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Getting Back to Full Employment: A Better Bargain for Working People by Dean Baker, Jared Bernstein

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, Alan Greenspan, American Society of Civil Engineers: Report Card, Asian financial crisis, business cycle, collective bargaining, declining real wages, full employment, George Akerlof, high-speed rail, income inequality, inflation targeting, low interest rates, mass immigration, minimum wage unemployment, new economy, Phillips curve, price stability, publication bias, quantitative easing, Report Card for America’s Infrastructure, rising living standards, selection bias, War on Poverty

ISBN: 978-0-615-91836-5 Contents Acknowledgements Chapter 1: Introduction Chapter 2: Evidence of the Benefits of Full Employment Data Appendix Chapter 3: Structural Unemployment: What It Is, Why It Matters, and Why It’s Not Our Biggest Problem Chapter 4: Full Employment and the Budget Chapter 5: Policies for Full Employment I: Improving the Trade Balance Chapter 6: Policies for Full Employment II: Public Investment, Public Jobs, and Work Sharing Chapter 7: Full Employment Now References Acknowledgements This book might not exist were it not for the help we got from many others.

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As we revisit this critical issue, the jobless rate has ranged from 7 percent to 10 percent for over four years, and it’s not expected to come down much anytime soon. A strong labor market with full employment need not be a rare economic anomaly that returns roughly twice for every one appearance of Halley’s Comet. Full employment can be a regular feature of the policy landscape, with tremendous benefits for rising living standards, poverty reduction, the federal budget, and equitable economic growth. In this book we present the benefits and importance of full employment in ways that are particularly germane to the economy today, and we offer policies to begin moving to full employment now. Full employment can be defined as the level of employment at which additional demand in the economy will not create more employment.

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Figure 2-4 shows the results of a statistical exercise to test the correlation between full employment and trends in real income for different groups of families. Specifically, the exercise examines the relationship between changes in real income by income group and the “deviation from full employment” – movements of the unemployment rate above or below the full-employment benchmark (see data appendix for more details).[4] The pattern of the bars shows that the lower your family income, the more you lose in slack labor markets. For families in the 20th percentile, for each percentage point that the unemployment rate was closer to full employment, incomes grew 2.2 percent.

The-General-Theory-of-Employment-Interest-and-Money by John Maynard Keynes

bank run, behavioural economics, business cycle, collective bargaining, declining real wages, delayed gratification, full employment, invisible hand, laissez-faire capitalism, low interest rates, marginal employment, means of production, moral hazard, Paul Samuelson, price stability, profit motive, quantitative easing, secular stagnation, The Wealth of Nations by Adam Smith, We are all Keynesians now, working-age population

It follows from this definition that the equality of the real wage to the marginal disutility of employment presupposed by the second postulate, realistically interpreted, corresponds to the absence of ‘involuntary’ unemployment. This state of affairs we shall describe as ‘full’ employment, both ‘frictional’ and ‘voluntary’ unemployment being consistent with ‘full’ employment thus defined. This fits in, we shall find, with other characteristics of the classical theory, which is best regarded as a theory of distribution in conditions of full employment. So long as the classical postulates hold good, unemployment, which is in the above sense involuntary, cannot occur. Apparent unemployment must, therefore, be the result either of temporary loss of work of the ‘between jobs’ type or of intermittent demand for highly specialised resources or of the effect of a trade union ‘closed shop’ on the employment of free labour.

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Evidently this amounts to the same thing as full employment. In the previous chapter we have given a definition of full employment in terms of the behaviour of labour. An alternative, though equivalent, criterion is that at which we have now arrived, namely a situation in which aggregate employment is inelastic in response to an increase in the effective demand for its output. Thus Say’s law, that the aggregate demand price of output as a whole is equal to its aggregate supply price for all volumes of output, is equivalent to the proposition that there is no obstacle to full employment. If, however, this is not the true law relating the aggregate demand and supply functions, there is a vitally important chapter of economic theory which remains to be written and without which all discussions concerning the volume of aggregate employment are futile.

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Thus, given the propensity to consume and the rate of new investment, there will be only one level of employment consistent with equilibrium; since any other level will lead to inequality between the aggregate supply price of output as a whole and its aggregate demand price. This level cannot be greater than full employment, i.e. the real wage cannot be less than the marginal disutility of labour. But there is no reason in general for expecting it to be equal to full employment. The effective demand associated with full employment is a special case, only realised when the propensity to consume and the inducement to invest stand in a particular relationship to one another. This particular relationship, which corresponds to the assumptions of the classical theory, is in a sense an optimum relationship.

Utopia or Bust: A Guide to the Present Crisis by Benjamin Kunkel

Alan Greenspan, Anthropocene, anti-communist, Bear Stearns, Bretton Woods, business cycle, capital controls, Carmen Reinhart, creative destruction, David Graeber, declining real wages, full employment, Hyman Minsky, income inequality, late capitalism, Lewis Mumford, liberal capitalism, liquidity trap, means of production, money: store of value / unit of account / medium of exchange, mortgage debt, Occupy movement, peak oil, price stability, profit motive, public intellectual, savings glut, Slavoj Žižek, The Wealth of Nations by Adam Smith, transatlantic slave trade, vertical integration, War on Poverty, We are the 99%, women in the workforce, Works Progress Administration, zero-sum game

But when the wage share of GDP has steadily fallen across the rich countries while their overall growth rates continue to slide, the opposite possibility looks more likely: only a rising total wage bill during the ’70s and after could have ensured consumer demand consistent with the maintenance of full employment—and a sustainably high rate of return. No less an authority than Kalecki,* in his classic essay on “The Political Aspects of Full Employment” (1943), insisted that “profits would be higher under a regime of full employment than under laissez-faire.” He and others produced models to bear the contention out; the models are unsurprising if you consider that full employment by definition entails expanded economic activity. There are also historical reasons for supposing that the central flaw of postwar capitalism lay in not-full-enough employment.

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Suppose that we are witnessing the end of the global imbalances that mounted so teeteringly high over the last decade, a collective folly in which one group of countries, led by the US, purchased the surplus goods of another group, led by China and Japan, with money the first group did not possess and had to borrow from the second. Neither group, at least not their corporations or governments, truly wanted anything like full employment. For the net-exporting countries, full employment would have raised wage costs and threatened competitiveness. For the net-importing countries, full employment would have triggered inflation and so undermined purchasing power and asset prices. True, the lack of full employment spelled inadequate aggregate demand across the system. But an increasingly baroque financial shell game conjured just enough demand to keep things afloat—until it didn’t.

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There are plenty of reasons to suspect this is only a daydream, not least the veto that international finance continues to wield over the policies of any country needing to borrow money to stimulate domestic development.* But if the US is to recommit itself to full employment, the first battle will have to be over the very definition of the term. Since Milton Friedman’s 1967 paper on the “natural rate of unemployment,” economic orthodoxy has defined full employment along Friedmanite lines as the Non-Accelerating Inflation Rate of Unemployment, or NAIRU. This is full employment not as common sense would gloss it—a job for all those willing and able to work—but as just enough unemployment for wage demands not to drive up inflation. Today full employment is defined by the Bureau of Labor Statistics as 4.9 percent unemployment.

Money and Government: The Past and Future of Economics by Robert Skidelsky

"Friedman doctrine" OR "shareholder theory", Alan Greenspan, anti-globalists, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, barriers to entry, Basel III, basic income, Bear Stearns, behavioural economics, Ben Bernanke: helicopter money, Big bang: deregulation of the City of London, book value, Bretton Woods, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, constrained optimization, Corn Laws, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Graeber, David Ricardo: comparative advantage, debt deflation, Deng Xiaoping, Donald Trump, Eugene Fama: efficient market hypothesis, eurozone crisis, fake news, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, forward guidance, Fractional reserve banking, full employment, Gini coefficient, Glass-Steagall Act, Goodhart's law, Growth in a Time of Debt, guns versus butter model, Hyman Minsky, income inequality, incomplete markets, inflation targeting, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Rogoff, Kondratiev cycle, labour market flexibility, labour mobility, land bank, law of one price, liberal capitalism, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, long and variable lags, low interest rates, market clearing, market friction, Martin Wolf, means of production, Meghnad Desai, Mexican peso crisis / tequila crisis, mobile money, Modern Monetary Theory, Money creation, Mont Pelerin Society, moral hazard, mortgage debt, new economy, Nick Leeson, North Sea oil, Northern Rock, nudge theory, offshore financial centre, oil shock, open economy, paradox of thrift, Pareto efficiency, Paul Samuelson, Phillips curve, placebo effect, post-war consensus, price stability, profit maximization, proprietary trading, public intellectual, quantitative easing, random walk, regulatory arbitrage, rent-seeking, reserve currency, Richard Thaler, rising living standards, risk/return, road to serfdom, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, shareholder value, short selling, Simon Kuznets, structural adjustment programs, technological determinism, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, tontine, too big to fail, trade liberalization, value at risk, Washington Consensus, yield curve, zero-sum game

By use of the formula, policymakers could calculate how much 125 T h e R i s e , T r i u m p h a n d Fa l l of K e y n e s extra spending needed to be injected into, or withdrawn from, the circular flow of spending to maintain full employment. The multiplier theory is the fiscal equivalent of the Quantity Theory of Money, and, at full employment, is identical to it. (For technical discussion of the multiplier, see Appendix 5.2, p. 133.) In advocating loan-financed public spending to maintain full employment, Keynes jettisoned the orthodox policy of cutting public spending to balance the budget in a slump. He wrote: it is a complete mistake to believe that there is a dilemma between schemes for increasing employment and schemes for balancing the budget – that we must go slowly and cautiously with the former for fear of injuring the latter.

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But by the same token, his economics threw little light on what would happen to class income shares when his own policies achieved full employment, in conditions of trade-union control of the supply of labour. In such a situation, would capitalism need to recreate Marx’s ‘reserve army of the unemployed’ to restrain wage demands, or would the government be forced to inflate the economy to keep profits racing ahead of wages? The latter is what the economist Jacob Viner assumed would happen when society got accustomed to full employment.74 Keynes himself admitted that he had ‘no solution . . . to the wages problem in a full employment economy’.75 Marxists, too, believed that attempts to overcome the class struggle by inflation would bring only temporary relief.

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Most British Keynesians rejected the analytical 146 t h e k e y n e si a n a s c e n da n c y relevance of ‘Phillips Curve’ Keynesianism, pointing out that Phillips’s data mostly preceded the existence of a full employment guarantee by the state: Victorian domestic servants, agricultural workers and casual labourers did not strike for higher wages. In the new situation, trade unions could push for higher wages without the risk of their members becoming unemployed. A modest check to demand would not stop inflation, since there was no trade-off between inflation and unemployment to be had short of abandoning the full employment commitment. The only policy that would simultaneously maintain full employment and keep prices stable was control over costs.21 The solution which seemed most congruent with the Keynesian philosophy of social compromise was a compact between government, capital and labour.

Brave New World of Work by Ulrich Beck

affirmative action, anti-globalists, Asian financial crisis, basic income, Berlin Wall, collective bargaining, conceptual framework, Fall of the Berlin Wall, feminist movement, full employment, future of work, Gunnar Myrdal, hiring and firing, illegal immigration, income inequality, informal economy, job automation, knowledge worker, labour market flexibility, labour mobility, low skilled workers, McJob, means of production, mini-job, post-Fordism, post-work, postnationalism / post nation state, profit maximization, purchasing power parity, rising living standards, scientific management, Silicon Valley, technological determinism, working poor, working-age population, zero-sum game

To bring a certain clarity into this bustling international debate, it makes sense to draw a fundamental distinction between the framework of scenario-building and the challenges of the second modernity. Most of the scenarios revolve around the question of Yes or No, end or recovery of full employment, hopes and worries. And all the time, the leitmotifs of the second modernity – science-based information technology, globalization, individualization and ecological crisis – need to be analysed in their consequences for the future of work. Let us first distinguish the following scenarios within the framework of the full-employment society. If the framework of a full-employment society is replaced with that of a multi-activity society, the collapse scenarios become the occasion for a redefinition of work and of the necessary reforms.

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The ‘reformers’, for their part, base their political opposition upon conflicting accounts of the present state of the work society – for even when the adversaries belong to the same society, they live in different worlds. Here the main dividing line is between those who think that full employment will be possible in the future – provided a few levers and screws are properly adjusted – and those who rule this out. To avoid misunderstandings, the point is not that the work society will run out of work. It is not the end of paid work but the end of full employment which is at issue. Two per cent unemployment, social security in work, normal work relations as the usual case – is all this history? So the basic dispute is over whether the full-employment society has ended for ever or will one day come back. Scenario 1: from the work society to the knowledge society Many authors chase away, as if it were a troublesome fly, the human concern that the revolutionary rationalization based on information technology is designed, if not to eliminate, then to thin out paid employment.

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For example, the number of people out of work rose dramatically in the crisis years of 1967 and 1975, only to fall again subsequently below 300,000. Apart from these exceptional periods, full employment remained the rule. But then the oil crisis destroyed this shining world of the full employment society. Slight conjunctural fluctuations aside, the number of unemployed rose tenfold between 1970 and 1996.22 Thus, ever since the 1970s unemployment has been constantly rising and the amount of work per capita has been constantly falling. This conclusion, which is used to counter the optimistic view that information technology will bring full employment, suggests that although the knowledge society is opening up new fields of work, it is gradually easing itself away from the normal work society.

The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy by Stephanie Kelton

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, Alan Greenspan, American Society of Civil Engineers: Report Card, Apollo 11, Asian financial crisis, bank run, Bernie Madoff, Bernie Sanders, blockchain, bond market vigilante , book value, Bretton Woods, business cycle, capital controls, carbon tax, central bank independence, collective bargaining, COVID-19, currency manipulation / currency intervention, currency peg, David Graeber, David Ricardo: comparative advantage, decarbonisation, deindustrialization, discrete time, Donald Trump, eurozone crisis, fiat currency, floating exchange rates, Food sovereignty, full employment, gentrification, Gini coefficient, global reserve currency, global supply chain, green new deal, high-speed rail, Hyman Minsky, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, Isaac Newton, Jeff Bezos, liquidity trap, low interest rates, Mahatma Gandhi, manufacturing employment, market bubble, Mason jar, Modern Monetary Theory, mortgage debt, Naomi Klein, National Debt Clock, new economy, New Urbanism, Nixon shock, Nixon triggered the end of the Bretton Woods system, obamacare, open economy, Paul Samuelson, Phillips curve, Ponzi scheme, Post-Keynesian economics, price anchoring, price stability, pushing on a string, quantitative easing, race to the bottom, reserve currency, Richard Florida, Ronald Reagan, San Francisco homelessness, shareholder value, Silicon Valley, Tax Reform Act of 1986, trade liberalization, urban planning, working-age population, Works Progress Administration, yield curve, zero-sum game

Why not just strive for a better mix of fiscal and monetary policy to keep the economy operating at its full employment potential? Couldn’t we achieve true full employment by asking the Fed to improve the way it runs monetary policy? Or maybe Congress could help fine-tune the economy with better real-time adjustments in government spending and taxation? Recall that the Fed chooses its own definition of full employment. For them, maximum employment is defined as the level of unemployment it believes is necessary to hit its inflation target. In other words, although it’s legally responsible for full employment and price stability, one goal takes clear priority over the other.

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But that’s because America has almost never achieved anything like true full employment. It’s something we’ve rarely experienced, outside of wartime. One of the most important features of a job guarantee program is that it maintains a form of full employment by immediately rehiring the unemployed into public service work, providing them with income and the retraining required when they are displaced by trade shocks. In this way, the job guarantee can serve as the core of a response to both “free trade” and the “trade war.” With a job guarantee, free trade is no longer a threat to full employment, and trade wars are no longer necessary to prevent unemployment.

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When that happens, the credit cycle reverses, and businesses experience a decline in sales. 28. See, for example, Michael J. Murray and Mathew Forstater, eds., Full Employment and Social Justice (New York: Palgrave Macmillan, 2018); Michael J. Murray and Mathew Forstater, eds., The Job Guarantee (New York: Palgrave Macmillan, 2013); Pavlina R. Tcherneva, The Case for a Job Guarantee (Cambridge, UK: Polity Press, 2020); and William S. Vickrey, Full Employment and Price Stability (Cheltenham, UK: Edward Elgar, 2004). 29. Wray et al., Public Service Employment: A Path to Full Employment. 30. For a more thorough discussion of how this would work, see Pavlina R. Tcherneva, “The Job Guarantee: Design, Jobs, and Implementation,” Working Paper No. 902, Levy Economics Institute of Bard College, April 2018, www.levyinstitute.org/pubs/wp_902.pdf. 31.

The Euro: How a Common Currency Threatens the Future of Europe by Joseph E. Stiglitz, Alex Hyde-White

"there is no alternative" (TINA), "World Economic Forum" Davos, Alan Greenspan, bank run, banking crisis, barriers to entry, battle of ideas, behavioural economics, Berlin Wall, Bretton Woods, business cycle, buy and hold, capital controls, carbon tax, Carmen Reinhart, cashless society, central bank independence, centre right, cognitive dissonance, collapse of Lehman Brothers, collective bargaining, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, currency peg, dark matter, David Ricardo: comparative advantage, disintermediation, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial innovation, full employment, George Akerlof, Gini coefficient, global supply chain, Great Leap Forward, Growth in a Time of Debt, housing crisis, income inequality, incomplete markets, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Kenneth Arrow, Kenneth Rogoff, knowledge economy, light touch regulation, low interest rates, manufacturing employment, market bubble, market friction, market fundamentalism, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, neoliberal agenda, new economy, open economy, paradox of thrift, pension reform, pensions crisis, price stability, profit maximization, purchasing power parity, quantitative easing, race to the bottom, risk-adjusted returns, Robert Shiller, Ronald Reagan, Savings and loan crisis, savings glut, secular stagnation, Silicon Valley, sovereign wealth fund, the payments system, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, trickle-down economics, Washington Consensus, working-age population

Highly indebted households and firms can go bankrupt, because they cannot meet their debt obligations. The countries within Europe differed in these and other ways, implying that it was virtually impossible for them all to attain full employment and external balance simultaneously, in the absence of other institutional arrangements of the kind found in the United States. The eurozone failed to put into place these institutional arrangements. MAINTAINING FULL EMPLOYMENT An economy facing an economic slump has three primary mechanisms to restore full employment: lower interest rates, to stimulate consumption and investment; lower exchange rates, to stimulate exports; or use fiscal policy—increasing spending or decreasing taxes.

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REFORMING THE STRUCTURE OF THE EUROZONE Reforms of the structure of the eurozone itself should aim at an economic system that can simultaneously achieve full employment and robust growth in each of the member countries with sustainable current account deficits in the absence of flexible exchange rates and independent monetary policies. There needs to be a fundamental commitment of the eurozone to maintain the economies at full employment. Markets do not on their own maintain full employment, and markets on their own are not in general stable. In the absence of government intervention, there can be persistent unemployment and high instability.

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But without appropriate reforms in the structure of the eurozone—the institutions, rules, and regulations that govern it—restoring the countries to full employment will lead to unmanageable current account deficits. We saw how the eurozone’s current structure leads to divergence and actually creates current account deficits and crises. The eurozone needs to be reformed so that all countries within the eurozone can attain and maintain full employment. The current eurozone structure does not allow this. As we saw in the previous chapter, while the programs that have been imposed on the crisis countries are intended to eventually lead the country back to full employment, the path is extraordinarily costly with uncertain success.

Hubris: Why Economists Failed to Predict the Crisis and How to Avoid the Next One by Meghnad Desai

3D printing, Alan Greenspan, bank run, banking crisis, Bear Stearns, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, correlation coefficient, correlation does not imply causation, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, German hyperinflation, Glass-Steagall Act, Gunnar Myrdal, Home mortgage interest deduction, imperial preference, income inequality, inflation targeting, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, low interest rates, market bubble, market clearing, means of production, Meghnad Desai, Mexican peso crisis / tequila crisis, mortgage debt, Myron Scholes, negative equity, Northern Rock, oil shale / tar sands, oil shock, open economy, Paul Samuelson, Phillips curve, Post-Keynesian economics, price stability, purchasing power parity, pushing on a string, quantitative easing, reserve currency, rising living standards, risk/return, Robert Shiller, Robert Solow, Ronald Reagan, savings glut, secular stagnation, seigniorage, Silicon Valley, Simon Kuznets, subprime mortgage crisis, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, women in the workforce

Keynes told the world that a capitalist economy could have two alternative states of equilibrium – one at full employment and the other at less than full employment. The economy might get stuck at the underemployment equilibrium for prolonged periods of time unless deliberately moved. The postwar data showed that the economy was cruising along at full employment. There were short lapses from full employment, but these were quickly corrected thanks to the “built-in” stabilizers – unemployment compensation, social security, old age pensions – which kept demand up even when unemployment was rising. The result of the continuous full employment was that any interest in business cycles disappeared from academia just 20 years after Schumpeter had written his two-volume classic, Business Cycles.

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The intersection of the two curves – aggregate demand and aggregate supply – determined total employment. Keynes’s argument was that this level of employment might fall short of full employment; there might be workers willing to work who would not find employment. They were involuntarily unemployed. Aggregate demand was inadequate to ensure full employment. But if aggregate demand fell short of the full employment level, how could demand be raised to the level at which full employment would result? Consumption was determined by income and largely workers’ income. Income could only rise if there was an increase in employment but employment itself would only rise if incomes rose.

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As orthodox economists, they championed not only laissez-faire but also the quantity theory of money, which could explain inflation. Keynes had rejected the quantity theory as irrelevant for economies with mass unemployment. At full employment, he did acknowledge that the quantity theory would come into its own. Describing how the economy would behave if it got close to full employment, he wrote “We have reached … a situation (i.e. full employment) in which the crude quantity theory of money (interpreting ‘velocity’ to mean ‘income-velocity’) is fully satisfied; for output does not alter and prices rise in exact proportion to MV.”12 But his followers would have none of it.

Keynes Hayek: The Clash That Defined Modern Economics by Nicholas Wapshott

airport security, Alan Greenspan, banking crisis, Bear Stearns, Bretton Woods, British Empire, business cycle, collective bargaining, complexity theory, creative destruction, cuban missile crisis, Francis Fukuyama: the end of history, full employment, Gordon Gekko, greed is good, Gunnar Myrdal, if you build it, they will come, Isaac Newton, Joseph Schumpeter, Kickstarter, liquidationism / Banker’s doctrine / the Treasury view, means of production, military-industrial complex, Mont Pelerin Society, mortgage debt, New Journalism, Nixon triggered the end of the Bretton Woods system, Northern Rock, Paul Samuelson, Philip Mirowski, Phillips curve, price mechanism, public intellectual, pushing on a string, road to serfdom, Robert Bork, Robert Solow, Ronald Reagan, Simon Kuznets, The Chicago School, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Malthus, trickle-down economics, Tyler Cowen, War on Poverty, We are all Keynesians now, Yom Kippur War

“Suddenly everyone was looking to restrain inflation, cut deficit spending, reduce regulation, and encourage investment.”91 But the old thinking was hard to jettison. The ever-smiling Georgia peanut farmer and former submariner Jimmy Carter reached the White House on the Keynesian pledge of returning America to full employment. In 1978, he approved the Humphrey-Hawkins Full Employment Act,92 a reprise of the Full Employment Bill of 1945, mandating the president and the Federal Reserve to keep aggregate demand high enough to maintain full employment. In apparent contradiction, the act also directed the president and Congress to balance both the budget and the balance of trade. Like Canute93 commanding the tides, legislators were proving their impotence.

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Kahn exposed the fallacy thus: “If entrepreneurs responded to the abnormal profits by increasing the output of consumption goods, the price level of consumption goods would progressively fall, and abnormal profits would fall, until either entrepreneurs earned no more than normal remuneration or some barrier was encountered—full capacity utilisation or full employment of labour.”13 In his defense, in an anguished letter to Joan Robinson, Keynes pointed out that in parts of A Treatise, “I have long discussions [on] the effects of changes in output; it is only at a particular point in the preliminary theoretical argument that I have assumed constant output.”14 But the objection of Circus members to both fallacies suggested to Keynes what was to become a pivotal element of The General Theory, that overall output was not fixed and could be raised through increased investment to a point where everyone in an economy was employed.15 It was this first slender thread of thought that led to Keynes’s wholesale contradiction of the claim of classical economists like Hayek that an economy, left to its own devices, in the long run inevitably came to rest at a state of equilibrium where there was full employment. Keynes was to argue in The General Theory that in the short and medium terms an economy could reach equilibrium with considerable unemployment and that the full employment equilibrium predicted by classical economists too often proved to be elusive. Keynes believed that the chronic unemployment endured in Britain and America in the 1920s and 1930s was evidence that the full employment equilibrium was a fallacy. During the writing of The General Theory, Kahn proved to be far more than Keynes’s favorite and most devoted pupil; he acquired something of the status of a missing son.

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More distressing to Hayek, perhaps, was that Beveridge’s amanuensis both for the Beveridge Report, presaging nationalized social security and the National Health Service, and for full employment as national policy was Hayek’s star pupil, Nicholas Kaldor. Hayek conceded, with irritation, that “Kaldor, through the Beveridge Report, has done more to spread Keynesian thinking than almost anybody else.”8 The notion of full employment as a government’s prime responsibility was not restricted to Britain. The Australian Labor premier John Curtin in 1945 introduced “Full Employment in Australia,” mandating the government to find a job for everyone capable of working. The same year, drafters of the Charter of the United Nations included a pledge that all governments should strive for “higher standards of living, full employment, and conditions of economic and social progress.”9 The UN took a further step in 1948 when it declared, “Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment.”10 War-torn Europe became a laboratory for Keynesianism.

No More Work: Why Full Employment Is a Bad Idea by James Livingston

Affordable Care Act / Obamacare, Bear Stearns, business cycle, collective bargaining, delayed gratification, do what you love, emotional labour, full employment, future of work, Herbert Marcuse, Internet of things, John Maynard Keynes: Economic Possibilities for our Grandchildren, labor-force participation, late capitalism, Lewis Mumford, liberal capitalism, obamacare, post-work, Project for a New American Century, Ralph Waldo Emerson, Robert Gordon, Ronald Reagan, scientific management, Silicon Valley, surplus humans, TED Talk, The Future of Employment, Tyler Cowen, union organizing, warehouse automation, working poor

These days everybody from Left to Right—from Dean Baker to Arthur C. Brooks—addresses this breakdown of the labor market by advocating full employment, as if having a job is self-evidently a good thing, no matter how dangerous, demanding, or demeaning it is. But “full employment” is not the way to restore our faith in hard work, or playing by the rules, or whatever (note that the official unemployment rate is already below 6 percent, which is pretty close to what economists used to call full employment). Shitty jobs for everyone won’t solve any social problem we now face. Don’t take my word for it, look at the numbers.

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And by “we” I mean pretty much all of us, Left to Right, because everybody wants to put Americans back to work, one way or another—full employment is the goal of right-wing politicians no less than left-wing economists. The differences between them are over means, not ends, and those ends include intangibles like the acquisition of character. Which is to say that everybody has doubled down on the benefits of work just as it reaches a vanishing point. “Full employment” has become a bipartisan goal at the very moment it has become both impossible and unnecessary. V Why? Because work means everything to us—regardless of whether it still produces solid character and allocates incomes rationally, and quite apart from the need to make a living.

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Even George McGovern’s counterproposal, the famous manifesto of May 4, 1972 (published in the New York Review of Books), which would have given all Americans a minimum income grant, made the “loss of grant benefits [as family income rose] sufficiently gradual as not to discourage those on welfare from seeking a job.” So the full-employment agenda was already the default setting of the Democratic Party and the larger Left produced by the New Deal coalition. When he proposed an increase in the corporate income tax rate, for example, McGovern emphasized that his program also included a $10 billion fiscal stimulus that would enhance consumer spending and corporate profits: “Nothing spurs profits like a strong full employment economy, which has the highest priority in my economic program.”5 Third, and this is most important for my purposes, everyone assumed that wages for work would soon be insufficient to sustain family life.

Not Working: Where Have All the Good Jobs Gone? by David G. Blanchflower

90 percent rule, active measures, affirmative action, Affordable Care Act / Obamacare, Albert Einstein, bank run, banking crisis, basic income, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Lives Matter, Black Swan, Boris Johnson, Brexit referendum, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Clapham omnibus, collective bargaining, correlation does not imply causation, credit crunch, declining real wages, deindustrialization, Donald Trump, driverless car, estate planning, fake news, Fall of the Berlin Wall, full employment, George Akerlof, gig economy, Gini coefficient, Growth in a Time of Debt, high-speed rail, illegal immigration, income inequality, independent contractor, indoor plumbing, inflation targeting, Jeremy Corbyn, job satisfaction, John Bercow, Kenneth Rogoff, labor-force participation, liquidationism / Banker’s doctrine / the Treasury view, longitudinal study, low interest rates, low skilled workers, manufacturing employment, Mark Zuckerberg, market clearing, Martin Wolf, mass incarceration, meta-analysis, moral hazard, Nate Silver, negative equity, new economy, Northern Rock, obamacare, oil shock, open borders, opioid epidemic / opioid crisis, Own Your Own Home, p-value, Panamax, pension reform, Phillips curve, plutocrats, post-materialism, price stability, prisoner's dilemma, quantitative easing, rent control, Richard Thaler, Robert Shiller, Ronald Coase, selection bias, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, South Sea Bubble, The Theory of the Leisure Class by Thorstein Veblen, Thorstein Veblen, trade liberalization, universal basic income, University of East Anglia, urban planning, working poor, working-age population, yield curve

Because of the high levels of labor market slack around the world, wages are the dog that hasn’t barked. If there were no labor market slack, meaning economies were at what’s considered “full employment,” wages would be rising, as employers would have to attract workers from competitors, given there are so few people without jobs looking for work. To do that they would have to raise wages. The fact that they haven’t suggests full employment is a faraway dream. Despite this reality the Federal Reserve Board, known as “the Fed,” believes the United States is at full employment and wage growth is set to rise, and hence they are raising interest rates. This looks like a mistake. Pain, Immigration, and Politics Recessions, slow recoveries, and policy mistakes have consequences.

…

Share of Excess Hours (%) As an economy moves toward full employment opportunities should increasingly present themselves for underemployed workers who want more hours and overemployed workers who want fewer hours to overcome their hours constraints. Full employment opens up possibilities as more jobs become available. One possibility for those who want more hours is to obtain a second job. A further possibility would be for employees to switch to self-employment, where they could choose their own hours. Self-employment could be a secondary or primary job. This should be especially apparent as the economy moves closer to full employment. There is no evidence in the data so far to support such a claim in the United States or the UK on either front in the recent period when the unemployment rate dropped below 5 percent to 4 percent and lower.

…

In reality, the high level of labor market slack and the weakness of workers’ bargaining power are keeping pay and price inflation down. Full employment is a long way off. If it was anywhere close wage growth would be back to pre-recession levels of 4 percent or even higher. Workers are not standing by waiting for high-wage offers to roll in. A wage norm near 3 percent is operating. If and when an economy approaches full employment we will see wage growth rising to 4 percent or so. Until it does, it is a good indicator the economy is not close to full employment. I do expect wage growth will start to kick up gradually as the economy moves to the left of the flat part of the wage curve.

