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The Job Guarantee and the MMT Core: Part Two

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MMT and Public Purpose:The Normative Component

I ended Part One by saying that Warren Mosler's reply to Cullen Roche is nearly a decisive argument that the Job Guarantee (JG) is a core component of MMT, provided, of course, that one accepts that full employment with price stability is an important component of “public purpose” or “the general welfare,” and that also one thinks that the Government's fiscal policy ought to fulfill the public purpose. Since all the MMT founders and many later MMT adherents like myself agree with this, it's not surprising that we think that the JG is a core component of MMT.

But what if one either doesn't accept “public purpose” as a normative standard guiding Government monetary and fiscal policies, or thinks that full employment with price stability is either not a means that should be used to accomplish the public purpose, or thinks that another means can better accomplish public purpose and still lead to full employment and price stability? Then one's verdict on whether the JG is a part of the MMT core will be different.

For example, Cullen objects to the full employment goal because he doesn't:

“. . . believe the JG is the optimal usage of these monopoly powers and in fact could come at substantial long-term cost. Instead, I think there are better options which can also lead to price stability and full employment.”

In the post, or his replies to commenters he doesn't say anything about “public purpose,” but he reveals that he disagrees with the goal of full employment with price stability and thinks instead, that the Government's monopoly over the currency should be used to provide

“. . . the gift of time and the ability to live a fuller and more meaningful life via the prosperity that innovation and productivity create?”

And he also goes on to say that he thinks creating “full productivity” will also achieve full employment and price stability as a side effect, and that we have a moral responsibility to become enormously productive and increase living standards for our children and future generations, and he thinks Government spending to accomplish that should have a higher priority than Government spending to create a JG buffer stock.

Also, he's worried about the long-term real costs or risks of the JG as indicated in this comment:

“You guys see no need for unemployment. I do. I think it serves an incredibly important psychological component to any healthy economy. I’ve feared for my job and been unemployed. Those moments shaped who I am and what I’ve become. They were invaluable in retrospect. If I’d been able to apply for a JG job I might not be half the man I am today. Maybe it’s just personal entrepreneurial experience speaking here, but I know what it means to hunt and kill for ones dinner. Very little, aside from great parenting and education, was handed to me in life. My psychological development through having to earn things has been a building block that no govt program can ever provide. Ever.”

It's easy to make fun of this statement, or to criticize it rather bluntly, as I did at Cullen's site. But here I'd rather point to the larger issue. There may be side effects of the JG program we can't anticipate now; but we know what the effects of an unemployed buffer stock are on society. And Cullen's conjecture, based on his interpretation of his own experience that there is value in experiencing unemployment, which we will lose if we implement a JG (even if that value may not be apparent to others who have had the experience of unemployment and its corrosive effects), even if true, doesn't on the surface seem to suggest anywhere near the individual and social costs that we know are caused by unemployment.

Those of us who feel this way, may be wrong, but I think opponents of the JG have to do better than to just voice vague fears and anxieties about future real costs. They have to produce at least some cogent negative arguments about why we should expect side effects of the JG that are more serious than the costly realities due to unemployed buffer stocks we see right now, and also they have to produce alternative policies that appear less risky than the JG proposal.

Why Not try Both?

So, it seems that the JG, assuming it is the best way to get full employment with price stability is very likely to be a component of the public purpose and therefore a core component of MMT. However, even assuming that the JG is such a core component, that doesn't mean that a goal of maximizing productivity should not also be viewed as a core component of MMT. As a number of commenters on Cullen's post have pointed out, the Government can afford to both pay for the JG and also for efforts to increase productivity. Nor are these components of public purpose competitive. So, why not try to enormously increase productivity and also implement an FJG?

There is a measurement problem, here. The current most common measure of increases in productivity, increases in GDP per labor hour, is laughable as a measure of real productivity gain, and I think it is enormously difficult to arrive at a good way to measure such gains, since doing so would involve measuring the non-monetary value of economic, including Government outcomes. But, if the measurement problem could be solved, then as productivity gains are made, the employment conditions of a JG buffer stock can easily be changed by raising JG wages to pass through productivity gains to whole labor force.

Since 1970 most of the productivity gains have been distributed by neo-liberal economic/political regimes to the wealthy, greatly increasing the inequality gap and clearly threatening democracy itself. But a JG program in concert with an emphasis on increasing productivity could fix that, if we can find better ways to measure productivity gains than we have now, and use those measures to help shape JG programs.

