Book Review - Ending Poverty: Jobs, Non Welfare

The Levy Economics Institute of Bard College published a majority of Hyman P. Minsky's articles nether the title: Ending Poverty: Jobs Not Welfare inwards 2013. Minsky's analysis of financial instability is well-known, especially afterwards the financial crisis. This majority was published to highlight i of Minsky's other concerns, which was ending poverty via a high-pressure project market. Although the showtime article inside the majority was showtime published almost 50 years ago, the writings are nonetheless relevant.


The majority features a preface yesteryear Dimitri B. Papadimitriou, in addition to an introduction yesteryear L. Randall Wray. They both collaborated with Hyman Minsky, with Professor Wray beingness a doctorate educatee of his.

Overview

The chapters contained inwards the majority are equally follows:

1. The purpose of work policy (1965).
2. Effects of shifts of aggregate demand upon income distribution (1968).
3. Policy in addition to poverty (1969).
4. The macroeconomics of a negative income revenue enhancement (1969).
5. Where the American economic scheme - in addition to economists - went incorrect (1972).
6. The poverty of economical policy (1975).
7. Full work in addition to economical growth equally the objective of economical policy: some thoughts on the limits of capitalism (1994).

As the dates indicate, most articles were written during the War on Poverty. Some were previously published. As hinted yesteryear some of the chapter titles, Minsky viewed the War on Poverty equally beingness a predictable failure.

I read the electronic version of the majority on the Kindle. There were a few kid typographical glitches inwards that version.

Target Audience

Many of my readers are interested inwards the analysis of the economic scheme in addition to the financial markets. If this describes you, in addition to you lot are non familiar with Hyman Minsky's work, it mightiness last an thought to start with other books of his that focus to a greater extent than on financial instability. For example, Stabilizing an Unstable Economy, or his summary of Keynes. This majority is focused tightly on the labor marketplace position in addition to antipoverty policies. The analysis is less "Minsky-an" (assuming that is a word) than those other books.

But fifty-fifty if your only involvement inwards economic science is inwards the context of the financial markets, this majority is also interesting. The distribution of income inwards the economic scheme is non simply a inquiry of jurist in addition to politics, it also affects economical performance. The electrical flow sluggish equilibrium nosotros are inwards straight off reflects the lack of growth of income with the households at the bottom halt of the income distribution. Assuming that high corporate profits would Pb to strong growth in addition to higher bond yields was a costly fault this cycle.

Additionally, Minksy's analysis of the beginning causes of inflation is interesting for a fixed income analyst. The only affair that volition pause Treasury yields decisively higher is a structural alter inwards inflation performance. We demand to await at historical episodes to consider the causes for previous structural breaks. Explanations of the ascension inwards inflation inwards the 1960s in addition to 1970s based only upon the opinion of monetary policy appear unconvincing (especially inwards lite of the electrical flow episode of extended negative existent policy rates), whereas Minsky's analysis looks to last much sounder.

"Keynesian" Economics Is Complex

One potential challenge for a reader who is unfamiliar with Minsky is his complicated human relationship with "Keynesian" economics. Minsky viewed himself equally a follower of Keynes' theories, but he was critical of the "Keynesian" economists who formulated policies inwards the 1960s. I conduct keep non looked at the historical literature inwards plenty particular to enable to push clit a job solid trace betwixt his in addition to their theoretical views. But inwards the context of the labour marketplace position articles inside this volume, it appears that the differences largely revolve around policy implementation.

He argued:

All of the policy instruments conduct keep a "what kind" equally good equally "how much" dimensions. Proper attending to the "what kind" is necessary inwards using monetary - financial measures, in addition to the "what kind" should last determined inwards the lite of the contribution it makes to the state of war against poverty.

As a result, some of Minsky's views mightiness come upward equally a surprise to modern readers, equally he is non stereotypically "liberal" (following the modern American usage of that term) despite his Keynesian sympathies. For example, he criticizes nutrient stamps equally beingness inflationary. (Food stamps conduct keep been renamed equally the SNAP programme.) He fifty-fifty sounds similar an cyberspace Austrian when he refers to them equally beingness "funny money".

He agreed with the Keynesian analysis of aggregate demand management inwards the context of a render from a recession. The preferred techniques of stimulating demand conduct keep non actually changed since the 1960s, beingness revenue enhancement cuts, investment in addition to revenue enhancement incentives, transfer payments in addition to armed forces spending. These policy levers volition cut down the unemployment charge per unit of measurement afterwards a recession. But i time the economic scheme has returned to a steady growth path, they create an inflationary bias.

Labour Market Divergence

The exercise of too-broad aggregates is ofttimes a telephone commutation weakness of mainstream economics. Minsky viewed the departure betwixt depression wage in addition to high wage workers equally beingness a critical business office of the analysis of the labor market. He uses a two-sector model developed yesteryear Baumol to illustrate his thinking. Demand management techniques tend to favor high wage sectors. And hence stimulus tends to last dissipated inwards inflation without doing really much to aid the poor.

