PUBLICATIONS
Mainstream
economists, including Federal Reserve Chairman Ben Bernanke,
embrace the core concepts of the New Economic Consensus
and have severed the Keynesian link between fiscal policy
and full employment. The Post Keynesian school of thought,
however, has reinstated that link via functional finance,
and maintains that there is nothing inherently inflationary
about fiscal policy.
To understand the renewed role for fiscal policy, Research Associate Pavlina R. Tcherneva examines the following issues: (1) the effect of government spending and debt on the behavior and expectations of rational consumers; (2) the method of financing government spending and whether there is a binding budget constraint; and (3) the impact of fiscal policy on the banking system and central bank policy.
Tcherneva explains why crowding out, Ricardian equivalence, and budget constraints are irrelevant to understanding the nature of government finance. She discusses the explicit link between fiscal policy and full employment, and concludes that guaranteeing full employment by closing the demand gap will likely fail. Tcherneva favors employer-of-last-resort programs that are judged by their economic impact rather than their budgetary stance.
Globalization has been associated with declining labor standards, especially in developing economies. The search for greater flexibility and lower costs has led to a race to the bottom and the exploitation of cheap female labor. Zahra Karimi, University of Mazandaran, Iran, investigates the economic condition of carpet weavers in Kashan and finds that, as a profession, carpet weaving has become a sign of poverty. Harsh competition between developing countries has suppressed real wages, maintained the subordinate position of female workers within households, and led to the substitution of Iranian weavers by Afghan immigrants.
Female carpet weavers bear a double workload, Karimi observes, as traditional gender roles within the household have not changed. Weaving is considered a hobby, and most female weavers have no access to their wages. As the profit margin of investment in Persian carpets continues to shrink, Iran’s female carpet weavers find themselves among the principal losers in the rapid expansion of international trade.
Research Scholar Rania Antonopoulos provides a comprehensive overview of current research about gender disparities in paid and unpaid work. She suggests that a more appropriate usage of the term “unpaid care work” should be constructed around the concept of unpaid social reproduction work (direct unpaid care work plus indirect care work), which excludes unpaid work that produces goods for sale in the market. When paid work is combined with unpaid work, women work longer hours than men in most countries (an additional two to five hours per day). The disparity is higher in rural areas, and declines with the level of economic development.
The working poor must endure substantial “time poverty,” whereby time use forms and structures poverty, while poverty shapes time use. Although women have unequal access to goods, services, and productive resources, they play a significant role in reducing poverty within the household. It is essential to value unpaid work, says Antonopoulos, because it contributes to well-being, makes unpaid work visible, is an economic good, justifies measures to promote gender equality and poverty reduction, and improves women’s claims to entitlements.
Antonopoulos stresses the need for better time-use data, as well as new indicators and mechanisms to monitor the impacts on unpaid work; an analysis of family-work reconciliation policies and unpaid care work; an exploration of the importance of employment guarantee policies in alleviating unpaid work burdens; and a greater focus on the kinds of social protection paid informal care workers require.
Research Associate Pavlina R. Tcherneva revisits John Maynard Keynes’s view of employment policy and argues against the mainstream stance that the Keynesian solution for full employment is to boost aggregate demand (i.e., “plug the gap”). Rather, Keynes had a targeted approach to full employment, and favored employment schemes in the form of public works during times of recession and expansion.
The principle of effective demand was truly innovative in Keynes’s work, says Tcherneva. She examines how effective demand differs from aggregate demand; why fixing the point of effective demand at full employment is not possible, and how a policy of public works circumvents this problem; and what role “plugging the gap” plays in Keynes’s analysis.
Pro-growth, pro-investment policies that attempt to push growth beyond potential output as a function of current prices is a wrongheaded approach to full employment, says Tcherneva. The only way to “plug the gap” is to plug the gap for labor via public works (an “on the spot” approach that solves the problem of unemployment via direct job creation, irrespective of the business cycle). To reinstate the link between fiscal policy and full employment, it is necessary to embrace Keynes’s methodology of measuring output.
