People’s Economists

By Annavajhula J C Bose, PhD

Department of Economics, SRCC

Moral standards are not part of modern economics and finance based on the foundation of let devil take the hindmost. That means, let everyone put his/her own interest first, leaving the unfortunate to their fate. We cannot get rid of the dog-eat-dog Hobbesian world.

But it is not the case when you are with Prof. Pavlina Tcherneva (pictured above) at Levy Economics Institute of Bard College. She is also the Director of the OSUN Economic Democracy Initiative. She challenges us to imagine an ethical world where the phantom of unemployment is banished and anyone who seeks decent, living-wage work can find it—guaranteed.

I summarise here, her jobs-guarantee-policy ideas.

The takeaway for you is that Pavlina can make you distinguish between Dismal Macroeconomics Simplified and Pleasant Macroeconomics Simplified. And she attracts you to opt for the latter. Which is really not only humane but also funky (without the negative meaning implied), like, say, enjoying jazz funk beats or dance rock “Beat It” from MJ’s Thriller album.

In Dismal Macro, there is ‘natural rate of unemployment’. This means that the market mechanism will produce some number of jobless people. It is natural or inevitable because more jobs cannot be created by the profit-driven private sector employers. In case policymakers attempt to bring the unemployment rate lower than this so-called natural rate, prices will shoot up because too much income and spending is generated and workers ask for higher wages due to labour shortage. Given the resultant trade off between unemployment and inflation, a reserve of unemployed needs to be maintained in order to tame the prices.

Dismal macro, thus, guarantees mass unemployment entailed by rippling economic costs, political costs, social costs, public health costs and psychological costs.

In Pleasant Macro, there are many non-negotiable, interconnected fundamental propositions.

The first basic first proposition is that if somebody wants to work, they should have employment opportunities. They should not be going into the cruel environment, trying to out-compete the next unemployed person for the scarce jobs that are out there.

Second, jobs guarantee honours the human right to work. Work, much of which is paid work, is the most important determinant of wellbeing.

Third, because there are millions of working people who do not even earn the poverty wage floor and others who do not even have a job to earn, we need to firm up what constitutes a social wage or living wage or basic decent wage level above the poverty wage floor. Anyone, wherever they work, can and should earn it at least.

Fourth, because the economy expands, contracts, expands, contracts and so there is periodically laying off en masse, jobs guarantee provides a stabilising mechanism. When the private sector recovers and starts growing and provides better paid wages, then the job guarantee programme shrinks as people move to better opportunities. However, the problem is that the private sector of the economy considers employment as a cost and does not create robust, better-paid employment opportunities. There are jobless recoveries and the jobs that are created are precarious. So, and given the fact that the higher skilled individuals do not tend to experience the scorch of unemployment, and if they do, they tend to have the assets to weather the short spell of unemployment, jobs guarantee strengthens the labour market and provides better working experiences for those at the very bottom—like folks who might have not completed high school, folks who are regularly last hired, first fired, folks who are long term unemployed and so considered as bad by private employers, folks who have difficulty holding out certain private sector jobs like people with disability, and folks who are discriminated against on one ascriptive ground or the other. This democratisation of work is the fifth plus point of the jobs guarantee.

Besides, the jobs provided are not ‘bullshit jobs’. Suitable jobs for the public purpose are provided—jobs in the public service sector comprising sanitation, care work, environmental work, social healing work, etc. When jobs are guaranteed this way, dignity of work as also job satisfaction is universally enabled and ensured. This is the sixth benefit out of jobs guarantee.

Finally, jobs guarantee is backed by Modern Monetary Theory (MMT). This theory smashes the myth that the public sector does not have financial resources and so we need to tighten our belt and we just cannot afford economic rights or anything else of public value. MMT talks about money, and specifically state money and the public purse. The public sector has, in a technical sense, unlimited funding capacity to pay for its priorities, to finance its budget deficits and debts. MMT also makes an ethical philosophical funda-point that if you issue a currency, you also have a responsibility to provide it in a manner that is consistent with public objectives and consistent with economic stability and consistent with full employment and price stability. When you have unutilized or underutilized resources, including unemployed people, you can activate those resources through public payment without having a lot of inflationary pressure. Jobs guarantee is less inflationary than the conventional ways of stimulating economy such as pump priming or providing subsidies and tax cuts to the private sector. These conventional ways stimulate the economy by picking up winners. Industrial sectors which are already at capacity and which have highly skilled labour and folks that do not experience unemployment are stimulated. Consequently, there is an add-on problem in terms of bidding wars in those sectors for skilled workers breaking out. As such, this kind of stimulus would be more inflationary than if you just went and employed the unemployed, and just provided the basic public job offer rather than hiring from the top. Similarly, if you dump Universal Basic Income into the economy, it does not create additional output on its own. Also, that money goes to folks who do not need it and it basically does represent a major fiscal injection that does not have the automatic stabilising feature of the jobs guarantee. UBI still does not create enough jobs for all. Giving unemployment benefit is also useless. It will not cause a lot of people to step out of some precarious private sector work. The private sector in any case will never create jobs on its own that satisfy the multiple social psychological health reasons other than income as to why people like to work, or want to work.

Time to conclude. Pleasant Macro makes solid sense to me. It aims to ensure everyone in society has access to fairly waged, decent work. The functioning of the economy must primarily be judged like this only.

Such an economy is a people’s economy, according to Stephanie Kelton (pictured below). In such an economy, government balancing the budget like a household does is bad economics. Instead, the points of good economics are simply simple—clear and easy—as mentioned in her book, pictured below.

People’s economy refers to “a just and more prosperous world—one that combines ecological sustainability with full employment, well-being, lower degree of inequality, and excellent public services that meet the needs of all”. To achieve it, the government must remove many anti-people deficits. The government just needs to print more money and spend it on expanded government employment, healthcare, education, transportation, environmental issues, infrastructure, housing, retiree benefits, and on and on. In other words, more and more deficit spending is required.

Government is good if it runs deficits to address shortfalls in investment, infrastructure and education, R&D – the kinds of things that enhance the economy’s longer term productive potential; and bad if it just runs deficits to generate windfalls for big corporations and wealthy people. When conservative govcrnments increase the deficit by cutting the corporate income tax to create greater incentives for businesses to invest, we do not see a boom in hiring and investments. By contrast, progressive central governments can run deficits which are good for the middle class and low income, poor people as well as state and local governments and small businesses.

Kelton should not be misunderstood as advocating unlimited government spending. She talks about real limits to spending as well like inflation and ecological constraints as binding constraints. The central point is that the government can just print more and more money and spend it more and more for people’s welfare as long as the economy has the ability to churn out the needed goods and services. The limit is the “economy’s real resource capacity. We have the people we have, we have the machines we have, we have the factories we have, we have the technology we have, we have the raw materials. Those are our means of production. Those are our material means. Once we exhaust them, once they’re all used and being put to use, then any additional attempt to spend into an economy that is maxed out is going to produce bottlenecks in production and inflationary pressures.”