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1AC- Poverty
Contention 1- Poverty
ELR makes poverty obsolete
Randall Wray, 7-7– Senior Scholar and professor of economics and director of the Center for Full Employment and Price Stability
at the University of Missouri Economic Perspectives from Kansas City, “The Carnage Continues: Time to Ramp Up the Stimulus”
July 7, 2009, http://neweconomicperspectives.blogspot.com/2009/07/carnage-continues-time-to-ramp-up.html)
Jobs to reduce poverty: Last week Pavlina Tcherneva provided an excellent argument for direct job creation by the federal
government. We have already lost 6 million jobs, and Tcherneva notes that unemployed plus discouraged workers total
about twice that number. However, a plausible case can be made that we are short more than 20 million jobs—as Marc
Andre Pigeon and I demonstrated a decade ago. Further, as Stephanie Kelton and I showed, a substantial amount of
America's poverty problem is really a jobless problem. We found that in 2002 the poverty rate of families with no member
working reached nearly 26%; on the other hand, if the family had at least one member working full-time, the poverty rate
fell to just 3.5%. Our conclusions were similar to those offered by Hyman Minsky: "The achievement and sustaining of
tight full employment could do almost all of the job of eliminating poverty" (1968, p. 329); "a large portion of those
living in poverty and an even larger portion of those living close to poverty do so because of the meager income they
receive from work" (p. 328). Minsky believed that "a suggestion of real merit is that the government become an employer
of last resort" (1968, p. 338). Thus, not only will direct job creation reverse the trend toward ever-higher unemployment
rates, but it will also go a long way toward filling the growing holes in the social safety net.
We should act to prevent poverty
Udayakumar, director of the South Asian Community Center for Education and Research, 95-(S.P
Udayakumar, “The Futures of the Poor,” Futures Vol. 27, no. 3 pp 339-351, 1995)
Although race, ethnicity, gender, generation and political powerlessness all contribute to poverty, the ‘economic worth’
factor forms the basis in ‘poorcide,’ the genocide of the poor. It is an economic group (or class) discriminated against in
poorcide. A particular group of people is massacred in genocide, but poverty kills indiscriminately, irrespective of the group.
Genocide just kills you, but poverty tortures and condemns you to a slow and painful death. Poverty degrades human beings,
negates human dignity and wastes human resources, genocide prompts physical elimination, but poverty causes physical pain,
mental agony, moral degradation and spiritual dissipation. Extending the analysis of physical violence and structural violence
to genocide, we can distinguish between direct and indirect or physical and structural, genocide. Genocide means not just
massive killing (which we can call direct or physical genocide) but also includes calculated attacks on and constant efforts at
undermining the basic human dignity and life-support systems of a particular group of people (which may be described as the
indirect or structural genocide). Poorcide may not be actual physical elimination of the poor in a massive scale, but it’s a slowpace silent holocaust.
Genocide takes place in pockets of human polity, but poverty afflicts humanity all over the world. Unlike genocide, poverty is
widespread, systematically rooted and popularly accepted. However fickle and fragile, the victims, or potential victims, of
genocide may be able to take some precautions. But the victims of poverty can only watch themselves being taken for granted,
or even worse, being taken advantage of by the privileged. In a genocidal act, only those with prejudices and biases
participate, but we are all complicit in the poverty crime. Leading a ‘rich lifestyle; or letting the problem persist is the definite
complicity in the crime of poorcide
1AC- Economy Advantage
Contention 2- Economy
A. Short Term Collapse
The economy will not recover without a trickle up policy- unemployment, tax appeals, forclosures
Randall Wray, 7-7– Senior Scholar and professor of economics and director of the Center for Full Employment and Price Stability
at the University of Missouri Economic Perspectives from Kansas City, “The Carnage Continues: Time to Ramp Up the Stimulus”
July 7, 2009, http://neweconomicperspectives.blogspot.com/2009/07/carnage-continues-time-to-ramp-up.html)
Some like to see green shoots everywhere, but that is becoming an increasingly audacious hope. Here are four related
stories from the July 5th edition of the New York Times:
Tax Bill Appeals Take Rising Toll on Governments By Jack Healy
Homeowners across the country are challenging their property tax bills in droves as the value of their homes drop,
threatening local governments with another big drain on their budgets…. The tax appeals and reassessments present a new
budget nightmare for governments. In a survey conducted by the National Association of Counties, 76 percent of large
counties said that falling property tax revenue was significantly affecting their budgets…. Officials in some states say their
property tax revenue is falling for the first time since World War II.
Safety Net Is Fraying for the Very Poor By Erik Eckholm
Government "safety net" programs like Social Security and food stamps have pulled growing numbers of Americans out of
poverty since the mid-1990s. But even before the current recession, these programs were providing less help to the most
desperately poor, mainly nonworking families with children… The recession is expected to raise poverty rates, economists
agree, although the impact is being softened by the federal stimulus package adopted this year…. "It's a good thing we have
the stimulus package," Mr. {Arloc} Sherman said. "But what happens to the most vulnerable families in two years, when
most of the provisions expire?"
Employment Report Sours the Market By Jeff Sommer
A grim report on unemployment on Thursday let the air out of the stock market…. In a monthly report, the Labor
Department said that 467,000 jobs were lost in June. In surveys, most economists expected 100,000 fewer jobs lost. The
unemployment rate edged up to 9.5 percent from 9.4 percent the previous month, to its highest level in 26 years, and
virtually all analysts expect joblessness to mount in the coming months.
So Many Foreclosures, So Little Logic By Gretchen Morgenson
LAST week, the stock market tumbled on news that housing foreclosures and delinquencies rose again in the first quarter.
The Office of the Comptroller of the Currency said that among the 34 million loans it tracks, foreclosures in progress rose
22 percent, to 844,389. That figure was 73 percent higher than in the same period last year.... But the most fascinating, and
frightening, figures in the data detail how much money is lost when foreclosed homes are sold. In June, the data show
almost 32,000 liquidation sales; the average loss on those was 64.7 percent of the original loan balance.
What do these reports have in common? They provide powerful evidence that the federal government is not doing enough
to help the "real" economy. As Sam Gompers famously responded when asked what workers wanted--"More!"—our
nation's state and local governments, households, workers, and poor need more help, now. We have tried the
Reagan/Paulson/Rubin/Geithner "trickle down" approach of targeting relief to Wall Street, but the only thing trickling
down is misery. The only way to stop the downward spiral is to substitute trickle-up policy—and even if nothing tricklesup, at least we will have helped those most in need.
