ZERO UNEMPLOYMENT IN A PLURAL ECONOMY A working document of the South African Research Chair in Development Education Prepared by visiting fellow Howard.

ZERO UNEMPLOYMENT

IN A PLURAL ECONOMY

• A working document of the• South African Research Chair in• Development Education• Prepared by visiting fellow Howard Richards (Chile)• With the support of professors Joanna Swanger (USA)

and Alicia Cabezudo (Argentina)

No Magic Wand

There is no single solution. There are many ways to arrive at zero unemployment.

We propose here a thought exercise consisting of six complementary steps

Whose outcome would be a decent livelihood for everyone

At the end we will briefly present two other thought exercises regarding unemployment

The dominant paradigm

The dominant paradigm (the neoliberalism of the Washington consensus)

Thinks in terms of employment with an employer rather than in the broader category of livelihood

It recommends pumping money into education and health services

In order to add value to what the poor have to sell in the labour market, i.e. themselves

Error of the dominant paradigm

It is impossible to eliminate unemployment by education (conceived as job training) and health services

Because sometimes the problem is not lack of qualified applicants

But lack of jobs

Neoliberal theory

The dominant theory holds that markets match employers and employees

Hence the main problem is to produce the qualified employees the market wants

Keynesian theory

Markets normally tend to a low level equilibrium that leaves willing workers unemployed

“Full, or even approximately full, employment is a rare and short-lived occurrence.” --General Theory, p. 250

Recent theory

Recent experience confirms the theoretical insight of Keynes that there is a chronic weakness of effective demand for labour

--Paul Krugman, Nobel Memorial Prize in Economics 2008, in The Return of Depression Economics, 2009

Consequently

In today´s economy those who lack education and job skills will not find employment

…but those who have education and job skills may and may not find employment

Livelihood is the broader idea

We will propose six basic steps toward livelihood for all

Starting with maximizing traditional forms of employment

And ending moving beyond employment to a broader idea of livelihood

LIVELIHOOD need not come from a job It is true that everyone should contribute to

society But it is not true that everyone's

contribution to society (and livelihood) must depend on finding an employer whose ability to pay salaries ultimately depends on sales or on taxes

First step: PROMOTE First step: PROMOTE LIVELIHOOD LIVELIHOOD

BY ENCOURAGING EMPLOYERS TO BY ENCOURAGING EMPLOYERS TO CREATE JOBSCREATE JOBS

EMPLOYMENT IN THE ENTREPRENEURIAL SECTOR DEPENDS ON TWO FACTORS

• 1. the efficiency (“marginal efficiency") of capital • 2. the rates of interest

• (from John Maynard Keynes, General Theory of General Theory of Employment, Interest, and MoneyEmployment, Interest, and Money, p. 39))

“efficiency of capital”

• A technical concept• Which boils down, as Keynes says• To whatever motive in fact motivates

running a business and hiring employees to work for it

• The motive may be maximizing profit, or a vocation to serve the public, or fascination with technology, or even a desire to create jobs

“efficiency of capital” again

• Often the decision to run a business is driven by what Keynes calls “animal spirits”

• Or love of adventure

• Keynes, Schumpeter and others find that decisions to invest are rarely purely rational

Treat business people as Treat business people as human beings human beings

Not as machines programmed to Not as machines programmed to maximize profits by minimizing costsmaximize profits by minimizing costs

But as humans who are called to live in But as humans who are called to live in community and in service to others community and in service to others

SEEK AND ENCOURAGE SEEK AND ENCOURAGE THE IDENTIFICATION OF THE IDENTIFICATION OF BUSINESS PEOPLE WITH BUSINESS PEOPLE WITH THE ETHICAL VISION OF THE ETHICAL VISION OF THE COMMUNITY THE COMMUNITY

Remember that bulk of Remember that bulk of employment in the entrepreneurial employment in the entrepreneurial sectorsector is provided by small and is provided by small and

medium-sized businesses,medium-sized businesses, Therefore it is key to generate Therefore it is key to generate

participatory processesparticipatory processes through which small and through which small and

medium sized businessesmedium sized businesses identify with the communityidentify with the community and are supported by the and are supported by the

communitycommunity

Returning to Keynes …

• In bare theory, employment in the entrepreneurial sector depends on two factors

