Hyman Minsky, full employment, and political demands

84 posts / 0 new

Tue, 2009-09-29 02:36

skarredmunkey

Bump.

Sad to see "full employment" being conflated here with "workfare" and the like, but this is precisely what I was talking about when I suggested some social democrats are the biggest obstacle to full employment because they have an irrational fear of it replacing the welfare state, or, that full employment would require coercing workers to work.

A full employment policy would mean the state using its power to create what is essentially a "permanent labour shortage" (for lack of a better phrase) in key industries so that the supply of new jobs would always be equal to or more than the number of citizens looking for jobs. This can be done any number of ways (nationalization of certain industries, a permanent stimulus fund, long-term investment in the public sector and in infrastructure, etc.). It's rooted in Keynesian thinking but it is also a fundamentally socialist/progressive concept meant to eliminate unemployment - the unwanted kind of unemployment, that is. The cautious/liberal method would be to allow the private sector to have complete control of the labour market, and then the state would step in as a last resort and provide the residual unemployed with jobs.

Full employment policies have existed, a basic wiki/google search turns up these examples: Clement Attlee's near complete adoption of the Beveridge report in the UK; the U.S. Employment Acts of 1946 and 1978 (which Jacob Richter alluded to above)... they came close but got watered down; and Australia came closest in the immediate post-WWII era.

Tue, 2009-09-29 09:50

#53

Jacob Richter

The US Employment Acts weren't the things I referred to. There were two Depression-era employment programs that were shot down by the Supreme Court because of "state rights." I don't recall the names, though.

As for obstacles: MOST social democrats don't care about this proposal. Even now, there was Boston Globe radio chat on Hyman Minsky, and the bourgeois media wants to remember only his musings on finance. History repeats itself, first as tragedy then as farce: Marx the crisis economist (to say nothing about his own take on the labour theory of value, much less his political activity in the IWMA), and now Minsky on finance.

Quote:
The cautious/liberal method would be to allow the private sector to have complete control of the labour market, and then the state would step in as a last resort and provide the residual unemployed with jobs.

The liberal method would be to have the state provide only unemployment benefits, not the "trickle up" proposal above. Without unemployment, liberals say that wages will spiral upwards ("inflation out of control"). The implementation of this proposal may result in "investment strikes," since the bourgeoisie would lose their biggest stick against labour (unemployment).

Tue, 2009-09-29 22:14

#54

skarredmunkey

Jacob Richter wrote:

The US Employment Acts weren't the things I referred to. There were two Depression-era employment programs that were shot down by the Supreme Court because of "state rights." I don't recall the names, though.

Let us know if you can dig these up - I'm interested in looking into it a bit further.

One was likely the court-ordered overturning of NIRA/NRA in 1935.

Quote:

Quote:
The cautious/liberal method would be to allow the private sector to have complete control of the labour market, and then the state would step in as a last resort and provide the residual unemployed with jobs.

The liberal method would be to have the state provide only unemployment benefits, not the "trickle up" proposal above.

You're correct, but I am talking about liberals who want to see full employment. A "full employment liberal" would prefer a passive rather than an active role for the state. A socialist would prefer the opposite.

Tue, 2009-09-29 22:18

#55

Unionist

Quote:
In May 1935, the court attacked two laws. First, it invalidated the Railroad Retirement Act of 1934, a law that had established pensions for railway workers. Then in a blow to the cornerstone of the New Deal, the court gutted the National Industrial Recovery Act of 1933.

[url=http://www.enterstageright.com/archive/articles/0799fdrcourt.htm][color=...

Tue, 2009-09-29 22:29

#56

Jacob Richter

I'm not sure about the RRA, but yes one of the two measures was indeed NIRA!

Anyway, since this discussion has actually exceeded not just my expectations by the corresponding threads elsewhere, I should quote them here for further contemplation:

http://www.revleft.com/vb/full-employment-under-t118165/index.html

JJM 777 wrote:
If you ask from a Socialist viewpoint, full employment is the goal to go for -- only not for "minimum wage" but rather for "standard wage".

