Economic power, employment and economic theory

Please cite the paper as:
Professor Dr. Rubens R. Sawaya, (2016), Economic power, employment and economic theory, World Economics Association (WEA) Conferences, No. 1 2016, Capital Accumulation, Production and Employment:, 15th May to 15th July 2016

Abstract

The debate about economic growth and unemployment in Brazil is hindered by Friedman’s imported theory, based on the “natural rate” of employment that today pervades global economic thought as adopted by new classical and new Keynesian economists. This misguided view is responsible for a brutal recession, with rising unemployment and a drop in aggregate production, failing at that which it purports to do: recover metaphysical credibility for companies. This matter concerns the political power of a specific social group, which today extends beyond political parties. It is the result of an imported theory from abroad that also is damaging the global economy by imposed economic austerity.

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4 comment

  • Stephen I. Ternyik says:

    Yes, Prof. Sawaya, the dominant economic ideology serves the rentier groups who own the land (monopoly) of natural resources (and real estate locations in urban centers) ; the progressive privatization (since the late 1980s) of economic rent curbs wages and interest which implies the dangerous trap of ‘neo-feudalism’ at the productivity stage of (rentier) capitalism. With the fall of the ‘Soviet Empire’, this ‘hidden curriculum’ (of economic value extraction/capture from wages and interest to private rent via ‘monetary tools’) is called globalization. As a socio-economic result, the growing quantity of (‘unearned’) private rent, finally curbs production and reduces to the same extent (‘earned’) income from labor and capital, not to mention the ‘taxation bias’. Consequently, we have got a legal (ethical) and economic problem at the same time.

  • Gerson P. Lima says:

    About the labour market you say that “In this way, there exists no real labour supply curve defined by workers who have not the capacity to determine their salaries. Instead, what exists is a constant and dynamic pressure to maintain low salaries, combined with an unemployment rate, which does not impact the rates of corporate earnings”.
    I suppose that it is expected that companies, like consumers and anybody else, intend to lower their costs, and wage is an important cost item; consumers and investors are not committed to creating jobs. As you said, “It is this investment that determines the level of employment”; and investment depends on the really existing demand.
    My opinion, expressed in my Conference´s paper, is that the purpose of neoclassical doctrine about the labour market is to “prove” that the aggregate supply curve is a vertical line and therefore fiscal policy only causes inflation without creating jobs. Neoclassical doctrine creators and followers invented a supply and demand scientifically unsustainable “theory” exclusively targeted to the final end of enhancing the value of money, specifically the money wealth of the few powerful. What backs money is production and men are the essential element in production; so, contemporary mainstream economic policy systematically appraises money and devaluates mankind and this is done by the otherwise useless monetary policy. The point is that we must think supply and demand real world theory outside the produced Wonderful World of the neoclassical people. In so doing I demonstrated that in the USA the monetary policy reduces GDP and raises prices, thus creating unemployment and concentrating income and wealth. Jobs creation and income distribution are macroeconomic and social concerns that should be the first priority of all truly democratic economic policy mixes.

    • Rubens Sawaya says:

      “the purpose of neoclassical doctrine about the labour market is to “prove” that the aggregate supply curve is a vertical line and therefore fiscal policy only causes inflation without creating jobs.” Yes I agree totally. Going further, they want to blame workers by the idea that they don’t accept work based on imaginary labor supply curve: the workers only offer additional time-labor by increase of their real wages.
      “the monetary policy reduces GDP and raises prices, thus creating unemployment and concentrating income and wealth.” Yes, by maintaining the metaphysical idea of “natural unemployment rate” defined by supply and demand labor curves. The idea is to maintain a certain level of unemployment compatible to low salaries and high profits, a macroeconomics contradiction because profits are, in part, the result of future consumption created by the decision to invest and employ today (in other part because comes from future decision to invest – the most important variable).
      “The point is that we must think supply and demand real world theory outside the produced Wonderful World of the neoclassical people.” Yes. In the case of labor market, there is no supply curve because workers have no power to decide.

  • capital2016 says:

    Rubens, you got my phrases out of context, probably because you have not yet time to read my paper and falsify my conclusions. By the way in the first part the paper develops logic arguments that demonstrates that the NEOCLASSICAL supply and demand has no scientific support and should be dismissed. This is the meaning of the phrase “The point is that we must think supply and demand real world theory outside the produced Wonderful World of the neoclassical people.”
    About a REAL WORLD supply and demand THEORY, my conclusions stem basically from Marshall´s Principles; I have not invented the supply and demand curves, I deduced them from Marshall´s Principle, Book V, and of course I may have make mistakes. I would appreciate it very much if you could point to some of them and improve the real world supply and demand theory.
    In short, about supply the main assumption is that producers make two decisions: (bid) price and production start-up. A producer´s price bid decision depends basically on cost of production and, here comes Marshall´s idea, on the producer´s individual demand as perceived by the stock of products wherever available. As a rule, producers do not impose price; they propose prices and if they were wrong about the individual demand, as perceived by individual inventories levels variation they change bid prices accordingly. If inventories decrease, because for instance the demand curve was shifted to the right by some exogenous variable variation, then a new point in the plane (P, Q) will appear at the right an above the previous one – this is the supply curve.
    So, assuming that workers are suppliers of labour, supply and demand labour curves may define a kind of “natural unemployment rate” only as a metaphysical idea of the NEOCLASSICAL followers; actually (un)employment depends mainly upon aggregate demand.