Pavlina Tcherneva: Gobernuaren gastuaz eta pandemiaz geroztiko suspertzeaz

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we talk a lot about de-risking right this is the Vogue term these days well

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the public sector is absolutely de-risking the financial sector for

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example right we invent new institutions to impart more stability on the system

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to eliminate Bank runs to eliminate defaults on certain Financial assets the

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public sector uses its exclusive spending powers to do risk Tech investment we provide large contracts

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guaranteed profits we believe it’s important to provide the subsidies the one thing that we don’t seem to be

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de-risking very effectively is the labor market what mmt brings to the table is an understanding that unemployment in

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fact is engineered by the monetary system and it says that we have a concrete tool in the form of the job

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guaranteed employer Last Resort that can provide that public option

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[Music] is the mmt podcast with Patricia Pino and Christian Riley

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hi I’m Christian Reilly and welcome to the modern monetary Theory podcast you

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big thank you to all of our supporters so far and thanks as ever for the time

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you put into understanding mmt let’s dive in welcome one and all to the mmt

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podcast I’m Christian Riley and I’m Patricia Pino and it’s our absolute pleasure to welcome back to the show

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director of the economic democracy initiative and author of The must read the case for a job guarantee Professor

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pavlina chernova hi pavlina hi it’s good to be back so pavlino we wanted to talk

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about your chapter in the recently published mmt key insights leading thinkers and that chapter is entitled

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three lessons from government spending and the post-pandemic recovery and

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lesson one of the three lessons is the funding is always there just for anybody new to mmt can you say what you mean by

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that well basically crisis after crisis we see that whenever governments wish to

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provide funding for whatever policy priority um they have the fun ending no matter

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the size is available there are no limits constraints there’s no ring of

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hands or calling up of taxpayers public institutions are there to fund those

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policy priorities so it really is supposed to put to rest this question of how do we pay for various programs and

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objectives and so given that as you write in the chapter quote the central lesson of the covid fiscal response is

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that money isn’t scarce and quote could you give us your thoughts on the recent

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debt ceiling drama that just concluded for now at least over there in the U.S

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while it has become like Groundhog Day you just anticipate that every time

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government expenditure approaches that arbitrary limit this has become a

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political tool to undermine various other programs and policies so it’s

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completely artificial it is counterproductive and diverts attention

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to the important economic concerns at hand so in a sense we are trapped in a

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false conversation trying to debate whether or not the public sector has the funding to pay for programs where in

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fact we know very clearly that it does and it’s just a matter of what we prioritize and then put together our

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existing tools to fund those policy priorities I mean one of the things that I discussed in my chapter is that yes

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money is not scarce but money is also fundamentally a public institution and

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despite the very many intricacies that we see at the Institute official level different countries have ministries of

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Finance central banks they coordinate or not in different ways whatever those

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legal institutional arrangements are the Bills get paid for what we would call

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monetarily Sovereign Nations and major crises illustrate that even those

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institutional arrangements are not really a limitation to paying for crises

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and then what we also saw in the pandemic is that countries that do not have monetary sovereignty well they were

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not able to respond in the same scale the same size but some countries try to

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ReDiscover their monetary sovereignty notably those in the Eurozone and the

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Eurozone broke its own rules implemented various funding mechanisms to allow countries to respond with the kind of

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large-scale government packages that were necessary to address the crisis and

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since you bring up the Eurozone in your chapter you compare German unemployment to U.S unemployment

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over the initial pandemic response period tell us about that yes I mean

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this is fundamentally a question of how governments spend it’s really rather trivial to observe that countries that

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have currencies which are public monopolies do not have operational

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constraints to spending they are not going to ever run out of the currencies

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that they issue so that is a rather trivial observation it is an important one that mmt has emphasized because

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frankly no one else has done it but what we have always attempted to do is to say listen we are trying to shine a

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spotlight on the way governments spend and we need to go beyond this

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conversation of can we pay for our programs because we do have institutions

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that can and so we’ve spent considerable time explaining some of this financial

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architecture and some of these historical artifacts like the debt ceiling like dead to GDP ratios and the

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kind of legal separation that might exist or at least limitations between fiscal and monetary authorities so we’ve

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spent some time doing that because the institutional analysis is important in illustrating these capacities of

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governments but then what we are really interested in is the question how do we spend and what is the economic outcome

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what is the effectiveness of that spending and kovid gave us some insights

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into that question because when you survey the major oecd countries

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developed countries we see different size packages so Japan traditionally

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always have been very fiscally bold and aggressive and they had spent over 50

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percent of GDP to address the covet crisis the United States we spend the

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equivalent of 26 point nine percentage just in in 2020 alone I mean that is

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quite extraordinary in the post-war era we have not seen this size government expenditure the last comparable such

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spending was during World War II and the Great Depression but then there are countries like Germany Italy France that

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spent about 10 percent of GDP and as I just said there are obviously constrains

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monetary constraints but those were relaxed and the spending was supported by the European Central Bank but they

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also came out of the recession despite their smaller relative spending with lower unemployment rates or in fact they

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just didn’t allow unemployment to accelerate to the degree that it accelerated in the U.S so again in the

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U.S 27 of GDP but we ended up with 14 almost

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15 percent unemployment rate at its peak that’s extraordinary Germany spends

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about 10 percent but they end up with Peak unemployment 5.5 why and that

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really is about policy design it is about the way the governments chose to respond and in Europe the policy Choice

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was to protect payrolls whereas in the United States we simply allowed firms to

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have workers in mass and then on the back end we decided to provide Income

