Latest Productivity Commission report – relies on and exploits our ignorance – to undermine our well-being
I had a sense of déjà vu this week when I read the latest release…
This is the third part in my historical excursion tracing where progressive forces adopted the idea that it was fair and reasonable for individuals who sought income support from the state to contribute to the collective well-being through work if they could. As I noted in Part 1, the series could have easily been sub-titled: How the middle-class Left abandoned the class fundamentals, became obsessed with individualism, and steadily descended into political obscurity, so much so, that the parties they now dominate, are largely unelectable! Somewhere along the way in history, elements of the Left have departed from the collective vision that bound social classes with different interests and education levels into a ‘working class’ force. In this Part, we disabuse readers of the notion that the ‘duty to work’ concept was somehow an artifact of authoritarian regimes like the USSR. In fact, we find well articulated statements in official documents in most Western democracies.
The earlier parts in this series are:
1. Tracing the roots of progressive views on the duty to work – Part 1 (August 4, 2020).
2. Tracing the roots of progressive views on the duty to work – Part 2 (August 11, 2020).
I thought the responses to my first were very illustrative of the modern state of so-called progressive thinking, which is a separate research program in itself.
Regular readers will know that I have long been interested and researching the question as to how the neoliberal paradigm has dominated for so long and why the progressive position in politics has failed to articulate a powerful and successful challenge to it.
Thomas Fazi and I also articulate our ideas on those questions in our book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017).
It is clear that the Left side of politics, the traditional social democratic forces, have largely abandoned the contest with conservatives over macroeconomics, and, have instead, sought to differentiate themselves from the conservatives by identifying identity issues, in which they define what they perceive as the modern progressive view.
So questions of ‘right to work’ and the state’s responsibility in ensuring that there are sufficient jobs and the partner expectation, ‘the duty to work’, both of which were the cornerstones of progressive thinking and practice in the Post World War 2, have been abandoned in any meaningful way.
There is no Left commitment to the practicalities of ensuring a ‘right to work’, and, as a consequence of the human damage that has followed the mass unemployment and underemployment that has become the hallmark of the neoliberal period, these politicians get diverted into proposals like basic income guarantees and all sorts of justifications of why we should be relaxed about proposals that allow individuals to receive state income support when they are clearly able to work.
It has become a gospel of progressives that this is somehow a basis for a coherent and connected society. That some people who can work will be able to ‘express themselves’ without having to work but still receive sufficient income, while enjoying the products and services created by others who are working.
The willingness to promote the ‘individual’ over the collective is, of course, another hallmark of the neoliberal era, and progressives, in their willingness to abandon economic class as an vehicle for understanding the social location, have aided that culture of the self over responsibilities to be a societal member.
Further, one of the reasons that this positioning by the traditional progressive political parties have made them largely unelectable (with exceptions) is that the views do not resonate with the mainstream view among workers, who still consider that people who can work should do so.
I am working on a research project at present where we hope to generate the evidence to support that conjecture.
But there is a disjuncture or dislocation between the views found in traditional working class communities and the views that are expressed by educated, urban middle class (I use the term in the social sense) who have largely benefited from globalisation and neoliberalism.
The Brexit vote and the Yellow vest movement are two manifestations of that dislocation.
My earlier parts started with the concept of a duty to work as espoused by Marx in the – Critique of the Gotha Programme 1875 – which was one of Karl Marx’s last important works.
We then followed the historical train to consider how his views had been implemented and as a result we ended up in the USSR, where the concepts of a ‘right to work’ and a ‘duty to work’ were well articulated.
I found it extraordinary how much angst that exercise caused. All the ‘Reds under the Bed’ paranoia came to the fore.
Apparently, I was portraying the Job Guarantee as a path to socialism – then Stalin gulag-style oppression. These claims were pathetic. Sorry.
The fact is that progressive intellectual history is replete with similar debates about the necessity for the state to ensure there is sufficient work for all, and, in return, the citizens had a responsibility to contribute to society, through work, if they were able to.
Otherwise, citizens who were not able to work, would be supported in a material sense by the state.
That sort of duality defined the progressive Post World War 2 period.
It had nothing to do with being an exclusive ‘socialist’ ideal. It was the core ‘bread-and-butter’ social democratic tradition in Western democracies.
That is how we chose to define good societies and these ideals were found in official documents from most nations – such as the nation-building strategies outlined in the – 1945 White Paper on Full Employment – published by the Australian government – and in constitutions of various Western, non-Socialist countries.
The – Preamble to the Constitution of 27 October 1946 – which defined the foundation of the Fourth French Republic (it was the result of a constitutional referendum held on October 13, 1946) is illustrative of Rousseau’s concept of – General Will.
If you study the historical period you will appreciate that France was in turmoil at the end of the War and de Gaulle had a task in normalising France after the disgraceful Vichy period.
There was a huge debate about the way in which a return to constituent government could be accomplished.
Those debates are very interesting but tangential to my objective here.
The historical study by Jon Cowans – French Public Opinion and the Founding of the Fourth Republic – (published in French Historical Studies, Vol 17, No. 1, 62-95 – link is for JSTOR subscribers through your library) – makes it clear that public opinion at the time was definitely in favour of the new constitution.
There was disputes about the role of the presidency etc, but Article 5 reflected the strong public sentiment of the time:
Chacun a le devoir de travailler et le droit d’obtenir un emploi. Nul ne peut être lésé, dans son travail ou son emploi, en raison de ses origines, de ses opinions ou de ses croyances.
Which in English reads:
Each person has the duty to work and the right to employment. No person may suffer prejudice in his work or employment by virtue of his origins, opinions or beliefs.
The Preamble was subsequently incorporated in the – Constitution française du 4 octobre 1958 – which was adopted on October 4, 1958 and became the Constitution of the Fifth Republic (English version)
Further, consistent with the idea that if you were unable to work for any reason, then the state would provide material support, Article 11 reads:
Elle garantit à tous, notamment à l’enfant, à la mère et aux vieux travailleurs, la protection de la santé, la sécurité matérielle, le repos et les loisirs. Tout être humain qui, en raison de son âge, de son état physique ou mental, de la situation économique, se trouve dans l’incapacité de travailler a le droit d’obtenir de la collectivité des moyens convenables d’existence.
It shall guarantee to all, notably to children, mothers and elderly workers, protection of their health, material security, rest and leisure. All people who, by virtue of their age, physical or mental condition, or economic situation, are incapable of working, shall have to the right to receive suitable means of existence from society.
The progressives did not challenge these aspects of the Constitution.
A similar evolution of thinking is embodied in the – La Costituzione – of Italy, which by the way is one of the most progressive of its type (pity it is not followed).
Article 4 defines the ‘right to work’ and the ‘duty to work’ expectations of the Republic:
La Repubblica riconosce a tutti i cittadini il diritto al lavoro e promuove le condizioni che rendano effettivo questo diritto.
Ogni cittadino ha il dovere di svolgere, secondo le proprie possibilità e la propria scelta, un’attività o una funzione che concorra al progresso materiale o spirituale della società.
Which in English reads:
The Republic recognises the right of all citizens to work and promotes those conditions which render this right effective.
Every citizen has the duty, according to personal potential and individual choice, to perform an activity or a function that contributes to the material or spiritual progress of society.
Now the ‘right to work’ is not the same as a ‘duty to work’.
The former reflected the longstanding progressive view that full employment was a legitimate goal for any nation state and that the government should use its capacity to ensure there is work for all.
So, there had to be a buffer of sorts to ensure that fluctuations in ‘market’ work (private sector decision-making) did not compromise the capacity of workers to work.
History tells us that the former has not been respected by the Italian government nor the European Union.
In part, this failure reflects the tension within this neoliberal era between the economic responsibilities of the state to provide sufficient work (the pre-neoliberal construction) and the later views that emphasised the role of government as being limited to making the ‘market’ work better, which we can translate to mean producing the conditions that allow profits to boom, without respect for the labour market consequences.
Despite all the talk in the European Union about ‘social Europe’, the balance has shifted sharply over the last three decades towards the second construction of the role of the state, and as a consequence, the ‘right to work’ lacks any intent or weight.
The second sentence in Article 4 relates to the ‘duty of work’ statement in the Italian Constitution.
The interesting aspect of this clause is that it defines ‘work’ more generally than we would associate with traditional notions of the ‘right to work’.
It is also clear that the evolution of the European Union has made it difficult for the Italian government, even if it had the will, to fulfill its constitutional responsibilities to the Italian people and has split the historical logic that is embodied in Article 4, that being:
1. All citizens should be able to work and the state was historically seen as ensuring there were sufficient jobs.
2. In return, citizens were responsible for contributing effort by way of work, if they could, to advance the commonwealth of the nation.
The neoliberal period compromised the second expectation because it denied the capacity of the state to achieve the first requirement.
It is also clear in the Italian constitution that anyone who could not work would receive adequate material support from the state.
While Article 4 does not really bind the state to guaranteeing sufficient employment, even though that is how such an article has been interpreted, Article 38 does impose direct responsibilities on the state:
Ogni cittadino inabile al lavoro e sprovvisto dei mezzi necessari per vivere ha diritto al mantenimento e all’assistenza sociale.
Which in English reads:
Every citizen unable to work and without the necessary means of subsistence is entitled to welfare support.
Taken together, these articles reflect the overwhelming social democratic consensus that prevailed in the Post World War 2 period.
I could relate many more official statements across many nations to the same effect.
The concept of the ‘right to work’ and the ‘duty to work’ were ground into human aspiration and were very clearly embedded in progressive thinking.
They may be foreign to Americans, which does not provide any specific statement about expectations in this regard, but for most Western democracies, these concepts were unexceptional.
However, the concept of a ‘work ethic’ was not foreign to the Americans.
There is an interesting strand of debate within the philosphical literature about liberty.
So-called ‘defenders of freedom’ abhor the ‘duty to work’ concept even if it provides benefits to society in general.
They claim that it is “artificial rather than natural” and “must be subordinate to the demands of liberty” (see Lawrence Becker provides an excellent discussion of these points in his 1980 journal article – The Obligation to Work – library subscription needed)- published in Ethics (Vol. 91, No. 1, pp.35-49).)
But as Lawrence Becker notes (p.39):
This is a simple non sequitur. It must be granted that nonvoluntary obligations to pay taxes and to do socially useful work are artificial, that is, that their moral basis lies in the ongoing human artifacts known as social institutions rather than in an imaginary state of nature. But it does not follow that their justification is any more difficult than the justification of the (equal) right to liberty or that they must be subordinate to liberty.
That is, the concept of liberty is a ‘social institution’ rather than a state of nature.
And the claim that it is more just for a person to refuse to work when they can, yet live of the work of others, than the requirement that everyone contributes to the commonwealth of society if they can is also spurious.
We will take up that strand of argument in Part 4.
In Part 4, we will discuss the concept of reciprocity, scaling of policy, the concept of the maverick and concepts of justice and coercion.
That is enough for today!
(c) Copyright 2020 William Mitchell. All Rights Reserved.
This Post Has 123 Comments
I agree with all you have said – and particularly sigh at the ridiculous carping about your historical explorations. I have just one issue, that I imagine you may eventually cover, namely (ignoring criminals) the indigent who have little intention or emotional commitment to working. Should we let them starve – I think not. Should we punish them (e.g. Gulags) – no. We should understand that in a community that imposes the appropriate societal pressure of duty to work, then the numbers of the indigent will be minimal and hardly a massive drain (appreciating MMT, I am not thinking of a financial drain) on the community. They can be kept at a level of sad existence, abhorred, and regularly pressured to work constructively for the benefit of the community. That notwithstanding, currently, I understand that the wealthy are substantially a greater drain on the community than any number of indigents would be.