Peter Cooper's JIG Adds Freedom

Above, I said that I find the MMT argument for JG as a core component nearly a decisive one, provided, of course that one accepts that full employment with price stability is an important component of “public purpose” or “the general welfare,” and that also one thinks that the Government's fiscal policy ought to fulfill the the public purpose. However, as part of the general debate over the JG, Peter Cooper has proposed a JG, supplemented by a Basic Income Guarantee (BIG), as a better alternative than the JG alone, because net/net it would increase personal freedom since people could choose either JG or BIG based on their needs, while still fulfilling the requirement of having an employed buffer stock as an automatic stabilizer.

I think this idea is promising. It has received vigorous discussion over a number of days at Peter's site. Dan Kervick objected to it on numerous grounds. And in a comment I made on his objections, I summarize my views on Peter's proposal, which he decided to call “JIG”. Here's my comment.

The nub of it is that neither the private sector nor the Government is infallible in its judgments about which jobs and roles produce value, and which do not, or about which individuals are producing value and which are not in their individual activity. So, why should we rely completely on either the market or the Government to make these judgments?

Why shouldn’t we accept instead that individuals who would rather be free from working either for the private sector or for the Government still have the right to a decent living and free health care? Are they not human beings? Is there no possibility that people who make such a choice will not use the time they gain to contribute value to society, or that they might do so in the future?

I think there are some people who would use the time provided by choosing a BIG option to innovate and create outcomes of great value to society. Neither private sector nor Government authorities can be trusted with power to make all the decisions about which activities are valuable and deserve decent monetary compensation in return.

Ordinary people have to have some of the power to decide for themselves what they'd like to do and still be able to remain alive and in good health to do it. That is an increase in individual freedom that our modern economies, including the US, can afford, and it may provide a better core component for MMT than the JG alone.

In Part Three, I'll review John Carney's objections to the Job Guarantee.

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Submitted by Hugh on

One of the problems is that MMTers don't themselves agree on whether proposals like a Jobs Guarantee are intrinsic to the theory or add-ons. I have gotten into it with them on both sides of this.

There are several economic and financial issues that MMT and its adherents need to address whether these are part of MMT or not. Jobs are certainly one issue but so are wealth inequality, kleptocracy, and class war. Indeed one observation is that kleptocrats take an MMT approach to money in their looting.

With regard to a jobs guarantee, I differ with the MMT proposal because I think the government should be the first resort, not last resort, employer and that it should pay a living, not a minimum wage. Along with restrictions on offshoring and other measures, this would force employers into offering higher wages and benefits to compete with government.

Productivity is a fairly meaningless concept. The real question is production of what? We need to re-industrialize and do so in a sustainable way. We need to improve education and provide healthcare to all. We need to rebuild and rethink our communities and their infrastructure. These are all major tasks. They are all worthwhile. It is here we need to concentrate production and productivity.

Hugh

Submitted by hipparchia on

With regard to a jobs guarantee, I differ with the MMT proposal because I think the government should be the first resort, not last resort, employer and that it should pay a living, not a minimum wage.

that's my preference too, and this seems to be another divide in mmt-land. warren mosler appears to be in favor of minimum wage jobs while bill mitchell advocates for living wage jobs.

Indeed one observation is that kleptocrats take an MMT approach to money in their looting.

my take on this is that the kleptocrats have figured out, and always will be the the first to figure out, how the money system works [whatever that system is] and turn it to their advantage if the rest of us don't watch them like hawks.

Submitted by lambert on

Yes, and that's why "public purpose" is the contested area.

First they ignore you, then they ridicule you, then they fight you, then you win. -- Mahatma Gandhi

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Submitted by letsgetitdone on

I think the MMT people haven't emphasized public purpose enough and now there's a problem when people want to ignore that value interpretation of MMT.

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Submitted by letsgetitdone on

Even in terms of numbers. Warren still sticks with $8.00 per hour. Randy and Stephanie now seem to favor $12.00 per hour. That's 50% more than Warren, quite a lot. My own view is that things should start at $10,00 per hour in the rural areas of Kansas or in similar low cost places and should range all the way up to $24.00 per hour in places like New York city where the cost of living is 140% greater than in the low cost rural areas.

I don't know if I agree that the Kleptocrats understand MMT. Some may understand it how the money system works, but others are just thieving where they see an opportunity and are buying off politicians.

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Submitted by letsgetitdone on

One of the problems is that MMTers don't themselves agree on whether proposals like a Jobs Guarantee are intrinsic to the theory or add-ons. I have gotten into it with them on both sides of this.

