Banking on ELR: How Hyman Minsky’s Ideas Can Help Tackle Unemployment

This article suggests a way of building a comprehensive program that can effectively eliminate unemployment using the employer-of-last-resort (ELR) scheme, which comes from the Minskyan tradition. According to this scheme, the state offers a job to everyone who is willing to work. In response to the many critiques the ELR program has received, we show that it is the best alternative to eliminating unemployment, instituting sound public finance, ensuring social and financial stability, and achieving long-term growth and international economic balances. We also make suggestions with a view of ensuring the efficiency of the ELR institutional design. In this context, we highlight the accountability issue that is largely ignored in the relevant literature, but that is paramount given the state of public finances after the 2008 crisis. We argue that accountability and efficiency should be taken as the core of the ELR project if it is to be politically viable, and they can be addressed alongside the analogy of lending of last resort. In particular, ELR projects should be supervised by a state bank that is set up to ensure the cost-effectiveness of the scheme, along with controls from below. We conduct a simulation of how much such an ELR program would cost for Italy, showing that its gross cost would be less than 2.0 percent of Italian GDP and its net cost would be negative.