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.
The Australian Council of Social Service (ACOSS), which represents income support recipients, in conjunction with Jobs Australia (a peak body for the not-for-profit job services providers) released a report last week (September 14, 2018) – Faces of Unemployment – which was a welcome return to a focus on joblessness and the need to provide more jobs, rather than the lame faux-progressive retreat to UBI advocacy that has dominated the policy debate for the last few years. However, once you start reading the analysis you realise that these supposedly ‘progressive’ organisations offer the same old neoliberal remedies to solving poverty and unemployment. They want: Compulsory, assisted job search, which is just coercion of jobless workers by Australia’s privatised job services industry that has an appalling record; 2. Wage subsidies in the private sector and Public sector wage subsidies – which never produce effective sustainable outcomes of sufficient magnitude to be called a solution; and vocational training, which is the same old ‘put workers on the training treadmill and shuffle the jobless queue’. This reinforces the theme I focus on a lot that the progressive elements in our society have become captured by the neoliberal mainstream and cannot think outside that frame. There is actually no mention or analysis of public sector job creation programs in the entire ACOSS/JA Report. Sadly, groups like ACOSS have a major public voice and the Federal government sees their advocacy as non-threatening because the type of policies they advocate are mainstream neoliberal and just more of what the Government, itself, thinks are viable. The irony (or disgrace) is that if these policies were effective then the ACOSS/JA Report would not have had to be written. Just imagine what they could have written about the “Faces of Unemployment” if a Job Guarantee program effectively wiped unemployment out. It would become a very short story of workers moving between jobs.
This is the third and final part of this series where I examine claims made by senior advisors to the British Labour Party that a fiscal policy that is designed using the insights provided by Modern Monetary Theory (MMT) would be “catastrophic” and render the British pound worthless. In Part 1, I examined the misunderstanding as to what MMT actually is. A senior Labour advisor had claimed, in fact, that any application of MMT would be “catastrophic” for Britain. He talked about MMT “policy prescriptions”, which disclosed an ignorance about the nature of MMT. In Part 2, I considered the British Labour Party’s Fiscal Credibility Rule and demonstrated that its roots were in core neoliberal ideology and any strict adherence to it would not be consistent with progressive outcomes. I noted that it was likely to promote a private ‘debt-bias’ that was unsustainable. In this final part, I explore some economic history over the last five decades to give some further force to the argument presented in Part 2. And I finish by arguing that a well governed, rule of law abiding Britain with a government building and maintaining first-class infrastructure, with excellent public services (energy, transport, health, education, training, environmental certainty, etc), with a highly skilled labour force, and regulative certainty, would be a magnet for profit-seeking private investment irrespective of whether it was running a continuous fiscal deficit or not. Yet, it is highly likely, given Britain’s history, that such a deficit (both on current and capital contexts) would be required.
Today is Wednesday and only a few observations today as I want more time to write other things. Last night, I gave a talk at a Politics-in-the-Pub event in Newcastle, which is a monthly gathering held at a local hotel and attracts an audience of around 80 people or thereabouts. These are people who purport to be active politically and progressive in bent. The topic was Universal Basic Income and Automation, although it was really a general discussion of UBI, and, with my appearance, a comparison with the Job Guarantee. It was a revealing evening really because the discussion indicated that major policy issues are debated in public and among progressive people without the provenance of ideas being understood or how things fit together in a system. Quite dispiriting really. So I thought I would explore the appeal – I just want to do my art, which was one statement last night in support of a UBI.
I have written about the concept of dynamic efficiency before. The most recent blog post on this theme was – The ‘truth sandwich’ and the impacts of neoliberalism (June 19, 2018) – which examined how social mobility across generations has been declining as a result of the decades of entrenched unemployment driven by neoliberal austerity biases. I also outlined the proposition in this blog post – US labour market reality debunks mainstream view about structural impediments (January 15, 2018). The point of all this is that establishing high pressure labour markets brings about more than just workers who want to work having jobs. It brings other major benefits that workers can enjoy and forces firms and governments to manage their affairs differently from when there is entrenched unemployment. The UBI proponents never really understand that point as they continue to surrender to the proposition that mass unemployment is inevitable and all the governments should do is keep people alive with some guaranteed income. All these dynamic efficiency gains are then not realised and capital has the run of the field.
