 Isn't it ironic that we have 15, 20% unemployment depending on how you measure it? And the stock market is going up, not down. It went down, but then it came back up, came back up because the Fed is keeping it up. So the Fed is defending capitalism really to an unprecedented degree. Hello and welcome. I'm Lynne Fries, and that was Robert Polen joining in this episode of Global Political Economy News Dogs. What would it take to move from COVID-19 lockdown to an abundance of decent jobs in all countries? Is it possible for a capitalist society to reach full employment and stay there? In this segment with Robert Polen, we get some perspective on all this and on why full employment is such a challenge to capitalist prerogatives and neoliberal logic. Robert Polen is a professor of economics and co-director of PERI, the Political Economy Research Institute at the University of Massachusetts in Amherst. A prolific author, Robert Polen's upcoming new book is titled Climate Crisis and the Global Green New Deal, The Political Economy of Saving the Planet. Co-authored with Noam Chomsky. Welcome, Bob. Thank you. With the COVID-19 crisis, unemployment's reaching levels last seen in the Great Depression. In your book, Back to Full Employment, you delve into basic observations of Karl Marx, John Maynard Keynes, Michael Kolecki and Milton Friedman as major thinkers on unemployment. Let's start there. Give us a press say on that. Karl Marx is widely considered to be the great thinker of socialism, which he was, but the fact is that Marx spent about 90% of his time when he wrote about political economy, writing about the nature of capitalism, and in his discussions about capitalism, one of his most fundamental insights, in my opinion at least, was his point that capitalism needs mass unemployment in order to function as capitalism. Not that you need mass unemployment in terms of the well-being of human beings, but if we're operating within a capitalist system, you have to have masses of people who are unemployed or else you can't have a functioning capitalist system. And his argument is straightforward. What he said was in a full employment version of capitalism, workers will get more bargaining power. Why? Because if they don't like their job, they can quit and just go get another job and they don't have to worry because you have full employment. So what Marx said is you have to have that mass of unemployed people or what he called the Reserve Army of Labor. Waiting outside the factory gate, waiting outside the office, waiting in the unemployment lines and that because of that, that enables capitalists to maintain bargaining power over workers and to keep their wages down. If workers had more bargaining power, they bargained up their wages that squeezes profits and capitalism without profits is an impossibility. So that's why Marx said mass unemployment is intrinsic to the operations of capitalism. Now if we move forward to some of the other major thinkers that you listed, we have John Maynard Keynes I would argue is the next great theorist on unemployment and Keynes critically was writing in the midst of the 1930s Great Depression. So thinking in terms of the 1930s, where we have 20, 25% unemployment rates, Keynes was making the argument that this was a massive policy mistake that you could run capitalism without mass unemployment, certainly not without 25% unemployment. So Keynes said what we need to think about are policies that will bring the capitalist economy to full employment and what he was referring to specifically were government policies to stimulate economic activity, to get businesses to invest more, to get people to spend more and that way and the government would then be responsible for maintaining the higher level of activity and with a higher level of overall economic activity, people have jobs. And so he was saying from a technical standpoint, we can certainly operate a capitalist economy at full employment and keep it at full employment as long as you have well meaning intelligent policymakers who are hitting those targets of keeping the level of overall activity high. Now the third person you mentioned is Kalitsky and Kalitsky is obviously nowhere near as well known as Marx and Keynes who are probably two of the three or four most influential economists ever. But Kalitsky had a very insightful approach and he basically made the point that there's a lot of truth in both Marx and Keynes and his synthesis of them is what's really critical because he said, Kalitsky said, okay, Keynes is right. Keynes made the point we have the economic policy tools and we have like really smart intelligent people sometimes in government and it's true they can raise the overall level of activity in the economy which will create more jobs. They can keep the economy at the high level of activity so you have full employment under capitalism no problem technically he was right. But then Kalitsky said, listen, Marx is also right because Marx's point was not about the technical requirements for full employment it was about the political requirements for full employment and in fact Kalitsky's famous paper is called political aspects of full employment. And so Kalitsky said, look, sure we can get to full employment following Keynes but we still haven't solved the problem that at full employment the workers are going to get more bargaining power they will bargain up their wages that will squeeze profits. Capitalists won't have profits to the extent that they want and that is going to undermine the viability of the capitalist system. So Kalitsky had this brilliant synthesis of