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We are undermining our futures by deliberately wasting our youth

What simple measures might we use to see whether a system is working or not? Well that depends on the objective of the system. For me, one of the worst things that can happen in a social context is a capitalist system is involuntary unemployment because work is intrinsic to our beings. From the time we crawled out of the slime we have had to transform nature in order to survive. That reality goes to the heart of human existence and gives us purpose and builds our sense of network and cooperation and giving. I know all the arguments – this is a filthy capitalist system and why would we want people to be wage slaves – I am older now. I have been a left-winger all my life. I heard these arguments decades ago. And until those revolutionary armies that are apparently hiding out in the suburbs arms themselves and appear in the streets, I am thinking of the actual societies we live in and have to make the best of. We would spend our whole life times talking about revolution while workers around the world are being made to bear the costs of the failing neoliberal system.

The most recent Eurostat data illustrates the point.

The first graph shows the evolution of unemployment rates since January 2000 in the Eurozone, Japan, Norway, the UK and the US. All the nations that are represented, either explicitly or the 19 within the Eurozone are what we consider to be advanced nations.

So we broadly track the period of the common currency, even though the austerity that drove the poor outcomes began before the currency became official as the European Commission drove nations during the convergence stage in the second half of the 1990s to cut fiscal deficits and impose austerity.

In effect, austerity has been the norm since the convergence process began. 25 years of it. Brussels-sanctioned hardship of European workers.

Ignoring the extraordinary Trump unemployment blip, the Eurozone nations together have systematically sustained much higher unemployment rates for 20 years or more than these other nations, two of which have been closely intertwined with the European economy but have had their own fiscal latitude.

The GFC saw the US and UK approach the situation that the Eurozone faced but their responses were quite different (and different between each other). The US stimulus was stronger and more immediate than the UK approach which under George Osborne maintained the myth that they could grow out of the crisis by inflicting austerity.

The UK just didn’t inflict as much austerity as the austerity machine that the Eurozone endured.

We should also be clear, that I am not holding out these non-Eurozone nations as exemplars in dealing with unemployment. Far from it, which makes the comparison with the Eurozone much starker.

Japan is the only nation here that shows a collective desire to really keep unemployment low – and that is because they understand that the social fabric is damaged if there is a high proportion of joblessness.

The obvious point is that the Eurozone has never really worked in terms of this indicator. For 20 years it has sustained unacceptably high levels of unemployment.

During the 1980s, economists talked relentless about – Eurosclerosis – which was a term that a German economist introduced to summarise the “economic stagnation in Europe”.

The Right used the term to justify deregulation, privatisation and the acceleration of neoliberalism.

They also claimed that unless Europe integrated more and took legislative power away from the Member States, nothing would change.

Jacques Delors, in particular, made a big thing of this after he turned away from Socialism (as economic minister in the Mitterand government) and pushed the austerity turn, and then, once assuming role as European Commission boss, pushing the – Single European Act 1986 – which was an early neoliberal statement about how Europe should operate.

The irony, of course, was the way Delors cajoled the Committee that produced the – Delors Report – in 1989, which paved the way to the Maastricht Treaty, into accepting his fake notion of subsidiarity.

So while the Eurosclerosis set were claiming that the problem of European stagnation was excessive economic capacity held by the Member States, which required transferring powers to Brussels and then deregulating and privatising and all of that, they pushed their integration model by leaving the key fiscal capacities with the States, because they knew Germany would never agree to a proper federal system running the common currency and that France would never cede that power.

But then they had a problem – the North didn’t trust the South (or something like that) and so they had to, largely, take the fiscal power away from the Member States via the imposition of fiscal rules under the Stability and Growth Pact, which provided for neither stability or growth. It was a total sham.

Neoliberalism did not start in Europe with the introduction of the euro.

The Barre Plan in the 1970s, the austerity turn by Mitterrand in 1983, Delors in the Commission in the 1980s, the Single European Act were all building blocks in the take over of neoliberals in Europe.

The sclerosis was not the result of too much government but government that had been taken over by the corporate cabals and wanted legislative and regulative attacks on workers to accelerate.

And if all their arguments about way so-called excessive regulation and too much Member State discretion were producing the Eurosclerosis were true then why hasn’t the situation improved with the monetary union and the increased transfer of powers to Brussels.

A sham.

The point is that on even the most basic indicator – aggregate unemployment – the Eurozone doesn’t work.

And the problem in political terms is that the progressive side of politics have become, seemingly, trapped into proposing solutions that centre on making the lives of the unemployed a bit better through the introduction of a European unemployment insurance scheme.

