It’s Wednesday and only a collection of snippets today. Today we saw some self-aggrandising hypocrisy with a short memory come out of the sewers, and a statement by a government denying that they are a “successful case of MMT”, an advertisement (call for help) and some music linked to a recent, rather significant death, when considered in the history of contemporary music. Pretty full day really.
I was coming through the streets of inner Melbourne the other night after playing in my band. I couldn’t believe how many little scooters with those big boxes on the back were buzzing around, in and out of traffic, turning here and there, presumably, delivering food to people who preferred to stay in from the cold weather. I had sort of noticed these ad hoc cavalcades of cheap scooters before but never really assessed the extent of the proliferation. It represents an amazing and highly disturbing trend in our labour market. Okay, that sounds like something someone from another (older) generation might say. He who grew up when there was secure employment and wages and conditions were more tightly regulated. And I have seen Tweets from young people telling us ‘oldies’ to step aside. But what the scooter riders don’t realise is that they will get old themselves one day. And secure, well-paid work coupled with a broad spectrum of high quality public services is what makes that transformation liveable. In mapping out what I think are the essential aspects of a social transformation that we might call a Green New Deal, eliminating precarious work is one of the priorities – it is intrinsic to creating a more equitable society in harmony with nature. This aspect also calls in question the role of a Job Guarantee. Note the capitals – there is only one Job Guarantee but many jobs guarantees. I will explain today why the Job Guarantee will be an intrinsic part of the Green New Deal but by far a minor player in terms of the job opportunities that will be created by the socio-economic shift. Many commentators seem to think the Job Guarantee is sufficient for a Green New Deal. It is not and we need to understand its role in a monetary system to understand why.
When the governments in the advanced nations abandoned full employment as an overarching macroeconomic objective, and instead, starting pursuing what I have called full employability, they stopped seeing unemployment as a policy target (to be minimised) and began using it as a policy tool to suppress inflation. As mass unemployment rose, the politics were massaged by the mainstream of my profession who claimed that the level of unemployment that constituted full employment had risen (this was the NAIRU era) and so there was really no problem. Governments adopted the neoliberal line that they ‘didn’t create jobs’ and had to target fiscal surpluses to ensure their position was ‘sustainable’. The costs in lost income and human suffering have been enormous – most people would not have any idea of the massive scale of these losses that accumulate day after day. Now, it seems, the ‘sound finance’ school is going a step further. We are probably facing an environmental emergency in the coming period (years, decades) but the question commentators keep asking is not what we can do about it but ‘how can we pay for it’? So ‘sound finance’ has already destroyed the lives of millions of people around the world as a result of mass unemployment and poverty, now it is turning its focus on the rest of us. Madness. Paradigm change has to come sooner rather than later.
Apparently the British Left is “fizzing with ideas for a smarter economy” according to the UK Guardian article (May 12, 2019) – The zeitgeist has shifted. Now the left is fizzing with ideas for a smarter economy – written by Will Hutton. I can’t say I sensed an outbreak of fizz. But in the colloquial language from where I come from, the term fizzer means “Something that promised excitement but instead was a disappointment”, Yes, Hutton’s fizzers include promoting the insights of a long-standing (pun intended) critic of employment guarantees, who prefers people to be propped up as consumption units by a UBI, and, yes, surely, if Hutton is involved, reversing the “tragedy” of the democratic choice the British people made to exit the EU. Apparently, “Remain” is the “great progressive social force of the moment” and if Britain was to leave the EU it would “stand in the way of any of it ever being implemented”, where “it” refers to all these ‘left’ fizzers. It is hard getting one’s head around this logic. A restoration of democracy and sovereignty apparently disables the elected government from using its currency-issuing capacity to deliver a progressive program aimed at advancing well-being. But, staying in a corporatist cabal which has embodied neoliberalism in the core legal structure of its existence and allows corporations to sue governments which threaten their profits and is unaccountable to the people is the exemplar of progression. This stuff is in the world of the pixies!
This is the second and final part of this cameo set, which aims to clear up a few major blind spots in peoples’ embrace with Modern Monetary Theory (MMT). This is all repetition. I don’t apologise for that and it does not reflect a slack or bad editorial approach from yours truly as some critics have claimed. Repetition is how we learn. Reinforcing things in different ways (aka repetition) helps people come to terms with concepts and ideas that give them dissonance. MMT is certainly about dissonance as the current level of hostility towards our work is demonstrating. It is also challenging existing ‘fiefdoms’ in the academy and beyond, which also creates aggression and retaliation. The problem is that most of the current criticism merely rehearses the same tired lines of inquiry. A stack of mainstream (New Keynesian) economists now regularly claim they ‘knew it all along’. The short and truthful response is – ‘no they didn’t. The standard mainstream macroeconomic theory cannot accommodate MMT principles unless it jettisons its core propositions and becomes something else. At any rate, as noted in – Operationalising core MMT principles – Part 1 – I am happy to help clarify quandaries that newcomers have with MMT if they are genuinely trying to work out what it is all about. I have no desire to interact with ‘critics’ who are just defending mainstream macroeconomics in its death throes and have no genuine interest in really understanding MMT beyond the superficial and no penchant for reading the now lengthy body of work we have generated in the academic literature. Yesterday, I considered a typical inquiry about an important operational detail of implementing a Job Guarantee. Today, I consider a related topic. If a government is facing a situation where it needs to shift workers to the Job Guarantee pool to stabilise inflation, how does it do that? The ‘critics’ often claim we only advocate tax increases to fight inflation and because they are politically tricky to engineer MMT essentially fails to have an effective price anchor. Today, I bring together many past blog posts to summarise the MMT position on counter-stabilising fiscal policy for those that might be struggling to put it all together.
