The Direct Approach

When talking of job creation, many will likely have noticed the vacuous nature of the economic conversation. Whether you are a conservative proposing tax cuts and regulatory cuts or a liberal advocating increased education and infrastructure spending, job creation is always cast in the same light. It is depicted as the derivative result of some other policy.

Just take the following examples. Increased education spending, it is said, will increase the economy’s capability to produce the high-tech jobs of tomorrow (whatever they might be). Tax cuts will cause investors to spend more on factories and equipment resulting in more hiring. Boosting social programs will allow consumers to spend more in economic downturns. Cutting regulations will allow jobs to be created more easily. Starting to see the pattern? In a sense, these policies can be referred to as “indirect” job creation efforts. Job creation is the result of some ripple effect caused by a government policy or project that does something else in the immediate time frame. Both the left and the right rely on these assumptions and arguments and they form the basis of neoclassical economic theories on government policy.

Note. The White House released a report in May 2009 that estimated job gains from the Recovery Act. It had three definitions of government sponsored job creation: direct, indirect, and induced. Direct jobs are those created strictly for a particular project (paving a road). Indirect jobs are those created in the industries providing supplies for the project (cement manufacturers). Induced jobs are those created elsewhere in the economy through various ripple effects caused by increased income (a local restaurant profits from increased nearby activity). My definition of indirect job creation invokes both the latter two.

But they have their limits. For one thing, talk of full employment has utterly faded from the policy world and from the economic catalog of the mainstream left. And we can see the results. Throughout the developed world, employment recovery has been agonizingly slow even as economic growth (sort of) returns, corporate profits soar, and stock markets approach their previous highs. In parts of Europe, employment recovery is nonexistent and unemployment remains at depression levels. In America, while unemployment rates might have dropped, underemployment is abnormally high. Many people are stuck with low paying, low-skilled jobs that will do nothing to secure their long term finances.

Clearly, our policy prescriptions have been limited in their effectiveness. Now, none of this is to say that pursuing indirect job creation is a bad thing. As I said, all kinds of government policy (even policy not specifically targeting employment) depends upon economic ripple effects. But the fact remains that current Western efforts haven’t adequately addressed long-term employment problems. And more needs to be done.

As you can probably tell from this article, that something revolves heavily around direct job creation efforts, government policies and projects done with the sole purpose of increasing the number of employed people and jobs. I drew my initial inspiration from the Roosevelt Institute itself. One of its namesakes, FDR, become a modern liberal icon precisely because of jobs he directly created through the New Deal. Other sources include the Congressional Progressive Caucus which has released several proposals containing direct-hire public works corps. These kinds of policies are incredibly varied. They can include anything from expanding the military, rehiring conventional public sector employees, to recreating the Civilian Conservation Corps.

In whatever form it might come, reviving direct hiring would not only create more jobs more quickly, but it would tear open the political straight jacket the left trapped itself in by supporting austerity. But there’s another plus. Full employment, a goal that’s been neglected by progressives since the 1970s, could be revived as a legitimate vision. The damning statistics behind unemployment fail to convey the massive costs to society of long-term joblessness, costs that hinder current indirect job policies: skills deterioration, loss of employability, disengagement from economic life, etc. Ending mass joblessness via direct hiring represents one of the many proverbial silver bullets needed to tackle these and many other societal ailments.

I’ll end with this. Direct hiring has its political weaknesses. Those must be addressed but first, there needs to be a definitive model with firm academic backing. There is and it’s the one I’ll address next time: the government becomes an employer of last resort through a job guarantee.

 

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Playing Defense: Tribulations of the Left

Europe. American progressives have, for years, hailed the continent as an icon of social progress. Europe, to us, represents visionary governance, an image of what public sectors can do to alleviate the worst afflictions of modern society: hunger, poverty, inequality, and illness. Universal healthcare, free tertiary education and generous social safety nets constitute the tools of this Social Democratic project, tools many American Progressives have struggled to import. 

