German Reunification and De-escalating Labour Market Conflict through a Basic Income

So I have been watching the Netflix doco “A Perfect Crime” which focusses on the assisination of Detlev Rohwedder, who was the head of Treuhand, the responsible for reforming the East German economy after reunification.

The context of the crime is the conflict between the needs of labour and the needs of capital. East German industry had been set up to make sure everyone had a job, and that those jobs paid well. But the firms were not efficient or competetive in the global market. Making them competetive meant massive economic pain for ordinary East Germans — wage cuts and, especially, job losses.

Here we have a microcosm of the essential class conflict that had driven much of politics in the developed world since the industrial revolution. Capital wants to cut labour cost, workers want to get paid more. Globalisation and cross border wage competition is one face of this problem, but not the only one. Let’s say automation comes along as some predict, and employing people *anywhere* becomes inefficient. Do we deliberately keep doing things the innefficient way as an excuse to give people money? How can doing more work than is needed really be in the interest of workers as a whole?

The problem is we are asking the labour market to do two things at once: efficiently produce goods and services, and provide incomes to support household consumption and prevent poverty. If the basic income is how we support consumption, and the labour market is just for getting things done, we can have it both ways.

This is what some on the left don’t like about a basic income, it deconflicts the labour market. They are so busy worrying about escalating the conflict and winning the fight, they have forgotten what it is we’re meant to be fighting for: decent lives for ordinary people.

They don’t want a way around the fight, they want some kind of (impossible) final and decisive victory, in which the interests of capital are forever vanquished — but that would mean a loss of the drive for efficiency, economies of scale, and so on — which means, as a whole, more work and less stuff for everyone.

If we solve distribution through a basic income, we can allow capitalists to be as ruthlessly efficient as they like, and all those efficiency gains will allow us to pay a higher basic income before we hit the inflationary limit of too much spending and not enough to spend it on, so productivity growth means greater prosperity for all.

But there will still be a labour market where, and this is what I think the left-opponents of a basic income get wrongest, labour has a stronger hand!

They seem to think that because they aren’t fighting for survival, or because they have lost some moral argument about the need for higher wages, workers will accept shitty pay. That might be true in some areas where people really want to work (media, politics, etc). But I think overall the opposite will be true.

People will need wages less, so they will be in a stronger bargaining position to demand more. Many people will leave the workforce entirely, others will work fewer hours, jobs, or years. The overall supply of labour will be constricted, while the demand for goods and services rises. This will give workers — who collectively have guaranteed strike pay, and as individuals always have the option of walking away — immense bargaining power and the wage share of income relative to profit will increase, not decrease.