Full Employment Policy Research Articles

Africa between Financialization and its Commodities: Post-pandemic Economic Development Path

The objective of this article is to delve into the development of the region’s financial fragility and economic instability process in an environment where, in the absence of the United States, other agents such as Turkey, the United Arab Emirates, Saudi Arabia, Russia, and the growing presence of China, have emerged. An inflationary environment, high indebtedness, and rising interest rates in the short term are placing countries of the region to the limit due to the lack of a full employment policy given the burden of servicing external debt and the need to import food, fertilizers, and fuel. This situation prioritizes institutional investors who play a determining role in the economic development of the African region.

Mobilization of Fiscal Resources as Development Engine of Decentralized Territorial Entities: The case study of Mbandaka City in Democratic Republic of the Congo

The State as an institution was born from the will of the people for the realization of activities of common interest, such as: the building of hospitals, roads, schools, electrification, job creation, water etc. As the protector of goods, the state is called upon to fulfill several duties either governmental, when the state exercises its sovereignty to legislate and execute, or administrative when it ensures the management of the public administration for the benefit of the collective welfare thanks to the various taxes, levies and other charges mobilized and/or collected from the population in order to meet its expectations and aspirations. The modern State fulfills five important socio-economic duties, which are: production, regulation, protection, compensation and finally the function of stabilization and stimulation of the economic growth. Through production, the state intervenes not only to produce and create material wealth, but also to ensure the necessary conditions for its creation (e.g., provide adequate infrastructure and create an efficient administration). The state plays the role of the father of the city, must demonstrate certain equity through distributive justice, ensuring the redistribution of income by means of taxation on the income of the individual and the profit of the corporations or by means of aid and social security. Finally, the state has the responsibility of stabilizing and stimulating the economic growth. To achieve this, it is vital to practice the policy of full employment, price stability and very rapid economic growth, with the aim of increasing the quantity, quality and mobility of production factors, it is reflected in the policy of education, scientific research and training as well as labor mobility. Thus, local elected officials are called upon to fulfill these different functions in order to take off the development of their areas of common interest for the benefit of community welfare at the grassroots level.

How the Phillips Curve Shaped Full Employment Policy in the 1970s: The Debates on the Humphrey-Hawkins Act

AbstractThis article relates the history of economists' influence in shaping the content of the Humphrey-Hawkins Act (1978) and its immediate consequences. The act committed the federal government to reducing unemployment to 4 percent and inflation to 3 percent as soon as 1983. Initially, the Humphrey-Hawkins bill was conceived as a project to favor the economic integration of African Americans and economic planning and targeted only the unemployment rate. Republican senators successfully pushed for adding a numerical inflation target during the debates in Congress. The act eventually put on equal footing inflation and unemployment. This article argues that the economists in the Carter administration, and notably the Council of Economic Advisers, were instrumental, even if unintentionally, in favoring the integration of an inflation target and such an interpretation of the bill. In the negotiations that opposed them to the supporters of the bill, as well as in the analysis of the bill they produced, they insisted on the existence of a trade-off between inflation and unemployment and referred frequently to the famous Phillips curve. They endeavored to anchor their expertise on academic publications, which strengthened the role of the Phillips curve in shaping the debates. Business organizations and senators used references to the trade-off to undermine the bill and favor the integration of an inflation target.

Is There an Appropriate Monetary Policy Framework to Achieve a More Equitable Income Distribution or Do Central Bank Mandates Really Matter? Interest-Rate Rules versus a Full-Employment Policy

This article focuses on monetary policy from a Post-Keynesian/Institutionalist perspective, where there are essentially two approaches to how monetary policy can be framed. On the one hand, the rules-based approach suggests that discretionary monetary policy should be abandoned in favor of central bank fixed interest-rate rules that would seek to maintain a “fair” and stable rentier income share. On the other hand, the full-employment policy approach acknowledges that discretionary monetary policy can help to achieve full employment and, by doing so, could affect both the rentier share and the wage/profit shares of national income. Thus, while fixed interest-rate policy rules focus primarily on the rentier/non-rentier income relation, thereby leaving all concerns for unemployment and the wage-profit distribution primarily to fiscal policy, a full-employment monetary policy might directly contribute, in coordination with fiscal policy, to attain higher employment levels and desirable wage shares. This article argues, based on comparative experiences between Canada and the United States in the last four decades, that a full-employment monetary policy, or a multi-goal central bank mandate, in practice would be not only more politically feasible, but also more consistent with an equitable and stable overall functional distribution of income compared to strict interest-rate policy rules

