An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
Do the rich need jobs? No, they don't since the rich have the resources they need in order TO WORK. Then why haven't the rest of us those resources?
Speaking of conspiracy, the true purpose of a Job Guarantee, as opposed to an Income Guarantee, is to consume the time/energy/morale of potential private sector, including self-employed, workers to drive up wages. A Job Guarantee is thus akin to milk dumping in the 1930's to drive up milk prices.
This is not to say that a large amount of infra-structure spending is not needed but lets focus on getting WORK done, not on consuming people's time.
Once you realize that the conspiracy narrative is wrong, MMT will move forward much faster.
The fact is that people (rich and poor) truly and legitimately believe that the government works like a household and that money is like gold. That's the simple truth. You are trying to add conspiracy theories where there are none.
In my country austerity was introduced a couple of years ago, leading to the traditional disastrous effects (skyrocketing unemployment, low economic activity, rising inequality and many others).
Contrary to what you imply in your conspiracy theory, the austerity affects everyone, including the rich. Of course, the poor was more affected, but the fact is that the rich was also.
Multiple industries are facing calamity, and a lot of big companies and their rich executives and shareholders are now out of business.
Some of them are famous and do appear in television, in interviews and such. They do not realize that it was austerity that destroyed their businesses and their way of life. On the contrary, they blame the previous government, claiming that if austerity was introduced before, they will not have gone broke.
How does this kind of evidence fits in the conspiracy theory? It doesn't.
Unemployment serves other purposes. In the US it provides fodder for an all-volunteer military (because people don't have any other options). It also creates a permanent underclass that can be vilified to further divide society, and provides justification for the militarization of police to deal with the "threat" - ostensibly crime but in reality civil unrest.
Anyone that has been in business knows that market capitalism is based on profit margins. The average of profit margins of products and lines is the profit margin of the firm. Some products contribute more than others and this guides management unmaking decisions. Firms watch this closely since it is foundational.
Profit margin comes from controlling costs and market power to set price. Bazaar bargaining is mostly over. Firms are no longer price takers but price setters.
Market power is desirable, first to increase firm bargaining power over workers, and secondly, to create otherwise imperfect markets since competition drives down margins.
The chief cost of doing business is the wage bill.
A buffer stock of unemployed "disciplines workers," i.e., controls worker bargaining power.
Firms also use many ways to reduce competition individually, e.g., intellectual property. Firms also join in trade groups and industries lobby for legislation and regulation that controls competition in other ways, such as licensing that advantages all firms in the group.
It's very simple for business owners and top managers to understand since they face the issue of margins constantly. Big shareholders are also owners and they get it. So do Wall Street analysts.
Since Reagan profit share has been increasing over labor share. Now it has reached the degree of asymmetry that it has become a social and political issue in addition to an economic one.
This is not a conspiracy. It is how market capitalism works.
"A buffer stock of unemployed 'disciplines workers,' i.e., controls worker bargaining power."
No one thinks like that but some MMTers. You will find no executive or shareholder promoting unemployment. That's not how it works.
What you will find is the rich promoting the reduction of workers' rights. They claim that those rights generate economic inefficiently and that kind of perfect competitive market garage we all know. Also, they do not care about workers. They care about profits and care about workers only when it affects profit. But workers' rights is one thing, unemployment is another.
You will never see an executive promoting economic downturns, because it will affect their profits directly. No one likes economic downturns, and the rich even less.
The rich (and everyone, actually) do not believe that austerity brings calamity. They do not believe that it raises unemployment. That's the simple truth. No conspiracy here.
What you will find is the rich promoting the reduction of workers' rights. They claim that those rights generate economic inefficiently and that kind of perfect competitive market garage we all know.
Worker's right = labor bargaining power.
Do you really think that employers are promoting economic liberalism in order to more closely approximate perfect competition when they know that the symmetry reduces profit margins and perfect competition eliminates profit as price approaches cost?
Employers want their employees to work more, paying less wages and rights. On the other hand, employees want to earn more wages and rights and to work less.
Each one pursues what is in his best interest. None of them is virtuous. Each one will have their own justification and narratives. None will be 100% truthful and just.
Employers will claim that reducing rights and wages (and increasing working hours) is somewhat good for the society. Maybe they will even believe their own words, maybe not - it does not matter.
Employees will claim that increasing wages and rights (and reducing working hours) is somewhat good for the society. Maybe they will even believe their own words, maybe not - it does not matter.
However, none will promote unemployment and economic downturns, because unemployment and economic downturns are not good – neither to the employers nor to the employees.
Employers will never pursue unemployment as some kind of “buffer stock of unemployed” to “disciplines workers”, “i.e. controls worker bargaining power.” That is a conspiracy theory, and it is simply not true. It is wrong. It is as simple as that.
Both employers and employees believe that the government works like a household and money is like gold. In that view, it is wrong (even immoral) to spend more than you earn. If a government does that, it would supposedly cause economic catastrophe, like economic downturns, inflation, famine, rising poverty, etc. That is it. No conspiracy theory. No “buffer stock of unemployed” as a means to “discipline workers”. People actually believe that austerity is good. If you cannot see that, you are too removed from the real world.
That conspiracy theory nonsense put away a lot of potentially smart people from MMT theory, because they (correctly) assume that we are a bunch of lunatics when we claim things like that.
