Great Leap Forward


Last week Allan Sheahen published a piece arguing that “Jobs Are Not the Answer” to America’s unemployment problem. Here’s his reasoning:

“The current unemployment rate of 7.5% percent means close to 20 million Americans remain unemployed or underemployed. Nobody states the obvious truth: that the marketplace has changed and there will never again be enough jobs for everyone who wants one — no matter who is in the White House or in Congress. Fifty years ago, economists predicted that automation and technology would displace thousands of workers a year. Now we even have robots doing human work. Job losses will only get worse as the 21st century progresses.”

In fact, economists have recognized this possibility since at least the early 19th century, when David Ricardo posed it as “the machine problem”.  “Robots” have been doing “human work” since the time of Adam Smith’s pin factory. Or, indeed, since the first proto-human discovered the fulcrum and lever so that one could do the work of four.

However, “unemployment” has existed only since the development of production for market. Our tribal ancestors “worked” about a dozen hours a week to provide the food, clothing, and shelter required for the standard of life they deemed acceptable. They occupied themselves the rest of the time with all the other human activities that we regard as “culture”: dancing, singing, tattooing, shaman-ing, piercing, ritualizing sacrifices, child rearing, storytelling, marrying, fighting, debating, drawing, and thinking.

Neither were our peasant forbearers, who had access to the main means of production—agricultural land—unemployed. They might have worked much longer days, and they grudgingly turned over an ever-rising portion of their production to rapacious feudal lords, but they were not unemployed. It is only once they lost access to land through enclosures, etc, that their livelihood depended on the whims of the employing class.

Why didn’t the inexorable trend to greater use of “robots” from the time of Smith forward lead to the dis-employment of all (or most all) human labor? First we raised living standards (arguably, of course, since it is not altogether clear that we live better than our tribal cousins in all important respects), always finding other ways to employ humans to produce products that our ancient ancestors never knew they needed. Second, we reduced the workweek—adding “weekends” and “holidays”, and reducing the daily grind from 16 hours to 12, and hence to 10 and finally 8. And there it got stuck—at least in America.

Further, being a Puritanical/Calvinist sort, Americans really never embraced the idea of vacations, anyway, and so unlike every other civilized society on earth, there is no considered right to a vacation and most Americans either don’t get them or don’t want them.

In recent years, it seems that involuntary unemployment and underemployment in the US has been rising. There are a number of reasons. First, the really lousy jobs have left the country and headed to developing nations like India, China, and Viet Nam. For reasons that escape me, many of my progressive friends want to bring them back. Somehow they’ve idealized life in the factory (one suspects because they’ve never read Dickens or Marx, nor actually done manufacturing work, and apparently slept through the history lectures on the Lawrence, MA fire at the Pemberton Mill factory: According to the Boston Globe: The scene after the fall was one of indescribable horror. Hundreds of men, women, and children were buried in the ruins. Some assured their friends that they were uninjured, but imprisoned by the timbers upon and about them. Others were dying and dead. Every nerve was strained to relieve the poor unfortunates, when, sad to relate, a lantern broke and set fire to the wreck. In a few moments the ruins were a sheet of flames. Fourteen are known to have been burned to death in the sight of their loved ones, who were powerless to aid them.)

No matter how often one reads about fires or structural collapses in Asia that kill hundreds of workers at a time behind locked factory doors, our progressives want to bring back those “good jobs” to America.

At the same time, they disparage the kind of work done by the vast majority of workers in all rich, developed, capitalist societies: services. These jobs come in all shapes and sizes: personal, financial, customer, educational, health care, entertainment, and insurance. They are the jobs of the past, the present, and the future but are forgotten or denigrated by progressives who pine for the days when American workers serviced machines.

Some of those service sector jobs will be taken by robots, others will be lost to increased productivity. It is inevitable, of course.

I saw in the news that the prostitutes of the future will be robots. I’m not sure what to think of that development, but it is probably inevitable and will displace a lot of human workers. (Will future progressives bemoan the loss?)

My own profession—education—will almost certainly see technological displacement as we increasingly use “on-line” and “distance learning” methods to reach greater numbers of students. Doctors are already doing diagnosis and even providing care at a distance, and robots will soon enough do the delicate procedures at the operating table that are too difficult for even well-trained human hands.

Again, I do not know whether it is better to have a robot’s digits exploring body cavities, but it is going to happen.

I’ve focused on the advanced economies, but the same thing is happening everywhere. Unemployment globally had already reached a record high before the GFC hit in 2008. Chinese manufacturing employment will soon begin to trend downward at a rate that will make USA factory job losses look trivial. The truth is that global demand for manufactured products cannot possibly be high enough to support more than a relatively small proportion of global jobs (much like agriculture before it).

Like it or not, humans everywhere will rely mostly on the service sector for paid employment. I like to joke that we’ll all be in one of the “P” jobs: performance, personal care, politics, or prostitution.  Maybe that’s really only three categories since members of the third can be combined with the first or last.

And—who knows—maybe the best comics and magicians and preachers of the future will be robots. I already suspect that most comments provided to blogs are submitted by robots—a hunch strengthened by a recent stunt perpetrated by Brad DeLong (who programmed a “sub-turing robot” to harass David Graeber;  see here)

Indeed, note that all the tribal “cultural” activities that I listed above that were created to occupy time are now respectable and paid professions: dancing, singing, tattooing, piercing, ritualizing, child rearing, storytelling, marrying, fighting, debating, drawing, and thinking. Add accounting, banking, and marketing and you’ve pretty much identified the whole damned service sector. The difference from tribal (and other pre-capitalist) societies is that we moved to what economists from Marx to Veblen and through to Keynes called a “monetary production economy”—one in which much of the provisioning process is undertaken using money with a view to make “more money” (for the technically trained, that is M-C-P-C’-M’).

