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Capitalism is Flawed - Part 1

The sooner we recognize the flaws and accept them the sooner we can fix it.  This NOT a socialist or communist rant. 

This is constructive criticism that we should accept if we are going to make our capitalist system work better for the most Americans as possible. 

John Maynard Keynes recognized capitalism’s flaws when he wrote General Theory of Employment, Interest and Money:

The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.

 
That ‘economic society’ he was referring to is capitalism.  Capitalism’s major flaws are its failure to deliver full employment and its incredible inequitable distribution of income or income inequality.  Both are major problems in the U.S. today. 

Full employment has many definitions.  Most definitions serve as a scapegoat for policy makers by setting a high unemployment standard.  For instance there was talk recently of increasing the threshold of unemployment rate that signals full employment:

Policy-makers may be accepting a higher level of unemployment—around 5.25 percent as opposed to around 4.75 percent—as their goal for full employment in the future as a result of lingering problems from the deep recession

How convenient is that?  Move the goal posts instead of addressing the problem.  Here is a much better definition: Full Employment is when anyone who wants a job can get one.  Based on that definition we have never reached full employment. 

There has been a proposal to reach full employment that has been studied extensively by a group of economists for quite some time but doesn’t get much attention because it may actually work and change our economic system for the better.  The idea is called “Employer of Last Resort” or Job Guarantee. 

A job guarantee program is one in which government promises to make a job available to any qualifying individual who is ready and willing to work. Qualifications required of participants could include age range (i.e. teens), gender, family status (i.e. heads of households), family income (i.e. below poverty line), educational attainment (i.e. high school dropouts), residency (i.e. rural), and so on. The most general program would provide a universal job guarantee, sometimes also called an employer of last resort (ELR) program in which government promises to provide a job to anyone legally entitled to work.
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There are different versions of the job guarantee program. Harvey’s (1989) proposal seeks to provide a public sector job to anyone unable to find work, with the pay approximating a ‘market wage,’ whereby more highly skilled workers would receive higher pay. Argentina’s Jefes program (examined below) targets heads of households only and offers a uniform basic payment for what is essentially half-time work. In Hyman Minsky’s (1965) proposal, developed further at The Center for Full Employment and Price Stability, University of Missouri-Kansas City and independently at The Centre of Full Employment and Equity, University of Newcastle, Australia, the federal government provides funding for a job creation program that offers a uniform hourly wage with a package of benefits. (Wray 1998; Burgess and Mitchell 1998) The program could provide for part-time and seasonal work, as well as for other flexible working conditions as desired by the workers. The package of benefits would be subject to congressional approval, but could include health care, childcare, payment of social security taxes, and usual vacations and sick leave. The wage would also be set by congress and fixed until congress approved a rate increase—much as the minimum wage is currently legislated. The perceived advantage of the uniform basic wage is that it would limit competition with other employers as workers could be attracted out of the ELR program by paying a wage slightly above the program wage.

It is possible to achieve Full Employment in a capitalist system.  The proposals and ideas are out there supported by research.  The question is whether there is the political willingness and courage to do so. 

Good luck.