A lot of effort attending meetings, talking a lot, writing papers and Op Ed pieces has been expended on this proposal. There are many versions and designs.

But what is staring us in the face is that the system doesn’t work and patching it up with a scheme to help the unemployed – stay unemployed – will not fix it.

The progressive political onslaught should be about eliminating the dysfunction that creates the unemployment not managing the unemployment better.

And my considered view is that that requires an abandonment of the current Treaty structure and the restoration of individual currencies and international agreements through inter-governmental accords rather than forcing nations into the straitjacket of Treaties that can rarely be changed.

But if we dig a little deeper we see that not only is Europe killing its present, but in doing so, it is also undermining its future prosperity.

I say that because of the way youth are losing out in Europe.

It is one thing to force a mature adult into unemployment. But another to prevent a young person from gaining the vital transitions for school to work.

That dislocation undermines their adult trajectories and creates the conditions for a permanent underclass, in addition, to poor future productivity performances.

With societies ageing, it is imperative that the next generation of workers be more productive by far than the last. By maintaining very high and persistent levels of youth unemployment, nations are guaranteeing that the productivity challenge will not be met.

The present folly ensures a bleaker future for all of us.

The following graph shows the youth unemployment situation for the countries in the first graph above.

The economic cycles are more pronounced in the Eurozone and the asymmetry across the cycle more obvious – they take much longer to reover than the other nations.

But it is also the levels that matter and the Eurozone has never go its youth unemployment rate below 15 per cent.

And if we look at the data for – Young people neither in employment nor in education and training (NEET) – we find that:

1. 13.5 per cent are in this category for the European Union.

2. 2.6 per cent Norway.

3. 9.5 per cent UK

4. Australia 6.8 per cent

5. Japan 3.93 per cent

6. US 7.1 per cent.

7. OECD average 6.7 per cent

This is going to be the ‘lost’ generation.

This Bruegel.org article – The scarring effect of COVID-19: youth unemployment in Europe (November 28, 2020) – talks about the long-term effects of maintaining persistently high levels of youth unemployment.

It notes that:

… youth unemployment has been shown to have longer-term effects. The literature on the ‘scarring effect’, the effect of being young and unemployed, shows there are irreversible consequences … unemployment early in an individual’s career increases the probability of subsequent unemployment …

And what are the Tsars in Brussels doing about?

Not a lot:

European Commission President Ursula von der Leyen did not identify youth unemployment as a key policy concern in her state of the union address on 16 September 2020.

Conclusion

Neoliberalism is a myopic ideology.

It promises big and then loots and burns but leave total chaos behind while the top-end-of-town steal away in the shadows.

We will all regret this compliance to this ideology.

Meanwhile, the best the progressives can come up with is an unemployment insurance scheme.

Modern Monetary Theory: Economics for the 21st Century – starting tomorrow March 3, 2021

Don’t forget to enrol in the upcoming edX MOOC – Modern Monetary Theory: Economics for the 21st Century.

The free course begins March 3, 2021 and over 4 weeks will provide an introduction to MMT.

The course is introductory and covers a wide range of issues.

It is self-paced which means the learning materials will be available 24/7 in each week. The discussion forums are where you will be able to work things out on a peer-to-peer basis, but I will appear daily to see how things are going and to provide assistance if I can.

The forums are intended to serve educational rather than political purposes. The moderators are well trained in sorting out ‘trolls’.

We begin by improving the students’ economic literacy with terminology, concepts and language.

In Week 2 we get into history and the first steps in understanding MMT.

More detailed material emerges in Week 3, which helps us deal with policy questions in Week 4.

You will be required to spend around 3 hours per week on the material – videos, articles, discussions, quizzes, polls etc – to really gain from the course.

Skimming the material will likely lead to a less-than satisfactory outcome.

If all goes well, we will start building MMT201x which will offer a more complex, technical study course.

This marks the first venture for – MMTed – in partnership with the University of Newcastle.

Further Details:

From – University of Newcastle.

From – edX.

That is enough for today!

(c) Copyright 2021 William Mitchell. All Rights Reserved.

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    This Post Has 26 Comments
    1. “in a social context is a capitalist system is involuntary unemployment”

      Should that be ‘within a capitalist system’?

    2. ‘The course will begin tomorrow: on Wednesday the 3th March at 00:00 UTC.
      We do highly recommend you use a time zone converter to identify when 00:00 UTC is for your own time zone.’

