Advocating full employment

Today I am travelling all day and have no time to write anything. So I asked our guest blogger Victor Quirk who has just completed a PhD on the political constraints to full employment to fill the gap. As usual, he more than fills it. In this blog he shares some of his doctoral research which I had the pleasure of being the supervisor. The depth of documentary enquiry that Victor engaged in was something else. And the final product was an incisive and very challenging critique of the mainstream orthodoxy that erects artificial barriers to the achievement of human potential (in the form of unemployment) to advance its ideology urgency which ultimately is about extracting an ever greater share of real national income. I will be back tomorrow.

The advocacy question looms large in any discussion of MMT, the Job Guarantee, and the quest to restore full employment, in Australia and globally, as a right of citizenship.

Bill and his MMT-enlightened economist colleagues fight the good fight at the technical-economic level through their continuing critique of the economic policies underpinning neo-liberal public policy, and their alternate explanations.

But there is considerable frustration among acquaintances who read the blog – or are otherwise familiar with CofFEE’s and Bill’s work – that it fails to get much traction in the broader community.

Certainly my primary interest, as a political scientist, has been the question of its propagation.

Mind you, I think more people are hip to this material than we probably realise. Just in the last few weeks I’ve had a number of interesting chance conversations with people not otherwise connected to CofFEE (or the uni) where they’ve started telling me all about Modern Monetary Theory – and quite well informed they were too. They were just as surprised that I knew something about it.

But there is, no doubt, still quite a bit to do to get the message out to a wide enough audience that will give it political force. For example, I’m earning some rent money marking exams for a third year business and public policy course at the moment.

Because it would be unfair on the students to do otherwise, since it’s what they were taught, I have been marking as correct statements that ‘government and business both seek full employment’ when I’ve just finished a Phd that argues they don’t, or that taxation pays for government activity (true perhaps at the level of state taxes, but certainly not for the Commonwealth), and that budget surpluses mean the Commonwealth will be able to spend more in the future…

You get the picture …

So our colleague Graham Wrightson, who among other things edits the proceedings for the annual National Unemployment Conference (I hope you’re all coming), and myself, are currently planning a briefing program that we hope to take to as many interested progressive policy groups next year, outlining (in layperson’s terms) what the potential value of this brand of economics has for advancing their cause – be they environmental groups, disability advocates, advocates for better aged services, youth groups, political parties…whoever would like us to come and speak to them.

It raises the question of what are the tricky parts of this material for people to get their heads around and what are good ways of explaining them. I thought – what better group to put this question to than the regular readers of BillyBlog – particularly those who have had a go at explaining this to other people. What strategies have either helped you get your head around it – or helped others to get into this stuff?

While you’re thinking about that, I thought I’d share some of my own research into past endeavours in the field of advocating for full employment.

Some historical notes

The project to establish full employment has a long pedigree, certainly in the British-Australian policy tradition with which I am most familiar. The basic Job Guarantee / Employer of Last Resort ideas of using public sector job creation to soak up the otherwise unemployed, doing useful physical and social infrastructure work, dates back centuries.

In 1536, for example, when Henry VIII was confiscating the Catholic monasteries, some of his advisors pointed out that the problem of landless beggars (the peasantry having been progressively forced off their landholdings during 150 years of enclosures and manorial consolidations) was certain to intensify because the monasteries were major providers of their food and shelter.

Close them, they advised, and the hoards of desperate thieves and able beggars that were already in plague proportions would only be made worse. So Henry told them to come up with a solution and one of them evidently did. In the surviving papers of Thomas Cromwell is a detailed draft act of parliament establishing a public sector job creation scheme for Greater London funded from a progressive income tax, which authorised 8 commissioners of public works to employ architects to design bridges, jetties, roads and other infrastructure, and to publicly announce a week in advance of commencement that the unemployed of nearby parishes had to present for paid work. Anyone too ill to work was to be given free medical treatment.

Anyone found not to have attended and subsequently begging would be branded on the thumb and taken to the worksite. Anyone caught a second time (with an existing brand on their thumb) would be hung unless they could get someone to agree to employ them for a year. The scheme wasn’t proceeded with, we don’t know why, but we know it must have been dusted off and considered several times over following decades, as successive poor law legislation appears to have incorporated sections of its preamble analysing the nature of the unemployment problem.

There were schemes to make ‘pauper employment’ self-financing that emerged in the 17th and 18th centuries, and a few even established, but had there been a market for what the unemployed could produce, they probably would not have been unemployed in the first place.

These schemes morphed into the dreaded 18th century workhouses run by profit-seeking entrepreneurs who competed for tenders to dispense poor relief for a parish or group of parishes for a year at a set fee.

They made their profits by deterring all but the most desperate from seeking assistance, by making poor relief conditional on living in a prison-like structure and being put to hard labour. The mentally ill, orphaned children, the sick and dying were all thrown in together in what must have been close to a living hell.

But it was not until the 19th century that we get actual advocacy for the rights of people to have work. As early as 1816, a provincial English banker, Thomas Attwood, argued against the Bank of England’s deflation of the British economy in preparation for its resumption of the gold standard (following the Napoleonic War) arguing instead for a floating exchange rate and an expansion of fiat currency until full employment was achieved at a minimum wage around 16 shillings per week.

Attwood, who became a leading figure in the chartist movement, was typically undermined in his public denunciations of the gold standard by the so-called progressives of his day, such as William Cobbett, that supported the gold standard in an effort to shore up their own economic credibility – much the same as ‘progressives’ of today buying into the ‘fiscal constraint’ and ‘balanced budget’ line.

The most famous early attempt at implementing a Job Guarantee was that of the National Workshops of Paris of 1848, whereby after a surprisingly quick revolution, a coalition of mostly economic liberal male suffragists formed a provisional government charged with preparing the way for a national election.

On the second day of their deliberations at the Hotel de Ville, with ten thousand armed workers encamped in the surrounding streets, one of the workers entered the cabinet room and thumped the butt of his rifle on the floor demanding (on behalf of his fellow workers) the immediate establishment of the ‘organisation of labour’. This phrase had been popularised by one of the few socialist members of the provisional cabinet, Luis Blanc, in a book he had published a decade earlier describing a system of state-sponsored cooperatives for members of each trade to join whenever they were unemployed.

Blanc negotiated with the intruder, saying the country was in a state of chaos and it wasn’t feasible to attempt his particular scheme, and asked him to accept a declaration establishing the ‘Right to Work’ instead.

So the next day, 25 February, 1848, the 19th decree of the new government was that:

The Provisional Government engage themselves to guarantee the existence of the workmen by means of labour. They engage themselves to guarantee labour to every citizen

The liberal cabinet were deeply opposed to this, and gave the job of implementing it not to Blanc, but to the member of the cabinet most diametrically opposed to Blanc and the ‘right to work’. He was determined this would be no working demonstration of ‘socialism’. Local government engineers were ordered to hurriedly establish work for the tens of thousands of unemployed, which they resented having to do, and no check was put on the number being referred for work.

Within weeks an unmanageable 117,000 people were employed (though mostly with nothing to do) on public works around Paris. Meanwhile the cabinet arranged for Blanc and fellow socialists to go and consult with the public on a range of social programs for the new parliament as a ruse to get them out of the way while the liberals set about training a militia capable of putting the workers down when the ‘right to work’ was rescinded, which happened in July. 6000 workers died in hand to hand street fighting over 3 days unsuccessfully defending the ‘right to work’.

After the event political theorists of the left and right wrote their views on what it all meant.

Nassau Senior, the economic advisor behind Britain’s dreaded 1834 Poor Law Amendment Act was in France at the time and drew the conclusion:

Had not that decree been issued, relief to the unemployed would have been given as relief. It might have been subjected to conditions to which none but the destitute would have submitted; and, though subject to these conditions, if tendered as charity, it would have been accepted with gratitude. But the 19th decree converted it into a debt; and the first consequence was to deprive the Government of all power of selection…

The decree guaranteed employment – not to the diligent or to the well disposed, but to all. Now, to guarantee subsistence to all – to proclaim that no man, whatever be his vices or even his crimes, shall die of hunger or cold – is a promise that in the state of civilisation of England, or of France, can be performed not merely with safety, but with advantage; because the gift of mere subsistence may be subjected to conditions which no one will voluntarily accept. But employment cannot safely be made degrading, and cannot practically be made severe.

In other words, guaranteed employment could not be made sufficiently repulsive to adequately replace the disciplining role of unemployment. His friend Alex de Toqueville argued that removing the threat of unemployment was nothing less than a slippery slope to communism.

These opinions appear to have informed the position of British policy makers some forty years later when following a riot by 20,000 unemployed in Trafalgar Square in February 1886, a proposal that had been supported by numerous parliamentary committees since the 1850s was raised again as a solution to the unemployment problem.

The idea was to build a system of ‘harbours of refuge’ around the British coastline to give the fishing industry more ports from which to operate and give the merchant navy more sanctuaries to head for in bad weather, a scheme that would employ thousands of workers. Speaker after speaker, even those who agreed the harbours would be useful, denounced any suggestion of the state accepting responsibility for alleviating unemployment – harking back to the ‘failed experiment’ of 1848.

Despite the fact that the private sector had no interest in undertaking the works in question, President of the Local Government Board Joseph Chamberlain denounced the suggestion arguing:

…if the State were for the first time to make an exception, and to undertake public works of a kind which were now, and for a long time, undertaken by private enterprise, let the House consider the serious consequences which would immediately follow. They would put a stop absolutely to all private enterprise in the United Kingdom.

The lie to this argument was being given half a world away in Melbourne, where a proto-Keynesian system of demand management using public sector infrastructure development (and multiplier effects) was fuelling the highest economic growth and the highest standard of living of any city in the world.

While the rest of world was going through a slump, London investors were getting a good return on railway development loans to Victoria. The rail construction was employing thousands, who were buying homes and other goods, the provision of which employed thousands more.

The Londoners realised the political consequences of their actions in September 1889, however, when the economically secure people of Melbourne, appalled at the impoverished misery of London Dock Workers, sent £22,000 in strike funds, out of an Australasian total of £37,000, and a world total of £42,000 (including from Britain) that delivered to the dockworkers the most unlikely and unexpected victory in industrial relations history.

The London financial houses promptly put a stop to the Melbourne loans, but not before the dockers’ victory inspired a massive increase in union membership in Britain, sufficient to finance the entry of three fully independent Labour parliamentarians to the House of Commons in 1893. One was Britain’s champion of the ‘Right to Work’, the Scottish miners union leader, James Keir Hardie. In his maiden speech he declared:

I believe all the horrors of sweating, of low wages, of long hours, and of deaths from starvation, are directly traceable to the large numbers of people who are totally unemployed or only casually employed. The worker in the workshop is fettered by the thought that outside his workshop gates there are thousands eager and willing to step into his shoes should he be dismissed in consequence of any attempt to improve his position. I therefore submit that in dealing with the unemployed we are dealing with the whole industrial problem, and those who object to long hours being limited by act of Parliament should at least aid us in providing means for the absorption of the unemployed in order to give the workers employed a free hand in shortening the hours of labour without the aid of legislature (H of C, 7/2/1893:col 726).