Apart from semantics, I do think they pretty much agree if we're talking about Mosler, Wray, Mitchell, Bell-Kelton, Tcherneva, Auerback, Parenteau, Forstater, Fullwiler, and good many of the economists and writers, including Jamie Galbraith, who have picked up on MMT. As the word about MMT has spread however, a group is developing that accepts its descriptive position stance on money, but not its normative stance that fiscal policy is about public purpose and the full employment with price stability goal. This group now contains, Ed Harrison, John Carney and Cullen Roche, though I think Cullen's position is a little different from the other two right now in that he seems more friendly to the FE/PS goal, but is contending that it is best achieved by maximizing "productivity," a position I think he will find hard to maintain because economists' measures of this property are philosophically laughable.

Having said that, I still think it's true to say that MMTers are overwhelmingly in the corner of the founders, their collaborators and their students making the public purpose, FE and PS core to MMT.

There are several economic and financial issues that MMT and its adherents need to address whether these are part of MMT or not. Jobs are certainly one issue but so are wealth inequality, kleptocracy, and class war. Indeed one observation is that kleptocrats take an MMT approach to money in their looting.

Clearly, most MMTers do address the jobs issue in terms of the JG idea. Some such as Peter Cooper and myself are starting to shade over to Peter's JIG notion discussed above. As for wealth inequality, kleptocracy, and class war, I think it's pretty clear that MMT as a whole aligns itself with Bill Black on kleptocracy. People don't often use the word kleptocracy, but they do write as if they think it's here now. Warren Mosler tends to write less about. But Stephanie, Randy, Pavlina, Marshall, and Bill Mitchell all have positions very close to Bill Black's. I may be wrong about this but I think I remember Bill Mitchell using the word "kelptocracy" once or twice himself.

Most also believe that a war between the 1% and the 99% is going on. Bill probably believes in "class war." I have my problems with "class war" simply because I'm not sure empirical requirements fulfilling the idea of "class war" are there yet. Sometimes I use the term myself for ease of communication. But right now I really think it's a war between a global power elite and the rest of us that is going on.

On wealth inequality, I think MMTers are most likely to write about that when they criticize neoliberalism as an ideology. So you'll see most of this in Bill Mitchell's and Randy's writings. Among close associates of MMT, Michael Hudson and Jamie Galbraith have had inequality as a major concern. I also think there's a position on inequality implicit in MMT. That position is: go for full employment with price stability using the JG after full payroll tax cuts, and State revenue sharing, if and when inflation hits; then tax "the top end of town" to contain it.

With regard to a jobs guarantee, I differ with the MMT proposal because I think the government should be the first resort, not last resort, employer and that it should pay a living, not a minimum wage. Along with restrictions on offshoring and other measures, this would force employers into offering higher wages and benefits to compete with government.

I don't think it matters if it's an ELR or an EFR, as long as the wage paid is a living wage. I agree on restrictions on offshoring. I have zero tolerance for that, and think it is quixotic to allow "free trade" without having a unitary political system to regulate the world political economy. Without it "free trade" just becomes a system in which foreign countries buy off our elites and get them to move jobs located here out of the US. We should follow the rule, if you don't make it here, then you don't sell it here, and make exceptions only when the conditions are carefully negotiated.

I agree with you however, that MMT writers don't write much about offshoring directly. They do write about races to the bottom however, and point out that not every nation can have an export-led economy. They also point out that those with a trade deficit are getting real wealth in return for electronic credits. So that's quite a racket if you can keep it going.

Productivity is a fairly meaningless concept. The real question is production of what? We need to re-industrialize and do so in a sustainable way. We need to improve education and provide healthcare to all. We need to rebuild and rethink our communities and their infrastructure. These are all major tasks. They are all worthwhile. It is here we need to concentrate production and productivity.

I couldn't agree more, and I also think that we need to begin to measure productivity in units other GDP per labor hour. GDP needs to be replaced by measures of real non-monetary value. And we also need productivity measures relativized to real consumption of non-renewable resources, and damage done to the environment. I think Cullen Roche's appeal to full productivity in his blogs is ridiculous without any writing at all on how he plans to measure that.

Submitted by Hugh on

Thanks for the thoughtful reply. My disagreement with Bill Black is that he sees criminality, even a great deal of criminality, in the system but this is still different from my view of criminality as the system. A system that has a lot of criminality in it is still susceptible to reform. Its foundations are sound. But if the system is criminal, then so are its foundations. It cannot be reformed. It can only be replaced.

