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The top 10 progressive issues for 2015! Did I say progressive?

I am away most of this week and have limited time for blogs and I am also concentrating on the Modern Monetary Theory (MMT) book I am working on that will be published later in 2015. I also do not want to use the blog space exclusively for that book writing like I did for a portion of this year when I wrote the book on the Eurozone (which will come out in May 2015). I can also say that an Italian version of the book is now going to be a reality and we hope to get it out as soon as possible in 2015 – more later on that topic – it tells a story in itself about the Italian left! So for the rest of the week we will be in Blog Light’ territory although only marginally. Today – a sad story of how progressives seem to lose their way. I would have thought the first progressive imperative would be to counter the neo-liberal myths about economics in order to liberate a range of other social and environment initiatives that will improve society and the world in general from the yoke of neo-liberal lies about fiscal deficits and the way the monetary system operates. I was wrong. After considering the material for this blog, I think I will file it under my – Friend’s like this … – series.

On December 28, 2014 – Truthout – who describes itself as an organisation “dedicated to providing independent news and commentary on a daily basis” and believes (rather modestly! not) that that they “we will spur the revolution in consciousness and inspire the direct action that is necessary to save the planet and humanity” released their – Top 10 Progressive Policies We’d Love to See Enacted in 2015 (but Probably Won’t Be).

It tells you what the problem with jettisoning is! Apparently, out of the “top 10 progressive policies” we cannot advocate getting rid of unemployment. At best, and at Number 8 on the list, is the aspiration that the US government extends the unemployment insurance, which will apparently:

Bringing back extended unemployment payments could make the difference for those who are trying to get a real job, not just a job.

How, exactly does paying unemployment benefits for longer help workers get a real job when there is a shortage of jobs.

Granted, taking unemployment benefits away from those without a job undermines spending, which clearly ensures a situation marked by deficient demand is exacerbated.

But when there is mass unemployment, the problem goes well beyond whether unemployment benefits have a finite life or not.

How about the government actually becoming an employer again of a scale necessary to ensure their is no unemployment above that necessary to allow people to transit between jobs?

That might be too progressive it seems for the 2015-style (neo-liberal) progressives.

But then I would have thought the first progressive imperative would be to counter the neo-liberal myths about economics in order to liberate a range of other social and environment initiatives that will improve society and the world in general from the yoke of neo-liberal lies about fiscal deficits and the way the monetary system operates.

The day after (December 29, 2014) Truthout had another go, this time with the articulation of their – New Year’s Resolutions: Ten Ways to Combat Upward Redistribution of Income.

Hmmm.

Out of 10 resolution, only Number 10 deals with employment. But then it does so in an almost comical way.

But before we get to that point we have to labour (excuse the pun) through several non-employment proposals.

For example, at NBumber 8, we learn that the “most obvious cause of the lack of demand … [is] … the country’s large trade deficit”, which Truthout wants to eliminate.

What! … undermine the capacity of US citizens to enjoy the hard work of other nations in producing goods and services that they are willing to ship to America in return for bits of papers (financial claims).

Exports, which Truthout wants to encourage as the growth saviour – which puts them in bed with the leading international scammers the IMF, are a cost to the US.

Imports are a gain.

And why isn’t it progressive to argue that if the US is enjoying an import’s party, then why should it not be the responsibility of the government via a larger deficit to expand public employment, improve public services, rejuvenate decayed urban systems, and provide better public infrastructure to offset the spending gap left by the private sector behaviour?

How is it that the current account deficit is the “most obvious cause of the lack of demand”? In the case of a sovereign, currency-issuing country such as the US, the first culprit to finger when there is a shortage of demand, after you allow for the fact that the private sector makes spending and saving decisions according to private motivations that do not necessarily generate the best outcomes for society in general, is the currency-issuing government.

They are the ones that issue that currency and can spend it into existence whenever they choose as should do so as long as there are idle resources – which means there are goods and services (including labour) for sale in that currency that currently have zero bid in the private markets.

That surely is a starting point for a progressive position.

Then at Number 9 we learn that the US should cut the working week and introduce job sharing to reduce replicate “Germany’s economic miracle”. Is this the same Germany that spans longitude between France and Poland?

I wonder if the workers in Germany that have been forced increasingly into mini-jobs and forced to take real wage freezes and cuts for a decade or more would call the current state in that nation, an “economic miracle”?

Apparently, the workers should be allowed to cut back hours and would be “compensated for their lost wages through the unemployment insurance system”.

Is this really a joke or something. Since when has it been a progressive position to advocate cutting workers hours and incomes and then paying them the dole for the lost wages?

Would it not be better to ensure there are enough jobs overall at decent wages to satisfy the desires for work hours of the workers?

Is that too progressive for the 2015-style (neo-liberal) progressives?