Angrynomics by Eric Lonergan, Mark Blyth

AlphaGo, Amazon Mechanical Turk, anti-communist, Asian financial crisis, basic income, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big Tech, bitcoin, blockchain, Branko Milanovic, Brexit referendum, business cycle, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collective bargaining, COVID-19, credit crunch, cryptocurrency, decarbonisation, deindustrialization, diversified portfolio, Donald Trump, Erik Brynjolfsson, Extinction Rebellion, fake news, full employment, gig economy, green new deal, Greta Thunberg, hiring and firing, Hyman Minsky, income inequality, income per capita, Jeremy Corbyn, job automation, labour market flexibility, liberal capitalism, lockdown, low interest rates, market clearing, Martin Wolf, Modern Monetary Theory, precariat, price stability, quantitative easing, Ronald Reagan, secular stagnation, self-driving car, Skype, smart grid, sovereign wealth fund, spectrum auction, The Future of Employment, The Great Moderation, The Spirit Level, universal basic income

AfD (Alternative für Deutschland) 114 Afghanistan 6 aging population 10, 13, 14, 95, 106–11 and consumption 109–10 and government bonds 138–9, 152 and inequality 56–7, 58, 107–10 and inter-generational transfer 106–107 and poverty 57, 107 as stressor 57, 91, 106, 110, 111, 116, 118 and technological change 90, 106, 122 AIG 85, 124 Amazon 96, 98, 104, 142, 143–4 Anderson, Elizabeth 176 anger 2–3, 7–9, 10, 11–12, 159, 161 misplaced 13 as opportunity 16 and play 153 private see private anger public see public anger reducing see calming strategies anxiety/stress 9, 13–14, 50, 53, 55–6, 88, 118, 161 and cognitive effort 89–90, 91 and job insecurity 95–6 three causes of 91 and uncertainty see uncertainty Apple 96, 142, 143 Aristotle 59, 153 artificial intelligence (AI) 14, 102–106, 142 Asian financial crisis (1998) 77, 140 asset ownership 130–31, 133, 136, 140–41 Atkinson, Tony 80, 173 austerity policies 2–3, 6, 15, 34–5, 41, 48, 84 and euro crisis 44–5 and low interest rates 135 Australia 125 Austria 3 baby boomers 107–108, 110, 111, 175 Bank of England 84, 103, 120, 145, 148 TFS scheme 149–50, 166 banks 1, 6, 15, 33–5, 42, 44, 48, 145–50 and capital/liquidity ratios 126 and direct support for consumption 145–8 and dual interest rates 149–50 and economic models 3, 4 failure of 119–21, 122 and helicopter money 131, 146 independence of 78, 79 and leverage see financial leverage and problem of low interest rates 120–21, 122, 131, 135 regulations on 125–6, 127, 129, 132 restrictions on 72, 77 see also financial crisis (2008) Beck, Aaron 171–2 Bernanke, Ben 6, 148 Biden, Joe 106 billionaires 4 Bitcoin 102, 103 Blackrock 165 blockchain technology 14, 103 Blyth, Mark 172, 175 bonuses 81, 85, 124 Brazil 11, 127 Brexit 4, 7, 11, 22, 24, 37, 38, 55, 117, 154 and austerity policies 41, 45 and immigration 111, 112, 114, 116 and job insecurity 100–101 Brill, Stephen 175 Britain (UK) 3, 38, 119, 155, 162, 164 aging population in 107, 110 austerity policies in 41 dual interest rates in 149–50 and EU see Brexit fear of immigration in 27 gig economy in 100 and government bonds 135, 140 government spending in 71 immigration in 111, 112, 114, 115–16 inequality in 6 interest rates in 145 nationalism in 23 Thatcherism in 75, 76 Brittan, Samuel 151 Brynjolfsson, Erik 173 budget deficits 71, 75 Buffett, Warren 130 calming strategies 12, 15, 118, 122, 123–57 and data dividend see data dividend and direct support for consumption 145–8 and dual interest rates 149–50 and economic diversity 153–6 and inequality see inequality, strategies to reduce and national wealth fund see NWF and regulations on banks 125–6, 127, 129, 132 and sustainable investment see sustainable investment Canada 125 cancer 53, 87, 88, 106 capital 4 cost of 137, 139, 153 and dispersion 97–98 as “fictitious” commodity 65 formation, rate of 108 global 40, 42, 43, 49, 50, 58 and labour 50, 60, 69, 72 and neoliberalism 75, 76, 77, 79 protection of, following financial crisis 85 versus capital 97, 98 Capital in the Twenty-First Century (Piketty) 49, 108–10 capital/liquidity ratios 126 capitalism 64–5 and commodities 65–6 capitalism as computer 11, 61–72 fixing 124–25 hardware of 62–3, 117 software of 63–4, 68–71 and unemployment/inequality 66–7 version 1.0 68–9 version 1.0 crash 64, 66, 67, 71, 73, 83, 118 version 2.0 69–73, 74, 75, 76, 116 version 2.0 crash 70–71, 73, 83–4, 118 version 3.0 74–80, 98–9, 117, 125, 140–41 version 3.0 crash 116 car industry 100–101 caring industry 104 Case, Anne 54, 176 centrism, political 38, 48, 118–19, 121, 160–61, 162 CEOs (chief executive officers) 4 Chamberlain, Joseph 66 Chile 3 China 42, 63, 64, 78, 93, 137, 151, 156 Citibank 81, 82 cities 55, 56 climate change 104, 111, 121, 129, 131, 153, 159–60 and investment see sustainable investment Clinton, Hillary 160 Coggan, Philip 172 cognitive effort 89–90, 91 Cold War 28, 48 ending/legacy of 5, 23, 26, 29, 30, 37, 116 communism 68, 71 competition/competitiveness 47, 65, 94, 95, 111, 116, 125 and technology 105 see also product market competition computer analogy see capitalism as computer constrained volatility 85 consumption, direct support for 145–8, 150–51, 160 consumption, distribution of 52–3, 58 Corbyn, Jeremy 119 corporations 6, 20, 57 and competition 95, 96 and data dividend see data dividend corruption 8, 29, 61, 130 Covid-19 163 culture 160 Czech Republic 146, 147, 155 data dividend 141–4, 160, 162 and monopolies 142, 143, 144 and privacy 141–2 and property rights 142–3 de-unionization 50, 95, 99 Deaton, Angus 54, 176 debt 75, 84, 120, 132, 145, 150 and demography 109, 111, 131 government 136–7, 151, 152 net 136 deflation 65, 69, 120, 128, 144, 148 demand management 44–5, 47, 126–7 democracy 16, 25, 29, 39, 40, 104, 117, 130 and markets 68 demography see aging population Denmark 64, 164 depression see recession deregulation 28, 40, 48, 50, 58, 75 and inflation 127 as micro-stressor 94, 96, 99, 101, 118 DGSE (dynamic stochastic general equilibrium) models 3–4 Doughnut Economics (Raworth) 131–2, 165 dual interest rates 131–2, 149–50, 174 Dublin (Ireland) 17–18 economic change 9–10, 29, 43, 153 see also fiscal reform; recession economic growth 2, 6, 41, 69, 71, 86 and demography 108–10 and immigration 116 and inequality 76, 79–80 and quality of jobs/wages 46, 47, 85 economic ideology 28 economics 12, 54–5 shortcomings of models 3–5, 6, 7 education 24, 53, 58, 135, 141 tuition fees/student loans 107, 111 electoral politics 5–6, 104 and demographics 107, 110 and tribalism 13, 22, 24–7, 29, 30, 31 electric vehicles 153 elites 2–3, 5, 6, 7, 9, 37 in cities 55, 56 and corruption 8, 29 and ethical norms 20 and financial crisis 43–4 manipulation of tribal identity by 22, 24, 61, 116, 161 policy failures of 48–9 Engbom, Niklas 175–6 environmental degradation 29, 161 see also climate change environmental and social governance 168 ethical norms 20 euro crisis 7, 37, 44, 77, 144 Europe 34, 42, 137, 140 inequality in 41, 53, 56, 58 migrant crisis in 7 tribalism in 30 European Central Bank (ECB) 34, 84, 146, 155, 164–5 TLTRO programme 147–8, 166 European Union (EU) 22, 33, 34–5, 37, 43, 119 austerity policies in 2, 36, 48 and financial crisis (2008) 82 micro-stressors in 47–8 and nationalism 154–6 and neoliberalism 76, 77 unemployment in 44–5 see also Brexit eurozone 45, 65, 83, 148, 151, 155 exchange rates 72, 134 Extinction Rebellion 8, 131–2 Facebook 27, 96, 98, 142, 143 fake news 26 Farage, Nigel 17, 161 Farmer, Roger 174 fascism 45–6, 66, 67–8, 71 fear 16, 17, 94, 113, 117, 150, 161 and media 26, 27 and politics 7, 45 financial crisis (2008) 1–2, 6, 26, 29, 30, 39, 48, 127, 163 and automation 102–103 and bail-out of banks 84 fragility of recovery from 46, 85, 89, 121 further reading on 172–3 and globalized financial system 84 and growth of populism 85 and inequality 79–80 and low interest rates 135 and regulation of banks 129 financial leverage 72, 81–3, 85, 99, 126, 157 and credit crunch 83 and interest rates 81–2 financial market deregulation 77 fiscal councils 150–51 fiscal reform 15, 150–53, 162 Fischer, Stan 148, 165 Florence (Italy) 87–8 foodbanks 6, 53 football fans 8, 19, 56 France 2, 3, 20, 55, 56, 71, 101, 154, 156 and NWF 135 Franklin, Benjamin 87 free markets 30, 69, 118 Friedman, Milton 118 full employment 40, 47, 60, 66, 71–2, 79, 85, 175 and inflation 73–4, 76 without inflation 121, 125, 126 future 101–102, 111 Garcia family, parable of 33–5, 43 Gates, Bill 130 GDP (gross domestic product) 5, 44, 76, 79, 100–101, 106, 151, 152 and NWF 135, 141 Germany 3, 11, 34, 38, 42, 62–3, 66, 151, 154, 156, 167 and migrant crisis 111, 113–14 and NWF 135 Gibley, Bruce Cannon 175 gig economy 94, 98, 99–100 global economy 12, 39–40, 50, 53, 58, 133 and nationalism 154 and neoliberalism 77 globalization 5, 39, 41, 42–3, 48, 77, 117 hyper- 40 and inequality 80 and inflation 127 and insecurity 101 and labour market 42, 43 and nationalism 154 Gold Standard 65, 67 Google 96, 98, 104, 142 government bonds 72, 131, 133, 135, 137, 138–9, 152 as insurance policies 139, 140 government borrowing 134–5, 137, 152–3 and cost of capital 137, 139, 153 and low inflation 128, 138–40, 150 and NWF 136–137, 138–40 Great Depression 40, 44, 66, 69, 120 Great Moderation 6, 120 Greece 35, 38, 44, 45, 106–07, 110, 144 green revolution see sustainable investment gross domestic product see GDP Guilluy, Christophe 55 Gulf States 133, 134 Hayek, Friedrich 118 healthcare 47, 53–4, 58, 123–4, 135, 139 and access to data 141–2 and NWF 141 and uncertainty/probability 92 hedge fund managers 4 helicopter money 131, 146, 166 Hildebrand, Philipp 165 Hong Kong 2–3, 140, 164 Hopkin, Jonathan 172 Hopkins, Ellen 123 housing 71, 113, 114, 135 Hungary 11, 23, 30 Iceland 1–2, 8, 20 immigration 5, 7, 26, 27, 111–17, 164 economic effects of 115–16 and housing/training 113, 114 and income distribution 112, 113, 114–15 and manipulation by media/politicians 111, 115 as stressor 113, 115 and technological change 106 and tribalism 95, 111, 112, 113 income see wages income distribution 43, 50, 51 and Keynesian economics 71 and neoliberalism 80, 81 independent fiscal councils 150–51 India 23, 127 individualism 29, 154 Indonesia 3 inequality 3, 4, 6, 15, 29, 30, 40–41, 43, 49–57, 58, 61, 79, 118 difficulties in measuring 50–53 and distribution of income/consumption 53–4 and financial crisis (2008) 79–80, 83, 85 further reading on 173, 176 intergenerational 56–7, 107–10 and populism 54–5 and uncertainty 49–50 inequality, strategies to reduce 121–2, 129–31, 132, 162 asset ownership 130–31, 133, 136, 140–41 and data dividend 141–4 National Wealth Fund see NWF optimal/effective 132–3 and universal basic income (UBI) 141, 144 wealth tax 130, 132 inflation 5, 40, 51–2, 53, 69 death of 126, 128 and full employment 73–4, 76, 121, 122, 125 and global financial markets 78 and interest rates 75, 81–2, 120 low see low inflation and oil prices 96–7 and printing money 78, 128, 145 and raising taxes 129 and recession 144–5 and regulation of banks 125–6, 127, 132 and stagflation 40, 74, 120, 128 inheritance 132, 133, 160 national 136 innovation see technological change insurance industry 93 interest rates 15, 33–4, 75, 81–2, 165–6 dual, and sustainable investment 131–2, 149–50 low, problem of 120–21, 122, 131, 132, 135, 146–8, 152 negative, problem of 15, 148, 149, 150 and spending 147 internet 25 investment spending 40, 60, 69 and future expectations 103 and global capital flows 77–8 and inflation 74 public sector 67, 70–71 sustainable see sustainable investment IRA (Irish Republican Army) 17 Iraq 6 Ireland 17–18, 23, 24 Islam 27 Italy 35, 37, 38, 39, 44, 66, 71, 87–8, 144, 156, 167 aging population in 110 poverty in 47 tribalism in 45–6 Japan 26, 84, 110, 137, 140, 148 job security/insecurity 34, 50, 56, 61, 94, 95–6, 100–101 and technology 102 Kalecki, Michał 60–61, 73–5, 120, 121, 127 Keynes, John Maynard/Keynesian economics 60, 66–7, 68–70, 92, 103, 118, 127, 151 General Theory of Employment, Interest and Money 66, 175 and inflation 67, 69, 128 labour market 35, 40–41, 42, 43, 44 and automation 102–106 deregulation 50, 95, 99, 122, 127 dispersion in 98–9 and full employment see full employment and immigration 115–16 in Keynesian system 71–2 and labour as commodity 59, 60, 65–6, 73, 85 and protectionism 59–61, 66 and secular stability 125, 126 and training 62–3 see also wages Lagarde, Christine 167 Lerner, Abba 118 libertarianism 63 Lonergan, Eric 174 Los Indignatios 85 low inflation 79, 134, 157 and full employment/secular stability 126 and government spending/borrowing 128, 138–40, 150, 152 and recession 144–5, 150, 162 Luce, Edward 164 Ludd, Ned/Luddites 102 machine learning (MI) 102–104 see also artificial intelligence macroeconomics 9, 13, 47, 89 failure of 119–20 and uncertainty 94 Macron, Emmanuel 162 Mair, Peter 172 markets 30, 59–61, 62, 66–7 and democracy 68 and quantity theory of money 68–9 see also labour market Mauss, Marcel 21–2 Mazzucato, Mariana 156 media 11, 43, 47 and technological change 98, 102–103, 105 and tribalism 24–5, 26–7, 29, 31, 61, 116, 161 Merkel, Angela 114 Mexico 63 micro-stressors 47–8, 53, 84, 91 and aging populations see aging populations and change 94 and fourth industrial revolution 94 and immigration see immigration microeconomics 9, 13–14, 160 migrant crisis 7, 111 Milanovic, Branko 52, 80 minimal group paradigm 21 Minsky, Hyman 128 mobile phones 53, 96, 97, 142 modern monetary theory (MMT) 118, 128–9 money, printing 78, 128, 145 monopolies 142, 143, 144 moral outrage 8, 13, 15, 35–6, 57–8, 117, 130, 161 and inequality see inequality as rational 36 and tribalism, compared 19, 20, 22, 29, 30–31, 36 triggers for 36 mortgages 34, 35, 38, 82, 111, 137, 145 nation state 39–40, 48, 50, 117, 119 national wealth fund see NWF nationalism 5, 11, 23, 29, 31, 39, 41, 116, 119 as positive 153–6 neoliberalism 4, 28–9, 37, 75–8, 122 and global capital flows 77–8 and inequality 51, 52, 53 NHS (National Health Service) 107 Nissan 100–101 Nixon, Richard 26 Northern Ireland 17–18, 23, 24 Norway 133, 134 Nussbaum, Martha 16, 35, 36 NWF (national wealth fund) 15, 132, 133–41, 143, 152, 168 and aging population 138–9 and asset ownership 133, 136, 140–41 and government borrowing/debt 136–7, 138–40 and growth of global stock market 137–8 and individual trust funds 135 and negative interest rates 134–5, 136 and risk 136, 137–8 sovereign 133–4 and trade surplus 134 Obama, Barack 29, 46 oil prices 96–7 Orban, Viktor 23, 30, 161 “Panama Papers” 2, 20 pensions 57, 63, 106–107, 138 perpetual loans 147–8 Philadelphia Eagles 20 Pickett, Kate 168 Piketty, Thomas 49, 52, 80, 108–10 play 153 Poland 11, 30 Polanyi, Karl 59–61, 64–5, 67, 175 political centrism 38, 48, 118–19, 121, 160–61, 162 political disengagement 29 political economy 12, 13 political identity 22–3, 29–30, 37, 48, 116, 117 further reading on 172 political parties 5–6, 7, 28 politics, new 15–16, 58, 160 populism 11, 27, 39 and financial crisis 86 three genres of 54–5 Portugal 35, 38, 44, 144 poverty 47, 67, 72, 80, 115 and demographics 57, 107 power 4, 48 powerlessness 9, 41 price stability 76, 79, 128, 147 private anger 7, 8, 9, 10, 13–14, 36, 117 and cognitive effort 89–90, 91 see also anxiety/stress private sector debt 131, 145 and government borrowing 134–5, 137, 138–40 investment 67, 70, 149–50, 151 liability in financial crisis 85, 127 privatization 28, 40, 96, 107 probability 91–3 product market competition 94, 95–8, 116, 125 and deregulation/privatization 96–7 and dispersion 97, 98–9 intensification of 96, 101 and technological change 96, 97–8, 99 productivity 40 and technological innovation 9, 10, 15, 102, 104–105 and wages 71, 72, 74, 76 profit margins 98, 101, 105, 143 property prices 34, 38 property rights 142, 143, 154 protectionism 59–60, 61, 66 public anger 7, 8–9, 10, 89, 98, 117–18 economic causes of 13 see also moral outrage; tribalism/tribal anger public housing 71, 113, 114 public sector investment 67, 70–71 public services 24, 115, 116 quantitative easing (QE) 146–7, 167 quantity theory of money 68–9, 78 racism 26, 54, 55, 115 Raworth, Kate 131–2, 173 Reagan, Ronald 26, 75, 118 recession 15, 29, 30, 34–5, 44, 49, 55, 58, 84, 152, 153 and dual interest rates 150 and interest rates 75, 120–21 and investment spending 60, 70, 71 and low inflation 144–5, 150, 162 and MMT 128–9 and stock markets 139, 140 see also euro crisis referenda 37 regeneration, economic 132 regional development 15, 115, 116, 149, 153, 156 Renzi, Matteo 37 risk 91–2, 127, 136, 137, 153 Roberts, Carys 174 robotics see artificial intelligence Rodrik, Dani 4, 39, 40 Russia 11, 41 Sahm, Claudia 150–51 Salvo, Francesca 87–8 Sandbu, Martin 174 Sanders, Bernie 128, 164 savings 93 scale economies 98, 99, 142 Scottish nationalism 7, 119 secular stability 125, 126, 127 service-based economy 52 Singapore 133, 134, 162 SMEs (small- and medium-sized enterprises) 164–5, 166 social democracy 63–4 social media 26, 27, 90, 98 Solow growth model 109 sovereign wealth funds 133–4 sovereignty 39 Spain 33–5, 38, 44, 45, 144 protests against austerity in 85 spending increasing 145, 147, 151 investment 40, 60 power 145 public sector 67, 70–71, 128, 151 restrictions on 41, 44, 149 sports fans 8, 19–20, 21, 25 sports industry 99 stagflation 40, 74, 120, 128 status-injury 36, 54 stock markets 63, 137–8, 139–40 stress see anxiety/stress strikes 73, 74 student loans 111 supply–demand 60, 96, 104 sustainable investment 131–2, 149–50, 152, 153 Sweden 63–4, 72–3 Syria 111, 113 Tavris, Carol 36, 171 taxes 40, 50, 57, 108, 116, 124 cuts in 34, 44, 111, 151 dodging 2, 6, 20, 132–3, 143 political opposition to 129, 130, 132, 133 raising 152 on wealth 129, 130, 132, 140 Tea Party movement 85 technocracy 37, 42–3, 48, 160–61 technological change 29, 58, 96, 109 and aging population 90, 106, 122 and competition 96, 97–8 and dispersion of returns 97 and fourth industrial revolution 94 further reading on 173–4 and inequality 50, 53 and labour market 102–104 and media 24–5, 27 as micro-stressor 88, 91, 94, 96, 97–8, 99, 101–102, 105, 116, 118 and productivity 9, 10, 15, 105, 122 and rate of diffusion 14 and uncertainty 101–102 telecommunications 96, 97, 142 terrorism 17, 18, 27 Thatcher, Margaret 75, 76, 118, 131 Thunberg, Greta 150 TLTRO programme (European Central Bank) 147–8 trade 21–2, 26, 42, 78, 154 and neoliberalism 78 trade surplus 134 trade unions 28, 42, 63, 66, 72, 73, 76, 79 trade wars 21–2, 26 training 62–3, 93, 113, 114, 141 tribalism/tribal anger 8–9, 11, 18–31, 41, 45–6, 117 and central/eastern Europe 23, 30 destructiveness of 24 and ethical norms 20 and fascism 68 and financial crisis 86, 89 and global politics 21–2, 26, 28–9 and immigration 95, 111, 112, 113 manipulation by politicians/media of 13, 22, 24–7, 29, 30, 31, 35, 61, 95, 116, 161 and minimal group paradigm 21 and moral outrage, compared 19, 20, 22, 29, 30–31, 36 and political identity 22–23, 29–30 social function of 20–21 and sport fans 19–20, 25 see also nationalism trickling down/up 79–80 trilemma, political 39 trucking industry 103 Trump, Donald 11, 22, 23, 25–6, 27, 33, 38, 119, 126, 161 and deregulation 129 election of 41–2, 54 tax cuts of 11 Turkey 11 universal basic income (UBI) 141, 144 Ukraine 11 uncertainty 9–10, 43, 49–50, 65, 91–4, 99, 118, 161 and aging populations see aging populations and emerging technologies 102–103, 106 and healthcare 92 and immigration see immigration reducing 93–4 and risk/probability 91–3 and skills development 93 unemployment 2, 30, 34, 44–5, 48, 58, 66, 72, 84, 167 and inflation/interest rates 74, 75, 125 unfairness 25, 36, 105 United States (US) 3, 38, 93, 118, 129, 164 aging population in 107–108, 110, 111 automation in 103, 104–105 financial crisis in (2008) 82–3, 84, 85 gig economy in 100 healthcare in 47–8, 53–4, 58, 106, 123–4 independent fiscal councils in 150–51 inequality in 50, 51, 53–4, 58, 80–81 Keynesian system in 71, 72–3 labour market in 42, 44, 46, 62 micro-stressors in 47–8 neoliberalism in 76 and NWF 135 stock market in 63 tribalism in 23, 25, 29 wealth tax in 130 US Federal Reserve 6, 46, 84, 108, 110, 120, 148, 151 voice, loss of 37–9, 43, 48, 58 Volcker, Paul 75, 81–2 voting 37–8 see also electoral politics wages 2, 60 and automation 105 and competition 96–7, 98 and consumption 53–4, 58, 72 distribution of see income distribution growth in, without inflation 125 and immigration 115–16 and inequality 4, 50–53, 58 and neoliberalism 76, 77 and oil prices 96–7 and productivity 72, 76 stagnation in 34, 47, 58, 80–81, 83, 84, 85 and supply/demand 65–6 Wall Street Crash 67 Warren, Elizabeth 130, 132 Watson’s Analytics 19 wealth, distribution of 4, 15, 29, 30 welfare state 71 WhatsApp 2 Wilkinson, Richard 176 wind power, investment in 150 Wolf, Martin 80, 173 World Trade Organization (WTO) 42 Wren-Lewis, Simon 151 Yates, Tony 151 “Yellow Jackets” protests 2, 20, 55, 56

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ERIC: It’s important to stress how different the new system was. Regardless of national hardware variations and local software modifications, one policy target – full employment – was the common goal of all nations. This had never happened before. But since the 1920s and 1930s had shown that unemployment and poverty made people angry to the point that the system will collapse, the new system reset was designed to make sure that didn’t happen again. But to sustain full employment and high real wages, the hardware of v.2.0 had to be fundamentally rebuilt too. First, finance had to be put in a box and locked away. Finance that built factories and invested in technology was fine.

…

This produced a virtuous circle where high productivity created high wages, which meant high consumption and high tax revenues, all of which enabled the production of high quality public goods (healthcare, education, housing) that lowered labour’s dependence on the market still further and took the anger out of the system.19 And all of this was buttressed by a set of international monetary institutions and agreements that kept exchange rates stable and capital local.20 This was a radical and deep-seated hardware reconfiguration and software reboot that enabled countries as different as the United States and Sweden to sustain full employment as the policy target for three decades, until the wheels, rather unexpectedly, fell off the wagon. Because just as there was a bug in the software of v.1.0 – treating labour as a commodity while denying the possibility of involuntary unemployment – so there was a bug in this system too. Which brings us to Michał, the third economist in our opening parable. You know all about this guy, Mark, so over to you. MARK: In 1943, in the midst of the war, and with the revolution in economic ideas about full employment in full swing, the Polish economist Michał Kalecki wrote seven pages of text for the journal Political Quarterly that not only identified the bug in the software of v.2.0, but predicted what v.3.0 – the world we grew up in – would look like.

Rewriting the Rules of the European Economy: An Agenda for Growth and Shared Prosperity by Joseph E. Stiglitz

"World Economic Forum" Davos, accelerated depreciation, Airbnb, Alan Greenspan, balance sheet recession, bank run, banking crisis, barriers to entry, Basel III, basic income, behavioural economics, benefit corporation, Berlin Wall, bilateral investment treaty, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, corporate social responsibility, creative destruction, credit crunch, deindustrialization, discovery of DNA, diversified portfolio, Donald Trump, eurozone crisis, Fall of the Berlin Wall, financial engineering, financial intermediation, Francis Fukuyama: the end of history, full employment, gender pay gap, George Akerlof, gig economy, Gini coefficient, Glass-Steagall Act, hiring and firing, housing crisis, Hyman Minsky, income inequality, independent contractor, inflation targeting, informal economy, information asymmetry, intangible asset, investor state dispute settlement, invisible hand, Isaac Newton, labor-force participation, liberal capitalism, low interest rates, low skilled workers, market fundamentalism, mini-job, moral hazard, non-tariff barriers, offshore financial centre, open economy, Paris climate accords, patent troll, pension reform, price mechanism, price stability, proprietary trading, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, Robert Shiller, Ronald Reagan, selection bias, shareholder value, Silicon Valley, sovereign wealth fund, TaskRabbit, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, tulip mania, universal basic income, unorthodox policies, vertical integration, zero-sum game

However, if demand does not move in tandem with supply, structural policies have no effect on output since there is already excess supply. In such a case, policies can simply exacerbate the gap between demand and supply. Over the long run, such policies may have a positive effect on standards of living, for if and when aggregate demand increases enough to restore the economy to full employment, output at full employment will be higher. But an economy has to get to full employment first. For that reason, we are focusing on the short-run impact here. In the short run, structural reforms increase output if they increase aggregate demand and decrease output if they decrease aggregate demand. A review of the structural reforms imposed by the Troika in the euro crisis makes clear that most of them worsened the downturn.

…

At the very least, the EU needs to carve out an exception to the pact when the ECB cannot lower interest rates further. As we have noted, one of the reasons for the seeming lack of concern about the macroeconomic implications of the deficit rules was that monetary policy could be used to restore Europe to full employment. But the ECB cannot ride to the rescue when growth stalls with interest rates near zero. Especially in these circumstances, policy has to allow sufficient fiscal stimulus to restore full employment. Recognize that Burden-Sharing Is the Essence of Greater European Integration The authorities imposing austerity and the other extreme policies that resulted in such suffering often said there were no alternatives.

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But even if it did so, there remains the question: What happens in a currency union like the euro to a country that is facing recession? It cannot lower its own interest rate; it cannot devalue its currency. This chapter has outlined a broad set of approaches for how Europe can achieve full employment, or at least steer toward that goal in all countries simultaneously. Solving Europe’s macroeconomic problem, namely ensuring that aggregate demand is sufficiently strong so that there is full employment across Europe, is a condition for achieving shared prosperity. Higher incomes and low unemployment would open up greater possibilities for public investment, directly reduce inequality, promote growth, and create the fiscal space adequate to test new ideas to achieve the inclusive, equitable, and sustainable growth that Europe seeks.

Universal Basic Income and the Reshaping of Democracy: Towards a Citizens’ Stipend in a New Political Order by Burkhard Wehner

basic income, business cycle, full employment, universal basic income

Such a decision could therefore be morally well-founded even if political constraints allowed only a modest initial level of a citizens’ stipend. 3.4 Basic Income, Minimum Wage and Full Employment Guarantee If under a basic income scheme the citizens’ stipend alone is not sufficient for an adequate livelihood, then all members of the work force—at least all those who cannot live on savings—will want to earn a work income. For all these individuals there must then be work opportunities on acceptable terms, so that the sum of work income and citizens’ stipend ensures the minimum standard of living as stipulated. In this sense, full employment conditions must be fulfilled. In the recent past, such full employment conditions have proved no longer attainable in most countries.

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A citizens’ stipend is, however, not only a system of material redistribution, but affects social justice in a much broader moral sense. It does so particularly in its capacity as a full employment scheme. A distributional justice associated with full employment is morally superior to a purely arithmetic distributional justice, particularly because the unemployed can in part be assumed 16 3 A Long-Term Vision to belong to the least advantaged of a society. Full employment therefore not only improves the overall perception of social conditions, but also benefits those who are the materially and immaterially most needy. A citizens’ stipend system would, however, be superior to a conventional system even if it neither raised the minimum income nor ensured full employment.

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A citizens’ stipend would create conditions in the labor market that would make full employment objectives easier to achieve. Notably, no workers would any longer be under pressure to cover their livelihood solely from labor income. As basic income recipients, they could manage with lower work incomes than under the conventional social system. With these lower work incomes, the required minimum work performance would also be lower. Workers incapable of higher performance would not on that ground be excluded from the labor market. In this way, a citizens’ stipend could generate full employment conditions. Market processes alone, however, would not provide a guarantee that a sufficient minimum wage at this reduced level is actually paid.

Big Three in Economics: Adam Smith, Karl Marx, and John Maynard Keynes by Mark Skousen

Albert Einstein, banking crisis, behavioural economics, Berlin Wall, Bretton Woods, business climate, business cycle, creative destruction, David Ricardo: comparative advantage, delayed gratification, experimental economics, financial independence, Financial Instability Hypothesis, foreign exchange controls, full employment, Hernando de Soto, housing crisis, Hyman Minsky, inflation targeting, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Arrow, laissez-faire capitalism, liberation theology, liquidity trap, low interest rates, means of production, Meghnad Desai, microcredit, minimum wage unemployment, money market fund, open economy, paradox of thrift, Pareto efficiency, Paul Samuelson, Phillips curve, Post-Keynesian economics, price stability, pushing on a string, rent control, Richard Thaler, rising living standards, road to serfdom, Robert Shiller, Robert Solow, rolodex, Ronald Coase, Ronald Reagan, school choice, secular stagnation, Simon Kuznets, The Chicago School, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, Tobin tax, Tragedy of the Commons, unorthodox policies, Vilfredo Pareto, zero-sum game

Keynes and the Classics," British economist John Hicks developed a graphic framework (known as the IS-LM diagram) to demonstrate Keynes's version of full-employment equilibrium (the special classical theory) versus unemployment equilibrium (the general theory) (Hicks 1937). Today's textbooks use a similar diagram to demonstrate aggregate supply (AS) and aggregate demand (AD). In Figure 5.1 we see how the economy is depressed at less than full employment. According to Keynes's model, the classical model only applies when the economy reaches full employment (Qj), while the Keynesian general theory applies at any point along the AS curve where it intersects with the AD curve.

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So the investment schedule is set at any level, unrelated to income. Equilibrium (M) is set at the point where S = I, which you will note falls short of full-employment income (F). Thus, the Keynesian cross reflects underemployment equilibrium. This static equilibrium model represents Samuelson's (and Keynes's) view that capitalism is inherently unstable and can be stuck indefinitely at less than full employment (M). No "automatic mechanism" guarantees full employment in the capitalist economy (Samuelson andNordhaus 1985,139). Samuelson compared capitalism to a car without a steering wheel; it frequently runs off the road and crashes: "The private economy is not unlike a machine without an effective steering wheel or governor," he wrote.

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In his revolutionary 1936 book, The General Theory of Employment, Interest and Money, Keynes preached that capitalism is inherently unstable and has no natural tendency toward full employment. Yet, at the same time, he rejected the need to na-tionalize the economy, impose price-wage controls, and interfere with the microfoundations of supply and demand. All that was needed was for government to take control of a wayward capitalist steering wheel and get the car back on the road to prosperity. How? Not by slashing prices and wages—the classical approach—but by deliberately running federal deficits and spending money on public works that would expand "aggregate demand" and restore confidence. Once the economy got back on track and reached full employment, the government would no longer need to run deficits, and the classical model would function properly.

The People: The Rise and Fall of the Working Class, 1910-2010 by Selina Todd

"there is no alternative" (TINA), call centre, collective bargaining, conceptual framework, credit crunch, deindustrialization, deskilling, different worldview, Downton Abbey, financial independence, full employment, income inequality, longitudinal study, manufacturing employment, meritocracy, Neil Kinnock, New Urbanism, Red Clydeside, rent control, Right to Buy, rising living standards, scientific management, sexual politics, strikebreaker, The Spirit Level, unemployed young men, union organizing, upwardly mobile, urban renewal, Winter of Discontent, women in the workforce, work culture , young professional

Basil Dean could not have dreamed that, by the time he felt able to speak of that evening in Bridport, Dunkirk would have been immortalized as a victory for the British; and its army as representatives of ‘the people’ – the workers who, victorious in war, deserved to win the peace. He could not have envisioned Labour’s landslide election victory in 1945, on a pledge to maintain full employment and a welfare state as thanks to the workers on whom victory had depended. The Second World War was the people’s war. It marked one of two major turning points in the twentieth century, heralding a period of full employment and comprehensive welfare provision that was only brought to an end by the second turning point: the election of Margaret Thatcher to government in 1979. During the war the government struck a contract with the people: work hard in return for a guaranteed job, a living wage and care in times of need.

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Local activists, voting figures and opinion polls revealed that Labour had continued to poll strongly in working-class constituencies, though the party had lost ground in some middle-class areas. The Conservatives concluded that Labour’s attractions were, in order of importance: ‘full employment, the National Health Service and social services, Fair Shares, bigger wage-packets [and] “Tory Misrule”’: voters vividly recalled the hungry thirties. While some middle-class voters were greatly attracted by the Conservatives’ commitment to cut income tax, working-class voters in particular were put off by the ‘vagueness of [Conservative] policy for full employment’, ‘cuts in food subsidies’ – including the promise to end rationing – and by ‘Churchill – seen as a warmonger’.50 Yet just one year later, on 26 October 1951, the Labour Party lost the general election.

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There’s too much class distinction.’59 Post-war welfare and educational reforms, together with near-full employment and Labour’s rhetoric of equality and technological innovation, gave young workers a new confidence in their right to be listened to. They were angry to discover that most employers had no intention of consulting them. Wilson’s attitude to the strikers did nothing to assuage their anger. After the election of 1966, the government stopped talking so much about ending social inequality. Changes in the international economic situation were one cause: in the face of foreign manufacturing competition, Wilson fell silent on the issue of full employment, and instead focused on eradicating the most extreme cases of poverty.

Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism by George A. Akerlof, Robert J. Shiller

affirmative action, Andrei Shleifer, asset-backed security, bank run, banking crisis, Bear Stearns, behavioural economics, business cycle, buy and hold, collateralized debt obligation, conceptual framework, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, Deng Xiaoping, Donald Trump, Edward Glaeser, en.wikipedia.org, experimental subject, financial innovation, full employment, Future Shock, George Akerlof, George Santayana, housing crisis, Hyman Minsky, income per capita, inflation targeting, invisible hand, Isaac Newton, Jane Jacobs, Jean Tirole, job satisfaction, Joseph Schumpeter, junk bonds, Long Term Capital Management, loss aversion, market bubble, market clearing, mental accounting, Michael Milken, Mikhail Gorbachev, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Myron Scholes, new economy, New Urbanism, Paul Samuelson, Phillips curve, plutocrats, Post-Keynesian economics, price stability, profit maximization, public intellectual, purchasing power parity, random walk, Richard Thaler, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, seminal paper, South Sea Bubble, The Chicago School, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, W. E. B. Du Bois, We are all Keynesians now, working-age population, Y2K, Yom Kippur War

The first such target— and the only one that would be needed in a normal recession—would be a monetary policy and a fiscal policy that would be jointly sufficient to return the economy to full employment. But because of the severe credit crunch, which has been induced by the low state of confidence, such a stimulus is not enough. Indeed, in the face of the credit crunch, it might take very large increases in government expenditures or tax reductions to reach full employment. So we argue that government macroeconomic policy should have a second, intermediate target. Credit flows should also be targeted at the level that would normally prevail at full employment. In the postscript to Chapter 7 we shall describe how the Federal Reserve has developed clever schemes that could enable it to achieve such a target even in these dire times.

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Most of the time—as now, when the U.S. unemployment rate is still 6.7% (although rising)—it predicts remarkably accurately. Consider yet again the Great Depression. Few people ask why employment was as high as 75% in 1933. Instead the common question is why 25% of the labor force was unemployed. To our mind macroeconomics concerns departures from full employment. Failure to be at such full employment must then result from a departure from the classical model of Adam Smith. We do believe, like most of our colleagues, that Adam Smith was basically right regarding why so many people are employed. We are also willing to believe, with some qualifications, that he was essentially correct about the economic advantages of capitalism.

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Most notably, firms that count on outside finance will go bankrupt if they cannot obtain credit. If the credit crunch continues and many firms go bankrupt, it would take an impossibly large fiscal and monetary policy stimulus to achieve full employment. There is the further problem that, as long as credit markets are frozen, the need for fiscal and monetary stimulation will continue. Using the appropriate fiscal and monetary stimulus, in sufficient amount, could possibly keep us at full employment. But to do so without relieving the credit crunch would be like propping a sick man up in bed so that he looks all right. He will collapse again just as soon as you remove the prop.

Samuelson Friedman: The Battle Over the Free Market by Nicholas Wapshott

2021 United States Capitol attack, Alan Greenspan, bank run, basic income, battle of ideas, Bear Stearns, Berlin Wall, Bretton Woods, business cycle, California gold rush, collective bargaining, coronavirus, corporate governance, COVID-19, creative destruction, David Ricardo: comparative advantage, Donald Trump, double helix, en.wikipedia.org, fiat currency, financial engineering, fixed income, floating exchange rates, full employment, God and Mammon, greed is good, Gunnar Myrdal, income inequality, indoor plumbing, invisible hand, John von Neumann, Joseph Schumpeter, Kenneth Arrow, laissez-faire capitalism, light touch regulation, liquidity trap, lockdown, low interest rates, Machinery of Freedom by David Friedman, market bubble, market clearing, mass immigration, military-industrial complex, Money creation, money market fund, Mont Pelerin Society, moral hazard, new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, paradox of thrift, Paul Samuelson, Philip Mirowski, Phillips curve, price mechanism, price stability, public intellectual, pushing on a string, quantitative easing, rent control, road to serfdom, Robert Bork, Robert Solow, Ronald Coase, Ronald Reagan, school vouchers, seminal paper, Simon Kuznets, social distancing, Tax Reform Act of 1986, The Chicago School, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, too big to fail, trickle-down economics, universal basic income, upwardly mobile, urban renewal, War on Poverty, We are all Keynesians now, Works Progress Administration, zero-sum game

But while, according to one White House insider, “Keynesian management of the economy was fading [and] acceptance of the key role of money was rising,”19 Friedman’s monetarism did not figure in Nixon’s thinking. This became evident early in January 1971 when, in his State of the Union address, Nixon announced “a full employment budget,”20 a budget designed to be in balance if the economy were operating at its peak potential. “By spending as if we were at full employment, we will help to bring about full employment.”21 He went on: With the stimulus and the discipline of a full employment budget, with the commitment of the independent Federal Reserve System to provide fully for the monetary needs of a growing economy, and with a much greater effort on the part of labor and management to make their wage and price decisions in the light of the national interest and their own self-interest—then for the worker, the farmer, the consumer, for Americans everywhere we shall gain the goal of a new prosperity: more jobs, more income, more profits, without inflation and without war.22 Friedman, distressed to find himself shut out of the decision making, was taken by surprise when, in an interview immediately after the State of the Union, Nixon declared, “Now I am a Keynesian.”

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Secretary of Commerce from February 29, 1972 to February 1, 1973. 18.From taped conversation 546-2, July 26, 1971, White House Tapes, Nixon Presidential Materials Staff, National Archives at College Park, Md. http://millercenter.org/presidentialrecordings. 19.Stein, Presidential Economics, p. 138. 20.“A full employment budget” alluded to the amount of federal government stimulus spending needed to ensure full employment. By fixing spending as if full employment had been achieved, Nixon hoped to boost the economy and create jobs. 21.http://www.presidency.ucsb.edu/ws/?pid=3110. Nixon was expressing a commonly held simple Keynesian view that unemployment should be reduced by public spending and a budget deficit until full employment had been reached, when the budget should be made to balance to avoid overheating [inflation].

