New Economic Perspectives
The Answer to the Unemployment Problem Is More Jobs
L. Randall Wray | Professor of Economics, University of Missouri at Kansas City
cross posted at Economonitor — Great Leap Forward
An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Tuesday, December 2, 2014
Randy Wray — The Answer to the Unemployment Problem Is More Jobs
New Economic Perspectives
The Answer to the Unemployment Problem Is More Jobs
L. Randall Wray | Professor of Economics, University of Missouri at Kansas City
cross posted at Economonitor — Great Leap Forward
Randy can make his pitch to ordinary Americans. Especially those Americans who are un- or under-employed. That is where support for a JG will come from. Build a grassroots political movement and be assured that progressives and other opportunists will come a running.
ReplyDeleteYup, Bob. Ordinary people - including many "conservatives" can understand why full employment, the JG is the solution better than many "progressives" whose ideations have become so rigid they are impervious to simple, obvious, rational argument. So impervious that I am less optimistic than you are that "progressive" opportunists will come running. Mosler was just relevantly commenting on Italy at billyblog.
ReplyDeleteI'm not sure which "progressives" Randy is talking about? The so-called "progressives" in Congress are to the right of Nixon as often as not.
ReplyDeleteThere is more than one approach to full employment. Instead of direct creation of temporary minimum wage jobs, why not direct creation of permanent middle class jobs, otherwise known as "socialism?" Why not a CCC? Why not functional finance budgeting? Why not shorten the work week? Why not lower the retirement age? And so forth.
As usual, Randy never explains how he would pull suitable temp jobs out of thin air.
One reason that the WPA and related New Deal programs failed to end unemployment during the Depression was because much of the WPA work was outsourced to state and local governments. The locals had to devise suitable labor intensive projects and also come up with their share of the cost -- typically 30% or more. Since state and local government budgets were pinched during the Depression, they were slow to develop WPA projects.
Keynes criticized the New Deal work projects for relying on state and local funding.
While JG proposals vary, most seem to want to repeat the New Deal mistake of outsourcing projects to state and local governments and requiring them to share the cost.
Also, many public works projects are not labor intensive. Want to build a road or a bridge? Then you'll need asphalt, concrete, steel, heavy equipment, engineers, and skilled operators. That doesn't mesh well with the MMT minimum wage JG.
I certainly support various forms of both direct and indirect job creation -- a CCC, full funding for existing agencies, free rooftop solar for every home, Beowolf's proposal to index the FICA rate to the unemployment rate, Nixonian "revenue sharing" with the states, Warren's "direct unlimited hiring" proposal, etc., but have never understood MMT's fixation on minimum wage temp jobs as a cure-all.
Good points but imo it all hinges on a wider recognition that we have authority to pursue this policy in the first place... and that it would benefit all of us ....
ReplyDeleteBased on what I see in the think tank chatter on twitter, the first question will be: "how much will it cost and how are we going to pay for that?" by the unqualified libertarian mathematical morons who run economic/fiscal policy in DC...
So these people need to be confronted and I'm sorry ridiculed and laid bare as the morons that they are.... we wont make any friends this way, too bad...
rsp
I agree with Dan Lynch. JG is an idea with possibilities, but it has problems. Unfortunately the most vociferous advocates of JG have no grasp of the problems.
ReplyDeleteThanks for saying that, Ralph. Sometimes I feel like a lone voice in the wilderness, and I don't mean to hate on MMT which in other respects I mostly agree with.
ReplyDeleteI definitely support direct job creation -- for sure a CCC for young people -- but there is more than one way to do it, and not everyone will fit into a particular job program for one reason or another.
When I was a young man I performed all sorts of jobs but as I get older I am pickier about what type of work I am willing to do. :-) I would love to have a job that utilizes my training, but failing that, frankly I am looking forward to retirement.
Dan, you are largely replacing misapprehensions of JG proposals and recommending as a better alternative, the actual JG proposals, or something like them. Progress :-), but ...
ReplyDeleteAbove all , the JG is not a proposal for "temporary minimum wage jobs", but for "permanent middle class jobs." The JG is a permanent job offer, which is a permanent job if the worker decides, at a living, "middle class" wage.
Also, no modern JG proposal I know of envisions a burden on local governments. Minsky, who you often groundlessly and unfairly criticize, advocated a CCC in his employment proposals in Stabilizing an Unstable Economy.
Really there is only one JG proposal. Only one proposal for full employment: pay people money for work. The devil is not in the details, but in the decision to not run a society in a sadistic, insane way. A society which forces "involuntary" unemployment (as if there were any other kind!) on one person is acting criminally toward him, just as if society thought it was OK if there were just one slave.
Also One reason that the WPA and related New Deal programs failed to end unemployment during the Depression has an implicit incorrect assumption. These programs did end unemployment in many places, did end most unemployment in the USA as a whole. Almost all works use the nonsensically wrong high figures on unemployment, which color all their theses.
Here is a relevant quote from someone old enough to have seen the reality first hand, but usually not praised around here:
"What I resisted in Keynes the most was the notion that there could be equilibrium unemployment.… The way I finally convinced myself was to just stop worrying about it. I asked myself: why do I want to refuse a paradigm that enables me to understand the Roosevelt upturn from 1933 to 1937? It’s … completely untrue that the New Deal didn’t work until World War II came and bailed it out. Some of the highest rates of real increase in and highest levels of plant and equipment capital formation are in the period 1934 to 1937."
(Paul Samuelson, quoted in Madrick's Seven Bad Ideas).
@Calgacus, the JG wage would be, at best, minimum wage, not middle class. Mosler currently proposes $10/hour. That's not even a living wage, let alone middle class. Never mind that regardless of what you ask for, the politicians will give you less.
ReplyDeleteLast I heard, Randy proposes JG cost-sharing with local governments, so yes, there will be a burden on locals, and no doubt many red states would "opt out" of a JG similar to how they opted out of O-Care.
Unemployment never dropped below 9.1% during the New Deal, until the war started.
https://edgeofthewest.wordpress.com/2008/10/10/very-short-reading-list-unemployment-in-the-1930s/
The complaint that I mentioned previously about how local governments were slow to ramp up WPA programs was from the WPA's final report.
Yes, it is true that the economy got a big shot in the arm between 1934 and 1937. That was when Congress voted to give WWI veterans a one-time BIG, over the conservative FDR's veto. The BIG worked like gangbusters to stimulate the economy and reduce unemployment. As per Wikipedia " The cash payments constituted an efficient economic stimulus, since the program required little government administration, the monies were likely to be spent without delay, and the entire process did not require the long lead time of a public works program.
https://en.wikipedia.org/wiki/Adjusted_Compensation_Payment_Act#Bonus_Bills_of_1930s."