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[00:00:00] And if the harvest was very good in one year, if the crop, the clip was very good one year and the market was flooded with wool, well then the government would buy all that wool because that would stabilise the price. Of course when the clip was poor and the government would sell the stuff out of their wool store.
[00:00:28] To prevent the inflationary costs. Yeah, and so to stabilise the price. And of course a bit of lateral thinking then says that well the government can do that with employment so that if there's idle, too much labour without a job, that is unemployment, the government can buy all that stock up. This is the Debunking Economics Podcast with Steve Keen and Phil Dobbie.
[00:00:53] That's MMT advocate Bill Mitchell explaining his thoughts on a job guarantee that was about 10 or so years ago. Much like the government in Australia buying up wool when there's a lot of it and selling it back when there's not much of it around, he thought the same thing could be done with jobs. Buying up people when there's no jobs around. Not entirely sure of the analogy because you don't stick people in store cupboards for years of course and the government is buying when demand is low, not the other way around.
[00:01:20] But that's his thinking behind the job guarantee and at risk of upsetting MMT advocates. We want to question the merit of all of that this week on the Debunking Economics Podcast. Well, the MMT policy, the modern monetary theory policy of a job guarantee we're going to look at this week. I have to say this is one that I've got a bit of a problem with.
[00:01:49] I mean, I like the idea that there's a job for everybody, whether it's supplied by the government or not, is the one that I've perhaps got the least agreement with. Perhaps it's because I've worked in local government so I know what it's like. But Steve, before we look at the practicalities of it, let's look at the approach. So what is the thinking behind the job guarantee? It's basically saying the government will be the employer of last resort, so everyone will always have a job. Is that a bit of a utopian vision? No.
[00:02:19] I mean, it's quite a sensible idea that there's a business cycle. Capitalism has booms and busts. And that's one thing which modern monetary theory, having a foundation in post-Keynesian economics rather than neoclassical garbage, understands there's a cyclical system. And the workers tend to be the ones who, the capitalists have a downturn when there's a boom collapses into a bust. Then, of course, lots of capitalists have a fall on their level of profit and so on.
[00:02:47] But it also means large numbers of workers lose their jobs. And that also then amplifies the downturn because suddenly there aren't wages being earned to buy the goods and services being produced by the capitalists and so on. So it's an intention. The intention of the whole thing is to reduce the volatility of the business cycle and make it in such a way that's… Will that work in reality? So, because, I mean, the start of that downturn is, you know, businesses lose… At some point, businesses lose confidence. So they stop hiring.
[00:03:17] And as you say, that creates the problem where if they're not hiring, people don't have money. Therefore, they can't buy stuff. So the whole situation gets worse. But if people go, well, okay, there's a downturn happening. But not to worry. The government is going to pick up with jobs. But still, there's a downturn happening. Does it actually change that much? Well, it does. I mean, if you look at… It's important to take a look at the world when there wasn't a big enough government to be a stabilizer for the economy to a world where there is.
[00:03:43] And this is something which, again, because we get buried by what we know in the moment we're in, we tend not to look at the history and not understand it. But if you look at the rough size of governments now around the world, they're of the order of 30% of GDP. 30% and up. Okay. Even the American economy, you know, they've got so much that is taken up in local and state government rather than federal. If you look at the federal, you get about 20% of GDP. The aggregate level of government spending is the order of 30% of GDP.
[00:04:11] And then the same thing globally, you get anything from 30% to 50% of GDP is the range of sizes of government spending these days. Go back to 1910. In America, it was 3% of GDP. So that meant if you had a downturn in the market side of economy, the capitalist side of a capitalist economy, the increase in government spending, which would come out of that, was trivial.
[00:04:31] And therefore, when you look at the ups and downs of the 19th century, and it is one of my very few favorite economists who was actually a mathematician, John Blatt, did a brilliant book called Dynamic Economic Systems. If anybody wants to get a head around how capitalism actually behaves and decent mathematical models of that, then John Blatt's Dynamic Economic Systems is the book to read. He made the point that 19th century should be a wet dream for Austrian economists and all the rest because you had time to lose the government.