By no means should this be taken to mean that all production is monetary—most kids do not pay their parents for child care (yet)—but much of it is, and increasingly we have brought more of our provisioning activities into the market. While it is true that we also provide many of those activities through government, those, too, involve money. Indeed, I’ve argued that the monetary system was created to mobilize resources for the “public purpose”—but we need not go into that.

The important point is that our modern government uses the monetary system to mobilize resources (think national security) or to ensure access to them (think Social Security and Medicare). (Of course, we can consume some publicly provided resources—such as parks—without paying fees, but generally the state has directly or indirectly paid the wages required for upkeep.)

And, if it really should be the case that robots take away even our service sector jobs, then the answer (of course) is to reduce the work week—to share the work that living humans can contribute toward production.

In a capitalist society, access to many of the resources needed for the good life requires money, and access to money is linked to employment. Neither of these is a one-to-one correspondence, of course. To a greater or lesser degree, we “take care of our own” even when they do not have money or jobs. Still, there is an expectation that healthy people of appropriate ages “work for a living”.

As I said before on this blog, when discussing a “new meme for money”, we expect that those who are able to do so will “pay for” their own support. Everyone knows what “pay for” means—we all go to the shopping mall, and we pull out our wallets to “pay for” the Gucci handbag. You do not grab the bag and look around for someone else to pay. “Hey bro’, I’m a bit short today; can you spare a few hundred to buy this for me?” No, if you cannot afford the Gucci you buy the Wal-Mart store brand made in China. It does little good to argue that those who can “afford” to pay more ought to do so for the benefit of those who need welfare. That is what the charity meme is for. Of course we all ought to give to charity—from each according to ability to each according to need. If the tax system comes down to charitable contributions, then it should be based on voluntary contributions.  The mixing of these memes will at best lead to confusion, but more predictably it will lead to tax revolt and social spending cuts.

So here’s the strange reaction of Allan Sheahan to the observation that we’ve got “growth without sufficient jobs”, not only at the USA level but also at the global level: we don’t need no more stinking jobs. He says:

“Job creation is a completely wrong approach because the world doesn’t need everyone to have a job in order to produce what is needed for us to live a decent, comfortable life. We need to re-think the whole concept of having a job. When we say we need more jobs, what we really mean is we need is more money to live on. One answer is to establish a basic income guarantee (BIG), enough at least to get by on — just above the poverty level — for everyone. Each of us could then try to find work to earn more.”

In short, he claims we need the BIG (basic income guarantee). Those who cannot find jobs will simply live on publicly supplied hand-outs.

Now, I’m all for charity, even publicly organized charity. As Hyman Minsky put it, this has nothing to do with reducing poverty caused by unemployment, but rather, as he said “expanded, improved, and modernized programs of transfer payments and income in kind for the aged, the infirm, the disabled, and needy children are necessary. As I see it, this has little to do with the War on Poverty; it has mainly to do with our national conscience and affection for man.” He (rightly) predicted way back in 1965 that a War on Poverty based on charity would not lower the poverty rate at all—and it did not. It relieves our national conscience but it does nothing to alleviate poverty.

The BIG proponents, like Sheahan, always use a “bait and switch” approach. They love to point to the supposed success of Alaska’s “permanent fund” program that shares the profits from oil production with state residents. This, it is claimed, separates income from work, allowing all residents to choose to pursue a life of leisure free from the necessity of work. That life of leisure allows all Alaska residents to voluntarily contribute to the higher life of the community—free of the daily grind of work, they can pursue charity, or the arts, or a life of quiet contemplation. And then we find out exactly how much Alaska provides in the form of a “BIG” income guarantee:

“In 1982, the state of Alaska began distributing money from state oil revenues to every resident. The Alaska Permanent Fund gives about $1000 to $2000 each year to every man, woman, and child in the state. In 2012, the amount fell to $878. There are no work requirements. The grant has reduced poverty and the inequality of income in Alaska.”

Uhhmmm: there’s no typo there. You read it right: $878 smackaroos for the year. In Alaska that buys approximately two Big Macs plus a Coke every other month to feed a family of four, living out their dreams of a life of leisure among the Grizzlies.  Now, let me see. If we added several zeros to that number, we might get close to what BIG promises, holding all else constant.

But all else would not be constant if we paid “every man, woman, and child” in the US, say, $87,800 per year. Because we’d add just about two or three zeros to all prices and wages in the US—at least within a reasonably narrow margin of error. We’d simply raise the price of that life of leisure the BIG proponents promise, until we’d priced out the couch potatoes who are now willing to live on $878 a year in Alaska without work, but would want the same $87,800 that a BIG actually requires. (To be sure, it will get messier than that, but you get the idea. It amounts to little more than a quick devaluation of the currency. It could even be much, much worse than this if we all together decide to become couch potatoes to live out the BIG promised life of leisure–and then that $88k would buy just about nothin’.)

I love the best quote ever from Dean Baker, to the effect that, in general, economists are not very good at economics. We could go further. BIG folks are just plain horrible at economics.

Look, I love welfare. I’ve got a huge bleeding liberal heart. I think our nation should take care of its own. But this incoherent nonsense argument that we don’t need no stinking jobs is just plain stupid. Even the progressive’s favorite argument that we need to bring back to the US all those old horrible factory jobs is better than BIG.

But why not advocate for decent pay in good service sector work, jobs for all who want to work, and an Employer of Last Resort to make the promise something more than empty?