• 1. the efficiency of capital

• 2. the rates of interest

impact of a rate of interest

• If the rate of interest is high enough

• It does not pay to hire

• Because you can make more money without hiring anybody

• Letting money gather interest

Nobody hires workers if it is safer and more profitable to speculate Therefore, to move toward zero

unemployment Put the brakes on non-productive speculation Channel money toward job-creating

production Lower interest rates to make it harder to

speculate and easier to run a business

Discourage capital flight

• Anchor money in a territory and in a community

Another problem: Inflation

It is often said, and not incorrectly That it is inflationary to lower interest rates

in order to boost employment Easy money brings higher prices It risks making business impossible By making money lose its value

It is necessary to rethink inflation:

Inflation is too much money chasing too few goods

It can be stopped by taking money out of circulation by taxation, taxing most those who have most

And by increasing production, putting more workers to work

PROMOTE LIVELIHOOD

• BY PROMOTING PRODUCTION

A PRO-ACTIVE APPROACH

• Besides encouraging business

• Take direct measures• To support

employment and livelihood generally

• Including production that is not for sale, but for barter, use, gift, sharing etc.

• We reject the idea that the way to stimulate job-creation is to further lower wages that are already low

• It is necessary to create livelihoods for people

• With more imagination and less cruelty

For example

Restrict competition from imports from low-wage countries with non-existent labour laws

Back productive projects with public funds on condition that jobs are created and good wages paid

Plan production with deliberate attention to jobs as a goal

Form productive alliances with universities, now that knowledge is the leading factor in production

Measure the efficiency of the public sector and all sectors with social criteria, including job creation

Work with institutional sources of capital, such as pension funds and the endowments of schools, churches and charities

Another problem: ecology

Unfortunately Increasing production and

consumption Without adequate environmental

planning Tends to destroy the biosphere And therefore all of us

It is necessary to rethink livelihood Livelihood is at the junction where ecology,

culture and economics meet Zero unemployment has to be made

compatible With green technologies and simple living Because that is the only way our species

can avoid destroying itself by destroying its habitat

A healthy economy is ecological A healthy economy is ecological and it creates jobs and it creates jobs

It creates jobs installing the It creates jobs installing the green technologies that must green technologies that must replace most of the existing replace most of the existing technologies technologies

It creates jobs by substituting It creates jobs by substituting human labour for technologies human labour for technologies that rely on fossil fuels…that rely on fossil fuels…

……and poison the environment.and poison the environment.

SUPPORT THE PEOPLE’S ECONOMY

The people’s economy

• Is that economy• Where the main resource is labour (not

capital)• And the objective is making a living (not

profit)• It supports the lived world of the majority

of the world´s people• It is self-employment, whether alone or in

a cooperative group

Enterprising people

• It includes the businesses where the workers and owners are the same people

• It includes grassroots sharing of resources for mutual survival

• It includes independent workers, like a plumber who owns the tools, or a taxi driver who owns the vehicle

The people’s economy…The people’s economy…

►……creates livelihoods that do not exist creates livelihoods that do not exist according to the equations of Keynesaccording to the equations of Keynes

►Because it repeals the rule that for Because it repeals the rule that for someone to be employed someone else someone to be employed someone else must profit must profit

►The workers who own their own tools do The workers who own their own tools do not have to make profits not have to make profits

►They can get by with just enough to live on They can get by with just enough to live on and to replace tools when they wear out. and to replace tools when they wear out.

REBUILD THE WELFARE STATE AND THE PLANNING STATE

IT IS FUNDAMENTAL THAT THERE BE A STATE

THAT WORKS FOR THE WELFARE OF ALL THE CITIZENS

….AND HAS RESOURCES

In our epoch of neoliberal globalization

The state is weakBecause it lacks resourcesBecause it cannot tax society’s major

wealthFor fear of capital flight and similar

reprisalsAnd must support itself with taxes that fall

on the poor and the middle class

Public control of natural resources The relatively strong states are the ones

that finance themselves with income from natural resources

But from the people’s point of view it is useless to have a strong state

If that state is dominated by a corrupt elite that serves not the people but itself

therefore

To achieve zero unemployment

We need a government devoted to the service of the people.

