> More generally, the problem for capitalism with politicising the wage
> bargain for purposes of macroeconomic rationality is that it opens the
> door to other political demands around the wage, like the
> old-fashioned demand that profits take the restraint instead. In the
> right circumstances it could be part of a good strategy for a strong
> labour movement – but the Accord shows the perils of accepting wage
> restraint in a weak position and leaving the other side of the bargain
> to the future. I think a wage bargain needs to be combined with some
> serious seizure of the means of production, or at least investment, or
> capital will keep the upper hand. We shouldn't fall into the social
> democratic fallacy of thinking we can just design a more rational
> set-up and imopse it on reality from above.
>
This is great stuff. I've been thinking a lot about these issues, oddly. Hope you don't mind this overlong post.
First off, I see your point about the dangers of accepting an incomes policy based on wage restraint while labor is weak. But I would add this: Through most of the period you're working on, labor was at least structurally strong enough (or held on to enough dregs of past strength) to deter any resort by the authorities to catastrophic recessions as an answer to inflation. That was just "not done" back then. But why was it not done? Partly because of the brute fact that the working class was too strong to have such measures forced down its throat. But also because of the prior existence of institutions "at the ready" capable of offering an alternative to barbarous macropolicy as an answer to inflation - in Australia's case the arbitration system.
My lodestone on this subject is Ton Notermans' book on the history of social democratic economic policy in Europe, do you know it? (I imagine you'd have some smart, critical things to say about it.) So for example, in Europe, Notermans argues that it was historically fortuitous that the Depression had given rise to various state-sponsored price/wage stabilization schemes (often implemented by *conservatives*, especially in agriculture) aimed at preventing *deflation*. As a result, once the postwar boom was underway, there happened to be institutions already in existence that made it possible to permit full employment while *repressing* prices. The counterexample, for Notermans, is the post-WWI years, when the authorities, under pressure from labor, tried to reflate their way to full employment but had no price-repressing institutions, so the immediate result was galloping inflation that led to popular opposition and the experiment being promptly shut down, leading to deep recessions.
So what lesson does that hold for the present? Right now, labor is very weak, obviously - not just in its political strength but in the way current institutions are now designed. The centerpiece of macroeconomic policy is now the NAIRU-enforcing central bank. So the question is - *if* labor were once again to become strong enough to impose full employment as the object of policy, what institutions could be used to counter inflation? This is an important question, since any such revival, if it arrived, could be promptly squelched simply as a result of a failed experiment in full-employment macropolicy in the absence of a price strategy. Such a revival could also be *forestalled* in the first place by the absence of anti-inflation institutions: Part of labor's weakness can be attributed to the intellectual belief (including among many labor people) that there is no alternative to the NAIRU/central bank model. Also, it seems to me there's a chicken-and-egg problem: It's hard to picture labor getting very strong without full employment, but hard to picture a return to full employment without labor getting very strong.
I guess the upshot of these remarks is just that labor should take an interest in this topic, since a key element of any possible revival would fail unless these issues were dealt with. I don't know if you mention this in your dissertation, but you probably know that in the 70s, especially in the US, there was a flurry of work done on various incentive anti-inflation schemes. The crudest and most famous example was Weintraub's TIP, but more complex and sophisticated versions were put about by others, including by Abba Lerner and David Colander, the latter of whom coupled their proposals with some very interesting theoretical work on inflation, picturing inflation as the result of an externality embedded in market institutions. Needless to say, all this work went down the memory hole after our 1982 recession. (The one we "needed to have.")
One final point/question. You say it's not in the power of policy alone to ensure full employment, and cite the fact that without exogenous boom conditions real wages and profits have to grow more slowly come what may. Of course you're right about that. But I don't see the connection - real growth in wages/profits/income is analytically a different issue from full employment. One involves the growth of production potential, the other involves putting to full use existing production potential. Obviously West Germany in 1960 had much lower real wages than the US in 2010, but the former had full employment and the latter most certainly doesn't.
None of this, incidentally, is to deny your point about the limits of policy and the much greater horizons that would open up if control over investment could be wrested. I was a great fan of your essay about the limits of social democracy.
SA