Wednesday, February 5, 2014

Hyman Minsky's "Economics for Democrats"

Just a quick note on a Hyman Minksy paper I read today (thanks much to the excellent Professor Kelton for calling the paper to my attention).

The paper starts out on a promising note -- who does not agree that today's Democrats need some lessons on economics? -- but then devolves into "a Job Guarantee will solve all our problems" sales pitch,  which I have heard many times before and am not interested in hearing again.  Sigh.

Anyway, here are a few highlights:

~ Minsky calls for raising the Social Security retirement age to 70 (and in another paper, Minsky called for repealing child labor laws and putting children to work, as well! ).  Because ..... well, because he hates giving people money, that's why.   Like the Puritans, Minsky believes that leisure is sinful and work is heavenly.  Never mind mechanization and automation, never mind that one farmer can grow enough food to feed 1000 people, never mind that cars can be built by robots, etc..  

~ Minsky apologizes for FDR's inadequate response to the Great Depression by claiming that Keynesian economics was not well understood until the end of FDR's first term, presumably referring to the publication of Keynes' "General Theory" in 1936.   However, Huey Long had already demonstrated the success of what we now call Keynesian economics during his term as governor of Louisiana 1928-32.   Huey embarked on massive public works projects, building roads, bridges, hospitals, upgrading public schools, and offering free med school for qualified students, financed with a combination of bonds and new taxes on resource extraction (which fell largely on out of state corporations like Standard Oil).  Huey's 1934 Share Our Wealth  proposal was very popular, and Huey (who by then was a Senator) threatened to run against FDR as a 3rd party in 1936 if FDR failed to enact Huey's economic proposals.  The threat worked, and FDR did co-op a watered down version of Huey's "Share Our Wealth" proposal in what became known as the Second New Deal.  FDR explained to his staff that he had to "steal his thunder," referring to the popularity of Long's Share Our Wealth plan.

Huey Long's "Share Our Wealth" proposal pushed FDR to the left

~ Minksy attempts to justify his disdain for "transfer payments" by claiming that "the welfare state ... was not a critical part of the New Deal."  Well, it is true that FDR shared Minsky's disdain for handouts, but it's not true that handouts were not a critical part of the New Deal.  Social Security, for example, was certainly a critical part of the New Deal, and Social Security at the time was a handout -- the people who received SS in the 1930's had not paid into it.  

Though FDR opposed it and vetoed it, nonetheless Congress overrode the veto to pass the Bonus Bill giving a handout to WWI veterans.  The veteran's bonus was hugely popular at the time, and provided a much needed economic stimulus.

Aid to Families With Dependent Children was certainly a critical part of the New Deal, and it was a handout.  It primarily benefited to stay-at-home mothers, yet Minsky has nothing nice to say about AFDC.  Why does Minsky hate stay-at-home mothers?  Did he have relationship problems with his own parents?   Did he feel abandoned because his mother died when he was only 19?  I don't know, but Minsky doesn't seem to have a lot of empathy for mothers, for children, or for old people.

~ While the paper is mainly a sales pitch for the Job Guarantee, which would coerce unemployed people to perform dead end jobs for minimum wage, Minsky proposes that the Federal government should also create jobs by way of "national research universities and institutes."  Presumably these proposed research universities would pay the going rate for PhD's and not merely minimum wage?  How convenient, since Minsky spent most of his life working in universities and research institutes!  

~ Minsky proposes a "defined contribution pension" to supplement Social Security -- for those lucky enough to live to his proposed retirement age of 70!  The conservative Heritage Foundation would surely agree with that!

So to sum things up, the allegedly socialist Minsky hates handouts, hates stay at home parents, hates old people, and hates children.  He loves minimum wage grunt jobs for other people, but prefers government subsidized research university jobs for himself!

Lest you get the impression that I am against Minsky, let me say that I am mostly impressed with his theory of business cycles.  He's good at macro theory, but doesn't seem to have a lot of empathy for people.  Of the JG/ELR, he speaks in generalities but never spells out the details of exactly how it would work.  As  Perry Mehrling said of Minsky, "he was an inspiring teacher, but his students learned to look elsewhere for the nuts and bolts of their professional training."  


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