Pavlina Tcherneva: Lan bermea eta MTM (Moneta-Teoria Modernoa)

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how many of you have heard the story that Warren Mosler talks about about the business cards he would tax his children

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in the form of his business cards and if they don’t provide the business cards he

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will take away play dates TV time Etc and the reason why he did this is because they weren’t doing their chores

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and he wanted to have them to like clean their room do the dishes all of that and so he imposed the tax in his business

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cards and then they asked well how do we get the business cards and he said well you could clean your room I’ll give you

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five business cards and and the whole thing basically generated like a little monetary system in the household and I

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thought that was so cute like such a such a cute little experiment and he says you know the government works this

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way uh you know the tax creates unemployment and people have to work to get the money that there is in a sense

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an original sin in the monetary system that taxation is that one initial cause

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of unemployment

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this is the mmt podcast with Patricia Pino and Christian Riley

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[Applause] hi I’m Christian Reilly and welcome to

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the modern monetary Theory podcast you can find us on Twitter at mmt podcast

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and you could support the show by going to patreon.com mmt podcast a big thank you to all of

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our supporters so far at the beginning there you heard Economist and author of the case for a job guarantee professor

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pavlina chernova and in a moment we’ll hear highlights of her presentation at this year’s Levy economics Institute

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summer seminar our huge thanks to the levy Institute for their kind permission to produce the audio and I’ve linked to

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where you can see video of the whole presentation in our show notes if you’re new to mmt you can listen to our first

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three episodes for an introduction but if you want to dive in here as you heard at the beginning money is designed to

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create unemployment not out of malice but so that the issuer of currency the national government can step in and

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solve the problem it created by hiring people taxation creates a demand for the

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government’s currency which allows it to spend its money into existence to pay for things whether it’s roads and

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bridges and public transport and hospitals and schools and doctors and nurses in advanced economies or a prime

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minister’s gold wallpaper in emerging market economies unfortunately since

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mainstream economics adopted the view that stagflation was the result of workers getting too uppity

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unemployment’s become a policy Target rather than a policy failure but the

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good news is that there is actually a better way to manage an economy than getting nine six-figure salaried people

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together every few weeks to see how they feel about forcing millions of people into involuntary unemployment in the

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name of price stability because guess what they’re always okay with it I mean these meetings could have just been one

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email professor chernova will lay out that sane alternative in a moment but as

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I see it either there is a trade-off between inflate and unemployment in which case we should Implement a job

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guarantee or there isn’t a trade-off between inflation and unemployment in which case we should Implement a job

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guarantee just before we dive in right now in the UK as I record this there’s still a lot of what conservative MPS are

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probably going to start calling alternative stability in the guilt market and I think the Dynamics we

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covered in last week’s episode with Dr Dirk ants are still at play so check that out if you haven’t already

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basically private Pension funds holding risky assets were hurriedly selling off

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UK government bonds or guilts to get the money to meet their liabilities and the

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sell-off was pushing guilt prices down and so the bank of England intervened by

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buying guilts to push the prices back up to what they considered to be quote unquote orderly but then also this week

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Additionally the Boe have been offering financial support directly to private

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Pension funds presumably to stop these disorder orderly guilt sell-offs while at the same time the governor of the

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bank of England has told pension fund managers they’ve got until Friday to stop needing the support but then also

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the financial times is reporting that the bank of England has said privately that the support may continue beyond

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Friday now I’m not saying it was and always has been a bad idea to make the provisioning of retirees dependent on

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the emotions of Traders but I guess my point is that free markets do seem to need a fair bit of government

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intervention and given that that intervention starts with the creation of money itself my sincere hope is that one

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day we recognize money for what it is which is a policy tool for provisioning the public purpose rather than a finite

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quantity of consumption tokens we will have to fight over and ultimately take to some Global casino to afford

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retirement but for more on all of the above in the show notes for this episode I’ve linked to our job guarantee

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episodes and our monetary operations episodes just in case any of the not the real Nobel Prize committee are listening

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because they seem a bit confused about how Banks work and as ever I’ve linked to where you can support this podcast

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financially via patreon.com mmt podcast support starts at a dollar a

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month or a pound a month or whatever the equivalent is wherever you live and no matter what level of support you give

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spreading the word about this stuff really helps too so thanks as ever for the time you put into understanding mmt

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let’s dive in my name is I have a very simple task today and that

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is to explain why the job guarantee is not an afterthought or secondary to the

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mmt project but why it is core and how it really comes out of our particular

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understanding of the monetary system them so I really enjoyed the discussion yesterday with Chris design and she made

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a comment that the Revival of the money project hasn’t been connected to the

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Revival of Labor right the connection of Labor and I I thought that was so interesting because it is her work in

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fact and the work of other historians who really elucidate that link that

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there is a very inherent connection between the nature of money the origins

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of money and the way labor is organized and so hopefully I’ll be able to make

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that case to you today that whatever conversation we engaged in about the

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public money about democratizing money that actually goes hand in hand with

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democratizing the terms on which labor is offered so the job guarantee uh is a

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straightforward proposal to provide permanent federally funded locally

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administered with via distributed System Program um which would provide voluntary

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employment opportunity at Living wage and benefits on demand to anyone who’s seeking such work so the case that I

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want to make here is that from an mmt perspective this is not just another jobs program it’s actually a structural

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reform structural macroeconomic policy to unemployment whatever the cause is so

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we’ll be reviewing how the job guarantee represents a safety net it’s anti-cyclical features how it is a

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self-limiting program it’s very much an alternative to the way conventional policy is exercised fine-tuning and how

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it represents an economy why Benchmark for labor standards I often start with actually the human rights angle because

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the job guarantee is not a new proposal you know calls to secure the right to employment data as far back as the late

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1700s and you know there is there is a reason for this you know the birth of

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the market economy wage labor the economic insecurity that came with this were palpable they were understood and

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so their right to guarantee employment was that initial call for Economic

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Security but what I will focus on is that yes it does importantly provide a

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legally enforceable right to employment but I want to just concentrate today on how the mmt informed job guarantee

