Jan Toporowski Explains Why Capitalists Dislike Full Employment

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:15)

And I'm Tracy Alloway.

Joe Weisenthal (0:17)

Tracy, you said something on a recent episode, and I don't remember which one it was.

One of our macro ones, maybe like Neil and Connor or something like that. This idea still that we sort of talk about like, relief at the idea of labor market softening. Right. It's kind of perverse.

Tracy Alloway (0:34)

First of all, thank you so much for listening to what I say. I really appreciate that.

Secondly, I think what I said is, it feels really weird that you have a central bank, specifically the Federal Reserve, that is saying basically that they want to push the unemployment rate up.

Joe Weisenthal (0:50)

Yeah, and significantly, right? So we're at around 3.5% unemployment right now in the United States. 50-year low. A 50-year low.

Tracy Alloway (0:58)

Which sounds great.

Joe Weisenthal (0:59)

That seems unambiguously good, and especially after coming out for years of slow labor market growth, some of the fears during the worst of the COVID pandemic about how much unemployment there is, and yet here we are, and it's almost always talked about as a problem to be solved rather than an opportunity to be embraced.

Tracy Alloway (1:20)

Yeah, there's always concern that you're running an economy too hot if employment gets too low, but then that just brings up all these really big picture questions about, well, what is the economy for anyway? Shouldn't we be aiming for a system that kind of works for everyone where hopefully the unemployment rate is very, very low, but I guess the risk is and the concern is that you don't want to run it in such a way that it starts pushing up prices and you get this unrelenting inflation.

Joe Weisenthal (1:49)

Right, and inflation is bad, and it hurts people and people don't like it, but nonetheless, I think people find it strange that the central bank is part of what they see as an outcome of optimal monetary policy, would put so many, at least another million to have people out of work. They find it strange when weak labor market data often leads to a stock market rally.

Tracy Alloway (2:11)

Right, the whole bad news is good news for stocks.

Joe Weisenthal (2:14)

That feels perverse. And you'd think like, okay, a lot of people have jobs, that means a lot of spending. Corporate profits really high. You think these are good things, and yet at some level, it's like all of this is bad. And I think we shouldn't just jump away from that. We shouldn't sort of move on, and of course, there's room to discuss soft land things and all that, but some of these root questions, I think, are still worth thinking about.

Tracy Alloway (2:37)

Like, why do investors hate full employment?

Joe Weisenthal (2:40)

Yeah, yeah, exactly right.

So I'm really excited about our guest. So one of the economists from the old days that people sometimes talk about when they talk about the political economy of full employment or maximum employment, an economist named Michał Kalecki has talked about this. His work comes up every once in a while. So we're gonna be speaking to an economist who himself has studied a lot of Kalecki's work and has done his own work on a lot of these questions. We're trying to understand a little bit more about this tension that full employment brings. We're gonna be speaking to Jan Toporowski, professor at SOAS University in London. And so Professor Toporowski, thank you so much for coming on Odd Lots.

Jan Toporowski (3:26)

Thank you very much for inviting me.

Joe Weisenthal (3:27)

Why don't you tell us a little bit about your work and your research and sort of like what drove you to sort of focus on some of these topics?

Jan Toporowski (3:36)

Well, I came into this kind of work. I actually came across Kalecki when I first came to study economics. Now, at the time when I actually didn't do my undergraduate studies in economics, it was more in sociology and political science.

And the first job that I got was in fund management for the Church of England, for an institution called Augustus Institution or the Church Commissioners for England. And because I had done one course in introductory economics, they thought, oh, well, he knows something about it. And they put me into the Decentralized Change Investments Department. Now, this was in 1974

You're obviously too young to remember what happened around 1974, but there was an oil price shock, which in England was rapidly followed by a collapse in the real estate market, a collapse in the stock market. A couple of brokerage houses went bust.