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Support expanded unemployment insurance various other stimulus programs and these outcomes are certainly not

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inevitable they’re very much policy Choice which is I guess the second lesson that I highlight in my chapter

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that unemployment at bottom is a public policy choice would you say though that

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in that because here we had something called the furlough and people would be kept on the payroll but that’s despite

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the fact they were sent home because the law here was that you can only be in fellow if they’re not working during

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that period right and isn’t that hidden unemployment though isn’t the effects of

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that similar to other types of unemployment might be yes in a way yes

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but also note that this was quite a different crisis from the conventional

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recession that we see this was very much a supply side crisis where businesses

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close doors and Productions stopped and we just tried to engineer a pause in the

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global economy and so yeah in a sense if you’re not going to the office or if you’re being furloughed that is a kind

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of hidden unemployment that is a consequence of the shutdowns but the

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furlough also keeps you attached to the job it also affords more a better

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reintegration in the labor market better transition whereas in the United States

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they were there are a lot of workers who do not have first the formal employment Arrangements that we tend to observe in

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Europe and when restaurants shut down or they close their doors permanently then those folks are in a very real sense

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unemployed and the government did provide income support but that

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transitioned back into the labor market was more difficult now I think it’s important to note that we had still seen

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the fast swiftest recovery in post-war history but then we got to ask ourselves

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these questions was it the government that did that was it the large-scale government spending that rescued the

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economy is it to me the answer to that question is both yes and no if we did not have this significant support on the

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fiscal side then what was a temporary pause in the labor market would have

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become a permanent Devastation and so in a sense we provided that kind of income

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support for folks to come back in but also no because it was largely a supply

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side shocked and so when the economy reopened firms were able to bring back

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large swaths of the labor market but then also that begs the question well what happens next in the next Crisis

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would we have to rely on 20 30 percent of GDP government expenditure to

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engineer a very rapid recovery and I think that the answer is no there’s hardly any appetite for this scale of

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government spending the politics definitely don’t give us any reason to

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be optimistic but also we tend to address these crisis by relying on these

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discretionary expenditures and so again the question is how should government respond to crisis are there better ways

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to spend financial resources and address real crisis and in your chapter I think

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the line that Nails the difference between the U.S approach and say the German approach is this line from a

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macroeconomic perspective the policy maker has two choices either close the output Gap or close the employment gap

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can you lay that out for our listeners no absolutely this is a very peculiar way in which economists tend to think

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about the problem of unemployment you see often when we Define an economy that

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is fully employed economy we don’t actually mean people conventional economists tend to think of some sort of

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output potential output that the economy can reach and so that would imply yes

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people working but also factories operating at high capacity resources not

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being underutilized so it’s a very amorphous abstract concept of Full Employment and often when we talk about

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unemployment we talk about deviations of actual GDP growth from this mythical

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potential but you see we can close that Gap and that’s what essentially

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recoveries do we can bring us back either close to that previous growth path or we simply reduce the growth path

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the potential gets redefined and so the output gets closed through these two

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effects but what we’ve seen in the postural areas that we’ve seen jobless recoveries so in a sense we are closing

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the output Gap we are restoring growth or the economy is recovering but the payrolls do not return at the same rate

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so while increasing the production should imply increases in employment

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there’s no like stable ratio and if our attention is just on the GDP number on

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growth then in a sense you can accomplish the goal of returning the economy to a growth path but you still

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have many people who are unemployed and this is a fundamental problem the

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European approach I think recognize that you need to protect people there employment payrolls whereas in the US

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that was not the focus of policy the focus was well how large should government spending be to grease the

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economic wheels and hopefully restore growth when the pandemic is over on the subject of the European Union because as

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you mentioned the rules got relaxed over there in order for the pandemic response to happen despite the fact that the

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rules got relaxed for a few years there was less than expected government spending in a number of countries and I

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was wondering what your view may be about the why in the context of okay

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there are no restrictions now we’re going to support all government spending in the European Union why would

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governments hold back when before they would quote European Union rules in

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their spending yes I mean that’s a really good question my sense is that when we are trapped in a paradigm of

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austerity for decades and decades it’s policy makers don’t just wake up one day and say hey our hands are untied let’s

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just go and do everything we can to support our economy I think that there’s that General principle you know the

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folks in elected office tend to be fiscally conservative they are not as

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Progressive in terms of Social and economic policy so that would be one hurdle I think that they may have been

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also the question of what happens next and that is a question that you know is being discussed at the European level do

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we urge countries now to go back to the Mastery criterias now that they have accumulated increasing deaths in part as

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a consequence of the covet pandemic do we now impose on them ever harsher austerity to bring them back under the

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60 The Impossible 60 debt to GDP or the deficit and that may be one other reason

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and I think the third reason is related to the first like low appetite for spending is that you in some sense we

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have also either not built or destroyed public institutions that would be there

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to address problems with well infrastructure gaps care needs gaps the

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Paradigm has been so much reduced the public support privatize essential

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services so that is another hurdle of Swift and quick responses in spending on

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care needs and kind of essential needs while we’re on lesson two which as you

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write unemployment is a policy choice just in the theory mmt is focused on bringing about full employment with

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price stability most people understand why we’d want price stability because we

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all hate inflation but maybe people new to this don’t understand the Dual emphasis on price stability and full

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employment and maybe some people think full employment’s a nice to have rather than a must-have So for anybody new here

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why the emphasis on phone employment well this is also a particular artifact

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of how the economics profession has evolved full employment was not a nice

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to have I think all mainstream and non-mainstream economists will say that full employment is a precondition for a

