From Full Employment To “Inclusive Growth”
This is the third of three posts on full employment. The unifying thread is that “full employment” has always been a political and not an economic problem. The first two posts were The Electoral College, White Supremacy and Full Employment as “Reign of Terror” and Full Employment and the Myth of the General Strike.
Employing Sorel’s distinction between myth and utopia, full employment has always been a utopia. But it is a utopia long abandoned by economists, who have substituted the totem of economic growth for the utopia of full employment.
The term “full employment” did not appear in the speech given yesterday (December 5) by Mark Carney, Governor of the Bank of England. Instead, he mentioned the term “inclusive growth” six times.
“The cry for more inclusive growth starts with a crisis of growth itself.”
First, economists must clearly acknowledge the challenges we face, including the realities of uneven gains from trade and technology.
Second, we must grow our economy by rebalancing the mix of monetary policy, fiscal policy and structural reforms.
Third, we need to move towards more inclusive growth where everyone has a stake in globalisation.
What did Carney mean by “inclusive growth”? Not much:
For free trade to benefit all requires some redistribution. There are limits, of course, because of fiscal constraints at the macro level and the need to maintain incentives at the micro level. Fostering dependency on the state is no way to increase human agency, even though a safety net is needed to cushion shocks and smooth adjustment.
There are more reservations about redistribution in that paragraph than advocacy. And who says greater equity is necessarily redistribution? Wasn’t displacing workers for the sake of corporate profits already redistribution? But why worry about redistribution when “technology platforms such as taskrabbit, Alibaba, etsy, and Sama can help give smaller-scale producers and service providers a direct stake in global markets”? Not to mention the burgeoning opportunities to sell Chiclets to Uber drivers stuck in traffic jams! After all, “more inclusive growth requires frank talk about risks and concrete initiatives to help people adjust to new realities.”
“If only there was etsy, I could sell these apples globally!” |
Here is some of what full employment meant in the era before inclusive growth: Stephen Leacock, The Unsolved Riddle of Social Justice:
“Unemployment,” in the case of the willing and able becomes henceforth a social crime. Every democratic Government must henceforth take as the starting point of its industrial policy, that there shall be no such thing as able bodied men and women “out of work,” looking for occupation and unable to find it.
William Beveridge, Full Employment in a Free Society:
Full employment… means having always more vacant jobs than unemployed men, not slightly fewer jobs. It means that the jobs are at fair wages, of such a kind, and so located that the unemployed men can reasonably be expected to take them; it means by consequence, that the normal lag between losing one job and finding another will be very short.
John Maynard Keynes, “The Long Term Problem of Full Employment”
As the third phase comes into sight; the problem stressed by Sir H. Henderson begins to be pressing. It becomes necessary to encourage wise consumption and discourage saving,-and to absorb some part of the unwanted surplus by increased leisure, more holidays (which are a wonderfully good way of getting rid of money) and shorter hours.
Stephen Leacock, The Unsolved Riddle of Social Justice
The hours of labor are too long. The world has been caught in the wheels of its own machinery which will not stop. With each advance in invention and mechanical power it works harder still. New and feverish desires for luxuries replace each older want as satisfied. The nerves of our industrial civilization are worn thin with the rattle of its own machinery. The industrial world is restless, over-strained and quarrelsome. It seethes with furious discontent, and looks about it eagerly for a fight. It needs a rest. It should be sent, as nerve patients are, to the seaside or the quiet of the hills. Failing this, it should at least slacken the pace of its work and shorten its working day.
Not everyone supported full employment, as Michal Kalecki pointed out in “The Political Aspects of Full Employment“:
Among [the past opponents of full-employment policy] there were (and still are) prominent so-called ‘economic experts’ closely connected with banking and industry. This suggests that there is a political background in the opposition to the full employment doctrine, even though the arguments advanced are economic. That is not to say that people who advance them do not believe in their economics, poor though this is. But obstinate ignorance is usually a manifestation of underlying political motives.
