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ZERO UNEMPLOYMENT
IN A PLURAL ECONOMY
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A working document of the
South African Research Chair in
Development Education
Prepared by visiting fellow Howard Richards (Chile)
With the support of professors Joanna Swanger (USA)
and Alicia Cabezudo (Argentina)
No Magic Wand
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There is no single solution. There are many
ways to arrive at zero unemployment.
We propose here a thought exercise
consisting of six complementary steps
Whose outcome would be a decent livelihood
for everyone
At the end we will briefly present two other
thought exercises regarding unemployment
The dominant paradigm
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The dominant paradigm (the neoliberalism of
the Washington consensus)
 Thinks in terms of employment with an
employer rather than in the broader category
of livelihood
 It recommends pumping money into education
and health services
 In order to add value to what the poor have to
sell in the labour market, i.e. themselves
Error of the dominant
paradigm
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It is impossible to eliminate
unemployment by education
(conceived as job training) and health
services
Because sometimes the problem is not
lack of qualified applicants
But lack of jobs
Neoliberal theory
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The dominant theory holds that
markets match employers and
employees
Hence the main problem is to produce
the qualified employees the market
wants
Keynesian theory
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Markets normally tend to a low level
equilibrium that leaves willing workers
unemployed
“Full, or even approximately full,
employment is a rare and short-lived
occurrence.” --General Theory, p. 250
Recent theory
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Recent experience confirms the
theoretical insight of Keynes that there
is a chronic weakness of effective
demand for labour
--Paul Krugman, Nobel Memorial Prize
in Economics 2008, in The Return of
Depression Economics, 2009
Consequently
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In today´s economy those who lack
education and job skills will not find
employment
…but those who have education and
job skills may and may not find
employment
Livelihood is the broader idea
We will propose six basic steps toward
livelihood for all
 Starting with maximizing traditional forms
of employment
 And ending moving beyond employment to
a broader idea of livelihood
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LIVELIHOOD need not come from
a job
It is true that everyone should contribute to
society
 But it is not true that everyone's
contribution to society (and livelihood)
must depend on finding an employer
whose ability to pay salaries ultimately
depends on sales or on taxes
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First step: PROMOTE
LIVELIHOOD
 BY
ENCOURAGING EMPLOYERS TO
CREATE JOBS
EMPLOYMENT IN THE
ENTREPRENEURIAL SECTOR
DEPENDS ON TWO FACTORS
• 1. the efficiency (“marginal efficiency") of capital
• 2. the rates of interest
• (from John Maynard Keynes, General Theory of
Employment, Interest, and Money, p. 39))
“efficiency of capital”
• A technical concept
• Which boils down, as Keynes says
• To whatever motive in fact motivates
running a business and hiring employees
to work for it
• The motive may be maximizing profit, or a
vocation to serve the public, or fascination
with technology, or even a desire to create
jobs
“efficiency of capital” again
• Often the decision to run a business is
driven by what Keynes calls “animal
spirits”
• Or love of adventure
• Keynes, Schumpeter and others find that
decisions to invest are rarely purely
rational
Treat business people as
human beings
 Not as machines programmed to
maximize profits by minimizing costs
 But as humans who are called to live in
community and in service to others
 SEEK
AND ENCOURAGE THE
IDENTIFICATION OF BUSINESS
PEOPLE WITH THE ETHICAL
VISION OF THE COMMUNITY
Remember that bulk of
employment in the entrepreneurial
sector
 is provided by small and
medium-sized businesses,
 Therefore it is key to generate
participatory processes
 through which small and
medium sized businesses
 identify with the community
 and are supported by the
community
Returning to Keynes …
• In bare theory, employment in the
entrepreneurial sector depends on two
factors
• 1. the efficiency of capital
• 2. the rates of interest
impact of a rate of interest
• If the rate of interest is high enough
• It does not pay to hire
• Because you can make more money
without hiring anybody
• Letting money gather interest
Nobody hires workers if it is safer
and more profitable to speculate
Therefore, to move toward zero
unemployment
 Put the brakes on non-productive
speculation
 Channel money toward job-creating
production
 Lower interest rates to make it harder to
speculate and easier to run a business
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Discourage capital flight
• Anchor money in a
territory and in a
community
Another problem: Inflation
It is often said, and not incorrectly
 That it is inflationary to lower interest rates
in order to boost employment
 Easy money brings higher prices
 It risks making business impossible
 By making money lose its value
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It is necessary to rethink inflation:
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Inflation is too much money chasing too few
goods
It can be stopped by taking money out of
circulation by taxation, taxing most those
who have most
And by increasing production, putting more
workers to work
PROMOTE LIVELIHOOD
• BY PROMOTING
PRODUCTION
A PRO-ACTIVE APPROACH
• Besides encouraging
business
• Take direct measures
• To support
employment and
livelihood generally
• Including production
that is not for sale, but
for barter, use, gift,
sharing etc.