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proposal rests on two core mmt propositions the first one is that

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taxation creates unemployment and the second is that the currency issuer is a price Setter how many of you have heard

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the story that Warren Mosler talks about about the business cards that he used in

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his household okay but half of you very quickly you know 1996 Warren Mosler was

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looking for a researcher and I found out about it I got the job and he told me

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about this scenario in his household where he would tax his children in the

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form of his business cards and if they don’t provide the business cards he will take away play dates TV time Etc and the

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reason why he did this is because they weren’t doing their chores and he wanted to have them to like clean their room do

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the dishes all of that and so he imposed the tax in his business cards and then they asked well how do we get the

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business cards and he said well you can clean your room I’ll give you five business cards and and the whole thing basically generated like a little

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monetary system in the household and I thought that was so cute like such a such a cute little experiment and he

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says you know the government works this way uh you know the tax creates unemployment and people have to work to

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get the money and I just I just couldn’t believe that it was like that simple in terms of experience how one experiences

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mmt for me that was like the first claim that sounded a bit like too easy until

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you start reading about the history of money and when you started reading about the history of money you understand that that’s exactly what the function of the

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tax is the tax is never to generate Finance for the state if you will the

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taxation um has been always there to drive real resources always to bring some sort of

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resource some sort of Labor some sort of commodity livestock grain whatever to the Palace you know Mesopotamian palaces

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you know you know the earliest forms of money are clay tablets I mean they’re written checks you know they’re little

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claims where they will represent the payment of wages or you know how much

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livestock one is entitled to Etc and so mmt looks to this history and argues

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that taxation is a neglected cause of unemployment that the main purpose of

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Taxation is to indeed distribute resources in the system to drive them

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usually from the private to the public domain and that taxes are paid by by performing

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that labor and so when you look to uh as I said clay tablets or tally sticks

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where you know you know the markings represent wage payments when you look at these old plantations right the

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haciendas which you use labor but paid labor in the form of coins that were

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denominated in days of work you realize that these claims these Financial claims

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represent some sort of real resource a number of days of work performed and the

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tax is then paid by delivering that token back to the Hacienda that represents how much work has been

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performed Corvette labor as as old as ancient Greece even the pyramids were likely

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built through corvae Labor which is forced labor which is required labor and

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can be performed in lieu of payment of taxes when you study the colonization of

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Africa that’s actually how I stumbled upon this this history you realize that taxation is a very effective tool of

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colonial exploitation and so taxes have always been a tool of resource transfer

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and they create some kind of unemployment so to speak

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in the modern world money obvious gave these relationships you know money is a

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veil everything all transactions take place in a currency and so we actually don’t see the true purpose behind some

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of these core economic relationships so if you’ve studied economics you know that money unemployment is a monetary

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phenomenon Is Not A New Concept either right that Marx had that idea that you

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know capitalist system that produced for profit you know has certain laws of motion that organize labor in such a way

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that not all labor is employed and there’s the reserve Army of Labor right that’s part of the the marxian analysis

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if you study Keynes you know that he also had a monetary theory of unemployment and he talked about

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deficient effective demand that the profitability from employment is not

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sufficient to justify the cost Associated from offering employment right and so there’s like an effective

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demand problem you have monetary unemployment and you know he has a whole other analysis of money and returns on

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the money well so mmt fits within this traditional institutionalists of course talk about uh the enclosure movement

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property rights path dependencies for them also you know unemployment is a monetary phenomenon but mmt adds to

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these stories by adding that there is in a sense an original sin in the monetary

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system that taxation is that one initial

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cause of unemployment that we may have many causes on which we typically Focus

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but we don’t focus on the fact that when there is a non-recipical mandatory obligation somebody has to do something

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to fulfill that obligation to earn that which will settle the obligation and the inability to to do that to earn that was

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which will settle their tax in the modern world is monetary unemployment so

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that is really one of the two core propositions in the mmt approach that connects the birth of money to

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unemployment now the second recognition in the mmt approach is that in the modern world currency is typically a

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public Monopoly and the monopolist is a price Setter all monopolists set prices

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this we learn in econ 100 and yet we never really engage with the idea what does it mean for a currency monopolist

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we talk about Goods but we don’t talk about the monopolies of money so all prices are administered this is very

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much within you know the post games and her redox tradition but there is a key price Setter in the economy that is also

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often neglected right we talk about administered prices markup approach you administer all of that but we do have a

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very crucial price Setter in the economy and that would be the Monopoly issuer so

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then how do we think about the price setting powers well in economics you know you have

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these two prices that usually um we talk about the first price will be the own rate of money how money

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exchanges for itself it could be the own rate of corn how much corn corn

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baguettes if you plant corn right the own rate of the commodity so the own rate of money is the interest rate and

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we know how to set the interest rate it’s a straightforward thing before 2008 we used to sell and buy short-term

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Securities to set the interest rate now we just set it directly so the monopolist of the currency sets the

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price of money directly it’s a price setting function that is quite obvious but when you take that step further you

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realize that the monopolist can also set other prices if they so choose so the

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commodity rate of money would be the exchange between money and other Commodities so if you’re the sole

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supplier of currency you can certainly set the terms on which you will provide it and you can set the prices that you

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would pay for Commodities we do that too you know governments also do that too and so you know a good question would be

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what commodity prices should we be setting and so in the mmt tradition much

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like all other traditions in heterodox approach labor is special it’s not like

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corn it’s not like setting the price of money it’s not like setting the price of wheat or soybeans Etc it is special and

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I’m not going to go for all the reasons you know over all the reasons why I think they’re quite obvious uh but only

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to say that price setting is quite ubiquitous so when you today read about you know administered prices should the

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government set that price or that price we should recognize that’s very much part of parcel of public policy we use

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procurement on regular basis to figure out how much we’re going to pay for a contract we’ve used buffer stocks for a

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very very long time and we have recognized that that’s a pretty robust way of setting a price you know Bill

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Mitchell talks about you know how he arrives at the job guarantee proposal by looking at the buffer stock for wheat