As Hyman Minsky remarked barely one year into President Johnson’s battle against poverty, “The war against poverty is a conservative rebuttal. . . . It can spread poverty more fairly. . . . However, this approach, standing by itself, cannot end poverty”. The critical missing component in 1964, and that remains AWOL today, is a government commitment to full employment. Only a targeted jobs program, paying decent wages, will successfully fight poverty among the non-aged in a politically acceptable manner.

Minsky went on: “We have to reverse the thrust of policy of the past 40 years and move towards a system in which labor force attachment is encouraged. But to do that we must make jobs available; any policy strategy which does not take job creation as its first and primary objective is but a continuation of the impoverishing strategy of the past decade. A necessary ingredient of any war against poverty is a program of job creation; and it has never been shown that a thorough program of job creation, taking people as they are, will not by itself, eliminate a large part of the poverty that exists”.

And to conclude with my favorite quote from J.M.Keynes:

“The Conservative belief that there is some law of nature which prevents men from being employed, that it is ‘rash’ to employ men, and that it is financially ‘sound’ to maintain a tenth of the population in idleness is crazily improbable–the sort of thing which no man could believe who had not had his head fuddled with nonsense for years and years….”

Sorry, got to quit now. I expect there will be a Part Two after the inevitable comments by the turing bots.

51 Responses to “ARE MORE JOBS THE ANSWER? The “BIG” Bait and Switch”

JIm WhitmanJune 25th, 2013 at 4:08 am

I was introduced to economics and political economy via social theory, Marxism, and the idea of socialism. The idea was that capitalism could show us how the promise of machine-based production might end human poverty and misery. The big problem was capitalism itself – the theory said there were 'crises' were always on the horizon, that crises would drive us to socialism, and that socialism would finally put machine-reliant productivity and economic planning under full democratic control.

That was before green thinking and green science blew up socialist political thinking and warned us that long before capitalism had finished showing us the way to socialism, productivity would turn weather into the scourge of all our socialist aspirations and destroy the planetary paradise we were hoping to share.

But, the biological evolutionary story of the dog-like creature that turned into a whale, should really warn us that history is directionless, at least as far as there being any necessary inherent direction to capitalism, to production, the satisfaction of human wants, and for productivity. 'Feudalism' for example shows apparently no 'feudal mode of production' but apparently many descriptively feudal-like power relations married to local social organisation and local power relations. Capitalism emerged side by side with peasant- like land holdings, subsistence farming, putting out, slavery, and many different levels of technology. The capitalism we have now was not pre written and definitely did not follow Marx's schematic stages of development.

Likewise, Pomeranz has some interesting things to say about China and Europe.

So, where are we going? The blog perhaps extends the present into an even greater machine-robot and human-labour-less (rentier-dominated?) future. But lets say we dig our heels in and follow a Pomeranz-inspired pathway on which we, like China, stick out for labour intensive production for longer – for green reasons perhaps. Or simply share out work giving the rest to robots. Is there anything left of the Marxist theory of the 'falling rate of profit'. If we got rid of our rentiers, held back on robots, maintained lower levels of productivity, stopped doing filthy polluting and energy lavish production, will capitalism survive, will we survive, will we transition to something else – 'socialist' or 'feudal' or, whatever?

CortinaJune 25th, 2013 at 7:32 am

Those machines are never going to provide us with the level of social interaction we great apes desire. Unless we get our asses completely whipped by they machines, there will be social interaction. Some of the social interaction will be monetized and in the public space. Therefore classed as economic activity. I don't really understand this straw man attack against a basic income guarantee. I interpret a BIG as saying we all have an equal shot at consuming machine made goods.

If the quantum of BIG income were limited by the productive capacity of the economy. The smaller the supply of goods and services the smaller the BIG gets. The more the people and machines provide goods and services the larger the BIG gets. Those who do contribute more services to the economy would get more income to spend. Those who don't contribute services to the economy would only get the acceptable minimum. Society gets to decide what's a fair and reasonable reward for the effort put in by each party. What's to tear your hair out over?

Surely the lowest level of welfare payments in any country are a BIG in any case. Can you not have a BIG and a JG in the same country. The JG wage being significantly higher than the BIG.

Personally I think most people would choose to work anyway. Most people like the idea of contributing to society. It's no fun baking cakes for yourself all the time.

Then again the elites who end up controlling the machines are going to decide for us how we spend our time so why fret over JG's and BIG.

Neil WilsonJune 25th, 2013 at 7:33 am

This boils down to a "I think this and you think that" argument. There is still, to my mind, no accurate codification of the issues that separates the BIG and the JG. It just hasn't been explained in a manner that ordinary people can understand.

For me the flat payment of BiG is a pipe dream. Universal benefit has already been withdrawn here in the UK with the attack on Child Benefit, and the suggestions that even the state pension shouldn't be paid to 'rich people'. Add to that the fact that unemployment benefit and income support are under attack from all side with the 'shirker' meme, the discussion of 'contributory principles' (ie older people should get more than younger people) and you can see clearly that any flat income support payments are undermined politically over time. That can only happen if the majority do not fundamentally support them. Why is that?

BIG has huge counter-cyclical issues in that it undermines the automatic stabilisers. It isn't withdrawn as the economy moves into boom period. Therefore you have to have a massive hike in tax rates as the tax side has to bear all the burden. Like it or not people don't like high tax rates – and being irrational they just won't see the offset on the income side. Why is that?

What I've learnt recently is that economists are not just lousy at economics, but that they don't appear to have any understanding of human behaviour. Apparently the sort of stuff that appears in the likes of Dan Ariely books is a revelation, yet that sort of stuff has been in my field's text books for 30 years.