A buffer stock of unemployed "disciplines workers," i.e., controls worker bargaining power. Tom Hickey
Those with independent means, including the means to do work that is MEANINGFUL TO THEMSELVES, are immune to such disciplining.
The question then is why JG proponents are so intent on supplementing private sector wage slavery with public sector wage slavery rather than setting the slaves free of ANY slavery?
Andre they hit a brick wall technically, iow they reach the limits of their technical training and instead of getting tough, digging in and just grinding it out technically, they find it easier to fabricate conspiracy theories...
Like its all a vast "neo-liberal conspiracy!" or something... at that point...
They need more technical training reps... they all have Art Degrees...
André, in the US the beta noir of employers is unionization and worker's rights.
Some companies will even not hire workers that have ever belonged to a union and if employees lie about it and are discovered, they are fired. These are large chains that every American would recognize if I named them. Since I don't have documentary evidence, I won't. Managers are also penalized if there is any push for unionization under them.
There was an illegal anti-poaching agreement in Silicon about knowledge workers, who do have market power individually. Search on "Steve Jobs" and "anti-poaching agreement."
This has everything to do with lowering the wage bill and keeping employees in line.
Employers are well-aware of the disadvantage they face as the economy approaches full employment, both a higher wage bill and losses of their best employees to other companies. This squeezes margins unless firms can pass along the wage increases to customers. Increasing sales may preserve total profits but profit margin shrinks if prices cannot be increased proportionately to the increase in wage rate.
Firms optimize rather than maximize. Optimization occurs at about 80% of capacity. Capacity can be added but it suffers from diminishing returns and increasing management problems. So "full employment" means full employment at 80% of capacity. That leaves millions of people with no job offer in the US. Chronic UE is considered normal.
Chronic UE constitutes a buffer stock of unemployed that allows companies to adjust quantity up after optimization is reached if needed. At this level, inflation is increasing and the Fed steps in to contract the economy, using unemployment to cool the labor market, which is considered the chief cause of inflation.
However, none will promote unemployment and economic downturns, because unemployment and economic downturns are not good – neither to the employers nor to the employees.
Employers will never pursue unemployment as some kind of “buffer stock of unemployed” to “disciplines workers”, “i.e. controls worker bargaining power.” That is a conspiracy theory, and it is simply not true. It is wrong. It is as simple as that.
... No one thinks like that but some MMTers. You will find no executive or shareholder promoting unemployment. That's not how it works.
While thinking in conspiracy theories is very wrong, these statements are wrong too. It is not common, but if you look, you will find clear and indisputable pro-unemployment statements through the ages. Victor Quirk was a doctoral student of Bill Mitchell and surprised him by how many such unequivocal statements there are out there; look at various papers he has written. Of course business leaders prefer booms to busts, but they prefer being "the boss" to sharing power and wealth - and secure access to power and wealth - with anyone else. "All for ourselves and nothing for other people" you know.
I just came across a "new" one myself, from debates over the US Full Employment Act in 1946. What was striking about it was almost identical to something Randall Wray said: That the JG is powerful because it changes the structure of the economy. Business Week (I think) back then did not dispute that full employment, courtesy of the government, was practical and possible, but opposed it because it would change the structure of the economy. Would that MMT fans would understand so well how powerful a JG is.
"Some companies will even not hire workers that have ever belonged to a union", "Since I don't have documentary evidence, I won't"
But you don't need to show evidence, because it happens in my country too (and I have personally witnessed this sort of thing happening). I don’t have documentary evidence too, but I believe you.
Such evidence only reinforces the fact the employers are seeking their own interests. It does NOT reinforce, however, any kind of unemployment conspiracy theory. “Lowering the wage bill and keeping employees in line” is one thing, and a conspiracy to make unemployment high is another.
You may even claim that employers are conspiring to lower wages and benefits. I would not stand against such claim, because I believe it is true – maybe not all employers, but some big, relevant ones are indeed probably conspiring (or maybe acting on their own).
However, I will stand against you claim that employers are conspiring to make unemployment high. That does not make sense. No businessman in his own mind would undermine himself by promoting economic downturns. I am sure they are not pursing such strategy. Employers (and everyone else) indeed do believe that austerity is good.
Calgacus, I'm not familiar with the work of Victor Quirk, and I am not sure if I understand what you are saying. I will read his papers.
The natural state of a 'private profit' monetary economy is that there will be fewer jobs than people that want them. That is the aggregate state of the individual choices.
You then get boom and bust. Corporations then hire politicians and lackeys to manage the economy to avoid the bust. The policies then suppress workers to ensure they have no pricing power.
MMT suggests that we need a political party to act as the one union to rule them all, return pricing power to the workers via a job guarantee and force private profit seekers to be price takers.
OK, for the sake of argument, let's say that employers have no input to the employment level.
Then the issue become monetary policy. Central banks take their chief objective as relative price stability. The increase interest rates to cool the economy when it threatens to overheat and reduce rates when there is a economic contraction.
They use models that judge inflationary expectation based on price indexes and the condition of the "the labor market." Generally speaking they find price indexes rising as leading indicators and a tighten labor market, that is, higher wages, as a coincident indicator. They begin to raise rates slowly when price indexes increase and get aggressive in raising rates when the labor market begins to tighten in anticipation of that leading to higher prices as firms eventually pass costs along to customers.
To do this they use the guideline of fitting "the natural rate of interest" to the "natural rate of unemployment" to target the "non-accelerating inflation rate of unemployment." This is taken to define "full employment" even though this policy leaves millions of people in the US without a job offer. They constitute the "buffer stock of unemployed."