Hardie drew several supporting speeches. Mr Bousefield, Member for Hackney North, envisaged an operational job guarantee :

…we ought to have some permanent machinery to deal with the unemployed, the conditions of which should be twofold. In the first place it should be elastic. Labour should be organised in what he might call skeletal battalions, which might be filled in times of distress to their full strength, and which might go down again to skeletons when employment was plentiful. In the second place, the employment should be of a temporary character, and not such as to induce the recipients of it to remain in it in preference to seeking employment elsewhere (H of C,7/2/1893:col 747).

As the Independent Labour Party gained ground on their Liberal and Conservative opponents, much the same as the Greens are encroaching on the ALP and the Liberal National Coalition in Australia today, Keir-Hardie introduced a ‘Right to Work’ Bill in 1907. It almost split the Liberal Party when sufficient numbers of them crossed the floor to enable a second reading debate.

Feeling the political heat in 1908, even Churchill had conceded:

There is nothing economically unsound in increasing temporarily and artificially the demand for labour during a period of temporary and artificial contraction. There is a plain need of some averaging machinery to regulate and even-up the general course of the labour market, in the same way as the Bank of England, by its bank rate, regulates and corrects the flow of business enterprise. When the extent of the depression is foreseen, the extent of the relief should also be determined. There ought to be in permanent existence certain recognised industries of a useful, but uncompetitive character, like, we will say, afforestation, managed by public departments, and capable of being expanded or contracted according to the needs of the labour market, just as easily as you can pull out the stops or work the pedals of an organ.

But the success of Labour’s policy at stealing the Liberal’s electoral base prompted Churchill (then a Liberal) to commission William Beveridge to come up with a policy alternative.

By1911 Beveridge and he decided it was better to preserve unemployment but mitigate the political risk of losing the support of the higher skilled tradesmen (the aristocracy of labour), by buying them off with a contributory unemployment insurance system that matched worker contributions with equal government and employer contributions.

This gave those skilled workers who were in regular work a good measure of protection, removing unemployment as an issue for them, while the mass of unskilled workers, whose employment was patchy, and contributions insufficient to spare them the ravages of unemployment, were left to the tender mercies of the parish relief system.

The British Labour Party leadership (Ramsay MacDonald) then sold out Keir Hardie and his revised 1911 Unemployed Workers Bill, by supporting the Churchill / Beveridge scheme in exchange for establishing parliamentary salaries.

Eight years later E.G. Theodore was promoting the 1919 Unemployed Workers Bill in Queensland, which I described in a previous blog, and by the 1930’s depression, as Treasurer of Australia, he was arguing for the power to reflate the Australian economy to implement a similar policy on a national scale.

When his efforts at credit expansion were blocked by the privately controlled quasi-central bank (the Commonwealth) and the conservative controlled Senate, he agreed to the deflationary measures demanded by his opponents in a bid to buy sufficient time for other countries’ reflationary endeavours to disprove the alarmism of his opponents.

The government was, however, brought down a few months later, and he lost his seat. After Theodore left politics, John Curtin (who also lost his seat) asked him to return to the fray and lead the ALP, which he declined.

He did however spell out his views on unemployment in 1932 in a personal letter to Curtin, the future Prime Minister who went on to establish full employment in Australia:

… it is the outstanding problem. I believe it should be the first duty of our rulers (our rulers include those in charge of the monetary system as well as the government) to keep the population at work. If production of consumable goods increases beyond the market needs the redundant workers should not be sacked but should be employed upon capital works and improvements. When the time comes that there is not sufficient work for the employment of all the workers an all round reduction of working hours should take place.

In his 1937 campaign speech, by then Federal ALP Leader John Curtin declared:

We approach the unemployment problem from the national economic standpoint and our policy, with the nation’s credit as backing, will not only remove this ugly blot on Australia’s economic life but will so advance the nation that it will contribute substantially to the nation’s defence programme. Wealth production is limited by manpower. The non-employment of manpower means the reduction of the power to produce wealth. Doles and starvation rates of relief pay sap the moral and mental fibre of those who are forced by circumstances to accept them. Industrial armies engaged in the construction of homes, roads, schools and other permanent works are sustained, just as our military armies, by production and transport armies in the rear. They are fed with the energies of field workers; they are clothed, shod and equipped with the energies of workers in factories. No hocus pocus about banking and currency systems can alter these fundamental facts. The Labor Party therefore is determined that no group of private bankers, no coterie of vested interests and certainly no instrumentality set up originally by the people for the people shall stand in the way of bringing industrial emancipation to Australia’s unemployed army (Curtin, 1937).

The extensive constitutional powers of a war-time government enabled Curtin and his Treasurer Ben Chifley to make the institutional arrangements that made full employment a post-war reality, in the face of strenuous opposition by Robert Menzies and his conservative colleagues in and outside parliament.

Similar figures such as Hardie, Theodore and Curtin stand out in other countries, people like Sweden’s Social Democratic Party Finance Minister Ernst Wigforss. Winton Higgins contributed a great chapter on the ‘Breakthrough in Sweden’ to a 1985 book ‘The 1930’s depression: are there lessons from history?’, edited by Jill Roe, in which he describes how Wigforss denounced the Swedish economic liberal’s calls for belt-tightening during the depression.

In a 1932 pamphlet called ‘Can we afford to work?’, Wigforss argued such a policy:

… leads to a fantastic conclusion that work is a luxury, that jobs for all is something which rich societies can afford, but which is well beyond the means of a poor country like Sweden…In the face of growing unemployment our citizens are bidden to tell each other, with concern but also resignation: we are too poor to be able to work. And the poorer we become, the less we can afford to work. No society still in command of its common sense could satisfy itself with economic wisdom of this lunatic kind. If incomes fall, if poverty grows, it quite obviously means that we are not working as much as before, that we are not maintaining our productive activity, and the immediate task must be to create jobs and expand production (Higgins, 1985:113).

Wigforss confounded his liberal opponents, and the economic orthodoxy of his day, by reminding Swedes of the real economy in a 1934 speech:

“Whatever we, by our own efforts, can produce in this country determines the standard of living of the Swedish people. However much food our agriculture yields, that is how much we can afford to eat. It is not extravagance and not unsound economics. However fine the dwellings we can build with our own materials and our own hands, these are the dwellings we can afford to move into. We can afford to consume the quantity of clothing, footwear, furniture and household items, roads, bridges, railways and telephones and gramophones and radio installations, cinemas and theatres and concert halls, schools and research institutes, meeting halls and sports grounds, as much of whatever belongs to life’s necessities, comforts or luxuries, as we ourselves can produce. And it is madness to suggest otherwise.” (Higgins, 1985).

Wigforss worked hard to convince his party to make the pursuit of full employment its first priority, and then to form alliances with the agrarian parties and other groups, forming a broad front that kept the social democrats in office, and maintained full employment, for decades.

Conclusion

Devising a system for establishing full employment and an enlightened monetary policy, even with the most eloquent advocacy, is not sufficient to bring about its actual implementation.

Thomas Attwood, Luis Blanc, James Keir-Hardie and Edward Theodore may have been clear-sighted thinkers, sincere and persuasive speakers and advocates, and even subsequently proven to be right in what they advocated, but their immediate efforts at securing full employment were largely unsuccessful, for one reason or another.

John Curtin and Ben Chifley only managed to develop the institutional machinery to establish post-war full employment in Australia because they took office with extended war-time constitutional powers. Given his strenuous opposition to it, had Menzies stayed in power during the war, we would certainly not have had post war full employment in Australia. It was fortuitous for Australia not only to have survived the war, but for most of its duration we were governed by advocates of full employment who had real power to bring it about.

Ernst Wigforss and his colleagues in Sweden created their own luck, by building a broad front for full employment, taking the majority of the country with them. I believe that building a similar broad community coalition is the only strategy that will bring about full employment in Australia, and countries like it, in the 2010’s.

So if you belong to a group whose aims could be advanced by removing the blight of unemployment and mobilising the unused 10 per cent of our nation’s willing labour supply, or whose goals are thwarted by notions of Commonwealth fiscal constraint, think about having us over for a talk next year. Graham and I are keen to talk to you.

As for the rest of you – what MMT/JG ideas do you think people struggle with most, and what do you think are effective strategies for making them comprehensible?

I suppose I better get back to marking those exams…

Cheers!

Victor Quirk.

Advertising segment: Annual CofFEE Conference – December 2-3, 2010

Each year my research centre – The Centre of Full Employment and Equity (CofFEE) hosts the annual Path to Full Employment Conference. For many years it has also been combined with the National Conference on Unemployment (which began in the aftermath of the 1991 recession as a venue to discuss ideas about the persistently high unemployment that remained for some years after that downturn.

This year we are hosting the 12th Path to Full Employment/17th National Unemployment Conference at the University of Newcastle (NSW, Australia) from Thursday, December 2 to Friday, December 3, 2010.

It is a chance to meet a lot of the Modern Monetary Theory (MMT) developers and to participate in debates. Newcastle is beautiful at this time of year – sunny and warm with great surf beaches.

The conference is accessible for all interested parties and is not overly academic. A lot of government officials and workers from relevant sector organisations attend as well as academic researchers.

So register and come along if you would like a nice few days in Newcastle.

I will be back tomorrow.

That is enough for today!

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64 Responses to Advocating full employment

  1. Anas Jalil says:

    Dear Victor Quick,

    For the benefit of all humanity, I wish your centre could record all the lectures in video format and upload it togather with the working papers on this site.

    I couldn’t attend the conference this year but I wish to attend it in the future.

    Cheers

  2. NKlein1553 says:

    Thank you for this outstanding historical overview profiling some of the courageous politicians, economists, philosophers, and activists who have advocated for the right to work. I think one effective strategy for those currently advocating for full-employment demand management schemes like the job guarantee is to do exactly what you have done in this post. That is, to tell the story of those politicians, economists, philosophers, and activists who have argued passionately for the government to use its rightful monopoly over currency issuance to promote the cause of full-employment. Even when these individuals have failed, their histories can still be inspiring.

    The most common objections to the MMT argument I hear from friends and family fall into two main categories:

    1) Monetary sovereignty does not change the fundamental ineffectiveness of government programs. The government is just not capable of creating full-employment because it is either too corrupt (government spending will go to well connected political cronies, not to the deserving) or too incompetent (the money will be wasted). More sophisticated naysayers may bring up such arguments as the long run neutrality of money to bolster their arguments.

    2) Even if monetary sovereignty does give the government the power to create a full-employment economy, the government should not use its power because the government has no business creating jobs. That is socialism, or communism, or something else terrible and unamerican (I’m American). Also, job scarcity is necessary to keep people motivated to work.

    The first set of objections are somewhat easier to address because they are technical in nature. Probably the simplest way to respond to such objections is to merely point out the historical fact that during times of war full employment has often been achieved so full employment reached by way of government spending cannot be technically impossible. Whether or not the government spending necessary to establish full employment will be used for good purpose is a separate issue. And actually I think the argument that government spending will not be used for good purposes, i.e. to enrich the politically well-connected, is a good one that should be taken seriously. Jamie Galbraith has raised this issue in one of his recent books, “The Predator State.”

