Yves here. As an accompaniment to this article, please read (or re-read) Michal Kalecki’s classic essay on the obstacles to achieving full employment.
By Pavlina R. Tcherneva, Associate Professor of Economics, Bard College. Originally published at the Institute for New Economic Thinking website
Global unemployment is expected to surpass 200 million people for the first time on record by the end of 2017, according a recent ILO study, and limitations of official statistics suggest that the problem is much larger . As conventional measures increasingly fail to produce tight labor markets and jobless recoveries become the norm, economists grapple with this new reality by calling it secular stagnation and by adjusting upwards the rates of unemployment deemed ‘natural’ — but the human, social and economic costs of this growing problem are rarely considered in economic modeling.
The Problem: A Global Unemployment Epidemic
Mainstream economic theory considers some level of unemployment to be ‘natural’ (i.e., unresponsive to policy remedies without creating some other problem like inflation), but it largely ignores the harsh human, environmental, and economic costs of unemployment. In fact, some of the best work on this question comes from disciplines outside of economics.
It’s not hyperbole to note, for example, that unemployment kills. Literally. Research shows that one in five suicides is related to unemployment, and joblessness causes 32–37 percent excess mortality for men. And while for women the impact is less clear, we know that there are robust and lasting negative effects from unemployment on social participation and social capital – all prerequisites for a fulfilling and productive life at home and in the workplace. The deep negative impact of unemployment on individuals’ mental and physical health is well-established. And joblessness has been found to have strong scarring effects on life satisfaction.
The link between crime and unemployment is also well-established. Certain criminal activities vary with the business cycle, and studies have found significant and sizable impact of unemployment on the rates of specific violent and property crimes. The connection between youth unemployment and crime is particularly troubling in the context of the ILO’s findings that 74 million young people are unemployed globally (one third of their overall global unemployment estimate). Other studies suggest that the actual number of jobless youth around the world may be six or seven times the ILO estimates.
Unemployment doesn’t just harm the unemployed. It also harms their children and families. It exacerbates infant mortality, depression, alcohol consumption, and the spread of infectious disease. And joblessness is a root cause of human/child trafficking and global sexual and labor exploitation.
This list only scratches the surface of the insidious effects of unemployment. While the ‘natural’ unemployment rate is embedded in virtually every forecasting model used by government and industry, none of them account for the extraordinary social and economic costs of the epidemic that this ‘natural rate’ actually represents.
The Solution: A Global Marshall Plan for the Unemployed
Because the social and economic costs of unemployment spread and reproduce in complex and pernicious ways, it ought to be treated like an infectious disease. The policy response should aim at inoculation against unemployment, not at countering its effects.
Today, when governments tackle the issue they focus on counteracting its impact after mass layoffs have already occurred. Monetary and fiscal measures are fine-tuned to produce investment-led growth, but they are usually too weak and always too late.
But instead of accepting rising levels of unemployment, a preventative policy of inoculation is needed, which avoids accepting unemployment as natural in the first place. Such a policy requires providing decent jobs at decent pay to all who want to work on as-needed basis: A Global Marshall Plan for the unemployed.
As economists rediscover the limits of monetary policy, the policy discourse is shifting. Calls for strong fiscal policy intervention are coming from unlikely places. And while some countries cling to austerity like lovers in a dysfunctional relationship, a new era of fiscal policy activism is near.
Whether by deliberate policy design or by necessity, governments will have to respond to the looming economic, social, political and environmental challenges by using their fiscal powers. Preferably, this would happen by design. Otherwise, it will arrive in the form of inadequate ad hoc emergency measures.
This proposal is for a coordinated approach in the form of a Global Marshall Plan for the unemployed that tackles a wide array of global problems by deliberate and direct action, and by mobilizing the planet’s most abundant resource – labor.
No workfare, no bullshit jobs, no compulsory work, no digging holes. A global Marshall plan would offer employment opportunities to the unemployed in every country, while addressing country-specific problems. As the world faces the consequences of climate change, the Marshall Plan can be the big-push policy that puts the unemployed to work in a Global Green New Deal program. Whether it involves green projects, infrastructure projects, community projects, or care projects, there is no shortage of projects that need doing.
The private sector will continue to serve as the engine of growth, but the capital development of the economy depends both on the private and public sectors. And the Global Marshall Plan will serve as a global employment safety-net for anyone who has been left behind and is looking for work.
Currently most countries provide some unemployment benefits to the jobless. It is time to rethink and modernize the welfare system and switch from an unemployment safety-net to an employment safety net. As market economies move through the economic cycle, so would people – from the Marshall Plan programs to private employment and vice versa, as needed. Thus the Marshall Plan will act as a preventative program that does not allow joblessness to develop on a large scale.
