Randy Wray: Rising Tides Lift All Yachts – Why the 1% Grabs all the Gains From Growth

This is Naked Capitalism fundraising week. 419 donors have already invested in our efforts to shed light on the dark and seamy corners of finance. Join us and participate via our Tip Jar, which shows how to give via credit card, debit card, PayPal, or check. Read about why we’re doing this fundraiser, what we’ve accomplished in the last year, and our current target.

By L. Randall Wray, Professor of Economics at the University of Missouri-Kansas City, Research Director with the Center for Full Employment and Price Stability and Senior Research Scholar at The Levy Economics Institute. Originally published at http://neweconomicperspectives.org/2014/08/money-matters.html“>New Economic Perspectives

You’ve probably seen references to the work of my colleague (and former student), Pavlina Tcherneva in recent days. If not, take a gander at this:


The NYT article includes links to her published article in the Journal of Post Keynesian Economics, the first issue edited by me and my Levy Institute colleague Jan Kregel. Pavlina also presented her results at the just finished International Post Keynesian Conference at UMKC. We’ll soon have a website up with many of the powerpoints and papers. The next conference will be held in 2016. Mark your calendars.

Back to the topic at hand. Rising Tides Don’t Lift All Boats. Who wudduva thought?

Actually, you have to conclude that economists and policy-makers are an optimistic lot. Going all the way back to the Kennedy days, it has been conventional wisdom that if you can boost economic growth, everyone wins.

Actually, as I’ve long argued, that is remarkably naïve and counterfactual. In good times, the powerful grab the spoils. In bad times, they get government bail-outs.

Why on earth would you want to be powerful if you could not protect and even enhance your well-being no matter what the economy does?

Why do elites everywhere always clamor for economic growth? Every policy advocated by them is justified on the argument that it will boost growth. Cut taxes on the rich! Eliminate regulations! Free trade! Slash welfare! Balance the budget! Save Wall Street!

Every policy they hate is said to hinder growth: raising minimum wages; environmental protection; school lunches for poor kids; vacations and sick leave for workers.

Where such policies do enhance growth, the rich will get more than their fair share. Where the policies do not boost growth, they will increase the share of the rich. Heads they win and tails they win too.

Who would be surprised by that? Well, just about every economist and policymaker on the planet. Why? Because they refuse to consider POWER. While our economy is often referred to as “market-driven”, it is actually driven by power. P. O. W. E. R.

Anyone who’s been paying attention has noticed that the power of the top 1% has risen inexorably over the postwar period. Their ability to shift ever more of the gains from growth to themselves has risen commensurately. As Pavlina demonstrates, the pay-off is obvious. Here’s one of her graphs.

Screen shot 2014-09-25 at 12.35.01 AM

As you can see, with each recovery from a downturn, the rich capture a larger share of the subsequent growth.

She has shown that no matter how you slice up the rich at the top of the income distribution—the top 10%, the top 1%, or the top few tenths of a percent of the top 1%, their share of the spoils from growth has increased in each subsequent recovery.

And when things go bad, Uncle Sam jumps in to rescue them. In the latest calamity, we had tens of trillions of dollars of attention paid to rescuing our top tenth of a percent on Wall Street, and mere peanuts thrown at Main Street. In other work, Pavlina has documented that the “fiscal stimulus” was not aimed at those who suffered the most; and students of mine, namely Andy Felkerson and Nicola Mathews showed that Uncle Ben originated well over $29 trillion in low interest rate loans to rescue Wall Street. (Go here for papers on this project: http://www.levyinstitute.org/ford-levy/governance/)

No wonder that when the economy began to recover, our One Percenters captured more than all the gains. They are rich and powerful, and Uncle Sam directed almost all his efforts to them.

As Hyman Minsky argued back in the 1960s, if you want to reduce poverty you must include job creation as a central component of your War on Poverty. He (correctly) predicted that the Kennedy-Johnson War on Poverty would fail because it did not contain such a program.

Further, he argued that once you’ve provided jobs to all who want to work, you need to gradually shift the distribution of income toward the bottom. You do that by holding down income growth at the top while gradually increasing pay at the bottom.

We did neither, of course. Inflation-adjusted minimum wages have plummeted since the 1960s. Joblessness has risen. As documented by many, while labor productivity has continued to rise on trend, inflation-adjusted median wages have stagnated since the early 1970s.

Who got the difference? The rich and powerful.

Some progressives want to continue the failed policies of the past. They want to use the tried-and-failed twin strategy of economic growth plus welfare dressed in its modern garb, the basic income guarantee. As Minsky argued, we certainly need welfare. Our generosity is a measure of our humanity. However, throwing more money at the poor will never solve our unemployment and poverty problems.

See here: http://www.levyinstitute.org/publications/the-war-on-poverty-after-40-years for an exposition of Minsky’s critique of the failed approach and his proposal for an alternative. As he argued,

“The war against poverty is a conservative rebuttal. . . . It can spread poverty more fairly. . . . However, this approach, standing by itself, cannot end poverty… The liberals’ War on Poverty was born out of neoclassical theory in which it is the poor— not the economy— that is to blame for poverty. The War on Poverty tried to change the poor, not the economy.”

As Stephanie Kelton and I wrote in 2004, 60 years after the War on Poverty began: “’Keynesian’ policies to raise aggregate demand in order to stimulate private sector employment have also been adopted on the belief that economic growth would raise the demand for labor and thereby “lift the boats” of the poor. Still, unemployment rates have trended upward, long-term unemployment has become increasingly concentrated among the labor force’s disadvantaged, poverty rates have remained stubbornly high, real wages for most workers have declined, and labor markets and residential neighborhoods have become increasingly segregated as the “haves” construct gated communities and the “have-nots” are left behind in the crumbling urban core… According to Minsky, the critical component that was missing in 1964, and that remains AWOL in 2004, is a government commitment to full employment. Only a targeted jobs program, paying decent wages, will successfully fight poverty among the nonaged in a politically acceptable manner.

“How,” Minsky asked, “can the distribution of income be improved?” He answered: “First of all by full employment.” By this, Minsky meant that it was necessary to achieve and sustain “tight full employment,” which he defined as: “[the situation that] exists when over a broad cross-section of occupations, industries, and locations, employers, at going wages and salaries, would prefer to employ more workers than they in fact do… The achievement and sustaining of tight full employment could do almost all of the job of eliminating poverty”.