    The second set of objections are more difficult to deal with because those raising them have a fundamental philosophical objection to any sort of government intervention in the economy, even if such intervention could lead to full-employment. It is tempting to simply scorn such individuals as zealots blinded by their ideology. I’ve even seen some go so far as to call them sociopaths willing to let others suffer for the sake of ideological purity. However, I don’t think it is a good idea to demonize anyone. One way to address fundamental philosophical opposition to government sponsored employment schemes like the job guarantee is to point out that it is the introduction of state money itself that creates the possibility for involuntary unemployment. There is no unemployment in simple barter economies. Because the state created the possibility for unemployment it has a corresponding obligation to implement policies which alleviate that unemployment. Conceptualizing the right to a job as a fundamental human right tends to make some people uncomfortable because it implies that others may have a claim on their time or property. If those others are not of a similar class, religious, or ethnic background, then such a claim will often be viewed as illegitimate. In such cases the conversation should be shifted away from work as a right individuals are entitled to and toward the necessity of the government rectifying the problem of unemployment, which it itself created. I would also note that there are other policy options besides the job guarantee that would do much to move the economy toward full-employment. Mr. Mosler tends to emphasize tax-cuts, for example. Such policies may be more palatable to those with fundamental philosophical objections to government involvement in the general economy.

  3. Ray says:

    I think in Australia at least that the ‘right to a job as a fundamental human right’ is something that could work from a conceptual viewpoint however I really think this would not be well received by the unemployed. I would imagine only the ‘right to a job OF ONE’S OWN CHOOSING’ would seriously dent the ranks of unemployment, especially with the unemployment rate relatively low at present.
    And as we know from previous JG discussions, tailoring jobs to individual’s preferences isn’t really what it is all about.

  4. Tom Hickey says:

    NKlein1553: One way to address fundamental philosophical opposition to government sponsored employment schemes like the job guarantee is to point out that it is the introduction of state money itself that creates the possibility for involuntary unemployment.

    They will respond that state money is the problem, especially fiat money, and therefore should be done away with. Many of those who advocate abolishing the Fed (central bank) is getting government out of the picture entirely and making the private financial sector responsible for all money creation, .e.g, using gold backing. See, for example, Milton Friedman’s second thoughts

  5. James Haughton says:

    On the “government shouldn’t create jobs because it shouldn’t” argument, most JG programs would be supplying public goods that it is government’s business to supply, which won’t compete with but assist private enterprise. Ask them if they want to privatise the police, the fire brigade and the army/navy/airforce (only really hard-core libertarian fanatics will say yes). Point out that the army employs lots of people and that they do lots of things; the National Guard helps out in civic emergencies like cyclone Katrina for example. Aren’t these government-created jobs? If those jobs are ok, what’s wrong with a civil army corp of the unemployed doing useful things?
    On government inefficiencies, JG jobs can be administered by private contractors who are hired to efficiently manage projects and employees.

  6. Ray says:

    James Haughton says:
    Wednesday, November 24, 2010 at 17:10
    “the National Guard helps out in civic emergencies like cyclone Katrina for example. If those jobs are ok, what’s wrong with a civil army corp of the unemployed doing useful things?”

    How many instances can you recall of the ‘army being called in’ in the past 35-odd years since Cyclone Tracey? Once maybe during the Newcastle earthquake? Seriously, the army is there to worry about sovereign defence and that is all they should be there for.
    The unemployed do not want to be employed in a chain gang who do odd jobs here and there (at least I wouldn’t want to).
    I wonder if there have been studies done to see exactly how employable the last 5% of the employable pool is and how they stand up against peers in the fields of their choosing.
    Are these people genuinely suffering hard luck because there are too few jobs or perhaps they are older and no one will employ them or is the reason that they are inept, lazy or just plain don’t want to work. Would be an interesting study and hope someone has some data on this.

  7. PG says:

    @NKlein1533

    “it is the introduction of state money itself that creates the possibility for involuntary unemployment.”

    No, it is not. Or not only.

    It is the complete appropriation of all the means of production by a subset of the people living in a closed geographical area that creates unemployment. Such a subset of people becomes the class of proprietors. The other class – the non-proprietors – has no option other than becoming serfs (before capitalism) or (after capitalism) employees or unemployed – if jobs are not offered.

    Said in another way. If Earth were an infinite planet with a never ending supply of habitable continents, there would be no unemployment, as whenever a continent would become fully appropriated, the non-proprietors would move to appropriate the next one.

    Therefore, it is an ethical responsibility of the class of proprietors to provide full employment to non-proprietors.

    Proprietors and non-proprietors alike can agree, or be taken in agreement to establish and maintain a society organized upon private property of means of production. Yet, such a society would break apart without the existence of a State to provide external and internal defense through army and police, and to provide courts to resolve internal conflicts. It would also break apart if the State would not provide safety nets as unemployment support. As it is agreed that it is the responsibility of the State to provide full defense and full justice, so it must be agreed that it is the responsibility of the State to provide full employment.

    Less than this is to favor forces pushing for regression to no-civilization – where private property does not exist, because only possession by force or isolation can exist.

  8. Ray says:

    James, sorry, I was looking at the army argument from an Australian point of view. Cyclone Tracey was a 1974 mini version of Hurricane Katrina. Not sure how often the US army is employed for civil duties but I am suspecting not very often and only a couple times here in 40yrs.

  9. Magpie says:

    Very interesting piece, Victor.

    The subjects of economic history and history of economic thought receive very little interest. It’s a shame, as it seems we’re doomed to never learn from the past and forever make the same mistakes:

    “History does not repeat itself, it rhymes” (attributed to Mark Twain)

    “Hegel remarks somewhere that all facts and personages of great importance in world history occur, as it were, twice. He forgot to add: the first time as a tragedy, the second time as farce.” (Karl Marx)

    You should make any other additional writings you might have available. Cheers.

  10. victor quirk says:

    Thanks for comments so far,

    The US perspective is always interesting.

    I’m actually still marking exams. I’ve just learnt Ronald Reagan was the Prime Minister of Britain.

    Magpie: I’ll add some links later on to some of the working papers where some of this material can be found.

    But I worry about you, Ray!

    Firstly, I don’t really get your point in the first comment. In the two main publications we have on the subject, CofFEE authors have explicitly proposed that people should have a wide range of jobs to choose from, which is perfectly feasible, and that people with special needs (and abilities) should have jobs tailored to suit them. Persons-based labour force measures such as the unemployment rate, as you would know if you had read any of CofFEEs literature on the subject, such as the CLMI, hides casualised underemployment. The ABS now publishes labour underutilisation measures that include underemployment (following advocacy by CofFEE), the latest of which (May 2010) indicates 12.3% of the willing labour force is not being utilised.

    But as for people being unemployed because they are lazy! What was the cause of the sudden outburst of laziness in 1930 that occurred all over the western world? Was it all that sitting around listening to crystal sets? Why did it practically disappear in Australia soon after the mobilisation for the WWII and for the next 30 years ? Why then in 1975, did it suddenly re-emerge, grow and subside in the 1980s, grow rapidly again in 1990 (strangely in sync with increased interest rates) gradually subside, and why it is now growing in various countries of the world most affected by retrenchments? It is clearly an under developed area of study.

    Where they have done quite a bit of research, however, is on the effects of unemployment. As it happens, when we work, we get money, a structure to our day, social contact, activity, stimulation and our occupation forms an important part of our identity. What would you imagine happens to people when they don’t get these things?

    Well, we humans are very adaptive animals. We can live on ice-flows, in deserts and in jungles. When we don’t have work, we adapt to that situation as well. We spend enormous amounts of time working out how to adapt to living in poverty. We tend also to adopt non-work-related daily structures, and through lack of practice, our social skills decline and our capacity to interact with other people becomes awkward and stressful. Our stamina declines, we suffer painful boredom and the lack of stimulation reduces our capacity to concentrate and make decisions to the extent we could when we had regular work. We shy away from social situations, because lacking an occupational label, we are of the lowest status in any social situation. Unemployed people are characteristically depressed. Long term unemployed people have higher suicide rates, higher stress levels, poorer mental and physical health.

    What you perceive as the cause of unemployment is actually its effect.

    Thats what unemployment does to people. Keep people in this condition for a year and they find the prospect of a job interview, where their confidence and communication skills determine success or failure, excruciatingly painful. Thus the longer someone is unemployed, the greater the prospect of their remaining unemployed. There has been research on this Ray – it is one of the most researched areas of sociology over the past century, and it is all fairly consistent in its findings.

    Its because unemployment is such a bad experience, that people like Menzies, Sir Colin Syme, Nassau Senior, Alex de Toqueville, Winston Churchill, and all the rest of them wanted to preserve it: because it was a punishment for failing to work profitably for an employer. Its really not rocket science.

    You remind me of a favourite quote. In August 1931, at the height of the depression, when unemployment in Melbourne was around 30%, and people were starving, two men were picked up on their way to an anti-eviction protest being held to stop a family being thrown out onto the street. In sentencing them for carrying rocks in their pockets, the magistrate declared ‘It is the fault of many persons themselves that they are not working at present. There is nothing to hinder persons from seeking work and doing something if they really desire it.’ It was the ‘laziness thesis’ once again. Is that really your view, Ray?

    I would have thought, that if you don’t want people to adapt to being unemployed, or in your terms, encourage laziness, the answer was to give them work to do! As I mentioned, the latest labour underutilisation rate from the ABS (May 2010) is currently 12.3%. That’s how much of the willing labour supply is left idle and unproductive every day in this country. Think of what we could have done with all that human power every working day that has elapsed since the deliberate abandonment of full employment 35 years ago. Think of how much better so many people’s lives would have been had they had the services of these people, and for the people themselves to be given something useful to do, and a decent pay packet to boot.

    You may think unemployed people would not welcome a Job Guarantee, but of the many thousands I have come to know over the years, I believe nearly all would dive at the chance. Thats why I’m for it.

    Excuse the verbosity, Ray, but I go off when unemployed people are blamed, as they often are, for what governments and others do to them.

  11. Min says:

    Ray: “Are these people genuinely suffering hard luck because there are too few jobs or perhaps they are older and no one will employ them or is the reason that they are inept, lazy or just plain don’t want to work. Would be an interesting study and hope someone has some data on this.”

    I hope that you are asking that question in general. In our current circumstances, do you really think that the inept and lazy just decided to chuck it a couple of years ago?

    As for the question in general, it seems to me that we do not have a lot of empirical evidence, but a jobs program that hired most people at minimum wage would provide an empirical test. As you indicate, such jobs are hardly desirable, and would not attract people who are lazy or just do not want to work. As for the inept, such jobs do not require a lot of skill, either. A jobs program that always hires people, regardless of economic conditions, would provide experimental control that the “natural” economy does not provide. :)

  12. Re the earliest example of something resembling JG, the earliest example I know of was a proposal by Pericles (political leader in ancient Greece) to have the unemployed engaged in public works. That was around 500 B.C. I got that from “Unemployment in History” by J.A.Garraty (published by Harper and Row, 1978).