This is not conspiracy theory. It is how the Fed operates as the institution delegated to set monetary policy.
No appeal to business interests is needed to explain the buffer stock of unemployed under NAIRU versus a buffer of employed under a JG.
I don't think that there is any conspiracy involved in how market capitalism works. Government institutions are committed to delivering growth, full employment and price stability and presently, monetary policy is the chief means. According to conventional economics it is not possible to target and achieve all three simultaneously, so the political choice is to target growth and price stability using unemployment as a tool.
Of course, this would be unpopular and probably not viable politically if admitted. So, the solution is define "full employment" such that there may be an unemployed cohort. The fact that is chronic would be explained as coincidental and unintentional.
At the same time, this is choosing winners and losers, just as monetary policy also chooses winners and losers between borrowers and savers in rate setting.
The losers are the chronically unemployed. Firms win in that the labor market is "disciplined" by government action.
So, even if employers have no input on this, firms win and workers lose.
This analysis ignores both class interests and social, political and economic power. Do these make a difference in the mix? Conventional economists think no, while many heterodox economists say yes.
For the analysis of power, think back to the "bad old Keynesian days" before monetarism took hold in the US. Trade unions were strong and labor bargaining power was high, as were wages. With the economy humming at or near optimal capacity owing to government stimulus, including military spending, inflation became a problem.
The conventional argument then was that the culprit was labor power and "corrupt" union bosses were conspiring to increase wages to the point of breaking companies out of spite or "to get even." The argument about power and corruption of power by union bosses was fully on display then. Many workers became convinced of it themselves, especially non-union free-riders that were receiving high wages and good treatment owing to union power.
Reagan set out to break that power and that has been the history of the US since. However, one never hears of the power of capital as one did of labor power.
The terms "power" is just beginning to return to the debate owing to the social, political and economic dysfunction resulting from past policy that led to gross asymmetry that is often characterized as "obscene inequality."
This doesn't happen without power and its application. It may be coincidental, the result of ignorance and blind pursuit of self-interest and in-group interest, rather than intentional, or the result of conspiracy.
On the other hand, in the "bad old days of Keynesianism," the charge was power and conspiracy. Is power not an issue now, when profit margins of super-firms are extraordinarily high, which is an indication of economic rent and rent extraction is an effect of market power.
Conspiracy is about intentional collusion. Conspiracies do exist but they tend to be on a limited scale.
This is the problem with conspiracy theories that involved large scale collusion. Too bulky.
Market capitalism (bourgeois liberalism) is not a conspiracy in which owners and their minions (management) collude against workers on a large scale, although they may in some firms.
The issue as Marx observed is social class, class structure and class interests. This is not conspiratorial and most members of the social classes do not "collude." it's a matter of culture and as Marx noted, it is grounded in the means and relations of production in modern human society. It is the means of production (economic infrastructure) that determines the relations of production. Under capitalism a bourgeois class arose that replaced the feudal lords in the transition from the agricultural age to the industrial age.
Culture and institutions adapted to the new mode of production. These reflect the characteristics of the new ownership class and its structure, interests, and mode of operations. It was unplanned and only very loosely coordinated.
Bourgeois liberalism ("capitalism") is based on social status, power, and distribution reflective of the economic base (infrastructure) as the superstructure of tradition, custom, law, and other institutions.
The scale is too large to involve conspiracy to any coordinated degree, although there is certainly the potential for collusion on smaller scale, the evidence of which is the law regulating this. But this tends to be mostly about intra-elite competition.
"Then the issue become monetary policy. Central banks take their chief objective as relative price stability. The increase interest rates to cool the economy when it threatens to overheat and reduce rates when there is a economic contraction. They use models that judge inflationary expectation based on price indexes and" blah blah blah...
Monetarism is quackery Tom... listen to Yellen she just said the Fed doesnt even know what "inflation!" is or how it works...
So they have been raising rates and trying to reduce risk free assets at the member institutions for a while now is the economy slowing down?
Noooooooo... its actually increaing the rate of growth a bit...
There are skill shortages developing... firms are giving out free bonuses post tax reform... this is all just getting started...
This whole thing sprang largely but not exclusively from the mind and persuasive ability of Milton Friedman. Friedman was driven by ideology rather than scientific inquiry.
There is a difference between being ‘self-centred’ and centered in the self.
From this arise differences in personality relations in all aspects of human living.
People seek the approval of others above and below on the ladder of societal status, when all they need do is seek the approval of their selves.
If people were centered in the heart where the self resides, then everything else would follow, in a beautiful, highly intelligent harmony. The greatest sin of the mind is separation.
"The issue as Marx observed is social class, class structure and class interests. This is not conspiratorial and most members of the social classes do not 'collude'"
Well, I guess that is more or less my point.
There is no conspiration or collusion. There are selfish people trying to pursue their interests, but no conspiration.
Most of those people, powerful employers or weak employees, all believe that the government works as a household and money is like gold. That's why they like austerity. They are not trying to make people unemployment on purpose.
This is also the case with neoliberalism as a political theory based on economic liberalism modified by the realization that government cannot effectively be excluded after the manner of a laissez-faire classical liberalism, but that government can be controlled by class interests (in-group interests) based on class power.
This doesn't imply that the the elite (higher social classes) are homogenous. It means that inter-group competition is among factions of the elite that have different in-group interest that intersect but do not overlap.
