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Today’s New York Times came up with a scoop. In a that ran on the front page, the paper reported that the rich don’t like wealth taxes—which are key platform planks for Senators Bernie Sanders and Elizabeth Warren. That said, the rich and their defenders have realized they can’t oppose such a tax on the grounds (however true) that they want still more money, and the power and perks that come with it. Instead, they argue that taxing wealth will curtail the investment that America needs to keep its economy humming. “You’re going to completely disincentivize capital investment, which is going to be very, very bad for economic growth,” Treasury Secretary Steven Mnuchin (a multimillionaire) told the Times. Harvard’s Larry Summers, in an article co-authored with Natasha Sarin of the University of Pennsylvania Law School, argued that “[t]urning the tax code into a vehicle for confronting what some call ‘oligarchic drift’ would undermine business confidence, reduce investment, degrade economic efficiency and punish success.” Summers, however, didn’t explain how even with massive capital accumulation by the top one-tenth of 1 percent, and without a wealth tax, America had somehow lapsed into the “secular stagnation” he has long contended ails the nation’s economy—an ailment chiefly characterized by a deficiency in capital investment. Therein lies the rub: In fact, as wealth has concentrated to an unprecedented degree at the tip-top of the economy, investment has correspondingly declined. As one University of Chicago economist has , between 1984 and 2014 the share of income going to investment declined by 7.2 percent, the share going to labor declined by 6.7 percent, and the share going to shareholders rose by 13.5 percent. The rich are getting richer, that is, at the expense of investment. What ails the American economy is underinvestment, both private and public, in productive enterprises and facilities and in its workers. Warren’s and Sanders’ wealth tax proposals are anything but confiscatory—Warren’s calls for a 2 percent tax on wealth in excess of $50 million—but the proceeds from their proposed taxes could kick-start investment in our decaying roads, airports, schools, and grid, and in the new green infrastructure we desperately need. So: Want investment? Pass a wealth tax.

UBI would also serve as a valuable Keynesian stabilizer by keeping aggregate demand up even during economic downturns (Theobald 1965, 113). That will help governments to smooth out business cycles, which will increase business investment because companies will be able to take bigger risks without worrying about long, major recessions. If necessary, UBI payments could be easily increased with a stabilization bonus like the stimulus payments various countries, including the United States, have made in the past. In fact, rich countries could have implemented UBI instead of engaging in Quantitative Easing, which props up troubled banks by buying beaten down financial securities (Standing 2017, 100–2). “Technology,” one UBI proponent assures readers, “will inevitably increase productivity” (Crocker 2020, 8). Innovation will not dry up under UBI as it is mostly state-driven. As two researchers put it, “figures such as Steve Jobs and Elon Musk slyly obscure their parasitical reliance on state-led developments” (Srnicek and Williams 2016, 179). Moreover, UBI will increase private innovation by giving people a secure base from which to launch enterprises (Theobald 1965, 93) and free up their time to engage in entrepreneurship and provide them a backstop when they fail (Sammeroff 2019, 23). Increased productivity from technological advances will ensure ample tax resources to fund UBI, even without full employment (Standing 2017, 99). Policymakers should not worry about raising taxes if necessary to fund UBI because a study showed that high-income people work almost as long and hard after taxes go up. In fact, unless taxation becomes confiscatory (100%), they might work even longer and harder to keep their net income up (Standing 2017, 149). If tax resistance is a problem, though, UBI can be funded by creating (“printing”) new money with no need to raise taxes or sell state assets. UBI, in other words, can be combined with what Geoff Crocker calls “sovereign money.” With antiquated calls for “full employment” stifled, modern monetary theory (MMT) plus UBI will add up to plenty for everyone, without inflation (Crocker 2020, 37– 40). As Crocker points out, if the sums printed match “potential full employment output GDP” inflation will not ensue (Crocker 2020, 6–7, 30, 45). The fact that governments have been “printing money” and running up large deficits and national debts for decades proves that it causes no economic hardships or problems. “Deficit is inevitable and manageable,” as one researcher put it (Torry 2019, 183). The need for a balanced budget is an illusion of economic orthodoxy, nothing more and nothing less. Money is just a claim on GDP (output), so austerity is harmful because it limits output (Torry 2019, 184).

The first one is that it is an economic stimulus. I mean business can only hire in response to increasing consumer demand or purchasing power. If we want to grow the economy, we have to make sure that enough people can participate in the economy and buy things so that new businesses and the vibrancy of new startups, all that can be maintained. Quite simply, there’s been research shown that programs that put more money in the hands of those who have the least generate five times more return to the economy than corporate tax cuts.

The velocity of money in the US has been drastically affected since 2008. I think I saw Nick Hanauer put up a slide that the average dollar was exchanged 17 times in the year before 2008, and now it’s only exchanged five times in a year because wealth has been so concentrated in the hands of a few. Maybe it’s time that we engage in a demand-side stimulus like a basic income that directly brings people up to a livable level and stimulates the economy.

Social entrepreneurship is the most crucial type of entrepreneurship, as it is startup companies that develop ideas and solutions to current social, cultural, and environmental issues, such as climate change. Unfortunately, entrepreneurship has been on the decline. According to the INC, “entrepreneurs have been in decline for 40 years due to fear of financial failure.” Furthermore, the Office of Advocacy explains that around one in twelve small businesses is doomed to close a year, most commonly due to low sales and restricted cash flow. To resolve the fear of failure and stimulate small businesses, a Universal Basic Income (UBI) of $1,000 a month should be implemented. Luckily, a UBI has the potential to stimulate entrepreneurship further and give businesses the push they need to start, and provide a safety net for companies.

The largest concern of most small business startups is the lack of funding and spending ability. According to an NSBA study, more than 25% of small business owners say they aren’t able to obtain the funds they need to operate their business. Not only are legal fees expensive, but branding and web hosting sites are as well. According to Sammi Carmella, a writer for Business News Daily, average costs for a micro-business average around $3,000. The Journal of Small Business and Entrepreneurship quantifies that many small businesses were forced to finance through personal savings and credit cards. They explain, “over 80% of US entrepreneurs utilized personal sources of funding, accounting for 57% of all startup financing acquired during this period.”

“It’s Not Russia (they supply just 3% of our oil.),” a Facebook user wrote last Wednesday. “It’s’ not the oil companies, It Is the GREEN NEW DEAL regulations. They are lying to us…” But the claim is false. The Green New Deal, which is a sweeping plan backed by some Democrats to address climate change, has not been enacted by the federal government, experts told The Associated Press. “It’s like blaming what’s happening in the world on a boogeyman that doesn’t exist,” said Michael Wara, director of the climate and energy policy program at the Stanford Woods Institute for the Environment. “That’s not correct.” The Green New Deal, which originally existed as a nonbinding resolution, called for a “10-year national mobilization” to move the U.S. economy away from fossil fuels and replace them with renewable sources, in March 2019. But the resolution Congress. Wara noted that Build Back Better, President Joe Biden’s roughly $2 trillion spending plan, included provisions that were inspired by the Green New Deal, such as rebates for electric vehicles. However, the spending plan has been stalled in Congress for months. “Build Back Better is the core of the Green New Deal and it has not been enacted into law,” Wara said. Amy Myers Jaffe, a research professor and managing director of the Climate Policy Lab at Tufts University, said that high gas prices are not being caused by other federal climate change-oriented policies, either. There are many reasons gasoline prices have pushed higher. The biggest driver is the price of crude oil, which has been rising over the past year. As more people get on the road after being cooped up during the pandemic, oil and gas suppliers that had scaled back production during the pandemic lull in demand are struggling to keep up. And decisions by the OPEC+ oil cartel, led by Saudi Arabia and Russia, to only modestly increase the oil they released to the market kept prices high. Some in the oil and gas industry say that Biden’s policies, including , have discouraged companies from drilling. But in fact, oil and gas drilling has under Biden. Now, companies in the U.S. are ramping up drilling but also dealing with tight supplies of rigs, trucks and labor that they need to supply more oil. Global oil prices have climbed even higher as Russia, a major oil supplier to the world, invaded Ukraine and many buyers Russian crude, reducing the viable global oil supply. “The current spike in gasoline prices is tied to the spike in global crude oil prices. Global crude oil production dropped during COVID and has been relatively slow to recover for a number of reasons, none of which are Green Deal related,” Robert Johnston, an adjunct senior research scholar at Columbia University’s Center on Global Energy Policy, wrote in an email to the AP. “The key reasons include OPEC production policy, extremely strong demand post-COVID, low inventories, and now the major geopolitical disruption in Russia,” Johnston added.