But the thread title asks from a Capitalist viewpoint -- the answer is NO WAY. The prevailing theories of "free market economy" estimate that unemployment must be at least around 5% to keep the economy stable. If unemployment falls too low, then many companies will have shortage of workers with exactly their desired education, and any such shortage would set workers in a position to bargain for higher wages. This is the reason why a "free market economy" must maintain sufficiently high unemployment in the society.

This information I learned when I once considered enrolling to a university to read economy. I read some of the required course books, and found this explanation in the introduction to the economical politics of Western world.

Demogorgon wrote:
Quite so, indeed as much is explicitly stated in a lot of economic theory (under the pretext that inflation should always be avoided regardless of consequences). It is why for example the Thatcher Government claimed that rising unemployment was "a price worth paying" for lowering inflation.

Capitalism can obviously go through brief periods with close to full employment-it occasionally does after all-but as a rule, full employment is toxic to it and it has built in defence mechanisms to stop it from happening.

Demogorgon wrote:
Yes, because without the threat of becoming unemployed, firms lose their biggest stick to keep workers in check and have to resort to carrots instead (better pay and conditions) and they hate having to do that in the long run.

It should be noted that notwithstanding that, this proposal would achieve its desired ends. The Keynesian policy of combating recession by keeping aggregate demand up does work after all and this would be an effective way to do it, but corporations would hate it in the long run (they may tolerate it temporarily to get out of a bad period) and use an investment strike to stop it.

So while it is a theoretically sound plan, it would only work in a society that had already taken control of investment out of private hands.

Come to think of it, it might have worked in Japan in the sixties and seventies because the Government had control of investment then and the workers were kept in check by Government provided carrots saving the need for corporations to either threaten or appease them, but even then they might not have liked it. At any rate moving to that kind of economic model would still be a big change for Western style capitalism.

A final thought though is that this kind of policy could be a good way for a leftist Government to undermine capitalism. Given that full employment is toxic, feeding capitalism something that it can't stomach would, on the face of it, be a pretty good idea. It all depends on whether people accepted the subsequent investment strike and dismantled the policy or moved to stop it.

Chuck Stone wrote:
It occurs to me that a capital strike would, in theory, be subject to the same weakness as a workers strike. Namely, any strike would only be effective as long as no investors were prepared to "scab". Now, in this Keynesian vision, the government is competing with private enterprise for the workers' labour, so if the forces of private enterprise were to coalesce, and combat these unfavourable policies with a capital strike, then the government should simply fill the void with its own investment as and when it becomes neccessary. At this point, there are two possible outcomes, the private sector will be forced to offer favourable terms to its employees, thus making the labour market a "sellers market" so to speak, or the private sector continues its investment boycott, allowing the state to gain a significant foothold within any industrial sector it pleases. Eventually forcing each individual to adapt or perish. Of course, it would only take one competitor within any sector to capitulate in order to gain the advantage.

As long as the worker has the freedom to choose his or her employer, then offering favourable working conditions would be a much greater factor in a business' success than it is today. This is already the case in any job requiring a specific education. (Have you ever heard of an out of work doctor?), as there are usually less qualified workers than there are positions to fill, but by giving [B]all[/B] workers an alternative, then this would force private industry to compete for workers, rather than workers competing for jobs.

Of course, whatever that wage is set to, you can guarantee that private industry would, as long as is possible offer that rate or higher. So this would allow the government to impose a reasonable minimum wage without the need to resort to legislation. I think its important here to differentiate between Minsky's hypothetical "set minimum wage" and the Minimum Wage as we know it today. There is no reason why the set minimum wage could not be for instance, the European Decency Threshold of £7.50.

Demogorgon wrote:
A worker's strike can survive a few scabs and a capital strike can do the same.

The thing is though, we are not speaking theoretically here, capital strikes have proven very effective over the years and are the reason why right wing policies tend to be imposed in most nations irrespective of the wishes of the electorate.

Clearly capitalists will tolerate some degree of policies intended to help the worst off. Indeed to an extent they even support it because it keeps the workforce healthy and educated, but when it comes to the point where it fundamentally threatens them and could cause the political environment to reach a "tipping point" where the balance of power shifts to the people, you can bet that they will act to prevent it. A good example of it happening is the second Wilson Government in Britain in the early seventies. For the first couple of years it was pretty left wing and clearly sympathetic to Worker's needs, but it only took a couple of years for the investment strike to force it very much to the right (under Callaghan).

