I have received several E-mails over the last few weeks that suggest that the economics…
Violence, suffering and denial
I wrote about the way the recent neo-liberal narrative in the UK, that constructs the unemployed as gaming the income support system and about how they need to be weeded out by harsher activity tests etc, is a theme Australians will be familiar with in this blog – The victims become the perpetrators – the neo-liberal smokescreen. The discussion touched on the way we abstract from the human suffering that accompanies mass unemployment and how the dominant paradigm seeks to construct the unemployed as an “Other” different to ourselves and accountable for their own state. Unemployment is not seen as a violent act deliberately perpetrated by us (through the agency we give our governments – the “mandate”) but rather as a chosen outcome, a rational end of an informed choice. Perhaps not one we would take ourselves but rational nonetheless and therefore of no further concern. I have been reading some relatively oblique philosophical literature lately centred on conceptions of ethics and the way historical temporality forces us to take a moral perspective whether we like it or not – that is, denial of past action is a particular moral perspective. It bears on some work I am doing in remote Indigenous communities in the Northern Territory at the moment as well as broader debates that exist in society. Here are some notes and thoughts that arise from this sort of reading and reflection.
There is a long-standing debate within the “founders” of Modern Monetary Theory (MMT) about how we should construct and present our own narrative. It should be understood that the value systems of the early writers (and I include Wray, Bell-Kelton, Mosler, Fulwiler, Forstater, Mitchell (me), among that group) vary and I won’t personalise that statement.
But the debate went along the lines of whether the narrative should be restricted to the operational realities of the monetary system – this so this – or whether it was important to situate the discussion in broader debates about ethics and morality.
In particular, I have heard statements like “X is a bleeding heart liberal” and invites criticism as a result, which diminishes (in some way that has never really been explained to me) the essential argument that, for example, mass unemployment is the result of a budget deficit being too low relative to non-government spending and saving decisions.
The “operational reality” is factual and sufficient is one view. Just the massive loss of national income is a sufficient political motivation to do everything possible to avoid mass unemployment.
According to this narrow view, no further discussion about the other personal and societal costs (damage to physical and mental health; family breakdown; increased incidence of alcohol and substance abuse; increase crime rates; skill loss, and the rest of it) is needed and only leads to the accusation that MMT is mired in a contest of values rather than being about the cold, hard operational reality.
The alternative view that is expressed is the tolerance of mass unemployment and the pain and suffering that accompanies it is immoral and unethical and is a significant extra dimension that should inform the policy debate.
Why should we disavow our “bleeding heart” views? Why should we be defensive about the fact that we seek to use our understanding of the cold, hard operational reality of the monetary system to truly expand human potential?
Why should we be uncomfortable with our view that we think full employment, for example, is good and moral and an expression of our view that suffering from unemployment, is bad?
Why is it politically naive to deny all of that and fail to educate the populate that when we think of the self (thereby denying the “other”) then we really, without knowing it, reduce our own capacity to grow as humans and prosper in a moral sense?
Some rabid opponents of our ideas will call us Socialists or Communists (the latter if they are really wanting to disparage us – although from my perspective the latter would be a higher complement than the former!) whatever we write and say. But knowledge has a way of getting out and no paradigm can maintain a dominant position indefinitely if it is degenerative – that is, losing empirical content to the point that is is devoid of such.
First, a little real world digression.
In the May 2013 – Budget – the Government said:
The outlook for the Australian economy is favourable, with solid growth, low unemployment and well‑contained inflation. GDP growth is forecast to be close to trend at 2¾ per cent in 2013‑14 and 3 per cent in 2014‑15, and the economy is expected to continue to outperform most other advanced economies over the forecast period.
The narrative that followed was all about how much larger the Australian economy was relative to 2007 (when this Government was first elected) and how much larger it would be in a few years.
More household consumption – “expected to grow solidly over the forecast period” – “growth in household wealth” and “a recovery in the housing sector”.
All these forward looking visions – to be celebrated and longed-for – despite the admission that the unemployment rate was still 1.5 per cent above the low-point of the last cycle in February 2008 and that:
… the unemployment rate is expected to rise by ¼ of a percentage point to 5¾ per cent in 2013‑14, but then stabilise at that level over the remainder of the forecast period and remain amongst the lowest in the developed world.