Such a policy is not only a better countercyclical stabilizer than conventional fiscal measures; it also inoculates the global unemployment epidemic and prevents all of the associated costs we already bear.
Can Trade Be an Alternative?
Globally, the pro-employment policy du jour is export-led growth. Traditionally pursued to promote industrialization, today many developing countries and even industrial giants such as Germany and Japan rely on exports to compensate for lower domestic demand. In the U.S., President Obama has launched the first ever national plan to increase exports in the name of job growth, the National Export Initiative (NEI).
One of the first lessons learned by introductory students in economics (and evidently quickly forgotten after graduation) is that benefits from trade are reaped in conditions of full employment. Since for every net exporter there is a net importer, in the absence of global full employment trade will necessarily produce winners and losers. Job gains in a net-exporting country will correspond to job losses in a net importing country. It is impossible to tackle unemployment on a global scale by pushing export-led policies around the world. Instead, we should be devising policies to produce and preserve full employment in conditions of free trade.
Remembering the Havana Charter
That full employment is a prerequisite for free trade was well understood in the immediate postwar era, when the Bretton Woods system created the IMF and the World Bank. The third organization to complete the new global financial architecture was the International Trade Organization (ITO). The ITO was established by the Havana Charter, the final act of the United Nations Conference on Trade and Employment held in Havana, Cuba, 1947-48.
The very first chapter (out of nine) in the Havana Charter dealt with the issue of employment. Articles 2 and 3 articulated the “Importance of Employment, Production and Demand” and the “Maintenance of Domestic Employment”, respectively. The Articles outlined the necessity of attaining and maintaining full employment by each nation in conditions of free trade. While the U.S. led the initiative, the ITO eventually failed due to weak Congressional support. As a result, the modern financial architecture has no comparable institution that explicitly addresses unemployment and underemployment that arise from trade.
The maintenance of full employment was the mandate not just for individual nation-states but for the global community. Today, not only do we lack labor standards and policies as outlined under the ITO, but we urgently need a set of binding environmental standards as well.
Completing the International Financial Architecture
In that context, creating a Global Marshall Plan for the Unemployed would complete not only the global safety-net, but the global financial architecture as well. The Plan could be funded by an international institution. Short of supplanting it with an international clearing union as in Keynes’s bancor proposal, the responsibility would fall on individual nation-states to institute a national employment safety-net. Additionally, the WTO could mandate that all trade agreements contain provisions requiring governments, labor, and firms to cooperate in devising plans for additional job creation that fully offset job losses from trade. The task is to produce permanent international infrastructure and policies that generate and maintain full employment over the long run.
To be sure this is a tall task. However, if the U.S. leads the way by re-embracing and re-envisioning the New Deal model for the modern day and instituting such an employment policy, the rest of the world will undoubtedly follow. Every nation is already paying for the enormous costs of unemployment: not only for the costs of unemployment insurance and other income support, but importantly for the higher associated health costs, lost output, stunted growth in children, family disruptions, lost social capital, increased crime and incarceration, deteriorating communities, political instability, human trafficking, and migration.
The Marshall Plan for the Unemployed is undoubtedly the fiscally responsible policy approach, as it eliminates these costs and generates positive social and multiplier effects.
In 1948, against all odds, President Truman pushed for a sizeable program, which helped end the economic crisis in Europe. There was little political will. The conversion to peacetime production in the U.S. was not easy. In 1948, the economy was sliding into its second post-war recession. Unemployment at home temporarily soared, food shortages abounded, and policy makers advocated austerity. The country had just emerged from a period of extraordinary deficit spending to fight WWII, and many feared that the Plan would finally “bankrupt America”. But the Marshall Plan passed.
The price tag: $5 billion dollars in 1948. That was about 2% of U.S. GDP and 11% of government spending that year. In the following three years, the Marshall plan disbursed $8 billion more. Later, it was replaced by the 1951 Mutual Security Plan and, by the time it expired, the U.S. was providing $7 billion annually to Europe until 1961.
In 2009, the American Recovery and Reinvestment Act authorized $848 billion in economic stimulus, spread over 4 years, or a little over 1% of GDP per year. It aimed to save or create 3-4 million jobs. Had the funds been disbursed as they were under the New Deal, namely towards direct employment programs and public investment, the ARRA could have created 20 million living-wage jobs, virtually wiping out all of the unemployment and underemployment in the U.S.
Many countries have experimented with small- and large-scale direct job creation programs. These are true and tested policies that are relatively inexpensive and bring great many social and economic benefits. To tackle global unemployment, nothing short of a Marshall Plan for the Unemployed will do.