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how government will buy and sell wheat on demand so that it can Peg the price

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of wheat at the desired level so in market demand Falls then the public sector will purchase the excess wheat

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when the market demand increases their inflationary pressures on wheat the public sector will release uh no it’s

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not wheat sorry wool right well right Australia World um and so buffer stocks have been there

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since for centuries actually and we we use them on ongoing basis like I just mentioned before 2008 we used the buffer

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stock to set interest rates a buffer stock of short-term Securities right we would sell Securities and buy Securities

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to drain reserves as needed to Peg the price of Reserves at a particular level

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when their access reserves we will drain them when they’re shortage of reserves we will add them there’s a buffer stock

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um the gold standard is a buffer stock it sets the price of gold right you buy and sell gold as needed to maintain the

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price of gold at a particular rate to to the currency you could look at it from the other way around right that the

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price of the currency terms of gold but it’s a buffer stock we do that with various other Commodities and so it’s

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not really an extraordinary leap to say why are we offering more protections for these other Commodities in terms of

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prices then the perhaps the most essential commodity in the economy okay so for Effective price setting though

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what we need to recognize that we need both a price Target and we need to have

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a full employment policy you can’t hit the target unless you are prepared to

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buy and sell the commodity on demand so this is where this idea comes from

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that we can design macroeconomic policy where we recognize that labor employment

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is the reliable casualty of any economic fluctuation it is always sacrificed

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right technological change globalization crisis we know that reliably people lose

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their jobs as a consequence of these economic conditions so why not provide a kind of support that will maintain the

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minimum decent living condition for all people and so initially we used to call

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this the employer Last Resort we changed I’m happy to talk why I changed and don’t talk about that anymore but the

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job guarantee is that and so from an mmt perspective what I want to emphasize

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today is what Abalone has stole this from Abalone he called theorems of purist form

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and then you just want to have some of the basic kind of objective uh relationships and then we can add on to

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that and the first one just to summarize there are compulsory taxes in this world fines fees in the modern world

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everything is for sale you have to buy everything right and so everything’s compulsory in some sense but non-recipro

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obligatory finds fees dues Etc uh create the need to earn that which will set all

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those debts those debts are settled in state money typically final permissive payment is the state currency and the

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state happens to be Monopoly issue of the currency now we have nuanced analysis on this some states abdicate

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this right some states monetary sovereignty is eroded undermined by various other conditions but as a first

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approximation the first theorem pure theorem is that the state is the Monopoly sure of currency and that the

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tax that the state imposes creates demand for that currency and the inability to earn it creates

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unemployment thus the very powers that are used to determine the money of account to ensure

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that the private sector uses that money of account right taxes play that crucial role that those very same powers are the

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same powers that create monetary unemployment so the problem of unemployment is not separate from our

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understanding of money in fact we need to understand that inherent connection which means that a monopoly issuer as a

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monopoly sure only the state can choke off that demand for currency and the refusal to do so is actually a refusal

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to resolve a problem that it has helped create through the monetary system all

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right so by virtual being currency Monopoly the state also can set prices and by employing and releasing labor at

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a base wage on demand the state can secure Full Employment and price stability there is no trade-off I think

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that is probably the most crucial part of the mmt project there is no trade-off

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we are not the first ones to criticize the Niro okay there have been plenty you know written on how poor than is a

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concept I’ll talk about it in a moment but I think perhaps I would venture to say that maybe heterodoxy has not been

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able to mount a successful critique on the naira because we haven’t offered a

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genuine alternative to the trade-off and I think the job guarantee is it so the natural rate of unemployment I mean if

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you’re just reading the news you know I don’t know my blood boils I don’t read the news anymore because the FED right now is deliberating uh how much

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unemployment they should create the Wall Street Journal just had an article yesterday it’s like oh you just have to put up with some unemployment because

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inflation like this is a discipline we our discipline is completely structured

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around this idea that some people have to be living an economic insecurity in

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the name of price stability there’s there’s no other way to deal with this problem in the mainstream and and you

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would have probably understood how schizophrenic the view is from the mainstream you know just two years ago

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chairman Powell was talking about how the Nile relationship has broke broken

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down if it ever existed right so deny a relationship right everybody knows what the naira is there’s a trade-off between

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unemployment and inflation but there is like a non-accelerating rate of unemployment that we cannot reach that

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barrier else inflation just shoots through the roof right accelerates you know the mainstream has been believing

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this for quite some time but Jay Powell comes up and says no that relationship is broken down and then in the same

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breath he says but we need this relationship like we really need to know what is the right level of unemployment

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and he says you know we need to know whether it’s too high too low right there’s something called too low unemployment or just right and then

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Eisner I just love this quote from him who says and if unemployment is natural God has certainly treated his children

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differently in different times and places there’s nothing natural or necessary about all this misery or the

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damage to the economy and so yes God has certainly treated his children different he has heard children differently

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because in the United States we would like typically talk about a natural rate

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of 5.5 percent like the CBO I think has a calculation of the natural rate we’re constantly below it right we’ve been

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below it before but for Spain narrow estimates have gone up to 26 percent

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like what does that mean for the economy to be naturally unemployed at 26 right so there’s something fundamentally

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broken in this approach and then the return of the Niro we see it today and in the papers the FED is operating on a

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reserve Army of Labor policy that’s a good quite above the Marxist approach to obtaining inflation you just keep people

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unemployed and only working people are called upon to serve as sacrificial offerings in the fights against inflation this was you know this has

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been recognized and it was kind of the signature call for credit Scott King who was saying why are we constantly

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insisting that people have to lose their livelihoods to fight inflation in the 70s it’s the same story today okay

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unemployment is a public sector failure so if we have a state administered monetary system which creates

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unemployment clearly it is also public failure but unemployment is also a

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problem that brings enormous social and economic costs and I typically spend a lot more time talking about these you

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know go in the literature it’s very clear you know mortality Health you know physical mental health effects that

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transfer not just to the person who experience unemployment children Partners we don’t account for these