Involuntary Unemployment Due to Instability of the Economy and Fiscal Policy for Full-Employment

The existence of involuntary unemployment, proposed by J. M. Keynes, is a very important issue in modern economic theory. Using a three-generation overlapping generations (OLG) model, we show that the existence of involuntary unemployment can be attributed to economic instability. Economic instability is the instability of the difference equation for equilibrium prices around the full employment equilibrium, which means that the presence of involuntary unemployment will further reduce employment when the nominal wage rate declines. This instability is due to the negative real balance effect that occurs when consumers' net savings (the difference between savings and pensions) are smaller than their liabilities, which are calculated by multiplying childhood consumption by the marginal propensity to consume. The paper also presents arguments for fiscal spending and tax cuts by seigniorage, rather than public debt, as a fiscal policy to achieve full employment. This paper presents the theoretical and mathematical foundations of Functional Finance Theory (Lerner (1943), (1944)) and MMT (Modern Monetary Theory, Mitchell, Wray and Watts (2019), Kelton (2020)). It may be an attempt to present the theoretical and mathematical foundations of MMT (Modern Monetary Theory, Mitchell, Wray and Watts (2019), Kelton (2020)).

THE GERMAN ANTI-KEYNES? ON WALTER EUCKEN’S MACROECONOMICS

The work of Walter Eucken (1891–1950), founder of German ordoliberalism, is often described as being in direct opposition to that of John Maynard Keynes. Our paper challenges this claim by making two main arguments. First, we show that Eucken supported a proto-Keynesian stimulus program at the height of the Great Depression, the so-called Lautenbach plan of 1931. Second, we analyze his critique of full employment policy, which reveals that Eucken’s approach to solving macroeconomic problems is fundamentally different from, if not necessarily contrary to, that of Keynes.

Involuntary Unemployment as a Nash Equilibrium and Fiscal Policy for Full Employment

This study aimed to provide a game-theoretic interpretation of the analyses of involuntary unemployment by deficiency of aggregate demand and fiscal policy to achieve full employment using an overlapping generations model. We showed that involuntary unemployment is in a Nash equilibrium of a game with a firm and consumers. Moreover, we showed that full employment can be achieved through fiscal policies that create budget deficits in recessionary conditions with involuntary unemployment. Once full employment is achieved, it can be sustained without a budget deficit.

Managing the impact of globalization and technology on inequality

This article tests the relative importance of globalization and technological change in explaining income inequality at higher and lower development levels. Besides, the article analyses the effectiveness of a set of policy measures for fighting inequality. We use relative pre-tax income shares as a proxy for inequality. Several linear and non-linear threshold panel data models with GDP per capita as the threshold variable are estimated for 42 countries over the period from 1994 to 2016. We find that technology is the most important generator of inequality, while the effect of various globalization measures is weak and often insignificant. We find limited evidence that the effect of globalization differs with respect to the level of GDP per capita. Our results suggest that full employment policies in the low inflation environment are the most efficient solution for the inequality problem. Higher employment and low inflation rate decrease the inequality level. Other than that, we do not find other policy measures that satisfy the one-size-fits-all criteria for tackling inequality. Instead, a set of efficient policy measures against inequality, including expenditures on education, minimum wage policies, and lending rates, depend on the development level and idiosyncratic policies and institutions.