Marx and Keynes and then the last person that you mentioned Milton Friedman he comes at it from a very different tradition but weirdly enough his conclusions aren't all that different than Marx believe it or not though he comes at it from a right wing neoliberal I mean Milton Friedman pretty much defined neoliberalism but here is basically Friedman's argument is look in in a capitalist economy you have competitive markets and people are competing businesses are competing for customers they're competing to produce products that people want to buy so any business at worth its salt is going to hire workers and as long as they need workers and they're going to pay people what they're worth bargaining is going to end up paying everybody what they're worth because otherwise you lose good you lose good employees the other businesses will hire the good employees pay them more and so you can't compete by just paying low wages this is what Friedman said so what Friedman said is if you just let the free market operate um you would be at full employment all the time everybody who wants a job would get a job they would bargain with the individual businesses capitalists in the end they would get paid what they are worth because businesses have to pay you what you're worth uh or else you lose you go and work someplace else and so that's he said look in capitalism we have full employment naturally now then what he said is that okay i know i know i know we don't really have full employment but he said the reason is that uh workers bargaining power causes the unemployment which is kind of what marx came out and said uh coming at it from a different angle but Friedman said the following take the idea of minimum wage laws so the minimum let's say we set the minimum wage at $15 an hour businesses say these workers aren't worth $15 an hour maybe they're worth 10 but the law says i have to pay them 15 and i can't pay them 15 because then i can't make any money so therefore these workers are going to be unemployed and what is causing unemployment in this case in the Friedman story what's causing it is the government intervention presumably trying to help out the workers ending up making things worse for a lot of workers because even if a worker says okay sure i'll work for ten dollars an hour the law says you can't do it so you have all these people that are willing to work for ten dollars an hour that can't get jobs because the businesses don't want to pay them 15 so that's what Friedman called it labor market rigidities and those rigidities like minimum wage laws and as Friedman also said uh unions perform the same function unions bar give workers bargaining power they do they bargain up the wage but Friedman says well if you bargain up the wage then businesses are going to get forced to pay workers more than they're worth and that won't last and so that according to Friedman is the basic cause of unemployment that workers have too much bargaining power uh that'll cause unemployment ironically Marx also said uh when workers have too much bargaining power capitalism can't work as capitalism Keynes was known as the father of macroeconomics talk about that and about the most important purpose of macroeconomics in the time of Keynes and then how the use and purpose of macroeconomics changed so dramatically from the late 1970s you know of course we had economics before the great depression and before Keynes and as i said Marx really focused a lot on the problem of mass unemployment but really it's with Keynes's book in 1936 during the great depression and in the aftermath of that that we really start to focus on this and we have this field explicitly addressing the issues of the overall economy so we come up with this term macroeconomics and really in initially macroeconomics had as its single most important purpose initially to achieve and sustain full employment under capitalism that was all the point and so the policy tools that were being refined and implemented were that the government should maintain the level of activity targeted at the level of activity that would be consistent with everybody who wanting a job getting a job so if the level of overall activity what we call GDP the level of overall activity was such that you had big big numbers of unemployed seven percent eight percent nine percent the government should basically spend more create more jobs that way till you get to the full employment point that's government spending with government borrowing so it's government deficit spending so you're not taking out in terms of tax money you're just putting in in terms of government spending and then the government pays off its debts later when you hit the full employment the other big tool during this period of macro policy was the central banks operating interest rates influencing interest rates so if you have high unemployment the central bank would lower the interest rates to the extent they could and with low interest rates businesses are more likely to borrow money consumers are more likely to borrow to buy a house or to buy a car and therefore that's the other way through which you stimulate the economy and keep it at a full employment and that was the basic that was it basically from coming out of world war two until the early 1970s that was the toolkit now countries did it to greater or lesser degrees their refinements but that was basically the model what happens in the 1970s is that you have this period of high inflation that was really unprecedented uh certainly in peacetime now the cause of the high inflation was uh the oil price shocks coming from the uh