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 Part 4 of my on-going examination of the concept of ‘duty to work’ and how it was associated with the related idea of a ‘right to work’. In Part 3, I extended the analysis to the Western democracies of the Post World War 2 period and found that progressive political parties and movements firmly considered the two concepts to be fundamental elements of a progressive society. In this part, I extend that analysis and consider ways in which the ‘duty to work’ has been justified, drawing on the idea of reciprocity and social obligation. I also show how the emergence of neoliberalism has broken the nexus between the ‘right to work’ responsibilities that the state assumed in the social democratic period and the ‘duty to work’ responsibilities that are imposed on workers in return for income support. That break abandons the binding reciprocity that enriched our societies.
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).
3. Tracing the roots of progressive views on the duty to work – Part 3 (August 20, 2020).
4. Tracing the roots of progressive views on the duty to work – Part 4 (September 1, 2020).
We concluded Part 3 with the clear understanding that there was an intrinsic link in Western social democracies in the Post World War 2 Period between the concepts of ‘right to work’ and the ‘duty to work’.
These work-related concepts, upon which policy was based, were considered to be the foundations of modern, progressive societies aiming to achieve increased increased equity, effective pathways to social mobility, poverty reduction and income security.
The state was committed to using its policy instruments to ensure there were enough jobs to absorb the desires to work, and, in return, citizens who were able to work were considered to have a communitarian responsibility to contribute to the material prosperity of society through work.
As part of this consensus, it was clearly understood that those who were unable to work for various reasons (age, health, etc) were to be provided with dignified income support.
The continuity of this societal consensus did not conceive of a class of workers who would be able to receive state income support (as a right) and thus enjoy the material benefits of production derived from the work of others.
Binding this consensus was a notion of reciprocity.
This principle extends well beyond concepts of work responsibilities.
Western democracies use parliamentary authority to grant rights to citizens but these rights also carry responsibilities (duties). And many of those responsibilities are explicitly coercive, and I will talk more about that presently.
We should be explicit here to disabuse people of the idea that a ‘duty to work’ means the same thing as a legal compulsion to work. The two are different obviously, although that seems to evade the understanding of many on social media.
Of course, Marx observed that while under capitalism superficially freed workers from the manorial coercion of the feudal system, such that they could choose freely which jobs they might take and who they might work for, the coercion of capitalism lay in the fact that workers did not have a choice whether to work at all.
Unlike owners of capital, who could enjoy access to the income distribution system without exerting any labour effort, workers had to work for someone if they wanted to eat.
And within socialist thinking, that was a motivation for the duty of work type ethics being formalised because they wanted no group being able to live off the work of others (bar those affirmed or unable to work).
Within social democracies, these ideas were expressed somewhat differently (the language was different) but the sentiment remained.
Even in the US, the concept of the ‘work ethic’ was a powerful social disciplining force.
Liberals who evoke ‘natural’ rights to freedom miss the point that all these ‘freedoms’ are social products – constructs that societies agree on in some way or another.
There is no real way of determining which of these constructed ‘rights’ are more privileged over others.
In his 1980 article – ‘The Obligation to Work’ – (see reference in Part 2), Lawrence Becker wrote:
No one is self-made. Whatever good there is in our lives is, in part, a product of the acts of others. Moreover, it is also the product of others’ fulfilling their putative social obligations: obligations of restraint (such as are found in the criminal laws against murder and theft), of care (as found in the law of negligence), of effort (“trying” to help) …
All the standard theories of justice support a requirement (obligation) of reciprocity, that is, a proportional return of good for good …
Citizenship obligations may be thought of as the institutionalized demands of our benefactors for reciprocity. Thus, an important class of nonvoluntary social obligations is justified.
He goes on to discuss the complexity that can be involved in determining proportionality in the “good for good” principle.
The question he explores is whether the ‘duty to work’ can be justified within this reciprocity ideal.
He understands that “Obligations must be scaled to competence, ability, and benefits … it would be impossible to justify any proposal to require the same work from everyone”.
Why would anyone think they were exempt from a “social obligation to work”?
Some use the arguments we debated in Philosophy 101 – I “did not ask to be born”.
I did not ask my mother to nourish me when I was young.
But I receive the benefits from the work of others.
Further, Lawrence Becker notes that:
Each of us is a burden on others. Our mere existence diminishes natural resources; we pollute; we consume the time and energy of those who have to deal with us. We are a net burden on others if we do not make an offsetting contribution to their welfare. Now, it is a fact that some people do make an effort to offset these burdens and succeed in offsetting them. Reciprocity to them is as much in order as it is for people who produce “positive” good for us. And reciprocity here may also require a contribution produced by effort.
Why should we contribute to the society rather than just those who directly benefit us as individuals? In other words, do we have a sense of society?
Clearly, we accept the benefits that are derived from public infrastructure (so-called public goods). So all workers who produce these goods and services are effectively contributing to society rather than to specific individuals.
Once we have public goods, we also accept social obligations.
We also accept membership obligations of social groups from an early age, which clearly establishes the concept of social obligations that transcend our individual leanings.
Does this argument extend to work obligations?
Some might argue that a person might just contribute financial input and be exempt from having to expend effort. But that would offend any progressive sense of equity.
While nations in the immediate Post World War 2 period were embarking on a nation-building process and were keenly aware that all available labour was necessary to quickly improve material prosperity, it might be argued that we need less production now and technology has solved scarcity.
There is truth in that argument but it requires that societies always need work effort to continue functioning and we all benefit from that work.
And as scarcity gives way to material affluent (generalised), we have the luxury in many nations of being able to expand the concept of productivity and valued labour, which means there are unlimited jobs that can be created and performed which enhance our well-being, whether measured in material terms or other more qualitative terms.
In that sense, there remains an argument based on reciprocity for a ‘duty to work’.
Lawrence Becker wrote in this respect that:
People who are able to work, and do not work, are parasites, however unattractive and emotionally loaded that label is. People in this society all live, in part, off the labor of others. And there is a chronic oversupply of jobs which need to be done to sustain and improve the quality of life for us all. (I am not speaking here of simply income-producing jobs.) So reciprocity in the form of work seems not only appropriate but necessary in our present circumstances.
Over the last several decades, as neoliberal ideology has emerged as the dominant approach to policy, the foundations of the social democratic consensus have been fractured.
Thomas Fazi and I trace this evolution in our book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017).
Relevant to this discussion, is the fact that the ‘duty to work’ idea has been retained and fine-tuned (along parasitic lines), while the state has abandoned its responsibilities to provide sufficient work, which has terminally compromised the ‘right to work’ principle, especially for the most disadvantaged workers.
It is also true that progressive political parties, in many nations, have led the deterioration in this consensus by abandoning the aim of full employment and adopting pernicious activity test approaches to the unemployed that they created through the embrace of neoliberal fiscal austerity.
As an example, think about Germany (thanks to Graham and Jochem for some research help here).
I have written about the German embrace of neoliberalism many times.
Here is an early blog post – Germany attacks its unemployed! (January 4, 2005) – which was written as we learned more of the so-called Hartz reforms that transformed the way the state income support systems changed.
When the Social Democratic Party in Germany embraced neoliberalism during the Chancellorship of Gerhard Schröder (in power 1998-2005) the government made several major policy shifts.
They abolished regulative restraint on the financial markets (for example, abandoned the capital gains tax on the sale of shares) which spawned the financial excesses that are still playing out (think Deutsche Bank).
The previous Helmut Kohl CDU regime would not have been able to pull that off – a feature of social democratic parties across the globe – as neoliberal leaders!
At the same time, Gerhard Schröder’s Agenda 2010 program sought to reduce the German welfare state and impose harsh work obligations on income recipients.
The interesting point here is that at the time, Schröder and his officials made it rather explicit – that if you were not prepared to work then you would not eat!
In a Speech to the Bundestag on March 14, 2003 – Gerhard Schröders Agenda gegen den Reformstau – the Chancellor said at the 34:40 mark that (translated)
In future no one will be permitted to refuse reasonable work at the cost of the community – he must expect sanctions.
Their concept of ‘reasonable work’ was very broad.
Another example of this sentiment came from SPD politician Franz Müntefering when he was the Bundesminister für Arbeit und Soziales (Federal Minister for Labor and Social Affairs) who told the SPD Parliamentary Group on Tuesday, May 6, 2006, as part of the process for reforming the SGB II-Optimierungsgesetz (the social code in Germany) that (Source):
Wer nicht arbeitet, soll auch nicht essen … Nur wer arbeitet, soll auch essen.
(Those who do not work should not eat … Only those who work should also eat).
