Late last week The Financial Times ran a story about a critical account of the Chinese economy published by Yu Yongding, a Chinese monetary policy expert and academic. Yu’s piece was published in the China Daily, a state-run newspaper. While Yu’s brutal critique of how the Chinese government have built, buoyed and sustained their high economic growth is important for the challenges it poses to the government’s assumptions on growing the economy, once section stands out as relevant to high unemployment and slow economic growth in the United States.
“Some local governments are literally digging holes and then filling them in to ratchet up the GDP,” Mr Yu wrote. “Consequently, there are simply too many luxurious condominiums, magnificent government office buildings and soaring skyscrapers.”
What’s remarkable about this is that Mike Konzcal has previously noted that a great, but simple way to help working Americans – specifically, homeowners – is to just fund people digging and filling in holes. It’s not the best policy, but it would work!
There was talk about how fiscal policy can’t move through Congress. I asked them about only 0.5% of HAMP being spent and how that could be used without Congress’ permission. Before I suggested that the remainder of the $50bn be divided into two funds, the Digging Holes Across States (DHAS) fund and the Filling Holes Across States (FHAS) fund, two far more socially productive means of spending the HAMP money than what is currently being done with it, I was told that the entire $50bn is expected to be spent by the time the program is over. I didn’t believe it; we will see.
While it is understandable that putting people to work for the sake of putting people to work is not always desirable after periods of prolonged, meteoric growth, this is exactly what we should be doing in the US now. We’ve had unemployment over 9.4% since June of 2009. While economic stimulus measures have prevented unemployment to continue to rise precipitously, there unemployment isn’t going down. People need jobs more than anything else. What those jobs are is frankly irrelevant at a time when the words “structural unemployment” are being tossed around in some quarters.
As we see in Yu’s critique of the Chinese economy, government does have the power to create jobs that are socially productive, create economic growth, and ensure that the unemployed have jobs. Following the first stimulus bill, there was a lot of talk about there being fewer “shovel ready” projects than everyone had hoped. Of course, you know what is shovel ready? Shovels! Digging Holes Across States and Filling Holes Across States are not long term solutions for building and sustaining economic growth, but during an unemployment crisis, they are better than failing to create jobs and markedly reducing unemployment.