job guarantee

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The Government, like the Pied Piper, marches the nation back to Dickensian Britain

“Please spread the word. We need to end the ‘state is like household’ analogy. The main constraint on govt. spending is the productive capacity and resources in the economy and the risk of inflation – not the size of the budget deficit.”

Josh Ryan-Collins on Twitter

The Pied Piper of Hamelin playing his pipe and leading the children away from the town
The Pied Piper of Hamelin, print, Henry Marsh, after John La Farge (MET, 21.65.4). John La viola, CC0, via Wikimedia Commons

This week, the Chancellor of the Exchequer, after dragging his feet and protesting in his speech to the CBI that, given the external global circumstances driving the cost-of-living increases, ‘there is no measure that any government could take’, has now done an about-turn. After telling the public not so long back that his top priority as the dangers of the pandemic receded was to restore the public finances, the ongoing and worsening supply crisis has finally forced his reluctant hand, albeit as a temporary and inadequate measure as many charities and other anti-poverty groups have already noted in their analyses. He fails, yet again, to get to grips with the underlying structural problems caused by the policy decisions of successive governments. Decisions which have led to a low wage economy, and over decades driven poverty and inequality which has benefited businesses at the expense of working people. Existing problems which have severely exacerbated the current unstable economic situation.

It is, however, once again too little and too late. An afterthought for a man who appeared last week for the first time in the Sunday Times Rich List, who seems to have no concept of the difficulties in ordinary people’s lives. Andrew Harrop, of the Fabian Society, described the Chancellor’s measures as a ‘sticking plaster’. We have had a lot of those over the last decade as government austerity has resulted in the inevitable breakdown of public and social infrastructure, and of society and its values. Half-baked policies have glossed over the growing hardship this government has caused by doing nothing except revel in its rhetoric and smoothing over of the truth with its propaganda.

Societal breakdown is not an unavoidable destination, it is the result of the deliberate failure by the government to enact the policies that would keep its citizens safe and secure in a functioning, fair economy and ensure that in hard times it acts to cushion the blows caused by events out of its control. Furthermore, whilst many, with their hearts probably in the right place, talk about creating a fairer welfare system and higher benefits as a way out of this situation, in the long term that is not the answer, and buys into more dependence on the state, which, frankly, has already done its utmost through reforming the welfare system to punish those citizens who find themselves in involuntary unemployment or precarious employment, or unable to work through illness.

The solution lies in creating a fairer society that is predicated on better wages and terms and conditions of employment, not so-called welfare ‘handouts’ to those who are disparagingly referred to as the ‘deserving poor.’ As Hannah Fearn wrote in the Independent this week: ‘Benefits do not support the poorest to live a self-determining and fulfilled life, but trap them in desperate cycles of poverty.’

It also lies in creating a high-quality public service sector, instead of the diminished one we have today, the implementation of a Job Guarantee to support people, as now in this current economic climate, and for those that cannot work, a properly funded social security system which gives people dignity and sufficient income to live on.

It was shameful to note that in his speech, the Chancellor, announcing his spending measures, said that the government would ‘not sit idly by’. That would be laughable if things were not so serious. For over more than ten years, the Conservative government has ‘sat idly by’, as it cut spending on public and social infrastructure to the bone, on the specious lie of unaffordability, couched in narratives of sound finance. This is therefore not a new phenomenon. The price we have paid for that lie as the pandemic raged has been made very clear. The public infrastructure upon which society relies, both in good and bad times, fell short, from the NHS to social care, education, local government and other vital institutions. Everything that binds society together with a cooperative purpose has been whittled away.

The emphasis on balanced budgets to serve an ideologically driven agenda that benefits global corporations rather than delivering public purpose, has led to rising poverty and inequality, which have translated into hunger and the growth of food banks as families have struggled to put food on the table and heat their homes. GIMMS has covered these disturbing subjects endlessly in its MMT Lens, week by week, month by month, year by year, since its launch in 2018. The fractures began in earnest a decade ago, with unnecessary austerity, and a false discourse that governments are limited in their spending policy choices by the tax they collect or what they can borrow, which, in turn, according to the orthodoxy, has consequences for future generations in terms of higher tax burdens. An obscene deception in the light of what has followed, and which arose out of a political choice driven by a pernicious economic ideology, and not financial necessity. It is time to hammer home that the line so often used by Sunak and others is false. The future burdens won’t be tax ones, but human and environmental ones created by governments which have failed consistently to invest today to create a truly productive and sustainable future tomorrow.

The global pandemic which affected and is still affecting production, followed by the outbreak of war in Ukraine, have only served to highlight our strategic planning deficiencies and interdependence. Ukraine and Russia play a major role in global food markets (not to mention oil and gas) which, when increasingly combined with the growing consequences of climate change on food production, with India imposing a ban on wheat exports as severe heatwaves have damaged crops, and East Africa in the grip of a relentless drought, only serves to emphasise the real costs for governments which have prioritised keeping the global corporatised economic order functioning, and the capitalist gravy train, predicated on exploitation, rolling. The tsunami of climate change is bearing down upon us, and yet, the government still sees the future as being defined by increasing growth in consumption, regardless of its impact on the planet. We apparently have to make up for the losses of the last two years, even if that means abandoning our climate promises which now seem to have been lost somewhere in the ether.

Instead of focusing on sound, consistent, long-term strategies to secure food and renewable energy domestically, governments have allowed the global corporate juggernaut to dictate the pace, thus securing its power, influence, and wealth. But as we are belatedly discovering, the ‘Just in Time’ world in which we live has distinct disadvantages. Nature, disease, and geopolitics combined, have exposed the weaknesses of a decaying unipolar economic system, which, until recently, has based its ideas on the finite nature of money and persuaded an unaware public that there is no alternative. A system predicated not on cooperation but on dividing people and allowing, by design, an unfair distribution of real wealth and real resources.

The Global Financial Crash in 2008, the Pandemic and current economic uncertainties have changed all that, and governments have been driven, as a result, to ‘re-discover’ the power of the public purse to manage their economies in the face of the prospect of economic decline, although always with a view to constraining that spending at some future point in time, once an emergency is over. There is always a price to pay on this model of how government spends. But just when Sunak thought he could get back to ‘business as usual’, his plans were scuppered once again by the conflict in Ukraine.

Balancing the books is a perennial concern for all governments, sooner or later. The government should be a good manager of the economy by ensuring that the public and social infrastructure meets the needs of the people it serves, from individuals to communities and businesses, and by aiming to balance its spending with the very real resource constraints, which requires strategic planning. Instead, governments, the media and those working in think tanks, endlessly replay their messages of monetary scarcity which have played a cruel and destructive trick on the population. Such deceitful narratives ultimately constrain the actions that are needed to address poverty, inequality, environmental sustainability and planetary health. Should that, of course, be a government objective. However, these narratives are useful for governments who wish to avoid such actions. It doesn’t bode well for the now seemingly defunct concept of levelling up or addressing the climate emergency.

We are led to believe that government spending is constrained by taxation or borrowing, and the media without fail, reinforces those messages, as Larry Elliott did in an article in the Guardian at the end of April. On the one hand, journalists report the state of public services and other vital infrastructure, relate stories about how people are struggling to keep their heads above water and being obliged to use food banks or switch off their heating, and yet, in the next breath, in an astonishing display of cognitive dissonance, give their readers a blow-by-blow account of the state of the public finances, as if somehow it is of vital importance to know how well the Chancellor is delivering his fiscal objectives. Put the fear of God into a nation by focusing its attention, like a magician, on the wrong subject. It seems that they choose not to make a connection between government spending (or the lack of it) and the state of the nation. Those two things are not disparate subjects, they go together.

As the current government, like the Pied Piper, marches the nation back to Dickensian Britain, journalists should at least be challenging the accepted economic dogma which prevails, rather than reinforcing the message that sound finance trumps public purpose. That should be the role of the media. But then, of course, as Upton Sinclair so rightly observed, ‘It is difficult to get a man to understand something when his salary depends upon his not understanding it.

So, given his predilection for household budget accounting, it was not surprising that Rishi Sunak, the arbiter and promoter of sound finance, had to eat his words and do yet another about-turn, by stating that he will be imposing a ‘windfall tax’ on oil and gas companies (well sort of) so he can, as he claims, partly cover his spending pledges. Whilst some Conservatives are critical of the tax, suggesting it will reduce investment and goes against their low tax stance, (at least where the rich corporations are concerned), Labour’s calls over the last few months for a tax on extraordinary profits to help people manage their way through the energy crisis, thus have now been satisfied. Job done. That is, of course, if we believe the notion that has been drilled into the public consciousness that taxes fund government spending.

The government as the currency issuer has the capacity to spend what it needs to, to balance the economy in good times and keep it functioning during economic crises. It doesn’t have to go begging to rich people or large corporations to provide that funding, or impose windfall taxes, and nor does it have to borrow to do the same. That is all part of the smoke and mirrors that have created false narratives. The sequence is spend first, then tax, not the other way around.

The last two decades and more should have proved categorically that household budget economics, in terms of government spending, is a myth. The public is beginning to take note that there is always money to bail out ‘too big to fail’ banks and other large companies, fund wars or address the fallout from pandemics, when it suits the government to do so. As the contradictions become ever clearer, the public are slowly coming to understand the political nature of spending decisions, and that, by the same token, the UK government could, in the same way, create the money to fund public services and vital infrastructure, that poverty and inequality could be addressed to ensure that citizens have dignified and meaningful lives, and that the climate crisis could be tackled through legislation, and targeted spending and taxation policies, to drive change and force businesses to do or die.