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costs why don’t macroeconomies like try to bring these into their models even when we try to figure out their

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efficiency outcomes but what is even more kind of uh you know paradoxical is

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that the state chooses to pay these costs so it has a critical role in the

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creation of unemployment but then refuses to solve it but then accepts that it has to pay the social cost of

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unemployment as Bill Mitchell often says the unemployed are already in the public sector right they’re already there isn’t

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there a better way to do this and so the required policy response from a technical vantage point is to offer

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employment not to create unemployment and then leave labor idle but to actually offer employment for those who

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cannot find it you know and then you Branch out to all of this other Rich literature that has very well

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demonstrated the link between unemployment and inequality we can’t really claim to to solve the various

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aspects of economic deprivations or address the issue of inequality if we haven’t secured the floor so uh you know

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I talked a little bit about the social determinants of Health the deaths of Despair unemployment is kind of a very

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powerful structural force that really shapes labor markets it shapes who gets

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the job who gets the Callback shapes discrimination the ability to harass somebody because they don’t have another

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an out wage theft I mean you name it so this rise of the precarious we sit and

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bemoan it but there is a clear solution providing decent guaranteed employment

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for all so the public sector is responsible uh in part for the problem and for the solution so the structural

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features of the job guarantee what are those structural features it doesn’t rely on fine-tuning or running the

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economy hot you you may have heard before inflation the last couple of years you may have heard pundits say

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this is what we want you want hot economy more title they bring tighter

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labor markets people start to come into the labor market uh oh wages maybe are

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increasing for some people you know that haven’t seen wage increases so so the typical expectation is you just prime

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the pump stimulate stimulate stimulate and maybe that will produce some sort of desirable results in the labor market

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this is not how we’re doing things we’re doing it directly we’re providing direct targeted employment at a base wage the

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job which is also not kind of a punitive program where you know you are asked to give up your benefits

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um in order to to work you know it’s truly democratizing the terms on which the offer of employment is made it is

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voluntary with guaranteed access so that’s what job guarantee means you have guaranteed access you will not be turned

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away you you know you go to the unemployment office you submit an application and you can walk out with

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the job it is a bottom up approach because by its self-selection design by

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by its targeted employment Approach at a basic living wage it tends to support

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those who do not have the kind of Labor Market opportunities that others would

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have so you will typically talk about Folks at the bottom of the income distribution that are constantly coming

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and going coming and going out of jobs are experienced long-term unemployment so it is a bottom-up approach the focus

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here is that we are closing the labor demand Gap typically economists are

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going to be talking about closing the output Gap so you know GDP is going on a particular path we know we have some

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sort of shock and then we want to close close that output Gap and bring growth back to its path but we know that for

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the last half century we have you know we we come back you know we’re recovering from a recession but labor

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markets take longer and longer and longer so jobs don’t return growth does not generate jobs enough jobs and much

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less jobs for all and we’re talking about closing the labor demand Gap so many people wish to work we are

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providing the missing employment opportunities we don’t have any more uh Reliance on Nairobi because the direct

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approach is in fact a counter-cyclical approach now what that means of course

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is that whenever there are crises downturns as I said jobs may be real the

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reliable casualty but now we have an employment safety net folks are able to replace a job with a job they will be

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some sort of cyclical Behavior because of the way the heartbeat of the market economy is you know the economic

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activity tends to accelerate it tends to slowed down and so the public sector is counter-cyclical uh by virtue of its

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design and so the job guarantee will have counter-cyclical features as it responds to layoffs in the private

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sector it’s a structural feature because it provides a price anchor and a benchmark for all wages in the economy you know

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that employer that is paying 7.25 will have a hard time retaining their workers

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if the job guarantee pays 15. and so it does provide that kind of floor for the

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economy-wide wages it’s also a self-limiting program this is not endless spending when people don’t show

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up at the door we stop spending on the program when they move and find other

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employment opportunities the program uh shrinks and it is a genuine minimum wage policy for reasons I just described now

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let me pause a little bit and talk about the anti-cyclical nature of the job guarantee one of the criticisms that I

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hear is well can really the government do this employ a lot of people disemploy

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a lot of people they’re coming they’re going first I’m going to say why is the private sector able to do this right

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like why shouldn’t the government be able like they can’t they don’t Mass layoffs Mass hiring right that’s not it’s okay but the public sector somehow

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cannot well the most important part is that an economy that operates at full employment

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is a fundamentally different economy than an economy that operates with mass unemployment it is more stable economy

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you don’t see these wild swings you know unemployment if you notice unemployment has these huge swings and downturns it’s

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almost like an avalanche effect and then slowly the jobs recover and keeps going and we are still looking at the narrow

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definition of unemployment the people who are sloshing in and out of the labor force and then there are a whole bunch of people who are just out of the labor

31:21

force like they will take a job if one were available but we don’t see them right and so we’ve got this kind of

31:28

instability in demand I use this example you know Home Depot we’re big employers you know Walmart big employers you know

31:35

when there’s a downturn and they lay off hundreds of people or thousands of people what happens to the restaurant the local restaurant they lay off some

31:43

of the waiting staff right the taco truck goes out of business it kind of actually multiplies through the economy

31:49

and you also don’t know when you’re going to get your job back and so the economy doesn’t recover so quickly but

31:56

if you know that you have access to decent stable employment you continue to

32:02

patronize the restaurant the grocer Etc so we don’t have these wild swings in

32:08

demand just by virtue of that Economic Security that the Employment Program provides so we don’t have this yoyo

32:14

effect the economy is far more stable the reason why the program is anti-cyclical is because of the way the

32:21

private sector behaves that is the reason we created the

32:26

welfare state in the 30s for reasons of providing economic security

32:31

and we transformed the economy we managed depressions we banish these huge

32:38

negative episodes prolonged negative growth episodes you know we ended up with a far more stable economy it’s

32:44

still a cyclical but we don’t have depressions every 10 20 years anymore interspersed with little recessions we

32:51

don’t have huge booms in bus we’ve stabilized the floor and that is the function of the public sector a fiscal

