Date: December 3, 2012
Venue: Paasitorni, Sirkussali, Helsinki
It is often argued that the era of full employment and Keynesian economic policy is over. Most orthodox economists claim that, in the long run, real full employment cannot be achieved with demand management policies. Active demand management is, thus, deemed to be too costly and inflationary.
Top Post-Keynesian economists James K. Galbraith and L. Randall Wray, however, argue that achieving full employment through demand management is still perfectly possible. They suggest that, in order to achieve full employment and carry out democratic economic policies, governments have to break out from the pressures of the private bond markets.
Come to hear Galbraith and Wray for the most important economic policy event of the year!
The event is free and open to everyone. We do ask participants to register in advance. The event will be streamed live at www.sorsafoundation.fi .
The event is organised by the Foundation for European Progressive Studies with the support of the Kalevi Sorsa Foundation and the Finnish Confederation on Trade Unions (SAK). The program and registration form is available at http://sorsafoundation.fi/2012/10/04/seminar-on-full-employment-policy/ .
The Return of Full Employment Policy
Ernst Stetter, Secretary General, FEPS
Mikko Majander, Director, Kalevi Sorsa Foundation
14.15–15.00 A Question of Institutions: Why In Spite of Reactionary Economic Ideas the US Still Survived the Great Financial Crisis, and Europe Did Not
James K. Galbraith, Professor, University of Austin Texas
15.00–15.45 Modern Money, Functional Finance, and Full Employment
L. Randall Wray, Professor, University of Missouri – Kansas City
16.15–18.00 Comments and Panel Discussion
Comments will be delivered by Olli Koski (Chief Economist, SAK), Jukka Pekkarinen (General Director, Economics Department at the Ministry of Finance) and Lena Sommestad (Professor of Economic History, MP in Sweden). They will join professors Galbraith and Wray in a panel discussion, which will be moderated by Dr. Ville-Pekka Sorsa(University of Helsinki).
Given that the real, or inflation adjusted rate of interest on US, German, Japanese and UK debt is about zero, I’m baffled as to what “pressure” bond markets are imposing on those governments. Anyone who pays a zero real rate of interest to their creditors has got their creditors over a barrel, haven’t they?
But my advice to the above countries is to take it a bit further, and pay creditors a small negative rate of interest: that way they’d make a profit out of their creditors. As to how to do that, well it’s easy. Instead of rolling over debt, just print money and pay off holders of maturing debt. And if that is too inflationary, then raise taxes. As long as the inflationary effect of the money printing equals the deflationary effect of the tax increase, the NET EFFECT on unemployment, inflation and GDP will be about zero.
Most orthodox economists claim that, in the long run, real full employment cannot be achieved with demand management policies.
Great, except that there really is a better word for “Orthodox Economics” – one I just coined – “Coprodox Economics”. Thought the OED records a similar usage: “High would rise the koprolithic mountain of his lies”.
Second, the JG, MMT is not really “demand management” in the style of the old “Keynesians”, but rather the sort of policies that Keynes himself supported. Non-inflationary targetted “demand management” – employ everyone who wants a job, and the Keynesian, “multiplier” effects will usually employ even more outside of the government programs. But MMT & the JG could even support full employment while the government is intentionally creating a depression elsewhere, deflating the economy – by restricting bank lending, allowing a debt-deflation to occur, cutting spending, raising taxes etc. Together, the effect of the government action would be to move people from presumably higher paid private employment onto lower fixed wage JG employment.
Welcome to my country!
I feel that after 20 years of high unemployment people are open to new ideas how to tackle this problem. Policy discussions here have been grinding around same old facets of mainstream economics because for some reason you cannot be independent economic thinker and credible at the same time. Thinking goes that U.S. economists know it all, and if economists from such a large and successful country are not thinking the same (even as an alternative to the mainstream) there must be something wrong with your theory. You guys command considerable amounts of respect here right from the getgo.
I mean, people here sincerely believe in lump of labour fallacy and are advocating more immigration on the basis that immigrants crate their own jobs. Unemployment is seen as a fault of the unemployed because they are not just trying hard enough. These are just some of the basic myths that need busting.
At the same time we have good counterculture of alternative thinking. We have the finns party that has in the past at least campaigned with the promise to return our old currency. They came second in the last parlamentary elections, not a small party. Guy who came 3rd on our recent presidential election, from an another party, also advocated return of the mark. He is no fool and knows there is something wrong with the euro. Euro has never enjoyed that much of a popularity here that is why politicians can take these positions. I heard that the Finnish government has a plan in case the euro breakup to introduce domestic currency (I’m sure they could use some help here). Idea keeps popping up.
I’m from Finland too. I just watched our Minister of Finance (so called “social democrat”) on TV and she continued with the dire rubbish about deficit reduction. She parroted the usual neoliberal statements about “credibility” regarding public finances and so on.
We have here a very perverse way of thinking about economics. Our media debate is very anti-Keynesian and people argue for deficit reduction without actually understanding the economy as a whole. Let’s just hope this conference gets more new people interested in the economic realities so that the politicians can’t continue with their rubbish so easily. I’ve tried to explain the main MMT principles to ordinary people and they’re very receptive. You just need to be patient with them.
Finland is interesting case because we have unique pre-saving pension system. 1/4th of all future pension liabilities are pre-saved to the pension funds and we have massive democgraphic shift going on. Post-WW2 baby boomer generation was large and is now in the process of retiring.
For years now Finnish pension funds have been running surpluses of 4% GDP I think. They have now so much money that if you include them in the public sector where they belong and some calculations do, and subtract goverment debt from that figure, public sector has no debt and actually have financial assets worth 50-60% of GDP! And then they have nerve to say we have no money! It is just this stupid thinking that do not include sectoral balances. Money to the pension funds have to come from somewhere and when it is takes out has to go to somewhere. Now they are causing recession but in the future they are going to overheat our economy when these pension funds are being unwind, because they see increased tax revenue as a reason to spend more.
I think Finland with its pension system is in unique position in the world. Few countries if any have so much money stored away. Understanding pension dynamics would be crusial to our policy makers.
Almost similar debate is going on by the bloggers of IMF – probably they call the zero interest rate (the inflation adjusted) as neutral rate – but both the writers of that article also claim that that attained situation will lead to full employment and stable inflation.
Full employment can be achieved by working for the state. Everyone pretends to work and everyone and everyone gets a crummy pretend paycheck. Supply and demand is well controlled. No one gets overfed and unhealthy.
Of modern slavery or life as a farmed animal?
Video from the meeting: