“Unemployment is sanctioned by government policy.” This is a quote from Pavlina Tcherneva’s 2020 book, The Case for a Job Guarantee. This post briefly demonstrates how it is official American government policy to keep millions unemployed in the name of “fighting inflation.” This is part of a larger story of how prices are stabilized in our now-half-century-long neoliberal era: on the backs of the disadvantaged.
|Related post: Managing price stability only for some, on the backs of millions (our current system)|
GO BACK TO ALL MMT RESOURCES
This post was last updated September 30, 2020.
Disclaimer: I am a layperson who has studied MMT since February of 2018. I’m not an economist or academic and I don’t speak for the MMT project. The information in this post is my best understanding but I don’t assert it to be perfectly accurate. In order to ensure accuracy, you should rely on the expert sources linked throughout. If you have feedback to improve this post, please get in touch.
In 1977, during the Carter administration, the Federal Reserve was mandated by Congress to maintain: “(1) maximum employment, which means all Americans that want to work are gainfully employed, and (2) stable prices for the goods and services we all purchase.” From that same page (emphasis added):
The maximum level of employment is largely determined by nonmonetary factors that affect the structure and dynamics of the job market. These factors may change over time and may not be directly measurable. As a result, the FOMC does not specify a fixed goal for maximum employment; rather, the FOMC’s policy decisions must be informed by its members’ assessments of the maximum level of employment, though such assessments are necessarily uncertain and subject to revision.
In fact, a 2017 study by the a London School of Economics and Paris School of International Affairs concludes: “Despite unavoidable caveats, we find robust evidence of a systematic impact of the ideological features of their alma mater on FOMC members’ voting behaviour – impact that is found to be more important than the other traditional determinants of central bankers’ actions.”
In other words, the maximum level of employment is determined primarily by the ideology and guesswork of those who actually make these decisions (and who are definitely not desperate for a job, shelter, or healthcare).