This is why it is very difficult to achieve much in the way of progress without taking control of investment out of the hands of the capitalists (or to use Marxist jargon: taking control of the means of production). That really does need to be one of the first things to be done.

None of this means of course that we shouldn't call for these reforms, they help us clearly present to the public the sort of thing we stand for in concrete terms, we just have to recognise that they are the sort of thing that can only be done as we move to socialism.

Sun, 2009-10-04 19:10

#57

Jacob Richter

Anybody's thoughts on NIRA, by the way?

Sun, 2009-12-20 19:36

#58

Fidel

The idea behind monetarist monetarism is for governments to run budget supluses and squeeze money from the economy in order to shovel it to the banks. They want to sabotage our ability to get out of debt to banks and foreign creditors by strangling the physical economy with policies for low inflation. Those policies make countries more dependent on foreign imports and creditors. The neoliberal mumbo-jumbo is now exposed to be economic sabotage in the thirdworld capitalist nations as well as affluent western countries. The new business model declares debt to be the new wealth creation. Debt is wealth, and all risk shall be socialized. It's very undemocratic, but what people don't know won't hurt them. It's been the political strategy all along.

Sun, 2009-12-20 19:57

#59

Neo-Kaleckian

Hey guys, gals and those that refuse either term,

Just thought I'd come and chime in on this "full-employment" thread. Hyman Minsky was considered to be part of the economic school of "Post-Keynesianism," and I'd like to highlight here the ways that Post-Keynesianism sees the posibility of full employment political economic policies.

Post-Keynesianism (PKE), like one of its biggest influences Keynes, put thw importance on the demand side of the economy as opposed to Neoclassical economics that is supply side oriented. This has a definite impact on the way that PKE looks at the economy, because the demand for goods is the driving for in the short term and the long term. This pushes PK economists to believe that full employment is possible through government spending increasing demand and in doing so raises the rate of employment. Full employment schemes and policies by governements are highly reliant on business cycles (as emplyment is higher during booms then bust) and on international financing.

Full employment does not automatically mean that the government is creating or giving the unemployed jobs to reach full employment, but more of an effect of increasing aggregate demand through public spending. Unionist is kinda off the mark with his caracterisation of full employment policies when he mentions solely the responsibility of the government to assure employment to those willing to work through employing them themselves.

Can anyone tell me whether or not these policies, including the cyclical deficits that are created by the financing required, can be included into Michal Kalecki's "principle of increasing risk?" Michal Kalecki debated and fought for full employment policies that he thought were a definite posibility with international financing, but he never extrapolated his "principal oof increasing risk" that was created for firms to nation-states. Just wondering if anyone knew about this stuff and could provide an answer, I'll ask my Economics Prof to see, and if anyones interested I'll see what he says.

Sun, 2009-12-20 20:28

#60

Fidel

And many of Keynes' ideas were never implemented after Bretton Woods. We can have the kind of populist policies for fuller employment. The new liberal financial regime in place post-Keynes and Kalecki still provide governments with policy options for sovereign economic decision making in counter to market forces of international capital. But there is no political will in Ottawa to buck capital. And the political impotence is feigned. There is no market rule which says that Ottawa can not pursue policies for fuller employment and funding social programs to pre-1995 levels. This modern form of political impotence is entirely self-imposed by our two old line parties working hand in glove on behalf of marauding capital, banks, and bond holders.

Sun, 2009-12-20 21:07

#61

Neo-Kaleckian

Fidel,

I like you're use of "fuller employment" because it seems to me that that terminology is closer to the truth when speaking of these types of policies.

And to add to your point, their is NO economic reasoning (well if you exclude the neocons and some classicals) that suggests that this type of policy is not feasible. It is all up to political will as Fidel pointed out.

