Andy Crow has become a regular commentator on this blog over the last year or so. Overnight he offered this comment on my post on MMT. It is written in his style but because it raises some really quite fundamental questions I think it worth sharing it more widely as discussion on what full employment now means and how we might achieve it seems to be central to modern economic thinking and the political discussion on the issue is at present locked in a time far ago:
“In that case more responsible measures have to be adopted as the goals for economic policy. MMT suggests that full employment is the alternative goal.”
Here I think, we get to the nub of the issue. Assuming we are intent upon taking this forward.
Let us ignore what precise figure we will accept as ‘full employment'. The number is not arbitrary, but by for example, raising the pension age, or the school leaving age it can be shifted substantially at a stroke. Also there will always inevitably be a degree of churn at any given time and that is not only inevitable, but necessary.
In terms of developing policy it is pointless to speak of ‘full employment' without considering what we are going to accept as 'employment' and how its ‘fullness' might be achieved.
There are important issues here. And policy choices to make. I'm going to take it as a given that pointless digging and filling of holes is off the agenda.
There are two, not necessarily mutually exclusive, routes to full employment. One is to allow the free market to get us there. (Stop laughing at the back ! )
We know how that works out. We're still waiting to see how it might be achieved without going all out for war: the only strategy, so far proven, to get even close.
Or we can have government job creation schemes, and I've been there and it was a piss-poor show (unless you were one of the civil servants employed to set up and administer schemes and don't mind being bored rigid and wasting your life.) The schemes I was involved with (forty years ago) assumed there was only one type of employment viz that which was ‘traditionally' accepted as ‘work'. That model assumed that half the population (the female half) should be at home working for nothing whilst doing (often badly and with bad grace) the most important work of raising the next generation, managing the social infrastructure or skivvying.
Emasculation of heavy industry has produced an economy in which (still, iniquitously, underpaid) women have shite jobs which barely cover the expense of paying for, even worse paid, inadequately educated, but maybe well meaning, young women (girls) to look after their children. We have made no progress whatsoever in addressing this nonsensical policy. (Because it IS policy. It may be a default policy but it's policy) We have, under this policy regime, created no role for ‘manly' activity which is not criminal, and incidentally not actually manly. There is nowt ‘manly' about criminality, be it in dealing drugs with menaces, or stealing money through fraudulent insurance and investment devices.
The alternatives which are obvious are to institute a Universal Basic Income, or a Job Guarantee.
If there are other options, I'd seriously like to know what they are. I do not regard the status quo as an option. It stinks.
Social and economic conservatives (with a small or large ‘c') reject outright the need for change because we allow them to live in blissful ignorance of the condition of the lives of anything up to a third of their fellow citizens, and they have the effrontery to blame the very people whose lives they are sucking dry.
UBI requires for its success, education of people to the standard and mindset where they can become genuinely entrepreneurial and create opportunities which don't currently exist, to employ themselves (much more difficult and time consuming than it sounds) and create opportunities for employment of others without that level of self determination and ‘drive'. (I've spent most of my working life in default self employment. I don't do ‘business'. I can do all sorts of things, but making money doing it is not where I'm at. It's a mystery to me.)
UBI has to be pitched at a level which provides a subsistence income, or it fails by definition and isn't worthy of consideration. There is no point whatsoever in setting a UBI at a transitional level which does not support life unless it is in addition to existing social welfare benefits (many of which are already woefully inadequate and getting worse.) In effect UBI is a free market solution. It reprices labour. And not before time.
A Job Guarantee strategy is difficult to imagine and absolutely requires considerable state input. Once you get beyond the screamingly obvious need for hospital and other health care staff, and for more teachers and classroom assistants to make Eton-sized classes a reality in the state sector you rapidly run out of state sector employment opportunities because everything else has been sold off. (OK, I exaggerate, but not by much. I expect there are civil service vacancies by the tens of thousands to deal with Brexit, but I was considering useful work (!) and there a re probably a couple of extra bodies needed at HMRC)
Elderly care is a massive social requirement, but needs levels of training, supervision and administration that requires expertise which we don't seem to have. (Though there's plenty of individuals who have been forced to learn the hard way by looking after their kith and kinfolk) The private sector does this expensively and badly (with criminal brutality in some cases). That will not be rectified quickly. I see the Job Guarantee as a difficult strategy to transition into and one which cannot possibly be done without restructuring the local governance that would make it possible. (I think it would be worth it, but not easily achieved)
We need ‘conversations' about this.