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In 1960, Samuelson hinted that there were problems with the Phillips Curve jobs/prices trade-off when he described cost-push inflation as “a force that operates year-in and year-out, whenever we are at high employment, to push up prices. … Instead of setting in only after you have reached over-full employment, the suspicion is dawning that it may be a problem that plagues us even when we haven’t arrived at a satisfactory level of employment.”13 Samuelson thought demand-pull inflation was a problem primarily for prosperous economies. As steady economic growth led to full employment, labor became scarce and allowed workers, in particular trade-union members, to win pay increases that restored the value of their wages when prices rose.

Two Nations, Indivisible: A History of Inequality in America: A History of Inequality in America by Jamie Bronstein

Affordable Care Act / Obamacare, back-to-the-land, barriers to entry, basic income, Bernie Sanders, big-box store, Black Lives Matter, blue-collar work, Branko Milanovic, British Empire, Capital in the Twenty-First Century by Thomas Piketty, clean water, cognitive dissonance, collateralized debt obligation, collective bargaining, Community Supported Agriculture, corporate personhood, crony capitalism, deindustrialization, desegregation, Donald Trump, ending welfare as we know it, Frederick Winslow Taylor, full employment, Gini coefficient, Glass-Steagall Act, income inequality, interchangeable parts, invisible hand, job automation, John Maynard Keynes: technological unemployment, labor-force participation, land reform, land tenure, longitudinal study, low skilled workers, low-wage service sector, mandatory minimum, mass incarceration, minimum wage unemployment, moral hazard, moral panic, mortgage debt, New Urbanism, non-tariff barriers, obamacare, occupational segregation, Occupy movement, oil shock, plutocrats, price discrimination, race to the bottom, rent control, road to serfdom, Ronald Reagan, Sam Peltzman, scientific management, Scientific racism, Simon Kuznets, single-payer health, Strategic Defense Initiative, strikebreaker, the long tail, too big to fail, trade route, transcontinental railway, Triangle Shirtwaist Factory, trickle-down economics, universal basic income, Upton Sinclair, upwardly mobile, urban renewal, vertical integration, W. E. B. Du Bois, wage slave, War on Poverty, women in the workforce, working poor, Works Progress Administration

Twenty-five years after internment, those who had been interned were still experiencing annual incomes 9 to 13 percent lower than those Japanese Americans (in Hawaii and outside the evacuation area) who were not interned.89 RIGHT TO FULL EMPLOYMENT Full employment had become so important that by 1944, Roosevelt proposed a second, “economic Bill of Rights,” in his State of the Union message. He hoped to guarantee Americans full employment at a living wage, medical care, and a social safety net—the same kinds of reforms called for in Britain’s Beveridge Report two years before.90 It is worth quoting Roosevelt at some length: We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence.

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In 1946, Congress passed an Employment Act committing the federal government to maximizing employment, production, and purchasing power “in a manner calculated to foster and promote free competitive enterprise and the general welfare.”8 Unlike the act that had failed to pass in 1945, this 1946 act strove for “maximum employment” rather than full employment, thus paving the way for a postwar consensus that varying degrees of unemployment were acceptable.9 The President’s Council of Economic Advisers (CEA), created by the act, advised successive presidents on policy, but none of the CEA chairmen prioritized government-guaranteed full employment.10 The Republican victory over both houses of Congress in 1946, and Truman’s Cold War military buildup further decreased concern with employment.11 As Cold War ideological divisions hardened into anticommunist hysteria, the degree of central planning that Roosevelt’s notions required may have seemed more Soviet than American to many.

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Not only was this proposed spending increase controversial, but Carter administration insiders also warned that the program would be massively concentrated in a few poor southern states that had traditionally done little to address poverty.81 Despite having Democratic majorities in both the House and the Senate, Carter was unable to cultivate good relationships with key legislators, and PBJI was killed in committee.82 The Carter administration also seriously grappled with the notion of government-guaranteed full employment. The Humphrey-Hawkins Full Employment Act of 1978, originally drafted in 1974, would have compelled the federal government to provide jobs for all who wanted to work, whether or not the private sector demanded their needs or talents. Willing workers could sue the government if it failed to find them jobs. The bill called for a government department to conduct both employment and production surveys and then generate necessary jobs, whether in the public or the private sector.83 Like Nixon’s FAP, the Humphrey-Hawkins Bill was attacked from the left and the right.

The End of Loser Liberalism: Making Markets Progressive by Dean Baker

Alan Greenspan, Asian financial crisis, banking crisis, Bear Stearns, Bernie Sanders, business cycle, collateralized debt obligation, collective bargaining, corporate governance, currency manipulation / currency intervention, Doha Development Round, financial innovation, full employment, Glass-Steagall Act, Home mortgage interest deduction, income inequality, inflation targeting, invisible hand, low interest rates, manufacturing employment, market clearing, market fundamentalism, medical residency, patent troll, pets.com, pirate software, price stability, public intellectual, quantitative easing, regulatory arbitrage, rent-seeking, Robert Shiller, Silicon Valley, too big to fail, transaction costs

But at least Disney and Comcast do not get to directly appoint members of the FCC. Chapter 6 Full Employment without the Fed In principle, the Fed should vigorously pursue policies that promote full employment. [49] However, it does not do so now, nor is it likely to do so in the near future. Under its current structure, the Fed is primarily responsive to the financial industry’s concerns about inflation, and full employment comes in a distant second. A progressive agenda should include efforts to educate the public about the Fed’s importance and its structure, for two reasons: to maintain pressure on the Fed to pursue the full-employment portion of its mandate, and to create support for legally restructuring the institution so that it is more accountable to democratically elected officials.

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A progressive agenda should include efforts to educate the public about the Fed’s importance and its structure, for two reasons: to maintain pressure on the Fed to pursue the full-employment portion of its mandate, and to create support for legally restructuring the institution so that it is more accountable to democratically elected officials. But even in a best-case scenario, the Fed will be controlled by financial interests long into the future. This raises the question of whether there are other steps that can be taken to move the economy back toward full employment even when the Fed is at best indifferent – if not outright hostile – to this effort. Work sharing: The quickest route back to full employment In the absence of a growing demand for labor that would increase employment, an alternative route is to divide up the existing work among more workers. While this may be an inferior path – there is enormous waste associated with an economy operating below its potential – it may be the only route available given that the possibility of further fiscal stimulus appears to be blocked by political considerations.

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While this may be an inferior path – there is enormous waste associated with an economy operating below its potential – it may be the only route available given that the possibility of further fiscal stimulus appears to be blocked by political considerations. Yet, in any case, work sharing might be a proper route back to full employment, since there is nothing written in stone about the current length of the work week or work year. Work sharing is not a new idea. The idea of shortening work time to create more jobs has a long history. In the context of an economy that is at full employment, the approach might be misguided, since legislated reductions in work time can lead to increased inflationary pressure and economic distortions. However, in an economy that is operating well below its potential and that is projected to remain below potential output for much of the next decade, as is the case with the U.S. economy, work sharing may be the most viable way of bringing the nation back to full employment.

Inventing the Future: Postcapitalism and a World Without Work by Nick Srnicek, Alex Williams

3D printing, additive manufacturing, air freight, algorithmic trading, anti-work, antiwork, back-to-the-land, banking crisis, basic income, battle of ideas, blockchain, Boris Johnson, Bretton Woods, business cycle, call centre, capital controls, capitalist realism, carbon footprint, carbon tax, Cass Sunstein, centre right, collective bargaining, crowdsourcing, cryptocurrency, David Graeber, decarbonisation, deep learning, deindustrialization, deskilling, Doha Development Round, Elon Musk, Erik Brynjolfsson, Evgeny Morozov, Ferguson, Missouri, financial independence, food miles, Francis Fukuyama: the end of history, full employment, future of work, gender pay gap, general purpose technology, housing crisis, housing justice, income inequality, industrial robot, informal economy, intermodal, Internet Archive, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Kickstarter, Kiva Systems, late capitalism, liberation theology, Live Aid, low skilled workers, manufacturing employment, market design, Martin Wolf, mass immigration, mass incarceration, means of production, megaproject, minimum wage unemployment, Modern Monetary Theory, Mont Pelerin Society, Murray Bookchin, neoliberal agenda, New Urbanism, Occupy movement, oil shale / tar sands, oil shock, Overton Window, patent troll, pattern recognition, Paul Samuelson, Philip Mirowski, post scarcity, post-Fordism, post-work, postnationalism / post nation state, precariat, precautionary principle, price stability, profit motive, public intellectual, quantitative easing, reshoring, Richard Florida, rising living standards, road to serfdom, Robert Gordon, Ronald Reagan, Second Machine Age, secular stagnation, self-driving car, Slavoj Žižek, social web, stakhanovite, Steve Jobs, surplus humans, synthetic biology, tacit knowledge, technological determinism, the built environment, The Chicago School, The Future of Employment, the long tail, Tyler Cowen, Tyler Cowen: Great Stagnation, universal basic income, wages for housework, warehouse automation, We are all Keynesians now, We are the 99%, women in the workforce, working poor, working-age population

Still, it might be imagined that, with the right political pressure and policies, a return to full employment could be an option.137 But, given that the height of the social democratic era required the exclusion of women from the waged workforce, we should in fact wonder whether full employment has ever been possible. If full employment remains operative only as an ideological mystification, its normalisation of work still extends to the unemployed. The transformation of welfare and the rise of workfare – forcing people to work in order to receive benefits – represent an increasingly insidious example of this. Mirroring the changing fortunes of full employment, unemployment has long been governed according to different ideas.138 Initial approaches saw unemployment as an individual accident – something to be mitigated by insurance-like solutions.

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Another, much smaller, set of arguments has been interested in the claim that the surplus population has a secular trend to grow in size. 49.Marx, Capital, Volume I, p. 798. 50.Richard Duboff, ‘Full Employment: The History of a Receding Target’, Politics & Society 7: 1 (1977), pp. 7–8. 51.While NAIRU is debatable as a measure of full employment, the postwar period saw unemployment typically below NAIRU, and the neoliberal period has seen unemployment consistently above NAIRU. Jared Bernstein and Dean Baker, ‘Full Employment: The Recovery’s Missing Ingredient’, Washington Post, 3 November 2014, p. 10; José Nun, ‘The End of Work and the “Marginal Mass” Thesis’, Latin American Perspectives 27: 1 (2000), p. 8; Guy Standing, The Precariat: The New Dangerous Class (London: Bloomsbury Academic, 2011), pp. 46–7; Jeffrey Straussman, ‘The “Reserve Army” of Unemployed Revisited’, Society 14: 3 (1977), p. 42. 52.Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents, December 2014, Federal Reserve Board, 2014, pdf available at federal-reserve.gov, p. 1. 53.Claire Cain Miller, ‘As Robots Grow Smarter, American Workers Struggle to Keep Up’, New York Times, 15 December 2014. 54.Bureau of Labor Statistics, ‘Civilian Employment–Population Ratio’, Federal Reserve Bank of St Louis, 2014, at research.stlouisfed.org; Deepankar Basu, The Reserve Army of Labour in the Postwar US Economy: Some Stock and Flow Estimates, Working Paper (Amherst: University of Massachusetts, 2012), p. 7. 55.ILO, Global Employment Trends 2014, p. 17. 56.The job growth rate dropped from 1.7 per cent between 1991 and 2007 to 1.2 per cent between 2007 and 2014.

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One of the principal ways to manage the unruly surplus has been to champion the social democratic ideal of full employment, whereby every physically capable (male) worker has a job. In support of this ideal, economic policies aim to reincorporate the surplus into capitalism as disciplined and waged workers, secured by a hegemonic consensus between the representatives of labour and capital. The apogee of this approach was the postwar period, when working-class struggle and conservative concern with social order positioned full employment as a necessary economic goal.119 In this brief ‘golden age’ of capitalism, unemployment was kept to a minimum, and capital had to seek out pre-capitalist populations around the world in order to expand and accumulate.120 For the most part, job growth was achieved through healthy economic growth that increased the demand for labour.121 Historically, growth of the national economy has often been important in warding off the effects of technological unemployment – either by increasing the output of existing industries or by inventing new industries to employ the displaced workers.

An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy by Marc Levinson

affirmative action, airline deregulation, Alan Greenspan, banking crisis, Big bang: deregulation of the City of London, Boycotts of Israel, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, car-free, Carmen Reinhart, central bank independence, centre right, clean water, deindustrialization, endogenous growth, falling living standards, financial deregulation, flag carrier, floating exchange rates, full employment, George Gilder, Gini coefficient, global supply chain, Great Leap Forward, guns versus butter model, high-speed rail, income inequality, income per capita, indoor plumbing, informal economy, intermodal, inverted yield curve, invisible hand, It's morning again in America, Kenneth Rogoff, knowledge economy, late capitalism, Les Trente Glorieuses, linear programming, low interest rates, manufacturing employment, Multi Fibre Arrangement, new economy, Nixon shock, Nixon triggered the end of the Bretton Woods system, North Sea oil, oil shock, Paul Samuelson, pension reform, Phillips curve, price stability, purchasing power parity, refrigerator car, Right to Buy, rising living standards, Robert Gordon, rolodex, Ronald Coase, Ronald Reagan, Simon Kuznets, statistical model, strikebreaker, structural adjustment programs, The Rise and Fall of American Growth, Thomas Malthus, total factor productivity, unorthodox policies, upwardly mobile, War on Poverty, Washington Consensus, Winter of Discontent, Wolfgang Streeck, women in the workforce, working-age population, yield curve, Yom Kippur War, zero-sum game

By the final months of World War II, a large majority of Americans, and nearly one-third of business leaders, told pollsters that it was government’s role to maintain full employment. Among Americans with college degrees, a stunning 70 percent concurred that “Full employment is something we should try to get, and it will require government action as well as planning by industry to get it.” When the US Senate, dominated by conservatives, considered the Full Employment Act in September 1945, seventy-one senators agreed that the government should ensure full employment when the private sector fell short, and only ten voted no.18 Although the Full Employment Act was much weakened before Congress finally approved it, support remained strong for the idea that government should, and could, ensure jobs for all.

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No one seemed to notice that the “full-employment budget” created perverse incentives for elected politicians everywhere. Agreeing to more government spending at times of high unemployment was easy enough, but reducing spending during economic upturns was far less attractive. Deficit spending would become the norm. The well-intentioned idea of a full-employment budget, like many well-intentioned ideas, had unforeseen consequences. Economists became arbiters, specifying what unemployment rate would constitute “full employment” and then calculating how much government spending would be required to reach that target. “Conceptual advances and quantitative research in economics are replacing emotion with reason,” Walter Heller, formerly the chief economic adviser to presidents John F.

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See also specific presidents and prime ministers Franco, Francisco, 211–213 Franklin National Bank, 87–89, 91, 95, 96 free enterprise, 224, 225 free-market economics, 30, 31, 254–255; Thatcher and, 172, 260 French Republic, 4 Friedman, Milton, 75, 76, 153, 176, 180–181, 185 full employment, 6, 25–26, 30, 35, 170, 179, 180, 233, 261; tax cuts, easy money, government programs and, 75. See also employment/unemployment; unemployment Full Employment Act, 25–26 full-employment budget, 26 Fullerton, Don, 228 G-77, 43 gas: deregulation of, 99–100, 102, 103–104, 107–108, 109, 113 GATT. See General Agreement on Tariffs and Trade General Agreement on Tariffs and Trade (GATT), 42 German Bundesbank, 28, 51, 55, 86, 181 Germany, 19, 224; banks/banking system in, 28, 91, 94 (see also banks/banking systems); debt crisis in, 246; economic crisis of 1970s in, 164; economic planning in, 28, 29–30; economy at close of World War II in, 16–17; economy policy in, 27–35; formal division into two zones in, 28–29; income inequality in, 135; inflation and buying power in, 55–56; labor/trade unions in, 169; political parties in, 27–28; postwar occupied zones in, 28; postwar productivity in, 23; welfare state in, 17.

People, Power, and Profits: Progressive Capitalism for an Age of Discontent by Joseph E. Stiglitz

affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, AlphaGo, antiwork, barriers to entry, basic income, battle of ideas, behavioural economics, Berlin Wall, Bernie Madoff, Bernie Sanders, Big Tech, business cycle, Cambridge Analytica, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, carried interest, central bank independence, clean water, collective bargaining, company town, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, crony capitalism, DeepMind, deglobalization, deindustrialization, disinformation, disintermediation, diversified portfolio, Donald Trump, driverless car, Edward Snowden, Elon Musk, Erik Brynjolfsson, fake news, Fall of the Berlin Wall, financial deregulation, financial innovation, financial intermediation, Firefox, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, George Akerlof, gig economy, Glass-Steagall Act, global macro, global supply chain, greed is good, green new deal, income inequality, information asymmetry, invisible hand, Isaac Newton, Jean Tirole, Jeff Bezos, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John von Neumann, Joseph Schumpeter, labor-force participation, late fees, low interest rates, low skilled workers, Mark Zuckerberg, market fundamentalism, mass incarceration, meta-analysis, minimum wage unemployment, moral hazard, new economy, New Urbanism, obamacare, opioid epidemic / opioid crisis, patent troll, Paul Samuelson, pension reform, Peter Thiel, postindustrial economy, price discrimination, principal–agent problem, profit maximization, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, Richard Thaler, Robert Bork, Robert Gordon, Robert Mercer, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, search costs, secular stagnation, self-driving car, shareholder value, Shoshana Zuboff, Silicon Valley, Simon Kuznets, South China Sea, sovereign wealth fund, speech recognition, Steve Bannon, Steve Jobs, surveillance capitalism, TED Talk, The Chicago School, The Future of Employment, The Great Moderation, the market place, The Rise and Fall of American Growth, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, trickle-down economics, two-sided market, universal basic income, Unsafe at Any Speed, Upton Sinclair, uranium enrichment, War on Poverty, working-age population, Yochai Benkler

I explain here what government can do to create the economy we should have. Ensuring full employment No policy is more important for equality, growth, and efficiency than maintaining full employment. And the most important ingredient in a middle-class life style is having a decent job. That in turn requires that there be jobs—a macroeconomic framework that ensures full employment. In spite of the fact that many conservative economists believe that markets always work efficiently, it should be obvious: there have been long periods of time in which the market, on its own, has failed to achieve full employment. Massive unemployment is a great waste of resources.

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If monetary policy responds by lowering interest rates, and the lower interest rates increase investment or consumption, full employment might be restored. But sometimes monetary policy doesn’t work, or at least work well enough to achieve full employment. That helps explain why after the admission of China to the WTO in 2001, American unemployment increased and wages fell in those places that produced goods that were competitive with things being imported in growing volume from China.5 Even when monetary and fiscal policy work to return the economy eventually to full employment, globalization often leads to job destruction in the short run, as the loss of jobs from an onslaught of imports occurs faster than job creation from additional exports, especially when banks aren’t lending much to new enterprises seeking to take advantage of the new opportunities offered, say, by a new trade agreement.6 Moreover, trade agreements and tax laws have effectively encouraged firms to move manufacturing abroad, destroying jobs at home.

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With the Federal Reserve keeping interest rates so low for so long, capital costs relative to labor were especially low—and not surprisingly, then, attention got drawn toward reducing labor costs. The demand for labor, already not enough to maintain full employment, was weakened further.13 Lower wages and increased inequality Even getting us to full employment may not be enough. If machines replace labor, then by definition, the demand for labor at any given wage is reduced, so to restore the economy to full employment wages must fall. This is just a straightforward application of the law of supply and demand. But it means that, without government intervention, large parts of the economy will be worse off.14 Of course, in principle, technological advances should be able to make all of us better off, as is also true for globalization.

End This Depression Now! by Paul Krugman

airline deregulation, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, bond market vigilante , Bretton Woods, business cycle, capital asset pricing model, Carmen Reinhart, centre right, correlation does not imply causation, credit crunch, Credit Default Swap, currency manipulation / currency intervention, debt deflation, Eugene Fama: efficient market hypothesis, financial deregulation, financial innovation, Financial Instability Hypothesis, full employment, German hyperinflation, Glass-Steagall Act, Gordon Gekko, high-speed rail, Hyman Minsky, income inequality, inflation targeting, invisible hand, it is difficult to get a man to understand something, when his salary depends on his not understanding it, It's morning again in America, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Joseph Schumpeter, junk bonds, Kenneth Rogoff, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, low interest rates, low skilled workers, Mark Zuckerberg, Minsky moment, Money creation, money market fund, moral hazard, mortgage debt, negative equity, paradox of thrift, Paul Samuelson, price stability, quantitative easing, rent-seeking, Robert Gordon, Ronald Reagan, Savings and loan crisis, Upton Sinclair, We are all Keynesians now, We are the 99%, working poor, Works Progress Administration

Of the 13 million U.S. workers who were unemployed in October 2011, only 1.1 million (a mere 8 percent) had previously been employed in construction. More broadly, if the problem is that many workers have the wrong skills, or are in the wrong place, those workers with the right skills in the right place should be doing well. They should be experiencing full employment and rising wages. So where are these people? To be fair, there is full employment, even a labor shortage, on the High Plains: Nebraska and the Dakotas have low unemployment by historical standards, largely thanks to a surge in gas drilling. But those three states have a combined population only slightly larger than that of Brooklyn, and unemployment is high everywhere else.

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Before I get there, however, let’s talk briefly about the views of those who don’t believe any of what I’ve just said. Is It Structural? I believe this present labor supply of ours is peculiarly unadaptable and untrained. It cannot respond to the opportunities which industry may offer. This implies a situation of great inequality—full employment, much over-time, high wages, and great prosperity for certain favored groups, accompanied by low wages, short time, unemployment, and possibly destitution for others. —Ewan Clague The quotation above comes from an article in the Journal of the American Statistical Association. It makes an argument one hears from many quarters these days: that the fundamental problems we have run deeper than a mere lack of demand, that too many of our workers lack the skills the twenty-first-century economy requires, or too many of them are still stuck in the wrong locations or the wrong industry.

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Sometimes it’s framed in terms of a story about how technology is simply making workers unnecessary—which is what President Obama seemed to be saying when he told the Today Show, There are some structural issues with our economy where a lot of businesses have learned to be much more efficient with fewer workers. You see it when you go to a bank and you use an ATM, you don’t go to a bank teller. Or you see it when you go to the airport and you use a kiosk instead of checking at the gate. [my emphasis] And most common of all is the assertion that we can’t expect a return to full employment anytime soon, because we need to transfer workers out of an overblown housing sector and retrain them for other jobs. Here’s Charles Plosser, the president of the Federal Reserve Bank of Richmond, and an important voice arguing against policies to expand demand: You can’t change the carpenter into a nurse easily, and you can’t change the mortgage broker into a computer expert in a manufacturing plant very easily.

Free Money for All: A Basic Income Guarantee Solution for the Twenty-First Century by Mark Walker

3D printing, 8-hour work day, additive manufacturing, Affordable Care Act / Obamacare, basic income, Baxter: Rethink Robotics, behavioural economics, Capital in the Twenty-First Century by Thomas Piketty, commoditize, confounding variable, driverless car, financial independence, full employment, guns versus butter model, happiness index / gross national happiness, industrial robot, intangible asset, invisible hand, Jeff Bezos, job automation, job satisfaction, John Markoff, Kevin Kelly, laissez-faire capitalism, late capitalism, longitudinal study, market clearing, means of production, military-industrial complex, new economy, obamacare, off grid, off-the-grid, plutocrats, precariat, printed gun, profit motive, Ray Kurzweil, rent control, RFID, Rodney Brooks, Rosa Parks, science of happiness, Silicon Valley, surplus humans, The Future of Employment, the market place, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, universal basic income, warehouse robotics, working poor

Those fortunate to be still employed, in other words, should find BIG an attractive means to avoid the threat of having their heads put on the ends of pikes by angry mobs upset by perceived unfairness of the robotic revolution. On the other hand, if the economy is able to generate full employment, then the economy will have to grow faster than the redundancy rate to maintain full employment. This means that the economists who predict full employment must also predict a massive growing economy of unprecedented proportions as a logical consequence. That is, optimism about full employment logically requires optimism about a massively expanded economy. In this case, paying for BIG will be comparatively easy as it will be a small percentage of total economic output.

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The point, in other words, is that new industries themselves will likely use advanced robotics and computers, and so economic output will have to increase faster than the percentage of unemployed to keep the economy at full employment. Figure 5.2 shows the relationship necessary for economic growth and full employment. Table 5.1 Increase in economic output Employees per firm Total employees 100 111 125 142 166 200 250 333 500 1,000 10 9 8 7 6 5 4 3 2 1 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Economy Growth Necessary to maintain full employment Firms Total widgets Percentage of economy in 2014 (%) 1,000 1,110 1,250 1,425 1,660 2,000 2,500 3,333 5,000 10,000 100 111 125 142 166 200 250 333 500 1000 2000 1800 1600 1400 1200 1000 800 600 400 200 0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Employment Redundancy Figure 5.2 redundancy Exponential rate of economic growth and employment PEACE, ROBOTS, AND TECHNOLOGICAL UNEMPLOYMENT 111 We are now in a position to see why BIG is a smart bet, given the uncertainties in employment creation.

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Indeed, the belief that the economy will always generate enough jobs seems to be well entrenched: every year I hear college freshmen state it with the same unflinching faith, just like economists such as Tabarrok. Notice that the economists have the more extreme position. They are committed to the idea that the economy will generate full employment. Chicken Little wins if there is anything less than full employment due to technology’s advancement. Despite Chicken Little’s horrendous track record of failure in predicting technological unemployment, I think the prediction of technological unemployment is sound. The Nature of the Debate between Chicken Little and the Economists Thus far, I have merely rehearsed the outlines of a familiar debate.

The End of Alchemy: Money, Banking and the Future of the Global Economy by Mervyn King

Alan Greenspan, Andrei Shleifer, Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, behavioural economics, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Boeing 747, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, classic study, collapse of Lehman Brothers, creative destruction, Credit Default Swap, crowdsourcing, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Doha Development Round, Edmond Halley, Fall of the Berlin Wall, falling living standards, fiat currency, financial engineering, financial innovation, financial intermediation, floating exchange rates, foreign exchange controls, forward guidance, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, German hyperinflation, Glass-Steagall Act, Great Leap Forward, Hyman Minsky, inflation targeting, invisible hand, Japanese asset price bubble, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, labour market flexibility, large denomination, lateral thinking, liquidity trap, Long Term Capital Management, low interest rates, manufacturing employment, market clearing, Martin Wolf, Mexican peso crisis / tequila crisis, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, Nick Leeson, no-fly zone, North Sea oil, Northern Rock, oil shale / tar sands, oil shock, open economy, paradox of thrift, Paul Samuelson, Ponzi scheme, price mechanism, price stability, proprietary trading, purchasing power parity, quantitative easing, rent-seeking, reserve currency, Richard Thaler, rising living standards, Robert Shiller, Robert Solow, Satoshi Nakamoto, savings glut, secular stagnation, seigniorage, stem cell, Steve Jobs, The Great Moderation, the payments system, The Rise and Fall of American Growth, Thomas Malthus, too big to fail, transaction costs, Tyler Cowen: Great Stagnation, yield curve, Yom Kippur War, zero-sum game

Growth today seems possible only if interest rates are much lower than normal – at present the long-term real rate of interest is close to zero. The ‘natural’ real rate is the real rate of interest that generates a level of total spending sufficient to ensure full employment. When asked why demand is weak, economists tend to answer that it is because the natural real rate of interest is negative – in other words, people will spend only when faced with negative real interest rates. And when asked why that is, they reply that it is because demand is insufficient to maintain full employment. The reasoning is circular. Simply restating the phenomenon of secular stagnation in different words and pretending to have offered an explanation does not amount to a theory.

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From the start of monetary union until 2013, prices on this measure rose by 16 per cent in Germany, 25 per cent in France, 33 per cent in Greece, 34 per cent in Italy, 37 per cent in Portugal, and 40 per cent in Spain.19 So although the birth of the euro brought about some initial convergence of expected inflation rates, the consequence of a single interest rate was to generate subsequent divergence of inflation outcomes. The resulting loss of competitiveness among the southern members of the union against Germany is large, even allowing for some overvaluation of the Deutschmark when it was subsumed into the euro. It increased full-employment trade deficits (the excess of imports over exports when a country is operating at full employment) in countries where competitiveness was being lost, and increased trade surpluses in those where it was being gained. Those surpluses and deficits are at the heart of the problem today. Trade deficits have to be financed by borrowing from abroad, and trade surpluses are invested overseas.

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The General Theory, although it contains some beautiful and compelling prose, includes many arguments that are obscure and difficult, even at times almost incomprehensible. Macroeconomics in this era became divided into two schools of thought: Keynesian and neoclassical.4 The former focused on the role of the state in returning an economy from depression to full employment. The latter studied the conditions in which a market economy returns to full employment under its own steam after a temporary deviation from its normal equilibrium. Neoclassical economists often argue that the Keynesian analysis presents a special case in which employment is temporarily below its attainable level, often as a result of misguided government policies.

Limitless: The Federal Reserve Takes on a New Age of Crisis by Jeanna Smialek

Alan Greenspan, bank run, banking crisis, Bear Stearns, Berlin Wall, Bernie Sanders, bitcoin, Black Lives Matter, blockchain, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, Colonization of Mars, coronavirus, COVID-19, crowdsourcing, cryptocurrency, decarbonisation, distributed ledger, Donald Trump, Fall of the Berlin Wall, fiat currency, financial engineering, financial innovation, financial intermediation, Fractional reserve banking, full employment, George Akerlof, George Floyd, Glass-Steagall Act, global pandemic, Henri Poincaré, housing crisis, income inequality, inflation targeting, junk bonds, laissez-faire capitalism, light touch regulation, lockdown, low interest rates, margin call, market bubble, market clearing, meme stock, Modern Monetary Theory, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Nixon shock, offshore financial centre, paradox of thrift, price stability, quantitative easing, race to the bottom, risk tolerance, Robinhood: mobile stock trading app, Ronald Reagan, secular stagnation, short squeeze, social distancing, sovereign wealth fund, The Great Moderation, too big to fail, trade route, Tragedy of the Commons, working-age population, yield curve

The inaugural Fed Listens event in Chicago in June 2019—before the pandemic, when the labor market was widely assessed to be at or near full employment—had changed his mind. Brainard had moderated a panel with the chancellor of the City Colleges of Chicago, the chief executive of the National Skills Coalition, and the head of the Greater Kansas City AFL-CIO. It was titled “What Does Full Employment Look Like for Your Community or Constituency?” Juan Salgado, the chancellor, had pointed out that in one of the heavily minority communities his college served in Chicago, unemployment was at 35 percent and 47 percent of people were not in the labor force.[28] “When I hear we’re at full employment, that’s not my reality.

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The Month Markets Melted 3. One Nation, Under Banks 4. The Fed’s Second Act 5. The Temple Is Under New Management 6. A Polarized Fed 7. March Madness 8. A Corporate House of Cards 9. The Day the Fed Changed 10. Racing Across Red Lines 11. Culture Wars and Capital 12. Love Songs to Full Employment 13. A Fed Restrained 14. The Creeping Crises 15. A Year of Uncomfortable Questions Epilogue Acknowledgments Bibliography Notes Index _142549205_ INTRODUCTION The interviewer on the April 9, 2020, webcast had a simple question for the chair of the Federal Reserve: How much support could the central bank provide to businesses and households using its emergency powers?

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It lowered rates to encourage lending and spending when the economy was weak or raised them to slow it down when consumption and hiring were running hot. It was a technocratic job, but an important one with big consequences for the American population. The Fed used its policy to achieve the two main goals Congress had assigned it: keeping inflation low and fostering full employment. Prosperity turned on whether it succeeded. The Fed’s role in society didn’t stop there. As of 2019, it also regulated and supervised the nation’s largest bank holding companies, monitored financial stability, managed the nation’s cash supply and core payments system, and performed extensive economic research.

Men Without Work by Nicholas Eberstadt

business cycle, Carmen Reinhart, centre right, deindustrialization, financial innovation, full employment, illegal immigration, jobless men, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labor-force participation, low skilled workers, mass immigration, moral hazard, post-work, Ronald Reagan, secular stagnation, Simon Kuznets, The Rise and Fall of American Growth, War on Poverty, women in the workforce, working-age population

(April 2016, International New York Times4) •“June’s Super Jobs Report (July 2016, Atlantic Monthly5) In addition, U.S. economists and policymakers who have served under Republican and Democratic presidents maintain that today’s U.S. economy is either near or at “full employment”: •“It is encouraging to see that the U.S. economy is approaching full employment with low inflation.” (Ben Bernanke, former chairman of the Federal Reserve Board, October 20156) •“The American economy is in good shape . . . we are essentially at full employment . . . tight labor markets are leading to increases in hourly earnings and in the producer prices of services.” (Martin Feldstein, former chair of the President’s Council of Economic Advisers and longtime director of the National Bureau of Economic Research, February 20167) •“We are coming close to [the Federal Reserve’s] assigned congressional goal of full employment.

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This disturbing situation is our “new normal.” No less disturbing is the fact that the general public and political elites have uncritically accepted this American decimation as today’s “new normal.” Today’s received wisdom holds that the United States is now at or near “full employment.” An alternative view would hold that, by not-so-distant historic standards, the nation today is short of full employment by nearly 10 million male workers (to say nothing of the additional current “jobs deficit” for women). Unlike the dead soldiers in Roman antiquity, our decimated men still live and walk among us, though in an existence without productive economic purpose.

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_r=0. 5.Bourree Lam, “June’s Super Jobs Report”, Atlantic Monthly, July 8 2016, http://www.theatlantic.com/business/archive/2016/07/june-jobs-report/490466/. 6.Ben Bernanke, “How the Fed Saved the Economy,” Brookings, October 4, 2015, https://www.brookings.edu/opinions/how-the-fed-saved-the-economy/. 7.Martin Feldstein, “The U.S. Economy Is in Good Shape,” Wall Street Journal, February 21, 2016, http://www.wsj.com/articles/the-u-s-economy-is-in-good-shape-1456097121. 8.Jana Raindow, Christopher Condon, and Matthew Boesler, “Yellen Says U.S. Near Full Employment, Some Slack Remains,” Bloomberg, April 7, 2016, http://www.bloomberg.com/news/articles/2016-04-07/yellen-says-u-s-close-to-full-employment-some-slack-remains. 9.Note that the workforce is officially defined as the sixteen-plus population (more or less is the age you legally can get out of school); historically it was the fourteen-plus population. In this study, I use three measures working age population: twenty-plus, twenty-to-sixty-four, and the “prime working” ages of twenty-five-to-fifty-four. 10.While the U.S.

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis by Anatole Kaletsky

"World Economic Forum" Davos, Alan Greenspan, bank run, banking crisis, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Black Swan, bond market vigilante , bonus culture, Bretton Woods, BRICs, business cycle, buy and hold, Carmen Reinhart, classic study, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, currency manipulation / currency intervention, currency risk, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, eat what you kill, Edward Glaeser, electricity market, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, F. W. de Klerk, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, foreign exchange controls, full employment, geopolitical risk, George Akerlof, global rebalancing, Goodhart's law, Great Leap Forward, Hyman Minsky, income inequality, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, long and variable lags, Long Term Capital Management, low interest rates, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, military-industrial complex, Minsky moment, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, Nelson Mandela, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, oil shock, paradox of thrift, Pareto efficiency, Paul Samuelson, Paul Volcker talking about ATMs, peak oil, pets.com, Ponzi scheme, post-industrial society, price stability, profit maximization, profit motive, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, rising living standards, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, seminal paper, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, systems thinking, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Vilfredo Pareto, Washington Consensus, zero-sum game

As a result, labor militancy intensified and pay demands escalated; and in an economic system where the top priority of government policy was maintaining full employment, companies felt confident that enough money would be printed to accommodate whatever pay offers were needed to stave off labor militancy and strikes. Inflation was the inevitable result. The only way to stop this inflationary spiral and restore discipline in the labor market was for governments to abandon full-employment policies and create conditions in which millions of workers would lose their jobs. This is exactly what happened after 1979. The self-destruction of Keynesian full-employment policies was anticipated in 1943, in one of the most prescient economic papers ever published.

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This inflationary crisis would, in turn, force the capitalist system to reinvent itself again—and economic theory would devise retrospective justifications for whatever new policies the survival of capitalism demanded: The assumption that a government will maintain full employment in a capitalist economy if it knows how to do it is fallacious . . . Under a regime of permanent full employment “the sack” would cease to play its role as a disciplinary measure. Continuous full employment would cause social and political changes which would give impetus to the opposition of business leaders . . . The self-assurance and class-consciousness of the working class would grow. Strikes for wage increases and improvements in working conditions would create political tension . . .

