The Economy of the 1 Percent

We saw in the 2016 election that the global political establishment has no intention of changing its direction.  Therefore I propose that we get our talking points straight and settle in for the long haul.  In the last article I said something to the effect that it won’t do any good to break up the banks until we solve the problem of the dollar being the reserve currency.  The problem with this claim is that we have no control over monetary policy, and it would then follow that we can’t do anything about the banks. Obviously I don’t believe that.  Breaking up the banks is a solid proposal and a worthwhile goal for the short term.  But we also have to talk about the underlying cause of the money problem.  

I’ve been studying a book cited in the last article, Who Adjusts?: domestic sources of foreign economic policy during the interwar years, by Beth A. Simmons, which has a number of implications for workers’ rights.  For example, the author argues that the gold standard couldn’t be maintained in countries that allow worker organization and universal suffrage because such a government becomes a financial pariah to the markets.  Market reactions then hamstring the finances of the government based on the expectation that it won’t be willing to impose harsh measures to correct its deficits.  

Simmons’s argument suggests the possibility that the markets leave no room for workers’ rights. It will take some time to examine the accounting details behind this assertion but the fact that she glosses over important realities in order to make her point tells me there is an argument to be made.  In the next article I will describe the workings of the prewar and interwar gold standard as she describes them in her book.  In this article I want to deal with the social assumptions that underly her main thesis.  

She is not necessarily arguing for a return to the gold standard—she views the gold standard as a normative benchmark for appropriate foreign economic policy and goes on to explain the conditions associated with the decision to devalue and protect. The issue of abiding by the rules is the focal point of her study.  Simmons seems to admire what she interprets as prewar indifference to the majority of the population.  She views the first world war as a calamity for the classical gold standard of the prewar years and traces the collapse of the interwar gold exchange standard to worker organization and representation after the industrial revolution, and to World War I.  She argues that without universal suffrage prewar governments could do whatever they deemed necessary without repercussions.  

One reason the international monetary system was stable during the nineteenth century was because of the excellent fit it enjoyed with prevailing domestic political institutions and practices.  From 1870 to 1913 the gold standard was managed from the top down.  External balance could be maintained with costs going to domestic economic activity.  Lack of resistance may be attributed to exclusionary politics and laissez-faire political philosophies that did not recognize state responsibility for the economic well-being of its citizens.  Political systems that could ignore economic and social pain; Political philosophies that could shun responsibility for misery.(page 22)

She does acknowledge that workers would not have organized if not for the Industrial Revolution, which forced them to move to the cities and work in factories, but she treats the plight of the workers as an obstacle that can and should be overcome in the interests of a balanced budget.  She completely ignores the logic of worker organization as a direct result of the Industrial Revolution.  

The book’s unspoken assumption, that workers rights are the only real obstacle to balanced budgets, led me to see the Great War as a war against workers, and that led me to the following video. Click “Watch Online” in the right-hand column and choose Part 3.

Source: Who Adjusts?: domestic sources of economic policy during the interwar years  Beth A. Simmons, Princeton University Press, 1994

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