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Thank you for publishing this. Having spent quite a bit of time with the USG in Africa, AFG, IRQ and SA I have to say she is right on the money. You fix things by addressing the root causes. The root cause of the wars, terrorism, “refugees,” etc. is simply that the birth rate vastly exceeds the rate of employment creation. Of course, we cannot forget that Mohammed disparaged “men of the plow” or farmers and workers. That is why we see so many Muslims surviving with trading, bartering rather than working with their hands. But there either has to be massive birth control throughout the world or some way to provide meaningful paid work throughout the world. I would like to see some sort of worldwide guaranteed minimal income which would have to be tied to some limits on numbers of births. I read somewhere that at the end of WW2 there were 8 million people in the Phillipines. Now there are over 100 million after massive immigration out….and the masses live in grinding poverty. And the numbers are similiar in AFG, throughout the mideast, and Africa. If the growth rate in the rest of the world was comparable to the US the phillipines would have perhaps 20 million people……a lot more manageable and a lot better off.
Replying in an Quixotic attempt to shut off italics.
Fixed, thanks.
If your thesis were correct, then the rise of China from poverty could have never realized. No, it’s not massive population per se. The root cause is the Imperial plunder and rape.
Well your point is accurate but the time frame for education and womens empowerment is the issue. If the rate of improvement in the economic survival situation of women lags behind the population growth rate then we get what we have in Afg or Libya or Palestine or the Phillipines. The Chinese instituted a dtrraconian one child rule and the results speak for themselves. The comments made by western liberals about China not having enouugh workers in the future are ridiculous….they are automating like mad. A guaranteed annual income will be necessary there and throughout the world if we are to preserve the planet. And somehow China sees no need in importing millions of poor Afghans even though they are next door to integrate into their society although I am sure they are happy they are being directed to Bavaria.
Experience in nation after nation shows that when women have education, opportunity, and control over their own reproduction, the birth rate plummets. This is the easiest first step to addressing overpopulation.
If governments didn’t try so vigorously to make it expensive and risky to employ people, perhaps more people would be employed.
“expensive and risky”
Hmm. What measures do you mean by that, concretely? The minimum wage? OSHA regulations? What?
Risky: in France, if you hire someone, you have hired that person for life! You go bankrupt in order to lay that worker off.
Risky: In Greece, if you need to pay your employees, you had best get a foreign bank account (still denominated in Euros); the EZ hierarchy seems to want to shut down all the banks in your country.
Those are probably what Mogden meant by expensive and risky.
Just sayin’
I agree with Lambert. What makes it ‘expensive’ exactly? If anything its not the government but the inflated housing market and inflated medical costs. Neither of which the Government has bothered to try and fix.
There is no political support for a global anything. But if we’re going to dream, why not a global debt jubilee?
Oh, I don’t know about “no political support”……
For the first time, I have elected officials actually willing to sit down with me (I have been advocating for the anti-foreclosure policies for the past 7 years.) My belief is that they are beginning to see that you can’t simply allow complete lawlessness of one part of the populace (the bankers) without seeing massive consequences for your constituents (homelessness, rents rising) and therefore the risk they may not retain their job! My thought is the rise of demagogue Trump and compassionate Bernie have the political elite nervous enough that there just may be enough political will now to curtail the massive lawlessness. (Although, granted I may be a little wishful thinking here.)
99% of human employment consists of extracting natural resources, converting them into stuff, buying and sell said stuff. Google, the largest company in the world makes what revenue it does by advertising the above mentioned processes.
The only reason unemployment is a problem is because it KILLS. It doesn’t have to. There is plenty for people to do that can and should be considered “productive” that have nothing to do with resource extraction and conversion we just currently do not have a way to get money into their hands so they don’t die.
Increasing employment as it is currently defined, even if it were to fall under the heading of “Green” employment means an ever increasing amount of energy and resource usage on a finite planet that is already at the limits of extraction and waste stream absorption.
We need to change the core premise of how human civilization works if we want to have any kind of future worth having
This is a market solution…. it’s still based on consumption. How about a switch from consumption to leisure? People could have more down time to play music, read, socialize, walk, ride etc rather than working and shopping and having the latest fashions.
One small idea… The govt could build, for lack of another word – monasteries. It would provide communal living and the community could decide what to build/sell/trade and the impacts should be less as they wouldn’t want to pollute their own home.
Please turn off the Italics?
And please, why do people who look clear-eyed (as much as possible, in this Age of Bernays) at the world have to propagate Big Lies and Narrative Untruths, like linking a possibly wise notion of global repair of neoliberal and base-humanity deformation of the Political Economy to something like the Marshall Plan?
