The Social Wage, Welfare Policy and the Phases of Capital Accumulation

The Jerome Levy Econ. Institute Working Paper No. 291

57 Pages Posted: 9 Mar 2000

See all articles by Jamee K. Moudud

Jamee K. Moudud

The Jerome Levy Economics Institute

Ajit Zacharias

Bard College - Levy Economics Institute

Date Written: December 1999

Abstract

This paper addresses two broad questions. The first one relates to the economic rationale for the existence of the welfare state. To address this question, we review the marginalist arguments and then counterpose a historical and institutional analysis of the rise of the U.S. welfare state. The second question concerns the macroeconomic impacts of welfare spending. We examine the standard neoclassical macroeconomic arguments for and against welfare cutbacks and then propose an alternative growth framework, rooted in the classical and Harrodian traditions, to evaluate social policy. We argue that the alternative framework provides both demand-side and supply-side mechanisms whereby social spending can be supported without harmful long-run macroeconomic effects. Our analysis suggests that, in general, because growth and crises are endogenous, there may be no tension between social policy and economic performance. Specifically, the recent cutbacks in the U.S. are hard to justify on purely economic grounds.

JEL Classification: E64, H53

Suggested Citation

Moudud, Jamee K. and Zacharias, Ajit, The Social Wage, Welfare Policy and the Phases of Capital Accumulation (December 1999). The Jerome Levy Econ. Institute Working Paper No. 291, Available at SSRN: https://ssrn.com/abstract=203492 or http://dx.doi.org/10.2139/ssrn.203492

Jamee K. Moudud (Contact Author)

The Jerome Levy Economics Institute ( email )

Blithewood
Bard College
Annandale-on-Hudson, NY 12504
United States

Ajit Zacharias

Bard College - Levy Economics Institute ( email )

Blithewood
Annandale-on-Hudson, NY 12504
United States
845-758-7734 (Phone)
845-758-1149 (Fax)

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