How to Save the Global Economy: Hire Everybody
Through the 1930s, a young Ohio lawyer named Benjamin Roth kept a diary about the economic and social chaos he saw around him, chronicling the extreme uncertainty about the future that was affecting ordinary, middle-class Midwesterners. The striking thing to readers now is how many false dawns there were and how accordingly slow the authorities ...
Through the 1930s, a young Ohio lawyer named Benjamin Roth kept a diary about the economic and social chaos he saw around him, chronicling the extreme uncertainty about the future that was affecting ordinary, middle-class Midwesterners. The striking thing to readers now is how many false dawns there were and how accordingly slow the authorities were to take action; they kept thinking — hoping — that the economy was about to improve. "When I started these notes it never occurred to me that the depression would last more than two years," Roth wrote in 1936. "We are now in the beginning of the seventh year and the road is not yet clear."
Measured by the length and depth of the downturn in global GDP, the current economic crisis is set to be even worse than that of the 1930s. As in the 1930s, governments in the United States and Europe must switch from doing the least they can get away with to avert immediate disaster to acting with enough commitment to the future that their citizens begin to believe in a brighter economic outlook. Above all, this means creating jobs — perhaps even creating a modern equivalent of the Depression-era Works Progress Administration.
Unemployment breeds hopelessness. Whether it affects young people just entering the workforce or older people who will find it hard to get re-employed, it scars their prospects for the rest of their lives. As of November, 16- to 19-year-olds in the American workforce and adults seeking to re-enter it had nearly the same alarming unemployment rate: about 25 percent. Of course, it is best if private businesses start to create jobs for these people by growing — but until they do, the government must step in.
That’s why governments in the United States and Europe should take a page out of the Depression-era playbook and introduce major public-sector jobs programs, guaranteeing employment, at least for young people. Why? There are about 3.6 million youth ages 16 to 24 in the United States looking for work, and more than 1 million — a record 21 percent — in Britain. At a time when governments are trying to cut their budgets and firing public-sector workers, this might seem wildly contrarian. But in practice, this kind of program would not cost much more than existing social security benefits in Europe, and in any case it would save a great deal of future government expenditure supporting a lost generation. The programs could also be time-limited, say, to three or five years. But they should be meaningful and suit a range of skills, from construction to the arts.
Some uses for this kind of instant labor force are obvious, such as rebuilding decaying infrastructure. At a time of similarly massive economic and social upheaval, Britain’s Victorian-era leaders made such massive, confident investments in the fabric of the nation that we are still using them; the same is true of the dams and bridges built in the United States under Franklin D. Roosevelt’s New Deal. But let’s not leave it at that. Why not also take on the sorts of brave artistic and cultural projects funded during the Great Depression? We could use more of the introspection and discovery of meaning that comes from the arts in this time of dislocation.
Of course, it would be better for the private sector to create enough jobs instead, and in the end it will have to: Structural government deficits clearly need to be eliminated. The job creation I’m advocating is an emergency measure, and its additional short-term financial cost need not be large — especially compared with the estimated $1 trillion annual subsidy banks are still receiving globally. The long-term savings of getting millions of young people to work, and the long-term benefits of a commitment to investing in the national fabric, are hard to estimate but surely are large. What’s required is sufficient responsibility and courage from politicians and, above all, a recognition that if too many people stay unemployed, with no prospects and on the fringes of mainstream society, there will be no end to this economic crisis.