Sun, 2009-12-20 21:50

#62

Fidel

Yes, and [url=http://www.scientificamerican.com/article.cfm?id=the-social-welfare-stat... Sachs[/url] pointed out that there is a valid alternative to the new liberal economic model or neoliberal ideology. That is really something coming from a well-known economic shock therapist and free market advocate. Social democrats and those on the centre-left in general in those countries have realised that full employment is not really doable in even a mixed market economy like their's. They understand that big business is fickle and will go where labour is educated and "flexible" in a different way than labour market flexibility is understood to be in the English-speaking countries. They've proven that social welfare spending tends to compliment competitive economies rather than representing a hinderance as predicted by people like von Hayek and Ricardo. It's about as good as it gets for labour in today's capitalist world.

Tue, 2009-12-22 11:35

#63

Doug

Eek! It's another economist with a clue!

When someone is laid off, should the government provide high benefits? Traditional theory says no, since big benefits seemingly reduce the incentive to find a job. “Standard models predict that we should have no safety net,” said Chetty.

But in reality, higher benefits are more in line with actual needs, because most Americans have so much income tied up in fixed commitments, such as payments for houses, cars, and furniture. “There are a lot of things you can’t adjust in the short term,” he said.

So the traditional economic models that are used to determine unemployment benefits miss a simple fact: People have bills to pay. “You miss certain features of reality,” said Chetty, “when you’re trying to write down simple models of the world.”

Wed, 2010-01-13 01:54

#64

bruce_the_vii

Canada is an immigration coutry. The problem is not full employment but labour shortages. It's been that way for generations. Socialists in particular will argue for robust immigration. There is a tendency by everyone to forget all this.

Wed, 2010-01-13 10:02

#65

Jacob Richter

Labour shortages in the strictest sense means that the unemployment rate is below 0%. That is never the case in any capitalist country. Heck, even Alberta has a bit of unemployment.

Wed, 2010-01-13 15:25

#66

Fidel

[url=http://www.citytv.com/toronto/citynews/life/money/article/65141--canada-... rates across Canadian provinces for November[/url] Looks like long-time NDP prairie provinces are faring about the best

Wed, 2010-01-13 20:32

#67

Jacob Richter

Yeah, but they, like most soc-dems, are so myopic to not even consider this kind of policy.

Wed, 2010-01-13 20:56

#68

Fidel

bruce_the_vii wrote:

Canada is an immigration coutry. The problem is not full employment but labour shortages. It's been that way for generations. Socialists in particular will argue for robust immigration. There is a tendency by everyone to forget all this.

Canada is the second or third largest country in the world with unparalleled in the world natural resource wealth, and a shitload of energy. Canada also has a relatively tiny population to employ and house and provide adequate health care for. Our stooges in power can't even do this without screwing up.

Most logical people might be inclined to ask how Canada's colonial administrators have managed to achieve so little with so much at their disposal.

Sat, 2010-01-16 17:32

#69

bruce_the_vii

Here's the typical socialists economic philosophy. "Capitalism doesn't work, it's irrational. It's corrupt. Just look at the poverty around. Oh, there's labour shortages too. We have to let in a million immigrants pronto. God, capitalism is beautiful."

Sat, 2010-01-16 19:47

#70

Fidel

Social democrats believe in free labour markets whereas believers in British free trade theory believe in rigging markets of any kind to favour capital and a handful of elitists. Socialists in general want the whole system scrapped and replaced with a dictatorship of the proletarian majority. And I tend to lean that way myself, although the NDP are the best shot we all have for democratizing the system.

Sat, 2010-01-16 23:38

#71

bruce_the_vii

I tend to think that the free market will produce a $12 an hour defacto minimum wage in growth cities if immigration is kept to Just In Time. Reports are this is the situation in Alberta pre-recession. I calculate the nanny state subsidies of such minimum wage workers as $4 an hour, as taxes are almost flat. Thus the effective minimum wage would be $16 an hour. This is 70% of the average wage of $23 in growth cities, which would not be net subsidized. That is not so bad in terms of wage disparity, 70%. A wage of $12 is not good, but the problem is that's all productivity will support. It's socially acceptable, the Canadian Way. The unemployment level would be kept low by Just In Time immigraion as well. I have support for this idea with the Liberal MPs in Ottawa. The NDP have been silent.

