Big Ideas for Right Now: Give People Money! And Jobs!

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July 27 2010 2:46 PM

Big Ideas for Right Now: Give People Money! And Jobs!

What to do about a global economy where everybody is broke and unemployed? Drake Bennett of the Boston Globe reports on initiatives around the world that fight poverty by, uh, giving money to poor people :

In Brazil and Mexico, India, China, South Africa, and dozens of other nations, hundreds of millions of poor people are now receiving billions of dollars in cash grants. The programs vary widely, but typically the money — disbursed through banks, post offices, state lottery offices, and even, in rural Africa, ranging armored cars with ATMs on them — goes directly to the poor, rather than being spent on particular projects by government or international aid officials.

The regular infusions of cash augment the paltry budgets of poor households, alleviating the pinch of deprivation, but proponents also see them as a long-term path out of poverty, and even a catalyst for economic growth. Research has credited cash transfers with improving the health and education of poor children, and there is also evidence that cash transfers nurture microenterprises, improve crop yields, and allow the poor to begin to save and invest. On a broader scale, some development experts argue that giving the poor more money to spend expands consumption and markets, and can boost local and national economies. 

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Nearly a quarter of all Mexicans are getting payments, Bennett reports, averaging $38 a month—"more than a quarter of the average household income of the rural poor." That's not really a lot of money, unless you are poor, in which case it is, which is the point.

What does this have to do with life up here in the developed world? Pseudonymous bond analyst Carl Hegelman discussed the state of the economy in an essay for The Awl :

Most CEOs and CFOs on earnings calls are not taking the big-picture view. They're focused on the details of their own particular business. Still, I often ask myself if they see the connection that's staring you right in the face: when is "the consumer" going to start spending again? Well, maybe when you stop firing him. 

Hegelman's conclusion about this situation is not cheerful: 

The stock answer to this quandary is that we must invent new industries and re-train workers in the skills required to drive them; but, frankly, that's bullshit and I think we secretly all know it. The truth is, there is no good answer to this quandary. 

Over at n+1, though, Benjamin Kunkel takes a similar reading of the economy and runs with it : what if the global slump is due to decades of deliberately keeping part of the workforce unemployed, as a buffer against inflation?

Imagine that we are witnessing the end of the global imbalances that mounted so teeteringly high over the last decade, a collective folly according to which one group of countries, led by the US, purchased the surplus goods of another group, led by China and Japan, with money the first group did not possess and had to borrow from the second. Neither group—at least not their corporations or governments—truly wanted anything like full employment. For the net-exporting countries, full employment would have raised wage costs and threatened competitiveness. For the net-importing countries, full employment would have triggered inflation and so undermined purchasing power and asset prices. True, the lack of full employment spelled inadequate aggregate demand across the system. But an increasingly baroque financial shell game conjured just enough demand to keep things afloat—until it did not. Now the world’s exports can no longer be purchased with phantom wages.

Solution? Stop worrying so much about inflation, and start giving people jobs: private jobs, public-works jobs, jobs in "workers’ cooperatives producing marketable goods and services." Then everybody can spend more. Is it crazy socialism? Hey, if workfare is good enough for GE , maybe it's good enough for everyone. 

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