Michal Kalecki’s (1943) classic paper, “Political Aspects of Full Employment” remains surprisingly modern, and its message still is worth revising. If you read and/or watch the current debates on economic policy in the mainstream media you would think that public deficits and debt are the main economic problem ahead. Further, if you look at Obama’s budget proposal, with the offer of reducing payments to social security recipients, you would think that entitlement programs are unsustainable and must be overhauled. On the other hand, the mainstream media is not as vocal on the unemployment problem, and in some quarters the current rate of unemployment, 7.6%, is seen as not too high, and only slightly above full employment, which is put by some at 5.5% (the so-called natural rate).
On Wednesday, April 24, an 8-story building outside of Dhaka, Bangladesh collapsed. Over 600 people were killed, and over 1,000 injured – but the death toll may rise as rescue crews continue their search.
The building housed a variety of businesses, including a bank and five garment factories that employed over 3,100 garment workers – mostly young women. Observers noticed a large crack develop on in the building on Tuesday, and the bank on the second floor told its workers not to come in the next day. The garment factories decided to stay open for business, and the result was tragedy.
They came, they danced, they marched, 2,000 people spirited and strong, Robin Hood’s merry band of men and women, through the streets of Washington April 20.
Ending up astride a prominent government building, christened with a new name and a naming ceremony. No more U.S. Treasury, now, the banner declared, “The U.S. Treasury. A Citigroup Subsidiary. Jack Lew, Inc., CEO.”We could end AIDS, reverse climate change, fund jobs and health care. Who do you work for Secretary Lew?” asked Jennifer Flynn, managing director of Health GAP (Global Action Project). “You work for the people, not Wall Street.”
Last Friday, The New York Times published a lengthy response by Reinhart and Rogoff to our critique of their work in “Growth in a Time of Debt,” and the ensuing worldwide debate. We have replied to them, which appeared in the Times online Monday night. As you can see below, we did not find their defense at all convincing. We also go into these issues in much more depth in a technical appendix here.
Debt and Growth: A Response to Reinhart and Rogoff
The debate over government debt and its relationship to economic growth is at the forefront of policy debates across the industrialized world. The role of the economics profession in shaping the debate has always come under scrutiny.
Many economists and market participants applauded the Federal Reserve’s decision in September 2012 to make monthly purchases of $85 billion in Treasury and mortgage-backed securities, and hold short-term interest rates at near zero until unemployment fell to 6.5 percent. Now, however, the issue of when to end bond buying is being debated both within and outside the Fed. Some think the central bank isn’t doing enough to deal with the still-fragile economy, while others argue that its actions will result in future price inflation. There is also growing concern that the rapid run-up in prices of stocks and other capital market assets reflects greater risk taking and more leverage and may be signs of yet another bubble.