MMT looks after the money, but that really isn't the core problem. The real challenge is how to structure a society that functions. And functions for everybody. Even the finance sector, because they do have a useful and important role to play.
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Sorry, but this piece is absurdly superficial and the author seems to have no concept whatever – certainly makes zero mention – of what should be the all important *macro* economic issues or effects of the alternatives here.
Again, we see things like UBI or JG only discussed at the micro economics level of the individual. Seriously, 80 odd years after Keynes, and we still totally ignore ‘fallacies of composition’?
First and foremost, MMT is a macro policy forming framework, with a couple of operating protocols which are designed to maximise output and price stability, regardless of what mix of public/private economy is chosen.
This is why Bill Mitchell states the JG is ‘core’ to MMT. Why does no one read or seemingly notice why, or what macro economic notion is meant by that?
UBI is just another Gov (hand out) policy. An external, or exogenous disturbance to the macro economy. It will have destabilising effects, the severity and nature of which will depend on the scale of payment. Which no one ever mentions. (That lack of macro conceptual capacity again.)
Even for a minimal unemployment benefit level, the numbers are large. Sure, right now, there’s lots of slack in the economy. But when full employment is achieved, what then? How do these numbers of additional Gov spend play out thru’ the market mechanisms of society?
Well, let’s take one aspect. If we now say, as most do, that top up welfare benefits for the low paid but working (millions of people) are simply a subsidy to their profit gouging employers, then how is a (low level) UBI not precisely the same thing?
Does a UBI change anything about the power dynamic between employers and workers, especially at the low wage end? Nope.
Does the community gain anything from UBI? Nope.
No wonder those profit gouging billionaires are plugging UBI for all they’re worth.
The JG is totally different. It requires Gov to set a minimum, fixed level of pay and contract conditions which will apply to the whole workforce, since JG is open to anyone, working or not. And that has to benefit non JG workers as employers must then face a bit of competition to attract workers.
But the JG wage rate is fixed, so if the labour market gets too tight near full employment, the JG wage has a degree of drag anchor effect, helping to avoid a wage/price inflation spiral.
JG numbers automatically expand and contract in counter cycle with the economy.
UBI, at any significant level is going to raise macro effects which will need constant monitoring and other measures to maintain some kind of stability.
And I don’t accept for a moment that local community/charity sector cannot find plenty of worthwhile activities for JG participants. (I’ve worked in economic development in this sector. I have no doubt of JG’s potential value to a community.) The MMT academics also cite reams of sociological research to support the view that (strictly voluntary) employment is extremely positive for people’s well being. Especially for people who have been badly neglected by poverty and unemployment, over decades.
Mike
I think you rather overstate your case
Many are not convinced by JG: I remain ambiguous
This comment will certainly not change my mind
Richard
In what respect do I overstate the case?
I see reams of ‘micro’ arguments in media and blogs, including such absurdities that ‘trials’ like Finland etc. constitute something meaningful for a macro economic policy.
By definition, macro measures cannot be ‘trialled’ in any meaningful way. (I’m sure you know this Richard, but I doubt any of your untrained readers do, or why.)
People rarely seem to read anything of substance on this issue, so I’ll put a couple of links in I urge people to read.
https://jacobinmag.com/2017/12/universal-basic-income-inequality-work
http://www.truth-out.org/opinion/item/21451-sixteen-reasons-matt-yglesias-is-wrong-about-the-job-guarantee-vs-basic-income
http://www.levyinstitute.org/pubs/pn_12_02.pdf (Pavlina Tcherneva: Full Employment Through Social Entrepreneurship. The Non-Profit Model For Implementing A Job Guarantee Program)
‘I remain ambiguous’
You presumably mean ‘ambivalent’, Richard. It’s comforting to know that I’m not the only one who has these momentary malapropisms! If I was blogging all day I’d be doing that all the time.
Apologies!!!!!