As far as the wealthy being a greater drain on society than the indigent, I couldn’t agree more. It’s being demonstrated daily in the UK with the way the government dishes out money to its crony friends. The latest example being the replacement of Public Health England with a new bloc headed by a serial failure, Dido Harding. PHE’s budget was a small fraction of what was dished out to Serco and others for Track and Trace and these decisions have attracted no anger or criticism from the Labour Party. I wonder if the entire population has had its water supply dosed with bromide. There’s no anger in this country. The lack of anger makes this old man of nearly 76 positively fume. Maybe it’s like a volcano or earthquake and we won’t know what’s hit us when it finally blows.
Apart from that, great article by Bill and the three parts so far have made me move the furniture around in my mind. I wish we had some political thinkers in the UK that would/could step outside the neoliberal framing.
If you are a business owner and know MMT surely you would support it ?
All these increased savings that consumers can spend once they have used those savings to pay off debt. Which again the virus shows clearly this happens with larger deficits. Full employment that keeps aggregate demand constant at all times meaning you can plan further into the future regarding investment in your business.
Rent seekers on the other hand and the HUGE growth in the rentier class since the 80’s how do they see MMT ?
They want to make sure economic rent gets paid. Basic income and other forms income for doing nothing guarantees the rent gets paid. To the point that landlords want tenants who get paid by the state which is a guaranteed income for them. Which in most cases get paid straight into the bank accounts of the landlord and allow them to increase their rents.
I think the rentier class and how it has grown has been one of the main drivers behind the change in narratives in Bill’s article. Along with the domestic policy changes again since the 80’s moving to a more service based economy in the UK.
This disconnect between a business owner that creates jobs and a rentier who rely on economic rent has become unhinged causing all sorts of problems. This change must have had played a role in destroying the Job guarentee full employment narrative of previous generations.
Along with the other main driver Geopolitics. Foreign policy driven by the neoliberal globalists who want to take over the world. Lay waste before them and call it peace.
“namely (ignoring criminals) the indigent who have little intention or emotional commitment to working. Should we let them starve”
Do they not have any personal violation? Are they cattle to be herded or people who can make their own decisions? Should we not respect that decision?
Do you not think it is a little patronising to suggest that they do not know what they are doing? I can assure you that the majority of the “antiwork” people do. There’s a whole army of them with their own SubReddit. Quite a few have PhDs. Most of them believe the world owes them a living. They are “takers”. Quite a few think they are Anarchists, although I doubt they know what the term actually means since they seem to spend most time learning how to ask leading questions than reading Proudhon or Kroptkin.
Remember everything without a contribution of hours behind it is a transfer of output from those who are contributing.
If you wish to assuage your guilt, then feel free to contribute to a charity. You’ll even get tax relief on your contributions. If there are enough like you then the “takers” will be kept by your generosity.
But don’t pre-suppose you have the right to impose a tax on the rest of us who know exactly those who know how to game the system are playing at. I don’t want to have to pay thank you, and you have no right to use state power to force me to pay to prop up such people.
The UK Universal Credit or Job seeker payment requires that everybody capable spend 35 hours a week looking for jobs that cannot exist. Once you fix that so that the work coach is required to construct a job for anybody who wants to work, then you have the “Job Support” framework that helps people who want to work to get work and be able to contribute to society. Those who can’t work will be signed off as such by an actual qualified doctor, not an outsourced clipboard jockey. Those too old or too young are covered by pensions and child benefit.
Who else is left that a Matcher would consider appropriate to support?
The charity approach fixes both problems and satisfies both the Givers and the Matchers. Givers pay the voluntary tax. Matchers don’t. Takers are kept by Givers. All is well.
Why cripple a sensible political compromise on the alter of Paternalistic Ideology?
“But don’t pre-suppose you have the right to impose a tax on the rest of us who know exactly those who know how to game the system are playing at. I don’t want to have to pay thank you, and you have no right to use state power to force me to pay to prop up such people. ”
I thought taxes didn’t fund government expenditure. 🙂
Neil may not, or likely will not, answer you.
See his later replies from just yesterday IIRC.
There (if I understood him correctly, which I may not) he said (here I’m adding a lot of words that he seemed to have left out) that after a while any nation with JGP and using MMT to its *fullest* will be using all the available resources. In order to increase spending (like by adding a small UBI for those who refuse to work) the Gov. will be required that find a way to divert resources from someone to give to the UBI ‘takers’. He calls this a “tax”. He knows that it might be done without an actual tax, but that is what he wants to call it.
. . . Or, maybe adding the UBI will cause inflation and then he wants to call the resulting price increases “an inflation *tax*”.
Neil W, would you object to the Gov. operating the charity for the whole nation? Those who want to contribute can, and then the Gov. doles out the money in someway equally to all who don’t work.
“I thought taxes didn’t fund government expenditure. ”
You thought wrong.
Taxes release real resources for the public use. If you want to feed and clothe people, then you have to get those materials from production somewhere. And that requires somebody else’s hours to create them. Hours that cannot be repaid materially as the people you are feeding and clothing are refusing to add their hours to the pot.
Once a Job Guarantee is in place, and unemployment eliminated, everything else is straightforward tax and spend. The classical rules of economics can be treated as applying. Much as an app developer has no need to understand how Android makes it look like they have infinite memory available and exclusive use of an entire mobile phone.
Neil did reply to you.
IMHO, if you look closely at what he sad there, then you will see that he is making an assumption that you may not be making.
It is that all the production by the privately employed is not (or can not) be creating a surplus over what all the people in the JGP and working in the private sector want to consume. There is nothing left for the so-called takers. I really doubt this assumption is true, though.
I also think that the Gov. could set aside some of its so-called deficit spending to support the so-called takers. This *would* deprive someone somewhere in the economy of the benefit of that so=called deficit spending. Neil W might be calling this a ‘tax’ also.
Totally convinced now and can even agree with the terrible Neil Wilson (I’ve only seen your recent contributions – they were a shock – but I’ve got it now). Although I’d accepted that those who don’t want to contribute should not be rewarded I considered that how it would be framed in legislation would be difficult. But you’ve given the answer there, Neil.
A couple of years ago I was working with ANO on a new Clause IV for the Labour Party but couldn’t find a way of embedding MMT principles. I now feel I can. It wasn’t the right time for the debate then but it is now. I would be grateful for anyone who wants to help in drafting.
“You thought wrong”
So taxes do fund government expenditure?
“Neil W, would you object to the Gov. operating the charity for the whole nation?”
You’re aware, I presume, that most of the NHS hospital systems are run as charitable trusts (known as NHS charities). Much as most of the UK’s doctors are actually private commercial businesses.
It’s always entertaining when people from outside the UK call the UK’s health system nationalised. It most certainly isn’t. It is single payer with charitable additions. Which is how Captain Tom’s ~£33 million tour-de-force, will end up benefiting the NHS.
Whether it is via ‘official’ charities created by statute, voluntary charities, or as happens with the NHS a mix of the two is a political matter.
Everything boils down to what is politically required to keep the people we need to work working a full week and ensure they feel as though they are getting a fair return from everybody else for their time. The JG ensures those who want to demonstrate that fair return are always able to do so.
I would keep the handout charity away from government. After all it is the Givers’ money and they should decide. They tend to like having endless meetings discussing matters of worthiness in minute detail and it would keep them out from under the feet of the rest of us.
Win-win all round.
“So taxes do fund government expenditure?”
As Mosler would put it, if there are any unemployed then we are overtaxed for the size of government we have.
The unemployed have no alternative bid. Therefore they don’t need releasing.
Is that a yes or a no?
“We have also seen that a sovereign government does not need such revenue (i.e. tax) in it’s own currency to spend”
Mitchell, Wray and Watts, Macroeconomics, p.323.
“This *would* deprive someone somewhere in the economy of the benefit of that so=called deficit spending.”
What benefit is there of that spending if the income the earner earns cannot be used to purchase something else? That implicitly requires that somebody uses up hours of their finite life producing something in exchange for money – and only money. Aka increased savings – which as we know act like a tax. Only capitalists tend to want to do that over the long term. Workers tend not to.
Have you reached the point yet where you realise that the financial circuit and the real circuit are inductively connected, not directly connected? (The analogy is that Finance is “apparent power” in electrical terms, Stuff is “real power” and the spend/tax cycle is “reactive power”).
That may explain why when I talk about real stuff you try to talk about money.
I’m pretty sure there were indigents/workshy people in our society (mine is the UK) throughout the full employment era, few with PhDs, but they were a small minority, of inconsequential burden/tax to those in work, and would have been even fewer with a state Job Guarantee. There was almost one: wlhen I left school and approached the dole office, I was given a choice: find a private sector job or work in the local mental hospital. After being a burden, mostly on the state while in further education, I did a stint assessing welfare payment claims in the 80s at a time when the previous small minority of claimants had been vastly inflated by people competing for limited job vacancies. A Job Guarantee at a wage considered merely a living one by most, would have swiftly reduced the number of claimants.
What we are talking about is a basic proposition of MMT or at least I thought it was and if it is not I have wasted my money buying Bill et al’s book.
Somebody said yesterday or the day before that Neil sometimes is sort of opaque. Not his word.
I tried to explain, Neil may understand MMT totally, but he does further.
Like where he said that onlt the wages of the JGP are (can be) freely deficit spent.
All other gov. spending must be done just like when the world was on the gold standard. [Not his words, but his meaning AFAIK.]
So, you are right. MMTers do say that the Gov. must so-called deficit spend the amount that is being saved. I think this includes being saved after it buys some foreign stuff. If the Gov. does not do this, then the Private Sector will not have enough money to keep the economy humming along. At least according to MMTers, IIUC.
I think Neil is wrong and you are right.
But, everyone here tells me Neil is an expert and I keep saying that I’m not.
Try to ask Bill.
An excellent read, thank you. There is an abundance of work that is not done, I remember park keepers, they had a role to play in society and worked hard as overseer’s at public parks. They received a good wage in return from the State. This was also local work that strengthened communities. The wage received from the State would then be targeted by the private sector as the workers next step would be as a consumer. The wage would feed upwards through the economy. Would this not be seen as a direct State stimulus promoting aggregate demand and further job creation? My point is, there is work that needs doing within societies that has not interested the private sector except in a charitable/voluntary role. However, the private sector will defiantly be interested in acquiring the monetary stimulus provided by the State to the worker. The difference would now be that private sector businesses will have to work to gain that stimulus from the worker. At the moment, it seems to me, that direct State stimulus is delivered/injected straight to the top, therefore missing out the full work potential to achieve optimum capacity. State stimulus that is not turned into product value within the real economy would then be taxed out of the economy and returned to the base, then reallocated direct State stimulus can be re injected to encourage further demand. Work carried out for the betterment of society is undervalued, and to a great extent now has become non-existent. Such as an NHS worker, civil force, armed forces, fire brigade paid by the State are not just a State expenditure, they also spend that State monetary stimulus within the private sector creating demand. Therefore, an increase in their wages would just increase demand. Other work can easily be added to the list of social benefits. I believe the private sector would benefit greatly from such a direct State monetary stimulus in all sectors at all levels. The list of job opportunities had no need to be created, the need already exists within our societies, governments just need to step up to the plate to facilitate the needed monetary stimulus placement. Economies that utilize a free floating fiat Sovereign currency, that holds no intrinsic value have no excuse, other than political preference. Governments should be honest with the electorate that underemployment is a political choice, and let the chips fall where they lay come election day. Well, that is how I see things.
