Degrowth, Deep adaptation and MMT – Part 3

This is the third part in a on-going series that I am writing about Deep Adaptation, Degrowth and related concepts, all of which are designed to provide some sort of pathway beyond the current mess that the world is in with respect to climate, inequality, poverty, excessive consumption, and excessive population growth. Today, I consider how Modern Monetary Theory (MMT) fits into the transition agenda and discuss the labour market dislocation that will accompany the transition to degrowth.

Series to date

1. Deep adaptation – Part 1 (August 22, 2022).

2. Deep adaptation, degrowth and MMT – Part 2 (September 8, 2022).

3. Deep adaptation, degrowth and MMT – Part 3 (October 3, 2022).

Background

Some years ago, my research group – (Centre of Full Employment and Equity (CofFEE) – did some early work on estimating the employment consequences of moving away from coal-fired power stations in the state of New South Wales (Australia).

I discussed that research in this blog post – Australia’s response to climate change gets worse … (November 15, 2009).

We found that shifting from coal-fired power generation to a clean, renewable energy economy would result in a net gain of 5,760 and 10,650 jobs depending on assumptions made about market reach and manufacturing input.

The net job creation would result in well-paid jobs in the research, design, manufacture, installation, maintenance and export of energy efficiency and renewable energy technologies.

We also outlined a Just Transition framework that would be required to accompany such a shift in employment.

It was an experimental piece of work commissioned by Greenpeace, which sought to provide ballpark estimates of the shifts in the labour market towards renewables for power generation.

We followed that up with a more complex analysis, which extended the scope of the analysis and found positive results.

The final report is not publicly available but you can download the technical conference paper we published – Job Impacts of a Decarbonised Australian Economy (November, 24, 2011).

That research found that there will be significant gains in employment in the electricity industry under either decarbonising scenarios we modelled.

Technological advances have been vast since we did that work in 2008, which only serve to reinforce the positive outcomes we found for workers in abanding carbon-intensive power generation.

The earlier research we did was not ambitious enough, where ambition is a shifting target really, given the uncertainty of the climate challenge.

In other words, we now appear to have less time to make the necessary shifts than was considered to be the case 15 or so years ago.

The point though is that jobs remains an important part of the degrowth debate and warrants further consideration.

Degrowth and MMT

In Jason Hickel’s book – Less is More: How Degrowth Will Save the World – Chapter Five focuses on ‘Pathways to a Post-Capitalist World’ where we read that:

… degrowth is not about reducing GDP. It is about reducing the material and energy throughput of the economy to bring it back into balance with the living world, while distributing income and resources more fairly, liberating people from needless work, and investing in the public goods that people need to thrive. It is the first step toward a more ecological civilisation.

To accomplish this shift several steps are outlined including “End planned obsolescence … Cut advertising … Shift from ownership to usership … End food waste … Scale down ecologically destructive industries … ”

All of the steps are sound.

Just the other day, the pump that connects our home water tanks to our house failed.

Upon inspection the failure was a plastic grommet that was not designed to handle the daily stress of pumping water.

I then sought a replacement and found that to remedy the problem I had to purchase the entire new sensor unit and connectors (around $A950) whereas the plastic grommet was easily dissambled and would cost a few dollars to produce.

The waste involved in having to discard the whole unit to replace a small disposable piece was staggering.

We encounter frequent examples of this disposable society.

But that is not what I am writing about today.

Jason Hickel is as aware as anyone involved in this debate that it is one thing to propose sweeping changes in isolation but the reality of the consequences for employment must be addressed.

To some extent, the ‘green’ lobby has been held back by its reluctance to address the jobs issue front and centre.

It is one thing to go into a community and lecture it on how its forestry industry, for example, has to close down, but another to provide that commnunity with the confidence that such a shift will not leave them materially impoverished.

Green politicians and activists have been strong on the first part and almost non-existent on the jobs front.

That is why Brian Kohler, who was a leader with the Communications, Energy and Paperworkers Union of Canada, said on December 6, 1996:

The real choice is not jobs or environment. It is both or neither … if you attack us in our workplaces, if you fail to understand the jobs issue, you will create a confrontation that you cannot win. You will force us into an alliance with our employers and you, we, society and the environment will all be the losers.

Brian Kohler first introduced the concept of the Just Transition as a result of his insight into the importance of jobs in the environmental debates.

He knew that it was about jobs, jobs, and jobs.

Jason Hickel knows that too and he followed the outline of his steps towards ‘Post Capitalism’ with a section entitled – “But what about jobs?”.

Indeed.

He knows that “the policies … suggested … are likely to reduce industrial production”, which will cause jobs to “disappear across the supply chains”.

He writes:

In other words, as our economy becomes more rational and efficient, it will require less labour.

He also understands that “from the perspective of the individual workers who will be laid off from these jobs, it is a disaster.”

The rise in unemployment implied by this shift would present major political problems for governments around the world.

Jason Hickel, though, thinks he has a solution to this imbrolgio.

He writes that:

As we shed unnecessary jobs we can shorten the working week, going from forty-seven hours (the average in the United States) down to thirty or perhaps even twenty hours, distributing necessary labour more evenly among the working population and maintaining full employment. We can facilitate this process by introducing a job guarantee …

In an Op-Ed piece he wrote in 2020 – Degrowth and MMT: A thought experiment (September 23, 2020) – he amplifies this message and ties it in with Modern Monetary Theory (MMT).