1AC- Economy Advantage
Unemployment won’t decrease even in economic recovery absent the aff
Sudeep Reddy, 6-8 - economics reporter for the Wall Street Journal. (Wall Street Journal, “Another Jobless Recovery”
http://blogs.wsj.com/economics/2009/06/08/another-jobless-recovery/, June 8, 2009)
What will follow the great recession of 2007-2009? Economists at the Federal Reserve Bank of San Francisco point to
a path similar to the early 1990s as a “plausible scenario” for this cycle’s recovery. In research released
today, they cite two key reasons “for even greater pessimism” than the consensus forecast:
1) Relatively low level of temporary layoffs. Fewer workers today are waiting to be called back to jobs when the
economy improves than in the early 1980s, they write. From July 1981 to November 1982, the share of unemployed
workers on temporary layoffs increased to 20.7% from 16.1%. From December 2007 to April 2009, however, the share
of unemployed workers on temporary layoffs decreased to 11.9% from 12.8%.
2) High level of involuntary part-time workers. The number of workers employed part-time against their
wishes is at historical highs. About 5.8% of the labor force reported working part-time for economic reasons in
April 2009, up from 3% in December 2007. More than half of such workers faced reductions of five hours or more per
week.
The economists created an alternative measure of labor underutilization based on the number of involuntary part-time
workers. “This projection indicates that the level of labor market slack would be higher by the end of
2009 than experienced at any other time in the post-World War II period, implying a longer and slower
recovery path for the unemployment rate,” they write. “This suggests that, more than in previous recessions,
when the economy rebounds, employers will tap into their existing workforces rather than hire new
workers. This could substantially slow the recovery of the outflow rate and put upward pressure on
future unemployment rates.”
And Failure to address unemployment ensures we fall back into recession
Douglas A. McIntyre 6 – 29 – 09. Douglas A. McIntyre is a partner at 24/7 Wall St., LLC. He has previously been the Editor-inChief and Publisher of Financial World Magazine. He has been CEO of FutureSource, LLC and On2 Technologies, Inc. He has served
on the board of directors of Vicinity Corporation, The Street.com, and Edgar Online. McIntyre is a magna cum laude graduate of
Harvard. [“With Unemployment Moving To 9.6%, Economic Impact Of Jobs Is Just Beginning”]
http://247wallst.com/2009/06/29/with-unemployment-moving-to-9-6-economic-impact-of-jobs-is-justbeginning/
Unemployment is called a “lagging” indicator by most economists. The jobless rate recovery often runs a quarter or two behind
an upturn in GDP. A prolonged period of unemployment higher than 10% may break that mold. A large enough number
of people without work could hamper consumer spending enough that some parts of the economy could move back into a
recession next year. The ranks of the unemployed are rarely good credit risks. This poses important problems for banks which
hope to see the quality of their loan portfolios begin to rebound. There is a point at which unemployment becomes both a lagging
and leading economic indicator. It shows the end of one recession and foretells the beginning of another if double-digit
joblessness persists for any period beyond next year. The modern economy has not experienced this but once in the last several
decades. That was in the early 1980s. The banking system was not as riddled with problems among its largest firms then and the
auto industry was not in need of nearly complete nationalization.
1AC- Economy Advantage
Low consumer confidence and unemployment risk will prevent recovery
Neil Irwin and Ylan Q. Mui, 8-1 - Washington Post Staff Writers (“Economy Turning Out of Steep Dive: Slow to Spend Again,
Consumers Could Be Holding Up Recovery” August 1, 2009)
Analysts are also expecting a boost to GDP in the second half of the year from the end of the housing bust. Residential
investment has fallen for 14 consecutive quarters, including at a 29 percent rate in the second quarter. There are some big ifs
attached to that forecast, however, with the biggest being the fragile American consumer. For a sustained recovery to kick in,
expanding production by businesses will need to result in a more steady job market and greater consumer confidence, even
optimists acknowledge. So far, that doesn't seem to be happening. The Conference Board's index of consumer confidence fell in
July for the second month after rising sharply in the spring, with the slumping job market clouding consumers' assessments of
their financial situations. Even those who have higher incomes seem to be saving rather than spending; savings rose to 5.2
percent of disposable income in the second quarter, up from 4 percent in the first quarter. In particular, people are avoiding bigticket items. Sales of durable goods, those expected to last more than three years, were down at a 7.1 percent rate, compared with
a 2.5 percent drop in spending on nondurable goods. That is visible at Suraphel Worku's watch and jewelry shop in the Fashion
Centre mall in Pentagon City, where sales of new items have plummeted. "People, instead of buying stuff, they choose to fix it
instead," Worku said, leaning over a case of gold and diamond jewelry discounted 40 percent. He doesn't blame them. He said he
has also dramatically cut his personal spending. A movie fan, he stays home from the theater and reads books instead. "More
consumers are pessimistic about their income expectations, which does not bode well for spending in the months ahead," said
Lynn Franco, director of the Conference Board's Consumer Research Center. Federal Reserve Chairman Ben S. Bernanke has
identified the troubled American household as one of the risks to a recovery. "The possibility that the recent stabilization in
household spending will prove transient is an important downside risk to the outlook," Bernanke told Congress in July.
Stimulus is not enough- full employment solves immediately through a bottom-up multiplier effect
Pavlina Tcherneva, 9- Ph.D. is Assistant Professor of Economics at Franklin and Marshall College, Research Scholar at The Levy
Economics Institute, and Senior Research Associate at the Center for Full Employment and Price Stability. “Obama’s job creation
promise: a Modest Proposal to Guarantee That He Meets and Exceeds Expectations” http://www.levy.org/pubs/pn_09_01.pdf)
Nevertheless, Obama’s plan does indeed set its sights too low; not because he is asking for too little money, but because
his job creation goals are extremely modest. Are 3.7million jobs by the end of 2010 all we can hope for? According to the
Romer- Bernstein study of Obama’s plan (2009), the unemployment rate in 2014 is estimated to be 5 percent even with a
massive fiscal stimulus and a full-fledged recovery—far higher than the lows of the Clinton years or those during the 1950s
and 1960s. And we will still have to wrestle with an unemployment rate well above 7 percent over the next two years. As
Krugman himself has questioned in the New York Times (2009b), is this really an audacious plan?
While Krugman and Reich are asking the right questions, they have not yet offered a satisfactory answer. The job guarantee
amendment proposed here can solve the concerns outlined above, while bringing far more bang for the buck than the
current proposal.
