Live Interview: How Our Simplistic ‘Inflation’ Discourse Fuels the War on Workers — with Josh Mason
Citations Needed | July 13, 2022 | Transcript
Intro: This is Citations Needed with Nima Shirazi and Adam Johnson.
Nima Shirazi: Welcome to Citations Needed, a podcast on the media, power, PR and the history of bullshit. I am Nima Shirazi.
Adam Johnson: I’m Adam Johnson.
Nima: Thank you everyone for joining us for another live interview. Of course, you can follow the show on Twitter @CitationsPod, Facebook Citations Needed, and if you’re not already, you can become a supporter of the show through Patreon.com/CitationsNeededPodcast, all your help through Patreon is so incredibly appreciated as we are 100 percent listener funded. And of course, when you become a supporter, you get access to over 100 News Briefs, extensive show notes for every episode, our newsletter and goodies like these live shows, live chats, Ask Me Anythings, and of course, if you’re interested, you can grab some hot new Citations Needed merch, shirts, hoodies, mugs, and of course the requisite tote bag at Bonfire.com/store/citations-needed. But Adam, we are thrilled to have an amazing guest today for this live interview. We’re joined by Josh Mason, Associate Professor of Economics at John Jay College at CUNY, that’s the City University of New York, and a fellow at the Roosevelt Institute. Josh, thanks so much for joining us today on Citations Needed.
Josh Mason: Thanks for having me.
Adam: Yes, we’re really grateful for you coming on because this has been a very, I would say, maybe the first or second most requested topic we’ve had, a inflation, as a topic or as sort of now becoming a buzzword, is very much at its core, we think, a media story, which is to say it’s a very politically charged issue. A recent Gallup poll just said it’s the number one issue for 66 percent of Americans, which is obviously a lot, it is number one, number one on most people’s list, and so the issue then politically becomes sort of who’s to blame? The political blame is the most politically urgent issue right now, because who is blamed becomes what the solution is, right? And there is much debate about whether or not this is some law of nature handed down by the gods of Econ 101 or whether or not there’s human agency at work here, whether or not to the extent to which there is human agency, we’re told it’s kind of the logical byproduct of too generous or too liberal economic policy under COVID. So with that as a kind of table setter, I want to sort of start out with broadly speaking, how you would characterize the current present-day situation with respect to inflation, is inflation, even the right word we should be using? I know there’s some people who think maybe that’s kind of a way of loading the deck and if there was maybe a perhaps more constructive way of framing this issue.
Josh Mason: All right, you know, the word inflation is hard to avoid, because it’s what everybody uses, but I think there is an argument that we shouldn’t be using that word, because when you say inflation, you sort of imply that there’s one thing going on, one economic process, one source, one set of causes and one solution, and the truth is, you know, that’s really not true. If you step back and think about it, there’s a lot of different prices in the economy and there’s prices that get set in different ways, you know, the price of housing is very different from the price of energy or gasoline, which is very different from rents, which is very different for the price of health care, the price of food, there are different dynamics at work in these different parts of the economy, and we certainly have a widespread, although certainly not across the board, rising prices. You know, Adam Tooze, who I think is a great historian, but has turned himself into a sort of turbocharged pundit lately, he had a piece lately where he said, all prices are rising in unison. Well, I don’t know where he got that but he’s clearly too busy now to actually look at the data because that’s definitely not at all the case. We have some prices like recently energy, that are rising very rapidly, we have other prices in the economy, you know, most of the service sector, things like education, health care, where prices are not rising very rapidly at all, and then we have areas like rents, which are rising fairly rapidly, but we’re also rising fairly rapidly back in 2018, 2019. So it’s not clear that there’s something really new here. So when you say inflation, you’re sort of assuming that there is in fact one phenomenon, where all these prices are rising in lockstep. So you might even say how does somebody as smart as Adam Tooze get such a basic fact about the situation so wrong? Well, one reason is because he’s used to talking about inflation, which we define, the sort of textbook way is all prices rising together, but that’s not the phenomenon out there in the world. Out there in the world, we have a relatively small number of prices rising very rapidly, some prices rising, you know, faster than we would like, like again rents, and a lot of prices not doing anything, particularly rising at all. So I think it’s better when we can to focus on individual prices and think about what’s driving those and what’s the solution then to talk about inflation as this one sort of undifferentiated thing.