Economists broadly agree that placing a price on carbon, whether through a cap-and-trade program or a tax, is a key element of an economically efficient suite of policies to reduce greenhouse gas emissions. In the current US Congress, numerous bills propose the establishment of national carbon tax systems, along with a few that push for cap-and-trade programs. These bills reflect a growing consensus that action is needed at the national level to curb carbon pollution in the United States and that a carbon tax is the most straightforward way to do that. The bills also reflect the existing consensus among economists, as typified by the more than 3,500 economists (including us) who signed the Climate Leadership Council’s statement published in the Wall Street Journal last year, which calls for a carbon tax as “the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary.” However, a major stumbling block to pricing carbon pollution is concern over the macroeconomic impacts of the policy. The Trump administration’s retreat from national climate policy reflects a belief that ambitious climate action could have detrimental consequences for economic growth and employment. While initiating a process to withdraw the United States from the global Paris Agreement, for example, the president claimed that the cost to the economy would be “close to $3 trillion in lost GDP and 6.5 million industrial jobs.” How should we assess the economic costs of a carbon tax? Until recently, most analyses have been based on large-scale computable general equilibrium models. One of these models, the Goulder-Hafstead E3 model, is the engine behind one of Resources for the Future’s digital data tools, the Carbon Pricing Calculator. Today, we have enough experience with carbon tax systems around the world to carry out statistical analyses of existing carbon taxes: with the first carbon tax implemented in 1990, we can draw from up to three decades of data. Directly examining the empirical evidence has two virtues. First, estimating the real-world effects of carbon taxes on GDP, employment, and emissions reductions speaks directly to concerns that carbon taxes kill jobs. Second, the empirical estimates provide a check on the calibrated theoretical models. In two recent papers, we carry out an analysis of the 31 countries that comprise the European Union–wide emissions trading system (EU-ETS). While all of these countries price a portion of their emissions through this cap-and-trade system, 15 of the countries also impose a carbon tax, mostly on emissions not covered by the EU-ETS. By limiting our analysis to countries that are part of the EU-ETS, we can identify the incremental impact of carbon taxes on economic output, employment, and emissions by leveraging the variation in carbon tax systems within this group of nations. For a wide range of specifications, we find no evidence of adverse effects on GDP growth or total employment. We also find that long-run growth rates of GDP and employment are unaffected by the tax. This latter finding is consistent with macroeconomic theory, which suggests that long-run growth rates are driven by fundamentals such as technological progress, which in turn are unaffected by changes in relative prices. Our results also are consistent with most general equilibrium modeling of climate policy. Finally, we find cumulative emissions reductions on the order of 4 to 6 percent for a tax of $40 per ton of CO2 covering 30 percent of emissions. We argue that this is likely to be a lower bound on reductions for a broad-based carbon tax in the United States because European carbon taxes do not include in their tax base the power sector, which has the lowest marginal cost of carbon pollution abatement. (In Europe, power sector carbon emissions are priced under the EU-ETS.) Source: World Bank Carbon Pricing Dashboard. Table 1 shows the considerable variation in European carbon taxes in terms of their tax rates, coverage, and time of enactment. Figure 1 shows annual GDP growth rates before and after the implementation of a carbon tax in the individual countries. While the point estimate of the average GDP growth across countries that enacted a carbon tax suggests a modest increase in the growth rate, there is wide variation and—more importantly—no evidence of the tax hurting economic growth. Figure 1 is only suggestive, because it does not control for other factors that might influence growth or relate to a carbon tax, nor does it allow for the possibility that countries with existing strong GDP growth might feel confident enough to adopt a carbon tax. But in our recent papers, we address these econometric problems and estimate the causal effect of a carbon tax on GDP, employment, and emissions. GDP growth before and after the imposition of a carbon tax among European countries covered by the EU Emissions Trading System (EU-ETS). Gray lines represent 15 countries; red points indicate the average among countries, with associated confidence intervals; horizontal lines indicate the pre/post means. Identifying the dynamic causal effect of a carbon tax on GDP growth is complicated by the possibility of what is called “simultaneity”: poor economic outcomes could lead tax authorities to reduce the rate or to postpone a planned increase. Our approach is based on the insight that changes to a carbon tax can be thought of as having two components: one that responds to historical economic growth, and another that’s unrelated to past growth. The latter category can include tax changes based on legal mandates that follow a preordained schedule, changes in ambition based on the environmental preferences of the party in power, or responses to international pressure on climate policy. We argue that this latter category of changes—those not predicted by historical GDP growth or current and past international economic shocks—are exogenous. This assumption allows us to estimate the dynamic effect on GDP growth from the unexpected component of a carbon tax using a vector autoregressive framework. We report results by simulating a one-time permanent increase of $40 in a carbon tax that covers 30 percent of the country’s emissions (a coverage rate close to the sample mean) and constructing impulse response functions. Figure 2 shows a typical impulse response function for GDP growth rates. A typical impulse response function for the annual rate of growth of GDP in response to a permanent $40 increase in a carbon tax, estimated using a structural vector autoregression. The red line indicates the point estimate, and the two shaded areas indicate 67 percent and 95 percent confidence bands. Three things stand out. First, the point estimate is positive, but small. Second, we cannot reject the possibility that the carbon tax has no effect on GDP growth. And third, we can reject the possibility that the carbon tax exerts an economically significant negative impact on GDP. These findings are consistent across our analyses: we find similar results for total employment growth rates (Figure 3) and manufacturing employment. A typical impulse response function for annual rate of growth of employment in response to a permanent $40 increase in a carbon tax, estimated using a structural vector autoregression. The red line indicates the point estimate, and the two shaded areas indicate 67 percent and 95 percent confidence bands. A typical impulse response function for the percentage reduction in carbon emissions in response to a permanent $40 increase in a carbon tax, estimated using a structural vector autoregression. The red line indicates the point estimate, and the two shaded areas indicate 67 percent and 95 percent confidence bands. Finally, we estimate the impact of this $40 carbon tax on cumulative carbon dioxide emissions. We find a point estimate of a 6.5 percent decline in emissions (Figure 4), though the error bands are wide. While we cannot reject the possibility that the carbon tax has zero impact in most years, we also cannot reject the possibility of double-digit declines in emissions. Worth noting is that countries applying a broad-based carbon tax should view these simulated reductions as lower bounds on potential emissions reductions, since the EU-ETS cap-and-trade system already covers those sectors where emissions reductions are least costly to implement, and so those sectors are generally not subject to the carbon tax. Our results rebut the oft-cited argument that a carbon tax would harm the US economy. While our results suggest that a carbon tax would have a small positive impact on GDP growth, our more cautious conclusion is that a carbon tax would not harm the US economy. Based on the European experience, at least, we find no support for the view that carbon taxes are job destroyers or growth killers.

Further, access to healthcare is limited during power outages. People with elevated health needs requiring medical equipment, such as those using at home ventilators, are some of the most vulnerable when the power goes out. Pregnant women face an increased risk of complications during outages, with low-income, uninsured individuals hit the hardest. In the aftermath of outages, those who can afford them often purchase batteries or backup fossil fuel generators which worsen local air pollution during outages. Low-income families and those who rent housing generally have a lower capacity to prepare for the next power outage and the physical and emotional strain of surviving an environmental disaster can persist for decades.

Power outages cost U.S. businesses, on average, about $150 billion per year. During Winter Storm Uri, Samsung’s giant microchip factory in Austin was forced to shut down for over a month, leading to tens of millions of dollars of economic loses. The broader economic impact of the storms of February 2021 has been estimated at upwards of $300 billion.  Outages lead to increased insurance claims, diminished business confidence, and reduced growth. Between 2003 and 2012, estimates put the cost of weather-related outages on the U.S. economy between $18 billion and $33 billion per year.

A JG offers a job at a fixed money wage to any individual ready, willing and able to work, thereby creating an infinitely elastic labour demand at that wage. The money wage represents a ‘liveable wage’ and can be supplemented with a benefits package.8 The programme is financed by the federal government, but the type of job is determined by the local government who are informed about unmet social needs. This level of decentralisation also helps to reduce policy lags.9

The purpose of a JG is to address macroeconomic inefficiency and mitigate the ‘indignity and insecurity of underemployment, poverty and social exclusion’ (Quirk et al. 2006: 2), along with the ‘amelioration of many social ills associated with chronic unemployment (health problems, spousal abuse and family break-up, drug abuse, crime), [while enhancing] skills due to training on the job’ (Wray 2012). The implementation of a JG would ensure that unemployment and poverty rates satisfy Europe 2020 targets.10

32. Although these examples review modest increases in the minimum wage, we argue that small businesses will likely benefit from the more sizable wage increases that would occur if the FJG were enacted. Businesses would benefit because the program would increase the purchasing power of working-class households, who have a higher marginal propensity to consume. Additionally, with a higher wage, the economy would likely see more robust productivity growth.