Reich (2009a) has called on the government to serve as the spender of last resort, when what is really needed is the
government to serve as the employer of last resort (ELR). Only a job guarantee or an ELR program can reduce the
unemployment rate drastically and immediately. Such policies tend to have much larger multiplier effects than pump
priming and represent a genuine bottom-up approach to the recovery—one that offers employment opportunities to all,
including minorities and women, irrespective of skill, educational attainment, or past work experience. The job guarantee
must therefore be coupled with a program for enhancing human capital. This way it will undertake the necessary strategic
investments outlined by President Obama while providing for the wholesale training, education, and on-the-job instruction
of millions of people.
According to the Bureau of Labor Statistics (2009), there were 11.1 million individuals out of work in December 2008. By
all indications, the private sector will continue to streamline its operations and shed jobs in the months to come, irrespective
of any immediate stimulus. Thus, a job guarantee is absolutely essential. Such a direct employment approach will allow
President Obama to fulfill his promise of three million jobs within his first few months in office. There are plenty of
shovelready jobs that can be launched immediately. (Can we not put three million people to work repairing our roads,
bridges, schools, and hospitals right away?) Additionally, the openended employment guarantee could double, triple, or
even quadruple the number of jobs created over the next several years. This will bring the economy close to full
employment and allow the president to concentrate on the strategic long-term goals of the plan. And all this can be done
within the limits of the budget currently under discussion.
1AC- Economy Advantage
B. Long term Stability
Recessions will become greater and more frequent absent reform
Randall Wray, 8– Senior Scholar and professor of economics and director of the Center for Full Employment and Price Stability at
the University of Missouri (The Levy Economics Institute Of Bard College “Securitization” http://www.levy.org/pubs/pn_08_2.pdf,
2008)
Today, we can surmise that the financial innovations of the past decade greatly expanded the availability of credit, which
then pushed up asset prices. That, in turn, encouraged not only further innovation to take advantage of profit opportunities,
but also ever more debt and greater leveraging. The upbeat analyses conducted throughout the boom relied on modern
orthodox finance theory, incorporated into complex models that appeared to show risk was being systematically reduced
and shifted to those best able to bear it. With the benefit of hindsight, we can now say that risks were neither shifted nor
reduced. The financial crisis still appears to be spreading from one market to another, and from one country to another. We
might justifiably wonder whether “it” (another debt deflation) could happen again. I expect that the combination of Big
Government and Big Bank, plus the remaining safeguards built into the system by the New Deal, will prove once again to
be sufficient to prevent a recurrence of a great depression. However, the bigger question is whether analysts and
policymakers will learn from the mistakes of the past couple of decades and begin to formulate policy that will constrain
the natural thrust toward fragility that makes these crises occur with greater frequency and virulence.
1AC- Economy Advantage
We access the only internal link to economic growth- ELR uses the correct economic model
Randall Wray, 8– Senior Scholar and professor of economics and director of the Center for Full Employment and Price Stability at
the University of Missouri (The Levy Economics Institute of Bard College “Financial Markets Meltdown What Can We Learn from
Minsky?” http://www.levy.org/pubs/ppb_94.pdf, 2008)
Minsky argued that the Great Depression represented a failure of the small government, laissez-faire economic model,
while the New Deal promoted a highly successful Big Government/Big Bank model for financial capitalism. The current
crisis just as convincingly represents a failure of the Big Government/Neoconservative (or, outside the United States, what
is called “neoliberal”) model that promotes deregulation, reduced supervision and oversight, privatization, and
consolidation of market power in the hands of money manager capitalists. In the United States, there has been a long-run
trend that favors relatively unregulated “markets” over regulated banks that has also played into the hands of
neoconservatives. The current financial crisis is a prime example of the damage that can be done by what has been called
the “post-regulatory environment” (Thomas 2008).
The New Deal reforms transformed housing finance into a very safe, protected business based on (mostly) small, local
financial institutions that knew their markets and their borrowers. Home ownership was promoted through long-term, fixedrate, self-amortizing mortgages. Communities benefited, and households built wealth that provided a path toward
middleclass lifestyles (including college education for baby boomers and secure retirement for their parents). This required
oversight by regulators, deposit insurance courtesy of the FDIC and the Federal Savings and Loan Insurance Corporation,
and a commitment to relatively stable interest rates. Other policies identified byMinsky as “paternalistic capitalism” also
helped to build a robust economy: cooperation with unions to ensure rising wages and thus growing consumer demand; a
social safety net that also encouraged consumption; student loans that enhanced earnings capacity; and a sense of shared
responsibility to take care of the young, the old, and persons with disabilities. Together, these policies reduced insecurity,
enhanced trust, and promoted economic stability. Over time, however, the economy gradually evolved toward fragility. The
Cold War favored investment in the leading industries, where wages were already high. Inequality grew as other sectors
and workers with less education fell behind. Social programs were cut, and trickle-down economics favored the growth of
inequality. Policy increasingly turned to promotion of investment in particular, and business in general, to fuel growth—
rather than relying on growing consumption fueled by growing household incomes. Because a large portion of investment
in our type of economy must be externally financed, this policy mix increased the importance of finance. At the same time,
the absence of a depression in the postwar period allowed financial wealth to accumulate, albeit increasingly in the hands of
an elite. A formally “anti-government” bias led to the erosion of many of the New Deal reforms. In practice, however, the
rising conservative ideology never really embraced a return to the prewar small-government form of capitalism, but rather
merely substituted a meaner “big government” for the paternalistic government of the early postwar period. Hence, the Big
Government/Neocon model replaced the New Deal reforms with self-supervision of markets, with greater reliance on
“personal responsibility” as safety nets were shredded, and with monetary and fiscal policy that is biased against
maintenance of full employment and adequate growth to generate rising living standards for most Americans. In short, the
government was neither smaller nor less interventionist. However, its constituency had shifted away from America’s
middle class and toward Wall Street’s money managers.27
The model is in trouble—and not just with respect to the mortgage mess, as the United States faces record inequality and
destruction of the middle class, a health care crisis, an incarceration disaster, and other problems beyond the scope of this
analysis (see Wray 2000, 2005).We must return to a more sensible model, with enhanced oversight of financial institutions
and with a housing finance structure that promotes stability rather than speculation. We need policy that promotes rising
wages for the bottom half (or even three-quarters) of workers so that borrowing is less necessary to maintain middle-class
living standards, and policy that promotes employment, rather than transfer payments—or worse, incarceration—for those
left behind. Minsky always advocated job creation programs so that government would act as an employer of last resort—
the only way to ensure that the supply of jobs would be adequate to maintain continuous full employment. Not only would
this eliminate involuntary unemployment, but he also showed that it could be used to reduce inequality and poverty, while
also ensuring that the government’s budget would swing countercyclically to offset recessionary forces as well as
inflationary forces in a boom.
