The Federal Reserve’s Killing Floor

People, if I ever can get up off of this old hard killin’ floor,
Lord, I’ll never get down this low no more

— Skip James, Hard Times Killing Floor

A measured dose of hard times has been official government policy for at least the last 40 or 50 years, starting with Jimmy Carter, and before that for most of the period between 1870 or so and 1932 or so. The New Deal and the four or five succeeding presidencies were exceptional.

The Federal Reserve manages the economy by raising or lowering interest rates when unemployment falls below some level. This has the effect of increasing unemployment, which keeps wages flat and prevents “overheating” and inflation.

This is not some kind of secret, backroom policy that the Fed is being accused of. It’s the Fed’s public, officially declared policy. Don’t let unemployment fall too low. For neoliberals, full employment is an enemy.

Whenever times get too good, the Fed turns the interest rate spigot, jobs disappear, and the Skip Jameses of the world are thrown back to the killing floor where they’re supposed to be. Last hired, first fired — who’s that? The misery of those people is a necessary, functional part of the system.

Many years ago I was reading the paper and saw a story about how the labor market was so tight that that companies were were sending buses into the Milwaukee ghetto to pick up workers who didn’t have transportation. Good times! But on a different page of that very same paper I read that a group of bankers, worried that an overheated economy would cause inflation, was saying that interest rates must be raised. Those people cannot be allowed to get off the killing floor.

Economic issues and race issues are closely related and not at all mutually exclusive. If some group is going to be sacrificed every time the Fed turns the spigot, it’s easier to get away with hurting almost everyone if the ones hurt worst are the ones no one else else cares about. Those people.

James’s song (1931) is a Depression song, and while the system then was somewhat different in points of detail, in the most important ways it was about the same thing: “liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate” (Secretary of the Treasury Mellon, 1932). For Mellon the Depression was a good thing, because it would reward the virtuous, punish the guilty, and make the economy more efficient. “Creative destruction”.

Since the 2008 crash and since the COVID crash they haven’t been using the spigot as much as before (though Larry Summers wants to). What this means I don’t know. I think that it means that we’re in serious trouble.

And no, it’s not a long stretch to go from Skip James’s blues to the Fed policies that made that blues necessary. This is a song for which the economic / political reading is much more to the point to the existentialist / subjective reading.