Regular readers will know that I have spent quite a lot of time reading the…
Friday Lay Day – ruminations on MMT and the JG
It’s my Friday Lay Day blog and today I’m spending some time travelling and some time thinking about the Modern Monetary Theory (MMT) textbook that I’ve been promising to finish for some time. I can confidently say now that we are on track to finish the first edition by March 2016. Randy Wray and I have taken on a third author (Martin Watts) and have agreed on a completion plan. More information on availability will be available in the new year as we get closer to completion. This week I noted a lot of comments (particularly with respect to my Job Guarantee post) that suggested many readers still do not exactly know what MMT is. Further, there was a heterodox conference in Sydney this week, where MMT proponents were accused of being neo-liberals and politically naive. Unfortunately, other commitments prevented me from attending the conference this year but I read the paper in question and wondered why salaried academics would bother writing it. So a few reflections on both those matters today.
MMT is not a regime we can move to!
I often read comments like “if we introduced MMT …” or “under MMT policies …” or “when MMT becomes the norm”, All of which, implies that MMT is a regime that we would move to if society was more enlightened and would open up a new range of policy options that a truly progressive government might pursue.
This is tied in with other comments, specifically about the Job Guarantee, which suggest that MMT is a progressive doctrine or a left-wing approach to economic policy-making and what is holding MMT back from being introduced is the right-wing conspiracy to maintain hegemony.
I understand all these comments are well intended and people are genuinely attracted to some of the policy options that MMT proponents advance. This is notwithstanding, what I consider to be some doctrinal and irrational resistance to proposals such as the Job Guarantee.
But the conception that we might move to an MMT world where enlightened policy will free us from the yoke of capitalist exploitation is plain wrong.
The fact is that we are already living in the MMT world. We interact with each other every day in the MMT world. The monetary system, whether it be in the US, Australia, Japan or any of the Eurozone nations, is and MMT-type construct.
So it is not about moving to some new Shangri-La, which we might call the MMT world – we are already in, the world that is.
What MMT provides is a new lens to view the world we live in and the monetary system operations that are important in our daily lives.
This new lens opens up new insights into what is going on in the economy on a daily basis. It’s not something to move to, it already is.
MMT, as a new powerful lens, makes things that are obscured by neo-liberal narratives more transparent.
It means that the series of interlinked myths that are advanced by conservative forces to distract us from understanding causality and consequence in policy-making and non-government sector decision-making are exposed.
So when a Conservative politician or corporate leader claims that the government has run out of money and therefore cannot afford income support for the unemployed any longer at the levels previously enjoyed, MMT alerts us to the fact that this is a lie and that there must be an alternative agenda.
MMT thus empowers a population who learn about it to see things for what they are and to ask questions that they never previously would have thought possible to ask or even relevant.
Previously, when a politician has said the government will run out of money or is maxing out its credit card, an uninformed population will take that statement as granted. But an understanding of the MMT framework all its lens would mean that the population will now reject the “run out of money” obfuscation and instead demand to know why the government doesn’t want to support a particular policy option.
MMT thus, introduces into the policy debate, the possibility of new policy options and directions that have previously been dismissed out of hand through the use of spurious economic arguments that the politicians and their advisors know will not be properly scrutinised nor understood by the general population who they are trying to manipulate.
MMT is thus, a framework for understanding how the monetary system we live in operates and the capacities and options that are currency-issuing government has to advance our well-being.
It also allows us to understand the likely consequences of deviating from a truly sovereign state, which we define in terms of the currency-issuing status of the government (incorporating exchange-rate arrangements and central bank interest rate setting capacities).
In the latter context, the MMT lens provided us with a clear understanding of why the Eurozone would be a failure with significant negative consequences for the Member States.
Further, MMT is neither left-wing nor right-wing (I’ve said this before). The ideological persuasion of any perspective will manifest in the values that are expounded and the policy prescriptions that are proposed to advance those values.
What MMT means is that the ideological persuasion becomes much clearer when a person advances a particular policy proposal.
For example, when a politician, faced with rising unemployment, says that there is no fiscal space for the government to create jobs to deal with the mass unemployment, a person considering that comment through the MMT lens, will immediately realise that the government must have a reason for maintaining higher than necessary unemployment.
We know there must be a ‘hidden’ agenda because our understanding tells us that the government fiscal space is defined in terms of available real resources that the government can purchase with its currency-issuing capacity. So if there is mass unemployment then we know that there are such available real resources.
So why would the government refuse to purchase them and bring them back into productive use?
The focus then shifts on what that reason is and questions are likely to lead, for example, to an examination of corporate influence that might be leading the government to refuse to use their currency-issuing capacities to maintain full employment.
I hope that clarifies any misunderstandings.
The second issue that arose this week relates to a paper that was presented to the heterodox conference in Sydney this week. The paper claimed that the Job Guarantee was politically naive and that it essentially reflected a neo-liberal approach. Apparently, MMT is a “theoretical cousin” of the JG.
I’m not sure how this family tree was arrived at.
The JG is a buffer stock approach to macroeconomic stability, where employment buffers are used instead of unemployment buffers, the latter which characterises the so-called NAIRU approach of mainstream economics.
The JG should not be thought of, exclusively, as a job creation program, although clearly its use of employment buffers accomplishes that end.
The JG is the MMT response to Phillips curve equations in the mainstream macroeconomic theoretical frameworks. The Phillips curve proposes a trade-off between unemployment and inflation, and the extent of that trade-off is a topic of considerable debate within the mainstream framework.
The advent of Monetarism tried to claim there was no trade-off, which they believed all owed for a categorical rejection of the so-called Keynesian framework.
By turning the question of price stability on its head, if you like, the JG, through the use of employment buffers, also shows that there is no trade-off between involuntary unemployment and inflation, but with quite devastating consequences for the Monetarist conclusions.
What the JG shows is that a currency-issuing government can maintain stable inflation rates with full employment through the use of appropriately designed employment buffers. I consider that a major theoretical advance in macroeconomics and one of the contributions of MMT to advancing knowledge in this area.
The claim in the paper presented to the heterodox conference in Sydney is that the use of employment buffers “incorporates neoliberal methods of inflation reduction” and “does not represent a departure from a neoliberal paradigm.”
Apparently, using restrictive macroeconomic policies to ensure that total spending is consistent with the available real output at any point in time is a neoliberal mechanism.
The alternative proposed by some Post Keynesians is to rely on so-called incomes policies to suppress income growth in the private sector so that spending grows in line with real capacity.
Apart from the logistical problems of introducing effective incomes policies and the fact that these policies have historically broken down when under strain, there is nothing objectionable to an MMT proponent about the use of incomes policies.
But to suggest that the introduction of the JG will face political constraints yet the implementation of an effective incomes policy will not is rather far-fetched.
Further, Keynes’ himself, in his essay – How to Pay for the War – written in 1940, considered the question of inflationary pressures. He had also written extensively about this in the early 1930s (for example, in Essays on Persuasion), but this was before he broke with classical monetary theory and published his General Theory in 1936.
The range of policies proposed all amounted to limiting the spending capacity of the private sector to allow for more spending space by the public sector – all intended to avoid inflation.
Further, Abba Lerner, in his theories of functional finance, elaborated more extensively on the way in which inflation control could be accomplished by the government managing total spending.
Are we really going to call these approaches neoliberal?
In my early JG writings (which, by the way go back to 1978 when I was fourth-year (honours) student), I examined, in detail, the shift from a NAIRU economy to a JG.
Specifically, I considered the issues that arise when the government seeks to maintain full employment using the JG.
I should add that my intellectual evolution in economics did not start with Keynes’ General Theory but rather with Karl Marx and later Michał Kalecki. Some of the early MMT proponents place much more emphasis on Keynes than I ever have.
While orthodox economists typically attack the JG policy for fiscal reasons, economists on the Left are also critical.
They constantly cite Kalecki’s 1943 article – Political Aspects of Full Employment – to argue that the JG policy is politically naive.
That brilliant article by Kalecki laid out the blueprint for socialist opposition to Keynesian-style employment policy. The criticisms are also relevant to the JG.
Indeed, the paper presented in Sydney this week specifically uses the 1943 article as its authority.
… the assumption that a Government will maintain full employment in a capitalist economy if it knows how to do it is fallacious. In this connection the misgivings of big business about maintenance of full employment by Government spending are of paramount importance.
Kalecki (1971: 139) lists three reasons why the industrial leaders would be opposed to full employment “achieved by Government spending.”
The first asserts that the private sector opposes government employment per se.
The second asserts that the private sector does not like public sector infrastructure development or any subsidy of consumption.
The third asserts that the private sector merely dislikes “the social and political changes resulting from the maintenance of full employment”.
One is tempted to respond to these assertions by referring to the long period of growth and full employment from the end of WWII up until the first oil shock.
Most economies experienced strong employment growth, full employment and price stability, and strong private sector investment over that period under the guidance of interventionist government fiscal and monetary policy.
This period of relative stability was only broken by a massive supply shock, which then led to ill advised policy changes that provoked the beginning of the malaise we are still facing some 40 years after they occurred.
In Kalecki’s defense it might be argued that it took 30 odd years of the Welfare State to generate the inflationary biases that were observed in the 1970s.
Kalecki explains how the dislike by business leaders of government spending:
… grows even more acute when they come to consider the objects on which the money would be spent: public investment and subsidising mass consumption.
If public spending overlaps with private spending then:
… the profitability of private investment might be impaired and the positive effect of public investment upon employment offset by the negative effect of the decline in private investment.
This criticism is inapplicable to the JG because the JG jobs would most likely be located in the areas that have been neglected or harmed by capitalist growth. The chance of overlap and substitution is minimal.
Of course, government industry policy may deliberately target an overlap to drive inefficient private capital out.
Kalecki acknowledges that the “pressure of the masses” in democratic systems may thwart the capitalists and allow the government to engage in job creation.
His principle objection then seems to be that:
… the maintenance of full employment would cause social and political changes which would give a new impetus to the opposition of the business leaders.
The issue at stake is the relationship between the threat of dismissal and the level of employment.
Indeed, under a regime of permanent full employment, ‘the sack’ would cease to play its role as a disciplinary measure. The social position of the boss would be undermined and the self assurance and class consciousness of the working class would grow.
Kalecki is really considering a fully employed private sector that is prone to inflation rather than a mixed private-JG economy.
The JG creates loose full employment rather than tight full employment because the Job Guarantee wage is fixed (growing with national productivity).
The issue comes down to whether the JG pool is a greater or lesser threat to those in employment than the unemployed when wage bargaining is underway.
This is particularly relevant when we consider the significance of the long-term unemployed in total unemployment. It can be argued that the long-term unemployed exert very little downward pressure on wages growth because they are not a credible substitute.
The JG workers, however, do comprise a credible threat to the current private sector employees for reasons noted above. The JG pool provides business with a fixed-price stock of skilled labour to recruit from.
In an inflationary episode, business is more likely to resist wage demands from its existing workforce because it can achieve cost control.
In this way, longer term planning with cost control is achievable. So in this sense, the inflation restraint exerted via the employment buffer is likely to be more effective than using a NAIRU strategy.
The International Labour Organisation (1996/97) said “… prolonged mass unemployment transforms a proportion of the unemployed into a permanently excluded class.” The ILO argues that these people “cease to exert any pressure on wage negotiations and real wages.”
The result is that “the competitive functioning of the labour market is eroded and the influence of unemployment on real wages is reduced.”
Kalecki says that counter-stabilisation policy would not worry business as long as the “businessman remains the medium through which the intervention is conducted.”
Such intervention should target private investment and should not “involve the Government either in … (public) investment or … subsiding consumption.”
He said that if attempts are made to:
… maintain the high level of employment reached in the subsequent boom a strong opposition of ‘business leaders’ is likely to be encountered … lasting full employment is not at all to their liking. The workers would ‘get out of hand’ and the ‘captains of industry’ would be anxious to teach them a lesson.
He was very vague about the form that capitalist opposition would take. Kalecki implies that the reaction would work via business and rentier interests pressuring the government to cut its budget deficit. Presumably, corporate investors could threaten to withdraw investment.
It is clear that the investment ratio moves as a mirror image to the unemployment rate, which reinforces the demand deficiency explanation for the swings in unemployment. In Australia, the rapid rise in the unemployment rate in the early 1970s followed a significant decline in the investment ratio. The mirrored relationship between the two resumed albeit the unemployment rate never returned to its 1960s levels.
Far from being a reason to avoid active government intervention, the JG is needed to insulate the economy from these investment swings, whether they are motivated by political factors or technical profit-oriented factors.
Another factor bearing on the way we might view Kalecki’s analysis is the move to increasingly deregulated and globalised systems.
Many countries have dismantled their welfare states and enacted harsh labour legislation. Trade union membership has declined substantially in many countries as the traditional manufacturing sector has declined and the service sector has grown. Trade unions have traditionally found it hard to organise or cover the service sector due to its heavy reliance on casual work and gender bias towards women. It is now much harder for trade unions to impose costs on the employer. Far from being a threat to employers, the JG policy becomes essential for restoring some security for workers.
Finally, looking to the future, those who criticise the JG from a Kaleckian viewpoint have to address the issue of binding constraints.
Kalecki comes from a traditional Marxian framework where industrial capital and labour face each other in conflict. The goals of capital are antithetical to those of labour. In this environment, the relative bargaining power of the two sides determines the distribution of income and the rate of accumulation.
Industrial capital protects its powerful position by balancing the high profits that come from strong growth with the need to keep labour weak through unemployment. However, the swings in bargaining power that have marked this conflict over many years have no natural limits.
But the concept of natural capital, ignored by Kalecki and other Marxians, may now become the binding constraint on the functionality and longevity of the system. It doesn’t really matter what the state of distributional conflict is if the biosystem fails to support the continued levels of production. The research agenda for Marxians has to embrace this additional factor – natural capital.
I could write much more about all of these issues and I haven’t provided a detailed critique of the specific paper presented this week in Sydney but time is short today.
Update on November Labour Force estimates for Australia
The ABS publication – Labour Force, Australia – November 2015 – allows us to understand why I (and many other commentators) assessed yesterday’s employment data as being a strain on credibility.
In yesterday’s blog (December 10, 2015) – Australian Labour Force – improvement but credibility stretched – we learned that employment increased by 71,400 (0.6 per cent) on the back of a similar substantial increase last month.
In the ABS commentary, we learn that:
The Labour Force Survey sample can be thought of as comprising eight sub-samples (or rotation groups), with each sub-sample remaining in the survey for eight months, and one rotation group “rotating out” each month and being replaced by a new group “rotating in”. This replacement sample generally comes from the same geographic areas as the outgoing one, as part of a representative sampling approach. To understand movements in the original estimates, it is important to consider the contributions from the three components of the sample:
- the matched common sample (survey respondents who responded in both October and November,
- the unmatched common sample (respondents in November but for whom we didn’t have a response in October, or vice versa), and
- the incoming rotation group (who replaced respondents who rotated out in October).