32:58

policy to be counter cyclicals or whatever you may hear about the business cycle it’s there it’s alive the government sector mitigates it and so

33:05

every program has a cyclical component even if you look at Social Security which is again a retirement program that

33:13

has a cyclical component you know people take up more Social Security and downturns Medicare Medicaid they have

33:20

cyclical components so they shouldn’t come you know it shouldn’t be a surprise that the job guarantee two will have

33:26

some cyclicality to it okay the more stable the labor market the more stable the economy the smaller the fluctuations

33:31

for Mass layoffs if you if you look at the immediate postwar period countries that have maintained low stable

33:39

unemployment title employment for the long run Scandinavian countries I mean even European countries used to have

33:45

like two three percent unemployment you know today they’re you know eight ten right but if you look at those countries

33:51

you notice that they’re far more stable okay labor flows are ubiquitous people come

33:58

and go out of jobs all the time right and maybe that’s a good thing if you have a chock full employment as Vickery

34:05

would say right then you don’t move in between jobs for just you know reasons

34:10

of distress and economic insecurity but because there are opportunities out there and that’s kind of the kind of environment we want to create the same

34:17

the second uh structural feature well let me just uh it’s not a second but these are this price stabilization

34:23

features of the job guarantee I want to just run through those um how the structural approach actually

34:28

gives us more price stability so we do have a currency anchor we know what the

34:33

crisis of money is in terms of Commodities and in terms of Labor the most valuable commodity right we’re

34:39

setting the price of the currency in terms of Public Service work performed by anchoring wages at a living wage

34:46

level we have secured the floor and we also have the counter cyclical mechanism which I just explained the public

34:52

program the job guarantees contribution to the economy diminishes when the economy is growing

35:00

so it has a disinflationary effect in a inflationary environment the program

35:05

would expand when we have downturns and so it has inflationary infection and

35:10

inflationary environments spending on the employment is always at the right level I think this is really an

35:15

important Point how much should we spend today to employ every person who wants a

35:21

job you know imagine we didn’t have the inflation Boogeyman right like how much more we spend what you know 26 percent

35:28

of GDP in the last year should we spend 50 percent of GDP 75 like how much is

35:34

enough right there isn’t really a ceiling to even if we had kind of a benevolent right government that wanted

35:41

to do this we just don’t know the limit and there are good reasons why there’s no limit because the private sector is not in the business of employing

35:47

everybody it’s not their mission and so Keynes were so clear about this in

35:52

chapter 20 of the general theory he said the closer you get to Full Employment the more difficult it is to do it you

35:58

know you keep pumping demand it’s going to go to prices so the capital share of income not to labor so actually he

36:04

preempts this whole kind of naira discussion he says you can’t get to Full Employment by generalized demand you

36:10

have to go directly you have to Target employment to distressed areas okay so the job guarantee is actually that kind

36:16

of articulation of this issue that the priming the pump model is not uh going to get you full employment and so we

36:23

don’t rely on the general uh stimulative aggregate demand policies and thus we don’t do this bidding up of prices where

36:30

already resources are utilized or you know bidding up of workers and wages to

36:36

pull into new sources of demand the job you’re going to increase is both demand at the bottom you purchasing power and

36:41

Supply public goods and services we are absorbing part of the wage through the new Public Service it’s a targeted job

36:48

creation in the most distressed areas you know I often do this talk by showing a map of unemployment across the United

36:54

States and some of you might be surprised that there are many communities in these countries that have

37:00

40 50 unemployment right involuntary unemployment I mean it’s just perennial and so the aggregate statistics don’t

37:07

show this spatial effect you know and how really unemployment spreads like you

37:12

know it has this contagion effect Whenever there are mass layoffs in like the epicenter and one urban center and

37:18

just all the layoffs then it’s spread through a community so we are targeting it we’re just going to the heart of the

37:24

problem creating the jobs where they need it where we have the most capacity and so that’s also an anti-inflationary

37:30

kind of approach uh we also Target projects in areas of social needs so if cost of food is is something that is

37:37

eating away at our paycheck it’s a sustainable agriculture you know instead of traveling to the grocer there are

37:45

food deserts across the country uh in the United States you know wealthy Nation but that’s typical for Europe and

37:50

of course many many developing countries we have food deserts here instead of traveling and not even getting access to

37:56

healthy food you know the gas station is the only source of food let’s do sustainable agriculture and so in a way

38:03

we are providing what is needed and reducing some of those costs we are reducing existing social and financial

38:09

costs of unemployment I mean that’s another important point that a lot of our expenditure is to deal with with

38:18

unemployment but also the mass neglect of our capacity right so it’s on both

38:23

sides on the demand side around the supply side we’re just not doing it right and we want a support capacity and

38:28

we want to provide for economic security so it is a method for building capacity that alleviates inflationary pressures

38:33

across sectors I remember during the pandemic well when you know schools were reopening they had trouble finding bus

38:40

drivers okay so pay a good wage right give benefits you will find them so this

38:46

approach also complements case’s approach uh to the broader socialism socialization of investment which is

38:52

slightly different thing from the job guarantee all right this is where I just public investment you know good amount

38:58

of investment in the economy is under public guidance but that does provide more stability to the economy as a whole

39:04

so that the job guarantee is that much smaller um so I’m about to close out um but you know how do you go about doing

39:10

this the very obvious one is the green New Deal I mean it is an all hands on

39:16

deck approach there is no shortage of work to be done and I often say that

39:21

there may not be enough people to do all the work that we need to do but we have quite a lot to address our most urgent

39:28

challenges and so the job UA team was called the most crucial component of the green New Deal and what is really

39:35

important in the current climate discourse is that virtually every statement and not just the Paris Accord

39:40

links the just transition to just transition of workers that in some sense

39:45

it is it it you know saving the environment while people experience the

39:51

devastation from economic insecurity is not solving the job job and then providing your good job guaranteeing

39:57

with a good job while you’re still drinking polluted water is also not doing the job like these things are