Adam: The way it’s framed is that typically, it sort of spirals, that things catch up to each other and then there’s, you know, you have this image of inflation. So let’s hone in on what is most politically urgent, if you will, which is I go to the grocery store, my groceries are clearly more expensive than they used to be. I buy steak, it’s more expensive than it used to be, I buy milk, it’s more expensive than it used to be, I buy gas, it’s more expensive than it used to be. This is the thing that politically is the most relevant insofar that it’s a daily reminder, psychologically, it has tremendous purchase — not to make a pun — because it’s something you notice on a daily basis versus say more of an obscure spending, you know, or the tax you don’t notice, and that this is politically going to be the thing that absolutely kicks Democrats’ asses in the midterms. So let’s focus on that kind of day-to-day purchasing.
Josh Mason: Yeah, that’s right, and it’s really one of the unfortunate kind of ironies of this situation, that there are some prices that are extremely visible to people, I mean, look at gasoline prices, every street in every American city has giant signs announcing the current gas prices down to a 10th of a cent. So you know, you could not, if you wanted to, you could not make that price more visible to people, and yet, gasoline prices are up a lot, it’s certainly a fact, gasoline is a lot more expensive than it was, you know, a year or two or three ago. But that’s, first of all, a lot of the current price rises we’re seeing, but it’s a relatively modest part of the overall spending of the typical family, and it’s also one of the prices that is least connected to what’s going on in the US economy. The stories we tell about inflation that have to do with, you know, too much demand or too much spending or interest rates that are too low or wages that are rising too quickly, well whether or not those might be relevant for some prices, they’re definitely not relevant for gas prices because, as we know, first of all, this is a market where, you know, current labor is a trivial part of the overall costs, where there’s a global market where oil prices really move around the world, you know, in countries with very different economic policy, gas prices are still rising, because this is really a global market. So it gives people a very misleading sense of the overall situation. Food is not quite as extreme as that, it’s certainly a global market, but not to the same extent that, you know, oil is, and it’s a bigger part of people’s budgets, but it’s also, you know, not necessarily representative of what’s happening in the rest of the economy, but it’s very visible to people. You know, my older son loves limes, this is his snack, he eats multiple limes a day, just eat them like oranges, so, you know, limes used to be, you know, 10 cents a line, a quarter a lime, 60 cents a lime, you know, I mean, that’s very noticeable in our family but it’s not necessarily very informative about what’s going on. The fact that healthcare prices are not rising at all, well, nobody sees that because you don’t pay those bills typically, and when you do pay them, you’re not buying the same thing over and over the way you are with gas or groceries so you’re not aware that the price has gone up from what it was. So I think the fact that right now the prices that are rising the fastest are also the ones that are most visible is giving this issue of really outsized importance in people’s minds, relative maybe to what you see in the statistics, which is certainly a rise in prices that I think we can agree it’s not desirable, but it’s not necessarily the crisis that it’s being treated as.
Nima: Yeah, you know, I think this idea of what is most visible, and then also, you know, as Adam you mentioned a little earlier, the idea of who’s to blame, right, the reason. So before we get into maybe a set of solutions, let’s talk about some of this blame and what we’re seeing in the media. We’ve heard from Mitch McConnell, that people are just quote-unquote “flush with cash right now,” possibly referring, or I guess effectively referring to the $700 to $1,400 checks that people got two years ago during the pandemic, somehow that is allowing people to still be “flush with cash,” right? That people have too much money and that’s what’s driving inflation. Josh, talk to us a little bit about maybe what we don’t hear. Profits are skyrocketing, and yet, the only kind of cause for inflation that we’re hearing is that too many people have jobs and too many people somehow have, you know, bursting overflowing wallets.
Josh Mason: You’re right to be skeptical about stories that too much power for labor, too many people can be too picky about jobs, and that’s the cause of inflation. I think you’re right to be critical of that. But it is actually the case that the balance sheets, the finances of most American families are much better than they were a couple of years ago, and I don’t think we want to go so far that we dismiss the real success of the pandemic economic response in sheltering American families from what otherwise could have been an absolutely devastating economic disaster. You know, it’s not just the one-time stimulus payments that you mentioned, but also the pandemic unemployment relief, which I think it’s just an absolute model of how we should handle economic disasters.