L. Randall Wray L. Randall WrayJune 25th, 2013 at 11:30 am

Cortina and Jim: Note I agreed that we need welfare, and we can call it BIG or TANF or AFDC or WELFARE. I think giving welfare to everyone is a dumb idea. It just scales up prices–as Food Stamps raise all food prices. Instead, give BIG to those who need it; we take care of our own. But note my piece is a response to a BIG advocate who argues AGAINST providing jobs to those who want them. I do not see it as ELR VERSUS BIG. That is the position of the BIG promoters. All ELR supporters that I know support JOBS PLUS WELFARE.

AndrewJune 25th, 2013 at 1:28 pm

You're worried that BIG devalues the currency? Really? OK, so there are limits in absurdity, and perhaps $87,800 is absurd. But this isn't that difficult. Does Social Security devalue the currency? How is BIG any different than expanding Social Security? If $878 does nothing and $87,800 is too much, there must be a number in the middle that is about right. And we don't have to get it all right at once. One could adjust a stipend based on inflation, which would sure be easier than trying to have the Fed do it via interest rates and QE. Additionally, as people have more money in their pockets, the need for the stipends decreases as jobs are naturally created from demand, and people want to work.

Jobs are important because they provide a sense of self-worth and pride. Doesn't Warren Buffet like to tell us that he goes to the office every morning? Money has little to do with it. What BIG does provide is flexibility to allow people to pursue the "jobs" that they find fulfilling — whether that be blogging, making custom furniture or working at the hospital. And stipends are always better than taxes. Everyone likes to receive money. Nobody likes to pay. In the end we must remember that the value of a dollar is relative and whether it is stabilized through taking or giving makes no difference.

F. BeardJune 25th, 2013 at 1:33 pm

Victims should not have to work for their restitution. What kind of justice is that?!

And yes, the general population are victims – of unethical purchasing power creation by what is essentially a government-backed counterfeiting cartel, the banking system.

And there's no excuse for it. Common stock is an ethical form of endogenous money creation – one that "shares" wealth and power while consolidating capital for economies of scale.

Robert KellyJune 25th, 2013 at 1:35 pm

"and you can see clearly that any flat income support payments are undermined politically over time. That can only happen if the majority do not fundamentally support them. Why is that?"

The other kind if BIG, BIG MONEY, dominates the political process at this point in time. When you say "the majority", what matters is the majority of policy and law makers. And the current sentiment among those that make our laws is to ensure the profits and well being of those who contribute to the process of getting them elected to a position of law making power.
The other majority, those who actually cast the votes electing those decision making representatives, are not yet uncomfortable enough to affect the necessary change. Milton Friedman used to say change only comes after a crisis. Human nature.

Neil WilsonJune 25th, 2013 at 2:13 pm

Probably time to explain in detail why pure welfare scales up prices and why it sows the seed of its own destruction. We know it fails over the medium term because it's been tried and tinkering with it at the edges can't fix that fundamental resentment problem.

Why is the 'Jobs plus welfare' approach sustainable into the long term economically and socially? Why can you extend the definition of a job and have the rest of society accept those are jobs worth paying for?

I think there are lots of interesting questions about what 'work' is, and what it has to become in the future to allow a sustainable counter-cyclical automatic stabiliser powerful enough to offset the worst the private sector can throw at it.

L. Randall Wray L. Randall WrayJune 25th, 2013 at 2:32 pm

Andrew: so you swallowed the bait (BIG allows one to choose to NOT work, whilst waiting for that dream job to come along) but do not see the switch ($878 will get you through about a month of waiting, except in Alaska where it will last a week). $88K would indeed allow one to choose to wait, so long as prices do not rise. The greater the number who choose the wait, the greater the price rise.

L. Randall Wray L. Randall WrayJune 25th, 2013 at 2:39 pm

Neil: OK try it this way. All of us get $200 worth of foodstamps a month. What is your prediction? The average consumer’s foodbasket price will rise somewhere near $200/month? It just becomes the entry fee to get into the grocerystore. The “food-like” concoctions sold are from oligopolists take into account the “coupons” to raise prices sufficiently to eliminate the discount. The real world is more complex and some of the extra purchasing power will be drained off elsewhere, but it’s a fair approximation to what happens. Or try it another way: every homebuyer in America gets $100K check from Uncle Sam. What happens to homeprices? Anyone want to bet that they do not rise?

EricJune 25th, 2013 at 4:29 pm

Check out "Mincome" in Dauphin, Manitoba, Canada from 1974-79. It was a type of guaranteed minimum income tried experiementally in that small town by the federal and provincial governments. It seemed to be having good effect without people losing the interest in working and improving themselves.

Alan RhodesJune 25th, 2013 at 5:31 pm

Given our propensity to tax to "pay for" expenditures, I assume that we would be taxed for the additional food stamps. So providing food stamps (credit) for all would be a wash, except that the elimination of means testing for the basic dignity of eating would be a net plus because means testing is a cost that probably is greater than universal smart cards. And even though means testing provides jobs, I believe it unproductive.

Besides, even rich folks can only eat so much. There is a ceiling therefore on how much food people desire. Demand for food is not unlimited, and it is unrealistic, I think, to assume that demand would increase for no other reason than that form of credit changes from a VISA card to a Federal Government issued smart card.

L. Randall Wray L. Randall WrayJune 25th, 2013 at 9:40 pm

Alan: No, I think the idea is that we give BIG but do not take it away through a tax. If give give everyone $88K then tax it back thru a new $88K head tax then I think you are right–effects would be minimal.