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good economy for one that delivers prosperity for one that has solid foundations however over time full

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employment has grown to mean great many things except jobs for all and frankly

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we do hear this not just from only from mainstream circles but even some of our

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you know heterodox friends will sometimes say look we don’t believe in the nairo but there is an unemployment

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level that is consistent with full employment to me that is also a paradox we can’t meaningfully Define full

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employment as some level of unemployment now mmt argues that perhaps the critique

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of the nairu has not been as effective because Henry Darcy doesn’t have a

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genuine alternative to the unemployment stylized fact that there is some sort of

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tacit acceptance that we can try to do as much as we can but we will never

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finish the job completely there will be always some unemployment an nmt outright

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rejects this proposition and it says that we have a concrete tool in the form

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of the job guaranteed employee of Last Resort that can in fact provide that public option now this idea of the job

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guarantee is not new there is a long history I would say specifically out of

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the human rights economic rights tradition that has emphasized jobs for all what mmt brings to the table is an

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understanding that unemployment in fact in many ways is engineered by the monetary system that there are just

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fundamental aspects to the way money works that contribute to the existence

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of unemployment and specifically imposing taxes and obligations on the

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economy yeah I think in your lecture at the levy summer school last year you

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said it’s an original sin yes exactly that is so at the core of a monetary

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economy that I mean it’s the old adage nothing else is certain but death and

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taxes you know there is that very fundamental like question that is true that taxes have always been part of

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whatever economic system we want to look at and taxes have always been there to

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generate some sort of resource transfer to tax somebody and transfer those real

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resources to somebody else right so taxation means that somebody has to work

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to produce resources so that then those and I really mean real resources I’m not

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talking about working to produce money if we are working to produce grain services economic DTS to provide our own

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time to the taxing Authority whatever that may be so taxes have always been

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this mechanism of organizing work and transferring resources but in the modern system this organizational system is

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hidden behind the veil of money we don’t really see deeply what taxes do to our

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system all we see is that people get taxed their income gets tax profits Etc and then that these are paid in monetary

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terms but we paid them in the unit of account that is established by the

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public sector and in the very Financial instrument that is imposed by the

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government sector and so in some sense the public sector is not only imposing

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the tax obligation and creating the need of people to work for the currency but

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they also have the unique capacity to provide the very employment that will choke off that demand this creation of

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unemployment by taxation to what extent does it rely on power imbalances in the

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private sectors because I’ve seen a lot of proposals for different types of tax taxing land taxing rent taxing all sorts

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of things and capital always seems to be very creative in its way and rent is

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very creative in their way to pass on this burden to workers and then I guess

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you could see it and then that generates the unemployment could we in an imaginary Society where there is no

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class would we be in a better position to eliminate unemployment completely yeah this is really like a philosophical

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question sorry how do we envision a society that is fairer that provides a

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good life I think that’s a really huge question and I think finding meaningful decent employment is one way in which we

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self-determine and I think that there are in just even this Society there are more Equitable ways of doing this in

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providing these opportunities for folks who absolutely we need them I think that the other philosophical aspect to your

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question is that what mmt illuminates is that money has a fundamental kind of

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public character in nature but also that money is also from inception a political

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project so you can’t eliminate the question of power because it’s right

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there from the start who gets to tax who how are folks taxed and what do they

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have to deliver and to whom to the Palace in the form of slave labor or to

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the polity in the form of some sort of democratic redistribution of resources like these are political questions they

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are questions of power and distribution and so fast forward to the modern day

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what do we talk about often we talk a lot about de-risking right this is the Vogue term these days well the public

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sector is absolutely de-risking left and right and has been de-risking of the

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financial sector for example first decades if not centuries right we invent

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new institutions to provide to import more stability on the system to eliminate Bank runs to eliminate

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defaults on certain Financial assets the public sector uses its exclusive

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spending powers to de-risk those markets and the risk yeah Capital now we do this

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sometimes in terms of de-risking Strategic investment let’s say Tech

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investment we provide large contracts guaranteed profits we believe it’s important to provide the subsidies in a

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sense we’re de-risking the investment the one thing that we don’t seem to be de-risking very effectively is the labor

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market we had done a little bit after the Great Depression we put in place minimum wages eliminated child labor

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social security standard labor contracts in some countries not others so we’ve

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made some progress and then we’ve stopped economic insecurity still is with us and that is security a huge part

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of that insecurity originates from the inability to secure stable well-paid job so there are policies that can continue

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to risk the life of families by focusing on employment yeah all we’re asking is

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for policymakers to imagine that human beings are banks and then right policy accordingly as if they were as precious

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as Vex there’s any way it goes to Bill Mitchell’s point about he was studying agricultural economics and he sees the

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wool price stabilization scheme is basically this is a full employment of wool scheme yes there’s no zero bid for

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war and it’s like well maybe we could care about people as much as we care about wall uh you know we might get to a

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better economy yes absolutely I love that example but I also often think of the gold standard because like that

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speaks to just obsession with shiny little objects because when it’s a full employment of gold essentially a gold

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standard but we don’t have one for people so this problem is solved and you’ve written so much about this and a

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fantastic book the Case for the job guarantee and so people like us we kind

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of understand where you’re coming from out there in the media there are a few

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talking points that I’d like to be able to push back on we’re told by the media the problem isn’t unemployment the

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unemployment’s low and the real problem is this thing called a skills Gap what’s your response to that this is another

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Groundhog Day conversation time and again we slog through these recoveries

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and then we arrive at the conclusion that there never was a skills Gap I mean just today we had the data that came out

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the employment data and we saw a huge jump in labor force participation rate in Prime working age people and so up to

