Thread by @LittleKeegs0

Did not think "The Three Worlds of Welfare Capitalism" would build up to such a incisive and devastating critique of capitalism. This book slaps

The critique is basically that capitalism can't handle the wage demands of full employment while maintaining decent growth and low, steady inflation.
High wage demands lead to lowered profitability, therefore less investment and less growth. It also leads to wage-push inflation.

Lowered competitiveness too! You can attempt to divert these wage demands into welfare state expansion ("only raise wages by 5% and gov. will increase pensions by 5%"). This requires tight solidarity between workers and non-workers. But even then, consumption remains high.

Plus, the welfare state expansions must be funded. You can fund them through tax increases-but this will just raise wage demands, as it cuts into real wages. You can fund them through deficits-but remember, inflation is an issue too.

The alternative is to funnel wage demands into command of capital, returns on which can even fund pension increases: the Meidner. But this provoked a harsh response from capitalists, seeing it as a step too far against... well, capitalism. The neo-corporatist system broke down.

This analysis requires some modern updates. First, the effect of wage demands on inflation seems overstated (remember, this book came out in 1990). The Phillips Curve actually seems pretty flat:
paulkrugman.substack.com/p/stagflation-…

Second, with decent policies, private employment will probably shrink over time. Healthcare, education, childcare, and elder care should be mainly socialized, and it often is in many countries.

https://twitter.com/jdcmedlock/status/1378199270705127431?s=20

This means monetary policy to control inflation is important, and the public sector will be the source of many labor conflicts in the decades to come. But the original point still stands, I think. And it means we have to be careful.

Full employment empowers leftist movements, but steady full employment requires socialism, but movements toward socialism can hurt full employment due to political and financial reaction from capitalists. There is no win-win scenario.

PS: full employment has not been obtained in the US. Even if it was, it's weaker without strong unions. We still have lots of room to easily expand welfare. This is not a top priority right now in the US: but it's something to think about!

Whoops *the Meidner Plan*