Hi Richard,
Enjoyed reading your MMT in a nutshell post and glad to find a respected writer on things ‘economic’ writing about MMT in the UK. Job Guarantee does take some thinking about. But the MMT prof’s over in Missouri State and of course Bill Mitchell over in Australia have thought a great deal about Jobs Guarantee and how it would work. I think it is worth taking time to read over the material they have put together because lot’s of people have had similar doubts to yourself and your readers. Bill Mitchell’s central academic work is on the economics of the labour market, so I think he has both depth and breadth on this topic. Where I wonder how it works is when people are working along side each other during a down turn and some are on Jobs Guarantee wage rates and some on normal public sector rates. I went to a talk Randall Wray gave at Sheffield Uni a couple of years ago, and he suggested that people could take sabbaticals from their normal jobs to do Job Guarantee work as a contribution to public purpose. So I guess part of the Jobs Guarantee is that as a society there is a cultural shift in attitudes to working for the community which would lessen resentment in the above scenario. Bill Mitchell would also include a lot of arts and cultural based activities within the Jobs Guarantee as this is an important component to a well functioning and prosperous society. Personally, I would also want to advocate for much less household time spent on work – so push wages up gradually so that an average household could live comfortably on one wage with work divvied up however it suits the household at any given time. But that is another topic.
I am reading Bill Mitchell on Reclaiming the State right now
Mike Hall says:
“Sorry, but this piece is absurdly superficial and the author seems to have no concept whatever — certainly makes zero mention — of what should be the all important *macro* economic issues or effects of the alternatives here.”
It’s a fair cop, MIke. I have to accept your criticism of lack of ‘macro’ rigour, but you, I think have to accept that most people live rather superficial lives, controlled and affected by superficial constraints and we rather wish the clever-buggers who dictate the terms, from Parliaments and Central Banks showed some signs of understanding the issues you suggest I am skirting past.
My post simply seeks to raise some issues that I think we ought to be thinking about I was not attempting to lay out a comprehensive theory. I thank for the time taken to respond and will attempt to come to terms with the points you are making.
We accept that MMT explains the behavior (certainly some of the behaviours) of money, but that leaves a myriad questions about how we make use of that knowledge.
After all with nuclear fission you can generate electricity or cause massive destruction. Economic theory can be just as bipolar in its outcomes.
I don’t believe MMT is some sort of panacea. Harnessing its revelatory power, will by no means be plain sailing. Not least because there will as ever be a minority wishing to game the system for their own advantage.
You might also consider that one of the central questions I pose concerns our attitude to ‘work’ and what we think that is actually about. They seem to have drifted from it somewhat, but the American principle of ‘life liberty and the pursuit of happiness’ has something going for it. I’m not convinced the ‘right to a job’ stacks up well against that.
Andy
I thought your comment worth sharing precisely because of the perspectives it brought
I hope you will forgive me for exposing you to criticism for something you did not claim to be doing
Richard
Fair enough Andy, and apologies for my somewhat strident tone.
But we are facing a huge battle against the firepower of the mainstream (on left and right) to get the (primary, macro) issues properly considered at all as regards UBI, or the far better alternative of JG even mentioned.
Citizens are being corralled to UBI on very false pretences imo. UBI is very much a macro trojan horse.
I agree that there is that risk
No apology required, Richard.
Ideas do not come fully formed and I appreciate the opportunities provided by your blog to air my views and gauge the validity of the responses.
I am firmly of the opinion that the status quo is not acceptable, but I don’t have a recipe for an instant fix and I don’t see any indication that anybody else has a comprehensive ‘big fix’ prescription. Certainly not one which could form an electable manifesto.
As I’ve said in my reply to Mike Hall, MMT is not some freestanding panacea. Bank bailouts and QE are ‘pure’ MMT in the sense that they injected vast liquidity (from thin air) into the economy. The result is damning. And it’s damning because just throwing money at a problem doesn’t (necessarily) create a solution.
How that cash is injected (whereabouts into the economy and to what end) is absolutely crucial in terms of the effectiveness if the results.
We could imagine, for example, that the banks had been allowed to go broke in 2008 and how a similar scale of cash injection might have created an entirely different world. Austerity could as well have been inflicted on the top end of the economic food chain as it was in the bottom.