  13. Thank you for another enlightening article, Victor.

    As far as experiences in advocating MMT/JG go, I have rarely met people in person who thought that the creation of jobs was a bad idea. However, I have met many people who doubt that it is possible financially, specifically because of all the talk about the necessity of austerity and the Maastricht Treaty. So the question for me has been, how can I get people to understand that the financial constraints of governments in the Euro zone is an institutional arrangement that does not exist for sovereign nations, and that could be eliminated in one way or another if the Euro members worked together?

    Now I am not an economist, and neither are the people I talk with personally. In this context, it seems that one of the biggest advantage of MMT advocates is that laypeople have no clue about what a central bank actually does. Nobody ever told them, and honestly I get the impression that even politicians and journalists working the Business sections of newspapers have no idea about that.

    So if you simply and calmly explain to people the structure of what a central bank functionally does – and I don’t mean monetary policy, but simply the administration and management of central bank accounts, and what they represent – then you are in a position of authority as a person who teaches. The important point here is that with this approach, you are not trying to overwrite existing preconceptions in the other person’s mind. Trying to do that is always very difficult. Instead, you are filling a gap in the other person’s knowledge, which is much easier.

    Once you have brought that particular story across, it should create the first seeds of doubt about existing preconceptions that the other person has. It becomes easier to convince them that something is suspicious about the story that they are being told by the mainstream. In other words, you have your foot in the door.

    That doesn’t mean that everything just runs easily from that point on. But it’s a first step that I’ve personally been successful with in a few cases.

  14. Ray says:

    thanks Victor for dedicating a rather lengthy span of your attention.
    I have not said that all workers unemployed are lazy or inept, just that there is a certain residual who would probably rather sit on Bondi beach or think getting up in the morning to do a hard day’s work was all too much. Let’s call them the last 5 in 100 people.
    I think the problem with academics such as yourself is that you spend a little too much time in universities or classrooms looking at statistics rather than getting into the real world and witnessing the things I speak about.
    As having run a business of hundreds of employees I can generally say that the free market is fine in assigning a fair value for workers who in turn respond by being productive and advancing their personal reward, however just sometimes you strike some people who do not see things this way.
    I once even went so far as to try to extend a job offer to a very underprivileged person who deemed it necessary to rob me while my family and I slept at home yet they would not even entertain me for 5 mins to hear what was on the table.

    I must say I have a disdain for academics and those who try to improve the world with a treasure of theories that may not bear out in the real world.
    Rather than coming on here and kissing your behind like many others do, I try to give a genuine alternate point of view (call me a neo-liberal devil) with a little experience first hand as an employer of people and operator of business. I py my taxes in full and always have and do get a little peeved by the leftist notion that the wealthy somehow have robbed the system.
    I wonder with all your knowledge and advice whether you have participated as such?

  15. Ray says:

    Min, it was a genuine question. In a society where FULL employment is deemed to occur, what is the makeup of the unemployed?
    I think this would be a very enlightening and informative study and I can’t believe for a moment that the outcome would be that these people are equally skilled or motivated to participate and per the majority. Likewise I cannot believe that there would not be jobs available in a thriving economy to accomodate these people if they were willing to undertake them.
    Give me some stats and prove me wrong however.

  16. Neil Wilson says:

    “Are these people genuinely suffering hard luck because there are too few jobs”

    In the UK the ‘inactive’ section of the workforce is surveyed as to why they are inactive. One of the columns is ‘Inactive – want a job’ for which the current estimate is about 2.3 million people. Those people are definitely not “lazy or just plain don’t want to work.”

    This is in addition to the 2.4 million people who are officially unemployed.

    There are currently about 480,000 vacancies.

    So it’s nothing to do with hard luck and everything to do with a 10-1 ratio of demand to supply.

  17. Ray says:

    and a final point Victor, concerning the famous Aussie sickie. I would warrant that a fair proportion of your underemployment is as a result of sick days, unjustified worker’s comp, leave without pay, health related absence from work etc.
    I’d like to see what constitutes ‘underemployment’ and would not be surprised if it is in fact the majority of the workforce taking a little time off (as above) who are beefing up the numbers.

    If the ABS says a worker should produce 48 weeks less public holidays of production and every day below this is ‘underemployment’ then I think this is something entirely different from your notion that there is a vast reserve of unemployed labour laying idle. Human nature does not tend to figure well in your statistics.

  18. NKlein1553 says:

    @Tom Hickey

    Thanks for the reply. In response to the suggestion that money creation should be left to private financial entities, I would recommend bringing up the historical record of unregulated money creation schemes. For example, “A Nation of Counterfeiters: Capitalists, Con Men, and the Making of the United States,” by Stephen Mihm is an excellent historical account of the freewheeling, pre–Civil War era when the federal government not only did not print paper money, but likewise did not bother to regulate those regional banks that did. As the author’s book makes clear, the historical record is not very kind to unregulated money creation schemes. Really it is only the most extreme libertarians who would deny the state any role at all in regulating money creation. Even the gold standard involved state intervention in initially setting the exchange rate at which paper dollars could be converted to gold. Once the principal of the necessity of state regulation of the money supply is admitted, a factual debate can be conducted over the relative merits of different schemes.

  19. NKlein1553 says:

    @PG

    Thanks for the interesting comment. I don’t think we’re really saying substantially different things. In pre-capitalistic societies the owners of the means of production had a responsibility to provide tenants with a means of sustenance. For example, feudal lords had to provide common agricultural land for their serfs to grow crops on. The monopoly over the use of force gave lords corresponding responsibilities. In modern societies ownership of the means of production is accomplished through the control of currency. Control over currency therefore brings along with it a corresponding responsibility to provide a means of sustenance (employment). Since in modern monetary systems it is the state that gives currency its value I believe the corresponding responsibility for providing sustenance should be placed on the state. The overall point I was trying to make was that rights have corresponding responsibilities. Rather than talk about the right to work, it might be easier to bring up the responsibility of those with power to those without.

  20. Oliver says:

    Thanks, Victor!

    In most western countries, absolute poverty of the Dickensian type has been more or less eradicated. This is of course a great achievement. On the other hand, it makes the case for a JG or even unemployment benefits more difficult to argue. As Tom Hickey often points out, the main hurdle in conveying MMT monetary principles is the simple assumption by most people that the government budget works like a household budget. This fallacy of composition, combined with some less palatable human characteristics such as greed and self-righteousness, may help explain the negative reactions towards a job guarantee or other state interventions in favour of the disadvantaged.

    As soon as we have paid our dues as conscientious citizens by collectively making sure nobody starves or dies unnecessarily, we concentrate fully on optimizing our relative personal standing within society. Armed with an infallible disregard for the fallacy of composition and complete blindness towards the possibilities of fiat money, we are indoctrinated to perceive any meddling by government in the attribution of goods or money above dire poverty as a direct encroachment on our own, well deserved lifestyles. The more competitive a society is, and it is undoubtedly also a great asset to our western society, the harder it is to convey any arguments that run contrary to this narrow mindset.

    I would postulate that countries that value individual competitiveness very highly, such as the Anglo-Saxon countries or places like Hong Kong or Singapore, are likely to be most opposed to a JG or the like. Unless it becomes politically inevitable, that is. I know from experience that both of the latter countries have very successful public housing and infrastructure programs that stem from their particular geographical and geo-political situations but are completely inconsistent with all the neoliberal drivel they officially stand for. These programs arguably do more to sustain their peace and affluence than any of the blatant corporatists who run the places. The fact that welfare for the masses is dealt with by the state whereas individual welfare beyond dire poverty is considered a private matter probably exacerbates our tendency to separate the two although they are undoubtedly intertwined.

  21. CharlesJ says:

    I think a good idea is to produce a Campaign Pack including editable Power Point slides, documents covering the history of the argument as above, its operational design and the fiscal / monetary framework – plus instructions on how to tailor it to individual countries. Designs for protest banners can also be included!

    I think that the trade unions need to be brought on board in a more vocal way, by emphasising that full employment improves the bargaining position of those that are already in work – perhaps a special campaign pack for trade unions!

    Currently in the UK there are large student protests underway, and I think students are the best people to target as they have the energy and enthusiasm to make a difference that some of their parents lack, plus a healthy resistance to mainstream indoctrination.

    A pack for business would also be usefull, so businesses can understand how they benefit.

    In short, the academic debate must be accompanied by activist methods – we should get organised!

    I would also recommend a single MMT portal on the internet, with frequently asked questions, and “quick answers” of no more than three or four paragraphs for each of the usual arguments against MMT and full employment, with references to more technical details. In political and economic blogs, for example, upon identifying a spurious comment, we simply look it up and cut and paste the counter argument into our comments plus links! This way we don’t need to recall (or even understand) the technical details, we can just faithfully reproduce the answers on demand. The mainstream use these methods and so should we.

    The portal should have sections for individual countries, and how MMT and full employment can be acheived within those countries.

    I think MMT needs a rich benefactor to make all this possible, or maybe there are other ways of funding the campaign – not my forte though.

    Kind Regards
    Charlie

  22. CharlesJ says:

    Further to the above, the MMT portal can have already written clauses for both left and right wing parties (and greens) to add to their manifestos! Things like this would make campaigning for full employment much easier, as the hard work has already been done by pooling contributions internationally over the internet. These contributions can be reviewed and signed-off as approved (or recommended) by MMTs main proponents like Bill et al.

  23. Tom Hickey says:

    NKlein1553: Really it is only the most extreme libertarians who would deny the state any role at all in regulating money creation.

    Yeah, it’s rather interesting how Friedman is considered mainstream when he was actually an extreme libertarian. The difference is that he was willing to compromise, while the current crop is not. Or maybe the only difference is that Friedman didn’t see a practical possibility for realizing his true ambition, whereas the current crop does.

  24. Tom Hickey says:

    Charles, good ideas about a site. Such ideas have been proposed on a number of occasions previously and Bill has offered space on his server. However. creation and administration of the site would require the services of a qualified webmaster or team. This is a big project for volunteers. Most of the people that visit MMT sites are busy with their own lives. So it seems that it may take a funded organization if it is to happen.

  25. CharlesJ says:

    I think that the best way to convey MMT to the layman, is to simply describe it in a Chartalist way – govt spending adds money to the economy for people and businesses to spend and save, and taxes take away the excess to avoid inflation and pursue public purpose etc etc. (This is quite easy to understand). We then simply ascert that minimal changes are needed to the existing institutional arrangements, which are already compatible.

    ‘Full employment through Job Guarantee is necessary for business and private enterprise, as it maintains aggregate demand in the economy even in the bad times, whilst keeping inflation under control’ – simple – just ascert it without reference to the mainstream arguments! When the mainstream come up with an argument, just cut and paste the correct answer from the MMT portal!

  26. CharlesJ says:

    Tom,
    There was a wealthy business man who appeared on a poltics programme in the UK who advocates the Job Guarantee (though he never actually gave it a name nor referred to MMT). I forgot to write down his name, but he may have other friends in the business community who would fund a campaign. I’ll see if I can find out who he was.

  27. dave says:

    Victor,

    It is a little known fact but Ronald Reagan was the PM of Britain, just at that time his name was Margaret Thatcher!

    Two comments from above stand out: One is the need for a reduction of MMT principles into Talking Points.