He showed that the reduction inwards poverty inwards the 1960s was largely the final result of a decrease inwards the unemployment rate, but at the same fourth dimension wage inequality increased. The chop-chop increasing reward of highly paid workers fuelled the inflation that made the existing policy mix politically toxic.

His sentiment was that poverty tin only last effectively fought yesteryear policies that focused only on project creation for the less well-off. The political challenge is that if you lot heighten reward at the bottom of the distribution, you lot demand to comprise wage increases - in addition to turn a profit income - at the locomote yesteryear of the distribution inwards monastic tell to comprise demand. Otherwise the resulting inflation could cancel out your policy initiatives.

He felt that this was a job that could last dealt with. Any ascension inwards the toll degree equally a final result of raising reward at the bottom of the distribution should only last a one-off shock. The association of persistent inflation with a depression unemployment charge per unit of measurement was an accident of history. As he notes,

In the showtime place, in addition to the only type of tight labor marketplace position that has always been observed inwards the U.S. of A. is the transitional type. We moved tightness in addition to dorsum away. We conduct keep never observed the results of moving to a tight labor marketplace position in addition to staying there.

The most effective policy he saw would last for the authorities to deed equally the employer of final resort, which was the policy thrust taken inwards the Great Depression but was abandoned inwards favour of transfer payments (welfare, unemployment insurance). Modern Monetary Theory has adopted a policy prescription of a project guarantee, in addition to hence his analysis has been extended yesteryear others.

He rejected the thought that unemployment is the fault of the unemployed, in addition to hence nosotros should alter them. Training people for non-existent jobs is pointless, but it remains the preferred approach with policy makers. As he states,

However, the objective is clear: is to accept the labor forcefulness equally it is [my emphasis added] in addition to brand certain that plumbing equipment jobs are available. Instead of the demand for the low-wage worker tracking downwards from the demand for the high-wage worker, such a policy to final result inwards increments of demand for acquaint high-wage workers "bubbling up" from the demand for low-wage workers.

Still Relevant

The articles inwards this majority remain surprisingly relevant. This appears to last a reflection of the lack of progress inwards labour marketplace position policy. The indications of historic menstruation appear inwards a few dated political references (many of which are explained inwards footnotes), equally good equally some shifts inwards fashion inwards terminology (he refers to GNP piece modern writers prefer to exercise GDP).

But some things conduct keep changed. One obvious difference is that policy makers conduct keep largely given upward talking nearly fighting against poverty. He also refers to the no-longer existent job of the gilded standard. His fantabulous summary of that issue:

The solution to the gilded measure barrier is simple: larn rid of the gilded standard.

Modern Monetary Theory inherited his sentiment that policy makers should non stymie domestic policy inwards monastic tell to save the external value of the currency. This is a departure from another schools of post-Keynesian thought, where at that topographic point remains an attachment to fixed unusual commutation regimes.

One affair that I let out that distinguishes Minsky from some to a greater extent than recent intelligence nearly inequality was his job for political feasibility. Policies are non implemented simply to brand a gesture; they conduct keep to conduct keep a reasonable run a jeopardy of coming together their stated objectives. And at that topographic point has to last some practice goodness to non-poor households from anti-poverty measures. Pure transfer payments in addition to highly redistributive taxation proved to last politically unsustainable. Transfer payment mechanisms inside the welfare state conduct keep ended upward largely disguised equally something else. For example, government pensions are non typically analysed equally if they were pay-as-you-go schemes, fifty-fifty though that is what they actually are. Since people believe these pensions are "paid for", they remain politically untouchable (which shows the political shrewdness of the politicians that created them).

In his view, workers who accept business office inwards authorities guaranteed jobs would render populace goods, which they would non practice if they simply received unconditional transfer payments. The disputation of policy makers in addition to hence in addition to straight off is to attach trivial value to such populace goods; instead the objective is to increment measured GDP. Providing populace goods, such equally rubber populace parks, raises the "quality of living" (public welfare) without pressing on resources constraints. The political job with this strategy is that rich households practice non accept reward of such populace goods, limiting the potential political coalition that volition back upward such a programme.

Concluding Remarks

This majority is less distinctive than Minsky's other works, but it provides a non-standard analysis of the developments inwards the 1960s in addition to 1970s. The fact that the majority is nonetheless highly relevant provides a cautionary tale nearly the importance of edifice coalitions to back upward reforms.

The majority is available at Amazon.com at Ending Poverty: Jobs, Not Welfare (affiliate link).

Finally, equally an administrative note, I am moving to a "summer schedule" with a target of i article per week.

(c) Brian Romanchuk 2014