“Under normal conditions, reductions of wages are in our time almost impossible. Even under the worst conditions, capitalists in many cases prefer to endure a diminution of their profits rather than enter upon a struggle with their organized laborers. How many corporations maintain wages unchanged, even though the stockholders – i.e., the capitalists – get no dividends?” (Lexis 1895: 16–17).It is extraordinary that an economist regarded this as already true in the 1890s.
The empirical data here also shows it was generally true for the UK and the US by the 1890s.
It seems clear to me that if there really was strong downwards nominal wage flexibility in America during the recession of 1920 to 1921, then this was a remarkable exception to the general rule of wage stickiness that had already become established in the advanced capitalist world by the late 19th century.
The Austrian economists and libertarian idiots who make so much of this episode in 1920–1921 have mistakenly generalised from one highly anomalous case to the whole pre-1929 period.
But I’m sure that none of them will ever stop pushing the same falsehood in their endlessly derivative and discredited literature and their fantasy-world blogosphere.
“Malthus on Nominal Wage Rigidity,” May 25, 2015.
“Henry Thornton on Downwards Nominal Wage Rigidity,” December 1, 2014.
“Alfred Marshall on Wage Stickiness and Debt Deflation,” November 30, 2014.
“Were Nominal Wages Flexible in 1890s and Early 1900s America?,” January 31, 2014.
Lexis, W. 1895. “The Concluding Volume of Marx’s Capital,” Quarterly Journal of Economics 10 (October): 1–33.