Which takes control of the incomes that are not produced by anybody’s labour or by anybody’s entrepreneurial skill (the gifts of nature)

And uses them to support livelihoods for all

We do not need

Businesses or individuals So powerful That the state does not dare to tax

them at reasonable rates

RECYCLE EXCESS RECYCLE EXCESS PROFITS TO PROFITS TO FINANCE HUMAN FINANCE HUMAN DEVELOPMENT DEVELOPMENT

•Argentina, Chile, and South Africa are enormously unequal countries.

• Source: UNDP, Human Development Report 2005.

Extreme Inequality

• Is not only unjust and inefficient• It is also dangerous• It produces economic instability• Because of the accumulated profits

that are not spent on consumption • And have no profitable investment outlets• And which can be taken out of the country

at any moment

An excess of money

• Extreme inequality is due to

• The limitless accumulation of the profits of the upper class

• With a consequent instability of the system

• Due to lack of consumers who would justify investments by buying products

• In other words due to the poverty of the majority

• …whether or not governments care about reducing inequality

• Or about poverty

• They always care about stabilizing the system to keep it from collapsing

• So they seek some solution to the problem of keeping money circulating so the economy can keep going.

Constant economic growth as a solution

• The classic solution of Keynes to the problem of keeping money circulating was to promote through public policies…

• …every year spending on investments sufficient to compensate for insufficient spending on consumption

• So that total spending would be enough to keep the

economy humming along and profits rolling in

• This classic solution has proven not to be reliable

The “capitalist revolution” as a solution.

• The neoliberal solution has been to dismantle the regulation of financial markets.

• So that accumulated profits with no profitable productive outlets could be thrown into the global casino of high-flying speculation.

• Which has led to a series of crises as the bubbles burst.

We propose another solution

• Recycle the accumulated profits that have no profitable investment outlets

• In order to finance • Livelihoods directly connected to human

development• For example in sports, in culture; in

personal attention to young children, sick people, and old people.

What to do with the excess profits of the upper classes?

• Is always a moral question

• Whose answer

• Or rather whose answers

• (since there are many legitimate answers)

• Determine to a great extent the happiness or the misery of the entire population.

A moral answer to a moral question

• We propose that to some considerable extent rents and profits be devoted to promoting human development

• By the voluntary actions of their owners…• ….complemented by suitable public

policies

• Tending to overcome the barriers blocking zero unemployment.

BARRIERS BLOCKING ZERO UNEMPLOYMENT

• Employment in the entrepreneurial sector is limited by the barrier that there is no employment if it does not lead to profit for the employer.

• Livelihood in the people’s economy is limited by the barrier that it is impossible to earn a livelihood when there are not enough customers willing and able to buy the product or service.

• Public employment financed by taxes cannot in the long run serve as a guarantee of employment for all, as the experience of Sweden shows.

Sports partly overcome the barriers.

• “Sports give dignity to the person rejected by the labour market.”

• --Rolando dal Lago• Sports Director• City of Rosario, Argentina

To memorizeThis will be on the testTO ACHIEVE SOCIAL INTEGRATION WITH

DIGNITY FOR ALL, SOCIETY MUST SUPPORT THOSE ACTIVITIES THAT HAVE HUMAN VALUE EVEN IF THEY DO NOT PRODUCE ANY MERCHANDISE THAT CAN BE SOLD.

DIVERSITY

Support for sports and culture, for life-long education, and for the care of the weak….

… comes from many diverse sources, from civil society, from families and traditional communities and from governments at the municipal, regional, and national levels.

This diversity is desirable.

The ethical principle

The ethical principle is an ancient idea found in ubuntu, in the world’s main religions, and in indigenous knowledge systems around the world. As articulated by Mahatma Gandhi the principle is that those of us who have more than we need are trustees of our surplus for the benefit of those who have less than they need.

Recycle the Surplus

• According to the ethical principle of solidarity

• Which is put into practice in diverse ways in diverse traditions

• Thus we overcome the instability of a system in which excess profits accumulate

• And we take another step toward zero unemployment

BUILD SOLIDARITY IN THE NEIGHBOURHOODS

“Our aim is that in every barrio in Argentina the people will be assured at the neighbourhood level of adequate nutrition, housing, and primary health care.”