Post 2008 David Cameron infamously said ‘we’re all in it together’. He was quite right in his diagnosis of the situation, but in my estimation, he and George Osborne were about as wrong as possible in prescribing an appropriate treatment. (And I don’t exonerate Gordon Brown from his share of responsibility – I’m not making a party political point)
Mike Hall -makes some very valid and important points about the JG but he was unnecessarily acerbic in his initial sentence. Andy should be applauded for what he offered which was not offered as ‘expert’ opinion but from the perspective of someone on an explorative journey trying to think creatively. Sometimes well -intentioned aficionados of MMT do MMT a dis-service by an overly abrasive tone ( I’ve done this myself). Let’s offer each other supportive criticism rather than lambasting. The great value of this site is that it allows people to find a voice on these issues and listen to each other. MMT is getting through but laying in with harsh words ain’t gonna help! Do that to the arrogant politocos but not to people who offer there thinking with integrity.
I have also been over acerbic in my time (shocking revelation!)
The aim is to, as I think Andy put it, ferment ideas
I accept that is sometimes stressful
But Mike was engaged in that process and had useful stuff to say. I certainly did not think he was remotely near deletion
I’ve just noticed Mike’s apology to Andy- I think that’s good as well as Mike’s explanation for the stridency which is rooted in the difficulty of getting the message heard. MMT was often mocked , especially in the early days . Bill Mitchell describes experiences where he was mocked after speaking at conferences.
MMT protagonists tend to fee they have to shout a bit louder over the constant chorus of: ‘printing money/Zimbabwe/high interest rates/bond vigilantes/Country Going Bankrupt/ending up like Greece etc.
I have known that feeling on many issues for many years
Mike Hall,
No apology required, Mike. I was dragged-up in Yorkshire where, tradition dictates Tha keeps thi best insults for thi best friends.
The idea of JG is one I am still getting my head round which in part is why I wished to provoke discussion. I, for example, would prefer not to have ‘a job’, because in my experience this too often necessitates working for an idiot. (By ‘idiot’ I mean someone who has different priorities, objectives worldview and interests from my own)
The world of work is difficult to discuss because there is baggage attached to all the words we use. Employment can mean paid work (for a ‘boss’) or it can mean any useful endeavour. It is very easy to get at cross purposes using Humpty Dumpty words. The confusion is almost fully comprehensive and stretches into the voluntary sector where much of the work is not done by volunteers and is only voluntary in the sense of not being government mandated.
The media commonly confuses ‘managers’ and ‘bosses’ and ‘directors’ without reference to ownership. We refer constantly to a ‘working class’ much of which at any given time may well be ‘unemployed’, and in some areas may have been so for three or four generations since the 1926 General Strike Politicians then come out with phrases like ‘Alarm Clock People’, or the recent favourite of ‘ Hard Working Families’ with scant regard to what these phrases actually imply or to whom they apply.
I’ve got a lot of catching up to do on JG, Bill Mitchell’s contribution is extensive and in fact I have only just started. Pavlina Tchernova likewise, though initially I agree with every word she says (on the ‘believing the last opinion you heard’ principle !).
Six months ago I thought UBI was the bees’ knees, and I still think there’s much sense in there, which I see peremptorily dismissed by mainstream media pundits whom, I believe have given the subject no serious consideration. Some remarks indicate zero understanding of the proposition, but are highly influential in dissuading others from perhaps even having a look and being able to form an opinion or even understand what the real (as opposed to imagined) issues might be. One common misconception is that UBI is no more than a restructuring of Unemployment benefit.
I agree with you entirely that there is a huge battle to be fought even to make a start on dragging a popular mindset away from TINA, and as Yanis Varoufakis said coming to terms with the idea that maybe a flirtation with TATIANA would be rewarding.
Because sure as eggs is eggs, we need to get out the message: That Actually There Is An Alternative. (And nobody needs to die to work out what it might be.)