Josh Mason: We’re not going to go around trying to sort out, you know, who’s deserving and who isn’t deserving, we’re not going to have all these ways that we qualify to get assistance — you have to work so many months at a wage at this amount and be able to document everything and show that you’re out there looking for a job so you’re one of the deserving poor — we’re not going to waste our time with any of that, we’re just going to say, ‘Look, you lost your job, you get money so that you don’t get evicted from your house, your children don’t go hungry,’ and you know what, it worked, it worked great, and the result of that is people did come out of the pandemic with less debt and more cash in their bank accounts than they went into a with. We should be proud of that and say, ‘Look, this is what we need to demand from the government going forward.’
Josh Mason: The people who say people can afford to be pickier about jobs then they were before the pandemic, they’re right, and it’s great, it’s good. That’s something we should be trying to bring about.
Nima: And the nature of work has changed in that way as well.
Josh Mason: Right. This is good.
Adam: We’re definitely pro-pandemic aid. To be clear.
Josh Mason: Yes. But is the fact that workers have a little more bargaining power and not, you know, let’s not exaggerate that that way either, because it certainly doesn’t change the basic dynamic of the labor market, there is still a boss and a person who’s hoping to work and they are not meeting as equals, but they’re a little less unequal than they have been for quite a while, and that’s why I think one big reason why you’re seeing things like that, you know, successful unionization efforts in Amazon, Starbucks and so on, because when you have a little more bargaining power, one of the things you can demand is actually the right to bargain. So I think all that is real but then the question is, is that what’s actually driving rising prices? And I think we can say pretty definitely that it’s not. One reason is, as I said, the prices that are rising most rapidly in the economy are not the ones where we would expect to see a big impact from labor costs. Energy prices are not a function really of American wages at all, or not to any significant extent. Now, the interesting thing if you look at food is that the price of food at home has risen much more rapidly than the price of food away from home. So the price of groceries has risen much more rapidly than the price of restaurant meals. Now from the point of view of people’s living standards, that’s bad, because you can more easily go without restaurant meals than you can go without groceries but it also is telling us something important, which is if this was a labor story, we would expect to see that reversed because there’s a lot more labor input into restaurant meals than there is into groceries, into food at home, and a lot of the most, you know, other services, you know, rents are rising lot. Rent is really a function of the availability of housing, not current wages. So, you know, the fraction of your rent that is going to actual wage costs of maintaining that building is very small. So that’s not a function of wages. And other services, we’re seeing very little price rises. So the areas, if we had a story about, this is all about wages, we would see a very different mix of price increases than we’re actually seeing, and then, you know, as you said, there’s also the point that although wages are rising, prices are rising even more rapidly, and as a result, the profits claimed by corporations are also going up, and Lindsay Owens at Groundworks and her team, Rakeen Mabud and the other folks over there, I think they’ve been making that argument very effectively just given that the Economic Policy Institute had a nice analysis. To some extent, this is sort of a long run trend in the US economy that, you know, if you go back to the post war era, the ’50s, the ’60s, ’70s, it was generally the case that when you saw prices rising more rapidly, you saw wages rising as rapidly or even more rapidly, and that really hasn’t been the case for a while but it’s particularly not the case recently. Although one also has to be honest that profit margins have come down significantly recently. So that analysis is a little bit sensitive to exactly what time period you’re looking at. But certainly it’s very hard either if you look at the pattern of where the price increases are happening or the overall picture of rising profits, it’s very hard to tell a story where rising wages are the main thing that’s going on, and you know, at the most recent press conference after the Fed’s most recent rate hikes, even Jerome Powell, who earlier had been really stressing the need, as he said, to get wages down, actually said wages are not the main thing that are driving price increases right now. He said it really that bluntly. So when even the Fed, which historically, you know, the Fed has been absolutely on the frontlines of making workers pay for any increase in prices and putting it all on the shoulders of workers, when even the Fed is saying, ‘No, actually, that’s not what’s going on,’ I think you know that’s a pretty weak argument.
