Men on a Wall

By J.D. Alt

I recently saw a newspaper photo of ten or twelve men sitting on a crumbling stone wall beside a dirt road. It was somewhere in Africa, but the location doesn’t matter. What matters is that the men, as the caption made clear, were sitting on the wall because they had nothing else to do: they had no land to farm, there was no local job or employment available to them, they had no savings or credit with which to start some venture. So they sat. Presumably there was some place of charity they trudged off to at the end of each day, where they got some food and water and a place to sleep; but when they awoke, there was nothing really to do except go back and sit on the wall.

What is interesting to consider is the Conservative and Progressive positions with respect to these men. The Conservative believes the only thing that can improve their daily plight is the “free market”: Until some local or regional entrepreneur organizes a tranche of capital and starts a venture that requires the men’s labor, there is nothing to be done except let them sit.

The Progressive believes that, in absence of the free market coming along and giving the men something to do, the sovereign government ought to hire them to do something—anything really, like, for example, getting off the wall and restacking the fallen stones so the wall is tall and straight again. The Progressive argues that hiring the men to do something—even if it’s just stacking stones in an orderly fashion—puts into motion a virtuous cycle of benefits:

  1. The men receive a wage which they will then spend in the local economy.
  2. The new spending in the local economy will allow merchants to expand their businesses and hire more employees.
  3. The pressure on charity to provide for people without income will be reduced.
  4. The men will grow healthier, because they will be getting exercise and eating better, and so fewer of them will end up on the steps of the hospital begging for aid.
  5. The men will be learning a skill—even if it just the stacking of stones—and will be acquiring the daily habit of working for a living.
  6. The nation’s roads will improve—if only because the stone walls alongside them are more orderly and pleasant to look at.
  7. Because the men begin to create a viable work-force in a growing local economy, “free-market” entrepreneurs will now be attracted to come in and start ventures which can then hire the men away from their stone-stacking, and grow the economy further.

The Conservative response to this Progressive’s strategy is built completely upon a single question: How are you going to pay for it? Where is the money going to come from to pay the men to get off the wall and start stacking stones? This is the pivotal question where the partisan debate becomes suddenly clouded with confusion. Implicit in the Conservative’s question is the unspoken assumption that the financial resources of the sovereign government come from the Private Sector—either through taxes or borrowing. If the sovereign government is going to spend on something—like, say, paying men a working wage for stacking stones—then it must either tax or borrow to do so. The confusion is created because both the Conservative and the Progressive believe this to be an absolute, uncontested truth—a veritable “law of nature.” Money for public spending comes from the Private Sector. Where else could it possibly come from?

From the Conservative perspective, this incontrovertible belief means the following things with respect to the Progressive’s strategy:

  1. Working people (and, even worse, wealthy entrepreneurs) must be penalized for their efforts by being taxed in order to pay idle men to stack stones.
  2. Alternatively, the sovereign government must borrow the money for the men’s wages from the Private Sector, an act which will (a) drive up interest rates (b) reduce the capital available for private investment and entrepreneurship, and (c) saddle future generations with an enormous debt they’ll have to somehow repay.
  3. Hence the fairer and better approach of doing nothing, minimizing tax burdens (especially on the wealthy entrepreneurs who are going to be starting new ventures), and NOT sucking investment capital out of the Private Sector by borrowing money our grandchildren will have to make good on.

Given the options (taxing or borrowing from the Private Sector) accepted by all, the Progressive can only respond to these Conservative assertions with a few meek rejoinders:

  1. Paying the men to stack stones has “social” benefits that wealthy citizens ought to be willing to invest in.
  2. It is fair for people who have been blessed, and lucky enough to be successful, to be taxed in order to help those less fortunate pull themselves up.
  3. As long as the borrowing remains below a certain percentage of GDP, it is a reasonable and good “investment” that will expand the economy and pay dividends in the long run.

Together, the Conservative assertions and the Progressive rejoinders, create a self-deceiving and self-defeating dialog that has devolved into nothing more than a shouting match: The building is burning, but since we have agreed we don’t have enough water to put it out, we can only argue about whether we’ll douse a little over there or a bit over here. If I say it we ought to douse here, you scream that’s not fair—we ought to be dousing over there instead. At what point in this futile effort, I am wondering, will we stop shouting at each other and realize the fundamental, almost silly, error in our thinking? Oh, look! We actually do have all the water we need to put the fire out completely. Look! Over there! You see that great big water spigot? What have we been thinking?