Today in the United States, a number of congressional Democrats endorse proposals that would establish a job guarantee for all Americans seeking work. Within academia, much recent research providing an intellectual foundation for such proposals comes from economists writing about the need for government to serve as an “employer of last resort,” a notion often traced to the work of Hyman Minsky (1986).1 However, arguments for such a policy can be traced back much further: John R. Commons, a pioneer in institutional economics, wrote in favor of government jobs for the unemployed as early as the 1890s. This article demonstrates that there are actually three arguments in Commons’s writings that provide a case for government as employer of last resort. The first, which can Charles J. Whalen is a visiting scholar at the Baldy Center for Law and Social Policy, University at Buffalo (New York). This article is based on a paper presented at the annual meeting of the Association for Evolutionary Economics on January 4, 2020, in San Diego, California. The author thanks Hiroyuki Uni for an e-mail exchange that inspired the paper, and Linda Whalen for reviewing the manuscript. 1 For an example of that literature, see Tcherneva (2011). JOURNAL OF ECONOMIC ISSUES Volume LIV No. 2 June 2020 DOI 10.1080/00213624.2020.1752525 John R. Commons and Government as Employer of Last Resort: Three Paths to a Progressive Right to Work John R. Commons and Government as Employer of Last Resort 429 be called the legal path to the right to work, was offered by Commons at the beginning of his career. The second, the financial path, is rooted in work on money and business cycles that Commons undertook in the 1920s. The third, the historical path, can be pieced together by drawing on his Institutional Economics (Commons 1934a), published as Commons embarked on retirement and President Franklin Roosevelt grappled with the Great Depression. Each path is considered in turn, and a brief conclusion underscores the continuing relevance of Commons’s contributions. Securing Life and Liberty: Legal Path to the Right to Work In the United States, the “right to work” is associated most often with state laws that allow workers to refuse to join a labor organization or even pay fees to cover the cost of union representation. However, the term originally referred to a progressive call for the right to employment. In three early works, Commons (1893, 1899, 1900) presented the right to work as a logical extension of the right to life and liberty, which must be secured by government. A Bundle of Rights In those publications, Commons described the right to liberty as “a bundle of rights.” That bundle grants us freedom to do many things, including contract with others, leave one employer and work for another, and establish a new enterprise. The bundle evolves over time—evolving as society recognizes that conditions have changed. According to Commons, changes to the American economy in the second half of the nineteenth century threatened the right to life and liberty because wage labor had for many people become the only route to providing for one’s self and family, which left them in a weak bargaining position relative to employers and extraordinarily vulnerable during periods of joblessness. Thus, Commons argued that society’s bundle of rights must be updated to contain the right to work. That right would be defined and enforced by a web of laws aimed at unemployment prevention, unemployment compensation, and public employment—and the latter would include giving the unemployed the right “to have work furnished by the government” (Commons 1893, 81).2 The Next Great Human Right The thrust of Commons’s public employment recommendation was aimed at the loss of employment caused by business-cycle downturns. But he also suggested that public employment would be needed to help some displaced workers at all stages of the cycle. In addition, Commons saw public employment as a wage policy as well as an employment policy. Commons (1899, 141) wrote: “The right to employment would give laborers steady work throughout the year, and . . . abolish involuntary poverty among the able-bodied.” To summarize: the new bundle of rights Commons envisioned would expand the liberty of working people—by reducing coercion and capricious use of power in employment relations, by increasing employment security and economic security, by providing new economic opportunities, and by bolstering incomes. Taken as a whole, Commons (1893, 80–81) saw a web of laws establishing the right to work—“the next great human right.” Securing the right to life and liberty in this way is Commons’s legal path to the right to work. 2 For more on Common’s discussion of unemployment prevention, unemployment compensation, and public employment in his early essays, as well as a more detailed discussion of his legal path to the right to work, see Whalen (2019, 322–324). 430 Charles J. Whalen Taming Business Cycles: Financial Path to the Right to Work Between World War I and the start of the Great Depression, the American economy experienced several inflationary booms and deflationary busts with high unemployment.3 That decade is when Commons (1921, 1922, 1925a) came to see business cycles as the most important of all labor problems. His investigations produced a profit-margin theory of cycles and policy recommendations aimed at dampening and coping with such cycles. Those investigations are where we find his second argument in favor of government as employer of last resort—a financial path to the right to work. Commons on Business Cycles Commons’s cycle theory focuses on expectations, bank credit, and profit margins (Commons 1922, 19–20; 1934a, 508–589; 1937, 689; 1950, 255). He argued that the key to igniting a stalled economy is business confidence. If firms and bankers lack confidence, due to unfavorable profit forecasts, then the unemployed will not be put to work. In contrast, favorable profit forecasts encourage the banking system to create the new money that sparks a recovery by augmenting purchasing power and allowing firms to acquire labor, machinery, and materials. And since a recovery boosts confidence, expansions often evolve into booms. Unfortunately, profit expectations are fragile, Commons emphasized, so it’s easy for a boom to turn sour, causing the economy to stall.4 Commons preferred to prevent cyclical downturns rather than cope with them. Since he identified the credit policies of the banking system as a “fundamental cause” of business cycles, Commons sought to stabilize credit—that is, safeguard “the general credit situation” (Commons 1925a, 43; 1925b, 43). “Any improvement that looks to the prevention of unemployment must go back to the period of inflation and prevent the over-expansion that caused the unemployment,” wrote Commons (1922, 20). Commons believed unemployment insurance and monetary policy had important roles to play in preventing economic downturns. His unemployment insurance proposal was designed so employers would incur a financial liability for laying off workers (Commons 1922, 1934b, 198–199; Lewisohn et al. 1925, 188). Commons saw the liability as a factor that both employers and bankers would need to consider before allowing enterprises to expand. Thus, he believed firms would have an incentive to better regulate their growth and contraction. Meanwhile, Commons (1925b, 1927a, 1927b, 1929, 1982) wanted the Federal Reserve to use open-market operations, the discount rate, and moral suasion, to stabilize the average price level. That, he believed, was the most effective way to stabilize the general credit situation. However, Commons recognized that cycles could at best be tamed, not eliminated. “What is really meant by stabilization of prices,” he wrote, is the avoidance of “excessive peaks and slumps” (Commons 1925b, 45; 1934a, 557). Thus, the financial path to the right to work runs through Commons’s analysis of business cycles and the policy tools designed to dampen them and brings us to the need to cope with a downturn once it hits. Because Commons understood that it’s much easier for monetary policy to prevent an inflationary boom than to ignite a recovery and reduce joblessness in the face of low business confidence, he wrote that a more direct form of public action is needed during a recession or depression: 3 The National Bureau of Economic Research (2019) identifies four contractions in that period, one of which—between January 1920 and July 1921—is widely referred to as a depression. 4 For a further discussion of Commons’s cycle theory, see Whalen (1993). John R. Commons and Government as Employer of Last Resort 431 In order to create the consumer demand, on which business depends for sales, the government itself must create the new money and go completely over the head of the entire banking system by paying it out directly to the unemployed, either as relief or for construction of public works, as it does in times of war. (Commons 1934a, 589–590) Commons on Public Works Writing in the mid 1920s, Commons argued that public employment—in particular, public works—has a key role to play during an economic downturn. In 1925, for example, he joined a colleague and two business leaders to coauthor Can Business Prevent Unemployment? In their chapter on “Public Policies to Relieve Unemployment,” Commons and his collaborators argued: “There are large possibilities in the wise use of public works to alleviate unemployment” (Lewisohn et al. 1925, 150). The chapter demonstrates that cities and states accelerated public works in periods of depression at least since 1914—and that a bill was introduced before Congress in 1919 to create an Emergency Public Works Board, so that federal, state, and local agencies could cooperate in using public works to address unemployment after World War I. The chapter also approvingly cites the work of William Clark, a Canadian economist who drew on international research to stress the importance of countercyclical government spending for public works and advance planning to ensure such projects would be ready for use in downturns (Lewisohn et al. 1925, 121–125). The rest of the chapter by Commons and his colleagues (Lewisohn et al. 1925, 126– 151) reviews various public-works initiatives in America and abroad, highlighting lessons and challenges. For example, they maintain that public works must legitimately provide a public good or service (rather than charity in the form of a “make-work” job) and should avoid displacing employed workers by taking work from private employers: Public-works jobs should “permanently increase the wealth of the community, and be performed by labor employed in the ordinary way, i.e., on an efficiency basis and at current rates of wages.” For maximum program effectiveness, they also stress the importance of anticipating a downturn by giving preemptive attention to details of program administration: “Work must be planned in advance, places approved, contracts drawn, and everything ready.”5 Saving Capitalism: Historical Path to the Right to Work Commons’s third argument for having government serve as an employer of last resort, the historical path to the right to work, can be pieced together from his analysis of stages of economic history. To be sure, Commons left this path a bit incomplete, but the elements 5 Writing with his former student, John B. Andrews, Commons returned to the subject of public works in the opening chapter (on unemployment) of the 1936 edition of Principles of Labor Legislation (Commons and Andrews 1936). In a section on emergency public works, they conclude that although results of such work projects “have not always been gratifying, . . . the opinion has been growing that the flaws are not inherent, . . . [and] may be largely overcome by proper administration. Against the added cost [owing to inefficiencies], which may be a serious problem, must be placed the value of the work accomplished and also the human resources which are conserved and even improved” (Commons and Andrews 1936, 27–31). Another section of the chapter stresses the importance of labor-market information (such as current data on hirings and layoffs), which “would make possible intelligent action for the prevention and relief of unemployment through the systematic distribution of public work and the pushing of necessary projects when private industry’s demand for labor is low.” They conclude: “Public work would then act as a sponge, absorbing the reserves of labor in bad years and slack seasons, and setting them free again when the demand for them increases in private business” (Commons and Andrews 1936, 27). 432 Charles J. Whalen are there to fashion a historically grounded argument in addition to the legal and financial arguments outlined above. Commons’s discussion of stages of history is most fully developed in Institutional Economics, so that will be our focus. Scarcity, Abundance, and Stabilization In Institutional Economics, Commons (1934a, 773–788) divides economic history into three epochs: eras of scarcity, abundance, and stabilization.6 The era of scarcity, characterized by shortages of the material means of life and minimal individual liberty, extended from the earliest days of human civilization until the late eighteenth century. The era of abundance, a product of the industrial revolution and characterized by the rise of individualism and laissez-faire capitalism, lasted until the late nineteenth century. The era of stabilization followed, continuing to the present. In the era of stabilization, individual liberty is constrained (but may also be secured and enhanced) through collective action initiated by either the public or private sector. Such constraints emerged as a way to control economic booms and busts at the national level as well as to address labor-management disputes and other conflicts at the enterprise and industry levels. In the 1930s, stabilization took various forms across the globe: communism in Russia; fascism in Italy and Germany; and managed capitalism in the United States and England, owing to business combinations, industry-wide collective bargaining, and government regulation. In capitalist democracies, the shift to an era of stabilization was far from a settled matter—a point John Maynard Keynes recognized and stressed in a 1925 lecture based on material by Commons that was later included in Institutional Economics (see Whalen 2008). Keynes warned: “The transition from economic anarchy to a regime which deliberately aims at controlling and directing economic forces in the interests of social justice and social stability, will present enormous difficulties both technical and political.” The way forward was not clear: “We have to invent new wisdom for a new age,” wrote Keynes (1972, 305–306). Communism, Fascism, and Capitalism By the time Commons published Institutional Economics, the challenge of inventing new wisdom for the era of stabilization had become even more difficult—and the stakes were greater than ever. The Great Depression gripped the world economy, and communism and fascism were emerging as serious threats to capitalist nations. Commons (1934b, 143)—who believed in liberty and democracy and saw fascism and communism as incompatible with both—wanted to “save capitalism by making it good.” In 1934, however, Commons (1934a, 902–903) wasn’t convinced that his desired real-world outcome was a sure thing. The form of managed capitalism that existed at the start of the Great Depression is what Commons called “banker capitalism.” According to Commons (1934a, 773), investment bankers “arose out of their former intermittent activity in special flotations of securities of corporations and nations, into a dominant position in the consolidation of industries, the sale of foreign and domestic securities to the public, and the control of boards of directors.” But a huge problem remained: banker capitalism proved itself incapable of preventing an economic collapse. “In fact it appears that fluctuations of overproduction and unemployment are more extreme with large corporations than with little employers,” wrote Commons (1934, 896). 6 For an earlier, but less detailed, discussion of stages of history, see Commons (1925c). See also Commons (1934a, 876–903). John R. Commons and Government as Employer of Last Resort 433 The Great Depression also created a new problem for Commons and others interested in liberty and democracy. That’s because the crisis put even more power in the hands of bankers—namely, those in charge of the government’s Reconstruction Finance Corporation and, of course, central bankers. In the end, observed Commons (1934a, 773), the economic crisis meant that “bankers rise to new importance, and banker capitalism comes into control of industries and nations.” As a result of observing the expanding power of bankers as well as growing support for a national planning council to rationalize industry and stabilize output, Commons expressed concern that America might be on the road to fascism. It left him troubled. While Commons was deeply committed to liberty and democracy, he believed that large numbers of workers would not miss liberty and democracy as long as fascism or communism gave them the employment security that capitalism failed to deliver (Commons 1934a, 902–903). Employer of Last Resort as the New Wisdom Commons did not complete the argument for government as employer of last resort when discussing economic history in Institutional Economics. While a chapter does call for public works to put people to work during depressions, chapters dealing with economic history focus instead on the need for economic and political institutions to involve voluntary associations and give voice to a wide range of economic stakeholders (Commons 1934a, 876–903; see also Commons 1935). But Commons did provide a prominent discussion of the need for government job creation “in bad years and slack seasons” when updating Principles of Labor Legislation in 1936 (Commons and Andrews 1936, 27).7 Moreover, history completed the argument for him. It turns out that government as employer of last resort has, in practice, become an important part of the “new wisdom” of the stabilization era. In the years following publication of Institutional Economics, the United States (and other industrial democracies) avoided fascism and communism by finding another way forward. In the face of economic downturns, countercyclical macroeconomic policies have been used to moderate recessions. And when downturns have been particularly severe, the federal government has indeed furnished work for at least some of the unemployed.8 The approach that has emerged is not nearly as thoroughgoing as what Commons envisioned in his writings on public works and government job creation, nor is it as ambitious as what Commons advocated when he called for workers to have the legal right to such employment, but it does represent a step in that direction. Conclusion: Reclaiming the Right to Work This article has identified three arguments in Commons that provide a case for government to serve as employer of last resort. The legal path navigates through the right to life and liberty. The financial path makes its way via a profit-margin theory of cycles. And the historical path traverses a series of economic stages and threads the needle between fascism and communism. But these are not just paths. Each provides insight with contemporary relevance. The legal discussion highlights the often overlooked problem of economic coercion. The financial discussion leads to a still pertinent analysis of how public-works employment can be made 7 For some discussion of Commons and Andrews (1936), see note 5 above. 8 For a discussion of countercyclical job creation in the United States, see Levine (2003); Congressional Research Service (2010); and Whalen (2019, 13–28). 434 Charles J. Whalen most effective. And the historical discussion reminds us of the fragile nature of democratic capitalism. Since joblessness—the threat of it as well as the reality—remains among the most serious of all labor problems, the survival of liberty and democratic capitalism may continue to depend on our ability to provide public employment to those willing but unable to find work.9 It’s been more than a century since Commons outlined the right to work as a bundle of liberties that should include the right of the unemployed to have work furnished by the government. Yet unemployment remains an outstanding defect of capitalism, and important lessons from Commons’s scholarship remain to be learned and used as a foundation for public policy. The work of saving capitalism “by making it good” continues. It’s time to rediscover Commons’s arguments and build on them to reclaim the right to work as a progressive cause.