We are, but it has both a finance and a real view. And the two are distinct from the MMT viewpoint.
There is no need of prior taxes, but there is a need of something to buy at a price worth paying, or there can be no spending in any case.
Only the unemployed have no alternative bid. That is all there is spare without taxing. It can either use it directly (via a Job Guarantee ), or indirectly via some trickle down approach (hoping somebody somewhere hires the unemployed and quantity expands rather than putting up prices). The latter is the use of an unemployed buffer stock with all the problems that has (Macroeconomics 19.4 pp296)
Would it help to view the Job Guarantee as spending at the “federal level” which injects money at the “state” level and causes “state taxation”, which the state can then spend?
Then you have a federal spend causing state taxation, which then funds the ” state government expenditure” on discretionary items the taxation has freed up to be bought.
Discretionary government spending in a system with a Job Guarantee is essentially a “state like” operation not a “federal like” operation.
“There is no need of prior taxes, but there is a need of something to buy at a price worth paying, or there can be no spending in any case.”
THE CRUX OF THE ISSUE and actually where the debate should be at. MMT economists have been trying to get it there for years. Who gets first dibs on both the skills and real resources and in what order and who should set the price.
Of course sometimes taxes are a very blunt took to do that. Sometimes you just have to ban certain things from happening. Which is why doctors back off the debate around the NHS issue. Once all the options have been discussed private healthcare should be banned as the best option but very view who’s salaries depend on it admit that.
Taxes are a very blunt tool as the tax increase just gets passed on as higher prices. If you have a neoliberal right wing weak competition and mergers authority who prefer monopolies. In many cases taxes fuel inflation and bottle necks rather than move the skills and real resources to where they are needed.
You need to introduce everything at once and fine price hikers and monopolists and jail them if need be to make it work. Ultimately, banning things works better.
Derek, of course banning is sometimes the correct tool but taxes are sometimes the correct tool – where they correct market failure, as with land value tax.
“where they correct market failure, as with land value tax.”
There’s little merit in the land value tax. It’s a relic of an idea from a bygone age that serves little purpose in a world where IP is what actually matters.
As Bill puts it
It would help if MMT supporters spent less time obsessing about tax. Tax is financial sewerage. Ordinary people aren’t interested in talking about it and even less in paying it. Get it dealt with in the simplest way possible (almost certainly a payroll tax of some sort paid by the employer – since that frees up the required real resources and keeps it away from ordinary people) and move onto the stuff people want to talk about – like jobs, and mortgage rates, schools, hospitals and pensions.
Back when the US had a military draft in place there was a provision for ‘conscientious objectors’ for those who refused to participate for ethical reasons. Of course they had to explain their objections convincingly and often could be assigned to other service in lieu of military service.
Perhaps those who demand an income while refusing to participate in any ostensibly worthwhile labor could qualify if they explained themselves convincingly- perhaps by sitting in a room for a few hours a day filling notebooks with their arguments. Then at the end of the day, someone who actually was willing to provide a useful service in exchange for a living could come around and deliver the notebooks to a trash to energy recycling center. And everyone involved would be credited with that day’s JG wage.
Neil Wilson, could a land value tax not be seen as a tool to encourage better use of land resources , a way to discourage an idle land ownership monopoly? Land wealth ownership cannot be hidden, and is heavily invested in. Land is a finite commodity, so will always hold vast value.
One of the most controversial parables attributed to Jesus is the one about the vineyard owner, who needing to harvest his ripening fruit, went out in the early morning to hire workers for the entire day at the wage of one denarius. A few hours later, he hired some other workers, promising unspecified compensation, then a few hours after that did so again, and finally hired additional workers, in the same fashion, shortly before the work day ended. In the evening, all the workers came to collect their wages, and each received one denarius. Those who worked the entire day immediately complained to the vineyard owner, pointing out that they had worked hard for many hours while others had worked for only a few or only one. The vineyard owner’s response was that the full-day workers had no standing to complain, because they had been paid precisely as promised. Why, he asked them, are you offended by my generosity? I think that this strange, somewhat disturbing parable gets at something that runs deep inside us. We cling to and sometimes aggressively assert a sense of justice more focused on others not getting what they don’t deserve than on others getting what they do. Resentment so easily creeps into the concept of justice and becomes a dominant tone, disrupting our inner harmony, sense of solidarity with others, and appreciation of what we have. This is especially true in politics, where I’ve seen a friend here in America oppose universal health care, care he himself needed but couldn’t afford, because the so-called undeserving poor (takers) would also be covered by such a policy. I cite this parable not to endorse a UBI over a JG, which I don’t, but rather to point to something we all should be aware of and careful about. How many, do you suppose, oppose a JG not because they prefer a UBI or have a problem with paying an honest wage for honest work, but rather because they quickly imagine a hoard of lazy, undeserving people “playing” a public jobs program by lounging around and doing as little as possible?
“a way to discourage an idle land ownership monopoly”
Wouldn’t it be better to address the right to exclude, which is where the power comes from.
One of the vagaries of England is that you can’t own land. All land is owned by The Crown – to whom it reverts in the case of bona vacantia. A process humorously knowns as “escheat”.
Yet I have full control over the land I use due to the title I possess.
“Use it or lose it” titles would be far more effective.
“rather because they quickly imagine a hoard of lazy, undeserving people “playing” a public jobs program by lounging around and doing as little as possible?”
That is neutralised by a very important feature of the Job Guarantee: you can choose to go on it.
Therefore if you think the JG is the easy option, you are welcome to try it yourself.
“Taxes don’t fund government expenditure”
The formulators of MMT determined that the national government/treasury/central bank entity creates currency when it spends, therefore taxes are clearly not being spent. However taxes, net government spending, net private sector spending, the foreign sector balance, inflation and unemployment are all interconnected and what is being argued over in many of the earlier comments appears to be just the sequence of these interconnected factors.
If the full employment condition has been attained, ideally with a JG in operation, then if a further increase in net government spending is deemed necessary and assuming other relevant factors are constant, taxes will also need to increase if additional inflationary pressures are to be averted however any spending precedes taxation. Neil is correct in saying that the fiscal limits would then have been reached which is much like having the currency again pegged to gold or to a foreign currency.
On the contentious issue of providing a subsistence unemployment benefit for the small proportion of the able unemployed that despite every effort refuse to work in a JG, it appears to me that the contempt that some demonstrate for such people is unreasonable. Despite the best efforts there will still be some alcoholics, drug addicts, misfits, rebels, hermits, excessively anxious or terrified souls and whatever other disparaging label we might think of, that will refuse to participate in any organised activity even if ample social and medical help are provided.
They can have a few crumbs of the collective resources and I would throw in free basic housing and meals as well, the far larger JG will still function as intended and the JG could periodically send around recruiters for a chat?
I know plenty of places where more than enough wasted resources could be found to ‘fund’ it all. The parasitic FIRE sector first comes to mind but also tax havens, privatised fee gouging utilities, major defence contractors, the bloated anti-terrorism/state surveillance industry, the heavily subsidised fossil fuel industry, gambling, private insurance/healthcare/aged care/prisons/education and the pharmaceutical industry.
The ‘free market’ has a habit of allocating far greater resources to the most undeserving people. Often the most greedy, dishonest, unethical and cruel but they have a job or a business or investments so then it’s OK. That is neoliberal thinking.
On the land tax, that would mean I would lose the family home that I built as an owner builder way back when I had a good job because the land value is now high due to speculation and my income is meagre. I can live with a major deflation of real estate prices but would be forced to sell up by a land tax or higher local government rates which are calculated based on capital improved property values. Payroll, income taxes and capital gains taxes seem much more just to me.
Neil Wilson, “Use it or lose it” would be a much more aggressive stance, and would work to facilitate increased economic value. This could also be easily portrayed as dictatorial towards personal asset. That is why I would advocate using the taxation tool to discourage the unwanted economic behaviour. Apastamba said “If any person holding land does not exert himself and hence bears no produce, he shall, if rich, be made to pay what ought to have been produced” This is an age old debate, in this modern money age, tax not because the government needs to tax to spend, but to utilise our natural resource efficiently. Thank you for your thoughts.
Dear Andreas. Among much that you write that I agree with you say ‘(I) would be forced to sell up by a land tax or higher local government rates’. That depends how the tax is collected. It need not be collected so inflexibly, even until the home is sold following your passing, if your income was insufficient in the years before.
Last week, I posted Bertrand Russell’s “In Praise of Idleness” on part 2 of Bill’s thread.
I’m delighted to note that some German Universities and adopting similar principles!
“But don’t pre-suppose you have the right to impose a tax on the rest of us who know exactly those who know how to game the system are playing at. I don’t want to have to pay thank you, and you have no right to use state power to force me to pay to prop up such people. ”
If the MMT proposition that taxes don’t fund government expenditure pertains then benefits paid to the JGS refusing unemployed are not being funded by taxes or any other person’s effort. The benefits are funded by government expenditure and by money created by the government/central bank.
It’s funny when you think about.
We are all discussing the best ways to control your skills and real resources.
Imagine using the Euro or being on an EU convergence program. When they control your spend and tax and On top of that then tell you, you have to export your way to growth.
It’s amazing they got away with it. It’s unbelievable so many countries signed up to that and waved flags and sang Ode To Joy when they done it.
Andreas, drug addicts and alcoholics arguably deserve access to treatment rather than an income allowing them to continue along in that unfortunate (for all of society) condition. Excessively terrified or anxious souls obviously cannot work due to medical reasons. Hermits eschew all interaction with society in the first place. That is their choice and nobody is saying there is anything wrong with that. Rebels might as well be truly rebellious and not demand social support. Various oddballs and misfits might be quite happy to scribble or maybe draw odd pictures in a few notebooks each day about why they won’t work in exchange for an income.
Or standing In front of a judge in an EFTA court ?
You explain this what you want to do with your skills and real resources.
The judge says not today thank you. We’ve put neoliberal globalist rules right through our laws like Blackpool rock. I’m afraid what you plan to do with your skills and real resources has broken 4 of those laws.
” Hermits eschew all interaction with society in the first place. ”
And they should live on fresh air and fried snowballs. 🙂
When it comes to those who have contributed and those who choose not to contribute.
Why not sort it out when both groups collect their pension ?
When they are in school as children you lay it out clearly so there is no mis understanding and explain this is the social contract.
When you contribute and take the job when you retire at 50 you get A
When you choose not to contribute and not take the you retire at 50 and get B
The choice is clear cut and for children to decide at an early age if they want A or B ? It’s then up to them if they want to be part of the social contract Or not. A job is there for you which path do you want at the end of it.
Or am I beginning to sound like a dictator ?
The choice between A and B has to be so different
That they say to themselves as children no way am I choosing B. I am going to work on the JG and get A.
@Neil: “There’s little merit in the land value tax. It’s a relic of an idea from a bygone age that serves little purpose in a world where IP is what actually matters.”
You mean that the ownership of IP is more important than the ownership of land. Wow.
“” Hermits eschew all interaction with society in the first place. ”
And they should live on fresh air and fried snowballs. :-)”
Presumably they are rational agents, have done a cost/benefit analysis of their career choices, and decided that the optimal living arrangements for themselves does not include the rest of society. Anyways what good is money if you don’t want to interact with anyone else- you can’t eat it after all 🙂
Do they have snowballs in Australia? A fried snowball would be fascinating from a physics point of view… Would you bread it first?
