The combination of MMT full employment policies and the job guarantee is the best way to strengthen family financial stability. The United States, which has a sovereign currency, can do that. The European Union nations that lack a sovereign currency will frequently be unable to do so. Jobs, not simply income, are essential to many humans’ happiness and sense of self-worth....New Economic Perspectives
The Job Guarantee Should Unite Anyone Interested in Strengthening Families
William K. Black | Associate Professor of Economics and Law, UMKC
ReplyDeleteThese are the debates we have to win.
https://www.pragcap.com/ama/does-the-price-level-exist/
We look at the defense of those who don't agree with us and take them on point by point. Our theory has to be solid and concise.
We look at the defense of those who don't agree with us and take them on point by point. Our theory has to be solid and concise.
ReplyDeleteOne also must remember than there is no satisfactory progressive answer in the framework of a capitalist system.
There are always tradeoffs and winners and losers. By definition, under capitalism ownership always wins since capital is the favored factor. Profit is based on rent extraction or else it is competed away.
Rent comes from the application of power to exploit workers and the environment.
TINA without changing the system by changing the insitutional priorities.
"Conservatives deeply resent safety net programs in which the recipients are able to work but decline to do so."
ReplyDeleteYet conservatives opposed the New Deal job programs, and conservatives today resent government workers like the Forest Service and the BLM. Conservatives are anti-government (except for their own pet programs).
"The jobs guarantee would ... replace perceptions with an easily observable reality."
Or with easily criticized make-work jobs?
To win public support, any jobs program should provide visible, tangible benefits to the public. I.e., roads, bridges, schools, hospitals, etc., like the New Deal, but unlike the service oriented JG proposals.
There is more than one way to guarantee full employment. It seems odd to focus on only one policy proposal.
Also, it seems odd to harp on the "MMT" identity. I'm not sure that anything would be lost if the "MMT" label were discontinued?
I agree with Bill's main point that it is probably possible to unite (most of) the country around a populist economic program. Jobs, health care, and pensions would be the center of that program. But there is more than one way to get there. Chartalism helps explain how to pay for it, though if I were a politician I would not campaign on chartalism because it is over most people's heads.
Tom said "One also must remember than there is no satisfactory progressive answer in the framework of a capitalist system."
Can't argue with that.
IN thinking about this, we also have to recall that replaced feudalism at the time that the Industrial Age replaced the Agricultural Age. Bourgeois liberalism aka "capitalism" replace the land-titled aristocracies and gentry of late stage feudalism with the owners of industrial capitalism.
ReplyDeleteAt the time of this transition in productive relations, tenant farmers from whose labor rents could be extracted by land owners began to be replaced by industrial workers from whose wage labor capitalist rent could be extracted by owners of productive capital.
Rent extraction proceeds from social asymmetry (class structure), political asymmetry (political power and influence), and economic asymmetry (income and wealth distribution).
Now that what seems to be late stage capitalism has dawned, productive capital is losing ground to financial capital in influence, and much of the rent extraction is going to financial capitalists as a result of increasing use of credit and the development of fintech.
As the world transitions from the Industrial Age to the Information Age, it is time to rethink economics.
What is now called "economics" is largely the development of understanding about the dynamics of industrial capital, which began with the classical economists. Now conventional economists is dominated by neoclassical economics based on foundational assumptions about rational optimization and equilibrium and taking methodological individualism as given.
Unless the framing is shifted, the debate will be about a wave that is cresting if it not already falling.
We need a fresh frame, that is to say, a new way of looking at the issues in terms of resources, opportunities and challenges based on emergence brought about by technological innovation, especially digital.
"To win public support, any jobs program should provide visible, tangible benefits to the public"
ReplyDeleteIt also needs a PR department like any large operation to sell the benefits of the operation to the public. That's what Walmart, Amazon, Google, etc. all do.
The failures of the programmes previously have been due to their anonymity. The Implicit Job Guarantee after the Second world war period where jobless people would 'work for the council' was chipped away precisely because nobody sold the reason it was there in the first place.
And therefore over time people forgot and they became susceptible to the propaganda of business who has never liked full employment.