As if the developed world has become our benchmark given that a substantial swathe of it is comprised of nations that voluntarily surrendered their currency sovereignty and lost their capacity to defend their domestic economies from a major aggregate demand failure of the likes we saw in 2008 and 2009.
And a significant proportion of the rest of the developed world has deliberately introduced austerity policies which deliberately pushed their jobless rates up (or prevented them from falling from their high levels).
Why would we want to compare ourselves with these nations, especially when our terms of trade have been at record levels courtesy of the boom associated with China’s unprecedented urbanisation?
At the current labour force, the difference between the unemployment rate the current Government inherited and what it was forecasting in the May 2013 Budget as being associated with “solid real GDP growth … consistent with the fiscal consolidation underway at all levels of government” is some 216 thousand workers.
216 thousand more people without work.
We also know that underemployment and hidden unemployment rise when unemployment rises, so the change in the scale of the wastage would be far in excess of that 216 thousand workers.
Of-course, the Australian economy has slowed dramatically since then as a result of the declining private investment (as the terms of trade have fallen) and the fiscal drag coming from the significant austerity in 2012-13 finally catching up.
In its most recent – Economic Statement – which is couched in language such as “Investing in Australia’s Future” and “Ensuring rising Australian living standards” and “Sharing the benefits of a growing economy” and such, we learn that the Government will help us:
… in the longer term with new policy directions to lift productivity, economic growth, and therefore Australian living standards now and into the future.
Please read my blog – Australia – the good and bad of the Economic Policy Statement – for more discussion on the Economic Statement.
In the Statement, we are told that the Government is “Managing the transition” between the resources boom and a more balanced growth strategy but that this will take time and we can look forward to “relatively smooth growth” and “improving living standards”.
Forward-looking … lets not talk about the present too much otherwise some unattractive facts might become the focus – sort of stuff.
The language is all about being “committed to the medium-term fiscal strategy … which provides the basis for the Government’s decision to keep the budget on track to return to surplus and keep Australia’s fiscal position strong”.
On Page 1, we are told that unemployment is “moderate”.
On Page 2 we read that “the unemployment rate expected to increase slightly over the next year”. Moderate and slightly – no alarm necessary.
On Page 5, again we are reminded that we have “moderate unemployment”.
These are part of the “Overview” and the same assessments are repeated on Page 21 when a detailed discussion of the “Economic Outlook” are presented.
So after touting all this positive, future-oriented discussion, it is not until later in the Statement (Page 21) that the Government, without even blinking, informs us, that:
As the transition unfolds, the unemployment rate is expected to reach 61/4 per cent by mid-2014 and then stabilise at that level in 2014-15
So – don’t worry, this is just a transition to a better time even though the pain and hurt will remain with us for a while. Remember, the Government tells us that it is about “Sharing the benefits” but says nothing about sharing the costs!
At the current labour force scale, the Government is expecting the unemployment rate to rise to 6.25 per cent by June 2014. It then expects, that rate to persist for the next fiscal year ending in June 2015.
Compared to now (where unemployment is at 705.4 thousand, that amounts to an extra 67 thousand workers unemployed. Compared to the low-point unemployment rate of the last cycle (February 2008) the forecast outcome would mean 278.1 thousand extra workers will be unemployed by June 2014.
By 2016-17, that is nine years after the crisis began the unemployment rate is still forecast to be 1 per cent higher than the low-point that was achieved in February 2008. On the current labour force size, that would be 123 thousand workers extra who are without jobs compared to the situation that would prevail at a 4 per cent unemployment rate.
Of-course, with population growth that number will be much bigger in 2016-17.
That is the best the Government can offer in this glorious future world they are crafting – or so the narrative would have us believe.
So what is the Government proposing? Well, instead of its manic pursuit of a budget surplus, which pulled out at least 1.5 per cent of real spending growth from the domestic economy (the difference between trend growth that would have reduced the unemployment rate and the current pathetic growth rate which is seeing unemployment rate rise), the Economic Statement tells us that:
To ensure that unemployment remains relatively low, that households and businesses are not hurt by excessive cuts to spending and services, and that the transition away from the mining investment boom is as smooth as possible, it would not be prudent to offset the entire fall in revenues since the Budget in the near term.
