Friday, June 27, 2014

Jobs, not welfare

Surely this is an idea anyone could support - conservative, liberal, or other. Yet it seems so elusive. An irrational fear of socialism/government and debt/deficits has paralyzed and blinded whole nations so they can't see how capitalism can thrive best when people are fully employed. And there are ways to do this without increasing the size of government if that's preferred. 

Perhaps the greatest economist of the late-twentieth century was Hyman Minsky. His prescient understanding of financial markets led to accurate predictions of the crises that unfolded in the latter part of the century and continue to this day - predictions that eluded all the mainstream economists whose complex mathematical models somehow ignored (and still ignore!) banking and credit.

He also studied poverty extensively, and understood that the Kennedy-Johnson "War on Poverty" would not work. The failure of these programs came from, among other things, a reliance on "pump-priming" stimulus and a hope for "trickle-down" benefits (picked up and expanded later by Reagan), plus more welfare for those who still couldn't find work (Reagan wasn't so keen on this one). In other words, if you can stimulate the private sector with some tax cuts or targeted spending, enough economic activity would result that would lift the lowly out of poverty in a "rising tide lifts all boats" hope. Welfare and handouts would pick up the (hopefully very few) leftover pieces. 

It never happened and it never will. 

Capitalism will never employ everyone who can and desires to work as there are strong forces that prevent this from happening. And consequently, capitalism on its own will never solve most poverty: nor will welfare. The unintended consequences of well-intentioned welfare programs leading to counterproductive behavior have been well documented. We all know the saying, "Give a man/woman a fish and feed them for a day; teach a man/woman to fish and feed them for a lifetime". Yet we somehow miss the obvious connection to employment (and I would add education) that this implies.  

Minsky saw full employment as the solution to both the growing financial instability and the growing poverty that was unfolding. Employment solves a host of social problems, and full employment, when done right, provides a strong anchor in price and financial stability. 

We need to cast off the bi-party political rhetoric that is all based on faulty economic principles and the myths of history they each love to claim to back up their positions (yes, I mean Ds, R's and even the Tea Party and Libertarians!) 

We can truly restore our nation to an equitable prosperity but we must decide that we can use the people's money (our national currency and monetary system) to help, and not hyperventilate that its use is always some socialist/communist takeover of our constitution!