I normally agree with whatever Dan Lynch says, and I agree with his point that associating JG with MMT is a bit of a nonsense. The biggest JG scheme in the last 100 years (the WPA) was implemented without other specifically MMT policies. Plus it would be perfectly feasible to implement the monetary side of MMT without JG. Plus any idea that MMTers were the first to think up the JG idea is also nonsense.
ReplyDeleteRe the “roads, bridges, schools and hospitals” to which Dan refers, most of the labour used by firms building those items is SKILLED (bricklayers, plumbers, etc). Any idea that JG can concentrate to any great extent on CONSTRUCTION is plain unrealistic: a large majority of members of the dole queue do not have construction skills.
Next, if you have IDENTIFIABLE physical structures put up by JG schemes, as was the case with the WPA, that means a large majority of those on JG schemes are people who would otherwise be unemployed – i.e. people who will in a relatively short space find a regular job. That in turn means labour turnover on JG schemes is so high that efficiency is impossible. Ergo it’s better to subsidise JG people into work with EXISTING EMPLOYERS if possible.
Efficiency on WPA schemes actually wasn’t too bad, but that’s explained by the CATASTROPHICALLY high unemployment levels that obtained in the 1930s: people were unemployed for years on end. JG in contrast aims to operate even when unemployment is relatively low.
What about the price level Ralph and the price anchor ??
ReplyDeleteIf you want to subsidise JG people into work with existing employers then surely the race to the bottom continues.
Do you think tax credits have been a success or a complete failure and what effect do you think tax credits have had on productivity ?
One of the main aspects of the JG is it lifts all boats and stops the race to the bottom. It creates competition and forces the capitalists to compete for labour which will have the add on effect of improved productivity.
"Plus it would be perfectly feasible to implement the monetary side of MMT without JG."
ReplyDeleteOnly if you accept that 5% of the population will remain unemployed and destitute. JG works by competing with the private sector for labour - forcing them to innovate, invest and improve to stay in business. Labour becomes reassuringly expensive. Parasite businesses go bust.
Ralph's approach is to continue with subsidising private business with public funds. Precisely the same idea that lead to a wage price spiral in the 1970s. Businesses have to be allowed to go bust. Once you have an outside employer 'saving jobs' is no longer a political argument for a bung to an inefficient firm.
The Job Guarantee works even with everybody on Gardening leave. But to make it work long term you have to get people giving up their time for others so that the reciprocation condition is fulfilled and to create a better price anchor by making JG people a more credible threat to those on slightly higher wages in the non-JG sectors.
The bit that is often missed is that the Job Guarantee merely buys up your time so you can't use it for your own purposes. That means that other people, in factories and on the land, who similarly are having their time bought up and are unable to use it for their own purposes don't feel they are being short changed. The vast majority of the current private service industry has a similar function - hoover up time. Most of it has no critical purpose beyond giving people something to do with their time.
Any transformation of those labour hours into useful labour services is a bonus. If those are freely available to others even better. However the primary purpose is the social function - to show everybody has contributed hours to the pot for the benefit of others.
P.S. The WPA wasn't a Job Guarantee scheme. It still followed the 'create some jobs and match people to them' approach.
ReplyDeleteJG takes a different approach. It employs everybody and then matches jobs to them - creating matches where necessary. It has more in keeping with social care provision than a private sector employer looking for labour.
"what about the price level Ralph and the price anchor?" The so called price anchor claim is unproven.
ReplyDelete"It employs everybody and then matches jobs to them - creating matches where necessary." Only in the imaginations of JG proponents. Implementation has never been satisfactorily explained. No real life job legislation has ever claimed to match jobs or to employ everyone. JG proponents have never succeeded in getting a single legislator to endorse a JG.
"It also needs a PR department like any large operation to sell the benefits of the operation to the public. The New Deal programs had such PR, but conservatives still hated the New Deal. Even FDR disliked the WPA.
"Only if you accept that 5% of the population will remain unemployed and destitute. How do we know that functional finance budgeting would result in 5% unemployment? We've never tried functional finance budgeting.
All these issues have been debated before, specifically during the debate over the Employment Act of 1946. Conservatives were ideologically opposed to government job programs and instead peddled monetary policy as sufficient to maintain full employment and price stability. Monetarism fit conservative anti-government ideology perfectly, never mind that it has never worked.
