Washington, D.C.’s think tanks produce a tsunami of studies, reports and manifestos. Most of it has a readership that, outside of wonks and reporters, could be counted on the fingers of one hand.
It truly matters that this not be the fate of a new paper from the Center for Economic and Policy Research, Fed Up, and the Center for Popular Democracy.
Titled “The Full Employment Mandate of the Federal Reserve: Its Origins and Importance” – WAIT, don’t switch tabs and check Facebook! – it’s a history of the economic policies of the civil rights movement, the movement’s focus on capturing the Fed’s power to generate full employment, how they partially succeeded, and why we have to fight right now to preserve their accomplishments. It deserves to be discussed and carefully studied by absolutely everyone on the left side of the political spectrum — Democrats, Greens, Hillaryites, Berners, Autonomous Collectives, and miscellaneous.
Before looking at what the paper says in detail, I want to explain my own perspective on why it’s so significant.
Ask yourself this: When was the last time you sat around with your family and friends talking about the Federal Reserve? By far the most likely answer is never, because you are normal human beings.
But when was the last time you all hashed over one of you needing a job, or your health care coverage, or your asshole boss, or the chances you’ll get laid off? The answer to that is, you never stop talking about it.
The combination of these two things is truly bizarre, because the Fed has more power than any institution over everything about work in America.
Here’s how the Fed does it:
The Fed largely sets short term interest rates. If it lowers interest rates it heats up the economy, because cheap money makes it easier for entrepreneurs to start new businesses, for old businesses to expand, and for everyone to borrow to buy expensive stuff like homes or cars. That in turn generates new jobs and lowers the unemployment rate. And low unemployment takes leverage away from employers and gives it to employees, making it far, far easier for everyone to get raises and demand decent working conditions.
Meanwhile, the 0.1 percent who actually own and operate the country generally do not want full employment — and keep a close eye on the Fed to make sure it doesn’t make it happen. Why? Straightforward class conflict. For instance, a current Ohio business owner who’s feeling pressure to raise wages to attract workers recently told the New York Times, “I sometimes wish there was actually a higher unemployment rate.” Full employment would also tend to raise the rate of inflation, thereby reducing the value of government and consumer debt — which is largely owned by the creditors at the top of the economic pyramid – and relieving the burden on all the debtors down below.
So the Fed sits right at the center of American politics. Yet for most of us, it might as well be invisible.
How can this be?
The explanation is a phenomenon known in anthropology as “social silence.” Here’s how Gillian Tett, the U.S. managing editor of the Financial Times, describes it:
… the way that an elite typically stays in power in almost any society is not simply by controlling the means of production (i.e. wealth), but by shaping the discourse (or the cognitive map that a society uses to describe the world around it). And what matters most in relation to that map is not just what is discussed in public, but what is not discussed because those topics are considered boring, irrelevant, taboo or just unthinkable. Or as [French anthropologist Pierre] Bourdieu wrote: “The most successful ideological effects are those which have no need of words, but ask no more than a complicitous silence.”
In other words, the Federal Reserve hasn’t vanished from political debate despite the fact it’s so critical to our lives, but because it’s so critical.
None of this is a conspiracy. It’s just the way human societies work, as natural as water running downhill.
However, with enormous amounts of effort, political movements can break social silence and force what truly matters onto the agenda of the whole country.
Doing that with the Federal Reserve was one of the key accomplishments of the civil rights movement. Yet since the 1970s what happened has slowly slipped from popular political memory, letting social silence once again envelope the Fed. What “The Full Employment Mandate of the Federal Reserve” does is excavate this buried history and explain its tremendous continuing relevance.
If all you know about the modern civil rights movement comes from TV or one class in high school, it seems like it started with Brown vs. the Board of Education in 1954 and was mostly about desegregating schools, lunch counters, and water fountains.
In fact, its roots were in the Great Depression of the 1930s and then World War II in the 1940s. And the war powerfully demonstrated something that had only been theoretical before: that democracies can set government policies that create full employment.
This meant more for African-Americans than anyone. Blacks had always been locked out of decent work, with unemployment rates far higher than that of whites. But the war created the demand for so much labor that for the first time significant numbers of blacks could find good jobs and gain a small toehold of economic security. The question was what would happen when the war ended.
The paper quotes Willard Townsend, a prominent African-American union leader, saying this in a 1944 speech at Fisk University in Nashville:
Will peace destroy the gains toward full employment of the Negro? What will be his status at the end of hostilities? A depressed economy has always meant but one thing for the Negro worker — widespread unemployment. If we have an economy of full employment, it will establish a framework favorable to the continuing occupational advancement of the black worker; and to the removal of white worker’s fear of him as economic rival.