• We reject the idea that the way to
stimulate job-creation is to further
lower wages that are already low
• It is necessary to create
livelihoods for people
• With more imagination and less
cruelty
For example
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Restrict competition from
imports from low-wage
countries with non-existent
labour laws
Back productive projects
with public funds on
condition that jobs are
created and good wages
paid
Plan production with
deliberate attention to jobs
as a goal
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Form productive alliances
with universities, now that
knowledge is the leading
factor in production
Measure the efficiency of
the public sector and all
sectors with social criteria,
including job creation
Work with institutional
sources of capital, such as
pension funds and the
endowments of schools,
churches and charities
Another problem: ecology
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Unfortunately
Increasing production and
consumption
Without adequate environmental
planning
Tends to destroy the biosphere
And therefore all of us
It is necessary to rethink livelihood
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Livelihood is at the junction where ecology,
culture and economics meet
Zero unemployment has to be made
compatible
With green technologies and simple living
Because that is the only way our species
can avoid destroying itself by destroying its
habitat
A healthy economy is ecological
and it creates jobs
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It creates jobs installing the
green technologies that must
replace most of the existing
technologies
It creates jobs by substituting
human labour for technologies
that rely on fossil fuels…
…and poison the environment.
SUPPORT THE
PEOPLE’S
ECONOMY
The people’s economy
• Is that economy
• Where the main resource is labour (not
capital)
• And the objective is making a living (not
profit)
• It supports the lived world of the majority
of the world´s people
• It is self-employment, whether alone or in
a cooperative group
Enterprising people
• It includes the businesses where the
workers and owners are the same people
• It includes grassroots sharing of resources
for mutual survival
• It includes independent workers, like a
plumber who owns the tools, or a taxi
driver who owns the vehicle
The people’s economy…
► …creates
livelihoods that do not exist
according to the equations of Keynes
► Because it repeals the rule that for someone
to be employed someone else must profit
► The workers who own their own tools do
not have to make profits
► They can get by with just enough to live on
and to replace tools when they wear out.
REBUILD THE
WELFARE STATE
AND THE
PLANNING STATE
IT IS FUNDAMENTAL THAT THERE
BE A STATE
THAT WORKS FOR THE WELFARE OF
ALL THE CITIZENS
….AND HAS RESOURCES
In our epoch of neoliberal globalization
The state is weak
Because it lacks resources
Because it cannot tax society’s major
wealth
For fear of capital flight and similar
reprisals
And must support itself with taxes that fall
on the poor and the middle class
Public control of natural resources
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The relatively strong states are the ones
that finance themselves with income from
natural resources
But from the people’s point of view it is
useless to have a strong state
If that state is dominated by a corrupt elite
that serves not the people but itself
therefore
To achieve zero
unemployment
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We need a government devoted to the
service of the people.
Which takes control of the incomes that
are not produced by anybody’s labour or
by anybody’s entrepreneurial skill (the
gifts of nature)
And uses them to support livelihoods for
all
We do not need
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Businesses or individuals
So powerful
That the state does not dare to tax
them at reasonable rates
RECYCLE EXCESS
PROFITS TO
FINANCE HUMAN
DEVELOPMENT
•Argentina, Chile, and
South Africa are
enormously unequal
countries.
• Source: UNDP, Human Development Report 2005.
Extreme Inequality
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Is not only unjust and inefficient
It is also dangerous
It produces economic instability
Because of the accumulated profits
that are not spent on consumption
• And have no profitable investment outlets
• And which can be taken out of the country
at any moment
An excess of money
• Extreme inequality is due to
• The limitless accumulation of the profits of
the upper class
• With a consequent instability of the system
• Due to lack of consumers who would
justify investments by buying products
• In other words due to the poverty of the
majority
• …whether or not governments care
about reducing inequality
• Or about poverty
• They always care about stabilizing the
system to keep it from collapsing
• So they seek some solution to the
problem of keeping money circulating
so the economy can keep going.
Constant economic growth as a
solution
• The classic solution of Keynes to the problem of
keeping money circulating was to promote through
public policies…
• …every year spending on investments sufficient to
compensate for insufficient spending on
consumption
• So that total spending would be enough to keep the
economy humming along and profits rolling in
• This classic solution has proven not to be reliable
The “capitalist revolution” as a
solution.
• The neoliberal solution has been to
dismantle the regulation of financial
markets.
• So that accumulated profits with no
profitable productive outlets could be
thrown into the global casino of high-flying
speculation.
• Which has led to a series of crises as
the bubbles burst.
We propose another solution
• Recycle the accumulated profits that have
no profitable investment outlets
• In order to finance
• Livelihoods directly connected to human
development
• For example in sports, in culture; in
personal attention to young children, sick
people, and old people.
What to do with the excess profits
of the upper classes?
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Is always a moral question
Whose answer
Or rather whose answers
(since there are many legitimate answers)
Determine to a great extent the happiness
or the misery of the entire population.
A moral answer to a moral question
• We propose that to some considerable
extent rents and profits be devoted to
promoting human development
• By the voluntary actions of their owners…
• ….complemented by suitable public
policies
• Tending to overcome the barriers
blocking zero unemployment.
BARRIERS BLOCKING ZERO
UNEMPLOYMENT
• Employment in the entrepreneurial sector is
limited by the barrier that there is no
employment if it does not lead to profit for the
employer.