MMT has the naive political view that conservatives merely oppose deficit spending and welfare, and that once conservatives understand that deficits are harmless and once welfare is replaced with a JG, then the left/right division will disappear and we'll live happily ever after. Bill's article is a continuation of that theme. It's nonsense.
You'll never change conservative ideology; it's deeply rooted in values and in self-interest. But most people are not ideological, they just want the trains to run on time.
Dan,
ReplyDeleteI agree the much vaunted "price anchor" element in JG is complete nonsense (if that's what you're saying). I.e. given excess demand, employers will outbid each other for labour and inflation will ensue under JG just as it does under a non-JG scenario.
Footsoldier,
ReplyDeleteRe your claim that subsidising JG people into work with existing employers encourages the "race to the bottom", that certainly COULD BE the effect: it depends on exactly how the system is organised.
Also, if that fault is present, it is not a fault specifically of JG. For example for most of the time since WWII there have been subsidies in the UK for employers in high unemployment regions. Clearly a possible effect that the latter is to encourage unproductive types of work in those regions. Indeed, productivity in the London area (a low unemployment area) is way above other areas. So possibly that "unproductive" effect has been present.
As to how to minimise the “unproductive” effect, one way is to limit the time JG people stay with a specific employer: employers like to keep productive employees, so if JG employees are taken away from them after a month or two if they’re still claiming the JG subsidy, that’s an inducement to claim the subsidy only in respect of GENUINELY unproductive employees.
Neil says “JG works by competing with the private sector for labour - forcing them to innovate, invest and improve to stay in business.”
ReplyDeleteThere’s a slight problem there, which is that most employers ALREADY try to maximise productivity: it’s in their interest to do so (except to the extent, mentioned above, that they can get away with low productivity due to employment subsidies). Thus the effect of trying to make employers raise productivity even further will in most cases simply be to induce employers to throw in the towel / retire / live on benefits / get nice secure public sector jobs with generous pensions.
"The so called price anchor claim is unproven"
ReplyDeleteIt's very much proved. The unemployment buffer we have at the moment has kept inflation under control. That's how you anchor the economy. You move workers from the private sector to the public sector on a much lower wage by reducing the flow of spending.
The Job Guarantee doubles down on that by making the unemployed an even more credible threat to those in higher waged employment. Funnily enough by giving them a job.
"How do we know that functional finance budgeting would result in 5% unemployment? "
Sigh. Because that's roughly how much unemployment you get before you exhaust the buffer at key points in the economy. Because you have no automatic spatial deployment of extra funding, because you have nothing that does the reverse of the matching process.
In other words you haven't addressed or fixed the problem that lead to the 1970s collapse of Keynesianism. You're just doing the same again and expecting to avoid a wage price spiral and stagflation. That's the definition of insanity.
You have to fix the bug in Keynesianism. The one that Kalecki explained in his famous piece.
"which is that most employers ALREADY try to maximise productivity:"
ReplyDeleteReally. So why are there still hand car wash stations on the street then, rather than automated machines doing the same job?
Those automated machines cannot get a foothold because the parasite businesses undercut them with state subsidies and poor wages.
The Uber disaster in London would not have occurred if they had to compete for labour and come up with an offer that attracted people away from a living wage Job Guarantee.
We want parasite businesses to go bust. That way their competitors that pay people properly and innovate have room to grow and expand. We don't want private businesses being the ones we rely upon for jobs. That way when the automated car Uber shows up, we don't need to worry about the job losses. The Job Guarantee picks them up.
You have to think in terms of a collection of businesses, not individual ones. Individual businesses come and go. Once you get rid of the job issue, you can intensify competition in any market area and force businesses to compete. And if they start to put up prices, then clearly in that market area competition no longer delivers any benefits to consumers. At that point you can look at making the capitalist redundant.
"No real life job legislation has ever claimed to match jobs or to employ everyone."
ReplyDeleteNo real life legislation ever claimed to provide everybody with health care based upon need rather than ability to pay - until we invented and implemented the National Health Service.
I'm British. We don't do "can't".
Tom, I believe the problem goes beyond the issues of rent extraction and productive vs. financial capital. Capitalism itself, which is the only economic system the world has known since it began with the French Revolution, is an institutional impediment to the liberty, equality and fraternity that Marx wanted. It systemically generates perverse incentives and, I would argue, cannot at this point be repaired.