I’m going to bold the following, to clarify that it is an excerpt:
Catallaxy blog posts 2006
Mythology of the Marshall Plan
Under the Marshall Plan the US provided massive financial assistance to European nations to help them rebuild after World War II. This is almost universally regarded as a great success and among other triumphs it is credited with the “German Miracle” when the most damaged nation of all recovered in spectacular fashion. It also provided the model for most of the programs of international economic aid from that time to the present day.
Tyler Cowen has demonstrated that the usual view of the Plan is quite wrong. Just to give two examples before proceeding to more details. (1) the Belgians recovered before the Germans and both were on the rise before any aid arrived. (2) Britain received more aid per capita than any other state but had the slowest rate of economic recovery. That incidentally kills another widespread myth that it was the losers and bystanders rather than gallant Britain who got the best deal after the war.
The Marshall Plan
Secretary of State George Marshall gave a speech at Harvard University on 5 June 1947, with the idea of a comprehensive aid package “directed not against any country of doctrine but against hunger, poverty, desperation and chaos”. Aid was offered to all European nations except Spain and in April 1948 Congress approved $1.7 billion (what is that today?) for a four-year package of grants to buy American products. Interesting? The Europeans got the goods but Americans got the money! The countries behind the iron curtain did not agree to participate.
“Assistance was officially given to promote industrial and agricultural production, attain and maintain internal financial stability, and stimulate trade with Europe and the outside world. The Economic Cooperation Administration (ECA) was created to oversee the aid program”.
The myth of the role of aid in recovery.
The German and Belgian examples are illuminating. Aid never exceeded 5% of Germany’s GNP, even at the peak of the program in 1948-49. Allied occupation costs and reparations absorbed over 10% of West German GDP and the net outflow out of Germany persisted into the mid 1950s because Germany repaid half the ECA aid. The Allied Control Commission (ACC) persisted with comprehensive system of Nazi controls, including constraints on foreign trade.
Although most of the German populace were consuming food at a rate just slightly above the starvation level, the Allies forced Germany to refuse numerous barter deals, like food for coal and steel, offered by other European nations. In addition, the ACC limited West German industrial output to levels ranging from 10 to 70 percent of those in the mid-1930s. Until mid-1948 the German economy hobbled along at near subsistence level, sustained only by black markets and private scavenging.
The turn about came in mid 1948 when the Allies instituted a drastic reduction in the money supply and a month later Ludwig Erhard set the famous bonfire of regulations on a Sunday afternoon when the allied authorities were not on duty to reverse the decision.
Erhard’s free market philosophy worked well. Monthly production indices rose at rates exceeding many later yearly increases. The West German miracle was under way. Several months later, Marshall Plan aid began to arrive. The West German miracle was sustained through a combination of sound monetary policy, supply-side fiscal policy, and a relatively free market.
The Belgians moved faster in the appropriate direction. In October 1944, a month after liberation, they devalued the currency and embarked on deflationary fiscal policy to correct the wartime Nazi monetary expansion. They also had liberal import policies and conservative fiscal policy. Price controls, including rent controls were minimal and so they never had the severe shortages of food and housing that were standard elsewhere in Europe.
“A study noted that Belgium recovered fastest from the war and placed the greatest immediate reliance upon capitalism. The Belgian recovery thus was due to sound economic policy and predated US aid”.
Ironic to note that Brussels is now the head of the EU octopus.
Other myths harpooned
The Plan encouraged the development of free enterprise and sound economic policy Europe.
The Plan boosted the American economy.
The operation of the Plan was not strongly influenced by domestic US special interests.
American postwar policy was one of free trade and the open door.
The arguments are all on line so there is no need to repeat a lot of detail. Just a few snippets.
On economic policy, it has to be recalled that the US administration was full of people who administered the New Deal, the maze of bureaucratic interventions that kept the US anchored in depression from the late 1920s to the start of World War II.
State intervention was built into the plan; for every dollar that the ECA gave a foreign government, that government had to set aside an equivalent amount of domestic currency to be used for public works, public investments and similar state projects. The plan also subsidized the extensive postwar monetary and fiscal policies that caused enormous problems for many West European governments.
The plan caused huge distortions in trade because the Europeans were obliged to spend the aid money on goods from the US. So the US tractor people gained at the expense of the Italians. US exports of tobacco wrecked the Greek tobacco industry and diminished the trade from Turkey, Rhodesia and Algeria. “Militarily related items” could not be exported to the East and that was defined to include most machinery, chemicals, medicines and even typewriters.
Special interests ruled supreme on the home front.