So austerity flat-lining effectively, allowing the automatic stabilisers to put a floor in the decline in aggregate demand (and adding 0.75 per cent to spending growth). How magnanimous of them!
The clients or customers or job seekers or whatever strange nomenclature that we are now using to describe the unemployed are almost absent from this narrative. 5.5 to 6.25, forward estimates, who cares.
As an aside, the neo-liberals started this obfucation of mass unemployment by invoking “market-based” terminology to describe essentially non-market phenomena.
So the unemployed – denied access to work by a lack of aggregate demand – became customers of income support providers. In the textbook microeconomic models, students are taught about consumer sovereignty.
The “customer is always right” summarises the power consumers are meant to have and producers are just passive responders to these spending patterns. Even advertising is cast as being benign information rather than being a vehicle whereby supply-determined outcomes are pushed onto unwitting consumers.
Customers have power and make choices. The outcomes are the manifestation of these choices being exercised.
The terminology, when applied to the unemployed, changed our perceptions. The unemployment – as customers – are in some market relationship with the income providers (increasingly privatised). They exercise choice – the ultimate choice in the more extreme text book sections being between leisure and work.
Leisure is the code-term they use for joblessness in this context.
And then all the value-narratives are piled on to influence the policy debate. For example, the unemployed choose to be so. They prefer leisure -> they like lying around in the sun on the beach -> they are lazy -> they don’t deserve income support -> they are despicable parasites.
Each part of this logic train reinforces the last to the point that we allow our governments to dehumanise the unemployed and the media to represent them as some strange species, foreign to us hard-working souls who really care about our families etc.
This is all part of the neo-liberal agenda to seize increasing proportions of real income for the elites (in the corporate and non-corporate world) and to maintain a domination over the public debate that if informed differently would revolt and burn down Wall Street (and its ilk).
The reason I have taken some time over the Economic Statement and related discussion is that it fits nicely (or awfully!) with the literature I have been reading covering suffering and denial.
A good starting point to this literature is Emmanuel Lévinas’s article “Useless Suffering”, which is contained in a 2006 collection (first published 1998), entitled – Entre Nous (Chapter 8).
You can download a copy of the article (translated by Richard Cohen) – HERE, which appeared in another volume as Chapter 10.
Levinas’s work developed a coherent challenge to what we might consider to be the dominant Western thought paradigm. His critique of what he constructs as a dialectical process towards a Utopian good where suffering is eliminated.
Emmanuel Lévinas writes that:
Suffering is surely a given in consciousness, a certain ‘psychological content’, like the lived experience of colour, of sound, of contact, or like any sensation. But in this ‘content’ itself, it is in-spite-of-consciousness, unassumable.
For Lévinas, suffering and violence go together.
Suffering is made rational by dominant paradigms. In noting that suffering is a scandal, Lévinas says that:
Western humanity has none the less sought for the meaning of this scandal by invoking the proper sense of a metaphysical order, an ethics, which is invisible in the immediate lessons of moral consciousness. This is a kingdom of transcendent ends, willed by a benevolent wisdom, by the absolute goodness of a God who is in some way defined by this super-natural goodness; or a widespread, invisible goodness in Nature and History, where it would command the paths which are, to be sure, painful, but which lead to the Good. Pain is henceforth meaningful, subordinated in one way or another to the metaphysical finality envisaged by faith or by a belief in progress.
We are seduced by “grand ideas” – the path to goodness – which allows us to depersonalise suffering. There is a plan. It will eliminate suffering. Don’t worry.
This leads to conclusions, such as, the Germans didn’t embrace Nazism because they liked the suffering that it brought. They were seduced by a rational narrative that divided the world into the super and sub-races on the path to Utopia.
The Germans were encouraged to believe that the suffering of the sub-races (organised slaughter) was a developmental process – on the way to a higher order for the super-race. That cohort we the deserving.