[00:05:00] And what you had every 10 to 15 years was a financial crisis that caused a complete breakdown and near complete breakdown in the economy. And you had severe burns and busts. You would have years in which the anti-inflation rate was 30%, okay? And then the next year it'd be minus 20, that level of volatility. That's gone. So you're saying a bigger government is helping to ease those… It's a stabilizing force. Right. But it's not necessarily doing it through job creation though, is it?
[00:05:29] No, it's doing the sheer scale of government spending. But that scale of government spending is related to the level of economic activity. So if you take a look – and I've done this for my work on my sub-stack and Patreon pages and so on – when the government spending – when you look at the relationship with government spending and the unemployment rate, government spending goes up and unemployment goes up. There's a positive correlation between the two. Now, that doesn't mean that government causes unemployment.
[00:05:59] It's the other way around. When the unemployment rate goes up, the government has a whole range of locked-in levels of spending that it has to do. So – and also locked-in revenue sources that fall. So taxation of profits falls. That means the net government spending rises because you've got still the same level of spending, less tax revenue, your deficit increases.
[00:06:22] Equally, now with unemployment benefits, as much as they've been quarterized by neoclassical economists over time, they provide a stabilizer as well. So if you get unemployed, you're not totally bereft of income sources. You've got to – and an adult check turns up. So that's the stabilizer at the moment. But that means you get the unemployment check without having to work for it. And the idea of the job guarantee is you get a higher payment, but you're required to work as part of that. Right.
[00:06:51] But you have quite rightly criticized economists in the past for making this assumption that things can change overnight, you know, that resources can be reallocated overnight. Isn't this a bit the same? Sort of like the economy sees a downturn, the government all of a sudden creates jobs out of nowhere instantaneously as a temporary measure.
[00:07:17] And those jobs then will disappear as those people are reemployed in the public sector. That just sounds a bit unrealistic, doesn't it? Well, tell you what, why don't you recount – you said you work for local government. Give us your experience. What happened? Well, I mean, I work for St. Albans District Council. Oh, my God. St. Albans District Council? Yes. My God, is that particularly far from Hogwarts? For a short period of time. And look, no, actually, it was – you know, it functioned quite well, actually. Okay, okay.
[00:07:46] But I – and there was a bit of innovation, I guess. But, I mean, the – I've worked for far more innovative companies, let's put it that way, which were not run by the government. But it's not – but it's – I know if that – and I was working in the Department of Leisure and Tourism in St. Albans. If you suddenly said, hey, hang on, here's another 20 people, they would be employed in pretty meaningless jobs, particularly if we knew that those jobs were going to disappear again when the economy was on an upturn.
[00:08:15] I just don't know how – the practicalities of how that would work. Yeah, and this is something that I'm – you know, I've got my opinions about as well from similar experiences. I worked in the Department of Trade for a couple of years. And it was a very unusual unit. I was employed by an old left-wing mate of mine from university who was a charismatic character. And – but I used to look at the rest of the work. And there were some people who worked quite hard there, but the rest of it felt like a bit of a sheltered workshop.
[00:08:43] So, you know, you can have your negative opinions of government spending. Equally, there are things like DARPA. And I just saw an interesting profile of DARPA yesterday. And the whole focus of DARPA was to give people money and say, let's innovate the F out of this. And that's where, for example, we're talking on the internet. Who invented the internet? DARPA. Okay? So it isn't necessary that you're going to get dead-end, you know – No, but it's the short-termism.
[00:09:09] So, you know, okay, you've got a government department that's working long-term on something, comes up with some great ideas because you've got dedicated people working for a long time on that. But to say, you know, here's a bunch of people temporarily. We're going to find jobs for them. It just sounds like it's almost going to be like work experience. You know, you – Well, yeah. Yeah. And this is something which turns up – you know, critics obviously of MMT make that case. And it's a real problem.
[00:09:37] If you are going to provide a job buffer – so if people get unemployed, they're automatically moving to a job buffer, then the job buffer itself has to be able to expand when there's a downturn in the private sector and contract when the private sector grows. And there's, you know, no guarantee you're going to end up with anything interesting. You could find yourself, you know, having cleaning duties, which could be quite a brain-dead way of functioning. Yeah, demotivating. Yeah, exactly.
