August 20, 2013

Why the economy won't work for all

By Stephen Dick
CNHI News Service

— Economist Michal Kalecki knew 70 years ago why big business and its political apologists conspire to prevent full employment. Obviously few people listened, but with the still shrill deficit alarmists and the rabid push for austerity, some are trotting Kalecki back onto the stage to show why.

I'd never heard of Kalecki until I read a column by Paul Krugman. Kalecki was a Polish, Marxist economist (and, really, who knew capitalism better than Marx?). In a short 1943 paper called "Political Aspects of Full Employment," Kalecki wrote that government intervention is needed to get all people to work. This was shortly after John Maynard Keynes wrote "The General Theory of Employment, Interest and Money," (1936) with many ideas shared by Kalecki.

President Roosevelt had already used the government to alleviate the appalling unemployment during the Depression, with programs such as the Works Progress Administration. But even with this so-called government interference in the market, there was never full employment. Big business likes it that way. In fact, even mainstream economists view an unemployment rate of 3 to 4 percent as "full employment."

Kalecki writes that there are three reasons why business doesn't want everyone to have a job: (1) dislike of government interference; (2) dislike of direction of government spending (public investment such as roads and subsidizing consumption, such as welfare and food stamps); and (3) dislike of the social and political changes resulting from the maintenance of full employment.

This is where it gets interesting. Commenting on the third point, Kalecki says businesses fear full employment because it will give workers confidence to form unions, fight for higher wages and create better working conditions. Those are capitalism taboos.

Of course, Kalecki maintains that full employment would mean a boost to production and hence a rise in profits. Then the economist goes on to argue that businesses will gladly give up some profits in order to maintain rigid control over workers and (my words) be able to threaten their livelihoods with firings and layoffs.

Fast forward 70 years, and it's all going on still. Captains of Industry, as Kalecki calls them, coupled with their Republican defenders in Congress, decry the deficit at every opportunity. Whatever public investments are made, businesses would like to see privatized. Government spending on food stamps and welfare, while encouraging consumption, takes money out of the hands of investors.

This gives rise to the austerity gospel that the most unequal countries in the world – the United States and Britain -- bow to. Austerity means working class people, and their communities, give up things while money moves to those who already have plenty.

In other words, the working class must be kept in its place, and a little more suffering won't hurt if it keeps government out of the market.

This why former Rep. Mike Pence -- now Indiana's governor -- and other Republicans blasted Fed Chairman Ben Bernanke for his policy of quantitative easing designed to get more people to work. The Fed should just concentrate on holding down inflation, they said.

Nowadays, unlike 1943 when the government stamp was all over the economy, private markets are worshipped and looked at as the sole savior of the economy. But anyone with a perfunctory grasp of economics knows that the markets don't work. A long time ago, Kaleceki pointed out that the rich who control the markets don't want an economy for all.

Screaming about the deficit and promoting austerity is a just a masquerade to protect economic privilege. Americans are an optimistic people, but economists like Kalecki illustrate that the game is rigged against working people and always will be until they tire of it.

Stephen Dick is a CNHI News Service columnist. He can be reached at