Finally, at Number 10 on the list, the proposal is for some progressives to be “watching the Fed’s actions” which:

… should make it harder for the Fed to take steps to deliberately throw people out of work and reduce workers’ bargaining power.

The way they think the central bank would make it harder for people to gain employment is for the bank to raise interest rates.

Of course, this proposal – the only one that really addresses the need for increased employment – is a non-proposal. First, monetary policy is not the problem. Fiscal policy is a much more effective way to alter the employment prospects of the workforce and can be targetted to improve the employment of specific demographic, skill and geographically-located groups.

Monetary policy cannot do that and it is still not clear that rising interest rates within normal ranges destroy jobs independent of fiscal policy changes.

A progressive position should be to encourage higher employment via direct public sector job creation and more deficit spending in areas that benefit society overall and also generate employment.

But, moreover, there also has to be a fundamental shift in the wage bargaining environment and government support for workers to ensure that they can enjoy real wage rises commensurate with productivity and start gaining a greater share in the national income produced.

That has to be a central plank in any progressive manifesto. Employment growth alone will not provide the basis for a redistribution of national income back towards wages.

The reason that the top-end-of-town is getting increasingly higher shares of national income is twofold: (a) real wages generally are lagging behind productivity growth; and (b) the wage distribution itself is becoming more unequal.

Both need to be addressed at an elemental level. Strong public employment can help. But also public interventions into private wage setting has to also occur to redress the shift in the balance of power towards capital over the last three decades.

Reading all this stuff is very frustrating. It also dovetails into a Fairfax article this week (December 28, 2014) – Joe Hockey’s budget woes overshadow all else in 2014 – written by a researcher at the right wing Australian organisation – the Institute of Public Affairs. The writer Chris Berg, appears to have history and political science qualifications (B.A) but has become a frontline attack dog for the IPA again any form of government regulation and government interference with the so-called ‘free market’.

It is, of course, a ‘market’ we never observe in the real world, but that is another matter altogether.

His principle argument is that:

Neither side of politics really has any idea how to lift the economy out of its decline.

To which we can really agree.

As he notes, this period will be defined by the dominant obsession with the public “budget”.

He says that “Economic policy dominates everything” but doesn’t make the next point that the aims of policy are expressed in terms of the need to achieve certain ‘budget’ parameters deemed desirable with an almost total disregard for anything else.

It is that homogeneity that is responsible for both sides of politics being lost with respect to dealing with an economy in decline.

While so-called progressives tinker around the edges and carp about CEO pay and the Federal Reserves possible interest rate rises, the mainstream political parties obsess about being out of fiscal surplus.

But, in fact, all these positions reflect the same mania – the neo-liberal myths about the way the monetary system operates and the promotion of voluntary constraints on public net spending.

Chris Berg claims that the May 2014 fiscal statement (aka ‘The Budget’):

… exposed how the political class does not have a directed vision for the future of Australia.

It showed that neither side of politics really has any idea of how to lift the economy out of its slow but steady decline. Neither side has any real idea of what Australia ought to look like in 10, 20 or 30 years.

It is true that the major political parties articulate an economic strategy that seems to be homogenous because they are both “constrained by the policy ideas available and the advice they receive.”

That is about all the article wants to say. The last line suggests that:

The real question for 2015 is whether the government’s advisers have any new ideas to boost economic growth.

It is clear how the government can boost economic growth. The solution has been known since the 1930s – spending equals income. This is not rocket science.

If non-government sector is not sufficient to generate the growth that the government desires in order to eliminate unemployment and provide a wages environment where workers can enjoy growing real living standards then there is only one sector left which can fix the problem.

We know that. It is clear. We also know how it can fix the problem.

The ideological debate should be about the form that the necessary increase in net public spending should take – not that it is essential.

Conclusion

At that point the progressives should be leading the charge in articulating employment guarantee schemes, better school, hospitals, public transport system, renewable energy infrastructure research and development and a plethora of other things that we could think of.

But sadly that space is empty – instead there are discussions of how we can work better within the fiscal constraints – to improve things.

Just as the Greece left wing movement thinks they can solve the massive problems that that nation faces within balanced fiscal environment while staying within the Eurozone, the progressives elsewhere still cannot get their heads around the fact that the underlying orthodoxy against fiscal deficits has to be countered.

The Greek left-wing seems to think it is a radical position to argue for fiscal balance rather than fiscal surpluses. There is a long way to go.

That is enough for today!

(c) Copyright 2014 Bill Mitchell. All Rights Reserved.

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    This Post Has 5 Comments
    1. Bill, I have a quibble with one sentence: “How about the government actually becoming an employer again of a scale necessary to ensure there is no unemployment above that necessary to allow people to transit between jobs?”