[00:10:07] But, yeah, it's an issue. And like the person – and I have to confess I haven't read her book yet – Pavlina, who's now the boss of the Bard Institute in upstate New York, her specialty has been the job guarantee. So, apologies to Pavlina, but we should actually probably have her on the show one day and get her to say, you know, how she looked at how you might fill in these obvious weaknesses
[00:10:32] and just having like an idea of jobs as if it's completely fungible to go from being a computer programmer to doing – working in a council. A healthcare worker. I wish we'd actually drag Pavlina on one day and have a good chat to her about it. Yeah, because, I mean, I know whenever – and look, you know, I've given up the – I used to do this in the olden days like you still do, that if I offered an opinion on Twitter, which I don't do anymore, then, you know – and I've offered this in the past.
[00:11:01] People are going, oh, you know, that's crazy. There's loads of jobs to be done that can just be turned on, like healthcare workers. You know, there's loads of people who – or assisting the aged. You know, look, if you are depressed, you – believe me, you really don't want me helping you. You know, it's – I'm not going to fulfill that role. I thought you were a pretty good joker. I mean, if you damn go to dinner parties, I've had you a few lunch fungings.
[00:11:28] I've had people in stitches and not necessarily for medical reasons. Yeah, but I don't know. I feel like if you – but if you've got mental problems, you know, I don't have the expertise to do that. And I would hate jobs like that. So, I mean, a lot of the jobs that can be done by local government are the sorts of things that a lot of us are just not very good at. And it's – I mean, it takes vocational workers, people who are dedicated, not people who are there in there for the short term. So, I think it could be more destructive than positive, that whole experience. That is feasible.
[00:11:56] But I think, again, it's not a straightforward thing to design this. If I want to go back to a period where Australia had something similar as part of its national system, it was back when Nugget Coombs was the main person driving government employment policy. And the whole idea was to have a whole range of what he basically called shovel-ready projects, that if there was a downturn in the economy, then you can employ people on them.
[00:12:23] Now, that was – and you had, you know, quite a good bunch of extremely skillful engineers coming up with a whole range of projects that if we – if there's a downturn in the economy, right, we can hire the workers for this particular purpose. And there's a whole range of skilled and unskilled positions that are available as part of that system. In some ways, even the Snowy Mountain Scheme had that type of idea behind it.
[00:12:48] So, I mean, again, I have some personal experience with the Snowy Mountain Scheme because my first girlfriend's father was the medical – hot site medical officer. So, I could see the good and the bad of that. I heard some pretty dirty stories about what happened. And so, I'd equally heard some quite successful ones. So, it is feasible, but it's not a straightforward design process. So, we should have Pavlina on to say, what have they proposed about it? So, it's clearly a big issue. And, you know, in that sense, I'm sort of, you know, more on your side about the –
[00:13:17] The practicalities of it all. The practicalities. But you have to plan for it. It can be done. Well, okay. Not necessarily – you know, you can't get a complete alternative to a private sector business in what you get done if you work in a job guarantee. So, let me throw economics at you, Steve. Conventional economics. What about – and you'll love me for this – what about misallocation of resources?
[00:13:43] So, the local government says, oh, my goodness, we've got an economic downturn. Let's create a project to paint all the walls in our neighbourhood orange. You've got a sudden run on orange paint. You've got price of orange paint skyrockets because all of a sudden there's this demand. And at the end of it, a load of people have been employed. The resources to make those orange paints have been used up.
[00:14:12] But in terms of productivity for the world, nothing whatsoever. But orange might, for example, might insidiously might be the brand colour for the political party that's actually in power at the time. I mean, so you've got politics. You've got misallocation of resources. You've got no productivity coming at the end of it. How do you control all of those things when it's done by, you know, by the government sector? Well, I mean, the private sector is pretty good at misallocation as well. They're talking of the neoclassical fantasy of the private sector. At least they do have a profit motive, don't they?
[00:14:43] But so, again, you'll find some of this writing on some of the MMT tracks saying that the gold guarantee lets you – well, I mean, I won't speak out of school. But I have had some pretty crazy arguments about how unemployment is created in the first place coming out of some figures in MMT, which I think are batshit crazy, frankly.
