A Leftist Critique of the Principles of Identity, Diversity, and Multiculturalism by Richard Anderson-Connolly

Author:Richard Anderson-Connolly
Language: eng
Format: epub
ISBN: 9781498590686
Publisher: LEXINGTON BOOKS

(3) Employers

In contrast to the mainstream (neoclassical) model of economics,3 which asserts that the pricing mechanism should produce full employment and thereby offers very little useful advice when we actually encounter unemployment in the real world, the Keynesian approach emphasizes the role of aggregate demand—the combined spending on commodities by consumers, businesses, and the government—on the level of economic activity.4 The Keynesian approach predicts that the laissez-faire economy will tend to have a level of aggregate demand insufficient to produce full employment. Fortunately, there is a solution: the state can inject more demand into the economy via deficit spending. The added dollars recirculate in the private sector, a phenomenon known as the multiplier effect. In addition to deficit spending, known as fiscal policy, the state can use monetary policy as well. To expand the economy, the Federal Reserve Bank will lower the interest rate to encourage borrowing, and hence spending and demand.

Arrow #3 in figure 3.2 should be interpreted as depicting the Keynesian position that the unemployment rate largely depends on public policy; a state that wants to reduce unemployment has the power to do so. Such public spending helped to move the economy out of the Great Depression and has been used in every subsequent economic downturn. It was one of the great failures of the Obama Administration that it used these tools too cautiously, thus prolonging the human suffering of the financial crisis and Great Recession of 2008. In this regard Obama is no different from most of his neoliberal predecessors. While Keynesian tools have been used, they have been underutilized, as evidenced by the nearly permanent presence of unemployment, even though this violates the Full Employment Act of 1978.

In fact, the government has often used contractionary Keynesian policies. To weaken the economy, the government could reduce its deficit but, because this can be politically challenging, more commonly we see an increase in the interest rate by the Fed, an institution run by bankers and all but immune to democratic regulation. Either way, we might wonder why the state wants to generate unemployment. The neoliberal state, certainly the Federal Reserve, has the power and incentive to act on behalf of the capitalist class to weaken the bargaining position of workers in order to keep wages down. Although such concerns about the strength of the working class were temporarily dampened in the aftermath of the economic crisis of 2008 in more “normal” times the Federal Reserve typically steps in early to prevent the economy from “overheating,” a favored term for low unemployment. While the problem will be identified as “potential inflationary pressures” in reality the threat will take the form of a working class with sufficient power to cut into profits. The bankers who operate the Fed will not tolerate such market “instability” and will wield the monetary power given to them by the state to promote their interests.

A leftist state, on the other hand, would use those same tools to maintain full employment. The economy is not a car and euphemisms like “overheating” are to be rejected as neoliberal propaganda.

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