… the matched common sample is generally around 80% of the sample …
Analysis of the matched part of the common sample in November 2015 shows that just over 94% did not change their labour force status over the period (with 61% of the matched sample remaining employed, 2% remaining unemployed, and about 32% remaining not in the labour force). Of the 6% that did change their labour force status, around a third entered employment, left employment or moved status outside of employment.
So what does this mean for the estimates published yesterday?
1. The original (unseasonally adjusted) increase in employment was 69,600.
2. The “matched common sample contributed 5,300, while the aggregate difference in the unmatched part of the common sample contributed 11,600, and 52,700 came from the aggregate difference between the outgoing and incoming rotation groups”.
3. The new group for the November 2015 survey (“the incoming rotation group”) “displayed a stronger tendency towards both participation and particularly employment than the group it replaced” which meant that the participation rate and the employment estimate were pushed up.
4. Both the October and November surveys were effected by the incoming rotation group having employment to population ratios much higher than the other groups in the sample.
5. The ABS say that this survey sample quirk has led to the “strong growth in employment” estimates.
6. If oranges were compared to oranges, then the matched common sample is the most reliable guide to what has happened between the months – which means that the more reasonable estimate of employment change is 5,300 rather than 71,400.
I also remind readers that the sample (point) estimates are subject to standard errors and associated 95 per cent confidence intervals.
In the latest publication the ABS tell us that there is 95 per cent confidence that the “true value of the estimate lies within that interval”.
And for November 2015 they are:
1. Employment change: Estimate 71,400; Interval: 13,000 to 129,800
2. Unemployment change: Estimate -2,800; Interval: -39,800 to 34,200
3. Unemployment Rate change: Estimate -0.1 points; Interval: -0.5 points to -0.3 points
4. Participation Rate change: Estimate 0.3 points; Interval: -0.1 points to 0.7 points
Which means, for example, that we can be equally confident that total employment grew by anywhere between 13,000 and 129,800 (the sample rotation discussion notwithstanding), which is a very large span and at either end of the span would generate a very different final assessment of the state of the labour market.
Thus we have to be circumspect when dealing with these numbers. They are information but we also need to understand their limitations and their nuances.
All this does not warrant claims that the data are meaningless.
Music – BFE on the revolution
This is what I have been listening to this morning while I have been working. It is from a 1995 album by the American music collective – Brooklyn Funk Essentials – Cool And Steady And Easy – and it is called The Revolution Was Postponed Because of Rain.
It is a great album overall and this song is typical of the acid-jazz poetry that BFE is renowned for.
It is about Black American activism in the face of mass consumerism and the way in which individualism undermines collective, revolutionary zeal.
But it could easily be about all the left-wing progressive coffee shop plots, where left-wingers with protected jobs and stable salaries discuss tactics relating to overthrowing the capitalist system in between sipping their cafe latte.
I have often been criticised for advancing the Job Guarantee among other measures to help the day to day lives of the most disadvantaged in our society. The criticism doesn’t just come from the right-wingers but also from the Left, the latter who say I’m just a stooge for the capitalist system advocating palliative measures that underpin the profit rate of the capitalists and preclude any revolution occurring.
As these characters order another croissant and stir the cream at the top of their coffee, they wheel out this sort of abuse with some disdain.
I often think about this song when that sort of criticism arises.
The lyrics are as follows:
and trigger mechanism causes
were all in place when
some nee-gro or the other got hungry
had to stop at the McDonald’s
had to get on the line
with the new trainee cashier
“uhh, where’s the button for the fries?”
so we missed the bus…
Then the leader couldn’t find his keys
didn’t want some poor ass moving
his brand new 20″ and VCR
out his living room on the shoulders.
It was too late when the locksmith came
Then our demo expert Willie Blew got arrested
came out with his head hanging under his hoody
“Didn’t know they started doing that
for jumping the turnstiles,” he said.
“How many times must we tell you –
Don’t.. get.. caught.”
We voted against shootin’ him on the spot
In the winter we were all depressed
so we leaned our guns against the sofas
and listened instead to Tim Tim Tiree
singing about his dysfunctions:
Cool and steady and easy
It makes them like it
“Sometimes I wonder if ah’ll ever be free
free of the sins of my brutish daddee
Like the cheating, the stealing, the drinking, and the beating”. . .
The weatherman said the 17th would be sunshine
and it wouldn’t be too hot –
Tim Tim Tiree doesn’t like sweatin’
but that night the weatherman came on crying
saying he didn’t control the weather
that God was real
that he’s lucky He, God, didn’t strike him, the weatherman, with lightning
for taking the credit sometimes
and that he, the weatherman, was in no way responsible
for the hurricane coming
and that we, the viewers, should
pray Jesus into our hearts
before it was too late.
Superbowl Sunday was out
all the women wanted
to see the game
and the men were pissed
at their insensitivity
The 20th was supposed to be a definite
we looked for some Bastille to storm
didn’t find any
settled on the armory instead
before they moved the homeless in…
“We’ll bum-rush it anyway,” I said
“It smells like a collection
of a thousand farts in there,” they said
So we waited for the approval of the city
contract to build a Bastille
which set the revolution back five years.
Cool and steady and easy
It makes them like it
Peace wanted to start the revolution on Tuesday
She was in a pissed-off mood
her tax return didn’t come in time for the rent
But they showed the We Are the World video
on cable that evening
and we all held hands
and cried to stop from laughing
and our anger subsided
Looking back, it could’ve been a plot
but there are more substantive plots to expose
than the We Are the World conspiracy
Now we wait for the rain to stop
All forces on the alert
some in Brooklyn basements
packed in between booming speakers
listening to Shabba Ranks and Arrested Development
bogling and doing the east coast stomp
gargling with Bacardi and Brown Cow
breaking that monotony with slow movements –
slow, hip-grinding movements
with the men breathing in the women’s ears to
Earth Wind & Fire’s Reasons
and wondering what the weather will be like
The Saturday Quiz will be back again tomorrow. It will be of an appropriate order of difficulty (-:
That is enough for today!
(c) Copyright 2015 William Mitchell. All Rights Reserved.
This Post Has 122 Comments
I’m yet to read the ruminations.
However to call MMT proponents neo-liberals is in itself quite naive or worse ignorant. That said I do think there is a minute amount of merit in political naivete. However when the Greens managed to abolish the debt ceiling myself and many others were pleased. The allegedly more politically astute moaned that the Greens or Labor themselves didn’t get something themselves out of it and boast about it. Unfortunately that is the partisan nature of political people these days – they don’t really give one care about outcomes. I’m an outcome based person and so should we all be.
Again I haven’t read your ruminations yet but even the so-called political economists seem to care more about the politics than the economics. The economics is the foundation, as long as the desired outcome is effected, the politics will take care of itself. Again, not understanding this is either naive or at worst ignorant.
The political wonks want short-term outcomes as much as the media cycle, policy wonks – dare I say – like ourselves want the best outcomes for everyone and it does not matter which party or person gets us there.
Now back to your ruminations 🙂
I have now read it all.
I’m with you. I don’t understand how people that have read up on MMT do not get this. I read the “if we move to MMT type world” a lot too especially in articles. Seriously I don’t get how anyone can form a conclusion like that if they actually understood MMT
your response seems enough. I wonder if the paper itself specifies how it is neoliberal method of inflation reduction. I’m not even sure there is such a thing as neoliberal inflation reduction other than the current stance of keeping all currency units at the top and none down the bottom causing disinflation to deflation but that would also assume gold standard type thinking etc too.
As for MMT and capitalism, even Peter Cooper at Heteconomist has provided arguably revolutionary ideas without changing the currency/economic system.
While orthodox economists typically attack the JG policy for fiscal reasons, economists on the Left are also critical.
Isn’t this the nub of the problem with the JG?
For it to get anywhere, it’s going to need some support in the political parties. There are some examples or where that has occurred from Argentina and India but they are few and far between.
The British Labour Party had a “Job Guarantee” in its May 2015 election manifesto but that was more a form of workfare – IMO.
So I’m just wondering where that support could possibly come from? It has to be from the left. There’s nowhere else. MMT proponents do have to accept that if there is no accommodation possible between those on the left who may have been critical (right or wrongly – it doesn’t matter) and do have some reservations about the workings of the JG, then there’s Buckley’s chance of it ever happening.
If by “workfare” you mean a system that involves a penalty for those refusing work (JG or regular work), there always has been a penalty element in the UK’s unemployment benefit system, ever since it was re-jigged by Beveridge just after WWII. Beveridge was quite clear that able bodied people cannot be allowed to live on unemployment benefit their entire lives. Though possibly one can argue that with today’s much improved GDP/head figures, idlers SHOULD BE allowed to do no work at all.
A further problem with objecting to the penalty element is that if you get round it by making JG jobs very attractive, that reduces the RELATIVE ATTRACTIONS of regular work, which reduces aggregate labour supply. That’s inflationary, which means aggregate demand has to be reduced: hardly the object of the exercise. That problem was recognised by the Swedish labour market economist Lars Calmfors. He referred to it as the “Iron Law of Active Labour Market Policy”.
Ultimately those on the Left objecting to the JG don’t believe people should have to work for a living. That’s what it boils down to.
They have the inconsistent position of wanting to pay people off because we have a surplus of workers, but wanting open borders because we haven’t got enough workers for an ageing population.
The reason they don’t like the JG is because it highlights the inconsistency between those two viewpoints very clearly.
If you have an individualistic philosophy that believes in completely open borders and not having to work for a living, then you’re going to pull out all the political stops to head off the one system allows a stable mixed economy without poverty.
Similarly if you’re a dyed in the wool Marxist, Socialist, Libertarian or Anarchist who really doesn’t like the idea of governments of nations as a concept, you’re going to object to a fix that allows nations to continue with governments operating an existing mixed economy.
It does look like we’re going to have to have yet another round of daft extremist philosophies defeated at the ballot box before sense prevails. It’s always the way.
“if you get round it by making JG jobs very attractive, that reduces the RELATIVE ATTRACTIONS of regular work, which reduces aggregate labour supply. That’s inflationary, ”
No it isn’t. If it was a basic income it would likely be inflationary, but with an alternative job system you have replacement output and additional output.
If a JG was inflationary then any new business setting up and borrowing money would be inflationary instantly – and they are not.
So the ‘Iron Law’ is a marginalist mistake. All businesses operate with slack on a mark-up basis.
If you get any inflation, then the level of competition in the markets is insufficient and you need to increase it by breaking apart monopolies and oligopolies – possibly even state funding new competitors to get over any barriers to entry.
Competition and the fear of failure of businesses is what causes the capital share to absorb the shift – either by income or by volume change.
You may get a one off shift as the prices correct themselves. But you may not – just as you don’t always get output price corrections when currencies move markedly depending upon the competitive position at the time (the 25% drop in Sterling from the crash barely shifted prices at all – because the competitive environment was intense).
The JG is specifically designed to be self limiting. Hence why it doesn’t have a ‘wage structure’.
Might I suggest that the conflation of policy choices with analysis of how the
economy works is a result of placing one policy choice at the heart of MMT.
Yes we live in a MMT world ,a world that has never implemented a universal JG
at a living wage .
“If by “workfare” you mean a system that involves a penalty for those refusing work”
Let’s get the definitions right. ‘Workfare’ is forcing somebody to take a job you have pre-created – normally in the private sector. So it is the equivalent of banging a square peg into a round hole. The social prerogative is punishment.
A Job Guarantee is where you take the person and the job opportunities out there and tailor the job to the person. It is the equivalent of finding the squarest hole you can for the square peg. The social prerogative is social care, nurturing and assistance – like a social worker or family support worker.
In both cases, and like any other job, you don’t get paid if you don’t work – unless you are exempted from working by reason of age or infirmity. There is no penalty. Just reality. That’s the extant social convention – one that scientific evidence suggests is hardwired into our ape brains.
But there is a world of difference between turning down a sweatshop job at your local sportswear distribution warehouse and turning down a job where everybody has bent over backwards to accommodate what you want to do.
In a jury of your peers the former would get most nodding in agreement. The latter would get most folding their arms.
“The alternative proposed by some Post Keynesians is to rely on so-called incomes policies to suppress income growth in the private sector so that spending grows in line with real capacity.”
So essentially they still believe in millions of people unemployed. Permanently unemployed without any chance of getting out of it.
The ‘neoliberal’ belief is that there is a magic setting somewhere where the laissez faire system will employ everybody. Not in any system that dreams up a job spec and then searches for people to match it.
Because ‘income growth’ restriction doesn’t solve the matching problem. The JG with its ‘jobs for the people’ approach does. The key innovation of the JG is that it takes people and tailors a job spec to them *as they are now*.
“Might I suggest that the conflation of policy choices with analysis of how the
economy works is a result of placing one policy choice at the heart of MMT.”
It’s not a policy choice unless you discard full employment as a philosophical goal.
Are you discarding full employment as a philosophical goal and demanding that people remain unemployed?
You expect the unemployed and the job uncertain to vote for you when you are championing structural unemployment as a policy goal?
That’s the new philosophy isn’t it. Championing the delights of unemployment. Except of course for those individuals that clean the fat bergs out of the sewers. Not for them obviously.
Very Animal Farm.
Central banking operations are independent of the political and collective social decision to still operate with monetary constraints. We do not operate in a world driven by functional finance principles, but still mired with bogus gold-standard and moralist view of monetary operations and spending.
Hence people saying “if we move to a world where MMT …”.
Dear Kevin Harding (at 2015/12/11 at 17:12)
Your understanding of history evades you somewhat. Prior to the neo-liberal era, which began around the time of the first OPEC oil shocks in 1973-74, most nations maintained full employment. It was not the private sector nor the ‘mainstream’ public service that provided the jobs that were necessary to achieve that outcome.
Most nations also ran a buffer system of jobs – not called a JG true – but the principle was the same. There was an elastic pool of jobs, usually in the public sector that would be available at all levels of government to ensure everyone had a job. I have documented these systems extensively in my earlier work.
In his 1994 book – The Death of Economics – Paul Ormerod wrote that the economies that avoided the plunge into high unemployment in the last 25 years (after the oil shocks) maintained a “sector of the economy which effectively functions as an employer of the last resort, which absorbs the shocks which occur from time to time…” He noted Japan, Switzerland, Austria had clear examples of the use of buffer stocks.
So most nations did have clearly defined buffer employment systems which provided them with the flexibility to meet the flux and uncertainty of private spending and still maintain full employment.