So, the elite factions work politically to advantage the elite over "the little people" while elite factions contend for share.
This doesn't mean that there is no neoliberal collusion among elite groups. Economists are distributed in so-called schools, and some schools are ideologically neoliberal ("freshwater" schools, Chicago School) and others classically liberal (Austrian economics, especially Rothbardian). The "saltwater" school is more socially democratic. But they are all elite factions. Those schools that are non-elite are deemed "heterodox" on account of this.
There is a difference between conspiracy and "group-think." The former implies collusion and the latter, a shared mindset based on commonly held assumptions.
David Sloan Wilson wrote a short piece on Ayn Rand that I suspect applies to Milton Friedman and other free market fundamentalists as well. They are similar to religious fundamentalists. The world is black and white, and there are no trade-offs.
André:They are not trying to make people unemployment on purpose.
As I said above, this idea cannot be squared with clear and indisputable words that say the opposite. Unemployment is intended, not an accidental side effect of some other incorrect belief - which has persisted for centuries in the face of superior, more logical, more realistic ideas - why?
No one likes economic downturns, and the rich even less. Not at all true. The poor hate economic downturns much more. The rich don't mind economic downturns so much. Why should they? They can ride them out. The rich prefer the occasional economic downturn to the loss of power and control, the structural changes that permanent full employment entails.
IN addition, deep pockets pick up assets on the cheap during downturns.
IN fact, some believe that the deep pockets engineer downturns periodically as a factor in the cycle. This was a belief of many Populists and Progressives that viewed the elite conspiratorially.
"They are not trying to make people unemployment on purpose."
In a monetary economy unemployment is a natural consequence of a productive economy and the political views of those who create that economy. It is an emergent behaviour. There will always be fewer jobs than people that want them as a natural consequence of the power relationship: businesses only hire when there is profit to be made, whereas workers have to be hired or they die of starvation.
And policy causes unemployment to persist because although it is easily fixed, that would remove power from those with money. So they promote political beliefs that ensure that a large group of workers are always the price takers in economic interactions, and they do this to ensure that the natural boom and bust cycle busts over workers not those with the money.
And yes, the networked class of business owners deliberately promote a particular view of the world. It is a religious devotion. And that devotion creates unemployment.
"The "saltwater" school is more socially democratic."
So called 'Social democracy' is about handing power to the networked metro-liberal middle class. They want to act as Robin Hood - taking from the rich and giving to the 'deserving poor' as determined by them. Essentially they see the working class as puppy dogs that need looking after.
Social democracy relies upon keeping 5% of the population in destitution and unemployment as much as any other neoliberal belief system, but in a way that allows the metro-liberal to patronise them so the metro-liberal looks good to their peers. The whole Piketty phenomenon was jumped on by them as justifying this need for active intervention by do-gooders.
They want to act as Robin Hood - taking from the rich and giving to the 'deserving poor' as determined by them. Neil Wilson
Whereas government-privileged private credit creation takes from everyone and gives to the most so-called "credit worthy" what is, in essence, the PUBLIC'S CREDIT but for private gain.
How about we abolish BOTH forms of theft? Starting with welfare for the "deserving rich" so that welfare for the poor will be less necessary?
IN the US, those folks are called "limousine liberals" and "latté liberals."
For those living outside the US and not familiar with the US of terms politically in the US, I, "liberal" is meant as opposed "conservative" in the US political sense. Neither closely conform to the traditional use of these categories in political thought.
In the US, the conservatives are the traditional economic liberals, while the Democrats are the traditional social democrats economically. The GOP tend toward social and political conservatism, while the Democratic Party toward social and political liberalism. The Libertarian wing of the GOP is pretty much "liberal" in the traditional sense across the board.
Jimmy Carter began the pivot away from social democracy toward neoliberalism. Then Bill Clinton moved further right to capture the center, followed by Barack Obama. HRC ran on extending that "New Democratic" platform. (Tony Blair followed suit in the UK with the Labour Party, as I understand, so there is likely overlap here.) Bernie has reasserted FDR's social democratic position as the champion of progressive wing of the Democratic party.
When referring to Bill Clinton or Tony Blair, The Third Way [https://en.wikipedia.org/wiki/Third_Way] has been used to describe an approach to imply that these politicians could please everyone (or at least a larger group of followers). At the time I was confused as that belief system permitted the user to determine whether Clinton was acting according to Democrat or Republican. However, after 9/11/2001 it became obvious that Blair could use Third Way principles to justify collusion with 'W' and the neocons. Did I miss something?
38 comments:
Do the rich need jobs? No, they don't since the rich have the resources they need in order TO WORK. Then why haven't the rest of us those resources?
Speaking of conspiracy, the true purpose of a Job Guarantee, as opposed to an Income Guarantee, is to consume the time/energy/morale of potential private sector, including self-employed, workers to drive up wages. A Job Guarantee is thus akin to milk dumping in the 1930's to drive up milk prices.
This is not to say that a large amount of infra-structure spending is not needed but lets focus on getting WORK done, not on consuming people's time.
The UBI has a simple proposition.
"Since the Rich can steal from the workers, we middle class metro-liberals should be able to steal from the workers as well"
"Oh and for PR purposes we'll let the workers steal from each other as well. Aren't we so clever"
No, you're not. The workers can see it a mile off, and will have it stopped.