And the point is NOT that demand for food is more or less fixed. It is that given that everyone walks into the store with “coupons” worth $200 lets oligopolists markup prices by an average of 200 per food basket. Consumption doesn’t rise in real terms. Like housing: Uncle Sam donates $100k toward your purchase; you don’t buy an extra house, but sellers raise prices to absorb your windfall. Here it is not quite so direct because house sales are not monopolized in the same way that “food” sold in grocery stores is controlled by a half dozen firms. (I use the term “food” loosely, as very little of what is sold in grocery stores is really food, of course.)

F. BeardJune 25th, 2013 at 9:52 pm

So long as wealth and income are justly distributed then how much work is done is no one's business, is it? Or does productivity require injustice?

L. Randall Wray L. Randall WrayJune 25th, 2013 at 9:53 pm

Eric, thx, but the links are rather vague on how much each family could get. Looks paltry, nothing like what BIG proponents claim. To really test BIG you need to give a middle class lifestyle so that one can CHOOSE not to work. The manitoba program was a negative income tax (indeed, much like the USA earned income tax credit); payments appear to have been very small, so it is no surprise almost all “chose” to continue working. That is not a test of BIG. It just shows that low income folks appreciate a bit of Welfare (and I certainly support giving them help!). But they need jobs first and foremost.

F. BeardJune 25th, 2013 at 10:01 pm

But they need jobs first and foremost. LRW

No. They need justice first and foremost. And a government-backed credit cartel is far from just.

RobertJune 25th, 2013 at 11:02 pm

Both the BIG and JG are pipe dreams. The trend in has been towards dismantling the welfare state and I see no indication this is about to be reversed. If you're unable to find a job, then you'll be supported by someone who does have income. There's typically less resentment if the person doing the 'supporting' has a personal stake in your well-being. For the socially unattached the options will be local charities, prison, or communal type arrangements.
The unemployed will continue to contribute to society as they do today, in a myriad of ways. Eventually society will become mature enough to recognize these contributions.

The economics of all this is moot. Policy is being driven by ideology, which is being driven by special interests. Our public institutions have become ineffective and corrupt. But the world will not end because there is mass unemployment. Politics will continue as usual so long as those who view themselves as being disenfranchised are a minority. The lack of political organization for the disenfranchised guarantees that their concerns will be ignored. As will the concerns of bloggers who present much the same in economic terms.

The most pessimistic outcome that I can see is that we will 'muddle through'. Needless suffering will ensue, but humans have a long history of living in purgatories of their own choosing. Eventually there will come a realization that we are living in a gift economy, as fewer and fewer people do what is traditionally defined as work. By any definition that I have read there are no job or basic income guarantees in a gift economy.

This concludes my crystal ball report.

F. BeardJune 25th, 2013 at 11:10 pm

BIG has huge counter-cyclical issues in that it undermines the automatic stabilisers. It isn't withdrawn as the economy moves into boom period. NW

The government-backed banking cartel is the cause of the boom-bust cycle.

Can't admit that, can you?

L. Randall Wray L. Randall WrayJune 25th, 2013 at 11:44 pm

Robert: Me thinks your crystal ball is rusty. I agree BIG is a non-starter. It is also incoherent nonsense. And dishonest. Bait and Switch. The JG/ELR does what it says it does, as Keynes put it. Puts Millions to work. Doing useful things. Provides income in a manner that is consistent with the political-economic system we actually live in. That might not be sufficient for some. They can work for more. I do not know precisely what is politically possible. But jobs for all is.

Beard: Getting a bit Johnny one-note, aren’t we? I’d break up the big banks, but first investigate, indict, and prosecute their top management. And then what? Exactly? It would be an improvement over what we’ve got, but we’d still have 25M+ unemployed.

Alan RhodesJune 26th, 2013 at 12:21 am

Thanks for the reply. Do you think the present food stamp program has caused food prices to increase more than equivalent expenditures funded by paying jobs would have?

RobertJune 26th, 2013 at 3:10 am

There is a version of the BIG that has some support among free marketers. It would be revenue neutral. Welfare/employment insurance programs would be ended and the minimum wage abolished. Needless to say the incentive to work would remain with this version.
Is there a possibility that a BIG of this type could gain traction and be imposed? I think so.
My crystal ball may be rusty, but there will never be a JG until the unemployed become organized and demand it.

John R. WoodwardJune 26th, 2013 at 4:35 pm

I'm trying to think about what I'd need to know in order to form a defensible opinion on whether or not BIG programs can effectively compensate for the upward redistribution of purchasing power associated with the intensification of productivity (via "automation," to use a catch-all term).

My conceptual understanding of the issue is this. Industry, in addition to producing tangible output of varying social utility, also distributes the purchasing power necessary to consume that output (a la circuit theory). By itself, over a given period, the income distributed into the economy by industry (through job creation) cannot be enough for all firms to make a profit by selling output, even if all income earned is spent (a la Kalecki). From this perspective one function of federal deficit spending is to make it possible for industry to be broadly profitable and financially stable (a la Minsky), probably a necessary condition for increasing standards of living (or quality of life).

So the debate I'm seeing here is whether there is good reason that federal spending, in it's fulfillment of that function (distributing purchasing power in excess of the costs of production), should be conditioned on work being done by the recipients of that spending. Prof. Wray is arguing in the affirmative, and though it seems uncharacteristic of him, I detect traces of quantity theory in his analysis (more money chasing more goods just raises prices, distribution of purchasing power aside). That said I am not sure he is incorrect.