ReplyDeleteFrom this perspective the JG must at a minimum be subsidiary to a post-capitalist economy. Otherwise it fails to address the contradictions tearing society apart.
@ Ben Johannson
ReplyDeleteAgreed.
Marx recognized that change occurs based on underlying conditions:
At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production or – this merely expresses the same thing in legal terms – with the property relations within the framework of which they have operated hitherto. From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution. The changes in the economic foundation lead sooner or later to the transformation of the whole immense superstructure.…
No social order is ever destroyed before all the productive forces for which it is sufficient have been developed, and new superior relations of production never replace older ones before the material conditions for their existence have matured within the framework of the old society. — Preface to A Contribution to the Critique of Political Economy
Extreme social pressure could catalyze the shift through revolution instead of gradual change. Based on their analysis, Marx and Engels believed that conditions were sufficiently ripe to call for revolution to provoke the next stage. The Communist Manifesto was the result.
This assumption turned out to be wrong. Communism did not supplant capitalism but rather prevented chiefly agricultural Russia and China from going through the capitalist transition first.
The question facing us is when the wave of capitalism will crest, or is it cresting now?
Transition from the Industrial Age to the Information Age in capitalist countries suggests that the transition point may be near. The decline of productive capital and its replacement by financial (unproductive) capital also suggest late stage capitalism.
The question then becomes evolution or revolution.
If it is evolution, then MMT could provide the basis for a transitional stage to "socialism" as prioritizing people and the environment.
If it is revolution, then all bets are off and the outcome is uncertain.
Assuming evolution, then a plausible scenario is social democracy supplanting bourgeois liberalism and then being supplanted by democratic socialism.
The most significant and successful attempt at democratic socialism so far is China. But it is unlikely that China's model, developed for the people and conditions there would be exportable to the West.
The West needs to find its own way, and this what needs talking about now.
The West has retrenched after experimenting with social democracy to some degree, e.g., the New Deal in the US and the Scandinavian model.
So I view MMT as it is presently expressed in theory and policy as transitional — change from within the existing system.
Evolution via revolution, because the 'haves' aren't going to let go. Ever. We're going to have to pry the reins out of their cold dead hands.
ReplyDeleteTom,
ReplyDeleteMy hope is for peaceful transition before systemic damage becomes critical. The Labour Party in the UK has committed to a plan that gives workers right of refusal for any business that threatens to close, move or be sold off and government financing to make it happen. This alone can facilitate the radical transition to a post-capitalist society and a JG-type program either on the old employer-employee model or taking the same form as the worker owned cooperative can provide bridge employment to smooth over disruptions. At least that's what I believe.
@ Neil said "subsidising private business with public funds. Precisely the same idea that lead to a wage price spiral in the 1970s ... you haven't addressed or fixed the problem that lead to the 1970s collapse of Keynesianism. You're just doing the same again and expecting to avoid a wage price spiral and stagflation."
ReplyDelete70's inflation was caused by oil. The U.S. labor market at that time was only ho-hum. Stagnation in the U.S. was caused by demand leakage (due to imported oil) and austerity (due to our first neoliberal president).
@ Tom said "MMT could provide the basis for a transitional stage to "socialism" as prioritizing people and the environment."
Or MMT could be used to pay for wars, the police state, tax cuts for the rich, and Wall Street bailouts.
OK, I'm being negative. While lots of things are possible, there is no clear cut political path forward. In theory a populist economics platform could unite the masses, but in practice it is very easy to keep the masses divided. I view MMT as helpful mainly for preaching functional finance and sectoral balances. The JG sounds good at first glance but runs into problems in practice. It's easily attacked from both the left and the right, and easily degraded into a workfare gulag. Bernie never embraced the JG and I don't blame him.
The people who would benefit most from a JG, assuming you could actually make it work, would be the poor and minorities -- who have the least political power to help you get elected and pass legislation. Further, the poor and minorities might be better served by socialism, so if you really care about the poor and minorities then why mess around with capitalism? To me it seems like a questionable strategy, but then I admit there is no clearcut path forward.
@ Tom said "MMT could provide the basis for a transitional stage to "socialism" as prioritizing people and the environment."
