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Via Workers World News Service
Reprinted from the March 13, 1997
issue of Workers World newspaper
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Why does fed head fret about wages?

By Fred Goldstein

Workers in the United States may be somewhat less insecure about losing their jobs. They may be in the mood to press for raises, according to the chief banker, Alan Greenspan, head of the Federal Reserve Board.

And that is such a dangerous thing, Greenspan told Congress Feb. 26, he is considering a pre-emptive strike to head off any such development.

But although Greenspan wants to attack the workers, he is also afraid that such an attack could bring on a 1929-type collapse. This has created an insoluble dilemma that is understandably aggravating him and U.S. capitalism's financial overseers.

Worries about 'wage inflation'

Workers are getting more confident because the capitalist boom has increased the bosses' demand for labor power. This is slowly bringing the workers out of the totally defensive position they have been in since the epidemic of downsizing and restructuring spread like wildfire and traumatized the whole class.

It is giving them a new, although cautious, confidence. Real wages have risen slightly-about .5 percent-in the past year.

The only way to counteract this tendency is to slow down the boom and raise unemployment. Greenspan would like to be able to engineer a soft landing. But to slow down the boom means to reduce the volume of profit.

The wild orgy of stock speculation on Wall Street is based on obscene profits flowing from the giant corporations. So any attempt to attack the workers by choking off the boom could precipitate a stock market crash. Such a collapse of paper value in this leveraged economy could be a precursor to an economic collapse.

As the stock market zooms higher and higher, any move to slow the expansion gets riskier and riskier.

Greenspan showed his aggravation in December with his famous remark about "irrational overexuberance" in referring to rising stock prices. The speculators heeded him for 24 hours. Then they rebounded with another orgy of investment.

In the month of January they put $24 billion into mutual funds. That was the fourth highest monthly figure on record.

Thus, when Greenspan went before the Senate bank panel on Feb. 26 he was more blunt and forceful. He said the United States has been able to maintain a "low-inflation environment" mainly "as a consequence of greater worker insecurity.

"In 1991 at the bottom of the recession a survey of workers at large firms ... indicated that 25 percent feared being laid off. In 1996, despite sharply lower unemployment ... 45 percent were fearful of job layoff."

But then he warned that in January 1997 the Bureau of Labor Statistics reported "that people were somewhat more willing to quit their jobs and seek other employment than previously." And worst of all, "wages rose faster in 1996 than in 1995."

Greenspan grimly concluded that "suppressed wage growth as a consequence of job insecurity can be carried only so far. At some point the trade-off of wage growth for job security has to come to an end."

This, of course, means that as workers win raises it cuts into the bosses' profits. The bosses will transfer the burden to society as a whole by raising prices. And this will bring about inflation, which will in turn threaten Wall Street bondholders.

Higher wages are anathema to both the industrialists and financiers. So Greenspan said "we cannot rule out [the possibility that] a ... pre-emptive policy of tightening may become appropriate before any sign of actual inflation." By inflation Greenspan meant wage increases.

In other words, he was saying, it may be necessary to raise interest rates and slow down the economy-the way his predecessor Paul Volcker did under Reagan in 1982. That brought unemployment up to 10 percent.

A calculating class

What are the financiers-who fought every minimum-wage raise, and lobbied to destroy welfare and cut social services in the name of a balanced budget-so up in arms about?

On Feb. 13 the New York Times carried an article on creeping higher pay for workers. The piece was written from Raleigh, N. C., and cited the case of the Austin Quality Foods plant as an example of the new trend.

"Managers here first blamed their agency, Monarch Temporary Services, for failing to recruit enough help at $6 an hour," the Times wrote. " `We went to barber shops, beauty parlors and churches,' said Dolores Smith, Monarch vice president. She left leaflets under windshield wipers. She checked with homeless shelters."

Finally Austin "reluctantly raised the starting pay to $7 an hour." They hired workers who had been making $5.30 an hour at Hardee's.

Such instances are occurring more frequently-which is setting off alarm bells among the millionaires and billionaires in the boardrooms.