If we go along with the reasoning that industry has been distributing increasingly insufficient purchasing power to buy up full-capacity output, and will likely continue to do so, what evidence is there that simply giving people more money to spend on the cost of living will cause businesses (oligopolies, yes) to raise prices and render the cost of living just as unaffordable as before. I have no evidence. I believe rent-seeking behavior is real and maybe that is the bane of BIG, as it is of so much other well-intentioned policy. We could look to Denmark and the Nordic States to see how cost of living has been affected by their programs.

On a theoretical level though I can't simply accept that granting the means to afford the current cost of living will necessarily raise the future cost of living (as if money is mere numeraire?). Nor can I see why working a federal service job for that same "stipend" would have any different effect than BIG, if indeed inflation is the natural result. Firms distribute income and try to get it all back by marking up prices over the wage bill. Barring regulatory controls, if wages go up, so too will prices. This wage-price-profit spiral (a la Galbraith) is what the union movement at it's height was attempting to address. It just seems obvious that inflation has a good deal to do with the distribution of national income, specifically how big the profit share maintained by business relative to the wage share. I know Prof. Wray is not a monetarist so I wonder what I'm missing here. As labor's share of national income keeps falling, It seems to me that whatever the actual result of increasing transfer payments–either as payment for a federal service job or payment for citizenship (BIG)–it is no different either way. Private job creation is distributing less and less income (more and more unequally), so the demand for an alternative source of purchasing power is rising. Does it really matter, economically (not ethically), whether people work for the money that industry needs them to spend?

AndrewJune 26th, 2013 at 4:49 pm

You take it as an all or nothing, but it needn't be so. BIG could allow people to work less. And I'm not talking about "waiting for the dream job to come along," though one could have more time to do that depending on the stipend.

As I said, the stipend could be linked to inflation, so price rise could be kept to the magic 2% the Fed seems to think will lead to rainbows and butterflies.

PatJune 26th, 2013 at 10:32 pm

What about a version of BIG where the government chips in just the missing part, until the total personal income reaches the poverty line. This is not "coffee for all", so it could work as an appropriate welfare system. I think that this is how it is implemented in some European countries.

Neil WilsonJune 30th, 2013 at 7:39 am

"Alan: No, I think the idea is that we give BIG but do not take it away through a tax."

The ones I'm reading do take it back via a redistributive tax and make vague gestures in the 'and I suppose we might ask them to look for a job occasionally' direction.

Standard tax rates are in the 50%+ range depending how progressive/realistic the author is – because obviously half the counter-cyclical response mechanism has been rendered inactive.

We need to be careful we're criticising the latest thinking here. The idea evolves.

The Other HobbesJuly 1st, 2013 at 1:44 am

So the problem isn't BIG, it's oligopoly and the inability of markets to distribute resources rationally.

In other words, it's about values. If you try to fix an effect without fixing the cause – which is predatory narcissistic capitalism and the Cult of Profit as the primary social value – then of course economic horrors are going to continue.

What's worrying is that you're arguing as if the Cult of Profit is some kind of social given, and not the wacky pseudo-religion it actually is.

In reality most people aren't hyper-competitive egotistical barbarians, and won't demand profit at any cost unless the alternative is homelessness and starvation – which is pretty much the only reason why they might feel they *have* to profit in the ways you're describing.

Perhaps we should stop rewarding the extreme crazies with extreme wealth and power, give normal people a chance to run things, and see how well guaranteed economic security works then.

My suspicion is that it will work far, far better than you're suggesting. Because the only thing stopping a whole lot of clever and inventive people from being clever and inventive in socially beneficial and prosperous ways is corporate slavery and lack of access to social support.

Guaranteed income, even of a basic kind, would be an excellent way to begin breaking out of that capitalist tar pit of social futility.

DrewJuly 1st, 2013 at 2:44 pm

It seems to me the obvious problem with BIG, unlike ELR, is that it doesn't involve any production to match the new income.

If the government employs a bunch of people to build roads, rail lines, new power/water/sewer plants, it's an addition to society's wealth. Fewer lost hours and dollars to auto repair, faster/cheaper transport of goods, more efficient utilities/better public health, and so on.

BIG strikes me as, at best (under some very generous assumptions), shifting resources around.

Valerie KeefeJuly 2nd, 2013 at 9:19 am

Kind of pathetic for you to pick a sum that represents about 150% of US per capita nominal GDP, as though that's what the Basic Income proponents are calling for… This twaddle is as fallacious as the people who ask "why don't we have an $80 an hour minimum wage?" You can have a Basic Income that doesn't accelerate inflation by having it paid for from revenue increases.

But you know that, so the question is: Why do you think your readers don't?

Valerie KeefeJuly 2nd, 2013 at 9:22 am

What would abolishing the minimum wage do for government revenues other than eliminate a regulation that's been good at counteracting the monopsonistic nature of the labour market?

I'm fine with replacing other transfers with Basic Income (that's how you pay for about half of it for a 25% per-capita GDP I've modeled for Canada, but let's not throw the baby out with the bathwater because the prole-haters gonna prole-hate.

windrivenJuly 2nd, 2013 at 3:07 pm

"most Americans either don’t get [vacations] or don’t want them"

A facile assertion without a source. I wonder if this is true? Everyone that I know and everyone who works for me or for anyone I know gets a paid vacation. Of course that doesn't disprove Dr. Wray's assertion. I'd be interested to know the actual numbers.

"First, the really lousy jobs have left the country and headed to developing nations like India, China, and Viet Nam. For reasons that escape me, many of my progressive friends want to bring them back."

I would argue that more than the really lousy jobs have left the country. I would further argue that a desirable society has a valued job for everyone who wants one – but that includes people without the education or perhaps even the intellectual skills for a job that Dr. Wray or I would consider 'not lousy'.