opac oil producing countries that realized they could get away with this they raised oil prices 300 percent in 1973 and then again another 300 percent in 1979 now that's just one price price of oil but that's a very important price the price of oil so that really through the capitalist western capitalist economies off kilter uh through the night let's say the early 1970s uh the rich um high income especially european economies were operating pretty close to full employment you know two percent one and a half percent unemployment rates they were succeeding in this kind of canesian model it got completely uh overturned due to the oil price shock and then the shift in focus uh in macroeconomic policy was really to worry about controlling inflation as opposed to maintaining full employment now it so happened that when that oil price shock led to the inflation you then also you return to these people like Milton Friedman who said see we told you all along capitalism if you give workers too much bargaining power just like mark said if you give workers too much bargaining power you're going to have inflation and so that we need to drive down worker bargaining power there's too much uh strength in unions there's too many regulations that support workers uh like minimum wage laws uh other forms of worker protection like unemployment insurance and so this whole gigantic shift in the policy direction really started in the early 70s but maybe more in the moving into the late 70s and really got uh crystallized with the election of margaret thatcher in england in 1979 and reagan in the united states in 1980 that were so aggressively anti-worker what they uh the way they posed it was to say well we are really for you know inflation control having an economy where we control inflation and we don't have workers having so much bargaining power so that we can now learn to control inflation and that's that's really what happened and that really is the beginning of neoliberalism uh that idea that macro policy should be used to attack the working class not to maintain sustained decent jobs full employment let's turn now to the 1990s when neoliberal macroeconomic policy really took hold in the developed and the developing world how do you explain that in my opinion the uh consolidation of neoliberalism of you know a policy regime in which we focus on inflation control over jobs in which we deregulate the financial markets in which we basically abandon equality within capitalism as a goal um in which uh the public sector is uh is uh attacked and in which we uh embrace austerity as opposed to expansion expanding the economy uh to create more opportunities even if it means government spending more so that whole neoliberal package it's been it was around forever i mean yeah Milton Friedman this is what he'd been talking about for decades um it was really however only when democrats in the u.s uh you know blareites and labor uh similar in germany the social democrats they embraced a somewhat more moderate version of this neoliberal package and that's what gave it the consolidated force that it had if the left parties official left parties like the democrats in the u.s had been a a new deal party a party you know fairly strongly committed to the well-being of workers neoliberalism could never have been consolidated it was when you got clinton in there who was you know this brilliant slick talker slick willy that was the term uh and he could talk about feeling people's pain and all that and so uh and that he was the first black president because he was so cool and he played the saxophone uh so all of that uh really helped to um uh create an image meanwhile the reality was uh clinton and the democrats were doing the bidding of wall street just like the republicans had done and the fact that it was being done by democrats is what enabled it to come in come in full force in 1998 uh the deregulation of the financial markets in the u.s was signed by president bill clinton he's a democrat this is a left of center party saying yeah let's let wall street do whatever they want and you get the equivalent uh with Blair in the uk and schroeder in uh west germany and so forth so uh really the neoliberal project uh becomes a unified project of mainstream parties and the rise of inequality has preceded a pace throughout the whole era of neoliberalism throughout uh clinton throughout bush one bush two uh obama inequality in the united states has risen persistently throughout all these periods taking a developing country experience so we get a developing as well as a developed country perspective on all this give us some context on how this transformation of economic thinking throughout the world and most especially the global south was not simply a matter of ideological persuasion that there was coercion involved take the case of south africa as an example as you have extensive experience there what really is underlying this ideological transition is the fact that under neoliberalism the power of capital becomes overwhelming so sure we have this you know beautiful revolution in south africa where we overturn apartheid and mendela uh you know impossible to believe but mendela nelson mendela becomes president of south africa a man who spent 27 years in prison as a terrorist so-called terrorism so these were unbelievable historical achievements at the same time once the african national congress came to power they made the decision that well really they can't do anything unless they have the approval of global capital they cannot upset the apple cart because they won't get any investments in they won't