Newton Finn, as is often the case, has some wisdom to share with us. I think- the double negatives trip me up sometimes 🙂
But anyways since I was also quoting the bible the other day (on an economics blog no less!)- I also think that people need to put things in perspective just a bit. But I might go a bit in the other direction from Newton here.
I would ask that people look at the Job Guarantee that Bill Mitchell has proposed as an economic policy that follows from an understanding of MMT, and that many people such as Neil Wilson and myself support, and ask themselves if it makes sense as an economic proposal first of all. And then ask themselves if it would constitute an improvement over what currently exists in the society they live in. And most importantly ask themselves if that proposal can fit in with what they believe is moral and ethical- even though it all by itself does not solve all the possible problems and moral dilemmas that we face here in this world. And I would ask them to consider that just because it has been proposed in a certain format does not mean that the proposers are some kind of heartless individuals who wish to see people who won’t work starving in the streets or that they would be willing to put up with any such an outcome.
The Job Guarantee is a logical extension that follows from MMT economic analysis- that is it. We can and should attempt to persuade society to implement additional non Job Guarantee policies if that is what our conscience guides us to do. Consider the JG on its own merits and try not to imply that I or Neil or Bill are some scrooges who lack compassion.
Jerry Brown, surely Bill would have engineered the Job Guarantee with the understanding that the State is the ultimate bearer of human rights’ duties. For those that choose not to engage in the work that is offered, there would be a minimum duty of care required by the State.
Maria, I have never considered the State to be the ultimate decider of what my moral obligations are as a human being. Legal obligations, yes it is ultimate. Even so, many laws, as written, are obviously unjust.
I prefer to think of the Job Guarantee as an economic proposal that is obvious once an understanding of the economy as explained by MMT is reached. Economic proposals are not moral imperatives of course.
Jerry Brown, all that would change is that unemployment really would be a choice, beneficial economic activity would increase. Also, the private sector would have to compete with the State to gain its workforce. The private sector would claim that the State has an unfair advantage with the ability of currency creation. Could you just imagine the uproar, the private sector would have to pay an increased wage, and maybe even need to improve health and safety to secure their workforce. I agree, the Job Guarantee really is a no-brainer.
“Do they have snowballs in Australia? ”
We do have plenty of fresh air.
“The Job Guarantee is a logical extension that follows from MMT economic analysis- that is it.”
I’m not sure I see the logic of the logical extension, but I do think you should be careful what you wish for.
In the hands of a benign government the JGS would do much good. That is the unspoken assumption, that it is implemented by a benign government.
In the hands of a right wing government it could work to the detriment of wage earners. Instead of using the JGS to underwrite a humane wage structure it could be used for the reverse, that is, to pull down the wage structure over the long term.
I think this might be another reason the Murdoch press were willing to publish BIll’s JGS manifesto.
That makes it 3 non-altruistic reasons why the Murdoch press might have published the manifesto.
Well then Henry- I guess they will have maximized their personal utility curves such that they reflect the absence of fried snowballs keeping in mind the plethora of fresh air in Australia. Or something like that…
Yes Henry @9:35, many things can be perverted from the good, including democracy. Why bother proposing anything at all if that is your standard to evaluate it. Come on already
“absence of fried snowballs ”
We also have, of course, plenty of sunshine. Fresh air and sunshine ain’t too bad.
“Come on already”
Yes, I know. But the point about the unspoken assumption is worth making. And I was more musing about the Murdoch press angle.
I think a big reason the left is so bad is because of the middle class.
What I like about you Henry is your usual willingness to debate. And in a fair manner. Stick with that fairness. The question of why some organizations that typically do not appeal to lefties might publish a piece by Bill Mitchell is very interesting- but wouldn’t you think that in all fairness it is somewhat off of this topic?
I understand the difficulties involved with arguing something when your arguments have been dealt with in a way that is difficult to counter… But droll humour, or whatever it is you call it, is a dodge at that point.
What the ‘Murdoch press’ decides to publish has nothing to do with any of this. That is not much of an argument even if it is somewhat interesting.
“In the hands of a benign government the JGS would do much good” – Henry Rech. That is enough for me. Once past subsistence, the challenge has always been to ensure that the most powerful element of society do as much good as possible- and not do much evil. I’m glad you are on board Henry.
” but wouldn’t you think that in all fairness it is somewhat off of this topic?:
Probably, but so what. Most of the comments that come thru are like that.
I find it intriguing that the arch boosters of the mainstream were willing to publish Bill and Noel. The cynic in me believes there is an agenda.
“But droll humour, or whatever it is you call it, is a dodge at that point.”
No, not really. How many times do you want to make the same point over and over again. I found it tedious as, I’m sure, did everyone else. So I flicked the switch to my silly version of vaudeville.
“In the hands of a benign government the JGS would do much good” – Henry Rech.
“In the hands of a benign government the JGS would do much good” – Henry Rech.
“In the hands of a benign government the JGS would do much good” – Henry Rech.
Perhaps a bit tedious but at some point it may become humorous in some manner…
Big smiley belongs at the end of that one Henry 🙂
I got a strange sense of humor sometimes
“all that would change is that unemployment really would be a choice,”
Except for those tasked with providing the output necessary to maintain the unemployed, who would have to be forced to work by some mechanism – or there would be insufficient basic goods to go around.
The UBI uses a money illusion – you end up with tokens that in aggregate cannot purchase anything further of value.
Which mechanism of forcing labour onto other people are you proposing?
All Anarchic concepts founder on this one rock. Why should anybody spend any amount of their finite life producing output for you when you refuse to do the same for them?
We know from the Zimbabwe hyperinflation what happens when you try to implement the concept – by giving farm land to people who cannot farm and “sharing out the unemployment”. The Marxist concept of “socially necessary labour”. You can’t do that in a modern world. There are too many humans in existence to allow anything other than specialists to produce what we need to live.
We need the specialists to work a full week. And we cannot give them more and those who refuse to contribute more as we’ll end up with more demand than we have supply. So who loses out?
My proposal is those who wish to allow people to be unemployed. They should have less since they are the ones who consider it important. How is that anything other than perfectly fair?
“In the hands of a right wing government it could work to the detriment of wage earners. ”
You mean a right wing government elected by the people? Which means that a JGS implementing breaking rocks is what the population requires in exchange so they continue to create the goods necessary to maintain people on the JGS?
An odd population perhaps, but in a democratic society who is to say they are wrong in requiring that?
Always remember that Parliament is the rest of us. And the JG embeds the principle “What do I need to do so that nice farmer will continue to use their time to grow carrots for me”.
The people decide that – by voting. Nobody else.
Which is a far more democratic proposal than the UBI alternative: “The farmer will be forced to grow carrots either by using a monetary illusion because we think such people are stupid, or when that fails, as it always does, using some other form of psychological trickery to steal time”.
Animal Farm’s Boxer was an allegorical warning, not an instruction manual.
Um Neil- I think Maria was agreeing with the JG. It’s ok to lighten up a bit once in a while 🙂
“Perhaps a bit tedious but at some point it may become humorous in some manner…”
I find meaning is somehow lost with repetition rather than reinforced – very strange.
Not saying that was the best argument Henry. You are the one who came up with it after all…
Perhaps we should pray the rosary and see what happens.
Or better still get one of those Tibetan Buddhist prayer wheels inscribed with “The JGS is Good” – and just spin the little fella.
Anyway better get on topic otherwise we’ll get a note from the headmaster.
“f the MMT proposition that taxes don’t fund government expenditure pertains then benefits paid to the JGS refusing unemployed are not being funded by taxes or any other person’s effort. ”
It’s a dynamic process, not a static concept.
Let’s try a different angle.
You don’t need prior taxes to spend. There is no zero value where “sorry we can’t spend any more”. Zero has no meaning for a currency issuer. Or as MMT says “government cheques don’t bounce”.
That’s it. Other than that you have the standard business approach of selling goods on credit.
There is an expectation of taxes, and the spending causes that expectation to crystallise into real paid taxes. The expectation of taxes reduces the demand for output and increases the supply sufficiently to accommodate the JG money wage.
Society has decided that an individual without any other job will use their time to create some form of public goods (let’s say tidy the park up), which builds up credit for which they will be paid. At the same time the farmer is growing carrots because they know there will be demand for those carrots and the farmer is happy knowing that parks will be tidied up ready for the weekend football kick around and is therefore happy to pay the income tax from the income from the sale of the carrots. An amount of income tax that will be higher because they have sold more carrots than they otherwise would have. And so on down the spending chain induced by the JG injection many of whom appreciate tidy parks. The accounts are balanced in both money and labour time (since they are pegged together).
A person doing nothing on the other hand gets paid twice in time terms – self consuming their own hours and yet still getting the carrots – the output of somebody else’s time. Everybody else rapidly starts to ask why some people get to stay at home and consume while they are working. The accounts may be balanced in money, but they are out of balance in labour time. The parks remain untidy. People see around them much that could be done with all that time they are paying for.
The Job Guarantee is paid for by tidy parks, etc in exchange for the transfer of the output gap we are currently throwing away.
Effectively the JG taxes time, not money.
” I think Maria was agreeing with the JG”
Ok. I’l take that one. My mistake.
” People see around them much that could be done with all that time they are paying for. ”
You still don’t get it. Taxes don’t fund expenditure.
I’ll add it to the prayer wheel. Maybe that will help.
Yes Henry you often make sense- even when you are not extolling the virtues of the Job Guarantee when used by a government that gives a damn about its people.
So back to the topic of if there is an obligation to work. To avoid a scolding I will share a bit of my admittedly lucky life. I guess it could count as an anecdote. So when I quit college in the middle of my senior year and thought to resume my life at my parents’ house, my Mom soon disabused me of the notion that they were going to house and provide me meals just because I was me and they had brought me into this world. I was told to get a job and contribute to the household if I expected to stay. So I got a pretty miserable minimum wage job, it being the middle of a recession around 1991- that was what was available at that time.
Now I had not heard of some of the arguments that I have learned exist now- things like society was obligated to support me since I was me. And if that was so- how much more obligation shouldn’t the mother and father who were responsible for my very existence have towards my support? That I didn’t know those arguments is just as well, because my Mother would have said that it was just total nonsense that a healthy 21 year old should not contribute to his own upkeep at the very least. And the idea that society should step in when his own family would not is even harder to imagine.
Well anyways- I went back to finish up my college degree in Economics after a while of that job. And while I knew it was mostly bs at the time, reading this blog has explained exactly why it was such crap in detail.
There might not be a duty to work. But that doesn’t mean someone else has a duty to work instead of you.
” But that doesn’t mean someone else has a duty to work instead of you.”
Now you’ve caught Neil’s dyslexia. 🙂
Taxes don’t fund expenditure.
I’ll have to spin the wheel faster.
BTW, were your parents the equivalent of a monetarily sovereign government – I don’t think so.
You keep praying Henry. It won’t hurt you and it might keep you out of trouble.
Dear All (at various times)
I am happy to have the comments open for readers to express views, point out my errors, discuss the topics at hand, and provide relevant material.
But I don’t want my site to become a ‘chat channel’ where off-hand comments, jokes on jokes, and other related material becomes common.
Express your view and leave it at that please.