40:03

organically connected and perhaps more you know concerning is the latest uh un

40:09

report of 2022 that is talking about global collapse they are running like

40:15

five scenarios possible scenarios and out of the four out of the five scenarios they are finding a very

40:21

serious threat of civilizational collapse that the environmental systems are so destabilized that they create

40:28

social system instability poverty miseration and all of that uh you know

40:33

social antagonism and then that in and of itself prevents us from actually mobilizing policy action we become more

40:40

polarized and prevents us from actually focusing on the correct policy tools which then feeds into the environmental

40:46

instability so it is this this kind of feedback effect and those tipping points but of course there are so many things

40:52

to do Beyond just the climate as well you know the experience with job

40:58

guarantee like programs and I think we’ll have a chance to talk about those you know he’s usually focused on a

41:04

comprehensive set of public service that we can broadly call care it’s the care economy and it does deal with both food

41:12

security and social care um but it also deals with arts and

41:18

culture with education with uh yeah environmental services so you know this is a map of the kind of work that can be

41:24

done I’m going to conclude by saying that the job guarantee is popular this

41:30

is a survey that was done in 2019 by the Harris Hill polling agency and you break

41:37

it down by demographic by different demographic group and you’ll find overwhelming support for the job

41:43

guarantee we’ve done this in France the UK had a survey on the job guarantee

41:49

there have been other surveys since the 60s that show strong support for the public sector to create employment for

41:55

the unemployed and the Gallup poll last year 2021 found that 93 of the poll

42:03

public supported government Employment Program as a response to the crisis but

42:09

I want to say the job Unity is not a policy for just the moment of Crisis it

42:15

really is that structural support that I had articulated so there are three paths

42:21

to the job guarantee it is the first and most important is the human rights case that connects our civil and economic

42:28

rights and we need to start from that moral proposition first and foremost the

42:34

climate case is undeniable we need all hands on deck but we can’t go there we

42:39

can’t make good on these promises without understanding the economic tools

42:45

before us and I think that’s what the mmt project contributes thank you so what follows is the question and answer

42:52

section of the presentation and the questions didn’t record very clearly so I’m going to dive in here and interpret

42:58

them to the best of my abilities apologies in advance if I’ve made any mistakes but the first one is given that

43:04

mass exploitation is required by those who are on top in our economic system how do you get the job guarantee to pass

43:11

in a world where this is the case so I mean I’ve learned that this doesn’t convince many people I mean you guys are

43:19

here to learn the mmt approach and so we need to understand the principal tools

43:24

before us but it does convince some people like people in finance I’ve given this doctor Central Bankers they

43:30

actually see the anti-inflationary effect that’s appealing to them um but I think the primary problem is

43:38

that the idea has not been there for such a long time when you consider the New Deal

43:46

like the sea the the the CWA was considered uh Civil Works Administration

43:51

was considered to be was the most popular program and people so liked it that they

43:57

considered it they started to think of it as a right so once you do these programs they’re

44:03

very popular and it would be good to do them on the grounds of Legally enforceable rights so that they are not

44:09

taken away the reason why we lost the New Deal program is because a conservative budget director convinced

44:14

FDR to not to reauthorize it so you see the deficit myth once again kind of you

44:20

know acted as a very important tool the one program that I think is uh needs

44:26

more attention is India’s program you know everybody says oh you don’t have institutional capacity to do this this

44:32

is so hard to do oh you know India has rural guarantee it’s not Universal it doesn’t pay you know uh uh you know full

44:40

living wage jobs but it provides 100 days of guaranteed employment to a rural family

44:45

and on a given day it benefits 26 to 30 percent of rural households in the

44:51

pandemic it was upwards of 40 percent and so it has been crucial and it’s a

44:57

program you can’t take away it has its problems I’m happy to talk about it but it has been truly a different path to

45:03

economic stabilization and security you know like economic security policy that has been very helpful as a primary

45:10

program that deals with water and security uh with some environmental issues in rural communities so I think

45:16

it is really underappreciated at the same time people are now starting to recognize that they want more of this

45:22

they want not 100 days they want 200 days they want urban employment so I really don’t find these to be

45:28

unsurmountable I I take seriously the political economy the critique you know about political government full

45:34

employment but I I don’t think that they are unsurmountable I think it’s the way we go about doing them you know I’ve

45:41

shared this experience in the past you know how this happened that the plan heaves was implemented in Argentina and

45:46

you know it was somebody sitting in the audience as we were presenting the employer Last Resort and The Economist

45:52

took the program and you know proposed it to the ministry of labor and tried it year after year and four years you know

45:59

no takers and then the crisis Came Upon Argentina and they pulled it off the shelf and they implemented it as people

46:04

took to the streets asking for jobs you know if they had done it as a permanent policy I think we would have had you

46:11

know a lot more success it was kind of phased out but I think there are opportunities and the first step is to

46:18

make the idea like you know to make it to mainstream the idea you know we’re we are writing proposals for a European job

46:24

guarantee for just many different Corners in the world so I think the first step is really mainstreaming the

46:30

idea and second looking to real life experiences you know I think Ryan is going to talk about what she did in

46:35

Greece we have small programs in Europe we have big programs they have real material effects and I think they

46:42

they’re not in a in a people’s Consciousness this next question is with regard to development economics can you

46:49

talk about the job guarantee in the context of countries that face some constraints May maybe they have an IMF

46:56

loan or other external debt is the job guarantee something that they’d have to work up to being able to afford or would

47:03

they need to have monetary sovereignty before they could Implement one that’s a really good question I don’t think

47:09

monetary sovereignty is a precondition one of the reasons why is we know that you know like France is doing it you

47:15

know I mean it’s not the kind of structural policy that I’m you know I articulating here with it’s kind of

47:22

anti-cyclical stabilization effects but you know France has the zero long-term unemployment areas

47:27

um they had launched this pilot I forget how many years ago uh and just 10 municipalities they try to hard really

47:34

to convince the Mayors to take it up and all of a sudden it became popular so popular that they started calling them