[00:15:08] And I told the writer that quite directly. But you have to have a nuanced vision of a capitalist economy and the range of activities people undertake. And then when you have a downturn, let's take the classic downturn, you experience the collapse of the laying out of –
[00:15:31] Optus versus Telstra are laying optical fibre down every street that had a decent population density in Australia when that ridiculous rollout was done, where the government decided that the best way to have a rollout of telecommunications optical fibre was to have two bloody companies ploughing it down the same streets where there was sufficient revenue and zero doing it in other streets where there wasn't enough revenue, which is absolute crazy.
[00:16:01] But then you had all these people with various skilled jobs who lost their jobs. Could you re-employ them in the available council positions at the time? No, OK? In terms of jobs that fulfil their own needs plus their own – you require the skills that they had. So you do have huge issues in addressing that. It's not a simple process. In a sense, the simplest side of MMT is that the government can easily create money. It does that by running a deficit.
[00:16:31] We should do that. We need fiat money in a capitalist economy as well as credit money. That's quite straightforward. But then to say you've got to actually match the ups and downs of the capitalist economy to stabilise the business cycle, then you've got the issues of whether you actually have the positions to take – employ people who have got very specialised skills that they've acquired in a private sector boom, and then when the slump occurs, you hire them somewhere else.
[00:17:00] It's very unlikely they're going to have the job satisfaction they had when they were in the boom phase. No, or have the driving force to move on to the next thing. So I've lost my job lots of times, normally because of this thing, my mouth – Oh, I don't know where you bite yourself, do you? Saying the wrong thing in meetings. I can never see you doing that. Well, it's happened, believe me. Normally right, I have to say. Look back on those companies where they're saying, well, we should be doing this, but the people didn't like it very much.
[00:17:29] But anyway, I sound a bit like Donald Trump now, aren't I, all of a sudden? But anyway, because obviously I'm the best at business. Nobody knows as much about X as me. But yeah, so look, I've lost jobs and I've had to reinvent myself. Now, if I went into a local government job, I wouldn't have that drive to reinvent myself. I might find myself now on lower income, still working in a government job because I haven't had – because I've not been scared.
[00:17:58] And I think I feel as though that's an important part of the working economy. People have got to – there's got to be an element of fear in amongst all of this. Hello, it's going to turn to a 19th century capitalist topic. But I mean, not to the full extent. There needs to be safety nets. But there's got to be a driving force that encourages you to say, well, I need to retrain myself.
[00:18:20] This is one area where I find part of the MMT attitude to what's called – it's called universal basic income. And when you talk about it being universal, then I also have my own issues with it. But the idea of having three options, you either get a private sector job, which you lose and you've done that numerous times.
[00:18:43] You have either a job guarantee where you get a higher rate of – where you get a lower rate of pay than you got on the private sector job. But I'd also like to have the – not a universal basic income, but a guaranteed basic income where there's a third level where you don't work for the local councils, et cetera, et cetera. You accept that lower income coming in, but you've then got the chance to reinvent yourself on something else. It's like for a couple of times – I've been through my bouts of unemployment as well.
[00:19:13] And one of them, I was trying to get my organization to run seminars on news coverage between journalists of different countries. They rejected my proposal. I resigned. I then spent six months or so trying to raise the funds to get the project rolling. And by the time I got the project rolling, I was on unemployment benefits for about six months.
[00:19:37] And I remember vividly that by the time I finally got funding for the seminar I did in China in 1981, 1982, I had $14 in my account. But that experience has made you more innovative, I'm sure, that you've – I was innovative enough anyway. Thanks very much. Right. It was traumatized. You did come out of it traumatized. Absolutely. But your driving force would be greater, won't it, as a result of that? Oh, yeah. No, no, no, no. The paranoia of being able to – can I pay the bills?
[00:20:06] I mean, this is one of the reasons that unemployment is so destructive and one of the reasons that the job guarantee is proposed in the first place. Worrying about being able to put food on the table at all is traumatizing and depressing and debilitating. And in the neoclassical fantasy, and this is the sort of nonsense that Milton Friedman dreamt up, they basically think that, oh, people, if they're unemployed, they go and work on their own land. Only trouble. They haven't got their own land.