Adam: Yeah because I think to the average person, I don’t want to demagogue here too much, you know, kind of simple country lawyer, but to the average person witnessing the narrative unfold, there is a kind of width of, I don’t want to say conspiracy, but width of a constellation of interests that have sought to place the blame on greedy cashiers at Chick-fil-A, who had too much pandemic aid, and there is a bit of a political backlash to the pandemic aid that seems like sort of broadly, and you saw this very early on with the whole labor shortage issue, which sent a real panic through industry, you know, Retail Association, the Chamber of Commerce, right? It’s a conspiracy insofar that there are trade groups that actively kind of work to massage the media messaging around this to make sure that the blame doesn’t go to corporations or even to pro corporate policymakers, and you’ve seen people like Elizabeth Warren, there were even some half assed attempts by the White House, to say there is a little bit of opportunism going on here from the capital class that even if we accept that some percentage is probably due to there being too much money out there, we printed too much money during COVID or whatever, that people have taken that maybe otherwise organic or kind of natural force and used it to raise prices because they can, because there’s always a psychological element of mass psychology to prices, what you can kind of get away with, and when you have the CEO of Chipotle crying on CNBC telling you why your burrito is more expensive, it seems like there’s probably a combination of both. So to this issue of political blame, we want to play a clip here, which is kind of the conventional wisdom 101 from Stephanie Ruhle, who has a $7.5 million home on the upper west side, but that’s neither here nor there, we’ll play this clip, and then I want to respond to it, if you will, as far as the most important thing, which is political fucking blame — sorry for my language. Go ahead.
Stephanie Ruhle: We don’t have enough people to fill our current jobs and his argument, there are going to be jobs at higher wages, higher wages are one of the contributing factors to inflation.
Josh Mason: (Sigh.)
Nima: Yes, the deep sigh is the best response.
Adam: What are your thoughts on that?
Josh Mason: Yes, yeah. No, it’s so, it’s just incredible to me people can go on saying this and saying this, and it doesn’t matter what the evidence shows, and it doesn’t matter what the data, you know, it just, you just say this over and over again. We had this line about labor shortages about a year ago when pandemic unemployment insurance was still enforced, you know, there was a decision to let that expire but it didn’t expire all at once, individual states could opt out of it. So okay, so we had this, from my point of view, really appropriately generous pandemic unemployment insurance but people like this would blame that, ‘Oh, this is why we have rising wages and prices, this is why businesses aren’t open,’ you know, this whole talk about a labor shortage, ‘restaurants have shortened their hours, businesses are closing down because nobody wants to work.’ Okay. Well, here’s the thing, we did an experiment, we did exactly the experiment, if you wanted to test that theory, which is that we cut off this pandemic unemployment insurance in some states, and we didn’t cut it off in others, not right away, eventually got cut off everywhere, but not right away, so we could do this experiment and was quite a substantial amount of money. If the number of people getting hired depended on people’s willingness to work because they were or we’re not getting this kind of public support, well, it’s a lot of money that you’re taking away from people, if that’s the factor we should have seen more jobs and nothing, nothing, nothing, nothing. Arin Dube, a really quite brilliant labor economist at the University of Massachusetts, just dug through this and no matter how you slice it, there was absolutely no increase in employment in the states that cut off pandemic unemployment insurance, it was the cleanest experiment you could ask for is this theory true, and the results were unequivocal, it is not true. You do the test, you got a theory, you do the test, and yet they just ignore the results. It’s absolutely, unequivocally the case that taking away this sort of assistance does not increase hiring at all. And why? Well, there’s no mystery because actually businesses make the decision to hire, people don’t, there’s all this talk about labor shortage, people don’t want to work. It’s like people have this vision where a business says, ‘Okay, we need workers, we’re going to post a wage and see how many people show up and that’s how many people work today,’ that is not, maybe there’s, maybe you can find some business somewhere in the country that operates that way, but it’s not the way businesses operate. They say, ‘Here’s how much we think we can sell, here’s how many people we need to make it, we hire that many people.’ The business makes a decision about hiring, not the workers. That’s the business, they decide. Now, it’s true if people are in a better position to bargain, they can say, ‘Well, I want better hours, I don’t want to have to work a split shift, give me eight hours in a row, I want a higher wage, that’s a very natural thing, or you know, maybe you get to be a little more human on the job without getting fired because they’re worried. So you get some benefits as a worker from labor being scarce, so-called, from other people not being willing, desperate enough to take whatever job is offered. But one thing that does not happen is that more people get hired, because businesses just hire the number of people they need to produce the stuff that they think they can sell, and again, you might doubt my story on that, but we did the experiment, we took away the pandemic unemployment insurance, and there was no benefit in employment at all, and people, you know, some people like Jason Furman who were making this argument over and over again, ‘Oh, my God, you know, we’re going to have this terrible disaster, it’s holding back hiring, this labor shortage, we got to cut this stuff off,’ and then once the data was clear he just stopped talking about it. Somebody like this person, I guess, hasn’t gotten the memo. So she’s still making these arguments. But there’s absolutely, there’s no reason to believe it’s true and at this point pretty overwhelming evidence that it’s not true, that there is no sense in which a labor shortage is holding back employment.