MMT’s policy prescriptions in Small and Open Economies: Addressing some Controversies

According to Modern Monetary Theory, a country that issues its own floating currency -and has no foreign exchange denominated debt- can simultaneously achieve both full employment and price stability through an Employer of Last Resort. The ELR is a policy option in which the government offers a job to anyone willing and able to work at the program's wage. Along with a zero interest rate policy, these prescriptions constitute MMT’s base case for analysis. Unfortunately, they are seldom considered as a whole by critics. Most criticisms of MMT emphasize the inflationary consequences of full employment policy. The author argues that, ultimately, it is the definition of full employment that seems to be the key when discussing the feasibility and desirability of an ELR program. Implementing an ELR program could result in an increase of the price level as measured by some index. Arguing that, as a consequence, full employment should not be pursued is tantamount to keep using unemployment to control the price level.

What is Full Employment? A Historical-Institutional Analysis of a Changing Concept and Its Policy Relevance for the Twenty-First Century Post-COVID-19 Economies

: Unemployment and the related concept of full employment have acquired different meaning depending on the historical evolution of capitalist economies since the eighteenth century. The purpose of this article is to provide a broad historical perspective and to contextualize the meaning of full employment in a COVID-19 world and possible aftermath. In opposition to the view of many economists and policy makers on both the Right and Left of the political spectrum, the article affirms that a full-employment policy is not passé. What we have learned from the COVID-19 crisis is that a full-employment commitment ought to be coupled with a “full” or universal basic income system. These should be viewed as complementary and not competing policy visions for a twenty-first-century post-COVID-19 world.

Workplace reform: a new social contract for Australia

The COVID‐19 crisis impels us to think about the future of Australia in many dimensions and from different perspectives including our social, economic and governance structures. A new social contract at work in Australia should rest on three pillars: a full employment policy coupled with a strong safety net for those not able to find work; a comprehensive system of post‐secondary and vocational training, and easy transition between them; industrial relations reforms to provide a stronger voice for workers in decisions affecting them in the workplace. These pillars should be based not only on the historical experience of Australia but also draw on successful examples from elsewhere. The Nordic countries, for example, have based their social and economic systems on a social partnership approach that relies on voluntary cooperation between interest groups rather than legislation.

Neoliberalism’s prologue: Keynesianism, myths of class compromises and the restoration of class power

Many anthropologists interpret neoliberalism as a radical break from and dangerous rupture in post-war societies that featured Keynesian economic policies and welfare provision. The allure of a mythic welfare state has boosted John Maynard Keynes’s popularity to many who embrace certain facets of socialism. Many critical social scientists have embraced Keynesianism in ways that overlook how the US used Keynesian policies to reengineer and redeploy state power. Keynes’s liberal synthesis inspired managers in the US Treasury Department to understand depression-era problems of unemployment and poverty in ways that were consonant with the expansion of corporate power. For understanding Keynesianism, as it actually existed during the Cold War, we must analyse how the US Treasury and State Departments used Keynesian principles to rebuild the social reproductive capacities necessary for capitalist accumulation both domestically and in Western Europe. I focus on how the architects of post-war capitalism used full employment policies, labour laws and welfare provision to renovate the nexus of political practices and institutional structures in ways that formed a benevolent and caring image of ‘the state’ and the myth of a class compromise. Through these reforms, governmental planners and administrators used the ‘state idea’ to reorganize capital accumulation as if the post-war economy would represent ordinary people’s best interests. In the process, these sophisticated practices of power became reified as the ‘welfare state’ and the ‘Keynesian compromise’ in ways that endow these institutions and policies with a character divorced from practices of power. The post-war state embodied a dialectic of repression and reform that combined criminalizing dissent with full employment policies and welfare provision. Taking these aspects of power into account, we can see post-war Keynesianism in ways that inspire a robust and far-reaching criticism of the contemporary predicament of economic uncertainty, political instability and environmental degradation.

Is it rational for policy makers to tolerate unemployment; and does there exist feasibility of, asymptotically, a full employment policy in capitalist economies?

Is it rational for policy makers to tolerate unemployment; and does there exist feasibility of, asymptotically, a full employment policy in capitalist economies?

Involuntary unemployment as a Nash equilibrium and fiscal policy for full employment

Using two types of overlapping generations (OLG) model, we show that involuntary unemployment is in a Nash equilibrium of a game with a firm and consumers, and we can achieve full-employment by fiscal policy financed by seignorage not tax. Once we achieve it, it is maintained without government expenditure. Also we show that a fall in the nominal wage rate may not decrease involuntary unemployment.

