The U.S. Election and People’s Front Politics

A note on the stimulus

I will start with the “stimulus” proposal and how it will affect the evolution of the industrial cycle now beginning. In recent weeks, Trump has been all over the map on the stimulus proposal. In a tweet, he announced that he was ordering the Republicans to end the negotiations with the Democrats. Hours later, after a sharply negative reaction on the stock market, he announced that since the stimulus is desperately needed he is for an even bigger measure than the Democrats have offered.

Trump’s motivation here is obvious. The president, who is sharply down in the polls, sees the mailing out of government checks — with his name on them — as a way to use the vast financial resources of the federal government to buy votes. However, Majority Leader Mitch McConnell and his fellow Senate Republicans have emerged as the main opposition for the stimulus. McConnell is opposed to any aid to ordinary Americans, only to business.

A curious correlation has recently emerged in the financial markets. Whenever the passage of the “stimulus” seems more likely, the stock market rises but so does the dollar price of gold, which measures how much real money — gold — the U.S. dollar actually represents. The higher the dollar price of gold the lower the gold value of the dollar. When passage of a stimulus bill appears less likely, we see the converse. Both stocks and the dollar price of gold fall. That is, U.S. stocks lose dollar value and the dollar gains gold value.

It may seem at first glance that the capitalist class favors the stimulus since the stock market rises whenever passage appears more likely. So isn’t there a common interest between the capitalists — or at least the corporations listed on the main stock exchanges — and the workers, who can certainly use whatever money the government puts in their hands? Due to an accelerating turnover of capital and higher selling prices (to the extent the stimulus checks represent newly printed money that is then borrowed and spent by the U.S. Treasury), as well as higher profits and dividends, stock prices will also rise. Many progressives reason in this way. Only reactionary Republicans, according to them, drunk on their “conservative” or “neo-liberal” ideology are opposed to the stimulus.

Why then does Mitch McConnell, who directly represents the interest of capital as much as is humanly possible, oppose the proposal to put extra money into the hands of the workers if it is so good for profits, dividends, and stock market prices? Is McConnell turning against the interests of business? Hardly. Or is it that he and his donors are blinded by their reactionary conservative, or if you prefer neo-liberal, ideology? Again, the answer is no.

From the standpoint of capital, mass unemployment created by the COVID-19 pandemic provides a unique opportunity for employers to lower wages and increase the rate of surplus value. To the extent that the government feels obliged to put money into the hands of workers if only to damp down unrest caused by the U.S. government’s incredible mishandling of the pandemic, the opportunity to raise the rate of surplus value — the ratio of unpaid to paid labor — is “spoiled” because the workers then feel less desperate and therefore better able to resist the wage cuts.

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