Very early in his economic writings, Karl Marx described the capitalist class as a "calculating class." Greenspan is the ultimate calculator. On Feb. 27, New York Times economic writer Louis Uchitelle explained Greenspan's theory of job insecurity, which he is counting on to keep the capitalist expansion going.

"Job insecurity in Mr. Greenspan's hands," Uchitelle wrote, "is a rather complex monetary indicator. That workers are fearful of losing their jobs" is not enough to stop wage growth.

"The sense of job insecurity has to be rising; that is, getting worse. Once it levels off, and workers become accustomed to their new level of uncertainty, their confidence may revive and the upward pressure on wages resume."

Workers must pre-empt bosses

All the calculation in the world will not suppress the ultimate emergence of the class struggle of the workers.

Greenspan is openly conspiring on behalf of the capitalist class to increase worker exploitation and suffering. But exploitation brings rebellion as surely as day follows night.

Greenspan and the Federal Reserve Board can no more abolish the workers' struggle than they can control the capitalist economy's destiny. Tinkering with interest rates cannot stop capitalist overproduction and the crises it brings in its wake. At best, the money managers can accelerate or temporarily retard a capitalist bust.

Greenspan in his own way acknowledged as much in his testimony. He warned speculators against taking things too far.

He said there is "no evidence that the business cycle has been repealed." He also said: "Excessive optimism sows the seeds of its own reversal. .... Is it possible that there is something fundamentally new about this current period? ...

"Regrettably, history is strewn with visions of such `new eras' that, in the end, have proven to be a mirage."

All working-class organizations should take careful note of the malevolent conspiracy afoot on Wall Street to unload its impending crisis onto the workers' backs. The working-class movement should also begin plans to take "pre-emptive measures" to prevent massive layoffs and shutdowns in the event of a collapse on Wall Street.

The surest way to pre-empt such a development is to prepare to take the economy out of the hands of the greedy, profit-hungry capitalists and run it on a socialist basis.

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"It's all going to end very badly": A capitalist worries

Alan Greenspan's Feb. 26 testimony before the Senate Banking Committee was deadly dull. The workers, of course, were not expected to pay attention. But he made telling remarks about the low-wage trend that he's afraid is in danger-and the "preemptive" strike he's preparing.

Greenspan said: "Atypical restraint on compensation increases has been evident for a few years now and appears to be mainly the consequence of greater worker insecurity. ... The reluctance of workers to leave their jobs to seek other employment as the labor market tightened has provided further evidence of such concern, as has the tendency toward longer labor union contracts. ...

"The low level of work stoppages of recent years also attests to concern about job security. Thus the willingness of workers in recent years to trade off smaller increases in wages for greater job security seems to be reasonably well documented. ...

"One possibility [for why] may lie in the rapid evolution of technologies at use in the work place. Technological change has been an important impetus behind corporate restructuring and downsizing. Also, it contributes to the concern of workers that their job skills may become inadequate. ...

"Certainly other factors have contri buted to the softness of compensation growth in the past few years. ... I would be surprised if they were nearly as important as job insecurity. ...

"At some point, the trade-off of subdued wage growth for job security has to come to an end. ... Indeed, some recent evidence suggests that labor markets bear especially careful watching for signs that the return to more normal patterns may be in process.

"We cannot rule out a situation in which a pre-emptive policy tightening may become appropriate before any actual sign of higher inflation becomes evident."

All boom, no bust?

As for President Bill Clinton, he says he's not worried at all. He told corporate leaders Feb. 27 that he agrees with the assertion "that the U.S. economy is performing so well and so differently that long-term business cycles may no longer exist."

No bust, that is. Clinton says it's all boom from here on out.

Contrast that with a dose of reality from Barton Biggs, chief global strategist at Morgan Stanley. He wrote this in a memo to his clients at the end of February: "Like everyone else, I am still pretty fully invested, albeit uncomfortable. The game is so hot you just can't afford to get out if you are in the luxuriant profession of running money for those who demand instant performance.

"Yet in my heart, I suspect it is all going to end very badly."

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