ZERO UNEMPLOYMENT

1. ZERO UNEMPLOYMENT • 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)

2. 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

3. 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

4. Error of the dominant paradigm • It is impossible to eliminate unemployment by education (conceived as job training) and health services • Because the main problem is not lack of qualified applicants • But lack of jobs

5. Livelihood is the broader idea • In the modern world most people meet their basic needs • By buying what they need with money • Which they obtain by working • We will propose six steps to livelihood for all • Starting with job creation by employers

7. PROMOTE LIVELIHOOD • BY ENCOURAGING EMPLOYERS TO CREATE JOBS

8. 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 Employment, Interest, and Money, p. 39))

9. “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

10. “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

11. Treat business people as human beings • Not as machines programmed to maximize profits by minimizing costs • But as humans who are called to live in community and in service to others

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

13. Returning to Keynes … • Employment in the entrepreneurial sector depends on two factors • 1. the efficiency of capital • 2. the rates of interest

14. 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

15. 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

16. Discourage capital flight • Anchor money in a territory and in a community

17. 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

18. 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

20. PROMOTE LIVELIHOOD • BY PROMOTING PRODUCTION

21. 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.

22. 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

23. Restrict competition from imports from low-wage countries with non-existent labour laws Back productive projects with pubic 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 For example

24. Another problem: ecology • Unfortunately • Increasing production and consumption • Without adequate environmental planning • Tends to destroy the biosphere • And therefore all of us

25. 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

26. A healthy economy is ecological and it creates jobs • It creates jobs installing the green technologies that must replace most of the existing technologies • It creates jobs by substituting human labour for technologies that rely on fossil fuels… • …and poison the environment.

28. SUPPORT THE PEOPLE’S ECONOMY

29. 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

30. 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

31. The people’s economy… • …creates livelihoods that do not exist according to the equations of Keynes • Because it repeals the rule that for someone to be employed someone else must profit • The workers who own their own tools do not have to make profits • They can get by with just enough to live on and to replace tools when they wear out.

33. REBUILD THE WELFARE STATE AND THE PLANNING STATE

34. IT IS FUNDAMENTAL THAT THERE BE A STATE THAT WORKS FOR THE WELFARE OF ALL THE CITIZENS ….AND HAS RESOURCES

35. In our epoch of neoliberal globalization • The state is weak • Because it lacks resources • Because it cannot tax society’s major wealth • For fear of capital flight and similar reprisals • And must support itself with taxes that fall on the poor and the middle class

36. 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

37. therefore

38. 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

39. We do not need • Businesses or individuals • So powerful • That the state does not dare to tax them at reasonable rates

41. RECYCLE EXCESS PROFITS TO FINANCE HUMAN DEVELOPMENT

42. Argentina, Chile, and South Africa are enormously unequal countries. • Source: UNDP, Human Development Report 2005.

43. 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

44. 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

45. …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.

46. 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

47. 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.

48. 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.

49. 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.

50. 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.