On the fiscal policy for full employment: Theoretical analysis with an overlapping generations model

On the fiscal policy for full employment: Theoretical analysis with an overlapping generations model

Pełne zatrudnienie – porzucona idea i jej odrodzenie

This article deals with the recovery of the idea of full employment. Its principal aim is to gather evidence that this idea has new functions in the present social context and that the main problems of the full employment policy have reasonably well founded solutions. The method of this text is to analyse the social meaning of economic theories. In every analysis of full employment, the politics of inflation pressure seems to be the main and unresolved problem. This pressure is biggest as the economy nears full employment. The first proponents of full employment policies, including W. H. Beveridge and A. P. Lerner, knew this problem very well. Contemporary followers of full employment policies also endorse the Lernerian concept of functional finance. However, they recommend an institutional change and reject the Keynesian discretionary macroeconomic policy. Their proposition is the Job Guarantee Programme: employing all of the willing people without a job in the public sector and paying them a universal decent wage. The job guarantee is an old idea in a new form and a new context. In times of economic decline, a Job Guarantee Programme delivers a more egalitarian organisation of society and a greater level of equality instead of doubtful prospects for economic growth.

Existence of Involuntary Unemployment and Fiscal Policy for Full-Employment

Existence of Involuntary Unemployment and Fiscal Policy for Full-Employment

La nation face à l’État et aux rapports de classe : quels enjeux contemporains pour la politique économique ?

Comment caractériser les contradictions entre l’État et la nation, tout en tenant compte du fait que la société réelle est divisée en classes ? Ces éléments sont abordés sous l’angle des implications d’une politique de plein emploi, à partir des analyses de l’économiste marxiste polonais Michal Kalecki. L’idée d’une double nature de l’État, dont on trouve les prémisses chez Marx, est ensuite mobilisée pour articuler les notions d’État, de nation et de classes sociales. Enfin on s’interroge sur les enjeux actuels de la politique économique face aux tendances qui sont censées éroder le rôle de l’État et des nations.

A Keynesian Approach to Fiscal Policy for Full Employment and Continuous Time Debt Dynamics

Abstract It is widely argued that public debt is a burden on the future generations. We analyze another aspect of public debt as an economic stimulus program, that is, the measure to realize full employment from an under-employment state. Using a continuous time version of a dynamic analysis of debt-to-GDP ratio we show that a fiscal policy to realize full employment from a state of under-employment can reduce the debt-to-GDP ratio. More precisely we show that the larger the extra growth rate (increasing rate) of real GDP by a fiscal policy is, the smaller the debt-to-GDP ratio at the time when full employment is realized is. Also we show that even if the marginal propensity to consume is very small (including zero), an aggressive fiscal policy can realize full employment without increasing the debt-to-GDP ratio. Further, we consider a condition to realize full employment from a state of under-employment within one year without increasing debt-to-GDP ratio.

The 'Kansas City' Approach to Modern Money Theory

Modern money theory (MMT) synthesizes several traditions from heterodox economics. Its focus is on describing monetary and fiscal operations in nations that issue a sovereign currency. As such, it applies Georg Friedrich Knapp’s state money approach (chartalism), also adopted by John Maynard Keynes in his Treatise on Money. MMT emphasizes the difference between a sovereign currency issuer and a sovereign currency user with respect to issues such as fiscal and monetary policy space, ability to make all payments as they come due, credit worthiness, and insolvency. Following A. Mitchell Innes, however, MMT acknowledges some similarities between sovereign and non-sovereign issues of liabilities, and hence integrates a credit theory of money (or, “endogenous money theory,” as it is usually termed by post-Keynesians) with state money theory. MMT uses this integration in policy analysis to address issues such as exchange rate regimes, full employment policy, financial and economic stability, and the current challenges facing modern economies: rising inequality, climate change, aging of the population, tendency toward secular stagnation, and uneven development. This paper will focus on the development of the “Kansas City” approach to MMT at the University of Missouri–Kansas City (UMKC) and the Levy Economics Institute of Bard College.