He thinks that ‘degrowth’ and MMT:

… belong together.

What links them in his view?

I can quibble with his rendition of MMT, but that would take me away from the point of this post.

For example, he wrote “the purpose of taxation is not to fund government spending … but rather to reduce excess demand”.

Well, strictly speaking that is not entirely accurate from an MMT perspective.

The major purpose of imposing a tax liability is to create a demand for the otherwise worthless currency.

And the extent of the taxation levied is to designed to create the real resource space in which government can spend into without having to compete for resources at market prices.

The difference between that characterisation and Jason Hickel’s is subtle but important.

But, as I wrote, I don’t want to quibble about that.

The link between degrowth and MMT in Jason Hickel’s view is defined in three ways:

1. Government capacity as the currency-issuer to “Develop generous, high-quality universal public services” – which go beyond health care and education into “public transportation, affordable housing, etc”.

2. Fast track the substitution of “fossil fuels” for “renewable energy infrastructure” funded by the currency-issuing capacity of the government.

3. “Introduce a job guarantee, so that anyone who wants to work can get a job” – and these workers would be “working in public services, building renewable energy infrastructure, and regenerating ecosystems”.

On reflection, when I am asked what is the relevance of MMT to transitions from carbon-usage, I reply ‘not much’ – MMT has very little to say about the transition.

But what it has to say is very important and Jason Hickel clearly has seen that.

MMT allows us to understand that there is really no financial constraint facing society, which has the urgent need to make expenditures designed to fast track decarbonisation and expand activities that benefit people and reduce energy usage.

Where I have issues is in the characterisiation of the Job Guarantee, which is a central pillar of MMT.

A degrowth agenda will create massive disruptions in our lives – it has to to be successful.

And the structure of the labour market will have to shift more quickly than historical structural changes in the composition of employment.

Millions of workers will have to move from existing jobs into other jobs and do that fairly quickly.

The sort of transition that will be required will not be easy and unless there is hope at the end of the tunnel, it will be resisted and undermined.

The Job Guarantee is not the key here – it is a buffer stock.

In fact, a national Job Guarantee, might only be a small part of a Just Transition framework to deal with climate change.

Obviously, having an employment safety net in place means that the most disadvantaged workers can always find some degree of income security that would be otherwise absent.

But the Job Guarantee is a coercive system – it provides a socially inclusive minimum wage job as an alternative to unemployment.

We should always aim to minimise the size of the Job Guarantee pool exactly because we don’t want to only provide minimum wage jobs as the solution to social dislocation arising from structural change.

The role of the Job Guarantee in MMT is to provide a macroeconomic stabilisation capacity when spending is outstripping the supply capacity and fiscal contraction is required.

That is its provenance.

It should not be thought of as a stand-alone job creation option when jobs are being shed.

We must ensure, in the words of the Canadian Labour Congress in 2000, that workers are not “simply thrown on the scrap heap as a sustainable economy” (Source):

The idea that a Job Guarantee will provide a ‘just’ and ‘equitable’ employment solution to the massive dislocation that will accompany a degrowth agenda is selling ourselves short and is unlikely to engender the hope that will be required to facilitate such a transition.

A ‘Just Transition’ requires the “costs of environmental change will be shared fairly” such that “workers in targeted industries and their communities” will not endure the costs that benefit us all (Source).

It is clear that the need to provide “Re-employment or alternative employment” goes well beyond what we think of as the Job Guarantee, which is a buffer stock job to deal with spending fluctuations.

Among other things, government support will be required in:

1. Skill development – new training courses in renewable energy, with linkages into schools and potential employers. A significant boost in funding is needed to support quality teaching, to attract students and engage employers.

2. Special targeted support for older, disabled and less educated workers will be required.

3. Relocation support – funding to help ease housing and transport issues should a worker nominate to relocate.

4. Job creation in renewables – new public sector jobs to be created in renewables in all aspects of the sector – primary industry, design, manufacturing, sales, administration, maintenance and support, etc – this is the way communities can retain pay levels, benefits and seniority.

5. Job Creation elsewhere – a raft of jobs will need to be created in low-energy using activities which also provide adequate material outcomes for the workers and prospects for individual expression and creativity.

An understanding of MMT tells us that our governments can fund these elements.

Paying for them is not the issue, although critics use the ‘how are we going to pay for it’ ruse to prevent such adaptation.

The challenges for all of us is to ensure no-one gets left behind.

Relying on Job Guarantee to address the labour market fall out will not meet that challenge.

In ‘Less is More’, Jason Hickel writes in relation to the jobs challenge that there will be a need to:

… roll out retraining programmes so that people laid off from shrinking industries can transition easily to others (renewable energy, public services, maintenance, etc.).

This is the key.

Provide pathways for people into jobs that offer less hours, creative opportunities, social status, individual advancement, and material security in a low energy world – that is the key.

Conclusion

I am currently working in Japan and there is much less attention to these issues at present.

Part of my efforts here will be to elevate the degrowth agenda up the ladder of importance.

That is enough for today!

(c) Copyright 2022 William Mitchell. All Rights Reserved.