In other words, what if it turns out the original, pivotal assumption the Conservative assertions and Progressive rejoinders are built upon is simply untrue? What if it turns out the sovereign government doesn’t need to collect taxes, or borrow from the Private Sector, to pay the men? What if the sovereign government, all by itself, can issue the currency required to put them to work stacking stones? What then?

I will not attempt here to outline the basics of Modern Monetary Theory. I’ll leave that to the MMT economists who can do it admirably—though, to date, their explanations seem mostly to fall on deaf ears. (This is likely because everyone else is shouting so loud.) What I’m interested in is how this new “reality”(if it were accepted by each side) would alter the Conservative and Progressive positions regarding the men on the wall.

It’s reasonable to suppose the original basic positions would be unchanged: The Conservatives will still believe—with legitimate merit—that the “free market” should come along and create jobs for the men; that until that happens the men don’t really have “jobs”, and the economy hasn’t really been expanded. The Progressives have no need to refute this; in fact, they can happily and whole-heartedly agree with it. Since they no longer have to defend the need to increase taxes or borrowing from the Private Sector, they are free to both agree with the Conservatives and to focus on the original virtuous cycle of their strategy, which is now worth repeating. If the sovereign government hires the men to get off the wall and start rebuilding it:

  1. The men receive a wage which they will then spend in the local economy.
  2. The new spending in the local economy will allow merchants to expand their businesses and hire more employees.
  3. The pressure on charity to provide for people without income will be reduced.
  4. The men will grow healthier, because they will be getting exercise and eating better, and so fewer of them will end up on the steps of the hospital begging for aid.
  5. The men will be learning a skill—even if it just the stacking of stones—and will be acquiring the daily habit of working for a living.
  6. The nation’s roads will improve—if only because the stone walls alongside them are more orderly and pleasant to look at.
  7. Because the men begin to create a viable work-force in a growing local economy, “free-market” entrepreneurs will now be attracted to come in and start ventures which can then hire the men away from their stone-stacking, and grow the economy further.

The final “target” outcome of the Progressive strategy is identical to the fundamental Conservative goal. If the Conservatives really want to achieve this basic goal, how could they now argue against the Progressive strategy? The only argument they could level is that the strategy would be inflationary. The MMT economists, I believe, have a plausible rejoinder to that. The bottom line is there is no reason we have watch the building burn down: there is no need for men to sit idly on a wall when it is possible to start a virtuous cycle that will attract “free-market” entrepreneurs who will create jobs for them. Is it possible that—except for this confusion about where sovereign public money comes from—there is really no difference at all between the Conservative and Progressive positions?

 

19 Responses to Men on a Wall

  1. Nice article. Well put.

    But I think our American building is “fully involved” as the first-responders say.

    Regarding:

    [MMT] “explanations seem mostly to fall on deaf ears. (This is likely because everyone else is shouting so loud.)” I don’t hear progressives shouting at all. I mostly hear them yukking it up about how comically stupid the Right is, even as the Right consolidates its stranglehold on power. The routine for the Right has become:

    “We steal elections and you whine about it. We base campaigns on wholly false and fictitious claims, and you whine about it. We use the power of money to own the political process and you whine about it. We grind up working-class kids like sausage in our oil wars and, yes, you whine about that too.”

    I think there is zero probability that MMT will go mainstream in time to avert the next collapse. Sorry. This movement is going to either erupt in some other country or end up sifting through the ashes of this one. The corporate Democrats are every bit as clueless as the Republicans – in fact, they are Republicans. They have, themselves, *become* the “responsible conservatives” they remember so nostalgically on the Sunday talk-shows. They are every bit as hypnotized by the national debt clock as the Republicans – and every bit as invested in their junior-member-of-the-elite status. Examine “liberals” like Tom Daschle, Chuck Schumer, Chris Dodd etc.