ReplyDeleteOr MMT could be used to pay for wars, the police state, tax cuts for the rich, and Wall Street bailouts.
OK, I'm being negative. While lots of things are possible, there is no clear cut political path forward.
FDR was a reluctant social warrior who was created by the needs of the time. He also had some fortuitous advice from people like his secretary of agriculture Henry A. Wallace, Fed chair Marriner Eccles, and John Maynard Keynes. There was also a pretty strong tradition of populism and progressivism in the US and there was also a socialist movement.
On the other hand, Germany got Hitler, Italy got Mussolini, and Russia got Stalin.
There's no telling in advance.
Further, the poor and minorities might be better served by socialism, so if you really care about the poor and minorities then why mess around with capitalism?
ReplyDeleteThat would require a definition of socialism other than the popular non-Marxist view of government owning and running things. So when you write about being better served by socialism, what does that mean?
Ben, the poor and minorities are better off in Cuba than in the U.S.. Less discrimination, universal health care, equal education opportunities. Ditto the U.S.S.R. and Eastern Europe. Polls show that at least 1/2 think life was better under communism. Not everyone is a winner in capitalism.
ReplyDeleteI look at the economic system as the life-support system of a society. Economic systems have a purpose. It is to support society.
ReplyDeleteAs a social system, society is a network of people. Networks are comprised of elements and relationships. Simple networks are made up of elements and relationships among them, as well as to the whole system. Complex networks like national societies are made up of people and a host of relationships among people, subsystems and the whole system.
Economics arbitrarily has arrived at three major factors of production, although this is disputed. The three factors are capital, land and labor.
Feudalism prioritized land.
Capitalism prioritizes capital.
Socialism prioritizes people.
There are different varieties of these three type of organization base on these priorities.
The hard dichotomy between capitalism as characterizing the economic system of "the Free World" and socialism as character sizing the economic system of "Communism" is both naive and passé.
We need to move beyond this black and white conception to a more realistic one.
The transition from feudalism is gradual and there are still aspects of feudalism operative in today's capitalistic societies, even down to aristocracies and monarchical and aristocratic privilege. This is exemplified in the bastion of liberalism, Britain.
We can also conceive of a transition to social as prioritizing people based on new potential from technological innovation as the Industrial Age morphs into the Information Age. For example, direct democracy in real time is now feasible through digital technology.
No one is going to write the book of socialism and then have the world adopt it. It doesn't work that way.
continued
continuation
ReplyDeleteMarx, I think, explains the process well:
In the social production of their existence, men inevitably enter into definite relations, which are independent of their will, namely relations of production appropriate to a given stage in the development of their material forces of production. The totality of these relations of production constitutes the economic structure of society, the real foundation, on which arises a legal and political superstructure and to which correspond definite forms of social consciousness. The mode of production of material life conditions the general process of social, political and intellectual life. It is not the consciousness of men that determines their existence, but their social existence that determines their consciousness. At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production or – this merely expresses the same thing in legal terms – with the property relations within the framework of which they have operated hitherto. From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution. The changes in the economic foundation lead sooner or later to the transformation of the whole immense superstructure.
In studying such transformations it is always necessary to distinguish between the material transformation of the economic conditions of production, which can be determined with the precision of natural science, and the legal, political, religious, artistic or philosophic – in short, ideological forms in which men become conscious of this conflict and fight it out. Just as one does not judge an individual by what he thinks about himself, so one cannot judge such a period of transformation by its consciousness, but, on the contrary, this consciousness must be explained from the contradictions of material life, from the conflict existing between the social forces of production and the relations of production. No social order is ever destroyed before all the productive forces for which it is sufficient have been developed, and new superior relations of production never replace older ones before the material conditions for their existence have matured within the framework of the old society.
Mankind thus inevitably sets itself only such tasks as it is able to solve, since closer examination will always show that the problem itself arises only when the material conditions for its solution are already present or at least in the course of formation....
— Preface to A Contribution to the Critique of Political Economy
Are we at this point? If so, the change will start occurring dialectically. Looks to me like this may already be underway.
Dan, Cuba is a state capitalist system like the USSR. Government ownership of production doesn't equate to socialism, it just puts another small group into a position of control of employment, investment, the goods that are produced and what is done with the labor surplus.
ReplyDelete