Mike Hall,
“UBI is just another Gov (hand out) policy. An external, or exogenous disturbance to the macro economy. It will have destabilising effects, the severity and nature of which will depend on the scale of payment. Which no one ever mentions. ”
(Actually I did question the scale of payments. viz “UBI has to be pitched at a level which provides a subsistence income, or it fails by definition and isn’t worthy of consideration.” )
I’m not ready to accept your dismissal of UBI. It’s too glib for my liking. Note your use of weasel words in there – you describe the destabilising effect in terms of their ‘severity and nature’
You might (arguably) if you thought some disturbance, to an abusive and divisive orthodoxy, was long overdue look forward to the ‘extent and quality’ of the improvements which might be wrought. That you don’t see them doesn’t mean they aren’t there to be had. And I don’t buy your ‘external and exogenous’ bogey-man without some description of what manner of horns ‘he’ wears.
If UBI disrupts the Macro economy we need to consider precisely how it disrupts it. The Macro economy may have to function in different ways. It isn’t set in stone. It would be unreasonable to expect you to slay your own bogey-man, because you are currently in the corner for the JG which would avoid rather than confront ‘him’.
The state of the economy today (in the UK and beyond) is predicated on having fixed a gross failure of the finance industry. We still have the same finance industry and it will self destruct again in due course (almost certainly).
My hesitation at present regarding JG is that I am not conversant with how that proposition covers those variously unable to work, or indeed how it would deal with retirement. As I think I’ve said, I have a long way to go with investigating this, and with respect I suggest maybe we all do.
“Even for a minimal unemployment benefit level, the numbers are large. ”
Mike , I don’t know who produced/calculated the figure, but they said the bank bailout was the equivalent of 240 years (neck-on two and a half centuries) of unemployment benefit.
If the bank bailout keeps banking, as we know it, afloat for two and half decades it’ll be a miracle (the whole shooting match could go to bagwash in two and half weeks if somebody says ‘boo’ at a crucial moment.) and private sector bankers and financiers are supposedly professional practitioners who understand finance.
Yeah, right. I’ve had my leg pulled so hard and so often I had to have a hip replacement.
A Job Guarantee needs to overcome the coercion problem so, unless you bring back the chain gang, it can only ever be a Job Offer.
I think probably a hybrid scheme similar to this: http://ftp.iza.org/pp133.pdf
and ‘reviewed’ here http://www.progressivepulse.org/economics/basic-income-and-a-job-offer-rather-than-a-guarantee is a good way of starting.
For the JG to be strictly voluntary, as specified, there has to be a ‘hybrid’ scheme where a simple income means tested lower (basic) income is provided for those who choose not to take up a JG.
That is the position of the majority (near all) MMT academics, founders and activists.
There is no need or point in providing such a basic income to those who already have existing incomes. The increased aggregate demand of any universal income will have to be counter balanced elsewhere in the economy, when it is at the intended target of full employment.
UBI opens the door to the right wing desire to dissemble the welfare infrastructure which provides an accountable system to ensure essential needs are met for all. UBI is the perfect trojan horse policy. (And the right wing know it.)
The community aspect of JG organisational, together with its strictly voluntary nature are a far more sustainable means of ensuring voters continue to see the value of it.
If it’s desired (not a bad idea) to redress the work/life/family etc balance, that is easily done by reducing the working week for all.
Mike,
“There is no need or point in providing such a basic income to those who already have existing incomes.”
I’m inclined to disagree with this point. Quite simply if it is to be a Universal BI by definition it’s available to all.
Take that central tenet away and you are talking about a restructured welfare benefits system. That totally bypasses some of the most fundamental aspects of the perceptual shift which UBI offers in our relationship with work and reward.
Mike,
“If it’s desired (not a bad idea) to redress the work/life/family etc balance, that is easily done by reducing the working week for all.”
If you think for one moment that reducing the working week is something to be achieved ‘easily’, I have to say I’m doubtful. In a factory based industrial economy it’s doable, (demonstrably -Ted Heath managed it by upsetting the miners, but nobody has done it recently, nor showed any appetite to do so.) but how do you reduce the working week in a casualised gig economy ?
Peter-Warren Mosler, who has been involved in developing and developing models of implementation of the JG, refers to people being ‘willing and able.’ So no coercion at least not directly. Of course, our society is coercive in all sorts of ways and can’t be entirely otherwise unless you believe in the chimera of absolute freedom.