As Josh Ryan-Collins, who is an associate professor in economics and finance at the UCL Institute for Innovation and Public Purpose wrote in an article in the New Statesmen this week, ‘Government spending power is limited not by tax revenues or borrowing but by the productive capacity of the UK economy and political will.’

Ryan Collins, promoting a new co-authored working paper, ‘The self-financing state: An institutional analysis‘, published by the UCL Institute for Innovation and Public Purpose (IIPP), which provides an in-depth analysis of the mechanics of the key institutions involved in UK government spending, demonstrates clearly in his article that the ‘British state always creates new money when it spends’. That is fundamental to what comes next.  It is the starting point for change.

The self-financing state: An institutional analysis

This paper is an institutional analysis of government expenditure, revenue collection and debt issuance operations in the United Kingdom.

 

So, while Chancellors, politicians, think tanks and journalists indulge in relaying myths that describe how governments spend, and keep the prevailing economic system functioning in the favour of capital, the reality is somewhat different.

A challenge to that understanding and the economic orthodoxy which drives it, is, however, underway.

The World Economic Forum’s meeting in Davos this week has revealed the growing cracks. The realisation by the wealthy elites that the global economic system, which has created vast wealth for the few, whilst at the same time crippling poverty and inequalities in the distribution of real wealth for many others, is under threat. As working people in the global north wake up to their exploitation and the associated injustices, and those in the Global South begin to reject the economic solutions imposed by the north, under the tutelage of the US, its allies and the institutions which it controls – the IMF, the World Bank and the World Trade Organisation, those that have benefited over decades may, at last, be facing a rude awakening which could force a rethink. Not that one is holding one’s breath! But it should not be surprising that the Establishment which has dictated the rules for decades, feels threatened in this time of flux and uncertainty. Things ‘ain’t what they used to be’ and the certainties are slipping away.

Reuters reported this week that world leaders, financiers and chief executives were leaving Davos with ‘an urgent sense of the need to reboot and redefine globalisation’. Their version of globalisation has, hitherto, not been about real cooperation in the service of humanity, rather it has been the exploitation of human labour and finite resources in the service of greed and profits.  Globalisation has not been about planetary flourishing, it has proved to be the exact opposite, favouring the few, a billionaire class who, as Oxfam pointed out this week, were increasing their fortunes by $1billion every two days. Not because they worked hard but because the system is rigged in their favour. A system which allows them to amass vast resources and pollute the planet with their excesses, while the rest labour in low wage economies as slaves.

Its dominant position has been ably assisted by the notion of monetary scarcity, which has been hugely damaging as countries in the global south have been weighed down by foreign debt and forced to accept punishing bailout regimes, which have, in turn, forced cuts to public spending and decimated public infrastructure. This is the common link between the global north and the global south. The toxic economic system which prevails and leads Sunak to focus on fiscal discipline rather than public purpose.

 

The MMT Podcast with Patricia Pino & Christian Reilly: #131 Fadhel Kaboub: Free Trade Isn’t Free: Food Sovereignty And Why It MattersPatricia and Christian talk to economist and President of the Global Institute For Sustainable Prosperity Professor Fadhel Kaboub about how global food and energy systems have been fostered to benefit the global north at the expense of the global south, and how understanding modern money is vital to…

 

The damage that has been done over decades is incalculable. The events of the past few years have revealed the inherent weaknesses of globalisation and its bedfellow, neoliberalism.

As the effects of climate change, caused by the burning of fossil fuels, combine with the associated loss of biodiversity due to land mismanagement and exploitation, the degradation of soil, resulting from unhealthy farming practices and overuse of herbicides and fertilisers, along with changing global weather patterns, the world faces an uncertain future without adequate urgent action.

Ultimately, the UK does not exist in a bubble and must now see its future actions and policy decisions in a global context, but not the one we know. Not a continuation of the status quo which protects a rotten free trade system and sustains the wealth of the few, but an all-encompassing strategy for human and planetary fulfilment. It is not about pulling up the drawbridge. It is about ensuring that nations can help themselves to ride the economic and climate storms ahead, and work cooperatively to trade fairly and sustainably with their global neighbours.

Some might call this an unachievable pipe dream, given the current instability forged out of a toxic economic system and endless wars for global hegemony, and let’s be honest, theft of real resources. But it doesn’t have to be.

Our future depends on real and substantial change, not tinkering around the edges so that the global elites can maintain their power and influence. It begins with a public understanding of how the government spends, to challenge the status quo and set the scene for creating a fairer world, which has both a sustainable and liveable future. The way ahead may be bumpy but that’s no reason not to try.

 

Announcement

The GIMMS book ‘Modern Monetary Theory: Key Insights, Leading Thinkers‘ – Edited by Professor L. Randall Wray and the Gower Initiative for Modern Money Studies, is scheduled to be published by Edward Elgar Publishing in January 2023

For more details, please see the EE website via the link below:

 Key Insights, Leading Thinkers" draft front coverModern Monetary Theory’This is a fascinating, eclectic group of professional papers in which the reader may explore both the first principles of Modern Monetary Theory and many institutional and historical details that lend weight to the conceptual framework. This book is a landmark in the development of MMT, a boon for…

 

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The post The Government, like the Pied Piper, marches the nation back to Dickensian Britain appeared first on The Gower Initiative for Modern Money Studies.

Journey to the heart of Argentina

Published by Anonymous (not verified) on Mon, 16/05/2022 - 6:00pm in
By Carlos García Hernández

Originally published in Spanish in El Común on 13th May 2022

 

Women and a child walking past ouses in La boca Buenos Aires, ArgentinaImage by Fernando Hidalgo Marchione on Flickr. Creative Commons 2.0 license

Between May 2nd and 5th, 2022, I had the opportunity to join economist Warren Mosler’s visit to Buenos Aires organized by Pymes para el Desarrollo Nacional and Grupo Bolívar.

In this way, the interest in modern monetary theory has allowed Mosler’s analysis to be oriented towards the specific case of Argentina. It has been a fascinating experience that has taken us to the bowels of the country’s economy.

The organizers asked Mosler to focus his proposal on two things: the possibility of achieving full employment without inflation (an economic state I have dubbed the Lerner point) and Argentina’s latest agreement with the International Monetary Fund.

Mosler presented his proposal at several public events, to managers of the Central Bank, to the leaders of the public financial institution Banco Nación, at the University of Moreno, in a visit to the Río Santiago shipyard and on the radio program Teoría Monetaria Moderna Presenta. His conclusion is that Argentina’s problem is primarily of a fiscal nature, since Argentina currently spends 8% of its GDP on interest payments derived from public debt securities and Mosler estimates that this figure will soon rise to 20%. On the other hand, the official unemployment figure is not very high (7%), but youth unemployment is over 30%. In addition, the real unemployment rate is much higher than the official one and poverty reaches 37.3% with a marginal poverty rate of 8.2%. Added to this is the enormous problem of inflation, which currently stands at 55.1% per year, but is expected to exceed 60% by the end of the year.

The specific measures he proposed were threefold: the adoption of floating exchange rates, a permanent 0% interest rate policy, and the implementation of job guarantees based on employment buffer stocks.

The adoption of floating exchange rates is the measure that would make it possible to carry out the other two, since only floating exchange rates allow for permanent full employment policies and 0% interest rates decided by the central bank. Currently, Argentina has a fixed exchange rate of the peso against the dollar. The reason for this is that there is a belief among the leadership and the general population that Argentina’s main problem is external constraint. Therefore, it is believed that the Argentine peso is worthless and that it is necessary to maintain large foreign exchange reserves in order to import and grow. This puts the Argentine economy at the mercy of financial speculators, since Argentina has to defend the exchange rate by buying Argentine pesos through its dollar reserves. The consequence is that Argentina periodically suffers debt crises and the risk of running out of reserves, which drives up interest rates, inflation and unemployment. Mosler’s proposal is to adopt floating exchange rates so as not to have to defend a fixed exchange rate by means of foreign exchange reserves and for the Argentine economy to function exclusively through the national currency. He gives as an example the debt crises of Mexico in 1994 and Russia in 1998. Both countries adopted floating exchange rate policies in the face of explosive debt crises resulting from fixed exchange rates. The consequence was that after the introduction of floating exchange rates, there was a sharp adjustment in which the Mexican peso and the ruble lost 66% and 75% of their exchange value against the dollar respectively. Thereafter, the value of the currencies stabilized and then gradually recovered. According to Mosler, something similar would happen in Argentina because the Argentine economy is similar to that of Russia and Mexico. Currently, the official exchange rate of the Argentine peso is 116.25 pesos per dollar and the exchange rate in the black market (the so-called blue dollar) is 202 pesos per dollar. Therefore, the devaluation resulting from the floating exchange rates would bring the value of the official peso to approximately the value of the blue dollar. After this adjustment, the value of the peso would stabilize and then recover progressively, as occurred with the Mexican peso and the ruble.

In response to this proposal, Argentine leaders argue that such a devaluation of approximately 60% would increase the price of imports and that the poorest classes would not even be able to buy food for subsistence. However, Mosler argues that this problem would be solved by means of subsidies in pesos to those who need them and an indexation of salaries that require it. In addition, Mosler also points out that the price of Argentina’s exports would become cheaper and therefore the devaluation would increase the country’s exports. In addition, annual inflation is already at about 60% or so, forcing periodic wage indexations. Therefore, floating exchange rates would require a new and final indexation before entering the period of stability.