Adam: Really what they mean is a labor pool shortage. They want 100 applicants per job, not 10, because if there’s 100, they can tell them all to fuck off and work at 3:00 in the morning.
Josh Mason: Right. Now, look, what she could say, which would be true is it’s because we have so many jobs and not so many workers that people are organizing unions at Amazon, which they never could do before, and that’s probably pretty upsetting to her, and I’m sure it’s upsetting to Jeff Bezos and whoever else. That would be an honest thing to say, but it wouldn’t play as well on TV so they don’t say that, they make up this nonsense about how it’s what’s driving inflation or holding back employment.
Nima: Yeah, to stick to what the media is constantly lifting up in terms of who the experts that we should be listening to are, right, you have your Jason Furmans, you know, who’s now a professor at Harvard University’s Kennedy School of Government.
Adam: Progressive case for Walmart, bro.
Nima: Yeah. Former Chairman of the Council of Economic Advisers under Obama.
Josh Mason: He’s just a professor of practice, right?
Nima: Yeah, exactly.
Josh Mason: That’s not really a faculty job.
Adam: Okay. Sorry.
Nima: But then you also have, you know, someone like Larry Summers, who we’ve been hearing from a lot lately, and getting kind of amplified through numerous articles, right? So you’ll see it from last month, from early June 2022, in The New York Times an article, “Why a Not-So-Hot Economy Might Be Good News,” and this was the subheadline, quote, “As the Federal Reserve tries to rein in inflation without causing a recession, slower job creation and wage growth could be a plus.” Josh, maybe just respond a bit to the Larry Summers argument of more people need to be out of work for inflation to go down and how that is this pervasive narrative that we’re hearing.
Josh Mason: Yeah. Well, I mean, the reality is, right now, high wages, I think, are clearly not what’s driving inflation. I think the evidence is overwhelming. But let’s put it the other way, suppose you raised interest rates, you know, to 20 percent, and every business that had to borrow, you know, said, ‘We can’t do it, we’re canceling our plans, every home builder in the country said, we’re sending everybody home, we can’t afford to build these interest rates,’ and every business that has debt they have to rollover says, ‘we can’t do it, we got to declare bankruptcy,’ and every family, you know, that has to roll over their debt says, ‘We can’t do it, we got to,’ okay, you do that, a lot of people are going to lose their jobs, a lot of people are going to get kicked out of their houses, a lot of people aren’t going to be able to meet their basic needs, and I do think at some point, prices will come down. If enough people cannot afford to buy housing, landlords will lower their rents. If enough people cannot afford to buy gas, gas stations will find they just have to charge less, and eventually you will get prices down by that route. So, in some sense, you know, what he’s saying is not absolutely factually wrong in the sense that, yes, if you trigger a deep enough recession, and the Fed does have the power to do that, you can eventually, but it’s an incredibly wasteful and destructive and pointless and unnecessary way of achieving that. You know, this story, which is unfortunately really deeply inculcated in people in economics education, that the only thing you can do about inflation is have the Fed raise interest rates, it’s incredibly destructive, because it says there’s only this one tool, which is really not well suited to the job, which is not historically or even, arguably, legally, you know, something the Fed is really expected to do and now becomes the only tool for the job and it’s an incredibly poorly designed tool for that job. But if you insist, there’s nothing else we can do, and you insist that slowing down price increases is absolutely the only thing we care about, then okay, I guess that’s where you end up. And there’s really, there’s no reason to think, first of all, that that’s the only tool that we’ve got, and secondly, that even if it were that the benefits would be worth the cost, because another thing that really gets beaten into people is the notion that inflation is just absolutely, categorically unacceptable and we cannot tolerate it no matter what. There’s this story that if you have a little bit of inflation, it inevitably snowballs and turns into hyperinflation. I don’t think there’s a single historical case where that’s happened. Every single hyperinflation you can point to historically is basically the result of a fundamental sort of state breakdown. A lot of times it’s countries that have lost wars, it’s poor countries that really just lack any sort of capacity to raise taxes, it’s countries with a huge amount of foreign debt in many cases, that basically all their available public resources are going to that, but it’s a basic breakdown in the machinery of the state, it is not a case, there is really not a case in history, where when you get 3 percent inflation, 5 percent and 10 percent and before you know it you have 8,000 percent inflation, It’s just doesn’t work that way.