Mike’s point about neo-liberal support for the UBI is worth noting. Finland being a recent example. The JG supplies a price floor for Labour which will never be acceptable to the wealth siphoning capitalism we have no. UBI carries all sorts of hidden issues which this article from Truth Out describes:
‘Besides macroeconomic incoherence, other issues emerge. Tcherneva points to the likely stigmatization of those who do not work. More than this, UBI points to the emergence of a new subaltern class, as UBI “does not deal with the loss of skill and deterioration of human capital that result from unemployment.” Nathan Tankus, a research scholar at Modern Money Network, has noted that, “If you distributed to everyone the same amount of IOUs regardless of whether they worked, production will fall into volunteerism and the community has no method of insuring that work is distributed equally or that production continues at adequate levels given the goals of the community.” This holds the potential for exacerbating gender and racial inequities.’
UBI is, arguably, not a real challenge to the status-quo and will have no effect on the scourge of rent seeking through asset bubbles and low wages supplemented by rentier extraction through bank debt ( ‘bankers’ heaven’ as economist Richard Wolff describes it).
The article goes on to say:
‘his is hardly an end to neoliberalism; it is an intensification of it, as every individual is granted a certain sum of money to fulfill their status as a good and abiding consumer. With UBI — and the presumably unchanged state and capitalist control of credit — one’s status as a consumer is perpetuated while their status as a worker is tentative and subject to elimination. Capitalist control over the means of production remains intact, and the finance, insurance and real estate sectors continue to go unchecked and unconstrained.’
Simon Cohen,
‘his is hardly an end to neoliberalism; it is an intensification of it, as every individual is granted a certain sum of money to fulfill their status as a good and abiding consumer. With UBI – and the presumably unchanged state and capitalist control of one’s status as a consumer is perpetuated while their status as a worker is tentative and subject to elimination. Capitalist control over the means of production remains intact, and the finance, insurance and real estate sectors continue to go unchecked and unconstrained.’ credit –
If this is what Richard Wolff thinks I think he’s wrong.
a) “one’s status as a consumer is perpetuated….” Nothing wrong with being a consumer and the only thing that determines a consumer’s status is availability of cash.
b) “…while their status as a worker is tentative and subject to elimination.” That’s simply not so. Au contraire, it reflects the current state of affairs. In a world where the only work is in a traditional manufactory setting, it may apply, but UBI would change the captive relationship of worker to employer. It could also destigmatise the perception of loss if status in not being in formal employment.
You can’t apply the mores of our present and past societal values in a world where they have changed radically.
UBI has the capacity to totally alter our expectations and attitudes to work. When you break the coercive connection between work and money (paid slavery) you are in a different world.
Richard Wolff is not grasping the difference. It’s like envisioning a mediaeval gargoyle on a Frank Lloyd Wright structure and saying it’s going to look ridiculous.
UBI is philosophically a far cry from just tweaking deckchairs. It’s a new deck.
But it is only a deck. It’s not the whole ship.
”UBI is just another Gov (hand out) policy. An external, or exogenous disturbance to the macro economy. It will have destabilising effects, the severity and nature of which will depend on the scale of payment.”
Meanwhile, in the world as it is – in the UK at least – millions of people, both in and out of work already receive very necessary income support of one kind or another from the state. UBI, as envisaged by those proposing it in this country (e.g. Citizens Income Trust, RSA, Green Party, Guy Standing), is conceived of as a humane evolution of our dysfunctional welfare state. These proponents of UBI for the UK are not tech billionaires or neoliberal ideologues.
The MMT opponents of UBI seem to be concerned that the JG idea will not get a look-in, if UBI is competing for the attention of would-be progressive reformers. But, the two ideas are not mutually exclusive, and they could both have a part to play in addressing different needs.
Proponents of the JG would naturally say of the JG that the way it’s implemented is all-important, in order to gain all the theoretical social and economic benefits. After all, in theory a Job Guarantee could be introduced in a way that is authoritarian and not at all progressive. They should give the idea of the UBI the same nuanced treatment, rather than building up a strawman neoliberal version and throwing the baby out with the bathwater.
To me the ideas are not mutually self exclusive
I have said I am open to persuasion but right now I still see them as mutually supportive
Jim Green,
All policies are subject to political support.
