Discussion 3
In this chapter Geogehegan talks about Keynes idea can bring back the labor movement. Ggovernment should push Keynes original idea to get rich to invest and reduce our balance of trade. . According to Keynes the problem wasn’t just about getting rich to invest in economy but also huge trade deficit that the US runs. Trade deficit arises when country import exceeds export.  In 1936, when Keynes wrote his classic—The General Theory of Employment, Interest and Money—he was emphatic on this point: no country, ever, should run up any kind of trade deficit, much less the trade deficit on steroids we are running. Geogehegan talks about that two lessons can be taken from this theory that is labor market doesn’t work and new institutional arrangement is needed to get us out of the debt. He talks about labor movement is justified if it can get us out of debt. Also, we should set up the wages that doesn’t require us to take any loans. Keynes points out if we lower the wages we lower the demand, and company will not hire more workers. In other words, if we lower the wage less people will go to college to earn almost the same as they can without going to college. The professor of economics in University of Chicago, Raghuram G. Ragan point out that middle class never have enough paycheck, so they have to borrow money to run up visas and to carry out mortgages. Ragan says we don’t need equality of income as long as we have equality of spending. For example, china export too much and spend too little whereas, the US spend too much on import and make too little in the U.S. Therefore, to stabilize the economy we need higher wages and lot of public work, so that we don’t have to borrow to get to the right level of aggregate demand. In the past forty years the U.S. average hourly rate has dropped by 8 percent and the output per worker has risen 400 percent or more, which means the reward has been cut down as worker put more effort to produce more. The middle class ends up having no purchasing power, an external debt ends up increasing their cost of living. For the past 5 years, we have been running massive trade deficit, as a reason, we are becoming less competitive in goods and services. As more jobs are being assigned to other countries the higher Trade deficit we will have.
I believe Keynesian ideas are relevant to the issue of labor movement and can help us to save middle class, revive economy, and can lower our trade deficit. The U.S Corporation outsourcing so many job to other countries due to decrease labor cost.  Here is a headline from the Wall Street Journal on April 19: Big US Firms Shift Hiring Abroad. During the 2000s, the Journal reports, while US multinationals have fired 2.9 million workers here, they have hired 2.4 million abroad. Corporations reduce labor cost in times of uncertainty. As a result, Household can’t buy much because their income is low and corporation stop investing in economy because they might need money later. In the United States is there is no government check as in China or organized labor check as in Germany to keep employment here. The term “Multiplier effect” means the number of times a rise in national income exceeds the rise in injections of demand that caused it. Basically, the Jobs Corporation is giving by outsourcing product, give workers in other countries to buy more and that way the multiplier effect keep on circling.
To summarize, Government and Rich people have to start investing money instead of lending it. The higher wages and more jobs would lead to more people spending money and that can only happen if we make product in the U.S rather than buying from other countries. The US have to start improving trade balance. As it is also quoted in the text, “the world’s biggest debtor should do what the world biggest exporter in the developed country is doing.