Speaker 1: So the jobs will come from the public sector, much like we did during the New Deal. We will create a program that will create public service, employment opportunities, job lists, if you will, in every job center with some basic guidelines of what the community might need. Now, often, these are small infrastructure projects, and God knows that all of our communities can benefit from a little extra upkeep, some extra infrastructure. There is just so much work to be done. We also have care projects. There are so many elderly who need help with trips to the pharmacy, with meal delivery. They're a projects that can be created by the public sector to fill that need. The way we do it today is a lot of this work is done by community groups. A lot of this work is done on volunteer basis. It's not a very good sustainable way to support those people in need. In fact, if anyone is doing that work, why shouldn't they be paid a good wage with good benefits? So I think that we can create the work, but we also have done it in the past, and perhaps we don't need to create 15 million jobs. Maybe we need to create five, and that extra boost to the economy is going to be a boost to the mom-and-pop shop and that community. There will be more customers, and so employment will then trickle into the private sector.

Speaker 2: According to Tcherneva, employment trickles into the private sector because more stable employment would lead to more steady consumer demand, and thus, employers needing more workers to meet that demand. And that's not all. A job guarantee could also result in fewer layoffs in the private sector. Why?

Jerome Segal, Presidential candidate of the Bread and Roses Party, has called for the enactment of a Federal Employment Guarantee as a new structure within which the United States would respond to the 36 million unemployed Americans caused by the Pandemic. He issued this statement: “In 1978 Congress passed the Humphrey-Hawkins Full Employment Act. In its original form, but stripped from the Act, was a Federal Employment Guarantee, and this is what we need today, a legal entitlement of every American to either a job, or free education and job training to enable future employment.” “If we had had an Employment Guarantee in place when the pandemic hit, we could have kept unemployment under 4%. Everyone who was not in an essential industry or service and could not work from home, would have been put on extended vacation from their existing job. It would have been illegal, so long as America was under lock-down, for any company outside of bankruptcy to fire any worker. At the same time, the cost of the vacation-with-pay, would have been picked up by the Federal Government, with direct payments either to businesses or to workers themselves.” “Instead, we have had the utter chaos of underfunded, uncertain and limited paycheck protection efforts, and tens of millions of people seeking unemployment insurance after being needlessly fired from jobs they should have retained. The cost of direct vacation pay would have been less than the hodge-podge of programs that Congress enacted, well below the cost of the stimulus package.” “At the same time, a Jobs Guarantee, would have given Americans not actively engaged in work, not only the income they need, but the security that when the pandemic abates, their job would still be there. This means consumer confidence, and this in turn implies business confidence, all of which is necessary for a strong and sharp economic recovery. Instead we have today widespread uncertainty and insecurity that will weigh down the economy long after the worse of the pandemic is behind us.” “It is not too late to enact a jobs guarantee. Right now we can enact a program that will help reverse the errors we have made. With new legislation, we can provide powerful incentives for companies that have laid off workers, to immediately begin the rapid re-hiring of their work force. Those not put into active work, would still be re-hired, going from being unemployed to being on extended vacation. The Federal government would assume this cost until workers were actually back on the job. Immediately, unemployment status would be ended for millions of workers. This would provide the 36 million unemployed not only with income security but with confidence in the future. And this in turn would limit pressure to re-open the economy prematurely.” “Secondly, the process of bringing workers back to the active workplace should be done within the basic Job guarantee framework, which is that Americans share an equal right to be actively employed — this means that companies do not bring back 3 workers at 40 hours a week, when they can bring back 4 workers at 30 hours a week. Job sharing should become the national norm both for resuming active employment, and for any future steps towards work de-activization whether caused by pandemics or national recessions.” “Inevitably, because of the current pandemic and in future economic downturns, there will be businesses that will fail, even with ample efforts to protect them. We can expect this in the airlines, in cruise ships, in hotels and among restaurants. Thus, some permanent job elimination is inevitable. A Federal jobs guarantee responds to this in four ways.” “First, there is the guarantee of education and re-training. This means deepening human capital. Workers that lose their jobs and cannot find employment, would be entitled to free higher education and/or free vocational re-training so that they would be able to successfully navigate to higher tiers of the job market.” “Secondly, we would have powerful policies to expand employment in the non-profit sector to provide services of vital importance. Here we would provide through the tax system, a refundable tax credit to all tax payers, on a sliding scale, of contributions they make to vital non-profits organizations that directly provide social services. People most in need would be empowered to support and expand those non-profits that most adequately respond to their needs. We would empower the homeless, empower the poorest and weakest among us.” “Third we would stimulate private sector employment through Federal contracts and government grants to pursue the Green New Deal objectives of transitioning to a “Do No Harm” ecologically sound economy.” “And fourth, we would pair the Green New Deal with A Beauty New Deal, a nationwide program of grants for artists and writers and performers, and for starting theatre repertory companies in every mid-sized city, and for planting 330 million flowering fruit trees in every town and city in the land.” “The Pandemic has thrown this country on its heels. At the same time, it offers us a once-in-a-generation opportunity to re-think the basics of our economic life and of the social contract which holds us together. The most basic of these elements, though vital, is not the Safety-Net or The Basic Income Net which say, “No one will go hungry,” it is The Employment Net which says “Everyone has a right to make a productive contribution to our national life.”