  2. You’re missing the point. What the economy needs is government MONEY not government jobs. Why pay people to waste their time? With sufficient resources (especially land) people can find their OWN meaningful work to do – by definition.

    But why would there be a shortage of government money? That’s simple. The government enforced/backed money cartel has driven people into excessive debt with what is essentially counterfeiting – so-called “credit creation.” Government money is needed so people can pay off that debt without shrinking the money supply.

    Yes, there are legitimate infrastructure needs and we should spend generously on those too. But the crucial need now is reform of the money system plus restitution for those cheated by it (nearly everyone).

  3. Three years ago I would have fully agreed with this statement: “The Conservative response to this Progressive’s strategy is built completely upon a single question: How are you going to pay for it? Where is the money going to come from to pay the men to get off the wall and start stacking stones?”

    Since then, however, I have had the experience of seeing how conservatives (and some self titled progressives) reject the idea of direct employment even after they accept an MMT frame work. The responses to Wray’s Primer is exhibit 1. It is clear to me now that this single question is much more a screen than anything else. The real misgivings conservatives have about the government employing the unemployed are much deeper, much more political, and much more resistant to reasoned argument.

    Take what you’ve just written. Its clear. It makes good sense. But, I guarantee that even if conservatives accept that the government is not fiscally bound, they will find some other reason why government employment is a Pandora’s Box. After all, conservatives believe that unemployment has its own virtuous cycles: it disciplines, it culls the unfit, etc.

  4. looking forward to the modern money theory book coming out, this is very interesting stuff.

    One wonders what the theoretical difference is between taxing to try and keep a balanced budget and having zero taxes and simply printing the money that needs to be spent each year. The GDP would seemingly grow much faster, the only question would be regarding inflation, as the author mentions here.

  5. I don’t know about your conclusion. The conservatives would feel that the government is too big. The cons would rather have the money given to them directly to hire the men and they could pay them less than a living wage and make some really good profit from the venture. The men would be better off but still wouldn’t be able to live decently from their own labor. The progressives would like to share with the private sector but they think that there are some things that are done better by the public sector rather than the private sector. Roads should probably be built without the profit motive being the prime goal. The government would pay the men a living wage, provide health care and provide a pension where both contribute. When the private sector sees the good wages being paid and the benefits provided, they will howl, “The government is too big!” How’s that?

  6. After all, conservatives believe that unemployment has its own virtuous cycles … Paul S

    That’s irrtelevant if the population has been cheated and it has been. Then restitution is called for, not a JG. On what basis can conservatives reject just restitution? They can’t and maintain any claim to virtue.

    • You are right, but they will find a way nevertheless. Here’s a start: part of that cheating you referenced, they will say, was perpetrated by the poor getting into houses when they had no right to be there. Had government not interfered by helping these unfit people live in a house for a few years on borrowed time, then we wouldn’t be in this mess! Thus, they will say (and I’ve heard this), at least part of the suffering now underway IS a form of restitution for the profligacy of the poor, fat, gluttonous, ungrateful losers that make up the bottom half of our population.

  7. I really like this. It clears the fog away from the progressive and conservative positions. Once the fog clears, it is much easier to see that the progressives who refuse to believe what clearly lies before their eyes are really just the financial elite’s ground force, agents of the 1%, and the conservatives who refuse to believe are just social Darwinians, those who can’t exist without bootstrings.

  8. I am inclined to agree with Paul S, conservatives hate the poor, hate the working underclass, hate them three times as much if they themselves are poor and working underclass. Either that or they are the elite “entrepreneurs” who use the debt cycle to bash the population with the wage arbitrage that large unemployment creates. The point is, one side doesn’t get (or care) why they are so put down as they just want to hate an “other”; the other portion knows exactly why it happens (they manufactured it for their own benefit), but is happy to make a devil’s deal in stoking the rage of it’s “helpers” to acheive the goal. It all ends in tears, but try to tell them that. All of conservatives arguments are designed to prop up this arrangement, they really don’t care about the numbers or logic at all. As long as the hate is kept nice and hot for the one group and the cool cash rolls in to the other, they could care less what is the best policy.