This leads us to the second proposal, permanent 0% interest rates and the renunciation of issuing any public debt. Currently, Argentine interest rates are 47%. This reflects a self-defeating attitude similar to that of fixed exchange rates. Argentines believe that without very high interest rates like the current ones, the Argentine peso would lose all its value and therefore high interest rates are the only incentive for the currency markets to accept the peso. This generates a constant flow of pesos directly into the international currency markets where pesos are exchanged for dollars. This dynamic floods the foreign exchange markets with pesos and causes the peso to devalue constantly. This, according to Mosler, is the main source of inflationary pressures in Argentina.

Currently, Argentina spends 8% of its GDP on interest payments, but according to Mosler’s estimates, this figure will soon be 20%, mainly due to interest payments on inflation-linked debt securities, real monetary time bombs that already represent 20% of the total public debt and amount to 70 billion dollars. Mosler proposes to eliminate the issuance of public debt securities, since Argentina is a country that enjoys monetary sovereignty and therefore does not need to either collect taxes or issue debt to finance its public spending. He also urges Argentine policymakers to stop talking only about the primary fiscal deficit (which does not include the interest payments derived from the debt) and suggests that when dealing with the fiscal deficit, they should do so taking into account the enormous and unnecessary amount of pesos that are permanently going to the foreign exchange markets to be exchanged for dollars. In response to the unfounded expressions of fear about the value of the peso, Mosler pointed out that the value of the peso corresponds to the Argentine GDP and to all the products that can be purchased with pesos. To maintain that the peso would lose all its value if interest rates were 0% is as absurd as saying that meat, soybeans, grain, gas, oil, tourism and all the products produced by the Argentine economy would lose all their value. That is simply not going to happen, especially at a time when Argentine exports are reaching record levels. As long as taxes have to be paid in Argentine pesos, the value of the peso will never be zero. Only in an unimaginable case in which no taxes would have to be paid in Argentina would the value of the peso be zero.

With floating exchange rates, interest rates would no longer be determined by the markets, but by the Central Bank. Therefore, once floating exchange rates are adopted, the level of interest rates in Argentina should be 0% and the Argentinian government should renounce the issuance of debt securities.

All of the above brings us to Mosler’s last proposal, job guarantees based on employment buffer stocks. This proposal is only sustainable over time with floating exchange rates that avoid having to adopt fiscal austerity measures to defend fixed exchange rates. In addition, the job guarantee would eliminate any inflationary pressures that may have subsisted from floating exchange rates and the elimination of positive interest rates, since guaranteed labour acts as a wage anchor in both downturns and upturns.

As Mosler tirelessly repeated in his expositions, the price level of an economy, and therefore its level of inflation, can only be explained by the price that the State is willing to pay for the goods and services it needs to supply itself. This especially concerns the price of labour reflected in wages, since the origin of all goods and services is socially embodied human labour. According to Mosler, the wage level is not the cause of inflation in Argentina. Therefore, the State would have no difficulty in setting up a program similar to (but broader than) the so-called Plan Jefes y Jefas, which until a few years ago served as a job guarantee in Argentina. Under this model, anyone who wants and is able to work, but cannot find work in either the private sector or the permanent public sector, should receive a transitional job until he or she can be incorporated into work in the private sector or the permanent public sector. The purpose of the job guarantee is not production per se but to demonstrate the beneficiaries’ work capabilities, since the private sector generally only likes to hire people who are already working. Therefore, guaranteed work should be implemented after the government has decided on the desirable size of the public sector to ensure good quality public services.

The job guarantee wage would become the minimum wage of the economy and would act as an automatic price stabilizer in both expansionary and recessionary economic periods, while eliminating poverty and unemployment.

Before going into the IMF agreement, Mosler also pointed out that in Argentina there is a problem with market regulation. According to Mosler, this is due to a high concentration in strategic productive sectors that leads to oligopolistic practices. His proposal is to regulate these oligopolistic markets to limit their excessive profit margins and avoid speculative practices, especially in the banking and primary sectors.

Finally, he delved into the tempestuous field of the agreement with the IMF. This agreement includes a loan of $45 billion and numerous conditionalities that are very harmful to Argentina, such as the issuance of long-term debt securities and fiscal austerity measures. Mosler proposes to replace this agreement with one that is more beneficial to both Argentina and the IMF. His proposal is to repay the loan through a 3% tax on Argentina’s gross exports. These exports amount to a total value of approximately $100 billion per year. Dedicating 3% of that figure to loan repayment would be beneficial to the IMF because it would ensure that it would receive dollars from the only source of dollar inflows into the country, exports. This means that no currency exchange would have to take place to make payments. Moreover, the IMF would no longer have to worry about imposing any kind of conditionality on Argentine policies. For its part, the Argentine government would be able to exercise its political sovereignty without any constraint from the IMF in the form of conditionalities. Moreover, the 3% tax could be deducted from exporters’ other taxes if it deemed it appropriate, so that there would be no mandatory increase in the tax burden.

I believe that the Argentine government should listen to Mosler’s message and implement the measures he proposes. The achievements of an Argentina with full employment, price stability and well-regulated markets would be beyond imagination. If such a situation were sustained over a prolonged period of time, I am convinced that Argentina could once again become the great world economic power it once was and regain its rightful place of relevance on the international scene.

Euro delendus est

 

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Cabinet brainstorms quick fixes for the cost-of-living crisis to avoid the real solution

Published by Anonymous (not verified) on Sun, 01/05/2022 - 3:51am in

“When people live in a fair, caring society, where everyone has equal access to social goods, they don’t have to spend their time worrying about how to cover their basic needs day to day – they can enjoy the art of living. And instead of feeling they are in constant competition with their neighbours, they can build bonds of social solidarity.”

Jason Hickel – Less is More.

Boris Johnson holds a meeting of UK Cabinet minstersPPicture by Simon Dawson – No 10 Downing Street on Flickr. Creative Commons 2.0 license

According to the Telegraph this week, the Treasury has ‘raked in more tax than ever before’, thus putting the UK, it says, on course to have the ‘highest tax burden since the aftermath of the second world war’. The Chancellor, still counting his beans, was not in the slightest bit apologetic, making clear his assertion that he had no other option but to get the public finances back on track after the vast amount of public money that had been spent during the pandemic. Keeping the £12,570 personal allowance for income tax at its current level would, the author of the Telegraph article indicated, generate an extra £20bn for the Treasury over the next five years, thus reinforcing, yet again, the plainly wrong idea that government relies on tax to spend, or balance the public accounts. A government spokesperson called on for comment, said, wiping a tear away, that it had been forced to make ‘tough decisions’, but not to worry, in 2024 we can expect a tax cut bonanza just before the next election.

The Guardian took another tack, not taxes, but borrowing. In an article by Larry Elliott entitled, ‘UK government borrowing halves but is still close to record high’, he quotes figures from the ONS which reported that the gap between the state’s revenues and its spending was down on the previous year, but that despite the improvement over the year, the total deficit for 2021/22 was more than £20bn higher than forecast by the OBR. All as if borrowing figures were a sound measure of the government’s management of the economy. The Chancellor, trying yet again to sell his agenda of fiscal discipline, was quoted by Elliott, reiterating yet again, that ‘Public debt is at the highest levels since the 1960s and rising inflation is pushing up our debt interest costs, which means we must manage public finances sustainably to avoid saddling future generations with further debt’.

They are all at it! Whether it’s former or current Chancellors of the Exchequer, journalists or orthodox economists, they all have one thing in common: their addiction to the false narrative of household budgets. The idea that governments are limited in their spending policies by how much tax they collect or what they can borrow. The false corollary of all that, is that without careful management of the public accounts, either we face the prospect of the UK going bankrupt, as former Chancellor George Osborne suggested to the public, or future generations will pay the price in higher taxes. All nonsense, of course, but it keeps the public in their place, meaning acceptance without question, that the government has limited fiscal capacity, and the message that government has no option but to impose belt-tightening policies, completely ignoring the fact that a government deficit represents a private sector surplus, in layman’s terms, the money in our pockets. Taxing away more doesn’t give the government more to spend, or to pay down public debt as is implied, and it certainly doesn’t help an economy to navigate difficult times.

We are now witnessing in the most distressing way, the terrible consequences of those narratives which are having a direct effect on the economy, or more precisely, the people who do the work to keep it functioning. Not just the effects of the last 2 years on people’s lives but the ongoing consequences of decades of successive government spending policies. Policies which have ranked fiscal discipline over economic health and public well-being, seen wealth distribution skewed to favour ever fewer people and overseen the selling off or privatisation of key public assets with vast amounts of public money syphoned off for private profit, along with the underfunding of vital publicly run and paid for public infrastructure which has left it in a state of ongoing decay. We have paid a heavy price as a nation for the economic ideology which prevails and dictates policy and spending.

From every corner, the warning signals have been ringing loudly. Last month, Martin Lewis, the Money Saving Expert, said that he was running out of tools to help people manage the cost-of-living crisis. He said that ‘it’s not something money management can fix, it’s not something that for those on the lowest incomes telling them to cut their belts will work, we need political intervention.’

Phil Andrew, the CEO of the StepChange Debt Charity, echoing Lewis, said that their advisers had been taking increasing numbers of calls from people who fear they won’t be able to keep up their debt repayments. With eleven million households facing Covid-related debt, and four million using credit to pay for essentials, he was clear:

‘For these households, rises in energy bills and the increasing cost of essentials are not things that make the difference between being able to afford luxuries or not. They are the things that genuinely make the difference between heating and eating.’