There are still those who criticise the concept of a Job Guarantee. I have received a lot of E-mail’s lately about a claim that the introduction of a Job Guarantee would be de-stabilising in a growth phase unless there is some time limit put on the jobs or the wage is flexible. Apparently, in a growing economy, the stimulus provided in the form of Job Guarantee wages (relative to what occurs when unemployment buffer stocks are deployed) will drive the economy into an inflationary spiral, which will then necessitate harsher than otherwise fiscal and monetary policy contraction. Further, the Job Guarantee is claimed to limit the size of the private sector relative to a system of unemployed buffer stocks and this distorts resource allocation and would undermine our overall material standards of living. The criticisms have been dealt with before – there appears to be a cyclical sort of pattern where newcomers seize on past criticisms and recycle them, without bothering to read the original literature on employment buffer stocks, which includes my work and several other authors. That literature considered all these possible issues – 15-20 years ago. As I understand the arguments presented in the E-mail torrents, the mechanism, whereby the Job Guarantee undermines the private sector is claimed to be something like this. If there is strong demand for labour from the private sector, the Job Guarantee ‘demand for labour’ will drive overall labour demand into excess. Excess is relative to the available supply of workers. The claim is that the Job Guarantee introduces an unnatural scarcity for labour, beyond which the private market would generate itself in a growing environment. In any excess demand situation, the price has to rise as competition for the scarce labour intensifies. Private firms would then be involved in a bidding war which will either discourage new entries or generate accelerating inflation. These claims seem to invent a new version of excess demand relative to the agreed terms by economists of all persuasions. Excess demand is calibrated in terms of available supply and is associated with price bids at going prices. The Job Guarantee only employs workers at a fixed price which becomes the effective minimum wage in the economy. It absorbs workers who have a zero market bid for their services. It therefore does not compete for labour at market prices and therefore cannot introduce an ‘excess demand’ for labour. The fixed price bid is invariant in a cyclical sense, although the minimum wage would be increased over time in recognition of productivity growth and other considerations. The non-Job Guarantee employers will always be able to bid the workers away from the Job Guarantee pool if they are prepared to offer more attractive conditions, which generated a satisfactory target rate of profit (or in the case of a public sector employer – a satisfactory social return). Obviously, firms that cannot profitably produce anything that the ‘market’ desires at the minimum wage will be forced out of business. No apologies there. The minimum wage as a statement of how sophisticated you consider your nation to be or aspire to be. Minimum wages define the lowest material standard of wage income that you want to tolerate. In any country it should be the lowest wage you consider acceptable for business to operate at. Capacity to pay considerations then have to be conditioned by these social objectives. If small businesses or any businesses for that matter consider they do not have the ‘capacity to pay’ that wage, then a sophisticated society will say that these businesses are not suitable to operate in their economy. Such firms would have to restructure by investment to raise their productivity levels sufficient to have the capacity to pay or disappear. This approach establishes a dynamic efficiency whereby the economy is continually pushing productivity growth forward and in that context material standards of living rise. I consider that no worker should be paid below what is considered the lowest tolerable material standard of living just because low wage-low productivity operator wants to produce in a country. I don’t consider that the private ‘market’ is an arbiter of the values that a society should aspire to or maintain. That is where I differ significantly from my profession. The employers always want the wages system to be totally deregulated so that the ‘market can work’ without fetters. This will apparently tell us what workers are ‘worth’. So some small business operator that can spin a profit by selling some item using below poverty line labour is just acting in accordance with the market But the problem is that the so-called ‘market” in its pure conceptual form is an amoral, ahistorical construct and cannot project the societal values that bind communities and peoples to higher order considerations. The minimum wage is a values-based concept and should not be determined by a market. All of that is in addition to the usual disclaimers that the pure ‘competitive market, cannot exist for labour given the imbalances between workers and employers and the fact that the use value of the labour power is derived within the transaction (that is, the worker has to be forced to work). This is unlike other exchanges where the parties make the deal and go their separate ways to enjoy the fruits of their trade. The Job Guarantee thus would embody the social values that we aspire to and the ‘economy’ would be moulded to suit those values and private profit making would have to adjust accordingly, rather than set the agenda that the human and physical environment has to succumb to. What about the expanding economy argument? Suppose we characterize an economy with two labor markets: A (primary) and B (secondary) broadly corresponding to the dual labor market depictions. Prices are set according to markups on unit costs in each sector. Wage setting in A is contractual and responds in an inverse and lagged fashion to relative wage growth (A/B) and to the wait unemployment level (displaced Sector A workers who think they will be reemployed soon in Sector A). A government stimulus to this economy increases output and employment in both sectors immediately. Wages are relatively flexible upwards in Sector B and respond immediately. The compression of the A/B relativity stimulates wage growth in Sector A after a time. Wait unemployment falls due to the rising employment in A but also rises due to the increased probability of getting a job in A. The net effect is unclear. The total unemployment rate falls after participation effects are absorbed. The wage growth in both sectors may force firms to increase prices, although this will be attenuated somewhat by rising productivity as utilisation increases. A combination of wage-wage (wage demands by one group of workers to restore their relativities viz another group), and wage-price (workers defending real wages and firms defending real profit margins) mechanisms in a bouyant product market (where goods and services are sold) can then drive inflation. This is a classic Phillips curve world where unemployment is inversely related to price inflation and there is a trade-off between the two. To stop inflation, the government has to repress demand. The higher unemployment brings the real income expectations of workers and firms into line with the available real income and the inflation stabilizes – a typical NAIRU story. Please read my blog – – for more discussion on this point. What would be the impact of the introduction of a Job Guarantee into this type of economy? Introducing the Job Guarantee policy into the depressed economy puts pressure on Sector B employers to restructure their jobs in order to maintain a workforce. The Job Guarantee wage sets a floor in the economy’s cost structure for given productivity levels. The dynamics of the economy certainly change significantly. The elimination of all but Wait unemployment in Sector A and frictional unemployment does not distort the relative wage structure so that the wage-wage pressures that were prominent previously are now reduced. There is no wage competition from Job Guarantee workers in an expansion – the fixed price anchor (their wage) remains unchanged. But the rising spending (as Job Guarantee workers now have an income rather than the dole or worse) stimulates sales and the demand for labor rises in Sector A. Importantly, there are no new problem faced by employers who wish to hire labor to meet the higher sales levels. They must pay the going rate, which is still preferable, to appropriately skilled workers, than the Job Guarantee wage level. The rising demand per se does not invoke inflationary pressures as firms increase capacity utilisation to meet the higher sales volumes and productivity rises (as the fixed labour resources such as administrative and overhead staff are spread over higher output levels). What about the behaviour of workers in Sector A? The allegation is that workers would also allegedly use the fact that the presence of a Job Guarantee as a bargaining weapon to push for higher wage demands. This would drive the private sector wage levels up. Firms would have to pay well in excess of the the minimum wage would already be at a socially-acceptable level. The suggestion then is that the non-inflationary space for expansion would be reduced. One E-mail I received claimed that this would place a limit on the size of the private sector and thus suppress innovation because one the inflationary ceiling was reached, the government would deploy fiscal constraint to redistribute workers back into the fixed price Job Guarantee pool. This would, in turn, so the story goes, inhibit new firms from entering because they would not want to be crushed by contractionary fiscal policy, once this alleged private ‘limit’ was reached. Wendell Gordon (1997, Page 833) said: If there is a job guarantee program, the employees can simply quit an obnoxious employer with assurance that they can find alternative employment. [Reference: Gordon, W. (1997) ‘Job Assurance — The Job Guarantee Revisited’, Journal of Economic Issues, 21(3), September), 817-825]. It is true that with the Job Guarantee policy, wage bargaining is freed from the general threat of unemployment. However, it is unclear whether this freedom will lead to higher wage demands than otherwise. In professional occupational markets, it is likely that some Wait unemployment will remain. Skilled workers who are laid off are likely to receive payouts that forestall their need to get immediate work. They have a disincentive to immediately take a Job Guarantee job, which is a low-wage and possibly stigmatised option. Wait unemployment disciplines wage demands in Sector A. However, the demand pressures may eventually exhaust this stock, and wage-price pressures may develop. At first blush, it might appear that the Job Guarantee pool of workers would have to be greater than the unemployment pool for an equivalent amount of inflation control. This is one of the classic arguments that were raised by economists in the 1990s when I gave presentations about the Job Guarantee proposal. I recall one presentation I gave in New York in 1998 when this question was raised by an economist. It is clear that the Job Guarantee workers will have higher incomes and so a switch to this policy would see demand levels higher than under an unemployed buffer stock world. That is the nub of the claims by these critics about restricting the non-inflationary growth space. But the reality is that the Job Guarantee would provide better inflation proofing than a unemployed buffer stock approach because the Job Guarantee workers represent a more credible threat to the current private sector employees In other words, the Job Guarantee pool is a more effective excess supply of labour than the unemployment pool, given the varying duration categories (short- to long-term unemployment). The buffer stock employees would be more attractive than when they were unemployed, not the least because they will have basic work skills, like punctuality, intact. This reduces the hiring costs for firms in tight labor markets who previously