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a few weeks ago everybody was saying well we’ve ran out of workers we don’t have enough people to take these jobs

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they’ve decided to just exit the labor market and retire the great resignation and here we are as soon as the labor

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market does a little better people come back in and start looking for those employment opportunities the Great

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Recession was explained is the slow recovery out of the Great Recession was explained through again hysteresis

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effects and people losing their skills because they’ve been unemployed for a while and listen there is something to

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that when you don’t work there is a difficulty to get back in but not because people are unemployable but

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because friends are not ready to come and provide the employment opportunity and on-the-job training so we don’t

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really have skills Gap as a dominant narrative it’s not a compelling

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explanation for aggregate outcomes it may very well be true that in some

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specific areas there is a shortage of particular type of skill but this is not an aggregate story for the labor market

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because there just tends to be significant labor markets like and we haven’t really seen truthful employment

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outside of conditions of World War II this goes back a little bit to what you said about the medical output Gap and it

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seems like something very tricky to estimate with any degree of confidence even when we speak about the job

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guarantee and we talk about that if there is three percent unemployment we don’t really know how many people might

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take it on if it is introduced is there in your view any reliable way of making a an estimate of how much would the

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economy expand or how many people would join the workforce it is a very difficult question and I’m not sure that

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would necessarily be a useful guide to policy I mean just as a little bracket I just love how John Maynard Keynes used

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to call the potential output measure he called it an imposter because potential output cannot tell you what the economy

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can potentially do and produce except for an instantaneous moment in time but

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we invest and we produce more capacity we generate more capacity that can then yield greater investment the labor force

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is affected by great many meetings and I think that we don’t have a complete

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understanding of how many people would come in if the employment conditions are better this economy is a good moment to

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look at participation rates why are people leaving because crisis after crisis we see that people are exiting

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the labor force and they are not coming back in to make up those losses this is

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the case for the United States at least we have had a long-term decline in male

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labor force participation rates around the world but the US is below our European counterparts even though in

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Europe men exiting are not at the same rate as in the US women in the U.S had

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entered in great numbers in the 60s and the 70s and then that entry flatlined in

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the 90s now women seem to be exiting but that’s not true for our developed

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countries in Europe women are continuing to enter the labor force and there are policies that support their employment

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opportunities now just because you’ve entered the labor force doesn’t mean you have found employment but you see it

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tells you something about the need and the desire to work and then there are just so many other nuances in these

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numbers and the Dynamics in the U.S for example in the flows data folks who find

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employment tend to come from outside of the labor force and so we don’t have very good surveys to understand why

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they’re outside of the labor force except to note that for example reasons

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of disability is the most important reason why they are outside of the labor force outside of care and people haven’t

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gotten suddenly sicker because this is not a covet related phenomena this is a phenomenon over the last 20 years so

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what happened in the last 20 years that made people suddenly sicker what I think a disability is a proxy precarious work

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unstable work and economic insecurity or at least in part it is a prox see so

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there are so many things that are happening in the labor market that if we were to think of a policy full

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employment policy trying to figure out how many people would enter would be a useful exercise if you were trying to do

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a job guarantee but it wouldn’t be a useful exercise to tell you how much stimulus to put in and when should you

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stop like we want to Target a participation rate I think that we need

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to allow people to determine whether they want to be in the labor market and that might give us much higher

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participation rate that we may calculate that might give us lower participation rate which will tell us that there is a

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good chunk of people outside and we need to be looking at why are they outside and what kind of economic policies do we

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need to support them is it because the caregivers is it because they’re going back to school is it because they’re

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aging so you see I think in terms of policy design I think we need to create open-ended policies the that will

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accommodate whatever influx of workers we observe I’ve also heard the argument

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very often that actually employment is restricted by Capital availability and I

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think this is an argument often made particularly with developing economies and I’ve noticed as

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well that when Warren does pricing for job guarantees he does include in their

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10 cost allowance for Capital required for new employees what would you say to

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those people which one comes first is it capital or the employment well I think what we’ve seen is that we can create

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direct employment that is low Capital intensity and we make use with what

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resources we have at hand and we also have seen cases where people figure out

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ways of doing the kind of work that is provided so some will be more Capital intensive some will be low Capital

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intensive I mean in in developing countries we have seen some of the largest scale employment programs so I

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wouldn’t say that employment is actually in any sense constrained by the

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availability of capital I mean if you see rural employment in India which on a given year provides employment the 25 to

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35 percent of rural households in very very poor conditions and you see the

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kind of work that they are doing in terms of water conservation and some kind of environmental renewal or even

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just frankly doing as basic things as building toilets in areas that don’t

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have any irrigation Etc I mean these are essential they’re absolutely essential for those communities and they’re not

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constrained by the availability of capital it reminds me of in Peru very

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often people say that it improve the working class is very creative and even you see it in people who are hired to

33:29

clean roads we don’t have the fancy Machinery that they use in the UK to clean the roads and the Pavements and

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they use instead like big trees and they have a really long brush shaped leaves

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and they just use that and with a sweep they just do it all in one go and I thought that was so ingenious I mean

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I’ve used this example when I went to Argentina to visit some of the projects eight was really amazing to me to see

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how people will donate some of their garages so that they would be the site of work and 10 20 people will pack in

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and they will be knitting or making children’s toys and people find very

34:06

creative ways to do what needs to be done as long as the support is there and that’s also a very interesting criticism

34:13

that we see of the job guarantee that there’s just no way we don’t have the

34:18

capacity we don’t have the know-how we don’t know how to do the work but so long as you involve the communities they