MMT’s JG with it’s strong community but-in (as local organisers of JG) offers a far stronger forward defence of its value to voters.
UBI is the opposite, as it will come under pressure from workers sharing their aggregate demand capacity with people who choose to do little work and are little worse off.
Further JG is demonstrably a much enhanced economic stabiliser. Again UBI is the opposite – a destabiliser.
These effects will also inevitably play in to the ‘money for nothing’ begrudgers’ hands over time.
As I’ve already pointed out, JG should have a back up basic income, at a lower level as a safety net and to provide incentive for those willing to do JG.
Making this income universal creates similar problems to any UBI.
Near all MMT academics and supporters advocate this back stop BI approach.
In other words the two can complement each other
With specific conditions, such that a BI does not unduly negate the required operation of the JG, yes, a form of Basic Income and JG are compatible.
In UK terms, it would comprise a somewhat enhanced and more humane form of unemployment benefits, without all the degrading ‘conditions’ and sanctions (except an existing income test), plus a JG at a ‘living’ income level (somewhat higher than present minimum wage).
As I’ve pointed out, in macro economics terms, there is no point in making this BI ‘universal’ (given to all citizens regardless of existing income), since the added aggregate demand would have to be dealt with anyway, by some means, in due course of time. Effectively negating its original purpose.
Provide the BI on the basis of (only) income need.
Offer the JG, with a higher income, as an incentive to participate with some work for society, with benefits for both individual and local community (as research evidence shows).
Macro economically sound and sustainable, and socially and politically attractive to the widest possible spectrum of the electorate. And no one left with nothing, ever.
We are closer than you imagined
In this context what are you thoughts on Universal Basic Services?
Richard, if you mean by Universal Basic Services, public (direct) provision of life essentials like healthcare, education, minimum affordable housing g’tee etc. then yes, absolutely.
(Eg we should have a social housing (in mixed developments preferably) buffer stock to price anchor the private market, akin to JG)
I would also include natural monopolies like transport, energy etc. as public provision.
Indeed, the more we provide the essentials by direct provision, the better JG+BI (as described) will work, since it removes the middle man profit gouging and pricing variance from interfering. The principle being that money itself is no g’tee that services will be available with the given income levels, when our objective is to g’tee minimum living standards. ie no ‘marketisation’ of essentials.
So maybe MMT + JB + UBI + UBS = an answer
Richard,
I like your equation above, but would change the UBI to BI, leaving out the ‘Universal’, as mentioned previously, as a safety net compliment to JG, as specified, that leaves JG with adequate incentives for participants.
Thus:
MMT (framework, Functional Finance et.) + JG + BI +UBS is the answer. And I believe I can confidently say that is supported by near all MMT founders, academics and activists.
On the subject of UBI and UBS, I saw this piece today, and thoroughly recommend it to all here (sadly no recognition of JG in this otherwise good piece from NEF’s Anna Coote, plus her wrong ‘financed by taxation’ framing).
I’m assuming that UBS does not mean full Gov direct provision in all the areas mentioned, but the concept is absolutely right imho, and in macro economic sustainability terms (stability against ‘market’ intermediary action etc.), allows the JG & BI to better ensure the minimum living standards goals can continue to be met over time.
http://neweconomics.org/2018/02/better-fairer-ways-spreading-prosperity-ubi/
What is full employment? Good question. I also wonder what constitutes a ‘created job’. We hear ministers say “we have created X million now jobs”. Really? If my local plumber takes on an apprentice, how has the government created a new job?
If they mean a job was created during their time in office (thus claiming credit for it) what is a new job?
If Fred retires and Young Lucy joins the company, is that a new job?
If Fred’s employer closes his company and his employee joins another company adding one to that workforce, does this count? Yet the number of employed people has not increased.
The number of nominally self employed has grown but how many of these were doing what were previously done by employed people.
It may seem to be a naive question but I’ve not found a definitive answer. I uncharitably assume when politicians say that they are creating jobs-moving towards full employment? we have to be sceptical.
Ian Stevenson says:
” I uncharitably assume when politicians say that they are creating jobs-moving towards full employment? we have to be sceptical….”