    But that’s no reason to throw MMT out the window. After all, if civil rights leaders had decided to wait until the Klan converted to their reasoning, they’d still be marching today. 😉

    I’ve heard of MMT on Corrente before, but I’m not fully familiar. My one question about MMT is what about inflation? If you just print fiat currency to prop up the economy, how do you control devaluation of the dollar? There is no such thing as a free lunch as they say.

  9. You leave out the one benefit that the conservatives would like the most. After

    1.The men receive a wage which they will then spend in the local economy

    should be “The increased spending will cause the private sector to produce more and hire more people, including some of the men who had been sitting on the wall.”

    Also, the argument about the size of government is legitimate and will persist with or without a JG. Conservatives who want a smaller government will continue to argue for tax cuts and lower spending, even if they buy into MMT and the JG and the need for chronic deficits. Likewise, Progressives will continue to argue for more government spending and more government programs even if MMT and JG are adopted and involuntary unemployment is eradicated. There may be some evil ones who “hide behind” such arguments (on both sides of it) in order to foist their nefarious schemes upon us, but it remains the essence of the philosophical divide between sincere conservatives and sincere progressives.

  10. Good expression of an important point: most people believe that money originates in the private sector, which is the productive one. Government is viewed as a “taker” and not a “giver.” If you point out the reality of fiat money, then the reply is that this is just “printing money.” “Printing money” is equivalent to “getting something for nothing.” The average man cannot wrap his head around the fact that money is a social construct, essentially an idea, an abstraction, facilitating exchange, and in in our economy a unit of account on a spreadsheet; and in particular they fail to see that the whole business is tax-driven. Dollars are required to pay taxes, therefore they are assets in the hands of the private sector because they can be used to pay taxes; looking at the other side of the ledger, they are government liabilities because the government has agreed to take them for payment of taxes. Thus, dollars are tax credits.

    The problem here for the average man is the level of abstraction. The average man needs to be able to imagine something concrete illustrating the ideas and processes. This is why the explanation given by Mitchell and others of the family that puts children to work, or the explanation of the way the student money at the UMKC works can be very useful as an initial basis for progressively complex explanations. Think of the concrete explanations put out by certain Austrian booklets, such as Hazlitt’s, and homely illustrations such as Bastiat’s parable of the broken window. They are very effective. Mosler’s booklet is a superb example for MMT, and more are needed.

    Some have made the argument that the word “theory” in the label MMT weakens the MMT arguments in the public mind. I think that is likely true, given the very pragmatist and “anti-theory” mentality of the American ethos, which in many ways is strongly anti-intellectual, and for which “theory” suggests something that is put forth by people who do not have their feet firmly on the ground. “Theory” here is that which is opposed to “fact,” and the fact that facts are usually “theory-laden” totally escapes this mentality. “Chartalist economics” is probably a good alternative for MMT, and there may be other and better suggestions, although it may be too late to effect a change.

  11. casino implosion

    Paul S has the right idea. Nothing horrifies conservatives—even (especially) those who accept the validity of the descriptive MMT framework–more than the idea of a mob of proles coming to understand that they can just “vote themselves benefits” from a never ending cornucopia of sovereign currency,

    You can just the their conservative minds working: “Today the proles want government MMT money paying for make-work jobs, tomorrow they’ll say ‘who the hell needs the jobs, let’s just have fat checks sent to every household on the first of the month’ “.

    Then there are the worries about inflation. When the entire populace comes to understand the truth of MMT, will politically neutral technocrats in charge of the money supply be able to resist the calls for ever more free money? Maybe it’s a good thing that most people are benighted and believe that we’re still on a gold-standard type system.

    Then there are all the other conservative emotional motivations, like unemployment as discipline, and fear that government spending will upend the true, just, free-market-determined natural right-and-proper hierarchical order of things.

  12. Why must the example be doing something useless? It takes away from the argument. There are always things of value to be done that don’t make an inherent profit in our current system of currency and reserve banking. That’s why the not for profit world exists. How about they pick up trash, or make signs, or give foot massages? Anything that’s not an example of uselessness for the purpose of showing it could be any uselessness.