There is an interesting dilemma currently emerging in Australia, which provides an excellent case study on how governments can use fiscal policy effectively and the problems that are likely to arise in that application. At present, the Australian states are engaging in an infrastructure building boom with several large (mostly public sector) projects underway involving improvements to road, ports, water supply, railways, airports and more. I travel a lot and in each of the major cities you see major areas sectioned off as tunnels are being dug and buildings erected. Not all of the projects are desirable (for example, the West Connex freeway project in Sydney has trampled on peoples’ rights) and several prioritise the motor car over public transport. But many of the projects will deliver much better public transport options in the future. On a national accounts level, these projects have helped GDP growth continue as household consumption has moderated and private investment has been consistently weak to negative. But, and this is the point, there have been sporadic reports recounting how Australia is running out of cement, hard rock and concrete and other building materials, which is pushing up costs. This is the real resource constraint that Modern Monetary Theory (MMT) emphasises as the limits to government spending, rather than any concocted financial constraints. If there are indeed shortages of real resources that are essential to infrastructure development then that places a limit on how fast governments can build these public goods. The other point is that as these shortages are emerging, there is still over 15 per cent of our available labour resources that are being unused in one way or another – 714,600 are unemployed, 1,123.9 thousand are underemployed, and participation rates are down so hidden unemployment has risen. So that indicates there is a need for higher deficits while the infrastructure bottlenecks suggest spending constraints are emerging. That is the challenge. Come in policies like the Job Guarantee.
This is Part 3 (and final) of my mini-series analysing some of the challenges that the newly elected majority government in Timor-Leste faces. In Part 2, I discussed the progress of the Strategic Development Plan and the challenges ahead in terms of poverty, unemployment, and other indicators relating to the development process. In Part 2, I focused more on the currency debate – documenting how the IMF and World Bank had infused its ideological stance into the currency arrangements that Timor-Leste set out with as a new nation. I made the case for currency sovereignty which would require Timor-Leste to scrap the US dollar, convert the Petroleum Fund into its stock of foreign exchange reserves, and to run an independent monetary policy with flexible exchange rates, mediated with the capacity to use capital controls where appropriate. In this final discussion I consider specific policy options that are required to exploit what is known as the ‘demographic dividend’ where the age-structure of the nation generates a plunging dependency ratio. To exploit that dividend, which historically delivers massive development boosts to nations, the shifting demographics have to be accompanied by high levels of employment. That should be policy priority No.1.
My blog post last week – On the path to MMT becoming mainstream (April 17, 2018) – discussed the way in which the language and concepts that have been developed by the Modern Monetary Theory (MMT) authors are now permeating mainstream narratives and the media. While this has increased the pushback and hostility from both the Right and Left opposition to MMT, it is also a sign that the public understanding of the way in which the monetary system works and the policy options available to currency-issuing governments, is improving. Most recently, there is been a flurry in the US media discussing employment guarantees, which is a welcome relief from the previous saturation coverage of impoverished UBI ideas. It is fabulous, that at the policy level, the idea that the state can eliminate mass (involuntary) unemployment if it so chooses is becoming more acceptable. That’s down, in part, to the great work being done there by my MMT colleagues. There are also derivative public sector job creation proposals getting ‘airplay’ which I do not consider to be MMT-inspired nor are what I would call Job Guarantee initiatives, but which are still, to their credit, raising awareness of the need for the state to ensure there are sufficient jobs for all rather than dispatch citizens who are unable to find work to the unemployment queue. The push back is increasing and that is a sign that dissonance is being felt by the neoliberals who oppose the state taking responsibility for mass unemployment and using its fiscal capacity to render it a thing of the past. Many of the critics from the Left do not have the courage to come out and say they prefer the alternative to a Job Guarantee, which is entrenched unemployment. That leaves them carping away with no legs to stand on. The Right objections are venal as they always are – they want mass unemployment to persist to dampen wages growth and allow more real income to be captured by the top-end-of-town.