I find the word ‘work’ can mean different things to different people. Investors can considerably increase their capital merely by sitting still and, occasionally, buying and selling shares. A stock trader is considered employed, but what is produce? I found this statement by the IMF interesting. “Our research in the new Fiscal Monitor shows that few governments know how much they own, or how they use those assets for the public’s well-being. Knowing what a government owns and how they can put their assets to better use matters because they can earn about 3 percent of GDP more in revenues each year and reduce risks, all at once. That’s as much revenue as governments make from corporate income tax receipts in advanced economies. Governments can put this money toward better schools, hospitals, or other priority spending.” https://blogs.imf.org/2018/10/09/the-wealth-of-nations-governments-can-better-manage-what-they-own-and-owe/ However, I don’t see governments clambering to promote the nationalisation of State assets. Could the JG not be attached to this thinking, as in promoting employment opportunity derived from State assets. It may help to quash some of the bickering.
What a marvellous discussion! How to motivate a populous to adopt a suitable work ethic! Your knowledge and intellect are a delight and of course, all arguments have merit.
But can I gently suggest, and I do so without any intent to offend, the entire discussion is completely irrelevant to the circumstances we are now in. The concept of redefining a macroeconomic policy using MMT principles to support a transition to a new green economy, just wont do, I’m afraid.
Think about where we are.
This morning, California is burning with over 900 wildfires across the State. Earlier this year, Siberia, Australia and Brazil experienced months of uncontrolled fires. This week, Death Valley in the USA recorded the highest temperature ever on this planet.
As the fires burn, oxygen is used up as fuel, just as much as the combustibles – and is replaced by CO2 and many other toxic particulates and gas. In rising temperatures, ice caps are melting, allowing methane to escape, accelerating the entire process.
Combined with the acidification in the oceans and the loss of critical ecosystems of oxygen producing organisms, that I posted on a previous thread, we will have an atmosphere on the planet by the end of this century that will not support human life.
The only way we have a chance of survival is if we cease immediately, all activity that contributes to that process, then try and mitigate some of the damage that’s been caused and restore the delicate balance in nature that we have dangerously and recklessly altered.
Going back to our old way of life isn’t an option. Designing financial systems to support a gradual transition of the existing economies doesn’t cut the mustard this time. Doesn’t even come close.
If I may use an analogy.
Tom was a very fortunate child. Born into a hard-working, wealthy family, he enjoyed a privileged upbringing and good education and graduated as a promising doctor by his early twenties. A great future awaited.
Then Tom inherited a substantial trust fund and became wealthy in his own right. He enjoyed the good life and soon, the attraction of pleasure became his primary motivation and within a few years, he became a regular user of drugs and alcohol. He didn’t care, there wasn’t a problem – he was just having fun.
Tom is now in his mid fifties and has been motionless for the last seven days.
He’s on his back, unable to move and has been conscious only for 24 hours. He can’t think properly, but gradually he becomes aware of his situation.
He’s lying on a mattress in a filthy, squat – alone and in a perilous state. A hypodermic is protruding from a vein in his leg – a belt still buckled above, strains under heavy swelling. He is naked apart from a blood covered T shirt and is lying in his waste – a mixture of puke, piss and shit. His left foot is gangrenous and he has difficulty breathing without coughing up more blood.
He can’t do anything else but take stock.
He hasn’t had any drugs or alcohol for days as he lay unconscious and despite the fog in his brain, he can see clearly for the first time in years.
In that moment he becomes truly aware. It’s as if he has come out of his body and is now looking down at himself lying close to death amidst the squalor.
Everything is illuminated.
He knows what he has done, there is no escaping the facts – the evidence is right there before him. He has a choice. To live or to die.
If he choses to live, he knows exactly what is in front of him and what he must do. He will lose a leg for sure – and he may also lose a lung and face further surgery and long-term care. – but, in time, he may recover to lead a “normal” life again.
It is not an easy battle. The psychological hurdles alone are considerable, even if everything else was healthy and working – but with determination, they could be overcome. It just depends on how much Tom wants to live.
He must never again have another drink, smoke or any other drug. Counselling and rehab is not an option. He knows what is needed – he has to quit everything absolutely and slowly work his way back to better health.
Or he dies.
That’s Tom’s choice – one faced by many people every day. It’s also humanity’s choice. That’s where we are right now, in the same position as Tom.
It is really that simple. If we make a choice to try and survive – to live – then we have to stop everything that killing us right now. Stop flying; stop driving your cars; stop polluting the oceans and atmosphere.
Analysing events in terms of output, GDP, money and graphs is all very fine. So too is getting frustrated at others for not doing the right thing, but really what is urgently needed is an application of knowledge and experience to design a completely new system, which can support the entire populous through the very difficult years ahead, whilst permitting and encouraging healing from all the damage done.
I don’t think a ‘Job Guarantee” really is an applicable term anymore, when you consider all the real work that needs to be done if we are to survive beyond this century.
There is no greater motivation for anyone than to stand on the brink and look over into the abyss.
Life or death; that is what is at stake.
Tom knows exactly what is required and what his future holds. It is so simple.
It always was.
Mark Russell “I don’t think a ‘Job Guarantee” really is an applicable term anymore, when you consider all the real work that needs to be done if we are to survive beyond this century.” Can you elaborate on what you mean by ‘real work’ please. What can be physically done by human begins to improve the situation. I understand that many things just need to stop, but how would you attempt to unravel a society in such a way? It would seem to me that without a comprehensive plan uncoordinated attempts could be counterproductive. I am rather depressed at the thought of “we will have an atmosphere on the planet by the end of this century that will not support human life.” Oxygen, thank god is not finite and can be created so there is hope in this dark view of our future. Your analogy reminded me of William Hogarth : ‘the rake’ 1733, wonderfully revamped. What would your plan be, how would you mobilise people to this change that is needed in a practical way? Could a JG not be an aid in promoting a workforce that can aid in this transition?
@Patrick B Friday, August 21, 2020 at 2:30
Thanks Patrick, a land tax that becomes payable after one drops off the perch and also when your income has been low is certainly more equitable but my wife and family will presumably live on after that. I suspect the tax office vultures will not want to wait till we’re all gone to get some of my cash so it then can be discarded by the RBA. Our home may even be in the top 20% of dwelling property values for Australia as Melbourne and Sydney real estate is way above the national average. The bad part is my income is probably in the national bottom 20%. This asset rich, income poor problem catches a lot of aged pensioners as well who paid off their mortgages long ago and just live in ordinary homes in cities that have experienced rampant property speculation. Taxing one’s home is generally political suicide in Australia so I think I’m relatively safe from that except for the stealth land tax in the form of local council rates that are now at about A$3,500 p.a. for me.
@ Jerry Brown Friday, August 21, 2020 at 3:52
But Jerry isn’t this just being excessively miserly over a bag of peanuts? I agree all those with substance abuse problems deserve healthcare and social support and hopefully most will take up the JG option but some won’t.
@Derek, Jerry again and Maria
Fried snow balls can indeed be cooked in Oz, it’s f’ing cold today and it snowed on some of the nearby mountains. Young Bill is further north but may have had to turn up the heating today? “there would be a minimum duty of care required by the State” can’t argue with that Maria.
@Neil Friday, August 21, 2020 at 15:34
Your comment “Except for those tasked with providing the output necessary to maintain the unemployed, who would have to be forced to work by some mechanism”
If this was about a UBI I could understand your concern but for meagre unemployment benefit for relatively few surely that is not equivalent. You and we are already working for the billionaire in the private yacht, not for the lazy unemployed. I have a deal for you I’ll help subsidise the unemployed if you subsidise the billionaire.
We are not the ones in the positions of power to make the changes needed. All of us could try to minimise all forms of our damaging consumption but the problem is the other 8 billion of our species will not notice our lead. Heavy lifters like Bill do have influence over policy makers but this path is also hit and miss in our democracies where others are pulling the strings. He and others have been fighting the good fight for decades as effectively and imaginatively as they can but the political game has been bought or is rigged. Political parties sometimes try to implement good policies and the issue of HOW DO YOU PAY FOR IT remains vitally important as well as all the other interrelated issues even if we are already sliding into the abyss because we collectively keep voting for shit governments or only get offered shit governments. You know we actually got close. If Bernie Sanders was allowed to win the primaries in a fair race the Green New Deal would have kicked off in 2021 and the rest of the world would have been jolted to follow, even in OZ under the current rule of the fossil fuel loving dinosaurs. You never know Slow Joe might win and Kamala may help steer the ship a little in the needed direction. The rest of us try to spread the message a little.
I agree with Mark Russell.
I am at the 50/50 mark on whether we need a revolution. At the present point, we are really not in the position to demand anything without political power. Only with political power can we make changes.
Servants of capital are too far gone to be able to change things.
Just my 2cents.
Can I suggest that society is unravelling in real time? That is the nature of a global contagion that exploits every weakness we present it with! The Genie is very much out of its bottle – or perhaps more appropriately, the lid on Pandora’s Box has been blown off!
If you permit me a few days, I will write in detail what we must do and how we can organise ourselves. We can produce oxygen, but not in the quantities needed to replenish the atmosphere. We need the little creatures in the ocean plus all the trees and plants to replace those we have destroyed, for that ‘job’.
Mark Russell, I look forward to reading your plan. I find all progressive ideas are important. That is why I like to read Bill’s blog. I was reading a document titled : Meeting the Global Food Demand
of the Future by Engineering.
Discussing crop photosynthesis and yield potential and emerging approaches to improving crop photosynthetic efficiency. https://www.cell.com/cell/pdf/S0092-8674(15)00306-2.pdf There are many great strands of thinking that need to pull together. For me, Bill shows the global monetary capabilities that can, if chosen, help to achieve forward movement towards a more sustainable and healthy world. At the moment people are asking for sustainability in many ways. Most are received with the question of “how are we going to pay for it”. At least Bill gives an answer to this question, and therefore the ability to move forward if the political will allows. Could you post on here? As I will know where to find your thoughts.
What is production though? I am middleman so do I actually produce anything?
The arguments and I am looking at you Neil seem to be based on a 19th century paradigm that doesn’t really apply anymore but people think it does.
“Servants of capital are too far gone to be able to change things.”
Gulag or Lubyanka?
Henry you could also add to your list ecocide with fascism, ecocide with more of the same, environmental sustainability with fascism, environmental sustainability with all the rest the same or environmental sustainability with some form of better society.
“Can I suggest that society is unravelling in real time?”
Certainly global society is under great stress because of the pandemic and climate change.
I personally think we can be hopeful that the pandemic will eventually be a thing of the past.
The climate change challenge is being met by private enterprise, despite government intransigence, inertia and plain corruption by the fossil fuel industry.
Solar and wind power matched to storage (battery and recirculated hydro) is cheaper than new coal and gas. Fossil fuel’s days are done.
Political action requires society to give up its venal concern for the cost of electricity over the planet’s existential crisis. Human beings being human beings have been the obstacle to change. Politicians merely reflect their constituents.
Luckily for the planet, change is being effected by force of economics and technological advancement. Political action has failed.
“Henry you could also add to your list…”
Which list would that be?
Henry, Gulag or Lubyanka?
“You and we are already working for the billionaire in the private yacht”
Which again the position of envy that far too many people hold. Why does that matter? What else are the people operating the yacht going to do for a job?
Jobs that would have to compete with the Job Guarantee once it is in place and offer better terms and conditions for the demands put upon the individual. Which then draws more money out of the billionaire’s savings pile and back into the real economy. As it does all the way down the chain of whatever passive income instruments they are relying upon.
0% interest rates and no bonds helps with that – since there is then no free money going into banks and finance. They have to earn it.