    In the US the Conservatives (Republicans) are very effective at demonizing their opposition (i.e. government) because they have a top down structure from the National Party which emphasizes the daily points. The Progressives are loosely organized (The Democrats and their National Party are largely controlled by Corporate Advocates) with a bottom up structure, so those advocating Progressive positions are off fighting little fires in the countryside while the City burns.

    The second need is a willingness to be more political. MMT is a concise explanation of the way the Central Bank operates, but leaves out the political reality that the Treasury and Central Bank are not one and the same. A political arm which was willing to reach out to the would-be proponents of MMT (such as labor unions, students, etc) would be the 1st step in building a larger movement.

    Take the principles, roll them up in a nice tidy ball, and then beat the hell out of the progressive organizations with them. That ought to do it!

  28. CharlesJ says:

    Following on from the above, I’ve found this guy (Sir Torquil Norman) described as an “arts philanthropist” advocating a “community national service”. Although it does not say so on the link below, when he discussed it further on the programme, it was at least compatible with JG more-or-less – paid at the minimum wage etc:

    Sir Torquil Norman on community national service for jobless
    http://www.bbc.co.uk/news/uk-politics-11721056

  29. Min says:

    Ray: “Min, it was a genuine question. In a society where FULL employment is deemed to occur, what is the makeup of the unemployed?”

    Good. I am glad you were not talking about our current predicament. :)

    Ray: “I think this would be a very enlightening and informative study and I can’t believe for a moment that the outcome would be that these people are equally skilled or motivated to participate and per the majority. “Likewise I cannot believe that there would not be jobs available in a thriving economy to accomodate these people if they were willing to undertake them.”

    It seems to me that there are feedback cycles, so that putting people to work will help the economy to thrive. :) But what you or I believe does not mean a whole lot, eh? :)

    Ray: “Give me some stats and prove me wrong however.”

    Statistics are not enough without having some control over conditions. Providing minimum wage jobs for all takers would test the idea that people are unemployed because they prefer leisure. :) I think that the stats would be so strong that we could use the best statistical test in the world, the interocular traumatic method. It would hit us right between the eyes. ;)

  30. Burk says:

    Thank you for a sobering as well as inspirational post.

    I would suggest two things. First, that the term “Job Guarantee” is a political loser / non-starter. It conjures the image of people being kept at their current jobs with no way to sanction or fire them. And that the point of the policy is tenderness to workers rather than sound macro-economic policy and general cultural betterment. I would suggest something like “Everyone Works”, stating the direct policy of putting all potential labor to use so that society benefits. It is time to stigmatize the status of being unemployed in a proper way- by making it possible and desirable for all able-minded persons to work productively.

    Secondly, the next objection to such public works programs is that of Bill’s notorious Boondoggling and leaf-raking. It is genuinely difficult for public sector work to escape some amount of waste and corruption. Proponents just need to make the case that even with such waste and corruption, the policy is hugely beneficial for all concerned, and worth the money to be spent. And then supply examples, as you have, of programs which transcend the difficulties of public works and actually provide public benefits through their direct efforts, in addition to all the indirect benefits.

    Thirdly, there is the issue of “job search intensity”, high on the minds of conservative and middle-of-the-road types. Will the unemployed look for jobs if they have jobs, however modest? Proponents have to keep explaining the involuntary nature of cyclic unemployment, the integrated job search and employer-friendliness of proposed schemes, and lastly, also mention that employers should have a duty to FIND employees. The search intensity should be going both ways in a healthy economy. It is an issue of fundamental fairness and psychic/cultural health.

  31. pebird says:

    Ray:

    Don’t confuse the goal with the process of getting there.

    Yes, there are many dysfunctional people out there. We can debate whether they are inherently so or whether society should take some responsibility for letting conditions deteriorate and multiply such characters.

    At any rate, I don’t think it can be a serious point of contention that the vast majority of unemployed do work when work is offered by the private sector and are retained by the private sector when there is sufficient demand.

    If you are saying 5 out of 100 unemployed are completely unemployable, then I might agree. If you are say 5 out of every 100 people, I think you greatly exaggerate.

    I also run a business and consult for businesses of many sizes. I find the financial executives of many these businesses to be truly dysfunctional, but they seem to be able to hang onto their jobs.

  32. David says:

    “I’ve just learnt Ronald Reagan was the Prime Minister of Britain.”

    Well, the one that they had was sometimes called “Reagan with balls.”

    A big problem with getting people to understand MMT ideas, and I mean better educated progressive minded people, is that they can’t get away from the ideas that their “tax dollars” are what limits the government’s ability to spend. When you try to explain the difference between a household which uses the currency and a government which issues it they’ll usually say well, yeah, you can print money for a while, but then you end up like the Weimar Republic. Most American liberals really believe that we just “can’t afford” the things we say we want.

    I think that, rather than direct fiscal intervention, maybe a better approach in America may be to push for progressive banking . Something along the lines of the targeted credit creation system developed by the Germans and emulated by the Japanese which resulted in high post-war growth. Of course, even that has aspects of “socialism” which would be viciously attacked by the right wing propaganda machine.

  33. Richard1 says:

    Victor,

    Many thanks for you interesting account in the blog today.

    I am very much a beginner in trying to describe MMT and, as a result, I may make mistakes in trying to express the ideas.

    Job Guarantee meets these typical reactions:
    1 We cannot afford to pay the current unemployment benefits, why should the state fund people to do what can only be make-work.
    2 Where’s the money to come from, and anyway it would just give skivers more?
    3 It would cause wage demands for private sector low paid jobs and thus cause wage inflation.
    4 The government should contract the Job Guarantee to industry to provide the jobs by giving them contracts for the work to be done.
    5 Think of all the additional civil servants we would need to employ to administer this, it would be prohibitively expensive.
    6 If people didn’t turn up for work, what sanction would you have, particularly if they are providing for young children?

    However, it is notable that 1 & 2 are by far the most common initial, and often only, reaction before there is a dismissive shake of the head and disengagement from the conversation. If it does continue, discussion about the ideas within MMT will then almost always founder on the point about government deficits, debt and borrowing.

    “We must borrow to cover the Government Deficit, otherwise they will just print money and that’s always inflationary and we will be like Germany in the 30s or Zimbabwe.”

    “Governments will be unrestrained and just spend and spend – then we get inflation.”

    There is no understanding that
    the government deficit (surplus) equals the non-government surplus (deficit) minus net exports
    Getting any recognition of the importance and implications of this has always been a struggle.
    Getting a recognition that government and household accounting are not equivalent seems very difficult.

    I realise I am painting a bleak picture. There is interest in economics, but very little willingness to think and follow new/different ideas that are outside the household experience. I’m obviously talking to the wrong people!!

  34. Peter Drubetskoy says:

    I think that while most people do think that debt/taxes finance the spending, they also understand that the government can simply “print the money” and the reason it is not doing so is to avoid “currency debasement”. Most people would say: “yes, sure, we don’t have to tax or issue debt, we can simply print dollars, but that would cause its own problems.” So, the end result of this thinking is not materially different from the more correct one that MMT people propose, which is that operationally there is no constraint on govt. spending, but that potentially there might be an inflation constraint. I believe that for MMTers to concentrate on the technicalities of deficit spending and balance sheets is a waste of energy better put to explaining in simple terms why there is no direct link between “money printing” and inflation. All the accounting minutia simply obscure the message.

  35. @Peter (Thursday, November 25, 2010 at 8:32):

    Definitely, the inflation angle is an important one. However, there is also the argument that “the government will be unable to sell bonds”. Explaining the silliness of that line of thought is definitely important, too, and it requires an explanation of how the monetary system works.

    Also, as I have already stated previously, if you explain the workings of the system, you are pretty much guaranteed to be filling a gap in people’s knowledge, whereas if you try to go to the inflation debate, you will have to fight against people’s existing preconceptions. Filling gaps of knowledge is much easier and can be used to get “your foot in the door”, so to speak, which can then make it easier to work on those preconceptions regarding inflation.

  36. nikhil says:

    Ray

    Generally the definition of underemployment, from what I understand, is people with work who are not working as many hours as they would desire. Either by being unable to find full-time work thus being left to part-time work or having their hours cut do to work slow downs or furloughs.

    Here is the definition from the ABS website.

    DEFINITION OF UNDEREMPLOYMENT

    The ABS definition of the underemployed is consistent with the International Labour Organisation (ILO) definition of time-related underemployment.

    According to the ILO definition adopted in 1998, time-related underemployment exists when the hours of work of an employed person are below a threshold, and are insufficient in relation to an alternative employment situation in which the person is willing and available to engage. More specifically, persons in time-related underemployment comprise all employed persons (as defined) who satisfy the following three criteria:

    * willingness to work additional hours – the ILO recommends that those who have actively sought to work additional hours should be distinguished from those who have not;
    * availability to work additional hours, within a specified subsequent period; and
    * worked less than a threshold (determined according to national circumstances) relating to working time – the ABS underemployment framework uses a threshold based on the boundary between full-time and part-time work. Only those persons working less than 35 hours in the reference week may be further classified as not fully employed.

    I do not think people who are on disability or taking vacation/sick leave would be considered in this calculation. At my job when you take a day off you must use one of your limited sick days or vacation days so that you can paid for your time away. This would not leave me underemployed because I am still technically employed for over 35 hours. From its description underemployment is exactly the statistic that would help us determine whether the private sector in an economy (thriving or not) is not able to provide the jobs to accommodate them as you asked Min for before.

    Having posted this I am skeptical it will effect your thinking or viewpoints in any way. I mean all this information I just posted took all of 10 seconds to find using Google, if you wanted the answer you could have had it. From the tone of your posts I get the feeling that these you feel attacked by these ideas somehow. I do appreciate your posts though it is good to have someone who is opposed to these ideas regularly posting on these boards especially on a blog posting about the political feasibility of these ideas.

    Victor
    As someone who lives in the US I have met quite a few people who are opposed to the ideas of MMT in a similar fashion to Ray. I have found it helpful to flip the argument to convince, or at least blunt the emotional response they have to MMT. Since they believe those who are unemployed are in that position because of a moral failing just convincing them it is structural will not satisfy them.

    Doing that will lead to mainly two possible outcomes
    1) They will accuse you of being naive. Not understanding human nature as they see it thus dismissing your argument.
    2) They will feel attacked. By saying the unemployed are not deficient you are challenging the frame they have for this situation (i.e. they are productive members of society and the unemployed are parasitic and leaching off them.) This can lead to the type of right wing victim-hood you see by the tea party where they feel under siege by the undeserving.

    Instead it is productive not to fight that belief. Instead for affirm their beliefs and argue from their side. For example instead of saying it as a job guarantee or a right to work call it welfare to work. By framing it as “Why should people just get to sit around and get welfare or unemployment for nothing. They should have to work for it. If there are no private sector jobs than they can go to work doing something for the community. No free lunches!” I have found this to be effective. The truly hardcore libertarian types will not be convinced they will simply be silenced, but those that have some sympathy for their views will be convinced.

    I know for many this will sound dishonest and it kind of is. Unfortunately we are talking about politics and sometimes you have to convince people that don’t already have the same sympathies or world view as you. For those people this can work.