1AC- Economy Advantage
ERL acts as a counter-cyclical economic stabilizer- stabilizes currency, wage anchor prevents inflation,
and ultimately decreases government spending
Randall Wray, 7 – Senior Scholar and professor of economics and director of the Center for Full Employment and Price Stability at
the University of Missouri (Society for International Development “Employer of Last Resort: Strategies for combating poverty” 2007,
http://www.palgrave-journals.com/development/journal/v50/n2/pdf/1100365a.pdf)
Critics argue that a job guarantee would be inflationary, using some version of a NAIRU-Phillips Curve approach
according to which lower unemployment necessarily means higher inflation (Sawyer, 2003). Some argue that ELR reduces
work incentives, raising private sector costs since workers would no longer fear job loss. Workers would be emboldened to
ask for greater wage increases. Some argue a universal programme would be so big that itwould be impossible to manage
it; some fear corruption; others argue that it would be impossible to find useful things for ELR workers to do. It is said to be
too expensive, causing the budget deficit to grow on an unsustainable path (Aspromourgos, 2000; King, 2001). Finally,
some argue that it will cause currency depreciation by worsening the trade balance (see Mitchell andWray (2005) for details
on critiques). A properly designed ELR programme would mitigate or eliminate these problems. Supporters emphasize that
the uniform ELR wage actually promotes domestic economic and price stability. ELR will act as an automatic stabilizer
with employment in the programme growing in recession and shrinking in expansion, counteracting private sector
fluctuations. The government budget will become more counter-cyclical because its ELR spending will likewise grow in
recession and fall in expansion. Furthermore, the uniform basic wage will reduce both inflationary pressure in a boom and
deflationary pressure in a bust. In a boom, private employers can recruit from the ELR ‘reserve army’ of the employed,
dampening wage pressures as private employment grows. In recession, workers down-sized by private employers work at
the ELR wage, putting a floor to how low wages and income fall. Further, to the degree that wages are stabilized by ELR,
production costs will be more stable. ELR will directly stabilize income and consumption of ELR workers, and if other
wages and incomes become more stable, that will further enhance macroeconomic stability.
Critics argue that if jobs are created that provide income to the poor, consumption will rise, including purchases of imports.
This will worsen the trade deficit, depreciate the currency, and possibly lead to accelerating inflation through exchange rate
‘pass through’ (import prices rise as the currency depreciates, adding to inflation of prices of the domestic consumer
basket). In other words, unemployment and poverty are the social cost of maintaining low inflation and the value of the
currency. Two kinds of responses can be provided. The first is ethical. Should a nation attempt to maintain macroeconomic
stability by keeping a portion of its population sufficiently poor that it cannot afford to consume? Are there other tools
available to achieve these ends? If not, should policymakers accept some inflation and currency depreciation in order to
eliminate unemployment and poverty? There are strong ethical arguments against using poverty and unemployment as the
primary policy tools to achieve price and exchange rate stability. And even if currency stability is highly desired, it is
doubtful that a case can be made for its status as a human right. However, we can challenge the notion that ELR actually
threatens price and currency stability. To be clear, I do not argue that EL Rwould have no effects on a particular index of
prices (such as the CPI) or on the exchange rate. I argue instead that ELR provides an anchor for the domestic and foreign
value of the currency, hence, actually increases macroeconomic stability. ELR will not cause domestic inflation, although it
can lead to a one-time wage and price increase, if the ELR wage is initially set above the prevailing minimum market wage.
Similarly, if ELR does increase income when implemented, this can lead to a one-off increase of imports. Even if the
exchange rate does decline in response (and even if there is some pass-through inflation), the stable ELR wage will prevent
a wage-price spiral by acting as a wage anchor. If a nation is not prepared to allow its trade deficit to rise with higher
employment and income in the ELR programme, it still has all policy tools available at its disposal with the lone exception
of forcing the poor and unemployed to bear the entire burden: trade policy, import substitution, luxury taxes, capital
controls, interest rate policy, turnover taxes, and so on. Finally, some critics worry that an ELR programme will cause a
growing budget deficit. However, ELR spending will fluctuate with the cycle, automatically shrinking when the private
sector grows. In recession, workers shed by the private sector find ELR jobs, increasing government spending and thereby
stimulating the private sector so that it will begin to hire out of the ELR pool. In any case, estimates by Harvey (1989)
andWray (1998) put net spending by the government on a universal ELR programme at well under 1 per cent of GDP for
the US. Indeed, on plausible estimates of the social costs of maintaining a large unemployed population (unemployment
compensation, welfare payments, costs of crime, and so on), a universal employment programme will almost certainly
reduce total government spending. Argentina’s Jefes programme peaked with 5 percent of the population employed in the
programme and with gross spending at just 1 percent of GDP (this figure overstates net spending because in the absence of
the Jefes programme, government would have had to provide alternative social spending) (Tcherneva
andWray,2005,www.cfeps.org). Developed nations typically spend three times as much on anti-poverty programmes.
1AC Economy Advantage
Federal ELR solves – key to stabilize the private sector and inflation
Todorova, Assistant Prof. at Wright State University, 09
(Zdravka Todorova, Assistant Professor at Wright State University, “Employer of Last Resort Policy and Feminist Economics: Social
Provisioning and Socialization of Investment,” http://www.cfeps.org/pubs/wp-pdf/TodorovaZWP-56.pdf)
An ELR program involves the establishment of a federally funded but locally decentralized job-creation program which
secures an infinitely elastic demand for labor ensuring simultaneously full employment and price stability (Minsky 1986,
343). The program guarantees an employment opportunity for all at a socially established living wage - government would
hire anyone who is ready, willing, and able to work3. Workers would be taken “as they are” and offered job training when
needed. ELR projects would not compete with investment already undertaken by the private sector. When the private sector
slows down, the ELR administration would hire more ELR workers. As the private sector recovers, it can hire ELR workers
away from the government at a premium above the ELR wage. The government therefore creates a buffer-stock of labor
and stabilizes wages and inflation (Minsky 1986, Wray 1998, Mitchell, 2001)4. When employment “at the bottom” is
guaranteed, businesses, and households’ expectations would be more stable. Households would know that they won’t end
up being a part of the reserve army of unemployed labor if they are ready, able, and willing to work for pay. Furthermore,
business enterprises would have more stable expectations of effective demand5. Thus, ELR will stabilize economic activity
at full employment. The program would be permanent – but its size will vary depending on the business cycle which is
driven by corporate investment decisions. The creation of infinitely elastic demand for labor at a floor (living) wage that
does not depend on profit expectations of financiers and business, and generally on pecuniary valuation is a different
approach from the standard idea of subsidizing demand (Minsky 1986, 343). ELR facilitates in fact socialization of
investment as described by Keynes. The buffer-stock nature of the policy mandates that funding must be federal as
the program will expand as the economy shrinks6. The program will add to the annual deficit and the national debt, but
those levels are just accounting indications of the private sector’s desire to net save and do not represent financial burden on
the government (Wray 1998, 1989b; Forstater 1999; Rima 2003) 7. It is the function of the deficit/debt such as achieving
full employment - that matters, not their levels (Lerner 1943) 8. The functional finance principles allow us to view
government deficits as tools (Todorova 2007). Government deficits can be employed for any purpose (Lerner 1943, 1947);
for example, the composition of deficits and state policy can be formulated in a way that (re)enforces patriarchal relations.