The Trussell Trust, which runs more than half of UK food banks, says it is witnessing an accelerating crisis across the UK as more and more people are unable to afford the absolute essentials necessary to eat, stay warm and dry, and clean. Figures released this week show that the Trust’s network provided more than 2.1 million parcels to people facing financial hardship from 1st April 2021 to 31st March 2022, which represents a 14% increase over 2019/20 – before the pandemic. And more than 830,000 parcels were provided for children, which represents a 15% increase from 2019/20, when 720,000 were provided. The Trust, again echoing Martin Lewis, said that there is still time for politicians to turn this situation around, saying that, governments at all levels must use their powers and take urgent action now to strengthen our social security system so it keeps up with the true cost of living and helps prevent hundreds of thousands more families being forced through the doors of food banks.’

These figures are a shocking indictment of a government that does have the fiscal tools to put in place solutions to mitigate the economic shock of Covid (although imperfect, already demonstrated), the effects of the war in Ukraine and last but not least to address a climate crisis which threatens humanity, but which seems to have been put on the back burner even as the planet’s life support systems continue to degrade and the social injustices intensify globally.

Our government has the legislative and fiscal tools, should it choose to use them, not only to mitigate this economic crisis in the short term, but also to challenge the market-driven ideology of decades. An ideology which has led to an increasing divide between the rich and the poor, with an ever-increasing share of wealth going into fewer hands, as wages have stagnated. A pernicious ideology that has created increasing reliance on an unfair social security system which punishes people rather than supporting them, whilst it has made the concept of real full employment a dirty word and allowed the corporate sector to get away with murder by paying low wages and setting working people against each other in the dash for a job and a modicum of security.

We may, as the Trussell Trust says, need a fairer social security system for those who cannot work, or who are caught in economic straits not of their making, but we also need a government with the political will to implement a Job Guarantee, not just to provide the vital cyclical economic automatic stabiliser at such times as these, but also to reverse the unfair advantage capital has had for decades over labour, which has been responsible for wages being driven down in a fight for competitive supremacy with all that entails in human deprivation.

However, apparently, the government is right out of tools, out of ideas, out of everything except perhaps its propaganda machine, which is working just fine. This week’s Cabinet ‘blue sky thinking’ exercise left many scratching their heads as Boris Johnson was reported as asking for proposals for tackling the cost-of-living crisis without actually spending public money. Ministers have been ordered to find new ‘non-fiscal’ solutions. Grant Shapps suggested making the MOT test biennial instead of annual. Is that a joke? If so, it’s in the worst possible taste, ignoring as it does the very real effects of higher energy and food costs on families across the country. Their problems won’t be solved by such crass intervention. And Johnson is said to have revived the Liz Truss proposal to cut childcare costs by lowering England’s legal limit on adult supervision for nursery children, even though such a move could well endanger the safety of these children. As we said – right out of ideas, well at least sensible ones like using fiscal policy to address the current crisis and indeed future ones. Meaning, spending newly created money as only a currency-issuing government can do.

Even Torsten Bell from the Resolution Foundation think tank, which has its roots in orthodox economic thinking, commented that he thought the government had ‘lost the plot’, if it believed that such ideas would improve people’s lives substantially.

It is quite shocking and disingenuous of a Chancellor who can afford a £600 pair of trainers, has an extensive property portfolio and will think nothing of spending £13,000 a year on heating a swimming pool, to tell listeners on Mumsnet this week, that it would be ‘silly’ at this moment in time to give poor families any further help with rising bills, when people are already feeling the pinch from record rises in energy price and steep increases in the cost of food and essentials. Sunak’s Spring Statement and previous budgets have been a kick in the teeth for ordinary people who have paid the price in living standards and rising private debt, caused by inadequate spending, not just by Sunak but also by previous Chancellors wedded to economic orthodoxy, and the lie that government spending is just like our own household budgets. People who have already been subjected to government policies which have driven growing poverty and inequality and decimated the public and social infrastructure over the decades which preceded the current emergency. They need help now, not later, when things are likely to be infinitely worse.

The Chancellor has at his disposal the fiscal tools he needs to address the current cost-of-living crisis and create a fairer and more sustainable society. But while he adheres to his fiscal discipline message that puts the household budget narrative of tax and spend, paying down debt, reducing public deficits or the objective of achieving balanced budgets or surpluses at the top of his agenda, regardless of the economic conditions that prevail, the lives of ordinary people can only get worse, and recession will be just over the hill. We are not all in this together under this regime.

There is an alternative. It’s just that we don’t have a government or other political parties willing to challenge the economic orthodoxy which drives spending and legislative decisions. The system has been corrupted to serve global corporations, whilst politicians have been bought, as a result, by benefiting through the revolving door. At the same time, the media plays out the narrative like a broken record, to keep the illusions going that governments are powerless to intervene when economic instability threatens, hamstrung as they are by scarce monetary resources, when the reverse is actually true.

What hinders government is not scarcity of money, but the recognition that it must align its spending to the available resources and the productive capacity of the nation, and make the political decisions about who gets the pie based on that. That is the real balancing act and the real starting point for a true understanding of what governments can do, with the political will, to create the sort of society which benefits everyone, by serving public purpose instead of corporate greed.

 

 

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Campaign Platform & Job Guarantee. Rick DeVoe MN-01

Published by Anonymous (not verified) on Sat, 16/04/2022 - 12:46pm in

Tags 

job guarantee

Hopefully we will see, in not too distant future, the inclusion of a Job Guarantee planks in many more platforms.

Campaign Platform – Rick DeVoe – MN1
Good Jobs For Everyone: Full Employment Plus (FEP) is the 2022 version of FDR’s and MLK’s proposals for all Americans to be guaranteed a job at a livable wage working in and for their own communities, when good jobs are unavailable in the private sector. FEP plan jobs will be determined, as to the scope of work, by local governments and nonprofits. Job completion will be locally administered. A Federal backstop program, consisting of work to restore human and natural habitat, will provide work if there is unfilled demand at the local level. Read more

Exploring the essence of MMT – the Job Guarantee – Part 2

Published by Anonymous (not verified) on Thu, 07/04/2022 - 5:11pm in

This is Part 2 of an irregular series I am writing on some of the complexities of Modern Monetary Theory (MMT) that are often overlooked by those who rely on reading airport-style books or Op Eds on the topic. In – Exploring the essence of MMT – Part 1 (March 29, 2022) – I dealt with some conceptual issues about values and theory. Today, I am considering the way to think about the – Job Guarantee – within the MMT framework. The Job Guarantee is at the centre of MMT because it contains an insight that is missing from the mainstream economics – the concept of spending on a price rule. This insight leads to the conclusion that the price level is determined by what the monopoly issuer of the fiat currency – the government is prepared to pay for goods and services. This, in turn, means that the Job Guarantee goes well beyond being a job creation program and constitutes within MMT a comprehensive macroeconomic stability framework – where the so-called trade-off between inflation and unemployment (Phillips Curve) is eliminated. However, while in the real world, complexity enters the scene and we need to be aware of the nuances so that we do not fall into the trap of thinking of the Job Guarantee as an inflation killer.

Origins of the Job Guarantee

In this blog post – The provenance of the Job Guarantee concept in MMT (April 20, 2020) – I traced the origins of the Job Guarantee within the MMT tradition.

I noted that as an agricultural economics student in 1978, I determined that the tradition of using commodity buffer stock in agricultural markets to achieve price stability could be applied to the labour market and alter the way we conceive the Phillips curve.

My motivation was the Australian Wool Reserve Price Scheme, introduced by the Australian government in November 1970.

It was a typical commodity storage scheme and required the government to maintain a wool buffer stock to stabilise wool prices in the face of market fluctuations.

The same principle operates for a Job Guarantee – the government operates a buffer stock of jobs to absorb workers who are unable to find employment in the non-government sector.

The pool expands (declines) when non-government sector activity declines (expands). Workers would also be able to choose the hours they desire up to full-time, which would significantly reduce time-based underemployment.

The unconditional job offer would be at a socially-inclusive wage, which would be set at the bottom of the wage distribution and become the wage floor for the economy.

At the point of introduction, government could set the wage above the prevailing minimum wage to facilitate an industry policy function (that is, shift resources out of low productivity, high cost private firms).

The novelty of the Job Guarantee is that the government purchases labour off the ‘bottom’ of the labour market rather than competing at market prices.

By definition, the unemployed have zero bid in the non-government sector for their services.

As an aside, many people have written to me claiming that if the – Australian Wool Reserve Price Scheme – which ran for 31 years between 1970 and 2001, was the model I used to design a Job Guarantee then it would fail as the wool scheme failed.

The problem with these criticisms is that they usually do not understand why the wool scheme failed.

All they know is that it was discontinued and they may have heard some negative things about it.

The facts are clear and lead us to conclude that the failure of the wool scheme, in no way compromises the integrity or the sustainability of the Job Guarantee mechanism.

I will write another day about the reasons that led to the collapse of the wool scheme (greed from farmers and neoliberal outsourcing by government etc). But it is important to note that those reasons are not applicable to a Job Guarantee scheme.

The Phillips Curve and MMT

I wrote about this topic in this blog post – Flattening the curve – the Phillips curve that is (April 7, 2020).

The following diagram captures the traditional Phillips curve and the way the Job Guarantee alters the trade-off.

We begin with an unemployment rate at UA and an inflation rate of IA.

The full employment unemployment rate is U*, which defines frictional unemployment.

The difference between U* and UA is what we term involuntary unemployment and serves an inflation-suppression force.

Why?

The unemployment buffer stock disciplines wage demands by workers (who fear they will be next to join the unemployment pool) and also reduces the incentive of corporations to raise prices for fear in a weakening market they will lose market share to competitors.