As Pavlina’s work has demonstrated, that was also the position of J.M. Keynes, who favored policies that would directly employ workers over the “pump priming” policies favored by 1960s “Keynesians”. As Minsky explained, those policies would favor the “already well-off”. Pavlina’s work shows convincingly that that was precisely the result.


  1. Vatch

    Thanks for showing us the Tcherneva chart again. I have shared it with various family members and friends, and I recommend that other Naked Capitalism readers do the same.

    1. ambrit

      It needs to be done as a t-shirt. Any copyright problems with that? (It would be a great NC Store item!)

  2. MikeNY

    Yes. As I’ve said many times, the GROAF talisman is a plutocrat protection charm.

    We need redistribution: a living wage law, and some kind of a JG or BIG, or GDP sharing (Beef’s solution). Without redistribution, the wheels on the system will come off entirely. It’s only a question of when. Some may argue that that would be a good thing; I don’t like blood. As MLK said, I prefer evolution to revolution.

    1. MyLessThanPrimeBeef

      You’re right about growth – more of it just means more for the rich.

      And more overal government spending will also mean more drones and surveillance…likely for every one dollar more in social spending, you get $3 more in military/securty spending. The key, here, is to redistribute military spending to social spending, possibly resulitng in lower overall government spending.

      1. ambrit

        I thought the Ebola militarization was an early experiment in cross-training our Military Minions. (Wasn’t that what the National Guard was originally for? Disasters etc.?)

  3. John

    Throwing money at the rich got the job done. They’ve never been better off. But throwing money at the poor — won’t work: its bad progressive policy, failed approach. Some hypotheticals cannot be proven but how about taking the trillions of dollars Bush, Obama and Feds gave to the super rich and instead, had given it to the poor? I suppose poor folks are not as equipped to handle all that cash like the white Wall Street rich guys can. Welfare only becomes welfare when black folks are on the receiving end of government payouts, not when banksters get the largesse.

    1. beans

      John, the rich often get the welfare redistribution, too. It only passes through the hands of the poor on the way to the 1%. Look at Medicaid – plenty of rich businesses have used the poor recipients to line their pockets by overtreating them, harming them, billing for services that weren’t provided to them, or all of the above. Take a look at Dentist the Menace blog (www.dentistthemenace.com) to see how the scam goes in pediatric dentistry.
      So really, it’s heads I win, tails you lose, and even when you think you’re winning you lose.

  4. Ben Johannson

    As Pavlina’s work has demonstrated, that was also the position of J.M. Keynes, who favored policies that would directly employ workers over the “pump priming” policies favored by 1960s “Keynesians”.

    Skidelsky and Perelman have also made this particular point, that Keynes’ recommendations for full employment and counter-cyclical stabilization were much more sophisticated than the “spend more” creed carried out by American economists who ignored his other work. There’s something about American culture in which, from the most educated to the least, we oversimplify to hear only what we wish.

    1. NoFreeWill

      Read some Marx on the “reserve army of the unemployed” on why the Fed will never act on its mandate to maintain full employment. Unemployed people drive wages down for the rest of laborers, which is why they can never be dispensed with. If only we paid them for their services to the economy by suppressing labor’s share of profits!

  5. Tyler

    “[T]hrowing more money at the poor will never solve our … poverty problems.”

    Did John Cochrane ghostwrite this piece?

    1. Ben Johannson

      See, this is where editing a quote with the old ellipses obscures the content. Actual quotation: However, throwing more money at the poor will never solve our unemployment and poverty problems..

      1. Tyler

        The way I edited the quote does not obscure the content. I have the same response to the way you quoted the author: Was this piece ghostwritten by John Cochrane?

        1. beene

          Keynes said “I have a better way”, meaning instead of revolution you have employment for the poor instead of welfare.

    1. craazyman

      that’s not surprising at all.

      a lot of people can’t understand how MMT could actually work — after they consider who’ll be in charge of all the spending.

      1. Auburn Parks

        Just as it is today, the people are in charge of the spending.

        And we don’t need to change anything to “have MMT” MMT describes what is currently. Its society’s priorities and ignorance that need to change. Not the operational and technical minutiae. That stuff is largely irrelevant.

      1. Banger

        No it wouldn’t end their poverty as one can see from what often happens to poor people who win the lottery. Poverty in the U.S. is often multi-generational and involves all kinds of what we would call dysfunctional behaviors that I would just call methods that allow people to survive psychically. The poor are told in a hundred different ways that they are detritus who don’t deserve to live but because we aren’t totally bad people we allow them to hang out in the margins. Their lives are filled with constant humiliations and anxieties about bills, utility cutoffs and so on–this wears on people and puts them on the edge of depression and despair. A regular income that took care of their needs would help–but they still would have to live with and try and heal the patterns they established–and it wouldn’t take care of their need for meaning, for belonging which is essential to human life. Having something to do that means something to others is the best way to cure the attitude that is often in poverty.

        But it is clear to me that most Americans don’t have the slightest interest in alleviating poverty or they would realize that a jobs program would do more than anything else to fix that particular problem.

        1. just bill

          Spoken like an overeducated academic who has never been poor. Having been poor myself (and unemployable) at forty, I can tell you that getting money solved the problem to my entire satisfaction. How did I get it? I was lucky. That’s how things really work outside the academy.

          1. Ben Johannson

            Yes, well you’re perfect aren’t you? Unfortunately your total self-absorption isn’t going to alleviate the problems of others, is it?

              1. Ben Johannson

                Not likely when it’s piling up on your keyboard as it oozes from under your fingernails.

          2. Banger

            Well, I have been poor and not poor–at the moment I’m in pretty deep financial trouble–lot’s of debt and low-income. So your critique doesn’t hold water. It is because I know and have known poor people and those struggling on the margins that I said what I said. Meaning, as Victor Frankl noticed in his examination of who survived the concentration camps in WWII, is of primary importance to human beings and often trumps any material deprivation. In the U.S. jobs give people a sense of meaning–or at least having something useful to do–to not see that is ignorance.

            1. just bill

              Work can give life meaning. Jobs generally don’t. This explains the bonanza of televised sports and even more trivial ‘entertainments.’ I would explain further but the baseball playoffs are starting.