Here is the view of an avowed opponent of full employment:
As a preface to the discussion of the Full Employment Act of 1945, which was conceived by the friends of the Russian system of government, it seems appropriate to examine here the present Soviet society which has come to be known as Stalinism. The Southern region is faced with a serious threat from this direction by sinister forces which unfortunately have the support of well-meaning people who for religious reason are interested in the welfare of the Negro. — Charles Wallace Collins, Whither Solid South
How did we get from more job vacancies than there are unemployed, at fair wages, to “frank talk” about high-tech platforms for 21st century costermongering? The first step, according to Roy Harrod, was “to extend Keynes’s analysis into the long run by considering under what conditions a growing economy could realize full-capacity utilization and full employment.” This was necessary, Harrod, claimed, because Keynes “hadn’t got round to it.”
Keynes hadn’t got a round tuit. |
On the contrary, Keynes had indeed gotten around to it in a 1943 memorandum on “The Long-Term Problem of Full Employment” in which he reiterated, in a more programmatic form, notions he had earlier expressed in his 1930 address, “Economic Possibilities for our. Grandchildren” and which he subsequently elaborated on in a letter to T. S. Eliot:
…the full employment policy by means of investment is only one particular application of an intellectual theorem. You can produce the result just as well by consuming more or working less. Personally I regard the investment policy as first aid . In U.S. it almost certainly will not do the trick. Less work is the ultimate solution (a 35 hour week in U.S. would do the trick now [1943]). How you mix up the three ingredients of a cure is a matter of taste and experience, i.e. of morals and knowledge.
But aside even from what Keynes’s views on full employment were, the point Harrod was making was that neo-classical growth theory was supposed to be about the conditions necessary for maintaining full employment. That is to say, economic growth was explicitly conceived as a means to a defined end — full employment — and not as an end in itself.
I originally was going to title this post “The Unsolved Riddle of (the Long-Term Problem of [the Political Aspects]) of FULL EMPLOYMENT (in a Free Society)” in deference to four of the texts that I quoted from above: Stephen Leacock”s The Unsolved Riddle of Social Justice, John Maynard Keynes’s “The Long Term Problem of Full Employment,” Michal Kalecki’s “The Political Aspects of Full Employment” and William Beveridge, Full Employment in a Free Society. But then Carney’s speech appeared with its tantalizing image of the economists’ totemic belief in free trade.
Some readers may find all this talk about myth, utopia and totem annoying. Aren’t we talking about economic policy options in the real world of production, exchange and finance? Yes and no. The economic conversation does have effects in the real world but more often it serves to mystify rather than clarify what is going on. Ironically, the rabid segregationist Collins is more trustworthy as a foe of full employment than Carney, the bank governor, is as an advocate of elusively inclusive growth. Collins knew where he stood. No one — least of all Carney — knows what he stands for.
IMHO the largest problem is the belief that infinite growth is possible in a finite world.
how big is the finite?
I went and read the speech by Carney, that UK bank governor but had to buy beer at the store and commence consuming it to complete the read….gag
You were too kind in your choice of quotes, IMO. Let me add a couple of the sickest:
“The fundamental challenge is that, alongside its great benefits, every technological revolution mercilessly destroys jobs and livelihoods – and therefore identities – well before the new ones emerge.
“And why is the above a given? Seems like “invisible hand” BS to me.
“Finally, in an age where anyone can produce anything anywhere through 3-D printing, where anyone can broadcast their performance globally or sell to China whatever the size of their business, there is an opportunity for mass employment through mass creativity.
“Is there any part of that above statement that is not a lie? “…anyone can produce anything anywhere through 3-D printing…” Whew! I was issued a US utility patent almost 20 years ago for an alternative bicycle saddle that cost me over $12/ea to make in Taiwan and was told that the average price for a bike saddle in Vietnam is $3.
”
In the end, monetary policy isn’t a spectre but a friendly ghost.
”
This the last statement from the speech……friendly ghost…tell that to the long term unemployed, especially the youth that are most affected.