In the traditional Phillips Curve world there is thus a trade-off between unemployment and inflation along the blue curve.

There was a lot of discussion in the 1960s and 1970s about how steep the trade-off was. The flatter the curve, the greater the gains in reducing the unemployment rate for a given inflation rise.

Empirical studies of the trade-off revealed the curve was also unstable – it moved around – which made it difficult to deploy as a policy vehicle.

In 2008, we published a research paper – Labour underutilisation and the Phillips Curve (the link is to a working paper version as the published paper is behind a paywall), which showed how the relationship between inflation and unemployment had waned in the 1990s and that the real trade-off was between broad labour underutilisation and inflation (the former including underemployment).

Anyway, referring to the diagram,

Accordingly, if the government sought to eliminate involuntary unemployment through generalised fiscal expansion then the economy would move up the curve to B with inflation rising to IB.

However, Milton Friedman and his Monetarists claimed that there would be no guarantee that inflation would be stable at that level.

When the concept of a Non-Accelerating-Inflation-Rate-of-Unemployment (NAIRU) was introduced into the literature by the Monetarists, it was argued that wage and price bargaining forces (unions, firms) would build the higher inflation rate at B into their expectations and resulting behaviour.

As a result, they would demand higher nominal wages and price-setters would push up prices further, irrespective of the state of the labour market.

This would result in this framework with the Phillips Curve moving out undermining the trade-off.

Mainstream economists came to believe that there was only one unemployment rate where inflation would stabilise and expected inflation would equal actual inflation – the so-called ‘natural rate’.

It was asserted that the government could not use fiscal policy to alter that rate and so any attempts to reduce the unemployment rate below it using fiscal expansion would just result in accelerating inflation and eventually (through the expectations movements) the unemployment would be reestablished at the NAIRU (which was the ‘natural rate’) at a higher systemic inflation rate.

However, whether that happens or not is not germane to the following discussion.

A Job Guarantee would provide jobs to (U* – UA) workers.

The improved labour market prospects would no doubt attract additional workers back into the labour force (hidden unemployment) who would be likely prefer the Job Guarantee to remaining without an income.

As a result, the economy would move from A to C instead of A to B as the government fights the inflationary pressures.

In other words, the introduction of the Job Guarantee flattens the Phillips Curve.

The macroeconomic opportunities facing the government are not dictated by a perceived unemployment and inflation trade-off which might be unstable (as in a NAIRU world).

Full employment and price stability can be simultaneously achieved.

The steeper the original Phillips curve, the smaller will the required increase in the Job Guarantee pool be to stabilise inflation at some desired level.

Now the distance A-C reflects private employment losses being the workers that are available to work in the private sector but who are employed in the Job Guarantee.

Government would clearly aim to minimise the Job Guarantee pool, while still allowing for higher levels of non-Job Guarantee employment to be sustained with stable inflation.

Initiatives that may reduce the size of the pool, include public education to stimulate skill development and engender high productivity growth; institutionalised wage setting processes where productivity growth is shared equitably across all income claimants, and restrictions on anti-competitive cartels which should reduce pressures for profit margin push.

So what is complicated about that?

Plenty.

First, recall that I saw the employment buffer stock approach as being superior to using unemployment as a disciplinary force against inflation at a time (late 1970s) when governments, under pressure from mainstream economists, were abandoning their Post War commitment to sustaining full employment because they thought it was inflationary.

Inflation was high at the time and governments were pursuing policy settings that had pushed up unemployment rates and the Post War consensus had crumbled.

The fact they also bought the line that fiscal policy should not try to reduce the unemployment rate and was an ineffective way to manage inflation spawned the reliance on monetary policy and tolerated elevated levels of mass unemployment.

As a postgraduate student, I wanted to devote my research work to coming up with an alternative approach that did not require large pools of unemployment to sustain price stability.

Hence the employment buffer stock approach.

But be clear about it.

A Job Guarantee works by the government creating unemployment in the non-government sector which is undergoing inflationary pressures, and, transferring the workers into the Job Guarantee pool, which is a fixed price job offer.

The transfer occurs through tightening fiscal and monetary policy settings, which we now refer to in summary as ‘austerity’.

In this context, the goal should be to keep the Job Guarantee pool as small as possible.

Yes, in better times, the Job Guarantee pool would still be occupied by the most disadvantaged workers who would otherwise count among the long-term unemployed.

But its primary purpose is to stabilise inflationary pressures without creating mass unemployment by creating the transfer of workers from the inflating sector to the fixed price sector.

Tightening aggregate policy settings to stifle non-government spending creates unemployment under a NAIRU approach.

Under a Job Guarantee, the transfer of workers, at some point, disciplines the distributional conflict driving the inflation.

The Job Guarantee generates ‘loose’ full employment because skill-based underemployment would remain.

The adoption of the costly NAIRU approach reflects the fact that current fiscal policy practice is based on a flawed understanding of the capacity of the currency-issuing government.

Claims that governments are financially constrained bias fiscal policy towards surplus creation.

As a result, governments spend on a quantity rule, which means they allocate $x, guided by what they think is politically acceptable.

What defines political acceptability depends on a range of factors, including the economic literacy of the voters.

The problem is that $x may not bear any relation to what is required to address the non-government spending gap arising from the private desire to save and/or spending drains via external deficits.

As a consequence, mass unemployment persists at elevated levels, which describes the history in most nations over the last 3-4 decades.

Once we appreciate that the fiscal space available to government is limited only by the real resource availability rather than any erroneous financial constraints then we can adopt policies such as the Job Guarantee.

Accordingly, government spending would follow a price rule, by providing an unconditional job offer at a fixed Job Guarantee wage and taking on whatever labour is forthcoming at that price.

It is this insight that points to the statement that in MMT, the government sets the price level by what it is prepared to pay.

Second, so with inflation now, does this mean that the Job Guarantee is the way to combat it?

No!

Why?

Obviously, if the government drives the Job Guarantee pool up, eventually the joblessness in the non-government sector will end any inflationary episode.

But this is a costly approach with the virtue that it is the least costly approach relative to creating mass unemployment.

It still requires workers be transferred to the fixed pay Job Guarantee pool by the government cutting aggregate spending in the economy.

What you should understand is not that the government sets the price level at all times by what it is prepared to pay, but, rather, that this capacity is a ‘conditioning’ force around which other influences interact.

We also need to understand that the scenario I outlined above – the transfer principle – while damaging, is less so if the inflationary pressures are arising from the demand-side – expansion of nominal spending against a steadily growing supply-side (productive capacity).

If the inflationary pressures arise from supply-side factors, as in the current episode, then the damage is greater if we want to use the capacity of the government to influence aggregate spending as the solution to the inflation.

Think about that for a moment.

The pandemic arrives at a time when inflation is low, which means that nominal spending growth is more or less in tune with the growth in productive capacity (supply).

Then factories close, workers get sick, shipping and truck transport becomes severely disrupted, workers are restricted by government in their movements, etc – and so the supply-side contracts for the time these disruptions are in force.

Also the pattern of spending shifts towards goods (as workers are in lockdown etc) and away from services (as cafes, etc are forced to close), so there are also intensification of sectoral imbalances at work.

Inflationary pressures rise even though total nominal spending might be below where it was at the beginning of the pandemic.

Yes, the government could use the ‘transfer principle’ and cut aggregate spending, withdraw stimulus support to workers, and the like and eventually total spending in the economy would fall to the level consistent with the supply-chain constraints.

And that would eventually make things so bad that shipping agents would stop hiking prices etc.

We would stop the inflation, increase the Job Guarantee pool substantially, and make matters worse.

If it was a demand-side event, cutting the excessive spending would for a time create higher unemployment (or more workers flowing in the Job Guarantee if it was in place).

But the extent of the cuts would take the economy back to a higher supply level than we have seen during the pandemic.

The point is that there are other influences on the price level operating here that can persist for lengthy periods and the fact that the government can ultimately discipline those influences doesn’t alter the fact that doing so involves damage under certain circumstances.

Then introduce cartel behaviour and wars

These become additional real world influences on the trajectory of the price level, which can operate quite separately from the monopoly currency-issuing capacity of the government.

Yes, eventually OPEC will stop hiking prices if unemployment becomes so severe that people stop driving cars.

We have seen that in the past.

But until that point, the cartel works as a separate influence on the inflationary process and any attempts by government to assert the discipline of ‘spending on a price rule’ will require huge increases in the Job Guarantee pool.

The question focuses on whether the relative costs of leaving inflationary temporarily high versus creating recession and stagflation.

And the Russian invasion at present is another chaotic factor entering the supply-side.

The existence of a Job Guarantee doesn’t alter that fact.

Conclusion

In the real world then, there are many influences on the price level and a full understanding of MMT requires us to recognise them and how they interact and the way in which government policy can militate against them.

It is not just a case of having a Job Guarantee in place.

Any attempt to stifle inflationary pressures using demand-side policy (austerity), which would invoke the ‘transfer principle’ will be costly – and the cost in terms of lost incomes and all the rest of the problems that accompany austerity could be massive in the case of an entrenched supply-side event.

The Job Guarantee is just a better framework than relying on unemployment.

But triggering increases in the Job Guarantee pool should not be the first thing a government does when confronted with rising price pressures.

Note also: I haven’t talked at all about the impact administrative pricing decisions (indexation arrangements, user cost charges, etc) play.

It may be the most effective way to deal, for example, with price gouging from OPEC is to make public transport more available and free of charge.