34:25

know what to do they also know how to do it we’ll be right back after this message from our sponsor

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35:54

let’s dive back in so just to take the high level macro view of the job

35:59

guarantee we like to say the job guarantee is a superior automatic stabilizer to the current approach what

36:06

do we mean by that pavelina what’s an automatic stabilizer the first thing thing that people recognize is that the

36:13

economy goes through ups and downs and we have expansions recessions downturns

36:20

growth periods what most people probably don’t think about on a normal day is

36:26

that we don’t have depressions right that there was a time when the developed

36:34

countries the industrialized countries experience huge bulls and busts and

36:39

major depressions and the public sector then grew to provide stability to the

36:48

economy in the form of various income supports such as unemployment insurance

36:53

such as Social Security such as food assistance housing assistance but it

36:58

also grew in terms of being a spender and a if you are a consumer of services

37:04

so it whether it’s infrastructure whether it is procurement policy the public sector group and so the economy

37:10

has become far more stable than we had once than we had prior to the Great Depression but it’s not stable enough we

37:17

now still have ups and downs and we still have the consequence of those downtrends is still unemployment that is

37:24

the reliable outcome of recessions that is the reliable outcome of structural

37:30

shifts of factories moving abroad that’s the real reliable outcome of pandemics crises it’s unemployment so what we need

37:37

to do is again think more clearly about how to stabilize the economy by

37:43

addressing unemployment and the current method is provide income support on

37:49

employment insurance and then throw in discretionarily some contracts in the economy hopefully they will land in the

37:56

right places and they’ll provide the right jobs and we know that doesn’t work so if we were to have a direct

38:02

employment approach a standby policy safety net employment policy that will

38:09

provide on-demand employment opportunities to people who need them whatever the reason it could be they’ve

38:16

lost the local shop the factory has shut down it could be a mom is entering the

38:22

labor market because the kids have gone to college it could be whatever the reason if there was a framework that

38:29

will provide employment on demand then that policy will act as an automatic

38:36

stabilizer because in some downturns more people will walk in the doors and

38:41

they will find decent and stable employment opportunities and when

38:46

economies recover as we see now people will move out they’ll find other better employment opportunities and so the

38:53

public sector will still fluctuate in this counter-cyclical way but it will do

39:00

it in a way without compromising full employment some people argue that a

39:05

universal basic income would Empower workers because it would give them the freedom to turn down bad

39:11

jobs and that a job guarantee is merely a Ubi with a work requirement what’s

39:18

your response to that well I mean of course it’s not true you don’t Empower people by giving them just income you

39:25

Empower them by giving them a choice and the choice of employment and the

39:31

universal basic income will provide some kind of income support but we know this

39:37

to be true people even who have basic income or get basic income they still want jobs so so long as there is a

39:45

shortage of employment opportunities no matter how much basic income people are provided they will not be empowered to

39:51

choose employment and then there is a whole other question of does income genuinely Empower because

39:58

we do know that poverty social exclusion all the other socio-economic

40:04

deprivations are cannot be solved by just providing income people need agency

40:10

they need access to various services and employment is a really critical way in

40:16

which it connects people to community and provides them the whole argument of

40:22

the Dignity of work the way people connect to the employment that they see they are visible then there are many

40:29

benefits and I should also say that there are great many people who are outside of the labor market who vitally

40:35

depend on people who are in the labor market and so income can never be a

40:40

genuine alternative to employment and so the job guarantee addresses that issue IT addresses the issue of shortage of

40:47

jobs that empowers somebody to say no to a bad job because they can have other

40:53

options now income might Empower you if that income were enough to provide for

41:02

everything else that you may need but as I said there are great many dimensions to economic and security it’s not just

41:08

income the other thing I want to say is universal basic income is universal as it is proposed it’s not count to

41:14

cyclical stabilizer it does not have the kind of macroeconomic functions because it is provided to all people at all

41:20

times irrespective of what happens to the economy and then there are macroeconomic issues with that depending

41:27

on the scale and size of the universal basic income yes if you are bothered about the gap between the Haves and the

41:34

have-nots people lower down on the income distribution are going to spend everything they get and people higher up

41:41

although just at the best they’ll just put it under their mattress but there’s a whole lot of options there you know

41:46

even in low Ubi to someone who doesn’t need the money to spend on Necessities

41:51

you could be given every five years you’re pretty much gifting the family A house there’s one thing that I thought

41:58

have has always United the basic income and job guarantee folks and that is a recognition that the labor market

42:04

doesn’t work well and that it doesn’t provide the kind of Economic Security so I think we all come out of an

42:11

appreciation that something is broken for Working Families fundamentally and

42:16

where I go is thinking about how to usher in a new form of decent and

42:24

dignified employment that is secured and guaranteed but as we have always said

42:30

this is just a piece of a broader safety net and certainly we don’t want to be

42:36

advocating for retired folks to be working and I should mention in the United States I talked about the decline

42:43

in labor force participation rates well the two groups that are increasing their participation rates are men and women 65

42:51

and over like that seems just fundamentally broken we need stronger Social Security we don’t need folks to

42:57

be coming back into the labor market looking for scarce jobs so yes the job guarantee will be there

43:04

for the grandma that wants to be involved potentially in a community project but that is not what we’re

43:10

advocating we’re talking about a good life and income support is part and parcel of that but Universal basic