      2. Ben Johannson

        That is an assumption based on a highly simplified model. In reality there is no basis for thinking that handing out cash to tens of millions will end poverty or function without significant negative feedbacks. We can, however, look at the historical record and confidently state that poverty fell and living standards rose during periods of tight, full employment.

        1. just bill

          There is no basis for thinking that helping people won’t help them? What will help them? Penetrating social criticism from the academy? Voting? Temperance? Birth control? After school tutoring? The First Tee? Sending Warren to the Senate, or Obama to the White House?

          1. Ben Johannson

            There you go again, ignoring what you don’t want to hear and oversimplifying the problem.

            1. just bill

              I’m curious. Have you ever tried giving money to people? You would be amazed how much it helps. And most of the poor are already employed, some are working two and three jobs. I would not be terribly surprised if a large portion of the unemployed are overeducated and unwilling to stoop to actual work. Got any data on that?.

              1. Calgacus

                Justbill, I agree with some of what you say. Giving money to the poor could and does work. For a while. The problem that poor people have is not how they behave, but how society behaves toward them, above all by not providing jobs, decent jobs. But giving money to everyone is a stupid idea that obviously can’t work, because this “money” inflates into nothing very soon. But it does have the merit of universality. Targeting money is better than nothing, but it is very vulnerable to plutocrat attacks. What has always worked, and protects and increases “welfare” spending is full employment, in particular a JG. A job offer is a right in a monetary economy. Plutocracy denies this right, and thereby divides and rules.

                Hardly any poor people are employed at decent jobs – otherwise they wouldn’t be poor. Pretty much the whole problem of poverty is caused by unemployment. Opposing poor people who work vs. unemployed ones who think they are too good for the presumably plentiful, if ill-paid jobs has no basis in reality. A job guarantee, even if offered at today’s derisory minimum wage – which is not what MMTers support – would eradicate most poverty quickly and permanently, let alone the MMT living wage JG.

    1. Lambert Strether

      Yep. IIRC, the bailouts averaged out to $65K of free money per American. If Ben’s helicopter had dropped a pallet of cash into my driveway with that much on it, I’d have insulated the house, gotten a new boiler, and fixed the roof, giving lots and lots of employment to skilled locals, and helping manufacturing, too. Throwing money at people like me would solve a lot of problems, and not just our own personal ones.

      Of course, what Pavlina’s chart shows is the successful implementation of policy. “You don’t bat zero for the season without a plan.”

      1. PaulArt

        You would also have roaring inflation. That is what happened in the 1970s. We had powerful Unions and we had a lot more jobs with no way to outsource. As prices rose, wages were MADE to rise because of the Unions. Once the 0.1% got rid of Unions and also moved jobs abroad the inflation problem was permanently solved here in the USA. I never hear or read Krugman talking about this – but then for him outsourcing and killing unions are all ‘exogenous’ issues that do not affect his moronic crystal ball models. Dropping helicopter money would instantly rocket inflation upwards and crash the dollar.

        1. Yves Smith Post author

          You have that utterly wrong.

          We got inflation because Johnson refused to raise taxes to fund Vietnam and the space race. The economy was ALREADY at full employment and labor had bargaining power. Most contracts had automatic cost of living increases.

          Nothing like the situation today, which lots of unemployment, slack in the economy, and unions in retreat.

        2. just bill

          The Seventies inflation was engineered by the big banks and their front man Kissinger, who allowed a handful of Arab sheiks to quadruple the price of oil in a half dozen years. This produced a windfall for the banks and also forced the Sixties generation back to work. Life had become to easy. Millions of young people were dropping out of the ‘labor force’. Nothing important happens in America without a reason.

    2. Nat Uerlich

      The problem with using “throwing money” derives from the power of framing. The phrase has been defined by the Right and, unintentionally, progressives who use it unavoidably reinforce the Right’s frame. (See Don’t Think of an Elephant! or other writings by George Lakoff.)

      Unfortunately, framing remains a strength of those who favor the 1% and a weakness of those for the 99%. When that strength is matched, the ideas on the Left will have an excellent chance to win the “hearts and minds” of the great majority.

    3. Gerldam

      What about throwing money at the young entrepreneurs, who:might be the Bill Gates of tomorrow? This would create far more jobs than throwing money at the rich or at the poor (which has never created the slightest job), the only way to alleviate poverty.

  6. Maude

    While I generally agree that everyone who wants a job should be able to have one, and that there is a lot of work to do, I don’t understand this MMT bashing of a Basic Income. Every human deserves a minimum of food, water, housing and healthcare. Paying a basic income to every single person is not a handout. People will still want to work. And people will still work, though some will choose unpaid work because that is how society operates. Childcare, elder care, volunteerism of all kinds is unpaid work in our society that will never provide an income, but is critical to our success. The truth is that we work too much. A sustainable society would not produce so much stuff. Most likely half of all we produce is unneeded and designed only to create a profit. What about the things we don’t create enough of, such as vaccines for the sick (ebola anyone?), clean water for everyone in the world, or a quality education? I would much rather focus on allowing people the freedom to have a quality life with rewarding work, than just give them all a 40 hour a week ‘job’ making crap we don’t need.

    1. Pokey

      Why does anyone “deserve” things? Being conceived and coming into existence requires no effort and contributes nothing to society. If the being does nothing but consume, it is a useless burden. In an affluent society such as ours, however, we liberals feel that there is an obligation to see that our fellow man has the basic necessities of life, food, shelter, and medical care. It is not because the recipient “deserves” these things, but that we cannot enjoy the benefits that we have in the midst of suffering that surrounds us.

      The opportunity to be productive is different, and under our economic and legal systems, everyone should have an opportunity for meaningful and remunerative work (“life, liberty, and the pursuit of happiness”). Whether he or she takes advantage of that opportunity, which does not presently exist to a large extent, should be left to the individual. One having and foregoing the opportunity deserves nothing.

      Our nearsighted policies, principally “free trade,” have made us poorer as a nation by sending work abroad that would provide a comfortable existence for people (and their children) who are being pushed out of the middle class. The ability to buy cheap goods at Walmart and take on ever-increasing debt concealed the rot in our economy. Those who are reaping the benefit of these policies appeal to the conscience of the liberal by saying “look what we have done for these poor people in third world countries.” Frankly, my dear, I don’t give a damn. It is debatable whether we have done anything other than stoke the fire of overpopulation. We who are lucky enough to have been born here or to have found our way here can and should enjoy the bounty of our resources.

