The National Bureau of Economic Research has identified December of 2007 as the official starting date for the current recession in the United States. In that month, economic activity in the country reached a peak. A recession is sometimes defined as a general decline in economic activity that lasts more than a few months, and which shows up in the data on production, employment, and real income. A recession, according to the national Bureau of Economic Research starts when the economy reaches a peak of economic activity and ends when this activity reaches a trough, or low point.
The October, 2008, national unemployment rate for the United States was reported by the Bureau of Labor Statistics as 6.5%. The national unemployment rate at the start of the current recession was 5.0% in December of 2007, and actually declined in the first two months of 2008. It has risen in seven of the last eight months from March to October of this year.
Catholic social doctrine regards unemployment as injurious to the common good. Joblessness harms families’ ability to meet basic needs and puts tremendous stress on workers worrying about job security. It burdens especially those looking for employment opportunities. The Compendium of the Social Doctrine of the Church paragraph 291 wants government policy to promote employment opportunities. It mentions specifically that the job of government is not to guarantee the right of a job to every citizen because this would restrict individual free initiative. The Compendium identifies the government’s job as one of sustaining business activity by “creating conditions which will ensure job opportunities,” (emphasis added) stimulating job-creating opportunities where they are absent and supporting them in moments of crisis.
This principle is important. Notice that Catholic social doctrine in this paragraph does not say government must provide jobs to citizens. It says government must foster conditions that sustain job opportunities. This is a crucial distinction. The Soviet Union’s Constitution outlawed unemployment and the USSR government viewed its role as providing employment to citizens and running the economy. The Church’s postion, in contrast, it seems to me, makes ample room for free and flexible labor markets that generate job opportunities and for government policy that assists the private sector in offering jobs.
The big question is what are those government policies that will help the private sector provide job opportunities. According to the Nobel-Prize winning economist Paul Krugman, the answer is lots of government spending on public works programs along the lines of the New Deal. New York Times best-selling author and economic historian Amity Shlaes disagrees. Shlaes’ latest book is called The Forgotten Man: A New History of the Great Depression (See Recommended Reading on A&M Blog right side bar.)
In a Wall Street Journal editorial on 11/28/08, Shlaes argues that even after massive government spending and public works during the 1930s, the national unemployment rate remained high. Her research shows that as public spending on government employment and infrastructure projects expanded, the private sector’s ability to offer job opportunities was hampered. Likewise, workers frequently demanded higher wages at a time when many businesses were struggling to stay afloat. This contributed to sluggish job growth.
The question of the most appropriate government policy during a recession will surface frequently and with urgency in the coming months. It will be important to remember the Catholic social doctrine principle discussed here. Government’s job ought to be helping, not replacing, the private business economy.
