Utopia or Bust by Benjamin Kunkel

Author:Benjamin Kunkel
Language: eng
Format: epub
Publisher: Verso Books
Published: 2014-03-10T16:00:00+00:00

Whether the Golden Age came to an end, and whether our own leaden age has persisted, because the wage bill of the international working class ran too high or too low can’t be settled here. But the illicit prestige that economists have enjoyed in recent years—a byproduct of so much forbidding mathematics, occupational arrogance, and coincidence with speculative bubbles—should not lead us to believe that the question has been answered among conferring neutral experts. Last year I had the chance to ask Nouriel Roubini—a disciplinary eclectic known for the breadth of his reading and the independence of his views, and world-famous for having predicted the financial crisis with extraordinary accuracy—if it might be that unemployment and wage stagnation on an international scale lay at the bottom of the global recession. His reply is worth quoting in full.

“Even without being Marxian,” Roubini said,

income is allocated between labor and capital. Capital has a greater marginal propensity to save out of that income, and labor has a greater marginal propensity to spend. And it’s a fine balance, because if there is too much capital accumulation and you produce too many goods, and the final demand is not there because wage earners don’t have enough income, then you can be in an equilibrium of low growth. That is the big conundrum we have to think about. If you want to take the more radical view, you say wages were not growing fast enough, capital income was growing fast, and the only way you got enough final demand is by allowing people to borrow against income they didn’t have. For a while, demand was sustained by equity and housing bubbles. Right now the reckoning has arrived, people have to live within their means, real wages are not growing fast enough, therefore we may be in—unless there is a change in distribution of income and wealth—a period of subpar growth. It’s a possibility, a hypothesis. I wouldn’t say it’s for sure true. The years to come are going to test it.

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