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The Job Guarantee Bill would reduce crony capitalism and recessions.

by on February 12, 2013

Many voters on both sides of the aisle are aware of the issue of crony capitalism, which is using government spending as a way to give favors to businesses, individuals that are campaign donors, or friends of politicians. This problem will likely never go away, unless we found a way to elect the most honest leaders and/or reform campaign financing, again, not likely to happen. Most of this favoritism is done under the guise of job creation and strengthening the economy, and sometimes it actually does. But the major problem behind this favoritism is that it allows the government to pick the winners and losers. It is an adherent to smaller businesses to enter markets and reduces competition especially when a small business, who can’t get a loan, has to compete against another business who just won a government contract without a bidding process because they knew someone who just got elected. But there is a way to reduce crony capitalism, and that would be to introduce and pass a job guarantee bill.

A job guarantee bill would replace unemployment insurance with a jobs bill that would hire anyone who is willing to work. It would also supply training and education to those who need it if they are entering a government job that required a newly acquired skill. So instead of having millions of people on unemployment insurance looking for jobs and filling out applications, you have millions of people improving our failing infrastructure, learning new skills and giving the government an improved bang for its buck.

On the individual scale it would work like this: the economy experiences a recession and your job is eliminated, you then start looking to the private sector for work, but there is no one hiring. So you move onto a government supplied job that would be related to your field and you take the work because you need the money, and this is the only way you could get income until you get back into the private sector. The job pays a minimum wage or a wage that is lower than the private sector’s equivalent for that particular position, so as to not compete with the private businesses that will eventually hire you back. If there is no related position in the government in your field then you would have to consider training at a minimum wage into another field, which will only make you more marketable to the private sector once they are able to hire you again.

This greatly helps liquidity because someone who is working is also someone that employers that are more willing to hire. So this would actually reduce the amount of people that would need the job guarantee bill, since unemployment insurance makes you less attractive to an employer.

So how does all this effect the rampant crony capitalism? It is simple, with a fully employed populace, the need to attract jobs into states and districts becomes less vital. So when Caterpillar threatens to leave unless they get a special tax break, the state of Illinois could say go ahead! If you leave some other company will replace you, or the government will hire the unemployed that you left behind, and eventually they will get hired back into the private sector. It takes away the incentive for companies to coerce officials into framing policy to favor business, especially business that have tremendous power because of the jobs they supply. This helps make the idea of becoming more “free market” a reality, and not just an ideology rhetoric line.

Bill Mitchell, who is part of the Center of Full Employment and Equity, sums this up nicely, and so I will leave you with this:

“The JG also differs from a Keynesian expansion because it represents the minimum stimulus (the cost of hiring unemployed workers) required to achieve full employment rather than relying on market spending and multipliers.

Further, the JG reduces (but does not eliminate) the influence of crony capitalists who always seek to capture government policy to advance their own interests.

The JG functions as an automatic stabiliser rather than as a discretionary program. It builds further endogeneity into the budget balance. When the economy turns down, the JG pool of workers will rise as displaced workers elect to take the guarantee. When the economy starts to improve again, the private sector merely has to offer a wage (or conditions) better than the JG wage and the JG pool will decline again.

The discretion by governments is thus reduced. A pool of projects would be agreed upon with local communities and the expansion or contraction of the scheme would be automatic. There would be no big bailouts of banks or business firms. The financial markets would be largely dealt out of the game.”

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