• --Enrique Martínez Director, INTI (National Institute of Industrial

Technology) Argentina

REVIEW: THE BARRIERS

Employment in the entrepreneurial sector runs up against the necessity of profit.

The people’s economy is limited by the necessity of having markets for its products.

The public sector normally has insufficient resources to satisfy social needs, even urgent ones.

The voluntary sector supports itself to a certain extent with hybrid resources from diverse sources, but in the last analysis it requires grant money from public or private sources, and there is never enough of it.

SOLIDARITY AT THE NEIGHBOURHOOD LEVEL Formerly clans and other traditional

communities maintained networks of solidarity through extended family ties.

Their continued existence today is generally underestimated and underappreciated.

To build community in today’s fragmented world many have concluded that a small territorial unit, a neighbourhood, is a promising space for restoration.

The New Extended FamilyThe New Extended Family

The neighbourhood being a small The neighbourhood being a small territory has the advantage that territory has the advantage that organizers can walk the streetsorganizers can walk the streets

And check every house, And check every house, apartment, or shackapartment, or shack

To be sure nobody is abandoned.To be sure nobody is abandoned.

Those who are still unemployed after steps I through V

Are not alone because they can fall back on friends, family, and neighbours

And on NGOs and government agencies that back up the efforts of the neighbours to serve and take care of each other

Decent work …

True grassroots solidarity is not like getting a welfare check and doing nothing in return

Every person has decent work to doDoing something to serve others

and/or to keep up the neighbourhood

FIRST CONCLUSIONFIRST CONCLUSION► ZERO UNEMPLOYMENT CAN BE IMAGINED AS THE SUM OF THE EFFORTS OF DIVERSE ACTORS, INCLUDING: ZERO UNEMPLOYMENT CAN BE IMAGINED AS THE SUM OF THE EFFORTS OF DIVERSE ACTORS, INCLUDING:

► ENTREPRENEURSENTREPRENEURS

► AN ACTIVIST STATEAN ACTIVIST STATE

► PUBLIC POLICIESPUBLIC POLICIES

► SELF-ORGANIZING WORKERSSELF-ORGANIZING WORKERS

► UNIVERSITIESUNIVERSITIES

► PENSION FUNDSPENSION FUNDS

► VOLUNTEERSVOLUNTEERS

► DONORSDONORS

► FAMILIESFAMILIES

► NEIGHBOURSNEIGHBOURS

A second thought exercise regarding unemployment

• A second way (among infinite possible ways) to think of ending unemployment

• Is to consider Mahatma Gandhi’s Constructive Programme for the villages of India

• Gandhi said there should be no idle hands in the villages

• Anyone who is idle should start working immediately

For Gandhi unemployment in principle disappears

• Because we repeal the rule that people only work when they are paid

• Simultaneously we repeal the rule that to get food you need money to pay for it

• Both rules are replaced by the restoration of the Hindu concept of dharma, i.e. duty

• (Similarly, he required his middle class followers to spin yarn without pay)

A Third Thought Exercise

• Think of the 70% of Africans living in rural areas and engaged in various modes of self employment

• They use a different metaphysics of economics, i.e. different mental frameworks socially constructing WHAT IS and WHAT SHOULD BE

• . Their paradigms for living cannot be reduced to POVERTY; they are not UNEMPLOYMENT

• They are interlocking systems of social and knowledge capital

• Capable of promoting and sustaining cohesion, peace human development, and LIVELIHOOD for all.

A fourth thought exercise

• Consider that in most of the cultures humans have invented

• In the 200,000 years since homo sapiens sapiens first appeared

• Unemployment has not been an intelligible concept

• The Swahili language, for example, had no word for it prior to European contact

The modern world-system

• The expansion of the European world-system

• To become the modern world-system

• Can be thought of as creating

• the historical conditions of the possibility of unemployment

SECOND CONCLUSIONSECOND CONCLUSION

““OUR GREATEST POLITICAL PROBLEMOUR GREATEST POLITICAL PROBLEM

IS LACK OF IMAGINATION.”IS LACK OF IMAGINATION.”

--MICHEL FOUCAULT--MICHEL FOUCAULT