These buffer systems were largely eroded once the attack on fiscal policy began.
“The British Labour Party had a “Job Guarantee” in its May 2015 election manifesto but that was more a form of workfare – IMO.
So I’m just wondering where that support could possibly come from? It has to be from the left.”
Haven’t you just answered your own question?
Unless you believe those who put forward that election manifesto (a) are not of the left and (b) are never going to run the Labour Party again.
Look at the impact of Brown’s Future Jobs Fund. The main weakness is the ideological obsession with the private sector being involved.
We can do even better. A Job Guarantee.
I agree with Ignacio. MMT describes how the monetary system CAN work not how it DOES work in practice.
A central principle of MMT is that the government is the exclusive issuer of the currency. In practice this is not how it works. In the UK the Bank of England is the issuer of the currency which isn’t quite the same thing. Worse in the US, where the Fed is the issuer of the currency, and the Fed is privately owned – at least the BoE is owned by the government, but was made independant by Gordon Brown in 1996.
I have just recently realised that the UK is bound by article 123 of the Lisbon Treaty in just the same as any eurozone country is. So the BoE is forbidden from financing the UK government’s deficit spending, hence the reason for borrowing to match the deficit. The UK’s only advantage is that it does not use the euro so is able to float its exchange rate.
To me this is the MAIN reason why the UK should leave the EU – provided, that is, it then uses its currency-issuing capacity (via the BoE) to stimulate its economy. Unfortuanately, this won’t even be on the “Leave” campaign’s agenda.
You claim (17.08) that where JG work replaces regular work there is no inflationary effect because JG involves output just as do regular jobs.
My answer to that is that it’s hardly the objective of JG to DISPLACE regular work. The objective is to have people do JG work INSTEAD OF be unemployed.
Second, JG work is bound to be unproductive relative to regular work, though I’m not suggesting it’s so unproductive as to not necessarily be worthwhile. The brute reality is that the dozens of make work schemes, job creation schemes, etc that have been implemented and then abandonned since WWII have been relatively unproductive. That’s why they’ve been abandonned. If an unproductive job displaces a relatively productive on, that’s inflationary.
You know that I’m more than a bit sympathetic to JG. But I think that there is still space for incomes policies because JG can actually increase bargaining power and heighten the risk of a wage-price spiral. I think that Abba Lerner’s MAPS program was meant as a complement to JG. I still think that MMT should round out its platform with this piece of the puzzle that Lerner provided. Love you to write something on it. Here are my thoughts:
I think that a wage-price spiral would lead to nasty politicians taking apart a JG if we ever got it put in place.
You will have to forgive those of us still awakening from the matrix who sometimes still make communications slips which suggest perhaps we are not living in an MMT world already. The fact is it doesn’t feel like an MMT world because we are constantly bombarded by messaging from politicians and media which strongly suggests otherwise.
Even in Canada which has a publicly owned central bank, the people have had to launch a lawsuit, which has been vigorously opposed by the government to date, in protest of the 40 odd year long practice of the central bank borrowing at interest from commercial banks to fund the federal spending upon which the functionality of the entire economy depends.
For those of us who do not carry the weight of a Phd in economics, confronting politicians, media and even our peers with reality is a daunting task, and it is mostly assumed that our voices can be ignored by those we try to persuade.
“Unfortuanately, this won’t even be on the “Leave” campaign’s agenda.”
Correct, I’m not too familiar with UK politics but I believe UKIP is plagues by “we are running out of money” and gold standard crowd thinking.
AFAIK very few have escaped this train of thought, I believe only the LePen’s FN is proposing to escape the euro and use sort of OMF (and Corbyn to an extend, with his PQE, although I’m very much unconvinced on how it would work on practice and I don’t see it as OMF from the details we have), btw the FN economic plan is an socialist as it comes compared to mainstream parties. I can see Trump doing something similar in the US; but so far his messaging has been on the “balance the budget” field (at least he is on for balancing the CAD, something MMT has completely wrong btw, has unbalanced worldwide trade just leads to conflict on the long run).
And on the JG, it would be used to screw it up at the first opportunity to claim the superiority of market based “solutions” and how useless the government is, this is neoliebralism 101 past the last 4 decades. Not to say there hasn’t been any comprehensive real suggestion on how to implement such programs and what they would entail at many levels of administration, resource provision, organization and dealing with the raising complexities and problems. Is not that it can’t be done, but the level at what it has been tried is not representative to the level we are talking with, specially if we had to deal with asynchronous implementations of it (and gl doing this worldwide). All plagued with numerous chances for TPTB to screw it up on purpose.
The reason why MMT is politically naive is because kicking the can of the current system without deep political and social changes is going to backfire badly, MMT is already used to finance military operations worldwide and provide corporate welfare, and in general most people is against this (that’s why is a hard sell amongst other things). We are probably beyond the point this system can be fixed (ie. useless COP21) without radical social and political change. The time for “Keynes second coming” saviour of capitalism style is further and further away as time passes by and the gap is closing.
where left-wingers with protected jobs and stable salaries discuss tactics relating to overthrowing the capitalist system in between sipping their cafe latte.
I have often been criticised for advancing the Job Guarantee among other measures to help the day to day lives of the most disadvantaged in our society. The criticism doesn’t just come from the right-wingers but also from the Left, the latter who say I’m just a stooge for the capitalist system advocating palliative measures that underpin the profit rate of the capitalists and preclude any revolution occurring
It’s easy to make these kind of sweeping generalisations, Bill.
I’d just make four points:
1) Yes I, and I’m sure others on the left too, do have reservations of how the JG would work in practice . I know the theory is fine as you describe how it could be.
2) Not everyone who feels this way has a protected job. I don’t, and never have had, for example.
3) Just because we may have some political disagreement, (I wouldn’t dare have an economic disagreement!) , I wouldn’t accuse you of being a stooge. Far from it. We can’t all agree – all the time. A comradely disagreement shouldn’t be taken as a personal attack.
So, it should at least be “some of the latter” and not the Left generally who may be making these comments but I haven’t heard anything like that.
4) I quite like cafe latte !
The brute reality is that the dozens of make work schemes, job creation schemes, etc that have been implemented and then abandonned since WWII have been relatively unproductive. That’s why they’ve been abandonned. If an unproductive job displaces a relatively productive on, that’s inflationary.
Because scaling up is not always the best solution… Many large corporations the larger the worse are highly inefficient. The government is inefficient because is much larger than even the largest of the corporations.
Complexity necessarily means inefficiency, this is something economists struggle to get. Complex ecosystems with lots of interdependencies and little resilience exist because the environment can provide a wealth of energy so they can develop to offset the problem of entropy. This is how we have built our modern society, and governments and corporations are the maximum expression of this design.
Anyway, the inflation bogeyman is not the real problem. A rise of prices due to resource constraints are going to be single events most of the time, they will trigger a chain along the supply chain but ultimately would cease as long as the system is resilient enough to adapt. With decreasing population (fortunately) any major inflation shock in the West is going to be contained, as long as the government promotes and forces substitution of our highly inefficient logistic and production system. All that big scare about inflation has to stop because is unreal: it’s not gonna happen unless we want it to happen, period. Most of that inflation can be eliminated with proper laws (housing, trade barriers) and investment (energy, transportation and logistics).
And the best way to avoid it is to build local resilience without obsessing over market competitiveness, this is where a well-done JG could help wonders, but the effort to make it works is monumental and requires both social and political changes beyond what MMT has to offer. What I’m trying to tell is that those changes are a priori, not ex-post. Printing money is not going to solve our problems, and it will just make them worse as long as that printing does not go with the right set of policy change.
So when a Conservative politician or corporate leader claims that the government has run out of money and therefore cannot afford income support for the unemployed any longer at the levels previously enjoyed, MMT alerts us to the fact that this is a lie and that there must be an alternative agenda.
Similarly, when a so-called Progressive claims that the rich must be taxed to pay for social services to the less well-off (among other things), MMT alerts us to the fact that this is a lie. There are valid reasons to tax the rich (and this is not my intent to debate about these here), but funding government expenditure isn’t one.
I know it’s obvious to MMTers, but a lot of my left-leaning friends tend to get confused by this.
“.. Let’s get the definitions right. ‘Workfare’ is forcing somebody to take a job you have pre-created – normally in the private sector. So it is the equivalent of banging a square peg into a round hole. The social prerogative is punishment.
A Job Guarantee is where you take the person and the job opportunities out there and tailor the job to the person. It is the equivalent of finding the squarest hole you can for the square peg. The social prerogative is social care, nurturing and assistance – like a social worker or family support worker… ”
is pure drivel and fantasy.
Workfare as a term in common use simply means being forced to work for a social welfare level income at a job dictated by some bureacrat. Ok, the JG is supposed to be at a higher ‘minimum wage’ income level, but there’s not the sightest guarantee that income level will be sustained for JG, over time.
And without the option to refuse a JG offer, and remain on a (lower) SW income, you will virtually guarantee two things:
1. With no lower income level option, your non voluntary JG wage rate will inexorably go downward.
2. Without the option of refusal of a JG offer, some idea that ANY ‘tailoring’ will exist for JG participants is crap of the highest order and completely ignores the decades of demonisation of the unemployed, virtually everywhere. Every single ’employment activation’ scheme ever implemented has never been anything more than a device for political optics and massaging dole statistics – at least for 99% of participants.
By insisting on a mandatory JG, you yourself are reinforcing the ‘scrounger’ narrative. There is nothing remotely ‘progressive’ about a mandatory JG. I don’t know what planet you are thinking about, but it’s not this one if you think it is.
The JG at minimum wage, we’re told, is also supposed to ‘discipline’ the quality of normal sector minimum wage jobs. So, if its mandatory, who or what is going to ‘discipline’ the JG jobs for ‘quality’ or adequate income level? Answer, no one and nothing at all.
Shudder the thought that whilst you support the neoliberal ‘scrounger’ narrative that you might actually have put your money where your mouth is and provide these wonderful ‘tailored’ JG offers to a cohort that can say ‘no’, if they don’t agree with your evaluations.
And I see Bill himself has completely ignored this key issue which I posted about on the other thread.
If you can’t see this elephant in the bloody kitchen, god help us.
Why do you insist on saying the JG advocated is mandatory? Nobody forces anybody to sign-up to the JG.
It has been explained many times that JG exists alongside other social care/support/hand-outs, it could even exist alongside a basic income guarantee. This would be the ultimate moment of truth for the people who so far are outside the employed cohort but able to work: do they want to be treated as consumption units, or do they want to directly contribute to society? If they are happy to be wallets on legs, then they go BIG. If they’d rather do something of themselves they go JG. And yes a JG job can include artistic professions, charitable work, and other so-called non-productive professions in capitalistic terms, as long as society deems that these activities worthwhile.
And since a JG job is still a job, (with constraints, even if they are light and possibly tailored to the individual), I would think it’s only fair the JG remuneration to be relatively higher than what the BIG provides.
Also, Bill as always said that it was his preference to remove unemployment support, should a JG be introduced, but that’s just his personal opinion on the matter. He never said it was mandatory to be “MMT compliant” (for lack of a better term, I’m not a native English-speaker after all!) to remove other forms of support.
So let people who want to work get a job if they want to! Who are we to deny them the right to work, to contribute to society, to feel useful, just because the private sector has decided they don’t need them?
You don’t have to be against JG. You can be pro-JG and pro-BIG at the same time. Give people a choice.
” if you get round it by making JG jobs very attractive, that reduces the RELATIVE ATTRACTIONS of regular work, which reduces aggregate labour supply…That problem was recognised by the Swedish labour market economist Lars Calmfors.”
Calmfors is known to come up with whatever conclusions private sector owners want him to come up with. During his whole career (that is a few decades) he’s promoted lowering wages as the solution for more jobs.
Calmfors has been around since the days Sweden had what could be considered full employment and at the same time had attractive schemes which accordingly to Calmfors ought to have reduced the RELATIVE ATTRACTIONS of regular work which it didn’t.
Calmfors is about as trustworthy as Reinhart and Rogoff.
“So the BoE is forbidden from financing the UK government’s deficit spending, ”
Directly permanently financing. As of course this is easily got around by QE.
“hence the reason for borrowing to match the deficit”
I don’t call it borrowing from the market. I call it draining reserves. Because the UK Govt does not borrow money (sell bonds) to deficit spend. It creates new reserves when it spends and then drains these reserves by issuing bonds. And if it wants it can once again (via the BoE) create reserves out of thin air to buy these bonds back. So reserves initially back all UK Govt spending and bonds can or can not back deficit spending.
“so is able to float its exchange rate.”
This is definitely not the main advantage of being out this dreadful Euro. but is an essential part of being monetary sovereign.
“It has been explained many times that JG exists alongside other social care/support/hand-outs, it could even exist alongside a basic income guarantee.”
Just a couple of points:
Those doing the “explaining” aren’t going to be the ones doing the actual implementation, if it ever happens, of the JG.
Yes the JG can run alongside other existing schemes if we have a truly voluntary JG. There does seem some reluctance to concede that the JG should be truly voluntary rather that just ‘voluntary’ on the basis that they could equally well choose to forego their existing payments. In the UK there is a scheme of national insurance. So it’s not fair to call them “hand-outs”. Insurance policies are supposed to pay out, aren’t they, as required?
Yes, I fully take your point that the issue of bonds only drains reserves and isn’t really borrowing. I was just using the groupthink terminology. However, the govt then has to pay interest on the bonds, increasing its spending and causing it to have to “borrow” more. It’s a viscious circle. And who gets all that interest?
If the UK exited the EU it would no longer be subject to the Lisbon Treaty and if (very if) the Chancellor had the sense to use the UK’s currency-issuing capacity the Treasury would no longer need to issue bonds unless it felt the need to drain capacity – it would become a regulatory tool.
Australia, of course, is entirely at liberty to do this but doesn’t.
In my view, and I think I am correct that Bill has said it, QE just shifts reserves from one place to another and really doesn’t achieve very much. The ECB is trying to get round article 123 by a programme of QE, but how much simpler it would be if 123 was abandoned. QE doesn’t get money to the right place – if any.
“In the UK there is a scheme of national insurance. So it’s not fair to call them “hand-outs”. Insurance policies are supposed to pay out, aren’t they, as required?”
No it isn’t. You don’t pay into anything. It’s not a saving scheme. Paying tax contributes literally nothing to society. It is just garbage collection for the economy.
What you are doing is trying to maintain your relative position by stopping the JG in its tracks if it does not fulfill certain criteria that gives you an advantage over others.
It is similar to the ‘poor widows’ argument against property taxes. Disgusting.