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Moreover, the proportion of unionized workers in the private-sector labor force started falling gradually in the 1960s as the United States, Britain, and other advanced economies reduced their reliance on large-scale manufacturing. Toward the end of that decade, however, the accelerating growth of public-sector employment began to offset this decline in union power. More importantly, the twenty-five years of continuous full employment after 1945 transformed the psychology of the postwar generation of workers and union leaders. Full employment began to be taken for granted and unions became increasingly militant in demanding a larger share of corporate and national incomes, as predicted by Michal Kalecki in his 1943 article. 25 Companies and governments were generally willing to concede to these demands for higher wages against the background of rapid global growth—and this labor market pressure started turning easy monetary conditions into inflation.

The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz

affirmative action, Affordable Care Act / Obamacare, airline deregulation, Alan Greenspan, Andrei Shleifer, banking crisis, barriers to entry, Basel III, battle of ideas, Bear Stearns, behavioural economics, Berlin Wall, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collapse of Lehman Brothers, collective bargaining, colonial rule, corporate governance, Credit Default Swap, Daniel Kahneman / Amos Tversky, Dava Sobel, declining real wages, deskilling, electricity market, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, framing effect, full employment, George Akerlof, Gini coefficient, Glass-Steagall Act, Great Leap Forward, income inequality, income per capita, indoor plumbing, inflation targeting, information asymmetry, invisible hand, jobless men, John Bogle, John Harrison: Longitude, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, London Interbank Offered Rate, lone genius, low interest rates, low skilled workers, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, mass incarceration, medical bankruptcy, microcredit, moral hazard, mortgage tax deduction, negative equity, obamacare, offshore financial centre, paper trading, Pareto efficiency, patent troll, Paul Samuelson, Paul Volcker talking about ATMs, payday loans, Phillips curve, price stability, profit maximization, profit motive, public intellectual, purchasing power parity, race to the bottom, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, search costs, shareholder value, short selling, Silicon Valley, Simon Kuznets, spectrum auction, Steve Jobs, stock buybacks, subprime mortgage crisis, technology bubble, The Chicago School, The Fortune at the Bottom of the Pyramid, The Myth of the Rational Market, The Spirit Level, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, Tragedy of the Commons, transaction costs, trickle-down economics, ultimatum game, uranium enrichment, very high income, We are the 99%, wealth creators, women in the workforce, zero-sum game

The United States is in a position, for instance, to tax corporations that operate in the United States on the full basis of the profits they derive from their sales in the United States, regardless of where their production occurs.13 Restoring and maintaining full employment A fiscal policy to maintain full employment—with equality. The most important government policy influencing well-being, with the most important consequences for distribution, is maintaining full employment. Unless the United States is careful, it could move into a situation similar to that of some European countries, with permanently higher unemployment—a vast waste of resources, which would simultaneously lead to more inequality and weaken both our economic and our fiscal situation.

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As we noted in earlier chapters, a defense of these subsidies is that they increase employment. But as we noted there, too, the responsibility for maintaining the economy at full employment lies with macroeconomic policy (monetary policy and fiscal policy). If macroeconomic policy is managed well, we can have an economy at full employment, without these subsidies. If macroeconomic policy is not managed well, we won’t have full employment, even with the subsidies. 23. The balanced-budget multiplier is normally assumed to be around unity. But if taxes are increased on the rich, who otherwise would have saved a lot, and expenditure increases are focused on “high multiplier” activities, like investments in education, then the balanced-budget multiplier can be much larger. 24.

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Getting more money into the pockets of those in the middle and at the bottom would do that. That’s why deficit reduction proposals that would, in effect, impose much of the burden of tax increases on the middle would simply make things worse.29 It is the responsibility of macropolicy—monetary and fiscal policy—to maintain the economy at full employment. When things are going well, and the economy is operating near full employment, excessive military spending and lavish corporate welfare don’t create jobs. They just distort the economy by moving labor from more-productive uses to less-productive uses. It is true that if we correct these distortions, some workers with sector-specific skills will suffer, as their skills will no longer be in demand.

An Economic History of the Twentieth Century by J. Bradford Delong

affirmative action, Alan Greenspan, Andrei Shleifer, ASML, asset-backed security, Ayatollah Khomeini, banking crisis, Bear Stearns, Bretton Woods, British Empire, business cycle, buy and hold, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, centre right, collapse of Lehman Brothers, collective bargaining, colonial rule, coronavirus, cotton gin, COVID-19, creative destruction, crowdsourcing, cryptocurrency, cuban missile crisis, deindustrialization, demographic transition, Deng Xiaoping, Donald Trump, en.wikipedia.org, ending welfare as we know it, endogenous growth, Fairchild Semiconductor, fake news, financial deregulation, financial engineering, financial repression, flying shuttle, Ford Model T, Ford paid five dollars a day, Francis Fukuyama: the end of history, full employment, general purpose technology, George Gilder, German hyperinflation, global value chain, Great Leap Forward, Gunnar Myrdal, Haber-Bosch Process, Hans Rosling, hedonic treadmill, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, housing crisis, Hyman Minsky, income inequality, income per capita, industrial research laboratory, interchangeable parts, Internet Archive, invention of agriculture, invention of the steam engine, It's morning again in America, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, land reform, late capitalism, Les Trente Glorieuses, liberal capitalism, liquidity trap, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, means of production, megacity, Menlo Park, Mikhail Gorbachev, mortgage debt, mutually assured destruction, Neal Stephenson, occupational segregation, oil shock, open borders, open economy, Paul Samuelson, Pearl River Delta, Phillips curve, plutocrats, price stability, Productivity paradox, profit maximization, public intellectual, quantitative easing, Ralph Waldo Emerson, restrictive zoning, rising living standards, road to serfdom, Robert Gordon, Robert Solow, rolodex, Ronald Coase, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, Simon Kuznets, social intelligence, Stanislav Petrov, strikebreaker, structural adjustment programs, Suez canal 1869, surveillance capitalism, The Bell Curve by Richard Herrnstein and Charles Murray, The Chicago School, The Great Moderation, The Nature of the Firm, The Rise and Fall of American Growth, too big to fail, transaction costs, transatlantic slave trade, transcontinental railway, TSMC, union organizing, vertical integration, W. E. B. Du Bois, Wayback Machine, Yom Kippur War

China in 2007 and after knew not so much that the market was made for man, but that the market was made for the purpose of serving the goals of the Chinese Communist Party. One of those goals was maintaining full employment. And so full employment was maintained. Were “ghost cities” built and lots of people put to work building infrastructure that would decay and degrade before anybody could use it? Yes. Were unstable financial structures constructed that would not be fully accepted by banks without government arm-twisting? Yes. But those costs were trivial relative to the damage avoided by maintaining full employment and growth through what was, elsewhere, the Great Recession. During the Great Recession, China gained from five to ten extra years in its race to catch up to the global north.

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The Gilded Age oligarchy of the robber barons had failed, and had in fact brought on the Great Depression—how was not quite clear, but, as Franklin Roosevelt put it, there was near consensus that the oligarchs and the plutocratic financiers needed to be cast down “from their high seats in the temple of our civilization.”8 Competition needed to rule. The Great Depression had also convinced the private sector that it needed the help of an active government to manage the economy in order to attain at least an approximation of full employment. Perhaps, more importantly, the Depression convinced the middle class that it had powerful interests in common with the working class—and from then on, both would demand social insurance and full employment from politicians. Adding to all of this, the totalitarian threat from Stalin’s Soviet Union played a large role in convincing the nascent North Atlantic alliance to follow America’s lead in both security policy and political-economic restructuring.

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The decade starting in 1966, of having, almost every year, surprise upward shocks to the rate of growth of money prices on average, convinced businesses, unions, workers, and consumers that (a) inflation needed to be paid attention to, and (b) it was likely to be the same as or a bit more than it had been last year—so you needed (c) to build into your planning the expectation that, over the next year, your wages and other people’s wages, and your prices and other people’s prices, would rise by at least as much as, and probably more than, they had last year. This then produced stagflation. If inflation were to stay constant, then employment would have to fall below full employment to put pressure on workers to accept wage increases lower than they had expected. If the economy were to be at full employment, then the rate of inflation would have to creep upward. The Organization of the Petroleum Exporting Countries imposed an oil embargo against the United States and the Netherlands in the aftermath of the 1973 Yom Kippur War, and this deranged the oil market.

Stolen: How to Save the World From Financialisation by Grace Blakeley

"Friedman doctrine" OR "shareholder theory", activist fund / activist shareholder / activist investor, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, basic income, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Big Tech, bitcoin, bond market vigilante , Bretton Woods, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, capitalist realism, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, credit crunch, Credit Default Swap, cryptocurrency, currency peg, David Graeber, debt deflation, decarbonisation, democratizing finance, Donald Trump, emotional labour, eurozone crisis, Extinction Rebellion, extractivism, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, fixed income, full employment, G4S, gender pay gap, gig economy, Gini coefficient, global reserve currency, global supply chain, green new deal, Greenspan put, housing crisis, Hyman Minsky, impact investing, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), Jeremy Corbyn, job polarisation, junk bonds, Kenneth Rogoff, Kickstarter, land value tax, light touch regulation, low interest rates, low skilled workers, market clearing, means of production, Modern Monetary Theory, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, paradox of thrift, payday loans, pensions crisis, Phillips curve, Ponzi scheme, Post-Keynesian economics, post-war consensus, price mechanism, principal–agent problem, profit motive, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Right to Buy, rising living standards, risk-adjusted returns, road to serfdom, Robert Solow, savings glut, secular stagnation, shareholder value, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, the built environment, The Great Moderation, too big to fail, transfer pricing, universal basic income, Winter of Discontent, working-age population, yield curve, zero-sum game

Michał Kalecki — a Polish economist who theorised demand management at the same time, and some have said before, Keynes himself — had foreseen such problems decades earlier.21 After reaching his conclusions about the capacity of the state to control demand in the economy, he argued that such policies couldn’t work for long because there were “political aspects” of full employment policy that rendered it inherently unstable. The state’s commitment to promote full employment undermined the thing that made capitalism work: the threat of the sack. A policy of full employment would remove the “reserve army” that capitalists relied on to ensure a steady stream of cheap labour. Without desperate workers to exploit, profits would dry up. The powerful state that had emerged from the Second World War had committed a second sin: it was no longer afraid of the capitalists’ threats to withdraw investment.

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In the 1960s, economists drew on the work of William Phillips to posit an inverse relationship between inflation and unemployment. According to the models they built, when unemployment was high, inflation was low, and vice versa, implying that states should tolerate moderate levels of inflation in order to promote full employment.20 Governments were supposed to boost spending and reduce interest rates until full employment was reached, at which point they should start to reduce spending and raise interest rates in order to bring down inflation. Effecting this balancing act between inflation and unemployment was seen as the main aim of economic policy throughout the post-war period.

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In this uncharted territory nobody knew what to do. By the time unemployment reached 4% in the early 1970s, it was clear that the state was trying to resolve the issue by tacitly withdrawing its promise to protect full employment in an effort to bring down inflation. But such a strategy posed an existential threat to the UK’s trade unions: the withdrawal of the state’s commitment to full employment would mean losing a powerful ally in their fight against the bosses. They could not afford to go down without a fight — not to mention, their members required jobs and pay increases in line with inflation to be able to survive.

Buying Time: The Delayed Crisis of Democratic Capitalism by Wolfgang Streeck

"there is no alternative" (TINA), "World Economic Forum" Davos, activist fund / activist shareholder / activist investor, air traffic controllers' union, Alan Greenspan, banking crisis, basic income, Bretton Woods, business cycle, capital controls, Carmen Reinhart, central bank independence, collective bargaining, corporate governance, creative destruction, currency risk, David Graeber, deindustrialization, Deng Xiaoping, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial repression, fixed income, full employment, Garrett Hardin, Gini coefficient, Growth in a Time of Debt, income inequality, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, labour market flexibility, labour mobility, late capitalism, liberal capitalism, low interest rates, means of production, moral hazard, Myron Scholes, Occupy movement, open borders, open economy, Plutonomy: Buying Luxury, Explaining Global Imbalances, profit maximization, risk tolerance, shareholder value, too big to fail, Tragedy of the Commons, union organizing, winner-take-all economy, Wolfgang Streeck

Whereas recipients of residual income seek the highest possible yield on their capital investment, earners of fixed income try to keep as low as possible the input required of them.41 Distribution conflicts arise from the fact that, other things being equal, higher residual income for the profit-dependent entails lower wages for the wage-dependent, and vice versa.42 For a theory of political economy in which capital is an actor and not just machinery, the seemingly technical ‘functioning’ of the ‘economy’ – above all, growth and full employment – is in reality a political matter. Here lies the difference from a technocratic concept of crisis, such as we find in the years after the Second World War and also in Pollock’s work and Frankfurt social theory. Both growth and full employment depend on the willingness of capital owners to invest, and that in turn depends on their aspirations for an ‘adequate’ rate of return, as well as on their general assessment of the security and stability of the capitalist economic order.

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His answer was that permanent full employment brought the danger that workers would become over-demanding once they had forgotten the insecurity and deprivation associated with unemployment. At that point discipline might break down at the workplace as well as in the political arena. This was why, in Kalecki’s view, capital should have an interest in lasting structural unemployment, serving to warn employees of what they might face if their demands became excessive. This, of course, assumed that governments could be persuaded to renounce Keynesian measures to guarantee full employment. To employers and governments under democratic capitalism, the global wave of wildcat strikes in 1968 and 1969 appeared to be the result of a long period of crisis-free growth and secure full employment that had fuelled excessive expectations on the part of a labour force spoiled by affluence and the welfare state.47 Workers, on the other hand, thought they had simply been insisting on their democratic right to continuous improvements in living standards and economic security.

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If this fails, and the insecurity and unsatisfied demands of capital make themselves felt as disturbances to ‘the economy’, a further, derivative legitimation crisis may ensue, this time among the wage-dependants for whom the technical functioning of the system, especially its provision of growth and full employment, is the necessary condition for them to be at peace with it. New demands are not required for this, only non-fulfilment of the old ones. In other words, capitalism presupposes a social contract in which the legitimate mutual expectations of capital and labour, of profit-dependants and wage-dependants, are more or less explicitly enshrined as a formal or informal economic constitution.

Economic Dignity by Gene Sperling

active measures, Affordable Care Act / Obamacare, antiwork, autism spectrum disorder, autonomous vehicles, basic income, behavioural economics, benefit corporation, Bernie Sanders, Big Tech, Cass Sunstein, collective bargaining, company town, corporate governance, cotton gin, David Brooks, desegregation, Detroit bankruptcy, disinformation, Donald Trump, Double Irish / Dutch Sandwich, driverless car, Elon Musk, employer provided health coverage, Erik Brynjolfsson, Ferguson, Missouri, fulfillment center, full employment, gender pay gap, ghettoisation, gig economy, Gini coefficient, green new deal, guest worker program, Gunnar Myrdal, housing crisis, Ida Tarbell, income inequality, independent contractor, invisible hand, job automation, job satisfaction, labor-force participation, late fees, liberal world order, longitudinal study, low skilled workers, Lyft, Mark Zuckerberg, market fundamentalism, mass incarceration, mental accounting, meta-analysis, minimum wage unemployment, obamacare, offshore financial centre, open immigration, payday loans, Phillips curve, price discrimination, profit motive, race to the bottom, RAND corporation, randomized controlled trial, Richard Thaler, ride hailing / ride sharing, Ronald Reagan, Rosa Parks, Second Machine Age, secular stagnation, shareholder value, Sheryl Sandberg, Silicon Valley, single-payer health, speech recognition, stock buybacks, subprime mortgage crisis, tech worker, TED Talk, The Chicago School, The Future of Employment, The Wealth of Nations by Adam Smith, Toyota Production System, traffic fines, Triangle Shirtwaist Factory, Uber and Lyft, uber lyft, union organizing, universal basic income, W. E. B. Du Bois, War on Poverty, warehouse robotics, working poor, young professional, zero-sum game

The stimulus enacted early in the Obama administration saved or created about nine million jobs from 2009 to 2012 and helped prevent a second Great Depression.120 The decreasing evidence over the last two decades that deficits lead to inflation has bolstered the already strong case for the use of government investment on an ongoing basis to expand economic demand and reap the economic dignity benefits of full employment. From a perspective of ensuring that work leads to economic dignity for all workers, the case for tighter labor markets and full-employment monetary and fiscal policy is very strong. As economists Dean Baker and Jared Bernstein summarized in their book Getting Back to Full Employment, “Unemployment is not just a problem that affects those unable to find jobs; it hurts the entire labor force. Unemployment reduces the bargaining power of all job holders.”121 Recent empirical work by Bernstein and Keith Bentele has further reinforced that the largest beneficiaries of such full-employment policies are low-income workers, particularly those non-white or single moms.122 Simply put: beyond wage growth, tight labor markets give higher capacity to make demands or exit to the very same workers who normally have the least power to say no to mandatory arbitration, no to noncompete clauses, no to erratic work schedules, and no to abuse at work.

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Benjamin Wallace-Wells, “Sherrod Brown Wants to Bring a Working-Class Ethos Back to the Democratic Party,” New Yorker, December 13, 2018, https://www.newyorker.com/news/the-political-scene/sherrod-brown-wants-to-bring-a-working-class-ethos-back-to-the-democratic-party; and “The Dignity of Work,” accessed November 5, 2019, https://dignityofwork.com/. 15. Mark Paul, William Darity Jr., and Darrick Hamilton, “The Federal Job Guarantee—A Policy to Achieve Permanent Full Employment,” Center on Budget and Policy Priorities, March 9, 2018, https://www.cbpp.org/research/full-employment/the-federal-job-guarantee-a-policy-to-achieve-permanent-full-employment. 16. Alexander Hamilton, “Federalist No. 1,” October 27, 1787, https://teachingamericanhistory.org/library/document/federalist-no-1/. 17. Gunnar Myrdal, An American Dilemma: The Negro Problem and Modern Democracy (New York: Harper & Brothers Publishers, 1944). 18.

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A percentage point decline in unemployment raises annual hours by 2.7 percent for African American households. Josh Bivens and Ben Zipperer, “The Importance of Locking in Full Employment for the Long Haul,” Economic Policy Institute, August 21, 2018, https://www.epi.org/publication/the-importance-of-locking-in-full-employment-for-the-long-haul. 122. Jared Bernstein and Keith Bentele, “The Increasing Benefits and Diminished Costs of Running a High-Pressure Labor Market,” Center on Budget and Policy Priorities, May 15, 2019, https://www.cbpp.org/research/full-employment/the-increasing-benefits-and-diminished-costs-of-running-a-high-pressure. Real wages of workers in the bottom quintile grow 2.3 percent in tight labor markets but fall 3.9 percent in slack labor markets—a difference of 6.1 percentage points—with the biggest effects at the bottom of the income distribution.

The Making of Global Capitalism by Leo Panitch, Sam Gindin

accounting loophole / creative accounting, active measures, airline deregulation, Alan Greenspan, anti-communist, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Basel III, Bear Stearns, Big bang: deregulation of the City of London, bilateral investment treaty, book value, Branko Milanovic, Bretton Woods, BRICs, British Empire, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon credits, Carmen Reinhart, central bank independence, classic study, collective bargaining, continuous integration, corporate governance, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, dark matter, democratizing finance, Deng Xiaoping, disintermediation, ending welfare as we know it, eurozone crisis, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, foreign exchange controls, full employment, Gini coefficient, Glass-Steagall Act, global value chain, guest worker program, Hyman Minsky, imperial preference, income inequality, inflation targeting, interchangeable parts, interest rate swap, Kenneth Rogoff, Kickstarter, land reform, late capitalism, liberal capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, market fundamentalism, Martin Wolf, means of production, military-industrial complex, money market fund, money: store of value / unit of account / medium of exchange, Monroe Doctrine, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, new economy, Nixon triggered the end of the Bretton Woods system, non-tariff barriers, Northern Rock, oil shock, precariat, price stability, proprietary trading, quantitative easing, Ralph Nader, RAND corporation, regulatory arbitrage, reserve currency, risk tolerance, Ronald Reagan, Savings and loan crisis, scientific management, seigniorage, shareholder value, short selling, Silicon Valley, sovereign wealth fund, special drawing rights, special economic zone, stock buybacks, structural adjustment programs, subprime mortgage crisis, Tax Reform Act of 1986, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, vertical integration, very high income, Washington Consensus, We are all Keynesians now, Works Progress Administration, zero-coupon bond, zero-sum game

More broadly their concerns related to their ambition to replace London as the world’s international financial center.48 But above all Wall Street’s opposition reflected the concern that New Deal–type economists and technicians ensconced in permanent international institutions might have even greater autonomy from them than those in the Federal Reserve and the Treasury (especially since the Treasury clearly wanted the Fund to displace the Bank of International Settlements, which had been created by the bankers themselves).49 Moreover, given the Keynesian provenance of the Fund and the Bank, it was hardly surprising that bankers would be anxious lest full employment rather than price stability might become the priority for governments. Their anxiety about the inflationary implications of full employment was by no means an idle concern, and would indeed prove to be—as Michal Kalecki and Joan Robinson also predicted at the time—the central contradiction of Keynesianism in the postwar era. If there was ever a case where the advantages of relative autonomy were manifest, allowing a capitalist state to act on behalf of capital but not at its behest, it was in the extensive public campaign the US Treasury undertook to get the Bretton Woods agreement endorsed by Congress over the bankers’ opposition.

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And a further, much more profound contradiction had arisen—one that overlapped with and to a considerable extent really underlay the others. The realization of Keynesian “full employment” objectives by the 1960s clearly brought to the fore the old question of how capital and the state were to cope with the demands made by working classes no longer restrained by the fear of involuntarily conscription into the reserve army of labor. The achievement of near full employment within all the advanced capitalist states spurred the growing militancy of a new generation of workers who drove up wages, challenged managerial prerogatives, and forced a steady increase in social expenditures—all of which not only made it very difficult for capitalist states to resolve international economic imbalances through domestic austerity policies, but generated growing worries about price stability, productivity and profits.

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The most significant indicator of the changing political balance of class forces lay in the fate of the labor-backed Humphrey-Hawkins Equal Opportunity and Full Employment Bill, to which the administration—in order to win over Democratic “moderates” in the Senate and assuage business critics—attached provisions specifying that it should not encourage inflation or “employee migration from the private to the public sector.”16 Those endorsing the bill faced the seemingly insurmountable task of overcoming the “fears of expansive government, increased taxes, and, especially, the acceleration of inflation.” Unsurprisingly, the Humphrey-Hawkins Bill’s ambitious proposal for “nationally coordinated economic planning to bring about full employment” was countered by those “entrenched interests that opposed planning—interests that were aggressively re-organized in the 1970s.”17 By the time the bill was passed, in October 1978, as the Full Employment and Balanced Growth Act, the promise of access to work for all was gone, and it was stipulated that for fiscal deficit reasons no new job-creation programs could be started before the end of 1980.

Modernising Money: Why Our Monetary System Is Broken and How It Can Be Fixed by Andrew Jackson (economist), Ben Dyson (economist)

Alan Greenspan, bank run, banking crisis, banks create money, Basel III, Bretton Woods, business cycle, call centre, capital controls, cashless society, central bank independence, credit crunch, David Graeber, debt deflation, double entry bookkeeping, eurozone crisis, financial exclusion, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, Fractional reserve banking, full employment, Greenspan put, Hyman Minsky, inflation targeting, informal economy, information asymmetry, intangible asset, land bank, land reform, London Interbank Offered Rate, low interest rates, market bubble, market clearing, Martin Wolf, means of production, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, negative equity, Northern Rock, Post-Keynesian economics, price stability, profit motive, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, risk-adjusted returns, Savings and loan crisis, seigniorage, shareholder value, short selling, South Sea Bubble, technological determinism, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, unorthodox policies

(Minsky, 1986, pp. 173-174) In today’s economy increases in lending for investment may also be non-inflationary at full employment so long as it attracts labour and capital that was previously not used to produce goods and services – that is, it must lead to an increase in the amount of goods produced in an economy. In an economy operating below full capacity It is unlikely that many people would argue that today’s economy is at ‘full employment’, even allowing for ‘natural’ or ‘frictional’ unemployment. In a situation where the economy is operating below potential output (less than full employment, however defined) many resources are lying idle. Credit creation for productive investment purposes should therefore increase output.

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(Turner, 2010, pp. 37-38) That asset price inflation and credit creation by banks interact with each other in potentially destabilising ways will be looked at in more detail in section 4.2. The next section will discuss the possibility that asset price inflation may feed into consumer price inflation. Box 4.B - ‘Full employment’ In neoclassical economics the term ‘full employment’i has a very specific meaning. It is not the level of employment where there is no unemployment, as one might expect, or even the level of employment which allows for a small amount of temporary unemployment as people shift between jobs. Instead the term full employment refers to the level of employment at which any increase in employment leads to an acceleration in the rate of inflation. In economics this is known as the Non Accelerating Inflation Rate of Unemployment (NAIRU).

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Most of these have long been known – indeed, a central theme of Keynes’ ‘General Theory’ (1936) is that markets, left to their own devices, will not necessarily deliver full employment. Nevertheless, despite these problems it will be useful to consider the effects of bank lending in a scenario where the economy is at its ‘full capacity’. The rationale for doing so is to examine whether bank lending – i.e. increasing demand through the creation of new purchasing power – can actually be non-inflationary, despite the economy being at full capacity.iii i. Full employment is a controversial term amongst economists. Some (such as Tobin) argue the term should be taken literally, that is full employment refers to a 0% unemployment rate.

The Shifts and the Shocks: What We've Learned--And Have Still to Learn--From the Financial Crisis by Martin Wolf

air freight, Alan Greenspan, anti-communist, Asian financial crisis, asset allocation, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Black Swan, bonus culture, break the buck, Bretton Woods, business cycle, call centre, capital asset pricing model, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, debt deflation, deglobalization, Deng Xiaoping, diversification, double entry bookkeeping, en.wikipedia.org, Erik Brynjolfsson, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, financial repression, floating exchange rates, foreign exchange controls, forward guidance, Fractional reserve banking, full employment, Glass-Steagall Act, global rebalancing, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, inflation targeting, information asymmetry, invisible hand, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, Les Trente Glorieuses, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, low interest rates, mandatory minimum, margin call, market bubble, market clearing, market fragmentation, Martin Wolf, Mexican peso crisis / tequila crisis, Minsky moment, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, negative equity, new economy, North Sea oil, Northern Rock, open economy, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, proprietary trading, purchasing power parity, pushing on a string, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, Richard Feynman, risk-adjusted returns, risk/return, road to serfdom, Robert Gordon, Robert Shiller, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, shareholder value, short selling, sovereign wealth fund, special drawing rights, subprime mortgage crisis, tail risk, The Chicago School, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, too big to fail, Tyler Cowen, Tyler Cowen: Great Stagnation, vertical integration, very high income, winner-take-all economy, zero-sum game

This is a situation in which Keynesian fiscal policy becomes relevant. This is no more than to say that the economy was in a ‘liquidity trap’: at the lowest interest rate the central bank could create, the private and foreign sectors would have had a large excess of income over desired spending at full employment (the spending that would have occurred had the economy been at full employment, which, of course, it was not). This could be dealt with in only one of two ways: either by a collapse in income greater than the associated collapse in spending – that is, an outright depression – or by a large fiscal deficit. If the government had refused to run the deficits, by slashing its own spending as the private sector was also doing, the result would have been a depression, possibly one as bad as the Great Depression.

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As domestic demand for both non-tradeables and tradeables expanded, a huge excess demand for tradeables emerged. The expansion of production abroad, notably in China, satisfied this excess demand, so generating huge trade and current-account deficits. Meanwhile demand and supply for non-tradeables returned to balance, producing the full employment the Federal Reserve was seeking. In this way, internal balance – full employment – was achieved, albeit temporarily, at the price of a huge external imbalance – excess demand for tradeables and so trade and current-account deficits. The global market for the US dollar is rigged. It is one in which governments are prepared to buy massively, to prevent prices from reaching natural market clearing levels.

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In Lerner’s words, ‘Government should adjust its rates of expenditure and taxation such that total spending is neither more nor less than that which is sufficient to purchase the full employment level of output at current prices. If this means there is a deficit, greater borrowing, “printing money”, etc., then these things in themselves are neither good nor bad, they are simply the means to the desired ends of full employment and price stability.’53 So long as these policies do not generate excess demand, there is no reason to fear their inflationary effects. This does not mean no constraint on monetary policy exists, but those constraints come from inflation and the associated risks of sharp declines in the value of the currency against other currencies.

The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities by Mancur Olson

barriers to entry, British Empire, business cycle, California gold rush, collective bargaining, correlation coefficient, David Ricardo: comparative advantage, full employment, income per capita, Kenneth Arrow, market clearing, Norman Macrae, Pareto efficiency, Phillips curve, price discrimination, profit maximization, rent-seeking, Robert Solow, Sam Peltzman, search costs, selection bias, Simon Kuznets, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, urban decay, working poor

The effect of combinations on the part of a group of workers is to protect their relative real wage.3 The central role of "sticky" (slow to change) wages in Keynes's theory, and one of the institutions that can cause this stickiness, are also emphasized in Keynes's chapter on "Changes in Money Wages": Since there is, as a rule, no means of securing a simultaneous and equal reduction of money-wages in all industries, it is in the interest of all workers to resist a reduction in their own particular case.... If, indeed, labour were always in a position to take action (and were to do so), whenever there was less than full employment, to reduce its money demands by concerted action to whatever point was required to make money so abundant relatively to the wage-unit that the rate of interest would fall to a level compatible with full employment, we should, in effect, have monetary management by the Trade Unions, aimed at full employment, instead of by the banking system.4 To be sure, Keynes's explanation of underemployment equilibrium did not consist merely of the assumption of sticky wages; pre-Keynesian theory already ascribed unemployment to unrealistically high wage levels, and Keynes was anxious to differentiate his theory from the theory that preceded it.

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Unwillingness to invest in a second profession may be due to a deplorable conservatism in many individuals of middle age or older, but it surely often exists, and when it does, a full employment equilibrium literally could arrive only after most of those in the category at issue have retired. As Keynes wisely said, in the long run we are all dead. Even if we take a timeless view of macroeconomic fluctuations and we unrealistically ignore the costs of the resource reallocation to the flexprice or equilibrium sector whenever aggregate demand is substantially less than expected, the fact that there are always some flexible prices need not ever insure full employment. A second problem with the hurried economist's general-equilibrium argument is that it overlooks what can best be described as the "selling apples on street corners" syndrome.

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If, indeed, labour were always in a position to take action (and were to do so), whenever there was less than full employment, to reduce its money demands by concerted action to whatever point was required to make money so abundant relatively to the wage-unit that the rate of interest would fall to a level compatible with full employment, we should, in effect, have monetary management by the Trade Unions, aimed at full employment, instead of by the banking system.4 To be sure, Keynes's explanation of underemployment equilibrium did not consist merely of the assumption of sticky wages; pre-Keynesian theory already ascribed unemployment to unrealistically high wage levels, and Keynes was anxious to differentiate his theory from the theory that preceded it. Indeed, Keynes argued that reductions of money wages need not bring full employment, and that if they did it involved, in essence, "monetary management by the Trade Unions." As we know, Keynes also had new ideas about the demand for money as an asset and other matters that played significant roles in his theory. Still, the fact remains that although Keynes's theory argued for changing aggregate effective demand, especially through budget deficits and surpluses, and claimed to explain depression and inflation solely from the demand side, it nonetheless began and in substantial part rested upon the assumption that there were forces that influenced wages and that, within limits and at least for a time, did so in ways that could not be explained in terms of increases or decreases in the demand for labor or individual decisions to trade off more or less labor for leisure.

Meghnad Desai Marxian economic theory by Unknown

book value, business cycle, commoditize, Corn Laws, full employment, land bank, land reform, means of production, Meghnad Desai, p-value, price mechanism, profit motive, technological determinism

Their analysis of the behaviour of corporations follows very closely John Kenneth Galbraith's theories of the New Industrial State. Their statistical investigations of the surplus have been anticipated in traditional macro-economics by the measure known as the full employment surplus or the Okun gap.5 This is the gap between the potential level of GNP at full employment level and the actual level at any time. It is used for operational purposes of macroeconomic stabilisation. The label Baran and Sweezy attach to this concept is critical but its function can be easily operational. Baran and Sweezy's analysis is then a combination of Neoclassical microeconomics, without the assumption of perfect competition, and orthodox macroeconomics.

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While Mane did not foresee many of these events, Mattick says. they are perfectly consistent with his theory. Indeed the rise of Keynesianism is a socio-economic development predicted by Mane's theory, according to Mattick. (p.130). What is more, state intervention to achieve full employment is not even a new socio-economic development which need be p~edicted by Mane. It is a part of Mane's theory anyway. "Mane's theory does not deny t~e fact that full-employment can and may be created either by government-induced investments or by an increase in the propensity to consume." (p. 131). For Mattick thus the Keynesian challenge is no challenge; it is all in Man and not a word of it needs revising, adapting or correcting.

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Having thus shorn Marxian theory of its historical and social content, having stripped it of its qualitative dynamics, an emasculated version of his model is retained to be criticised or worshipped, but not to be used as a tool for advancing our understanding of the real world. It is only in such emasculated systems that rising real wages and standards of living, shortening hours of work, continuous full employment etc. are seen ~s embarrassing to the Marxian model, to be regarded by the critics as refutations and to be denounced by the champions as illusory. All this is not said in a diehard defence of Marx's model. Whether we accept his theory or reject it, we need to specify correctly and completely all the aspects of his model.

Snakes and Ladders: The Great British Social Mobility Myth by Selina Todd

assortative mating, Bletchley Park, Boris Johnson, collective bargaining, conceptual framework, coronavirus, COVID-19, deindustrialization, deskilling, DIY culture, emotional labour, Etonian, fear of failure, feminist movement, financial independence, full employment, Gini coefficient, greed is good, housing crisis, income inequality, Jeremy Corbyn, Kickstarter, Mahatma Gandhi, manufacturing employment, meritocracy, Nick Leeson, offshore financial centre, old-boy network, profit motive, rent control, Right to Buy, school choice, social distancing, statistical model, The Home Computer Revolution, The Spirit Level, traveling salesman, unpaid internship, upwardly mobile, urban sprawl, women in the workforce, Yom Kippur War, young professional

This was most clear in education, where Labour promised reforms that would ‘give every boy and girl a chance to develop the best that is in them.’75 Labour’s version of social democracy was, therefore, an evolving and ambiguous one, which could appeal to egalitarian visions and meritocratic ambitions. It was also entirely new to Britain. The innovations of wartime – increased welfare, the expansion of scientific and technical jobs and training, full employment and higher wages – had been pioneered by the public sector, or assisted by state regulation of private enterprise. Now Labour argued that only social welfare provided by the state, public ownership of key industries and full employment could give ‘the people … the means of living full, happy, healthy lives’.76 On 26 July 1945 Clement Attlee’s Labour Party swept to power with a landslide victory.78 The new government’s jubilant supporters included many of those who had benefited from the meritocratic reforms of the war.

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Highest now was ‘the power of vested interests’, by which people meant ‘big business, conservative leaders … and the “old gang”’.68 Before the war, wealth had been hailed as a sign of personal success, and upward mobility a widely shared ambition. In wartime ‘fair shares’ Britain, the wealthy were increasingly viewed as self-interested rather than successful. By 1942 it was clear that state intervention in the form of rationing, co-ordination of welfare services and full employment had not stymied people’s liberty, but led to greater social equality, and more chances for some to climb the ladder. Increasingly, people defined equality of opportunity as central to ‘democracy’ – what Britain was fighting for. When Mass Observation asked people what they wanted from post-war education ‘greater equality’ was their single greatest aspiration.

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Free secondary education (introduced in 1947), the National Health Service and the new social services (launched in 1948) required millions of new professional, technical and white-collar workers. And winning the peace depended on skilled and professional workers to devise and enact ambitious town-planning schemes, to manage industry, and to deliver Labour’s promise of full employment. The breakthrough generation were well prepared to take advantage of the new post-war chances. Some of them had experienced upward mobility during the early 1940s, but even more did so after the war ended. By the time the breakthrough generation were in their forties, 17 per cent of manual-workers’ sons and 33 per cent of the sons of white-collar workers were professionals or managers.