As for class war, it is all around us. I say almost every time the subject comes up that the class war is about keeping the loot gained from kleptocracy. The 1% can not maintain the huge inequality of wealth they have created in any straightforward way. The numbers are against them. That is why the primary weapon in class warfare is distraction: directing anger against the Chinese, welfare cheats, lazy government employees with cushy jobs and benefits, grasping unions, pinhead intellectuals. The list goes on and on. The purpose is to keep the 99% from coming to consensus and taking collective action. The 99% can sweep the 1% away at any time. So the 99% must be kept from realizing this.

Kleptocracy has been under construction for 35 years. It is a system. It pervades our elites. It is, in fact, our elites. Class war is not a follow on to it. It is an integral part of how kleptocracy and wealth inequality work. It's always been there.

It is also why proposals like a jobs guarantee of whatever kind won't work because we can not get there from here as long as kleptocracy stands. With it gone or on the run, the world and the economy look much different. I don't think MMTers, or really many others, have given this much thought. What is the role of MMT in a post-kleptocratic economy?

I would just add a last thought. Another area associated with wealth inequality which MMT does not address is the paper economy. There are huge sums of money in that economy. It can have devastating impacts on the real economy, and has. Even so, these including the 2008 meltdown, are limited to the damage it could do. The main reason it hasn't is because most of the time most of it stays in its paper world. Relative to the real economy, its velocity is low. Anyway I have not seen much more MMT on velocity or the paper economy.

Hugh

Submitted by MontanaMaven on

anarchist, socialist, communists or "whatever" (Oscar Wilde's remark which I will expound on sometime), would ostracize these parasites. Looters were kicked out of the tribe. They would then become bandits and occasionally attack, but, by and large, their anti-social behavior was not rewarded.

All this talk of reforming the system has been going on in most recent times since the "progressive" movement's tweaking of the system with safety nets. If everybody had a living wage and were taken care of in retirement and when they were sick, we would't need all this bureaucracy. I'm starting to understand the derision with which early anarchists (but didn't use the word) like Oscar Wilde looked at "philanthropy" whether by an individual or by the state. I'm also learning how once the money goes from local to national there is a lot of skimming going on. And not just by greedy capitalist military bullet makers. It's called consulting.

Thanks to Alcuin, I am reading Jerry Fresia's "American Revolution" which is a Zinn like look at the constitution. Our Founders except for Thom Paine were elitist barons. They wanted the mob to be ruled by "their betters". They felt that rude mechanics and small farmers were inferior. Well, living now amongst those inferiors, believe me, when the shit hits the fan, I'll take my luck with people who can fix things and find food.

Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.
Groucho Marx

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Submitted by letsgetitdone on

One day people will really be free, but we'll have to work very hard on politics to get there. Here's to the 99% and the Occupy movement!

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Submitted by jest on

Part of what has been lost in the whole unemployment debate are the questions "why do we need jobs? why do we need to work?"

We don't need either; we need to pay the rent, take care of the kids, etc.

Throughout human history, we ironically have spent vast amounts of time and resources trying to eliminate jobs & work. We don't need as many nannies because of dishwashers, laundry machines, and instant foods (i know, i know, it's shitty processed food. but you know what I'm getting at). We need fewer secretaries because of Word, Excel, etc. Post offices all over the country are struggling because e-mail has made physical letters obsolete.

In other words, less work & fewer jobs are sort of the point of a highly technological society. Technology was supposed to free up more time & resources for us to do better things. Instead, the excess resources were all harvested the 1%, while the rest of us tragically scramble for jobs that are not necessary or are extinct because of machines & computers.

Jeremy Rifkin wrote The End of Work (1994) which looked at this in great detail. He even predicted a consumer based economy which would collapse under private debt, because consumer debt would have to explode to account for the loss of real jobs.

This is a long winded way of saying that from here on out, I think focusing on jobs is a losing battle. It's like filling the gas tank of a car that has a hole in it.

I'd rather see a focus on guaranteeing income and/or services, rather than a bunch of jobs people are going to lose anyway due to technology.

Long live the Income Guarantee!

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Submitted by letsgetitdone on

Of course, above I advocate for a choice between JG and BIG for those who don't have private sector employment. O also advocate immediately lowering the standard work week without lowering the weekly wage to 35 hours, while continuing to lower it as productive capacity increases further.

Submitted by MontanaMaven on

What are our base needs?

Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.
Groucho Marx