      Please can someone confirm that this means the start time is 12 midnight tonight (Tuesday 2nd) for the UK?

    3. In ‘popular’ time we tend to think of midnight ending the day; hence 12 midnight is the end of Tuesday 2nd March. In Universal Time, 00:00 starts the day. So 00:00 UTC 3rd March is indeed the same as 12 midnight on the 2nd. In the UK you have the benefit of being on UTC (except during Summer Time), so it makes the calculations easier!

    4. “For me, one of the worst things that can happen in a social context is a capitalist system is involuntary unemployment because work is intrinsic to our beings. From the time we crawled out of the slime we have had to transform nature in order to survive. That reality goes to the heart of human existence and gives us purpose and builds our sense of network and cooperation and giving.”

      Normally I can’t fault your thinking but you are way off the mark with this premise Bill.

      The basic fundamental law of survival for all animal life is use as few calories as possible to gain the calories needed to maintain life and the continuance of the species. This is essentially what every survival course teaches.

      “A study back in the 1960s found the Bushmen have figured out a way to work only about 15 hours each week acquiring food and then another 15 to 20 hours on domestic chores. The rest of the time they could relax and focus on family, friends and hobbies.”
      https://www.npr.org/sections/goatsandsoda/2017/10/01/551018759/are-hunter-gatherers-the-happiest-humans-to-inhabit-earth
      Australian native cultures were organized in the same way. The only native societies that promoted lots of work are northern reindeer herders who need to consume large calories and burn them off through physical work in order to keep warm in their cold environment.

      Work is something we do to survive. A lot of that work now days consists of human constructs designed simply make very rich people richer with absolutely no relation to the real world.

      As Joseph Campbell would of said it’s the relaxing and focus on family, friends and hobbies that give us meaning.

      What I’ve always found astoundingly amazing is that Paleolithic cultures like the Kamileroi worked an individual average of three hours a day to provide everything their communities needed, and now in the most technologically advanced and wealthiest time in history people have to work 60 hours a week plus just to have somewhere for their family to live.

      Perhaps it’s time MMT takes a look at subsistence Hunter-gatherer economies and the Resource-Based Economic ideas as espoused by Jacque Fresco. Apart from all the criticisms … lets face it Command Economies thrived and dominated the first 5000 years or so of civilization up until the Bronze Age Collapse and most successfully in the egalitarian Harappan civilization. … if we want full employment maybe people should work less hours for the same pay and the wealth and the resources of that work should be distributed more equitably. Einstein espoused this exact proposal quite some time ago and German Metal Workers recently got a wages award based on that premise.

      Just saying, yeah some work is important to provide a societies material needs, but you don’t get gems like this …
      https://www.youtube.com/watch?v=2Py37G9qsfY
      Albert King – Born Under A Bad Sign
      … with out having considerable free time to spend on hobbies and social interaction outside “work”.

      Other than that you nailed it once again.

    5. Hi, Bill! Ha! You think me a troll for bringing up population-related issues, but they really are at the core here… There’s just no way to productively employ everyone without inducing a worse environmental collapse than the ongoing Sixth (Anthropogenic) Extinction.

      GDP is a rough measure of the destruction we do to the environment (Second Law of Thermodynamics). There’s just no escaping this. While we may wish to deal with economics in a progressive way, we must also deal with it in a holistic, systemic way.

      More GDP isn’t the answer, no matter how “green” it purports to be. Even green development cannot escape the fact that total entropy (pollution, waste) is increased by the action. We have to get smaller.

    6. Gordon Brown (ex Chancellor) was PM when the GFC struck. He did a lot to maintain the economy: cut VAT, subsidised vehicle scrappage system – not much expenditure cutting. Of course, QE was not the right thing, but was considered to have ‘saved the world’ at the time.
      Austerity started when he was blamed for the GFC and lost the election to the tories. I don’t suspect Sunak will be cutting VAT tomorrow (Budget Day) but it would be a good idea.

    7. “but was considered to have ‘saved the world’ at the time.”

      He considered he’d saved the world. But since Brown has a huge ego, that is hardly surprising.

      Brown headed the biggest financial disaster the UK has ever undertaken – maintaining too high a currency, extending the tax code to ridiculous lengths and generally micromanaging things to the nth degree, all while thinking he was being clever.

      Fortunately Mrs Duffy was able to highlight his true character.

      Blair, Brown and King. We’re still paying for their mistakes from 25 years ago.