I get the same about the Royal Estates in the UK – despite them providing hundred of pretty decent jobs for people.
Look after the unemployment and the billionaire issue will look after itself.
“As the fires burn, oxygen is used up as fuel, just as much as the combustibles – and is replaced by CO2 and many other toxic particulates and gas.”
Which is then reversed during the next Northern Hemisphere summer, because that’s how the short term carbon cycle rolls. Increase CO2 concentration causes increased photosynthesis speed and an increase in the production of Oxygen.
Only the long term carbon cycle matters for climate change. As any fool knows.
Nobody is concerned about oxygen levels – for pretty sound scientific reasons.
Neil, it’s not envy for the billionaire just a realisation that is where the biggest misallocation of resources is – to the 1% or the 0.1%, not the few unemployed that may reject a JG and that receive a meagre support payment.
While I’m here the point of my list to Henry is that revolution may not be the worst path, ecocide means ecocide and if we don’t get this global warming job substantially done in the next ten years the costs of then removing CO2 from the atmosphere may accelerate faster than we can resource it. A tad more expensive than an unemployment benefit? Also I’ll be damned if I accept a return to fascism whenever that line is crossed? Trump and Pence I believe have this path in the back of their minds and most are sleepwalking into it.
I am not quite sure what you are saying.
I was asking Tom Y., given his avowed inclinations, how he would prefer the “Servants of capital” be dealt with.
I think rent controls are the best way to deal with the massive increase in housing costs.
With the goal of maximising owner ownership and minimising private rental stock .
If you had LVT you would have to have a rebate mechanism for the income poor asset rich
forcing people out of their homes is no kind of vote winner . landlords are a smaller group
who are unlikely to vote left anyway. A non profit rent sector should be the aim certainly for
Usually in mid-August, I’ll spend a couple of nights on top of a mountain if the sky is clear, with just a sleeping bag and my dog for company – and we’ll marvel at the Perseids meteor shower until dawn. I’m sure you and many others have done the same.
It’s always a good reminder of just how utterly insignificant we are – gazing into the void out there, particularly on a moonless night. Even with our telescopes and technology, the search for some other place like earth has proved fruitless. The only thing we have that separates us from that void is the atmosphere and our oceans. That’s it.
Water and air.
I hope I’m not being uncharitable, but your comments are a good illustration of what I might call ‘human folly’. With our little bit of intelligence, we think we are supreme and know everything; but in reality we understand very little about this place and how it functions. Even less than we understand ourselves.
You mention the cyclical nature of carbon capture as if it has limitless capacity, but you ignore the other factors governing oxygenation, even if carbon volume wasn’t an issue. Before the industrial revolution, less than 500 million tonnes of carbon entered the atmosphere each year – much of this from natural events.
Now we’re pumping almost 8 billion tonnes of carbon into the system – over a tonne per person on the planet. Concurrently, we’ve destroyed vast areas of forest and wild vegetation and dumped vast amounts of toxic waste, chemical and radioactivity into our oceans.
Japan has a major ecological crisis unfolding with the unrecoverable corium from the three reactors at Fukushima damaged in the tsunami. The concentrated highly radioactive waste water that’s needed to keep the corium reaction to a minimum, is stored in huge containers – and they are rapidly running out of space. Japan wants to dump the waste in the Pacific – what else can it do?
This will continue until the corium is somehow recovered and isolated. If the corium isn’t sufficiently cooled and the reaction intensifies – the consequences for Japan and much of the Pacific north west – would be unthinkable.
What influences the micro-organisms in our oceans that we rely on for oxygenation? We don’t know – but we can hazard a good guess that the stuff we dump in their environment because it’s deadly to us – might also not be that great for them too.
In simple economic terms, they may have been coping with the increase in demand from all the carbon overload we’ve subjected them too, but when you cut the workforce in half and reduce productivity by penalising the workers at every opportunity, the game is over.
Technology and economics might have helped – if used properly and productively – but what has humanity done with both? We build weapons to kill each other and to render this planet uninhabitable for all life – then we abuse the monetary privileges such economic activity creates in the most reckless and damaging ways.
I can see only two potential solutions – and I’m not that confident that either will now be sufficient to prevent another de-oxygenation event from occurring within the lifetime of some already born.
I will write further in a few days on one possible solution – what we can and must do without any further delay. The other remedy is a rapid and significant de-population to less than 10% of the present 7.6 billion of us.
Eliminating coronavirus could have been so simple and we might have achieved zero-covid by now, had it not been for our addiction to technology and the economy.
In my analogy above, if you were Tom lying on the mattress contemplating your future, I guess you’d be thinking – “Ok leg off at the knee and a new carbon blade will do nicely. Have two lungs, right? What’s the problem? Best stay of the class A’s though – get clean for a bit then maybe get my job as a doctor again. Bit more mileage in the liver yet, though. Hey Ho!”
I also read some comments earlier regarding the “indolent”. Those who live on the margins of society, activists, drop-outs, alt communities – and what can be done to make them work – or starve.
Punish them? They should be given our warmest thanks – they are a fine example to us all. They don’t contribute to the system because they can see what the system is doing.
It can’t be tweaked, Neil. It has to be rebuilt from the start.
Mark sees clearly and speaks plainly about one half of the bigger picture, the existential threat to humanity (and all living things) posed by the Scylla of ecocide. There is, of course, also the Charybdis of nuclear war. In response to Mark’s urgent concerns about the first monster, Maria asks a couple of useful questions: how we might mobilize people to address the threat in a practical way, and whether a JG could not “be an aid in promoting a workforce that can aid in this transition” (from eococide to the restoration of planetary health). These two comments pressed a personal button, prompting yet another call from me for a formal alliance between the MMT movement and the environmental movement, an alliance which IMHO would immensely strengthen both. I believe that the JG should be promoted or sold primarily as a vitally-needed source of labor to perform, with appropriate supervision and guidance from experts, essential yet low-skill environmental tasks: planting forests, grasslands, and other oxygenating, erosion-controlling vegetation; restoring and protecting wetlands, prairies, and other wildlife habitat; rebuilding the health of the soil, increasing water quality from streams to oceans, and monitoring endangered species and emissions into air, water, and land; refitting existing structures and building new structures and infrastructure in more environmentally-sensitive ways; etc. The list would be a long one and, I believe, a compelling one, if its creation were to be prioritized by MMT and environmental champions WORKING TOGETHER. I’m well aware that some initial steps have been taken in this regard by certain MMT economists in describing work that could be performed under a JG program. But I’m advocating something much bigger and bolder, something reminiscent of what happened when I was a young man in the late 60s/early 70s, and the Civil Rights/Black Power movement joined hands and stood shoulder to shoulder with the anti-war movement, and, if only for a regrettably short while, shook the world.
” The other remedy is a rapid and significant de-population to less than 10% of the present 7.6 billion of us.”
I always find it amusing when somebody mentions that, because it generally it means they haven’t yet taken the lead in the process.
“I always find it amusing when somebody mentions that, because it generally it means they haven’t yet taken the lead in the process.”
Very good! Not quite yet although it’s not for the want of trying. 😉
Newton Finn. Love it, if I was to be rendered redundant, that type of work would be amazing, with so many different skill sets that could be utilised. Not only would it keep the wolves from the door and hopefully earn a decent level of living, you would also become part of something much bigger, a chance to help heal the world while you find your feet and future work. It would raise the level of collective thought about the ‘unemployed’ they would become and be seen as an asset, part of an environmental workforce. I would think the worry and depression felt by the many newly unemployed would ease if such a system became the State safety net offering such vital work. You could hold your head high knowing you were still contributing to society. That list would offer something for everyone and the time slots could be adapted easily and locally around such things as parental responsibility, disabilities and so on. I could be wonderful.
It* could be wonderful.
Thank you, Newton – we are very much on the same page. I think my first principle in a new society would be the time honoured one we all know:
Do no harm.
That principle should apply to everything we do. No harm to the planet, each other and all other life we share this place with. The words are easy, but in reality we first have to undo the harm we have already done.
We have a real purpose in front of us. A proper challenge. We have to create an economy for survival and a framework to support that primary aim. A good use of money with applied knowledge on efficiency and productivity we have gained from our previous life, will help enormously.
We have to do this. Our children depend on what we do in the very near future. We have to create the environment for them to meet this challenge without exacerbating the problems of the existing globalised system.
Each day we keep the old economy on life support, we lessen the chances of their survival.
An aggressive but localised tumour in the leg is beginning to cause systemic complication in a 25 y/o girl. The choice is to amputate the leg before it metastesises or to try some radio/chemotherapy which has approx 50% success. The unknowns are the waiting times and what is happening at a cellular level. If one cell from the tumour travels through the lymphatics to another organ, she dies. But she is a world class sprinter.
It’s tonight. She’s back home and has an appointment with the surgeon in 36 hours, Monday morning. She wants to live.
What does she do?
“I’m advocating something much bigger and bolder, something reminiscent of what happened when I was a young man in the late 60s/early 70s, and the Civil Rights/Black Power movement joined hands and stood shoulder to shoulder with the anti-war movement, and, if only for a regrettably short while, shook the world.”
That was indeed a different time and moment of real possibility. I remember as a youngster, reading the essays of Howard Zinn late at night under the bedsheets with a torch – and being full of hope. My attic bedroom was covered in OS Maps and stuffed with travel books. It seemed such a promising time with endless possibilities.
The real catalyst then was music. I suspect it has a role to play again now.
(I do hope Bill still has time to play – even if gigs are a thing of the past. For now.)
Friday, August 21, 2020 at 22:52
“But Jerry isn’t this just being excessively miserly over a bag of peanuts? I agree all those with substance abuse problems deserve healthcare and social support and hopefully most will take up the JG option but some won’t.”
If you have ever had the misfortune to deal with a person with a serious substance abuse/addiction problem you might not characterize what I said as being excessively miserly. At a certain point one is not being at all helpful, even if that is the intention, by providing the means (income) by which they can continue on the path they are on. It is a difficult situation all around for sure, but jumping to the conclusion that what I said is evidence of miserliness is not warranted.
“It has to be rebuilt from the start.”
I’m not sure what you mean by “it”.
For me the “it” is internal. Begin there. But I would suggest it is not a process of construction but deconstruction.
All the -isms of the world count for nil.
The apparent return to, or reintroduction of, a ‘moral philosophy’ back into the ‘applied science of greed’ of the positivists is certainly admirable, yet the predominant outcome of a job guarantee seems to be maintaining the current social arrangement through state sanctioned order and stability.
How is that so? The current class and power relationships will not be weakened, but only reinforced through further labor discipline and curtailing potential labor unrest.
See for example,
1. “The Pandemic Depression: The Global Economy Will Never Be the Same”
By Carmen Reinhart and Vincent Reinhart in Foreign Affairs September/October 2020
“The historian Henry Adams once noted that politics is about the systematic organization of hatreds. Voters who have lost their jobs, have seen their businesses close, and have depleted their savings are angry. There is no guarantee that this anger will be channeled in a productive direction by the current political class-or by the ones to follow if the politicians in power are voted out.”
2. “Worker Insurgency, Radical Organization, And New Deal Labor Legislation”
By Michael Goldfield in The American Political Science Review, Vol. 83, No. 4 (Dec., 1989) pp. 1257-1282
“The virtually unanimous opinion among New Deal Democrats and progressive Republicans (the overwhelming majority in both Houses after the November 1934 elections) was that government regulation was necessary to constrain, limit, and control the increasingly militant labor movement.” (Page 1274)
Further, a recent study from the University of Chicago suggests that up to 40% of the pandemic related lay offs may become permanent. That is a recipe for social unrest that has not gone unnoticed by all those individuals wishing to preserve current class and power dynamics, i.e., the status quo.