So for those who thought the ‘parasite laws’ were just a construct of the hideous Stalinist Soviet regime, thinking that Western democracies were exempt from such thinking, think again.
Here is modern-day Germany, under the rule of a ‘progressive’ social democratic government articulating just the same attitudes.
An interesting article – Faule Arbeitslose? (May 6, 2003) – published by the – Bundeszentrale für politische Bildung (BPB) – which is the Federal Agency for Civic Education in Germany, shed some light on this debate at the time.
Faule Arbeitslose = Lazy unemployed and the article discussed the willingness to work in Germany.
It quotes Gerhard Schröder from April 2001, when he said “Es gibt kein Recht auf Faulheit in unserer Gesellschaft” (There is no right to be lazy in our society) and started the debate about “eine heftige Debatte über “Faulenzer”, “Drückeberger”, “Scheinarbeitslose” und “Sozialschmarotzer” vom Zaun” (“idlers”, “slackers”, “bogus unemployed” and “social parasites”.)
It is interesting that when unemployment began to rise in Europe and the rest of the world, this nomenclature started to enter the political narratives.
In Australia, the term ‘dole bludger’ was first introduced in 1974 by a Labor Party employment minister. It was not the conservatives who started this descent into indecency, although they certainly exploited it to the hilt once they gained power.
Similarly in Germany. The BPB article documents how SPD Federal Minister of Labor Walter Arendt “triggered the first laziness debate” in the Bundestag in 1975 as mass unemployment rose.
By the 1980s, this narrative was adopted by progressives and conservatives alike.
The obligation to work was at the centre of the debates, while the right to work had largely disappeared as a responsibility of the state to guarantee.
Of course, the obligation was applied exclusively to the working class.
The banksters who did nothing more than shuffle wealth and were thus largely unproductive were given state support to expand their profit-seeking behaviour.
But the low-paid and vulnerable were shoehorned into poverty-wage, mini-jobs because the German government refused to create the conditions for full employment.
The German derivation of this was influenced by harking back to religious documents.
In the – Second Epistle to the Thessalonians – sometimes, but not without dispute, attributed to the apostle Paul, the discussion is about the way the people of the city of Thessalonica, the “second city in Europe where Paul helped to create an organized Christian community” could maintain the traditions they had been taught (either in written form or by word of mouth) as they waited the “second advent of Christ”.
In Thessalonians 2, Chapter 3, Verse 6 begins the topic – “Warning against Idleness” and we read (thanks Tom):
6 Now we command you, brothers, sin the name of our Lord Jesus Christ, that you keep away from any brother who is walking in idleness and not in accord with the tradition that you received from us.
7 For you yourselves know whow you ought to imitate us, because we were not idle when we were with you,
8 nor did we eat anyone’s bread without paying for it, but with toil and labor we worked night and day, that we might not be a burden to any of you.
9 It was not because we do not have that right, but to give you in ourselves aan example to imitate.
10 For even when we were with you, we would give you this command: If anyone is not willing to work, let him not eat.
11 For we hear that some among you cwalk in idleness, not busy at work, but busybodies.
12 Now such persons we command and encourage in the Lord Jesus Christ to do their work quietly and to earn their own living.
13 As for you, brothers, do not grow weary in doing good.
14 If anyone does not obey what we say in this letter, take note of that person, and have nothing to do with him, that he may be ashamed.
15 Do not regard him as an enemy, but warn him as a brother.
So Christians were invoking the ‘no work, no eat’ idea – as a ‘tradition’, some centuries before Stalin’s parasite approach.
In other words, these ideas have been part of human life for a very long period of time.
In Part 5, we will link the ‘duty to work’ concept with theories of justice and discuss coercion.
That is enough for today!
(c) Copyright 2020 William Mitchell. All Rights Reserved.
This Post Has 80 Comments
There is a lot of talk of “rights” amongst some of the political class without any discussion of responsibilities. I suspect that is another Americanism.
Just like spending comes before taxation. Duty and obligation comes before rights.
You can’t have a drain before somebody has done an add.
I find the argument of “distributive justice” from the UBI crowd particularly pernicious, given that is already spoken for by the retirement pension. You get the pension, which is essentially a forced distribution from the efforts of others, in return for taking our capital legacy, maintaining and improving it over a working life and then handing it on to the next generation alongside the training in how to use it.
We cannot allow a selfish generation to spend the seed corn of the forthcoming ones.
Let’s say you have made a convincing argument that there is a duty to work in some way if you can. I already agreed with that beforehand so I might be too easily convinced.
But some also believe that we have a duty to care for others, at least to some extent, even if they can’t or don’t recognize that reciprocal obligation, at least not at the time. Maybe just in the hope they will recognize that in the future. Or maybe just because they are people. I don’t think there is anything wrong with that- kind of there myself on it.
And these people might desire that the most powerful organization they are part of, the government, reflect their beliefs through policy and impose a small cost on the many to care for a few- that they as individual citizens cannot possibly assist, or even be aware of- even with full knowledge of the costs involved with that. And I don’t really think there is anything wrong with that either.
My previous comment was directed towards Bill Mitchell.
Neil Wilson, this American thinks you are wrong when you say “Duty and obligation comes before rights”. Human rights are inherent and it our duty and obligation to respect human rights. Rights come before duty in that sentence.
But whether it is a human right to expect others to support you if you are perfectly able to support yourself with some exertion is a different question.
Pensions Neil that’s where part of the solution is.
We don’t talk enough about pensions. How we are going to set them up along side a job guarentee. Setting them up the right way along side a JG can solve so many issues with a stroke of a pen.
Why MMT is a lens infuriates me so much. I hate that meme with a passion. It’s becoming more annoying than TINA. Sorry Bill but I hate it. The lens gets so twisted out of shape it is no longer MMT.
Let’s stop hiding behind MMT is lens that others use to bend the MMT viewpoint. Let’s start putting some policy proposals along side the JG. MMT is a lens takes us to the first corner of the running track. Only problem is there are another 30 laps to go. Yes, I do think we hide behind MMT is a lens. For me it is a cop out and no wonder our opponent’s pick up on it quickly and use it to attack us.
Yeah sure it is a lens. What good is a lens without policy. MMT is a lens and JG is that all we have to say for the next 20 years ?
When is the MMT book on future policies going to come out ? One more book on the history that we can’t change since it has passed will drive me bonkers.
I’m sorry voters I know the economy you have received in the past has not been the standard you expected. There is nothing we can do to change that. However, if you allow us to help you and take ownership of your complaint. Moving forward we will work together to get not only the economy you were promised but the economy you deserve.
Or you can choose option b) voters.
Option b) is you choose the economy you want voters and we will consult. We have no policies we have a lens with a JG. We will charge you a consultant fee since we have no policies of our own and consult to let you know how you are doing. Using the lens there is a flat fee which includes VAT.
Is the reason we have no policies apart from the lens and the JG because we can’t get everyone to agree on certain policies ?
Banking ? What’s the vote is it a 6/2 split
Pensions? What’s the vote is it a 4/4 draw
Issue debt ? What’s the vote is that currently sitting at 5/3
Or do MMT economists and founders agree on banking, pensions and issuing debt policies ?
Nobody knows we just keep getting history lessons that we can’t change.
“Human rights are inherent”
They are not. They are granted by all of us and agreed as a species. Which means they can be changed over time as the notion of humanity evolves, and various sets of humans can have different ones.
That’s the problem with writing things down. They ossify over time. Appealing to “inherent” and “universal” is an appeal to a God. The human rights movement shares something of the hubris of development economics.
As Bill mentions above the duty of restraint is what gives the right to life – a suppression of the violent instincts. Others have to agree not to kill you before you end up with a right to life. And if they don’t there is little you can do about it – as many jurisdiction in the world demonstrate daily.
“We don’t talk enough about pensions.”
We don’t. One of the policies I’ve been suggesting for a while as you know is to reduce state pension ages. Particularly with Coronavirus wandering around, allowing older people to choose to retire early would help keep people who are susceptible out of the way and release economic capacity to those who are younger and more able to withstand the current situation.
The dependency ratio is based upon neoliberal assumptions and we need to recalibrate it in MMT terms. Do we have the productivity to allow people to retire earlier? Covid lockdowns suggest we do.
Similarly why aren’t we talking about low mortgage rates? Once zero interest rate is in place, permanent low mortgage rates are a thing. For those who don’t need the job insurance of a Job Guarantee, knowing that putting one in place would ensure that mortgages stay low forever is a big selling point.
Perhaps I should do a “what’s in it for you” series.