    8. Neil, I’m well aware of Brown’s failures, especially now I know about MMT, but you have to admit that it was Osborne who really put the boot in. We have no idea how Brown/Darling would have handled the ‘deficit’. In my experience (of LP lobbying) it was Darling who really had the ego.

    9. “maintaining too high a currency”

      Not sure how you can attribute Brown to the exchange rate ,since we have-and should have a free floating exchange rate

    10. Looking forward to the start of course. I also look forward to 201 and 301. we need to counter the courses presented by the IMF….A professional certificate in Macroeconomic analysis and policy, from an MMT perspective is a must. We MMT “foot soldiers” need to be properly “armed” with a coherent framework which allows us to navigate a monetary system. Not just a… “MMT says so and that’s it”,.
      We need (I think) to understand the lens and the ideological overlay, which enables us to understand, criticize or support, policies in our particular environments. Economic rhetoric is great for the sake of augment but useless in real terms…..

    11. John @0:12, you are using the wrong example. The Second Law of Thermodynamics does not describe human behavior which is what economics attempts to describe. Citing that ‘law’ is a mistake. It does not purport to limit potential GDP of any human economy.

      It doesn’t even describe the energy situation of the planet Earth that continues to receive massive amounts of energy from the star it orbits every single second. The situation is not as hopeless as you seem to think, although perhaps it will be in millions of years if the sun changes. At that time you can perhaps bring up thermodynamics and entropy as limiting factors of GDP. Before that time you are just misusing physics theories.

    12. Hi, Jerry! Ah… My apologies for any confusion. I did not mean to imply that the Second Law in any way limited our ability to produce GDP! You are quite right about that.

      The limit, in my view, to the amount of GDP we can produce is the recognition that total entropy of the “system” in which we live (a system that includes the sun), can only increase. You agree with that, no?

      Increasing entropy is caused by using energy to do things. So, for example, we can’t increase economic growth (make stuff) without creating waste and pollution. There’s just no way around this. The Second Law tells us that total entropy, total waste, total pollution can ONLY increase.

      Now, the rate at which total pollution increases is related to the rate of economic growth. You would agree, no?

      So we can’t really “solve” economic issues through growth. We need another path. Growth will only worsen our environmental crisis.

    13. Big congratulations to Bill and his team at the University of Newcastle for launching the first ever online course in MMT education. I can see lot of potentials being created for people across the globe and mankind in terms of better public policies creation, which need to be generated fast in today’s economy.

      It is also practical that the program can offer certificate at a reasonable fees for people who want it.

      I look forward to joining the first one and all other courses to be offered when I can.

      Thank you for the effort, it is highly appreciated!

    14. John writes:
      “we can’t increase economic growth (make stuff) without creating waste and pollution”.

      …unless we can create a 100% waste recycling industry?

    15. No John- I don’t agree. ‘GDP’ is a measurement of goods and services that are produced and exchanged for currency. I expect that you could agree that, at least on the services part, we could expand GDP without any increases in energy being used. If for an example, someone had been washing the dishes for free in my house but then they started getting paid for the exact same process, well GDP just went up as soon as they started charging for that service. No change in energy consumption at all from a day ago. Plenty of things similar to that. Suppose you paid me a dollar for writing this comment- well GDP just went up even though I was going to write it anyway and use the same amounts of energy to post it in either case. It is fair to argue that my comments would not increase anyone’s wellbeing though.

      But it is an important thing sometimes. The car I have now is probably 1000 lbs lighter than my first car built in 1967. Uses less than half the gasoline per mile of driving. But in almost any sense it is way better, safer, more reliable and more comfortable as well. It is a huge improvement in my wellbeing that uses far less resources.

    16. @Carol Wilcox you wrote: ‘We have no idea how Brown/Darling would have handled the ‘deficit’.’ Well after his appearance on last week’s Channel 4’s Dispatches, How is the covid deficit to be paid for programme (maybe not exact title), we know that Darling hasn’t spent the last few years or even the covid pandemic period learning anything from MMT, but is still of the full-on Treasury book-balancing mentality. He (if given the chance to continue) might not have been as destructive as Osborne, but that’s a pretty low bar which even Sunak appears to clear, while getting the Labour Party involved in a pointless debate on when to put up Corporation Tax.

    17. “Austerity started when he was blamed for the GFC”
      Austerity was already written into the rules that Brown chose to be bound by (since well before the GFC) as this article from 2006 shows (‘EC reprimands Brown over UK deficit’)…
      https://www.theguardian.com/politics/2006/jan/11/economy.uk
      “Gordon Brown was today reprimanded by the European commission for breaching the EU’s stability and growth pact, delivering a blow to his reputation for economic probity.”

