Listen to SocioEconomic Research Prof. Oren M. Levin-Waldman’s discussion of his most recent essay, “The Elites are Clueless When it Comes to Working People” this Wednesday, April 6, 2022. He can be heard every second Wednesday morning from 10-11am EDT on the Westchester On the Level broadcast. The broadcast is heard “Live” or “On Demand” by clicking onto the hyperlink noted – http://tobtr.com/s/12081261. Please note that the hyperlink changes every second week and is specific to the essay discussed herein. Listeners are welcome to share their inquiry with respect to the topic of the subject discussed. The call-in number to the broadcast is 1-347-205-9201.
NEWARK, NJ — April 5, 2022 — One cannot help but think that we are living in an Alice in Wonderland world. We are confronted by record inflation, but the president of the United States claims the economy is strong. One perhaps might suppose that to be true just looking at a 3.6 percent unemployment rate. But that really says nothing about the joblessness rate, which is usually twice as much. Those who are jobless are often those who dropped out of the labor market for a variety of reasons, including that they were unable to find work before the exhaustion of their UI benefits.
Despite rising energy prices, which has not only raised gas prices at the pump but has fueled inflation across the board because of the increased cost of getting things to market, the administration continues to push for green energy. That this administration is clueless is a given, but unfortunately it is emblematic of just how out of touch the elites are with the needs of the American worker.
The Washington Post would be considered by most to be a progressive newspaper. One might then assume that its owner, Jeff Bezos is also progressive. But one might not know that from the way that Amazon, one of Bezos’s principal companies, treats its workers. Against the wishes of the company, Amazon workers in Staten Island voted to unionize. Only a couple of months ago, Starbucks workers in western upstate New York also voted to unionize. Naturally these companies complained that these moves compromised flexibility.
AOC, the patron saint of all progressive causes, didn’t even show up at the event in Staten Island to lend her support to otherwise oppressed workers, many of whom are workers of color. She claimed it was somebody else’s district, but when did this ever stop her before? Once again, we have on full display elites lecturing ordinary workers how to behave and abiding by different rules.
As far as the elites are concerned, if gas prices are too high, then ordinary workers who are feeling the pinch should eat less meat, and take public transportation. Ideally, they should buy electric cars at a price considerably higher than regular gas cars. Hypocrisy is nothing new, but now we have the same elites pushing green energy while at the same time admonishing workers on their need to be flexible. After all, hardship and poverty are good for them. Does it not cleanse their souls?
Gas prices are high largely because this administration has been waging war on fossil fuels. Because Trump approved construction of the Keystone XL pipeline, Biden immediately canceled it. Not only did this reduce our energy independence, but it killed thousands of good paying union jobs. When Russia invaded Ukraine and we imposed sanctions on their oil, the administration asked Saudi Arabia and other Gulf states to increase oil production. But they refused because the same administration has been dismissive of their security concerns as it races to rejoin the nuclear deal with Iran. Now the administration says it will release oil from the Strategic Petroleum Reserve. But this will be too little and too late. Still, nothing can interfere with green energy.
In typical tax and spend fashion, some members in Congress are talking about giving Americans stimulus checks to pay for increased energy prices. Perhaps nothing dramatizes how out of touch they are than this proposal. When people get money to purchase something whose price is rising, they will only demand more of it because they can now afford it. Increased demand will then lead to even higher prices. Throwing more money at inflation usually leads to more inflation. Controlling for inflation usually requires decreasing demand, which typically accompanies decreases in purchasing power.
Of course, now the elites accept that inflation is not transitory, they want the Fed to do something about it. The traditional Fed remedy is to raise interest rates, thereby contracting the money supply. With money more expensive to obtain, on the consumer side demand for durable goods decreases and on the business side fewer investments are made. Instead of businesses expanding, as they do during periods when interest rates are low, they contract with the immediate effect being that workers lose their jobs.
Controlling for inflation, then, by tightening the money supply invariably leads to recession. And yet, those who make these decisions — economists in the Federal Reserve — will not be losing their jobs. Truthfully, raising interest rates may be good for retirees who will now get more of a return on their investments, but it will come at a cost to those working in industries sensitive to interest rate increases, like automobiles and other durable goods.
It is easy for the elites to preach about what is necessary to aid an ailing economy and to make decisions that they think are good for all, especially when these decisions have no effect on them. Monetary policy, however, is part of the traditional tool box for fighting inflation. Moving full steam ahead on green energy at a time when fossil fuels are needed without even so much as a thought to an overlapping transition period, demonstrates not only that they are clueless, but worse they simply couldn’t care less.
All through the pandemic elites have been dictating to ordinary workers that on-site work is dangerous, and therefore work should be done remotely. Again, this is fine for those who are fortunate to work in industries where work can be done remotely, but many ordinary workers, especially those at the bottom end of the distribution, don’t have that luxury. The same elites have in Downsian fashion of buying the quiescence of the poor to maximize their own interests, have offered stimulus checks to ordinary workers. When in doubt, spend, even for workers who haven’t lost their jobs. And yet, they scratch their heads when workers who have lost their jobs due to lockdowns, opt not to return either because the schools haven’t completely reopened and they have no place to put their children; the jobs they lost were lousy jobs and they just don’t want to go back; or they are still afraid of COVID.
Marxist economists generally assert that capitalist markets are by definition exploitative. When workers, especially low-wage workers, work because they have no choice but to, they are put in a place where they are subject to exploitation by those who pay their wages. The unfortunate reality is that many among the elite are also among the group that exploits. It would be nice if the elites really cared about ordinary workers. If they did, we would see serious policy proposals now, and even policy reversals, rather than the window dressing we have become accustomed to. Unfortunately, too much policy is about creating impressions that things are being done when in reality nothing is being done.