Where is the admittance by the political and financial elite that there will not, in any reasonable future, be enough jobs fort those wanting them if globalization continues. I am not an advocate of trade wars and all countries sucking back into their boundaries but since policy discussions about population control/readily available birth control are off the table then genocide seems to be the acceptable alternative to a humanistic safety net for all……Carney alludes to taxing corporations according to a (gag) Larry Summers proposal: “And that is why the G20 might at least consider, as Larry Summers has suggested, a minimum tax on reported earnings to be paid somewhere.” Of course, that “somewhere” tax will happen where it is least on the corporation and questionably useful to the local populace.
Where are the proposals to tax estates/trusts and limit inheritance?
Let them eat propaganda!
This won’t end well. When folks have nothing to lose they are apt to rise up and create havoc in society. Do the elite think they will escape and limit the mayhem to the lower “classes”? I don’t think so.
Yes, it’s true I was deliberately being restrained in my treatment of Carney’s speech. Some of the coverage of it was portraying the speech as a stinging rebuke to economists’ sneering contempt for the victims of their policies. That’s not the way I saw it. It struck me more as “let’s confess our sins so we can go out and sin some more with a clear conscience!”
Sandwichman,
I was not trying to denigrate your posting and thank you for it. I just became unglued reading the Carney speech and felt compelled to “throw up” on it more.
Thanks again for the forum to let me rant about our world.
Sandwichman,
Have you read James Livingston’s most recent book, “No More Work-Why Full Employment is a Bad Idea?” Here’s a condensed version of his idea that it’s possible to pay people a living wage while at the same time, not requiring them to work. https://aeon.co/essays/what-if-jobs-are-not-the-solution-but-the-problem
nanute:
I believe sandwichman has a few articles on the topic out there also. You might try looking here http://ecologicalheadstand.blogspot.com/ and also at Econospeak.
Haven’t read the book but have read his related essay, Fuck Work. I am in accord with him in spirit but I must confess to being a cock-eyed pessimist. The push back against working less (or not working) is truly prodigious. There is a reason for it. If people had secure incomes and plenty of free time they would not put up with the shit that they are made to put up with. Long — or unreliable — hours of work and low pay are the prerequisites of political domination and it is the latter that motivates public policy in a capitalist society. The reduction of working time thus leads to the abolition of wage labor and wage labor is the basis of the political domination by big owners of property.
Run: “how big is the finite?” —- are we not discovering that limit most everywhere? Possibly you can point to a countervailing example but why has most every resource extraction become less efficient in the sense that there is an increasingly smaller net gain on our increasing expenditure of energy.
Run75441,
I’ve been following Max for a while here and as you noted. Just thought it would lead to further discussion. I sent Livingston a link to this post. Perhaps he will chime in at some point.
Thanks
Nanute
nanute:
Sandwichman is an interesting person and I do read him religiously as my feed of endeavor deals with throughput analysis in manufacturing which usually results in less Labor. Just pointing you in another direction. It would be cool if he finds it interesting enough to answer.
Sammich
don’t take this personally or too seriously. it may just be a hobby of mine.
but what is the advantage of replacing the economic conversation which serves to mystify what is going on..
with quotes and “special words” from philosophers that serve to mystify what is going on?
i think you largely redeem yourself and perhaps get around to demystifying the special words in the course of your essay.
and, if it helps, i think i agree with you. but, what next?
There is a real good piece on this today from Thomas Pickety over at Economist View.com “Econ Growth in the US, A Tail of Two Countries”. He talks about the growing need for distibutional national accounts from the govt.paricularely at the top end of the income scale .He lays out an overview to do this…
In my end of the year message to clients I am pointing out that Trump will be cutting taxes and otherwise following stimulative economic policies in an economy at or near full employment. I would bet that it has inflationary consequences. Of course the inflow of foreign capital to finance his deficit will push the dollar higher which will dampen inflation.
So which will have the strongest impact?
At least when Reagan did this the economy had massive excess capacity.