  13. Why don’t MMT’ers hammer the question of where money comes from? The specifics of how a dollar bill, or the right to get a dollar bill from an ATM, comes from. I can’t make one. 99% of the population can’t simply make one legally. Yet they are in my pocket, so someone has the right to make money. Yea MMT can’t be wrong because money exists and in our society we have an entire generation that has only existed in the fiat currency world!

  14. Can anyone answer my question about inflation?

  15. A sad, sad tale that will only become more SAD and SADDER as time proceeds and we continue frame the problem of employment in this fashion. The truth of future employment has moved far beyond the old models of analysis. We are at a point wherein robotics and automation will unrelentingly absorb more and more jobs in more and more industries and we will come to a point, possibly within the next ten to fifteen years when no jobs with reasonable salaries will be available to families who do not have the technology credentials or technology potential to continue in the workforce. The only options will be minimum wage employment or near minimum wage. We already have a bogus unemployment rate, because economists have not adjusted the formula to account for jobs that have been permanently removed from the denominator due to employer’s retiring such jobs during the Great Recession. Very soon many people are going to become, for all practicle purposes, unemployable.
    Leader will be called upon to figure out how to keep such people engaged in the economy.

    • This is a very broad definition you are asikng for. Not only that, you’ll find liberals that have some conservative views (like me) and conservatives that have some liberal views.Abortion: Liberals typically are pro-choice, conservatives are typically pro-lifeWar: liberals typically try to stay away from war if possible. Conservatives will try to stay away, but will do it before exhausting as many possibilities for a peaceful resolution as liberals.Death Penalty: typically, I find Liberals tend to be against it, conservatives for it, but this one really varies from person to person.Religion: Conservatives tend to be religious, Liberals tend to believe in a religion, but aren’t as religious. Some extreme right wingers try to shove religion down everyone’s throat, Some extreme liberals that are atheist, try to shove atheism down everyone’s throat.Gun control: Conservatives tend to be against any form of gun control, liberals tend to be for gun control that is used in crimes, etc., but not guns used for hunting or typical self defense.Taxes: Conservatives tend to be for lowering taxes, and in recent years spending money and making us go into debt. Liberals tend to be for increasing taxes to pay for their programs.Social Welfare: Conservatives tend to be against social welfare, but will be for it in certain cases. For example, where people are laid off, so long as they are required to try to gain employment. Liberals tend to be more for social welfare programs.Environment: Environment is cool and hip, and both sides seem to be for the environment now, but it was only recently that conservatives were for it, because they came to realize that the general populace is for it. You’ll still find conservatives that are pretty much against any environment friendliness.There are tons more, but I hope this helps.

  16. Paul S.

    “… conservatives … reject the idea of direct employment even after they accept an MMT frame work”

    Right. It’s a *moral* objection. Those guys on the wall are FREELOADERS and you can’t reward that.

    Viewed technocratically, we just have a problem of “who goes first?” The private sector are all cowering in fear of the lack of demand, so the government needs to be the “spender of last resort” to break the stale-mate. But for a lot of people, it’s just plain immoral and even “Road to Serfdom”-style scary to put that spending power in the hands of their political leaders. Even if it would be beneficial for a while, there’s the question of “where does it end?” Will those political leaders ever surrender this power? Or just invent creative new ways to keep spending it after the crisis is over? They aren’t wrong to worry that the spending wouldn’t stop. Even the Republicans who constantly shout “cut spending!” consistently fail to do so — at least anywhere that a powerful constituency might notice it. Farm subsidies may have originated in concern for the plight of family farms, but they persist as a major benefit to agribusiness.

    I’m an unreconstructed “New Dealer” who wanted to see Obama unleash his inner FDR — the stimulus bill was too cautious, etc. — but I understand the emotional framework of the austerians well enough to recognize the roots of the objection.

  17. …for crying out loud seth!! its fiat money …its fiat money …so who gives a crap as long as it works …… old irrational logic about deficit spending and inflation no longer apply …unless you are a wall streeter who wants to privatize Social Security and stop Medicare from cutting in on private health insurance share holder quartlerly earnings …. wall streeters and their ilk have bought the media and have framed deficit spending as if it were a disease (via FOX CNN etc) ……………….. Let the central bank fiddle around with interest rates to keep inflation at bay …thats what they are payed to do ….