High interest rates deliberately broke workers’ power to enforce subordination

Evidence

The wave of monetary austerity that broke in 2022 was preceded by more than a decade of low interest rates. This did not enrich workers. As Janet Yellen reminded us, “Interest rates can be low only when workers are weak.” Easy money and forms of quantitative easing that immediately secured the assets of large corporations were politically compatible with the capital order because of previous waves of austerity. At the end of the 1970s, when workers’ organizations were strong, Fed Chairman Paul Volcker began raising interest rates, which would peak at 20 percent in the early 1980s. These decisions caused an economic recession in the US and many parts of the world, with American unemployment rising to 10 percent, breaking the back of workers at a moment of historical mobilization for higher wages and anti-capitalist alternatives. If you, as a worker, fear losing your job and, with it, the ability to pay for medical care, you become more controllable. If job opportunities are scarce, wages decrease. The risk of spiraling an economy into a recession is a short-term cost for capital accumulation: securing workers’ subordination and a healthy rate of exploitation come first. — Clara E. Mattei, Escape from Capitalism, 154

Categorization

• XREF: Connects to Naomi Klein’s ‘shock doctrine’ account of monetarism disciplining labor, and to the broader austerity-as-class-warfare literature. — connects to: Stabilizing currency deliberately imposed the costs on workers. — Clara E. Mattei, The Capital Order: How Economists…, 983; Monetary austerity deliberately aimed to rein in workers’ purchasing power — Clara E. Mattei, The Capital Order: How Economists…, 757; Monetary austerity deliberately induced recession to discipline workers. — Clara E. Mattei, Escape from Capitalism: An Intervention, 154 (+9 more)
• QUESTION: The Volcker recession as deliberate class tactic is claimed confidently; worth tracking the evidence that policy was chosen, not forced.

Broader Connections

• Monetary austerity deliberately induced recession to discipline workers. #expands (0.90) — Clara E. Mattei, Escape from Capitalism, 154
• Central banks trigger recessions to enforce workers’ acceptance of wage labor. #corroborates (0.90) — Clara E. Mattei, Escape from Capitalism, 39
• Monetary austerity deliberately aimed to rein in workers’ purchasing power #expands (0.88) — Clara E. Mattei, The Capital Order, 757
• Monetary austerity deliberately manufactures unemployment to compress wages. #expands (0.88) — Clara E. Mattei, Escape from Capitalism, 284
• Stabilizing currency deliberately imposed the costs on workers. #corroborates (0.85) — Clara E. Mattei, The Capital Order, 983
• Rate hikes cut social services and weaken workers’ bargaining power via unemployment #expands (0.85) — Clara E. Mattei, Escape from Capitalism, 153
• Austerity economists read inflation as a threat to capitalist subordination #corroborates (0.82) — Clara E. Mattei, The Capital Order, 784
• Anti-inflation policies sparing workers require challenging capitalism’s foundations #expands (0.80) — Clara E. Mattei, Escape from Capitalism, 278
• Fear of unemployment disciplines workers into subordination to capital. #complicates (0.80) — Clara E. Mattei, Escape from Capitalism, 250
• Financial income reallocates resources away from workers and strengthens owner bargaining power #expands (0.78)
• High wages require state discipline to keep workers spending rationally #qualifies (0.75) — Antonio Gramsci, Selections from the Prison Notebooks, 1120