Politically Incorrect Solutions: What About a New Deal-Style Jobs Program?

By Ryan A. Dodd, Dollars and Sense. Posted April 14, 2008.

Dark clouds are now looming over America's economic future. As first the stock market boom and then the housing boom have come to an end, along with the fountains of cheap credit that were their mainspring, the perennial gale of unemployment is blowing in. The president and Congress have addressed the downturn with tax rebates and talk of "debt relief." Meanwhile, public infrastructure is crumbling. Workers' wages are stagnating while their work hours are rising. Health insurance is becoming less and less affordable for the typical family. And as U.S. military spending escalates, government spending on essential services is drastically reduced.

All of these facts serve to remind us that capitalist economies are inherently unstable and structurally incapable of creating full employment at decent wages and benefits. While tax rebates and debt relief may provide some minor protection from the coming economic storm, these measures are temporary -- and inadequate -- responses to a perpetual problem. As an alternative to these ad hoc policies or, worse yet, the free-market fundamentalism still widely preached in Washington, some economists and policymakers, in the United States and abroad, are touting a policy that seeks to end unemployment via a government promise to provide a job to anyone ready, willing, and able to work.

Argentina's Experiment in Direct Job Creation

In early December 2001, following nearly two decades of neoliberal restructuring, the Argentine economy collapsed. Apparently, two decades of privatization, liberalization, and government austerity, ushered in by Argentina's brutal military junta (in power from 1976 to 1983), were not enough to sate the appetites of global financial capital: earlier that year the International Monetary Fund had withheld $1.3 billion in loans the country needed to service its $142 billion external debt. In response to the IMF's action, the government froze all bank accounts (although many wealthy Argentines managed to relocate their funds abroad before the freeze) and drastically cut government spending. As a consequence, the economy experienced a severe depression as incomes and expenditures fell through the floor. The unemployment rate shot up to a record 21.5% by May 2002, with over 50% of the population living in poverty.

The popular response to the crisis was massive. Protests and demonstrations erupted throughout the country. The government went through five presidents in the course of a month. Workers eventually reclaimed dozens of abandoned factories and created democratically run cooperative enterprises, many of which are still in operation today and are part of a growing co-op movement.

Reclaiming factories was a lengthy and difficult process, however, and the immediate problem of unemployment remained. In response, in April 2002 the Argentine government put into place a direct job creation program known as Plan Jefes de Hogar ("Heads-of-Household Plan"), which promised a job to all heads of households satisfying certain requirements. In order to qualify, a household had to include a child under the age of 18, a person with a disability, or a pregnant woman; the household head had to be unemployed; and each household was generally limited to only one participant in the program. The program provided households with 150 pesos a month for four hours of work a day, five days a week. Program participants mainly engaged in the provision of community services and/or participated in worker training programs administered by local nonprofits.

While limited in scope and viewed by many in the government as an emergency measure, the program was incredibly successful and popular with its workers. It provided jobs and incomes to roughly 2 million workers, or 13% of Argentina's labor force, as well as desperately needed goods and services -- from community gardens to small construction projects -- to severely depressed neighborhoods. The entry of many women into the program, while their husbands continued to look for jobs in the private sector, had a liberating effect on traditional family structures. And by some accounts, the program helped facilitate the cooperative movement that subsequently emerged with the takeover of abandoned factories. Not surprisingly, as Argentina's economy has recovered from the depths of the crisis, the government has recently made moves to discontinue this critical experiment in direct job creation.

"Employer of Last Resort"

The Argentine experience with direct job creation represents a real-world example of what is often referred to as the employer of last resort (ELR) proposal by a number of left academics and public policy advocates. Developed over the course of the past two decades, the ELR proposal is based on a rather simple idea. In a capitalist economy, with most people dependent on private employment for their livelihoods, the government has a unique responsibility to guarantee full employment. This responsibility has been affirmed in the U.N. Universal Declaration of Human Rights, which includes a right to employment. A commitment to full employment is also official U.S. government policy as codified in the Employment Act of 1946 and the Humphrey-Hawkins Act of 1976.

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Ryan A. Dodd is a Ph.D. student in economics and a research associate at the Center for Full Employment and Price Stability, both at the University of Missouri-Kansas City.

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