[00:20:34] So you face basically potential for starvation and death. And in that situation, you don't do the rational thing and consume less. You waste yourself on drugs and so on. It's a major cause of people's social breakdown. So something to avoid that, it's certainly – that's better than – a job guarantee is better than unemployment and no unemployment benefits or inadequate unemployment benefits, which is what people face right now.
[00:21:03] Well, actually, talking about freedom, I mean, maybe. Actually, yeah, we should create jobs where everyone becomes economic advisors to the government. That might be – because then you can just say what you want, really. It doesn't matter if it's true or not. And, you know, you can pay quite well for it. That could work really badly because they might make more sensible decisions than a bloody economist. It would be hard. Who loses? All right. Well, look, let's – we'll take a break. When we come back, I want to look at actually what, you know, when would this kick in? You know, when is unemployment bad and what are the causes of it as well?
[00:21:32] Does it apply in every case, for example? What changes if there – you know, as we've been through recently, a supply shock, which sort of gets back again to that allocation of resources thing, doesn't it? So we'll look at that when we come back on the Debunking Economics podcast. This is the Debunking Economics podcast with Steve Keen and Phil Dobby. So we are looking at the jobs guarantee today.
[00:22:01] It's part of the modern monetary theory approach to the economy that when the chips are down, everyone should be guaranteed a job that the employer of last resort is the government, whether it's your local government or whether it's the federal government. But when are the chips down? Steve, you talked about the causes of unemployment.
[00:22:20] One of the reasons why we've seen unemployment recently has been because of supply shocks, because of the pandemic, that there's just not been enough goods making it through to the destination. And so people have lost their jobs on the supply side rather than the demand side. So if you give people jobs that they've lost, it's not going to help push up demand because we've still got a supply shock. Well, it's not going to help push up supply because of that.
[00:22:49] So, yeah, you are going to get – I mean, the main point of a job guarantee is to maintain aggregate demand during slumps in the private sector side of the economy. So you're normally looking at supplementing demand rather than supplementing supply. But if you have a supply shortage, and we are going to face more of those given climate change, then you don't necessarily want people working. Okay?
[00:23:16] You've got to reduce energy consumption rather than boost it. So there are elements of the proposal which are much more complex in the world in which we live because we are facing those supply disruptions. And like the – you know, it's the supply side of the economy is likely the one that suffers more than demand as time goes forward.
[00:23:39] We need to address the capacity to produce absolutely essential outputs, food, energy. Yeah. Rather than, you know, replacing the sudden downturn and demand for Gucci handbags. Yeah. Well, which gets back to my misallocation of resources argument, doesn't it? That if you're creating jobs, they will be chewing up resources somehow.
[00:24:03] Are they resources which are desperately needed or are they just being used to create a job through no useful purpose? And if it's during a time of a supply shock, then it's also going to add to inflationary pressures as well, isn't it?
[00:24:20] Well, you normally have a – when you look at the – what the business cycle does to inflation, normally with a fall in – I mean, there's all sorts of complex issues there because firms actually get higher profit margins with increase in employment because they're using their productive capacity more fully. They have unemployed machinery. And as they increase the level of output, you actually have falling prices.
[00:24:47] So if you try to distinguish, you know, what's causing inflation in the business cycle, you often find unexpected results. And neoclassicals found this themselves. The paper by Kittleton and Prescott called Business Cycles, Real Facts and a Monetary Myth. And ironically, it completely contradicted their own theories, their own findings. They found that inflation was anti-cyclical. So as the boom occurred, inflation fell. Okay? That's the opposite of what they think.
[00:25:17] They think they're going to – you know, they think that supply constraints go with rising economic activity. In fact, the prices tended to fall. But if you have a serious downturn, as we saw in the Great Depression and we saw temporarily with the global financial crisis as well, the collapse in aggregate demand means firms cut their – reduce their markups and you end up in deflation.
[00:25:40] And that is – if there's any fundamental phenomenon of a capitalist economy you want to avoid, it's deflation. If people are worried about inflation, be careful what you wish for if you fall into deflationary forces. So a large part of the job guarantee is to avoid those deflationary experiences. Right. But if they – it's finding those jobs, isn't it? So if those jobs are all to do something.