would have lowered hiring standards and provided on-the-job training. They can thus pay higher wages to attract workers or accept the lower costs that would ease the wage-price pressures. The Job Guarantee policy thus reduces the ‘hysteretic inertia’ embodied in the long-term unemployed and allows for a smoother private sector expansion because growth bottlenecks are reduced. That is, skill levels deteriorate less in a Job Guarantee economy than in an unemployment buffer stock economy. The Job Guarantee wage provides a floor that prevents serious deflation from occurring and defines the private sector wage structure. However, if the private labor market is tight, the non-buffer stock wage will rise relative to the Job Guarantee wage, and the buffer stock pool drains. This is no different to a non-Job Guarantee economy. Wages rise as the excess supply of labour declines. The smaller the Job Guarantee pool, the less influence the Job Guarantee wage will have on wage patterning. Unless the government stifles demand, the economy will then enter an inflationary episode, depending on the behavior of labor and capital in the bargaining environment. In the face of wage-price pressures, the Job Guarantee approach maintains inflation control by choking aggregate demand and inducing slack in the non-buffer stock sector. The slack does not reveal itself as unemployment, and in that sense the Job Guarantee may be referred to as a ‘loose’ full employment. As the Job Guarantee pool rises, due to an increase in interest rates and/or a fiscal tightening, resources are transferred from the inflating non-buffer stock sector into the buffer stock sector at the fixed buffer stock wage. This is the vehicle for inflation discipline. The disciplinary role of the unemployed buffer stock system, which forces the inflation adjustment onto the unemployed, is replaced by the compositional shift in sectoral employment, with the major costs of unemployment being avoided. That is a major advantage of the Job Guarantee approach. The only requirement is that the buffer stock wage be a floor and that the rate of growth in buffer stock wages be equal or less than the private sector wages growth. Does that restrict the scope for expansion? The scope for private expansion is never unlimited. When we talk about restricting the ‘size’ of the private sector, there is nothing particular about the Job Guarantee in this regard. What are we talking about here? Number of firms? Size of firms? Total non-Job Guarantee spending? Where is the role for productivity growth in this vision? There is already a ‘limit’ in non-government spending without a Job Guarantee. Even an unemployment buffer stock approach to price stability imposes a spending limit for given productivity growth that the economy cannot go beyond before inflation becomes a problem. Would a Job Guarantee make that limit lower? It would actually expand the scope for private expansion because hiring costs are lower and the productivity boost would be higher. Think about agricultural buffer stock systems, which motivated me in the late 1970s, while still a student, to write up the Job Guarantee idea. The logic of the Job Guarantee policy came to me during a series of lectures in Agricultural Economics within the Honours program at the University of Melbourne. The focus of the lectures was the Wool Floor Price Stabilisation Scheme introduced by the Commonwealth Government of Australia in November 1970. The scheme was relatively simple and worked by the Government establishing a floor price for wool after hearing submissions from the Wool Council of Australia and the Australian Wool Corporation (AWC). The Government then guaranteed that the price would not fall below that level. There was a lot of lobbying to get the floor price as high above the implied market price, given that the aim of the scheme was to stabilise farm incomes. The price was maintained by the AWC purchasing stocks of wool in the auction markets. The financing of the purchases came from a Market Support Fund (MSF) accumulated by a small contribution from growers based on the value of its clip. Fund shortages were made up with Government-guaranteed loans. The major controversy for economists of the day was that it interfered with the market price mechanism. Note the similarity in the criticism of the Job Guarantee I have outlined above. There was an issue as to whether it was price stabilisation or price maintenance. This was not unimportant in a time when prices were in sectoral decline and a minimum guaranteed floor price implied ever-increasing AWC stocks. Other problems included the problems of substitutability from synthetic fibres and the maintenance of production levels, which would by themselves continue to depress prices. By applying reverse logic one could utilise the concept without encountering the problems of price tinkering. In effect, the Wool Floor Price Scheme generated “full employment” for wool production. Clearly, there was an issue in the wool situation of what constituted a reasonable level of output in a time of declining demand. The argument is not relevant when applied to available labour. Full employment is the state where there was no involuntary unemployment and that is ensured by a sufficient number of jobs to be available in relation to the supply of labour at the current money wage rates. This amounts to a rejection of the notion that all unemployment is voluntary and that full employment can be defined by market relations – the intersection of the labour demand and supply curves at some ‘equilibrium price’. Accordingly, mass unemployment is construed as a macroeconomic problem related to deficient demand, which in turn reflects a deficient fiscal deficit. The reverse logic implies that if there is a price guarantee below the ‘prevailing market price’ and a buffer stock of working hours constructed to absorb the excess supply at the current market price, then we can generate full employment without encountering the problems of price tinkering. That idea was the seed of the Job Guarantee model as I have expounded it over many years. The work of Benjamin Graham (1937) is also instructive. He discusses the idea of stabilising prices and standards of living by surplus storage. He documents the ways in which the government might deal with surplus production in the economy. [Reference: Graham, B. (1937) Storage and Stability, McGraw Hill, New York] Graham (1937, Page 18) wrote: The State may deal with actual or threatened surplus in one of four ways: (a) by preventing it; (b) by destroying it; (c) by ‘dumping’ it; or (d) by conserving it. In the context of an excess supply of labour, governments had at this time and now adopted the “dumping” strategy via the use of unemployment buffer stocks. It made much better sense to use the conservation approach. Graham (1937, Page 34) noted: The first conclusion is that wherever surplus has been conserved primarily for future use the plan has been sensible and successful, unless marred by glaring errors of administration. The second conclusion is that when the surplus has been acquired and held primarily for future sale the plan has been vulnerable to adverse developments … The distinction is important in the Job Guarantee model development. The Wool Floor Price Scheme was an example of storage for future sale and was not motivated to help the consumer of wool but the producer. The Job Guarantee policy is an example of storage for use where the “reserve is established to meet a future need which experience has taught us is likely to develop” (Graham, 1937, Page 35). Benjamin Graham also analysed and proposed a solution to the problem of interfering with the relative price structure when the government built up the surplus. In the context of the Job Guarantee policy, this means setting a buffer stock wage below the private market wage structure, unless strategic policy in addition to the meagre elimination of the surplus was being pursued. For example, the government may wish to combine the Job Guarantee policy with an industry policy designed to raise productivity. In that sense, it may buy surplus labour at a wage above the current private market minimum. In the first instance, the basic Job Guarantee model with a wage floor below the private wage structure shows how full employment and price stability can be attained. While this is an eminently better outcome in terms resource use and social equity, it is just the beginning of the matter. Graham (1937, Page 42) considered that the surplus should “not be pressed for sale until an effective demand develops for it.” In the context of the Job Guarantee policy, this translates into the provision of a government job for all labour, which is surplus to private demand until such time as private demand increases. It is true that some workers might wish to remain in the Job Guarantee forever which would reduce the available resources for the private sector. Is that a problem? Not at all. We should celebrate the fact that a worker is content with the wage and hours of work. The private firms that would likely be impacted in this case would be those who offer inadequate hours of work and/or pay and conditions. These ‘high’ cost firms would be forced to restructure or leave. That is a good thing for long-term material living standards. When I get E-mails telling me that the Job Guarantee would replace the buffer stock of unemployed with a buffer stock of failed small businesses I wonder whether the sender has really understood the dynamics involved. There is no logical evidence that small, high productivity businesses would not function profitably in a Job Guarantee world. If we are saying that we need to suppress real wages growth below national productivity growth to ensure high cost firms survive then I disagree. Prosperity is associated with a chase to the top not a race to the bottom. But the Job Guarantee would introduce no new issues. Governments have to tighten fiscal and monetary policy to curb an inflationary spiral that is accelerating out of control. The weaker firms always suffer in that case. There is a dynamic that replaces these high-cost firms at the bottom of the cycle with newer, lower cost firms that deploy newer techniques and capital. That sort of attrition always happens over the economic cycle. Small businesses have very high failure rates anyway. Usually this is because of a lack of capital and/or management skill. Small business always struggle to access bank finance. The introduction of a Job Guarantee would not change that. Further, at the top of the cycle, the Job Guarantee pool would be very small if negligible. Only a small number of workers who were unable to get jobs in the private sector through discrimination would likely remain – those with disabilities, the very low skilled, etc. It is hard then to claim that spending emanating from the Job Guarantee wage bill will be huge as the economy approaches full capacity. Which means that the policy contraction required to stem the inflationary spiral at full capacity will be not significantly different to that which would be required if the alternative was that the displaced workers become unemployed. If it turns out that a lot of workers wish to remain productively employed in the Job Guarantee then the real resource scope for private expansion is indeed reduced relative to what it might be if more workers were bid out of the pool. But what is the problem with that? The aim is to advance societal well-being not create a whole lot of profit-making private firms who serve narrower interests. If the ‘market’ is such – and the shrinkage of the Job Guarantee pool would be ‘market determined’ – that a lot of workers prefer to work in Job Guarantee jobs then the pattern of economic activity will reflect that. Why would those who support ‘market’ outcomes be opposed to such an allocation pattern? Answer: only if they wanted the ‘market’ outcomes artificially biased towards private profit-making activities. The society would judge the system each election and if the outputs of the economy were not deemed to be satisfying social needs then we would vote accordingly.