Cowen reports “The Virginia tobacco manufacturers were particularly influential at ECA. Europe was desperate for farm equipment, yet as of June 1949 the ECA had shipped only $40 million of farm equipment and $111 million worth of tobacco. In 1948 more than 175 million pounds of expensive, inferior-quality spaghetti were shipped to Italy [and] 65,00 trucks were shipped to Europe despite the dreadful condition of the roads and the serious petrol shortage.”
On a humorous note for those familiar with the old joke about going back to the Old Dart with tins of dripping as presents, the Chief of food procurement in Germany reported that the US Dept of Agriculture was pushing sales of peanuts to the Plan (due to a surplus) and so hundreds of millions of pounds of peanuts were shipped to Europe instead of the lard that he had requested.
Anyway, it just gets worse and less amusing when you read about the compulsory purchase of Texas gulf oil instead of closer and cheaper mideast oil, and the tariff protection in the US.
Some of the lessons from the Marshall Plan
This is according to Tyler Cowen, in contrast with the conventional wisdom that the Plan was a Good Thing.
Sound economic policy is the most important factor in economic growth.
Foreign aid frequently discouraged sound economic policy.
Foreign aid does not help the donor nation, it simply drains resources from its private sector.
Foreign aid programs will not be run in the public interest.
Free trade is the best way to help other nations.
All of these lessons have been repeated by the subsequent experience of aid to the Third World as explained a long time ago by Peter Bauer and Stanislav Andreski. The aid recipients have more often than not gone backwards rather than forwards due to the provision of government to government aid.
http://www.the-rathouse.com/2009/Marshall-Plan.html
I just picked that link from among many on the reality of the Marshall Plan, because it seemed to put all the deceit and fraud and imperial gaming succinctly in a relatively short piece.
Please, no more fokking “Marshall Plans.” (The Narrative view, from the Marshall Inheritors, is here, for contrast: http://marshallfoundation.org/marshall/the-marshall-plan/history-marshall-plan/
If Tyler Cowan is involved with it, it is part of the NeoLib narrative that the post war era was great despite the New Deal, not because of it. Cowan is as neolib as they get. You can find similar BS from Amity Shlaes and any number of other Think Tank intellectuals.
So the Marshall Plan critical observations about the actual details of wealth transfer and the operating mode of the “Plan” are in your view totally impeached because Cowen (and Champion too) are part of Austrianism? Care to take on the factual claims laid out in the link, about how the “Plan” actually operated and whether it was the great benefit it is sold as? Beyond the assumption that “everyone agrees…?”
Another link maybe more to your liking? http://www.mintpressnews.com/MyMPN/truth-marshall-plan/
Or some words from the CIA on the subject: https://www.cia.gov/news-information/featured-story-archive/2011-featured-story-archive/the-cia-and-the-marshall-plan.html
Too bad some possibly good ideas (IMF, R2P, and so forth) have to be sold (before they get sold out by the neolibs you point to, rightly, as evil sh!ts) by linking them to Narrative hooks that themselves are fundamentally evil…
No, I’ve spent twenty years on arguments like this and they don’t tend to be productive as I’m not footnoting myself and assembling a bibliography as I go.
Basic Chartalism, which is what this post is about, fiat money used as a tool to distribute goods and services in society by ensuring the distribution of money to people who will spend it to express demand and drive markets has always worked every where its ever been tried. At any moment in any place there are eddies and flows in the complexity of commerce that will yield up contradictory results. Yes villainy is always with us but middle classes didn’t sprout magically in all the US protectorates after the war, it was an intended policy result. Were there other less benign policies as well? Of course there were.
I know and knew people who were on CIA payrolls in the post war era and its not like it gets written up, post war is an experience you can’t simulate. Were they wrong thinking we won the war and not the Russians? Yes. Were they wrong to assume the benign intent of the institutions they were working for? Probably, but not always: the New Deal had in fact set up a bunch of institutions that really did look after the public good.
Tcherneva’s point about Bancor is like yours about IMF and R2P: all tools that could be used for public good. But all tools require moral agency from people to decide their good or bad use.
I continue so much post-graduate studies on this site!
Thank you for such intelligent discourse. Now, I will go study up on “Chartalism” as that is a new term to me. I appreciate learning from so many of you bloggers.
My sincere appreciation,
pWAR
Hear hear….
I embrace the term institutionalism which mandate is founded on ethical standards above wonky econnometrics – mathification of dubious philosophical views…
Disheveled Marsupial…. and yes the Austrians still give me the willies…. hard to reconcile the history or the vapid changeling actions e.g. neo-Austrians pinching post Keynesian theory’s and laying claim – authorship too them… just to keep their fingers in the pie…
+1
The US has done a lot of bad in the world, the New Deal and Marshall Plan were not part of it.