43:16

income the way it often is talked about as a replacement for these interventions

43:21

as a replacement for a good job because somehow we can’t do it or even as on the

43:27

conservative right as a replacement to the social welfare system and so there

43:32

is some danger as well there in losing Public Services because presumably a

43:39

generous Universal basic income would substitute for that which we know would

43:45

be very pernicious so the Biden package during the covet pandemic included a big

43:51

support package as you said it was just I think it was one or two checks that were sent overall and I think at the

43:59

time that could have been thought of as a one-off basic income because it was Universal as far as I understand

44:05

did you like that policy did you think it was the best that could be done at the time or what alternative would you

44:12

have proposed yes it was a basic income policy it was reasonably generous It Was

44:18

Then followed up by a child support I’ve always supported Universal child

44:24

allowance and I think this is critical but what the Biden policy did is it

44:30

appropriated a very large budget to beef up unemployment insurance and it did

44:35

some positive things because unemployment insurance in the United States does not really cover self-employed it doesn’t really cover

44:43

substitute teachers let’s say so it did expand coverage I think it was in a

44:49

sense a second best solution I would say because I much preferred the protection of employment approach to me again to

44:57

use an old quote by case he says it’s easier to prevent the ball from Rolling

45:02

than to stop it when it starts rolling so I think think that in terms of in Full Employment protecting jobs would

45:10

have been far superior so again paying the wage bill and the budget was large

45:16

enough with money to spare and it was significant to cover the payroll of

45:21

every single worker in the economy for three months plus funding for a generous

45:28

job guarantee for the unemployed that’s how much money we appropriated but we didn’t go that route and in fact of

45:34

course you don’t have to protect all jobs you have to only protect the ones that are endangered by the pandemic

45:40

shutdowns food Health Services but you also can’t really shut all of these down

45:46

because those are essential so if we had this vision of protecting jobs creating

45:52

a job guarantee and mobilizing to generate to create a public health core

45:59

I think we would have been far better positioned to respond to the Health crisis to still keep people attached to

46:07

the labor market to provide employment for people who didn’t have it and we could have potentially even used this

46:13

policy to change the terms of employment you know you could say okay the government is doing a public health core

46:19

twenty dollars an hour and they have it a public option that suddenly lifted the

46:25

minimum wage without minimum wage legislation so I think that the pandemic check was the easy expedient option it

46:32

was provided the support to the economy but I would have liked to see the kind of direct investment direct employment

46:40

immobilization approach in terms of critiques Matt brunick wrote a critique

46:46

of the job guarantee back in 2018 in Jacobin and I picked it because he plays

46:51

all the hits and I’d like to get your response he’s still out there yeah yeah the mats never

46:59

go away do they there’s at least two of them but yeah he writes the production undertaken by a job guarantee program

47:04

cannot rely upon skilled workers who can command wages higher than the minimum wage so he’s recognizing that the job

47:11

guarantee wage would become the de facto minimum wage but then to me and I wanted to get your take on this he makes a leap

47:18

he says because the job guarantee workers would be minimum wage workers he says this means that the only production

47:24

a job guarantee program could undertake is the kind of stuff that could be done exclusively with lowly skilled workers

47:31

so it is not enough for you to find a job that a low skilled worker can do it has to be a job that is possible to do

47:37

in an overall productive unit with no skilled workers in it at all to me I’m like why yeah but anyway how do you

47:45

respond to that pavelina okay there are certain kinds of jobs that require some

47:51

technical expertise but what we see in various corners of the world develop

47:58

context developing contexts we see that many different kinds of projects can be

48:04

created that are socially useful that take a range of skill and it really

48:10

depends on how the community organizes itself it is true that this is a public

48:15

option and it is by Design attracts those who have the greatest difficulties

48:21

in the labor market yet they may have less education and less experience

48:27

because they’ve been shuffled around in and out of the labor market but they are not unemployable nor are they producing

48:34

only a low value work and so this comes out of this perspective that we just

48:40

need to have high value added to employment that it’s justified by some kind of level of productivity these

48:48

conventional measures but our life is one that is supported through Social

48:53

Services as well and this is the aspect of our life that is underfunded there’s a great gaps in investment there and

49:01

people can fill those gaps and we see this time and again I mean Ethiopia has

49:06

a program of direct employment that is connected to food insecurity and it is the most significant program as small as

49:13

it is the most significant program that deals with floods okay mother nature doesn’t pay right it’s not a paying

49:20

customer but this is vital for the way people live there are other programs the

49:26

French experiment is really interesting because those are not lowly skilled

49:31

workers they are prime working age folks who have been out of the labor market for a long time long-term unemployed and

49:38

they have created through social Enterprise various useful employment

49:43

projects so there’s the gamut you just have to see how people are doing it on the ground and how it is motivated the

49:51

examples that I gave are motivated by the recognition that no one is unemployable that there is much Social

49:58

use for work that needs to be done and that the funding is there at least those are the three principles of the French

50:03

experiment so I find these to be you know abstract objections that you know

50:09

in the Practical reality they don’t really find a lot of support is it just me if there’s an element here of

50:14

prejudice against people on the minimum wage and the assumption that they can’t organize themselves around useful work

50:21

and that they need somebody skilled to tell them how to do things there are actually a lot of studies and articles

50:29

all the time about initiatives that communities take to make improvements at

50:34

local community and that these efforts are sorted almost always by lack of funds so I see it is actually a way of

50:43

kind of just unplugging this huge amount of talent that we just can’t see due to

50:49

lack of support absolutely and it’s also a matter of a vision of what we value and what we find to be socially useful I

50:56

mean there is an element it does ring of this kind of false meritocracy that they’re productive they’re less

51:01

productive but we just know that at the macro level the economy doesn’t work this way to provide employment for