[00:26:06] So it's like, you know, governments as well, okay, we've got to find jobs for 100,000 workers across the country. So let's – I don't know. Let's get them employed in installing heat pumps, for example. Well, to do that, you've got to have 100,000 heat pumps or however many thousand. Maybe they install five each. So 20,000 heat pumps. So all of a sudden demand for heat pumps goes up and you've got all the inflationary pressures on that plus the fact – But you're doing it at the time of a private sector downturn. Yeah.
[00:26:33] So, you know, you're trying to maintain both employment and aggregate demand at the same time courtesy of a downturn in the private sector. So, like, I think that the job guarantee is a sensible idea for a buffer to be able to reduce the volatility of the business cycle.
[00:26:58] But it's getting complicated issues about how you find something that suits what the individual has lost their job has as both a skill set and a set of interests. And that's one reason I would prefer to have a two-tiered system. Rather than just the job guarantee or working in the private sector or a government – a continuing government job, I'd like to have a guaranteed basic income. You can take a lower level of income, but you still get government money.
[00:27:28] That means you can still pay your bills and you're still providing a boost for aggregate demand. So, the biggest complaint I have about the job guarantee is not the job guarantee itself, but the animosity that a lot of the MMT crowd have towards what – not a universal basic income, but I think a guaranteed basic income. I think the proposal is incomplete.
[00:27:54] You can complete it by having a job guarantee or a guaranteed basic income. And if the person who loses the job has a choice between the two. And what frustrates me is the extent to which some of the advocates of the job guarantee deride the idea of being paid to not work in a job, but receiving a basic income.
[00:28:17] It's quite justified to attack that idea that everybody gets it, you know, regardless whether you're working or not, or a capitalist or worker, everybody gets a universal basic income. That just basically drives up prices for everybody. But if you have a job guarantee and a basic income guarantee, then I think that's a more workable program than just the job guarantee alone. But is it a bit academic right now? Because unemployment is quite low, isn't it?
[00:28:44] We seem to be at a situation where we can have an economic downturn and people, you know, may feel as though they're having it tough, but they're still working. They've still got jobs. We've got, you know, a load of working poor right now. If we're talking about the American economy and the British economy for that matter, I've got a feeling we're about to find out the hard way that those jobs aren't as permitted as people might have thought.
[00:29:09] I mean, you know, the tariff madness with Trump, the cutback on government spending with the Tory party. Sorry, I meant the Labour party in the UK. Because we changed government. I don't know if you noticed. I didn't. Because it was an Indian gentleman before. I think the Tories got relicted with a larger majority. Yeah. Yeah. Now it's a man who's just quite dull. Yeah. But they are apparently different political parties. Oh, are they? Yeah. Okay, okay. Difficult to imagine, isn't it? But yeah.
[00:29:34] But up to this point, though, you know, we've seen unemployment has been quite low, you know, in historic terms, in many parts of the world. So is there a need for a job guarantee? Because the employment market, for whatever reason, I'd be keen to know what your thoughts are, unless you just don't believe the statistics. I know that's part of the answer. Well, I mean, I don't believe the amount of money being paid to people on unemployment benefits.
[00:29:58] And particularly, it's the worst in America, where, you know, the extent to which you get unemployment benefits depends on how long you've been in a job. So there are many, many people who don't even qualify for unemployment benefits. And that leads to the social breakdown, frankly, over time. So I think the positive that I will always take out of the job guarantee idea is that it focuses on the importance of giving people an income source when they've lost their job in the private sector.
[00:30:28] Because, you know, you don't want people in a situation of, you know, have a private sector job or starve. Because when it gets to the starving side, yeah, they'll end up finding other ways to become small-scale entrepreneurs, normally involving little sharp objects or things that fire projectiles at high speed.
[00:30:46] And, you know, exchanges, when they make you an offer you can't refuse, the extent to which you get social breakdown at unemployment, that was the driving force in the formation of trade unions and the growth of the welfare state. So in some ways, that's what job guarantee is pushing back forwards. Well, let's go back to when unemployment was quite high in 1984. Margaret Thatcher was at her prime, at her peak.