It was about the future – the path to Utopia – to happiness where suffering was eliminated and everyone was white-haired, resolute, prosperous and beautiful.
Suffering was part of this deterministic historical path – it was inevitable – but everyone would be happy as a consequence of it.
Somewhere along the way some 14 million people didn’t get to see that future.
Lévinas noted that “double bind” becomes evident when the future developmental state of utopia is defined in terms of violence and suffering of a few people who form the excluded.
He considers that suffering goes beyond notions such as restricting our freedom for spontaneous action. Rather:
The evil which rends the humanity of the suffering person, overwhelms his humanity otherwise than non-freedom overwhelms it; violently and cruelly, more irremissibly than the negation which dominates or paralyzes the act in non-freedom … The evil of pain, the harm itself, is the explosion and most profound articulation of absurdity.
In this context, suffering becomes “useless” – it is “for nothing”.
In the current debate, we are led to believe that the suffering of unemployment is avoidable if we are motivated, look for jobs in earnest, and when there is just “moderate” unemployment in a climate of “strong real GDP growth” it will only last until 2015-16, and that is within the “forward estimates”, which is a current construct despite it pointing to the future.
That is, suffering is a category that can be mostly avoided and ephemeral anyway.
The deliberate generation of unemployment is an act of violence because it creates suffering. The government could immediately announce a Job Guarantee and end this violence but chooses not to because that scheme is not part of its developmental vision.
The problem is that we never get to where they want to go (there are cycles) and in the meantime we conveniently abstract from the people who suffer, who have the violence inflicted on them by the rest of us.
I will write more another day on how violence leads to suffering but also generates a moral burden on those who inflict the violence. When we are violent we are behaving as if there is no relationship between us and the sufferers of that violence. We deny that the unemployed are part of us. They are different and we invent nomenclature to reinforce that difference.
But in denying the others we effectively deny ourselves.
In his 1996 monograph – Proper Names – Lévinas writes:
… the self is not a substance but a relation. It can only exist as an I, as taking an interest in a Thou or as an I grasping an It …
Which relates his idea that we cannot comprehend ourselves independent of all others. And our conception of others, inherently involves the concept of responsibility and the ethics of connectivity.
When we inflict violence on others, we are ultimately immoral.
In Useless Suffering Lévinas writes:
For an ethical sensibility – confirming itself, in the inhumanity of our time, against this inhumanity – the justification of the neighbour’s pain is certainly the source of all immorality. Accusing oneself in suffering is undoubtedly the very turning back of the ego to itself. It is perhaps thus; and the for-the-other – the most upright relation to the Other – it is the most profound adventure of subjectivity, its ultimate intimacy.
Conclusion
This is an interesting literature and allows us to see why the so-called “bleeding hearts” want to elevate our MMT understandings beyond meagre issues of operational reality.
We can have that operational reality but still deny ourselves if we don’t see the violence and suffering that accompanies, for example, mass unemployment.
That is enough for today!
(c) Copyright 2013 Bill Mitchell. All Rights Reserved.
It’s not for nothing an ugly mace lays across the dispatch box in the House of Reps.
Symbolic it may be, but it’s also a reminder of the State’s unlimited capacity for violence.
Well said Bill.
Great piece, Bill.
For those who haven’t visited it yet, I have started a new blog to give myself a bit more personal space to express and develop my own moral and political thinking beyond a more narrow focus on operational realities and macroeconomic principles.
http://ruggedegalitarianism.wordpress.com/
It seems to me that the issue of employment and unemployment ultimately hangs on questions of the ownership and social control of the resources that are available for production, the decisions that are made over how those resources will be mobilized into productive enterprises, and the choices that are made over the ownership and management of those resources. I don’t believe that we can ever get full employment by relying on private enterprise alone. We need vigorous public enterprises playing a role as well, and helping to set the strategic direction for the nation – and the globe. I’m very excited to see Randy Wray is now working with Mariana Mazzucato to help brings the MMT focus on operational details and macroeconomics together with Mazzucato’s interest in the historical importance of state involvement in growth and innovation.
