(08-31-2018, 03:57 AM)Kinser79 Wrote: In a generally deflationary cycle of say 1-2% deflation the poor's purchasing power would increase yearly.
Sigh. No it wouldn't. A general deflationary cycle means prices of things, INLCUDING LABOR, go down. So, in a generally deflationary cycle of 1-2% deflation, the poor's purchasing power would remain unchanged.
However the purchasing power of dollars (or dollar-denominated financial assets like debt) would rise. This means the real cost of servicing debt would increase with 1-2% deflation. People like farmers who have to borrow at planting season would find the price they get at harvest less able to retire debt as time goes on. A string of bad years would become increasingly likely to bankrupt them as the deflationary trend continued. This monetary relation was the source of the agrarian anger that fueled the rise of the Populist Party in the 1890's, who promoted bimetallism as a solution.
For workers, deflation was not a problem, since they did not borrow. Their concern was poor working conditions, job insecurity and poor compensation which they attributed to an imbalance of power between a poor, politically powerless worker and the rich politically-connected employer. Their proposed solution was collective bargain which aggregated labor into a single negotiating unit who by removing their labor, could shut off cash flow needed to service debt and pay managerial staff and creditors. They often adopted Marxist theory as a justification for their right to do that (as collective bargaining was illegal). Politically they manifested as Labor, Socialist-Labor (e.g. Wobblies), Socialist and the Communist organizatons. During the New Deal era, they allied themselves largely with the Democratic party, which for a brief period of about 30-40 years functioned more or less as an American labor party (or the closest we ever got to one of those).
Because monetary policy was critical for agrarian populists, but not for industrial workers, while socialist/labor issues were critical for industrial workers, but not for farmers it was difficult for these two groups to find common ground. But they tried mightily. The Minnesota Democratic party is still called the Famer-Labor party as a holdover of these long-ago times. The entire basis of their alliances, when they formed, was "the enemy of my enemy is my friend". Both hated corporate America. For the farmers it was the railroads who with their monopoly fucked them royally with high rates. For the workers it was their employers, who fucked them over whenever they wanted to and enjoyed it when they did. They unified briefly under the Democratic party under the leadership of William Jennings Bryan of "cross of gold" fame in 1896. Thirty-seven tears later, FDR made a bid for their support by taking the country off the gold standard, which immediately halted the deflationary spiral and allowed a recovery to begin.
Although not complete the change in direction was enough for FDR to add to his Congressional majority in 1934 and 1936 so that it became so large that even after he was hammered worse than Obama in 2010 in 1938, Democrats still held a majority. His victory in 1940 and his decade-long Congressional majority made FDR the unquestioned commander in chief going into WW II. The result was a degree of political domination for 48 years after 1932 than was similar to what Lincoln had achieved for his party.