[00:31:12] She was closing down industries, particularly the coal industry. We had the big miners' strike. Lots of pit closures and lots of other supply-side reforms were happening at the same time. Deforms. Deforms, yeah. Okay. Excuse me. An accurate word. Economic deforms. But here's a scenario. Just supposing those miners who were striking were guaranteed government jobs doing something.
[00:31:43] Would they just say, well, okay, let's side with the enemy because I'm going to get paid for that? And those pit closures would have happened anyway. Well, actually, as it turns out, probably good for the environment if they were. But, you know, there needs to be a substitute energy supply. I mean, could it actually weaken the power of the unions if you've got the government stepping in and saying we'll always have a job for you? Well, that's an interesting angle, I must say.
[00:32:06] And, like, I think, you know, trade union militancy would actually dissipate to some extent. I mean, trade unions themselves have been destroyed over time anyway. But, yeah, that's one. You wouldn't get the same drive to maintain the employment you're currently in if you thought that you would have no economic consequences for you otherwise. Yeah.
[00:32:31] So there are elements of be careful what you wish for in virtually every potential economic policy. I see lots of them in this. That's why I wanted to bring it up. The other one is wages. So if I, you know, if you're in a situation, I know, you know, that it's not a healthy environment to have this fear factor in terms of your employment. But it does drive a lot of people. I certainly work harder. My wife works harder from having been unemployed for a period of time when we had our first child and times were tough.
[00:33:01] So we live in fear now. So we do everything we possibly can. Isn't that a healthy way to live? Well, it's just become. No, it's not. You're absolutely right. It's not a healthy way to live. But it's the reality of the situation that we're driven for survival. And so if we if there's a situation where you're told, you know, you'll always have a job, you are a more precious resource to the private sector, aren't you?
[00:33:28] Because if they don't give you give you your wage demand, you can say, oh, look, you know, there's loads of jobs around. I can always go and do nothing working for the council. Well, that's a big, big contentious now. But I mean, it's but, you know, could it push up wages? That is the is the other factor. Well, it would give some bargaining power to this. Let's look at historical. It's actually happened with the demolition of the bargaining power of the working class over the last 40 or 50 years with the demolition of the union movement. And that's been driven by conventional economic theory.
[00:33:58] The argument will get a high utility satisfying level for the whole society if we have disaggregated workers bargaining with disaggregated firms to decide the wage level. And that's another neoclassical fantasy.
[00:34:17] You end up with the power shift that's occurred with destroying the union movement is one reason why we have this ridiculous volatility in wages at the moment to some extent. Normally, wages, wage shares fallen dramatically over the last 40 or 50 years. There's a huge erosion of the share of national income going to workers versus that going to capitalists. And that's partly why the large part of the dysfunctionality of modern societies.
[00:34:43] Whereas when you had the unions being maintained, you got union level bargaining with employer associations, the whole idea of disaggregated workers and disaggregated employers negotiating with the wage bill as a fantasy. What you had beforehand, you had two relatively equal power groups, employer associations and trade unions.
[00:35:13] Bargaining over the wages. Therefore, more of the growth that occurred in productive capability went to workers. They got a larger share of income. Now that you've taken away that support for the workers, while you've still got the employer associations and the incredible bargaining power that large corporations have, more and more of the income has gone to the capitalists and not gone to the workers.
[00:35:39] And a large part of the social dysfunction we're experiencing now is because it's no longer possible to raise a family on one income. And you've got people, the fear of losing your job, the fear of not getting enough income when you're in a job. I think that's a huge part of why we have such a dysfunctional society these days. So isn't it better then that the government focuses on creating competition to the private sector in areas?
[00:36:06] I mean, people will use crowding out as an argument, but where government competition in a permanent state can try and offset some of that happening. So, for example, a government-owned bank, for example, which has been talked about for maybe the post office should be a bank, although they've not been very good at accounting, have they? Oh, in the UK, yeah.
[00:36:31] But that idea that, you know, rather than this, you know, ups and downs, this volatility around jobs, just creating short-term jobs out of nothing and then miraculously having them disappear when the economy recovers, maybe there just needs to be a higher rate of jobs within the government sector so that they can actually do something constructive and work on something long-term.
