By Arnold Kling
As promised, here is my review essay on Alexander Field’s A Great Leap Forward. I think the highlight of the essay is the table that lays out the six eras discussed in the book.
How much does the current period resemble the thirties? Jay Cost has a graph showing the rise in the number of Americans on food stamps.
The start date of this heartbreaking graph is important – June, 2009 is the point at which, according to the National Bureau of Economic Research (NBER), the economy hit bottom and began to recover.
The NBER, as usual, mostly relied on GDP data in order to mark the end of the recession. If it were up to me, employment data would be the key indicator, and I would say that the economy did not start to turn around until a few months ago. For a lot of people, the turnaround has still not materialized, and for many it never will.
On the topic of job creation, my currently-unemployed daughter downloaded How Do You Create a Job?, a podcast from Planet Money of NPR. We were listening to it in the car, and after a few minutes I could not stand it and asked her to play something else.
The host was talking about how Microsoft is just “sitting” on $40 billion, not creating jobs. So crude Keynesianism has gotten to the point where any saving, done by any entity, is contractionary?
Microsoft is presumably deploying its assets in order to earn the highest possible returns for its shareholders. If this means investing in the securities of other companies, then so be it. If it means investing in government bonds, well, somebody has to hold all that debt.
As I’ve also mentioned, I am working on a paper on PSST to submit to a journal. I am sick of job creation being described in hydraulic macro terms as N = f(Y), where N is employment and Y is real spending.
From a PSST perspective, job creation is more like opening up trade. David Friedman, in The Economics of Everyday Life, has this great line about how we can grow cars in the
wheat corn fields of Iowa. We grow corn, put it in ships to Japan, and the ships come back with cars.
Well, all of us grow cars. That is, nobody can make their own car. Instead, we work in whatever specialty we have, and we trade what we produce for a dizzying variety of goods and services.
Many workers in the 1930s found that their special skills were not needed. I have just started Inventing Ourselves Out of Jobs? by Amy Sue Bix, and she lists many examples, such as automatic bottle making machines displacing glass blowers.
I think a lot of workers no longer have something of value to trade in today’s market. Hence, more are subsisting on food stamps. Eventually, the patterns of specialization and trade will restore some of them to being able to work for a living. But I think that a lot of the older vintages of workers are not going to make it back into the labor market, and most of the recovery will come within newer vintages.