Fadhel Kaboub

Employment Guarantee Programs: A Survey of Theories and Policy Experiences

This working paper provides a survey of the theoretical underpinnings for the various employment guarantee schemes, and discusses full employment policy experiences in the United States, Sweden, India, Argentina, and France. The theoretical and policy developments are delineated in a historical context. The paper concludes by identifying some questions that still need to be addressed in the context of the global political economy.

The Low Cost of Full Employment in the United States

The US Census Bureau reports that 46.2 million people, that is about one in seven Americans (including 16.4 million children), lived below the official poverty level of

Elements of a Radical Counter-movement to Neoliberalism: Employment-led Development

22,000 for a family of four in 2010. The 2010 official poverty rate of 15.1 percent was the highest since 1993. According to the 2010 data, 8.9 million people fell below the poverty line in the United States since the beginning of the Great Recession in 2007. Between 2007 and 2010, the poverty rate for non-Hispanic Whites increased from 8.2 percent to 9.9 percent, and for Asians the poverty rate went from 10.2 percent to 12.1 percent. Blacks and Hispanics have experienced the largest percentage point increases from 24.5 percent to 27.4 percent and from 21.5 percent to 26.6 percent respectively. Economists have officially declared the recession over in June 2009 despite the major woes that continue to drain the US and the global economy. The economy has registered nearly 15 million foreclosure filings since 2007. The unemployment rate continues to hover around 9 percent and other labor market indicators continue to alarm the most optimistic observers, despite quarterly GDP growth averaging 3.1 percent in 2010 and 1.5 percent in 2011.

From Neoliberalism to Social Justice

After highlighting the failure of mainstream economic theory in dealing with the rising global inequality and economic struggles brought about by neoliberal economic policies, the paper presents the outline of an alternative policy proposal to create full employment and price stability, and to restore financial sovereignty to developing countries. Under the Employer of Last Resort (ELR) program, the government guarantees employment to all through a decentralized community-based job creation policy. Projects are selected by local community groups based on community needs and the availability of skills in the unemployment pool. Funding is provided by a central/federal fiscal authority and requires policy coordination with the central bank.

The Fiscal Cliff Mythology and the Full Employment Alternative

The educated unemployed youth of Tunisia have played a crucial role in the 2010 uprisings that have sparked revolutions across the entire Arab world (and beyond). It has been argued that the recent economic situation in Tunisia is the culmination of three decades of neoliberal economic policies that have contributed to the rise in income inequality, the lack of upward mobility for educated youth, and the removal of social safety nets for the working class. This paper argues that the economic success of post-Ben Ali Tunisia must do away with neoliberal economic policies and focus instead on direct job creation through public sector spending. A six-year full employment program is proposed for Tunisia in the Post Keynesian Institutionalist tradition of Hyman Minsky. The main purpose of this paper is to address the technical question of financial affordability of direct job creation, rather than focusing on the logistical aspects of the program. The paper demonstates that this program can create full employment, contribute an additional 4.8 percentage points to GDP growth, and cost 3.36 percent of GDP. JEL Codes: B5, E12, E24, F41, 023, O38, O47, O53

ELR-Led Economic Development: A Plan for Tunisia

This paper critiques the fiscal cliff mythology and the neoliberal push for economic austerity policies and sequestration of government programs. The purpose of the paper is to shift the debate to a social justice alternative that can sustain and enhance the social safety nets by implementing a full employment program that is both financially affordable and economically productive. First, the paper critically assesses the laissez-faire approach to job creation and lays out the mechanics of the job guarantee (JG) program as an alternative to the neoliberal model. Next, the paper critiques the deficit hawks’ and deficit doves’ “fiscal cliff” debate and demonstrates how the JG program can be financed according to modern money theory (MMT). Finally, the paper presents the cost estimation of the JG program for the United States to demonstrate its financial affordability and its productive capabilities. JEL Classification: B5, E5, E12, E24, J2, J3, H3, H6, O51

Financial Sovereignty and the Possibility of Full Employment in Saudi Arabia

This paper establishes the financial feasibility of an employer of last resort (ELR) program in a small developing country like Tunisia, and argues that an ELR-led economic development policy is vastly superior to the traditional import substitution industrialization (ISI), export-led, and FDI-led development models, all of which Tunisia has adopted without much success in reducing unemployment. Despite outperforming its peers in terms of macroeconomic stability, Tunisias official unemployment rate still hovers around 15 percent, with two-thirds of first-time job seekers having university degrees. The paper demonstrates that a well-targeted ELR program can be gradually introduced over a six-year period to remedy this problem by reclaiming sovereignty over the countrys domestic monetary and fiscal policies under a floating exchange rate regime. The estimated ELR net wage bill would be around 2.7 percent of GDP; however, spending by ELR workers would offset program costs, and the net effect on GDP would be an increase of about 3.6 percent. The paper concludes by proposing a set of complementary policy reforms that must accompany an ELR program to ensure long-term growth sustainability along with full employment and price stability.

Socialism after Hayek: A Post Keynesian Contribution to Burczak's Theory of Social Justice

This chapter presents estimates for the economic cost of unemployment and the financial cost of a Job Guarantee program in Saudi Arabia. The analysis demonstrates that while the Job Guarantee option is a cheaper and far more effective choice, one has to carefully address the institutional features of the Saudi economy, workforce readiness, and labor market regulations. The paper also presents a set of financing mechanisms ranging from a full-scale MMT-style financing to more hybrid versions of private–public partnerships, social venture partnerships, and social impact bonds. The paper will close with a set of strategic industries that should be prioritized in the process of diversifying the structure of the Saudi economy and ensuring not only full employment and price stability, but also sustainable prosperity.

Economic Development and the Fabrication of the Middle East as a Eurocentric Project

Abstract The paper presents a brief overview of the basic premise of the Burczaks Socialism after Hayek, and shows that Burczaks “applied epistemological postmodernism” presents a unique unifying ground for heterodox economics, breaking down traditional barriers between right and left. This new approach allows us to revisit the Marx-Keynes-Hayek debates in a more constructive way for a unified theory of social justice. However, we argue that Burczaks system does not automatically guarantee full employment, so it cannot be considered an ideal theory of social justice. A Post Keynesian contribution is presented in the form of the Employer of Last Resort (ELR) program which we argue is compatible and complementary to Burczaks theory of social justice. Finally, we argue that an adequate system design of the magnitude proposed here must be infomed by the principles of institutional adjustment as outlined by J. Fagg Foster.

Inequality-Led Financial Instability: A Minskian Structural Analysis of the Subprime Crisis

Economists deserve a fair share of the blame for their contribution to Eurocentrism. Joseph Schumpeter’s classic History of Economic Analysis (1954) taught generations of economists that there was a “Great Gap” in the development of economic thought between ancient Greece and the European Renaissance. During the “Dark Ages,” he argued, there was nothing of significant intellectual contribution worth studying. Schumpeter and his followers have completely ignored the contributions made to economics by Al-Ghazali, Ibn Khaldun, Ibn Taimiyah, Ibn Qayyim, Abu Yousuf, and Ibn Sina, among many others. Several decades later, the so-called Middle East and North Africa (MENA) region is still struggling with the socioeconomic consequences of Eurocentrism.