Has the Welfare State Destroyed the Working Class?

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Nick Johnson runs a blog — The Political Economy of Development — that I am rather fond of: he is open-minded and covers with acumen a wide range of essential topics in economics.

I have recently commented on a blog entry by Nick on Thomas Palley as follows:

Excellent summary of Palley’s position.

Palley is absolutely worth reading. His three books are remarkably lucid and coherent, providing a comprehensive analysis of all big sectors of the economy: “Plenty of Nothing”, “From Financial Crisis to Stagnation”, and “Financialization”. They represent an excellent applied introduction to economics. 

Also the author offers tons of heavy duty economics available as pdfs on the internet or in his rather advanced, technical, and difficult textbook “Post-Keynesian Economics”. His work is indispensable for a discussion among the open-minded.

Assuming Palley is right in his economic argument, the return to an political and social order of shared prosperity is severely vitiated by the difficulty of organising labour into an effective social force, having atomised itself by successful demands for a social welfare state.

Today, it is far easier for capital than for labour to organise itself effectively. I follow and extend Palley in claiming that there is a natural tension between capital and labour (which no social system can remove); and this tension is best managed if both sides are fairly strong and balanced contenders; society will be disrupted if the tense balance between capital and labour is upset in favour of one or the other “opponent”; since the mid-1970s we have a pronounced imbalance in favour of capital.