51:07

everyone and that there is also that Paradox that not only there are folks

51:13

needing work but that there are many just to use the low-hanging fruit cliche

51:18

opportunities in the community to materially impact and improve people’s lives and those two things can be put

51:27

together and we had seen it through the New Deal projects we had seen that with a youth entitlement programs in the US

51:35

there are small and large Virgos I think that they’re just not getting enough attention and they certainly have not

51:41

constituted the policy approach the direct employment approach has been forgotten in many ways so we better turn

51:48

the corner and get to lesson three of the pandemic from your chapter pav leader and lesson three is that large

51:54

government spending is not the inevitable source of inflation tell us more about that well I think economists

52:02

so want this to be true because they have not seen such large-scale government spending in their lifetimes

52:09

most certainly haven’t and now voila we have inflation and so in people’s minds

52:15

these two things must be connected and yet time and again we see that the price

52:20

pressures are coming from the production side they’re coming from the disruptions from the logistical problems and even

52:28

the FED has been quite clear that the labor market is not the source of inflation and yet we are using once

52:36

again the tool of unemployment to tame inflationary demand so it is another similar scenario as during the 70s when

52:43

we had a cost push problem now either here maybe theoretically we should say

52:48

something about the role of government spending where while government spending is not the cause of inflation

52:56

there is a certain sense in which government spending provides validation

53:01

to those increases that it provides a purchasing power that can then well

53:08

purchase the output that has appreciated in price so it’s not the cause but it

53:13

has allowed if you will these price increases to continue and that doesn’t

53:19

have to be government spending it could be just simply private credit you know you can have the private banking sector

53:25

extend enough credit to allow the private sector to purchase the now more

53:30

expensive output so there’s always going to be some sort of macroeconomic force that will validate these price increases

53:37

whether it’s government spending whether it is private Finance but this is not even part of the conversation and

53:44

certainly we should not be proposing a fiscal retrenchment to deal with price

53:49

increases just like we shouldn’t be proposing increasing interest rates

53:55

where it becomes prohibitively and expensive to carry on any additional investment if the source of inflation

54:03

comes on the cost side and then the bottlenecks then our Focus needs to be there and I think that is a lesson from

54:09

the pandemic which I’m not sure has been taken to heart I think Isabella Weber’s

54:15

work has helped shine a spotlight on the sources of inflation and that has been

54:22

very important speaking of sources of the price level shall we say what you’ve just said goes to your very old pay for

54:30

now about Monopoly money and Sam Levy previous guest of ours took it up again

54:36

took up the ideas in that paper again and I’m talking in the broad Strokes here the mmt view of the government as

54:44

the source of the price level as Warren Mosler likes to say and you write about pavilina what that says to me is the

54:52

market asks for a higher price and the government’s got a choice it can pay those higher prices or not pay it which

55:00

means then that the economy as a whole doesn’t get the money that it needs the government could say look we’re not

55:06

paying a penny more than we paid last year or last week then the economy as a whole doesn’t get the money that it

55:12

needs to pay its tax liabilities in the mmt money story and the whole system

55:17

crashes and yeah okay you’ve brought the price level down now but governments

55:23

don’t really want to do that Warren says I wouldn’t advise this as a good policy so the government has a choice when the

55:29

market is demanding higher prices it could either ratify those higher prices by continuing to spend will cause the

55:36

crash and it never chooses that second option and we wouldn’t advise that if I’m understanding everybody correctly

55:42

yes I mean there’s first the very big picture macro okay the theoretical argument that if you are the exclusive

55:49

issuer of a monetary instrument and that you have the choice of setting the price

55:55

you can set the conversion rate between the currency and what it exchanges for

56:00

we have done this in the past by setting it against gold but what we are proposing is that it’d be set against

56:07

some kind of basic unit of Labor wage maybe via kind of a job guarantee so

56:14

there is an anchoring macro story here that the public sector spends currency

56:20

into existence and what is it worth well it’s worth whatever it exchanges for and

56:26

we think that labor is worth more of a price sport than corn or gold so we can

56:31

set the price of some essential Commodities and that prices then become

56:37

a function of that price paid by government so that’s a very kind of this simple stylized version of the Monopoly

56:45

price setting Powers then the complication happens in the real world because the government absolutely has

56:53

price setting Powers even if at the macro level level it doesn’t provide the

56:59

currency if you will in enough to choke off the demand for it right even if we

57:04

still have quasi austerity you still can set prices of certain sectors through

57:11

procurement for example so we’ve got these kind of distortions we understand that the deficit is part of the macro

57:18

markup but we have these distortions that occur where the public sector has

57:24

abdicated this pricing power to private contractors so but it was a great report

57:30

just last week on what the military charges the government for valve it can

57:36

get that valve on Amazon for like 200 the government pays ten thousand dollars for some valve right and it’s these

57:42

sorts of things are just I think there’s a good research paper for yellow aspiring PhD on how government

57:49

procurement has evolved over the years and how that has actually surrendered

57:54

the pricing powers to the private contractors so that’s one thing on the

57:59

other hand and certainly you could look at the subsidies that we provide to certain industries but then we don’t

58:05

allocate enough resources in other areas so there are these various kinds of distortions that happen at the micro

58:11

level and at the macro level the overall government contribution to the economy

58:17

is going to either validate prices or not and that will be true for spending

58:24

by the private economy as well right like prices will be validated on the basis of the overall spending power that

58:31

comes from different sources of demand I was wondering about that because some

58:36

Levy he was here talking about his own research on the price level setting and

58:43

he mentioned that was the government has the power to set prices often that comes