That will divert spending from petrol usage to trains etc and achieve the same sort of demand effects on OPEC member income as a generalised austerity purge, without the concomitant rise in mass unemployment.

That is enough for today!

(c) Copyright 2022 William Mitchell. All Rights Reserved.

Some thoughts on a five-year development plan for Timor-Leste

Published by Anonymous (not verified) on Thu, 03/02/2022 - 4:43pm in

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job guarantee

Some years ago, I did some work for the Asian Development Bank on Pakistan and Central Asia. It was a really interesting experience because it taught me a lot about the challenges facing poorer regions who have dependencies on imported energy and food and limited export opportunities. Since then I have been studying a number of countries and am convinced that development strategies have to fundamentally change if the poorer nations are to achieve any hope of sustainable development. At present, I am working on the development of such a framework, which will incorporate the best-practices proposed by scholars who similarly reject the traditional IMF/World Bank development model. Specifically, I am focusing on Timor-Leste, which is about to stage a presidential election (March 19, 2022). Xanana Gusmão’s party – National Congress for Timorese Reconstruction (CNRT) – has backed former president Jose Ramos-Horta against the incumbent Fretilin President, Francisco Guterres and the third candidate Martinho Gusmão (United Party for Development and Democracy – PUDD). It appears that if Jose Ramos-Horta is elected, there will be a dissolution of parliament and early elections will be held after a period of political turbulence following the 2017 election. Early indications are that Ramos-Horta is well placed after the conduct of Guterres in recent years. The new government must consider a new development strategy and so I am working to provide some structure to that goal from a Modern Monetary Theory (MMT) perspective.

Setting the scene

Timor-Leste – first gained independence on November 28, 1975 from the Portuguese.

But we know that soon after (9 days), it was illegally invaded by Indonesia and a harsh occupation ensued that would last for 24 years and ended in Indonesian military troops devastating the infrastructure of the little nation as it was forced to leave under a UN-sponsored act of self determination.

It became a new state in its own right on May 20, 2002, nearly 20 years ago.

As an Australian I have borne the shame that our Labor government brought on us when it was complicit in the Indonesian invasion and the murder of investigative journalists at Balibo.

The Australian government has also been shameful in its territorial disputes with the new nation – as it tried to deprive TL of oil reserves. Australia also spied on the Timor-Leste during these negotiations (Source).

We have short memories. The Timorese incurred massive costs during the Second World War from the Japanese occupation, while helping to shield Australian soldiers who were fighting there.

I have written about Timor-Leste before:

1. Advanced nations must increase their foreign aid (April 7, 2021).

2. Labour force trends in Timor-Leste continue to point to a need for a Job Guarantee (October 15, 2019).

3. Timor-Leste – challenges for the new government – Part 3 (May 24, 2018).

4. Timor-Leste – challenges for the new government – Part 2 (May 16, 2018).

5. Timor-Leste – challenges for the new government – Part 1 (May 15, 2018).

6. Timor-Leste – beyond the IMF/World Bank yoke (November 20, 2012).

7. Why didn’t they build better houses! (December 30, 2004).

Now, after 20 years of nationhood, the next several years will be crucial for the nation’s future.

The first 20 years has seen a lot of progress funded by the oil revenue that they have enjoyed.

The problem now is to diversify the economy and deal with the on-going problems of food security with a reliance on imported products, inadequate water reticulation and flood control, unstable incomes, particularly in the rural areas, which compromise export quality and more.

Most farming activity remains at the subsistence level.

The Asian Development Bank provides – Poverty Data – for Timor-Leste and in 2014, the poverty rate was 42.8 per cent.

Their data shows that 30.9 per cent of people suffer from undernourishment (2019), 51.7 per cent of children under five years suffer stunted growth from lack of food and 9.9 per cent suffer wasting (malnutrition).

In March 2021, Timor-Leste endured massive flooding after a period of extreme rainfall. The floods caused substantial damage to the infrastructure – wiping out bridges, roads and several deaths. Dili endured massive damage.

The problem is that flooding on the island is not a once-off event.

The regular incidence of flooding is the result of a lack of planning and investment in water management systems as well as poor farming methods.

Up until now, the government response has been palliative rather than going to the nub of the problem.

The floods recur because the mountainous farming areas have not cared for the land over the decades, which has created low permeability in the soil, so when it rains, the water just gushes down the rivers to the coast and the capital.

The UN Office for Disaster Risk Reduction media release (January 29, 2022) – Timor-Leste floods teach costly lessons – reports that:

The floods … the worst the country has seen in 50 years, affected 13 municipalities and 30,322 households, destroyed 4,212 houses, and took 34 lives … Roads, buildings, and public infrastructure sustained damage. Agricultural areas covering 2,163 hectares were impacted and irrigation systems were wrecked.

Nearly a year later, roads remain impassable and other infrastructure is yet to be repaired as a result of delays in getting international aid.

The UNDRR also note that “Obstructed waterways – which are dry most of the year and only fill up when it rains – was named the biggest culprit in the catastrophe. As Dili grapples with the rising demand for shelter because of in-migration, people erect houses along waterways.”

Think about this – in the first two decades of nationhood, the – Timor-Leste Petroleum Fund – had accumulated $US17.7 billion by 2019 (Source), but recent discussions with those on the ground tell me that it is now $US19 billion,

In the blog posts cited at the outset, I have discussed the petroleum economy issue in detail.

In 2019, it earned $US2.101 billion and transferred only $US969 million to the ‘State Budget’.

Its portfolio as at 2019 was distributed according to the following graph.

Why they are investing in low-yield US government debt instruments is one issue, which I will deal with another day as I work on this project more over time.

There is always a tension in these situations between saving for the future and investing now to make sure there is a future.

That is where the problem lies and in developing a 5-year plan to take the country to the next level after the elections will have to deal with that issue.

The other issue that the nation has to deal with is their use of the US dollar. I indicated to relevant parties in a meeting the other day that Timor-Leste cannot be sovereign and independent until it has its own currency.

And to achieve that desirable aim requires a carefully thought out transition plan to be developed to ensure the new currency is a positive step rather than becomes the target for destructive speculation by the financial markets.

I will write more about what a blueprint might look like in that regard somewhat later when things become clearer in the political circles.

Towards a sustainable growth path

My work on Pakistan and the so-called CAREC nations of Central Asia some years ago emphasised that at the outset policy makers had to achieve an understanding of the functioning of the monetary systems of sovereign nations.

Such an understanding of the options available to a nation operating with a sovereign currency must be developed first in order to appreciate the policy space that is available.

This allows for a strategy for development that is feasible while exploiting as much of the policy space available, consistent with the goals of policy-makers.

Policy-makers might choose to use less space than is available, but they should at the very least understand which policies are feasible.

The problem facing many poorer countries is that the IMF and the World Bank consultants have told the goverments that their policy space is close to zero and can only be expanded by austerity measures in the domestic economy while transforming the subsistence agricultural sector into a debt-laden, export sector producing cash crops (to pay off the debt).

When world prices for crops fall, the IMF and World Bank, just extend more loans with harsher conditionality, and the nations get nowhere.

A sustainable development strategy requires that:

1. Material living standards rise.

2. Internationally recognised human rights are advanced.

3. Economic sustainability is achieved – the nation cannot be at the mercy of export markets.

4. Environmental sustainability is achieved – farming and urban systems (water, electricity, etc) have to evolve.

When I have been working in these types of nations, the predominant theme is that if the government pursues a domestic policy of full employment (with the introduction of a Job Guarantee being a central innovation to eliminate chronic joblessness), the balance of payments problems will become worse.

The idea is that if income levels rise as more people have employment security, then imports will rise and current account constraints on growth will impinge.

In general, under fixed exchange rates, the so-called stop-go constraints on growth were always a problem facing an economy with high unemployment.

Contractionary policies were required because the current account influenced central bank reserves and made domestic expansion dependent on the defence of the external parity.

Under floating exchange rates the constraint is not binding and domestic policy can pursue full employment targets leaving the exchange rate to absorb any adjustment.

But it is clear that a further source of cost pressure could come via the exchange rate for small trading economies with flexible exchange rates.

First, the higher imports (which is not an inevitability) may promote exchange rate depreciation. Second, depending on export and import price elasticities, net exports may increase their contribution to local employment and demand.

This becomes the obsession of policy makers and militates against pursuing sustainable domestic policies.

For example, when I was working on Pakistan’s development options during the GFC, the Economist magazine published two inflammatory articles.

1. The Last Resort (October 25, 2008).

2. Pakistan’s wounded sovereignty (October 29, 2008).

Quotes include:

– “Pakistan faces economic meltdown … The economy is close to freefall. The country needs at least $3 billion in short order, and a further $10 billion over the next two years to plug a balance-of-payments gap. Without it, default abroad might well coincide with political anarchy at home.”

– “Without foreign help, Pakistan won’t be able to afford its imports, repay its debts, or quell the insurgents encamped within its borders.”

– “Pakistan is running out of hard currency. It spent $3.6 billion on imports in September, including a $1.5 billion petrol bill that was 180% higher than a year earlier but earned only $1.9 billion from its exports.”

I will tell an interesting story about my Pakistan work at a later date – which will reveal IMF bullying of a major international development institution and the government. It was a fun time.

But the point is that it is the Balance of Payments issues that become the focus for nations that import much more than they export.

For Pakistan, the government clearly needed time to deal with the burgeoning balance of payments deficits and the unsustainable loss of foreign exchange reserves.

The mainstream economists advocated harsh austerity as the solution.

My recommendation was quite different.