Adam: So okay, I want to talk kind of big picture here real quick in terms of this issue of political blame and mass psychology. I hate to keep coming back to this, but it’s kind of more in our wheelhouse, which is that it seemed like there was this brief time during COVID where there was, for the first time, a kind of meaningful welfare state in this country that was not weighed down by an exotic patchwork of means testing. Poverty was reduced, child poverty was reduced significantly. We had a sense that you could actually, I knew plenty of people anecdotally who worked, you know, as baristas or worked at Target or whatever, who had more money than they had before, and there was a sense that we did have a little bit of a welfare state for five minutes, and then that was taken from us, and then the political priority became worker discipline through these concepts like inflation, labor shortage that you heard over and over again, where the poors had gotten too uppity, and that they needed to be basically be put back into their place, and since precarity is a major driver of our economy, and I know I’m inserting a bunch of ideological truisms, you don’t have to necessarily accept them, but that because precarity is essential to how the United States economy functions, in terms of destitution being one of the threats that keeps wages low, and that if you take that away, necessarily, you’re going to have workers who are a little bit more mouthy, a little bit more union-y. Sorry, sorry to get some bad ideas in their head. And that it seems like the political priority, certainly for the Republican Party, I think, also for the centrist wing of the Democratic Party, has been to kind of go back to normal. That we need to get the men in black thing and zap people’s brains and make them forget about the 12, 18 months in which they had some semblance of a welfare state, and that inflation plays a huge role in that. Inflation was the number one talking point against the infrastructure bill last fall that we thought was going to pass but never went anywhere, and the main talking point against that was this will basically spiral inflation 20 percent. Things like school food programs for the poor, dental insurance for the elderly, things that help the poor people, by definition, by definition, caused prices to skyrocket and gas prices to go up. I mean, I can’t think of a better way to kind of have an instant way of scaring people in any semblance of social welfare states. But then people look at that and say, ‘Well, there’s lots of countries that have robust social welfare states, to some extent,’ again, various forms of it, but they have it. They have things like generous unemployment benefits, they have things like universal health care, but they don’t necessarily suffer from massive inflation all the time. So how do we square that circle? How is it that when we did five minutes of some social spending for the poor in this country we suddenly are being subjected to this inflationary crisis whereas other countries don’t have that same outcome? Can you explain that? And then, of course, also countries that, a lot of countries have the inflation issue, regardless of how much they spend.
Josh Mason: That’s right. I mean, I think you’re right, and I think you’re onto something very important here, in some ways for a lot of people on the right, but even in the center politically, there’s a certain sense in which rising prices, you know, the fact that we have this oil price spike, food price spike that may have more to do with the war in Ukraine than anything else, but the fact that it came when it did was almost a godsend, it was almost a relief for them. Because otherwise, there were going to be some very difficult questions. You know, the reality is in the US, and not only in the US, we really relied on mass unemployment and a chronically weak economy to really settle distributional questions. When workers are kind of desperate, you don’t have to actually have a question about how are we going to divide up the product, the surplus, between labor and capital, labor gets enough to live and then the rest goes to capital when there’s people that are desperate enough, and you don’t have to have disputes about who controls the economic process, who controls the production process, the bosses do. But if you have a situation where demand is strong, and where people are not scared or as scared of losing their jobs, then those become live questions again. It doesn’t mean that it can’t be solved. It doesn’t mean, you know, there’s an argument that a lot of folks on the left are familiar with, you know, Michael Cholesky, the political aspects of full employment, where he says, you know, a capitalist economy cannot operate without mass unemployment, even if you could sustain full employment economically, you couldn’t sustain it politically, because the power of the bosses depends on the threat of firing people. Well, I think he’s onto something important here but I don’t think we want to concede all the ground to that, because as you say, there actually are historic models of social democracy, of welfare states that involve much more economic security for working people, much lower unemployment and more favorable bargaining conditions for workers that still remain capitalist economies in the sense that most of the means of production were owned by business and production decisions were largely made in pursuit of profit. Now, maybe we don’t want that, maybe we want to go beyond that, but we can say