Thursday, January 12, 2012

The Book of Jobs

I can't take credit for this catchy title - it is a direct quote from a piece in the January 2012 edition of Vanity Fair written by the eminent Columbia University's Economics guru, Joseph E. Stiglitz. I was so impressed with the piece that I want to share some salient points as well as the link:

While I'm not a Keynesian, i.e., proponent of government spending to cure recessions, Dr. Stiglitz appears to be as makes some important comparisons between our current Great Recession the Great Depression. He discusses a primary cause of the Depression as centered around the structural changes in an agricultural-based economy at the time. An agricultural revolution (improvements in farming techniques, better seeds, fertilizer and equipment) increased output, drove down prices and required fewer farmers. We all know the disaster that ensued in terms of declining incomes and jobs--our parents who lived through it never let us forget it. Nor should we.

Today's economy has similarities in principal, as we move from a manufacturing to a service economy. About 1/10th of our workforce today is employed in manufacturing, versus 1/3 60 years ago, because of greater productivity (for example the Internet reduced the need for some employees) and globalization (sending lower-paying jobs oversees where labor is cheaper).

World War II got us out of the Depression, which, in fact, was a massive example of government spending. According to Dr. Stiglitz, while we don't need another war, we now need something equivalent to that significant level of government spending because monetary policy is not working. Nor did bailing out the banks, because most of them stopped lending and many used that money for bonuses. The piece also suggests changes in tax policy and suggestions for a productive economy that focus on increasing living standards, rather than creating greater risk and inequality.

Well worth the read, so don't be fooled by Lady Gaga on the cover.

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