Historically, except in this cycle the change in average hourly earnings has been a very good leading-concurrent indicator of fed funds.
sammich
there is reason to be a little pptimistic. at least not too long ago management “theory” was beginning to understand that abusing labor was not the best way to better profits.
the problem may be that first, people, even poor people, think “money” first and tend to be very short sighted, perhaps with good reason: a dollar today might put you in a better position tomorrow than waiting until tomorrow to get two dollars. second, it appears to be the case at least among low level managers that the importance of “dominance” is more important tha actual productivity.
but i don’t think that paying people for “no work” will ever turn out to be a good idea except in cases where no work is possible. paying people for “less work” an amount that remaining resources can stand might work once people are used to the idea that they have to get by on less, and someone has taken the trouble to “educate” them so they can find meaningful (to them) ways to use the extra time.
oh, there is no reason for “gdp” to shrink: there are lots of things people could buy that don’t require burning fossil fuels.
http://www.nbcnews.com/news/us-news/donald-trump-picks-gop-oil-industry-ally-scott-pruitt-lead-n693231
Great news for those who were hoping that Ivanka would ensure that Trump doesn’t back out of climate change.
Or…not.
ttps://twitter.com/realDonaldTrump?ref_src=twsrc%5Etfw
Sooo … I do hope that Sanders, Warren, and United Steelworkers 1999 president Chuck Jones explain to Trump why, exactly, United Steelworkers 1999 ISN’T “any good.”
Or maybe Trump will explain to the manufacturing workers: It wasn’t trade agreements after all that killed U.S. manufacturing! It’s the incompetent union members and their union leaders!
Ah. THAT’ll sit well in the Rust Belt.
Of all the many of Trump’s baits-and-switches, this is the one most likely to hurt him:
Sandwichman,
I know you know about the Kellogg experiment.
With that, I can’t help but think that all these quotes are saying in many words what boiled down is simple: Mind the money and all will be well.
This is the problem with economics regardless of Keynes or others. Economics just seems to think that if you can make money flow well, then society will be ok.
This thought in an area of study that involves human activity simply is putting money/finance, economic before, in front of human activity that does not involve money. It is this activity of living, the non monetary relationships that are at the core of society civil or otherwise.
It is putting the money (paper or otherwise) interaction among humans as first in the order of relationship study that has lead to putting banking/finance equal to and in some ways ahead of production.
Humans are productive first. Consumers second. This is because the basic activity of living is to reduce the risks of life and living. The idea of an economy is a creation of humans, we are not a creation of an economy (just as a market is not an economy) means that an economy is in service to humans and thus society. But, if all you are concerned about is the efficiency of money then things like full employment are a second thought if a thought at all.
Early in my blogging here I asked: What good is it building the largest most powerful engine in history if all it is going to do is be the largest most powerful engine in history?
Why do we have an economy? If you answer to make money, you fail the test.
I forgot.
FDR’s second bill of rights:
Among these are:
The right to a useful and remunerative job in the industries or shops or farms or mines of the nation;
The right to earn enough to provide adequate food and clothing and recreation;
The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;
The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;
The right of every family to a decent home;
The right to adequate medical care and the opportunity to achieve and enjoy good health;
The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;
The right to a good education.
All of these rights spell security. And after this war is won we must be prepared to move forward, in the implementation of these rights, to new goals of human happiness and well-being.
America’s own rightful place in the world depends in large part upon how fully these and similar rights have been carried into practice for all our citizens. For unless there is security here at home there cannot be lasting peace in the world.
It’s where we were. Oh well.
The sheer god-awful childishness of Trump’s two tweets to United Steelworkers Local 1999 president Chuck Jones is breathtaking:
http://www.nytimes.com/2016/12/08/us/politics/trump-picks-twitter-fight-with-union-local-chief-in-indiana.html
Two key paragraphs in the Washington Post’s just-posted article, “Trump to name Andrew Puzder, a fast-food CEO and critic of substantially raising the minimum wage, to head the Labor Department”:
“As the head of a fast-food company, Puzder is a supporter of the approach touted by Trump on the campaign trail that lowering taxes for corporations and the wealthy and loosening regulations for businesses can boost job creation. …
“With the nomination of the fast-food executive, Trump brings another top fundraiser into his cabinet. Puzder supported Trump’s race to the White House financially and served as an economic adviser to his campaign. He and his wife, Deanna, contributed a total of $332,000 to helping Trump get elected, including money given to Trump’s campaign, to joint fundraising committees and to the Republican National Committee, according to the Federal Election Commission.”