The admiration is so deep that the quip, “I’d be a conservative in Europe,” is chanted wistfully even on the most liberal of American campuses. And it’s not without some truth. The line between the right and left in Europe, to the advantage of working people across the continent, isn’t demarcated over the existence of a welfare state. But American activists need to be increasingly cautious about any identification or praise for European political parties, even those on the left. For all their achievements, these parties are slowly walking away from the very institutions that made them so alluring. 

Austerity measures are cutting welfare payments, restructuring pensions, reducing public sector employment, slashing wages, and curbing investments in infrastructure. Despite the competition between traditional center left and right parties, both sides have generally continued this trend. The British Labor Party is arguing internally over whether it should agree to welfare caps imposed by its Conservative rivals. Francois Hollande’s French Socialists have suffered their own internal divisions over spending cuts. Germany’s SPD leader, Sigmar Gabriel, strongly blasted Greeks for voting against European Bailout Provisions (containing required austerity measures). Even the Greek radical left government of Alexis Tsipras seemingly betrayed its own heritage as an anti-austerity movement when it finally agreed to the humiliating bailout deal. 

That the right in Europe would advocate scaling back Social Democratic structures is easy to understand. The rising influence of free-market economics laid the blame for sclerotic growth squarely at the feet of the supposedly inefficient public sector. Center-right parties, with their inevitable friendliness to business, easily took up the mantle of promoting efficiency and competitiveness. But why the left would advocate similar policies is harder to fathom. It has partly to do with the fact that the influence of free market orthodoxy affected social democratic parties too, hence the rise of third way movements represented by politicians like Manuel Valls or Tony Blair who argue that moving to the center is critical to winning elections. But the dual combination of the Eurozone Crisis and the Great Recession played an even larger role. Even as they came to power opposing austerity measures, center left parties felt obliged to implement less stringent measures anyway. The argument, often dubbed by economists as TINA (There is No Alternative), is a powerful one precisely because it holds true for countries who want to stay in the Euro but can’t possibly convince Brussels and Berlin to push the kind of fiscal union necessary to make it work. 

So the mainstream European left is stuck. It’s witnessing seventy years worth of policy achievements being whittled away. But the best it can argue with its electorates is that it represents a supposedly ‘kinder’ way of implementing austerity. It won’t (or can’t) argue for policies like increased fiscal stimulus, jobs programs, or even more robust welfare. Whether these parties were forced into this position or not is moot. Their actions are affecting the electoral vitality  of the European left. Francois Hollande, the Socialist French President, is extremely unpopular. The British Labor Party just received a sound drubbing this past May. And the Syriza Coalition may just fracture or disappear as the Greek PASOK party did three years back. This trend isn’t limited to Europe. Center left parties in Canada, Australia, and even Israel haven’t been doing well at the polls precisely because they haven’t been presenting major alternatives to current economic policy. 

The lessons for the United States are indicative. The Democratic Party, especially at the state level, is struggling to defend welfare systems against public spending cuts. In many cases, it’s actively implementing them. In the long term, especially if party activists truly hope to import the best that Social Democratic policies have to offer (and its debatable if they do), this is a flawed strategy. There’s a limit to arguing that defending the public sector as a positive force is best achieved by cutting its funding and staff. Europe is actively playing host to those limitations now with catastrophic results for its economy and integration efforts.

The answer, both for Europe’s future and our own, is for the left to actively tackle the orthodoxies that plague centrist politics and to seriously promote the very programs it has long dreamed of and, in Europe’s case, actually achieved. For them, it would mean renewed efforts to repair damaged social safety nets, completely reversing austerity, and refusing to accept a Eurozone without the fiscal transfers to make it work (backed by a willingness to leave the currency if need be). For us in America, rejecting the triangulation of the Clinton era must go hand in hand with energetically supporting and pushing for measures like the restoration of Glass Steagall, single payer, free tertiary education. 

The short lesson is this. To have any chance of achieving one’s political desires, one’s views must at least exist in Justice William O’Douglas’ “marketplace of ideas.” We are at a point in history where the market is ready to hear these ideas and to take them in; we must oblige. The alternative is a social democratic movement permanently on the defensive and, inevitably, on the decline.