Bill,
MMT is practically unique as far as I can tell in that it places, yes, I agree, the ‘violence’ of mass unemployment at the forefront of the macro economic debate. From what I read even those self-styled ‘progressive’ economists could frankly care less about unemployment. Their unwillingness to peak outside the neo liberal paradigm for even a moment I find pathetic. Within that paradigm, they have no solutions.
One of the things I’ve noted about mainstream macro economists is that they, like me, must see the daily, ad nauseam, conflation of ‘household’ economics with the ‘macro’ of a nation, particularly as regards ‘debt’ & (aggregate) ‘spending’. I would say more than 95% of the electorate – anywhere – have not the slightest clue that decisions based on their ‘household’ insight will near universally be precisely +opposite+ to those which are correct & will produce more prosperous outcomes for all (except perhaps just a little less for the top few percent).
How can meaningful (informed) democracy exist in such universal ignorance of even basic principles, such as ‘paradox of thrift’? Answer, it can’t. To suggest otherwise is absurd. Yet mainstream economics could not give a sh1t how ignorant society remains, ‘progressive’ or rabid fascist alike. They disgust me.
It strikes me, a theme I’ve been writing about recently, that the neo liberal agenda of these last decades has been to deny the very existence of ‘macro’ itself. Thru’ that they deny need for any counter cyclical actors in the economy & thru’ that deny much any role for government, beyond police & protection of property rights etc.
The fact that there is no other ‘prescriptive’ element, except the JG, as regards the role of state vs private sector defines MMT as superior to any policy framework I’ve ever seen, separating the monetary & economic issues from the ideological.
It’s a simple and basic proposition – democracy decides everything with the exception that ‘no one gets left behind’ is non negotiable.
Seriously, if the general public understood even the basic principles of macro economics – ‘paradox of thrift’ & ‘fallacy of composition’ are not rocket science (once explained) – I think MMT, its Job Guarantee, Functional Finance etc. would be a no-brainer choice.
As ever, many thanks for your work Bill – and that of all your colleagues. MMT demonstrates that the right to work – as a human right – is absolutely achievable, right now. The refusal of elites to recognise this exposes their true concerns – their personal vanity & greed – for all to see.
There is a lot of tension between the passionate and the dispassionate sides of MMT. But even though I, myself, have laid great stress on the passionate element, I have also come to see the importance of the detached, objective side. Both are necessary and context is everything. MMT needs to win the academic argument based on rational argument alone. This is more important than any other single sphere of action. For one thing, it is the only arena where we have any short-term hope of winning. Big Economics doesn’t let it show, but they are scared, confused and desperately in need of intellectual cover to explain away the disasters they have inflicted on humanity. They aren’t burning down Argentina or Malaysia anymore. The Empire itself is reeling out of control, and their fingerprints are all over the economic narrative that brought us here and that’s keeping us here.
In my (sincerely) humble opinion, the role of the wider social and online MMT movement is to prepare the public mind for the day when it will have to absorb an enormous ideological shock. Economic orthodoxy is going to keep on failing until it falls apart. I see no other remotely likely outcome. MMT needs to be on the public’s and the media’s radar by then. And educated public opinion needs to be solidly on our side by then.
Let’s face it, it’s “Back to the Future”. But if we hit that wire, going exactly 88 miles an hour, at the very instant when lightning strikes the clock tower…
Everything will be fine.
State enabled ‘violence against the unemployed’ is one of the best definitions I have read for a while.
Imagine the outcry if 6.25 percent of the dolphin population were prevented from ‘earning a living’ (aka simply, being a dolphin)! And suffering thereby….
Dear Bill, I have adapted part of your post, as shown below, to use with people who have no contact with MMT. I am in a position to use this sort of information as ammunition in the coming election. I would like your OK to do so as the concept and much of the text is clearly your ideas and thinking.
Violence, suffering and denial
Posted on Monday, August 19, 2013 by Bill Mitchell (As adapted by Graham Paterson)
The neo-liberals depict the unemployed as gaming the income support system and they need to be weeded out by harsher activity tests. The victims become the perpetrators. This attempts to portray the unemployed as the “Others”; different to ourselves and responsible for their own state. The neo-liberals try to divorce unemployment from the “mandate” we give our governments. It is the government who deliberately allows the conditions to exist that cause the “problem”. Of course, it is only perceived as a “problem” to the unemployed, while it represents a significant cost cutting measure in improving the bottom line.