Sooo, folks, how many people in the Rust Belt do you think knew that on the campaign trail, Trump touted lowering taxes for corporations and the wealthy and loosening regulations for businesses can boost job creation. And that a fast-food-chain CEO was donating mega-bucks to Trump’s campaign and was on campaign fundraising committees? ANYONE?
And, yes, the news media did report this. They didn’t emphasize it, but it was reported. Funny, how different things would be right now had Clinton campaigned on this, shouting it from the rooftops, or even just whispering it now and then? Or maybe asking, say, union leaders to use their social media feeds to get out the word? On this and the other many, many facts of this sort?
‘Course, she would have risked losing some of those moderate suburban Republicans who cared one way or the other how Meg Whitman would vote. And why bother to get out word of this to millennials, when you have Katy Perry campaigning with you at your rare actual rallies at which you don’t mention this or anything else that voters don’t already know about your opponent?
I effing hate her. The dumbest presidential candidate in many decades, and the laziest and most selfish ever.
SENTENCE CORRECTION: “And why bother to get out word of this to millennials, when you have Katy Perry campaigning with you at your rare actual rallies, at which you don’t mention this or anything else that voters don’t already know about your opponent?”
THAT COMMA BETWEEN “RALLIES” AND “AT” NEEDS TO BE THERE., lest anyone think I meant to say that Clinton usually actually said anything worth saying, at her rare rallies.
There was far from full employment back in the “happy days” of the 50s and 60s, but plenty of activity.
The dirty little secret of economics is that a lot of activity, (i.e. unpaid labour) especially socially essential activity, is done outside the paid labour network, and (most importantly) will be done anyway, whether paid, unpaid, or even when actively discouraged. And those who juggle economies depend on this fact.
I call this sector the endurance economy. It encompasses many apparently unrelated activities, such as
— child rearing
— teaching
— farming
— arts, literature, music
— nursing, charities, home repair
— whistleblowing
— journalism
— authentic religious work
— clubs, sports, hobbies
— research and scientific inquiry
And many more.
Some of these are sometimes paid, but they persist even if unpaid or even lethally targeted.
One quality of the “happy days” of my Minnesota upbringing was the wide variety of volunteer work, Scouts, church groups, bowling leagues and so on. All these depended on the existence of leisure time for the employed, and a huge workforce of “unemployed” wives.
To my mind, full employment is a trap. To require every adult be in the paid workforce weakens the strength of labour, weakens the endurance sector, waters down wages, weakens communities, and in those eras where it is legitimately necessary, indicates a culture in crisis.
Is it good for people to be busy, active, inquiring, teaching, gardening, and caring for each other? Absolutely. Is it necessary for all this activity to be routed through a paid workforce model? No, it cannot work that way.
Noni
noni
thanks. at first i was afraid you were going to go in the other direction with that. but i agree with your conclusioin wholeheartedly.
Bev,
It is a month. Give it up.
Daniel, I don’t have a problem with most of those “rights,” but with the error that rights are something that must be provided to you by someone else. Rights are those things that governments are instituted to protect, not to provide. We have, for instance, the right to keep and bear arms. That only means that the government should protect our ability to procure and bear arms, not that the government must buy everyone guns.
Warren
we the people in a democracy create rights for ourselves. if our democracy has been designed (constitution) with sufficient checks and balances, the rights we create for ourselves will not impose unreasonable burdens on everyone else.
we may with perfect philosophical purity decide that in a complex economy which creates, willy nilly, poverty for some while creating plenty for most, we can establish a right to some relief from that poverty.
welfare is a lot easier than creating “fair” wages. a minimum wage is even easier. and in the case of old age, worker-paid social security which merely protects the workers own savings, is easiest of all.
trouble with a democracy, however, is that there are always people who are advantaged, willy nilly, by the inefficiencies of the market who are unwilling to give up any part of their windfall even to preserve the viability of the country that protects them.
and of course those that don’t understand anything, but who have a smart answer for everything.