      1. reslez

        > It is not because the recipient “deserves” these things, but that we cannot enjoy the benefits that we have in the midst of suffering

        Yes because worst part about poverty is that other people’s suffering impinges on our enjoyment. /s

        What is with all this culturally-inflicted psychopathy? People spout these things like they are totally ignorant of the soulless, antipathetic worldview they are helping to spread.

        A lot of people do things because they are the right thing to do. Not because seeing a starving person makes us enjoy our own food a little less.

      2. Auburn Parks

        I dont give a F#$%^&K about those poor people, I just want them to have the necessities so I dont feel like such an entitled jerk off and I can sleep with a clean conscience……how do you do it?

      3. Maude

        I just don’t even know where to go with this. Is it the word ‘deserve’ that you have such a problem with? It is something that runs through almost everything and it is killing us. Every living thing DESERVES to be treated humanely. Your calvanistic idea of work being the only thing that ‘deserves’ a reward is sick. A job is not always work, and work is not always a job. I also wonder where/who you think all these people are who have refused to take the opportunity to work and therefore deserve nothing?
        A basic income allows us to work meaningfully towards ending the unsustainability of us all having just a job 40 hours a week to make and consume more useless crap.

    2. washunate

      Yep. The BIG bashing seems to come down to the simple theoretical problem for MMT that the centralized complexity of a JG isn’t needed if you just use the Social Security Administration to mail people checks. You know, like they already do to millions of households.

    3. Pokey

      You people don’t get it at all. Life is a struggle for existence regardless of one’s means. When we did not have enough for ourselves and our families, we could not on any broad scale provide for others. Think about the farmers in the Midwest in the late 1800s or during the dust bowl. If you are watching your children starve, you would not be too receptive to someone saying “I deserve food or I deserve a house.” These comments reflect a total lack of historical perspective.

      No one deserves any thing simply because he or she exists. Humane treatment is not a thing.

    4. Calgacus

      While I generally agree that everyone who wants a job should be able to have one, and that there is a lot of work to do, I don’t understand this MMT bashing of a Basic Income. Every human deserves a minimum of food, water, housing and healthcare. Paying a basic income to every single person is not a handout.

      MMTers bash a Basic Income because they understand the economics of it. The MMT opposition is just an observation: Universal. Basic. Income. Can’t. Work. Never has, never will. It is like calling “give everyone three wishes” a political program. It is extremely inflationary. BIG proponents respond by changing the proposal but pretend that they are arguing the same one, and illogically mix and match the virtues and vices of inconsistent proposals. The problem is that they are doing this – what Wray calls a “bait and switch” unconsciously. BIGgers also usually reject the JG, and misrepresent the MMT positions and the JG.

      All the MMT thinkers are for sane, possible “BIGs” – guarantees that everyone will have some basic income, the necessities of life, etc. MMTers are “bleeding heart liberals” in Wray’s words. In the long run, in essence, if you are for a BIG, you logically have to be for MMT and the JG, because that is the only way even a basic, targeted BIG can really work. Plutocrats understand the issues perfectly well – which is why they have always been on the side of BIGs, and oppose the JG relentlessly. Poor people understand the issues and economics well enough too, which is why they want the JG, not the BIG.

      So the real question is: Why do so many BIG proponents reject, bash and belittle the Job Guarantee and people who would work in it?

      1. Ben Johannson

        Exactly right, and that isn’t even taking the political aspect into account. Social Security has survived for so long because it was structured to give Americans the idea “their” hard work was going into that fund, and by god no one was going to take it away from them. The Jobs Guarantee has the same advantage in that payments are the result of working for them; people will fight to protect it as they feel personally invested. The BIG does not and cannot do this and will inevitably be stigmatized as handouts for the looters and moochers. Then after decades of struggle we’re right back to square one.

      2. nothing but the truth

        as more and more production (and control of resources) becomes narrowly owned and produced by robots, the basic income will become a political reality.

        otherwise you will just see a revolt.

  7. Jim Haygood

    ‘The critical component that was missing in 1964, and that remains AWOL in 2004, is a government commitment to full employment. Only a targeted jobs program, paying decent wages, will successfully fight poverty.’

    Here’s your commitment. In 1977, Congress amended The Federal Reserve Act, stating the monetary policy objectives of the Federal Reserve as:

    “The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates.”

    Full employment IS government policy. But growth is needed to sustain full employment.

    Step outside the USA and look at southeast Asia. In two generations, the little dragons (South Korea, Taiwan, Hong Kong and Singapore) lifted themselves from African-level poverty to developed economy status, while far-larger China advanced from absolute poverty to a middle-income developing economy. Strong growth and free trade made this possible, lifting more than a billion people out of poverty.

    1. Benedict@Large

      I don’t know a single one of those billion people who have supposedly been raised out of poverty, although I have heard some stories about nets being used to catch some of them as they jump from high windows. Who I do know are some of my neighbors we may be having to sell some of these nets to, because they are being lowered into poverty as those others are being raised. Should I tell them not to despair; that a billion people somewhere else thank them very much for their loses?

      1. Jim Haygood

        In the early 1990s, I lived in Taiwan for a couple of years. A diplomat at AIT (the quasi-US embassy) told me that when he arrived in 1962, the streets of Taipei were almost devoid of vehicles other than rickshaws. By the early 1990s, motorcycles were ubiquitous, and quite a few people were moving up to cars. Today, Taiwan’s per capita GDP ranks just above Denmark’s:


        Developing Asia continues to outgrow the rich countries:

        MANILA—Developing Asia will remain the fastest-growing region in the world, the Asian Development Bank said Thursday.

        The bank’s Asian Development Outlook kept the growth estimate for developing Asia, which excludes Japan, at 6.2% in 2014 and 6.4% in 2015, faster than the 6.1% developing Asia recorded in 2013.

        The ADB projects major industrial economies to grow this year by 1.5%.


        The rise of China from autarkic poverty to middle-income developing economy, creating a middle class of over 300 million people, surely was the most important economic development of the past 50 years. Trade did that.