In reality, it is a very short term measure in respect to a consumer society, such as our economy. The neo-con’s claim the unemployment is a chosen outcome of a rational and informed choice by each of the unemployed. They prefer to give up employment for the benefit of living off the welfare state and bludging off the taxpayer!
It’s not a choice “we”, the still employed, would take, but if “we” accept it as a rational, conscious, decision by the “bludgers”, then “we” have every right to complain.
Of course, anyone who argues the case on behalf of the unemployed is immediately classed as a “bleeding heart liberal”. Being thus defined avoids having to confront the essential, and factual, argument that high unemployment is the result of a budget deficit being too low relative to non-government spending and saving decisions.
The massive loss of national income resulting from high unemployment should be sufficient motivation for political action by the government. But apart from the income loss, society is also confronted with the increased costs of damaged physical and mental health; family breakdown; increased incidence of alcohol and substance abuse; increase crime rates; skill loss, and all the other side effects.
The alternative “conservative’ view is that society must tolerate high unemployment, and the pain and suffering that accompanies it, because it represents a strengthening economy as is shown by the improved “bottom line” in the financial and banking sectors.
Unfortunately, it is seen as irrelevant to use an understanding of the cold, hard operational reality of a monetary system that is truly capable of expanding the human potential?
Why is it considered irresponsible to think full employment is a good and moral policy objective and that suffering from unemployment, is bad for a society?
It is regarded as being politically naive to believe a Government is there to serve a public purpose, and to help the population grow as humans, and prosper in a moral and economic sense?
As soon as anyone espouses the cause of the under privileged in our society they get branded as Socialists or Communists. Thus, they can be dismissed and no further argument is necessary.
In the May 2013 – Budget – the Australian Government went to great lengths to repeatedly compare Australia’s economic performance with the rest of the “developed” world, as if the developed world has become our benchmark. Given that a substantial swathe of it is comprised of nations that voluntarily surrendered their currency sovereignty and have lost their capacity to defend their domestic economies, this is hardly a valid comparison.
And a significant proportion of the rest of the developed world has deliberately introduced austerity policies that inevitably pushed up their jobless rates and/or ensured the maintenance of their high levels.
Why would we want to compare ourselves with these nations, especially when Australia’s terms of trade have been at record levels as a result of our Chinese trading partner?
Dear Graham Paterson (at 2013/08/20 at 10:12)
Thanks for the comments. What I would be happy with is if you re-write the piece in your own words and directly quote me verbatim as much as you like with a link back to my full blog at the start or end of your post.
I hope that is okay.
Just link quotes from me with your own words if that will help your cause.
best wishes
bill
Thanks Bill,
I will give that a try and see if I can get the links right. I speak and write to a lot of people about MMT and haven’t yet found anyone who is familiar with the theory. They can’t seem to get over the hangup of looking at government budgets as being the same as household budgets. I guess the brainwashing has been pretty successful over the years. I use Warren Mosler’s 7 Frauds book (with links) which I have summarised in a short article and added an 8th Fraud in comparing government budgets with household budgets. It seems Warren’s book is beyond the comprehension of 90% of the people and the other 10% claim it is all poppycock.
Seems MMT is faced with a huge educational challenge from the reaction I have experienced. I would guess most of the people simply don’t want to upset the thinking they have been brought up with. The few that have been prepared to argue the issue really don’t have, in my oponion anyway, a logical and rational case for their opposition to the “theory”. I personally, don’t consider MMT as a “theory” – it is a far more realistic explanation of how the monetary system can, and should, work. Obviously, putting it into practice is the “problem”.
There is a problem with economists getting emotional and political: the population can get it’s emotion and politics from daily newspapers, politicians or in the local bar. In contrast, they look to economists for cold dispassionate facts, logic, etc. If economists get emotional and political, then the population will ignore them.