58:51

at a cost so I think he mentioned that in the context of say reducing wages or

58:57

forcing its own prices on the private sector that eventually the private sector will have no choice but to follow

59:03

the government but that there may be a period where you may have the government not being able to as you say Supply its

59:09

own services and things like that so that sort of cast doubt in my head about who’s got the power here and what’s that

59:17

relationship and is the government really in a position to choose the price level if the cost is so great

59:23

politically you know I think that’s right and it goes back to the earlier comment that money is at bottom a

59:29

political project and how budgetary policy is shaped and formed and who gets

59:35

to bid who gets to be have the exclusive relationship with the government and be an exclusive supplier matters very much

59:42

in the kind of distributed outcomes that we get I think that’s probably true I mean as we like to say the Paradox of

59:48

the mmt project is that while we want to illustrate that money is No Object and

59:53

is not scarce it certainly demonstrates that money can’t solve all our problems all the ideas we’re trying to make money

1:00:00

the least important thing in policy discussions or finding the money exactly

1:00:05

okay so see what you think publicly but I thought an interesting way to bring the job guarantee alive in people’s

1:00:10

imaginations might be to walk through an alternate timeline of what would have happened in a country like the UK or the

1:00:17

US that had implemented a job guarantee as a permanent program decades ago and

1:00:22

kept it so stagflation in the 70s various bubbles that come after that the.com bubble the great financial

1:00:28

crisis the pandemic how might these things have played out in a country with a job guarantee I know that’s a big

1:00:33

question and time is limited so maybe you prefer to take the more recent shocks but you can talk about all of

1:00:39

them if you want whatever you prefer one thing we can say is that financial crisis and pandemics of Wars would

1:00:47

certainly have happened again the job guarantee is not the solution to that what we probably would have avoided is

1:00:54

these jobless recovery is which have really eroded the social Fabric and

1:01:00

created what I think have contributed to this enormous polarization but what I

1:01:05

think we would have had even if we had reauthorized the New Deal programs I

1:01:12

think we would have had a more robust if you will conservation movement I mean it was resuscitated with the CCC back

1:01:20

during the New Deal reforestation national parks we would have had a more

1:01:25

concerted effort to continue and support these ongoing public service projects

1:01:31

that address broader social environmental concerns young people would have had kind of a stepping stone

1:01:39

we’ve seen that youth around the world have had the highest levels of unemployment and for some depression

1:01:45

levels of unemployment this whole conversation about need the not in education employment or training I think

1:01:52

that is a conversation maybe we wouldn’t have had maybe would have talked about the four day working week or six hour

1:02:00

working day much sooner than now maybe that would have been a conversation back

1:02:06

in the 60s and 70s I mean in the United States the 30-hour working week as I

1:02:11

write in my book was narrowly defeated in the 30s so even back then there was overwhelming support for that and maybe

1:02:19

we wouldn’t be as overworked who knows this is the possibilities of our grandchildren Paradox for Keynes that

1:02:25

we’re wealthier and yet we’re overworked and somehow still have essential needs not supported but I think that just

1:02:32

providing employment support an ongoing basis long-run employment would have made conversations of trade a lot easier

1:02:40

the anxieties around job loss certainly AI so yeah in my ideal world I imagine

1:02:47

that we would have had some kind of employment support to these bigger conversations of course it could turn

1:02:54

another way John job guarantees are guarantees only because they’re

1:02:59

implemented on Democratic terms and on participatory terms and that’s what we’re talking about not about Urban

1:03:07

style forced employment and before we wrap up pavelina we should just plug

1:03:12

this year’s keynote address at the economic democracy initiatives summer

1:03:18

workshop it’s James Galbraith as I believe and it’s open to the public yes Jamie Galbraith will be talking about

1:03:24

the economics and politics of inflation fighting around the world we have a big

1:03:30

Workshop attended by 50 60 students from around the world with a lot of faculty

1:03:36

and we’re just very very excited for the second year there are no more places for students there but the keynote address

1:03:43

is open to the public correct the keynote address is open to the public it’s being held at the Franklin Delano

1:03:50

Roosevelt Library in Hyde Park in New York very close to Bart college and while there are no spots for the summer

1:03:57

school we do have lots of availability for the open keynote it’s on Thursday June the 15th great stuff that’s a great

1:04:05

place to leave it we’ve been talking to Professor pavlina chernover Economist and author of the case for a job

1:04:11

guarantee which is an essential read as is her chapter in the equally essential mmt key insights leading thinkers I’ll

1:04:18

link to where you can get hold of both of those in the show notes for this episode and for our patreon subscribers there’s a link to where you can listen

1:04:24

to the edited audio highlights of the book launch of mmt key insights leading thinkers and finally we can now announce

1:04:30

that applications are open for the Edward Lipinski foundation’s mmt summer school in poznan Poland that takes place

1:04:37

from the 5th to the 7th of September 2023 confirmed speakers so far include Stephen Hale L Randall Ray Nathan tankus

1:04:45

and Yan Lang so that’s going to be fantastic check out the show notes for details but for now thanks so much for

1:04:52

joining us today on the mmt podcast professor pavlina chernova thank you so much for having me

1:05:00

[Music] [Applause] [Music]

1:05:07

that was the mmt podcast with Patricia Pino and Christian Riley

1:05:13

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episodes you can do that by going to patreon.com mmt podcast you can also

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find me on Twitter at mmt podcast and you can find Patricia on Twitter at

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Patricia npino and you can email us at mmtpodcast

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outlook.com thanks for listening and we hope to hear from you [Music]

1:05:51

thank you