“However, the govt then has to pay interest on the bonds, increasing its spending and causing it to have to “borrow” more. It’s a viscious circle. And who gets all that interest?”
All spending generates tax and an amount of saving. It is just like any other government spending.
“who gets that interest?”
Well said Bill, nice to get these clarifications which support your excellent goal of full employment.
@Tristan, yes indeed.
The purpose of a minimal BIG is to completely take labor out of being considered a commodity. It further empowers the labor force.
I don’t think it’s necessarily the same people who favor a BIG that also favor open borders. But it might imply a willing to view various refugees as human and interested in finding the cause of their status and better solutions.
Nigel “QE doesn’t get money to the right place – if any.”
All QE does is increases reserves held by banks. And (unless a bank sells reserves) increases bank credit as well. It reduce bonds held by banks or the non banks.
So it removes an interest bearing asset for money to be invested in. And doesn’t replace it with anything. I still think this will impact maybe on the value of investments assets (more money chasing fewer investment assets) but I know MMT does not agree on this point.
“would no longer need to issue bonds” Issuing bonds is a good thing not bad. It result in more income (interest) for the non Govt sector. It’s our irrational, harmful fear of Govt debt that’s the real issue. That will still exist without issuing bonds
“It’s a viscious circle” I don’t think it is. In fact the opposite. It’s an essential component of the capitalist system.
“Paying tax contributes literally nothing to society. It is just garbage collection for the economy.”
This is a typical misunderstanding of the MMT position.
Firstly, some taxes are collected and spent locally. That is by local councils and non- sovereign govts like in Scotland etc. That collection and spending works exactly as everyone thinks it works.
Secondly, the taxes that are collected by the sovereign currency issuer give a value to the currency and are just as essential to the functioning of the economy as taxes collected locally. They aren’t garbage in the slightest. The collection of these taxes makes space for Govts to do their own spending without causing inflation. If we look at the economy in resource terms, real taxation by the sovereign issuer is the process of removing the ability of the private sector to consume those resources and transferring that consumption to govt. So real taxation, as opposed to monetary taxation, works like everyone thinks it works too!
In principle, the govt could subcontract the NI system to an independent body. The payments in and out would also then work like everyone thinks they work and people who only half understand MMT wouldn’t be able to make the type of objection you’ve just made to the NI system.
Would it make the slightest difference? Except that it would probably be slightly less efficient, none at all! So there is no reason to do it.
So as I understand it, from what Bill has written above, we already live in an MMT world and not a monetarist, neoliberal world? Not sure I follow that.
MMT is a theory of how an economy actually functions. It’s applicable to all economies which have currencies which are tied to an amount of precious metal, or another currency, or currencies which are totally fiat and aren’t tied to anything at all. Much of conventional economic thinking doesn’t allow for the latter possibility.
So if the government wishes to reduce its budget deficit, for example, and decides to cut spending and raise taxes when inflation is already very low, the users of the currency are net saving, and there is considerable slack in the economy, MMT will give us an explanation of why that is very unlikely to work!
It also allows us to suggest more suitable alternative policies which which might just produce the desired result of course.
In a country like the UK, for example, the government deficit needs to be increased rather than decreased. There’s more to it than that though. There is a huge property bubble which is apparent when we compare property prices in the UK and Germany. There has to be some convergence in future. That’s going to be difficult to achieve without bankrupting many recent buyers of UK property or without creating high inflation which will also cause problems for many. Even MMT doesn’t offer an easy way out of that problem.
The Oxford Dictionary of Economics agrees with your definition of workfare. It reads “A system making income support for the unemployed conditional on their performing some form of work for which they are suitable.”
Personally I cannot see how there can be a JG scheme when within 20 years, it is said, 40% of existing jobs will be done by robots. Those jobs will not be just manual jobs either. I think we should be talking about a guaranteed income for all and that income should be indexed to inflation and a theoretical full time income. Here in New Zealand we do have such an income but it is only for those over the age of 65. It is not means tested and you don’t have to actually be retired to get it. The universality of it started around 1935 so it is not actually a new idea. It is our attitude to work that will have to change.
That’s an interesting observation. But the ODE definition could be a contradiction in terms. Either the unemployed are really unemployed and are paid a subsistence for doing nothing, or they are given some work to do in exchange for money received, in which case they aren’t really to be considered unemployed.
There’s no clear and absolute dividing line between a JG and workfare. We’d use the term ‘JG’ if we approved and the term ‘workfare’ if we didn’t.
Dear petermartin2001 (at 2015/12/12 at 8:48) and Ralph and Mike among others.
There is a world of difference between Workfare and the JG. We have addressed this issue extensively in the literature over the last 20 years or so. Please, at least, read the literature before you make such comments.
The JG is not a more elaborate form of Workfare: Workfare does not provide secure employment with conditions consistent with community norms with respect to non-wage benefits and the like. Workfare does not ensure stable living incomes are provided to workers. Under workfare, the State extracts a contribution from the unemployed in exchange for their welfare payments. The State, however, takes no responsibility for the failure of the economy to generate enough jobs. In the JG, the state assumes this responsibility and pays employees award conditions.
Under a JG a worker can choose to work full-time (indefinitely) or some fraction. They can choose to undertake skill development. They can attend formal education. They can receive child care benefits, superannuation, sick pay, holiday pay and other benefits.
They are not on income support – they are earning a wage just like I do.
They are considered to be productively employed rather than paying for their income support.
Peter, I don’t think you understand the point I have made. First of all, NI is a regressive, nationally collected tax that should be IMV scrapped and ‘funded’ via regulating banks.
Secondly, my main point is that paying NI Contributions in the *past* does not free up current real resource space. The tax was superfluous to those purposes and meant real resources were wasted in the past.
The ‘dustbin’ analogy has been used by Bill before.
“In principle, the govt could subcontract the NI system to an independent body. The payments in and out would also then work like everyone thinks they work and people who only half understand MMT wouldn’t be able to make the type of objection you’ve just made to the NI system.
Would it make the slightest difference? Except that it would probably be slightly less efficient, none at all! So there is no reason to do it.”
The reason not to do it is because ‘contribution based’ systems suck for the people who don’t have access to do them. The JG treats everyone equally.
Surely the Left opposes regressive taxes and supports equality?
“Yes the JG can run alongside other existing schemes if we have a truly voluntary JG. There does seem some reluctance to concede that the JG should be truly voluntary rather that just ‘voluntary’ on the basis that they could equally well choose to forego their existing payments. ”
OK. What do you consider ‘truly voluntary’ Peter?
The JG is an alternative job offer available to all at the living wage from the state. You can choose to take it any time you fancy.
It has *nothing to do* with being ‘unemployed’ – and therefore nothing to do with compulsory Workfare concepts. No Jack boots or whips required.
Whether NI should be scrapped and replaced by income or some other tax is a political decision which is MMT independent. Some countries have contributory systems. Some don’t.
Yes, you’re right that NI contributions do go into the pot, or shredder if you prefer, but there’s still an implied contract between governments who administer contributory based schemes and those who pay in those contributions. The Government cannot simply point to a shredder full of chewed up money, either printed or digital, and say, in effect ” well that’s where your money went, so its tough s*** that we aren’t paying out!”
You ask “Surely the Left opposes regressive taxes and supports equality?”
I don’t think that the Left is saying that everyone should end up exactly equal. But we do of course oppose regressive taxes. Are NI taxes regressive? No tax is perfect but NI does have the advantage that at least some of those who don’t qualify for JSA don’t have to pay it.
Does a JG promote equality? Possibly. It all depends on the terms of the JG. But equally possibly it wouldn’t. The distribution of national income and wealth could be essentially the same before the introduction of a JG as afterwards.
I agree with most of the proposed theory of the JG and that could be indeed how the JG will turn out to operate. In fact if that is how we choose to define the JG then there’s little to object to about it.
I can’t see, though, that the implementation of a JG, along the lines described by the optimists, will be a possibility for the type of society we now live in. The creation of unemployment is part of the class conflict. If the present ruling class ever implement what they call a JG that will be part of the class conflict too.
I wonder how many critics have actually experienced long-term unemployment.
Further, how many have been sent to a ‘Work for the Dole’ or Workfare posting (I use the term posting because they are not jobs).
I have, and I can assure everyone here I would jump at the chance of a JG job.
The definition of an integration is a combination of truths that brings about a more unifying applicability, workability and ethical good. Integration is the very process of Wisdom itself. Economic theory requires the integration of the self interests of both the business community and the individual, and any business model, any corporate and/or political interest and any economic orthodoxy on the left or the right that is held dear and yet does not enable such integration must drop their opposition to such a unifying and ethical position. Monopoly, orthodoxy, ego and power are all trumped by the ethical imperative of the freedom of the individual and the free flowingness of the system.
Jesus H. Christ, haven’t we suffered enough bloody and enslaved history to rise above acquiesence or mere palliation of problems? The various leading edge theories and reform movements need to band together, integrate their separate aspects of the entirety of the solution, throw off the parasites and in so doing rescue humanity from the historically rhyming predicament of long term economic downturn followed by war…especially in an age of modern weaponry where no one’s life and no one’s productive capacity is safe.
Nigel, the US Fed is not privately owned. It is an arm of the federal government and always has been, unlike the Bank of England, which if I remember rightly was only nationalized in 1946 or thereabouts.
Dear Bill Mitchell,
I have returned to this blog to examine the predictable feedback re the JG and took a look at your Friday music suggestion again and have one question: What, please tell is a “protected job” in today’s world?
I would posit that such jobs do not exist in the absence of a JG . There may be some with temporarily stable incomes but they all stand politically undefended against neoliberal aggressions. This I would say is a major problem for our times!
All the best,
The FED is “an arm of the federal government” in name only. Both the federal government and the FED are captive of/act hand in glove with the interests of Private Finance. Private banks create loans which create deposits…and then look for any reserves they may need later. The money system is endogenous. We require a central bank which is both a sovereign branch of the national government and also has policy mandates which effect the economic and financial freedom of the individual and the free flowingness of the system. Those mandates are not mutually exclusive.
“The fact is that we are already living in the MMT world.”
I have a question about that. I often hear about how in the United States federal taxes don’t fund anything, and in fact CAN’T fund anything, since they are merely receipts and not actually money in a form that can be turned around and added to a budget. So that fact alone proves that, as you say, we already live in an MMT system, not merely that MMT is something we could shift to. So how can a majority of people in government not know this? This seems like something you would learn in a crash course introduction, along with civics lessons about how the government is laid out. Don’t they have advisers and the Congressional Research Service? And if this is how the system works, that means there are lots of human beings who take part in its mechanisms everyday as part of their jobs. It seems utterly insane to me that you can have a whole bureaucracy toiling away at something that isn’t even part of the dialogue in political spheres. And how is it that there are all these ‘fact-checking’ services like PolitiFact, and yet the very issue of our currencies fiat nature never seems to come up in them?
And if this is how our system really works, that means it was a system consciously crafted at some point. Which surely means documentation spelling out the entire process exists somewhere. Surely people working at the Library of Congress know where to find these papers. For that matter, the above-mentioned human beings who are part of the bureaucracy must be given some sort of manual explaining what exactly it is they do every day. I’m not saying you’re making it up, just wondering how in the world something so big and important can be so nearly universally misunderstood, especially among people in government. Passing budgets and handling funds is literally part of the job description of Congress.
Even though the fundamental insight of MMT looks to be right ie that a monetary sovereign can never run out of money and has no financial constraint, I think that the law of states where MMT works is ambiguous on the point. This is important because the ambiguity permits politicians and commentators to keep saying ‘the government has not got the money’ etc.
The key legal point endorsing MMT is monetary sovereignty – as stated in the Commonwealth Constitution and reflected in some ordinary legislation.
The key laws that run against this are constitutional provisions about taxation, supply and appropriation which make the Commonwealth look like a State or household. Recall that when ‘supply’ was blocked by Fraser in late 1975 there were publicly expressed worries about ‘running out of money’ akin to those that haunted the USA before the Congressionally imposed ‘debt’ cap was lifted.
When the current (and nasty) head of Treasury (in Canberra) was questioned a few months ago in the Senate, Penny Wong forced him to withdraw his earlier statements about the Commonwealth ‘running out of money’ ie he accepted that this can never happen.
The same tension was evident in the Pape case (about the legality of the stimulus payments of about $900 to each taxpayer in the depths of the GFC) where the court seems to have accepted the government has the power to spend money without taxation or borrowing etc, but hedged this acceptance in, well, typically narrow legal terms.
I saw that Frank Newman seems to have persuaded even suspicious tax lawyers at Columbia that MMT is not just a viable but a decent way of looking at the issue !!!
Bill you make my point for me .Prior to the OPEC price rise many countries
had basically no or very little involuntary unemployment.This was achieved
WITHOUT a universal job guarantee at a living wage .What a tight labour
market has NEVER been able to acieve is the elimination of poverty.
Accusations of neo liberalism against JG ,BIG,or even minimum wage are
ridiculous new or old Liberalsm as in embracing classical economics as a faith in
the ability of the ‘market’ free from or political constraints to efficiently develop
and distribute resources all these policy interventions are a direct rebuttal of
this absurd faith which places the ‘market’ outside human relationships.
Where they may be some small correlation between some aspects of the JG,
and classical economics is when it seems to be advocated as a magic bullet which
we introduce a just ,efficient equilibrium in the labour market,leading to the ‘right’
price for labour being established.That is wishful thinking .
Conflict for resources via a conflict for money tokens is inevitable.Humans like
every animal have complex asymmetrical power relationships.Which as history shows
even the nationalization of most of the economy will not solve.Neither will a JG or
a BIG.Understanding such basics and the monetary and military/judicial power of the
state we can advocate governance which attempts to MITIGATE the inevitable conflict
arising from asymmetrical power relationships.
Again my objections to introducing to a universal JG at a living wage are not ideological
but practical.The effects of government competition at the bottom end of the jobs market
depend on the size of that market.It is now massive.If you are advocating a real living wage
not Osbournian double speak, a wage that pays the rent where I live Brighton in the UK as well
as affords a holiday and a general decent living conditions you are talking about at least
doubling the current minimum which may well lead to a price wage inflationary spiral.
I understand how a JG could act as an inflationary buffer in a different (never achieved ) labour
market its introduction in this one is liable to be inflationary.
“This is a typical misunderstanding of the MMT position”
You’ll find that the misunderstanding is with you. As somebody who wants to smash the rich with taxation you have completely overlooked the subtitles of the position – in particularly the second and third order feedback system.
As ever if your only tool is a hammer, then everything looks like a nail. There are far too many on the left who have hooked onto the ‘taxation’ element in the MMT description with rather more relish than they should have. You’ll generally find they have a religious attachment to taxation – probably from the writings of some defunct economist. When you have writings called “Joy of Tax” you know that it has drifted from good sense into fetishism.