        1. alex morfesis

          having business owners focused on global trade (as exists in asia) instead of trying to figure out how to jackwelsh your employees into the gutter with phony 6 sigma nonsense and hiring people with ice in their veins and an MBA (Move the Business to Asia)…

          find a business owner in america who is trying to build a customer and community focused enterprise and I will spend my money with them…maybe it was just a myth…maybe there never were any american business owners who cared…maybe we got lucky for a while when europe decided to try to bomb royalty out of the history books between 1914 and 1946…

        2. MyLessThanPrimeBeef

          From rickshaws to cars in the last 50 years.

          Where do we go from here over the next 50 years? From cars to bikes? Clean energy!

        3. MyLessThanPrimeBeef

          I wonder if the Amish, still stuck with horse-drawn wagons, instead of cars, are not happy with their lack of ‘progress.’

        4. Vatch

          One should be very careful in discussions about the middle class in third world countries. For some analysts, any income above $2.00 per day qualifies as “middle class”. For an example of this, see:


          “This paper describes the size of the middle class in developing Asia across countries and over time. Based on an absolute measure of the middle class of $2-$20 (2005 purchasing power parity United States dollars), it finds that between 1990 and 2008, the size of the middle class in developing Asia has grown dramatically in percentage share, absolute size, and purchasing power.”

          Here’s an article in which the author protests against overly inclusive measures of the middle class:


          Are there 300 million middle class Chinese people? I sincerely doubt it. Definitely not by the standards of North America or Western Europe.

    2. MikeNY

      I submit to you that the reason we believe growth is needed to attain full employment is because 400 people in this country control more wealth than 160,000,000. If that wealth were more evenly distributed, I’m guessing that employment would be higher. Even the MSM is beginning to glean that high inequality impedes growth.

      To my mind, however, that is irrelevant. Redistribution in this country is a matter of social justice. There is not enough in the universe to satisfy the greed of some men. No amount of growth can solve that problem.

      1. Ben Johannson

        It’s only redistribution to Haygood if it’s oriented toward the bottom. If income is redistributed to the top as it is now, well that’s just free markets.

        1. MyLessThanPrimeBeef

          Wealth needs to be redistributed to lessen wealth inequality.

          Government spending also needs to be redistributed towards more social spending, and less on imperial adventures.

          1. Auburn Parks

            There is plenty of cronyism, waste, and fraud in the MIC, but somebody has to be the cop. Humans need authority, thats why we created Govts in the first place.

            Just because we have the military spending, doesn;’t mean we cant have the social spending too, as defense spending does not have a high inflation multiplier, for the same reasons why its not broadly stimulative.

            1. MyLessThanPrimeBeef

              The only responsible source of more social spending, today, is military spending.

              We take from military spending and use it for social spending.

              Doing it otherwise, more social spending just means more military spending. Thus, we must take from military spending and use it for social spending.

              1. Auburn aParks

                in what world does suspending FICA or investing in green energy = more military spending?

                1. MyLessThanPrimeBeef

                  in the world where. instead of taking money from military spending and use it for social spending, we simply say there is no restrain on government spending.

                  In that world, military spending, which already dwarfs social spending under the current government is a household model, will go up even much higher than what we have now, and the increase also will be more than any increase we will likely to get in social spending. This is simply a description of the world we live in today, but with more money to spend, bigger numbers to play with.

    3. reslez

      > Strong growth and free trade made this possible

      Whatever progress the tigers made had nothing to do with free trade, except in so far as they took advantage of ours. All these countries had strong mercantilist policies in place. That is what enabled them to grow their economies, not free trade.

    4. Ben Johannson

      Well gee, if there’s a statue on the books then that must be what government is doing. It’s fascinating to watch you post on things as though you’re the original discoverer.

    5. Ben Johannson

      China and South Korea and Taiwan did not engage in free trade, they practiced protectionism to foster growth and rising living standards.

      1. MyLessThanPrimeBeef

        If South Korea had the world reserve currency, and needed to run current account deficits, would they, too, have to sacrifice their middle class, their living standards, in order to make these higher up the totem pole and are in charge of Korean’s (in this hypothetical case) global reserve currency happy?

        1. Auburn Parks

          Giving up our middle class has been an active political choice for 30 years. Its not necessary. The Govt just has to increase its deficit (on the right things) to account for the dollars lost to foreigners through trade.

          We are better off on the real side of the economy, after all we are getting real goods and services for those dollars. The Govt has just failed to add the necessary amount to replace them.

          1. MyLessThanPrimeBeef

            1. Gov’t spending on the right choices.

            Govenment is run by humans. Money is power and power corrupts. There is no guarantee government spending will trickle all the from the top, with give away deals to the rich, military spending, security spending, down to, finally, social spending. Just look at the breakdown of our current government spending and one is not optimstic about spending on the right choices.

            2. On the real economy side….real goods and services.

            A. historically, or rather, pre-historical, people traded not for finished goods, but for unavailable raw materials, way back at the beginning…Baltic amber in S. Europe, and Mediterrean seashells in Ukarine, all around the time we co-existed with the Neaderthals…probably with barter, and not money.
            B. There is value in making things with your own hands…even if more expensive, at both the country-level and individual level. You want to grow your own vegetables, cook your own food, or make your own beer.
            C. Those real goods, many will tell you, are junk, and it’s not clear we’re better off with them.
            D. There is a moral question of why any country has to earn the global reserve currency while the empire doesn’t have to. We are compelling many countries to sell us junk to get our money.

            1. Auburn aParks

              Again, FICA cuts, or sending out checks to every american until demand is sufficient is not spending on the rich.

              You are free to live without any real good or service. Unfortunately, that would mean you cant comment on naked capitalism.

  8. Deaf Smith County

    In the discussion of full employment, not once did the words technology or productivity appear. As the two accelerate their pace in an economy and the human worker becomes more and more a bystander in the work place, full employment will evolve into becoming a guaranteed wage for people to stay at home, which is what welfare is today.

    1. financial matters

      There is a lot of ‘productive’ employment that would be useful..


      The Social Enterprise Sector Model for a Job Guarantee in the U.S.
      January 9, 2014
      By Pavlina R. Tcherneva

      ‘What kind of jobs?
      Non-profits and SEVs already work to produce sustainable and reproducible low-cost solutions for the most overlooked and blighted areas in our nation, such as low cost urban fisheries, community clinics, farms, aquaponics, youth mentoring projects, veteran services, and many other. Many support community sustainable agriculture initiatives, work to address the dual challenge of homelessness and AIDS, provide internship opportunities for at-risk-youth, or renovate and beautify decrepit urban spaces with murals and art projects.