have any money to buy uh imports that they need and therefore they're going to operate within the framework of capitalism as defined by neoliberal capitalism as defined by wall street because they think that's the only way they can uh really succeed that's the only path forward it's very difficult to challenge that view you have to have a strong analytic foundation that's an alternative but you also have to be able to say that look we have a a political movement that is capable of challenging the prerogatives of capitalism we can elect people to office that don't accept the idea that rising inequality is a given and maybe even a good we want more uh equality we want more commitments to social investments to health care to child care to elder care that that's our priority and yes we can have market operations within that framework but the commitment to general well-being is our foundation and that really is the basic idea coming out of carol polanyi in his great work the great transformation which came out at roughly the same time as koletsky's work so these people koletsky polanyi even canes are really people who experienced the great depression world war two and are thinking deeply about how to build a decent society and polanyi said okay markets are one thing but you have to have a foundation and solidarity or else you don't have a society you have a dog eat dog situation uh and so really the challenge coming out of polanyi is what are the things we need to do to create a foundation of solidarity that was really his challenge which by the way is pretty much what you get out of a careful reading of adam smith way back in 1776 people think of adam smith as the great expositor of free market capitalism it's not actually true he did see a lot of virtues in markets especially relative to monarchy but he also made the point that we have to build a society with a moral foundation in fact the book he wrote prior to the wealth of nations in 1776 was called a theory of moral sentiments and at smith theorized yeah you could we can have markets and markets can be competitive and people can be out for themselves but that needs to be within a framework of social solidarity but briefly recap the marx problem the canes problem and the polanyi problem in the era of neoliberalism under neoliberalism as we discussed you don't have the commitment to full employment uh so the marx problem of mass unemployment being the fundamental uh regulator the operations of the macro economy uh emerges full force under neoliberalism we eliminate financial regulations for the most part and that then leads to the emergence of the highly speculative bubbles financial bubbles that then led to the 2007 2008 2009 financial crisis and what about the issues of social solidarity well we certainly are seeing that all over the world i mean the rise of neo fascism is really a a marker in terms of people basically deciding we don't care about social solidarity we have gotten kicked around by the big shots the neoliberals the politicians that some of them talk a good game none of them deliver for us we've seen this for 40 years and so uh we have to fight for ourselves and we don't want immigrants uh we don't care about we don't want social institutions we don't want to pay taxes for that so that's really uh the three critical markers of neoliberalism let's wrap up with your thoughts on the way forward in a world facing massive unemployment on the scale of the great depression and where it is technically possible to generate decent jobs in all countries if instead of neoliberal macroeconomic policy making that blames workers for inflation macroeconomic policy was used to create and sustain decent jobs at full employment yeah we've had 40 years in which the class strength of the capitalists has uh been absolutely predominant and you can see that through the figures on inequality so that you know the level of inequality peaked in 1928 right before the great depression and the wall street crash where the top one percent got about 25 percent of all national income that that number after the great depression it collapsed top one percent had about 10 percent of national income way less proportionally and then with neoliberalism in the 1980 it started to rise again to where it is basically got back to the top one percent having about 25 percent of national income the difference between now and the 1930s is that now it is still staying at 20 you know the top one percent still has 25 percent of national income in the 1920s it was at that level 25 percent and then collapsed so the power of capital uh under neoliberalism has just been extraordinary has been really historically unprecedented what i'm advocating is yes a reversal uh back to something like a new deal tradition something like the kinds of things that uh bernie sanders was talking about in his campaign so you know sanders calls himself a socialist but really the types of policies he was advocating were basically along the lines of a new deal and so that's you were nice enough at the outset of the of this interview to mention the new book which is called climate crisis and the global green new deal so in addition to the issues of inequality obviously we have to focus on the issue of the climate crisis and what to do about it i see the the notion of the global green new deal is a way through which we can synthesize an egalitarian agenda and an ecological agenda we have to leave it there robert poland thank you thanks so much it's really been great talking to you and from janeva switzerland thank you for joining us in this episode of gpe news docs