"No matter how often one reads about fires or structural collapses in Asia that kill hundreds of workers at a time behind locked factory doors, our progressives want to bring back those “good jobs” to America."

Here Dr. Wray conflates Asian sweat shops with modern American factories. I happen to own one. The people who work there understand their contributions, they are given clear responsibilities and the authority and to achieve them. And they share in the company's prosperity.

In short I share Dr. Wray's concerns – but not his prescription. Creating more jobs that have nothing to do with creation of value (read 'employer of last resort' jobs) is just welfare in disguise. What you end up with is the old Polish axiom: we pretend to work and they pretend to pay us.

Our society is able to produce a wealth of goods and services with fewer labor inputs than ever before. What is necessary is a redistribution of the available work among the available workers: a shorter work week. What is further necessary is some rejiggering to move the US GINI coefficient closer to that of Sweden than that of Sierra Leone.

Jobs need to be meaningful to be valuable. Make-work jobs breed resentment and self-loathing.

Matt KoskoJuly 2nd, 2013 at 6:20 pm

I'm honestly more surprised that a progressive economist would advocate for unproductive jobs like insurance and financial services. As Dr. Wray undoubtedly knows, only a vanishingly small portion of what the financial sector does is productive.

Tomas KurianJuly 3rd, 2013 at 12:06 pm

The way of sorting out the unemployment problem is in more free time (paid free time) during employment.
But to achieve this, there must be a contribution of government towards offseting productivity decreases which comes from more people doing the same work.

Companies by themselves cannot achieve this as more people means higher prices and resulting would be only inflation. So government subsidies towards lower productivity are absolutely essential.
More about this you can find @:
chapter 18: Method of passing productivity gains towards free time

Another issue mentioned in the article is kind of happiness with moving "dirty" jobs abroad.
This is not so nice as it implies that some people abroad should be doing them permanently. Apart from somehow slavery flair it forgets the fact, that every society has different layers of people with different skills and abilities. Not everybody can be in services or science, some people are simply made for manual work.

Of course, the reasons for outsourcing were purely economical and that is lower costs.
But by outsourcing and so cutting jobs at home the industry is also cutting the very branch it is sitting on : demand. Unemployed people are not buying and so economy as a whole is deteriorating.
The solution is again in subvencing the low productivity industries, which will enable to bring back the jobs previously outsourced without price increases while maintaining decent wages.
More about this you can find @:
chapter 17: Ways of productivity subvencing instead of outsourcing

Without subvences to wages, ever rising productivity will cause more and more unemployment, which in turn causes lower demand and profits, feeding again to more jobs cuts and the endless spiral of recession.

L. Randall Wray L. Randall WrayJuly 3rd, 2013 at 4:34 pm

Windy: It is well-known that USA comes right at the bottom when ranked according to paid vacations.
See here, for example:
Now that Memorial Day weekend is over, Americans are eagerly entering the summer vacation season. Most of us can look forward to a few days — or even weeks — of hard-earned rest and relaxation. But a new report by the Center for Economic and Policy Research shows that not everyone will be so lucky. That’s because the U.S. remains the only advanced economy on Planet Earth that doesn’t guarantee all workers at least a minimal number of paid days off. Here’s a look, by the numbers, at just how stingy the nation’s businesses can be with vacation time:

Percentage of American workers who get no paid vacation time. The same percentage gets no paid holidays, either.

Percentage of part-time U.S. workers who get paid vacation.

Percentage of full-time U.S. workers entitled to vacation as part of their compensation.

Legally mandated paid holidays in the U.S.

Developed nations — out of 21 — where all workers are guaranteed paid vacation. The U.S. is the lone holdout.

Average number of vacation days U.S. full-time employees get after a year on the job, according to the Bureau of Labor Statistics.

Average vacation days American full-timers get after 25 years on the job.

Average days of paid vacation and holidays Americans receive per year. Of the 20 other rich nations in the study, only Japanese workers fared worse.

Paid vacation days required in Japan.

Required vacation days in France, the global vacation leader.

Combined required vacation days and holidays in Austria and Portugal, which lead in total days off required by law.

Share of small-business employees, by percent, who get paid vacation in the U.S.

Percentage of large-company employees getting vacation time.

Percentage of low-wage workers in America given at least a minimal amount of paid time off.

Percentage of high-earners in the U.S. who get paid vacation.

European nations with regulations that entitle people to take at least some of their paid leave during the peak summer vacation season.

Percentage of American workers who had unused vacation time — up to two weeks’ worth — at the end of 2011, according to a Harris Interactive survey.

175 million
Number of vacation days American workers are entitled to, but don’t take, in the typical year

L. Randall Wray L. Randall WrayJuly 3rd, 2013 at 4:39 pm

Boy, Matt, you do not read very carefully do you? I’m not advocating for insurance and other financial services jobs. I’m stating the fact that these jobs exist and increasingly employ Americans, while we lose factory jobs. We are a service sector economy, have been for years and years. Get over it.

L. Randall Wray L. Randall WrayJuly 3rd, 2013 at 4:41 pm

Valerie: pathetic? You don’t think it is pathetic that BIG proponents talk about providing the option to work or to just sit back and live off the generous BIG payments of….871 bucks a year? In Alaska? I said add some zeroes and we could get close to the utopia they are selling.

AndrewJuly 5th, 2013 at 7:16 pm

Why do we have a problem with supply/demand when talking about BIG but not otherwise? If there we increase demand, we might get some inflation, but then again, what about all this unused capacity that we keep hearing about? Isn't that supply just waiting for demand? And of course, one could tie stipends to inflation.

