My PhD thesis (1967) was a study of the reaction of BC workers to the economic fluctuations of the interwar period (1st WW and postwar inflation, bust and price deflation, slow and incomplete recovery, depression). My conclusion was that inflation tended to radicalize the workers since it meant a more or less across the board decline in real wages but that the rise of radical labour and political organizations after the war succumbed to the sharp post-war depression and political repressions, plus the rise in real wages for the majority of workers that remained employed, particularly the skilled workers organized in craft unions. The labour political parties remained but more as a rump minority. The impact of the depression was not immediate nor did it affect all equally. The real radicalization was most evident among the single unemployed although the unemployed families who had their water and electricity cut off or were evicted for not paying rent (most were in rental housing at that time) responded in a different, more direct action way -- organizing skilled workers to reconnect electricity, water, moving people back into their homes, etc. In any case, the state responded by providing some relief for the married unemployed. Interestingly, the workers and the craft union movement (if it could be called a movement) became more and more conservative as their (still employed) members' real incomes climbed and they became increasingly identified with the Liberal (i.e. 'Democratic') Party i.e. very modest reform, capitalist party. The labour movement only radicalized and the socialist and social democratic parties began to strengthen only when the economy started to improve in the second half of the thirties and the radicalized former single unemployed became organizers for the new industrial unions and became active in the growing socialist/social democratic parties. Nevertheless, the real explosion in labour organization and radical politics did not really come until the 2nd WW when unemployment fell and workers could go on the offensive (and increases in wartime prices and rationing threatened the real income of all workingclass families.)
This would suggest that should the housing bubble burst (as, I believe it inevitably must) and, as Michael suggests, the economy goes into a prolonged recession, we should perhaps see only a radicalization of the most affected and, if they are the unemployed or the dispossessed, a fragmented and individualistic response. However, what makes this period possibly different is the potential for cost-push (energy prices) inflation threatening the standard of living of all workers/consumers, whether organized or not. This could create the conditions for a more collective and radical response, though only on the basis of new organization. In short, the response will not be immediate but would follow from the buildup of new political movements (i.e. you can't build political movements in anticipation of a 'crisis', only as a consequence of such a 'crisis'). At least, that is what I concluded in my PhD research. Paul Phillips Michael Perelman wrote:
The aftershocks of the housing bubble could be more important than the bubble itself. This is not a prediction of a speculation. The Maestro has claimed that the wealth effect of the housing bubble is greater than that of the stock bubble. If so, then the effect on aggregate demand could be significant, especially because construction and the spending that follows it, such as furniture and appliances, is a significant part of the economy. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
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