Since the Powell Memo there has been sustained and focused funding for a counter narrative supporting private interests claiming everything Roosevelt and the New Deal did was along Hayek’s Road to Serfdom, but it was only after the institutions of the New Deal began to be systematically hacked away that the majority of people began to feel like serfs.
As compared to our current oligarchy and the one displaced by the New Deal, New Deal policies indeed felt like The Road to Serfdom for the Elites. People like Cowan identified where the money was in their fields and followed it to prominence, not for being right but for being supportive of elite interests.
Again, are the factual assertions about the actual operation of the “Marshall Plan” in the linked piece correct or not? Without regard to views on the politics and self-serving of the author, which even if your view is correct are part and parcel of the CVs of anyone with a significant voice in the world.
I don’t have the interest to review it. If Cowan was involved in it, it is likely the factual claims are mostly true but the framing extremely careful in order to present an anti government narrative. Like the Reinhart and Rogoff Debt paper that ignored monetary sovereignty, all of Cowan’s work assumes “loanable funds” finance and is thus BS. From that basis, I have to assume his historical analysis is equally deformed.
The guy argues, and I quote, that moving in the right direction meant deflationary policy. We’ve seen that tried many times. it doesn’t work, or at least not for the people at the bottom, who get all the pain so that the elites can gain. Or are Cameron’s Britain and Merkel’s Eurozone exemplars of sound policy for you?
Well that sure wandered into some far territory. My sole thought was that the Marshall Plan is not what ‘everyone knows’ it was, and that it’s unfortunate that the Narrative take on it is used to try to validate what is a laudable goal (depending on how one defines “full employment,” and the distortions and lootings that smart and self-interested power players will inevitably effectuate) by linkage to another Narrative-supported “success” that was not what it’s assumed to be (e.g., sending $$ to European nations with a mandate to spend them only US products like tobacco and lousy pasta).
And for sure, many pieces of the New Deal, along with softening the effects of MARKETS on us mopes, and keeping us from doing a revolution, also did a whole lot of good for the mope-ery. So much so that the current holders of great wealth and power are doing their damndest to demolish the last vestiges of those ideas, ideals and programs, and divert the last bits of wealth, in the Commons and the pockets of ordinary people, into their own hidden vaults. And the CIA and related institutions, from what I have learned over decades, may have people dedicated to “doing good,” but the operating parts of them have caused and abetted more misery by far, for ordinary people’s lives, everywhere they have operated in the world, than any good they have ever done. Thanks to “public servants” llike the Dulles Boys and the other Roosevelt…
I’ll comment more after real-life chores are done. Just wanted to add my 0.02$ about Tyler Cowen. That guy is a typical reality-averse shill for his Koch overlords.
The Koch are venal. The CIA is venal too. But the US establishment’s endorsement of both the New Deal and the subsequent post war Marshall Plan were literally their pact with the Devil. (Oligarchs see the Devil as an income redistributing social democrat).
The US elite were worried about revolution from below. And they were worried about newly conquered Europe and Asia being seduced by the lure of socialism and the Soviets.
I like this writer and the post is no doubt well-intentioned – perhaps as a marker for what is economically possible? But it completely ignores power and politics.
Fair claim, but I think she has a point here..
“Whether by deliberate policy design or by necessity, governments will have to respond to the looming economic, social, political and environmental challenges by using their fiscal powers. Preferably, this would happen by design. Otherwise, it will arrive in the form of inadequate ad hoc emergency measures.”
Yep. I know you are more receptive to MMT ideas, but from my vantage point, it is almost as if MMT has become purposefully obtuse both to what our Fearless Leaders do with power and to alternative ways of distributing resources outside of work in the formal economy.
Of course there are specific Big Projects that would be great to do. The obstacle to those projects is political, not economic. And then there are other things that have nothing to do with jobs at all, like universal health insurance, which would be better separated from employment, and the drug war, which is a problem of too much government employment, not too little government employment.
I would call myself MMT-receptive. But, honestly, everything I know about MMT I learned on this blog; still haven’t read any of the sacred texts (but intend to!).
This is the part of the proposal I was having a hard time wrapping my head around:
OK, and the funding part, too.