Sat, 2010-01-16 23:46

#72

Fidel

I think what you're longing for is the [url=http://conservativenannystate.org]conservative nanny state[/url] version of capitalism. And we share a lot of those same features of economy here in the Northern Puerto Rico already. They don't really believe in free trade. As Gore Vidal once said about it, they practice socialism for the rich while preaching market fundamentalism to everyone else.

Sun, 2010-01-17 00:17

#73

bruce_the_vii

You at least read my post, which I find is rare.

I get a lot of support for the idea of tightening immigration until we get to Alberta levels of employment. The defacto minimum wage should go up to $12 an hour. I estimate this would inflate about 0.5% nationally and most of that would be transfers within families. Poverty would come down. This is opposed to the idea of socialistic Scandanavia that spends about 15% more of the GDP through the government (55%, not reliable information).

Sun, 2010-01-17 00:45

#74

Fidel

Alberta has one of the highest levels of unemployment in Canada today, Bruce, and even as they "create wealth" from a natural deposit of it laid down by mother nature. Alberta is a perfect example of rightwing economics running amok, and it will leave them poorer in the end. Northern Canada is strewn with abandoned mining towns, minerals extracted, land devastated, and profits long gone with the capitalist dogs whove moved on to sponge off the next hosts' sweat, blood and tears.

"When money arrives, all is green, bustle and abundance. And when it leaves, all is trampled down, barren and bare" old Chinese proverb

Sun, 2010-01-17 00:56

#75

bruce_the_vii

Alberta has unemployment of 7.5% but their participation in the labour force is away higher than in Montreal, Toronto and Vancouver.

Sun, 2010-01-17 01:18

#76

bruce_the_vii

Fidel wrote:

Alberta has one of the highest levels of unemployment in Canada today, Bruce, and even as they "create wealth" from a natural deposit of it laid down by mother nature. Alberta is a perfect example of rightwing economics running amok, and it will leave them poorer in the end. Northern Canada is strewn with abandoned mining towns, minerals extracted, land devastated, and profits long gone with the capitalist dogs whove moved on to sponge off the next hosts' sweat, blood and tears.

"When money arrives, all is green, bustle and abundance. And when it leaves, all is trampled down, barren and bare" old Chinese proverb

Oh, really. Back in the day when Communist China was centrally planned the phrase "Iron Rice Bowl" came to the language. Some people had stable jobs and others were insecurly employed. There's a world of difference. Confucious basic philosophy was to "work for the government" as they have the prime jobs. There will always be secure jobs and boom and bust jobs. Personally I've had some 40 different jobs.

Sun, 2010-01-17 01:45

#77

Fidel

China is still centrally planned. And they're employing many more workers there than we have in total population here in a land of resources and unemployed and underemployed, and of waning ideology. Can we imagine if that many workers flooded into Canada looking for jobs and housing? Our own stooge central planners wouldnt know whether to crap or go blind. Theyre paying cash for apartments and new cars in China. Personal savings rates among the elderly as high as 50%. And now China looks like they will beat the USA to socialized medicine with the building of 30,000 new hospitals, clinics and other care facilities across China. China bustles with Keynesian-Confucianism while our "new" liberalised economies remain stagnant and mired in recession. Asia was once home to the largest and most influencial economies in the world. And they will be again.

Sun, 2010-01-17 01:49

#78

bruce_the_vii

China is centrally planned, eh. And doing better than Canada because of it. This is your dinner talk to the wife. Actually the Canadian economic strategy is immigration and this is by the central authorities - the central plan.

Sun, 2010-01-17 02:06

#79

Fidel

Yes, centrally planned and making the west look like we're standing stil and doing itl with Keynesianism and plenty of interventionism in the economy.

Capitalism is about maintaining vast regions of the world as under-developed preserves of natural resource wealth and cheap labour for supranationals to raid at will. At least China gets something out of it. All those other thirdworld capitalist hell holes are still under-developed hell holes and bastions of human rights abuses by the time the latest ideology for centrally planned state-capitalism expires.

