Tags: Bernanke | Bernstein | savings | employment

Bernanke on Growth and Employment

By    |   Tuesday, 31 March 2015 07:32 AM

Former Federal Reserve Chairman Ben Bernanke gave the keynote speech March 30 at a Center for Budget Priorities forum on policies that promote economic growth and employment.

Bernanke was introduced by Bob Greenstein, president of the Center, who explained that the event was sponsored by the Center's Full Employment Project, which is supported by the Open Philanthropy Project. He said that the Center has worked to reduce poverty and inequality and contributed to important budget and tax debates. The event was held at the Washington venue of the esteemed Johns Hopkins School of Advanced International Studies.

Greenstein added that the Full Employment Project is led by Jared Bernstein, who has broadened the work to include "various economic policy issues that are critically important but may be longer term in nature and extend beyond current policy battles." He announced that with the support of Atlantic Philanthropies, the Center is creating a new part at the Center called "Policy Futures," to employ a longer-term perspective to focus on a broad range of policy issues, including full employment.

Bernstein noted that the goal of the Full Employment Project is "to identify and advocate for policies that help get us to and keep us at full employment." He expressed the belief that the benefits of full employment should be broadly distributed.

Bernanke criticized as "a little bit defective" the tendency of economics to focus on jobs as the precursor to consumption, the means by which people are able to consume. He reminded the audience that people are also producers who seek personal satisfaction in their work.

While he explicitly refrained from commenting on current monetary policy, Bernanke recalled that full employment was directly related to the Fed's program of quantitative easing, and he credited the program with achieving "meaningful improvement in the labor market over the last few years." He raised the question as to "whether going forward, macroeconomic policy, primarily monetary and fiscal policy, can reliably and sustainably achieve full employment in our economy."

Bernanke proceeded to discuss two frameworks for analysis, the "secular stagnation" perspective, going back to 1938 and recently revived by former Treasury Secretary Larry Summers, and the "global savings glut" theory. Bernanke found that Summers' theory implies that getting to full employment implies a tolerance for financial bubbles that can be "very dangerous and we certainly don't want to be part of our policy toolkit." Thus, the solution would be more government spending.

For the rest of his speech Bernanke discussed the implications of the secular stagnation theory for global economic policy that the theory alone doesn't address, He observed, "In fact, trade and exports are an important source of demand for our economy." He argued that since the whole world has not devolved to "Facebook-type industries," there are still opportunities for investment somewhere, even if the U.S. economy is stagnant. Bernanke concluded that the global savings glut has become less severe over the past decades and needs to be reduced further.

(Archived video can be found here.)

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Former Federal Reserve Chairman Ben Bernanke gave the keynote speech March 30 at a Center for Budget Priorities forum on policies that promote economic growth and employment.
Bernanke, Bernstein, savings, employment
Tuesday, 31 March 2015 07:32 AM
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