      That rather suggests that “transitting” necessitates unemployment. The only evidence there that I know of was a study done by J.P.Mattila entitled “Job Quitting and Frictional Unemployment” and published in the American Economic Review. He found that just over half of those changing jobs found their new job before leaving their old one, and a majority of those actually moved straight from one job to the next with no intervening unemployment. Thus “transitting” certainly doesn’t necessarily mean unemployment.

      Also, why do you suggest expanding government’s role as employer “of a scale necessary to ensure there is no unemployment above that necessary to allow people to transit between jobs?” To the extent that transitting IS A CAUSE of unemployment, one group that JG would cater for would be that very group, i.e. “transitters”.

      In fact JG could take the form (at least to some extent) of a redundancy delaying subsidy. That is it wouldn’t be impossible to implement a system where when an employer decides an employee is no longer viable, the employer can claim such a subsidy for a month or two rather than sack the employee.

    2. Speaking of quibbles ….. “Exports …. are a cost to the US. Imports are a gain.” It’s not that simple, Bill.

      What is the real cost to the US when Microsoft exports software? What is the real cost to the US when Intel exports a computer chip that contains a few pennies worth of silicon? What is the real cost to the US when it exports pharmeceuticals that contain a few cents worth of materials?

      What is the real cost to Japan when it exports high-value products made with raw materials imported from Australia?

      The truth is that when you export a knowledge product, you don’t lose any knowledge. To the contrary, the more knowledge product you make, the more knowledge you gain.

      But when the US shuts down its factories, lays off its knowledge workers, and imports knowledge products, then the US loses knowledge.

      What are the real benefits of imported knowledge products, if imports merely result in lay offs at home, and the laid off workers are not redeployed to some other job that is more productive and more satisfying? While MMT may say “deficit spending should increase to employ those displaced workers,” that has never been politically viable, and workers with highly specialized skills and aptitudes don’t necessarily want to be moved to some other location for some other occupation that they have no aptitude for — they just want their old jobs back!

      Imported knowledge products are only a real benefit when the economy is running at full capacity — and the US economy has never run at full capacity in my lifetime. Not since WWII has there been anything approaching full employment, and even during WWII women and minorities were not fully employed.

      Free trade is destabilizing — people get laid off, industries move offshore, and the economy is more vulnerable to fluctuations in international conditions. Free trade creates a “race to the bottom” where the 1% can threaten to move their factories offshore unless governments agree to fewer regulations and lower taxes. MMT has no solution to this, since a highly skilled manufacturing worker who is laid off is not likely to be thrilled with MMT’s minimum wage grunt job.

      I do not advocate mercantilism. The goal should not be to maximize exports, rather, the goal should be to maximize self-sufficiency and stability.

      There is a grain of truth to MMT’s “imports are real benefits, exports are real costs,” but only with regards to scarce natural resources. The US gets a real benefit from Saudi oil (if you ignore the fact that oil is destroying the planet). On the other hand, it’s not clear that it is a real cost to the Sauds to export oil. What else are the Arabs going to do with their oil, drink it? Oh, in theory they could save the oil for their grandchildren, but since when has capitalism operated for the benefit of grandchildren?

      In other respects, I agree with your general sentiment that the left can’t get it’s act together. It’s not enough to have good intentions, you also have to make the trains run on time, so to speak.

    3. @ Dan Lynch
      Your response above makes me want to explore the cost of exports a bit more.

      Individual companies would appear to benefit from exports abroad. At the macro level, it shouldn’t make any difference whether it’s Microsoft software or a Caterpillar tractor, the real value of the product is the cost of raw materials plus the knowledge and labor that were factors of production. Again, at the macro level, the labor and materials might have been used beneficially here to employ others for different products unless our productive capacity was already fully employed.

      When other countries export to the US, their cost is, perhaps, reduced somewhat, because they gain the global reserve currency, which will change over time. Nevertheless, the Saudis, in your example, lose an irreplaceable resource, and the effort might have been used to develop the broader national economy instead of a lavish lifestyle for the royals.

      Please, consider the above a question.

    4. Dan Lynch:But when the US shuts down its factories, lays off its knowledge workers, and imports knowledge products, then the US loses knowledge.

      So don’t shut down the factories and lay off knowledge workers to the extent that the US loses knowledge.
      Most of MMT’s recommendations amount to that of a doctor who complains about the problems he has after he sets his hair on fire, amputates his limbs and drinks poison: “Don’t do that.” The problem is getting the patient to notice that he is doing these things. The nice mercantilists saving up $ have provided that much more spending space, and raised US workers (including JG workers) real wages. So there is no inflationary constraint to maintaining a cadre of factories, workers, preventing “knowledge loss”.