I.e. if MMTers want to dwell on the social costs of unemployment, then fine, but do so in as scientific a way as possible: e.g. cite suicide rates or divorce rates amongst the unemployed. And if suicide and divorce figures don’t back up the “horror of unemployment” story, then don’t dwell on the latter story.
I had the misfortune to work as a Federal Public Servant under the Howard government. Demeaning terminology for the unemployed became the official language. “Work for the Dole is an Australian federal government program that is a form of workfare, work-based welfare. It was first permanently enacted in 1998, having been trialed in 1997.” – Wikipedia. Considering that “dole bludger” is common disparaging term embedded in out minds by decades of right wing propaganda the message behind “Work for the Dole” is clear. It means “Work for the Dole and Stop being a Bludger.”
Imagine if old age pensioners were treated to the same style of disparaging terminology. Men over 65 could be told to apply for “Geezer Benefits”. Women over 65 could be told to apply “Crone Benefits.” Indigenous Australians could be told to apply for B…. B…… Benefits. (I daren’t even write it as it is unacceptably racist.)
You see, my point is this. If it is unacceptable to give insulting ageist and racist labels to assistance to these groups then it should be equally unacceptable to give insulting labels to the unemployed.
Bill is right. Given that there are about 8 unemployed for every bona fide job vacancy then it is clear that most unemployment is involuntary. It is due to policy failure and market failure not to individual failure or individual choice to “be a bludger”.
(mostly from a US perspective, hope it’s simple enough for anyone here to “use”, to fling at the MMT skeptics.
FACT
Its not hard to do sum TOTAL of # of dollars that are DRAINED out of our economy to foreign corp imports, plus how much is socked away in unspent savings (more by those who can afford big savings).
FACT
That “drain” (corp imports/savings/debt deleveraging) is a “leak” or “bleed” out of current consumer demand/sales. Similar concept to ulcerative colitis or hemorrhage or even engine oil leak or a leaky tire.
If the car is leaking a quart of oil per month, you must add a quart per month. If it’s leaking a quart per week, you add that much. For our economy, this analogy is especially true, since every indication (from the most powerful business sector) is there’s no plans to plug the “leak” … of foreign imports plus higher savings for the top 0.1 percent.
FACT
National tax collection is also a DRAIN on consumption aka demand aka sales.
So net tax collections are rising, the goal is for falling deficits, but look out, sales are weak, layoffs announced, unemployment stagnant or rising. Can’t see the connecton?
FACT
That “drain” or “leak” figure equals the Target size the annual national gov net deficit (taxes minus spending) MUST reach, at minimum, for a real economy to be stable and to grow, for the population to have more net income and more net savings … and jobs. (If tax cuts to the Rich lead to more money stashed in savings, not more consumption/demand, then that outcome demands even bigger deficits at the bottom to overcome the bigger DRAIN.)
FACT
Counterfeiting is a crime because it’s forging the signed pledge of the Treasurer of the United States and Secretary of the Treasury, which is printed on each paper Dollar and implied on electronic cash. Those two officials pledge that any Dollar they issue can be used to pay US taxes. That’s the “loop”.
The global supply of dollars is a closed system, obviously.
FACT
China has no rights to create a single U.S. Dollar. They create Renimbi/Yuan. They save most of their surplus US Dollar earnings in accounts at the US central bank.
FACT
Total Aggregate Net Savings of U.S. Dollars by everyone on planet Earth — foreign and domestic — is exactly equal to the sum total of all U.S. Govt Deficits since 1776. Where else could our “net savings” in Dollars come from?
FACT
Whether burying money in a box in the backyard or in a savings account or Govt security “debt”, that money is removed from domestic circulation, from consumption, from incomes, removed from incomes of many people in turn.
FACT
Only Uncle Sam creates dollars, yet a significant flow “goes overseas” (they don’t literally “move” anywhere, they are “parked” in Washington at the Fed as account balances which are designated to foreign banks or foreign central banks). Americans (and banks) also save their U.S. Dollars in the form of U.S. Treasury bonds ($250,000 is the FDIC limit on insured savings, T-Bonds are guaranteed by the Constitution, Amendment 14, “… shall not be questioned … “). This is nothing more than big numbers on a massive spreadsheet hosted on the computer system of the Federal Reserve in D.C. It’s been “cyberspace” money for over 4 decades.
