Can’t Buy a Thrill: Keep the Furlough Scheme

There has been quite some concern about what policy Labour can pursue in the context of a Conservative government that has essentially abandoned fiscal austerity as a goal. The good news is that there’s been a natural experiment on this in the United States, as this salty tweet points out – the $1200 emergency aid cheques are so generous compared to what passes for US unemployment benefit that the national poverty rate may have actually fallen during the COVID-19 pandemic.

However, and even though the money was distributed in the form of cheques literally issued over Donald Trump’s name and signature, Trump’s polls are still in the toilet. This is interesting as it implies there’s a limit to how far you can buy popularity; there is some level of depravity after which you can literally send voters thousands of dollars and although they will bank the cheques, they won’t amend their opinions any. He can’t buy a thrill.

This doesn’t, of course, mean that there’s any defensible reason at all to abandon one of the most important lessons of the 2010s, which is that Keynesianism works. We have now had at least four massive tests of this – the initial emergency response to the Great Crisis, then a negative test with the catastrophic pivot to austerity, a clutch of positive tests with the US, Japan, and Portugal’s returns to reflation, and now the emergency response to the virus pandemic. Unfortunately, it doesn’t say anywhere in the General Theory of Employment, Interest, and Money that the principles in this book and policy advice based upon them are only valid for the pure in heart.

James Meadway points out here that there’s not that much scope for just yelling “faster, please”, not least because Rishi Sunak has the keys to the money printer and seems determined to use the Treasury to bulldoze his way to the top. (To the top? Eh…maybe shovelling earth into a inclined plane to the pinnacle of politics, I guess?) Instead, if you want my two cents (the money printer is after all in fashion) I’d suggest going all in on keeping and formalizing the furlough scheme as an enduring institution. If you want to be all German and skills-intensive and whatnot it follows that preserving teams, relationships, and company-specific human capital is extremely important, and the German firms (and people!) who benefited from kurzarbeit in 2008-2009 were the ones who prospered mightily through the 2010s.

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