Sun, 2010-01-17 02:20

#80

bruce_the_vii

Fidel, do you have any idea who the proletariat is? I work as an auto parts courier and rub shoulders with them daily. Before Christmas "P" got fired because he couldn't control himself. He was always yelling at the customers, the fellow employers and the bosses. One day they told him to apolgize so he simply left. The other workers were relieved. Oficially "P" has grade eight but in reality it's probably grade six. Before that it is was "B". "B" smelled so bad that people didn't want to work with him. One day he cut a car off while driving and almost killed himself. They cut him off at that point. "B's"opinion was an interest in politics was similar to mental illness. Then there is "M". They made "M" a supervisor at one point ( that's businesses being innovative). He tried to punch out one of his staff. "M" has three children and his girl friend has two but all five have been taken away by the grandparents. Between "M" and his girlfriend they have produced five orphans. Then there is "V". "V" is a Jamacan immigrant and very religious. However he thinks he is poor because Jewish bankers control the world economy. This idea that the worker should be King, be comfortable, is a bit far fetched. I'm average myself and I can tell you from personal experience that is not that good. At the bottom there are problems and fortunately they are getting by at this time in Canada. God Bless.

Sun, 2010-01-17 02:24

#81

Fidel

Sounds like they need to invest everything in a handful of well-educated middle and upper management types for the sake of maximizing efficiency and to wring as much productivity from blue collar slobs as possible, and who themselves only need to be prodded and cajoled to get any work out of their lazy, useless eater carcasses. Ahhem! Kapitalists don't really understand human beings or what motivates them other than self-interest. It's why capitalism's on its ass again. It's a miserable system.

Sun, 2010-01-17 02:30

#82

bruce_the_vii

Again sir, have you any experience with well educated the upper management types. For one they are out of the price range of auto parts. For two they are not that good. They brought the tech bubble in 2000 which produced a recession in the uSA and the mortgage fiasco in 2008 which produced a world recession. That's what we have to work with.

Sun, 2010-01-17 02:51

#83

Fidel

I was pulling your leg, Bruce, sorry. I realize you are serious about this topic of discussion and should let someone else comment. Think free labour markets and a borderless world, and a real information based economy to allocate labour and resources as efficiently as possible. There is work to be done everywhere around the world, and this system isnt working to bring millions of idle hands to that work. We need a new way, imo. Carry on.

Sat, 2010-04-10 18:10

#84

Jacob Richter

[b]Public Employer of Last Resort for Consumer Services[/b]

"But if a surplus labouring population is a necessary product of accumulation or of the development of wealth on a capitalist basis, this surplus-population becomes, conversely, the lever of capitalistic accumulation, nay, a condition of existence of the capitalist mode of production. It forms a disposable industrial reserve army, that belongs to capital quite as absolutely as if the latter had bred it at its own cost. Independently of the limits of the actual increase of population, it creates, for the changing needs of the self-expansion of capital, a mass of human material always ready for exploitation." (Karl Marx)

In Chapter 25 of Volume I of [i]Das Kapital[/i], Marx made this damning observation of a phenomenon that, until the advent of the capitalist mode of production, existed only as a result of natural disasters and wars: structural unemployment. Meanwhile, and earlier in this work, the question of comprehensive labour reform in the form of both living-wage minimums and deflation-protected, accurately measured cost-of-living adjustments for various kinds of compensation took into consideration the necessity of applying these towards unemployment insurance and voluntary workfare benefits. Additionally, the question of unemployment arising from workplace closures, mass sackings, and mass layoffs was addressed by means of partially rehabilitating Lassalle's political agitation for the formation of producer cooperatives with state aid (in this case, pre-cooperative worker buyouts of existing enterprises and enterprises just like what happened in the Paris Commune). However, these two measures would still be insufficient to tackle fully the problem of unemployment. In the first instance, the mention of voluntary workfare benefits refers to pay levels and not to operational aspects of the government programs themselves. In the second, unemployment can arise from other situations.

In the recent economic crisis, there has been much discussion in the United States about all the measures of unemployment used by the Bureau of Labor Statistics:

   § U1: Percentage of labor force unemployed 15 weeks or longer
   § U2: Percentage of labor force who lost jobs or completed temporary work
   § U3: Official unemployment rate per the International Labour Organization
   § U4: U3 + "discouraged workers", or those who have stopped looking for work because current economic conditions make them believe that no work is available for them
   § U5: U4 + other "marginally attached workers", or "loosely attached workers", or those who "would like" and are able to work, but have not looked for work recently
   § U6: U5 + Part time workers who want to work full time, but cannot due to economic reasons.

