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LUMPENPROLETARIAT   During the Great Depression, unemployment and poverty soared; and, under pressure from the left, society responded through government social spending to alleviate the suffering.  Not only ‘soup kitchens‘ and free coffee houses for the unemployed, but New Deal reforms, such as job programmes, like the CCC, WPA, and other alphabet agencies, were implemented to provide jobs to the millions in need.

Well, what if our government could guarantee everyone a basic income, whether one has a job or not?  Since the Global Financial Crisis of 2007/2008, when millions of Americans lost their homes and jobs, the USA has found itself in a very similar scenario like the Great Depression, with too few jobs in the economy, wages too often inadequate, and widening income inequality.  In this context, radical or revolutionary economic policies are being considered, particularly on the left.

On free speech radio (and other broadcast media), the topic of a universal basic income (UBI, or unconditional basic income) has been increasingly registering on the popular consciousness radar.  Lumpenproletariat noted previously, for example, sociologist Dr. Erik Olin Wright‘s advocacy for the UBI as well as Dr. Kathi Weeks on life beyond work, or postwork imaginaries. [1]  Much of the arguments in favour of a UBI revolve around the structural aspects of involuntary unemployment, underemployment, and precarious employment, all of which contribute to poverty and a phenomenon known as the working poor.  Saliently, however, most of the advocates for a UBI are unaware of the revolutionary (and viable) job guarantee policy proposal, which is addressed in the field of heterodox economics, and which incorporates modern monetary theory (MMT, or modern money theory).  As the name suggests, an MMT-based job guarantee programme can provide a job to anyone willing and able to work, in other words, achieve full employment (or solve involuntary unemployment).  And, as one of my former economics professors, heterodox economist Dr. L. Randall Wray says, the job guarantee can function as a buffer stock which can absorb redundant or unemployed workers when the private sector economy slows down and companies lay people off, or provide an active pool of workers to draw from when the economy picks back up again.  (Another name for the job guarantee programme is employer of last resort, which is a term derived from the economic terminology of the lender of last resort.)

In an article published by Truthout this morning (see below), entitled “Why Socialist Job Guarantees Are Better Than Universal Basic Income” and written by Alexander Kolokotronis and Sam Nakayama, the authors cite heterodox economist Dr. Pavlina Tcherneva, a contributor to New Economic Perspectives, the economics blog started at the Economics Department at the University of Missouri-Kansas City by Dr. Stephanie Kelton, a leading advocate of the MMT-based job guarantee.  For years, Dr. Kelton and others have consistently held a dismissive stance toward the UBI because simply giving everybody a particular amount of income changes nothing about income inequality, which is the main point to addressing involuntary unemployment.  In this new Truthout article, the authors cited a 2006 paper by Dr. Tcherneva in which she argued that “solely implementing UBI would lead to ‘stagflation‘, i.e., ‘low employment and high prices’.” [See video below for a brief presentation on the MMT-based job guarantee programme by Dr. Tcherneva as well as a more in-depth presentation on MMT, federal budget deficits, and the job guarantee programme by Dr. Stephanie Kelton.]

The thrust of the Truthout article is to argue in favour of an MMT-based job guarantee programme (as opposed to the New Deal-style job guarantee programmes, which depended on taxation for funding in the wake of the Great Depression when the USA and the rest of the world was still on the gold standard where currency is finite since each dollar, for example, had to be backed by a dollar’s worth of gold).  Since the USA and the rest of the world went off the gold standard in 1971, the USA is the sovereign currency issuer of the US dollar, which means it can afford to spend without fiscal constraints.  The authors correctly assert that the only constraints are real resources constraints.  Unfortunately, the authors deemed it necessary to argue entirely against the UBI, which is not necessarily incompatible with a job guarantee programme.  Dr. Tcherneva’s arguments against the UBI are based upon a scenario of the state “solely implementing UBI”, but not as a supplement to the job guarantee programme or other social service programmes.

Notably, the Truthout article relied largely on conservative, or right-wing, arguments to discredit the UBI.  The authors cited articles by The Wall Street Journal and the “conservative-leaning magazine”, The Federalist, which claim that “the [UBI] idea is to end all social welfare programs and instead just cut everyone a check.”  But whose idea is that exactly?  And, if that’s a bad idea, then why pursue it?  Yes, there are competing and contending political ideologies.  The left doesn’t need to follow the lead of the right.  It’s up to each of us, individually or in groupings, to endorse, promote, advocate for, and organise around those policies, which we would like to see in our society.  There’s no reason why the UBI cannot function as a supplement to the job guarantee programme alongside traditional employment and existing social services.  If supporters of the job guarantee programme (or the UBI) fear political responses from the right-wing of the political spectrum, then we will be inhibited in the scope of our political possibilities.

Indeed, some of these political possibilities can be, and are, informed by the political realities of the past.  To that end, the Truthout article offers a few paragraphs on “A Chartalist Understanding of Money”.  Unfortunately, in narrowly focusing on chartalism, the result is an obfuscation of MMT (modern monetary theory), which offers us the most accurate (and undisputed) description of how a sovereign monetary system functions, such as that of the United States since 1971.  Also, the article provides a sense of the history of job guarantee programmes by surveying a few examples, such as the Argentine Jefes Program, the Indian National Rural Employment Programme, and the French National Workshops of 1848, which influential economist and philosopher Dr. Karl Marx chronicled in his classic The Class Struggles in France.  The article cited heterodox economists and expert scholars of job guarantee programmes, Dr. L. Randall Wray and Dr. Mathew Forstater; both are Professors of Economics at the University of Missouri-Kansas City.