Having MMT folks worry about inflation is a bit laughable, isn't it? And even if there were inflation, SO WHAT? Inflation isn't a problem unless it becomes an annoyance or a tool of a state trying to prop itself up. Inflation doesn't hurt savers — they are compensated with interest. Inflation doesn't hurt workers — their wages are inflated along with the cost of goods. Inflation really only harms lenders who have, perhaps, made a miscalculation on the future value of money. Are we really feeling sorry for lenders? I sure hope not.

golfer1johnJuly 5th, 2013 at 7:32 pm

I think your list of service jobs/industries is incomplete without including programming. Somebody has to tell all those robots what to do, and create apps for your smartphones and tablets.

L. Randall Wray L. Randall WrayJuly 5th, 2013 at 7:52 pm

Andrew: right, but give every man, woman, and child $88k bucks a year and tell them no need to work any more, and we’ll get rid of that excess capacity lickety-split. And indeed, that is the promise of BIG proponents.

RobertJuly 5th, 2013 at 11:13 pm

Unemployment is said to be the result of market distortions (e.g. the minimum wage). So I suppose this is a continuation of previous arguments.
Perhaps they view a BIG as a replacement for the minimum wage?
I should add that these proposals were made in light of a discussion on the effects of automation.

L. Randall Wray L. Randall WrayJuly 6th, 2013 at 12:24 am

robert somehow my response went to wrong place; here it is:
Right. And Wrong. Unemployment exists where there are too few jobs and too many seekers.

RobertJuly 6th, 2013 at 9:35 pm

Yes, they acknowledge this, and their response is to express approval for a BIG. Talk of automation has led to talk of basic income guarantees and negative income taxes. Who knows, this may signal the emergence of the next mainstream narrative.

EEBJuly 10th, 2013 at 1:27 am

I remember Robert Theobald once suggesting that 90% of the then- current work force would become redundant in another 50 years or so. Well, give it another 50 years from now and maybe his prophecy will come true. But technically, there is little difference between ELR and BIG, assuming that the payouts are calculated and structured technocratically. Of course, all this palaver misses the real point. Under neoliberal monopoly finance capitalism, neither ELR nor BIG will ever be realized! The great dream of the Fascist Bourgeoisie is Superexploitation- a protracted regime of paying the workers less than the value of their labor power. But this is only possible if the capitalists maintain sufficient unemployment to drive wages down below the value of labor power, which is why they love protracted mass unemployment. Therefore, CAPITALISM HAS GOT TO GO! THE EXPROPRIATORS MUST BE EXPROPRIATED! VIVA REVOLUTION!

GuestJuly 19th, 2013 at 3:41 am

I appreciated your comment a lot. We still treat the extreme crazies as if they were rational. We still believe their propaganda. We are still waiting for them to make good on their promises.

Yet you're right, these people are truly crazy, and they are not going to get better. Nearly everyone will accept their leadership, whether skeptically, grudgingly or enthusiastically, for a while longer . . . until one day they no longer accept it at all.

The conditions for the "very slowly then all at once" phenomenon are in place, as your post makes clear.


K. H. StanglinJuly 21st, 2013 at 9:41 am

Granddad said the government should pass a law " Making it illegal to work by yourself." Maybe a tax break for those with an apprentice. Costs of an education and training would go down too.

Valerie KeefeJuly 22nd, 2013 at 7:26 pm

Interestingly, the Permanent Fund payments are similar size as a proportion of per capita NGDP as Namibia's pilot programme and they found dramatic results (though again, diminishing returns being what they are, I imagine developed nations need a larger portion of poverty-level income to be spent to see the same positive outcome).

But more accurately, you could've added ONE zero, got to about 15-20% of PCNGDP and gone from there. Instead you decided to pick an absolute strawman to contend against, instead of taking on something similar in scale to the Canadian Mincome pilot programme. You really don't want to debate at THAT income level for some reason. Apparently we all have to be living the lifestyle of sitcom families or a guarantee against western poverty is ineffective for some odd reason.

A lot of your argument seems to stem from a confusion between the end of mandatory work and the end of all work. Still going to need janitors. They'll just have a higher reserve wage and be working to better their situation instead of avoid homelessness.

L. Randall Wray L. Randall WrayJuly 23rd, 2013 at 12:27 pm

No Valerie, I’m take BIG proponents at THEIR word. You are not. You apparently did not bother to read the piece, nor the advocacy pieces written by the promoters of BIG. All you want is a very low welfare payment. Fine. That is what we had in the USA from Johnson to Reagan. It never reduced poverty. Zero. Zip. Nada.

Valerie KeefeJuly 23rd, 2013 at 3:59 pm

Welfare has never been unconditional and been a large enough slice of GDP to lift people to a level of income commensurate with the ability to maintain oneself to the degree required to participate in the formal economy. Unconditionality is key to Basic Income, maintenance above the poverty line is key to Basic Income serving as what is, in effect, an atomistic strike fund.

Really, with its work requirements, TANF looks more like a Jobs Guarantee than a Basic Income.

And again, I am a Basic Income proponent. Howabout debating my propositions instead of strawpersons?

L. Randall Wray L. Randall WrayJuly 23rd, 2013 at 6:05 pm

But Valerie: you ARE presenting the strawperson argument. Read what BIG proponents claim for BIG. It is not the lifestyle of poverty that 8000 smackaroos a year would give you. It is the lifestyles of at least the American middle class, and should be at least US median income. So until you get off your strawhorse and actually deal with that issue, I can only debate a strawperson.