The Upside of Inequality by Edward Conard

affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Alan Greenspan, Albert Einstein, assortative mating, bank run, Berlin Wall, book value, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Climatic Research Unit, cloud computing, corporate governance, creative destruction, Credit Default Swap, crony capitalism, disruptive innovation, diversified portfolio, Donald Trump, en.wikipedia.org, Erik Brynjolfsson, Fall of the Berlin Wall, full employment, future of work, Gini coefficient, illegal immigration, immigration reform, income inequality, informal economy, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invention of the telephone, invisible hand, Isaac Newton, Jeff Bezos, Joseph Schumpeter, Kenneth Rogoff, Kodak vs Instagram, labor-force participation, Larry Ellison, liquidity trap, longitudinal study, low interest rates, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, mass immigration, means of production, meta-analysis, new economy, offshore financial centre, paradox of thrift, Paul Samuelson, pushing on a string, quantitative easing, randomized controlled trial, risk-adjusted returns, Robert Gordon, Ronald Reagan, Second Machine Age, secular stagnation, selection bias, Silicon Valley, Simon Kuznets, Snapchat, Steve Jobs, survivorship bias, The Rise and Fall of American Growth, total factor productivity, twin studies, Tyler Cowen, Tyler Cowen: Great Stagnation, University of East Anglia, upwardly mobile, War on Poverty, winner-take-all economy, women in the workforce, working poor, working-age population, zero-sum game

If these deposits sit idle, U.S. growth, employment, and wages will be lower than they would be if the economy used all its available resources—chiefly, labor idled by trade deficits. Of course, the economy can always reach full employment by cutting wages, in effect, by spreading a given amount of labor income over a greater number of workers. To reach full employment at the highest possible wages, the economy must fully utilize all its resources. To put risk-averse savings to work, someone must bear the risk of using those savings. With a limited capacity and willingness to bear risk, a portion of this capacity must be used to regain employment lost to trade deficits rather than using it to grow employment and wages further.

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He feared households would continue to save for retirement, down payments for homes, and college for their children, but without faster growth, there would be more savings than investment. To achieve full employment at the highest possible wage, the economy must deploy all its resources. It must either consume or invest its output. If consumers reduce consumption and increase savings, investors must borrow and invest the additional savings to maintain full utilization of the economy’s resources. Otherwise, growth will slow if savings sit unused. When growth slows, unemployment rises and wages fall relative to the economy deploying all its resources. Wages and unemployment are two sides of the same coin. Theoretically, the economy can always reach full employment by lowering wages.

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But the U.S. economy ran enormous trade deficits with China, Germany, and Japan—economies with large surpluses of risk-averse savings. These economies used risk-averse savings to fund large trade surpluses that indirectly necessitated large increases in U.S. borrowing and lending—chiefly subprime mortgages—to maintain full employment. This expansion of credit destabilized U.S. banks. When real estate prices fell 30 percent, it sparked a panicked run on an inherently unstable banking system. Rather than diagnosing the problems properly, demagogues on the left and right claimed that ill-advised monetary policy, misguided regulation, and debt-fueled growth—fraudulently devised by reckless bankers—had created unsustainable prosperity.

Pivotal Decade: How the United States Traded Factories for Finance in the Seventies by Judith Stein

1960s counterculture, accelerated depreciation, activist lawyer, affirmative action, airline deregulation, Alan Greenspan, anti-communist, Ayatollah Khomeini, barriers to entry, Berlin Wall, blue-collar work, Bretton Woods, business cycle, capital controls, centre right, collective bargaining, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, deindustrialization, desegregation, do well by doing good, Dr. Strangelove, energy security, Fall of the Berlin Wall, falling living standards, feminist movement, financial deregulation, floating exchange rates, full employment, Glass-Steagall Act, Gunnar Myrdal, guns versus butter model, Ida Tarbell, income inequality, income per capita, intermodal, invisible hand, knowledge worker, laissez-faire capitalism, Les Trente Glorieuses, liberal capitalism, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, Martin Wolf, new economy, Nixon triggered the end of the Bretton Woods system, oil shale / tar sands, oil shock, open economy, Paul Samuelson, payday loans, post-industrial society, post-oil, price mechanism, price stability, Ralph Nader, RAND corporation, reserve currency, Robert Gordon, Robert Solow, Ronald Reagan, Savings and loan crisis, Simon Kuznets, strikebreaker, three-martini lunch, trade liberalization, union organizing, urban planning, urban renewal, War on Poverty, Washington Consensus, working poor, Yom Kippur War

All of these decisions reinforced class voting and made region, ethnicity, race, and religion secondary. Not surprisingly, the Democrats also went back to their traditional issues. Determined to avoid the mistake McGovern made in 1972, the Democratic platform clearly embraced the federal government’s responsibility to create a full-employment economy. The Humphrey-Hawkins full-employment bill was written into the platform despite Jimmy Carter’s lack of enthusiasm for it. Democrats embraced wage and price control to address inflation. But the candidate continued the morality and leadership themes that had won him the nomination, avoiding specifics as much as the press allowed.

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Their only success was the Humphrey-Hawkins full employment law, and even this victory was more a tribute to Hubert Humphrey, who had died of cancer in January 1978, than a blueprint for action. In fact, it underscored the poverty of liberal economics. Humphrey-Hawkins was a lightweight version of the Humphrey-Javits bill, which was a full-blown planning bill. Humphrey-Javits had been introduced in the midst of the recession of 1975, when it seemed that the economy needed a major overhaul. It included new forms of sectoral, or “micro,” planning to ensure full employment. When the economy picked up in 1976, its sponsors dropped it.

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Before the Great Depression, economists believed that unemployment could never plague nations because fluid wages and prices would adjust and sop up the unemployed. But Britain between the wars and the U.S. during the 1930s did not reveal automatic rectification. The British economist John Maynard Keynes showed that economies lacked mechanisms to attain the full employment of their resources. Even if wages fell, the expectation of classical economists, profit prospects were not certain. If there was little prospect of demand, a businessman would not expand his factory, even if wages and interest rates were low. Keynes found answers by studying and compiling aggregate, nationwide statistics.

Liberalism at Large: The World According to the Economist by Alex Zevin

"there is no alternative" (TINA), activist fund / activist shareholder / activist investor, affirmative action, Alan Greenspan, anti-communist, Asian financial crisis, bank run, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, business cycle, capital controls, carbon tax, centre right, Chelsea Manning, collective bargaining, Columbine, Corn Laws, corporate governance, corporate social responsibility, creative destruction, credit crunch, David Ricardo: comparative advantage, debt deflation, desegregation, disinformation, disruptive innovation, do well by doing good, Donald Trump, driverless car, Edward Snowden, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Francis Fukuyama: the end of history, full employment, Gini coefficient, Glass-Steagall Act, global supply chain, guns versus butter model, hiring and firing, imperial preference, income inequality, interest rate derivative, invisible hand, It's morning again in America, Jeremy Corbyn, John von Neumann, Joseph Schumpeter, Julian Assange, junk bonds, Khartoum Gordon, land reform, liberal capitalism, liberal world order, light touch regulation, Long Term Capital Management, low interest rates, market bubble, Martin Wolf, means of production, Michael Milken, Mikhail Gorbachev, Monroe Doctrine, Mont Pelerin Society, moral hazard, Naomi Klein, new economy, New Journalism, Nixon triggered the end of the Bretton Woods system, no-fly zone, Norman Macrae, Northern Rock, Occupy movement, Philip Mirowski, plutocrats, post-war consensus, price stability, quantitative easing, race to the bottom, railway mania, rent control, rent-seeking, road to serfdom, Ronald Reagan, Rosa Parks, Seymour Hersh, Snapchat, Socratic dialogue, Steve Bannon, subprime mortgage crisis, Suez canal 1869, Suez crisis 1956, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, trade liberalization, trade route, unbanked and underbanked, underbanked, unorthodox policies, upwardly mobile, War on Poverty, WikiLeaks, Winter of Discontent, Yom Kippur War, young professional

‘The comments I make below are in the nature of footnotes rather than dissent.’34 Yet these footnotes did make clear three important concerns Crowther harboured about a post-war world of welfare and full employment, which carried over from the pre-war decade, and set strict limits to it. First, any major change in social structure must be ruled out. Crowther poured scorn on economist E. F. Schumacher, who had remarked in the draft that full employment might be hard to achieve without tackling the issue of ownership of the means of production. ‘No doubt it would be easier to achieve full employment if Control of Employment and the Essential Works Order remained in force in peacetime. No doubt it would also be easier if the whole of industry – or at least the large capital-using industries – were nationalised.’

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Yet it was simply a tax plan to secure ‘minimum levels of income’ with a Keynesian aim of ‘subsidising consumption’ and ‘preventing sharp falls in production and employment’.31 The success of the entire project, which was ‘not revolutionary’, depended on a return to liberalism at home and abroad: never so loose as to ‘lessen incentives to work and advancement’, promoting ‘full employment and the freest possible trade’, and ensuring low and steady inflation, which Beveridge’s plan secured by creating ‘a greater class of rentiers than ever before’ with a ‘vested interest in the stability of the currency’.32 Crowther did a variety of war work while editor, from analyses of manpower deployment for the Cabinet, to US goodwill tours.33 No job was more revealing, however, than his role in drafting the follow-up report from Beveridge in 1944, Full Employment in a Free Society. ‘I am fully in agreement with the line you take, which is closely similar to that taken in the series of articles in The Economist a year ago’, Crowther remarked in a detailed memorandum to Beveridge, followed up by in-person meetings, on the draft that emerged from the conference on international aspects of post-war employment policy at Nuffield College in September 1943.

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The third point is the most striking, for unlike the first two, it seems to have been the common assumption of all participants including Beveridge.37 The main ‘international implications of full employment’ for Britain in the post-war world were that the country must work to prevent any repetition of the rising tariffs, currency devaluations and other moves to autarky of the inter-war period. Full employment in one country was impossible. For if others allowed their trade cycles to continue, leading to a crash and mass unemployment, they would again try to export their way out of trouble at the expense of trading partners, precipitating a global race to the bottom.

How Will Capitalism End? by Wolfgang Streeck

"there is no alternative" (TINA), accounting loophole / creative accounting, air traffic controllers' union, Airbnb, Alan Greenspan, basic income, behavioural economics, Ben Bernanke: helicopter money, billion-dollar mistake, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, Clayton Christensen, collective bargaining, conceptual framework, corporate governance, creative destruction, credit crunch, David Brooks, David Graeber, debt deflation, deglobalization, deindustrialization, disruptive innovation, en.wikipedia.org, eurozone crisis, failed state, financial deregulation, financial innovation, first-past-the-post, fixed income, full employment, Gini coefficient, global reserve currency, Google Glasses, haute cuisine, income inequality, information asymmetry, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, junk bonds, Kenneth Rogoff, labour market flexibility, labour mobility, late capitalism, liberal capitalism, low interest rates, market bubble, means of production, military-industrial complex, moral hazard, North Sea oil, offshore financial centre, open borders, pension reform, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, post-industrial society, private sector deleveraging, profit maximization, profit motive, quantitative easing, reserve currency, rising living standards, Robert Gordon, savings glut, secular stagnation, shareholder value, sharing economy, sovereign wealth fund, tacit knowledge, technological determinism, The Future of Employment, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transaction costs, Uber for X, upwardly mobile, Vilfredo Pareto, winner-take-all economy, Wolfgang Streeck

It included an expanding welfare state, the right of workers to free collective bargaining and a political guarantee of full employment, underwritten by governments making extensive use of the Keynesian economic toolkit. When growth began to falter in the late 1960s, however, this combination became difficult to maintain. While free collective bargaining enabled workers through their unions to act on what had become firmly ingrained expectations of regular yearly wage increases, governments’ commitment to full employment, together with a growing welfare state, protected unions from potential employment losses caused by wage settlements in excess of productivity growth.

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In subsequent years governments all over the Western world faced the question of how to make trade unions moderate their members’ wage demands without having to rescind the Keynesian promise of full employment. In countries where the institutional structure of the collective-bargaining system was not conducive to the negotiation of tripartite ‘social pacts’, most governments remained convinced throughout the 1970s that allowing unemployment to rise in order to contain real wage increases was too risky for their own survival, if not for the stability of capitalist democracy as such. Their only way out was an accommodating monetary policy which, while allowing free collective bargaining and full employment to continue to coexist, did so at the expense of raising the rate of inflation to levels that accelerated over time.

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While Keynes and, to some extent, Kalecki and Polanyi carried the day, Hayek withdrew into temporary exile. Since then, however, mainstream economics has become obsessed with the ‘irresponsibility’ of opportunistic politicians who cater to an economically uneducated electorate by interfering with otherwise efficient markets, in pursuit of objectives – such as full employment and social justice – that truly free markets would in the long run deliver anyway, but must fail to deliver when distorted by politics. Economic crises, according to standard theories of ‘public choice’, essentially stem from market-distorting political interventions for social objectives.3 In this view, the right kind of intervention sets markets free from political interference; the wrong, market-distorting kind derives from an excess of democracy; more precisely, from democracy being carried over by irresponsible politicians into the economy, where it has no business.

The Production of Money: How to Break the Power of Banks by Ann Pettifor

Alan Greenspan, Ben Bernanke: helicopter money, Bernie Madoff, Bernie Sanders, bitcoin, blockchain, bond market vigilante , borderless world, Bretton Woods, capital controls, Carmen Reinhart, central bank independence, clean water, credit crunch, Credit Default Swap, cryptocurrency, David Graeber, David Ricardo: comparative advantage, debt deflation, decarbonisation, distributed ledger, Donald Trump, eurozone crisis, fiat currency, financial deregulation, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, Fractional reserve banking, full employment, Glass-Steagall Act, green new deal, Hyman Minsky, inflation targeting, interest rate derivative, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, land bank, Leo Hollis, light touch regulation, London Interbank Offered Rate, low interest rates, market fundamentalism, Martin Wolf, mobile money, Money creation, Naomi Klein, neoliberal agenda, offshore financial centre, Paul Samuelson, Ponzi scheme, Post-Keynesian economics, pushing on a string, quantitative easing, rent-seeking, Satyajit Das, savings glut, secular stagnation, The Chicago School, the market place, Thomas Malthus, Tobin tax, too big to fail

The commitment in the wartime White Paper to employment policy to maintain a high and stable level of employment had been achieved to an extent greater than anyone expected – and was reiterated both in the 1956 White Paper on the economic implications of full employment and in the Radcliffe Report in 1959. We had lived within the Bretton Woods arrangements – a little precariously at times but successfully.14 But the achievement of full employment was disregarded by economists and policymakers then, much as it is disregarded today: as a non-event. They promoted instead an agenda based on ‘growth’ and financial liberalisation. From the early 1960s with full unemployment at 2 percent, British policymakers echoed the OECD in setting an explicit target for real annual ‘growth’ of 4 percent.

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The assumption that it is the supply of money that is important is repeated when Fisher and his modern-day supporters echo another misunderstanding at the heart of monetarist and Austrian economics (the orthodox economics of the Austrian School based on the rejection of macroeconomics). This is the assumption that aggregate economic activity tends to be stable, or moving towards an equilibrium in which supply matches demand and full employment follows. In this view, very little can be done by the authorities to change or improve levels of activity. Instead matters are left to the ‘invisible hand’ to move the economy to full employment. According to this view, if the supply of money aimed at a given level of activity is too high, the result will be higher prices or inflation. The solution, monetarists argued, is to reduce the supply of money.

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Like the wolf in the fairy tale: ‘All the better to fleece you with.’ Satyajit Das, Traders, Guns and Money (2010) Finance must be the servant, and the intelligent servant, of the community and productive industry; not their stupid master. National Executive Committee of the British Labour Party (June 1944), Full Employment and Financial Policy The global finance sector today exercises extraordinary power over society and in particular over governments, industry and labour. Players in financial markets dominate economic policy-making, undermine democratic decisionmaking, and have helped financialise almost all sectors of the economy (except perhaps faith organisations).

Globalists: The End of Empire and the Birth of Neoliberalism by Quinn Slobodian

"World Economic Forum" Davos, Alan Greenspan, Asian financial crisis, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, business cycle, capital controls, central bank independence, classic study, collective bargaining, David Ricardo: comparative advantage, Deng Xiaoping, desegregation, Dissolution of the Soviet Union, Doha Development Round, eurozone crisis, Fall of the Berlin Wall, floating exchange rates, full employment, Garrett Hardin, Greenspan put, Gunnar Myrdal, Hernando de Soto, invisible hand, liberal capitalism, liberal world order, Mahbub ul Haq, market fundamentalism, Martin Wolf, Mercator projection, Mont Pelerin Society, Norbert Wiener, offshore financial centre, oil shock, open economy, pattern recognition, Paul Samuelson, Pearl River Delta, Philip Mirowski, power law, price mechanism, public intellectual, quantitative easing, random walk, rent control, rent-seeking, road to serfdom, Ronald Reagan, special economic zone, statistical model, Suez crisis 1956, systems thinking, tacit knowledge, The Chicago School, the market place, The Wealth of Nations by Adam Smith, theory of mind, Thomas L Friedman, trade liberalization, urban renewal, Washington Consensus, Wolfgang Streeck, zero-sum game

In 1952 the American Enterprise Association (­later the American Enterprise Institute) published Röpke’s critique of the UN “Report on National and International Mea­sures for Full Employment” (1949), which had been written primarily by British and French Keynesians.75 Röpke wrote that ­there was “no other economic issue which appears so attractive and yet may be so dangerous as the one based on this misleading and bitterly discussed concept” of full employment and warned that the report marked the dangerous shift from “national planning” to “international planning.”76 With the launch of Kennedy’s New Frontier program in 1961, Röpke found another “New” entity to place in the crosshairs of critique.

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Wiggins, 139–150 (Washington, DC: Public Affairs Press, 1958); Henry Hazlitt, Illusions of Point Four (Irvington-­on-­Hudson, NY: Foundation for Economic Education, 1950); Gaston Leduc, “Le Sous-­devéloppment et ses problèmes,” Revue d’économie politique 62, no. 2 (May 1952): 133–189; Wilhelm Röpke, The Economics of Full Employment: An Analy­sis of the UN Report on National and International Mea­sures for Full Employment (New York: American Enterprise Association, 1952); Wilhelm Röpke, “Unentwickelte Länder,” Ordo 5 (1953): 63–113. For an overview of MPS discussions of development, see Dieter Plehwe, “The Origins of the Neoliberal Economic Development Discourse,” in The Road from Mont Pèlerin: The Making of the Neoliberal Thought Collective, ed.

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The quote was repeated in a 1957 study sponsored by seventeen congressmen and published in the national magazine of the Chamber of Commerce: “Adverse Effects of Expanding Government,” Nation’s Business 45, no. 9 (September 1957): 39–94, at 89. 74. Quoted in Wegmann, Früher Neoliberalismus, 317. 75. Röpke, The Economics of Full Employment; J. F. J. Toye and Richard Toye, The UN and Global Po­liti­cal Economy: Trade, Finance, and Development (Bloomington: Indiana University Press, 2004), 93. 76. Röpke, The Economics of Full Employment, 5, 31. 77. Wilhelm Röpke, “Washington’s Economics: A German Scholar Sees Nation Moving into Fiscal Socialism,” Wall Street Journal, April 1, 1963. 78. Röpke, “Die unentwickelten Länder,” 15, 59.

Aftershock: The Next Economy and America's Future by Robert B. Reich

Abraham Maslow, Alan Greenspan, Berlin Wall, business cycle, carbon tax, declining real wages, delayed gratification, Doha Development Round, endowment effect, Ford Model T, full employment, George Akerlof, high-speed rail, Home mortgage interest deduction, Hyman Minsky, illegal immigration, income inequality, invisible hand, job automation, junk bonds, labor-force participation, Long Term Capital Management, loss aversion, low interest rates, Michael Milken, military-industrial complex, mortgage debt, new economy, offshore financial centre, Ralph Nader, Ronald Reagan, school vouchers, sovereign wealth fund, The Theory of the Leisure Class by Thorstein Veblen, Thorstein Veblen, too big to fail, We are all Keynesians now, World Values Survey

But he recognized in it two major faults—“its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.” Until these were corrected, Keynes argued, capitalism would continue to be highly unstable, vulnerable to economic booms that would often be followed by catastrophic collapses. Yet if government worked to correct these faults, he felt confident that future generations could inherit a stable and prosperous world. Classical economists had viewed markets as self-correcting. They had supposed that full employment would always prevail in the end. Any spate of unemployment would cause wages to drop until employers found it profitable to hire workers again.

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Keynes’s big idea was to use macroeconomic policy to maintain full employment. Policymakers should expand the money supply to permanently lower interest rates, so that consumers and businesses could get lower-cost loans, and government should increase its own spending to make up for the shortfall in consumer demand, so that more jobs would be created. Part of Keynes’s answer was also to spread the benefits of economic growth. Keynes recognized that growth depends on the incentives of the rich to save and invest. But he noted that until an economy reaches full employment, additional savings don’t help; in fact, they cause harm by reducing the demand for goods and services.

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To be sure, the U.S. government refrained from doing what many of Europe’s social democratic countries did—directly redistribute income from the rich to the poor and middle class, and nationalize industries. Nonetheless, it actively created the conditions for the middle class to fully share in the nation’s prosperity. It did so by pushing the economy toward full employment, creating a more progressive income tax, enhancing the bargaining power of average workers, building up Social Security, providing workers with a strong safety net when they couldn’t work, and improving their productivity. Franklin D. Roosevelt never fully understood Keynesian economics, despite the efforts of Marriner Eccles and others to educate him, but FDR proved the success of Keynesianism.

Servant Economy: Where America's Elite Is Sending the Middle Class by Jeff Faux

air traffic controllers' union, Alan Greenspan, back-to-the-land, Bear Stearns, benefit corporation, Bernie Sanders, Black Swan, Bretton Woods, BRICs, British Empire, business cycle, call centre, centre right, classic study, cognitive dissonance, collateralized debt obligation, collective bargaining, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, David Brooks, David Ricardo: comparative advantage, disruptive innovation, falling living standards, financial deregulation, financial innovation, full employment, Glass-Steagall Act, guns versus butter model, high-speed rail, hiring and firing, Howard Zinn, Hyman Minsky, illegal immigration, indoor plumbing, informal economy, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, junk bonds, Kevin Roose, Kickstarter, lake wobegon effect, Long Term Capital Management, low interest rates, market fundamentalism, Martin Wolf, McMansion, medical malpractice, Michael Milken, military-industrial complex, Minsky moment, mortgage debt, Myron Scholes, Naomi Klein, new economy, oil shock, old-boy network, open immigration, Paul Samuelson, plutocrats, price mechanism, price stability, private military company, public intellectual, radical decentralization, Ralph Nader, reserve currency, rising living standards, Robert Shiller, rolodex, Ronald Reagan, Savings and loan crisis, school vouchers, Silicon Valley, single-payer health, Solyndra, South China Sea, statistical model, Steve Jobs, Suez crisis 1956, Thomas L Friedman, Thorstein Veblen, too big to fail, trade route, Triangle Shirtwaist Factory, union organizing, upwardly mobile, urban renewal, War on Poverty, We are the 99%, working poor, Yogi Berra, Yom Kippur War, you are the product

The models conclude what is obvious to virtually anyone over the age of twelve: consumers will benefit from cheaper goods made by cheaper labor. What the typical American trying to understand the debate is not told is that these models invariably assume full employment. So it’s no surprise that they do not find that trade deficits cost jobs. Obviously, in the real world, economies are not constantly, or even typically, at full employment. So, unless compensated by an increase in consumer, business, or government spending, a trade deficit always means a slowdown in the growth of the GDP, which means a slowdown in job growth. Here the U.S. economics profession has disgraced itself over the trade issue.

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Therefore, for musician’s wages to increase along with the wages of industrial workers, the price of a symphony ticket has to rise much faster than prices in the industrial sector.11 Similarly, the public sector, which is also labor intensive, will naturally require higher prices (in the form of taxes) to maintain the quality of its services. In a full-employment economy with a healthy industrial sector, workers whose wages are rising can afford to pay high prices for services and pay rising taxes. But with the offshoring of the high-productivity sectors, the source of rising wages shrinks. Add the ideological resistance to tax increases and the undercutting of the bargaining position of labor, and you have a formula for wage stagnation. Add in economic policies that favor price stability over full employment and you have a formula for wage decline. Still, Pollyanna will not be suppressed.

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All have their part to play as workers and consumers, and therefore all have a claim on the benefits of growth. Economic security—pooling risks through social insurance, subsidizing higher education, and collective bargaining—is as important as the freedom to buy low and sell high. By providing a cushion for ordinary workers, the innovations of full employment, rising wages, unions, and government-sponsored safety nets also provided a protective cushion for the American capitalist class. After all, the implication of Keynes’s proposition was that what is good for General Motors is good for America—even though the businessmen had to also accept its corollary that what is good for the United Auto Workers is good for General Motors.

Arguing With Zombies: Economics, Politics, and the Fight for a Better Future by Paul Krugman

affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, Andrei Shleifer, antiwork, Asian financial crisis, bank run, banking crisis, basic income, behavioural economics, benefit corporation, Berlin Wall, Bernie Madoff, bitcoin, blockchain, bond market vigilante , Bonfire of the Vanities, business cycle, capital asset pricing model, carbon footprint, carbon tax, Carmen Reinhart, central bank independence, centre right, Climategate, cognitive dissonance, cryptocurrency, David Ricardo: comparative advantage, different worldview, Donald Trump, Edward Glaeser, employer provided health coverage, Eugene Fama: efficient market hypothesis, fake news, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, financial repression, frictionless, frictionless market, fudge factor, full employment, green new deal, Growth in a Time of Debt, hiring and firing, illegal immigration, income inequality, index fund, indoor plumbing, invisible hand, it is difficult to get a man to understand something, when his salary depends on his not understanding it, job automation, John Snow's cholera map, Joseph Schumpeter, Kenneth Rogoff, knowledge worker, labor-force participation, large denomination, liquidity trap, London Whale, low interest rates, market bubble, market clearing, market fundamentalism, means of production, Modern Monetary Theory, New Urbanism, obamacare, oil shock, open borders, Paul Samuelson, plutocrats, Ponzi scheme, post-truth, price stability, public intellectual, quantitative easing, road to serfdom, Robert Gordon, Robert Shiller, Ronald Reagan, secular stagnation, Seymour Hersh, stock buybacks, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, universal basic income, very high income, We are all Keynesians now, working-age population

Lerner says that the interest rate should be set at the level that produces “the most desirable level of investment,” and that fiscal policy should then be chosen to achieve full employment given that interest rate. What is the optimal interest rate? He doesn’t say—maybe because through the thirties the zero lower bound made that point moot. Anyway, what actually happens at least much of the time—although, crucially, not when we’re at the zero lower bound—is more or less the opposite: political trade-offs determine taxes and spending, and monetary policy adjusts the interest rate to achieve full employment without inflation. Under those conditions budget deficits do crowd out private spending, because tax cuts or spending increases will lead to higher interest rates.

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Once the crash happened, however, economists who had studied these things found themselves in familiar territory. We know a lot about financial crises, from both theory and history. We also know a lot about how economies work in the aftermath of crises: that 1998 paper was about what happens when even a zero interest rate isn’t enough to restore full employment, a condition that went from being a uniquely Japanese problem to the norm across the Western world. For me, then, the five or so years following the 2008 crisis were both the best and the worst of times. They were the best of times in the sense that my role as newspaper columnist and my academic research converged almost perfectly, so that I was in a position to say a lot about what policymakers should be doing.

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Budget deficits haven’t led to soaring interest rates (and the Fed’s “money-printing” hasn’t led to inflation); austerity policies have greatly deepened economic slumps almost everywhere they have been tried. Yes, the government must pay its bills in the long run. But spending cuts and/or tax increases should wait until the economy is no longer depressed, and the private sector is willing to spend enough to produce full employment. Is this impossibly complicated? I don’t think so. Now, I suppose that someone like Langone will just respond that it’s all gibberish he can’t understand. But unless he really is stupid, which as I said I doubt, that’s only because he doesn’t want to understand. NOBODY UNDERSTANDS DEBT February 9, 2015 Many economists, including Janet Yellen, view global economic troubles since 2008 largely as a story about “deleveraging”—a simultaneous attempt by debtors almost everywhere to reduce their liabilities.

How Much Is Enough?: Money and the Good Life by Robert Skidelsky, Edward Skidelsky

banking crisis, basic income, Bertrand Russell: In Praise of Idleness, Bonfire of the Vanities, call centre, carbon credits, creative destruction, critique of consumerism, David Ricardo: comparative advantage, death of newspapers, Dr. Strangelove, financial innovation, Francis Fukuyama: the end of history, full employment, Great Leap Forward, guns versus butter model, happiness index / gross national happiness, Herbert Marcuse, income inequality, income per capita, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, market clearing, market fundamentalism, Meghnad Desai, Paul Samuelson, Philippa Foot, planned obsolescence, precautionary principle, profit motive, purchasing power parity, Ralph Waldo Emerson, retail therapy, Robert Solow, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, Tobin tax, union organizing, University of East Anglia, Veblen good, wage slave, wealth creators, World Values Survey, zero-sum game

A second wave of New Liberalism associated with Keynes, Beveridge and Roosevelt took root in the troubled 1930s and 1940s and came of age in the 1950s and 1960s. Keynes aimed to fill the most important “gap” in the classical market economy, its failure to provide for continuous full employment. In his General Theory of Employment, Interest, and Money (1936), he argued that it was the state’s duty to maintain enough aggregate demand to ensure the continuous use of all potential resources. Continuous full employment was not only an essential condition of security, but, as we have seen, part of Keynes’s ethical project for getting over the hump of “economic necessity” as quickly as possible in order to open up the possibility of a good life for all.

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“His worst, because some of his social and political theory would not stand too close a scrutiny; because society is not likely to run out of new wants as long as consumption is conspicuous and competitive … His best because of the roving, inquiring, intuitive, provocative mind of the man.”4 But for all its futurism, “Economic Possibilities” links up directly with Keynes’s main preoccupation: the problem of persistent mass unemployment. It provides the “ideal” motivation for the revolution in economic policy for which he is chiefly known: continuous full employment, uninterrupted by slumps, was the quickest route to the utopia towards which the essay beckoned. Keynes wanted to ensure that the capitalist system worked at full blast so as to hasten the day when it would come to an end. More than eighty years have passed since he wrote his essay; we are his “grandchildren,” even his great-grandchildren.

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Obesity has risen threefold across Europe since the 1980s, even in countries with traditionally low rates.38 UK prescriptions for depression have also increased, though that may not reflect any rise in depression itself.39 And work-related stress has got worse since 1992, especially for women.40 By historical standards, we remain extremely healthy, but the old assurance that this state of affairs would continue in perpetuity is fading. The maladies of affluence may yet come to outweigh those of poverty. Chart 9. Alcohol-related Deaths in the UK Source: WHO Global Information System on Alcohol and Health Security. Full employment as a goal of macroeconomic policy was abandoned during the Reagan/Thatcher era and has not been reinstated. UK unemployment exceeded the 5 percent mark in 1980 and has largely stayed there since, soaring during recessions to 10 percent or higher. A similar pattern prevails across the OECD, as Chart 11 shows.

The Great Demographic Reversal: Ageing Societies, Waning Inequality, and an Inflation Revival by Charles Goodhart, Manoj Pradhan

asset-backed security, banks create money, Berlin Wall, bonus culture, Boris Johnson, Branko Milanovic, Brexit referendum, business cycle, capital controls, carbon tax, central bank independence, commodity super cycle, coronavirus, corporate governance, COVID-19, deglobalization, demographic dividend, demographic transition, Deng Xiaoping, en.wikipedia.org, Fall of the Berlin Wall, financial independence, financial repression, fixed income, full employment, gig economy, Gini coefficient, Greta Thunberg, housing crisis, income inequality, inflation targeting, interest rate swap, job automation, Kickstarter, long term incentive plan, longitudinal study, low interest rates, low skilled workers, manufacturing employment, Martin Wolf, mass immigration, middle-income trap, non-tariff barriers, offshore financial centre, oil shock, old age dependency ratio, open economy, paradox of thrift, Pearl River Delta, pension reform, Phillips curve, price stability, private sector deleveraging, quantitative easing, rent control, savings glut, secular stagnation, shareholder value, special economic zone, The Great Moderation, The Wealth of Nations by Adam Smith, total factor productivity, working poor, working-age population, yield curve, zero-sum game

Inflation then seemed to be primarily a consequence of wars and other major political disturbances. The over-riding concern, when Keynes was writing the General Theory, was to restore and to maintain reasonably full employment, not to control inflation. It is in some ways a measure of the success of Keynesian economics that since World War II, at least until the twenty-first century, the main problem that faced us was to combine reasonably full employment with price stability. Of course, the initial recovery to full employment at the end of the 1930s and early 1940s owed more to rearmament and World War II than to Keynesian economics. But after World War II and into the early 1950s, the initial major concern/expectation was that the advanced economies might fall back into a further bout of stagnation/deflation.

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In contrast, u* has varied between about 5 and 2%. After the unhappy experience of the 1930s, economists such as Beveridge and Keynes initially thought that achieving a level of 4–5% would be a good outcome. But the success of full employment policies bringing UE down to around 1.5% after World War II, initially with relatively little inflation, led to the aim of holding UE below 2%.4 Demand management, and full employment policies, greatly strengthened the bargaining power of workers and trade unions. The alternative to not agreeing to the employer’s wage offer would be another job elsewhere, rather than unemployment. Also, as noted in Chapters 3 and 5, demography led to an improving dependency ratio.

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The wider question, however, is whether, and how far, the patent effect on individual categories of work spills over into explaining the relative stagnation of real wages, and of labour’s share of income, as a whole? Superficially one might think that, if labour-saving technology was largely responsible, productivity should have grown faster than has been the case in the last two decades. But what if public policy to maintain aggregate demand and full employment has its main practical domestic effect on low productivity service industries, and the ‘gig economy’? A plausible hypothesis. Let us put the question another way; why would such technological developments change the slope and/or position of the Phillips curve? With the same level of overall unemployment, why would the associated aggregate wage/price outcome be less?

The Accidental Theorist: And Other Dispatches From the Dismal Science by Paul Krugman

"World Economic Forum" Davos, Alan Greenspan, Bonfire of the Vanities, Bretton Woods, business cycle, carbon tax, clean water, collective bargaining, computerized trading, corporate raider, declining real wages, floating exchange rates, full employment, George Akerlof, George Gilder, Home mortgage interest deduction, income inequality, indoor plumbing, informal economy, invisible hand, It's morning again in America, Kenneth Arrow, knowledge economy, life extension, new economy, Nick Leeson, paradox of thrift, Paul Samuelson, plutocrats, price stability, rent control, Robert Solow, Ronald Reagan, Silicon Valley, trade route, very high income, working poor, zero-sum game

Keynes was willing to concede that in some sufficiently long run, these theories might indeed be valid; but, as he memorably pointed out, “In the long run we are all dead.” In the short run, he asserted, interest rates were determined not by the balance between savings and investment at full employment but by “liquidity preference”—the public’s desire to hold cash unless offered a sufficient incentive to invest in less safe and convenient assets. Savings and investment were still necessarily equal; but if desired savings at full employment turned out to exceed desired investment, what would fall would be not interest rates but the level of employment and output. In particular, if investment demand should fall for whatever reason—such as, say, a stock-market crash—the result would be an economy-wide slump.

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It so happens that I am about to use my hot-dog-and-bun example to talk about technology, jobs, and the future of capitalism. And I plan to make some serious points about those subjects—the kind of points that can only be made if you are willing to play around with a thought experiment or two. So let’s continue. Suppose that our economy initially employs 120 million workers, which corresponds more or less to full employment. It takes two person-days to produce either a hot dog or a bun. (Hey, realism is not the point here.) Assuming that the economy produces what consumers want, it must be producing 30 million hot dogs and 30 million buns each day; 60 million workers will be employed in each sector. Now, suppose that improved technology allows a worker to produce a hot dog in one day rather than two.

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But macroeconomics—the study of economy-wide events like inflation and deflation, booms and slumps—was in a state of arrested development that left it utterly incapable of making sense of the Great Depression. So-called “classical” macroeconomics asserted that the economy had a long-run tendency to return to full employment, and focused only on that long run. Its two main tenets were the quantity theory of money—the assertion that the overall level of prices was proportional to the quantity of money in circulation—and the “loanable funds” theory of interest, which asserted that interest rates would rise or fall to equate total savings with total investment.