      As Salon’s Brian Beutler correctly observed, the astute conservatives understand what’s at stake here: not that the Rolling Stone article is advocating for some form of communism, Stalinism, or some other than the preferred –ism, but that young people are beginning to demand a renewed role for government policies that serve the public interest. Worse, that a policy like the JG represents a foundational rethinking of the safety-net in a way that provides economic opportunities to all. It is a call for a bolder New New Deal for the modern world.’

  9. The Dork of Cork

    Growth , growth growth,
    The progessives do it , the fabian socialists do it even the hyper capitalist republicans do it.
    Blah blah blah blah.
    The first objective should be a return to purchasing power (this may or may not create jobs but would certainly change the nature of jobs within the production , distribution and consumption chain) , if this can only be done at the village level then so be it.

    Again the purpose of a economy is not to create jobs.
    From the days of hunting and gathering in the local movable village the reason for human advancement was finding ways and means to reduce work to a minimum.

    Jobs in the age of capital certainly do not have any core wealth creating function.
    As we can see most starkly in Anglo countries who absorb the Industrial surplus of mercantile jurisdictions – the jobs created are a means to access purchasing power and not to create it.
    The jobs are essentially pointless and extractive of general wealth.

  10. Carla

    “In a recent study, Americans told researchers they thought CEO pay at major corporations was approximately 30 times more than their own. Actually, CEO pay averages 354 times what a worker earns at the same company.

    Americans also said they thought the pay gap between CEOs and workers should be approximately 7 to 1. To achieve that ratio, workers would have to make $1.8 million each year, a separate study concluded.”


    However, this article does not illustrate the great variance in executive vs. worker pay rates according to what industry we’re talking about. A recent New Yorker story about the Fight for $15 (http://www.newyorker.com/magazine/2014/09/15/dignity-4) notes that in the fast food biz, exec compensation averages 1,200 times what the average worker gets, while in construction, it’s “only” 90 times.

    This makes the protests by fast food industry execs that they “can’t afford” to pay workers more particularly nauseating.

    1. RUKidding

      Thanks for those links. I started discussing the vast income gap between the CEOs and the workers over 2 decades ago, when the gap was much smaller but still way too large. It’s hard to get a receptive audience for such information (or I may just be poor at conveying the details). Back in the day, most people’s eyes glazed over & went to pull the lever for the GOP, who was all-in for lowering taxes on the “job creators” because moar jawbs, blah blah…

      These days, I think more citizens are aware of how unfair the gap is, but as these articles prove, most are still in la-la land about how vast the disparity is. And now, of course, it’s getting nigh onto too late for anything meaningful to be done, at least within the confines of what passes for the USG these days, not to mention the pathetic-ness of the so-called “Regulatory” Agencies.

      The protests of the 1% & CEOs about the unfairness of taxes or workers’ allegedly egregious wages have always been b.s. There’s always been enough to pay US (and other) workers fair wages. The 1% simply doesn’t want to. And now they’ve bought off everyone & made their desires the laws of this (and others) land. And pretty much, they’re all: nyah nyah whachyooogonnadoaboudit. The end.

      1. Irish gold

        One of the difficulties in getting people upset about the huge CEO-to-worker ratio is that many Americans still cling to the End of the Rainbow Brave Hope, i.e., they believe there’s a chance that someday they may climb the rainbow found at the corner office and fall into a pot of gold there.

        This also explains voters’ reluctance to more heavily tax the well-off — “Hey wait, what if I become a jillionaire.” Americans persist in holding on to the Fond American Hope – the big treasure is around the corner, so don’t mess with my chances.

        The reality is far different of course. The chance of a working class guy or gal making it up to the jillionaire class is close to zero, as shown by research.

        Some ideologies are tenacious and tough to break. “What happened to Kansas?”

  11. yenwoda

    “As Stephanie Kelton and I wrote in 2004, 60 years after the War on Poverty began: “’Keynesian’ policies to raise aggregate demand in order to stimulate private sector employment have also been adopted on the belief that economic growth would raise the demand for labor and thereby “lift the boats” of the poor.”

    The suggestion here seems to be that the War on Poverty was composed of measures aimed at raising AD, but that strikes me as wrong. It focused on providing access to food, health care and education for vulnerable groups. You can argue that some of those measures indirectly raised AD, but I don’t think it’s accurate to paint the War on Poverty as an effort to lift all boats through the rising tides of economic growth. If anything, the War on Poverty was criticized from the right for being “inefficient” and thereby damaging to growth.

    1. Ben Johannson

      The war on poverty wasn’t limited to welfare payment’s; pump-priming, that is government purchases of goods and services to stimulate effective demand, was a major component. This worked for a time but businesses adapted to capture an increasing share of that spending as profits, negating much of the impact on employment and wages.

  12. Benedict@Large

    Your link to New Economic Perspectives is broken.

    [In that short sentence, the comments box made me go back 19 times to correct letters and spaces it missed on first entry. You’ve got some BAD performance problems in this new set of changes that are burying my CPU.]

  13. The Dork of Cork

    Love it or loath it but in traditional irish catholic society the women stopped working in paid jobs when they got married.
    This only really changed in Ireland during the 1970s
    (the saying goes that the 60s did not arrive in ireland until the seventies)

    There thats one method to solve a non problem created by banks but there are many more ways to skin a cat.
    Ian banks novel Whit comes to mind.
    Banks has called it:

    a book about religion and culture written by a dedicated evangelical atheist — I thought I was very kind to them… Essentially, Isis makes the recognition that the value of the Luskentyrian cult is in their community values rather than their religious ones. She recognises that efficiency isn’t everything, that people not profit are what matters.

  14. Jim

    Randy Wray argues persuasively that the political power of the top 10% has risen “inexorably over the postwar period.” with the consequent ability to shift more and more of the gains from growth to themselves.

    Yet in the Levy Economics Institute study “The Lender of Last Resort: A Critical Analysis of the Federal Reserves Unprecedented Intervention after 2007” MMT theorists argued, despite apparently being aware of the every increasing power of our private-public oligarchy operating through the Federal Reserve and Treasury, to shift benefits to themselves– that “quick decisive, and even secret action by the Fed was warranted in the earliest phase of the crisis…(pg. 6).