Things seem to come in cycles. We have been at this for some years now – trying to articulate the principles of Modern Monetary Theory (MMT) in various ways in various fora. There is now a solid academic literature – peer-reviewed journal articles, book chapters in collections, and monographs (books) published by the core MMT group and, more recently, by the next generation MMT academics. That literature spans around 25 years. For the last 15 odd years (give or take) there has been a growing on-line presence in the form of blog posts, Op Ed articles etc. More than enough, perhaps too much for people to wade through. Each period seems to raise the same questions as newcomers stumble on our work – usually via social media. The questions come in cycles but there is never anything raised in each cycle that we have neglected to consider earlier – usually much earlier. When we set out on this project we tried to be our own critics because our work (in this area) was largely ignored. So we had to contest each of the ideas – play devil’s advocate – to stress test the framework we were developing (putting together pieces of knowledge from past theorists, adding new bits or new ways of thinking about them and binding it all together with interesting and novel connections and implications). So it is continually testing one’s patience to read the same criticism over and over again. Please do not get me wrong. When these queries are part of the learning process from a reader who is genuinely trying to work out what it is all about there is no issue. Our role as teachers is to see each generation safely through their educative phase in as interesting a manner as we can. But when characters get on the Internet, some with just a year, say of postgraduate mainstream study and start making claims about what we have ignored or left out or got wrong then it can be trying. Ignoring them is the best strategy. But then the genuine learners get confused. So this blog post is Part 1 of a two-part series seeking to help answer two major issues that we keep being asked about – (a) Does MMT only advocate tax increases to fight inflation?; and (b) How can any meaningful jobs be offered in a Job Guarantee if the workforce is ephemeral by construction? Part 2 will come tomorrow.
Everywhere I read it seems, the ‘Green New Deal’ appears. I wrote a bit about it last week in my evaluation of the latest US job numbers – US labour market moderated in November and considerable slack remains (December 11, 2018). The point I made there was that a shift to a green economy would possibly generate around 21 million jobs (14 per cent of total US employment), which given reasonable estimates of excess capacity would require a huge shift in the employment structure and multiples of the available idle labour supply. Of course, that is the objective – to shift workers from fossil fuel, carbon intensive industries into sustainable activities. That is no easy task and would require a fundamental shift in the government-market balance in terms of resource allocation. The market alone will not accomplish that shift in a desirable manner. Cue – more regional and occupation planning. I have also been seeing an increasing number of Tweets talking about a ‘Just Transition’ framework, something I have written about in the past. And there are now Tweets out there equating that with a Job Guarantee. At that point, we get ahead of ourselves. We must see the Job Guarantee in perspective and not ask it to do too much. That is what this blog post is about.
I am doing some work on the way technology can be chosen to maximise employment in the pursuit of advancing general well-being. This is in the context of some work I am doing on advancing what is known as ‘relative pro-poor growth’ strategies in Africa via employment creation programs and draws on my earlier work in South Africa on the Expanded Public Works Program. In the current work, I have been assessing ways in which the Labour Intensive Public Works program in Ghana has been deployed to serve this purpose. The problem one confronts when working as a development economist in less well-off nations is that the institutional bias promoted by the IMF and the World Bank is towards advancing, at best, what we term ‘absolute pro-poor growth’. But that sort of agenda typically fails to strengthen other aspects of a strong civil society because it is almost always accompanied by rising inequality which continues to concentrate power and influence at the top and leads to resources being disproportionately expropriated by the wealthy (and usually foreign) classes. Institutions such as democracy, justice, law and order and causes such as environmental sustainability are then compromised.
I am now on a train heading back from Galway to Dublin for tonight’s event. This is Part 2 of my responses to the conversations I had and presentations I attended during the Second International Modern Monetary Theory which was held last weekend in New York City. In Part 1 I focused on the importance of starting an activist program with a thorough grounding in the theory and practice that the core Modern Monetary Theory (MMT) team has developed over the last 25 or so years. As MMT becomes more visible in the public domain and seems to offer much to those with progressive policy aspirations, there is tendency to adopt a stylised version of it (a sort of shorthand version), and sloganise MMT. Part 1 cautioned against that tendency. The latter part of Part 2 also introduced the idea that there is only one Job Guarantee and many of the multitude of employment guarantee proposals that have popped up like weeds after rain in recent years do not have the essential technical design features to make them consistent with MMT. I continue that theme in this blog post.
I have very little free time today. I am now in Dublin and am travelling to Galway soon for tonight’s event (see below). Last evening I met with some Irish politicians at the Irish Parliament and had some interesting conversations. I will reflect on the interactions I have had so far in Ireland in a later blog post. But today (and next time I post) I plan to reflect briefly on my thoughts about the Second International Modern Monetary Theory which was held last weekend in New York City. Around 400 participants were in attendance, which by any mark represents tremendous progress. The feeling of the gathering was one of optimism, enthusiasm and, one might say without to much license, boundless energy. So a big stride given where we have come from. Having said that, I had mixed reactions to the different sessions and the informal conversations I had over the three-day period, which might serve as a cautionary warning not to get to far ahead of ourselves. This blog post is Part 1 of my collection of some of those thoughts. They reflect, to some extent, the closing comments I made on the last panel last Sunday.