Hyman Minsky writes in the second paragraph of the introduction of his book entitled ‘Stabilizing an Unstable Economy’ that ‘although vital problems like personal safety, honesty, and integrity transcend pure economic concerns, my focus is upon stabilizing the economy. Perhaps naively, a premise in what follows is that if the economy provides basic security and a sense of personal worth for all – because work is available for all – many social problems will recede to manageable proportions.’ Oddly enough all the industries that have received (or seek to receive) very large sums of government bailout aid have continued to axe jobs. This government largesse is not without its critics. One main criticism of large government spending is the expected elevation of inflation levels. The US fiscal and monetary policy has historically been shaped to fear inflation more than unemployment. However, the creation of jobs will generally dampen the force of inflation while keeping unemployment low. The ancillary benefits of employment alluded to by Minsky, that is, stabilizing the economy, will generate goodwill and hopefulness in citizens as employees and consumers. These intangibles create tremendous value, social and economic, though mostly unrecognized by establishment economics. The key metrics for economic growth of our system are based upon the quantity of consumption of goods and services, regardless of actual benefit to society. For instance, an increase in the number of serious medical surgeries would be measured as a positive in terms of economic activity, an increase in GDP. Though we would mostly agree that an increase in serious surgeries suggests an overall decline in the health of our citizens. Actually, if this decline in health were a consequence of significant consumption of unhealthy fast food, then the metrics of economic activity would signal even more strongly healthy economic growth. So quality of life and standard of economic activity do not necessarily move hand in hand.
As Kevin Phillips documents in his book, ‘Bad Money’, the financial sector of our economy has been growing in influence and wealth since the Reagan administration. The combined intentional laxity of enforcement and unfettered greed have created a genre of financial wizards that sought to enrich the wealthy with undue risks to society at large. Eventually all Ponzi schemes collapse. By virtue of their large size and influence, when they falter (recall Long-Term Capital Management bailout, Savings and Loan bailout, Mexican debt crisis, etc.). they claim that they are too important to fail. Of course, if the government requires checks and balances on the money provided to these institutions, the media pundits and the myriad of think tanks shout bloody socialism. Without serious structural changes, we can only expect more of these financial crises and not necessarily a possibility of recovering and maintaining global economic status. It is likely that each such crisis weakens our economic advantages vis-a-vis other countries like a wound that never heals completely. If the US cannot control its economic elites then the international community may take steps such as the replacement of the US dollar as the accepted de-facto currency of international trade. As Minsky notes, instability is inherent to capitalism.
With this opportunity, where the US treasury is infusing a large amount of money into the national economy, the government should take serious steps to ensure that the money generates jobs that lead to economic stability and sustainability. Sustainability simply means jobs that focus on key areas for sustaining and improving present and future quality of life standards. Jobs that improve and strengthen public transportation, national health, democratic institutions, renewable energy sources, just to name a few, would qualify as sustainable.