Hence, the design of ELR program is crucial (Kaboub 2007c). However, as discussed below the decentralized planning
aspect of ELR gives avenues for gender informed inputs from local communities and organizations. Next, we turn towards
discussing some of inputs from feminist economics into this Post Keynesian policy.
1AC- Economy Advantage
C. Impacts1. Continued economic decline destroys US China relations and causes WWIII
Mead, 9 – Henry A. Kissinger Senior Fellow in U.S. Foreign Policy at the Council on Foreign Relations (Walter Russell, “Only
Makes You Stronger,” The New Republic, 2/4/09, http://www.tnr.com/politics/story.html?id=571cbbb9-2887-4d81-854292e83915f5f8&p=2)
The damage to China's position is more subtle. The crisis has not--yet--led to the nightmare scenario that China-watchers fear: a
recession or slowdown producing the kind of social unrest that could challenge the government. That may still come to pass-the recent economic news from China has been consistently worse than most experts predicted--but, even if the worst case is
avoided, the financial crisis has nevertheless had significant effects. For one thing, it has reminded China that its growth
remains dependent on the health of the U.S. economy. For another, it has shown that China's modernization is likely to be long,
dangerous, and complex rather than fast and sweet, as some assumed. In the lead-up to last summer's Beijing Olympics, talk of a
Chinese bid to challenge America's global position reached fever pitch, and the inexorable rise of China is one reason why so
many commentators are fretting about the "post-American era." But suggestions that China could grow at, say, 10 percent
annually for the next 30 years were already looking premature before the economic downturn. (In late 2007, the World Bank
slashed its estimate of China's GDP by 40 percent, citing inaccuracies in the methods used to calculate purchasing power parity.)
And the financial crisis makes it certain that China's growth is likely to be much slower during some of those years. Already exports
are falling, unemployment is rising, and the Shanghai stock market is down about 60 percent. At the same time, Beijing will have to
devote more resources and more attention to stabilizing Chinese society, building a national health care system, providing a
social security net, and caring for an aging population, which, thanks to the one-child policy, will need massive help from the
government to support itself in old age. Doing so will leave China fewer resources for military build-ups and foreign adventures.
As the crisis has forcefully reminded Americans, creating and regulating a functional and flexible financial system is difficult.
Every other country in the world has experienced significant financial crises while building such systems, and China is unlikely to be
an exception. All this means that China's rise looks increasingly like a gradual process. A deceleration in China's long-term
growth rate would postpone indefinitely the date when China could emerge as a peer competitor to the United States. The
present global distribution of power could be changing slowly, if at all. The greatest danger both to U.S.-China relations and
to American power itself is probably not that China will rise too far, too fast; it is that the current crisis might end China's
growth miracle. In the worst-case scenario, the turmoil in the international economy will plunge China into a major
economic downturn. The Chinese financial system will implode as loans to both state and private enterprises go bad.
Millions or even tens of millions of Chinese will be unemployed in a country without an effective social safety net. The collapse
of asset bubbles in the stock and property markets will wipe out the savings of a generation of the Chinese middle class.
The political consequences could include dangerous unrest--and a bitter climate of anti-foreign feeling that blames others for China's
woes. (Think of Weimar Germany, when both Nazi and communist politicians blamed the West for Germany's economic
travails.) Worse, instability could lead to a vicious cycle, as nervous investors moved their money out of the country,
further slowing growth and, in turn, fomenting ever-greater bitterness. Thanks to a generation of rapid economic growth,
China has so far been able to manage the stresses and conflicts of modernization and change; nobody knows what will happen if
the growth stops.
India's future is also a question. Support for global integration is a fairly recent development in India, and many serious
Indians remain skeptical of it. While India's 60-year-old democratic system has resisted many shocks, a deep economic
recession in a country where mass poverty and even hunger are still major concerns could undermine political order, longterm growth, and India's attitude toward the United States and global economic integration. The violent Naxalite
insurrection plaguing a significant swath of the country could get worse; religious extremism among both Hindus and
Muslims could further polarize Indian politics; and India's economic miracle could be nipped in the bud. If current market
turmoil seriously damaged the performance and prospects of India and China, the current crisis could join the Great
Depression in the list of economic events that changed history, even if the recessions in the West are relatively short and
mild. The United States should stand ready to assist Chinese and Indian financial authorities on an emergency basis--and
work very hard to help both countries escape or at least weather any economic downturn. It may test the political will of the
Obama administration, but the United States must avoid a protectionist response to the economic slowdown. U.S. moves to
limit market access for Chinese and Indian producers could poison relations for years. For billions of people in nucleararmed countries to emerge from this crisis believing either that the United States was indifferent to their well-being or that
it had profited from their distress could damage U.S. foreign policy far more severely than any mistake made by George