    18. @Patricia, take a look at the growth figures after Osborne took over. They had started to rise before the GE. That was the result of the VAT cut, vehicle scrappage scheme and other fiscal measures. There didn’t appear to be any plans to ‘deal with the deficit’ at that time. Osborne’s reign was all about dealing with the deficit caused by Labour.

    19. Hi, Neil! Excellent point! Recycling can help. But the process of recycling itself generates waste and pollution (albeit for a good purpose).

      The difficulty is that “100%” conversion of something from one form to another is not physically possible. There are always “losses” (heat, pollution, waste) generated by physical processes. That’s what’s so daunting here. That is the reason that total entropy (waste, pollution) in any physical system (like our galaxy) can ONLY increase.

      What recycling has the potential to do is reduce the RATE or SPEED at which this increase in total pollution occurs. But, in the end, there’s just no alternative to doing less. A LOT less.

    20. Hi, Jerry! You are absolutely correct! I agree 100% regarding the conversion of unpaid services to paid services.

      My contention is that GDP is a *rough* estimate of the amount of damage we do to the environment. And that GDP growth is *proportional* to the rate at which we are increasing the amount of damage we do. You would agree with this *rough* estimate, no?

      So let’s look at dish-washing in someone’s home. You’d agree that this is a process by which we generate and consolidate waste, right? We consolidate the waste in the form of sludge at the water treatment plant. If we add dish-washing to GDP, GDP will go up. But GDP will remain proportional to waste because there IS waste being generated by the dish-washing process. Hence, adding unpaid services to paid services won’t change the fact that GDP remains roughly proportional to waste.

      Of course, paying for services for which we currently do not pay is not really the type of GDP growth that I’m against. We can grow GDP growth this way, you’re quite correct. But major new infrastructure construction? Building more housing? Putting people who are not at work to work? We can’t do these things without increasing total pollution.

    21. @Carol Wilcox Hi Carol. I’m not disagreeing that measures by Darling moved the economy in the right direction and that Osborne brought that progress to a halt. My point was that he is still of the borrowing (picked up by the BofE via QE) will require increased taxes/public service cuts sooner or later. He wouldn’t have done it as quickly as Osborne, but it’s still the misleading economics myth being repeddled – the Treasury needs to act like a corner store with a bit more borrowing leeway, and the BofE viewed as independent, in order to control the spending urges of the elected govt. By the way, Patricia is my mother’s name. You’re not the first to get us confused.

    22. No- I don’t agree with you John. You are taking terminology from economics and physics and misusing that terminology. I might as well say GDP is a ‘rough estimate’ of the size of the population- which could lead to the conclusion that India has a smaller population than the USA.

      If you want to contend that people are putting too much plastic in the oceans or too much carbon in the atmosphere- just say that and make your case with the facts rather then pseudo-scientific terminology. Statements like “Putting people who are not at work to work? We can’t do these things without increasing total pollution” are not supported by your arguments.

    23. Don’t disagree with you Patrick. Perhaps Brown kept him under control – he’s certainly now revealed his liking for austerity. One of the Labour MPs I marked down a long time ago – how they treated little me. Chris Leslie was worse though.

    24. Hi Carol. Good grief, I just read the wiki entry for Chris Leslie. I was out of the country during his brief stint as Shadow Chancellor. Maybe he’s now found his true squalid calling heading up the UK private debt collection and purchase industry.

    25. @Glenn
      60h, or even 40h, isn’t implied, just that there’s some equality in the name of stability. I might be misremembering, but the JG can flexibly offer lower hour jobs for proportional pay.
      A government that can create a better economy will have no lack of popular support and political power for lower worktimes. But I’d be wary of examples that not only didn’t strive, but collapsed. Even if for external reasons, they haven’t left.

      @John
      Money is a measure of accounting of claims, on real stuff and services, where the unit is relative, not pegged. Yes, constructing more efficient and more lasting homes is temporarily polluting, but not as much as having homes so ineficient that they burn up or self-destruct the first time electricity stops. And, well, we do need homes and heat. There are similar improvements to work and leisure to be done, and, of course, infrastructure.
      Is it enough? Probably not, meat likely has to go, and definitely cars. But neither implies a lower GDP, just different stuff available. If we do need significantly lower GDP and standards of living because the carbon math still doesn’t add up, then, well, no, there isn’t any economic theory I know that can help. But neither there is any socio-political theory, and we’re in for interesting times.

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