Thoughts about full employment
The commentary below has been extracted from a Facebook posting by Ellis Winningham which appeared on 19 March 2023.
In his publication “The Political Aspects of Full Employment” which was published in 1943, the Polish economist Michal Kalecki says:
“The reasons for the opposition of the “industrial leaders” to full employment achieved by Government spending may be subdivided into three categories: (i) the dislike of Government interference in the problem of employment as such; (ii) the dislike of the direction of Government spending (public investment and subsidising consumption); (iii) the dislike of the social and political changes resulting from the maintenance of full employment.”
Kalecki’s examination of (iii) will be our concern here. First, he points out that though the establishment’s arguments are always advanced through economics, the fact is that political motives are the actual main driving force, and not economic motives per se: “It should be first stated that although most economists are now agreed that full employment may be achieved by Government spending, this was by no means the case even in the recent past. Among the opposers of this doctrine there were (and still are) prominent so called ‘economic experts’ closely connected with banking and industry. This suggests that there is a political background in the opposition to the full employment doctrine even though the arguments advanced are economic. That is not to say that people who advance them do not believe in their economics, poor though these are. But obstinate ignorance is usually a manifestation of underlying political motives.”
If we examine the situation carefully, we will easily notice the obstinate ignorance that Kalecki mentions at play in the current inflationary episode. Governments and heads of central banks continue to pursue demand-side measures to overcome inflation, such as pursuing deficit reduction, refusing to spend for wage increases for striking workers (or offering them paltry increases), continuous interest rate rises, etc., in a complete denial of all evidence to the contrary that says the inflation problem is a supply issue.
Why disrespect the data? Why deny the obvious? Political motives. It can be nothing else. For if the goal was a genuine concern for the overall state of the economy, they would immediately recognise that inflation is the result of supply issues related to the pandemic and war, along with corporate price gouging and financial sector shenanigans, immediately aiming their policies towards suppressing greed and alleviating the problems associated with it, instead of pursuing measures that address a non-existent problem: Inflation resulting from full employment, high wages, and too much spending.
So then, what are the political motives for throwing millions of people into unemployment to fight “inflation”? This is where Kalecki provides people with the simple answer they are missing:
“…the maintenance of full employment would cause social and political changes which would give a new impetus to the opposition of the business leaders. Indeed, under a regime of permanent full employment ‘the sack’ would cease to play its role as a disciplinary measure. The social position of the boss would be undermined and the self assurance and class consciousness of the working class would grow.”
So, it’s not exclusively about controlling inflation? It’s not just about huge profits? No. It’s about privilege and status as well, and even more so than profits. The following insight of Kalecki is relevant to current events:
“The mainstream belief among modern capitalists is that too many people working means a tighter employment market, making it harder for employers to fire and replace workers, meaning labour has more bargaining power, which in turn means that the business leader loses control over his workers, over his exalted social status, and in the end, he loses control over the nation’s political and economic narrative.”
Kalecki goes on to make this point absolutely clear: “It is true that profits would be higher under a regime of full employment than they are on the average under laisser-faire; and even the rise in wage rates resulting from the stronger bargaining power of the workers is less likely to reduce profits than to increase prices, and thus affects adversely only the rentier interests. But ‘discipline in the factories’ and ‘political stability’ are more appreciated by the business leaders than profits. Their class instinct tells them that lasting full employment is unsound from their point of view and that unemployment is an integral part of the ‘normal’ capitalist system.”Know someone interested? Please share