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth by Michael Jacobs, Mariana Mazzucato

Alan Greenspan, balance sheet recession, banking crisis, basic income, Bear Stearns, Bernie Sanders, Bretton Woods, business climate, business cycle, carbon tax, Carmen Reinhart, central bank independence, circular economy, collaborative economy, complexity theory, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, decarbonisation, degrowth, deindustrialization, dematerialisation, Detroit bankruptcy, double entry bookkeeping, Elon Musk, endogenous growth, energy security, eurozone crisis, factory automation, facts on the ground, fiat currency, Financial Instability Hypothesis, financial intermediation, Ford Model T, forward guidance, full employment, G4S, general purpose technology, Gini coefficient, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Internet of things, investor state dispute settlement, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, labour market flexibility, low interest rates, low skilled workers, Martin Wolf, mass incarceration, military-industrial complex, Modern Monetary Theory, Money creation, Mont Pelerin Society, neoliberal agenda, Network effects, new economy, non-tariff barriers, ocean acidification, paradox of thrift, Paul Samuelson, planned obsolescence, Post-Keynesian economics, price stability, private sector deleveraging, quantitative easing, QWERTY keyboard, railway mania, rent-seeking, road to serfdom, savings glut, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Solyndra, Steve Jobs, stock buybacks, systems thinking, the built environment, The Great Moderation, The Spirit Level, Thorstein Veblen, too big to fail, total factor productivity, Tragedy of the Commons, transaction costs, trickle-down economics, universal basic income, vertical integration, very high income

She consults with policy-makers, investment banks and portfolio managers across the globe, and is a regular commentator on national radio and broadcast television. L. Randall Wray is Professor of Economics at Bard College and Senior Scholar at the Levy Economics Institute. He is the author of Money and Credit in Capitalist Economies (Edward Elgar, 1990); Understanding Modern Money: The Key to Full Employment and Price Stability (Edward Elgar, 1998); and Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems (Palgrave Macmillan, 2012, 2nd rev ed, 2015). He is also co-editor of, and a contributor to, Money, Financial Instability, and Stabilization Policy (Edward Elgar, 2006), and Keynes for the 21st Century: The Continuing Relevance of The General Theory (Palgrave Macmillan, 2008).

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Since the financial crisis it has fallen further in most developed countries, including the US, Japan, France and the UK.16 At the same time there appears to be some evidence that rates of productivity-enhancing innovation have also slowed down.17 All this has led some economists to ask whether Western capitalism has entered a period of ‘secular stagnation’, in which a structural weakness of investment and demand leaves positive interest rates no longer able to support full employment. While such a prospect should not be regarded as somehow inevitable, it reflects a widespread concern that developed economies may face a long period of low growth and financial instability.18 Stagnant living standards and rising inequality But weak and unstable growth is only part of modern capitalism’s problem.

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Keynes, The General Theory of Employment, Interest and Money, London, Macmillan, 2007 [1936]. 52 Shiller, Irrational Exuberance. 53 ‘I expect to see the State … taking an ever greater responsibility for directly organising investment … I conceive, therefore, that a somewhat comprehensive socialisation of investment will prove the only means of securing an approximation to full employment.’ J. M. Keynes, The Collected Writings of John Maynard Keynes, vol. 7, Cambridge, Cambridge University Press, 1973, pp. 164, 378. 54 H.-J. Chang, Globalization, Economic Development and the Role of the State, London, Zed Books, 2002. 55 T. Piketty, Capital in the 21st Century, Cambridge, MA, Harvard University Press, 2014. 56 A.

Free to Choose: A Personal Statement by Milton Friedman, Rose D. Friedman

affirmative action, agricultural Revolution, air freight, back-to-the-land, bank run, banking crisis, business cycle, Corn Laws, foreign exchange controls, Fractional reserve banking, full employment, German hyperinflation, invisible hand, means of production, minimum wage unemployment, oil shale / tar sands, oil shock, price stability, Ralph Nader, RAND corporation, rent control, road to serfdom, Sam Peltzman, school vouchers, Simon Kuznets, The Wealth of Nations by Adam Smith, union organizing, Unsafe at Any Speed, Upton Sinclair, urban renewal, War on Poverty, working poor, Works Progress Administration

Under these circumstances, what average number of persons employed corresponds to full employment? As with spending and taxes, there is here, too, an asymmetry. Measures that can be represented as adding to employment are politically attractive. Measures that can be represented as adding to unemployment are politically unattractive. The result is to impart a bias to government policy in the direction of adopting unduly ambitious targets of full employment. The relation to inflation is twofold. First, government spending can be represented as adding to employment, government taxes as adding to unemployment by reducing private spending. Hence, the full employment policy reinforces the tendency for government to increase spending and lower taxes, and to finance any resulting deficit by increasing the quantity of money rather than by taxes or borrowing from the public.

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It enables them to increase government spending, providing goodies for their constituents, without having to vote for taxes to pay for them, and without having to borrow from the public. A second source of higher monetary growth in the United States in recent years has been the attempt to produce full employment. The objective, as for so many government programs, is admirable, but the results have not been. "Full employment" is a much more complex and ambiguous concept than it appears to be on the surface. In a dynamic world, in which new products emerge and old ones disappear, demand shifts from one product to another, innovation alters methods of production, and so on without end, it is desirable to have a good deal of labor mobility.

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It can do so by buying outstanding government bonds, paying for them with newly created high-powered money. That enables the banks to make a larger volume of private loans, which can also be represented as adding to employment. Under pressure to promote full employment, the Fed's monetary policy has had the same inflationary bias as the government's fiscal policy. These policies have not succeeded in producing full employment but they have produced inflation. As Prime Minister James Callaghan put it in a courageous talk to a British Labour party conference in September 1976: "We used to think that you could just spend your way out of a recession and increase employment by cutting taxes and boosting government spending.

Basic Income: A Radical Proposal for a Free Society and a Sane Economy by Philippe van Parijs, Yannick Vanderborght

Airbnb, Albert Einstein, basic income, Berlin Wall, Bertrand Russell: In Praise of Idleness, carbon tax, centre right, collective bargaining, cryptocurrency, David Graeber, declining real wages, degrowth, diversified portfolio, Edward Snowden, eurozone crisis, Fall of the Berlin Wall, feminist movement, full employment, future of work, George Akerlof, Herbert Marcuse, illegal immigration, income per capita, informal economy, Jeremy Corbyn, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Kickstarter, Marshall McLuhan, means of production, minimum wage unemployment, Money creation, open borders, Paul Samuelson, pension reform, Post-Keynesian economics, precariat, price mechanism, profit motive, purchasing power parity, quantitative easing, race to the bottom, road to serfdom, Robert Solow, Rutger Bregman, Second Machine Age, secular stagnation, selection bias, sharing economy, sovereign wealth fund, systematic bias, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, universal basic income, urban planning, urban renewal, War on Poverty, working poor

It does not impose a maximum limit on everyÂ�one’s working time but it makes it easier for Â�people to reduce their working time, both Â�because it reduces what they lose if they do and because Â� it gives them a firm income on which they can rely. It thereby attacks the root cause of trouÂ�bles for both Â�those who get sick by working too much and Â�those who get sick Â�because they cannot find jobs.58 It does not amount to giving up the objective of full employment sensibly interpreted. For full employment can mean two Â�things: full-Â�time paid work for the entire able-Â�bodied part of the population of working age, or the real possibility of getting meaningful paid work for all Â�those who want it. As an objective, the basic income strategy rejects the former but embraces the latter.59 And it pursues it both by subsidizing low-Â� paid work with low immediate productivity and by making it easier for Â�people to choose to work less at any given point in their lives.

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As documented by Juliet Schor (1993), some Americans are overworked Â�because they earn too much (say, one hour less a week would mean giving up a new swimming pool) and Â�others Â�because they earn too Â�little (say, one hour less a week would mean junk food for the kids). 59. A basic income is often defended as an alternative to full employment, though not always by distinguishing clearly between Â�these two interpretations. See, for example, Robert Theobald 1967, Claus Offe 1992, 1996a, Fritz Scharpf 1993, James Â�Meade 1995, Jean-Â�Marc Ferry 1995, André Gorz 1997, Yoland Bresson 1999. On the relationship between basic income, wage subsidies, and working time reduction, see chapter 2. ReÂ�sisÂ�tance to technological change and the banning of volunteering are two other (worse) ways of pursuing full employment (Â�whether in the bad or the good sense) for which basic income provides an alternative. 60.

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Thus, economist Xavier Greffe, while recognizing that the proposal “rests on justified criticisms of current social policy” and “would increase the effectiveness of social policy,” nonetheless found it badly defective: “Located at the heart of liberal discourse, the negative income tax implicitly admits that the market constitutes the privileged mechanism of social integration and that it therefore suffices to help individuals artificially when they access it in order to overcome inÂ�equality and the lack of integration.”108 Similarly, in one of his legendary lectures at the Collège de France, Michel Foucault (1926–1984) first presented the negative income tax in a way that sounded sympathetic: “Â�After all, it does not and should not concern us to know why someone falls below the level of the social game; Â�whether he is a drug addict or voluntarily unemployed is not imporÂ�tant.â•‹.â•‹.â•‹.╋╉The only Â�thing 95 BASIC INCOME that Â�matters is that the individual has fallen below a given level and, at that point, without looking further, and so without having to make all Â�those bureaucratic, police, or inquisitorial investigations, the problem becomes one of granting him a subsidy.â•‹.â•‹.â•‹.”109 Ultimately, however, the negative income tax is for Foucault essentially a tool in the serÂ�vice of “neoliberal” policies. Now that the peasant population no longer provides an “endless fund of manpower,” that function is to be served by the population assisted by the negative income tax scheme—Â� admittedly “in a very liberal and much less bureaucratic and disciplinary way than it is by a system focused on full employment”: “Ultimately, it is up to Â�people to work if they want or not work if they Â�don’t. Above all Â�there is the possibility of not forcing them to work if Â�there is no interest in Â�doing so. They are merely guaranteed the possibility of minimal existence at a given level, and in this way the neoliberal policy can be got to work.”110 For Foucault as for many of Â�those in EuÂ�rope who cared about the fate of the poor and the unemployed, this association with the functional needs of capitalism and neoliberal thought sufficed to discredit the idea, or at least to discourage active interest in it.

Making Globalization Work by Joseph E. Stiglitz

"World Economic Forum" Davos, affirmative action, Alan Greenspan, Andrei Shleifer, Asian financial crisis, banking crisis, barriers to entry, benefit corporation, Berlin Wall, blood diamond, business process, capital controls, carbon tax, central bank independence, corporate governance, corporate social responsibility, currency manipulation / currency intervention, Doha Development Round, Exxon Valdez, Fall of the Berlin Wall, Firefox, full employment, Garrett Hardin, Gini coefficient, global reserve currency, Global Witness, Great Leap Forward, Gunnar Myrdal, happiness index / gross national happiness, illegal immigration, income inequality, income per capita, incomplete markets, Indoor air pollution, informal economy, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), inventory management, invisible hand, John Markoff, Jones Act, Kenneth Arrow, Kenneth Rogoff, low interest rates, low skilled workers, manufacturing employment, market fundamentalism, Martin Wolf, microcredit, moral hazard, negative emissions, new economy, North Sea oil, offshore financial centre, oil rush, open borders, open economy, price stability, profit maximization, purchasing power parity, quantitative trading / quantitative finance, race to the bottom, reserve currency, rising living standards, risk tolerance, Seymour Hersh, Silicon Valley, special drawing rights, statistical model, the market place, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, Tragedy of the Commons, trickle-down economics, union organizing, Washington Consensus, zero-sum game

The Bolivians and Ecuadorians argued—rightly, I thought—that the return on investing in the recession was far higher than it would be when global conditions returned to normal levels and their economy was nearer to full employment. In addition to the direct return, there would be a multiplier effect, as the spending would stimulate the entire economy, which was marked by huge underutilization of productive capacity, and help it move toward full employment. Spending money, with natural resources to back the loans, made good economic sense. But the IMF, always worried about government overspending, pressured Ecuador and Bolivia to follow a quite different course.

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What we had fought for while I was in the Clinton administration was relevant, not just to Americans but to the rest of the world as well. As I moved from the Clinton administration to the World Bank, I continued to push for the right balance between the private and public sectors and to advance policies promoting equality and full employment. The issues I raised during my tenure at the World Bank—which received a warm reception by many of the economists there—are the same ones I raised in Globalization and Its Discontents. The passions evoked by the global financial crises and the difficult transitions from communism to a market economy have now faded.

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If one delegates decision making to “conservatives,” almost inevitably one will get economic policies and outcomes that reflect their political interests and cultural values.8 This book obviously reflects my own judgments and values; at least, I hope to be transparent, and present both sides of the ongoing economic debates. SAVING GLOBALIZATION FROM ITS ADVOCATES Some seventy years ago, during the Great Depression, the British economist, John Maynard Keynes, formulated his theory of unemployment, which detailed how government action could help restore the economy to full employment and growth. Keynes was vilified by conservatives, who saw his prescription as increasing the role of government. They seized on the budget deficits that inevitably accompany a downturn as an occasion to cut back on government programs. But Keynes actually did more to save the capitalist system than all the pro-market financiers put together.

Inflated: How Money and Debt Built the American Dream by R. Christopher Whalen

Alan Greenspan, Albert Einstein, bank run, banking crisis, Bear Stearns, Black Swan, book value, Bretton Woods, British Empire, business cycle, buy and hold, California gold rush, Carl Icahn, Carmen Reinhart, central bank independence, classic study, commoditize, conceptual framework, Cornelius Vanderbilt, corporate governance, corporate raider, creative destruction, cuban missile crisis, currency peg, debt deflation, falling living standards, fiat currency, financial deregulation, financial innovation, financial intermediation, floating exchange rates, Ford Model T, Fractional reserve banking, full employment, Glass-Steagall Act, global reserve currency, housing crisis, interchangeable parts, invention of radio, Kenneth Rogoff, laissez-faire capitalism, land bank, liquidity trap, low interest rates, means of production, military-industrial complex, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, mutually assured destruction, Nixon triggered the end of the Bretton Woods system, non-tariff barriers, oil shock, Paul Samuelson, payday loans, plutocrats, price stability, pushing on a string, quantitative easing, rent-seeking, reserve currency, Ronald Reagan, Savings and loan crisis, special drawing rights, Suez canal 1869, Suez crisis 1956, The Chicago School, The Great Moderation, too big to fail, trade liberalization, transcontinental railway, Upton Sinclair, women in the workforce

It would take four more years and the election of Ronald Reagan for the Kemp–Roth tax cut to be adopted by Congress. Humphrey-Hawkins and Full Employment The political reaction by the Democratic majority in Congress to the election of Jimmy Carter and Senator Fritz Mondale (D-MN) was to greatly increase federal spending. Among even mainstream Democrats, the answer to the years of uncertainty and unemployment during the 1970s was to embed in the law the right to full employment. Senator Hubert Humphrey (D-MN) and Congressman Gus Hawkins (D-CA) sponsored legislation in the early 1970s to do just that and in 1978 the Congress passed the Humphrey-Hawkins Full Employment and Balanced Growth Act. The law established a maximum unemployment rate of 4 percent and did not mandate a government-paid job for anyone who sought one.

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Taxes were cut to stimulate the economy after the war concluded, so that the United States did not experience a severe downturn in economic activity, as was the case following WWI. This act marked one of the early instances of Congress mandating full employment as a matter of government policy and giving responsibility for this goal to Washington. Like the promises made by Washington of financial regulation or consumer protection, the promise of full employment is worth no more than Washington’s paper money, but none-the-less helps define the American dream. As with much of the government effort and expenditure in the 1930s, the ostensible goal of Washington was to use a postwar surge in economic prosperity as an antidote to the return of national socialism or anything like it.

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Louis Federal Reserve Bank maintenance Free Banking era cessation Free Banking Model, collapse Freedoms (FDR) Free silver coinage, agitation Free trade American devotion global commitment, shift Keynes criticism policy, Federal Reserve System (impact) proposal Frick, Henry campaign contributions Friedman, Milton Depression arguments FDR analysis Fed analysis Monetary History of the United States New Deal documentation U.S. money supply analysis Full employment priorities Full employment, government mandate Fundamental disequilibrium Future earnings, trend (assessment) G-7 countries, loan guarantees Galbraith, John Kenneth deficit support Great Crash Gallatin, Albert Gardner, Richard (Sterling-Dollar Diplomacy in Current Perspective) Gary, Elbert H. Geithner, Timothy General Agreement on Tariffs and Trade (GATT) General Motors (GM) bailout bankruptcy organization collapse debt, impact du Pont investment Durant support General Motors Acceptance Corporation (GMAC) bailout credit supply founding Germany Barron attack (Wall Street Journal) central powers, attack (Barron support) WWI debt imposition, impact GI Bill of Rights Gilbert, Clinton (Mirrors of Wall Street) Gilbert, Parker Gilded Age cessation comparison impact trusts, near-bank status Glass, Carter American principle devotion Banking Act sponsorship populist facade proposal Secretary of the Treasury status Glass-Steagall Act Glass-Steagall laws Global currency backing system, problem Global imbalances Global inflation Global marketplace, U.S. advantage Global markets, dollar flow Global payments system, U.S. response Global system, equilibrium Gold Bretton Woods, impact coinage, hard money Jacksonian notion (continuation) coins (specie) confiscation hoarding confiscation conspiracy, relief convertibility Nixon cessation restoration (1879) American resistance return dollar peg, cessation (1971) dollar price, increase exchange FDR, impact greenbacks convertibility, restoration exchange market dynamic movement Fed policy independence impact paper dollars, relationship payment (WWI), promise post-market crisis, Gould operation price fluctuation peak (1869) production purchase, greenbacks (Gould usage) refinement, cyanide process (adoption) reserves bank drain drain seizure Board of Governors complicity stocks, U.S. government holding supply, expansion Goldenweiser, E.A.

The New Economics: A Bigger Picture by David Boyle, Andrew Simms

Abraham Maslow, Alan Greenspan, Alvin Toffler, Apollo 11, Asian financial crisis, back-to-the-land, banking crisis, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, capital controls, carbon footprint, carbon tax, clean water, collateralized debt obligation, colonial rule, Community Supported Agriculture, congestion charging, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Crossrail, delayed gratification, deskilling, digital divide, en.wikipedia.org, energy transition, financial deregulation, financial exclusion, financial innovation, full employment, garden city movement, Glass-Steagall Act, green new deal, happiness index / gross national happiness, if you build it, they will come, income inequality, informal economy, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, John Elkington, junk bonds, Kickstarter, land bank, land reform, light touch regulation, loss aversion, mega-rich, microcredit, Mikhail Gorbachev, Money creation, mortgage debt, neoliberal agenda, new economy, North Sea oil, Northern Rock, offshore financial centre, oil shock, peak oil, pension time bomb, pensions crisis, profit motive, purchasing power parity, quantitative easing, Ronald Reagan, seigniorage, Simon Kuznets, sovereign wealth fund, special drawing rights, systems thinking, the long tail, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, trickle-down economics, Vilfredo Pareto, Washington Consensus, wealth creators, working-age population

There are costs – social and economic – of everyone being at work.20 It would mean, for example, that with no one at home except the frail and elderly, there is a gap left among those who socialize our children, look after older people, prevent crime and provide the human face of our neighbourhoods and communities. Some of those gaps include informal childcare. The problem is, under a successful policy of full employment, when all available carers of working age would be at work in the daytime and, in the period after school, the time they have previously spent looking after children will have to be replaced. The same is true for the people who look after sick or elderly relatives at home. If the full employment policy were successful, these people might no longer be available. WHY DO BRITONS WORK HARDER THAN MEDIEVAL PEASANTS? 87 The care they provide includes help with shopping, cleaning, finances, washing, bathing and administering medicine, tube feeding, even occupational therapy.

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About 890,000 people in the UK over 16 are providing this informally for 50 or more hours a week, at an equivalent cost of £57.4 billion per year, two thirds of what it costs to run the National Health Service.21 Full employment would also considerably reduce the amount of time and effort that goes into volunteering. There is also increasing evidence that it is sheer neighbourhood activity, at all times of the day – not just outside working hours – that is the main determinant of crime rates. The major study of Chicago by the Harvard School of Public Health showed that it was the willingness of neighbours to intervene in small ways that was by far the most important factor in reducing crime.22 Full employment, in other words, is likely to be corrosive of social capital, if it leaves nobody available in communities.

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Often this is the kind of ‘work’ that is far better done by neighbours than by professionals. But the attitude of conventional economics to this unmarketable, unwaged work is corrosive. Once it drops out of the conventional economic system, it becomes invisible to policy makers, unless it can be sold and commodified. It also leads to a situation where the government believes that ‘full employment’ – or 80 per cent of the working age population in work – is a valuable objective, when their voluntary work or their work as parents might actually be more valuable to the neighbourhood. There are costs – social and economic – of everyone being at work.20 It would mean, for example, that with no one at home except the frail and elderly, there is a gap left among those who socialize our children, look after older people, prevent crime and provide the human face of our neighbourhoods and communities.

Money Mischief: Episodes in Monetary History by Milton Friedman

Bretton Woods, British Empire, business cycle, classic study, currency peg, double entry bookkeeping, fiat currency, financial innovation, fixed income, floating exchange rates, foreign exchange controls, full employment, German hyperinflation, income per capita, law of one price, Money creation, money market fund, oil shock, price anchoring, price stability, Savings and loan crisis, systematic bias, Tax Reform Act of 1986, transaction costs

They can increase government spending, and provide "goodies" for their supporters and constituents, without having to propose or vote for new taxes to pay for spending and without having to borrow from the public. A second source of higher monetary growth in the United States was the attempt to produce full employment. The objective, as for so many government programs, is admirable, but the results have not been. Full employment is a much more complex and ambiguous concept than it appears to be on the surface. Moreover, there is an asymmetry that imparts a bias to government policy in the direction of adopting unduly ambitious targets of full employment. Any measure that can be represented as adding to employment is politically attractive. Any measure that can be represented as adding to unemployment is politically unattractive.

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One way it can do so is by buying outstanding government bonds and paying for them with newly created high-powered money. That enables the banks to make a larger volume of private loans, which can also be represented as adding to employment. The pressure to promote full employment has given the Fed's monetary policy the same inflationary bias as it has given the government's fiscal policy. These policies have not succeeded in producing full employment, but they have produced inflation. As Prime Minister James Callaghan put it in a courageous talk to a British Labour party conference in September 1976: "We used to think that you could just spend your way out of a recession and increase employment by cutting taxes and boosting government spending.

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Whatever may have been true for money linked to silver or gold, with today's paper money it is governments and governments alone that can produce excessive monetary growth, and hence inflation. In the United States, the accelerated monetary growth from the mid-1960s to the end of the 1970s—the most recent period of accelerating inflation—occurred for three related reasons: first, the rapid growth in government spending; second, the government's full-employment policy; third, a mistaken policy pursued by the Federal Reserve System. Higher government spending will not lead to more rapid monetary growth and inflation if the additional spending is financed either by taxes or by borrowing from the public. In both cases, the government has more to spend, the public less.

Jihad vs. McWorld: Terrorism's Challenge to Democracy by Benjamin Barber

airport security, Alvin Toffler, anti-communist, Apple's 1984 Super Bowl advert, Ayatollah Khomeini, Berlin Wall, borderless world, Bretton Woods, British Empire, classic study, computer age, Corn Laws, Corrections Corporation of America, David Brooks, deindustrialization, Deng Xiaoping, digital map, export processing zone, Fall of the Berlin Wall, Francis Fukuyama: the end of history, full employment, George Gilder, global village, invisible hand, It's morning again in America, Joan Didion, Kevin Kelly, laissez-faire capitalism, late capitalism, Live Aid, market fundamentalism, Marshall McLuhan, minimum wage unemployment, new economy, Norbert Wiener, North Sea oil, off-the-grid, pirate software, Plato's cave, postnationalism / post nation state, profit motive, race to the bottom, Right to Buy, road to serfdom, Ronald Reagan, The Wealth of Nations by Adam Smith, Thomas L Friedman, undersea cable, vertical integration, young professional, zero-sum game

Not long after World War II, Victor Lebow recognized that “Our enormously productive economy … demands that we make consumption our way of life, that we convert the buying and selling of goods into rituals, that we seek our spiritual satisfaction, our ego satisfaction, in consumption.”8 Today, as Alan Durning remarks, “the words ‘consumer’ and ‘person’ have become virtual synonyms. The world economy,” Durning concludes, “is currently organized to furnish I. I billion people with a consumer life-style long on things but short on time High consumption is a precondition to neither full employment nor the end of poverty.”9 It is this world that the consumers of Ireland and Palestine and South Africa are now free to join. But full employment and social justice, or a lifestyle that leaves time to enjoy the goods wealth and education produce, are the concerns of citizens, not consumers, and the release from Jihad will not automatically make them citizens. Until McWorld finds a way to nurture citizens as successfully as it nurtures buyers and sellers, such aims will be systematically neglected, whatever innovative transnational institutions are introduced.

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“Communist” Vietnam is not far behind, and was opened to American trade recently, presumably on the strength of the belief that markets ultimately defeat ideology.24 Capitalism requires consumers with access to markets and a stable political climate in order to succeed: such conditions may or may not be fostered by democracy, which can be disorderly and even anarchic, especially in its early stages, and which often pursues public goods costly to or at odds with private-market imperatives—environmentalism or full employment for example. On the level of the individual, capitalism seeks consumers susceptible to the shaping of their needs and the manipulation of their wants while democracy needs citizens autonomous in their thoughts and independent in their deliberative judgments. Aleksandr Solzhenitsyn wishes to “tame savage capitalism,” but capitalism wishes to tame anarchic democracy and appears to have little problem tolerating tyranny as long as it secures stability.25 Certainly the hurried pursuit of free markets regardless of social consequences has put democratic development in jeopardy in many nations recently liberated from communism.26 Social insecurity and rampant unemployment for peoples accustomed to the cradle-to-the-grave ministrations of paternalistic socialist bureacracies are unlikely to convert them to a system of democracy for which they have otherwise had no preparation.

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Many modern nation-states have generated national industrial policies aimed at strategic coordination of economic policy and domination of international markets by their business corporations on the theory that the nation’s citizens will somehow be benefited by supporting corporations even if corporations decline to return the favor. Yet although full employment is a public good, it is not a corporate good. Business efficiency dictates downsizing, which means capital-intensive production, and capital-intensive production means labor-minimizing job policies. Translated into English this means firing as many permanent workers as possible and eliminating their costly benefit and pension packages.

Creating Unequal Futures?: Rethinking Poverty, Inequality and Disadvantage by Ruth Fincher, Peter Saunders

barriers to entry, classic study, ending welfare as we know it, financial independence, full employment, gentrification, Gini coefficient, income inequality, income per capita, labour market flexibility, labour mobility, longitudinal study, low skilled workers, low-wage service sector, marginal employment, minimum wage unemployment, New Urbanism, open economy, pink-collar, positional goods, purchasing power parity, shareholder value, spread of share-ownership, The Bell Curve by Richard Herrnstein and Charles Murray, urban planning, urban renewal, very high income, women in the workforce, working poor, working-age population

., Arum, R. and Voss, K. 1996 ‘The political economy of inequality in the ‘‘age of extremes’’’ Demography vol. 33, no. 4, pp. 421–5 Howarth, C., Kenway, P. , Palmer, G. and Street, C. 1999 Monitoring Poverty and Social Exclusion: Labour’s Inheritance, Joseph Rowntree Foundation, York Hughes, H. 1994, Achieving Full Employment Discussion Paper No. 1, Full Employment Project, Institute of Public Affairs and Melbourne University, Melbourne Hunter. B. 1997a ‘An indigenous worker’s guide to the Workplace Relations and Other Legislation Amendment Act’ Journal of Industrial Relations vol. 39, no. 4, pp. 439–56 ——1997b ‘The determinants of indigenous employment outcomes: the importance of education and training’ Australian Bulletin of Labour vol. 23, no. 3, pp. 177–92 ——1999 Three Nations, Not One: Indigenous and Other Australian Poverty CAEPR Working Paper No. 1, Centre for Aboriginal Economic and Policy Research, The Australian National University, Canberra Hunter, B.H. and Gray, M.C. 1999 Income Fluctuations over the Lifecycle— A Cohort Analysis of Indigenous and Non-indigenous Australians, 1986–96 CAEPR Discussion Paper No. 183, Centre for Aboriginal 237 PDF OUTPUT c: ALLEN & UNWIN r: DP2\BP4401W\MAIN p: (02) 6232 5991 f: (02) 6232 4995 36 DAGLISH STREET CURTIN ACT 2605 237 CREATING UNEQUAL FUTURES?

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Model: Jobs and Wages in a Deregulated Economy, Economic Policy Institute, Washington Mitchell, D. 1991 Income Transfers in Ten Welfare States, Aldershot, Avebury Mitchell, D. and Harding, A. 1993 Changes in Poverty Among Families During the 1990s: Poverty Gap Versus Poverty Head-count Approaches Discussion Paper No. 2, National Centre for Social and Economic Modelling, University of Canberra Mitchell, W.F. 1999 ‘Full employment abandoned—the macroeconomic story’, Out of the Rut: Making Labor a Genuine Alternative eds M. Carman and I. Rogers, Allen & Unwin, St Leonards Mitchell, W.F and Watts, M.J. 1997 ‘The path to full employment’ Australian Economic Review vol. 30, no. 4, pp. 436–44 Moore, D. 1998 Why Regulation of the Labour Market is Inequitable, Outdated and Inefficient, Occasional Address to Annual Meeting of the HR Nicholls Society, 30 November Morehead, A., Steele, M., Alexander, M., Stephen, K. and Duffin, L. 1997 Change at Work: The 1995 Australian Workplace Industrial Relations Survey (AWIRS 95), Longman, South Melbourne Morris, P. 1996 ‘Newspapers and the new information media’ Media International Australia no. 17, pp. 10–21 Mullins, P. 1991 ‘Tourism urbanisation’ International Journal of Urban and Regional Research vol. 15, no. 3, pp. 326–42 Murie, A. and Musterd, S. 1996 ‘Social segregation, housing tenure and social change in Dutch cities in the late 1980s’ Urban Studies vol. 33, no. 3, pp. 495–516 Murphy, P. and Watson, S. 1994 ‘Social polarisation and Australian cities’ International Journal of Urban and Regional Research vol. 8, no. 4, pp. 573–90 Murray, C. 1984 Losing Ground New York, Basic Books 240 PDF OUTPUT c: ALLEN & UNWIN r: DP2\BP4401W\MAIN p: (02) 6232 5991 f: (02) 6232 4995 36 DAGLISH STREET CURTIN ACT 2605 240 REFERENCES National Board of Employment, Education and Training: Higher Education Council 1996 Equality, Diversity and Excellence: Advancing the National Higher Education Equity Framework, AGPS, Canberra National Commission of Audit 1996 Report to the Commonwealth Government, AGPS, Canberra National Health Strategy 1992 Enough to Make you Sick: How Income and Environment Affect Health, Research Paper No. 1, National Health Strategy, Melbourne National Inquiry into the Separation of Aboriginal and Torres Strait Islanders from their Families 1997 Bringing Them Home: National Inquiry into the Separation of Aboriginal and Torres Strait Islander Children from their Families, Human Rights and Equal Opportunity Commission, Sydney Neumark, D. and Wascher, W. 1997 Do Minimum Wages Fight Poverty?

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Evidence from the Luxembourg Income Study Project, Discussion Paper No. 81, Social Policy Research Centre, University of New South Wales, Sydney Saunders, P. and Whiteford, P. 1989 Measuring Poverty: A Review of the Issues Discussion Paper 88/11, Economic Planning Advisory Council, Canberra Sawyer, M. 1976 Income Distribution OECD Occasional Studies, OECD, Paris Schlesinger, P. 1972 The Sociology of Knowledge paper presented to the 1972 Meeting of the British Sociological Association Schmid, G. 1995 ‘Is full employment still possible? Transitional labour markets as a new strategy of labour market policy’ Economic and Industrial Democracy vol. 16, no. 3 Schmid, G. and Auer, P. 1998 ‘Transitional labour markets: concepts and examples in Europe’ New Institutional Arrangements in the Labour Market: Transitional Labour Markets as a New Full Employment Concept, European Academy of the Urban Environment, Berlin Schmid, G. et al. 1996 International Handbook of Labour Market Policy and Evaluation, Edward Edgar, Cheltenham, UK Sen, A. 1982 Poverty and Famines, Clarendon Press, Oxford ——1983 ‘Poor, relatively speaking’ Oxford Economic Papers, vol. 35, pp. 153–69 ——1985 Commodities and Capabilities, North Holland, Amsterdam ——1992 Inequality Re-examined, Oxford University Press, Oxford ——1997 ‘Inequality, unemployment and contemporary Europe’ International Labour Review vol. 136, no. 2, pp. 155–72 Shaver, S. 1990 Gender, Social Policy Regimes and the Welfare State, Discussion Paper No. 26, Social Policy Research Centre, University of New South Wales, Sydney Shaver, S. and Bradshaw, J. 1993 The Recognition of Wifely Labour by Welfare States, Discussion Paper No. 44, Social Policy Research Centre, University of New South Wales, Sydney Smeeding, T.M. 1997 Financial Poverty in Developed Countries: The Evidence from LIS Final Report to the United Nations Development Programme, LIS Working Paper No. 155, CEPS/INSTEAD, Luxembourg Smeeding, T., O’Higgins, M. and Rainwater, L. eds 1990 Poverty, Inequality and Income Distribution in Comparative Perspective, Harvester Wheatsheaf, Hemel Hempstead Smeeding, T. et al. 1992 Noncash Income, Living Standards and Inequality: 244 PDF OUTPUT c: ALLEN & UNWIN r: DP2\BP4401W\MAIN p: (02) 6232 5991 f: (02) 6232 4995 36 DAGLISH STREET CURTIN ACT 2605 244 REFERENCES Evidence from the Luxembourg Income Study, LIS Working Paper No. 79, CEPS/INSTEAD, Luxembourg Smeeding, T. and Coder, J. 1993 Income Inequality in Rich Countries During the 1980s LIS Working Paper No. 88, CEPS/INSTEAD, Luxembourg Society of St Vincent de Paul 1999 The ‘Hidden Faces’ of Poverty.

Austerity Britain: 1945-51 by David Kynaston

Alistair Cooke, anti-communist, Arthur Marwick, British Empire, Chelsea Manning, collective bargaining, continuous integration, deindustrialization, deskilling, Etonian, full employment, garden city movement, hiring and firing, industrial cluster, invisible hand, job satisfaction, labour mobility, Lewis Mumford, light touch regulation, mass immigration, moral panic, Neil Kinnock, occupational segregation, price mechanism, public intellectual, rent control, reserve currency, road to serfdom, Ronald Reagan, shared worldview, stakhanovite, strikebreaker, the market place, upwardly mobile, urban planning, urban renewal, very high income, wage slave, washing machines reduced drudgery, wealth creators, women in the workforce, young professional

Overall, most historians are agreed with Correlli Barnett that a more modest appraisal of Britain’s place in the world, accompanied by lower levels of taxation, would have been beneficial to the productive economy – especially in terms of investment at a time when so much plant and machinery was rundown or even destroyed. Where his case becomes much more controversial is in his often polemical attack on what he sees as the unnecessary twin burdens of full employment and the welfare state. ‘The Pervasive Harm of “Full Employment”’ is one of the chapter titles in The Lost Victory – a doctrine embodied in the strongly Keynesian White Paper of 1944 and typically castigated by Barnett as ‘not so much a Schwerpunkt as a shackle’. He argues vigorously that it was a doctrine that owed everything to faulty perceptions of the inter-war years, when in fact, ‘except during the hurricane of the world’s slump in 1930–3’, unemployment had ‘never constituted a general problem . . . but a local and structural one’.

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In it he set out proposals for a comprehensive post-war system of social security, in effect laying the foundations for the ‘classic’ welfare state – an attack upon what he memorably depicted as ‘the five giant evils’ of want, disease, ignorance, squalor and idleness – and in so doing caused such a stir that an extraordinary 630,000 copies of the report (mainly the abridged, popular edition) were sold. Then, in 1944, as the war began to draw to a close, there were two major ‘reconstruction’ moments: in May the publication of a White Paper that committed the British government to the pursuit of full employment as the highest economic objective; and in August the arrival on the statute book of R. A. (‘Rab’) Butler’s Education Act, which, among other things, created free, non-fee-paying grammar schools. To all appearances the reforming, forward-looking tide was running fast. Who Else Is Rank was the symptomatic title of an unpublished novel co-written the following winter by a 22-year-old Kingsley Amis and a fellow Signals officer.

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‘We must see to it after we’re demobilised,’ the Amis figure (a sensitive young lieutenant) says at one point, ‘that these common men, from whom we’re separated only by a traditional barrier – we’re no more than common men ourselves – benefit from the work that has been done, and if the system won’t let that happen, well, we shall just have to change the system.’3. In April 1945, as Hitler made his last stand in Berlin, the Labour Party issued its manifesto for the election that was bound to follow the end of the war. Called Let Us Face the Future, it demanded decisive action by the state to ensure full employment, the nationalisation of several key industries, an urgent housing programme, the creation of a new national health service and (in a nod to Beveridge) ‘social provision against rainy days’. The tone was admirably lacking in bombast but distinctly high-minded. ‘The problems and pressures of the post-war world,’ the fairly brief document declared, ‘threaten our security and progress as surely as – though less dramatically than – the Germans threatened them in 1940.

