Complacency? WHAT COMPLACENCY?

As was reported by Brad DeLong, Paul Krugman and Mark Thoma, David H. Romer, the co-host of the IMF "Conference on Macro and Growth Policies in the Wake of the Crisis" had "one major source of unhappiness" with the conference:

Today, not only is unemployment higher than most 2008 forecasts of its peak levels, but the expected pace of recovery is weaker.

Despite this deterioration, the dire sense of urgency in late 2008 has not increased. Indeed, it has largely disappeared. I find this complacency in the fact of vast, preventable suffering and waste hard to understand.

The Sandwichman is shocked! Shocked to find that complacency is going on in here!

According to the Statistics Canada definition, the Sandwichman was unemployed from February 1994 to September 2006. This is not to say he was completely idle. Long stretches of proposal writing and network pestering were interrupted sporadically by intense bouts of well-paid contracting as a policy research consultant. Fed up with yet another seemingly interminable contract drought, S. got a job as a grocery store clerk in 2006.

One "Invitation for Proposals" that S. responded to in the early days of his spell as an independent contractor came in June 1995 from the Employment Strategies Branch of BC's Ministry of Employment and Investment. The proposal request was titled "Labour-Market Changes in Work Time and Distribution of Work." Its stated objective was:

To find viable new ways for the Province to create jobs by redistributing work over different time periods, such as shorter work weeks, and by more flexible working conditions, such as job sharing.

The proposal S. submitted highlighted an observation from the Canadian Government's 1994 Report of the Advisory Committeee on Working Time and the Distribution of Work that, "long term forecasts see unemployment rates declining only very slowly through the 1990s." That was 17 years ago. An abrupt freeze on discretionary spending in August 1995 led to cancellation of the project competition.

Nevertheless, S. proceeded with the proposed research project, unfunded. Over the years, S. accumulated a thick file of correspondence with bureaucrats, politicians and academics on the topic of his research ranging from desultory expressions of interest to amusement to occasional outbursts of inexplicable hostility. A subjective averaging of those responses approximates the complacency Romer found hard to understand.

Sandwichman doesn't find the complacency so hard to understand. The official dogma on unemployment is that doing something about it is futile, unnecessary and even harmful. Instead, the panacea  of boosting business confidence (or "competitiveness") is always at hand. This is not so much complacency as a confidence game. The persistence of this scam is not at all hard to understand -- it is a lucrative swindle. What is more perplexing is why "the rest of us" fall for it over and over again.

About a year after the Employment Strategies Branch issued its invitation for proposals, a "debate" on eliminating overtime appeared in the Business in Vancouver weekly between Jock Finlayson, then vice president of policy and analysis for the Business Council of B.C., and Ken Georgetti, who at the time was president of the B.C. Federation of Labour. Finlayson's contribution is an exemplar of the boosting-business-confidence-will-solve-unemployment con.

The line that struck Sandwichman back in 1996 begins in the second paragraph of the second column: "Work sharing rests on the belief that the economy can generate only a fixed amount of work..." Not only is the assertion utterly false, it is patently absurd. Yet economists, journalists, business leaders and politicians repeat it with impunity. David Romer may lament the complacency about fighting unemployment but what about the complacency in the face of the scam that underwrites the inaction?

Don't just take Sandwichman's word for it. Here's Michal Kalecki on business confidence in "Political Aspects of Full Employment" (1943):

We shall deal first with the reluctance of the 'captains of industry' to accept government intervention in the matter of employment. Every widening of state activity is looked upon by business with suspicion, but the creation of employment by government spending has a special aspect which makes the opposition particularly intense. Under a laissez-faire system the level of employment depends to a great extent on the so-called state of confidence. If this deteriorates, private investment declines, which results in a fall of output and employment (both directly and through the secondary effect of the fall in incomes upon consumption and investment). This gives the capitalists a powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis. But once the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness. Hence budget deficits necessary to carry out government intervention must be regarded as perilous. The social function of the doctrine of 'sound finance' is to make the level of employment dependent on the state of confidence.