I don’t waste my scepticism. I just assume they are lying 🙂
On Universal Basic Services looked in quite a bit of detail at last years report from UCL and concluded that it’s more complicated than it seems and that broadly transport and the internet (particularly the last) should work, but that their proposed food and shelter ideas may have been basic but were not at all universal. They are in fact targeted social assistance with free cooked meals thrown in!
http://www.progressivepulse.org/economics/universal-basic-services-the-soup-kitchen-and-others
We still have the problem of Housing costs which present an enormous ball and chain on almost every well-intentioned endeavour. After 40 years of ‘bubbling’ and zero political will to control it we are now in a ‘fine mess.’ I’ve yet to read of any coherent proposals to deflate the bubble to a point where housing costs are no more than 25% of income ( often considered to be a sensible level). Building large numbers of social houses will certainly give people options that could gradually bring down prices, but LVT and credit controls will also be necessary to stabilise this. Then there is the matter of negative equity during this transition. What do we do there? Some sort of tapered bail-out?
At present this seems a solution-free area and it looks like rentier activity here will go on for some time by banks and property/land speculators.
This means that even with a JG/BI wealth will be siphoned and, to some extent, undermine social change.
Anything that deflates housing prices has to:
a) Tackle negativity equity
b) Solve bank insolvency
No small task
I’ll muse on it
Keep us all posted on your musings, Richard. Housing/Land will always be the fly in the ointment of real change.
You are right, Richard. ‘The market’ will immediately respond to drive down prices as soon as it’s clear that there is a long-term goal however LVT is introduced. I believe that there would just have to be a huge fund available to protect banking, but this needs analysis of the consequences. We too are working on this and would be interested to hear your ideas.
The other problem of affordability for ordinary homeowners and tenants is quite easy to solve through transitional arrangements and legislation to stop landlords passing on the tax to tenants. The georgist argument that the latter is impossible (otherwise why don’t they charge more now?) may be true in the long run as the market adjusts but tenants would be very fearful – I know, I’ve heard from them.
How about an automatic annual mortgage jubilee on a mark to market basis? Civil Service could employ an army of valuation officers who could provide an up to date arms length MV for each property in the land. And if people’s property values went up then their mortgages would too… so it’d be fair 🙂
And frank it with more QE should banks get into too much trouble too quickly. (I find QE (the way it was done the last time) to be unpalatable, but it seems like a lesser evil to alleviate a greater one. Banks are hugely responsible for the housing bubble crisis, but in fairness it takes two to tango… the house-buying public has to accept their share of the blame for the state of things)
Just spitballing. The question of lingering debt following the price crash LVT would bring is never, ever going to be an easy one to solve.
There is quite a lot of logic to this
it is my direction of travel in my thinking
I know how you like to read about Jersey – and similar problems must apply here and the UK – but I don’t, for example, understand how JG can be applied to agri businesses where so few local people want to pick spuds or cabbages etc when its freezing cold or the work is just beyond most on a physical basis. There is a short video on FB looking at the Polish workers in Cornwall picking cabbages and how young locals simply won’t /can’t do it.
Agri is just a small part of the Jersey economy and cannot compete with the all dominant finance “industry” as we all know (12,000 employees) but agri is more important now as providing the green backdrop for an Island where people want to live or tourists to visit . Its a “cultural” thing to maintain pretty Jersey cows whereas their milk could be imported much cheaper if there was not a protective regulation against it. Labour for agri had been imported for about two centuries in the CIs and for a long time too for tourism and it seems that this is similar to the UK but the impact here is probably more “all Island” compared with your “all UK” solutions . By mathematical standards Jersey has “full employment” (1,000 or so not working) and there is no “unemployment benefit” payable, there is a minimum wage but not a “living wage” – and there is a desperate shortage of workers in agri, retail and hospitality sectors besides nursing staff, teachers and other professionals being in short supply. Yet there are 13,000 long term resident tax paying workers who do not have the right to rent or buy proper living accommodation and the Island has a housing shortage for those with “housing” qualifications. The population is 102,000 plus and rising at about 1,000 per annum in recent years.
I note what has been said about scaling up from “micro” to “macro” but I can only presume that the problems simply described here for Jersey can be seen as relevant to the UK – or at least large parts of it.