that some sort of system like that is possible. But you need a new set of institutions. It doesn’t just happen. If we were to try to run our economy with the institutions it has with sustained full employment, with a strong welfare state, I think we would see some real problems because we don’t have other institutions that allow for negotiation between workers and owners, and we don’t have other institutions that allow you to see a rise, let’s say, in the share of income going to labor, but a sort of slow and steady rise and arise that is widely shared, as opposed to going to a relatively small group of really favored workers. You know, there was a time not so many decades ago in the US, where strong unions were actually seen as an anti-inflation device precisely because they allowed you to negotiate over wages, you know, you say, ‘Okay, well, the economy is growing rapidly, businesses are selling a lot of stuff and workers are scarce and is valuable, and they are entitled to demand a bigger share of what’s being produced, a higher wage, but we’re going to negotiate over that and it’s going to go up incrementally.’ It’s not going to be a crisis where some businesses can’t operate at all and we’re not going to have a situation where, you know, I mean, we did, of course, in this country, we had big gains for industrial workers and people who were left out of that, a lot of women, a lot of people of color, were working in more precarious situations, so we certainly, but we had some notion that we’re going to do this in an inclusive way, and places like Scandinavia, of course, carried that much further. But that’s an actual, it’s a problem that has to be solved. So I think that we were going to have to have some really difficult problems that were going to take a lot of people, policymakers, opinion leaders and relatively privileged people out of their comfort zone, and so in a way, the fact that we’ve had this high inflation means that we can kind of put off those conversations for a while, hopefully not forever from my point of view, but it shifts the conversation back to something where they’re much more comfortable with about , ‘Oh, people just have too much, we just need to have less man and less economic security,’ an argument that’s much easier to make when inflation is 8 percent, than if we had a situation where prices were behaving pretty reasonably and it was just the fact that workers were getting higher wages and businesses were getting less profits, that would be a trickier conversation, it would be harder to go on CNN and squawk about that, or MSNBC, whatever the thing was we were watching.
Josh Mason: So I think you’re onto something actually quite important there.
Nima: And also, you know, part of the conversation always relies on what kind of public spending is allowed to be discussed, is allowed to be on the chopping block, right? I mean, meanwhile, all of these conversations are happening, military spending continues to grow, right? So it’s what gets to be discussed as part of a solution as a part of the problem and what is kind of off the table there. As you kind of set up, there can be alternative solutions, not just the Fed can change interest rates, and you have worked a lot on this creating alongside Lauren Melodia, an alternative policy toolkit. Can you talk us through what some of these alternatives can be? What is that broader imagination of what can be different maybe in the current reality and also maybe even more expansive?
Josh Mason: Yeah, well, I think the starting point here, the beginning of wisdom is to say there is no inflation, there are a bunch of different price increases, and different solutions are going to be called for in different cases, there’s not going to be a one-size-fits-all solution. So rents are rising rapidly today. So that’s a problem, obviously. But what do we do about that? Interest rates are not going to solve that problem. The only way interest rates help there is by making people too poor to afford their own houses, if enough people, you know, have to double up, say with live with their parents or become homeless eventually, or if people, you know, are forced to live in cheaper areas where there aren’t any jobs. Anyway, the point is a bad solution. Good solution. Well, on the one hand, we need more housing. And we can debate, it’s obviously a very lively debate, what mix of public spending and land use reform we need for that, but some combination of those things to get more housing, and then this is one area where we have price controls, rent regulation, a lot of the country has, not a lot, but some parts of the country have rent regulation, it’s actually, there’s a lot of support for it elsewhere. This is a form of price regulation that is well established, that makes sense and that works, and there’s a lot of evidence, it does not discourage new construction, because the places where rents are going up is where nothing’s getting built anyway, because of land use rules. So that’s housing. Now, should we have price regulation for cars? Maybe that’s not really a solution there. Maybe, you know, in some cases, we might even say, look, this is actually a short-term problem that private markets know how to solve, we don’t need to treat it as a crisis. If automakers miscalculated about the course of demand, they didn’t order enough semiconductors, now there’s a shortage, that’s a problem that’s going to take care of itself. They screwed up, they know they screwed up, they’re working on fixing it, you don’t need to