One of the things I want to do this year is to learn more about Modern Monetary Theory (MMT). Lat year I listened to a few episodes of The MMT Podcast and read a few articles about MMT that had me believing this was the missing piece that explained how the ideological foundations of austerity could be dug up and destroyed.
When Cory Doctorow appeared on The MMT Podcast not once, not twice, but four times….. and talked sense, as always, I was hooked. Listen here to the first of those episodes.
Two of the MMT books on my reading pile at the moment are Stephanie Kelton’s The Deficit Myth and Pavlina Tcherneva’s the case for A Job Guarantee.
Early on in chapter 2 of the Tcherneva, she discusses the way neoliberal idealogues have convinced us that unemployment is not merely an unfortunate by-product of a successful economy but, indeed, essential. This is both morally corrupt and completely wrong.
Tcherneva uses the examples of starvation, homelessness, and education to point out the stupidity off a policy that states that a level of, say, 5% unemployment is unavoidable. Here is how she relates that to some other measures of a successful society:
“Suppose you heard that, in a strong economy, the optimal level of children who wanted to but were unable to receive primary and secondary education was 5 percent; or that there was a natural level of starvation equal to 5 percent of the population; or that 5 percent of people would ideally remain without shelter.”
As she says, although — for the latter two categories, especially — our so-called advanced economies could do better, “we do not design or implement policy on the basis that there is some ‘optimal’ level for these social ills.”
On the other hand, it is clear that we do implement policies that keep a large number of people unemployed. This is likely to become a policy that becomes increasingly apparent as our corporate servants in government seek to reimpose austerity — possibly under a new name — to ‘pay’ for the cost of the Covid-19 pandemic.
I have skin in this game. My son is at home and unemployed. This is not a good time to find work, of course. It is especially not a good time to find work that he has trained for. His sense of self-worth diminishes by the day.
We have not always been so tolerant of an ‘optimal’ level of unemployment. And it’s worth asking; ‘optimal’ for whom? Although high levels of unemployment depress wages and lift profits, it turns out that unemployment has a detrimental effect, not only on the unemployed but also their families, their communities, and the economy as a whole. Go figure: economic policies are pursued that knowingly damage the economy simply to prevent wages from rising.
Of course, the old canard is that rising wages cause rising inflation and there is nothing that a central bank hates more than inflation. There are two things wrong with this belief now.
The first is that in the years since the crash of 2008 inflation has not been a concern. There were fears that great dollops of stimulus and quantitative easing would be followed by inflation. With low interest rates bordering on the negative, we’re more in danger of deflation now than inflation. No sign of increasing wages, of course.
The second is that, even in the old myth of inflation-driving wage increases, this happened when firms were competing for the same resources (i.e. workers). A policy of providing employment funded by the government at a living wage for the currently unemployed would not trigger competition with those employers who have no need of staff. (It might drive down the numbers of those forced into the gig economy — at what tends to be less than the living wage — or who are forced to hold down multiple part-time jobs but that does not feel like such a bad thing.)
Tcherneva makes a good case for the detrimental impact of unemployment beyond the unemployed worker. I don’t think this is new information or will come as a surprise to anyone with a modicum of awareness of our society. The issue is not so much how to pay for jobs for everyone as how can we afford not to?
It’s worth noting here that the points that Tcherneva makes about the cost of unemployment are valid regardless of whether you think MMT is a fantasy about a magic money tree or you see it as a mystery-dispelling antidote to the ‘there is no alternative’ brigade who believe in balancing the budget.
In the end, though, I suspect turning unemployment ‘benefit’ into employment benefit can only improve all our lives.