At the end of 2009, U6 was well over 15%.

Now, consider a similar downturn elsewhere and a few years back. Towards the end of 2001, the Argentine economy went into a nosedive after two decades of privatization and liberalization. Official unemployment jumped to 21.5% by the middle of 2002, and over half the population was living in poverty. However, local currency alternatives to government money flourished and, not unlike the workers of the Paris Commune, Argentine workers reclaimed many abandoned factories to form the cooperative movement in that country. Moreover, in April 2002 the government created the Heads of Household program, providing part-time work for all household heads who met various family requirements. This part-time work consisted of participation in nonprofit-administered training programs and, more notably, provision of community services.

In the March 2008 issue of [i]Dollars and Sense: Real World Economics[/i], Ryan A. Dodd described the above before making a general point about that program:

[i]Not surprisingly, as Argentina's economy has recovered from the depths of the crisis, the government has recently made moves to discontinue this critical experiment in direct job creation.

[b]The Argentine experience with direct job creation represents a real-world example of what is often referred to as the employer of last resort (ELR) proposal by a number of left academics and public policy advocates.[/b] Developed over the course of the past two decades, the ELR proposal is based on a rather simple idea. In a capitalist economy, with most people dependent on private employment for their livelihoods, the government has a unique responsibility to guarantee full employment. This responsibility has been affirmed in the U.N. Universal Declaration of Human Rights, which includes a right to employment. A commitment to full employment is also official U.S. government policy as codified in the Employment Act of 1946 and the Humphrey-Hawkins Act of 1976.

[...]

Today, the ELR idea is mostly confined to academic journals and conferences.[/i]

Because it is long overdue for the class-strugglist left to commit to programmatic clarity, quoted at extensive length is L. Randall Wray of the Levy Economics Institute of Bard College on the subject:

[i]The mainstream interpretation of Keynes's economics seemed to offer theoretical justification for policies that could tame the business cycle, promote full employment, and eliminate poverty. The two main levers to be used would be fine-tuning of investment spending to keep it at the full-employment level, supplemented by welfare spending to keep aggregate demand high while protecting the unfortunate who might be left behind by a rising tide. While Hyman Minsky is best known for his work on financial instability, he was also intimately involved in the postwar debates about fiscal policy and what became the War on Poverty. Indeed, at Berkeley he was a vehement critic of the Kennedy/Johnson policies and played a major role in developing an alternative.

[...]

Minsky argued that we need a "bubble up" policy, not trickle down economics (Minsky 1968). Spending should be targeted directly to the unemployed, rather than to the leading sectors in the hope that tight labor markets might eventually benefit lagging sectors and poor households. For this reason, he advocated an [[b]Employer of Last Resort[/b]] program that would take workers as they are and provide jobs that fit their skills (Minsky 1965, 1968, 1973, 1986). He argued that only the federal government can offer an infinitely elastic demand for labor, ensuring that anyone willing to work at the going wage would be able to get a job. Further, he argued that in the absence of tight full employment, the true minimum wage is zero; however, with an ELR program, the program wage becomes an effective minimum wage.

[...]

ELR could include part-time work, child maintenance, and a discounted youth wage, if desired. In addition to providing jobs where they are most needed, ELR would also provide public goods and services where most needed - in urban ghettos - to help quell unrest.

To ensure taxpayer support of the program, it would need to provide readily visible public benefits. Minsky advocated a progressive income tax, and would distribute the benefits of publicly produced goods and services progressively (Minsky no date). Hence, taxpayers would get something for their taxes - parks, safety, clean streets, education, child care and elder care, etc. - but there would be a strong redistributive bias. He recognized that the program would probably need a permanent cadre to provide critical services - as the public becomes accustomed to receiving public services from the ELR program, these cannot be suddenly shut off (Minsky 1973).