  37. bill says:

    Dear Ray (at various times)

    In March 1974 the Australian unemployment rate was 2.1 per cent and it had been at that level since the 1940s. By December 1975, it had risen to 5.3 per cent and hasn’t been much lower ever since. In the 1975 federal budget papers, if you bother to read the actual evidence ever, you will see for the first time in our history the claim that budget deficits are dangerous and have to be eliminated. The two observations are not coincidental.

    Do you imagine that more than 3 per cent of the labour suddenly became hopeless, lazy, unemployable in that short-time and have remained in that diminished state since then? What psychological theory do you have to support that? What do you think happened in that 18 months to cause this change?

    Your claims about underemployment – the reasons you “suppose” – are not supported by the facts. I invite you to delve into the actual data a bit more deeply rather than offer “off-the-top” of your head (“from my years in business”) assertions. Experience is good but knowledge is even better.

    best wishes
    bill

  38. Gary says:

    for me the most “liberating” point of MMT was the knowledge that taxes do not fund the government.
    I think that is the point that is the most important to bring across.
    the way I was doing it is to simply ask: “do you think government spends first or collects taxes first?”. That usually stops the opponent in his/her tracks and makes them think.
    From there it is easy to explain importance of spending. And Job Guarantee is essentially like unemployment payments, except that person also produces something (lets hope) useful.
    Although it might work in personal conversations only..

    However I also think that MMT misses a point when it assumes that spending will fix everything. I think current crisis in the world – which was caused by the excessive financialization of Western economies – is only a symptom of too much money concentrated in a too few hands. So that creates a situation where majority of populations either starve or lack money, while tiny minority just looks for easier and easier ways of multiplying their money without regard to the process of doing so. So what prevents this additional government spending from going into the same hands?
    Taxes also need to be reformed.

    However MMT is still better than the alternative – which is to let the tiny but very powerful minority spread their propaganda unabated.

  39. bill says:

    Dear Gary (at 2010/11/25 at 10:19)

    You asserted:

    However I also think that MMT misses a point when it assumes that spending will fix everything.

    Where is that assumed? Never by me! Spending equals income. Income growth doesn’t solve everything!

    best wishes
    bill

  40. Andrew Wilkins says:

    Oliver says:
    Thursday, November 25, 2010 at 1:57

    “I would postulate that countries that value individual competitiveness very highly, such as the Anglo-Saxon countries or places like Hong Kong or Singapore, are likely to be most opposed to a JG or the like.”

    I am living in Singapore and I can tell you there is a healthy and intelligent debate on the minimum wage. It is complicated somewhat by the desire to develop an export driven economy, largely based on exploitation of low wage workers from neighbouring countries. I believe pragmatism and desire for the welfare of the lower strata of society will win through in time. The minimum wage will become policy as dogmatic senior political personalities fade away.

    Interestingly, Singapore runs compulsory national service which is a kind of job guarantee for everyone in the 18-21 bracket. They are probably closer to a job guarantee (For citizens only) than any western democracy. Full employment is almost here courtesy of public works program to build e.g. a world class metro system. Any temporary spikes in unemployment will be mopped up by programs to build sheltered walkways or covered drains. They even have an underground social welfare system. It’s not publically admited, but all citizens in genuine hardship can approach their parlimentary representative. Almost all proven hardship cases will recieve benefit.

    I also find it so amusing to see Singapore and Hong Kong lauded as the ultimate of the neo-liberal ideal. They are pragmatic nations that choose whichever ideology suits their politic. In Singapore, there are so many paradoxes a true neo-liberals brain would be numbed (if it could understand the paradoxes).

    Singapore is happy to host foriegn financial institututions, allowing them to free roll on international money markets. They are not so stupid to let the dickheads loose on their own economy. Until 5 years ago they had a magnificent dominant state Giro bank. Dormant private sector savings are “sterilised”, not through bond issuance but through a state managed national pension scheme (The CPF). 80% of housing is public housing, nominally privately owned, but essentially a lease facilitated through the CPF system. Interest rates are kept permanently low. Credit growth and asset bubbles (they have learned already) are managed by the Government specifying minimum loan criteria to which regulated banks must adhere.

    I’m not sure on the Sinagpore floating currency peg, but it works bloody well for them. On the Singapore floating peg topic, I suspect this is one area the Singapore Monetary authority economists are smarter than Bill. I’m almost certain at a high level they understand MMT. They certainly understand the potential as a monopoly issuer of currency better than any western state.

    Seriously, the western democracies are the ones mired in regressive dogmatic ideology. I’ll put my money on a few less corrupt asian countries to show them a clean pair of heels in the next 20 years. It’s not about demographics or ideology it’s just who’s smarter.

  41. Spadj says:

    “They are pragmatic nations that choose whichever ideology suits their politic. In Singapore, there are so many paradoxes a true neo-liberals brain would be numbed (if it could understand the paradoxes)”

    YES! Moreover, I find it strange that people here seriously bother referring to the (now defunct) U.S. as a possible example of deploying MMT ideas (that is, a movement located in the U.S.). The U.S. is a system of government, by its very design, designed to ossify change and the implmentation of new clever ideas. It is not a country of empirical examation, logic or reason. The people their, possibly due to their Calvinist heritage, are purely ideological, or worse, rather see someone else suffer even though it does not benefit them. If you want to seriously apply MMT policies look at Finland, Sweden, Switzerland (Switzerland is probably your best bet as most of the population is educated), possibly Austria, or intensely pragmatic countries – like Signapore or Hong Kong, who are more novel in their economic experiments (e.g. they implemented alot of Henry George’s ideas).

  42. Gary says:

    Dear Bill,

    as I understand – the main point of MMT is that sovereign government that has its own money and floating rate is not constrained in its spending – and that government spending is directly reflected in private sector’s savings. Hence in times of economic hardship government spending is needed to revive private sector.

    MMT does not address income distribution, and it does not address the problems caused by excessive private debts which are beyond ability to pay. In fact MMT does not require Job Guarantee either.

    I did not mean to imply that it is your opinion that government spending will fix everything – but that role of government spending is one of the main points of MMT.

    I understand very well that it is very important to bring that point across. In fact – I wish it was a common knowledge – and when I listen (on the radio) to progressives making the mistake of calling government spending “taxpayer money” – I wish I could point them to your blog.
    However, as I read Michael Hudson and the importance he places on private debt as such and the parasitic role that financial part of economy plays in the world – I struggle to correspond that with a lack of discussion about that in MMT.
    The more I think the more it seems that it is extreme income distribution that is the real problem – and everything else (laws and government working for the wealthy; rise of financial part of economy; rise of debts; rise of asset prices; worldview that is based on money; control of economic knowledge ..etc) is just a consequence.

    However, I have no illusions that this problem (income distribution) can be solved easily (if at all) – so I definitely agree that it is very important to spread knowledge of MMT – because that in itself is very important when discussing economic options.

  43. Gary says:

    @Spadj

    I would exclude Switzerland and Austria. They have similar belief in the sanctity of money as Germans. Besides they are not doing very bad as they are.

    In fact it is US (well maybe with exclusion of Australia) that seems to be the closest to MMT model in practice. No other country runs such deficits. The problem, of course is that the money are not going to the people who would spend it for the benefit of all.

    Money are being spent for the benefit of the few – that is to bail out financial institutions and to fight wars (again for the benefit of the few).

  44. Grigory Graborenko says:

    Gary:

    MMT does address private debt, on a macroeconomic level. It shows how public deficits allow private debt to be paid down, and savings to grow. It also shows why private debt will rise when governments run surpluses. Have a read of this old blog:
    http://bilbo.economicoutlook.net/blog/?p=3346

    Bill also talks about income distribution quite often! Here’s an example:
    http://bilbo.economicoutlook.net/blog/?p=11245

  45. Spadj says:

    @ Gary

    The Swiss are (in my view) the most reasonable and educated group of people on Earth (as I said, their political environmental of direct democracy aims toward consensus, unlike the U.S., nor are they as sterile as the Germans – so if an empirical argument is put forward, they will run with it). They like experiments on a cantonal level, which if it works, then is adopted nationwide. My understanding was in Norway the idea of a guarantee job for youth started off from a series of local projects that the government not implements nationally. Although the Swiss do not require MMT per se (btw, they implemented very large fiscal stimulus) resulting in a low unemployment rate (ranges from 2 to 4.5) – but a JG it could certianly “mop up” the other unemployed to bring it to full employment (<1%). The Swiss are more pragmatic, not ideological in my view. Austria's I agree are more "German-like" but again the culture is different to the U.S.

    The U.S. deficit consists, as you point, out a motley of military spending and perks for the financial elite. And a J.G. would need to survive the Supreme Court challenege, two Houses of Congress, Presidential approval, public (and media) pressure (accusations of communist etc) and whole raft of other "checks and balances" – any progress is bound to fail. Let's forget about the U.S. and focus on countries that have not been brainwashed by the neoliberals – Finland, Iceland, Sweden, Norway and possibly central European countries.

  46. artsworker says:

    Explaining the Job Guarantee.

    For those of us who are not economists, understanding economic theory is enormously difficult. I prefer to place the Job Guarantee idea in a much broader picture, that of the immense change, or crisis, that humanity is currently going through. You will have to bear with me if the first paragraphs below sound completely off topic; I will bring the argument to a close further down.

    One of the most important but least well discussed scientific results of the last century is this: life on Earth creates the conditions for life on Earth. The early Earth was inimical to life as we know it. For instance, there was no oxygen in the atmosphere. Early lifeforms created the free oxygen that we need to breathe and plants continue this vital process for us today. Another example, rain-forests seed the rain and trap vital water and in so doing provide the habitat for a myriad lifeforms, in a way that deserts cannot. Or again, all lifeforms (including ourselves) provide food for other lifeforms.

    These are just a few examples, from many, of the processes whereby life itself creates the conditions for life to flourish in all its variety. We call the systems in which this goes on ecosystems. The corollary of this ‘bootstrapping’ of ecosystems is that any species that succeeds in devouring the ecosystem on which it depends, will die along with that ecosystem. We know this directly from human experience: if our fishing industry fishes out the ocean it will die along with the fish. It is sawing off the branch of the tree that you are sitting on.

    However, until roughly the beginning of the twentieth century, the human individual seemed very small and the world immensely large, and so we believed that there would always be another sea or another continent, just over the horizon, which we could venture out to and exploit, which meant that if we laid waste to our immediate environment it did not matter too much. Now, however, humanity is large and the world is small and there are no more new continents and oceans to discover and conquer.

    We have come smack up against the fact that, from now on, we will have to ourselves create the environment that will enable us to flourish, along with the rest of life on Earth. Up till now, nature has provided us with the complex ecosystems upon which we depend. Nature has done this work for us blindly and we have made use of it equally blindly, without fully understanding how nature provides us with this service.

    The immense change I referred to in the first paragraph is the change in mindset needed to understand how we can consciously and deliberately recreate the sorts of processes that nature has been providing for us now that we have grown too big for the nest; to understand how each individual, each one of us, can help provide the conditions in a consciously created, humanly built, ‘ecosystem’ for the flourishing of all other individuals and all other life.