‘Similarly why aren’t we talking about low mortgage rates? Once zero interest rate is in place, permanent low mortgage rates are a thing. ‘
The big problem is not the rates in the UK but the last 40 years of house/land bubbling which the Tories have vowed to keep percolating due to their voter base which now sees wealth as what is stored up in their properties. This process has been going on since 1971’s Competition and credit control. First of a long line of bubbles.
This is a major destroyer of reciprocity and why the Tories, following the Hartz reforms as Bill points, had to redefine the ‘parasite’ as someone to be forced into working within a parasitic model.
The libertarian economist, Fred Harrison, in his book ‘The Traumatised Society’ attempts to show how fundamental concepts of fairness and reciprocity are destroyed in this context. So we get Blair with his ‘rights and responsibilities’ and then Osborne with his more in-yer-face ‘shirkers’ actually manipulating the innate sense of fairness and reciprocity and passing it through a grotesque distortion.
We now have a very disturbing dynamic which is feeding dangerous divisions and functioning as a decoy. For me, the question is: can education and raising awareness actually work at this point so we can restore a true reciprocity? I’m personally in a bleak place on this one.
Apparently we disagree then Neil. Rather profoundly at that. But that is ok. At least in as far as this duty to work discussion goes.
But using your idea that rights are granted by society, it should follow that you would have no fundamental issue if the majority of people in a country, knowing any and all costs involved, decided they wished their government to provide support to a person who refused to work even though they could.
Granted them that ‘right’ so to speak. Democratically, as it were.
I never respected UBI arguments. Sorry. I have never been a workaholic, but its laughable if some people work and others just sit around.
Its just ridiculous to me. Always has been. What I wrote is not directed to anyone here.
The long slow slide to normalize authoritarian oligarchy [in the first world], along with its regulatory capture and political influence, must mean that it is time to both go ‘back to the future’ and to be extremely careful in what one wishes for; since, there are absolutely no safeguards regarding policy implementation; although, the frivolous use of pejorative language should offer up some clues to the attentive reader. For example,
“In the 1920s, policy towards marginals was debated between advocates of the “soft” line (often associated with the social-security authorities), treating the marginals as “social anomalies” and seeking to help them, and the tougher policy favored by the police, who often used the terms “social parasites” and “social danger.” ”
“What Putin accomplished through reining in of the roving bandit oligarchs was to create a system of stationary bandits whose wealth depends on proximity to the state and who, like every stationary bandit, have more of an interest in the strength of the state and the welfare of its population-simply because such welfare is more closely intertwined with theirs.”
It is the defining element of the ‘new’ global political economy and the ‘reciprocity’ of the economically and politically powerful. “Duty to work” only reinforces what already is.
“it should follow that you would have no fundamental issue if the majority of people in a country, knowing any and all costs involved, decided they wished their government to provide support to a person who refused to work even though they could.”
I have no problem with that at all. The problem is that the people who believe that believe they are in a majority, when the evidence is that it is an unelectable position – given that every single income scheme in the world fails on those grounds. Institutional research suggests that Matchers are in the majority, not the Givers. And since Matchers cannot live with the Givers position, but the Givers can live with the Matchers position (because they can use private charity to push their beliefs instead) then it makes sense, electorally, to stick with the Matcher position.
In the same way that everything is Kosher or Halal. You lose by not having the label. You don’t lose anything by having the label.
What does “a right to work” mean?
That society should provide me with work?
– specifically the work which, if It were entirely up to me to decide, I would choose to do?
– in that case, what happens if no employer needs that particular work to be undertaken? the next-highest-preferred work on my list, perhaps – and so on until a fit (a sub-optimal one by definition) is finally arrived-at by society just for little me – a bit like trying-on different pairs of shoes in a shoe- shop, in descending order of desirability?
If that is what in reality would transpire for the great mass of people most of the time, wouldn’t that be exactly the same as would result from a government having a full employment policy – and which did in fact result historically, in the era when we had one?
In which case what does postulating an individual “right to work” add which a demand that a government adopt a full employment policy doesn’t already cover? And given that MMT exponents long ago declared unequivocal support for a (macro-economic) full employment policy, what useful purpose is achieved by also introducing an (individual, and as a concept, arguable) putative “right to work” into the discussion?
IMO it just muddies the waters of what ought to be pragmatic policy-design evaluation with abstract philosophising concerning “human rights”.
“What does “a right to work” mean?”
In the language of rights, full employment is a societal goal, where as the right to work is a human right.
A societal goal is balanced against other societal goals like “low inflation”. Whereas a right trumps that. There is no right to low inflation since one cannot be derived from the right to life.
In other words a right should be respected even at the cost of some other societal goal.
I have to say this series would be more convincing if it could have stuck to the PROGRESSIVE
roots of the duty of work.
Not post stalin dictatorial USSR or post progressive neo liberal Germany.
Is it the paucity of sources which prevents this?
Even the marxist reference was in the context of moving from socialism to communism
eg after the elimination of the capitalist class and the common ownership of the means
I suppose in the marxist tradition current employment is exploitation.The reciprocity starts
Don’t get me wrong I am no Marxist I think the post war settlement was progressive and
reciprocity in a new deal ,a contract between citizens and state is valid but with such a vast
asymmetry in power between worker and employer the duty of work can seem a bit of a forelock
The dispensation proposed under a JG regime by some commenters in previous ‘Comments’ sections is identical to this:-
“…the coercion of capitalism lay in the fact that workers did not have a choice whether to work at all.
Unlike owners of capital, who could enjoy access to the income distribution system without exerting any labour effort, workers had to work for someone if they wanted to eat”.
What was proposed by the commenters concerned was that those persons who declined to take JG jobs without having been medically certified as unfit would be denied any level – even that of only bare subsistence – of official support, and if they starved to death as a result that would be by their own free choice: the express aim being, by means of the threat of starvation if they refused, to coerce such persons to take a JG job. That is indistinguishable in principle from the characterisation by Marx, paraphrased by Bill, of the dispensation obtaining under capitalism in the society of his own time.
“It” (ie “That sort of duality (which) defined the progressive Post World War 2 period”) “had nothing to do with being an exclusive ‘socialist’ ideal. It was the core ‘bread-and-butter’ social democratic tradition in Western democracies”.
No evidence is presented for that bald assertion. What, might one ask, is the “social democratic tradition” if it is not socialist? The founder and first leader of the German Social Democratic Party was Engels – co-author of The Communist Manifesto – was it not?
But all or most of the argument in this series of blog posts of course turns on what is taken to constitute a “progressive” position, which is deployed as a litmus-test governing what sources and what evidence are, selectively. referenced. No reference is made. for instance, to National Assistance:-
“The National Assistance Act of 1948 founded the National Assistance Board, which was responsible for public assistance. The Board established ‘means-tested supplements’ for the uninsured that were derived from national insurance contributions. Post-war inflation devalued national insurance benefits below subsistence level. Increasing numbers of the unemployed, particularly pensioners, therefore drew upon national assistance to increase their income…” (Source: The National Archives > Cabinet Papers > Unemployment Assistance)
I suggest that to represent the doctrine of a so-called “right to work” as the reciprocal of a “duty to work” as enjoying any kind of widely-recognised consensus is imposing an ex post facto construction upon the historical record. No evidence is offered for the postwar Atlee government having ever explicitly proclaimed or endorsed it. On the contrary it was the Beveridge Report which dominated postwar social policy of both Labour and Conservative governments in Britain up to the end of the ‘fifties, and there is so far as I remember (I’ve mislaid my copy) no mention whatever in Beveridge of any such doctrine.
Finally. it is nothing short of ludicrous – as well as being a trivialisation – to stigmatise anathemising of the pitiless regime under Stalin and his immediate successors down to (but excluding) Gorbachev as “‘Reds under the Bed’ paranoia”. I’m dismayed that Bill should lower himself to using that kind of hackneyed, kneejerk, invective which he himself is never slow to call-out when it is employed against him by adversaries in the Twittersphere.
@Neil. Since the GFC we’ve had the lowest mortgage rates of my life time. I haven’t noticed that homes are any more affordable.
@ Neil Wilson
“‘What does “a right to work” mean?’
“In the language of rights, full employment is a societal goal, where as the right to work is a human right”.
Which merely begs the next question: “What is a human right, and who or what bestows it, based upon what premise(s)?”
According to the Declaration of Independence it is “the Creator” – who as we’ve been told “moves in mysterious ways his wonders to perform”. Doesn’t take us very far though.
Pensions, indeed. A decent non contributory state pension would kill the pensions ‘industry’. Wouldn’t that be great. It could be clawed back via tax from those currently receiving a private pension.
From “Full Employment in a Free Society”.
