Beyond Pity and Safety Nets

By Dan Kervick

Paul Krugman is justifiably appalled at what he calls the “war on the unemployed”, the accelerating right-wing campaign to subdue, discipline and pauperize the jobless.  Yet there is nothing new in this campaign.  Economic conservatives and market fundamentalists have always tended to believe that the private enterprise system is both self-correcting and stringently just, and that unemployment results from a misguided combination of indulgent maternal do-gooding and inept government interference with the austere and efficient rectitude of market operations.  The fundamentalists believe unemployment happens because artificial minimum wage laws prevent wages from falling as far as they need to fall to clear the labor market, and that unemployment insurance compounds the problem by seducing potential workers into an unsustainable, dead-end limbo on the dole when they should be swallowing their strong laissez faire medicines and the bitter wages that go with them.  After all, if these dregs and flops were worth more handsome wages, then the Invisible Hand would have already dispensed those wages to them, right?

John Maynard Keynes wrote a great book dedicated to refuting this and related fallacies.  In Chapter 19 of the General Theory Employment, Interest and Money, he summarized some of the consequences of his theory for wage policies, and concluded:

There is, therefore, no ground for the belief that a flexible wage policy is capable of maintaining a state of continuous full employment; — any more than for the belief than an open-market monetary policy is capable, unaided, of achieving this result. The economic system cannot be made self-adjusting along these lines.

But Keynes’s name is mud in conservative circles, and as Krugman despondently notes, “The people out to punish the unemployed won’t be dissuaded by rational argument; they know what they know, and no amount of evidence will change their views.”  Still, I think we should look deeper to see whether there is something that even less rigid and more open-hearted people might be doing inadvertently to contribute to the ongoing problem of mass unemployment.

I would suggest that one reason the unemployed are both potentially ignorable and actually ignored is that even some of our more liberally-minded contemporaries have accepted policies and attitudes toward unemployment that locate the ultimate cause of joblessness in individual failure and inferiority, even if they think the correct response to these individual failures is charitable liberality.  Consider the very term “safety net”.  A safety net is something that catches those who have failed and who have done something they were not supposed to do: the acrobat who has fallen off the trapeze was not supposed to fall; the construction worker who has slipped off the girder was not supposed to slip.  The fact that they have tumbled into the safety net connotes a deficiency in their performance.

Thinking about unemployment policy – and several other social and economic policies for that matter – in terms of “safety nets” encourages us to think, however subtly, and with however kindly a spirit we might breathe, that there is something wrong with the unemployed.  Even where such attitudes are coupled with generous and compassionate social assistance programs, these programs stigmatize the unemployed in the very process of aiding them.  Now, if the choice is between a ruthless punitive conservatism and a compassionate liberalism, we should choose the latter.  But perhaps we should recognize that charity-state welfare liberalism with its high-minded pity and condescending denigration of the unemployed, unintentional though this denigration may be, contributes to the problem even while helpfully ameliorating some of its effects.

Perhaps also, then, we should stop thinking in terms of safety nets.  We should recognize that systemic mass unemployment is a routine, normal and eminently expected consequence of American-style capitalism, and its persistence is a natural consequence of our misguided over-reliance on the churning, choppy creative destruction of private enterprise and free markets as the delivery systems for progress and prosperity.  Private enterprise operating alone has repeatedly demonstrated itself incapable of generating labor opportunities in sufficient numbers both to assure that we are achieving all we can achieve as a society, and to guarantee the dignity and right to full social participation of all our citizens.

It’s time to look once again to thinkers like Hyman Minsky who have offered a social vision and policy agenda aiming at a genuine full employment society.   To achieve full employment, full social potential and maximum human dignity, private enterprise needs more assistance from public enterprise.  We need to build a more active, dynamic and flexible system of public enterprise that is always in action to organize and fund the endless varieties of work that can be done, should be done and need to be done to maximize the public good, but which private enterprise routinely fails to deliver.  If the private enterprise system sheds workers, the public enterprise system must stand ready to take those workers up and employ them in the innumerable tasks that we are always wishing could be done, but which establishment pundits stubbornly claim are “unaffordable”.   These pleas of public poverty are as wrong as can be.   We afford things with our resources, and languishing armies of unemployed workers represent a massive waste of resources.  We can’t afford not to employ every person who is willing and able to work.