Taxes are literally worthless to the currency issuer. As Warren says they go in the shredder. So to suggest that the taxes have value is wrong. It gets the whole process upside down.
It is the spending by the state government (the currency issuer) that determines the actual value of things. When government buys stuff in exchange for its money it links the financial circuit to the real circuit and sets the value marker. Hence the Job Guarantee as an anchor. When you buy an hour of labour for £10 you set the benchmark that everything else in the economy prices from.
The *liability* to pay taxes and the *punishment* of incarceration for failing to pay the liability is a sufficient *but not necessary* condition for the state to spend its scrip. The notion that you *may* have to pay taxes (i.e. a threat) is enough to kickstart the process, but there are lots of other motivations as well. I can use explosives to set off an avalanche but there are many natural processes that set one off as well.
How much taxes get paid at any level is a function of the saving in the scrip the private sector undertakes. If the private sector saves massively then you may not need to tax at all. The system will still function with the space being made by the paradox of thrift.
Since the tax paid is a function of private saving, it can never be the case that tax *collection* drives the system. That is simply a logical error. Too many on the left fall face first into that trap.
There are many more tools available to manage the system: asset quality management at banks, investment policy, import policy, research and development, planning control, corporate power management, competition policy, social and welfare policies.
If you’re constantly obsessed with using the hammer, then perhaps it is time to admit that you are not a high enough quality engineer to design and build the containment vessel that will control the nuclear power of capitalism.
They realise that hitting things with hammers is more likely to be destructive than constructive. A more advanced precision engineering approach is required. This is the 21st century, not the 1930s.
Dear Kevin Harding (at 2015/12/12 at 20:43)
You don’t seem to have taken in what I said. There was no involuntary unemployment in most nations prior to the OPEC oil price rises exactly because nations ran buffer stocks of jobs, mostly in the public sector, which could be accessed on any particular day by the most disadvantaged workers in the labour force who were without work. These jobs tended to pay at the minimum wage and were always accessible.
While the buffer stocks were not termed a “universal job guarantee” they acted in exactly the same way as the theoretical JG that I’ve developed (with others).
Further the notion you can eliminate poverty even in a country as rich as the UK with
a guarantee of either an income or a wage which will provide decent living conditions by
a government today is a nonsense.Not to say it is not achievable in the long run.
There are not the really crucial resources available today in either quantity or quality to
deliver such an outcome for all.Here in the UK this is most notable in the lack of decent
housing stock, although health and social care ,education,mass transport are all lacking.
Let’s face it ,the chronic lack of money tokens for the poor and the squeezed middle directs
resource use to poor quality goods and services in general(pound lands are taking over the
high streets.Then of course there is the little matter of future proofing the wealth we have
by developing sustainable non co2 producing energy.
The priorities of good governance should be clear ,the monetary power to attempt to achieve
these ends are there.These are the development of the above crucial areas with highly skilled
and we’ll payed jobs paid direct or via private providers if that is your thing(beware corruption)
The effects of such a fiscal stimulus can in a relative short period of time move us back
towards full employment as long as we (in the UK) exit free movement of labour(as Neil rightly
always points out)
Good governance is accepting the power available to promote the commen good .Charatalists
understand the one thing government cannot run out of is its own currency.
I am a passionate advocate of a progressive welfare and tax policy which directs some of those
money tokens and real resources away from the rich to the poor.The whole scrounger debate can
be undermined by universal citizen dividends ,OAP freebies are politically excepted, as can the large
effective tax rates on earnings of those who currently receive welfare.As chartalists know
no government welfare is paid by contributions it is time to challenge all this myths.
Do you have a link to these government run buffer job programmers Bill?
By the way Bill I am all in favour of the government providing low skilled ,low pay jobs
to the unemployed as well .
“The Government cannot simply point to a shredder full of chewed up money, either printed or digital, and say, in effect ” well that’s where your money went, so its tough s*** that we aren’t paying out!””
You’ll find they can. Sickness benefit was privatised in the 1980s. Unemployment benefit used to be linked to what you earned. Redundancy benefit has been capped for years.
It’s happened loads of times.
It is another of those fantasies that people fall into many times. The number of times I’ve heard “but I’ve paid my stamp” from particularly older people is as amusing as it is sad. They fell for the lies.
NI is pure politics, as is the social security fund in the USA. And unfortunately it works both ways since politicians can run up some projections and say there is ‘insufficient in the fund to permit that benefit’ and then cut it.
This desire by those on the left to try and bind the hands of future parliaments is another dangerous predilection that has caused more problems than it has solved – since in all the cases the ‘bindings’ have been hijacked by the right to cause untold misery.
It is time to admit the truth that pensions are paid from current output to current pensioners as a gift from current workers. If the current workers elect a government that wishes to cut the current pension, then cut it will be. There is no God given right to anything.
If the young see the old as stealing from them, and given the run down in student grants and the rise in property prices that is entirely likely, then all the NI contributions in the world isn’t going to stop a backlash.
The social contract is remade every tax year. Nothing is binding.
“Do you have a link to these government run buffer job programmers Bill?”
It was a well known fact throughout the post war era that if you couldn’t get a ‘proper’ job you’d end up working for the council. That was the implicit job guarantee of the post war era, and is the source of the ‘only rubbish people work for the council’ feeling that still resonates.
The structure started to break down as the number of ‘proper’ jobs declined and more and more people ended up working for the councils – and because there was no currency issuer funding – lots of people unemployed. Because it was implicit rather than explicit nobody did a sales and marketing job on the output of these workers (shining lights on people causes the Hawthorne effect) and so they ended up being labelled ‘non-jobs’.
In step the right wing promising to strip out waste and cut taxes, and the whole thing collapsed to what we have today – privatised non-jobs subsidised by tax credits.
The difference is that the output of the workers has been transferred to the private sector – and we have hand car washes and coffee baristas to show for it, rather than automated machines doing those jobs.
“is pure drivel and fantasy”
So social workers and family support workers are incapable of doing any good in a nurturing environment. They are incapable of keeping families together and fixing severe problems with targeted interventions. There is no way on earth that the public sector can create structures that nurture rather than punish. God only knows how the National Health service works then.
What is fantasy and drivel is believing that the everything in the public sector ends up as a control mechanism, when the National Health, Social work, mental health and probation services are existing prima-facia evidence.
It’s time to admit that what you really want is for people that should be working to be paid for doing nothing. And that really is politically naive.
Every single piece of ‘Basic Income’ literature somewhere grudgingly admits that ultimately you have to create a reason why others should allow you to be supported. That there is some sort of reciprocation.
Another of the tricks of the left is the ‘hide in the aggregate’ trick – where they discuss an aggregate to avoid having to talk about a small set of people that they actually want to sweep under the carpet.
The problem they have with the Job Guarantee is that it highlights the group that everybody wants to avoid discussing.
You will never get a payment for doing nothing to stick. Nobody ever has and nobody ever will. Unless society exempts you by reason of age or infirmity you are expected to chip in. If you don’t then you ‘outlaw’ yourself – in the traditional Anglo-Saxon manner. It’s how society maintains acceptable behaviour.
It is not us that support the JG that need to back off. It is those that want payments for nothing to people who refuse to join society.
Don’t forget that we jail people who steal goods from shops. But apparently some on the left think it is ok for some people to steal from shops if you do it via the medium of money.
” wage that pays the rent where I live Brighton in the UK as well
as affords a holiday and a general decent living conditions you are talking about at least
doubling the current minimum which may well lead to a price wage inflationary spiral.”
Why would it. It is paid for in real terms – either by expansion of real output because of the increase in demand being met by an increase in supply from existing capital stock, or by a redirection of real output due to demand restriction in certain areas – less casinos and fine suits of clothes for the rich and more decent housing for the poor.
If you want to fix poverty ultimately you have to increase real output, or you’ve to redistribute it.
The JG changes the nominal distribution and it increases real output.
“My answer to that is that it’s hardly the objective of JG to DISPLACE regular work. ”
Actually it is. It is one of the key functions of the JG to compete with the private sector. That disciplines the private sector and stops it creating substandard jobs.
The jobs at a certain sportswear distributor would not be able to exist in a Job Guarantee world. They would have to be better jobs or (preferably) replaced with efficient automation Amazon style.
Remember the job of the private sector is to make everybody redundant from the private sector and replace everything with robots and machinery. That is what we want to encourage it to do to advance productivity.
Eliminating substandard jobs means that private sector firms ‘doing the right thing’ are not undermined by also-rans. It is weeding the crops.
The JG doesn’t compete on price. It competes on quality.
“Second, JG work is bound to be unproductive relative to regular work”
You need to spend some time looking at ‘regular work’. You’d be amazed how unproductive it is. The bigger the company the more unproductive garbage is undertaken.
And of course there is no reason why somebody making sandwiches 15 miles away from home is going to be less productive because they are making sandwiches in a public run cafe closer to home. But you save a lot of time and have less load on the transport system. It’s clearly more efficient.
Again it is marginalist nonsense that fetishises the supposed efficiency of the private sector – which actually isn’t that efficient at all. The inflation argument relies on that nonsense and is quickly dismissed as soon as you look under the hood. Actually it promotes efficiency in the same way that cutting out weak saplings from an overcrowded forest creates stronger trees.
“There does seem some reluctance to concede that the JG should be truly voluntary”
The JG is truly voluntary in every ordinary person’s understanding of the word voluntary.
There is no superior power providing the fall back position from that. It is the same people that want to see a Job Guarantee that would provide any fall back position. And the general line of society is that the fall back is only available to those who are exempted by reason of age or infirmity.
As to ‘contributions’, the idea that those are embodied in some sort of nominal payment is again an illusion. The ‘contribution’ is a moral one that changes over time and is how people feel today.
The multi-millionaire property sharks running appalling shacks for the poor will have a full National Insurance record. But there will be few who feel that they have ‘earned’ anything at all. Try selling a ‘basic income’ payment to such a character in the Working Mens Clubs of Barnsley and see how far you get.
“1. With no lower income level option, your non voluntary JG wage rate will inexorably go downward.”
If so, then why has the minimum wage always gone up? And why, in such a situation, would the “lower income level option” not go down as well?
Ultimately in all these responses to the Job Guarantee there is this magical backstop that appears to be created by somebody other than the electorate and their representatives. Nobody ever explains which God is creating that?
Neil with the greatest respect this implicit job guarantee with the council in the post
war period is a fantasy.So is the government being able to tailor a job to suit the desires
of everyone . So is being able to increase minimum wage in rapid time to avoid the
need for welfare payments without increasing prices.
You are absolutely right that increasing real resources and redistributing money tokens
is how to tackle poverty.So let the government prioritse that.Employing more people to
provide the most important real resources we need in housing ,healthcare ,education,
mass transportation future proofing that wealth in advancing scientific research and
producing sustainable non co2 energy .High skilled jobs ,high pay refilling the middle class.
What would be the result of such a fiscal stimulus ? What would competition at the middle,
top and bottom of the job market do.Yes full employment absolutely should be the goal
and I shall repeat if necessary state job creation of low paid low skilled jobs is fine with me.
But the priority should be making the goods and services we need the most with
sufficient fiscal stimulus and exit from international labour markets full employment
is the relatively easy part(slaves and surfs never suffered involuntary unemployment)
“So is the government being able to tailor a job to suit the desires
All existing man made things is fantasies before they are realized. A lot of those realized fantasies have had people pointing out that they’re just fantasies never to be realized. Luckily those with fantasies didn’t listen to it.
If one supports the idea that a tailor job to suit the desires of the individual is good for the individual, then next step ought to be to fantasize about solutions for this to happen.
“Yes full employment absolutely should be the goal”
I definitely do not agree. Just accept that not everyone needs to work today.
Or redefine work. I think though it would be easier to sell the proposal that not everyone needs to work (say let as an example a 50 yr old retire early if they wish) due to technology improvements than calling attending a course work. We are all connected so someone out of work earning money can buy goods from those in work would be the way I would sell it.
“the government being able to tailor a job to suit the desires of everyone.”
Who wrote this? It will never happen without it becoming outrageously expensive
“Further the notion you can eliminate poverty even in a country as rich as the UK with
a guarantee of either an income or a wage which will provide decent living conditions by
a government today is a nonsense.Not to say it is not achievable in the long run.
There are not the really crucial resources available today in either quantity or quality to
deliver such an outcome for all.”
Then it’s hopeless. But that is not an argument against JG.
“Who wrote this? It will never happen without it becoming outrageously expensive”
Go on. Will the resources used for designing jobs prevent the poor from eating?
“Or redefine work. I think though it would be easier to sell the proposal that not everyone needs to work (say let as an example a 50 yr old retire early if they wish) due to technology improvements than calling attending a course work. We are all connected so someone out of work earning money can buy goods from those in work would be the way I would sell it.”
So why can’t you do the same but with people in work buying goods from those in work? Why not target the payments at the poor? Letting 50 year olds retire early may well help some (not yet) pensioners, but it does not seem to work too well as a general poverty reduction programme? An increase to the state pension to the living wage will help more.
If there are “technology improvements” then we surely can if we wanted implement a JG and there will be “crucial resources available today in either quantity or quality to deliver such an outcome for all.”
“”Yes full employment absolutely should be the goal”
I definitely do not agree. ”
I am guessing you are employed?
“I am guessing you are employed?”
I’m not at present. But I would sooner receive without any doubt whatsoever a payment (say £8000 min per year) no questions asked than work in a soul destroying Govt created job just to keep me employed. Even if I was required to write up what I did to better myself. Or attend verifiable events like a course or music school etc. This would lift me up. A JC would not.
The JC reminds me of 1930s depression work in NZ. Where someone I knew was required to move rocks from point A to B. The after he had finished was told to move them back again. At that point he said stick your job and walked out. But luckily he had other options.Many did not.
Why wouldn’t a sufficiently large (BIG) Basic Income Guarantee combined with a sufficiently large Minimum Wage serve to keep up aggregate demand without depressing wages? And let’s not conflate work (good) with having a job (not necessarily good).
What we need is restitution for theft*, not some program where the victims have to work for what’s due them.
*via government subsidized private credit/debt creation.
“then we surely can if we wanted implement a JG”
But why not just pay someone as noted above. Rather than going through this farcical JG process. That will cost a lot more and achieve a lot less.
“It is time to admit the truth that pensions are paid from current output to current pensioners as a gift from current workers. If the current workers elect a government that wishes to cut the current pension, then cut it will be. There is no God given right to anything.
If the young see the old as stealing from them, and given the run down in student grants and the rise in property prices that is entirely likely, then all the NI contributions in the world isn’t going to stop a backlash.”