§280, pp 197
… full employment does not mean that men will have no motive to retain their present jobs; full employment does not mean that everyone has security in his present job if he behaves well in it; still less does it mean that he has security if he behaves badly. Full employment means only that, if a man loses one job, he has the chance of finding another. That does not make it of no important to the individual to preserve his present job, if he has one which suits him and uses his capacities. *He will not get unemployment benefits, if he leave his job without just cause or is dismissed for misconduct.*
“Which merely begs the next question”
It does. As I’ve probably indicated I’m not a huge fan of the rights concept – which I find far too one sided and individualistic. I’m merely indicating how they attempt to differentiate the two terms within their philosophy.
Bill’s invocation of various justifications and the ensuing discussion is weird to say the least.
Why do we need some ideological authority to set our moral compass?
What happened to plain human compassion and common sense.
Bill’s drawn support from the Bible.
There passages in the Bible which justify the murder of non believers.
Could the Israelis use this to justify their occupation of Palestinian lands by force?
I am sure we could find exhortations to murder in many ideological tracts.
Do these justify anything?
The argument Bill is constructing is absurd.
Certainly has been an interesting series. Somewhat contentious too. But it is good to be reminded that not everyone thinks like me. And that reasonable people can disagree with each other. And hopefully we can work together on issues we agree with even if some aspects are not perfect in our individual opinions. I’m looking forward to how Bill ties this all together in parts 5, 6, 7 and 8.
[q] Jerry Brown
Wednesday, September 2, 2020 at 0:55
Apparently we disagree then Neil. Rather profoundly at that. But that is ok. At least in as far as this duty to work discussion goes.
But using your idea that rights are granted by society, it should follow that you would have no fundamental issue if the majority of people in a country, knowing any and all costs involved, decided they wished their government to provide support to a person who refused to work even though they could.
Granted them that ‘right’ so to speak. Democratically, as it were. [/q]
Jerry, I would go a step further and have asked Neil, if he would have a problem in the UK with the society deciding that some small ethnic group of UK ‘subjects’, aka citizens, being defined as having no right to life? We have examples of this from history. The Dredd Scott (1857) SCoUS decision comes to mind.
Jerry, you and I want to put that behind us. Neil doesn’t seem to care. He ought to make an exception for at least the rights to life, to liberty and to pursue Happiness.
Yes i forgot that other ‘progressive’ root the holy bible.
” if he would have a problem in the UK with the society deciding that some small ethnic group of UK ‘subjects’, aka citizens, being defined as having no right to life?”
Firstly we don’t have ethnic groups in the UK, at least not as far as those of us brought up in the great period of universalism are concerned. The UK is a peer level society which derives from its Saxon origins. Even the Queen is only there by common consent. You’re either allowed to be on the islands, or you’re not. Once you’re here, you’re the same as everybody else.
Secondly of course I’m ok with some small group of UK subjects being defined as having no right to life, or I’d be against the Abortion Act 1967.
Abortion being, of course, the rock on which the rights concept sunders. Alongside assisted euthanasia for terminally ill people. At least for those nations mature enough to have abolished the death penalty.
The right to life, you see, is just as clear cut as the right to bear arms.
Wednesday, September 2, 2020 at 6:15
“From ‘Full Employment in a Free Society’
So does that conclusively dispose of any and all dissent on the matter?
I think not.
You (and Bill) are perfectly at liberty to adhere to and advocate-for your own beliefs, and to support your argument by citing writers who share them. Others are equally free to adopt opposed positions similarly supported.
That proves nothing either way, does it. We must simply agree to disagree and leave it at that.
Ultimately, as I’ve pointed out before, it’s the ballot-box which will decide – so long as we continue to have some kind of democratic society no matter how imperfect.
“As I’ve probably indicated I’m not a huge fan of the rights concept – which I find far too one sided and individualistic. I’m merely indicating how they attempt to differentiate the two terms within their philosophy”. (Neil Wilson)
OK, that removes the apparent ambivalence. Thanks.
(And personally I agree with your position on this).
“So does that conclusively dispose of any and all dissent on the matter?”
Of course not. It is a primary matter of debate.
I was merely responding to your assertions above “No evidence is presented for that bald assertion.”, and “On the contrary it was the Beveridge Report which dominated postwar social policy of both Labour and Conservative governments in Britain up to the end of the ‘fifties, and there is so far as I remember (I’ve mislaid my copy) no mention whatever in Beveridge of any such doctrine.”
As the quote above shows, the Beveridge report was very much of a similar view to Bill – as you would expect.
And similar to mine.
It remains my view that forcibly taxing working people (which is what is necessary to effect the real transfer) to give to people who refuse to contribute is an unelectable position amongst working people. And that is the evidence of history.
Naturally a properly briefed political opponent would easily drive that stake home. So why go there? Why is that a hill to die on?
“It remains my view that forcibly taxing working people (which is what is necessary to effect the real transfer) to give to people who refuse to contribute is an unelectable position amongst working people. ”
There you go again. Taxation does not fund government expenditure – a core MMT proposition.
“There you go again. Taxation does not fund government expenditure – a core MMT proposition.”
There you go again with the boring old straw man. Yawn.
Perhaps I should do a “what’s in it for you” series.
A brilliant idea Neil.
Policies that sit beside and complement the JG that benefits “everybody”
“There you go again with the boring old straw man.”
No straw man.
You cannot on the one hand subscribe to the core MMT proposition that taxation does not fund government spending and then argue that taxation receipts are transferred to, in this case, the undeserving.
A more stunning contradiction could not be concocted.
‘Taxes are for Redemption, Not Spending’. Taxes for revenue are obsolete and have been for some time. It is as if the transition to permanent free floating fiat currency ‘Modern Money’ never happened in advanced economies when viewing debates. This debate always seems to center around those unable to work or that don’t want to engage with society. The benefit of governments being able to self-invest against its future predicted growth from that initial investment seems to be lost. The possible benefits of a government able to self- invest far out way the debate around a minute few that will refuse to work but will need their basic human rights to life met by the system. Tax does fill an important function as an economic tool, such as the ability to target unwanted economic activity within an economy, but State expenditure no longer depends on the tax take. Would people rather we didn’t have the privileged facility of huge self investment by the State. Politics gets in the way of effective economics. http://wer.worldeconomicsassociation.org/files/WEA-WER-7-Wray.pdf
“You cannot on the one hand subscribe to the core MMT proposition that taxation does not fund government spending and then argue that taxation receipts are transferred to, in this case, the undeserving.”
It isn’t a core proposition. It’s a summary for those who can’t quite grasp the core proposition (which is that there is no control point at zero in the government sector – summarised once more as “government cheques don’t bounce”). You account for numbers ex post, but they have no control effect on the prior actions.
It all becomes clear when you get the MMT nuance. Particularly the separation of money and stuff. Perhaps read what I said more closely (particularly the term “real transfer”).
Hence the straw man. Which means either you can’t see the distinction, or don’t want to see it as it will collapse some core belief: classic cognitive dissonance in other words.
It’s quite sad to watch frankly. I’m really not quite sure how much clearer we can be here.
Neil Wilson @ 17:04, wrote,
[q] Firstly we don’t have ethnic groups in the UK, at least not as far as those of us brought up in the great period of universalism are concerned. The UK is a peer level society which derives from its Saxon origins. Even the Queen is only there by common consent. You’re either allowed to be on the islands, or you’re not. Once you’re here, you’re the same as everybody else.
Secondly of course I’m ok with some small group of UK subjects being defined as having no right to life, or I’d be against the Abortion Act 1967. [/q]
Neil, your 1st point is spurious. It denies my assumption can happen. You must grant my assumption. It is too easy to refute any point by denying it.
. . . In the UK there are differences that could be exploited to deny some subjects their right to life. If fact when ACC makes the sh!t hit the fan and people are starving, all bets will be off. Until then I, for one, want to have a few rights that can only be taken away for criminal acts.
I defy you to find good evidence that any historical society defined the unborn as a person with the full rights of personhood. Even the Roman Catholic church didn’t have the same punishment for causing a stillbirth or having (or erforming) an abortion as it did for murder. *No* society studied by Anthropology did either. In fact, most r cose to all such societies allowed infanticide, like ancient Athens and Rome did.
The right to life starts when life starts. At birth. The UN list of human rights was adopted before abortion became a right. Or much of a thing. It is not proper to declare an absolute right and later redefine the terms. The UN has not voted to extend the right to life to the unborn. You don’t get to speak for the UN. I know of no nation that has a right to life, that also has a majority view that abortion is murder.
All your rights can be taken away if you commit a crime. In jail you lack liberty. Commit a bad enough crime and you may lose your life.
