Full Employment Abandoned
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Full Employment Abandoned

Shifting Sands and Policy Failures

William Mitchell and Joan Muysken

This book dismantles the arguments used by policy makers to justify the abandonment of full employment as a valid goal of national governments. Bill Mitchell and Joan Muysken trace the theoretical analysis of the nature and causes of unemployment over the last 150 years and argue that the shift from involuntary to ‘natural rate’ conceptions of unemployment since the 1960s has driven an ideological backlash against Keynesian policy interventions.
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Chapter 9: Buffer Stocks and Price Stability

William Mitchell and Joan Muysken

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9. Buffer stocks and price stability What motivates people and leads them to high endeavor is not fear but hope. (Arthur Altmeyer, 1968) 9.1 INTRODUCTION In Chapter 8 we developed a broad theoretical macroeconomic framework based on the recognition that fiat-currency systems are in fact public monopolies per se, and introduce imperfect competition to the monetary system itself, and that the imposition of taxes coupled with insufficient government spending generates unemployment in the private sector. An understanding of this widespread monetary framework allows us, once we have appreciated how unemployment occurs, to detail the role that government can play in maintaining its near universal dual mandates of price stability and full employment (see Mosler, 1997–98; Mitchell, 1998; Wray, 1998; Mitchell and Mosler, 2002, 2006; Mitchell and Juniper, 2007). In this chapter, we compare inflation control under a NAIRU regime with an economy that exploits the fiscal power embodied in a fiat-currency issuing national government to introduce full employment based on an employment buffer stock approach. In the context of such a policy approach we specifically consider the job guarantee (JG) model developed by Mitchell (1996, 1998, 2000a, 2000b) (see also Mosler, 1997–98; Wray, 1998).1 Under a NAIRU regime, inflation is controlled using tight monetary and fiscal policy, which leads to a buffer stock of unemployment. In Section 9.2 we show that the NAIRU is a costly and unreliable target for policy makers to pursue as a means of inflation...

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