Additionally, it is presumed that a job guarantee will further reinforce the current social arrangement by serving as a direct means of absorbing surplus production that is already being destroyed. (See for example, “Why fashion brands destroy billions’ worth of their own merchandise every year” by Chavie Lieber in Vox, September 17, 2018.)
A job guarantee not only increases the consumer class, but still allows a wealth transfer from producers/labor to the owners of capital; thus, further reinforcing current class and power relations.
Finally, it needs to noted that the goal of consumerism and its applied marketing for the sake of even greater consumerism and consumption is a fool’s errand.
Note: All source material is freely available online.
Alan @5:33, are you expressing the idea that improvements on the current condition that could reasonably be made now, should not be attempted because they reduce the likelihood of THE revolution that, whenever it might eventually occur, will solve all the problems at once? Because that is my take on what your comment means- that we should suffer in the meantime lest we decide a total revolution is unnecessary. I would just say that I am not willing to suffer now to increase those miniscule (in my opinion) possibilities.
I would also argue that the Job Guarantee does not “reinforce the current social arrangement” which is that the unemployed are currently used to discipline the labor demands of the lowest paid workers in society. Instead it represents a significant break with the current situation in at least the United States.
“A job guarantee not only increases the consumer class, but still allows a wealth transfer from producers/labor to the owners of capital; thus, further reinforcing current class and power relations.”
As if increasing the ability of the unemployed to provide for their families is a terrible thing? And current class and power relations would be improved from the point of view of labor if a JG as proposed by Mitchell was in place.
“Finally, it needs to noted that the goal of consumerism and its applied marketing for the sake of even greater consumerism and consumption is a fool’s errand.”
I can agree with that statement while not agreeing that would be the result of a Job Guarantee.
Alan: “A job guarantee not only increases the consumer class,”
That’s A VERY GOOD THING. We are all consumers. If we don’t consume, we die. A JG increases the consumption of those who have been robbed of consumption since forever.
As Bill’s favorite Marxist economist Michal Kalecki said in his favorite paper Political Aspects of Full Employment, promoting government spending for consumption over investment – ” . . . the higher standard of living of the masses. Is not this the purpose of all economic activity?”
Alan:”Additionally, it is presumed that a job guarantee will further reinforce the current social arrangement by serving as a direct means of absorbing surplus production that is already being destroyed. ”
Who presumes this? It is the opposite of the truth. The reference to the fashion industry here – why, this is basically the plot of the puffy pirate shirt episode of Seinfeld! Comedy, not social critique. 🙂
It further seems to presume the worship of capitalism and capitalists so prevalent in “Marxist” authors who understand very little Marx. “Socialism” – full employment, the right to work and the Job Guarantee is not about “redistributing” the stuff that only the “capitalists” can magically produce. It is about changing today’s capitalist, privately controlled system of production into something else. And that’s what a revolution is, and was for Marx et al, not some episode of physical violence.
Alan: “the predominant outcome of a job guarantee seems to be maintaining the current social arrangement through state sanctioned order and stability.”
“A job guarantee not only increases the consumer class, but still allows a wealth transfer from producers/labor to the owners of capital; thus, further reinforcing current class and power relations.”
In addition to being refuted by all historical approximations to the Job Guarantee, anybody that thinks that NEEDS TO READ THEIR MARX. And then read Kalecki’s paper as well. And Bill’s former student Victor Quirk on “The Problem of Full Employment”. A JG does the exact opposite. So it might help those at the top – why care! It helps those at the bottom, it helps the working class far, far more. It changes the structure of the economy into one that capitalists cannot tolerate, one that Marx would not call “capitalist”, was not what he was analyzing as capitalism.
Again, consider Marx’s very important but usually misunderstood words (I misunderstood them at first) -, from The Class Struggles in France, a passage that Engels drew attention to the importance of, almost 50 years later as the first clear expression of “modern working class socialism”.
“But behind the right to work stands the power over capital; behind the power over capital, the appropriation of the means of production, their subjection to the associated working class, and therefore the abolition of wage labor, of capital, and of their mutual relations.
Marx writes there as if speaking here as if to a slow student (like me 🙂 ) – who doesn’t see at first how powerful the Right to Work, the Job Guarantee is. But the plutocracy has never forgotten it for one minute. Trust them. Whatever they’re for – be against it; whatever they’re against – be for it!
Jerry I accept your point that those with a drug addiction that receive some form of income support will likely prioritise the purchase of more of that drug. However if these people don’t purchase food or obtain food from some form of welfare support service they are on the way to oblivion in any case. Further the price of drugs is more than likely to be well beyond any likely level of income support in any case. However I believe it is still worthwhile to offer an unconditional basic level of income support including basic housing and meals if needed as well as healthcare and social support for such people as then they would at least have a realistic path available from their perspective, of escape or at least mitigation which they currently usually do not get (in most countries) or alternatively they can choose to just wither away with less suffering. I suppose my basic point is that an unconditional floor of income support is still warranted in addition to the JG.
“It is true that profits would be higher under a regime of full employment than they are on the average under laissez-faire; and even the rise in wage rates resulting from the stronger bargaining power of the workers is less likely to reduce profits than to increase prices, . . . .”
Kalecki, “Political Aspects OF Full Employment”
After I grind through the rest of the ‘homework’ (I may be a while.), I will surely come back with further criticism, as I am still of the opinion that a job guarantee will, in the end, only serve to further entrench current class/power dynamics, and maybe even wealth inequality (See the above quote, noting that the world’s first trillionaire is an earthly reality not that far into the future.), as the above implies to me.
Further, “the higher standard of living of the masses.” only adds to increased pressure on a finite biosphere that is already struggling with the current mass of humanity. How much greater will those same environmental pressures be, as the rest of global humanity catches up to our standard of ‘conspicuous consumption’?
My understanding is that the JG would be effectively ‘self funding’ because firstly currency issuance is the source of the funding and secondly productive capacity is presumed to grow by a commensurate amount to that funding? In other words the extra aggregate demand is matched by a resultant growth in the supply of goods and services so there are no additional imposed inflationary pressures apart from those short term inflationary effects arising from the structural adjustments in the economy? Is this a fair summary?
The same presumably can be said about other areas of increased net spending by the national government such as on more healthcare, education, infrastructure, fund transfers to state and local governments and even more bombs for example, up to the point that full employment is reached?
How necessary is it for the jobs provided by a JG to to add to the productive capacity of the economy? Does it suffice if those in the JG are being well trained and that they maintain their work ethic so that they remain employable by the wider economy but are otherwise engaged in activities that do not add to the supply of goods and services? I mention this not as a suggestion to reduce the useful output of a JG which I would certainly not recommend, but to highlight that the argument used by MMT proponents that a UBI does not add to productive capacity and that a JG does add to productive capacity may not be completely fair and accurate. Many of the work proposals I have heard for a JG are social and environmental ‘goods’ that no one currently is able to or wants to pay for and are not that dissimilar from the activities that those receiving a UBI may undertake? I am not advocating a UBI by the way but just want to be better able to understand and advocate for a JG.
In distilled form the MMT proponents to my mind are revealing to us all that the ‘fiscal gap’ between a national government’s balanced fiscal position – where spending equals taxation, to the level of net spending that would result in full employment, can be utilised for spending on more government services, and/or tax cuts, without exacerbating any existing inflationary pressures or incurring any debt? This ‘fiscal gap’ really is the proverbial money tree or pot of gold or from the other perspective the ‘fiscal gap’ represents the imposition of an unnecessary and destructive ‘currency famine’ that has deprived millions of gainful employment and better government services, and/or tax cuts?
I think it is also reasonable to conclude that the government’s spending that is below the balanced fiscal position – where spending equals taxation, is effectively met through taxation. I do however realise the government’s spending precedes any taxation and MMT purists may object to the thought that taxation would fund any spending but I would maintain that it still effectively does up to the balanced fiscal position?
I assume the MMT position is that once the full employment condition is reached the national government should then abstain from further increasing net spending due to the risk of increasing any inflationary pressures? But what if inflation is near to zero an the full employment condition has been attained and the preferred level of inflation is say 2%? Presumably net spending can then be bumped up a little further? I realise a JG provides a self regulating method of adjusting the level of net spending by default through the buffer stock of readily employable workers mechanism, but perhaps the central bank would also need to advise the government of the day to adjust its fiscal settings to try to target the preferred inflation rate as well?
Also in times of national/global emergency such as major wars, pandemics or impending global ecocide I would suggest it may become mandatory to utilise the full fiscal capacity that may be available to national governments in order to meet those challenges. This means net spending well beyond the full employment point and constraining the associated inflationary pressures by selling bonds to the populace, introducing price controls, actively addressing supply shortfalls wherever possible and through rationing?
We are there now, not just due to the pandemic but even more so due to the global warming crisis, According to James Hansen and his many collaborators we have less than ten years to get global atmospheric CO2 levels down to 350ppm from the current level of 410ppm and that level is rising at an accelerating rate. The current path of inaction will soon lock in atmospheric CO2 levels that are then well past the point where we have any real hope of reducing them to tolerable levels due to the positive emission feed backs from melting permafrost and melting arctic methane hydrate deposits that will reduce massive quantities of methane as well as a few other feed backs, and due to the limited scope of those methods currently available to remove CO2 from the atmosphere.
The reason we are not already suffering and dying in a hideous hot house earth with most of our major cities under the sea due to the current greenhouse gas levels, is primarily due to the heat absorption of the oceans which acts to delay but that does not ultimately stop global warming. The sea is delaying the most catastrophic consequences of global warming by decades and up to a century or two. The most effective path still remains to rapidly reduce CO2 and methane emissions to net zero globally, but due to reckless delay it is now also necessary to remove at least 100ppm of CO2 from the atmosphere using expensive and relatively difficult methods such as bio-sequestration and geoengineering on a massive scale. The need for removal of atmospheric CO2 could have been avoided if the world had acted decisively two or three decades when the science was already well understood.
Cutting our global populations by some undefined means and joining an agricultural commune may help but are not in themselves a solution to the global warming crisis, nor is it necessary to give up the whole concept of a modern economy. The modern economy is potentially compatible with zero net greenhouse gas emissions and is probably now the only means remaining to drive such a needed transition.
Alan the JG could also potentially provide demand (that means the people) driven public/governmental services that could meet many genuine social and environmental needs – in other words demand driven socialism?
The right kind of people ideally should be in power for an optimal result, but some of the world’s major reforms were put in place by conservatives or traditionalists admittedly after pressure was applied by segments of society – usually lefties. For example when Chancellor Otto von Bismarck in Germany became the first in the world to adopt an old-age social insurance program in 1889. Richard Nixon implemented the EPA and fully unpegging the dollar from gold. The Dixiecrat Lyndon Johnson introduced the Civil Rights Act and other the Great Society social reforms.
We don’t really have the time for people’s revolutions at the moment and we all need to live with the current plurality of humans. There is more common ground than many realise and some of my best clients are old school conservatives. Filling large pits with non believers provides only temporary relief at best and descends into something even worse more often.
As for the WORST of the 0.1%, for example those that drive climate change denialism, seek to exploit even more fossil fuels, bribe and co-opt our governments, drive damaging austerity that leads to the premature death and needless suffering of millions and those that seek to impose a form of fascism – let them face fair justice.