Noticeably, Townsend’s perspective was not just that full employment was critical for the material well-being of African-Americans, but that it would in fact weaken white bigotry. How true that it is is certainly up for debate. But it’s a reasonable read of human nature, since people are far less hostile to others and more willing to share in environments of plenty than in environments of scarcity.
Regular Americans’ post-war economic hopes were embodied in the proposed Full Employment Act of 1945, which stated that the government must “assure the existence at all times of sufficient employment opportunities” for all adults. But after it passed the Senate, the bill was partially neutered in the House — not just by GOP business interests but by Southern Democrats who clearly understood how it would change racial power dynamics. Among the bill’s leading opponents were Rep. William Whittington of Mississippi, who thanks to Jim Crow was elected by just 4,000 people in a district of 435,000, and Rep. Carter Manasco of Alabama, who worried that full employment would let sharecroppers leave for better work elsewhere. The equivalent of today’s D.C. Twitterati liked to joke that the bill had been “Manascolated.”
This did not lead the civil rights movement to discard the economic side of its agenda. The 1963 rally at which Martin Luther King Jr. delivered the “I Have a Dream Speech” was officially named the March on Washington for Jobs and Freedom, and in its planning stages had been called the Emancipation March for Jobs. One of the most prominent placards at the Lincoln Memorial was “Civil Rights Plus Full Employment Equals Freedom.”
Afterwards the Kennedy administration showed some openness to the civil rights part of that equation — but none at all to the full employment part. So two of the movement’s leaders, A. Philip Randolph and Bayard Rustin, drafted the “Freedom Budget for All Americans.” One of its central demands was “more effective public control of the Federal Reserve.” King called the Freedom Budget “essential if the Negro people are to make further social progress.”
In a speech four days after King’s murder in 1968, his widow Coretta Scott King declared that “we must carry on.” The civil rights movement, she said, had fought for desegregation and voting rights “so that we could have political power. And now we are at a point where we must have economic power. … Every man deserves a right to a job.”
The most powerful, lasting impact of the Full Employment Act is that (together with the Federal Reserve Act of 1977) it made it explicit that Congress was giving the Fed a “dual mandate” of maintaining reasonable price stability and maximizing employment. The 0.1 percent had always preferred that the Fed focus solely on inflation, pushing it to raise interest rates and throw people out of work at any sign of rising prices, real or imagined.
At the bill’s signing, Scott King recognized the momentousness of what had just happened, saying:
This is indeed a great historical occasion, perhaps as significant as the signing of the Civil Rights Act of 1964 and the Voting Rights Act of 1965. Perhaps in the future, history will record that it may be even more significant, Mr. President, because I think it deals with an issue on a basic human right that’s the most basic of all human rights, the right to a job.
The 40 years since have shown exactly how right she was, even if we’re still a long way from full democratic control of the Fed.
As the paper points out, almost all America’s economic sages were certain that we’d reached full employment in the mid-1990s, and that the Fed had to raise rates to head off a dangerous bout of inflation. Instead the Fed held rates steady and sometimes actually cut them. The unemployment rate fell to 4.0 percent, the economy grew far faster than the experts believed possible, and for the first time in decades labor markets worked for regular people. The median wage for African-American men rose by 8.9 percent, and by 11.2 percent for African-American women. Comparable numbers for Latinos were 6.5 percent and 10.2 percent.
Likewise, the dual mandate made it easier for the Fed to massively intervene to keep the 2007-9 economic collapse merely horrendous for Americans, rather than absolutely catastrophic. By contrast, the European Central Bank’s orders are to “maintain price stability,” period. That’s one reason Greece and Spain saw unemployment explode to levels unimaginable in the U.S., at one point over 25 percent in both countries.
But if we’ve forgotten this history and why the Fed matters, the right never has.
Conservative pundit George Will fulminates endlessly on the danger of regular Americans seizing the power of the Fed for their own benefit. Mike Pence, Speaker of the House Paul Ryan, and Trump’s Director of the Office of Management and Budget Mick Mulvaney have all supported attempts to kill the full employment part of the Fed’s mandate. And Pence co-sponsored a 2008 bill to eliminate the Full Employment Act completely.
Less awful but still dangerous is the Financial CHOICE Act, which passed the House a month ago. While the headlines were about the bill gutting the Dodd-Frank Act’s restrictions on Wall Street, it also would impose strict rules that would limit the Fed’s freedom of action in economic emergencies, and change its structure in ways that would give private banks more influence.
So gather all your people together, share “The Full Employment Mandate of the Federal Reserve” everywhere, and get started with some economic consciousness raising. The few would far prefer that U.S. politics maintain its four decades of discreet silence about the Fed. The many have to recover our own story and start talking.