W. Bush.
It's not just the great powers whose trajectories have been affected by the crash. Lesser powers like Saudi
Arabia and Iran also face new constraints. The crisis
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1AC- Economy Advantage
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has strengthened the U.S. position in the Middle East as falling oil prices reduce Iranian influence and increase the
dependence of the oil sheikdoms on U.S. protection. Success in Iraq--however late, however undeserved, however limited— had already improved the
Obama administration's prospects for addressing regional crises. Now, the collapse in oil prices has put the Iranian regime on the defensive. The annual
inflation rate rose above 29 percent last September, up from about 17 percent in 2007, according to Iran's Bank Markazi. Economists forecast that Iran's
real GDP growth will drop markedly in the coming months as stagnating oil revenues and the continued global economic downturn force the government
to rein in its expansionary fiscal policy. All this has weakened Ahmadinejad at home and Iran abroad. Iranian officials must balance the relative merits of
support for allies like Hamas, Hezbollah, and Syria against domestic needs, while international sanctions and other diplomatic sticks have been made more
painful and Western carrots (like trade opportunities) have become more attractive. Meanwhile, Saudi Arabia and other oil states have become more
dependent on the United States for protection against Iran, and they have fewer resources to fund religious extremism as they use diminished oil revenues
to support basic domestic spending and development goals. None of this makes the Middle East an easy target for U.S. diplomacy, but thanks in part to the
economic crisis, the incoming administration has the chance to try some new ideas and to enter negotiations with Iran (and Syria) from a position of
enhanced strength. Every crisis is different, but there seem to be reasons why, over time, financial crises on balance reinforce rather than undermine the
world position of the leading capitalist countries. Since capitalism first emerged in early modern Europe, the ability to exploit the advantages of rapid
economic development has been a key factor in international competition. Countries that can encourage--or at least allow and sustain--the change,
dislocation, upheaval, and pain that capitalism often involves, while providing their tumultuous market societies with appropriate regulatory and legal
frameworks, grow swiftly. They produce cutting-edge technologies that translate into military and economic power. They are able to invest in education,
making their workforces ever more productive. They typically develop liberal political institutions and cultural norms that value, or at least tolerate,
dissent and that allow people of different political and religious viewpoints to collaborate on a vast social project of modernization--and to maintain
political stability in the face of accelerating social and economic change. The vast productive capacity of leading capitalist powers gives them the ability to
project influence around the world and, to some degree, to remake the world to suit their own interests and preferences. This is what the United Kingdom
and the United States have done in past centuries, and what other capitalist powers like France, Germany, and Japan have done to a lesser extent. In these
countries, the social forces that support the idea of a competitive market economy within an appropriately liberal legal and political framework are
relatively strong. But, in many other countries where capitalism rubs people the wrong way, this is not the case. On either side of the Atlantic, for
example, the Latin world is often drawn to anti-capitalist movements and rulers on both the right and the left. Russia, too, has never really taken to
capitalism and liberal society--whether during the time of the czars, the commissars, or the post-cold war leaders who so signally failed to build a stable,
open system of liberal democratic capitalism even as many former Warsaw Pact nations were making rapid transitions. Partly as a result of these internal
cultural pressures, and partly because, in much of the world, capitalism has appeared as an unwelcome interloper, imposed by foreign forces and shaped to
fit foreign rather than domestic interests and preferences, many countries are only half-heartedly capitalist. When crisis strikes, they are quick to decide
that capitalism is a failure and look for alternatives. So far, such half-hearted experiments not only have failed to work; they have left the societies that
have tried them in a progressively worse position, farther behind the front-runners as time goes by. Argentina has lost ground to Chile; Russian
development has fallen farther behind that of the Baltic states and Central Europe. Frequently, the crisis has weakened the power of the merchants,
industrialists, financiers, and professionals who want to develop a liberal capitalist society integrated into the world. Crisis can also
strengthen the hand of religious extremists, populist radicals, or authoritarian traditionalists who are determined to resist
liberal capitalist society for a variety of reasons. Meanwhile, the companies and banks based in these societies are often less
established and more vulnerable to the consequences of a financial crisis than more established firms in wealthier societies.
As a result, developing countries and countries where capitalism has relatively recent and shallow roots tend to suffer
greater economic and political damage when crisis strikes--as, inevitably, it does. And, consequently, financial crises often
reinforce rather than challenge the global distribution of power and wealth. This may be happening yet again. None of
which means that we can just sit back and enjoy the recession. History may suggest that financial crises actually help
capitalist great powers maintain their leads--but it has other, less reassuring messages as well. If financial crises have been a
normal part of life during the 300-year rise of the liberal capitalist system under the Anglophone powers, so has war. The
wars of the League of Augsburg and the Spanish Succession; the Seven Years War; the American Revolution; the
Napoleonic Wars; the two World Wars; the cold war: The list of wars is almost as long as the list of financial crises. Bad
economic times can breed wars. Europe was a pretty peaceful place in 1928, but the Depression poisoned German public
opinion and helped bring Adolf Hitler to power. If the current crisis turns into a depression, what rough beasts might
start slouching toward Moscow, Karachi, Beijing, or New Delhi to be born? The United States may not, yet, decline, but,
if we can't get the world economy back on track, we may still have to fight.
1AC- Economy Advantage
US-China relations solve nuclear war
Desperes, 1 - Senior Fellow at the RAND Corporation (John, China, the United States, and the Global Economy, p. 227-8)
Nevertheless, America's main interests in China have been quite constant, namely peace, security, prosperity, and a healthy
environment. Chinese interests in the United States have also been quite constant and largely compatible, notwithstanding
sharp differences over Taiwan, strategic technology transfers, trade, and human rights. Indeed, U.S.-Chinese relations have
been consistently driven by strong common interests in preventing mutually damaging wars in Asia that could involve
nuclear weapons; in ensuring that Taiwan's relations with the mainland remain peaceful; in sustaining the growth of the
U.S., China, and other Asian-Pacific economies; and, in preserving natural environments that sustain healthy and
productive lives. What happens in China matters to Americans. It affects America's prosperity. China's growing economy is
a valuable market to many workers, farmers, and businesses across America, not just to large multinational firms like
Boeing, Microsoft, and Motorola, and it could become much more valuable by opening its markets further. China also
affects America's security. It could either help to stabilize or destabilize currently peaceful but sometimes tense and
dangerous situations in Korea, where U.S. troops are on the front line; in the Taiwan Straits, where U.S. democratic values
and strategic credibility may be at stake; and in nuclear-armed South Asia, where renewed warfare could lead to terrible
consequences. It also affects America's environment. Indeed, how China meets its rising energy needs and protects its
dwindling habitats will affect the global atmosphere and currently endangered species.
1AC- Economy Advantage
2. Unemployment
Unemployment causes deaths within 1 year of the job loss
Reuters, 9 (Cites Harvey Brenner, Ph.D. and professor of public health and behaviol sciences at the University of North Texas,
“Unemployment, Healthcare Spending effect Mortality, March 2009,
http://www.reuters.com/article/pressRelease/idUS111573+13-Mar-2009+PRN20090313,)
At the Health Industries Council meeting on March 11, in Irving, Harvey Brenner, Ph.D. and professor of public health and
behavioral sciences at the University of North Texas Health Science Center's School of Public Health, announced new
findings that indicate that mortality is directly related to the economy. Specifically, unemployment and reduced spending
on health care have a direct effect on the country's mortality rate. "We have seen this correlation in cardiovascular disease,"
Brenner related. "But these are the first findings that show a direct correlation between reduced health care expenditures
and reduced labor force participation on increases in mortality." Since World War II, research literature has shown that
economic development is good for health in developing countries. However, it isn't clear if this same economic
development in already developed countries has the same benefits. In fact, Brenner's research shows that unemployment is
a much more important factor in health and well-being than economic development. "Interestingly, this economic
downturn is showing how quickly the effects of unemployment and, thus, reduction of health care expenditures is resulting
in mortality," Brenner said. "In the past, we saw people die within 10 years after their job loss. Now, we are seeing them
die as early as the same year." When a worker becomes unemployed, he or she often loses health insurance, suffers stress
and adopts unhealthy behavior as a result. They may delay preventive health care because of the cost or loss of health
insurance coverage. The stress of being unemployed causes both physical and psychological issues that may eventually
erupt into major medical conditions that easily could have been treated earlier.
