Re-Post Number 6: "Public Employment and Economic Planning: History, Theory, Implications" (September 19, 2007)

Note:
You'll note some similarities between this diary and the more recent diary on economic planning and the Apollo Alliance. Luckily, the older diary goes into what future economic planning should look like, providing enough new material to be of interest.
-------------------------------------------------------

History

Economic planning is probably the most obfuscated public policy in American history, bar none. The cries of socialized medicine, the Harry and Louise ads, the current struggles over SCHIP - all of these pale in comparison to the sound and fury raised over economic planning. Conservative Republicans and Democrats called it creeping socialism, Hayek called it creeping fascism, and the public imagination reeled before an onslaught of images of totalitarian control.

The reality was much less terrifying. The NRPB, the National Resources Planning Board, was probably the most influential of the New Deal planning institutions. Ostensibly an institution for rationalizing use of things like coal, oil, timber, etc., the NRPB instead became a place for people to re-think economic planning as an exercise in democracy, as a way of directing the guiding the economy towards goals that enhanced the quality of life for all citizens, as a way of putting the people in charge of their economic life.

Throughout the 1940's, the NRPB published a series of reports, laying out the blueprint for a new kind of American society that would come after the war, a society based on the principles of the Four Freedoms and the Second Bill of Rights proposed by President Roosevelt.

Now how does all of this tie in with public employment? In their reports, the staffers of the NRPB looked to programs like the Works Progress Administration as an example of how the government could provide services en masse to Americans in need. More importantly, the NRPB's reports, especially the 1942 Report titled "Security, Work, and Relief Policies," envisioned the provision of jobs by the Federal government as a permanent policy designed to push the country towards full employment, in conjunction with Keynesian economic policies.

The importance of this shift in economic planning, from the crude efforts to secure price and wage cooperation under the National Recovery Administration to a more sophisticated understanding of the possibilities of public action, was that it expanded the policy imagination of New Deal Democrats far beyond the narrow scope we see today. Moreover, New Deal Democrats had reason to believe that such actions were possible. The WPA had shown that the Federal government could fund and administer mass employment projects and that such projects had a substantial impact on the unemployment rare. The Office of Price Administration, a war-time agency that was given the power to regulate prices and wages, succeeded in holding inflation below 1% in a period of full employment.

Because of these advances, the NRPB believed that the national government could provide the trifecta of broad prosperity: low unemployment, low inflation, high economic growth. In essence, everything that the so-called "golden age" of the 1950-1960's was supposed to have achieved. However, there were two key differences between the golden age as envisioned by the economic planners and the golden age that transpired: first, public employment, price and wage controls, and more expansive social insurance programs would have ensured that prosperity would have flowed from public actions, such that the political will of the people, not the largess of corporate America, would have promoted economic growth. Second, it would have meant that the benefits of post-war growth would have been much more broadly distributed, both to the poor, and to minorities.

The end result, however, was that of political defeat - the de-funding of the NRPB, the watering-down of the Full Employment Act (as discussed in my previous diary), and the demonizing of both public employment and economic planning.

Theory

So what should this tell us about economic planning and public employment?

First, it should remind us that the belief that the government's actions do not influence the economy is historically inaccurate - public action can and has dramatically shaped the economy, altering employment levels and inflation rates for periods of several years at a time. Thus, our understanding of what is and is not possible in terms of economic policy should be expanded beyond the boundaries of the orthodox.

Second, it should make us think about the purposes behind economic policy. It is often a habit of Democrats to focus on particular economic indicators - economic growth, numbers of jobs created, and so forth - instead of picturing a vision of the kind of economy and society that we seek to achieve and then moving towards it.

Third, we must realize that victory begets victories and defeat, defeats - we cannot allow any push we make in the future to be stymied by Republican obstructionism. Just as the defeat of health care in 1994 robbed the Democrats of a major policy victory that would rally the base AND working class voters, so too will defeats on public employment, or any other initiative. More on this topic in my next diary.