Mark Thoma usefully cites some of the recent work on unemployment is a post entitled “The Unemployed Need and Deserve Our Help”.  He’s right.  But here’s my suggestion: instead of framing this issue entirely in terms of some sad and forlorn others who need our help, maybe we should consider emphasizing some of the following points:

1.We need the help of the unemployed, most of whom are ready and able to help us build a more prosperous 21st century society, but who are not being offered the work and income opportunities needed to secure their useful participation in that social project.  We especially need the contributions of the young, who are full of the energy, ambition and fiery hopefulness that humanity always relies on to regenerate and improve itself.  And yet a whole generation is being laid waste by the feckless and avaricious elites that control the developed world in 2013.

2. The private sector needs help from government and the public sector in order to play its most effective and appropriate role in the great task of building a country, a world, and a humane and prosperous democratic society – a task that the private sector can never successfully accomplish on its own. Determined and energetic public enterprise can lend valuable organization, coherence and strategic direction to the motley private business projects that otherwise degenerate into the mere haphazard and unfocused satisfaction of whimsical and sometimes wasteful consumer needs.

3. The unemployed are not a gang of pitiable dregs and n’er-do-wells in need only of compassion and alms from the fortunate and the superior.  Unemployment is our collective fault, a consequence of making poor social decisions about the function and design of our employment system.  The existence of mass unemployment shows that we have failed to assemble the right combination of public and private enterprises to mobilize and organize the labors of our citizens.

We should certainly have compassion for the unemployed, as we should have compassion for all of those who have been treated unjustly. But the compassion should be based on the recognition that the unemployed haven’t fallen, failed and dropped out. They have been locked out.  And we are all responsible for locking them out.  We have created a political and social culture that believes in casting aside those whom the adventitious owners of private enterprises deign not to employ.  It’s a bad system.

25 responses to “Beyond Pity and Safety Nets

  1. Bravo – well said. But if I might add a kindred word of advice for MMT types: The notion of an “Employer of Last Resort” is misconceived when it is thought of and presented as a program for the economic “losers”–those who have, as the ELR name implies, no other resort. And this is not merely a rhetorical issue; it affects program design too. Rather than an Employer of Last Resort, why not conceive of this signature MMT policy prescription as a system of alternative employment–and specifically, a system of employment on behalf of the community and its ends, rather than those of the private market? Let these be not Last Resort jobs, but Public Service jobs.

    I do not think this would require abandoning the core idea of the federal government standing ready to hire this labor at what would become the new minimum, living wage, and thus providing an inflation anchor to replace the destructive and haphazard one of mass unemployment. We need not pay the alternatively-employed more than a living wage to keep the program from being a program for economic “losers,” we simply need to make the work honorable, by making it self-evidently needful to the community.

    I believe that a great many people who might otherwise have taken their share of (too-scarce) employment in the private sector, but who can for a time do without the full monetary rewards that a private sector job would provide them, could be attracted to such a program of alternative, community-based employment. And the program should, I think, aim to attract precisely such people–those who do have other choices.

    A simple device would be to provide for community review boards, selected using the same means as juror pools, to pass judgment on job proposals submitted by qualified local government and non-profit organizations. A few bare bones rules (e.g., no substitution for existing jobs) would be all the “bureaucracy” needed. The rest would be up to the judgment of a cross-section of each community. Almost any entity should be able to propose projects, but only proposals approved as worthy by these ‘juries’ of citizens, would be entitled to the federal funding needed to hire from the pool of candidates for alternative employment.

    The resulting pool of jobs would have the imprimatur of democracy, and local democracy at that. One’s neighbors, and not the federal government, would be the employer of record. Their expressed needs would command the efforts of those employed in the program. The projects undertaken would have something of the moral legitimacy of volunteer work and community self-help, and little of the taint (fair or not) of bureaucratic featherbedding and makework.

    Something to consider.

    • I agree with you. I have long supported more of a “big government” form of MMT.

      • But big government is not what is needed per se; government MONEY is what is needed plus reform to prevent the problem from occurring again.

        Well, I won’t vote for Republicans ever again (“Fool me once …”) but it was GW Bush who sent out “stimulus checks.” They were way too small to be sure but they came far closer to a PRINCIPLED solution than expanding the size of government just because money is needed in the economy.

