The 10% of the population in the rail-force is now producing rail services and consuming other services provided by society. It's a trade within a community, which is made possible by money.
Now let's take the extreme case: nobody in this fictional society uses rail because they prefer their bicycles. Result: our dear leader has a serious financial problem. He can finance the rail-force (10% of the population) with a deficit or by printing money. If he prints money, he creates inflation. If he borrows, he burdens future generations.
Now let's take a realistic case: the situation in France today is such that the SNCF/RATP runs huge annual deficits. Its a socially (read state) subsidised operation. And that might be fine... but only to a certain extent. You need balance, otherwise your society goes bust producing goods and services that society doesn't want or need.
Besides unsustainable spending on the military complex, THIS model was at the epicentre of Soviet economic failure.
He would have to finance those 10 % anyway, if they were unemployed: He had to pay them a decent unemployment benefit.
The problem with your scenario - were it actually to occur - would be more along the lines of all the steel wasted.
Now, if the state employs an overwhelming fraction of society in this way, you might get issues. But 1) even in Scandinavian Socialist Republics, you don't have a government payroll (much) exceeding 50 % of the population, and 2) if you have > 50 % structural unemployment, then you have bigger problems than the solvency of your sovereign.
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
Not as mch as the roads. Not taxing the roads externalities is a HUGE subsidy. On top of the infrastructure spending, of course. Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
Focusing the infrastructure building to rail only, and letting the private sector build new roads on its own, would be smart, don't you think? In the long run, we're all dead. John Maynard Keynes
did building all the roads bankrupt society?
It certainly exacerbates air pollution problems.
But, no, I don't think it bankrupts society... nor do I think that it's the cause of the wars we're witnessing in the Middle East. They are more a result of the military-industrial complex in the USA lobbying for war - any war, to justify continued spending on their gadgets. Access to oil was just marketing. All oil producing countries have to sell their produce anyway. Look at Venezuela, or Russia. They're supplying us with energy & they're not occupied (yet).
Focusing the infrastructure building to rail only, and letting the private sector build new roads on its own, would be smart, don't you think?
Our society would be so much poorer if we didn't have a modern road network. Just imagine France without the A1, the A6 or the A10. You can also argue that what we need now is massive investment in finding clean automobile technology. I'm not against rail networks per se, but why do you think investing billions into rail a better solution than investing billions into clean energy R&D?
Thus we are so sensible, have schooled ourselves to so close a semblant of prudent financiers, taking careful thought before we add to the 'financial' burdens of posterity by building them houses to live in, that we have no such easy escape from the sufferings of unemployment. We have to accept them as inevitable results of applying to the conduct of the State the maxims which are best calculated to 'enrich' an individual by enabling him to pile up claims to enjoyment which he does not intend to exercise at any definite time.
From the 1970's we have seen an updated version of the paradigm that reigned before Keynes wrote his tract. Monetarist macroeconomics has failed just as spectacularly as pre-Keynesian economics did.
The question is whether it suffices to relearn Keynesianism or a totally new paradigm is necessary. I don't know the answer. At the risk of repeating myself I'll quote Krugman:
The answer, I think, is that we're living in a Dark Age of macroeconomics. Remember, what defined the Dark Ages wasn't the fact that they were primitive -- the Bronze Age was primitive, too. What made the Dark Ages dark was the fact that so much knowledge had been lost, that so much known to the Greeks and Romans had been forgotten by the barbarian kingdoms that followed. And that's what seems to have happened to macroeconomics in much of the economics profession. The knowledge that S=I doesn't imply the Treasury view -- the general understanding that macroeconomics is more than supply and demand plus the quantity equation -- somehow got lost in much of the profession. I'm tempted to go on and say something about being overrun by barbarians in the grip of an obscurantist faith, but I guess I won't. Oh wait, I guess I just did.
And that's what seems to have happened to macroeconomics in much of the economics profession. The knowledge that S=I doesn't imply the Treasury view -- the general understanding that macroeconomics is more than supply and demand plus the quantity equation -- somehow got lost in much of the profession. I'm tempted to go on and say something about being overrun by barbarians in the grip of an obscurantist faith, but I guess I won't. Oh wait, I guess I just did.
I guess the point is that you can be a bad writer and a great economist. And I really am gravitating toward a Keynes-Fisher-Minsky view of macro, although of the three I'd much rather read Keynes.
If you want a version that sticks fairly close to the current orthodoxy, you can read Making Globalisation Work, by Stiglitz.
Then there's Keynes, Galbraith (both of them) and a couple of other guys.
On the political side, you have Die Linke and those labour unions who haven't sold out.