What backlash? You have got to be kidding. This has been going on for many years.
At some point the UK government went through a bit of arithmetic and found that to ‘fund’ retirements a substantial chunk of GDP had to shift from younger to older residents to pay the level of pensions that older voters would demand, and older voters are a huge voting block, and if ‘funded’ with taxes that huge shift would mostly be paid by higher income and wealth voters.
The UK government decided that they would not raise official taxes to do that, they would rig markets to the same effect, and the main way would be to raise house prices instead to create the same shift of GDP, or larger, as someone pointed out:
“guaranteed property price inflation was the best way to fund ones eventual retirement”
This rigging of the market to transfer a large chunk of income from younger residents to older voters (note the “residents” vs. “voters”) was accompanied by vastly increased immigration and offshoring to push or at least hold down wages, in particular in public services like the NHS, which are also costs to retirees and high income and wealth taxpayers.
Asset price bubbles and immigration and offshoring have many advantages apart from obscuring the government instigated redistribution of a lot of income from workers to retirees:
* Extremely popular with older and female South East voters who tend to vote more often and swing vote more often than younger or male or Northern who tend to be locked into Labour voting and thus electorally irrelevant.
* Asset price bubbles result largely in capital gains that are largely untaxed, establishing a principle.
* The capital gains can be realized by remortgaging, a vital tool, as it generates huge profits for the financial sector and holds up property prices.
* Ensures that that income redistribution is regressive with wealth, that is wealth is not only redistributed from those who have none to those who have some, but even more from those who have some to those who have lots.
* By providing massive property based income for many people it drives them to seek lower wage increases or retire, to not worry about pensions as in made it even easier for the ruling elites to dismantle final salary pension schemes for everyone than them themselves, and to make most voters be indifferent to or hate trade unions.
* The desire of heirs to get huge windfall capital gains from inheritance, which has made them lobby hard their ascendants not to sell, and to demand free care for those ascendants successfully leading to the “old ladies in mansions” story.
* Rent have gone up a lot too, and many middle aged or retired property speculators in the South East own several properties that generate enough income to live like a lady of the manor without having to downshift.
To get an idea of the size of the latter point, in a recent committee discussion with the BoE governor it came out that 40% (FORTY PERCENT) of all mortgages are interest-only.
As to the first point, remortgaging has given property owners a way to cash in (by borrowing) capital gains amounting to over 100% of GDP growth during both the Thatcher and Blair eras.
Asset price bubbles and income redistribution via the magic of rigged land markets has been “performative”, that is has shifted a large chunk voters to to the right to side with big property interests.
The ideology of the right, the one that motivates whatever politics it chooses, is the protection and furtherance of the (economic) interests of incumbents, whatever the historical circumstances.
There is another interpretation of the ideology of the right, that it is always social Darwinism, watered down or not, because it is social Darwinism that is used to justify the protection of the interests of incumbents.
Given the above, the left’s ideology is the furtherance of the (economic) interests of those who don’t enjoy the perquisites of incumbency.
The problem of the left in places like the UK and the USA is that most voters think that they are incumbents, and their interests as ladies and lords of their own mini-manor are aligned with those of the billionaire lords of the maxi-manors. The petty bourgeoisie rules.
“Taxes are literally worthless to the currency issuer. As Warren says they go in the shredder. So to suggest that the taxes have value is wrong. It gets the whole process upside down.”
Neil I do find it slightly annoying that when I say something like taxes collected by the sovereign currency issuer “are just as essential to the functioning of the economy as taxes collected locally” that you deliberately misinterpret this to mean that tax money, per se , has a value to the currency issuer.
You know very well I’m not saying that.
You didn’t comment on my very leftish earlier statement that:
“The creation of unemployment is part of the class conflict. If the present ruling class ever implement what they call a JG that will be part of the class conflict too.”
Would you say this just another piece of evidence showing my irrational Marxist paranoia or would you agree that there might be something in it?
I think I’ve realised that we’ve been talking past each other because my understanding of what a JG will very likely be under the present system doesn’t accord with your very much rosier picture of the JG. We’ve been talking at cross purposes.
I earlier made the point that there is no clear and absolute dividing line between a JG and workfare which Bill disagreed with. But he simply illustrated the difference between workfare, as we all would understand it to be, on one end of the spectrum of what is possible and the JG as what might be possible on the other end. I do have my doubts that even in a socialist society the JG might not be quite as good as you describe it but, in any case, there won’t be any need for JGs in the MMT sense. There won’t be any need for “buffer stocks” of labour. Everyone will have a guaranteed job though. Everyone will need to make some contribution if they are able to.
So I do think the problem has arisen because I just can’t see that anything like your JG will be at all possible under the present system of capitalism – call it a ‘mixed economy’ if you like. Any thing that comes along will have flaws in it like the British Labour Party’s 2015 JG suggestion. MMTers will then say something like “Oh but that’s not really what we mean by a JG. That’s more like workfare”.
“soul destroying Govt created job just to keep me employed.” RJ
Adding that if people can’t find sufficient meaningful work to do on their own given a BIG then it’s for lack of other resources such as the family farms and businesses that were looted from them via government subsidized private credit creation, including the ruinous nation-(world?)wide boom-bust cycles engendered thereby.
“Issuing bonds is a good thing not bad. It result in more income (interest) for the non Govt sector.” RJ
So welfare proportional to how much spare cash one has to “lend” to a monetary sovereign rather than one’s NEED is good?! I think not.
“I do have my doubts that even in a socialist society the JG might not be quite as good as you describe it but, in any case, there won’t be any need for JGs in the MMT sense. There won’t be any need for “buffer stocks” of labour. Everyone will have a guaranteed job though. Everyone will need to make some contribution if they are able to.”
Is this just expanding regular public sector employment along with the JG? The JG is always necessary to “mop up” workers who cannot find work. Or is a basic income available to the poor (and everyone)? If the BIG is not enough to end poverty I would dislike that approach.
Perhaps write another blog to flesh out your ideas Peter.
” MMTers will then say something like “Oh but that’s not really what we mean by a JG. That’s more like workfare”.
Which will be a correct statement. A specific JG construct is part of MMT and if a Government is to put such in place they will be fully aware of the concept and understand MMT and thereby also be able to argue for it and against other opponents. Workfare called JG by a government doesn’t make it to the specific JG construct as part of MMT. Such government is probably not even a proponent of MMT so why bother to discuss their workfare monster to be part of the MMT concept when it’s not.
I can’t help feeling that the debate (here and on Tuesday’s blog) about whether the JG is, isn’t, should be or shouldn’t be part of MMT is a needless distraction from the real job at hand, which is getting the wider electorate to understand at least the basics of it all.
There are some people here who are willing and able to spread the message, but who have difficulty with the JG element, either because they don’t support it at all or see it as a nice-to-have add-on that is not part of ‘core MMT’. Should we be willing to lose their support by insisting on purity? Does it matter if a supporter of BIG pushes the MMT message? Are they somehow seen as cranks that we would be better off without?
I have some sympathy for the people who see JG as an opportunity that opens up when we ‘move to MMT’. And I think it’s probable that the electorate, the media and our democratic representatives will find it easier to think along these lines as well. As long as it does the job, does it really matter if this view of MMT is not quite accurate?
Similarly, a lot of people have difficulty reconciling these two statements, however true they may be: ‘MMT is neither left-wing nor right-wing’ and ‘the JG is an essential part of MMT’. I’m sure that Bill has made the point in the past that right-wing administrations who are forced to admit the reality of MMT would be under no obligation to change their existing policies (for example, the punitive regimes imposed on the unemployed). These administrations would just find it a lot harder to explain to the electorate the continuation of those policies.
I’m certainly finding it a bit difficult to put these two together: ‘we are already living in the MMT world’ and ‘MMT provides … a new lens to view the world we live in’. MMT as description; MMT as tool. It all seems a bit woolly.
Getting the MMT message into the mainstream is not easy. It requires multiple steps, starting off gently and increasing in complexity as the understanding takes hold. And these steps are quite likely to out of sync with respect to the theory, especially in relation to where the JG gets mentioned.
For example, if I were John McDonnell (I’m in the UK) I would follow this course:
1. Things are are not quite what they seem and the administration is being economical with the truth. Cue sectoral balances.
2. Reality is completely different to what you believe it to be and the administration is lying through its teeth all the time. Cue fiat currency and the non-existence of revenue constraints.
3. Now that you understand all that, just imagine what we could do. Cue fully provisioned public services.
4. And don’t panic about price stability – we have an elegant solution. Cue job guarantee.
Of course, I’m not John McDonnell, so this probably won’t happen.
I think it’s likely that a lot of the people here construct in their minds an understanding of MMT that best enables them to explain it to others. I know I do. And maybe there are people here who can help with the first few steps but then, at some point, diverge.
My point being that maybe there needs to be an acceptable version of the theory that matches the practical steps required to get it across. Imagine a discourse as it would be laid out in MMT for Dummies.
I attended the recent London event on Re-framing the Debate, where Bill made a couple of points that I think are relevant here. Firstly, that the neoliberals have succeeded because they have simple, ‘common sense’ analogies and metaphors that align with everyone’s everyday experience and that for MMT to become accepted it has to have a similar set of easily understood messages. I’m not sure that’s going too well.
The second point came up when a member of the audience was clearly upset at the slow pace that progressives, particularly those in academia, were making. With much compassion and understanding Bill explained what he thought his role, as part of the Academy, was (to develop the theory) and what it wasn’t (to disseminate the theory). It was Bill’s view the struggle will require the help of others with skills completely different from those of the academics. I hope that these others are not being discouraged.
Sorry this has been a bit long-winded.
Perhaps write another blog to flesh out your ideas Peter.
Maybe. But just quickly:
I suppose it would depend on the type of socialism that we move towards. I personally wouldn’t favour a system such as we had in the USSR and Eastern Europe. That would be easy enough to administer, though. Everyone would ultimately be a conscript in a vast proletarian army. Everyone could express a preference for where and for what type of work they preferred and could of course train for a certain profession. But, ultimately, everyone would have to obey orders and work where they were directed and accept whatever terms and conditions they were offered.
My idea of socialism would be one where the ‘commanding heights’ (in the old labour terminology) were controlled by the State. The banks, the railways, telecommunications, key manufacturing sectors, all land including some farms would be owned by the State. But some private capitalism would be allowed.There’s no need to nationalise every corner shop or every hairdressers for example.
It would be straightforward to use fiscal measures to have virtually zero unemployment. Maybe 2-3% at most. This would mainly represent those workers were changing jobs and who aren’t really a problem. The idea that workers are naturally lazy and would prefer to do nothing is one that does need to be challenged. The evidence is that the numbers are small. Unemployment in Norway and Switzerland, for example is about 3% without there being any formal JG system in place. For the small numbers of workers who may be a problem, a measure of supply side economics to improve everyone’s employability would be in order. There would be training courses offered and with the requirement that these be attended to qualify for unemployment pay for example. We could have consultants work with the small number of workers who did have difficulty finding their own job, just like we have now in fact. Except now there just aren’t enough jobs in existence, but in an economy run on sensible lines there would of course be those jobs!
There would have to be some mechanism in place to prevent inflation. I would accept that. The problem I have with the JG is that there is an assumption in the concept, which needs challenging IMO, that inflation is an inevitable consequence of having full employment and at the same time allowing workers to bargain freely on wages and conditions.
In the past we have had wage and price controls in the form of Prices and Incomes Policies. Except that it was always incomes which were targetted by Govt. Not prices. From time to time, workers would challenge the government’s limit on wage increases and strikes were the result. Whereas prices seemed to be allowed to be set freely and with only token attempts to control them.
So we need to have another try at using the Governments price setting policies. It was the failure of Governments to set prices on the essentials of life such as housing, transport and food which led to workers losing confidence in Government’s impartiality in the administration of these so called Price and Income controls. They can only work if workers do have that confidence and for that to happen we do need to have a socialist government with strong Trades Union representation.
“I’m not sure that’s going too well”
Agree. Its not. But countered ingrained beliefs (eg Govt debt is bad) is time consuming and hard work. It requires a simple, repetitious message. Complicating this with things like a JG is not the way to go. Stick mainly to facts (no JG), keep it simple, repeat this simple message time and time again and relate it to the future not the past. And include interesting, relevant stories. I throw in we can afford clean energy, helping the poor, boosting company profits, build housing, building hospital, increase savings etc. I never mention Govt created pretend jobs as I believe this will do more harm than good. Govt is already big enough but if it is involved in creating work create real jobs. Like Govt funded house building or funding mini nuclear energy etc.
Dear RJ (at 2015/12/13 at 20:50)
Will you please desist from your constant snipes about the JG?
You clearly have no experience in “helping the poor” at the macroeconomic policy level and when confronted with the mainstream attack on what would be the inflationary consequences of all your “interesting, relevant stories” what do you say? Where would your inflation anchor come from?
What would you say when a trained economist asks you to specify the nature of the trade-off between inflation and unemployment, a concept which dominates the policy-setting debate at all levels (which you clearly have not had direct experience in)?
The JG is a central aspect of the macroeconomic framework that defines MMT. Sorry about that. Get over it.
I plan to delete any further comments from you telling the MMT authors to ditch a key part of their work.
“I suppose it would depend on the type of socialism that we move towards. I personally wouldn’t favour a system such as we had in the USSR and Eastern Europe. That would be easy enough to administer, though. Everyone would ultimately be a conscript in a vast proletarian army. ”
We recognize the failures of the USSR. What is needed is a type of socialism between these two extremes.
I think N . Wilson explained it clearly enough:
“Capitalists must then compete for labour from the JG pool – investing and training to receive any profits. It’s the latter that is the valuable process in capitalism – just as the heat out of a nuclear reactor is the valuable bit. To get that you simply have to contain the nasty stuff using effective engineering.
That is what MMT is all about – effective engineering to make the system work properly.
If the JG is £10 per hour then capitalists must compensate people properly for doing anything else that is less pleasant than the JG job. That may be money, or it may be promises – but compete they must. It’s the lack of competition in the labour market that is causing the current malaise.
If capitalists can’t make a profit out of a process, then the process either dies, or if it is considered to have public value it becomes part of the JG job list.
Overtime you get towards equality as you move the bottom to the top.
What many on the left struggle with is that things still need to be made – which capitalism is very good at – and you have no other rational mechanism by which relative value is ascertained even remotely accurately.
Once you strip rents and oligopoly out of the system competitive valuation is pretty effective – particularly when you no longer have to worry about whether a business lives or dies.
It’s a bad idea to throw the baby out with the bathwater. We tried that with the Russian based systems, and they don’t work. That’s why China changed course.”
