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.
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…
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!