During the second half of last year a recession in 2023 for the US seemed inevitable. The economic headwinds were strong and coming from numerous flanks: high inflation eroding wages and the purchasing power of households, disrupted commodity markets with high oil prices, the beginning of a monetary policy tightening cycle by the Federal Reserve, and the removal of fiscal support for the economy. The discussions on the outlook then centered on the prospects of a “hard” or a “soft” economic landing, as the consensus growth forecast reached a minimum of 0.30% in December 2022.

But since late last year the growth outlook has improved. After the minimum of 0.30%, growth expectations gradually climbed up to 1.05% in April 2023. The improvement was not driven by any specific event that changed future expectations but by the release of stronger than anticipated activity data, evidence that the underlying economy is still robust.

Against the backdrop of a devastating pandemic, the global economy is projected to contract sharply by 3.2 per cent this year, according to the United Nations World Economic Situation and Prospects (WESP) mid-2020 report, released today. The global economy is expected to lose nearly $8.5 trillion in output over the next two years due to the COVID-19 pandemic, wiping out nearly all gains of the previous four years. The sharp economic contraction, which marks the sharpest contraction since the Great Depression in the 1930s, comes on top of anaemic economic forecasts of only 2.1 percent at the start of the year. The report estimates that GDP growth in developed economies is expected to plunge to -5.0% in 2020. A modest, 3.4% growth – barely enough to make up for the lost output – is expected in 2021. World trade is forecast to contract by nearly 15 per cent in 2020 amid sharply reduced global demand and disruptions in global supply chains. Nearly 90 per cent of the world economy has been under some form of lockdown, disrupting supply chains, depressing consumer demand and putting millions out of work. Under the baseline scenario, the developed economies are expected to contract by 5.0 per cent in 2020, while the output of developing countries will shrink by 0.7 per cent. The pandemic is exacerbating poverty and inequality The pandemic will likely cause an estimated 34.3 million people to fall below the extreme poverty line in 2020, with 56% of this increase occurring in African countries. An additional 130 million people may join to the ranks of people living in extreme poverty by 2030, dealing a huge blow to global efforts for eradicating extreme poverty and hunger. The pandemic, which is disproportionately hurting low-skilled, low-wage jobs, while leaving higher-skilled jobs less affected – will further widen income inequality within and between countries. Facing an unprecedented health, social and economic crisis, governments across the world have rolled out large fiscal stimulus measures - equivalent to an estimated 10 per cent of GDP - to combat the pandemic and minimize its livelihood impacts. However, the depth and severity of the crisis foreshadows a slow and painful recovery. Elliott Harris, UN Chief Economist and Assistant Secretary-General for Economic Development stated that “The pace and strength of the recovery from the crisis not only hinges on the efficacy of public health measures in slowing the spread of the virus, but also on the ability of countries to protect jobs and incomes, particularly of the most vulnerable members of our societies.” Crisis will likely accelerate shift towards digitalization The report highlights the pandemic could foster a new normal, fundamentally reshaping human interactions, inter-dependence, trade and globalization, while accelerating digitalization and automation. A rapid surge in economic activities online will likely eliminate many existing jobs, while creating new jobs in the digital economy. The net wage and employment effects could be negative, further aggravating income inequality. Many developing countries face severe fiscal constraints Most developing economies – saddled with chronic fiscal deficits and already high levels of public debt – are finding it very hard to implement sufficiently large fiscal packages, which have thus far averaged less than 1% of their GDP. Falling exports and growth are rapidly undermining the debt sustainability of many developing countries, particularly those that are heavily dependent on commodities, tourism revenues or remittances. Growing debt distress poses an enormous challenge to these countries, further constraining their ability to implement much-needed stimulus measures.

