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To: Karen E Hoof who wrote (17004)	8/30/1998 8:20:00 PM
From: goldsnow	Read Replies (2) \| Respond to of 116791

That is exactly what President Bush implied--He re-appointed him and the guy pull the rug under him by refusing to alter Fed's monetary policy to haisten than recovery...

To: Karen E Hoof who wrote (17004)	8/31/1998 8:40:00 AM
From: Alex	Respond to of 116791

Why Keynes holds the key to rescue of underclass Robin Marris is Prof Emeritus of Economics at Birkbeck College, London University. As an undergraduate at Cambridge he was taught economics by some of John Maynard Keynes's collaborators and in 1997 he gave a lecture which contended that Keynes was at least as relevant to the next century as to the present. After Labour was elected he imagined it was just the kind of message the new Government would like to hear. Now he realises how naive he was. Today's article is an edited version of the original lecture - next week Prof Marris will ask what went wrong Monday August 31, 1998 As the world's financial markets are crashing it must never be forgotten that the fundamental target of any rational economic policy must be to maximise the long-run growth of what economists call "social welfare". In other words, the average wellbeing of all the people in society with disproportionate weight given to people with lower incomes, or those who are born with inherited social, intellectual or material disadvantages. In a book I published in 1996, How To Save The Underclass, I argued that in the last quarter of the 20th century this has gone wrong. An underclass has emerged. These are typically people born into families with a combination of low ability, low education and low income. Up to about five years ago in both the UK and the United States, they experienced falling or stagnating real wages, increasing non-inclusion in the open economy, increasing involvement in drug dealing and crime and finally an increase in imprisonment. In both countries the upward tendency has since been slowed down, and I suggest that the essential reasons for this are not to be found in micro or social policies, such as welfare to work, but in the improved macro performance of the two economies. Keynesian economics is often described as "demand-side" economics: look after the general demand for goods and labour and the supply side will look after itself. In contrast, a good example of the supply-side outlook is the belief that if people are unemployed it must be because they are unemployable. I argued in my book that the cause of the new underclass problem was in fact an interaction between demand and supply-side factors. The supply side was mainly new technology. The demand side was the failure of economies to keep up with the long run growth of population, with labour released by productivity increases and with the long-run increase in the number of women who desired paid employment. SO there was increasing non-employment among men, frustration of the economic ambitions of women and the reappearance of a kind of Victorian situation, in which one half of the population becomes the low-paid servant of the other: today, in place of domestic service, the other half of the people work in bars, restaurants and other consumer services. Let me not be misunderstood, I do not say it is all bad. In my local riverside pub large numbers of young people seem to enjoy themselves on either side of the bar - and a rather good time, and not bad money, seems to be had by all. So the Keynesian solution to social problems is whatever it takes to expand the real economy. This could have many facets. For example, I would say if there is a case to be made for a heavy anti-inflation policy it must lie in concrete evidence that the effects of a looser policy would hinder rather than help the long-run growth of output. There is no other - repeat no other - case for having very low inflation. The July 1997 issue of the Economic Review of the National Institute for Economic Research studied the effects of reducing the inflation target in five established computer models of the British economy. It came up with the result - surprise, surprise - that they did not all agree. The Institute's own model came up with a massive long-term output gain while the Treasury model came up with a major loss! Among the other models, some gave neutral results, others moderate to serious losses. What happens when you do this to the model used by the Bank of England monetary policy committee? In the years to come there should, in principle, be a number of favourable factors reducing the supply of labour and increasing the demand for labour. As an increasing proportion of the female population is taken up, that factor must slow down. Increased flexibility in business organisation, with new technology, eases the costs of growth. But on the other side is the hangover of inflation-phobia and persistently high long-term real interest rates, caused in turn by the policy on short-term rates. In my opinion the greatest threat to any future progress is thus found in anti-Keynesian ideology. What is needed is a fundamental change in the signals emanating from the Government, along with a more pragmatic attitude to inflation. The atmosphere around EMU, in this respect, is especially bad. In Britain, there is confusion in high places. In a speech given in the garden of No 10 Downing Street in July to celebrate the first year's performance of his administration, the Prime Minister asked: "What other government would have given financial independence to the Bank of England as well as setting up a unit to deal with homelessness?" What a strange apposition. Did he mean that he knew that the brief his Chancellor had given to the Bank would necessarily tend to increase homelessness? If not, what did he mean? reports.guardian.co.uk