The government taxes people in order to force them to work for it, or for the nation’s private sector employers, in exchange for the currency in which the tax is denominated.
This is what ensures national acceptance of the, otherwise worthless, currency for all transactions within the economy, and allows the govt to provision itself of whatever real resources that the nation has that it requires.
That’s a core tenet of MMT, and nothing whatsoever to do with the (incorrect) notion, that “taxes fund govt spending”.
That was to Henry Rech, btw.
It isn’t a core proposition.
Neil’s right Henry and why Warren has never said it in 20 years. Warren frames it differently. Warren explicitly highlights when you say taxes do not fund spending it gets you into trouble because of the word ” fund” what does fund even mean. It depends on what the term fund means.
40 mins in Warren ‘s debate with Bob Murphy easily found on the internet. He goes over in detail what Neil is trying to explain to you Henry.
Warren frames it
” Spending is not constrained by revenues. The treasury instructs the central bank to credit the appropriate account. Taxes create goods and services for sale. ”
This is what happens when you get bogged down in the numbers that don’t matter and forget about the skills and real resources that we can run out of. With taxes what you end up transferring are goods and services not money the thing that is used to pay for those goods and services that are being transferred.
Or as Bill frames it..
“Okay, so there are no financial constraints. We all agree on that. So it would be good jettison all the macroeconomic theory that construes the government budget constraint as an ex ante financial constraint instead of seeing it as an ex post accounting statement, with no operational relevance. What is held out as a financial constraint is usually not that at all. Typically, in macroeconomic policy the constraints are political and voluntarily imposed.”
Neil’s right Henry. MMT economists when interviewed rarely say – taxation does not fund government spending all because of the ambiguity of the word Fund. Followers of MMT do and we always get our knuckles slapped for it.
Taxes don’t really have any effect on demand for a currency once the system has got going. Just like a starter motor has no impact on a car engine once it is running.
Once the engine is running taxes are really there solely to stop the system over spending itself because people are borrowing too much and not saving enough, and to correct failures in the distribution system that give some people too much money and others not enough.
But really we should address the root causes. Excessive borrowing. Insufficient savings and the ineffectiveness of competition in the market part of the economy. The reason ‘tax the rich’ wins is because it goes for the visceral disgust the hard left have for the wealthy. Nobody ever discusses the detail of ‘how much’.
Half the problem is discussing tax rates, when the amount of tax at a tax rate is variable by virtue of the auto-stabilisers. In other words it just pays for itself automatically.
Seriously Henry the numbers don’t matter. And that’s because they are thinking about *distribution* when we’re really concerned with the *total tax take*.
The distribution is in the gift of the chancellor and the government, whereas the total tax take isn’t. That is determined by how much people save over how much they borrow..
So probably the best approach is to turn it around and say “what do you think taxes should be” and then say “yeah that sounds about right” regardless of what they say. You’ve then just agreed with them and can get onto the next bit of persuasion. Plus it works with Liberal, Labour, Green or Tory.
You want to get acknowledgement that there is no fiscal constraint and get people talking about real resources rather than numbers. In particular you need to get across that taxing people is about freeing up real resources for use somewhere, and that taxing isn’t necessarily the best way of doing that. For example banning private practice of dentistry would free up dentists for the NHS.
“For example banning private practice of dentistry would free up dentists for the NHS.”
Probably time to address that one since I’m probably guilty of accidentally starting it as an over simplification.
Yes it would free up dentists. However it would also free up the money currently spent on private dentistry to be spent on something else, which is potentially inflationary.
When you ban something you have to be sure the money is saved, not spent if it is to create actual space rather than just move spending around like pressing on a water bed.
And generally the best way to do that is ban or restrict things that require a money creation event (aka a loan). Then the loan won’t be issued and the ‘net saving’ happens. Proscribing loans has the same effect.
As does reducing the pension age, since that naturally limits the duration of loans. You’ll note the move from 20 year to 25 year to 30 year+ mortgages has coincided with the steady creep up of the state pension age and the expected age of retirement. I noticed the ‘Squealer’ economists pushing the ‘pension ages will have to go up to pay for Covid’ line again today. The banking fraternity really do have them on a short lead…
Thanks, Derek. I’ve been known to use the phrase ‘taxes don’t fund public expenditure’ – frequently. Will try to understand now.
Something that’s been puzzling me, though. What good are savings to the economy? I will need a simple explanation:-l
Neil, MrShiggy, Derek,
Please tell Bill that “taxes do not fund government spending” is not a core proposition of MMT.
“The essential insight can be summarized by the title of the blog – taxpayers don’t fund anything.”
“…we need to think about the role of taxes in an entirely different way because taxes are not needed to fund government spending.”
p. 323, “Macroeconomics”, Mitchell, Wray, Watts.
Next you will be telling me that a monetarily sovereign government faces a budget constraint.
I have a pile of MMT papers next to me which is heading to a metre in height. I bet I could pull out anyone of them and find a reference to support my point.
Blog referred to above is:
“What good are savings to the economy?”
Ever had £20 in your possession? That’s savings.
Ever had a rainy day fund. That’s savings.
Ever run a business using cash for working capital rather than a loan (due to lack of collateral). That’s savings.
Ever wanted to show off how good a capitalist you are by the size of your bank account. That’s savings.
“Next you will be telling me that a monetarily sovereign government faces a budget constraint.”
Which part of “there is no control point at zero” is difficult to understand?
Cognitive dissonance it has to be then. Simply cannot see the point due to belief.
It’s about stuff, not money.
Much of this discussion has been in the context of a country that has already implemented a JG. It already has loose full employment. Maybe 2% of the working population is in the JG programme. Maybe 4%. Not many.
Okay, so with that in place, the government decides it wants to spend more.
Or does it?
What it really wants is a new hospital, or an aircraft carrier. The spending is merely a means to an end. It wants stuff.
“Taxes don’t fund spending”, so the government doesn’t need to tax to get that hospital/carrier, right? Well it doesn’t need the money; it creates that. But it isn’t really interested in that anyway. It wants a hospital/carrier. It wants stuff.
How does it get that? Skilled brickies/shipbuilders are all employed. The government could pull some people out of the JG pool and train them, but the pool is small and training takes time.
If the government is going to get the stuff it wants, it will need to limit the capacity of the private sector to purchase that stuff. Tax will do that.
The government doesn’t need the tax income; it can destroy that as soon as it gets its hands on it. What it needs is for the private sector to NOT have it. That frees up the real resources, including labour time, that the government is actually interested in.
Do taxes fund spending? I don’t want to get into the rabbit hole of defining the word ‘fund’. In a slack economy a government can increase its spending on real resources without increasing taxation, and without causing inflation. In a tight economy taxes allow a government to spend without causing inflation. Make your own mind up about what ‘fund’ means.
It’s about stuff, not money.
“Which part of “there is no control point at zero” is difficult to understand? ”
Please explain it to Bill.
While you’re at explaining it to Bill, perhaps you can also explain it to Stephanie Kelton and Warren Mosler.
“Deadly Innocent Fraud #1: The federal government must raise funds through taxation or borrowing in order to spend. In other words, government spending is limited by its ability to tax or borrow.”
“Seven Deadly Innocent Frauds of Economic Policy”, Warren Mosler.
“After carefully considering the complexities of reserve accounting, it is argued that the proceeds from taxation and bond sales are technically incapable of financing government spending and that modern governments actually finance all of their spending through direct creation of high-powered money.”
“Can Taxes and Bonds Finance Government Spending”, Stephanie Bell, 1998.
And another from Bill:
“Taxes serve many purposes….but none of these purposes relate to funding government spending.”
“Framing Modern Monetary Theory”, Louisa Connors and William Mitchell, 2013.
You have a lot of explaining to do Neil. Better get to it.
I can agree with a lot of what you say, however, it has nothing to do with the point I am making with Neil.
It is clear from the quotes I have provided that “taxes do not fund government spending” is a central proposition of MMT.
Having established that, I argue that Neil is engaged in a grand contradiction. He cannot use the argument that the benefits paid to those unemployed not willing to participate in a JGS are transfers from taxpayers because taxpayers do not pay for anything. If he believes that the transfers are funded by taxpayers then he is contradicting a central proposition of MMT.
” If he believes that the transfers are funded by taxpayers then he is contradicting a central proposition of MMT.”
Real transfers happen because those that would otherwise buy the supply no longer have the money due to taxation. They have desire, but no demand. That supply is then picked up by those people who have been given state funds for nothing real in return.
Neil, I asked: “What good are savings to the economy?” I don’t believe that yours was an answer to that.
What good are savings to the economy?