• Livelihood in the people’s economy is limited by
the barrier that it is impossible to earn a
livelihood when there are not enough customers
willing and able to buy the product or service.
• Public employment financed by taxes cannot
in the long run serve as a guarantee of
employment for all, as the experience of
Sweden shows.
Sports partly overcome the
barriers.
• “Sports give
dignity to the
person rejected
by the labour
market.”
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--Rolando dal Lago
Sports Director
City of Rosario, Argentina
To memorize
This will be on the test
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TO ACHIEVE SOCIAL
INTEGRATION WITH DIGNITY
FOR ALL, SOCIETY MUST
SUPPORT THOSE ACTIVITIES
THAT HAVE HUMAN VALUE
EVEN IF THEY DO NOT
PRODUCE ANY MERCHANDISE
THAT CAN BE SOLD.
DIVERSITY
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Support for sports and culture, for lifelong education, and for the care of the
weak….
… comes from many diverse sources,
from civil society, from families and
traditional communities and from
governments at the municipal, regional,
and national levels.
This diversity is desirable.
The ethical principle
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The ethical principle is an ancient idea
found in ubuntu, in the world’s main
religions, and in indigenous knowledge
systems around the world. As
articulated by Mahatma Gandhi the
principle is that those of us who have
more than we need are trustees of our
surplus for the benefit of those who have
less than they need.
Recycle the Surplus
• According to the ethical principle of
solidarity
• Which is put into practice in diverse ways
in diverse traditions
• Thus we overcome the instability of a
system in which excess profits accumulate
• And we take another step toward zero
unemployment
BUILD SOLIDARITY
IN THE
NEIGHBOURHOODS
“Our aim is that in every barrio in
Argentina the people will be
assured at the neighbourhood
level of adequate nutrition,
housing, and primary health
care.”
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--Enrique Martínez
Director, INTI (National Institute of Industrial
Technology) Argentina
REVIEW: THE BARRIERS
 Employment in the entrepreneurial sector
runs up against the necessity of profit.
 The people’s economy is limited by the
necessity of having markets for its products.
 The public sector normally has insufficient
resources to satisfy social needs, even
urgent ones.
 The voluntary sector supports itself to a
certain extent with hybrid resources from
diverse sources, but in the last analysis it
requires grant money from public or private
sources, and there is never enough of it.
SOLIDARITY AT THE
NEIGHBOURHOOD LEVEL
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Formerly clans and other traditional
communities maintained networks of solidarity
through extended family ties.
Their continued existence today is generally
underestimated and underappreciated.
To build community in today’s fragmented world
many have concluded that a small territorial unit,
a neighbourhood, is a promising space for
restoration.
The New Extended Family
 The neighbourhood being a small
territory has the advantage that
organizers can walk the streets
 And check every house,
apartment, or shack
 To be sure nobody is abandoned.
Those who are still unemployed after
steps I through V
Are not alone because they can fall
back on friends, family, and neighbours
And on NGOs and government
agencies that back up the efforts of the
neighbours to serve and take care of
each other
Decent work …
True grassroots solidarity is not like
getting a welfare check and doing
nothing in return
 Every person has decent work to do
 Doing something to serve others
and/or to keep up the neighbourhood
FIRST CONCLUSION
► ZERO
UNEMPLOYMENT CAN BE IMAGINED AS
THE SUM OF THE EFFORTS OF DIVERSE ACTORS,
INCLUDING:
► ENTREPRENEURS
► AN
ACTIVIST STATE
► PUBLIC
POLICIES
A second thought exercise
regarding unemployment
• A second way (among infinite possible
ways) to think of ending unemployment
• Is to consider Mahatma Gandhi’s
Constructive Programme for the villages of
India
• Gandhi said there should be no idle hands
in the villages
• Anyone who is idle should start working
immediately
For Gandhi unemployment in
principle disappears
• Because we repeal the rule that people
only work when they are paid
• Simultaneously we repeal the rule that to
get food you need money to pay for it
• Both rules are replaced by the restoration
of the Hindu concept of dharma, i.e. duty
• (Similarly, he required his middle class
followers to spin yarn without pay)
A Third Thought Exercise
• Think of the 70% of Africans living in rural areas and
engaged in various modes of self employment
• They use a different metaphysics of economics, i.e.
different mental frameworks socially constructing
WHAT IS and WHAT SHOULD BE
• . Their paradigms for living cannot be reduced to
POVERTY; they are not UNEMPLOYMENT
• They are interlocking systems of social and
knowledge capital
• Capable of promoting and sustaining cohesion,
peace human development, and LIVELIHOOD for all.
A fourth thought exercise
• Consider that in most of the cultures
humans have invented
• In the 200,000 years since homo sapiens
sapiens first appeared
• Unemployment has not been an intelligible
concept
• The Swahili language, for example, had no
word for it prior to European contact
The modern world-system
• The expansion of the European worldsystem
• To become the modern world-system
• Can be thought of as creating
• the historical conditions of the
possibility of unemployment
SECOND CONCLUSION
“OUR GREATEST POLITICAL PROBLEM
IS LACK OF IMAGINATION.”
--MICHEL FOUCAULT