The Secret History of How the Super-Rich Have Kept the Working Class Out of Work

New Yorkers in need wait in a long line to receive free produce, dry goods, and meat at a Food Bank for New York City distribution event on July 29, 2020.

Tim Gurner, an Australian real estate titan and multimillionaire, made international news last week by being recklessly honest about his desire for unemployment to spike and regular workers to suffer. Gurner has been understandably condemned for this across the globe and has now issued a weak, vague apology.

What truly deserves attention is why Gurner feels the way he does — and how it’s precisely explained in an essay written in 1943, titled “Political Aspects of Full Employment.”

In it, Polish economist Michal Kalecki argued that government spending could ensure a permanent economic boom with both low unemployment and increased business profits. Crucially, however, Kalecki predicted that business executives would hate having what everyone else sees as a good economy, because it would allow regular people to be less subservient to them. For the business class, no amount of money can replace the daily joy of watching your inferiors grovel when in your presence.

Gurner made his remarks to fellow executives during an event called “The Australian Financial Review Property Summit.” (The Australian Financial Review is loosely analogous to the Wall Street Journal in the U.S.)

“Unemployment has to jump 40, 50 percent in my view,” Gurner explained, with the cool affect of a sociopathic surgeon explaining why he has to cut into your body. “We need to see pain in the economy.”

The initial Covid-19 era, with increased social spending and low unemployment, gave workers more power in the labor market and the willingness to use it. Ever since, business executives and government officials have been expressing sentiments like Gurner’s, if slightly less bluntly.

Last July, The Intercept obtained an internal Bank of America memo that stated “we hope the ratio of job openings to unemployed is down to the more normal highs of the last business cycle.” Translated into English, this means the bank was rooting for there to be fewer job openings.

Likewise, a California real estate CEO said on an earnings call last year that a recession could be “good” if “it comes with a level of unemployment that puts employers back in the driver seat and allows them to get all their employees back into the office.”

Around the same time, an anonymous Texas businessman told the Dallas branch of the Federal Reserve about his delighted anticipation that “the workforce pulls its head out of its rear when a correction or recession makes jobs scarce and people start to feel the pain or fear of not providing for their family and loved ones.” He did have one concern, however  — that the government might “jump back into the fight and pay them to do nothing again.”

Even Janet Yellen, the current secretary of the Treasury and former chair of the Fed during the Obama administration, wrote this in a 1996 memo: “Unemployment serves as a worker-discipline device because the prospect of a costly unemployment spell produces sufficient fear of job loss.”

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What’s striking about these sentiments is they don’t always involve complaints that low unemployment is allowing workers to bid up wages and thereby hurt businesses’ profits. Gurner’s soliloquy in particular has little to do with fears that he and his fellow titans of industry are making less money. The website of his company is filled with braggadocious reports about how it’s thriving. Australia’s GDP, after falling in 2020 during the first year of Covid-19, has bounced back vigorously and appears on track to grow at about the same rate as it has over the past 20 years.

Rather, his complaint is that regular non-titans have more leverage with low unemployment — and hence are getting uppity and not showing due deference to their betters.

“We need to remind people that they work for the employer, not the other way around,” Gurner said. “There’s been a systematic change where employees feel the employer is extremely lucky to have them, as opposed to the other way around. It’s a dynamic that has to change. We’ve got to kill that attitude, and that has to come through hurting the economy.”

Kalecki perfectly understood the psychological suffering that low unemployment caused executives like Gurner 80 years ago.

He was writing in the midst of World War II, at a time when capitalism had produced catastrophic recessions for the past 100 years. Enormous swaths of the population had been intermittently thrown out of work and into terrifying destitution. This had culminated in the Great Depression of the 1930s, when John Maynard Keynes and other economists proposed a solution for these vertiginous falls: The government could just spend money to get the economy going again.

This had been proven to Kalecki’s generation by what they saw right in front of their eyes: a gigantic world war that put everyone back to work. Kalecki started his essay by declaring “a solid majority of economists is now of the opinion that, even in a capitalist system, full employment may be secured by a government spending program.” It didn’t require armed conflict, though: Socially productive spending or just handing out money to everyone would do just as well.

The key limiting factor, Kalecki believed, was not some shortage of money, since the government could create as much money as it wanted. Rather, it was the productive capacity of the economy. For this perspective he is recognized as a key forerunner of modern monetary theory (especially by people who hate him). As Stephanie Kelton, an economics professor and present-day proponent of MMT, has put it, “the government really could give everyone a pony … so long as we could breed enough ponies. … [The ponies] have to come from somewhere; the money is conjured out of thin air.”

At the time, given the incipient Cold War between the U.S. and the Soviet Union, you might imagine that business leaders would rejoice at this argument. After all, they could largely eliminate pressure for radical change, while keeping capitalism. Moreover, Kalecki argued, “higher output and employment benefit not only workers but entrepreneurs as well, because the latter’s profits rise.”

There was a big, big problem, however. Here’s how Kalecki described it:

Under a regime of permanent full employment, the “sack” would cease to play its role as a disciplinary measure. The social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would grow. … “[D]iscipline in the factories” and “political stability” are more appreciated than profits by business leaders. Their class instinct tells them that lasting full employment is unsound from their point of view, and that unemployment is an integral part of the “normal” capitalist system.

In the U.S., the issue was dealt with via subterfuge. There would be some government spending. One of the congressional proponents of the huge national highway system built during the 1950s explained that “it put a nice solid floor across the whole economy in times of recession.” 

But while government expenditures would reduce the severity of recessions and the concomitant unemployment, they wouldn’t be enough to eliminate them. And crucially, this spending would be focused on the military; the highway project was largely sold as necessary to national defense. (There’s even a page on the U.S. Army’s website about it.) 

The dream of a full-employment economy generated by social spending endured only at the fringes: At the same 1963 demonstration at which Martin Luther King Jr. delivered his “I Have a Dream” speech, United Auto Workers President Walter Reuther said, “I take the position if we can have full employment and full production for the negative ends of war, then why can’t we have a job for every American in the pursuit of peace.”

In any case, Gurner’s class instincts are telling him exactly what Kalecki foretold. He informed the crowd last week that “governments around the world are trying to increase unemployment to get [worker attitudes] to some sort of normality.”

The reality is that we have the tools to create a much better, richer society for everyone. But the people at the top would prefer a worse, poorer country, if that’s what’s required for them to stay completely in charge.