And employment is key to global peace.
Walter Russell Mead, Senior Fellow at the Council on Foreign Relations, 1994, “Commerce and Trade Speeches or conferences,”
Federal News Service
I'd like to add to that that unemployment is not unrelated to the question of world peace. We've had today hanging over us
a couple of times mentions of hundreds of millions of people in developing countries who would like to join the advanced
industrial democracies in their standards of living. We've spoken of the former communist states of Europe, all of whom are
looking for a place at this table. Our modern economic system originated after the second world war with some very
important insights, where people looked at why did the world get into World War II. And a big answer was the mass
unemployment of the '30s that led to fascism, that led to a climate of international confrontation, and ultimately led to war.
And the idea that full employment was central to concept of building peace after the second world war. Today we tend to
say that if you can get full employment at all it will follow free trade, if you -- you know, except for low interest rates and
GATT there is essentially no Western program today for jobs. This is putting the cart before the horse in the view of the
people who sort of originally designed the post-war system, where they said that free trade was actually a consequence of
full employment rather than a cause of it. And I think you can still see that in that the ink is hardly dry on the Uruguay
Round agreement when the United States and Japan are firing opening volleys in a trade war. So we are talking about the
viability of our democratic systems of government and we are talking about world peace when we are talking about
unemployment. What is so interesting is the -- and alarming, is the enormous gap between the gravity and intractability of
the problem and the very small scale measures being proposed to deal with it. I suspect that we will see out of this job
conference a very few recommendations coming forward on improving the efficiency of labor, sort of marginal
improvements, and there will be essentially a throwing up of the hands in despair about this thing.
1AC- Economy Advantage
3. India Relations
A. Absent U.S. growth, Indian economic liberalization will fail.
Funabashi, chief diplomatic correspondent and columnist, Recipient of the Vaughn-Uyeda Prize (Japan's Pulitzer Prize), 09
(Yoichi Funabashi, chief diplomatic correspondent and columnist, Recipient of the Vaughn-Uyeda Prize (Japan's Pulitzer Prize), April
2009, “Forget Bretton Woods II: the Role for U.S.—China— Japan Trilateralism,” The Washington Quarterly)
The U.S.-originated financial crisis has also created setbacks in India’s reform agenda, where economic reform has already
been halting, hesitant, and little helped by a public attitude that economist Pranab Bardhan has called ‘‘anti-reform
populism.’’46 Wharton professor Richard Herring observed this trend and explained that India can now ‘‘point to the U.S.
in particular and say, ‘Look, what a terrible mess they have made with their innovations and liberalized standards. Our
direct controls have kept us out of this whirlwind of financial chaos.’’’47
B. Economic liberalization is key to U.S.-Indian relations.
Adhikari, Editor of the Times of India, consultant with the World Bank, visiting fellow at the American Enterprise Institute, 05
(Gautam Adhikari, Editor of the Times of India, consultant with the World Bank, visiting fellow at the American Enterprise Institute,
June 22, 2005 “U.S.-India Relations: Report on AEI’s Roundtable Discussions” AEI Paper # 112)
Americans believe that the slow pace of India’s economic reforms is the main hurdle to better economic relations.
American direct foreign investment in India has not grown much. In former U.S. ambassador to India Robert Blackwill’s
view, the “modernization of U.S.- India economic interaction, based on Indian economic reform, is the missing piece in
our transforming bilateral relationship.” Washington sees India’s partially liberalized economy as impeding bilateral
relations in at least two ways. First, in order to take strategic relations to a qualitatively higher level, commercial relations
must expand significantly, but that cannot happen until India undertakes further economic reforms. Secondly, India’s
economy may be holding it back from becoming a major player on the world stage, especially when compared with its
main rival, China.
C. US-Indian relations prevent nuclear war
New York Times 02
(New York Times, June 10, 2002, “Wider Military Ties With India Offer U.S. Diplomatic Leverage,” Lexis)
Military cooperation between India and the United States has remarkably quickened since Sept. 11, with a
burst of navy, air force and army joint exercises, the revival of American military sales to India and a blur of
high-level visits by generals and admirals. The fledgling relationship between American and Indian military leaders
will be important to Mr. Rumsfeld in talks intended to put to rest fears of war between India and Pakistan. "We
can hope this translates into some influence and trust, though I don't want to overstate it," a senior American defense
official said in an interview on Thursday. "I don't want to predict this guarantees success." The American diplomatic efforts
yielded their first real gains on Saturday when India welcomed a pledge by Pakistan's military ruler to stop permanently the
infiltration of militants into Kashmir. India indicated that it would soon take steps to reduce tensions, but a million troops
are still fully mobilized along the border -- a situation likely to persist for months -- and the process of resolving the crisis
has just begun. India has linked the killing of civilians in Kashmir to a Pakistan-backed insurgency there and has presented
its confrontation with Pakistan as part of the global campaign against terrorism. India itself made an unstinting offer
of support to the United States after Sept. 11, and Washington responded by ending the sanctions placed on India
after its 1998 nuclear tests. With that, the estrangement that prevailed between the world's two largest democracies during
the cold war, when India drew close to the Soviet Union and the United States allied with Pakistan, has eased. India, for
decades a champion of nonalignment, seeks warmer ties with the United States in hopes of gaining access to sophisticated
military technology and help in dealing with Pakistan. From the start of President Bush's term, some influential officials in
his administration saw India as a potential counterweight to that other Asian behemoth, China, whose growing power was
seen as a potential strategic threat. But since Sept. 11, the priority has been terrorism. The United States is hoping its
deeper military and political ties with India will give it some measure of leverage to prevent a war
between India and Pakistan that could lead to a nuclear holocaust and would play havoc with the hunt for Al
Qaeda in Pakistan.
1AC- Plan text
Plan- The United States federal government should adopt an employer of last resort program designed to
maintain a nation-wide full employment rate by allocating jobs based on regional employment needs and
setting wages so that the employees are able to afford basic needs.
