We face a lot of policy challenges, but making sure Americans have jobs will make them all easier.
One of the interesting ideas to come out of the recent Occupy Handbook is Paul Krugman and Robin Wells' argument that inequality has contributed to the lack of a serious and sustained response to the unemployment crisis of the Great Recession.
Daron Acemoglu and James Robinson respond at their Why Nations Fail blog. Two points to discuss:
First, the distinction between “right” and “left” (or perhaps pro-elite and anti-elite) is not a natural one when it comes to Keynesian economics and policies. Many conservative politicians, and not just Nixon and Reagan, have embraced Keynesian economics. Both Fascist Italy and Nazi Germany were big-time Keynesians...Third, even in the current US context it is not clear why the wealthiest Americans should be opposed to Keynesian policies...
Fourth, even if Krugman and Wells’s emphasis is right, we find it hard to place lack of sufficient Keynesian stimulus as one of the most corrosive effects of soaring political inequality and political polarization in the US. What about the failure of our educational institutions; the huge incarceration rate, particularly for African-Americans; erosion of civil liberties; increasingly inefficient subsidies and tax breaks to select corporations and sectors; distortions created by implicit and explicit subsidies to the financial industry? Lack of sufficient Keynesian zeal seems a little less important.
For the first point, it's useful to distinguish between some stimulus/counter-cyclical spending and the actual policy goal of full employment. It is easy to imagine elites supporting policies that prevent system collapse -- nobody benefits from 25 percent unemployment -- but not being all that concerned with getting to full employment in two years versus 10 years (or even at all). Whether right now is a "sweet spot" of just enough aggregate demand and employment to keep the system running (and creditors paid) but not enough to give workers serious bargaining power is an ongoing topic of debate on the Internet. (Steve Waldman at interfluidity has the latest entry
.) The Krugman/Wells essay brings up Kalecki in a way that I think is useful on this question; the issue of coordination and relative priorities among many eilites is also important.
For the second paragraph (their fourth point), it is always difficult to rank bad things. But it is very important to remember that a policy of full employment makes it significantly easier to deal with many other problems. People have much more realistic and managed expectations for what education can do for workers' wage gains in an economy where wages are actually growing. There's good data that unemployment is linked
with a lack of interest in global warming, another very important issue. When there's full employment and serious wage growth people are also probably less likely to be concerned about immigration and trade's impact on their jobs. Deincarceration will be easier if there are jobs waiting for people on the other side of the walls rather than sky-high unemployment. And so on.
For all the policy fads of getting wages up -- Charles Murray's recent call for elites to shame the working class into higher wages being the latest, and probably not the worst -- the best way to get wages up is to have full employment. As Jared Bernstein notes
, "the working man and woman really have no better friend than full employment."
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