47:39

to ask for the program and uh now it was reauthorized in this last parliamentary

47:45

session I think the one last year two more areas what do they do it’s voluntary so people who are trapped in

47:51

long-term unemployment are provided unemployment opportunity they have to opt into it and they have found that

47:57

actually the cost of unemployment are so high for communities that this makes even Financial sense okay

48:04

um so I I don’t think these are these neglected costs that we talk about so I think that it’s not necessarily

48:09

prerequisite uh because the unemployed already the charge of the public sector now we’ve talked with you know ndongo

48:16

and Fidel very often about how you know this is a really key tool for food sovereignty you know that uh you know

48:22

that’s one of the Key conditions for limiting your policy space but you could do sustainable agriculture you could do

48:28

you know Local Schools you could do um employer domestic resources because

48:34

they employed in the domestic currency it has no bearing in a sense on your ability to pay the debt because you

48:39

you’re generating your in you know you’re using your local resources generating uh local benefits so I think

48:45

it is a tool for the taking but if you have major crises I would say for the

48:52

developer for example where you would need need to on short order mobilize large financial resources that monetary

49:00

sovereignty helps but what did the covet crisis teach us that even non-monetary

49:05

Sovereign areas discover their sovereignty to deal with their crisis the next question is what happens if

49:11

there’s a job that started as part of the job guarantee that turns out to be so important it gets moved into the main

49:18

government budget yes so quite often we clarify that these are not jobs that

49:25

will staff all the civil servant offices and public you know sector offices and

49:30

kind of Mainline employment job so this is a additional program for the unemployed and kind of the environmental

49:37

angle helps here how do I as a practical matter if there are food deserts in the

49:42

United States and we launch a job guarantee with sustainable agriculture

49:48

and then it turns out that this becomes kind of a Strategic investment for those communities you know I would very much

49:53

hope that remains a permanent infrastructure remains part of the kind

49:59

of funding model right the appropriated budget for these but those sites will be

50:04

the places where a person who loses a job can come to and find employment so I

50:09

I think that the job Unity can provide us with infrastructure of employment in the care sector right those are

50:15

underfunded right under provided you know after school activities so we can think about what those would be so the

50:21

projects will be permanent but the Staffing can certainly come and go the next question is if the job guarantee

50:28

provided training wouldn’t that present a project management problem let’s say

50:33

I’m in the program and I do four months of training and suddenly I find a job and I leave the program which works for

50:40

me but it’s disruptive to the project so does that mean the job guarantee necessarily can only be used to employ

50:46

unskilled labor so I’m I’m going to challenge a lot of the frames it is true

50:53

that it will be for folks who are at the bottom of the income distribution people who have experience that is

51:01

rather unstable like that’s the coming and going and I would challenge the notion is because they’re unproductive

51:06

this is the private sector Works in such way that it just dispose of certain people that it considers not productive

51:12

so it is targeted at the bottom of income distribution precarious income precarious employment conditions I

51:18

challenge the notion of unproductive because what is unproductive if you plant a tree where you clean up like a

51:24

lake we like you know a private sector would call it not productive right in certain sense but for us it is

51:30

incredibly socially useful like sanitation is like so critical right and

51:35

you often or see people as as kind of easily replaceable right and and that’s based on this notion of what you know

51:42

product it is so so it is a different perspective on how we see people’s contribution the zero long-term

51:48

unemployment areas they begin no one is unemployable everybody has something to contribute to the public project so it

51:55

is true it will be targeted at the bottom of the game distribution but we very much believe that this is socially productive if they go will it be

52:01

disruptive to the project so very legitimate question my sense is that if you look at these projects like the

52:08

rural Employment Program large scale that there is always a permanent kind of

52:13

work being done on these Wells or water systems and for us the example that I

52:18

gave was sustainable agriculture or care so my sense would be that actually we

52:24

will have that permanent infrastructure but people come and go in the public schools all the time right you go and you get your training for the six months

52:31

and then you go on to the next job so I don’t see that this that’s what I was trying to explain with the cyclical

52:36

aspect that this is not this enormous in and out that is happening that actually we’re just stabilizing the economy

52:43

stabilizing social provisioning and some people are going to lose their jobs and they’ll find themselves not knowing what

52:49

to do and then they will be a care center community you know CSA locally that they can go to we’ve seen this you

52:56

know Kansas City has a really great the farmer’s guys they do great things for at-risk youth for women caregivers like

53:03

they’re there always and people can come and and leave us as needed so at this point a number of questions were

53:09

collected and just paraphrasing they were if the job guarantee lifts the minimum wage some firms will see their

53:16

profits go down so what might the redistributive effects of that be how do we make sure the job guarantee doesn’t

53:22

give a handout to the corporate sector would you favor an incremental approach to implementing the job guarantee what

53:29

are the implications for domestic and informal labor and this first question as far as I can make out is can you talk

53:36

about how the job guarantee competes with the private sector will it bid up wages I think this is really a question

53:42

of the vision of the economy like what is a good economy I don’t think that job Unity is going to give it to us the

53:48

vision of a good economy is is a much broader Vision it means how do we provide public goods and the job UT

53:56

helps with that mission right but a robust public sector is critical and so

54:02

we we often say you know why are our schools understaffed and you know undefunded like get the teachers this

54:09

should not be a job guarantee job right right staff uh the NHS you know the

54:15

healthcare system that is a community health clinics I mean you know the the healthcare system in this country is

54:20

abysmal you know and we have like Health deserts and people don’t have access a community a community health center

54:26

would be fantastic so I think that um you know when we think of the public purse we’re really re-envisioning the

54:33

public purpose and not re-envisioning we are trying to kind of make good on some promises right of the public purpose and

54:41

then the job guarantee it becomes the genuine employment safety net so if the

54:47

schools are properly staffed and you have a young person graduating in a recession and they want to get some

54:52

training like on the job training and Shadow a teacher then they can do that with the job guarantee right um if there

54:58

is a green plenty of environmental projects in the Hudson Valley and and there’s an employment opportunity there

55:04

somebody who wants to you know move into green investment or some career right you can start there so we do have the