1AC- Solvency
Full employment is non-inflationary unemployment rate
Elizabeth Dunne Schmitt, Professor and Chairperson, Department of Economic, SUNY-Oswego 2003 Macroeconomics
http://www.oswego.edu/~edunne/200ch6.html
We should first start by noting that the goal for unemployment is NOT zero. Some unemployment is inevitable and even
desireable. If unemployment is too low, firms cannot find workers, resulting in output loss. One of our basic
macroeconomic goals is something called full employment. Full employment does NOT mean zero unemployment. To
understand what full employment means, lets look at 3 types of unemployment: Frictional unemployment is the
unemployment that results from people switching jobs or entering the labor market. The job search takes time, so this type
of unemployment is inevitable. Frictional unemployment is temporary because the jobs and workers are there, they justg
have to find each other. Recent college graduates who take a couple of months to land a job are an example of frictional
unemployment. Employment agencies, classified ads, the internet all reduce the time is takes to match job offers to job
seekers but some frictional employment will always exist. Structural unemployment is more serious. This type of
unemployment is caused by a mismatch between job skills needed and jobs skills possessed by job seekers, or a mismatch
in the location of jobs and job seekers. Although the jobs are out there, the job seekers are not qualitfied for them or have to
move to find them, making structural unemployment more long-term as people retrain or relocate. For example, many
garment workers have lost their jobs in the U.S. as factories move overseas, but they are not qualified to fill job openings
for computer programmers and web developers. With the rapid pace of technological change and growth of global markets,
structural unemployment is also inevitable. Cyclical unemployment occurs when there are too few jobs available due to an
economic slowdown. Due to low demand for goods and services, the number of workers demands is less than the number
of workers available in the labor force. Cyclical unemployment corresponds to recessions. Back to full employment. What
is it? Since 1946, the federal goverment is required to pursue the goal of full employment, but does not specify exactly what
it is. Full employment occurs when cyclical unemployment is zero, and structural and frictional unemployment are at a
minimum. When unemployment is higher, resources are not being used efficiently. When the unemployment rate is lower,
the shortage of workers will cause wages and prices to rise, triggering inflation. So the goal of full employment is defined
as the lowest unemployment rate consistent with stable prices. The Full Employment and Balanced Growth Act of 1978
gets more specific with goals of 4% for the unemployment rate and 3% for inflation. Most economists believe we are at full
employment when the unemployment rate is between 4 and 6%. This is known as the natural rate of unemployment. This
rate changes over time as changes in our economy affect structural unemployment levels.
1AC- Solvency
ELR creates valuable infrastructure jobs that benefit communities
Pavlina Tcherneva, 9- Ph.D. is Assistant Professor of Economics at Franklin and Marshall College, Research Scholar at The Levy
Economics Institute, and Senior Research Associate at the Center for Full Employment and Price Stability. (The Levy Economics
Institute of Bard College “Obama’s job creation promise: a Modest Proposal to Guarantee That He Meets and Exceeds Expectations”
http://www.levy.org/pubs/pn_09_01.pdf)
With direct job creation, we can be bolder in our goals and expectations. Suppose that all of the
unemployed, including many discouraged individuals as well as homemakers who were previously
outside the labor force, decide to join the public job guarantee program.Now suppose that we create the
outrageous number of 20 million public sector jobs that pay living wages. The entire wage bill will still be only $500
billion. If the amount doubles to account for the cost of materials, management, and administration, we still end up with a
budget comparable to the one House Democrats are contemplating—except that now, $1 trillion will have created 20
million new jobs! These jobs could include staffing state and municipal government programs and offices;
improving our schools and hospitals; creating new, green infrastructure; and repairing old
infrastructure. In other words, a job guarantee is entirely consistent with all of the objectives of President Obama’s
plan.
The newly employed individuals will spend their incomes on private sector goods and services, which will kick-start
private sector activity. As a consequence, the government labor force will shrink rapidly in subsequent years, as private
firms hire public sector employees and provide better-paying jobs. In the meantime, the government sector will
have an army of workers to help transform the country’s infrastructure and transportation system,
create fossil fuel–free sources of energy, improve health and educational infrastructure, improve
information systems, provide universal broadband Internet access, supply the infrastructure and care
services for the retiring baby boomers, and improve our overall economic productivity to compete in a
21st-century global economy.
1AC Solvency
ELR empirically solve- Argentina proves
Dodd, 8 (Ryan, Research Associate @ University of Missouri Dollars and Sense, “A New WPA?” http://www.dollarsand
sense.org/arch ives/2008/0308dodd.html, 2008)
In early December 2001, following nearly two decades of neoliberal restructuring, the Argentine economy collapsed.
Apparently, two decades of privatization, liberalization, and government austerity, ushered in by Argentina's brutal military
junta (in power from 1976 to 1983), were not enough to sate the appetites of global financial capital: earlier that year the
International Monetary Fund had withheld $1.3 billion in loans the country needed to service its $142 billion external debt.
In response to the IMF's action, the government froze all bank accounts (although many wealthy Argentines managed to
relocate their funds abroad before the freeze) and drastically cut government spending. As a consequence, the economy
experienced a severe depression as incomes and expenditures fell through the floor. The unemployment rate shot up to a
record 21.5% by May 2002, with over 50% of the population living in poverty. The popular response to the crisis was
massive. Protests and demonstrations erupted throughout the country. The government went through five presidents in the
course of a month. Workers eventually reclaimed dozens of abandoned factories and created democratically run cooperative
enterprises, many of which are still in operation today and are part of a growing co-op movement.
Reclaiming factories was a lengthy and difficult process, however, and the immediate problem of unemployment remained.
In response, in April 2002 the Argentine government put into place a direct job creation program known as Plan Jefes de
Hogar ("Heads-of-Household Plan"), which promised a job to all heads of households satisfying certain requirements. In
order to qualify, a household had to include a child under the age of 18, a person with a disability, or a pregnant woman; the
household head had to be unemployed; and each household was generally limited to only one participant in the program.
The program provided households with 150 pesos a month for four hours of work a day, five days a week. Program
participants mainly engaged in the provision of community services and/or participated in worker training programs
administered by local nonprofits.
While limited in scope and viewed by many in the government as an emergency measure, the program was incredibly
successful and popular with its workers. It provided jobs and incomes to roughly 2 million workers, or 13% of Argentina's
labor force, as well as desperately needed goods and services—from community gardens to small construction projects—to
severely depressed neighborhoods. The entry of many women into the program, while their husbands continued to look for
jobs in the private sector, had a liberating effect on traditional family structures. And by some accounts, the program helped
facilitate the cooperative movement that subsequently emerged with the takeover of abandoned factories. Not surprisingly,
as Argentina's economy has recovered from the depths of the crisis, the government has recently made moves to
discontinue this critical experiment in direct job creation