    Unless MMT can articulate an alternative political structure to our presently all- powerful centralized system of governance– MMT economic policy suggestions, in moments of crisis, only end up acting to reinforce the very structure of political power they are supposedly against.

    1. Auburn Parks

      MMT is true regardless of your politics.

      The Govt cant run out of dollars and controls its own interest rate
      Demand driven inflation wont be a problem until total spending is above productive capacity at full employment
      Spending = Income aka sectoral balances

      Thats MMT in a nutshell, these 3 simple economic facts. The policies you propose or support given these facts is up to you.

      1. washunate

        “MMT is true regardless of your politics.”

        I think what you mean is the part of MMT that says a currency issuer can issue however many currency units it wants. And I agree; that’s not some insight of MMT. It’s the basic math of infinity. Everyone agrees with that, from the hyperinflationists to MMTers to kids on the playground whose dads are infinity times 2 stronger than your dad. Dick Cheney is the quintessential MMTer.

        What is not true regardless of opinion, though, are some of the other claims. For example, Wray and Mosler claim that the basic insight of MMT is that monetary policy must choose a buffer stock. That’s not an objective fact. That’s an opinion. It is debatable. People can disagree. Another claim that is debatable is the notion that society is better off with more work – that the buffer stock we should choose is full employment. That also is an opinion with which one may disagree.

        As far as sectoral financial balances, it is all about aggregates. It ignores distribution within the various categories. It doesn’t even define what the private sector is very clearly. After all, it’s just a math equation. Nothing more, nothing less. Professor Wray is an employee of the state of Missouri. Is that a public sector job or a private sector job? Should academic economists make more money than preschool teachers? There is no objective answer to that question; it is fundamentally political, personal, a judgment call about the kind of society in which one wishes to live.

        And as far as inflation, that’s an academic game of semantics. Anybody alive knows that prices have risen. If you want to call the outrageous prices in academia, law, medicine, housing, food, transportation, etc., something other than ‘demand-driven inflation’, that’s fine. But it’s still that other combination of letters you use that isn’t ‘demand-driven inflation’.

  15. Banger

    I’m glad Wray brought this up. If you’re going to have a coherent society then everyone has to have a purpose or a sense of being a part of something. Some kind of job creation priority would benefit everyone maybe even the rich–but such a policy can never be implemented because the oligarchs have always opposed it because it means a transfer of power from the oligarchs in the private sector to the government which would have a unique power to shape the direction of the economy. And, most importantly, if such a program was successful then people would have confidence in the government and not support the pro-corporate policies that both political parties try to outdo themselves to implement. Remember–economics has nothing whatever to do with any of these so-called “economic” decisions–these are political decisions.

    The oligarchs know that should the public get the notion that “the people'” matter and that we ought to maybe have a real democracy not just on weekends but in the world of work then their punitive and nasty attitudes would, eventually, turn them into the pariahs they should be. That’s why they opposed any sane health-care reform whether single-payer or whatever. They’d rather pay more for health-care than their competitors in other countries than give people the idea that government can do something beneficial for the public. They have spend the past thirty-five years or more tirelessly trying to destroy every Department and Agency in the federal government with the enthusiastic help of both political parties–why would they want to reverse course now? Now that they can count on that government to print money to put in their own pockets whether in the financial sector or in endless wars.

    1. Calgacus

      Absolutely right, Banger. That is what the oligarch’s don’t want, their ultimate fear: Everyone realizing that they can very, very, very easily help themselves and everyone else by collectively deciding what to do, and then collectively helping out those who help achieve this goal. That is all the JG is. Realizing that the plutocrats don’t have the power. They never had the power. They just fooled people that they did. Wealth isn’t power. Knowledge is power, and what you just said is very, very powerful knowledge.

  16. The Dork of Cork

    I don’t accept I must have a purpose as defined by others.
    That is a communist / capitalist philosophy me thinks.
    You are expressing corporate beliefs and yet do not even know it.
    Give me equal purchasing power and I will create my own fucking purpose.
    In truth most people will gravitate to village life as we are genically programmed that way.
    Problem solved. as cooperation comes naturally anyway.

  17. Bluntobj

    I am sympathetic toward the aim of this work on the egregious wealth transfer going on from the common people to the 1%.

    This article, and those like it, as well as the misguided (truly? or intentional?) concern of the author are the sole reason for the vampire squid that is the financial elite’s success in asset stripping the world.

    Why, you might ask, if you had not already made up your mind that I’m evil incarnate.

    “. Only a targeted jobs program, paying decent wages, will successfully fight poverty among the nonaged in a politically acceptable manner…”

    By the government…
    That prints money to cover its bills, as there is not enough tax revenue to do as the author dreams…
    That flows to the first users of funds, the banks and the financial elite…
    Who own the projects that the targeted jobs program works on…
    and owns the debt…
    and writes the tax laws…
    and writes the regulations that raise barriers to entry and favors certain corporations that helped write the laws and guide the regulations then written from them…
    That everyone in the county must follow, often being forced to buy a (bad) service or pay a tax…
    The costs of which will rise far faster than “Inflation”…
    leading to effective “company store” status for 90% of the wage slaves…
    Things fall apart.

    … that was also the position of J.M. Keynes, who favored policies that would directly employ workers over the “pump priming” policies favored by 1960s “Keynesians”. As Minsky explained, those policies would favor the “already well-off”. Pavlina’s work shows convincingly that that was precisely the result.”

    Any reference to Keynes needs to fall in the same category of Goddard’s Law applied to finance. It is reprehensible to think that “direct employment” would lead to any different outcome than “pump-priming,” especially in a government as captured by the elite as this one.

    You might as well hand 20k on every citizen of the 99%. It would be a fast and clean death, at least. (I was going to say helicopter drop, but that would not have been apropo with the last bit…)

    1. Ben Johannson

      It would be impossible for a JG to lead to an identical outcome as pump-priming, no matter how badly structured. Pump-priming is centralized and corporate-focused via direct purchase mechanisms. A Jobs Guarantee is de-centralized and shifts both purchasing and bargaining power toward the working classes.

        1. Auburn Parks

          It comes from the Federal Govt

          It comes from the same place all other Federal Spending comes from. Congress passes laws and the Fed\Tsy create the money and give it to whomever We The People tell them to give it to.

          1. Bluntobj

            So, the financial elite, just like always?