The workers can see it a mile off, and will have it stopped.
Restitution for theft, even the subtle thievery of government-privileged usury cartels, is not something anyone should oppose.
Once you realize that the conspiracy narrative is wrong, MMT will move forward much faster.
The fact is that people (rich and poor) truly and legitimately believe that the government works like a household and that money is like gold. That's the simple truth. You are trying to add conspiracy theories where there are none.
In my country austerity was introduced a couple of years ago, leading to the traditional disastrous effects (skyrocketing unemployment, low economic activity, rising inequality and many others).
Contrary to what you imply in your conspiracy theory, the austerity affects everyone, including the rich. Of course, the poor was more affected, but the fact is that the rich was also.
Multiple industries are facing calamity, and a lot of big companies and their rich executives and shareholders are now out of business.
Some of them are famous and do appear in television, in interviews and such. They do not realize that it was austerity that destroyed their businesses and their way of life. On the contrary, they blame the previous government, claiming that if austerity was introduced before, they will not have gone broke.
How does this kind of evidence fits in the conspiracy theory? It doesn't.
Unemployment serves other purposes. In the US it provides fodder for an all-volunteer military (because people don't have any other options). It also creates a permanent underclass that can be vilified to further divide society, and provides justification for the militarization of police to deal with the "threat" - ostensibly crime but in reality civil unrest.
“Once you realize that the conspiracy narrative is wrong, MMT will move forward much faster.”
The MMT people are the ones promoting the conspiracy theory in the first place...
Of course, it is not a "conspiracy.'
Anyone that has been in business knows that market capitalism is based on profit margins. The average of profit margins of products and lines is the profit margin of the firm. Some products contribute more than others and this guides management unmaking decisions. Firms watch this closely since it is foundational.
Profit margin comes from controlling costs and market power to set price. Bazaar bargaining is mostly over. Firms are no longer price takers but price setters.
Market power is desirable, first to increase firm bargaining power over workers, and secondly, to create otherwise imperfect markets since competition drives down margins.
The chief cost of doing business is the wage bill.
A buffer stock of unemployed "disciplines workers," i.e., controls worker bargaining power.
Firms also use many ways to reduce competition individually, e.g., intellectual property. Firms also join in trade groups and industries lobby for legislation and regulation that controls competition in other ways, such as licensing that advantages all firms in the group.
It's very simple for business owners and top managers to understand since they face the issue of margins constantly. Big shareholders are also owners and they get it. So do Wall Street analysts.
Since Reagan profit share has been increasing over labor share. Now it has reached the degree of asymmetry that it has become a social and political issue in addition to an economic one.
This is not a conspiracy. It is how market capitalism works.
"A buffer stock of unemployed 'disciplines workers,' i.e., controls worker bargaining power."
No one thinks like that but some MMTers. You will find no executive or shareholder promoting unemployment. That's not how it works.
What you will find is the rich promoting the reduction of workers' rights. They claim that those rights generate economic inefficiently and that kind of perfect competitive market garage we all know. Also, they do not care about workers. They care about profits and care about workers only when it affects profit. But workers' rights is one thing, unemployment is another.
You will never see an executive promoting economic downturns, because it will affect their profits directly. No one likes economic downturns, and the rich even less.
The rich (and everyone, actually) do not believe that austerity brings calamity. They do not believe that it raises unemployment. That's the simple truth. No conspiracy here.
"The MMT people are the ones promoting the conspiracy theory in the first place..."
Just part of them
What you will find is the rich promoting the reduction of workers' rights. They claim that those rights generate economic inefficiently and that kind of perfect competitive market garage we all know.
Worker's right = labor bargaining power.
Do you really think that employers are promoting economic liberalism in order to more closely approximate perfect competition when they know that the symmetry reduces profit margins and perfect competition eliminates profit as price approaches cost?
"Just part of them"
"A little yeast works through the whole batch of dough." Gal 5:9
Tom,
Employers want their employees to work more, paying less wages and rights. On the other hand, employees want to earn more wages and rights and to work less.
Each one pursues what is in his best interest. None of them is virtuous. Each one will have their own justification and narratives. None will be 100% truthful and just.
Employers will claim that reducing rights and wages (and increasing working hours) is somewhat good for the society. Maybe they will even believe their own words, maybe not - it does not matter.
Employees will claim that increasing wages and rights (and reducing working hours) is somewhat good for the society. Maybe they will even believe their own words, maybe not - it does not matter.
However, none will promote unemployment and economic downturns, because unemployment and economic downturns are not good – neither to the employers nor to the employees.
Employers will never pursue unemployment as some kind of “buffer stock of unemployed” to “disciplines workers”, “i.e. controls worker bargaining power.” That is a conspiracy theory, and it is simply not true. It is wrong. It is as simple as that.
Both employers and employees believe that the government works like a household and money is like gold. In that view, it is wrong (even immoral) to spend more than you earn. If a government does that, it would supposedly cause economic catastrophe, like economic downturns, inflation, famine, rising poverty, etc. That is it. No conspiracy theory. No “buffer stock of unemployed” as a means to “discipline workers”. People actually believe that austerity is good. If you cannot see that, you are too removed from the real world.
That conspiracy theory nonsense put away a lot of potentially smart people from MMT theory, because they (correctly) assume that we are a bunch of lunatics when we claim things like that.