One of the goals of the program would be to make labor more homogenous through education and training, but Minsky opposed any education or skills requirement for admission to the program (Minsky 1965). He also opposed means-testing, which would turn the program into what is now called workfare [...] He recognized that the nation would still need some programs for skilled workers who lose high wage jobs and fall into the ELR program. As discussed, a dynamic economy would always be creating structural unemployment, so retraining programs would be needed to ameliorate skills mismatch. He also recognized that the nation would still need welfare for those who could not, or should not work [...] However, he showed that an ELR program by itself would solve most of the poverty problem [...] [b]He saw ELR as an alternative to the dole, arguing that unemployment compensation just institutionalizes unemployment. By contrast, jobs affirm the dignity of labor and allow all to participate more fully in the economy.[/b][/i]

This particular kind of job creation program is a major leap in approaching structural unemployment. Traditionally, public works programs have been initiated to get people back to work, but in the recent crisis have been on the whole ineffective because of their treatment as being little more than short-term stimulus spending by governments. Moreover, public works themselves do not take into account the skill set of most workers in developed economies, which is not in manufacturing or construction trades, but rather in skilled and unskilled services. Consequently, grassroots agitation for public works - much less for the traditional Trotskyist call for fully implementing a sliding scale of hours - tends to not win solid support from these workers, to say the least.

Because this is the most that bourgeois capitalism can accommodate with respect to unemployment, this reform - [b]for the expansion of public services to include employment of last resort for consumer services[/b] - does not meet the Hahnel criterion for facilitating other threshold demands or even immediate and intermediate ones. The biggest stick of bourgeois capitalism is unemployment; without this threat of employees entering unemployment, employers can only resort to carrots. Other reactions by employers would have to be pre-empted or dealt with swiftly, and a number of measures should be implemented beforehand to prevent capital flight, investment strikes (not investing as required by government plans), and other economic blackmail on the part of the bourgeoisie and petit-bourgeoisie.

Some will undoubtedly rush to say that this proposal is little different from the post-modernist call for unconditional basic income as discussed in Chapter 2. Recall that this scheme would, under bourgeois society, result in both the monetization of social benefits through their privatization and a universally downward shift in wages. Moreover, with jobs come certain psychological benefits not found in mere welfare receipts, not to mention the usual skills development, as demonstrated aptly by the rejection of welfare receipts by some of the very same participants in the Argentine government's job creation program (who in turn preferred work). The brief implementation of proposal in places like Argentina and even in the Depression-era US also means that this threshold demand is, as mentioned earlier, not directional or genuinely transitional.

How, then, does this reform enable the basic principles to be "kept consciously in view"? Besides the obvious call to class strugglism against the biggest stick of bourgeois capitalism, consider the approach to zero unemployment by an economy operating on the principle(s) of social labour, as explained by Paul Cockshott in a video on socialist economies:

[i]One of the key differences between a socialist economy and a capitalist economy is that, in a capitalist economy, there is always unemployment. This unemployment acts as a stick to beat the worker to work harder. [b]Now, in a socialist economy where the allocation of resources is being planned, you tend to get full employment[/b] [...] However, full employment could come in two forms. It could either come because, in the economy as a whole, there was sufficient demand for labour to take up all the people willing to work - or it could come because people had a right to work at one particular workplace where they started work. Now, if you have the latter form, you run the danger that the economy will become set in concrete; it becomes very difficult to reallocate resources to new industries and to run down old industries as tastes change or technologies change. [b]So, it has to be the case that the state guarantees people a job, but doesn't necessarily guarantee them a job at the same place indefinitely.[/b][/i]

[b]REFERENCES:[/b]

[i]Das Kapital, Volume I[/i] by Karl Marx
[[url=http://www.marxists.org/archive/marx/works/1867-c1/ch25.htm#S3]http://ww...

[i]A New WPA?[/i] by Ryan A. Dodd [[url=http://www.worldproutassembly.org/archives/2008/04/a_new_wpa_an_in.html]...

[i]Minsky's Approach to Employment Policy and Poverty: Employer of Last Resort and the War on Poverty[/i] by L. Randall Wray [[url=http://www.levy.org/pubs/wp_515.pdf]http://www.levy.org/pubs/wp_515.pdf[...

[i]Towards a New Socialism (video)[/i] by Paul Cockshott [[url=http://www.youtube.com/watch?v=wl5k1zH2oGM]http://www.youtube.com/watch?...

Hyman Minsky, full employment, and political demands

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