    This may seem an impossible challenge. It is certainly the greatest that has faced us for thousands of years. However, we are gaining the knowledge and the means as well as some experience of how to do this. We do meet this challenge, or at least attempt to meet it, whenever we build a city. A city is an artificial ecosystem, and successful ones enable a vast array of human aptitudes to develop. Cities, not villages, are where you find the great universities, the centres of the arts, the sciences and technologies; the big industries and corporations and also a thriving variety of different social structures.

    However, this is, in historical terms, early days for us. Not much more that a hundred years ago in Britain, cities were centres of disease, squalor and pollution. During the twentieth century much effort was put into constructing systems that would enable cities successfully to deal with these scourges. Now that we have recently reached the point where over half the world’s population live in urban areas, it will be the primary task for the next few hundred years to build successful cities as artificial ecosystems working in harmony with natural ones.

    A major obstruction to overcome is the tendency to see human activity from the blinkered point of view of what the single individual can gain from his or her activity, not from an understanding of how each individual’s activity links up with all others’ to construct a world fit for all life to flourish in.

    So where does the Job Guarantee fit into this? When you see that the activities of each individual can enhance the possibilities of all other life, including human life, then any person who is ‘out of the loop’ is not only failing to express their own capabilities but leaving everyone else that little bit more impoverished as a consequence. Unlike minerals in the ground, which if unused this year are available next, unemployed years cannot be stockpiled. Since so much needs to be done, in so short a time, to take the world successfully through the current crisis, we cannot afford this waste. Every person much have the opportunity to contribute to the best of their capacity to building the future.

  47. Victor Quirk says:

    Now that my exam marking and a day of careers counselling are complete, I wish to thank you all for your thoughts and energy on this topic (yes, even you Ray!), and have taken the liberty of compiling just the suggestions of definite action that emerged that Graham and I can take away and work on.

    Amid the various exchanges, including cross-cultural comparisons of where the most receptive minds in the world can be found, (not here in Newcastle Australia?) a surprising degree of clarity emerged in direct answer to my question: how best to propagate these ideas? So, pared back to the basic ideas:

    The Brand

    The term “Job Guarantee” is a political loser / non-starter. the point of the policy is sound macro-economic policy and general cultural betterment. I would suggest something like “Everyone Works”, stating the direct policy of putting all potential labor to use so that society benefits. It is time to stigmatize the status of being unemployed in a proper way- by making it possible and desirable for all able-minded persons to work productively.

    Instead of saying it as a job guarantee or a right to work call it welfare to work. By framing it as “Why should people just get to sit around and get welfare or unemployment for nothing. They should have to work for it. If there are no private sector jobs than they can go to work doing something for the community. No free lunches!”

    Use history

    Tell the story of those politicians, economists, philosophers, and activists who have argued passionately for the government to use its rightful monopoly over currency issuance to promote the cause of full-employment. Even when these individuals have failed, their histories can still be inspiring.

    Point out the historical fact that during times of war full employment has often been achieved so full employment reached by way of government spending cannot be technically impossible.

    Use existing examples

    Point out that the army employs lots of people and that they do lots of things; the National Guard helps out in civic emergencies like cyclone Katrina for example. Aren’t these government-created jobs? If those jobs are ok, what’s wrong with a civil army corp of the unemployed doing useful things?

    Make the case that even with unavoidable waste and corruption, the policy is hugely beneficial for all concerned, and worth the money to be spent. And then supply examples, as you have, of programs which transcend the difficulties of public works and actually provide public benefits through their direct efforts, in addition to all the indirect benefits.

    Accessible explanations of the system

    If you simply and calmly explain to people the structure of what a central bank functionally does – and I don’t mean monetary policy, but simply the administration and management of central bank accounts, and what they represent – then you are in a position of authority as a person who teaches. The important point here is that with this approach, you are not trying to overwrite existing preconceptions in the other person’s mind. Trying to do that is always very difficult. Instead, you are filling a gap in the other person’s knowledge, which is much easier.

    Once you have brought that particular story across, it should create the first seeds of doubt about existing preconceptions that the other person has. It becomes easier to convince them that something is suspicious about the story that they are being told by the mainstream. In other words, you have your foot in the door. Once the principal of the necessity of state regulation of the money supply is admitted, a factual debate can be conducted over the relative merits of different schemes

    Filling gaps of knowledge is much easier and can be used to get “your foot in the door”, so to speak, which can then make it easier to work on those preconceptions regarding inflation.

    The best way to convey MMT to the layman, is to simply describe it in a Chartalist way – govt spending adds money to the economy for people and businesses to spend and save, and taxes take away the excess to avoid inflation and pursue public purpose etc. (This is quite easy to understand). We then simply assert that minimal changes are needed to the existing institutional arrangements, which are already compatible.

    ‘Full employment through Job Guarantee is necessary for business and private enterprise, as it maintains aggregate demand in the economy even in the bad times, whilst keeping inflation under control’ – simple – just assert it without reference to the mainstream arguments!

    For MMTers to concentrate on the technicalities of deficit spending and balance sheets is a waste of energy better put to explaining in simple terms why there is no direct link between “money printing” and inflation. All the accounting minutia simply obscure the message.

    Proponents have to keep explaining the involuntary nature of cyclic unemployment, the integrated job search and employer-friendliness of proposed schemes, and lastly, also mention that employers should have a duty to FIND employees. The search intensity should be going both ways in a healthy economy.
    It is an issue of fundamental fairness and psychic/cultural health.

    Support activism

    A political arm which was willing to reach out to the would-be proponents of MMT (such as labor unions, students, etc) would be the 1st step in building a larger movement.

    Produce a Campaign Pack including editable Power Point slides, documents covering the history of the argument as above, its operational design and the fiscal / monetary framework – plus instructions on how to tailor it to individual countries. Designs for protest banners can also be included!

    The trade unions need to be brought on board in a more vocal way, by emphasising that full employment improves the bargaining position of those that are already in work – perhaps a special campaign pack for trade unions!

    Currently in the UK there are large student protests underway, and I think students are the best people to target as they have the energy and enthusiasm to make a difference that some of their parents lack, plus a healthy resistance to mainstream indoctrination.

    A pack for business would also be useful, so businesses can understand how they benefit.
    In short, the academic debate must be accompanied by activist methods – we should get organised!

    Build a web portal

    I would also recommend a single MMT portal on the internet, with frequently asked questions, and “quick answers” of no more than three or four paragraphs for each of the usual arguments against MMT and full employment, with references to more technical details. In political and economic blogs, for example, upon identifying a spurious comment, we simply look it up and cut and paste the counter argument into our comments plus links! This way we don’t need to recall (or even understand) the technical details, we can just faithfully reproduce the answers on demand. The mainstream use these methods and so should we.

    When the mainstream come up with an argument, just cut and paste the correct answer from the MMT portal!

    The portal should have sections for individual countries, and how MMT and full employment can be acheived within those countries.

    The MMT portal can have already written clauses for both left and right wing parties (and greens) to add to their manifestos! Things like this would make campaigning for full employment much easier, as the hard work has already been done by pooling contributions internationally over the internet. These contributions can be reviewed and signed-off as approved (or recommended) by MMTs main proponents like Bill et al.

    Raise Resources

    Creation and administration of the site would require the services of a qualified webmaster or team. This is a big project for volunteers. Most of the people that visit MMT sites are busy with their own lives. So it seems that it may take a funded organization if it is to happen.

    I think MMT needs a rich benefactor to make all this possible, or maybe there are other ways of funding the campaign.

    ——————————-

    Thanks to you all. Please continue to append any further thoughts, and I’ll keep checking back.

    Ralph: I found the Garraty book very interesting. I’m not sure if the Pericles program was Job Guarantee or Workfare though– its hard to tell what the level of the pay was relative to the rest of the workforce. I think he argues in that book also that the Pyramids were a ‘work for grain’ scheme one of the Pharoahs used when the Nile floods destroyed the farmers crops – early version of Australia’s ‘work for the dole scheme’ (itself modelled on the Act of 1601).

    Magpie : Some papers of mine (some with others) you may wish to peruse:

    http://e1.newcastle.edu.au/coffee/pubs/wp/2004/04-02.pdf (Problem of a full employment Economy)
    http://e1.newcastle.edu.au/coffee/pubs/wp/2005/05-17.pdf (Methods and motivation of social domination)
    http://e1.newcastle.edu.au/coffee/pubs/wp/2006/06-15.pdf (Job Guarantee in Practice)
    http://e1.newcastle.edu.au/coffee/pubs/wp/2007/07-14.pdf (The Job Guarantee of 1848)
    http://e1.newcastle.edu.au/coffee/pubs/wp/2009/09-04.pdf (21st century solution to Skills Shortages)
    http://www.newcastle.edu.au/Resources/Schools/Newcastle%20Business%20School/APSA/ANZPOL/Quirk-Victor.pdf (Lessons from the English Poor Laws)

    Now to repay your collective efforts, so you can all feel like you’ve gained important knowledge in return for what you have contributed here, further exam marking revealed, and I never knew this, but Bill Clinton was principally advised on neo-liberal reform by Bismark, the British leader who embraced market liberalism was Henry VIII, and neo-liberals believe socialism should be restricted to mining. See what a university education can do for you Ray?

    Cheers!

    VQ.

  48. Oliver says:

    Andrew Wilkins says:
    Thursday, November 25, 2010 at 12:44

    I also find it so amusing to see Singapore and Hong Kong lauded as the ultimate of the neo-liberal ideal. They are pragmatic nations that choose whichever ideology suits their politic. In Singapore, there are so many paradoxes a true neo-liberals brain would be numbed (if it could understand the paradoxes).

    I am absolutely with you and was merely trying to point out that is foremost their pragmatism and not their much, and quite obviously falsely, lauded neo-liberalism that is responsible for their success. I find there is a large discrepancy between what is preached and what is practiced, (especially in Hong Kong, although they do have a minimum wage), but you are probably right in that this may be more a problem of our perception in the West than of their own self-perception. On the other hand, the neo-liberal tripe you read in Hong Kong papers would suggest that at least parts of the masses are being made to believe that it is the infallible justice of the invisible hand and not Li Ka-shing’s grubby fingers that make their world go ’round. Plutocracy is a form of corruption.

  49. Oliver says:

    Andrew Wilkins says:
    Thursday, November 25, 2010 at 12:44

    Singapore is happy to host foriegn financial institututions, allowing them to free roll on international money markets. They are not so stupid to let the dickheads loose on their own economy.

    That’s the financial equivalent of allowing travel agents to advertise trips for paedophiles to the Philippines. Same problem here in Switzerland, btw.. It’s a pretty sad state of affairs if one needs laws to protect the Mugabes of this world to survive.

    Seriously, the western democracies are the ones mired in regressive dogmatic ideology. I’ll put my money on a few less corrupt asian countries to show them a clean pair of heels in the next 20 years. It’s not about demographics or ideology it’s just who’s smarter.

    I think Bill would choose academic honesty over financial smartness. An academically sound argument must be universally applicable and not crumble in the absence of a greater fool. What would Singapore do if the international money markets cleaned up their act? Not that that’s a likely scenario.

