An enormous round of layoffs has begun in the U.S. economy: over 200K tech workers have lost their jobs since 2022. This is despite the fact that most economic indicators are positive – or at worst neutral – and the supply chain shocks of both COVID and the Ukraine war have largely reached a new equilibrium in the U.S. So why is the Federal Reserve trying so hard to make a recession happen?
The watch-word for capitalism’s bookkeepers is inflation. It’s a very abstract word, and it’s easy to get confused by or simply bored of talking about it. But what inflation really means is that the buying power of labor has increased over time. Most of the Federal Reserve’s prerogative is to control this labor power, and they’re now taking major steps towards that end.
Whether it’s the New York Times or economics dorks on Twitter, when Fed-watchers talk about the responsibility to control inflation, they really can’t help but evoke the antagonism of a class war fought over interest rates. Yes, they use obscure economic words to describe that war, but they are clearly aware that when labor gets too strong, capital and the state that enforces its privileges must intervene.
The interesting thing about the United States’ system of capitalism is that it’s quite decentralized: the Fed only controls indirect levers of power like the base interest rate and other, private institutions use these simple signals as barometers for their collective action. When the Fed began raising rates last year, everyone downstream began tightening the screws on their investments, and so on. When interest rates rise, private equity and venture capitalists know that their capital pool will dry up and so they direct their portfolio companies to cut headcount, who then cut their suppliers and so on.
To the people, in institutions like the Fed or Bank of America, who regulate capital’s immune system – and we really should think of them as something like white blood cells – this is a sacred job of balancing the needs of labor and capital. They think of themselves as tenders to the garden of a liberal global economy, and to them these “business cycles” are like seasons; first the spring of economic growth in which labor power steadily grows and unemployment falls, and now the winter of austerity and layoffs to renew the earth with the rotting remains of last season.
Well, that’s kind of bullshit, isn’t it?.
No, I think this is much more like discipline. There’s a simple political goal behind all these nuanced graphs: workers must not be allowed to become self-conscious. Now is a dangerous time for capitalists, as the predominance of the U.S. economy wanes and the pandemic’s effects on our social culture spreads.
Today, economy-wide unemployment is at historically (dangerously) low rates. Especially given the nearly 15% unemployment during the pandemic, this shockingly stubborn number means more job security, more ability to negotiate in favor of labor, and more unionization. The social reality today for many workers is that we are not afraid of our bosses. Both the post-COVID cultural malaise and our relatively broad employment options afford us this privilege. And this social pattern – while largely harmless today – can turn much more militant and stubborn when given the chance to develop solidarity.
Federal unemployment % data by month
Even when the rational interests of individual capitalists are to stay productive and profitable and to invest in their labor force, nevertheless we see the opposite happen. Capitalists will discipline labor even when it hurts their bottom line. Marxian Polish economist Michał Kalecki wrote about this phenomenon in The Political Aspects of Full Employment, on which Red Star did a Red Start, and a coming podcast episode 🙂
So is the attempt to manufacture a recession in order to discipline labor going to work?
High-profile layoffs like Twitter and Buzzfeed have shown that even knowledge workers like writers and programmers are vulnerable to arbitrary layoffs. Even the notoriously lax privileges of San Francisco tech workers are ultimately revocable. But for that reason, we’ve been seeing people who’ve just been laid off come to DSA San Francisco and say that they’ve seen – often for the first time – the truth of one working class.
It’s the responsibility of socialists to direct this energy towards class organization. Workers should join an organization, socialize with other workers, be led to re-examine their core beliefs about the legitimacy of the capitalist state, and through that process emerge as more conscious of the part they will play in a revolutionary moment.
What the spreadsheet nerds at the Fed can never capture on a spreadsheet is the bond of solidarity that will be the social basis for revolution. In moments like these when people are forced to confront the fragility of their position in society as they are laid off by a form email, socialists can rise to the opportunity and present comfort and hope.