[00:36:59] And you still have those peaks and troughs, but if there's more government workers, they're not going to be susceptible to the troughs, so you're not going to feel it quite as much. Well, you go back and look at the 50s and 60s, and that was a much higher level of employment than now. But it also had, you know, predominantly it was a male workforce, a single breadwinner could support a family.
[00:37:21] And at that stage, the government jobs were a broader range of potential activities. And that's been undermined by the neoliberal emphasis of policy for the last 40 or 50 years. And now we have this ridiculous, you know, cut-down government that doesn't have sufficient resources for doing its own job.
[00:37:47] And that's like, you know, you see that with the UK where the National Health Service is being slashed because, hey, it's not working all that well. It's not working out well because you've underfunded it. So, like, a lot of the issues you're bringing up are caused by not by a job guarantee or those sorts of policies, but the sheer opposite put out by neoclassical economists where they said that would lead to a, you know, a better system and equilibrium. And, you know, there'd be such a rate of economic growth you wouldn't need welfare anymore. Well, bollocks to that.
[00:38:16] You've had a lower economic growth coming out of the neoliberal period, more instability, and you've actually reduced the quality of services by slashing government spending. We need to, you know, in many ways, the 50s and 60s with, you know, large trade unions, everybody, virtually everybody belonging to them in most advanced societies, including a thing of the order of like 40% of the workforce in America was in trade unions at the time.
[00:38:45] Large-scale government spending, you know, the most extreme example being NASA and the moonshot, but government spending being taken as a sensible part of a functional capitalist economy. That was a more stable society. Some of the reasons why you're complaining about the job guarantee are the consequences of accepting the arguments of neoclassical economists, that everything would be better if we deregulated well, you know. Yeah.
[00:39:14] Look at the state of the world now versus the state of it in the 50s. So the answer then is to go back to how we were in the 50s and 60s in terms of the ratio of jobs that are employed in government, when you literally could say in the United States, I'm a rocket scientist and I work for the government as opposed to, yes, I fill in forms for the tax office. It's, you know, that is perhaps a more sustainable answer than this idea of a job guarantee, which is just a bit up and down, really.
[00:39:40] Well, I think, you know, we've destroyed the depth that exists in the government sector. And it's all been driven, again, this is the positive side of MMT, by the nonsense about the government, you know, shouldn't run up against huge debt, yada, yada, yada. That's all garbage. That's the modern monetary theory has done a great benefit to point out the government is not borrowing. It's not debt like the private sector debt, et cetera, et cetera.
[00:40:08] But the paranoia over that generated by economists who don't understand money, which is a whole neoclassical camp and Austrians as well, that's led us to the stage where we've desiccated the government so it can't function as it once did. And that is the root of why we're having this conversation now, because if you had the government, well-funded government, and the functional private sectors as well,
[00:40:36] and you have companies run by engineers rather than MBOs, you know, I'm thinking General Motors and Jack Welch and that sort of thing, and Boeing as well. It was a more – that's why I say that what we've been driven by is economic deforms to correspond to the tech fiction of how capitalist economy functions, and that's what's led to the need for something like a job guarantee. The really positive as well is rebuild the capacity of the government
[00:41:04] to provide the long-term services that the government sector is better at providing because they don't have the short-term profit needs. And there are, you know, the long-term issues, education, health, you know, transport infrastructure, that's what we need to have built. So a large part of why the complaints you're making about the job guarantee come out of the fact that we've destroyed a functional system over the last 40 or 50 years by following the bullshit of neoclassical economists.
[00:41:33] Well, my complaint to me about the short-termism of it, whereas the long-term view is just, as you say, a bigger and deeper government employing a higher percentage of the total workforce, and that should even out some of these peaks and troughs that we've seen, and so less need for that job guarantee to happen. We can perhaps live with some of the fluctuations and some short-term employment, but people know that there's always a public sector there
[00:42:01] that's got depth that they could train for and move into, but not on a, you know, well, here's a job for a few months basis. That seems a healthier future, doesn't it? I think so. My God, we'd better shut up there, hadn't we? Yeah, we had. Good point to exit on. We've got a positive to leave with at long last, Steve. Let's go. We'll talk to you next week. I want to talk about energy next week, and is it all off track? Well, we know it is. Let's see if we can find an equally suitable answer there next week on the Debunking Economics podcast.
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