A buffer stock of unemployed "disciplines workers," i.e., controls worker bargaining power. Tom Hickey
Those with independent means, including the means to do work that is MEANINGFUL TO THEMSELVES, are immune to such disciplining.
The question then is why JG proponents are so intent on supplementing private sector wage slavery with public sector wage slavery rather than setting the slaves free of ANY slavery?
Andre they hit a brick wall technically, iow they reach the limits of their technical training and instead of getting tough, digging in and just grinding it out technically, they find it easier to fabricate conspiracy theories...
Like its all a vast "neo-liberal conspiracy!" or something... at that point...
They need more technical training reps... they all have Art Degrees...
André, in the US the beta noir of employers is unionization and worker's rights.
Some companies will even not hire workers that have ever belonged to a union and if employees lie about it and are discovered, they are fired. These are large chains that every American would recognize if I named them. Since I don't have documentary evidence, I won't. Managers are also penalized if there is any push for unionization under them.
http://progressive.org/dispatches/managers-menards-stand-lose-big-money-unions-form/
There was an illegal anti-poaching agreement in Silicon about knowledge workers, who do have market power individually. Search on "Steve Jobs" and "anti-poaching agreement."
This has everything to do with lowering the wage bill and keeping employees in line.
Employers are well-aware of the disadvantage they face as the economy approaches full employment, both a higher wage bill and losses of their best employees to other companies. This squeezes margins unless firms can pass along the wage increases to customers. Increasing sales may preserve total profits but profit margin shrinks if prices cannot be increased proportionately to the increase in wage rate.
Firms optimize rather than maximize. Optimization occurs at about 80% of capacity. Capacity can be added but it suffers from diminishing returns and increasing management problems. So "full employment" means full employment at 80% of capacity. That leaves millions of people with no job offer in the US. Chronic UE is considered normal.
Chronic UE constitutes a buffer stock of unemployed that allows companies to adjust quantity up after optimization is reached if needed. At this level, inflation is increasing and the Fed steps in to contract the economy, using unemployment to cool the labor market, which is considered the chief cause of inflation.
However, none will promote unemployment and economic downturns, because unemployment and economic downturns are not good – neither to the employers nor to the employees.
Employers will never pursue unemployment as some kind of “buffer stock of unemployed” to “disciplines workers”, “i.e. controls worker bargaining power.” That is a conspiracy theory, and it is simply not true. It is wrong. It is as simple as that.
...
No one thinks like that but some MMTers. You will find no executive or shareholder promoting unemployment. That's not how it works.
While thinking in conspiracy theories is very wrong, these statements are wrong too. It is not common, but if you look, you will find clear and indisputable pro-unemployment statements through the ages. Victor Quirk was a doctoral student of Bill Mitchell and surprised him by how many such unequivocal statements there are out there; look at various papers he has written. Of course business leaders prefer booms to busts, but they prefer being "the boss" to sharing power and wealth - and secure access to power and wealth - with anyone else. "All for ourselves and nothing for other people" you know.
I just came across a "new" one myself, from debates over the US Full Employment Act in 1946. What was striking about it was almost identical to something Randall Wray said: That the JG is powerful because it changes the structure of the economy. Business Week (I think) back then did not dispute that full employment, courtesy of the government, was practical and possible, but opposed it because it would change the structure of the economy. Would that MMT fans would understand so well how powerful a JG is.
Tom,
"Some companies will even not hire workers that have ever belonged to a union", "Since I don't have documentary evidence, I won't"
But you don't need to show evidence, because it happens in my country too (and I have personally witnessed this sort of thing happening). I don’t have documentary evidence too, but I believe you.
Such evidence only reinforces the fact the employers are seeking their own interests. It does NOT reinforce, however, any kind of unemployment conspiracy theory. “Lowering the wage bill and keeping employees in line” is one thing, and a conspiracy to make unemployment high is another.
You may even claim that employers are conspiring to lower wages and benefits. I would not stand against such claim, because I believe it is true – maybe not all employers, but some big, relevant ones are indeed probably conspiring (or maybe acting on their own).
However, I will stand against you claim that employers are conspiring to make unemployment high. That does not make sense. No businessman in his own mind would undermine himself by promoting economic downturns. I am sure they are not pursing such strategy. Employers (and everyone else) indeed do believe that austerity is good.
Calgacus, I'm not familiar with the work of Victor Quirk, and I am not sure if I understand what you are saying. I will read his papers.
The natural state of a 'private profit' monetary economy is that there will be fewer jobs than people that want them. That is the aggregate state of the individual choices.
You then get boom and bust. Corporations then hire politicians and lackeys to manage the economy to avoid the bust. The policies then suppress workers to ensure they have no pricing power.
MMT suggests that we need a political party to act as the one union to rule them all, return pricing power to the workers via a job guarantee and force private profit seekers to be price takers.
It's a political choice who get all suppressed.
OK, for the sake of argument, let's say that employers have no input to the employment level.
Then the issue become monetary policy. Central banks take their chief objective as relative price stability. The increase interest rates to cool the economy when it threatens to overheat and reduce rates when there is a economic contraction.
They use models that judge inflationary expectation based on price indexes and the condition of the "the labor market." Generally speaking they find price indexes rising as leading indicators and a tighten labor market, that is, higher wages, as a coincident indicator. They begin to raise rates slowly when price indexes increase and get aggressive in raising rates when the labor market begins to tighten in anticipation of that leading to higher prices as firms eventually pass costs along to customers.
