Saturday, January 10, 2015

Would Full Employment End Terrorism?

I once shared, fifty years ago, a small two-bedroom apartment in New York City with nine other guys. We were revolutionary socialists. I was the one who was employed. They picketed.

They worked occasionally to get cash and they also contributed to the rent. But I was the one who guaranteed that their home would still be there when they got out of jail if they ever got seriously busted. I picketed when I could.

This scenario is not too unusual. Pick it up and set it down in Paris. Let the unemployed youthful revolutionary socialists be unemployed youthful revolutionary Islamists.

What happens in such a group in slack times, when there is less need for casual labor and when the last employed member of the group loses his job?

They are no longer rooted in stability.

To live, they must accept money from people who wish they were even more radical. They must turn their hobby into a profession.

In Paris today there is grief over the vicious, violent actions of such people. Full-time professional destroyers of a world that has no room for them.

As more and more cash is withdrawn from the world by those already rich, this desert of opportunity leaves them no choice.

Suppose the profits of a business were to be legally limited to ten percent of its income? Any amount over that goes to the government. What would happen?

Businesses themselves would be forced to reinvest excess profits. This would create jobs.

There is a strange belief among economists that giving all possible profits from a business to its stockholders will lead to economic growth from their own further re-investment.  However, it has recently been observed that many stockholders just leave their dividends in the bank these days waiting for really bad times to come, when a dollar will buy so much more. A structure that requires businesses themselves, rather than stockholders, to reinvest their excess profits guarantees that the excess profit reinvestment will actually occur.

How would businesses use the income that they don't want to give to the government? It could just go into the salaries of top management. Or it could be used to grow the company.

A companies can hire more salesmen. Hire research and development people to create new products. Upgrade production lines to run more inexpensively. Pay better salaries and hire more skillful people. Buy back stock, which raises the value of the stock that is still in stockholders' hands.

Build the business.

All of this will tend to increase a company's income. Increased income will increase the size of the ten percent profit. Stock prices will rise accordingly.

Would this create jobs? Yah, sure, it would, Sparky. You can set that dynamite down, now.

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