Is anyone proposing killing off globalization or instituting broad tariffs on imports (like America had as a young country) to prevent Dollars from flowing overseas for imports? No. It’s too attractive to buy cheap stuff from countries where the economic state is similar to when Grandpa was working at Ford for $5 per day, which is about what Chinese factory workers earn, more or less. Ergo, imports are a NET GAIN for the country as a whole .. but to whom?
FACT
To DRAIN an economy that’s too hot, that is the ONLY real (economic) purpose of national tax collection, post gold standard. The Govt doesn’t have any NEED to acquire its own Dollars back from its own Citizens, who received them from the Govt in the first place, since zero net dollars are created by anyone else.
The only reason to for a tax hike is if we decide the economy is “too hot”, that there’s TOO FEW UNEMPLOYED people at a given time.
FACT
The other “politicallly-determined” purpose for US taxes is “social/economic justice” and economic planning, such as higher taxes on unearned gains from financial speculation and unearned “windfall” gains, combined with low or zero taxes on earned income from paychecks and salaries. That’s an economic stimulant that boosts sales, because most people spend what they earn.
FACT
We’re doing the opposite, slashing taxes on unearned speculation gains, while shifting higher taxes on to earned income from various work.
FACT
This the exact opposite of the formula Adam Smith proposed in “Wealth of Nations” in 1776, and the exact opposite of what America practiced for most of our history.
FACT
Even ultra conservative admins in yesteryear argued to untax earned income from labor “from the sweat of a man’s brow”, and more taxes on unearned dividends, as a matter of fact, to ONLY tax unearned gains and unearned dividends of Americans in the top 2% bracket. (Coolidge, Mellon)
If Congress fails to maintain around a TRILLION dollar deficit annually (more or less) in the form bigger tax cuts (for the bottom 50 pct or bottom 90, such as payroll taxes) and/or fails to do much more infusion/spending on whatever they think will be effective, even a “negative income tax” —- Milton Friedman proposed that to Nixon in place of “welfare system”, just let the IRS deliver the “welfare checks” —- the economy (aggregate consumer demand) MUST remain anemic and flat – sickly.
It comes down to simple addition and subtraction — sectoral accounting.
Bigger Social Security payments and halting tax collection for Social Security would not reduce one iota the national Govt’s ability and sovereign power to issue payments to elderly people and sick people. Everyone at the Fed knows this. Alan Greenspan stated this clearly to Paul Ryan, that the Fed Gov could never be unable to make a Soc Security payment or any other payment. The only possible issue, said Greenspan, is lack of real resources for Soc Sec recipients to buy. Like if there was a terrible famine, like a bee colony total collapse, Soc Sec payments wouldn’t buy food that didn’t exist.
Federal Tax “revenue” does not contribute to a limited “pool” for spending, in our current operational reality since 1933. Certainly not since 1971, when Nixon broke our “pledge” to hand out gold to all foreigners, at a “fixed exchange rate” set by “fiat” international agreement, post World-War Two.
The actual job of the tax collector (IRS in the USA) is to destroy our money (which the Govt previously created by it’s interesting methods), which we now think of as making the US govt “more solvent”.
But the Govt destroying (deleting) money that it created in the past does not make it “more solvent”, nor does creating more money make the govt “less solvent”. The GOAL should be full employment, and the TARGET for money creation should equal the DRAIN.
“It seems to me that the issue of employment and unemployment ultimately hangs on questions of the ownership and social control of the resources that are available for production…”
this is exactly what Karl Marx was preoccupied with (not to mention the Zeitgeist Movement/Venus Project).
” I don’t believe that we can ever get full employment by relying on private enterprise alone. We need vigorous public enterprises playing a role as well…”
let me play devil’s advocate–what’s the point of allowing “private enterprise” to exist at all? why not just only have “public enterprises?” one could make an extremely convincing argument (just look at the last 600 years of history, at the very least) that as long as you allow the existence of private enterprise, you will always have a powerful lobby which will force the government to create large pools of unemployed people. it’s nearly impossible to have one without the other…