“Add up how much a home, power, food, etc costs and set the job guarantee at that would do nicely for most advanced nations. Where prices creep up you tax away the excess profit and redistribute downwards until it stops.
What wage the private sector has to bid to take people away from JG is market determined. If they don’t bid for certain functions that then more of the economy moves into the public sector until they do.
“Where prices creep up” is a conditional. Skipping that conditional is a key ‘Watchtower’ mistake in the logical reasoning of your point.
The alternative is that prices don’t creep up and capitalists ‘pay’ for the JG via quantity expansion in the economy – which is how everybody would prefer that it was paid for.
How much the JG costs is entirely in the hands of the capitalists. If they invest, quantity expand and hire then it is very likely that it will pay for itself easily and the capitalists will be much better off than before.
That’s what happens when you concentrate on making the pie as big as possible rather than concerning yourself solely with getting the biggest slice.”
“In the past we have had wage and price controls in the form of Prices and Incomes Policies. Except that it was always incomes which were targetted by Govt. Not prices. From time to time, workers would challenge the government’s limit on wage increases and strikes were the result. Whereas prices seemed to be allowed to be set freely and with only token attempts to control them.”
Spot on, Peter.
The other thing is the State needs to take a much more pro-active approach towards attacking rent-seeking.
You can get to that by increasing the heat of competition. Breaking up firms, requiring them to be smaller and there to be many more of them in any particular marketplace.
The natural capitalist approach is to eliminate competition using a variety of techniques – from market niche to oligopoly. The state should spend a lot of its time ‘stirring the pot’ to prevent this happening. And the indication that the pot needs stirring is price rises of any magnitude in any market. That means encouraging and even funding competitors, forcing IP to be shared, etc to break the market power.
This is also why the Job Guarantee is so important.
Switching to a bottom up system starts to move the income distribution curve back to where it should be and the production curve back to where it should be – dealing with needs firsts and then wants.
Wealth is redistributed because the rich suddenly have to start providing services for the poor if they want to earn the money.
Once you have a JG and the ‘business confidence’ bogeyman that Kalecki mentions is laid to rest then you can be far more aggressive pushing up the living wage. At the top end you give the Ministry of Competition real jack boots to stop oligopolies forming.
Businesses actually hate competition but of course they are supposed to be supporters of it. So you exploit that Janus issue to the full.
Wages are then controlled since excessive wage rises mean that some of the firms go bust and everybody loses their job – falling back to the Job Guarantee.
The level of competition considered ‘acceptable’ by regulators is too low. And that’s because of the ‘business confidence’ meme that scares them into inaction.
“For example, if I were John McDonnell (I’m in the UK) I would follow this course:
1. Things are are not quite what they seem and the administration is being economical with the truth. Cue sectoral balances.
2. Reality is completely different to what you believe it to be and the administration is lying through its teeth all the time. Cue fiat currency and the non-existence of revenue constraints.
3. Now that you understand all that, just imagine what we could do. Cue fully provisioned public services.
4. And don’t panic about price stability – we have an elegant solution. Cue job guarantee.”
5. All government spending will come back as tax if there is no saving in the spending chain. The deficit is a source of private sector savings. Tie into point 1.
“The JG is a central aspect of the macroeconomic framework that defines MMT. Sorry about that. ” Professor Bill
Ouch! That’s pretty naked. Is it any wonder then that Progressives* are held in such contempt as control freaks? Talk about a poison pill!
But please explain why a generous BIG plus a generous Minimum Wage is not superior to a JG wrt to meaningful work and a sound economy? Because paying people to not work will cause price inflation? But please note that not having a job is not the same as not working. Many (most? Nearly all?) retired people continue to work (if they are able) – doing the things that are meaningful to them such as helping to raise their grandchildren, volunteering, etc. Doesn’t that lower price inflation in social services by, for example, reducing delinquency? So why not allow women to return to the home (if they desire) to properly raise their children rather than entrust them to social service employees?
And when does leisure ever arrive per JG advocates? Shall we eventually have the spectacle of extremely competent robots doing almost all necessary work while humans are paid to waste their time?
That said, I respect you most** of the MMT advocates and am saddened that you find a JG so necessary when it very clearly isn’t.
*I used to be a Progressive myself so I understand the temptation.
** eg for calling paying interest on the national debt of a monetary sovereign “corporate welfare.” Bravo!!
correction: “Because paying people to not work will cause price inflation?” should be “Because paying people without jobs will cause price inflation?”
And what solves the Job matching problem and the resentment problem?
“Many (most? Nearly all?) retired people continue to work (if they are able) – doing the things that are meaningful to them such as helping to raise their grandchildren, volunteering, etc.”
Agreed. If this work is accepted by their peers this becomes a JG job. The JG critics have a too narrow definition of ‘work.’ ‘Work’ is ‘doing something in your day which peers respect.’ I do eventually think we will have a Basic Income, but start with the JG first.
“The JG is a central aspect of the macroeconomic framework that defines MMT. Sorry about that. Get over it.”
OK. That’s me told too I suppose!
I’m quite happy to advocate that jobs should be guaranteed by government! No problem with that. It’s the T&C’s of such a scheme that could be the difficulty. ie the details.
But maybe there’s no point in arguing about that right now? Let’s just wait and see what the political process serves up so we can see what those T&C’s are.
“But please explain why a generous BIG plus a generous Minimum Wage is not superior to a JG wrt to meaningful work and a sound economy? Because paying people to not work will cause price inflation? ”
It reduces costs to hire from the JG pool than the BIG, as they are already working.
The difference between giving someone £15,000 per year (weekly/monthly), and giving them a £10/hr job 30 hours a week is when they get a £10.50/hr job (or the £9 one with excellent prospects) in the normal job sector, there is an automatic reduction in state spending.
Which means that you don’t have to put taxes up as much to recover, you don’t disrupt the private sector pay structure, and the ‘dead zone’ between the guaranteed income and the income required for a ‘normal job’ is less.
The JG only injects money at the lower end and sets a floor, whereas BIG goes to everyone. Needs need to be dealt with before wants.
“So why not allow women to return to the home (if they desire) to properly raise their children rather than entrust them to social service employees?”
Why not? It is useful work and should be recognised as such.
“It’s the T&C’s of such a scheme that could be the difficulty. ie the details.”
Perhaps Bill can do another blog? There was a BIG paper on JG Bill linked to but I can’t remember where it is, either on the web or my computer.
There is more discussion of the JG and various issues e.g. open borders in this piece and comments.
“But please note that not having a job is not the same as not working”
Yes it is, in the MMT sense of ‘job.’ It is a wider definition. If people are doing good stuff in society the government and society should support them.
“Because paying people without jobs will cause price inflation?”
No. It may or not cause inflation, depending on what else is happening. The larger inflation problem with a BIG is that paying everyone a fixed amount whether they have a job or not cannot respond to inflationary pressure. A JG rises and falls according to changes in the economy, providing automatic stabilisation. A JG that’s rapidly falling toward zero also provides an instant indication of over-heating that would need additional intervention.
A BIG can only provide a price anchor if almost no-one is working in the private sector or the conventional public sector. In a world where the robots are providing for our needs a BIG would be not merely workable but desirable. Even eliminating various bullshit jobs though, we do not yet live in that world.
It’s the old joke where a traveller asks for directions to [insert town] and the local responds with “Well, I wouldn’t start from here.”
Here – in terms of both industrial production and social attitudes – is where we are. It might be nice to start from somewhere else but we can’t.
“So why not allow women to return to the home (if they desire) to properly raise their children rather than entrust them to social service employees?”
I’ll just pause briefly to point out the sexism; why shouldn’t men be raising their children? Aside from that, yes, raising children could be a JG job. It could probably be included from the outset.
“And when does leisure ever arrive per JG advocates?”
Instantly, and increasingly. The working day could be cut to 6 hours right away, and the standard working week to 4 days pretty quickly. Competition for efficiency in the private sector will drive automation. Much of the opposition to ‘scroungers’ is driven by insecurity, and increased income, housing, and general life security will help ease social attitudes. That in turn will allow continuing expansion of what counts as work, and the options available on a JG can expand accordingly. Eventually including Bill’s and Neil’s surfers and singers.
In other words, a JG can become a BIG. JG advocates recognise that ‘here’ is where we are, but it’s not where we want to stay.
“The JG is a central aspect of the macroeconomic framework that defines MMT. Sorry about that. Get over it”
Then MMT is doomed to fail. But I will not mention it again on your site (and this will be my last post) but you can clearly see the opposition to it on this thread. And JG supporters (like Neil) do a poor job of explaining the need for it. So if they can’t explain it to people on this thread then what hope is there. And some MMT economics (I know one) don’t support it. And you will never sell it to the general public for the reasons given. I would strongly and actively oppose it for one.
Re inflation. I counter this by what’s worse. A risk of small inflation that will likely never happen or a major depression due to a lack of spending money. I’m not an economist and I honestly believe economists do more harm than good. Most are clueless and the good ones like yourself are not great at marketing what they know. (Warren Moslers book is excellent though. But even after people read this they still are confused. Or maybe its me, who knows)
I think the battle is lost in fact. Even someone like Corbyn hasn’t a clue. The Govt is like a household is simple, convincing, wrong but almost impossible to counter. Even MMT supporters are often confused about how it all fits together.
But good luck. I don’t know how you produce the amount of work that you do. You must be like a well oiled machine that operates on another level to me. Or the majority.
“I do eventually think we will have a Basic Income, but start with the JG first.” Bob
Most people recognize the need for justice NOW, not for a cynical ploy that will likely backfire when the public sees people being paid to waste their time as well as the public’s (eg. the TSA – South Park did a good rip on this, which I recommend).
The way to overcome resistance to a JG, BIG or citizen’s dividend is simply brush past any objections to them and implement it….probably best by marketing it to women who because part of them becomes another person tends to be a little more anchored to the temporal universe than men and so somewhat less prone to abstractionism. How long do you think even the most dedicated libertarian, conservative, tory arm chair theorist will refuse a citizen’s dividend? As long as they can resist their wives calling them idiots…and until (quickly) they see that everyone else is accepting it. Yes you’ll always have the occasional “iron maiden” like Margaret Thatcher, but in the temporal universe and so long as you have a body, a satisfactory if not abundant income will always trump austerity…even in the most “principled” as in deluded and macro-economically non-comprehending theorist.
The economy is in a chronic and continual state of disequilibrium and has a lot of moving parts, but if your macro-economic monetary policies pervade and bracket the entirety of the economy with the component parts of an equilibrium and at the correct place in the productive process like a citizen’s dividend and a rebated retail discount do then you’ll be able to effect an equilibrium. And an equilibrium that does not have to rigidly adhere to some orthodoxy about equilibrium itself either, but which in fact is fluid and malleable, and enables a proactive “push” toward both the dynamic tendencies of profit making systems and a generally shared abundance that technology and now AI have been trying to create…despite the regressive nature of the business model of Finance .
Here’s the fastest way to get a Job Guarantee operating in the UK.
Nigel Hargreaves made the point above that the UK won’t be able to implement MMT[*] because of the requirement to match spending with borrowing as specified in Article 123 of the Lisbon Treaty.
The UK has already been let off big chunks of the treaty, including a partial exemption from Article 123 which allowed the UK government to run up an overdraft under the old ‘Ways and Means Advances’, and an exemption from paragraph 1 of Article 126 (‘member States shall avoid excessive government deficits’).
So there probably wouldn’t be much of problem getting a complete exemption from 123. It would certainly be a lot easier than the spot of bother that Cameron is currently having trying to persuade 27 other heads of state to stop sending their unemployed here.
He’s currently trying to get an exemption from Article 45, which deals with the free movement of labour and the last paragraph of which states ‘the provisions of this article shall not apply to employment in the public service’.
So, if I were Cameron I would:
– Negotiate a full exemption to Article 123 (on the pretence that unmatched deficit spending will be needed to pay the UK’s lavish benefits to EU migrants);
– Set up a JG (thereby getting rid of all in-work and most out-of-work benefits);
– Declare JG jobs as ’employment in the public service’ (making it legal to exclude non-UK EU citizens);
This results in:
– the private sector, faced with having to pay a living wage, automating the jobs currently carried out by cheap EU labour;
– Millions of Poles and Romanians going home;
– UKIP and the Labour Party imploding, and the Tories in power for a thousand years.
Of course, I’m not Cameron, so this probably won’t happen.
[*] Yes, I know MMT can’t be ‘implemented’, but I don’t know how express it otherwise. How should I do this?
“I’ll just pause briefly to point out the sexism; why shouldn’t men be raising their children?”
Generally because women like to do it more. The idea that the genders are neutral is another one of those myths that won’t die.
The choice that women once had to look after their children has been removed from them and it is actually the Feminists that don’t want it put back. In their eyes every woman has to be like them you see.
In a progressive society you should not be shackled by assigned gender roles, but neither should the traditional gender role be denigrated as inferior.
There is no more important job than raising the next generation – which is why it should be a paid job
“Maybe 2-3% at most. ”
Which is millions of people. Whole cities full of people with no hope of getting a job. Structurally unable to fulfil their potential.
This is not wait unemployment – simple liquidity in the market cause by the snapshot process. This is people without hope.
You *cannot* ensure that everybody who wants a job can get one unless you address the job matching problem.
‘Training’ is the usual rubbish that requires infinite fungibility. You cannot make a silk purse out of a sows ear. You need to come up with a use for the Sow’s ear.
You cannot fix the allocation problem without significant liquidity in the job market. There are too many people ‘stuck’ in jobs they don’t really want. So you need lots of jobs on the ‘offer’ queue to get the matching process out of its inevitable halts.
The JG addresses both those point. It provides infinite liquidity to the job market and ‘jobs for the people’. It is the only process that ensures there is no involuntary unemployment.
“It’s the T&C’s of such a scheme that could be the difficulty. ie the details.”
Not really. It’s very simple.
As I said on the other thread, you are probably targeting your ire at the wrong target.
The Job Guarantee goes on top of the other provisions of society.
If you have a problem with the other provisions, then get those changed.
“Have Job Seekers Allowance scrapped and return to the old Income Support system without the job seeking requirements. Have Unemployment Benefit paid as a matter of right based upon the contribution record.
Put that forward to conference and see how far you get. Get the improved existing provision into the 2020 Labour manifesto. Should be straightforward if there is as much support for it as you believe.
It didn’t happen in 13 years of Labour rule but, hey, perhaps they just overlooked it.”
Never forget that the EU treaty is enacted in UK law by virtue of the European Communities Act 1972. Parliament has the right to simply put a rider in that act overriding any provision of the treaty if it so wishes.
“The larger inflation problem with a BIG is that paying everyone a fixed amount whether they have a job or not cannot respond to inflationary pressure.”
