Introducing the Payer of Last Resort

Introducing the Payer of Last Resort
Emmanuel Saez & Gabriel Zucman
Social Europe, 2020
Level: beginner
Perspective: Post-Keynesian Economics
Topic: Institutions, Governments & Policy
Format: Blog & Press
Link: https://www.socialeurope.eu/keeping-business-alive-the-government-will-pay

The coronavirus is developing into an economic crisis in the real economy and has the potential to push a multitude of businesses into insolvency. In order to stop this trend, governments in countries with possible lockdown situations should ensure businesses that they will pay no matter the costs.

Saez and Zucman (University of Berkeley, California) argue that governments should help hibernating businesses with a sort of social insurance scheme that prevents them from laying off employees. In addition to the support for businesses, they advocate that self-employed workers could report as idle workers as well and thus would be eligible for the special unemployment insurance as well. The progressivity of an insurance scheme is far more desirable than universal income approaches, they add.Several countries have installed plans to provide sufficient liquidity in the form of interest-free loans for example but this policy could lead to a massive debt burden of businesses in the long haul. Loans will not cover the losses suffered during a lockdown that most likely will not be compensated afterwards.
 

Comment from our editors:

The comeback of Hyman P. Minsky?

Saez and Zucman also argue against postponing tax payments on a wider scale since it would also benefit individuals and businesses not directly affected. The same goes for universal income models or helicopter money.

The economists estimate that a social insurance program that they envision would cost 3.75 per cent of GDP in the US which should be financed through an increase in public debt. With the model of a payer of last resort, Saez and Zucman follow up on the work of Hyman P. Minsky, who already started advocating for an investor of last resort and an employer of last resort in the 1970s. Today, Minsky is seen as the founding father of the Modern Monetary Theory who is arguing for public employment and insurance programs on a huge scale for quite some time.

Go to: Introducing the Payer of Last Resort

This material has been suggested and edited by:

Thore Beckmann
Tags: covid-19 | crisis | liquidity | minsky
Comment l'économie mainstream a-t-elle réduit les travaux de Ronald Coase à son "théorème" ? Que nous apprend véritablement l'oeuvre de ce "Prix Nobel" ?
2017
Level: advanced
Ronald Coase, un siècle d’économie
Elodie Bertrand
La Vie des Idées
Crises are a key part of the history of the global economy. This lesson by Economy Studies introduces students to the crisis management theories of John Maynard Keyens by presenting them in the historical context of the Great Depression, the Post-War increase in the state in managing the economy, and the Energy Crisis of the 1970s.
2022
Level: beginner
How to get away with a crisis? - Economy Studies
 
Economy Studies
Global Value Chains (GVCs) started to play an increasing and key role in the global economy from the 1990s on. The market mechanism in GVCs supports industrialisation in the Global South and under certain conditions product and process upgrading. But GVCs do not lead to the catching-up of countries in the sense of them approaching real GDP per capita levels comparable with developed countries. These arguments are supported by a critical interpretation of the traditional trade theory, the New Trade Theory and specific approaches to explain GVCs, especially different governance structures and power relationships. Several case studies support these arguments. For catching-up, countries need comprehensive horizontal and vertical industrial policy and policies for social coherence. The small number of countries which managed to catch up did this in different variations.
Level: beginner
Global Value Chains in economic development
 
Institute for International Political Economy Berlin
Die europäische Politik muss sich ein Beispiel an den USA nehmen und ihrer Wirtschaft den Weg Richtung Klimaschutz weisen. Von Kilian de Ridder.
2023
Level: beginner
Mut beweisen
Kilian de Ridder
Frankfurter Rundschau
Es stimmt hoffnungsvoll zu sehen, welche weitreichenden Maßnahmen die Politik ergreifen kann, wenn eine Situation einmal als Krise identifiziert wurde. Doch in der Klimakrise reicht der politische Wille allein nicht, solange bestehende Diskurse darüber, weshalb und wie investiert und reguliert werden soll, unangetastet bleiben. Ein Beitrag von Birte Strunk.
2020
Level: beginner
Postwachstum in Zeiten von Corona
Birte Strunk
Economist for Future
This historic timeline presents economic events, economic thinkers and schools of thought from the 18th century until the 2007/2008 financial and economic crisis with short texts on the respective event or perspective.
2017
Level: beginner
Economics: An Illustrated Timeline
Heske van Doornen
theminsky.org
Departing from an analysis of women's employment and changing gender regimes in the pre crisis period, Jill Rubery illustrates how the crisis affects men's and women's employment differently. Afterwards, she discusses the crisis' impact on gender relations. Based on empirical findings, she shows how men were more affected by the recession and women more by austerity and presents possible explanations. Those are furthermore linked to women's employment decisions and prevalent gender regimes. In particular, Rubery discusses cut backs in public spendings on care, flexibilization and the role of conservative gender ideologies.
2015
Level: beginner
Economic crisis and austerity: challenges to gender equality
Jill Rubery
Netzwerk Plurale Ökonomik

Donate

This project is brought to you by the Network for Pluralist Economics (Netzwerk Plurale Ökonomik e.V.).  It is committed to diversity and independence and is dependent on donations from people like you. Regular or one-off donations would be greatly appreciated.

 

Donate