Full Employment Versus Jobless Growth
By Herman Daly
24 July, 2013
Dalynews.org
Dalynews.org
The Full Employment Act of
1946 declared full employment to be a major goal of U.S. policy.
Economic growth was then seen as the means to attain the end of full
employment. Today that relation has been inverted. Economic growth has
become the end, and if the means to attain that end — automation,
off-shoring, excessive immigration — result in unemployment, well that
is the price “we” just have to pay for the glorified goal of growth in
GDP. If we really want full employment we must reverse this inversion of
ends and means. We can serve the goal of full employment by restricting
automation, off-shoring, and easy immigration to periods of true
domestic labor shortage as indicated by high and rising wages. In
addition, full employment can also be served by reducing the length of
the working day, week, or year, in exchange for more leisure, rather
than more GDP.
Real wages have been falling for decades, yet our
corporations, hungry for cheaper labor, keep bleating about a labor
shortage. What the corporations really want is a surplus of labor. With
surplus labor, wages generally do not rise and therefore all the gains
from productivity increase will go to profit, not wages. Hence the
elitist support for automation, off-shoring, and lax enforcement of
democratically enacted immigration laws.
Traditional stimulus policies do little to reduce
unemployment, for several reasons. First, the jobs that workers would
have gone back to have largely been off-shored as employers sought cheap
foreign labor. Second, cheap foreign labor by way of illegal
immigration seems to have been welcomed by domestic employers trying to
fill the remaining jobs at home. Third, jobs have been “outsourced” to
automation — to robots in the factory and to the consumer, who is now
her own checkout clerk, travel agent, baggage handler, bank teller, gas
station attendant, etc. And fourth, quantitative easing has kept
interest rates low and bond prices high to the benefit of banks’ balance
sheets more than employment. The public benefits from lower mortgage
rates, but loses more from reduced interest earnings on savings, which
does not help employment.
These facts argue for a return to the original intent
of the Full Employment Act of 1946 — specifically that full employment,
not growth, should be the goal. Let us consider four further reasons for
this return.
First, off-shoring production and jobs cannot be
justified as “trade.” The good whose production has been off-shored is
sold in the U.S. to satisfy the same market that its domestic production
used to satisfy. Off-shoring increases U.S. imports, and since no
product has been exported in exchange, it also increases the U.S. trade
deficit. Because the production of the good now takes place abroad,
stimulus spending in the U.S. largely stimulates U.S. imports and
employment abroad. Demand for U.S. labor consequently declines, lowering
U.S. employment and/or wages. It is absurd that off-shoring should be
defended in the name of “free trade.” No goods are traded. The absurdity
is compounded by the fact that off-shoring entails moving capital
abroad, and international immobility of capital is one of the premises
on which the doctrine of comparative advantage rests — and the policy of
free trade is based on comparative advantage! If we really believe in
comparative advantage and free trade then we must place limits on
capital mobility and off-shoring.
Second, for those jobs that have not yet, or cannot
easily be off-shored (e.g., services such as bartending, waiting tables,
gardening, medical care, etc.), cheap foreign labor has become
available via illegal immigration. Many U.S. employers seem to welcome
illegal immigrants. Most are good and honest workers, willing to work
for little, and unable to complain about conditions given their illegal
status. What could be better for union busting and driving down wages of
the American working class, which, by the way, includes many legal
immigrants? The federal government, ever sensitive to the interests of
the employing class, has done an obligingly poor job of enforcing our
immigration laws.
Third, the automation of factory work, services of
bank tellers, gas station attendants, etc. is usually praised as
labor-saving technical progress. To some extent it is that, but it also
represents substitution of capital for labor and labor-shifting to the
consumer. The consumer does not even get the minimum wage for her extra
work, even considering the dubious claim that she enjoys lower prices in
return for her self-service. Ordinary human contacts are diminished and
commerce becomes more sterile and impersonally digitized. In particular
daily interaction between people of different socio-economic classes is
reduced.
Fourth, a “Tobin tax,” a small percentage tax on all
stock market, bond market, and foreign exchange transactions would slow
down the excessive trading, speculation, and gambling in the Wall Street
casino, and at the same time raise a lot of revenue to help close the
federal deficit. This could be enacted quickly. In the longer run we
should move to 100% reserve requirements on demand deposits and end the
commercial banks’ alchemy of creating money out of nothing and lending
it at interest. Every dollar loaned by a bank would be a dollar
previously saved by the owner of a time deposit, respecting the
classical economic balance between abstinence from consumption and new
investment. Most people mistakenly believe that this is how banks work
now. Our money supply would move from being mainly interest-bearing debt
of private banks, to being non interest-bearing government debt. Money
should be a public utility (a unit of account, a store of value, and a
medium of exchange), not an instrument by which banks extort unnecessary
interest payment from the public — like a private toll booth on a
public road.
Cheap labor and funny money policies in the name of
“growth and global competitiveness” are class-based and elitist. Even
when dressed in the emperor’s fashionable wardrobe of free trade,
globalization, open borders, financial innovation, and automation, they
remain policies of growth by cheap labor and financial delusion. And we
wonder why the U.S. distribution of income has become so unequal? We are
constantly told it is because growth is too slow — the single cause of
all our problems! That we would be better off if we were richer is a
definitional truism. The question is, does further growth in GDP really
make us richer, or is it making us poorer by increasing the uncounted
costs of growth faster than the measured benefits? That simple question
is taboo among economists and politicians, lest we discover that the
falling benefits of growth are all going to the top 1%, while the rising
costs are “shared” with the poor, the future, and other species.
Herman Daly
is an American ecological economist and professor at the School of
Public Policy of University of Maryland, College Park in the United
States. He was Senior Economist in the Environment Department of the
World Bank, where he helped to develop policy guidelines related to
sustainable development. He is closely associated with theories of a
Steady state economy. He is a recipient of the Right Livelihood Award
and the NCSE Lifetime Achievement Award
No comments:
Post a Comment