2012-05-24 | Filed Under SteveG's Posts |
The article by L. Randall Wray, Should Growth Drive Jobs, or Jobs Drive Growth?, is largely made up of a long quote from the article Jobsworth by Edward Hadas. I give you links to both articles because I think each one adds something worthwhile reading.
Here is part of the quote that originates with Hadas.
Politicians and other leaders have watched the job destruction with something like horror. They shouldn’t have been surprised. The unending fight against inefficiency leads to a natural employment asymmetry. As technology advances, businesses and governments usually find it easier to cut than to add jobs. Some businesses can progressively expand headcount, but in tough times there are more employers looking for ways to use less labour.
Most politicians and economists believe that GDP growth is the cure. It is considered not only the highest economic good but also the best way to create jobs. In search of higher output, governments run huge deficits, while central banks pass out money for free. The policymakers often invoke the name of John Maynard Keynes. But they twist the great economist’s ideas. As Pavlina Tcherneva points out in a recent article in the Review of Social Economy, Keynes thought “the real problem” governments should address during the Great Depression was “to provide employment for everyone”. In Keynes’s view, output follows jobs, not the other way around.
Keynes’s own preferred solution was for governments to organise projects with a high “elasticity of employment”. “There are things to be done; there are men to do them,” he said. “Why not put the two together? Why not put the men to work?” The best way for governments to create jobs quickly is still to hire people directly. A look at the dilapidated infrastructure of the United States suggests that Keynes’ prescription is still relevant.
Enthusiasts for small government might want to privatise such programmes, but they should still agree with the true Keynesian principle: it is better to pay people to work than to pay them not to. Programmes which protect the unemployed and disabled serve a valuable social purpose and payments for early retirement may be defensible, but programmes which create jobs are far preferable to either.
The concept of “natural employment asymmetry” is a nice encapsulation of an idea that is kind of obvious when you are forced to think about it. However, the encapsulation into a simple ideas allows us isolate the phenomenon so that we can focus on the causes and possible cures. I am sure this isn’t news to many experts in the field, but it is eye opening for me.
The article is also a reminder of what John Maynard Keynes really thought was the most direct solution and exactly why he would think that way. This is also eye opening to me who has a very minor undergraduate level understanding of what Keynesian economics is all about. In another 40 years of reading a bit here and a bit there, I might be able to get to a Ph.D. level understanding. That doesn’t stop me from trying to explain things to people who are varying numbers of years behind me in understanding.
Oh, by the way, now that I have explained to you exactly what my opinion is worth, I can give you my answer to the question, “Should Growth Drive Jobs, or Jobs Drive Growth?” I do not think it should be an either/or proposition. I think the lesson learned should be that we ought to attack the problem from both directions. The value of the article is to remind us of one of the directions that we seem to have left out of what we are trying.