Oops more typos and crap grammar, dreaming of an edit functionality on Bilbo Mk2. 🙁
Whence is that knocking?
How is’t with me, when every noise appalls me?
What hands are here? Hah! They pluck out mine eyes.
Will all great Neptune’s ocean wash this blood
Clean from my hand? No; this my hand will rather
The multitudinous seas incarnadine,
Making the green one red.
“In other words the extra aggregate demand is matched by a resultant growth in the supply of goods and services so there are no additional imposed inflationary pressures apart from those short term inflationary effects arising from the structural adjustments in the economy? Is this a fair summary?”
“The same presumably can be said about other areas of increased net spending by the national government ”
That cannot be said.
But it is a common mistake.
The introduction of the JG is likely to cause a small one off rise in prices, but not wages and thereby a real redistribution towards those on the JG.
The majority of supply will be covered by the existing output gap, but that is because those on the JG require basic goods and services that are the items best covered by productivity mechanisms. Quantity expansion here is almost certain. Higher level outputs will not be covered and will price shift on a one off basis. (The main concern would likely be housing, which is supply limited at the best of times).
The reason you don’t get a rise in wages is because of the expectational anchoring of the Job Guarantee – again at the level of output expected by the JG spend.
That comes about because the JG has a “non compete” clause in its design. The JG labour is not to be used as unfair competition to existing businesses. So you wouldn’t use it to set up a tea shop next to an existing one.
Unless, of course, that tea shop demonstrated there was insufficient competition by putting up its prices once it has to pay the true cost of labour…
Given the tea shop knows the JG will do this it will either improve its productivity, or it will close. In the former case profits are restored by serving more covers, in the latter it is replaced by JG labour run by a social enterprise or local council. Or the spend redirects completely if the JG labour is engaged doing something else – which then has the same quantity expand or close choice.
The higher up the skill level the less the Job Guarantee is able to anchor wages – because with the best will in the world an unemployed labourer is not a substitute for a brain surgeon.
The more the spend impacts higher skilled operations, the less scope there is for quantity expansion and the more there is for price expansion. And that is where you need to start using taxes to free up real resource space that the government can spend into.
That’s why “pump priming” spending tends to be inflationary. A lesson we learned after the second world war, and a description of which which forms the preface of the 2nd edition of “Full employment in a Free Society” .
A lesson we have no wish to relearn – given the 40 year Monetarism hiatus it led to.
The output of the Job Guarantee is largely a salve. It is requiring people to give up hours so they cannot use them for themselves in exchange for the output of others who are giving up hours and cannot use them themselves. That’s the baseline. And forms the default job of a Job Guarantee system – spending your time obtaining a different Job Guarantee job.
The better a Job Guarantee’s job design is, the more useful the work is, both personally and socially, the less “dead zone” gap there will be between the Job Guarantee wage and the lowest private sector wage. Economically you want that “transition friction” to be as low as possible so people can move freely between the JG and other work in both directions.
Thanks Neil for your answers. I will need a bit of time to digest the econospeak parts, no offence intended.
Neil you wrote “The majority of supply will be covered by the existing output gap” re. the JG which is good to hear but the same doesn’t apply more generally to other forms of government spending, why is that? Is this comment of yours the reason?
“The more the spend impacts higher skilled operations, the less scope there is for quantity expansion and the more there is for price expansion. And that is where you need to start using taxes to free up real resource space that the government can spend into.”
If the national government decides they want to build 100 extra hospitals within the next five years surely they could also plan for the resources needed to build and staff these hospitals to become available when required so that ‘price expansion’ is minimised? Staging the construction and commissioning of hospitals to avoid high peaks in demand for skills and materials may also help? I should have worked in Gosplan?
“That’s why “pump priming” spending tends to be inflationary.”
I don’t think our blog administrator would agree with that if by ‘pump priming’ you mean larger national government deficits, he has written in various posts that the postwar years had close to full employment due to the appropriate use of fiscal policy with little inflation. Inflation only really became a headache due to the Middle East oil embargo and the rapid increase in oil prices which gave little time to adjust. Inflation dropped mainly due to the transition from oil to coal and gas for sections of the economy. Limiting government deficits and breaking the trade unions at the time may have also reduced inflationary pressures but I suspect governments could have gained more by assisting the transition from oil.
“The introduction of the JG is likely to cause a small one off rise in prices, but not wages and thereby a real redistribution towards those on the JG.”
Neil, I am not sure exactly what you mean here. I understand the one off rise in prices part. And I can understand the real redistribution towards those on the JG. But I would argue that, if the government sets a JG wage in accordance with the guidelines Bill Mitchell has proposed, It would have quite an effect on the wages of currently working wage earners. Just the knowledge that another job is there waiting for them increases their bargaining power. Yes sure, the higher your current wage is ,the less effect that would have- but then brain surgeons’ wages are not primarily arrived at by ‘free market’ mechanisms anyway.
So I think the median wage in the US is somewhere around 22 dollars an hour- meaning half of all workers make less than whatever the exact number would be. What percent of that half of all wage earners would not experience an increase in their bargaining power? I would say most of them will benefit. Let me guess somewhere around 60 million current workers in the US would benefit along with the many millions of officially unemployed, and many millions more who are not even counted as unemployed currently. So I see the JG as being a greatly effective program that anyone who claims to be interested in workers would support.
“But I would argue that, if the government sets a JG wage in accordance with the guidelines Bill Mitchell has proposed, It would have quite an effect on the wages of currently working wage earners. ”
Yes that’s what is likely to happen. The distribution curve would skew towards the bottom end as the pie expanded. The least change would be at the profit share end, and there may even be a reduction depending upon how the dice fell.
It’s essentially a market correction. Too many firms have been getting cheap labour for too long.
“he has written in various posts that the postwar years had close to full employment due to the appropriate use of fiscal policy with little inflation.”
There is a reason we have a Job Guarantee in MMT, and why it has two sides – one that restrains wages and one that restrains prices.
That’s because “pump priming” leads to persistent inflation.
From the Preface to “Full Employment in a Free Society” written in 1960.
All this comes from propping up jobs rather than letting market competition eliminate them.
“That’s because “pump priming” leads to persistent inflation.”
“All this comes from propping up jobs rather than letting market competition eliminate them.”
Assuming pump priming means Keynesian fiscal stimulus designed to reduce unemployment I do not agree that necessarily leads to persistent inflation. If your reason for the persistent inflation is wages rising faster than productivity then centralised wage arbitration could be applied, or if unions were deemed to be too powerful and militant then legislation could be applied to reduce their bargaining power (that would be a joke in the current era of feeble unions and it’s excessive profits that now need arbitration) or governments could actively facilitate productivity improvements such as the methods adopted by the East Asian’s or Germans.
If all that is on offer for unemployed workers is ever fewer and worse jobs or perpetual poverty and torment, no wonder some governments were pressured to prop up industries and jobs. With optimal fiscal policy, a generous social support system and even better with a JG as well, unemployment should be low and when businesses fail it is not such a tragedy. Inflation according to our Bill is rarely a problem and he knows the tools to hit it with.
“I do not agree that necessarily leads to persistent inflation.”
History says otherwise. And those who do not learn from history are doomed to repeat it.
That’s why you inject via a Job Guarantee (which eliminates unemployment permanently), and you tax and spend when you want “proper” public sector jobs.
MMT isn’t free money for people to spend on pet projects. There is a real cost that has to be paid. And that means explaining where the physical resources are going to come from to do the proposed tasks.
What counts as Keynesian ‘pump priming’? Recently the US federal government increased their spending by several trillion dollars in response to the pandemic. That would seem to comply with Keynes’s recommendations that the government should spend into the economy to repair aggregate demand when private sector income and employment falls. Have not seen much inflation, persistent or otherwise, nor would I be worried about it if Congress got their act together and doubled that spending given the current situation. One thing history actually does show is that the US government is consistently more worried about inflation than unemployment whenever there is a choice between the two.
Yes, Jerry “pump priming” does not mean that. The phrase comes from Depression USA, where the idea was that deficit spending would only be needed for a short time and then there would be a “normal” economy. A similar modern metaphor would be jump-starting a car. You don’t need to keep doing it once the car is running. Bill has said often enough how this WASN’T applicable during the Great Depression nor at many other times – there might be a need for a not-gigantic but significant deficit to keep things going well. The increasingly exceptional periods are more the “normal economies”, the “Great Moderations”. So pump-priming / jumps-starting and then ending “intervention” if anything causes deflation, not inflation!
As BIll has noted the neoliberal era has had no better record on inflation than the postwar full employment era preceding it. The oil crises were the only cause of serious inflation. (And that was no worse than the forgotten US post WWII inflation caused by neoliberal policy. ) The top-down “Keynesianism” of the postwar era made economies more susceptible to inflation. A Job Guarantee would have cured that.
Worrying about inflation or pump priming was inappropriate before the coronavirus and far-fetched now. Tax and spend isn’t simpler or more intuitive than the correct spend and tax order. Tax and spend isn’t straightforward. It is bass-ackward. It’s wrong and insane. One can observe that this and other neoclassical ideas begin to be true in a sorta, kinda way when there is full employment, a JG. But that’s the limit that can be done, and with great care. Using it for exposition, for basic theory is a very bad idea.
Similar to thinking about people and digestion. Once a sick person is brought back to health, they might excrete and ingest comparable amounts. But it is always ingest, then excrete, not vice versa as the mainstream crackpots have it. Thinking you have to plan your excretions before your ingestions is a psychological disorder not a path to health. Eat right and the other end takes care of itself.
Wasn’t it Keynes who was always mentioning ‘magneto troubles’ as an analogy? Good analogy or not- it is more pleasant to contemplate than the digestive cycle one 🙂 Yeah- different situation- I realize that.
Obviously I am a big fan of the Job Guarantee. One reason is that it would function as a large ‘automatic stabilizer’ in economic terms. One that was also much better targeted than existing economic stabilizers. But that still does not preclude that additional fiscal policy adjustments, as in ‘Keynesian’ policy, may be necessary depending on the state of the economy. I don’t think that history shows that well suited Keynesian policy always ends up with persistent inflation as a result.
Sorry for the late response.
Neil you wrote @ Tuesday, August 25, 2020 at 0:49
“That’s why you inject via a Job Guarantee (which eliminates unemployment permanently), and you tax and spend when you want “proper” public sector jobs.”
Yes I agree but for completeness it is important to clarify that the size of the ‘deficit spend’ available to the national government is increased by increased net savings, current account deficits and any reductions in net spending by the private sector.
So MMT informs us that we are not as fiscally constrained as the ‘surpluses are great’ Neoclassical dinosaurs or the ‘balanced budgets over the economic cycle are great’ Keynesian slow learners.
I suspect you will reply the JG would automatically expand to fill any additional fiscal space made available to the national government arising from increased net savings, current account deficits and any reductions in net spending by the private sector which would be true, at least in my mind. However I visualise implementing a more modest JG that becomes quite small at the peak of any economic cycles but still able to perform the essential ‘price anchoring/buffer stock of employed workers’ functionality in all localities in the nation (with laws limiting excessive speculation also being in place) that would provide a considerable additional one time ‘hit’ of fiscal spending space to national governments, above the current inadequate ‘austerity’ deficits of the neoliberal world (ignoring the complications of the Covid-19 hiccup).
But as you wrote once the JG is operating as intended we are back to a – “tax and spend when you want more “proper” public sector jobs'” world? I hope this all makes some sense?