To do this they use the guideline of fitting "the natural rate of interest" to the "natural rate of unemployment" to target the "non-accelerating inflation rate of unemployment." This is taken to define "full employment" even though this policy leaves millions of people in the US without a job offer. They constitute the "buffer stock of unemployed."
This is not conspiracy theory. It is how the Fed operates as the institution delegated to set monetary policy.
No appeal to business interests is needed to explain the buffer stock of unemployed under NAIRU versus a buffer of employed under a JG.
I don't think that there is any conspiracy involved in how market capitalism works. Government institutions are committed to delivering growth, full employment and price stability and presently, monetary policy is the chief means. According to conventional economics it is not possible to target and achieve all three simultaneously, so the political choice is to target growth and price stability using unemployment as a tool.
Of course, this would be unpopular and probably not viable politically if admitted. So, the solution is define "full employment" such that there may be an unemployed cohort. The fact that is chronic would be explained as coincidental and unintentional.
At the same time, this is choosing winners and losers, just as monetary policy also chooses winners and losers between borrowers and savers in rate setting.
The losers are the chronically unemployed. Firms win in that the labor market is "disciplined" by government action.
So, even if employers have no input on this, firms win and workers lose.
This analysis ignores both class interests and social, political and economic power. Do these make a difference in the mix? Conventional economists think no, while many heterodox economists say yes.
For the analysis of power, think back to the "bad old Keynesian days" before monetarism took hold in the US. Trade unions were strong and labor bargaining power was high, as were wages. With the economy humming at or near optimal capacity owing to government stimulus, including military spending, inflation became a problem.
The conventional argument then was that the culprit was labor power and "corrupt" union bosses were conspiring to increase wages to the point of breaking companies out of spite or "to get even." The argument about power and corruption of power by union bosses was fully on display then. Many workers became convinced of it themselves, especially non-union free-riders that were receiving high wages and good treatment owing to union power.
Reagan set out to break that power and that has been the history of the US since. However, one never hears of the power of capital as one did of labor power.
The terms "power" is just beginning to return to the debate owing to the social, political and economic dysfunction resulting from past policy that led to gross asymmetry that is often characterized as "obscene inequality."
This doesn't happen without power and its application. It may be coincidental, the result of ignorance and blind pursuit of self-interest and in-group interest, rather than intentional, or the result of conspiracy.
On the other hand, in the "bad old days of Keynesianism," the charge was power and conspiracy. Is power not an issue now, when profit margins of super-firms are extraordinarily high, which is an indication of economic rent and rent extraction is an effect of market power.
Conspiracy is about intentional collusion. Conspiracies do exist but they tend to be on a limited scale.
This is the problem with conspiracy theories that involved large scale collusion. Too bulky.
Market capitalism (bourgeois liberalism) is not a conspiracy in which owners and their minions (management) collude against workers on a large scale, although they may in some firms.
The issue as Marx observed is social class, class structure and class interests. This is not conspiratorial and most members of the social classes do not "collude." it's a matter of culture and as Marx noted, it is grounded in the means and relations of production in modern human society. It is the means of production (economic infrastructure) that determines the relations of production. Under capitalism a bourgeois class arose that replaced the feudal lords in the transition from the agricultural age to the industrial age.
Culture and institutions adapted to the new mode of production. These reflect the characteristics of the new ownership class and its structure, interests, and mode of operations. It was unplanned and only very loosely coordinated.
Bourgeois liberalism ("capitalism") is based on social status, power, and distribution reflective of the economic base (infrastructure) as the superstructure of tradition, custom, law, and other institutions.
The scale is too large to involve conspiracy to any coordinated degree, although there is certainly the potential for collusion on smaller scale, the evidence of which is the law regulating this. But this tends to be mostly about intra-elite competition.
"Then the issue become monetary policy. Central banks take their chief objective as relative price stability. The increase interest rates to cool the economy when it threatens to overheat and reduce rates when there is a economic contraction. They use models that judge inflationary expectation based on price indexes and" blah blah blah...
Monetarism is quackery Tom... listen to Yellen she just said the Fed doesnt even know what "inflation!" is or how it works...
So they have been raising rates and trying to reduce risk free assets at the member institutions for a while now is the economy slowing down?
Noooooooo... its actually increaing the rate of growth a bit...
There are skill shortages developing... firms are giving out free bonuses post tax reform... this is all just getting started...
Tom you have to think that Monetarism works to take the whole NAIRU view at all....
This whole thing sprang largely but not exclusively from the mind and persuasive ability of Milton Friedman. Friedman was driven by ideology rather than scientific inquiry.
There is a difference between being ‘self-centred’ and centered in the self.
From this arise differences in personality relations in all aspects of human living.
People seek the approval of others above and below on the ladder of societal status, when all they need do is seek the approval of their selves.
If people were centered in the heart where the self resides, then everything else would follow, in a beautiful, highly intelligent harmony. The greatest sin of the mind is separation.
We are human beings. But need some help.
“This whole thing sprang largely but not exclusively from the mind and persuasive ability of Milton Friedman. ”
No argument from me there...
"The issue as Marx observed is social class, class structure and class interests. This is not conspiratorial and most members of the social classes do not 'collude'"
Well, I guess that is more or less my point.
There is no conspiration or collusion. There are selfish people trying to pursue their interests, but no conspiration.
Most of those people, powerful employers or weak employees, all believe that the government works as a household and money is like gold. That's why they like austerity. They are not trying to make people unemployment on purpose.