In terms of economic planning, we need to shift our theoretical perspective to the global and the long-term. The United States stands at an uncertain point - we are still the world's largest economy, but long term trends in terms of debts, deficits, and balance of trade shows how vulnerable our position is. The American people stand at an even more perilous position - the poor, the working class, and the middle class are all facing stagnating and/or declining fortunes in terms of income, wealth, homeownership, health coverage, and no doubt higher education will be soon to follow.

What then should economic planning aim at?

1. Restore Income to Restore Savings/Balance of Trade/Rough Equality

The American economy has been shored up in recent years by the endless cycle of consumer debt that masks the decline in real incomes. Boosting the purchasing power of the ordinary American would help to restore our internal market- an essential goal, given the variability of the globalized economy. Moreover, it would put our consumer base on a much stronger basis regarding income v. debt, allowing savings, assets accumulation, and investment to increase, and redirecting more income towards the broader economy and away from finance payments, which fuel an over-saturated financial sector.

2. Use Public Employment to Shield Against Globalization

If the reality of living in a globalized economy is that industries shift rapidly across borders, then it becomes essential for the U.S and other developed economies that are likely to lose industries to less developed region to increase, not decrease their social spending. Increasing public employment can keep unemployment rates low, preventing economic decay in areas that are losing jobs, maintaining consumption levels through fueling wages. Moreover, public employment provides a shield against the destabilizing effects of globalization, a safe haven against sudden ups and downs in world markets, by counter-cyclical actions.

3. Use Public Investment to Guide the Economy Forward

Public investment can act in a complementary fashion, to create new industries that take the place of old industries, to improve the national infrastructure upon which industries depend - not just roads, bridges, and levees, but also schools, wireless internet, and research and development into new technologies. This both creates new goods and services, adding to economic growth, but also provides jobs that are designed to be more "grounded" in the American economy than consumer-goods production.

4. Set A Comprehensive Target for Economic Policy

Although we don't admit it, and we don't approach it in as much of a conscious fashion as we need to, there are certain targets that government policy does aim at - inflation at less than 2% a year, economic growth of at least 3% a year have been fairly standard aims. However, they are not targets that particularly benefit ordinary Americans - they don't include wage growth, they don't include unemployment, and they don't include the distribution of wealth in American society.

So when we engage in economic planning, it should be to hit targets that represent the whole of the American economy and the whole of the American people as well.

Implications

I'm sure that many of you are familiar with the Apollo Initiative, a joint project of labor unions and environmental groups to achieve energy independence on a basis of green technology and green jobs.
http://www.apolloalliance.org/...

Now, on it's own, the Apollo Initiative is an impressive policy innovation, envisioning a 10-year, $300 billion push towards alternative energy that envisions a whole host of coordinated policies, subsidies, and tax reforms towards a single end. It's certainly much more innovative than anything we've seen in the last few years.

However, as a model for future policy, it suggests an intriguing possibility for American policy and economic planning. Here we have a model of coordinating economic and social objectives that aims to "do good and do well" at the same time, a way of economic planning without falling into the public relations traps.

Imagine, if you will, a host of Initiatives, all designed to boost economic performance, develop new industries, create jobs, improve the national infrastructure, and benefit the commonweal of the country:

• Athena Initiative - centered around education (building new schools, recruiting teachers by providing salary bonuses, developing new educational technologies, expanding access to higher education through expanding campuses of both public and private universities - think about it, Harvard rejects all but 7% of applicants, turning away thousands and thousands of superlative students - why not expand the undergraduate body beyond just 6-odd thousand?)
  
• Mercury Initiative - centered around telecommunications and information technology (providing free broadband internet, universally compatible cellular phone networks, expanding opportunities for startups in the music and movie business, and so forth).
• Asclepius Initiative - centered around health care industry (leveraging our current public investments in medicine such as the VA, NIH, etc. into creative new publically-owned generic drugs, providing incentives for healthier work environments, improving our public health systems, using health research to uncover "best methods" of health care, so that more money is put towards care instead of overcare, and so forth).

In this way, the federal government would essentially become the national venture capitalist, using its ability to sustain investments across decades before technologies prove themselves.