The financial problems facing nations like this should not be seen in isolation from the real problems – the constrained supply and the persistently high rates of labor underutilisation.

If such nations just concentrate on the financial issues they narrow the range and scope of policy options and, ultimately, limit the capacity of the economy to redress the real problems.

A viable policy framework must seek to solve both sets of problems and provide a sustainable development path.

In the case of Timor-Leste – we recognise that a robust growth outcome will tend to generate a current account deficit because of nature of its dependence on imports.

The following graph shows the current account balance from 2000 to 2021 as a percent of GDP.

The reality is that I would expect that to grow as oil revenues decline.

The IMF approach that imposes austerity, reduces capacity utilisation and suppresses domestic demand, does not provide a sustainable development path. It tends to create a vicious circle with further balance-of-payments problems.

Timor-Leste’s challenge is to create more domestic policy space to pursue an alternative, sustainable growth path. It can do that in two stages.

First, within the current dollarised monetary regime using its massive Petroleum fund holdings as if they are a currency issuer. Clearly, that cannot be the indefinite future strategy though given the fund only has $US19 billion in it.

Second, introduce their own currency, float it on international markets, run their own interest rate policy and only issue debt in local currency.

Then they have to deal with the exchange rate issue.

In the medium-term, it can make use of the considerable policy space it has (see below) to pursue economic growth and rising living standards, even if this means expansion of the current account deficit and depreciation of the currency, which is possible once it abandons the US dollar.

Of course, continuous currency depreciation cannot be sustainable.

While there is no strict balance-of-payments growth constraint in a flexible exchange economy in the same way that one exists in a fixed exchange rate world, the external balance still has implications for foreign reserve holdings via the level of external debt held by the public and private sector.

Moreover, the evidence shows that, in the long-run, no country can grow faster than the rate consistent with balance on the current account.

Sooner or later the market penalises the country and attracting capital inflows from abroad becomes very difficult.

I have a detailed paper coming out on this topic which I will make available when ready.

So part of the development strategy for Timor-Leste has to be in preparing its domestic policy space to deliver short-run gains on the road to sustainability, while getting the nation ready for the introduction of its own currency.

That strategy must include policy initiatives that reduce its dependence on imports.

In a 2008 paper – Second-best Institutions – Dani Rodrik emphasised that development strategies must recognise the contextual nature of policy solutions and to tailor the policies in a trial and error manner.

This is in contradistinction to the IMF/World Bank approach that imposes a one-size-fits-all, Washington Consensus model onto all nations.

Strategies that just create growth are also inadequate and in early stages of development rarely address the structural problems that need to be overcome.

Indeed, barring calamity (GFC, floods, pandemic), Timor-Leste has demonstrated robust growth capacity.

As noted above, poverty is high, food security is compromised, basic infrastructure is insecure and joblessness is high (especially in the informal sector).

In the short-term, the Timor-Leste government has substantial financial resources available to it to fast track an alternative development strategy away from an export-petrol economy dependence.

I consider the essential components of this alternative strategy to be:

1. Introduce a national Job Guarantee to provide income security – this will be especially beneficial in the rural, farming areas where crop quality is often compromised because the workers don’t have enough income and try to harvest too early to pursue export markets.

I am working on the parameters that might define such a policy as more data comes in.

A $US100 per month wage would, for example, improve the circumstances for the nation substantially. More about this another day.

The Job Guarantee program can be designed to increase export capacity which can help mitigate any rise of imports caused by rising consumption by participants in the program.

But the program can also be designed to reduce import dependency on food etc.

2. Reorient emphasis toward employment-creating policies and away from growth-for-its-own-sake policies. Growth must be placed within the context of achieving full employment with price stability.

3. Reformulate tax and transfer policy: (i) replace regressive taxes with progressive direct taxes to reduce the burden on low-income and low-wealth households; (ii) switch from price subsidies to income subsidies with clear targeting mechanisms for poor households; (iii) protect vital social and economic services when poverty is increasing; (iv) allot funds to address the power and water shortages; and (v) eliminate subsidies to rent-seeking sectors.

4. Diversify the country’s export basket with a view to promoting those sectors that will lead to sustainable economic development in the long-run.

The aim of this development strategy is not to direct domestic resources toward production for external consumers (instead of using them to produce for domestic consumption).

The objective of this program is to reduce import reliance and to diversify and upgrade the country’s export structure to develop niche exports.

5. Reject the conventional agricultural development strategies currently in vogue – the so-called ‘modernisation’ approach, whereby the nation adopts the practices of industrial agribusiness and chemical-input based agriculture.

This approach involves dislocation for local communities and technologically backward small land holders.

Within the current government of Timor-Leste is the view that the nation should transition out of agriculture, develop the land for industrial purposes and create a consumer society that relies on food imports.

Neither approach will succeed.

The alternative which should be part of a five-year plan involves so-called agro-ecology which is otherwise known as permaculture techniques.

There is now sufficient evidence from practices in India and some Latin American nations that this approach is scalable and provides a firm and sustainable platform for increasing food security and protecting land resources, while at the same time, reducing the need for imported food.

In the case of Timor-Leste a development strategy that invests heavily in sustainable permaculture will also help mediate the water problems because the land will improve its water retention capacity etc.

This strategy also allows the employment creation policies to reinforce the farming policies.

6. Develop water security policies.

7. Develop eco-tourism based on small-scale opportunities rather than the big resort-style, hotel investments that are common in poorer nations and which just worsen the energy and food import issues.

Conclusion

I will write more specifically about all this as I accumulate more data over the coming weeks.

The goals for Timor-Leste are to use its human resources more fully and more productively while at the same time ensuring it deals with the environmental issues (flooding) and the food security issues.

It must aim to increase the value-added nature of its non-oil exports – by investing in processing and improving quality control.

That will happen, in part, if income security is increased.

And that will happen, if the government ensures everyone who wants to work can.

The agricultural sector will be vital in the next five years and a permaculture transformation is essential.

My Helsinki Lectures series 2022 – ending today

I am currently presenting my annual set of lectures on Modern Monetary Theory (MMT) and the global economy at the University of Helsinki.

Tonight, is the last lecture in the series.

The teaching program will be:

  • Tuesday January 25, 2022 – Streamed public lecture (YouTube) starting 10:15 Helsinki time.
  • Wednesday, January 26 – first Zoom lecture with class – 08:15-09:45 Helsinki time.
  • Thursday, January 27 – second Zoom lecture – 10:15-11:45 Helsinki time.
  • Tuesday, February 1 – third Zoom lecture – 10:15-11:45 Helsinki time.
  • Wednesday, February 2 – fourth Zoom lecture – 08:15-09:45 Helsinki time.
  • Thursday, February 3 – final Zoom lecture – 10:15-11:45 Helsinki time.

The Zoom link for the lectures is:

https://helsinki.zoom.us/j/5354174274?pwd=OHdTdWJzSHNndHpyVkV2Y0lJUExRZz09

Meeting ID: 535 417 4274
Passcode: ETZhk9

This is an MMTed initiative.

MMTed MOOC – Modern Monetary Theory: Economics for the 21st Century

MMTed – invites you to enrol for the edX MOOC – Modern Monetary Theory: Economics for the 21st Century.

It’s free and the 4-week course starts on February 9, 2022 (note edX adjusts the starting date for time zones, so for some the starting date will be listed as February 8, 2022).

The course is offered through the University of Newcastle edX program.

The course is self-paced so you can learn and participate as you choose. There is new material released at the start of each of the four weeks.

Learn about MMT properly with lots of videos, discussion, and more.

For – Further Details.

That is enough for today!

(c) Copyright 2022 William Mitchell. All Rights Reserved.

Income support for children improves brain development

Published by Anonymous (not verified) on Mon, 31/01/2022 - 12:46pm in

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job guarantee

When I first came up with the idea of a buffer stock employment approach to maintain full employment and discipline the inflationary process (back in 1978), the literature on guaranteed incomes was still in its infancy. The idea of a basic income guarantee was still mostly constructed within the framework Milton Friedman had laid out in his negative income tax approach, which I first came across when reading his 1962 book Capitalism and Freedom, while I was an undergraduate. I wasn’t taken with the idea and the preferred an approach to income security that not only integrated job security but also had a built-in inflation anchor. When I developed that idea, inflation was still conceived of the main problem and governments were fast abandoning full employment commitments because mainstream economists told them TINA. I thought otherwise. However, as I developed the buffer stock approach further in the 1990s as part of the first work that we now call Modern Monetary Theory (MMT), nuances about additional cash transfers became part of our approach. I refined those ideas in work I did developing a minimum wage framework for the South African government in 2008. I was reminded of all this when I read a report in New Scientist last week (January 24, 2022) – Giving low-income US families $4000 a year boosts child brain activity. Some might think this justifies the BIG approach, whereas it strengthens the case for a multi-dimensional – Job Guarantee.

Some work I did in South Africa

In 2007-08, I did work in South Africa that was funded by the International Labour Organization (ILO) and focused on the Expanded Public Works Programme (EPWP) in South Africa, which culminated in several reports.

The ILO initiated this research in accordance with its commitment under the UN Development Assistance Framework (UNDAF) for South Africa to support South Africa in addressing the problems of the “second economy”, and as part of its technical assistance to the Government in implementing the Public Works programme.

The Government has adopted a number of measures to reduce poverty and promote employment – primary twin-problems of the “second economy”.

The EPWP was the only programme with both employment and social protection elements directed to the working-age population who are able to work and willing to work but cannot find work.

We engaged in a series of consultations from March to October 2007 with the EPWP programme managers and implementers, key policy makers, social partners and academic experts which helped clarify the issues and identify research questions that would be useful inputs to national debate on policy choices.