55:11

concrete mechanism to kind of bring people who find themselves without work so public sector you could Envision as a

55:18

bigger program a permanent infrastructure with a smaller job guarantee in my ideal world we will not

55:23

have 20 million people in the job guarantee in the US the economy shouldn’t be working this way to be

55:29

disposing of 20 million people on regular basis right it should have stable overall employment and I think

55:36

this is kind of the supportive Foundation that will ensure that these other jobs are also more stable and so

55:42

the bidding up of wages again if it is if it’s a small program certainly it

55:47

will not be bidding up wages if you’re not trying to do the kinds of things that the main line jobs are trying to do

55:55

I think the bidding up of wages is what currently happens you give somebody a

56:00

stimulus you give them a contract the concern production company comes in they are your short staff they’re trying to

56:06

get folks from the the other construction companies you got some environmental group that is doing radiant heat they don’t have enough

56:13

people they’re like we’ve got contracts let’s get the workers from The Other Place bidding up the wages so the bidding of the wages is happening now

56:19

and it’s always for people who have jobs and have good stable jobs the job guarantee provides employment where it’s

56:25

missing and so it’s actually raising raising the floor and in that sense I I drew the distinction uh of how we do

56:33

things if it is a strategic goal that the public sector does mass environmental solar panel installation

56:39

and we need more skilled people then you gotta do credentialing training I go

56:44

back to that there’s no unskilled person you just grab a person and give them the

56:50

training and uh we’ve done this many many other times so so a little bit of

56:55

planning it will definitely a little bit planning and experimentation as Kane says how do we make sure the money

57:01

doesn’t go to the the corporate sector the first way is that we don’t subsidize the jobs in the corporate sector as a

57:08

job Unity public money for public purpose for the kinds of things the corporate sector is not doing today in

57:13

that sense it doesn’t go directly to the corporate sector I mean if you take the macro view of course right we know like

57:20

the sources of profit and it’s all distributive it depends you know the

57:25

Monopoly power that Fidel was talking about like who’s able to raise your rent who’s able to you know like charge you

57:31

high uh health insurance like you know the job unit is not going to solve that problem uh but it will make sure you’re

57:37

not going to die on the street incremental or a big bold approach I’ll take anything you know I mean we just

57:43

got to start somewhere it’s interesting we moments of Crisis sometimes present

57:49

an important opportunity to put in place policies if we have mmt informed design

57:55

where we make sure that they become part of the permanent policy infrastructure I think it’s very important because we are

58:01

trapped in this crisis response mode that’s how fiscal policy works we Face a crisis then we try to respond to it and

58:08

this stop go approach doesn’t seem to work the idea of automatic stabilizers

58:14

is being kind of revived a little bit so we need to be thinking about preventative measures preventative

58:19

measures so that shouldn’t be part of our our design permanent and preventative you know potentially the

58:25

the French model could work where there is sufficient demand from the ground up where the federal government has to pay

58:31

attention or they could be the back room kind of conversation maneuvering that took place in India to convince the

58:38

government and find an ally to put in place a legally enforceable right to employment domestically for an informal

58:44

labor very important this is a CARE program that can help unpaid work and it

58:50

can help it by socializing some of that work but it’s not a program that uh demands for everybody to be engaged in

58:57

paid employment so it’s again a question of what’s a good economy like how do we structure it so that we alleviate you

59:03

know the many hours that women spend bringing water in developing countries right to the home like build

59:10

infrastructure socialize some of that work provide child care so that the unpaid work in the home becomes less

59:16

onerous but the job Unity is situated within a broader understanding of what

59:22

the welfare safety net is it’s not the end of public policy it is part and

59:28

parcel of income support programs child allow balances retirement security the

59:35

very many the complex set of welfare policies that we have to address various dimensions of Economic and security so

59:41

you can certainly think of like a uh you know a domestic kind of income for a

59:46

domestic labor but we’ve talked about this a lot with with ndongo that you

59:52

know the informal sector is very large and the job guarantee can be an effective way of formalizing some of

59:58

these informal labor relationships this last question is what should the job guarantee wage level be the current

1:00:05

minimum wage or higher what should be the wage level yes um there are several ways of thinking

1:00:11

about the wage level typically in these public employment programs and and kind of practical experience we have had two

1:00:17

models one is the less disruptive model meaning that’s below the minimum wage and that’s effectively what happened in

1:00:23

Argentina the wage was set at what at the time was minimum wage but then the minimum wage was raised and the fs wage

1:00:29

wasn’t raised so that’s the punitive model like you know it’s really really not real work it’s not real employment

1:00:34

you’re not really employable you got to demonstrate that you’re good for it so you gotta you know you know somebody can

1:00:41

hire the private sector will still hire you and it’s cheaper for them to do it the other one is more just like the minimum wage you know there are models

1:00:48

where they say okay this is what we believe should be the Labor Standard you meet the minimum uh the minimum wage

1:00:53

standard so that’s how it is set and then the third model is the slightly disruptive wage which is the one we

1:00:58

prefer uh which is the living wage our minimum wage is is inadequate 725 hasn’t

1:01:05

been changed since 2009 there are living wage ordinances you know in city states

1:01:10

because they recognize you can’t pay rent on seven dollars right so that is happening uh and we think it cannot

1:01:17

happen without a job guarantee at a level that robust you know to secure the robust for so so we we prefer that we

1:01:24

have a political process that articulates what is the basic living wage that stat story it is required that

1:01:30

it is revised in the job guarantee t as cost of living increase and there’s some

1:01:35

some discussion about whether you index it or not but you know if you want two percent inflation you can kind of index

1:01:41

it two percent and increase it that way

1:01:46

[Music]

1:01:53

that was the mmt podcast with Patricia Pino and Christian Riley

1:01:59

don’t forget you can support the show through patreon starting at a dollar a month and get access to Patron only

1:02:05

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

1:02:12

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

1:02:17

Patricia npino and you can email us at mmtpodcast outlook.com thanks for listening and we

1:02:26

hope to hear from you [Music]

1:02:38

thank you