            Like I said, just give up on the work idea and do Basic Income. It will be over faster.

            1. Auburn aParks

              UBI and JG money come from the same place. This combined with your reply to Ben makes what you are saying nonsensical.

  18. washunate

    “…welfare dressed in its modern garb, the basic income guarantee.”

    Wow. Modern welfare is pretty much the opposite of a basic income guarantee. But nevermind what US social policy actually looks like today, or what a BIG might propose instead, just basic social insurance – universal unemployment insurance and universal health insurance – would be a dramatic improvement.

    “However, throwing more money at the poor will never solve our unemployment and poverty problems.”

    Wow again. Can’t trust those poors with money.

  19. The Dork of Cork

    its important to remind ourselfs the basics.
    The prime directive , indeed the only directive of capitalism ( which includes communism) is to concentrate wealth.
    That is what it does and it does this in a spectacular fashion.
    “Growth” is used to reduce social tensions but it has no real purpose by itself.
    Indeed if capitalism cannot grow it will destroy wealth in order to maintain concentration as we see most vividly in the eurozone today. ( the eurozone is merely a US or UK banking union in Adolescence)
    We see this again and again throughout capitalist history.

    In some sense these MMT types are super capitalists because obviously they want continual expansion of capital no matter what the true cost.
    We live in a world swamped with capital but ironically little purchasing power.

    This cultish power of capital & materialism is a priesthood of the most devasating kind.
    Not only is its beliefs profoundly anti humane (unlike many previous cults)
    But its power to destroy all life makes it a force of total destruction.

    Practionaires of the second American materialist Revolution of which Wray is one have totally destroyed the European village system.
    Many of us feel like Fridtjof Nansen on his trip to the states
    Total disgust
    But we don’t have to go anywhere – its outside the door.

    Not only has Belleville come to Europe , it is Europe.
    Have a nice day.

    1. susan the other

      MMT doesn’t necessarily want infusions of capital, since capital is money that comes from profits, which in turn comes from the proceeds of growth stimulated by debt and service on debt. MMT wants to create its own money without a suffocating debt service to privateer banks. And why not, since the privateers simply use sovereign money? Where do the privateers get the nerve to charge sovereigns any interest at all?

      1. susan the other

        Just to be completely incoherent: I want a banner that reads, “Adenosinetriphosphate for All!” Which means, as an early contributor to NC was posted and whom I will never forget: If there is a thriving amoeba colony and some of them decide to corner all the energy feeding the colony, starving and killing off the rest of the colony who once shared and shared alike, then the survival of the fittest (the most ruthless) really only leads to the death of all the amoebas because even the thieves needed the victims to supply them … and oops, they killed them. And etc. Rising tide indeed. The right and access to money should just be a given; money should simply be there like water and air. But the uses to which money is put should be controlled by the Soup Nazi. Loaning money and creating debt for no progressive purpose should be a serious crime, the equivalent of a long, low tide. And blablahblah.

      2. The Dork of Cork

        The state is not what you think.
        Since Tudor times the state is the bank and the bank is the state.
        MMT types are comfortable with this arrangement.
        I am not.
        MMT money creating operations requires banks to do this – why involve them at all. ?
        Are not banks a Pox on the land ?
        Yee guys seem to hold no real oral tradition of what the banks were and are capable of.
        When the money power proper arrived on Irish shores , they incorporated these lowly middlement to divide and conquer.
        These little bastards remain with us today.
        See at 18.00

        This problem goes very deep.

  20. proximity1

    Recently interviewed by an Al Jazeera reporter in Hong Kong, one of the protest-movement’s leaders–cannot recall with certainty which one–said something very astute in summarizing why so many in Hong Kong are discontent with the local government. He observed, in so many words,

    “The Hong Kong government represents Beijing’s authorities’ interests to the people of Hong Kong rather than representing the interests of Hong Kong’s people to Beijing authorities.”

    That observation neatly sums up what is essentially wrong with the way what we are pleased to call “democracy” operates just about everywhere in the world. Rather than representing populist/popular aspirations and claims to official authorities, elected officials represent the narrow interests of the class of corporate and political elite and their agents in officialdom to the various mass publics–offering bland and usually false canned explanations, excuses and rationalizations for why things have to be and must continue the way they are.

  21. TheCatSaid

    While I don’t recommend this, it is an interesting mental exercise to consider a mechanism that would transfer wealth from the 5op 1% to the LOWEST 1%.

    I know as per others above that giving people money isn’t effective (Banger above re: lottery winners), the point is we seem to be stuck in contrasting the 1% with the remaining 99%. What if we were to focus instead on the lowest 1% (or 5% or 10%)? Interesting head games. . .

    1. washunate

      It is an interesting head game.

      Because when you actually investigate the problems faced by people who are most disadvantaged and discarded in our society, the most vulnerable and voiceless, employment isn’t the issue. It’s about the legal system and the medical system and education system and housing system and how this systemic oppression is passed down from one generation to the next.

      And of course if you go ‘up the ladder’ a bit, say from the bottom 10% to the bottom half, existence of jobs isn’t the main issue there, either. Rather, the crappiness of jobs is the issue.

  22. RanDomino

    The only way to have “full employment” at this point is with loads of useless make-work. The problem isn’t that there aren’t enough jobs; it’s that the means of production and property are owned by (and therefore the excess productivity goes to) distant landlords and stock-holders rather than workers, communities, and/or the general population.
    Fuck full employment, because in a world where only a tenth of the work currently being done really needs to be done, those who argue for an 8-hour day for everyone argue for nothing but slavery and misery for reasons of pointless moralism.

  23. cripes

    There seems to be some confusion on this board abput the natire of poverty and available economic supports.

    Welfare barely exists for single mothers with children, and has been effectively eliminated for single adults. Of maybe 100,000 families eligible for TANF iGeorgia, about 6,000 are receving support, threadbare and punitive as it rs.
    Welfare is certainly not an equivalent for BIG income guarantee.
    Basic income, or variations, have been or are in use in Alaska, Gulf oil states, And were tried in the US AND native communities in Canada. The sky disnt fall, inflation is not a reault of fairer income distribution.
    And a jobs guarantee, without more, will not repair the social damage of millions of people in poverty who are working. Barbara ereinreich detailed this 20 years ago in Nickeled and Dimed.
    Sorry about unfixed typos. I,m on Android.

Comments are closed.