One of the reports, published on June 12, 2008 – Assessing the wage transfer function of and developing a minimum wage framework for the Expanded Public Works Programme in South Africa (252 pages) – considered, among other things, what extra assistance a Job Guarantee program would require to reduce poverty.

I considered how to deal with spatial price level differentials where prices and spending patterns vary significantly across space – in particular, between the more expensive (but higher quality) urban areas and the less expensive rural areas.

One recommendation was that where spatial cost-of-living disadvantage can be clearly identified and estimated, adjustments are made to social grants – such that a zone allowance might be paid to the worker via a social grant.

In developing the minimum wage framework designed in the first instance to provide a buffer against poverty, I also had to consider household size.

Note that the general Job Guarantee idea ensures a socially-inclusive minimum wage, which would be well above traditional poverty line estimates.

In the South African case, we initially were seeking to build a framework that provided, in the first instance, a buffer against poverty, which would give the government time to expand the things that the mininum wage could achieve.

The problem was that setting a minimum wage that will provide a buffer against poverty was complicated by the fact that household size and composition varied across the population.

This problem always bedevils efforts to set poverty lines because there are considerable differences in household consumption patterns.

I came to the view that it would have been too unwieldy to build adjustments for family size and age composition into the EPWP minimum wage determination framework.

Instead I recommended that poverty line measures be equivalised where possible (and achievable) and that the social grants system used through family assistance grants to supplement the EPWP wage.

I also recommended a scaling up of the social wage to ensure that essential public services such as education, health and aged care and the like are provided in adequate supply.

This public goods approach to services reduces the need for households to have private income.

If you consult the report, You will see that I devoted considerable attention to the alternative argument (against the EPWP) that the social grants system should just be expanded to some form of BIG as the primary means through which the fight against poverty is conducted.

I argued that the EPWP should be progressively scaled up to become a true employment guarantee rather than be restricted by fiscal allocations, which meant only some workers could access the guaranteed work (about 10 per cent of the unemployed at the time).

I recommended that the current social grant system be restructured to ensure that families of workers are also able to live beyond poverty.

That restructuring would be consistent with the principle I set that no South African should be left without an adequate income if they are willing and able to work.

And, for those unable to work because of age, disability, illness or child-rearing, the primary source of poverty alleviation should be an upgraded social grant system.

The New Scientist report

Kimberly Noble is a Professor of Neuroscience and Education at Columbia University in the US and has done a lot of research into the neuroscience of socioeconomic inequality.

Neuroscientists have long considered there are “links between a child’s socioeconomic background and the structure of the brain” although to date the evidence has been “correlational”, meaning lacking in clear causal understandings of what the links mean.

Kimberly Noble’s research team have sought to understand:

… how exactly child poverty causes reduced grey matter volume in the hippocampus and frontal cortex, which is associated with the subsequent development of thinking and learning. These changes have been seen throughout childhood and adolescence.

Their study tracks brain development in “1000 babies from low-income families in four metropolitan areas” across the US.

The families had an average income of $US20,000 per annum.

The US Census Bureau reports that the – Median household income (in 2019 dollars) – was $US65,712.

We also learn from – Table S1901 – that 11 per cent of US families had a 2009-inflation adjusted income over the last 12 months of less than $US24,999.

5.6 per cent of families had incomes of between $US15,000 and $24,999.

The average income for all families was $US108,587, with 11.1 per cent receiving $US200,000 or more.

The following graph shows the full distribution from Table S1901 – it is highly skewed with some very high income recipients biasing the average.

The point is that the families that the neuroscience team targetted for their study are very low income recipients and likely to suffer significant material deprivation.

The team:

The team gave half the babies’ mothers a monthly stipend of $333 and the other half $20 a month. The first payment was received soon after their baby’s birth.

So the $US333 a month is about $US4,000 per annum, which other studies have indicated leads to “improvements in a child’s school performance later in life.”

For example, a Harvard scientist (David Weissman) and team found that higher welfare payments in the US “can reduce the impact that living in a low-income household has on the size of a crucial region of a child’s brain” (Source).

The crucial region – the hippocampus – is “involved in learning and memory” and “kids with small hippocampal volumes are more likely to develop internalising problems … and develop depression”.

Back to the Columbia research.

The parents could spend the transfers any way they chose.

At the first birthday, 435 kids were checked for “their brain activity” – 40 per cent in the lower transfer group and 60 in the higher group.

Covid prevented the full sample being tested.

The results are stark:

… on average, children from families that received $333 a month had more brain activity in higher frequencies than those in the $20 group.

These frequences “predict skills that are important for thinking and learning” as the child gets older.

In general, one of the consequences of poverty is less “high-frequency brain activity”.

Why did the higher payment improve the cognitive development of the young children (babies)?

The researchers think that the higher payments “changed the home environments of those babies”, perhaps overcoming the typical stress that poor families endure, which undermines brain development in children.

Kimberly Noble was quoted as saying:

The fact that we did see effects after just one year really speaks to the remarkable plasticity of the developing brain and its sensitivity to economic resources.

As more research along these lines comes in, it is clear that governments have to do everything they can to resolve the poverty question.

My work in South Africa, and, later in indigenous communities in Australia, clearly supported this type of research.

Two aspects are important:

1. Reducing family stress by ensuring the adults can gain employment at a socially-inclusive wage. There is little thirst among adults that I have studied for a BIG if a job is available.

The income security arising from guaranteed work helps families risk-manage better and improves the environment for their children.

There is less anxiety.

2. Providing additional income support where family circumstances warrant to address size differences, other family issues (such as disability, etc), to make sure children get adequate learning support.

Conclusion

That additional support to supplement the Job Guarantee in no way makes a case for the introduction of a BIG.

Families want to work.

But that alone may not be enough, even with a socially-inclusive minimum wage provided, to address the diversity of family structures that exist.

The bottom line is clear – children suffer massive disadvantages from growing up in poverty.

Unemployment is one of the principle causes of poverty.

That is enough for today!

(c) Copyright 2022 William Mitchell. All Rights Reserved.

Debt Ceiling, Job Guarantee, Inflation

Published by Anonymous (not verified) on Fri, 05/11/2021 - 5:28am in

Grabbing a moment to catch up:

The Case for Minting a $1tn coin to deal with America’s Debt Ceiling
— Nathan Tankus (@NathanTankus) <em>The Guardian</em> (@guardian) Oct 15, 2021

Good Forms of Collectivity: Low-Carbon Care Work and a Federal Job Guarantee

— Natan Last (@NatanLast) Los Angeles Review of Books @LAReviewofBooks April 26, 2021

Like Haiku, the limits created by Twitter offer opportunities for brevity and coherence. Here’s the first bit of Steven Hail’s admirable Nov 1, 2021 Twitter thread:
“Inflation is not in itself some terrible disease which we have to minimize or eliminate.
It is not like Covid, needing to be stamped out. It is not like involuntary unemployment, underemployment and insecure employment, which are genuinely social evils.” Read more.

It’s All Connected

Published by Anonymous (not verified) on Fri, 03/09/2021 - 8:07am in

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job guarantee

Added to Job Guarantee, here.

A Federal Job Guarantee: The Unfinished Business of the Civil Rights Movement • The 1963 March on Washington put a government guarantee to a job at the front of the civil rights agenda. It’s long past time to complete the work.
—  Rep. Ayanna Pressley (@AyannaPressley), David Stein (@DavidPStein <em>The Nation</em> (@TheNation) Sept 2, 2021

A little macro background for Macroeconomics: Provisioning and Prosperity, particularly with regard to universities as a provider of alternative currencies.  

The Rise of the UniverCity • As they come to resemble corporations, universities increasingly wield the kind of power and influence that were hallmarks of ruthless employers in isolated company towns. Historian Davarian Baldwin calls this ominous trend the “rise of the UniverCity.”  — Davarian Baldwin (@DavarianBaldwin), <em>Jacobin</em> (@Jacobin) Sept 2, 2021 #Background #Unis4All #InTheShadow

A new addition to our Blogroll and Kelton’s page under Primary Sources.

The Lens – Stephanie Kelton • “The Lens is a portal into my academic and professional world. It’s a place to visit for economic analysis, commentary on public policy, and previews of forthcoming talks and publications. Never miss an update.”

 

 

Thursday, 7 September 2017 - 6:21pm

Published by Matthew Davidson on Thu, 07/09/2017 - 6:21pm in

I've been meaning to go through the literature on every thrust and parry in the ongoing argument between proponents of a Job Guarantee and those of a Basic Income, and put together a thorough response. That's not going to happen in the next month or so, so in case I get hit by a bus, here's two paragraphs of where I stand (or don't stand) in the debate, lifted from a comment I just posted on Neil Wilson's blog:

Basic income vs. job guarantee is a false dichotomy that ill serves anybody who takes sides. There is undoubtably some overlap in that they both aim to reduce hardship and stimulate demand, but as far as I can see they’re mostly orthogonal in the range of problems they can potentially solve. Also they’re both programs that we already run, in the sense that we (in developed sovereign currency economies) already have a labour buffer stock program — unemployment — and a basic income, set at the level of zero.

I’m totally sold on (at least my understanding of) the job guarantee as a better implementation of a labour buffer stock, but I don’t think that “with a job guarantee in place, no matter what the particular circumstances may be, anywhere and forever, no level of basic income other than zero could be justifiable” is a defensible argument. And it runs counter to the general MMT stance of “these are the economic policy tools available; how you choose to use them is a political decision”.

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