Bill explains it in his post today with graphs -Australian economy collapses and the federal government goes missing
The neoliberal era has all been about pushing households and businesses into debt. Reduce the private sector surplus and push people into the arms of the banks and pay day lenders. GDP growth from private sector debt which is unsustainable.
Steve Keen and Michael Hudson has written about it for years. Why big budget deficits are bad for banking profits. If households can save more They take on less debt. Private sector debt the debt that really matters.
Neoliberal era is the banks allocate the currency the banks allocate the skills and real resources. Govt is shrunk to the size of a pea.
If you understand Steve Keens work you’ll get it. Read Michael Hudson’s Why big budget deficits are bad for banking profits. Easily found on the internet.
Hope that helps
Randy Wray explained it well also in the lockdown podcast – Monetary Finance in the Age of Corona Virus: Modern Monetary Theory and the Green New Deal. Which can be found on you tube.
Randy used the sectoral balances to get his point across. He said …
” If someone is going to tell me they are going to balance the government budget. Then they have to tell me how they are going to deal with either private sector surpluses that are extremely financially fragile that will crash like 2007. Or how do they get the rest of the world to run trade deficits against us when that is out of our control.
Using the fact that the sectoral balances have to balance to zero. Which I thought was a masterstroke when discussing balancing the govt budget.
Thanks, Derek. Of course. It’s just the opposite of private (consumer) debt, which is bad. However, how about the savings of the very rich?
There is surely no benefit in businesses saving.
Let’s rephrase the question. What’s the pros and cons of taxing the super rich.
You already know the pros and cons. So you already know the answer.
Let’s say a JG is introduced in the UK and it now has full employment at all times. Or at least plenty of aggregate demand. That could and probably will attract both FDI and capital investment. Business owners and entrepreneurs will be looking at start ups or increasing productivity with what they already own.
Considering most businesses are small to medium sized savings are good. They don’t need to borrow to invest. Even if you tax the super rich by how much ? Because you could be depriving someone an income.
Just don’t issue debt. Deprive the rich the free welfare at source ?
Anyhoo you know the pros and cons so you know the answer.
“Real transfers happen because those that would otherwise buy the supply no longer have the money due to taxation. ”
That would be true if the government was in surplus. Seeing MMT compliant governments would be in deficit most of the time, it does not apply.
Well I have to admit Neil managed to shock me into shutting up for a while. And perhaps he is right that it is an “Americanism” to talk about ‘rights’. If it is, I am kind of proud about it. It is a bit ingrained in US citizens through schooling about the history of the US. The Declaration of Independence, the US Constitution and the Bill of Rights- the first ten amendments to it that we still have care for today. The obvious hypocrisies involved with the refusal to extend those rights to all- especially with the issue of slavery. And women. Americans have good reasons to talk about and think in terms of human rights.
But if you want to talk in terms of ‘duties and obligations’ , well I guess you have that right- at least under the US Constitution 🙂
Thing is- I’m not sure there is a real difference here. I say there are human rights- you say no, what I call ‘rights’ are the result of society demanding of all members the duty to respect those things I call ‘rights’. Not a big difference at least in a practical sense.
I say rights are inherent- you say that is basically an appeal to God as an authority. Maybe, maybe not. But where do your ‘duties and obligations’ that are necessary to confer rights come from? Who imposes them? You say society basically. Well that is an appeal to authority also- you have just changed authorities is all.
If it is not self evident- I prefer my framework 🙂 It has the advantage of using less words to explain the parts that can possibly be explained than yours does. But you have the ‘right’ to prefer your framework.
To Steve American- this is an economics blog. I would not recommend that anyone attempt to develop their moral compass by discussing economics at a blog- even here at the best one out there. Anyways, I could write 3000 words in disagreement on this issue and all it would come down to is I think I’m right and I think that the other guy is not. And that would be best case outcome on this subject for me. And I am obviously not a great moral philosopher. Or whatever someone who was good at this would be called.
“That would be true if the government was in surplus. Seeing MMT compliant governments would be in deficit most of the time, it does not apply.”
Doesn’t matter if the govt is in deficit or surplus Henry. What we are trying to do here is transfer real resources from one area of the economy to another. Regardless of deficit of surplus.
Let’s say the government wants wind and sun energy instead of nuclear energy. How would taxes be used to get that ? Or would banning nuclear power work better ?
Think that through then read Neil’s comment again.
By the way did you listen to Warren and Bob Murphy’s talk – Warren Mosler Defends the Essential Insights of Modern Monetary Theory (MMT)
Starts at the 40 min mark.
Easily found on tinternet.
I would say Henry has pointed out an inconsistency with one of the comments. And instead of admitting that is so, you guys are flailing around trying to make an argument that a minor mistake in communication just isn’t a mistake. It is just going to make matters worse.
Henry is mostly right about this. The MMT conclusion that tax collections do not fund the currency issuing government’s spending is pretty important. There is a reason why Bill Mitchell uses the words he uses when explaining MMT- he has to be precise. If you choose to use different phrasings it is important that your phrasings are equally accurate.
RobertH: In which case what does postulating an individual “right to work” add which a demand that a government adopt a full employment policy doesn’t already cover?
I agree with a good amount of what you say. The distinction that Bill makes between social democratic and socialist became de rigeur in the 20th century. I’ve been called “a man of the 19th century” as a wry compliment. 19th century socialists like me rightly think such distinctions are very foolish and have wrought much mischief. But no, it was not Engels who founded the SDP, but LaSalle.
But here it seems to me you may now agree with me in our earlier discussion.
To answer your question – True full employment, a JG would implement the right to work. “Postulating” it as a right means it would be formal, justiciable right that the courts would enforce. If you go to the local JG center – they have to give you something to do or at least wait there, and then pay you. If they don’t you can sue them.
In other words, the right to work should be treated as a right, a property right, not a revocable privilege or something to be “balanced”- just as pension rights should be. There is a 1960s US decision Flemming v Nestor against that concept – but I think most authorities think it is a bad ruling – not followed in practice, a product of rabid anti-communism that said “we don’t have to pay commies their social security.” On the other hand, surprisingly, a wide range – major economists conservative and liberal – in the 1960s agreed that the right to work WAS a property right. That the government deprived the unemployed of this property, their labor, by working with “the private sector” to prevent them from alienating it.
Crawford MacPherson relates that the development of capitalism saw restriction of the word “property” from wider meanings that would sound odd to modern ears. See his collection “Property: Mainstream and Critical Positions” and “Human Rights as Property Rights” (Dissent, 1977) also in “The Rise and Fall of Economic Justice” at the Internet Archive. So the word ended up meaning largely “property of the rich” while the property of the poor – for instance, their labor – was simply no longer seen as property. The 60s saw a laudable return to the older, more logical usages. But that disappeared for a while – until reappearing at the Center of the Universe that the rest of the world follows eventually – billyblog and its comment section. 😉
So of course if the gov takes your property, they ought to pay you, by the principle of reciprocity that all social and legal systems embody. “Problems” with a JG, with a “human right to work” as an enforceable “property right” are all imaginary, or amount to asking “where will sadists get their victims and slaves?”. It is very practical and important to recognize the right to work as a (property) right – because full employment is already a proclaimed goal and policy or verbal “right” in two US laws, in international covenants- which are completely ignored by the government(s). The duty to work doesn’t really enter here particularly (except as implicit in the money system)- and it is not exactly dual to the right. So I do agree with much of your position not exactly agreeing with Bill. Neither does Lawrence Becker, if you read his article.
RobertH: “IMO it just muddies the waters of what ought to be pragmatic policy-design evaluation with abstract philosophising concerning “human rights”.”
No, it is the reverse. The pragmatic policy-design muddies the waters of the abstract philosophizing. Everybody naturally and easily philosophizes abstractly. That’s how you grab and teach the common man. Not everybody is a technocratic policy designer, and they can reasonably seen with suspicion – surprising you’ve said this in light of your often justified criticism of the Soviet “pragmatic policy designers”. Or again, consider the decline and fall of the postwar consensus. The main reasons being the era did not abstractly philosophize as deeply or clearly or consistently as MMT, did not use it to connect with and explain pragmatic policy as well. Once one gets the abstract philosophizing right, understanding the practical designs are easy, much easier than vice versa. Don’t people cook up half-baked policy designs if they don’t get the “abstract philosophy” right? Is pragmatic evaluation even possible, even conceivable without some abstract philosophical basis?
@ Some Guy
Thank you for that most courteous, valuable and thought-provoking (as well as scholarly, which I can’t claim my more “off-the-cuff” remarks to have been) response.
I will certainly continue to ponder it.