Agreed. That’s one of the sentiments you find throughout the idea. MMT is a blank canvas onto which anyone can project anything. It seems to hesitate at offering specific criteria by which to weigh some courses of action as being superior to others. I think a quote from Wray’s primer at NEP summarizes quite well how they want the JG to be all things to all people:
Given the flaws of some theoretical orientations, I’d say a lack of threat is a serious shortfall of any theory claiming to solve our contemporary problems :)
For the basic idea of public sector employment, I’d recommend the CFEPS essay Wray wrote about a decade and a half ago now. It is a lot more concise than some of the more recent MMT offshoot work that has become rather wordy and unwieldy, almost purposefully dense as a defense-mechanism from outside criticism. On more than one occasion I have raised a specific question, and someone has pointed me to a lengthy item to read that didn’t actually answer the question, or did answer it – but in a way that actually supported what I said. (One of the most hilarious things I’ve run into is when I quote Wray verbatim and a commenter doesn’t like what Wray himself has to say on the topic)
Interestingly, my concern is less about the funding; I think a government that really wanted to fund a JG would find the money for it. My primary concerns are at the theoretical level of the entrenchment of inequality (MMT makes a point to distinguish the low wage JG jobs from the ‘regular’ publicly funded jobs) and at the practical level where it seems like the monetary economists have no sense of the interdisciplinary need to talk with the business folks. Management may be something that can be assumed away theoretically, but in practice, it is a huge part of an actual program like this. When Tcherneva, for example, simply waves her hands in the air and says that nonprofit organizations can administer the JG, it makes the reality-based hairs on the back of my neck stand up. Do academics understand that nonprofits are part of our system, not some angelic actor outside of it?
I mean, a nonprofit organization, the Urban Institute, just ran a major hit piece against the Sanders campaign, coordinated with national media and the Dem punditry. You would think that kind of topical example would awaken some basic intellectual curiosity about these things.
P.S., I forgot the Urban Institute effort is even more interconnected at a deeper level. It’s a project of the Tax Policy Center, which to my understanding is a joint project with the Brookings Institution, which is a project of an important WUSTL (Washington University in Saint Louis) benefactor (Robert Brookings) which is where Wray studied, including working with Hyman Minsky.
That’s not to say everything about establishment institutions is good or bad (in practice, most organizations are rather more gray). Rather, it’s that MMT of all schools of thought should be deeply aware of how these things work in practice. Especially an article talking about the Marshall Plan :)
It all revolves around the definition of free trade/ free markets — IE the original definition of a free market….one where the market is free from rentiers, tolls and takings as found in our current free market economy that is privatized and finacialized to buy back stocks to infalte prices on credit or blow bubbles with markets and commodities or land and real estate – — we need to whittle out the fire sector or the fire sector will demand to finance a martial plan to preserve their middle-man vig.
Maybe invest directly in infrastructure as a plan to make the planet habitable by all it’s inhabitants without paying some useless vampire squid what amounts to a private tax.
The Articles outlined the necessity of attaining and maintaining full employment by each nation in conditions of free trade.
I would counter that unemployment is a symptom of the disease, not the disease itself. This is a fundamental critique that MMT continues to ignore. We don’t live in a time of scarcity. We live in a time of abundance. The primary economic problem we face is one of distribution of resources. We waste billions upon billions of labor hours each year on unproductive and counterproductive endeavors because they line the pockets of connected insiders while keeping the unwashed masses in line through sheer exhaustion.
The answer is not to further entrench employment’s monopoly on income. Rather, the answer is to make employers compete for labor with a truly viable non-employment source of income. That’s what the safety net should be: cash payments with no work requirement attached.
Work in the formal economy should be about the productive outcome of the project, not providing a safety net.
“The primary economic problem we face is one of distribution of resources”
heh.
the fact that you have to say this “water is wet” comment tells you how deep into the money illusion we have fallen.
At one time economics used to be about the real world and choices. Now it seems to be about the technicalities of finance (or rather how to get a free lunch at the cost of everyone else).
Economists are a large part of the problem.
I think you are missing the point of that comment, which I believe is that the distribution problem is not an unfortunate side effect, it is the preferred mechanism for manufacturing the scarcity required to keep the global masses weak, debt-enslaved, and controllable.
I think you both have good thoughts on this. The social control aspect especially stands out to me since MMT writers are so conspicuously quiet about calling for cuts in spending on various authoritarian programs.
Actually you could all benefit from intro biology and environmental biology. We do live in an error of scaricity that is masked by our addiction to oil. Humans take more than the maximum sustainable yield and we are well beyond carrying capacity as a species. In short we are screwed.
The best way to deal with unemployment in LCD is land reform. Agricultural output should focus on the domestic market not the export market.
Gotta go, real life in the way again
I disagree with the doomsdaying. We could have civilization with much less oil usage. Just to give you an example of how this is all interconnected, the largest user of oil on the planet is the US national security state.
I do agree that we should pay more attention to environmental matters. Work in the formal economy is one of the main drivers of pollution and destruction. We don’t need more such activity. If anything, in aggregate, we should be working less. Hence how it’s a distributional problem, not a shortfall of aggregate activity as MMT defines the problem.
