Because it's not just politicians and fundamentalists who are starting to say quiet parts out loud.
The most powerful economic actors in the U.S. — entities like Bank of America and its clients — do not like working people to have power.
A Bank of America executive stated that “we hope” working Americans will lose leverage in the labor market in a recent private memo obtained by The Intercept. Making predictions for clients about the U.S. economy over the next several years, the memo also noted that changes in the percentage of Americans seeking jobs “should help push up the unemployment rate.”
The memo, a “Mid-year review” from June 17, was written by Ethan Harris, the head of global economics research for the corporation’s investment banking arm, Bank of America Securities. Its specific aspiration: “By the end of next year, we hope the ratio of job openings to unemployed is down to the more normal highs of the last business cycle.”
What the memo calls “the ratio of job openings to unemployed” is generally calculated the other way around — i.e., the ratio of unemployed people to job openings. The more widely used ratio offers one measurement of the balance of power between workers and employers. The lower this number, the more options unemployed people have when searching for work and the greater opportunities employed people have to switch to jobs with better pay and conditions.
The memo is an uncanny demonstration that the economist Adam Smith was right when he described the politics of inflation in his famed 1776 work, “The Wealth of Nations.”
“High profits tend much more to raise the price of work than high wages,” Smith argued. “Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price. … They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.”
Thus, exactly as Smith would have predicted, Bank of America complains loudly about the bad effects of high wages in raising prices, but appears to be silent about the pernicious effects of high profits.
This is especially remarkable given the role that corporate profits have played in the recent increase in inflation. After-tax corporate profits stood at 8.1 percent of the economy at the beginning of 2020 but have since shot up to as high as 11.8 percent of the GDP. In an economy the size of the U.S., that equals an increase of more than $700 billion in profits per year. These higher corporate profits have been the cause of over 50 percent of recent price increases.
Instead, the memo is focused on the enticing prospect of the Federal Reserve raising interest rates, slowing the economy, and bludgeoning workers back into line.