In the meantime all I will say is that while I think it succeeds in countering some of my arguments we are in fact quite substantially in agreement. Perhaps the most crucial divergence is in regard to our respective positions relating to “rights” (a divergence very evident also in the exchange between Neil and Jerry).
That’s hardly surprising seeing that it’s a matter which has been in contention for centuries – if not millennia!
I – in the British tradition – incline much towards pragmatism as the best guide in human affairs (at least in the context of a democratic polity), while you I think – and Jerry – more towards the American tradition of “inalienable rights”.
Perhaps that’s the reason why the USA is – and always has been – infested with so many pesky lawyers 😉 (But one mustn’t overlook the fact that one of them was Abraham Lincoln, and another Oliver Wendell Holmes!)
“The MMT conclusion that tax collections do not fund the currency issuing government’s spending is pretty important. ”
It’s less important than some people seem to think, and it certainly doesn’t mean what some people think. It follows from the simple logic of the system. As a currency user you can’t pay taxes in a denomination until the currency issuer has issued the currency. It’s an unarguable logical fact: spending must come first.
That debate has come about historically because of the mainstream obsession with the Government Financial Constraint hypothesis which MMT shows is an ex-post accounting identity and has no planning or control function whatsoever.
We’ve just about dispensed with that thanks to ten years of QE and governments finding billions “down the back of the sofa” to stop the world collapsing due to Corona.
Then the other side switches tactics and starts complaining about “printing money” (when, amusingly, money printing is actually a tax…) at which point MMT points out that taxes fund government spending by freeing up the real resources necessary to accommodate that spending.
And that point necessarily comes about once you have a Job Guarantee in place (which, yes, generates “Keynesian semi-inflation” while it is taking root – that’s in the literature) if you want the system to operate cleanly without inflation at the top of the cycle.
If you believe there is space to allow people who don’t contribute to purchase items without taxation, then all you are effectively saying is that you want to tax the people on the Job Guarantee by failing to set the JG wage sufficiently high to absorb the output gap. Since a low JG wage is the same as the correct JG wage less tax.
Taxes have nothing to do with funding things fiscally as a matter of logic. But they are the mechanism by which discretionary spending is funding in real terms. It’s the main way you make discretionary government demand effective without causing inflation – if you’re allowing the private sector to do its thing naturally in that capitalist mixed economy way.
“It’s less important than some people seem to think…”
Come on Neil, this is self serving bulldust.
The proposition that taxes don’t fund government spending is central to the logic and narrative about a monetarily sovereign government having no budget constraint and being faced with no financial constraint. These are the core ideas of MMT.
“But they are the mechanism by which discretionary spending is funding in real terms.”
And what about when a government deficit spends? Taxation does not release sufficient resources to cover the spend.
“And that point necessarily comes about once you have a Job Guarantee in place (which, yes, generates “Keynesian semi-inflation” while it is taking root – that’s in the literature) if you want the system to operate cleanly without inflation at the top of the cycle.
If you believe there is space to allow people who don’t contribute to purchase items without taxation, then all you are effectively saying is that you want to tax the people on the Job Guarantee by failing to set the JG wage sufficiently high to absorb the output gap. Since a low JG wage is the same as the correct JG wage less tax.”
I suspect there are some interesting points in there somewhere but I am damned if I can make sense of your mangled logic.
Is there any way you could recast these two paragraphs?
“And what about when a government deficit spends? Taxation does not release sufficient resources to cover the spend.”
Private saving has created the fiscal space for the deficit spending. Once the JG is in place, that space is used up, and further spending increases will have to be met with taxation and/or suppression of the JG wage. There are no free lunches once the JG is implemented.
Thanks Stuart, that makes sense.
Suppose the JG was to work as fully as Neil anticipates, as in there is never any more room for the government to deficit spend at all without creating inflation- the economy is therefore always at potential output. What happens when a bank makes a loan? We know that banks create deposits when they lend. Every time a bank makes a loan they are in effect suppressing the JG wage?
This model of the JG that Neil has made seems to go a bit beyond what I have read from MMT economists. Doesn’t mean it is wrong necessarily, but it doesn’t fit with some of my previous understandings about MMT.
Quite right, Jerry, well said. Was about to say exactly the same thing, more longwindedly. But I ended up being far more longwinded than you anyways, as usual, and probably muddying the issues you’ve clarified. 🙂
A living wage JG will be the biggest and quickest free lunch, but at any reasonable wage that is not intended to cause serious price rises – like a $100/hour wage, there will be plenty of free lunches left with one. People should usually not obsess “how are we going to raise taxes to pay for nice things” even with a JG.
The MMT idea as Bill has explained in numerous blogs is to thwack the economy on the nose, with a tax or rolled up newspaper, when it gets too frisky, when it heats up, when there is inflation at the top of the business cycle, when the JG can’t help much because it is empty, with everyone having taken a higher paying job.
But a JG will most likely be instituted as in the Depression, when there is mass unemployment, and it will be big, and thus a powerful anchor against inflation then. There would be plenty of room to have projects that paid higher wages along with it, for years after it. For instance, the TVA brought power to millions, eradicated malaria, developed a huge region of the US South – and with lower electricity prices etc it may have deflated, not inflated things. So successful that its fatcat foes were deadly determined and succeeded in thwarting all the other planned TVAs. So people get outrageously ripped off for power – feeding inflation – as with Enron years back.
The regime where we have to be quite serious about imposing taxes, “paying for things with taxes sorta kinda but not really” for new big ticket items – begins at the top of the business cycle and extends into when the government takes over the economy, turns it into a quasi command, state socialist economy as in WWII. Not the bottom of the cycle to a normal top, the usual state of affairs covering 9 out of 10 years. At worst, adding a new big but not gigantic program like the TVA to an economy with a JG in this usual state would just accelerate the cycle a bit, make whatever brake we put on it, taxes being one example, need to be applied a bit earlier.
The other view is wrong, is contradicted by history and MMT. It basically eliminates or ignores the business cycle! It may come from using neoclassical micro underneath MMT-ish macro. But neoclassical micro is almost as bad as neoclassical macro. Firms are usually quite able to raise quantities. They would do so first, for some time before they raised prices – towards the end of the cycle, not the beginning.
Thank you very sincerely for your very kind reply. It made my day and cheered my wife up too. I was about to make the same English v. American observation!
Yes SG. I think that what has been stated oversells the JG a bit. And putting a minimum guaranteed bid on labor, even at a decent living wage does not actually lead to the conclusion that standard (wrong) economic theory would then be accurate. That is the implication I am drawing from various recent comments about the JG. There are too many things wrong with with that old framework for even a JG to solve.
Right. It is an old observation that standard wrong theory becomes correct when you apply Keynesian economics enough. Forstater mentions this somewhere. Lerner called it setting the economy right side up, from the topsy-turvy depression state.
But that it instantly, discontinuously becomes totally correct when you have any JG at all – no matter the wage?! – why should a $10 and a $15 wage have the exact same eat all the free lunches effect? How could it? If both wages have the same null effect on inflation, then the $15 wage found more lunches. But your argument about bank / private spending being about the same as new, extra, non-JG spending is the clearest. The only real worry could be about future inflation at the top of the cycle, not present inflation. But that is so speculative it is silly. Sufficient unto the day is the evil thereof.
There was even an old joke in the days of the USSR. On the rare occasions that Soviet & Western economists met, they agreed that Western classical economics applied fine to the USSR while Marxist economics described the USA very well.
The mainstream approach doesn’t become correct, but it does become less wrong because the government does then need to tax if it wants to spend. Not because of bond vigilantes, or inter-temporal constraint nonsense (so they’re still wrong), but simply because of inflation. See my comment up-thread.
“But that it instantly, discontinuously becomes totally correct when you have any JG at all – no matter the wage?!”
Point out where Neil or Bill or anyone else has made claims anything close to what you’re saying and we can talk about it.
Eddie Baker, thanks. But it also implies that the government will need to tax more whenever a bank makes a loan. Whether for consumption or investment, a bank loan increases effective demand without decreasing anyone’s ability to spend. If the economy is already continually operating at max potential, because of the JG program, as Neil has been saying, then that additional private spending will push inflation forcing government to increase tax rates.
To a certain extent that would hold true for any private sector Investment spending, whether bank loan funded or funded out of prior savings, that does not reduce that investment spendor’s ability to continue consuming at their previous levels in the meantime.
The point is that ‘loose full employment’ with a JG is not the same as tight full employment where the economy is actually very close to full production and any additional spending will push prices.
“Point out where Neil or Bill or anyone else has made claims anything close to what you’re saying and we can talk about it.”