You cripple your spend side auto-stabilisers, which means you have to take up the slack on the tax side.
In the UK the basic tax rate would have to be about 45-50% to recover the income guarantee, and that would of course be from much reduced additional income.
So you have the problem of people working 40 hours a week for a reduced income and then paying the majority of that in tax even if they are just median earners.
Not really a winning proposition that in the sales department.
“But I would sooner receive without any doubt whatsoever a payment (say £8000 min per year) no questions asked than work in a soul destroying Govt created job just to keep me employed.”
I’m sure you would. But that is the wrong question.
The question is whether the person working 40 hours a week digging fat bergs out of the swear is happy with you receiving a payment ‘no questions asked’.
Everybody loves a bung. They are less enamoured when somebody else is getting a bung that they feel is undeserved.
“Never forget that the EU treaty is enacted in UK law by virtue of the European Communities Act 1972. Parliament has the right to simply put a rider in that act overriding any provision of the treaty if it so wishes.”
Thanks, I didn’t know that. So, would there be any blow-back if the UK used this power? Is it the same for all EU member states and have any of them used it?
“It is the only process that ensures there is no involuntary unemployment.” Neil Wilson
With adequate resources* people can employ themselves or volunteer** to work for someone else if they need to be bossed around. A sufficient BIG and/or asset redistribution would maximize MEANINGFUL employment.
Or is the purpose of a JG to provide pre-conditioned wage slaves for their oppressors and to save the banks from themselves? And that’s progress? I call it a perpetuation of an unjust system – one that Progressives have been instrumental in creating**.
*Such as the commons and family farms and businesses stolen via another Progressive cause, government subsidized private credit creation.
** Eg. FDR’s creation of the FDIC rather than expanding the risk-free Postal Savings Service along with bailing out depositors in the so-called private banks.
When I point out that there should be no more than 2-3% unemployment, as there was in the sixties, you don’t seem too happy about that. In the sixties, the counting method was much fairer than it is now, and the unemployment rate was no more than about 2%. I don’t know what that would be on the new scale. Something less that 2%, obviously, maybe 1.5%?
What’s not to like about that when we compare that to how it is now? That’s not to say we abandon the 1.5% and we would need to look at how many of that 1.5% were long term unemployed rather than just transitory unemployed. Training would be just one aspect of the help they would receive. If there was a medical impediment to employment we can look a targetted subsidies.
There are many possibilities to be explored before we get ourselves bogged down in what I would consider to be the compulsion of a JG scheme which Bill himself admits isn’t a socialist solution. But, that’s what we do need IMO.
Dear petermatin2001 (at 2015/12/14 at 8:51)
Where exactly do I admit that a JG scheme founded on the principles that those that can contribute to society should do so in return for society guaranteeing them a living wage (if they want one) “isn’t a socialist solution”?
I have never said that – please refrain from verballing me falsely.
I’m sorry if I misrepresented your earlier comments. I’m sensitive to others doing that to me. Especially if they put quotation marks around words that I haven’t used!
The exact quotation I had in mind when I made the comment to which you’ve objected is from your posting “Austerity proponents should adopt a Job Guarantee”.
where you said:
‘The Job Guarantee is not a “left-wing” “socialist” construct’
So have I misinterpreted your position? Or quoted out of context maybe?
I would say that in the right hands a JG could be considered socialist solution or even a socialist construct. But its not necessarily socialist and wouldn’t be in it were in the wrong hands.
Dear petermartin2001 (at 2015/12/14 at 10:25)
I would fully agree with your conclusion “I would say that in the right hands a JG could be considered socialist solution or even a socialist construct. But its not necessarily socialist and wouldn’t be in it were in the wrong hands.”
But the reciprocity element in the JG as I have developed the concept where a person is required to contribute to society if they can in return for society guaranteeing them a living wage would typically be a desirable ‘socialist’ element.
As Marx wrote in his Critique of the Gotha Program:
Thanks for your comment!
I intend to keep quiet about the JG for a time now. If I do have any misgivings about it they are vastly outweighed by all the other advantages that an understanding of MMT offers. There’s much more to unite us than divide us.
I do have to thank you and Randall Wray for helping me along with that. I’ll never forget the first time I watched a series of short lectures on youtube – filmed on what looked like the deck of your house in Australia. I just remember thinking “Yes of course. It’s got to be like that. Why didn’t I think of it that way?”
It was a real eye opener. So thanks very much.
Whether or not a JG is a palliative or a solution depends upon whether or not the economy/productive system itself is inherently cost inflationary as Douglas purported. Regardless, a JG or citizen’s dividend must be financed with new and additional credits and not via socialist re-distribution of present incomes generated by private work for pay. Then, if numerous futurists including guys like Ray Kurzweil suggest, AI will conservatively eliminate private employment by something like 30-40% in the next 10-15 years….which would anyone here rather have a JG job, or a citizen’s dividend and retail discount that together equated to an annual income of approximately $25,000, ($50,000 for a married couple)??? In other words the leisure and income to pursue self determined goals, higher education…and the option to try to find employment if they chose as well…which due to the additional aggregate demand would undoubtedly be much more prevalent than if we idiotically fail to make our technologically advanced economies functional by pursuing the austerity the non-comprehending pols, economists and self interested private financiers currently insist is enlightened!!!
I see no one answering concerns about the logistics of starting up
a universal Job Guarentee which pays a living wage and is tailored to the
individual.The problem will not be what to do with the very small percent of people
who will be unable to or unwilling to hold down a full time JG job.
The problem will be accomadating all the people who are currently hating their jobs.
You guys might enjoy what you do but most of us do not.I work in a average
paid ,secure ,at times satisfying but relentlessly stressful State healthcare sector
at the frontline clinical coalface and I dream of giving in the notice and working
for less pay with less jobs One of these tailored made secure JG jobs would be perfect.
Me and millions of others.It would be chaos.
What would the response be to compete with these wonderful jobs in comparison
to most of the labour market after 30 years of neo liberal onslaught.Well of course
that depends if you really mean a living wage .But the private sector and much of the
overworked and over managed current public sector would need to pay more than the
JG so this begs the question how fast can the minimum wage rise without leading to
cost push inflation and a resultant wage price spiral to protect the new ‘living wage’.
I get the theory of how it might work as an inflation buffer when up and running
(such a buffer is an improvement on an unemployed buffer )but most of us know
where we want to get to the abscence of involuntary unemployment (which is what I
mean by full employment not necessarily full time from 18 -67 ) and an end to poverty.
The question is how we get there.
Macroeconomic theoretical constructs to deal with the ‘problem’ of the Phillips curve may
appeal to you but maybe you are not seeing the wood for the trees .The inflation problem
is a conflict problem arising from asymmetrical power relationships .Good governance is
using all powers available force,monetary sovereignty (spending),taxation and regulations
for the public purpose .With inflation as with all else it means taking sides ,for justice,
for the majority ,mitigating the effects of inevitable asymmetrical power.It can tax hopefully
progressively to limit aggregate demand ,it can tax scarcity (land value tax),it can subsidies
essentials as many governments already do (food ,mass transportation,non co2 electric production)
regulate max prices if necessary (rent controls) it can direct resources to essentials to curb
There is no autonomous ,self correcting inflation free system available.It is an idealized folly
in its JG or social credit form.Macoeconomic hubris.
Yes let’s get the monetary sovereign government to employ more people .To provide the
most important stuff.Housing,healthcare,mass transportation,education lets attempt to
future proof this wealth (well being) with public expansion of non co2 electrical production
and scientific research .Let the government compete with the private sector for jobs at the
bottom middle and top of the labour market .
Inflation IS inevitable because the system is complex; because human beings are complex and to one degree or another flawed probably most basically because security is so important and so poorly addressed by the system, and because as Minsky said: “The fundamental direction of capitalism is up.”
As depressing as that seems it is not a hopeless condition because most basically money is creditary, i.e. digital in nature and also, despite the complexity of the system and the legerdemain of Finance, it is basically accounting. So if this is the case then a chronic and continual scarcity of total individual income in ratio to total costs/prices (all profit making enterprises are currently bound to the cost accounting convention that ALL costs must go into price) then that scarcity can be equated simply by gifting the individual a supplementary income. $10 in costs/prices and $5 in wages and salaries + $5 in citizen’s dividend = a continual ratio of $10 to $10.
But wait you say, “the fundamental direction of capitalism is up.” Right. But if you reduce the price at retail sale which is where all costs of goods and services are terminally summed….the individual suffers no inflation, the system’s fundamental tendency is thwarted and, if we’re real smart (because a citizen’s dividend and a rebated back to merchants retail discount are macro-economic policy mechanisms) we discount prices by 30, 40 maybe 50% and we end up with the win-win situation of a stable, monetarily abundant profit making economy…with active price deflation. And additionally you’ve broken up the present monopoly on credit creation by private finance (and its monopolistic claim of ownership of credit it creates out of nothing as well) so that it takes its proper and smaller place in the overall economy.
Finally, these policies wouldn’t solve all possible problems, but they would solve its most basic and chronic one. Human systems, especially if they are made humane by policy, are reflective of human beings. It is a well known and observed behavioral phenomenon that when a neurotic resolves his/her most basic conflict many of the peripheral symptoms in their behavior tend to dissipate/disappear as well. This would probably tend to be the case with the economy as well. And where it didn’t gracious and yet definitive regulation would obviously e called for. But let us have monetary security and the clarity that such security would effect FIRST. Our economic motto should be “Transformational policy first! Rational and ethical regulation…right along with it.
How much of the “relentless stress” of your job come about from constant “efficiency savings” and other regulatory changes imposed by the market-driven neoliberals? What would your opinions of your job be if your workload reduced, with more staff?
I used to be a teacher (Science, in the UK). It was a job I truly loved, but I gave it up in the end because of the stress. Having classes of 25-30+ students, all of different abilities, expected to set “aspirational” targets that became the minimum I was expected to achieve with them (and no, I couldn’t set their real targets as aspirational due to pressure from senior management and parents), marking, assessments, planning lessons and activities that were suitably differentiated… I wonder now how some teachers seem to breeze through all that when I typically stayed up until 1-2am every day, and most weekends. In the end, I just couldn’t take it anymore.
Class sizes in the State system are dictated by cost savings and efficiency. Not what’s best for the students and staff, but what’s best for the “British taxpayer”, hence why stories of overfilled classes are abound, why the UK faces the worst teacher shortage in history, why the State system fails most of the pupils, especially those from disadvantaged backgrounds. And they KNOW it’s failing them, just as it failed their low paid or unemployed parents, so participation seems pointless to them!
Here’s where a Job Guarantee could help, in a number of ways:
More staff in schools: Carefully selected JG “Volunteers” helping out in schools. More people becoming teachers, since much of the stress factors are reduced/removed
Kids in schools have parents now able to have a job or meaningful training, giving them a role in society. This serves as a role model anchor, the kids are more likely to engage in education (right now, the “encouragement” to participate in education is around the “you don’t want to end up like those unemployed scroungers” narrative, which both attacks their background if both parents are unemployed, but also falls flat against their sense of fairness – most state kids know it’s not hard work that gets rewarded, given our cash and celebrity obsessed media!)
A choice that’s not “FE or bust”. I’ve been in some schools (when I did a stint as a supply teacher) where most of the class I was teaching had no idea what they were going to do when they left school, since they had it rammed down their throats that not going to college/university was not an option, since the competition for jobs was so fierce. Try accepting that if you’re not academically gifted, and the odds seem stacked against you. If instead, they know they can get a guaranteed job (even if paid minimum wage) which can include vocational training, you offer them a future!
Regarding that last point, one of the courses I taught on was BTEC Science, which is a vocational course. Sadly, vocational courses in the UK are mostly just “coursework based”, rather than truly vocational, due to costs. So the “choice” right now is between Exams and Coursework. It’s a rare school/college where the course can be truly vocational, hands on experience! (the first incarnation of BTEC Level 3 was actually designed for students currently working and on day-release, but was adapted for schools and colleges to also be available for Post-compulsory students, 16-19. However, this depended on the facilities of the school/college, which was often sparse due to “budget cuts”)
daniel my job would be transformed by more staff and equipment.I take MRI scans and the uk
mahcines per capita is well below the OECD average.
My point is those are the kinds of priorities which a government needs to make even if it was
liberated by the idea of fiscal restraint. What real resources most importantly labour to direct
where.In the current labour market i find the idea of a universal tailor made secure job offer
at a living wage from the government fanciful and there are so many crucial areas to direct
@Kevin that is my point. Our current labour market can never supply a tailor made job for everyone not because it’s too difficult (we could include training and volunteer work into JG jobs, research and build renewable energy systems, build social housing and infrastructure.. there’s literally more that could be used to employ the workforce than individuals currently under/unemployed in my opinion!) but because politicians and managers refer to resource constraints as money, rather than labour or equipment.
When they say we cannot get the resources for education/healthcare/housing/infrastructure/energy, they mean that we cannot, in their opinion, afford it.
But MMT tells us that money is not a resource in limited supply, labour and equipment are the only constraints, the former of which we have literally millions currently underutilised, all to maintain the power, wealth and status of those who have or control the money.
Change the way we think about work. Imagine using colleges (who would have all the staff and funding they need) needed to train people to be builders, electricians, plumbers, mechanics (even Medical Technicians, and any other trades you can think of), with them required to work a minimum of 2 years in the Public sector building affordable/social housing, maintaining said housing, fixing fleet vehicles etc. After 2 years, they have the choice to move to the private sector (in their own business or employed) or stay on the JG (if theirs a shortage of private electricians, for example, they can make much more in the private sector. Too many, they’re better off on the JG). Pay people to volunteer in charity shops, care homes or wherever. The JG doesn’t require all participants work 37hrs a week, pensioners could work a couple of hours a week to “top-up” their pensions so they can afford luxuries. My vision of a JG (which I hope Bill doesn’t mind me sharing) would be like a Government run Agency – you register with them if you choose to, indicating your skills and working preferences, and when you need a few hours work, you go to the JG centre (which would replace Jobcentres) and see what “tasks” are on offer, you’re free to take a “task”, complete it and get paid. (People familiar with online games would see this a little like quests or tasks offered by NPCs to get coin or experience in the game). Handled electronically, this system shouldn’t be beyond the wit of society!
Can’t wait for your MMT Textbook Bill, super excited! Another grand addition to add to my growing arsenal, I hope to spread it far and wide among my peers. Keep up the great work!
Do you have much on China, in particular government and state entity debt?
[Bill notes: I edited out links to sites I do not wish to promote]
Let me try without links.
Do you have any comment on China, debt and rebalancing needs and effects?
Further news on your MMT upcoming text book?