It isn’t just oil, it isn’t just fossil fuels, or even just energy – it’s the cumulative impact of an enormously bloated population of one species upon all of the rest of the living biosphere in all of its incredible complexity of interconnected systems. There is no way, as in it is impossible, for the current 7 billion of us (let alone the 9 billion well before mid-century) to all maintain the resource utilization/waste production per capita footprint of any current advanced nation, let alone the wildly wasteful US (and Canada). It cannot happen, and it will not happen. The oceans can’t take it, the forests can’t take it, the soil can’t take it, the fresh water supply can’t take it. It is folly to believe we can or should bring everyone ‘up to’ the level of consumption/waste production of an average or median US individual or family unit. Now, that does NOT mean we need to cut loose most of the planet’s people (which I believe is the near-certain outcome of current thinking and policy) or we all have to live like monks, but it absolutely does mean that both the consumption-based economy and the organizational structures that sustain it – including such notions that income must derive from a ‘job’ – simply must be replaced.
We’ve already consumed over half of everything the planet provided, most of that consumption coming in accelerating fashion since WWII. The simple arithmetic of population and ‘growth’ as we conceive it has about hit the wall.
If we don’t ditch ‘growth’ it will ditch us:
https://www.youtube.com/watch?v=O133ppiVnWY
Building a Bridge to a New Global Culture
Nov./Dec., 2008 – Sustainable Land Development Today
http://www.triplepundit.com/2010/09/building-bridge-new-global-culture/
…The mission of Sustainable Land Development International is the bridge to a new global culture…promoting and enabling land development worldwide that balances the needs of people, planet & profit for today – and future generations.
SLDI 2008 Unaccepted Proposal – http://j.mp/1SYrzTb
Signing in to confirm am not a robot but I always download to read later to manage data costs.
Also understand very little of MMT and almost nothing of PE so can’t really converse. Had limited education in neoclassical econ etc.
Fascinated by nc and the can of worms (pandora’s box?) it always leaves gaping.
Key concern: In order to be remembered as a gentleman by unapologetic thieves, will Sanders really BETRAY his American constituents and ALL humanity by not taking the only genuine chance in 120 years to break the one party system that has now come to be known as the Washington / bipartsan consensus? Why can’t he contest as an independent in nov if need be?
We have to list those activities that humans do better than machines. Its my experience that machines have been constantly improving their abilities whilst we mortals have stood still. All the jobs created since the economic collapse are menial jobs that should be mechanised and soon will be. We are not attending to this important problem.
Australia is empty mainly because it is arid. The poles are ice bound. We need to connect the water from one to the deserts of the other – terminals for icebergs in the Great Austrlian Bight. Think of it like the ancient irrigation system of Ceylon with the north east connected by channels to the south west to make the entire country productive. We do this everywhere it is necessary.
The planet is our home and its improvement should be our concern. We do it in our houses, why not in our entire countries? We admire the rice terraces of Asia without thinking we could do it too. We have entire countries exposed to flooding like Bangladesh where what land is available must be accumulated in hills for settlement. Kiribati will sink under increasing sea levels soon and has bought an island from CoE in Fiji to resettle its population after applying to others for help and been rebuffed. Maldives will follow soon after and is negotiating with India and Sri Lanka for land purchase.
We have been limited by nationalism. Now we need internationalism.
Pretty much from what I can tell a commitment to any goal is what determines whether or not that goal is achieved.
Big goal means big commitment.
Big means big & time is a factor. All can be employed. The government just has to pay for what has no market. There are mature markets. Cars were transformational so making them is done by fewer faster.
Leisure appeared for workers who bought boats and cameras.
There was equity in their homes that psychopaths saw and turned into debt.
Leisure hobbies found no investors.
Changing to industrial banking would save normal productive chaos.
Government then pays for artists lives and clean up.
MMT is goal over treasury which real is subject to looting or spent on war.
Thank you for having put up the Kalecki article in ‘012 and for linking to it again. Very educational reading for me, if a little dry compared to what I’ve become conditioned to reading blogs and Internet “magazine” articles. I really need to (re)learn to read slightly denser, but more carefully explained, stuff.
I often feel the same way about things I read here that are outside of the to “link congregator” posts each day. I agree this is because of a dumbing down in general that I must fight against.
A Global Apollo Moon Shot for stabilization of the planet’s climate system — that’s what is most needed. Even if it doesn’t work, it’s worth a shot and it could put everyone to work on the predicament that is threatening all life on earth with extinction soon. Even those with no skills could be put to work planting trees.