by Michael Hudson and Paul Craig Roberts at Paul Craig Roberts
Today I am pleased to present a double feature on economic policy. Michael Hudson leads off with an explanation of economic policy as a social cost to the working class, and I follow up with an explanation that US economic policy is an act of national suicide.
A couple of definitions: A rentier economy is one in which monopolization or concentration of ownership permits profit without contributing to the welfare of society. Economic rent consists of payments or a rise in value of an asset in excess of its contribution to output or the cost of bringing it into production. An example of economic rent is a taxpayer financed road or transportation system. The rise in land values constitute economic rents, unearned income or wealth unrelated to any activity of the property owner.
The Fed’s Austerity Program to Reduce Wages
Michael Hudson
The Federal Reserve Board’s ostensible policy aim is to manage the money supply and bank credit in a way that maintains price stability. That usually means fighting inflation, which is blamed entirely on “too much money.” In Congress’s more progressive days, the Fed was charged with a second objective: to promote full employment. The problem is that full employment is supposed to be inflationary – and the way to fight inflation is to reduce employment, which is viewed simplistically as being determined by the supply of credit.
So in practice, one of the Fed’s two directives has to give. And hardly by surprise, the “full employment” aim is thrown overboard – if indeed it ever was taken seriously by the Fed’s managers. In the Carter Administration (1777-80) leading up to the great price inflation of 1980, Fed Chairman Paul Volcker expressed his economic philosophy in a note card that he kept in his pocket, to whip out and demonstrate where his priority lay. The card charted the weekly wage of the average U.S. construction worker.
Chairman Volcker wanted wages to go down,…
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