I would say "network effects."
This is also the case with neoliberalism as a political theory based on economic liberalism modified by the realization that government cannot effectively be excluded after the manner of a laissez-faire classical liberalism, but that government can be controlled by class interests (in-group interests) based on class power.
This doesn't imply that the the elite (higher social classes) are homogenous. It means that inter-group competition is among factions of the elite that have different in-group interest that intersect but do not overlap.
So, the elite factions work politically to advantage the elite over "the little people" while elite factions contend for share.
This doesn't mean that there is no neoliberal collusion among elite groups. Economists are distributed in so-called schools, and some schools are ideologically neoliberal ("freshwater" schools, Chicago School) and others classically liberal (Austrian economics, especially Rothbardian). The "saltwater" school is more socially democratic. But they are all elite factions. Those schools that are non-elite are deemed "heterodox" on account of this.
There is a difference between conspiracy and "group-think." The former implies collusion and the latter, a shared mindset based on commonly held assumptions.
David Sloan Wilson wrote a short piece on Ayn Rand that I suspect applies to Milton Friedman and other free market fundamentalists as well. They are similar to religious fundamentalists. The world is black and white, and there are no trade-offs.
It's a short and easy read.
Ayn Rand and Modern Politics
See also
https://www.globalresearch.ca/how-the-neoliberal-thought-collective-is-influencing-donald-trumps-presidency/5624577
André:They are not trying to make people unemployment on purpose.
As I said above, this idea cannot be squared with clear and indisputable words that say the opposite. Unemployment is intended, not an accidental side effect of some other incorrect belief - which has persisted for centuries in the face of superior, more logical, more realistic ideas - why?
No one likes economic downturns, and the rich even less. Not at all true. The poor hate economic downturns much more. The rich don't mind economic downturns so much. Why should they? They can ride them out. The rich prefer the occasional economic downturn to the loss of power and control, the structural changes that permanent full employment entails.
IN addition, deep pockets pick up assets on the cheap during downturns.
IN fact, some believe that the deep pockets engineer downturns periodically as a factor in the cycle. This was a belief of many Populists and Progressives that viewed the elite conspiratorially.
“has persisted for centuries in the face of superior, more logical, more realistic ideas - why?”
Because 99.999% of people are fing libertarians....
"They are not trying to make people unemployment on purpose."
In a monetary economy unemployment is a natural consequence of a productive economy and the political views of those who create that economy. It is an emergent behaviour. There will always be fewer jobs than people that want them as a natural consequence of the power relationship: businesses only hire when there is profit to be made, whereas workers have to be hired or they die of starvation.
And policy causes unemployment to persist because although it is easily fixed, that would remove power from those with money. So they promote political beliefs that ensure that a large group of workers are always the price takers in economic interactions, and they do this to ensure that the natural boom and bust cycle busts over workers not those with the money.
And yes, the networked class of business owners deliberately promote a particular view of the world. It is a religious devotion. And that devotion creates unemployment.
There is little wrong with the Kaleckian analysis - even after 85 years. https://mronline.org/2010/05/22/political-aspects-of-full-employment/
"The "saltwater" school is more socially democratic."
So called 'Social democracy' is about handing power to the networked metro-liberal middle class. They want to act as Robin Hood - taking from the rich and giving to the 'deserving poor' as determined by them. Essentially they see the working class as puppy dogs that need looking after.
Social democracy relies upon keeping 5% of the population in destitution and unemployment as much as any other neoliberal belief system, but in a way that allows the metro-liberal to patronise them so the metro-liberal looks good to their peers. The whole Piketty phenomenon was jumped on by them as justifying this need for active intervention by do-gooders.
They want to act as Robin Hood - taking from the rich and giving to the 'deserving poor' as determined by them. Neil Wilson
Whereas government-privileged private credit creation takes from everyone and gives to the most so-called "credit worthy" what is, in essence, the PUBLIC'S CREDIT but for private gain.
How about we abolish BOTH forms of theft? Starting with welfare for the "deserving rich" so that welfare for the poor will be less necessary?
IN the US, those folks are called "limousine liberals" and "latté liberals."
For those living outside the US and not familiar with the US of terms politically in the US, I, "liberal" is meant as opposed "conservative" in the US political sense. Neither closely conform to the traditional use of these categories in political thought.
In the US, the conservatives are the traditional economic liberals, while the Democrats are the traditional social democrats economically. The GOP tend toward social and political conservatism, while the Democratic Party toward social and political liberalism. The Libertarian wing of the GOP is pretty much "liberal" in the traditional sense across the board.
Jimmy Carter began the pivot away from social democracy toward neoliberalism. Then Bill Clinton moved further right to capture the center, followed by Barack Obama. HRC ran on extending that "New Democratic" platform. (Tony Blair followed suit in the UK with the Labour Party, as I understand, so there is likely overlap here.) Bernie has reasserted FDR's social democratic position as the champion of progressive wing of the Democratic party.
When referring to Bill Clinton or Tony Blair, The Third Way
[https://en.wikipedia.org/wiki/Third_Way] has been used to describe an approach to imply that these politicians could please everyone (or at least a larger group of followers). At the time I was confused as that belief system permitted the user to determine whether Clinton was acting according to Democrat or Republican. However, after 9/11/2001 it became obvious that Blair could use Third Way principles to justify collusion with 'W' and the neocons. Did I miss something?
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