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ZERO UNEMPLOYMENT

ZERO UNEMPLOYMENT . IN A PLURAL ECONOMY A working document of the South African Research Chair in Development Education Prepared by visiting fellow Howard Richards (Chile) With the support of professors Joanna Swanger (USA) and Alicia Cabezudo (Argentina). No Magic Wand.

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ZERO UNEMPLOYMENT

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  1. ZERO UNEMPLOYMENT IN A PLURAL ECONOMY • A working document of the • South African Research Chair in • Development Education • Prepared by visiting fellow Howard Richards (Chile) • With the support of professors Joanna Swanger (USA) and Alicia Cabezudo (Argentina)

  2. No Magic Wand • There is no single solution. There are many ways to arrive at zero unemployment. • We propose here a thought exercise consisting of six complementary steps • Whose outcome would be a decent livelihood for everyone • At the end we will briefly present two other thought exercises regarding unemployment

  3. The dominant paradigm • The dominant paradigm (the neoliberalism of the Washington consensus) • Thinks in terms of employment with an employer rather than in the broader category of livelihood • It recommends pumping money into education and health services • In order to add value to what the poor have to sell in the labour market, i.e. themselves

  4. Error of the dominant paradigm • It is impossible to eliminate unemployment by education (conceived as job training) and health services • Because sometimes the problem is not lack of qualified applicants • But lack of jobs

  5. Neoliberal theory • The dominant theory holds that markets match employers and employees • Hence the main problem is to produce the qualified employees the market wants

  6. Keynesian theory • Markets normally tend to a low level equilibrium that leaves willing workers unemployed • “Full, or even approximately full, employment is a rare and short-lived occurrence.” --General Theory, p. 250

  7. Recent theory • Recent experience confirms the theoretical insight of Keynes that there is a chronic weakness of effective demand for labour • --Paul Krugman, Nobel Memorial Prize in Economics 2008, in The Return of Depression Economics, 2009

  8. Consequently • In today´s economy those who lack education and job skills will not find employment • …but those who have education and job skills may and may not find employment

  9. Livelihood is the broader idea • We will propose six basic steps toward livelihood for all • Starting with maximizing traditional forms of employment • And ending moving beyond employment to a broader idea of livelihood

  10. LIVELIHOOD need not come from a job • It is true that everyone should contribute to society • But it is not true that everyone's contribution to society (and livelihood) must depend on finding an employer whose ability to pay salaries ultimately depends on sales or on taxes

  11. First step: PROMOTE LIVELIHOOD • BY ENCOURAGING EMPLOYERS TO CREATE JOBS

  12. EMPLOYMENT IN THE ENTREPRENEURIAL SECTOR DEPENDS ON TWO FACTORS • 1. the efficiency (“marginal efficiency") of capital • 2. the rates of interest • (from John Maynard Keynes, General Theory of Employment, Interest, and Money, p. 39))

  13. “efficiency of capital” • A technical concept • Which boils down, as Keynes says • To whatever motive in fact motivates running a business and hiring employees to work for it • The motive may be maximizing profit, or a vocation to serve the public, or fascination with technology, or even a desire to create jobs

  14. “efficiency of capital” again • Often the decision to run a business is driven by what Keynes calls “animal spirits” • Or love of adventure • Keynes, Schumpeter and others find that decisions to invest are rarely purely rational

  15. Treat business people as human beings • Not as machines programmed to maximize profits by minimizing costs • But as humans who are called to live in community and in service to others

  16. SEEK AND ENCOURAGE THE IDENTIFICATION OF BUSINESS PEOPLE WITH THE ETHICAL VISION OF THE COMMUNITY

  17. Remember that bulk of employment in the entrepreneurial sector • is provided by small and medium-sized businesses, • Therefore it is key to generate participatory processes • through which small and medium sized businesses • identify with the community • and are supported by the community

  18. Returning to Keynes … • In bare theory, employment in the entrepreneurial sector depends on two factors • 1. the efficiency of capital • 2. the rates of interest

  19. impact of a rate of interest • If the rate of interest is high enough • It does not pay to hire • Because you can make more money without hiring anybody • Letting money gather interest

  20. Nobody hires workers if it is safer and more profitable to speculate • Therefore, to move toward zero unemployment • Put the brakes on non-productive speculation • Channel money toward job-creating production • Lower interest rates to make it harder to speculate and easier to run a business