      While MMT may say “deficit spending should increase to employ those displaced workers,” that has never been politically viable,
      Even in the environment of omnipresent econogibberish, this deficit spending has always been very politically viable – more, it is imperative and actual. The US has run deficits that offset massive foreign $ saving, which would have caused a depression otherwise. So with intelligible economics being increasingly heard – as with Kelton’s new bully pulpit, IMHO, the USA has a very good chance of being the first nation to (re-)embrace MMT and a JG.

      and workers with highly specialized skills and aptitudes don’t necessarily want to be moved to some other location for some other occupation that they have no aptitude for — they just want their old jobs back!
      “You can’t always get what you want.” Rational government spending, including a JG ensures that “if you try sometimes, you get what you need”. The JG in particular will not move people to other locations. Lerner criticizes this kind of idea as mistaking means (jobs) for ends (people staying where they live). And as Minsky says, the JG will try to take people as they are, matching skills to jobs as best possible. If you worked, say at a crazy billionaire’s power company to extract sunbeams from cucumbers, society has no obligation to you to provide you with your old job when his money runs out.
      In a full employment economy, especially for the sole superpower USA, one that spends sufficiently on “better school, hospitals, public transport system, renewable energy infrastructure research and development and a plethora of other things that we could think of” the problems detailed above are about as serious as that example.

      Free trade creates a “race to the bottom” where the 1% can threaten to move their factories offshore unless governments agree to fewer regulations and lower taxes. No. The 1%ers threats are a joke in a full employment economy. They know this perfectly well. Kalecki (& many others) knew and explained it perfectly well. Unfortunately only the (<1)%ers still understand this, that the plutocracy is a paper tiger. MMT economists understand this too, but unfortunately many MMT fans have not thought things through enough to understand that there is "nothing essential to add" to FF/MMT for the foreign trade, open economy case. (Abba Lerner from memory)

      MMT has no solution to this, since a highly skilled manufacturing worker who is laid off is not likely to be thrilled with MMT’s minimum wage grunt job.
      A: MMT sez we should spend for whatever public purposes we have, like those in Bill’s list. Mass recognition that “affordability” concerns are irrational, to the point of being unintelligible, would lead to a permanent quasi-boom that would drastically decrease the job loss likelihood of the highly skilled manufacturing worker. Through direct and indirect “multiplier” effects from increased government hiring/spending, including the JG.
      B. Since the JG wage will be a decent living wage for a job in conditions as good as the USA can reasonably afford – both much better than now – the skilled workers will be happy to have a decent, if imperfect alternative in the now unlikelier case of job loss.

      There is a grain of truth to MMT’s “imports are real benefits, exports are real costs,” Properly understood, it is a tautology.

    5. My apricot tree has just produced a crop of apricots; my neighbour’s peach tree has just produced a crop of peaches. At some point, I get sick of eating apricots; my neighbout gets sick of eating peaches. I give my neighbour 25% of my apricots and she gives me 25% of her peaches. The total number of apricots and peaches consumed remains unchanged, but we are both better off. Simple ECON101 ‘benefits from exchange/trade’ stuff, with never any suggestion that one party should continuously give up more real stuff than it gets in return just to keep accumulating IOUs. Questions: Are the apricots I gave to my neighbour a cost or a benefit to me? And are the peaches I received a cost or a benefit to me? Answers: Cost in first case (my exports); benefit in second case (my imports). Same holds for a nation.

      If you can find a nation stupid enough to keep sending you stuff you want and all you have to do is hand over pieces of paper (especially if they are bonds that your govt can repay at anytime by dipping into its bottomless pit of the nation’s currency), then good for you and too bad for them. However, it is here where Dan Lynch makes one good point. Net-importers lose productive capability over time, while net-exporters build it up. Witness most of Europe (the former), which is not yet a complete basketcase because countries like China (the latter) have been generously net-exporting useful stuff to them for some time. But China has woken up to this stupidity and is now moving towards a policy of consuming more of what it produces. With inadequate central-govt spending in Europe, watch out Europe! You are about to become a complete basketcase. Australia is not much better placed and has only been spared to some extent (while its central govt inadequately net spends) by the fact that it has valuable rocks that it can sell to the ROW – still, an awfully costly way to boost the nation’s GDP.

      Trade should be balanced. If a nation is a net-exporter (X > M), the central govt can always dip into its bottomless pit of national currency to buy the real stuff that constitutes the difference between X and M (unless they are an EU nation). It can pay the same prices that foreigners were willing to pay for the would-be-exported stuff, so that income remains the same. The people who would otherwise be employed producing high-tech exportables can be redirected to produce high-tech hospital wards, universities, schools, low-carbon energy systems, etc. The nation doesn’t lose its productive capability and the private sector’s income remains sufficient to finance its spending and net savings desires – no need to borrow to spend; no need to reduce spending one day to pay back unsustainable debt (recession). Nothing more than 1945-1975 commonsense really!

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