read, you know, to feel like this is some crisis, you need to throw the whole economy into a tailspin for and it’s a purchase that people can put off in most cases. So it’s not an, maybe that’s one where we say, you know, this is not, then you look at energy prices, well, there’s a clear problem there, and maybe there again, we need some mix of price controls, maybe we target the excess profits being claimed in that industry, the way folks at Groundwork are talking about, and in the long run, we really need to build up alternatives, we need to transition away from fossil fuels, and even in the short run you can make transit free all over the country. You know, somebody said, I think somebody said, you know, we should have Biden buses, this should be a signature thing. Every bus in the country should run free, put up the federal money to make that happen, and Biden should completely own it, you know, take the bus, you can’t afford to drive a car, take the bus, everybody gets on the bus, hey, this is great, and some people discover actually, you know, the bus is not a bad option for me. Another thing here in California where I am now, they just said we’re going to send out a check to every household in the state, well, everybody who files taxes so, but it’s not the key thing is it doesn’t matter if you have a car or not, you’re going to get a check, which is basically reflects the excess amount that people are paying for gas right now. Does that bring down gas prices? No, probably there’s not a whole lot we can do in the short run to bring down gas prices. I said this is a global market, the capacity in the industry is what it is, but you can protect people from the economic hardship by sending them money, which is something the government is actually very good at doing and something you can do very quickly. And then, you know, you’ve got areas like healthcare, education, not a big source of rising prices right now, but you know, historically they have been, and maybe they would be in the future, and those are areas where there’s already extremely deep involvement by the public sector, and where direct regulation of prices shouldn’t even be controversial because so much of the funding comes from the public sector, there’s so many regulations and so many other areas, there’s really no reason not to just say, you know, we’re going to have some rules about how much college tuition can rise, but we’re going to have rules about how much you can charge for prescription drugs that has a lot of support, and then just to sort of run through it. Another area, you know, which is not necessarily a new problem, but a chronic problem, is the high cost of childcare. Well, childcare is not about corporate profits, it’s not about, you know, the margins of childcare are very, very low. These businesses, this is not a big business that’s making huge profits and it’s not about global prices. It’s not about labor shortage, it’s just about the fact that it is really expensive to care for small children, because to do it responsibly, each adult can only care for a few of them. So what do you do there? The only way you make it affordable is through some kind of public subsidy, you’ve got to put public money in to make this service affordable. That’s the only solution. So if we actually step back and say we’ve got a bunch of prices that we’re concerned about, we’re going to find, we’re going to look at different tools to manage different ones. But I think one tool we probably don’t want to use anywhere is rising interest rates. I don’t think that helps at all, except eventually if we actually trigger a recession and prices fall as people are losing their jobs and losing their homes, and that’s, you know, it’s not worth it.
Adam: Well, sometimes you got to bomb a village to save it, right?
Josh Mason: Yeah, well, I’m sure that’s what Larry Summers would tell us. Yes.
Josh Mason: You can have him on next.
Adam: If people are dead from freezing to death due to homelessness this winter they can affect unemployment.
Josh Mason: That’s right. Rents will come down.
Nima: That’s right.
Adam: That’s true. That’s more dead people.
Nima: Yeah, well, I think that’s an appropriately dark way for us to end. But we have been speaking with Josh Mason, Associate Professor of Economics at John Jay College at City University of New York and a fellow at the Roosevelt Institute. Josh, thank you so much for joining us today on Citations Needed.
Josh Mason: Thank you for having me.
Nima: And that will do it for this live interview. Thank you, everyone for joining us live, especially all you patron supporters that continue to support us, we can’t do the show without you so we so appreciate that. If you are not yet a Patreon supporter, please do consider joining up and helping us keep doing these shows. You can find our Patreon link at Patreon.com/CitationsNeededPodcast, and in the meantime, of course you can follow the show on Twitter @CitationsPod, and at Facebook Citations Needed, So until next time we want to thank you again for listening. I am Nima Shirazi.
Adam: I’m Adam Johnson.
Nima: Citations Needed is produced by Florence Barrau-Adams. Associate producer is Julianne Tveten. Production assistant is Trendel Lightburn. Newsletter by Marco Cartolano. Transcriptions are by Morgan McAslan. The music is by Grandaddy. Thanks again for listening, everyone. We’ll catch you next time.
This Citations Needed live interview was recorded with a virtual audience on Friday, July 8, 2022, and released on Wednesday, July 13, 2022.