology rather than being somehow alien to it (as latter day Leninists assert). However, it is somewhat “up in the air” (so to speak) – while it mentions key historical events, it does not link the Bolshevik policies to working class struggles under the Bolsheviks nor the state of the economy. Both need to be taken into account, particularly as the former explodes the standard Leninist “working class was atomised” excuse.

I’ve tried link Bolshevik ideology to both “the objective conditions” and labour unrest facing the regime in section H.6 of AFAQ, discussing how the ideological and structural prejudices of the Bolsheviks impacted on the revolution – and helping to contribute to the very problems later-day Leninists use to rationalise and justify Bolshevik authoritarianism. However, I’m well aware that this is just skimming the surface – a whole book would be needed! And any such book would have to use works like those by Jonathan Aves which presents an excellent account of workers’ resistance to the Bolsheviks, although it concentrates on 1920 onwards by and The Bolsheviks in Power which covers the first year of the Bolshevik regime in Petrograd (and as reviewed in Black Flag).

So Brinton’s work needs to be supplemented by sources like this. Now, that would be a project worth doing! The AFAQ section is just a start, with enough academic references to get someone working on such a task going. Other useful projects for the budding anarchist historian would be, I think, a libertarian account and analysis of the 1848 revolution in France. It seems crazy that the first revolution in the age of anarchy (that is, after anarchism became a named socio-economic theory) has not been analysed. Particularly as Proudhon was an active participant in it. Still, much of the Russian revolution still requires investigation – while revolts of the Paris Commune as are still subject to regurgitating convenient (usually Marxist) myths than serious analysis.

Still, as important is such historical research is we need to use it to inform current struggles and debates. Brinton’s work is a good example, using the historical experience of Bolshevism in power to refute Leninist claims in the 1960s that their ideology supported the then popular call for workers’ control/management. Any research conducted into historical events should have a message or lesson for today’s struggles and activists. Theory and practice must be linked, otherwise the former is nothing more than interesting and the latter little more than fun. Combining both and we can learn from the past in order to transform the future!

Until I blog again… be seeing you!