Adonis Diaries

In what ways can Spending creates jobs?

Posted on: November 12, 2011

In what ways can Spending creates jobs?

What do you think can create jobs? Can government budgeting for better infrastructures (roads, trains, communication network, allocating more money to city and town administration and management…) create jobs? Can Creative enterprises create jobs? Can spending on military hardware create jobs? Can empowered communities create jobs?

Polish economist Michael Kalecki wrote something to that effect: “If common people start to admit that the government can create jobs, then the message is to reduce the perceived importance of business confidence”  Which means, the business people and multinational financial enterprises will lose the grip on holding government hostage to spending big money on totally destructive projects (more performing military jets, nuclear weapons, sparing the ultra rich so that they keep confident in the system…) that do not benefit the economy of the vast majority of citizens.

John Maynard Keynes offered a partial answer 75 years ago, when he noted a curious “preference for wholly wasteful forms of loan expenditure, rather than for partly wasteful forms” Why?  Partially wasteful projects tend to be judged on strict ‘business’ principles.” For example, spend money on some useful goal, like the promotion of new energy sources, and people start screaming, “Waste!” Spend money on a weapons system we don’t need, and those voices are silent, because nobody expects F-22s to be a good business proposition anyway. That is funny.  Mankind twisted mind is funny, until the weapons are used, phosphorous bombs dropped, cluster bombs carpeting entire land…

Keynes suggested that government bury bottles full of cash in disused mines and letting the private sector dig them back up. Government may bury old jets with some cash, and let people figure out where they are buried…

PAUL KRUGMAN published in the New York Times under “Bombs, Bridges and Jobs” (I rearranged the article and edited slightly):

“A few years back, Representative Barney Frank coined an apt phrase for many of his colleagues: “weaponized Keynesians”.  They are the colleagues in Congress who believe “that the government does not create jobs when it funds the building of bridges or important research or retrains workers, but when it builds airplanes that are never going to be used in combat, that is of course economic salvation.”

Right now the weaponized Keynesians are out in full force — which makes this a good time to see what’s really going on in debates over economic policy.

What’s bringing out the military big spenders is the approaching deadline for the so-called supercommittee to agree on a plan for deficit reduction. If no agreement is reached, this failure is supposed to trigger cuts in the defense budget.

Faced with this prospect, Republicans — who normally insist that the government can’t create jobs, and who have argued that lower, not higher, federal spending is the key to recovery — have rushed to oppose any cuts in military spending. Why? Because, they say, such cuts would destroy jobs.

Consequently, Representative Buck McKeon, Republican of California, once attacked the Obama stimulus plan because “more spending is not what California or this country needs.” But two weeks ago, writing in The Wall Street Journal, Mr. McKeon — now the chairman of the House Armed Services Committee — warned that the defense cuts that are scheduled to take place if the supercommittee fails to agree would eliminate jobs and raise the unemployment rate.

What makes this particular form of hypocrisy so enduring?

First: Military spending does create jobs when the economy is depressed and when government decide to building up the military readiness. In the same vein, I recently suggested that a fake threat of alien invasion, requiring vast anti-alien spending, might be just the thing to get the economy moving again.

Second: There are darker motives behind weaponized Keynesianism. For one thing, to admit that public spending on useful projects can create jobs is to admit that such spending can in fact do good, that sometimes government is the solution, not the problem.

Fear that voters might reach the same conclusion is, I’d argue, the main reason the political right has always seen Keynesian economics as a leftist doctrine, when it’s actually nothing of the sort. However, spending on useless or, even better, destructive projects doesn’t present conservatives with the same problem.

Third: Appeals to confidence have always been a key debating point for opponents of taxes and regulation.  For example, Wall Street’s whining about President Obama is part of a long tradition in which wealthy businessmen and their flacks argue that any hint of populism on the part of politicians will upset people like them, and that this is bad for the economy.

Once you concede that the government can act directly to create jobs, however, that whining loses much of its persuasive power — so Keynesian economics must be rejected, except in those cases where it’s being used to defend lucrative contracts.

The sudden upsurge in weaponized Keynesianism reveals the reality behind our political debates. At a fundamental level, the opponents of any serious job-creation program know perfectly well, that such a program would probably work, for the same reason that defense cuts would temporary raise unemployment. But they don’t want voters to know what they know, because that would hurt their larger agenda like keeping regulation and taxes on the wealthy at bay.”

Paul Krugman wrote: “Indeed, much of the evidence that Keynesian economics works comes from tracking the effects of past military buildups. Some liberals dislike this conclusion, but economics isn’t a morality play: spending on things you don’t like is still spending, and more spending would create more jobs”.  I think that is a shallow argument. What has been spent on military buildups turns to a huge deficit once a preemptive war is launched.  The effects are felt right after the war, and for many decades later. Preemptive wars are decided upon mainly to absorb the lower middle class citizens off the streets in times of economic downturns and sending them overseas to be killed and maimed…

One critic wrote: “How can one disengage ethics from economics when it affects the well being of all humans and of Earth? Krugman has so ossified his views that he attempts to summarize Keynes with a single quote.  Spending does not create jobs; creative people and entrepreneurs create jobs. Giving handouts to corporations, particularly those in the business of selling arms, creates corruption, indulgence and death.


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November 2011

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