It’s interesting to note, as the article describes:

The real reason that elites resist full employment is because they facilitate class consciousness and help build dual power. This elite resistance is exactly the reason why the left must press all the harder to make full employment a reality, and take charge of its policy design. Full employment both requires class consciousness and creates it.

The case of the French National Workshops exemplified a democratising effect in the workplace, as “disgruntled artisans and skilled craftsmen demanded the socialization of their labor”;

the National Workshops mobilized large sections of the French proletariat and delivered real wage gains, before elites destroyed the program.

Naturally, elites resisted the Workshops as a waste of public resources and a locus for radical political agitation from the working class.

The industrialized cities faced a “collapse of the domination of the notables over the working class and the emergence of working class consciousness…” The workshops played a ‘key role in pitting the working class against the state and thus in shaping a common consciousness among the lower classes.” Perhaps because of this, at the end of June of 1848, the government closed the National Workshops.

In the case of the Argentine Jefes Program,

The program did face opposition from business communities, as the program became the de facto minimum wage in rural areas where much work fell below the minimum wage.

In an effort to wind down the program, a faction of government officials moved to reduce or eliminate job creation and substitute direct cash payouts. In interviews with participants, economists Randall Wray and [Pavlina] Tcherneva found not a single participant who preferred the cash payments to working. Argentines valued being out in the community and having a sense of doing something, and this exceeded the simple cash wage.

Messina

***

TRUTHOUT—[29 MAR 2017]

Why Socialist Job Guarantees Are Better Than Universal Basic Income

Alexander Kolokotronis and Sam Nakayama

Universal Basic Income (UBI) is on the rise. Pilot programs providing income on an unconditional basis are being implemented at national, provincial and municipal levels in places like Finland, Scotland, Kenya, the Canadian province of Ontario, the city of Utrecht in the Netherlands, and Oakland, California. Anti-work advocates see UBI as a victory against neoliberal productivist ideology and subjectivity (what some have referred to as “homo economicus“). Workerists see UBI as a way of tipping the balance of power in favor of labor.

While these qualities of basic income are ones worth aspiring to, the policy contains macroeconomic deficiencies if adopted universally. In addition, UBI advocates overlook one of the fundamental questions of power in political economy: Who controls the means of production? One way to address this question is through a self-managed socialist job guarantee. That is to say, providing a job to anyone who wants one, within a self-management institutional framework.

UBI as Hyperinflationary

Economist Pavlina Tcherneva has argued there could be disastrous results from wide-scale implementation of UBI. In a  paper from 2006, Tcherneva argues that solely implementing UBI would lead to “stagflation,” i.e., “low employment and high prices.” She writes:

In order to coax [UBI] recipients back into the labour market, employers will need to offer higher wages (which, at first approximation, is a desirable result). However, soon thereafter, these same employers will also raise prices, to cover the increases in wage costs. As a consequence, rising prices will erode the purchasing power of the [UBI] payment, which will affect particularly those recipients who did not return to the labour market. To maintain the objective of the universal guarantee and provide just levels of standard living, there will be pressure to revise the [UBI] benefit upward. If this happens it will further induce some exit from the labour market, drop in output, a compensatory rise in wages and prices and further drop in [UBI] purchasing power. This vicious cycle renders the income guarantee self-defeating. Note that, if the benefit is continually increased — the income guarantee becomes not just inflationary, but hyperinflationary.

Within a political-economic climate preoccupied with budget-neutrality (i.e., balanced budgets; running no fiscal deficits), “if taxes are raised … they will also induce workers on the margin to exit the labour force.” This coupling of a rising UBI to compensate for increased prices, with rising taxes (again, partially resulting from an obsession with budget-neutrality), will result in declining output.

[snip]

Learn more at TRUTHOUT.

***

Modern Money and the Job Guarantee” by Pavlina R. Tcherneva (Bard College, Levy Economics Institute)

The ‘Angry Birds’ Approach to Understanding Deficits in the Modern Economy” by Dr. Stephanie Kelton (Department of Economics, University of Missouri-Kansas City), delivered at the UMKC Student Union Theater on 19 NOV 2014 in an event organised by the Jobs Now! Coalition.  (Yours truly was in the audience for that event, as a then-student of economics at UMKC.)

***

[1]  For more on the UBI, see related articles, such as:

  • The Problem with Work: Feminism, Marxism, Antiwork Politics, and Postwork Imaginaries (2011) by Dr. Kathi Weeks; 12 APR 2016.
  • Sociologist Dr. Erik Olin Wright On A Guaranteed Income for All; 5 APR 2016.

***

[Image of unemployed men queued outside a soup kitchen in Great Depression-era Chicago, Illinois, 1931 by source is in the public domain.]

[Image of Truthout logo by source, used via fair use, Creative Commons.]

[29 MAR 2017]

[Last modified at 14:38 PST on 5 APR 2017]

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