Eddie, Neil has been making these claims in comments here over the past few weeks. Bill has never made these claims as far as I know- and that is pretty much the reason Neil is getting some pushback about his claims from me at least. Probably SG also.
The government can tax, or it can limit loans. The fact that all spending, government or private, can be inflationary is bog standard MMT.
Right now it’s not an issue because we’re not near capacity. A JG changes that. More to the point: a JG which has been in place long enough to absorb the output gap and put us into a position of loose, permanent*, full employment.
Yes, it’s loose, so the Government could pull people from the JG pool to produce that new hospital/carrier. If there are enough people with the capacity for the training needed, and if the government doesn’t mind waiting longer. Otherwise, it will need to prevent the private sector purchasing the resources needed.
As for Neil, my issue with SG’s comment was the idea that Neil thinks the mainstream view would become instantly and totally correct.
I can’t see any comment by Neil that says that.
The mainstream will still be wrong, but at full employment they are less wrong, especially when it comes to *what* governments will need to do. They’ll still be wrong about *why*.
* Of course a government could scrap it.
Eddie, that is my fault. I said that the implications of Neil’s recent claims were that with a JG in place, standard (not Keynesian) econ theory would then be correct. You would have to evaluate whether I was reasonable in my estimation about that by reading the comments yourself- which is not too difficult to do.
Like I said, I believe what Neil claims about the JG program to go beyond what MMT economists have said in the past. For example, I am not aware of other MMT claims that Keynesian fiscal policy would be completely ruled out once a JG was in effect. And I don’t see the purpose or benefit of making that claim in any event.
I have a lot of respect for Neil Wilson and I do not enjoy disagreeing with him. And it may turn out he is correct if we ever get the JG into effect- which is what we both want and think would be very, very good for all kinds of reasons. And then he can say- I told you so. And I will say ‘yes you did’ and be very happy to do so.
Eddie, I will just copy one of my previous comments on this issue. The points have not been addressed or at least not so that I understand. Perhaps you (or anyone) can help with that.
Wednesday, August 26, 2020 at 23:34
I think Neil would be right if there were two additional assumptions – that the JG effectively ended the ‘business cycle’, and that JG jobs were always the optimal use of people’s time and efforts.
The first means that private sector savings desires will remain static at all times.
The second means that the JG would no longer be functioning as a ‘buffer stock’.
Absent those, I see a role for Keynesian fiscal policy at times even with a JG in place.
Jerry, with luck someone smarter than me will jump in, if not I’ll have a go tomorrow.
The relationship between the individual and the broader society as represented by it’s government may be considered as as a contract between the two. The individual contracts (with little choice in the matter) to obey the laws set down by government. The government contracts to ensure that the individual has the means to support him or her self to some acceptable minimum standard without having to break those laws to do it.
Whether the government fulfills it’s obligation by ensuring everyone who wants one can have a paid job to support themselves, thereby bestowing a legally enforceable ‘right to work’ on all citizens via a job guarantee or other policies which ensure ample private sector jobs, or whether they provide a sufficiently funded welfare state to keep a significant proportion of the people at the same minimum economic level but in idleness (no problem if robots have taken over the productive work they would otherwise do) is immaterial in the material sense.
If the latter is adopted, no intrinsic right or obligation to work is required, indeed such a mechanism makes practical the right NOT to work. How you then ensure that enough people want to do the work required to keep society functioning without the incentive of ‘no work, no breakfast’ is another (critical) issue.
Which option has the best social outcomes is also relevant and relates to whether large numbers of people with money to spend but no commitment to go to work every morning will use their time in constructive ways or just get bored and drunk and break windows for fun.
Sunday, September 6, 2020 at 10:30
…no intrinsic right or obligation to work is required…’
That sounds like some terrible dystopia. I trust we never get there.
As for here and now there is ample work for all the underutilised labour in our economy. The JG elegantly connects that labour to local needs. However, it may lead to some reduction in volunteer work and some of the work done by ‘charities’.
To Eddie Baker: I didn’t name anybody in that comment on purpose. To think is to exaggerate. If people balk at “instant & total change”, I’m happy. I’m saying people are heading down that road, definitely too far. There have been comments that “the JG eats all the free lunches”, and after that, we must tax to spend etc. Or the following on your comments.
EB: Point out where Neil or Bill or anyone else has made claims anything close to what you’re saying and we can talk about it.
My impetus for wading into this is that there are claims about what happens once there is a JG, what is needed once there is, what are good taxes etc, that Bill & MMT do. not. make. But some people may not realize what the Offical Genuine MMT Recommendations and Theories are and what are not. So I’m trying to present the standard MMT view as best I can.
For instance, Bill in the just previous blog “US Federal Reserve statement signals a new phase in the paradigm shift in macroeconomics” just criticized the kind of “step on the brakes” behavior that is supposedly necessary. He notes the Fed decided:
“3. They will no longer tighten monetary policy as employment growth strengthens before there are inflationary effects – that is, they are rejecting all the ‘forward-looking’ bias that mainstream theory imparted that policy had to kill off employment growth before unemployment had fallen significantly.”
In a JG world, that would translate into not tightening if non-JG employment growth strengthens before there are inflationary effects. Stop fantasizing being a Laplacian omniscience who can smell far-off inflation when nobody else can. Trump’s Fed has realized that. Bill applauded that. So should we.
EB: “It [the government] wants stuff.
How does it get that? Skilled brickies/shipbuilders are all employed. The government could pull some people out of the JG pool and train them, but the pool is small and training takes time.
If the government is going to get the stuff it wants, it will need to limit the capacity of the private sector to purchase that stuff. Tax will do that.”
No, for most stuff, just putting in an order will do that. It is not necessary to limit private sector capacity, because it has not been reached merely because there is a JG, or even has been one for a long time. Most of the time, for most things, the government will not need to limit private sector capacity at all, most especially at the beginning of a business cycle. The usual problem is too much capacity, not too little!
EB: “Right now it’s not an issue because we’re not near capacity. A JG changes that.”
Again, no, it doesn’t. That’s a big point of MMT. Basic labor is fully employed. Not everything possible. Most things don’t follow neoclassical supply /demand micro. Maybe only something like 10% of the economy does. Albeit what the gov project needs could be in that 10%. It depends on the project, what it needs. It depends on the benefits envisioned.
EB: “Yes, it’s loose, so the Government could pull people from the JG pool to produce that new hospital/carrier. If there are enough people with the capacity for the training needed, and if the government doesn’t mind waiting longer. Otherwise, it will need to prevent the private sector purchasing the resources needed.”
That’s not exactly what would happen mostly. There are many buffer stocks, much flexibility in the economy, in the labor force. It is not reasonable or beneficial to eliminate them, and MMT doesn’t try. Suppose the government has a new project. There are people who do similar jobs who could be trained very quickly or on the job. Grading people by their dollar wage for simplicity, there are many who get $19 now but could do the $20 job the gov offers now. So the gov grabs them and the job they abandon gives $18 people a better one, down to the $10 JG people – and the size of the JG would shrink. Also, construction jobs are notoriously cyclical, feast or famine, and construction workers notoriously mobile, going where the jobs are, and simply working overtime if the demand is enough. That’s another buffer stock right there.
Top down so-called “Keynesian” spending could do what is feared. Spend on high tech missiles and cure unemployment by it trickling down, by the pulling up effect I mentioned. We might get near-full capacity nearly everywhere and lotsa inflation and make resources pulled tight everywhere. But that’s not what the JG does. But even then there is the “Domar effect” – businesses invest because of that demand and capacity always outruns demand again.
The conditions described by those with a new found enthusiasm for taxation – the rigid supply of everything simply do not apply until we are over the top of the business cycle, have been using top-down “Keynesian” spending at near WWII levels. Sure, the same considerations apply throughout the cycle, but marginally. At the beginning little. At the top, significantly. That might suggest shelving a project until these marginal considerations made it more appropriate – maybe until after a new tax or whatever thwacked the economy on the nose and replenished the JG pool again. One could also say that the “new project” after the JG isn’t really classical Keynesian demand/employment stimulation. Those things have to be considered, but the main thing should be the particular facts about the project. So in that sense the JG ends Keynesian demand management. But that’s about as far as it goes – and this new enthusiasm goes too far beyond that.
If anyone is interested, in my reply to RobertH, the economists who considered a worker’s labor as their property, the right to work as a property right- and very Properly so! – were Kennedy’s Council of Economic Advisors – it’s on page 200 or so of their 1962 report IIRC. And Herbert Stein, who wrote a paper then commenting on this – and said “of course they are right.” He became Nixon’s & Ford’s chairman of the Council of Economic Advisors.