  21. Discourage capital flight • Anchor money in a territory and in a community

  22. Another problem: Inflation • It is often said, and not incorrectly • That it is inflationary to lower interest rates in order to boost employment • Easy money brings higher prices • It risks making business impossible • By making money lose its value

  23. It is necessary to rethink inflation: • Inflation is too much money chasing too few goods • It can be stopped by taking money out of circulation by taxation, taxing most those who have most • And by increasing production, putting more workers to work

  24. PROMOTE LIVELIHOOD • BY PROMOTING PRODUCTION

  25. A PRO-ACTIVE APPROACH • Besides encouraging business • Take direct measures • To support employment and livelihood generally • Including production that is not for sale, but for barter, use, gift, sharing etc.

  26. We reject the idea that the way to stimulate job-creation is to further lower wages that are already low • It is necessary to create livelihoods for people • With more imagination and less cruelty

  27. Restrict competition from imports from low-wage countries with non-existent labour laws Back productive projects with public funds on condition that jobs are created and good wages paid Plan production with deliberate attention to jobs as a goal Form productive alliances with universities, now that knowledge is the leading factor in production Measure the efficiency of the public sector and all sectors with social criteria, including job creation Work with institutional sources of capital, such as pension funds and the endowments of schools, churches and charities For example

  28. Another problem: ecology • Unfortunately • Increasing production and consumption • Without adequate environmental planning • Tends to destroy the biosphere • And therefore all of us

  29. It is necessary to rethink livelihood • Livelihood is at the junction where ecology, culture and economics meet • Zero unemployment has to be made compatible • With green technologies and simple living • Because that is the only way our species can avoid destroying itself by destroying its habitat

  30. A healthy economy is ecological and it creates jobs • It creates jobs installing the green technologies that must replace most of the existing technologies • It creates jobs by substituting human labour for technologies that rely on fossil fuels… • …and poison the environment.

  31. SUPPORT THE PEOPLE’S ECONOMY

  32. The people’s economy • Is that economy • Where the main resource is labour (not capital) • And the objective is making a living (not profit) • It supports the lived world of the majority of the world´s people • It is self-employment, whether alone or in a cooperative group

  33. Enterprising people • It includes the businesses where the workers and owners are the same people • It includes grassroots sharing of resources for mutual survival • It includes independent workers, like a plumber who owns the tools, or a taxi driver who owns the vehicle

  34. The people’s economy… • …creates livelihoods that do not exist according to the equations of Keynes • Because it repeals the rule that for someone to be employed someone else must profit • The workers who own their own tools do not have to make profits • They can get by with just enough to live on and to replace tools when they wear out.

  35. REBUILD THE WELFARE STATE AND THE PLANNING STATE

  36. IT IS FUNDAMENTAL THAT THERE BE A STATE THAT WORKS FOR THE WELFARE OF ALL THE CITIZENS ….AND HAS RESOURCES

  37. In our epoch of neoliberal globalization • The state is weak • Because it lacks resources • Because it cannot tax society’s major wealth • For fear of capital flight and similar reprisals • And must support itself with taxes that fall on the poor and the middle class

  38. Public control of natural resources • The relatively strong states are the ones that finance themselves with income from natural resources • But from the people’s point of view it is useless to have a strong state • If that state is dominated by a corrupt elite that serves not the people but itself

  39. therefore

  40. To achieve zero unemployment • We need a government devoted to the service of the people. • Which takes control of the incomes that are not produced by anybody’s labour or by anybody’s entrepreneurial skill (the gifts of nature) • And uses them to support livelihoods for all

  41. We do not need • Businesses or individuals • So powerful • That the state does not dare to tax them at reasonable rates

  42. RECYCLE EXCESS PROFITS TO FINANCE HUMAN DEVELOPMENT

  43. Argentina, Chile, and South Africa are enormously unequal countries. • Source: UNDP, Human Development Report 2005.

  44. Extreme Inequality • Is not only unjust and inefficient • It is also dangerous • It produces economic instability • Because of the accumulated profits that are not spent on consumption • And have no profitable investment outlets • And which can be taken out of the country at any moment

  45. An excess of money • Extreme inequality is due to • The limitless accumulation of the profits of the upper class • With a consequent instability of the system • Due to lack of consumers who would justify investments by buying products • In other words due to the poverty of the majority

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