The global economy likely faces a decade of sluggish growth, according to Daniel Lacalle, author and chief economist at Tressis Gestion. Economies around the world have been grappling with a multitude of shocks — from Russia’s invasion of Ukraine to China’s persistent zero-Covid measures — that have sent inflation soaring and weakened activity. that global GDP growth will slow from 6% in 2021 to 3.2% in 2022 and 2.7% in 2023. The Fund characterized this as “the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the Covid-19 pandemic.” Meanwhile, global inflation is forecast to rise from 4.7% in 2021 to 8.8% this year before declining to 6.5% in 2023 and to 4.1% by 2024, remaining above the target levels for many major central banks. China offered some solace to economists and market participants on Tuesday, when it officially the end of quarantine requirements for inbound travelers on Jan. 8 — symbolizing an end to the zero-Covid policy that it has held for nearly three years. Speaking to CNBC’s “Squawk Box Europe” on Tuesday, Lacalle said the potential for a full reopening of the Chinese economy was “the biggest positive” that markets could expect for 2023. “We have been looking at a very bleak picture for the Chinese economy, which is essential not just for the growth of the rest of the world but particularly for Latin America and also for Africa,” he said. “The reopening of the Chinese economy is certainly going to give a significant boost to growth all over the world, but also — and I think it is a very important factor — German exporters, French exporters have felt the pinch of the lockdown and the weakening of the profit environment in China, and this is certainly going to help a lot.” However, he suggested that this boost will not come close to bringing growth levels close to where they were in the years before the pandemic for a good while to come. “I think that we are probably going to move into a decade of very, very poor growth in which developed economies are going to find themselves lucky with 1% growth per annum, if they are able to achieve it, and what is more unfortunate than everything else is with elevated levels of inflation,” Lacalle said. “I think that we are living the backlash of massive stimulus packages that were implemented in 2020 and 2021. That has not delivered the kind of potential growth that many economists expected.” Yet despite the bleak outlook, he emphasized that there is not a crisis on the horizon. “I think that markets are starting to price that environment in which the situation globally is not of a buoyant level of growth and economic development, but [is] one that avoids a financial crisis, and if that happens, it is certainly positive,” he concluded.

The global economy is "perilously close to falling into recession", according to the latest forecast from the World Bank. It expects the world economy to grow by just 1.7% this year - a sharp decrease from the 3% it predicted in June. The report blames a number of factors stemming from Russia's invasion of Ukraine and the impact of the pandemic. The effects of higher interest rates are picked out as the key challenge for policy makers to overcome. World Bank president David Malpass said the downturn would be "broad-based" and growth in people's earnings in almost every part of the world was likely to "be slower than it was during the decade before Covid-19". The 1.7% growth figure would be the lowest since 1991, with the exceptions of the recessions of 2009 and 2020, which were caused by the global financial crisis and the Covid pandemic. The World Bank said the US, the Eurozone and China - the three most influential parts of the world for economic growth - were "all undergoing a period of pronounced weakness", a downturn that was worsening the problems faced by poorer countries.

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A pair of central bank decisions next week will shape the outlook for a wobbly global economy that the World Bank warns in a downbeat new assessment is battling stubbornly high inflation amid the pandemic’s aftermath and the war in Ukraine. The gloomy forecast arrives days after one threat to global growth was eliminated when President Biden signed legislation Saturday to raise the U.S. debt ceiling and avert a potentially catastrophic government default. But other risks remain: China’s reopening after the end of its “zero covid” policy is starting to flag, while the German economy has shrunk for two consecutive quarters, meeting one definition of a recession. Even in the United States, where growth remains resilient, most analysts anticipate that activity will ebb in the coming months. The World Bank said in a new report Tuesday that the global economy is slowing dramatically as higher interest rates take a toll on both advanced and developing economies. Overall, global growth is projected to slump to an anemic 2.1 percent annual rate this year, down from 3.1 percent in 2022, and will remain “frail” through next year, according to the bank’s latest forecast. Investors now are focused on how much more work the Federal Reserve and European Central Bank must do to stem inflation, which has declined from last year’s highs but remains elevated. Fed officials have signaled they may pause at next week’s meeting after lifting their benchmark lending rate over the past 14 months at the fastest pace in four decades. European policymakers are expected to increase the euro zone’s key rate by a quarter percentage point when they meet next week. German inflation eased to 6.1 percent in May following several months of declines, even as Europe's biggest economy registered another painful increase in food prices of nearly 15 percent. (Markus Schreiber/AP) “The risks for both of them are high, and they always were in this inflationary environment. There is a chance they overdo it,” said Kathy Bostjancic, chief economist for Nationwide. If central bankers raise rates too much, the United States or Europe could be driven into recession. But if they fail to raise them enough, inflation will keep eroding living standards. Striking the right balance is difficult. In the United States, Fed officials warn that the full effects of the rate increases already enacted have not yet been felt. As the Fed considers whether more increases are needed, it must also take into account other forces that are expected to slow the economy, such as tighter lending conditions in the wake of recent bank turmoil and government spending cuts under the debt ceiling deal. In Europe, meanwhile, annual inflation dipped in May to 6.1 percent from 7 percent in April. Energy costs are falling, after a spike last year at the outset of Russia’s invasion of Ukraine. But food, alcohol and tobacco prices are soaring at a double-digit annual pace, according to the European statistical agency. “How quickly will inflation come down? How much higher do rates have to go up? We’re obviously focused on that,” said Neil Shearing, chief economist for Capital Economics in London. Higher interest rates represent a challenge that ripples from big economies to small ones, according to the World Bank. When the Fed raises borrowing costs, it slows the U.S. economy by making it more expensive for consumers and businesses to obtain loans. That reduces demand for goods produced overseas, hurting growth there. Higher U.S. interest rates also encourage investment in the United States rather than elsewhere. The inflow of capital pushes up the value of the dollar, which makes it more expensive for foreign governments and businesses to repay their dollar-denominated loans. Spillovers from Fed policy could lead to a financial crisis in the most vulnerable developing nations, which borrowed heavily over the past three years to deal with the pandemic’s health and economic consequences, the bank warned. The danger of renewed weakness in the banking industry could further constrict credit, aggravating those effects. “The global economy remains in a precarious state,” the bank’s latest assessment concluded.

From banks to burger joints, the U.S. economy is showing signs of stress as nervous shoppers watch their spending and anxious lenders keep a tight grip on credit.

A report from the Commerce Department Thursday shows the nation's gross domestic product grew at an annual rate of just 1.1% in the first three months of the year, compared to a 2.6% pace in the previous quarter. Growth was weighed down by declining inventories and housing investment.

Just-released research from Nationwide Retirement Institute, which surveyed 400 U.S. small business owners and 400 midsize business owners, found two-thirds of owners expect a recession within the next six months, with 72% of that number believing it will be similar or worse than the Great Recession in 2008.

Overall morale in the U.S. economy is low, Nationwide saw, with just 19% of small business owners and 39% of midsize owners rating the country’s economy positively. Additionally, close to two-thirds (64%) of small business owners and half of midsize business owners pointed to inflation and rising prices as the most significant challenge facing their business within the next six months. Currently, rising interest rates are at 30% for mid-market-size business owners and 31% for small business owners, up 11 percentage points and down one point from last year.