A Pelican Introduction: Basic Income by Guy Standing

"World Economic Forum" Davos, anti-fragile, bank run, basic income, behavioural economics, Bernie Sanders, Bertrand Russell: In Praise of Idleness, Black Lives Matter, Black Swan, Boris Johnson, British Empire, carbon tax, centre right, collective bargaining, cryptocurrency, David Graeber, declining real wages, degrowth, deindustrialization, Donald Trump, Elon Musk, Fellow of the Royal Society, financial intermediation, full employment, future of work, gig economy, Gunnar Myrdal, housing crisis, hydraulic fracturing, income inequality, independent contractor, intangible asset, Jeremy Corbyn, job automation, job satisfaction, Joi Ito, labour market flexibility, land value tax, libertarian paternalism, low skilled workers, lump of labour, Marc Benioff, Mark Zuckerberg, Martin Wolf, mass immigration, mass incarceration, moral hazard, Nelson Mandela, nudge theory, offshore financial centre, open economy, Panopticon Jeremy Bentham, Paul Samuelson, plutocrats, precariat, quantitative easing, randomized controlled trial, rent control, rent-seeking, Salesforce, Sam Altman, self-driving car, shareholder value, sharing economy, Silicon Valley, sovereign wealth fund, Stephen Hawking, The Future of Employment, universal basic income, Wolfgang Streeck, women in the workforce, working poor, Y Combinator, Zipcar

A Basic Income Would Distract from Progressive Policies, Such as ‘Full Employment’ There are several ways of rebutting this version of Hirschmann’s ‘jeopardy’ point. First, in the second decade of the twenty-first century, where is the pressure to achieve other progressive policies? The growth and level of inequality are almost unprecedented; economic insecurity is pervasive; full employment has been redefined to be about 5 per cent unemployment with much ‘underemployment’, concealed by labour statistics that are unfit for purpose; and, above all, the growing precariat has been neglected by mainstream politics. Second, why should ‘full employment’ be regarded as a progressive policy?

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If the basic income was funded by switching public expenditure rather than by additional spending, the inflationary effect would be minimal. As Geoff Crocker has shown, only if aggregate spending power were higher than economic production (GDP) could there be an inflationary impact.12 The inflation claim would only be valid in relation to an economy that was at or close to ‘full employment’. No modern economy is close to ‘full employment’. And labour markets are much more open than they used to be, so any increase in the demand for labour could be expected to lead either to more labour force entrants or, more likely, to a relative shift of jobs abroad, dampening the impact on wages. It is worth pointing out that, in recent years, central banks and governments around the world have been desperately trying to overcome price deflation (falling prices) and to increase inflation.

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After the Second World War, the ‘right’ was formalized in Article 23 of the Universal Declaration of Human Rights of 1948, as follows: ‘Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment.’ This commitment coincided with a sudden faith in the ability, and thus duty, of governments to create ‘full employment’ (which really meant ‘full employment’ of men). The International Labour Organization went a step further in its Employment Policy Convention No.122 of 1964. Although the Convention did not include an obligation on governments to commit to a ‘right to work’ in those words, it was subsequently interpreted that way.

A Brief History of Neoliberalism by David Harvey

"World Economic Forum" Davos, affirmative action, air traffic controllers' union, Asian financial crisis, Berlin Wall, Bretton Woods, business climate, business cycle, California energy crisis, capital controls, centre right, collective bargaining, creative destruction, crony capitalism, debt deflation, declining real wages, deglobalization, deindustrialization, Deng Xiaoping, Fall of the Berlin Wall, financial deregulation, financial intermediation, financial repression, full employment, gentrification, George Gilder, Gini coefficient, global reserve currency, Great Leap Forward, illegal immigration, income inequality, informal economy, labour market flexibility, land tenure, late capitalism, Long Term Capital Management, low interest rates, low-wage service sector, manufacturing employment, market fundamentalism, mass immigration, means of production, megaproject, Mexican peso crisis / tequila crisis, military-industrial complex, Mont Pelerin Society, mortgage tax deduction, neoliberal agenda, new economy, Pearl River Delta, phenotype, Ponzi scheme, price mechanism, race to the bottom, rent-seeking, reserve currency, Ronald Reagan, Savings and loan crisis, Silicon Valley, special economic zone, structural adjustment programs, Suez crisis 1956, the built environment, The Chicago School, Tragedy of the Commons, transaction costs, union organizing, urban renewal, urban sprawl, Washington Consensus, We are all Keynesians now, Winter of Discontent

The US itself turned towards a liberal democratic state form, and Japan, under the close supervision of the US, built a nominally democratic but in practice highly bureaucratic state apparatus empowered to oversee the reconstruction of that country. What all of these various state forms had in common was an acceptance that the state should focus on full employment, economic growth, and the welfare of its citizens, and that state power should be freely deployed, alongside of or, if necessary, intervening in or even substituting for market processes to achieve these ends. Fiscal and monetary policies usually dubbed ‘Keynesian’ were widely deployed to dampen business cycles and to ensure reasonably full employment. A ‘class compromise’ between capital and labour was generally advocated as the key guarantor of domestic peace and tranquillity.

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In October 1979 Paul Volcker, chairman of the US Federal Reserve Bank under President Carter, engineered a draconian shift in US monetary policy.18 The long-standing commitment in the US liberal democratic state to the principles of the New Deal, which meant broadly Keynesian fiscal and monetary policies with full employment as the key objective, was abandoned in favour of a policy designed to quell inflation no matter what the consequences might be for employment. The real rate of interest, which had often been negative during the double-digit inflationary surge of the 1970s, was rendered positive by fiat of the Federal Reserve (Figure 1.5).

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Since degree of neoliberalization was increasingly taken by the IMF and the World Bank as a measure of a good business climate, the pressure on all states to adopt neoliberal reforms ratcheted upwards.2 Thirdly, the Wall Street–IMF–Treasury complex that came to dominate economic policy in the Clinton years was able to persuade, cajole, and (thanks to structural adjustment programmes administered by the IMF) coerce many developing countries to take the neoliberal road.3 The US also used the carrot of preferential access to its huge consumer market to persuade many countries to reform their economies along neoliberal lines (in some instances through bilateral trade agreements). These policies helped produce a boom in the US in the 1990s. The US, riding a wave of technological innovation that underpinned the rise of a so-called ‘new economy’, looked as if it had the answer and that its policies were worthy of emulation, even though the relatively full employment achieved was at low rates of pay under conditions of diminishing social protections (the number of people without health insurance grew). Flexibility in labour markets and reductions in welfare provision (Clinton’s draconian overhaul of ‘the welfare system as we know it’) began to pay off for the US and put competitive pressures on the more rigid labour markets that prevailed in most of Europe (with the exception of Britain) and Japan.

What Would the Great Economists Do?: How Twelve Brilliant Minds Would Solve Today's Biggest Problems by Linda Yueh

3D printing, additive manufacturing, Asian financial crisis, augmented reality, bank run, banking crisis, basic income, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bike sharing, bitcoin, Branko Milanovic, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, computer age, Corn Laws, creative destruction, credit crunch, Credit Default Swap, cryptocurrency, currency peg, dark matter, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, endogenous growth, everywhere but in the productivity statistics, export processing zone, Fall of the Berlin Wall, fear of failure, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, fixed income, forward guidance, full employment, general purpose technology, Gini coefficient, Glass-Steagall Act, global supply chain, Great Leap Forward, Gunnar Myrdal, Hyman Minsky, income inequality, index card, indoor plumbing, industrial robot, information asymmetry, intangible asset, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, laissez-faire capitalism, land reform, lateral thinking, life extension, low interest rates, low-wage service sector, manufacturing employment, market bubble, means of production, middle-income trap, mittelstand, Money creation, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, Nelson Mandela, non-tariff barriers, Northern Rock, Occupy movement, oil shale / tar sands, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, Productivity paradox, purchasing power parity, quantitative easing, RAND corporation, rent control, rent-seeking, reserve currency, reshoring, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, school vouchers, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, special economic zone, Steve Jobs, technological determinism, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, total factor productivity, trade liberalization, universal basic income, unorthodox policies, Washington Consensus, We are the 99%, women in the workforce, working-age population

He argued that, even in normal times, the incentive to invest is too weak and the propensity to hoard cash is too strong. Without the necessary investment, the economy tends to operate at less than full employment, where all labour is deployed productively. If there were also a ‘shock’ to investment demand, such as a stock market crash, output and employment would decline, resulting in economic slumps. So, Keynes proposed that governments should incur debt to move the economy back to full employment. He stressed that government borrowing to spend need not be inflationary if the economy was operating below its potential, and advocated deficit spending, where the government borrowed to spend during downturns and repaid debt during the good times: ‘The boom not the slump is the right time for austerity.’18 A practical economist, he proposed a board of public investment to plan to have a stock of projects ready for when other types of investments started to decline.

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So, the role of government in promoting employment and reviving growth is front and centre in public policy. It is well known that Keynes did not believe in the market’s ability to self-correct, which was the dominant economic thinking at the time. Instead, he argued for government spending, and incurring a budget deficit if necessary, to bring the economy back to full employment. His views were shaped by the persistently high unemployment rates that followed the Great Depression, and Keynes’s ideas made him an influential figure, even posthumously during the post-war period which saw the birth of large government programmes such as the welfare state. In another parallel to today, the dominant economic debate since the Great Recession of 2009 has been over austerity – cutting government spending and raising taxes to reduce the budget deficit.

…

In another parallel to today, the dominant economic debate since the Great Recession of 2009 has been over austerity – cutting government spending and raising taxes to reduce the budget deficit. One of the results of austerity measures is a huge drop in government/public/state investment, which hampers economic growth. Looking ahead, what would Keynes advise today’s governments to do about public investment, an important driver of growth and full employment in the economy? Another big economic debate is over how to make economies more productive. Recovery since the financial crisis has been slow by historical standards. Raising productivity, which has stagnated in many developed economies, is crucial if the economy is to grow; but it requires innovation.

The Great Economists: How Their Ideas Can Help Us Today by Linda Yueh

3D printing, additive manufacturing, Asian financial crisis, augmented reality, bank run, banking crisis, basic income, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bike sharing, bitcoin, Branko Milanovic, Bretton Woods, BRICs, business cycle, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, computer age, Corn Laws, creative destruction, credit crunch, Credit Default Swap, cryptocurrency, currency peg, dark matter, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, endogenous growth, everywhere but in the productivity statistics, export processing zone, Fall of the Berlin Wall, fear of failure, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, fixed income, forward guidance, full employment, general purpose technology, Gini coefficient, Glass-Steagall Act, global supply chain, Great Leap Forward, Gunnar Myrdal, Hyman Minsky, income inequality, index card, indoor plumbing, industrial robot, information asymmetry, intangible asset, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, laissez-faire capitalism, land reform, lateral thinking, life extension, low interest rates, manufacturing employment, market bubble, means of production, middle-income trap, mittelstand, Money creation, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, Nelson Mandela, non-tariff barriers, Northern Rock, Occupy movement, oil shale / tar sands, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, Productivity paradox, purchasing power parity, quantitative easing, RAND corporation, rent control, rent-seeking, reserve currency, reshoring, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, school vouchers, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Simon Kuznets, special economic zone, Steve Jobs, technological determinism, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, total factor productivity, trade liberalization, universal basic income, unorthodox policies, Washington Consensus, We are the 99%, women in the workforce, working-age population

He argued that, even in normal times, the incentive to invest is too weak and the propensity to hoard cash is too strong. Without the necessary investment, the economy tends to operate at less than full employment, where all labour is deployed productively. If there were also a ‘shock’ to investment demand, such as a stock market crash, output and employment would decline, resulting in economic slumps. So, Keynes proposed that governments should incur debt to move the economy back to full employment. He stressed that government borrowing to spend need not be inflationary if the economy was operating below its potential, and advocated deficit spending, where the government borrowed to spend during downturns and repaid debt during the good times: ‘The boom not the slump is the right time for austerity.’18 A practical economist, he proposed a board of public investment to plan to have a stock of projects ready for when other types of investments started to decline.

…

So, the role of government in promoting employment and reviving growth is front and centre in public policy. It is well known that Keynes did not believe in the market’s ability to self-correct, which was the dominant economic thinking at the time. Instead, he argued for government spending, and incurring a budget deficit if necessary, to bring the economy back to full employment. His views were shaped by the persistently high unemployment rates that followed the Great Depression, and Keynes’s ideas made him an influential figure, even posthumously during the post-war period which saw the birth of large government programmes such as the welfare state. In another parallel to today, the dominant economic debate since the Great Recession of 2009 has been over austerity – cutting government spending and raising taxes to reduce the budget deficit.

…

In another parallel to today, the dominant economic debate since the Great Recession of 2009 has been over austerity – cutting government spending and raising taxes to reduce the budget deficit. One of the results of austerity measures is a huge drop in government/public/state investment, which hampers economic growth. Looking ahead, what would Keynes advise today’s governments to do about public investment, an important driver of growth and full employment in the economy? Another big economic debate is over how to make economies more productive. Recovery since the financial crisis has been slow by historical standards. Raising productivity, which has stagnated in many developed economies, is crucial if the economy is to grow; but it requires innovation.

Success and Luck: Good Fortune and the Myth of Meritocracy by Robert H. Frank

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Alan Greenspan, Amazon Mechanical Turk, American Society of Civil Engineers: Report Card, attribution theory, availability heuristic, behavioural economics, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, carried interest, Daniel Kahneman / Amos Tversky, David Brooks, deliberate practice, en.wikipedia.org, endowment effect, experimental subject, framing effect, full employment, Gary Kildall, high-speed rail, hindsight bias, If something cannot go on forever, it will stop - Herbert Stein's Law, income inequality, invisible hand, labor-force participation, lake wobegon effect, loss aversion, low interest rates, meritocracy, minimum wage unemployment, Network effects, Paradox of Choice, Paul Samuelson, Report Card for America’s Infrastructure, Richard Thaler, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Rory Sutherland, selection bias, side project, sovereign wealth fund, Steve Jobs, the long tail, The Wealth of Nations by Adam Smith, Tim Cook: Apple, ultimatum game, Vincenzo Peruggia: Mona Lisa, winner-take-all economy

The basic problem plaguing an economy operating at less than full employment is that low levels of total spending enable producers to serve their customers without having to hire everyone who wants to work. So, by making the after-tax price of consumer goods higher, taxing consumption would indeed inhibit spending, exacerbating an already sluggish economy. Since the economies of most nations have not yet recovered fully from the global financial crisis of 2008, adoption of a progressive consumption tax should be postponed until full employment has again been restored. Once that happens, the progressive consumption tax should be phased in slowly, allowing it to gradually replace the income tax.

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At the same, the availability of additional savings would cause interest rates to fall, which would give firms an incentive to increase their investment spending. For each dollar by which consumption went down, then, investment would go up by a dollar, leaving total spending the same as before. An economy’s ability to achieve full employment depends on its total spending, not on how that total is apportioned between consumption and investment. So a progressive consumption tax would not cause the economy to slow down, provided it was already operating at full employment. On the contrary, the progressive consumption tax would actually stimulate long-term economic growth in a fully employed economy. With higher investment and lower consumption, more workers would be employed to produce investment goods and fewer to produce consumer goods.

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The mere announcement that a progressive consumption tax was coming would stimulate hundreds of billions of dollars of additional private spending. Building larger mansions may not make the wealthy any happier, but it does create jobs for unemployed architects and carpenters. Phased in gradually when the economy is back at full employment, a progressive consumption tax would induce a gradual shift in the composition of national spending. The proportion devoted to luxury consumption would slowly decline, while the proportion devoted to investment would slowly rise. A progressive consumption tax implemented in that way would not reduce the number of jobs; it would merely alter the mix of tasks that get done.

The State and the Stork: The Population Debate and Policy Making in US History by Derek S. Hoff

affirmative action, Alan Greenspan, Alfred Russel Wallace, back-to-the-land, British Empire, business cycle, classic study, clean water, creative destruction, David Ricardo: comparative advantage, demographic transition, desegregation, Edward Glaeser, feminist movement, full employment, garden city movement, Garrett Hardin, George Gilder, Gregor Mendel, Gunnar Myrdal, guns versus butter model, Herman Kahn, immigration reform, income inequality, income per capita, invisible hand, It's morning again in America, Jane Jacobs, John Maynard Keynes: technological unemployment, Joseph Schumpeter, labor-force participation, Lewis Mumford, manufacturing employment, mass immigration, New Economic Geography, new economy, old age dependency ratio, open immigration, Paul Samuelson, peak oil, pensions crisis, profit motive, public intellectual, Ralph Waldo Emerson, road to serfdom, Robert Solow, Ronald Reagan, scientific management, Scientific racism, secular stagnation, Simon Kuznets, The Chicago School, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, Thorstein Veblen, Tragedy of the Commons, trickle-down economics, urban planning, urban sprawl, W. E. B. Du Bois, wage slave, War on Poverty, white flight, zero-sum game

In Population Growth and Levels of Consumption (1956), Belshaw argued that the former generally hindered the latter. Perhaps demographic expansion offers poorly performing economies a meager boost, but any benefits while at full employment are the “exception rather than the rule.”87 “The case for population growth in terms of . . . [higher] consumption,” he concluded, “rests on the failure to sustain full employment by other means.”88 Minimization of the importance of population growth also emanated, ironically, from some theorists who, despite the obvious inaccuracy of 1930s secular-stagnation theory’s predictions of the end of economic growth, continued to believe that modern capitalism had run its course.

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Right now, we are not making it.”46 The idea of a demographically induced gap between current and necessary economic growth received the administration’s stamp of approval in the 1962 Economic Report of the President, which CEA member James Tobin called one of the agency’s two “economic manifestos” (the other came under Ronald Reagan).47 The impression that the demographic bubble forced the economy to work harder just to stand still was thus an important weapon in the push for an aggressive full-employment policy, which culminated in major Keynesian-inspired tax cuts in 1964. managing the great society’s population growth 143 The aggregate-demand camp’s emphasis on the sluggish macroeconomy did not run counter to SPK.48 The community of economists surrounding the Kennedy and Johnson administrations maintained that, given the state’s ability to spur prosperity and full employment, population growth was a neutral economic variable—and hence the regulation of population growth proposed from various quarters could proceed.

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He had long been impressed by historical connections between demographic and economic expansion, although he believed that the causal link between them was tenuous.118 In the 1960s, Kuznets would move into the pro–population growth camp, but in the 1950s he was still sympathetic to the Coale-Hoover paradigm that rapid population growth—what he called “population swarming”—stunts capital formation and income growth.119 At the 1954 Columbia University Conference on Economic Welfare, Kuznets doubted whether continual population growth is necessary to preserve full employment, noting the “elusive . . . indirect association between population growth patterns and economic growth.”120 At the Population Council meeting, Kuznets declared that neither Harberger nor Spengler had sufficient evidence to prove the forecast that continued population growth would stunt per capita income, and he retained his view that the relationship between population and economic growth was unresolved.121 Overall, the meeting’s participants seem to have debated to a draw, and Osborn captured the unresolved nature of the economic debate when he wrote in his summary: “Economists seem generally to agree that per capita production and per capita consumption are now handicapped rather than benefitted by further increase in numbers of people, though technical advances, new capital and other factors will for a long time to come more than offset this handicap.”122 Though population anxiety remained widespread, several theoretical contradictions and barriers squeezed the economic case against population growth.

World Economy Since the Wars: A Personal View by John Kenneth Galbraith

business cycle, central bank independence, classic study, flying shuttle, full employment, income inequality, James Hargreaves, James Watt: steam engine, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, low interest rates, means of production, planned obsolescence, price discrimination, price stability, road to serfdom, Ronald Reagan, spinning jenny, The Wealth of Nations by Adam Smith, Thorstein Veblen, union organizing, War on Poverty

Let him assume that a President, or other candidate for reelection to major public office, has the opportunity of defending a large increase in man-hour productivity which has been divided equally between greatly increased total output and greatly increased unemployment. And let it be assumed that as an alternative he might choose unchanged productivity which has left everyone employed. That full employment is more desirable than increased production combined with unemployment would be clear alike to the most sophisticated and the most primitive politician. The foregoing provides the basic rule of procedure for the remainder of this essay. It shows that, in the absence of a genuine grading up of lower incomes, we need not be much concerned with the supply of goods for their own sake.

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Were the economy given to occasional bouts of stimulation with excessive investment and rising prices—the business cycle of the central economic tradition—then countercyclical repression of demand might involve no serious problem. Some who have seen no conflict between fiscal policy and growth have, without doubt, viewed it in such a context. But if full employment and full use of capacity is taken as the norm of economic policy, as in modern times it is, then the rate of investment associated with full use of capacity is also normal. A policy which holds production below capacity in the interest of price stability inescapably sacrifices economic growth.

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IV So long as the use of fiscal policy is in unresolved conflict with other and prior economic goals, it will not be used with effective vigor, at least in peacetime. This conflict and the resulting inutility of fiscal measures are not yet widely conceded by economists. The textbooks still elucidate the use of fiscal measures as a device for ensuring price stability. They concede that we must settle for something less than completely full employment and that this will offer difficulties. But they assume that, given inflation, taxes can be increased. The only difficulty is that the policy never looks practical at any particular moment. While the conflict with other goals persists, it never will. One last possibility remains. That is to combine fiscal policy with control over prices and wages.

Austerity: The History of a Dangerous Idea by Mark Blyth

"there is no alternative" (TINA), accounting loophole / creative accounting, Alan Greenspan, balance sheet recession, bank run, banking crisis, Bear Stearns, Black Swan, book value, Bretton Woods, business cycle, buy and hold, capital controls, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, deindustrialization, disintermediation, diversification, en.wikipedia.org, ending welfare as we know it, Eugene Fama: efficient market hypothesis, eurozone crisis, financial engineering, financial repression, fixed income, floating exchange rates, Fractional reserve banking, full employment, German hyperinflation, Gini coefficient, global reserve currency, Greenspan put, Growth in a Time of Debt, high-speed rail, Hyman Minsky, income inequality, information asymmetry, interest rate swap, invisible hand, Irish property bubble, Joseph Schumpeter, Kenneth Rogoff, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, Long Term Capital Management, low interest rates, market bubble, market clearing, Martin Wolf, Minsky moment, money market fund, moral hazard, mortgage debt, mortgage tax deduction, Occupy movement, offshore financial centre, paradox of thrift, Philip Mirowski, Phillips curve, Post-Keynesian economics, price stability, quantitative easing, rent-seeking, reserve currency, road to serfdom, Robert Solow, savings glut, short selling, structural adjustment programs, tail risk, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, Two Sigma, unorthodox policies, value at risk, Washington Consensus, zero-sum game

These same ideas were offered as explanations and implemented as policies in many countries in the 1920s and 1930s, and as we shall see in chapter 6, they didn’t work then either. As Keynes demonstrated, there is no reason for an economy to “naturally” return to a full-employment equilibrium after a shock. It can settle into a state far from full employment for a very long time.53 The Austrian explanation of sustained unemployment after a bust—the inability of the economy to self-heal as it should—is that trade unions are holding up the market-clearing wage. But in the United States, for example, where unions cover less than one in eight workers, such an explanation is simply not credible.54 Moreover, Germany and Sweden, countries with much higher unemployment rates through the business cycle, also have far higher unionization rates.

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In his assessment of George’s proposals, Keynes “first adumbrated the … relation of saving to investment.”88 That is, he argued that saving doesn’t drive investment if “investment is free to fluctuate under the influence of expectations” such that income and employment adjust to the ex post level of saving.89 As a consequence, government should “fill the gap/prime the pump” by spending money that business is sitting on because of uncertainty about the future. This view was extremely threatening to the Treasury since it implied that supply-side factors were insufficient to drive the economy to full employment. It required a response, which the Treasury duly provided in both the “Memoranda on Certain Proposals” and most publicly in Winston Churchill’s 1929 budget speech in which he argued that “when the Government borrow[s] in the money market it becomes a new competitor with industry and engrosses to itself resources which would otherwise have been employed by private enterprise, and in the process raises the rent of money to all who have need of it.”90 This is as pure a statement of the notion that the government crowds out investment as one can find.

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This, in turn, causes consumption to shrink, which in the aggregate pulls the economy down further and makes the debt to be paid back all the greater. Fourth, just as it does not follow that governments should always intervene to stave off market adjustments, as the “Greenspan put” and Ireland’s bank rescue showed only too well, to argue that there should never be intervention presumes knowledge of the system—it will return to full employment if left alone—that Austrians themselves say is impossible to attain. The Austrian counterfactual, that in the absence of interventions market allocation will be optimal, can never be satisfied. After all, if entrepreneurs are duped by short-term interest-rate cuts, there is no reason to assume that their choices would necessarily be any better than those of the state doing the duping when it comes to choosing how to allocate capital in the first instance.56 Fifth, one doesn’t have to accept a John Galt anti-inflationary capital strike thesis to explain why companies are currently sitting on tons of cash.

A Pelican Introduction Economics: A User's Guide by Ha-Joon Chang

"there is no alternative" (TINA), Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, antiwork, AOL-Time Warner, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Bear Stearns, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, Charles Babbage, collateralized debt obligation, colonial rule, Corn Laws, corporate governance, corporate raider, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, discovery of the americas, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, falling living standards, financial deregulation, financial engineering, financial innovation, flying shuttle, Ford Model T, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Akerlof, Gini coefficient, Glass-Steagall Act, global value chain, Goldman Sachs: Vampire Squid, Gordon Gekko, Great Leap Forward, greed is good, Gunnar Myrdal, Haber-Bosch Process, happiness index / gross national happiness, high net worth, income inequality, income per capita, information asymmetry, intangible asset, interchangeable parts, interest rate swap, inventory management, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, laissez-faire capitalism, land bank, land reform, liberation theology, manufacturing employment, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, Neal Stephenson, Nelson Mandela, Northern Rock, obamacare, offshore financial centre, oil shock, open borders, Pareto efficiency, Paul Samuelson, post-industrial society, precariat, principal–agent problem, profit maximization, profit motive, proprietary trading, purchasing power parity, quantitative easing, road to serfdom, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, scientific management, Scramble for Africa, search costs, shareholder value, Silicon Valley, Simon Kuznets, sovereign wealth fund, spinning jenny, structural adjustment programs, The Great Moderation, The Market for Lemons, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Vilfredo Pareto, Washington Consensus, working-age population, World Values Survey

If excess savings are reduced in this way, there will be no downward pressure on interest rates and thus no extra stimulus for investment. Keynes thought that investment will be high enough for full employment only when animal spirits – ‘a spontaneous urge to action rather than inaction’, as he defines it – of the potential investors are stimulated by new technologies, financial euphoria and other unusual events. The normal state of affairs, in his view, would be that investment is equated to savings at a level of effective demand (the demand that is actually backed up by purchasing power) that is insufficient to support full employment. In order to achieve full employment, Keynes argued, the government therefore has to use its spending actively to prop up the level of demand.18 Money gets a real job in economics: the Keynesian theory of finance The prevalence of uncertainty in Keynesian economics means that money is not simply an accounting unit or merely a convenient medium of exchange, as the Classical (and the Neoclassical) school thought.

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: the Keynesian explanation Keynes started from the obvious observation that an economy doesn’t consume all that it produces. The difference – that is, savings – needs to be invested, if everything that has been produced is to be sold and if all productive inputs, including the labour service of workers, are to be employed (this is known as full employment). Unfortunately, there is no guarantee that savings will equal investment, especially when those who invest and those who save are not one and the same, unlike in the early days of capitalism, when capitalists mostly invested out of their own savings and workers could not save, given their low wages.

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There are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don’t know. But there are also unknown unknowns. There are things we do not know we don’t know.’ The idea of ‘unknown unknowns’ nicely sums up Keynes’ concept of uncertainty. Active fiscal policy for full employment: the Keynesian solution In an uncertain world, investors may suddenly become pessimistic about the future and reduce their investments. In such a situation, there will be more savings than are needed – there will be, in technical terms, a ‘savings glut’. The Classical economists thought this glut would be sooner or later eliminated, as the lower demand for savings would drive the interest rate (that is, the price of borrowing, if you like) down, making investments more attractive.

Shadows of Empire: The Anglosphere in British Politics by Michael Kenny, Nick Pearce

battle of ideas, Berlin Wall, Boris Johnson, Bretton Woods, Brexit referendum, British Empire, colonial rule, corporate governance, Dominic Cummings, Donald Trump, eurozone crisis, Fall of the Berlin Wall, floating exchange rates, Francis Fukuyama: the end of history, full employment, global reserve currency, imperial preference, informal economy, invention of the telegraph, Khartoum Gordon, labour mobility, Les Trente Glorieuses, liberal capitalism, Mahatma Gandhi, mass immigration, Monroe Doctrine, Neal Stephenson, Nixon shock, public intellectual, quantitative easing, reserve currency, Ronald Reagan, Steve Bannon, Suez canal 1869, Suez crisis 1956, trade route, Washington Consensus

The managed international monetary system in which both the USA and the UK had a stake, as sovereigns of the world's two major currencies, was gradually replaced by a liberalised economic order under renewed American leadership. The class compromises of the post-war era, cemented on the foundations of full employment, real wage growth and the construction of the national welfare state, broke down, at first due to conflicts over coordinated wage restraint and the management of inflation, and later because of bitter struggles over the power of trade unions. At the same time, the Keynesian coordinates of macro-economic demand management and the maintenance of full employment were dismantled in favour of inflation control and public spending cuts. As the 1970s ended, Britain and the USA began the process of constructing a new neo-liberal political economy, with the financial sector at its heart.

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A full-blown sterling crisis ensued and dollar convertibility had to be suspended within weeks, followed by further rationing of food and petrol. The alternative option – of severe deflation to restore Britain's balance of payments – could not be countenanced, since it would mean sacrificing full employment and the building of the New Jerusalem on which the Attlee government was embarked. But the suspension of convertibility had to be acceptable to the USA, since it was being asked to continue to allow the sterling area to remain protected, with imperial tariff preferences, import controls on dollar goods, and a currency that could not be freely exchanged – ‘precisely those things that American leaders had been so determined to crush eighteen months earlier.’2 American forbearance when Britain defaulted on its loan terms was based on a new strategic assessment of the USA's economic and military interests.

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Support for the British Empire was the lodestar of his foreign policy, and he staunchly maintained it, even as he negotiated Australia's place within the USA's Pacific security umbrella (in 1951, to the UK's intense irritation, Australia and New Zealand took their place in the US constellation of Cold War alliances by signing the ANZUS Pact). Although, in the post-war era of full employment, Australia's labour supply needs could no longer be met by British migrants, it nonetheless maintained a ‘white’ immigration policy that lasted into the 1970s (the post-war Labour immigration minister, Arthur Calwell, notoriously declared when he deported Chinese refugees in 1947 that ‘Two Wongs don't make a White’).

Why Wages Rise by F. A. Harper

business cycle, collective bargaining, fixed income, full employment, means of production, wage slave

Let us take these Douglas-Pigou figures, leaning a bit on the conservative side of their conclusions. Let us say that the figure is 3 per cent. What would this mean when applied to real life? The accompanying chart of the wage level and unemployment shows how unemployment and the wage level are related on this three-to-one basis. At the free market wage of 100 (base scale) there is full employment — no unemployment. Everyone who really wants to work has a job. Now assume that wages are to be forced above the free market level (moving leftward from 100, on the base scale). Employment declines — unemployment increases — at a rapid rate, according to the factor of three. Starting from whatever level one wants to consider, a one per cent rise in wages will reduce employment by 3 per cent.

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Or one might ask people who are not working whether they have turned down jobs at the price offered, or whether they are out of work because they couldn’t find any jobs at any price. Moving in the opposite direction of wages below the free market price (rightward from 100, on the base scale) results in the opposite tendency. More and more people are wanted for work. But since there is full employment at the free market wage, reductions in wages from that point can cause “negative unemployment” only under special conditions. New persons not normally in the working force may be pulled into jobs at a wage below the free market point if they can be induced to do so under the urgency of war, or something like that.

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This is because wage earners are voters, and they do not form unions to keep wages below the free market point. The other reason why “negative unemployment” does not last long is that the labor statisticians soon conclude that their count of the working force must have been wrong before. So they revise their figures in such a way that full employment is not exceeded, according to the newly revised statistics. Such is the problem of pricing work in the market for labor. Such is the function of freedom in wages. ____________ 1Douglas, Paul H. The Theory of Wages. New York: The Macmillan Company, 1934. p. 501. Pigou, A. C. Theory of Unemployment.

Rethinking Money: How New Currencies Turn Scarcity Into Prosperity by Bernard Lietaer, Jacqui Dunne

3D printing, 90 percent rule, agricultural Revolution, Albert Einstein, Asian financial crisis, banking crisis, Berlin Wall, BRICs, business climate, business cycle, business process, butterfly effect, carbon credits, carbon footprint, Carmen Reinhart, clockwork universe, collapse of Lehman Brothers, complexity theory, conceptual framework, credit crunch, different worldview, discounted cash flows, en.wikipedia.org, Fall of the Berlin Wall, fear of failure, fiat currency, financial innovation, Fractional reserve banking, full employment, German hyperinflation, Glass-Steagall Act, happiness index / gross national happiness, holacracy, job satisfaction, John Perry Barlow, liberation theology, low interest rates, Marshall McLuhan, microcredit, mobile money, Money creation, money: store of value / unit of account / medium of exchange, more computing power than Apollo, new economy, Occupy movement, price stability, reserve currency, Silicon Valley, systems thinking, the payments system, too big to fail, transaction costs, trickle-down economics, urban decay, War on Poverty, working poor

The devastation of the Great Depression and the dramatic economic ramifications of the 1930s forced economists and nations to reexamine their assumptions regarding the economy, particularly the thendominant view that a free market, unfettered by government interference, would naturally bring about full employment equilibrium. This debate still rages, almost a century later. Without needing to parse the theories, ideas from three iconic schools of thought shape current economic and political debates: John Maynard Keynes, Friedrich Hayek, and Milton Friedman and their respective Keynesian, Austrian, and Chicago schools of economics.

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MIT economist David Autor predicts that automation will eliminate middle-class jobs, and shows that the trend of demand for mainly high- and low-wage extremes will continue for the foreseeable future. 119 120 PROSPERITY These views are supported by the official statistics, which show that employers tend to be hiring more temporary part-time workers or volunteer workers such as interns, with most job creation trending to lower-paying work. A staggering 21 million jobs need to be created by 2020 to return America to full employment.3 Santa Fe Institute economist Brian Arthur cogently describes the ongoing transition from industrial to information age: “With the coming of the Industrial Revolution—roughly from the 1760s, when Watt’s steam engine appeared, through around 1850 and beyond—the economy developed a muscular system in the form of machine power.

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The bridge was so different from how it had been described in various books and articles. It seemed in real life more diminutive, plainer, and definitely shorter, yet its impact was unexpectedly overwhelming. Back in the dreary days of the 1930s Great Depression, this nondescript yet iconic overpass symbolized the dreams of full employment and a decent standard of living for all. Scholars, government officials, and thousands of others traveled to this Austrian community to personally witness and learn from the miracle of Wörgl. Today, the town has little significance, noted mostly for its railway junction connecting the line from Innsbruck to Munich with the inner-Austrian line to Salzburg.

The Joy of Tax by Richard Murphy

banking crisis, banks create money, carbon tax, carried interest, correlation does not imply causation, en.wikipedia.org, failed state, full employment, Gini coefficient, Global Witness, green new deal, high net worth, Jeremy Corbyn, land value tax, means of production, Modern Monetary Theory, Money creation, offshore financial centre, price elasticity of demand, quantitative easing, race to the bottom, savings glut, seigniorage, The Spirit Level, The Wealth of Nations by Adam Smith, transfer pricing

Money is, of course, an issue of some importance in any economy. In fact, given that inflation was the sole issue of apparent concern in the mandate for the Bank of England from 1997 until recently, you might have gained the idea that money has been the most important issue to be addressed in the UK economy of late. I would strongly disagree: full employment, the sustainability of the economy and its ability to meet the real needs of those who live within it are all in my view of more importance than money; and yet if money is ignored none of those other objectives can be achieved. The amount of money in an economy has a dramatic impact on the scale of economic activity that takes place within it, and just two factors – the relationship between the amount of tax the government collects and its total spending; and the amount of money that is created by the banks when making loans – determine how much money (or credit, because all money is a promise to pay) there is in that economy to facilitate the trades people want to undertake.