  50. Tom Hickey says:

    Gary on November 25, 2010 at 16:13

    Michael Hudson belongs to the Kansas City School which is comprised chiefly of those associated with the economics department of the University of Missouri and Kansas City. Many if not most of the members of this school are MMT’ers, like Randy Wray. Wray often writes in the vein of Michael Hudson. The UMKC blog can be accessed at http://neweconomicperspectives.blogspot.com/. Warren Mosler is also out front on reform. See his proposals here. The notion that MMT is only concerned with monetary operations is erroneous.

  51. Victor Quirk says:

    I’ve not responded to Ray properly.

    Ray: I must say I have a disdain for academics and those who try to improve the world with a treasure of theories that may not bear out in the real world.

    VQ: So do I. They’re called mainstream economists.

    Ray: Rather than coming on here and kissing your behind

    VQ: Thank you for restraining yourself

    Ray: like many others do, I try to give a genuine alternate point of view (call me a neo-liberal devil) with a little experience first hand as an employer of people and operator of business.

    VQ: Seriously Ray, I applaud you for doing it. I may disagree with you sometimes, but you perform a valuable role as devils advocate here.

    Ray: I pay my taxes in full and always have

    VQ: So do I. Good on you.

    Ray: and do get a little peeved by the leftist notion that the wealthy somehow have robbed the system.

    VQ: Some have contributed heaps and some have taken heaps. Some are saints and some are arrogant greedy over-bearing creeps. It goes back to your point about the unemployed: I don’t know of any adult population segment (Men, women, doctors, lawyers, driving instructors, academics, employers, employed, unemployed, priests, politicians, bureaucrats, bankers…) that does not have its share of bludgers, cheats, sociopaths, crooks, idiots, and loonies. Its just that the malignant portion of wealthy people can peddle more influence and affect more people’s lives adversely, even millions at a time. Its seeing what happens to people on the receiving end of that makes people like me lefties. Perhaps some of us are wired to see it more than others. But some of my best friends are wealthy, successful, hard-working and very good, clever people. Not all of them are in the MMT-party either.

    Ray: I wonder with all your knowledge and advice whether you have participated as such?

    VQ: I’ve told you before, I was a long term unemployed youth, then had my own small businesses, then worked for 20 years in the public and non-profit sector’s as a specialist employment counsellor and training centre manager working exclusively with especially disadvantaged jobseekers (ex-offenders, people with disabilities, long term unemployed, etc) preparing them and placing them in employment. I’ve negotiated placements with thousands of employers and worked with 10,000+ disadvantaged unemployed people. It wasn’t easy work, and it wasn’t overly well paid. I did many thousands of hours of unpaid overtime. The degree and Phd were entirely motivated by a need to explain what I experienced in what some think is the real world. There are a lot of people in academia who have seen a lot of life before they came here, as well as the naive types, so it pays to differentiate. I’m sure at the personal level you probably do.

  52. NKlein1553 says:

    “Use existing examples.”

    A good resource to find existing examples of the benefits of workfare projects in the U.S. is “The Living New-Deal Project.”

    http://livingnewdeal.berkeley.edu/index.php

    I’m a public school social studies teacher and have used this resource in my classroom a number of times.

  53. Ray says:

    Fair enough Victor, good on you for doing what you believe in. I admit my lack of patience with those who continually knock the current system and generalise the blame to those they are philosophically at odds with and thinking the GFC is the fault of a select few.
    The main problem that I see with MMT is that it cannot ever work in the real world because, in isolation, a country would find its currency squashed to the point you would be pushing wheelbarrows of it around. To get unemployment back to 2% would involve such a large public spend and fiscal deficit that the FX markets would be brutal. That’s my view anyways.
    If many countries adopted MMT simulataneously, then perhaps and maybe the world may actually function a little better, who knows.
    Anyhow, has been nice sparring.

    ps. I do have a uni education…….in Maths. ;)

  54. victor quirk says:

    Cheers Ray!

  55. Neil Wilson says:

    “To get unemployment back to 2% would involve such a large public spend and fiscal deficit that the FX markets would be brutal. That’s my view anyways.”

    Ray, that view is clearly incorrect – as Japan demonstrates.

    What you’re missing is the simple fact that there *isn’t* any more money in *flow* in the economy. The public sector only has a massive deficit because the private sector is net-saving. The public sector is pumping more money into the system to make up for leaky money pipes throughout the rest of the system.

    If the private sector is functioning at full steam and the banks are balancing saving and spending efficiently then for every $100 spent by the government, the government will get $100 back in taxation for any positive tax rate. There will be no deficit.

    Unfortunately that nirvana of non-leaky pipes is impossible in the real economy. The sole job of the currency issuer is to maintain the right amount of money in flow around the economy to ensure that *real* output is as high as the economy can sustain. It has to counter the leaky pipes.

    And ultimately the FX rate is based in the medium term upon real output and active money – as the Yen rate demonstrates.

  56. Greg says:

    Ray

    Certainly you can agree that any system is under the control of some people more than others, right? In the case of our financial system, it is under the control,currently, of bond traders, bankers, and some politicians (with the help of their economist advisers), right? Yes we all have some influence on the flows of funds but the forementioned folks make rules and determine distribution much much more so than any one else. So how is it not proper to blame them when the financial system which they set up and control, goes terribly wrong. Not just a little off but careening down the shoulder of the road. Either it was part of their plan (a view taken by some which has some merit) or they are clueless to the variables which affect things and need to examine their biases.

  57. Gary says:

    @Grigory Graborenko
    thank you for the links, I will definitely read the articles.

    @Spadj:
    MMT does require some ideology. Pragmatism can be interpreted in various ways .

    @Tom Hickey
    Yes, I know Michael Hudson is from University of Missouri and Kansas City.

    I did ask him about MMT and he said he was all for it – except that the current situation required (private) debt reduction – and could hardly be solved by MMT.
    Basically – his study is on the debt itself and its implications in history. Also in the mechanisms needed to address its corrosive effects.
    If you think about it: if it is true that today’s society is ruled and controlled by money (which I think is true) – then debt is a tool with which control by money is applied.
    Ancient Middle Eastern societies – which pioneered the use of credit and compound interest also had traditions to periodically cancel debts for they recognized that it gets out of control.
    It is not so today.
    So government spending does not address that as such, nor would Job Guarantee.

    @Victor Quirk
    I agree 100% that probably the main use of MMT should be to give jobs to unemployed. Besides that – to address health-care in countries such as USA, then to fund all needed programs to transition to a more ecological way of life. But this is not derived simply from MMT – this is derived form broader view at society and life than current neo-liberal and ego-centric views that rule us.
    So MMT is an important theory to explain to people so they would understand that it is not the money that is lacking – but simply political will. There is nothing inherent in a currently used money systems (except for euro and such) that prevent us from addressing most (if not all) of the issues that are threatening humanity (starvation, pollution, ecological disasters…etc).

    So that is what people should understand.
    That money is not an issue, that we do not have to be taxed into the ground and lose social services to address all that – that everybody can work, can get healthcare, social security, move towards addressing ecological issues, climate change, and so on.
    That exposes the real issue that prevents us from solving all those problems which is the wish of some to rule the rest – currently by the means of money. The restrictions of the use of money are simply ideological (and ideology is of the rulers) – and is used to convince everybody that global solutions are simply impossible to solve (there is no money) – so everybody should take care of himself/herself – for that is the human nature – which is a lie, of course. So their objective is to scare people into abandoning the hope for solutions – and to convince that there is no money. So MMT should remove that fear.

  58. pebird says:

    Victor:

    Thanks for the links to your papers – haven’t finished them all – the Poor Laws Lessons is great.

  59. /L says:

    A note on the first Ernst Wigforss quote, it’s from the Social democratic party’s 1932 election pamphlet. The entire pamphlet is a pedagogic master piece explaining the economy. An election pamphlet addressing the party’s potential constituency as they where intelligent thinking people that was able to absorb logical reasoning on a complex subject as the economy. The facts say that the person that was the social democratic party’s potential constituency then was much less educated then than ordinary people are today. Despite that, in today’s election campaigns the potential constituency is addressed as they where fools with short nonsensical slogans etc and brainless TV debates that have became more like infotainment.

  60. Tom Hickey says:

    Gary: I did ask him about MMT and he said he was all for it – except that the current situation required (private) debt reduction – and could hardly be solved by MMT.

    Hudson is chiefly a Minskian concerned with debt issues. This is his specialty. Most experts specialize. Bill specializes in employment issues. One could argue that Hudson’s work does not address the employment issue. That is not what he is tackling.

    To the best of my knowledge, all MMT’ers are Minskians and agree concerning Minsky’s financial stability hypothesis. Therefore, they are all are concerned with credit as it effects the economy. All are agreed that debts that cannot be paid will not be paid, and “extend and pretend” is a foolish strategy that just creates deeper problems. They are aware of Fisher’s debt deflation theory of depression. They are also agreed that financial reform is necessary to resolve the crisis, or it will either deepen or repeat. I have not seen any MMT’ers disagree with this, although different people have different emphases, and they may also disagree somewhat on priorities and policy solutions. But I don’t see MMT’ers missing in action here. Moreover, MMT does address the issue of how debt becomes a problem for an economy when either public or private saving adversely affect demand, as well as how to deal with it through the sectoral balance approach.

    You seem to be saying that deficit spending and a JG are designed as a fix for the the debt problem. That is not my understanding at all. Bill is writing principally about employment. The claim is that public dissaving is needed to offset private sector saving that is not offset by the external sector, or an output gap will open due to lagging demand, resulting in rising unemployment. This is an entirely different issue from financial reform, including debt management. Randy Wray, recently writing with Bill Black, has been out front on this in the US with very scathing posts in The Huffington Post, for instance, posts in which “MMT” is not mentioned because this has turned into a forensic issue more than an economic one.

  61. Patriot says:

    Victor,
    One thing that I’ve found successful in explaining MMT is to talk about online games. In World of Warcraft especially, the creators have been (through trial and error) successful at controlling inflation and wealth gap issues.

    For many people, online games are a familiar and empirically working example of a fiat currency. Everyone I’ve talked to about it has been able to make the jump from seeing the World of Warcraft “money supply” as lines in a database, to seeing the dollars in Federal Reserve accounts as just a database of larger scale.

  62. Neil Wilson says:

    Patriot,

    Now there’s an idea. A ‘second life’ virtual world with an MMT state in operation.

  63. Tom Hickey says:

    @ Patriot

    Hugely significant. Population turnover is definitely going to bring different thinking to the fore since the folks coming along are digitally based and not only have had different tools available virtually from birth, but also using these tools has produced a different mindset and approach to problem-solving. Civilization might also be mentioned in that quite a few “older” folks play it, too. There’s an opportunity there for a game programmer with an understanding of MMT.

  64. Andrew Wilkins says:

    Interesting, we use incredible super computers to model the worlds climate. We use complex algorithms to drop an artillery shell on a dime.

    Most of the empirical data we need to model the economic system is digitised and in a banks database somewhere. A lot of data is already being collected for national statistics. Obviously not enough resources and effort put into macro level analysis of monetary flows, otherwise most of the economic fallacies would have been exposed by incontrovertible empirical evidence.

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