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In itself this chart shows the difficulty of delivering vertical equity in a tax system: when taxes on consumption are high (as they are in the UK when the combination of VAT, excise duty and other charges is taken into account) and those on low incomes spend all they have (and sometimes more besides because of untaxed income sources or borrowing), then what appears to be a partially regressive tax system results. In fact, the 10 per cent of people with the highest incomes in the UK appear to pay less in total taxation than many on lower incomes. Figure 8: UK tax paid by income decile, 2010–11 Source: Richard Murphy and Howard Reed, ‘Financing the Social State: Towards a full employment economy’, April 2013, Class Think Tank9 Equality may be the name of the game in tax, but we aren’t delivering it – and that is taking into account only the obvious issues relating to tax and equality that most people tend to think of. As I said at the start of this section, there is rather more to tax and equality than these obvious considerations.

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It is then important to note that this issue extends beyond mere cash payments to and from the individual. Ensuring availability of resources such as appropriate housing is an essential part of this process of achieving equality of sufficient well-being to participate in society, as too is a policy of full employment. It is pointless having a tax system that says it promotes equality of sufficiency but does not also promote the means to deliver it. One can, of course, extend this notion to education and healthcare as well as many aspects of the social welfare system on which so many depend at some point in their lives.

Unfinished Business by Tamim Bayoumi

Alan Greenspan, algorithmic trading, Asian financial crisis, bank run, banking crisis, Basel III, battle of ideas, Bear Stearns, behavioural economics, Ben Bernanke: helicopter money, Berlin Wall, Big bang: deregulation of the City of London, book value, Bretton Woods, British Empire, business cycle, buy and hold, capital controls, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, currency manipulation / currency intervention, currency peg, Doha Development Round, facts on the ground, Fall of the Berlin Wall, financial deregulation, floating exchange rates, full employment, Glass-Steagall Act, Greenspan put, hiring and firing, housing crisis, inflation targeting, junk bonds, Just-in-time delivery, Kenneth Rogoff, liberal capitalism, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, market bubble, Martin Wolf, moral hazard, oil shale / tar sands, oil shock, price stability, prisoner's dilemma, profit maximization, quantitative easing, race to the bottom, random walk, reserve currency, Robert Shiller, Rubik’s Cube, Savings and loan crisis, savings glut, technology bubble, The Great Moderation, The Myth of the Rational Market, the payments system, The Wisdom of Crowds, too big to fail, trade liberalization, transaction costs, value at risk

In this system, described in more detail in the next chapter, countries kept their exchange rates fixed against the US dollar, which itself was fixed against gold and (at least in theory) any changes in parity against the dollar needed to be discussed with the international community via the International Monetary Fund. The system was supported by an intellectual framework in which countries could use a combination of fiscal and monetary policy to achieve full employment and a desirable trade balance. The key insight was that, in response to excess economic slack, either a looser monetary policy or a larger government deficit could be used to achieve full employment (“internal balance”), but that the two policies had contrasting effects on the trade balance. Cutting short-term interest rates to stimulate activity via monetary policy would tend to lower the exchange rate, increase exports, and create a larger trade surplus.

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The two macroeconomic policies (monetary and fiscal) could combine to achieve the two objectives (full employment and a desirable trade balance). Support for this integrated policy framework started to fray soon after the break-up of the Bretton Woods system in the early 1970s as belief in the active use of fiscal policy waned. This came in large part from a backlash against the increased size of government and rapid rise in government debt in the 1960s and 1970s. The focus of fiscal policymakers switched from fine-tuning the government deficit so as to achieve full employment to longer-term objectives such as reducing the size of government and the associated tax bill.

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Equally importantly, assigning macroeconomic stability solely to the central bank is not intuitive. Indeed, before the 1980s the macroeconomic orthodoxy embraced an integrated approach in which monetary and fiscal policies were used simultaneously achieve full employment (“internal balance”) and a desirable trade position (“external balance”). In this macroeconomic scheme there were two objectives (full employment/stable inflation and a sustainable external position) and two instruments (monetary and fiscal policy). Currently, there are four objections—stable inflation/low slack, high underlying growth, low government debt, and financial stability—as well as four instruments—monetary, fiscal, structural, and financial policies.

Milton Friedman: A Biography by Lanny Ebenstein

Abraham Wald, affirmative action, Alan Greenspan, banking crisis, Berlin Wall, Bretton Woods, business cycle, classic study, Deng Xiaoping, Fall of the Berlin Wall, fiat currency, floating exchange rates, Francis Fukuyama: the end of history, full employment, Hernando de Soto, hiring and firing, inflation targeting, invisible hand, Joseph Schumpeter, Kenneth Arrow, Lao Tzu, liquidity trap, means of production, Modern Monetary Theory, Mont Pelerin Society, Myron Scholes, Pareto efficiency, Paul Samuelson, Phillips curve, Ponzi scheme, price stability, public intellectual, rent control, road to serfdom, Robert Bork, Robert Solow, Ronald Coase, Ronald Reagan, Sam Peltzman, school choice, school vouchers, secular stagnation, Simon Kuznets, stem cell, The Chicago School, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thorstein Veblen, zero-sum game

Keynes believed that the major cause of national economic activity at less than full employment in advanced economies was attempted excess saving for which investment opportunities did not exist. Essential to his view was that as an economy matures, desired savings exceed desired investment. As Keynes defined them, savings always equal investment after the fact. He argued that in developed economies, a failure to find investment opportunities would stymie the attempt to save. The result would be unemployment because money saved would not be spent on consumption. Economic equilibrium could occur at less than full employment and maximum output. Keynes’s General Theory is filled with references to the existence of and problems caused by excess saving as economics mature: The fundamental psychological law, upon which we are entitled to depend with great confidence . . . is that men are disposed . . . to increase their consumption as their income increases, but not by as much as the increase in their income.2 [W]e take it as a fundamental... rule of any modern community that, when its real income is increased, it will not increase its consumption by an equal absolute amount.3 In the United States... by 1929 the rapid capital expansion of the previous five years had led cumulatively to the setting up of sinking funds and depreciation allowances... on so huge a scale that an enormous volume of entirely new investment was required merely to absorb these financial provisions; and it became almost hopeless to find still more new investment on a sufficient scale to provide for such new saving as a wealthy community . . . would be disposed to set aside.

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The only way to maintain the temporarily beneficial effects of inflation is for inflation to rise at increasing, unanticipated rates, which is unsustainable. According to Friedman: “Keynes’s key theoretical proposition . . . [is] that even in a world of flexible prices, a position of equilibrium at full employment might not exist.”19 Friedman’s view, on the other hand, is that in a world of flexible prices, equilibrium at full employment will exist. Friedman’s view in the middle 1960s was that a regime of generally stable prices is the best public policy. To accomplish this goal, he recommends a fixed annual increase in the money supply, variously estimated (in part based on the money aggregates used) at 2 to 5 percent, about equal to long-term growth in the economy.

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Therefore, to the extent that Friedman’s theory dampened economists’ enthusiasm for an active fiscal policy, it thus helped to dampen the rate of growth of government.12 Friedman emphasizes the importance of the findings of A Theory of the Consumption Function in its final chapter. One of the major theoretical outcomes of Keynesian analysis is “the denial that the long-run equilibrium position of a free enterprise economy is...at full employment.”13 In Keynes’s view, free private property capitalism is inherently unstable or nonmaximally productive because of excess saving as capitalist economies mature. In challenging this hypothesis, Friedman helped to pave the way academically for the intellectual rehabilitation of free private property capitalism from the 1960s to the present.

The Making of an Atlantic Ruling Class by Kees Van der Pijl

anti-communist, banking crisis, Berlin Wall, book value, Boycotts of Israel, Bretton Woods, British Empire, business cycle, capital controls, collective bargaining, colonial rule, cuban missile crisis, deindustrialization, deskilling, diversified portfolio, European colonialism, floating exchange rates, full employment, imperial preference, Joseph Schumpeter, liberal capitalism, mass immigration, means of production, military-industrial complex, North Sea oil, plutocrats, profit maximization, RAND corporation, scientific management, strikebreaker, Suez crisis 1956, trade liberalization, trade route, union organizing, uranium enrichment, urban renewal, War on Poverty

In particular, it was feared that the logic of the socialization of the productive forces might spill over to the relations of production if, after the recommended ‘euthanasia of the rentier’, only the managerial element was left to maintain the rate of exploitation. As Kalecki argued in a well-known article of 1943, a democratic full-employment policy would always entail unacceptable consequences for the capitalist class. Keynes, too, was aware that the full realization of his programme risked endangering the capitalist form it intended to save and could only be attempted under emergency or wartime conditions. In a 1940 article, he conceded that ‘it seems politically impossible for a capitalist democracy to organize expenditure on the scale necessary to make the grand experiment which would prove my case — except in war conditions’.32 By this time, the class struggles underlying the ascendancy of the productive-capital concept over the previous liberalism had produced highly divergent outcomes in the United States and Europe.

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In October, the AFL leader, Samuel Gompers, was appointed to the Advisory Commission of the Council of National Defense, and in 1917, Wilson addressed the national convention of the AFL, inviting its leaders to serve on the National Labor Conference and later on the National War Labor Board. The war, with it stimulus to full employment,34 reinforced the hold of imperialist ideology not just over the trade-union bureacracy, but also over much of the native skilled working class.35 Their contribution to the war effort notwithstanding, however, workers’ standards of living declined; only after Armistice did wages begin to catch up with prices that by 1919 had doubled over their 1915 level.

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At a meeting of the AFL Executive Council in 1917, Gompers reprimanded a Negro delegation for ‘somehow conveying the idea that they are to be petted or coddled and given special consideration and special privilege. Of course that can’t be done’.39 Confronted by an upsurge of class struggle and reaction at home, the AFL’s new-found internationalism collapsed with even greater speed than Wilson’s attempt to create a new world order. Yet the Wilson offensive, absorbing social pressures generated by near-full employment and redirecting them (partly through an appeal to Anglo-Saxon chauvinism and partly through reform) towards support for expansion into the European sphere-of-influence, served as the paradigmatic precedent for the later Roosevelt, Marshall and Kennedy offensives. Atlantic unity, whether positive (for democracy) or negative (against socialism) in its explicit programme, derived its basic structural characteristics from this episode. 2.

The Globalization Paradox: Democracy and the Future of the World Economy by Dani Rodrik

"World Economic Forum" Davos, affirmative action, Alan Greenspan, Asian financial crisis, bank run, banking crisis, Bear Stearns, bilateral investment treaty, borderless world, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, central bank independence, classic study, collective bargaining, colonial rule, Corn Laws, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, Doha Development Round, en.wikipedia.org, endogenous growth, eurozone crisis, export processing zone, financial deregulation, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, George Akerlof, guest worker program, Hernando de Soto, immigration reform, income inequality, income per capita, industrial cluster, information asymmetry, joint-stock company, Kenneth Rogoff, land reform, liberal capitalism, light touch regulation, Long Term Capital Management, low interest rates, low skilled workers, margin call, market bubble, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, microcredit, Monroe Doctrine, moral hazard, Multi Fibre Arrangement, night-watchman state, non-tariff barriers, offshore financial centre, oil shock, open borders, open economy, Paul Samuelson, precautionary principle, price stability, profit maximization, race to the bottom, regulatory arbitrage, Savings and loan crisis, savings glut, Silicon Valley, special drawing rights, special economic zone, subprime mortgage crisis, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tobin tax, too big to fail, trade liberalization, trade route, transaction costs, tulip mania, Washington Consensus, World Values Survey

Countries on gold faced rapid capital outflows at the slightest hint of trouble, which required high interest rates and endangered their governments’ ability to maintain fixed parities. Stability on the foreign exchanges clashed with the goal of full employment. These financial market pressures ultimately condemned Britain’s return to the gold standard to failure. Once markets’ dynamics became intertwined with domestic politics, there was no hope that a world of smoothly functioning, self-equilibrating finance would lie within reach. Keynes identified another, more fundamental problem. Unfettered capital flows undermined not only financial stability but also macroeconomic equilibrium—full employment and price stability. The idea that the macroeconomy would self-adjust, without help from domestic fiscal and monetary policies, had been buried by the experience of the Great Depression and the chaos of the 1930s.

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They did so because that was the belief system that governed central bank behavior at the time. The maintenance of the gold standard had absolute priority in the conduct of monetary policy both because the system came to be viewed as the foundation of monetary stability and because there were no competing objectives—such as full employment or economic growth—in the conduct of monetary policy. Ideas mattered, here as elsewhere. The notion that active monetary and fiscal policies could systematically smooth business cycles or that currency devaluation could help reduce trade imbalances—these were yet to come, or heretical at best.

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There must be no microeconomic market imperfections other than the trade restrictions in question, or if there are some, the second-best interactions that are entailed must not be too adverse. The home economy must be “small” in world markets, or else the liberalization must not put the economy on the wrong side of the “optimum tariff.” The economy must be in reasonably full employment, or if not, the monetary and fiscal authorities must have effective tools of demand management at their disposal. The income redistributive effects of the liberalization should not be judged undesirable by society at large, or if they are, there must be compensatory tax-transfer schemes with low enough excess burden.

Keeping at It: The Quest for Sound Money and Good Government by Paul Volcker, Christine Harper

Alan Greenspan, anti-communist, Ayatollah Khomeini, banking crisis, Bear Stearns, behavioural economics, Black Monday: stock market crash in 1987, Bretton Woods, business cycle, central bank independence, corporate governance, Credit Default Swap, Donald Trump, fiat currency, financial engineering, financial innovation, fixed income, floating exchange rates, forensic accounting, full employment, Glass-Steagall Act, global reserve currency, income per capita, inflation targeting, liquidationism / Banker’s doctrine / the Treasury view, low interest rates, margin call, money market fund, Nixon shock, oil-for-food scandal, Paul Samuelson, price stability, proprietary trading, quantitative easing, reserve currency, Right to Buy, risk-adjusted returns, Ronald Reagan, Rosa Parks, Savings and loan crisis, secular stagnation, Sharpe ratio, Silicon Valley, special drawing rights, too big to fail, traveling salesman, urban planning

The growing sense of frustration and political concerns about the lack of full employment were reflected in new legislation. In 1977 the Federal Reserve Act was amended to require that the central bank “maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote the goals of maximum employment, stable prices, and moderate long-term interest rates.” Reasonable enough as an aspiration, but here we have the origin of what has since been interpreted as the “dual mandate.” The following year, Congress passed the Full Employment and Balanced Growth Act, known more widely as the “Humphrey-Hawkins Act” for the senator and congressman who sponsored the legislation.

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Then, with victory in sight, the authorities relax and accept a “little inflation” in the hope of stimulating further growth, only to see the process resume all over again. The sad history of economic policy over much of Latin America offers too many examples. The United States is not Latin America, with its history of recurrent inflation. But it does face an ongoing challenge for monetary and fiscal policy. The now long expansion and full employment with signs of growing pressures on labor markets have, so far, not upset price stability. But it is a crucial period for monetary policy. The late Bill Martin, as I recalled earlier, is famous for his remark that the job of the central bank is to take away the punch bowl just when the party gets going.

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Yet, as I write, with economic growth rising and the unemployment rate near historic lows, concerns are being voiced that consumer prices are growing too slowly—just because they’re a quarter percent or so below the 2 percent target! Could that be a signal to “ease” monetary policy, or at least to delay restraint, even with the economy at full employment? Certainly, that would be nonsense. How did central bankers fall into the trap of assigning such weight to tiny changes in a single statistic, with all of its inherent weakness? I think I know the origin. It’s not a matter of theory or of deep empirical studies. Just a very practical decision in a far-away place.

Meltdown: How Greed and Corruption Shattered Our Financial System and How We Can Recover by Katrina Vanden Heuvel, William Greider

Alan Greenspan, Asian financial crisis, banking crisis, Bear Stearns, Bretton Woods, business cycle, buy and hold, capital controls, carried interest, central bank independence, centre right, collateralized debt obligation, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, declining real wages, deindustrialization, Exxon Valdez, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, full employment, Glass-Steagall Act, green new deal, guns versus butter model, housing crisis, Howard Zinn, Hyman Minsky, income inequality, information asymmetry, It's morning again in America, John Meriwether, junk bonds, kremlinology, Long Term Capital Management, low interest rates, margin call, market bubble, market fundamentalism, McMansion, Michael Milken, Minsky moment, money market fund, mortgage debt, Naomi Klein, new economy, Nixon triggered the end of the Bretton Woods system, offshore financial centre, payday loans, pets.com, plutocrats, Ponzi scheme, price stability, pushing on a string, race to the bottom, Ralph Nader, rent control, Robert Shiller, Ronald Reagan, Savings and loan crisis, savings glut, sovereign wealth fund, structural adjustment programs, subprime mortgage crisis, The Great Moderation, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, wage slave, Washington Consensus, women in the workforce, working poor, Y2K

The self-taught Eccles (he never went to college) personally intuited what John Maynard Keynes developed as a formal theory: The national government, including the Fed, must become the intervening balance wheel in a modern industrial economy—the stabilizing force that, when necessary, stimulates the economy to encourage faster growth and full employment, while at other times it puts the brakes on economic activity to avoid inflation. Eccles essentially invented the modern Federal Reserve, liberating the central bank from the 1920s hard-money orthodoxy of banking and finance, an inflexible doctrine that gravely worsened the Depression. Greenspan, one might say, devoted his tenure to eliminating vestiges of Eccles and FDR.

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A public official who fails to alert investors to such risks “is no better than a doctor who, having diagnosed high blood pressure in a patient, says nothing because he thinks the patient might be lucky and show no ill effects,” Shiller wrote. The Price of “Sound Money” The lopsided focus of Greenspan’s Fed—exalting financial markets over the real economy—is perhaps his greatest ideology-driven error, and it caused the deepest damage to society. Congress by law instructs the Federal Reserve to pursue twin goals—stable money and full employment—and there is always a natural tension between those two objectives. Maintaining low price inflation gets much more difficult when the economy expands more vigorously, so the central bank traditionally tried to sustain a rough balance. Greenspan resolved the tension easily (as most conservatives probably would) by tipping the scales in favor of sound money.

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In fact, it is the most dangerous terrain in capitalism. Preventing deflationary calamities was one of the main reasons the Federal Reserve was created. After years of doing the opposite, the chairman belatedly took his foot off the brake pedal and decided to let the economy grow faster. His shift generated full employment and rising wages—the chairman was celebrated as an economic genius—but booming relief for the real economy came too late to last, given the other imbalances Greenspan had fostered. Faster growth perversely expanded the stock market’s delusions, and the price mania spiraled to new heights. Remember the predictions of Dow 35,000?

The Socialist Manifesto: The Case for Radical Politics in an Era of Extreme Inequality by Bhaskar Sunkara

Affordable Care Act / Obamacare, agricultural Revolution, Bernie Sanders, British Empire, business climate, business cycle, capital controls, centre right, Charles Lindbergh, collective bargaining, Deng Xiaoping, deskilling, Donald Trump, equal pay for equal work, fake news, false flag, feminist movement, Ferguson, Missouri, Francis Fukuyama: the end of history, full employment, gig economy, Great Leap Forward, Gunnar Myrdal, happiness index / gross national happiness, high-speed rail, Honoré de Balzac, income inequality, inventory management, Jeremy Corbyn, labor-force participation, land reform, land value tax, Mark Zuckerberg, means of production, Meghnad Desai, Mikhail Gorbachev, Neil Kinnock, new economy, Occupy movement, postindustrial economy, precariat, race to the bottom, Ralph Waldo Emerson, self-driving car, Silicon Valley, SimCity, single-payer health, Steve Bannon, telemarketer, The Wealth of Nations by Adam Smith, too big to fail, union organizing, Upton Sinclair, urban renewal, We are all Keynesians now, We are the 99%

Sweden in the 1970s was not simply the most livable society in history; it was also the European country where, after World War II, socialists got the furthest along in undermining capital’s power. While capitalists worried about Nikita Khrushchev’s shoe-banging promises to bury the West, the greatest threat to free market capitalism was not in Russia but in Scandinavia, where the combination of a universal welfare state, full employment, and centralized unions gave labor enormous power. Swedish trade unions even came out with a proposal for wage-earner funds in 1976 that would have slowly socialized private firms. How Sweden’s social democrats got to that point, and why their experiment eventually fell apart, is an unlikely, instructive story.

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And even in a period with emergency wage, price, and consumption controls, planning had a great deal of mystique. Despite Wigforss’s assurances about the continued role of private capital, the 1944 program advocated government takeovers of basic industries and finance and an overarching state responsibility for shaping investment and maintaining full employment. Economist and trade minister Gunnar Myrdal spoke of a “harvest time” for the labor movement, in which the fruits of recent economic development would fall to workers. Yet a push for nationalization found resistance from a capitalist class that could credibly threaten to withhold investment. That climate, combined with the onset of the Cold War, tempered the SAP, which forsook alliance with the Communists in favor of a new coalition with the Agrarians.10 With the march toward socialization blocked, the party eventually adopted a 1951 plan created by LO economists Gösta Rehn and Rudolf Meidner.

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These negotiations were done directly between labor and capital, but the role of the state was crucial: “active labor market policies” helped workers formerly employed in less productive firms get reabsorbed in expanding parts of the economy. Social guarantees—for health care, education, child care, and so on—meant that there was a growing state sector to help ensure full employment. It was a program for “functional socialism,” in that it made certain socialist priorities clear but would seek them by shaping the outcomes of capitalist enterprise rather than through nationalization. Such a model, however, was one that capitalists would agree to only under duress. As Meidner put it, “management prefers decentralized bargaining” and “wage differentials as instruments for managerial control.”12 Even though capitalists benefited from the Rehn-Meidner plan in many respects, it was only implemented because a powerful labor movement and social-democratic party forced its way.

The Great Divide: Unequal Societies and What We Can Do About Them by Joseph E. Stiglitz

"World Economic Forum" Davos, accelerated depreciation, accounting loophole / creative accounting, affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Alan Greenspan, Asian financial crisis, banking crisis, Bear Stearns, Berlin Wall, Bernie Madoff, Branko Milanovic, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Carmen Reinhart, carried interest, classic study, clean water, collapse of Lehman Brothers, collective bargaining, company town, computer age, corporate governance, credit crunch, Credit Default Swap, deindustrialization, Detroit bankruptcy, discovery of DNA, Doha Development Round, everywhere but in the productivity statistics, Fall of the Berlin Wall, financial deregulation, financial innovation, full employment, gentrification, George Akerlof, ghettoisation, Gini coefficient, glass ceiling, Glass-Steagall Act, global macro, global supply chain, Home mortgage interest deduction, housing crisis, income inequality, income per capita, information asymmetry, job automation, Kenneth Rogoff, Kickstarter, labor-force participation, light touch regulation, Long Term Capital Management, low interest rates, manufacturing employment, market fundamentalism, mass incarceration, moral hazard, mortgage debt, mortgage tax deduction, new economy, obamacare, offshore financial centre, oil shale / tar sands, Paul Samuelson, plutocrats, purchasing power parity, quantitative easing, race to the bottom, rent-seeking, rising living standards, Robert Solow, Ronald Reagan, Savings and loan crisis, school vouchers, secular stagnation, Silicon Valley, Simon Kuznets, subprime mortgage crisis, The Chicago School, the payments system, Tim Cook: Apple, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Turing machine, unpaid internship, upwardly mobile, urban renewal, urban sprawl, very high income, War on Poverty, Washington Consensus, We are the 99%, white flight, winner-take-all economy, working poor, working-age population

With formidable yet accessible economic insight, he urges us to embrace real solutions: increasing taxes on corporations and the wealthy; offering more help to the children of the poor; investing in education, science, and infrastructure; helping out homeowners instead of banks; and, most importantly, doing more to restore the economy to full employment. Stiglitz also draws lessons from Scandinavia, Singapore, and Japan, and he argues against the tide of unnecessary, destructive austerity that is sweeping across Europe.Ultimately, Stiglitz believes our choice is not between growth and fairness; with the right policies, we can choose both. His complaint is not so much about capitalism as such, but how twenty-first-century capitalism has been perverted.

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If it tightens prematurely—as soon as inflation seems nascent—it is likely that the share of wages will be ratcheted downward, for during the downturn, workers fare badly, and they have to be allowed to make up for what they lost. While the main thrust of the Fed’s policy has been to restore the economy to full employment—a policy that would be an enormous boon to workers—some of what it has done may have contributed to inequality. One of the main effects of quantitative easing, the policy of buying long-term bonds to lower the long-term interest rate, has been to bolster the stock market—of benefit disproportionately to the rich.

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Meanwhile, its failure to do what it could and should have done to make the financial market work better for ordinary Americans—to ensure competition, to restrict the excessive fees that credit and debit cards charge to merchants that ultimately get paid by consumers, to restore lending to small and medium-size enterprises, to create a mortgage market that serves Americans rather than the interests of the banks—has hurt those in the middle and bottom at the same time that it has enriched the coffers of the banks. Yellen is right, too, to point out (as I have done in this book) the limits to monetary policy. It is hard-pressed to restore the economy to full employment on its own. Indeed, it may be contributing to the jobless recovery that we are experiencing (the percentage of the working-age population that is employed, though it has rebounded slightly since the crisis, is still lower than at any time since 1984). Low interest rates encourage firms, when they invest, to invest in very capital intensive technologies—replacing unskilled workers with machines makes no sense in an era in which so many unskilled workers are striving to find jobs.

Roller-Coaster: Europe, 1950-2017 by Ian Kershaw

airport security, anti-communist, Apollo 11, Ayatollah Khomeini, banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, Bretton Woods, Brexit referendum, British Empire, business cycle, centre right, colonial rule, cuban missile crisis, deindustrialization, Deng Xiaoping, Donald Trump, European colonialism, eurozone crisis, Exxon Valdez, failed state, Fall of the Berlin Wall, falling living standards, feminist movement, first-past-the-post, fixed income, floating exchange rates, foreign exchange controls, Francis Fukuyama: the end of history, full employment, Herbert Marcuse, illegal immigration, income inequality, Jeremy Corbyn, Johann Wolfgang von Goethe, labour market flexibility, land reform, late capitalism, Les Trente Glorieuses, liberal capitalism, liberation theology, low interest rates, low skilled workers, mass immigration, means of production, Mikhail Gorbachev, mutually assured destruction, Neil Armstrong, Nelson Mandela, Nixon triggered the end of the Bretton Woods system, North Sea oil, Northern Rock, oil shale / tar sands, oil shock, open borders, post-war consensus, precariat, price stability, public intellectual, quantitative easing, race to the bottom, reserve currency, rising living standards, road to serfdom, Ronald Reagan, Ronald Reagan: Tear down this wall, Sinatra Doctrine, Suez crisis 1956, The Chicago School, trade liberalization, union organizing, upwardly mobile, washing machines reduced drudgery, Washington Consensus, Winter of Discontent, young professional

THE WELFARE STATE Part of the virtuous circle of economic growth was the increased stream of revenue to governments that enabled states to spend far greater amounts on welfare provision. Tax revenue rose at unprecedented rates with the return to full employment and the big expansion of consumer spending. State budgets in Western Europe were up to twenty times higher in the 1970s than they had been in 1950. Governments were consequently in a position to spend far more on welfare programmes than ever before. Welfare provision and full employment had been the overwhelming needs of a new society – the obvious lesson of the Great Depression, and recognized by all post-war governments. In the post-war decades all political parties agreed on the need to expand welfare provision.

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Two decades of high growth had produced full employment. The problem now was of rising inflation. Pumping money into the economy was guaranteed merely to add to inflationary pressures. Stimulating demand simply prompted claims for higher wages. Without increased productivity that just fed into further inflation. A large (and still rising) proportion of workers, especially in the expanded public sector, belonged to trade unions – in 1970 around two-thirds in Sweden, half in Britain, a third in West Germany (though little over a fifth in France). Unions were able to exploit virtually full employment and a labour shortage to win sometimes spectacular wage increases – 19 per cent in Italian industry in 1969 – without commensurate increases in productivity.

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The writer Johannes Gaitanides acknowledged in 1959 ‘the weaknesses, mistakes and failings of the Federal Republic’, but claimed it was a mistake to dismiss its notable achievements. ‘How would this critique of the Federal Republic look,’ he asked, ‘if it had not produced an economic miracle, full employment, improvement in the social status of workers, integration of expellees from the east and refugees from central Germany [by which he meant from the regions that had become the German Democratic Republic], further development of social security, shortened working hours, co-determination of workers in heavy industry and restitution to victims of Nazism?’

The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era by Gary Gerstle

2021 United States Capitol attack, A Declaration of the Independence of Cyberspace, affirmative action, Affordable Care Act / Obamacare, air traffic controllers' union, Airbnb, Alan Greenspan, Alvin Toffler, anti-communist, AOL-Time Warner, Bear Stearns, behavioural economics, Bernie Sanders, Big Tech, Black Lives Matter, blue-collar work, borderless world, Boris Johnson, Brexit referendum, British Empire, Broken windows theory, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, collective bargaining, Cornelius Vanderbilt, coronavirus, COVID-19, creative destruction, crony capitalism, cuban missile crisis, David Brooks, David Graeber, death from overwork, defund the police, deindustrialization, democratizing finance, Deng Xiaoping, desegregation, Dissolution of the Soviet Union, Donald Trump, Electric Kool-Aid Acid Test, European colonialism, Ferguson, Missouri, financial deregulation, financial engineering, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, future of work, Future Shock, George Floyd, George Gilder, gig economy, Glass-Steagall Act, global supply chain, green new deal, Greenspan put, guns versus butter model, Haight Ashbury, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, Ida Tarbell, immigration reform, informal economy, invention of the printing press, invisible hand, It's morning again in America, Jeff Bezos, John Perry Barlow, Kevin Kelly, Kitchen Debate, low interest rates, Lyft, manufacturing employment, market fundamentalism, Martin Wolf, mass incarceration, Menlo Park, microaggression, Mikhail Gorbachev, military-industrial complex, millennium bug, Modern Monetary Theory, money market fund, Mont Pelerin Society, mortgage debt, mutually assured destruction, Naomi Klein, neoliberal agenda, new economy, New Journalism, Northern Rock, obamacare, Occupy movement, oil shock, open borders, Peter Thiel, Philip Mirowski, Powell Memorandum, precariat, price stability, public intellectual, Ralph Nader, Robert Bork, Ronald Reagan, scientific management, Seymour Hersh, sharing economy, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, social distancing, Steve Bannon, Steve Jobs, Stewart Brand, Strategic Defense Initiative, super pumped, technoutopianism, Telecommunications Act of 1996, The Bell Curve by Richard Herrnstein and Charles Murray, The Chicago School, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, Uber and Lyft, uber lyft, union organizing, urban decay, urban renewal, War on Poverty, Washington Consensus, We are all Keynesians now, We are the 99%, white flight, Whole Earth Catalog, WikiLeaks, women in the workforce, Works Progress Administration, Y2K, Yom Kippur War

A large and mobilized labor movement provided many of the Democratic Party’s shock troops, its members working hard to get out the vote, staff polling stations, and generate enthusiasm for FDR and Democratic candidates up and down the ballot. Labor was matched in influence—and even more so in campaign contributions—by sectors of the business class persuaded that their industries would benefit from the full-employment, mass-consumption system of regulated capitalism that the New Deal promised to create. Moreover, the communist success in the Soviet Union scared American businessmen as did the influence of communists in the ranks of American labor, inclining them (the businessmen) to compromise with more moderate sectors of the labor movement.4 The New Deal order gained its power not just from dependable electoral and business constituencies but also from its ability to implant its core ideological principles on the political landscape.

…

These old-style Democrats were Keynesians; the New Deal order, they believed, could be reinvigorated. They fought hard for labor law reform meant to reanimate the labor movement and the capital-labor compromise on which the New Deal for so long had rested. They hoped that the passage of the Humphrey-Hawkins Full Employment and Balanced Growth Act of 1978 would impel the government to use its fiscal and monetary resources to encourage job creation in the private sector and to launch public-sector jobs programs. In 1979 and 1980, New Deal order stalwarts within the Democratic Party also drew Carter into deep discussions about creating tripartite boards of labor leaders, corporate heads, and representatives of the public of the sort that had flourished in the 1930s and 1940s.

…

He criticized them for accepting “private enterprise’s primacy as fully as Citibank’s Walter Wriston or Ronald Reagan’s official family.” They “pay small heed,” he disapprovingly observed, “to maldistribution of income and wealth.” The aims of these neoliberals were “not to be confused,” he alleged, with “traditional, highly honorable liberal aspirations for full employment, universal health coverage, tax equity, adequate housing, urban rehabilitation, integration of minorities into the labor force, and the mild redistribution of income, wealth and power.” The neoliberal ideal, Lekachman concluded, “appears to be more intelligent behavior by capitalists under the gentle tutelage of Government, which stimulates corporations with increased rewards.”60 Lekachman’s portrait of Democratic neoliberals aptly described Paul E.

State of Emergency: The Way We Were by Dominic Sandbrook

anti-communist, Apollo 13, Arthur Marwick, back-to-the-land, banking crisis, Bretton Woods, British Empire, centre right, collective bargaining, Corn Laws, David Attenborough, Doomsday Book, edge city, estate planning, Etonian, falling living standards, fear of failure, Fellow of the Royal Society, feminist movement, financial thriller, first-past-the-post, fixed income, full employment, gentrification, German hyperinflation, global pandemic, Herbert Marcuse, mass immigration, meritocracy, moral panic, Neil Kinnock, new economy, New Urbanism, Norman Mailer, North Sea oil, oil shock, Own Your Own Home, post-war consensus, sexual politics, traveling salesman, union organizing, upwardly mobile, urban planning, Winter of Discontent, young professional

It was certainly unfair to hold Heath personally responsible when the roots of the problem lay in the late 1960s, and when he had clearly tried everything, including Keynesian spending measures, to address it. In retrospect, it is obvious that full employment as it was understood in the 1940s and 1950s was destined for the scrapheap. From the Wilson years onwards, successive governments were forced to run the economy at higher levels of unemployment simply to keep inflation in check, and even during the fat years under Tony Blair full employment never returned. Indeed, by the standards of later administrations an unemployment rate of around 4 per cent, for which Heath was mercilessly pilloried, was astonishingly good.

…

For more than a decade, as Britain’s imperial possessions disappeared, its economic lead evaporated and its manufacturers struggled to compete with foreign rivals, politicians of both parties had talked of sweeping modernization and structural reform, from decimalization to European integration. In general, however, they had shrunk from radical economic change, frightened that it would undermine full employment and alienate the voters, content merely to keep muddling through. Perhaps this was not surprising: for twenty years, thanks to its soft Commonwealth markets and the weakness of its rivals, Britain had been protected from the harsh winds of global competition. But by the early 1970s, as Edward Heath was to discover, the kaleidoscope was shifting.

…

Now it was a typical section of the south London commuter belt, a world of identical semi-detached houses and brick council estates, inhabited by skilled workers, clerks and technicians. In 1945 it had been a safe Labour seat; now it was classic aspirational upper-working-class and middle-class Conservative. It was a place transformed by light industry, rising wages and full employment, a place where farms had been replaced by shopping centres and labourers had given way to pharmacists. It seemed a long way from the sensationalist high jinks that later dominated popular memories of the post-war years – the Profumo scandal, Swinging London, the Beatles and the Rolling Stones – and yet, better than any of those things, it symbolized the subterranean economic and social trends that had changed the lives of Britain’s 55 million people.

Debunking Economics - Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned? by Steve Keen

accounting loophole / creative accounting, Alan Greenspan, banking crisis, banks create money, barriers to entry, behavioural economics, Benoit Mandelbrot, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, book value, business cycle, butterfly effect, capital asset pricing model, cellular automata, central bank independence, citizen journalism, clockwork universe, collective bargaining, complexity theory, correlation coefficient, creative destruction, credit crunch, David Ricardo: comparative advantage, debt deflation, diversification, double entry bookkeeping, en.wikipedia.org, equity risk premium, Eugene Fama: efficient market hypothesis, experimental subject, Financial Instability Hypothesis, fixed income, Fractional reserve banking, full employment, Glass-Steagall Act, Greenspan put, Henri Poincaré, housing crisis, Hyman Minsky, income inequality, information asymmetry, invisible hand, iterative process, John von Neumann, Kickstarter, laissez-faire capitalism, liquidity trap, Long Term Capital Management, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, market microstructure, means of production, minimum wage unemployment, Money creation, money market fund, open economy, Pareto efficiency, Paul Samuelson, Phillips curve, place-making, Ponzi scheme, Post-Keynesian economics, power law, profit maximization, quantitative easing, RAND corporation, random walk, risk free rate, risk tolerance, risk/return, Robert Shiller, Robert Solow, Ronald Coase, Savings and loan crisis, Schrödinger's Cat, scientific mainstream, seigniorage, six sigma, South Sea Bubble, stochastic process, The Great Moderation, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, total factor productivity, tulip mania, wage slave, zero-sum game