    • I’ve no objection to changing the name from “Last Resort” jobs to “Public Service” jobs. But that’s a very superficial change. What’s vastly more important is to get the THEORY behind JG type schemes right.

    • The term “public service jobs” would be terrible because it could associated with terms like “community service” which unfortunately implies a group of delinquents rather productive members of society and thanks to on going campaigns against state workers and school teachers by the right wing.

      I believe the term we should use is Public Development Jobs or Federal Reconstruction Jobs after the fine old institutions like Reconstruction Finance Corporation. Terms like Development and Construction haven’t been ruined by the politicians yet and thus would be better than Public Service jobs which brings to mind long waits at the DMV.

      I liked the goal of this article to recast the issue as our failure to provide a opportunity for civic or National service to the unemployed of the county that is the real economic waste rather than used by the nation and it the politicians, lobbyists, and pundits who think that the unemployed Americans are disposable humans who are the real economic dregs of society.

      The problem is that I’m not sure if Mr. Kervick is willing to explain just how dangerous the current rightwing campaign to alienate the poor from society really is. Campaigns of targeted alienation can quickly become tribalized leading to apartheid, brown shirting, ethic cleansing, pogroms, and even genocide.

      The current classist campaign is playing close to dangerous Fascist campaign’s of externalization of national problems to false “enemies” to scapegoat.

    • reserveporto

      I’d tend to agree that the idea of using the gov’t as an employer of last resort slightly misses the point on the question of unemployment. There isn’t a lack of employers but rather a lack of paying customers, so gov’t as customer of last resort (and first resort for weapons makers) is more apt. It’s not even such a stretch to think of it as such. The gov’t’s entire agriculture policy is based of encouraging farmers to produce more than they can profitably sell to the private sector and to produce less than their potential (a major part of the New Deal was to encourage farmers to convert productive land to brush). Rather than create gov’t bureaucracies to hire vast numbers of unemployed producing things that no one really wants, better to hire a small number of buyers to vacuum up or neutralize all of the private sector’s spare production capacity or cutting taxes to increase the available number of private sector buyers who want the product of that spare capacity (not more cap gains tax cuts that just turn into higher prices for Picassos because the people who get the payments already own everything they could want).

  2. Good effort. Istvan Meszaros criticizes 20th century state based socialism as both reliant upon centralized planning and the absence of a communal critique. Particularly literary Marxist socialists tend to use socialism as interpretive basis for critique, but generally lack functional means to remedy the problems resulting from inequality as an outcome of capital-ism. Thich Nhat Hanh has invited the educational profession to visit and share the culture that is exemplified by Plum Village. Thich Nhat Hanh effectively advocates for cultural consciousness of suffering and the sources of suffering. Both are examples emphasizing the commoning culture which has remained largely implied by MMT. Capital-ism and the process of making invisible the otherwise quite visible hand of immoral priorities need to be exposed for its institutionalization of hypocrisy. If we recognize the econo-babble for the ideology that it actually is, perhaps the light of day will encourage to less visible. The core hypocrisy is by the politicians who eagerly sell their votes in the free market of corporately controlled discourse, and then the chorus of theo-classical/neo-liberal economists as the courtiers to the economic royalty. Their ideology is largely based upon a sort of psyops counter insurgency, but their whole edifice is loaded with lies. There are two primary ways that they sustain their fictions, the Horatio Alger pseudo memes and blaming the victims.The blaming the victims slice is also sustained by the blinded by dysfunction and the desire for some sort of normalcy.without shame. Social movements require a redefining of people’s capacities. Developing a social movement precedes the arrival of orators. This needs to be discussed more specifically as part of the economic sociology domain.

  3. sunflowerbio

    Excellent post Dan. It’s interesting to compare the attitude of the economic elite toward the unemployed during the
    Great Depression and toward those same people only a few years later during WWII. Those losers (dregs and flops) who only wanted to feed at the public trough suddenly became exemplars of the Greatest Generation when there was a mortal danger to the nation (and the free enterprise system) from the Axis Powers. Let’s hope a similar danger is not necessary to reformulate the attitude of the current plutocrats.

  4. After all, if these dregs and flops were worth more handsome wages, then the Invisible Hand would have already dispensed those wages to them, right? Dan K

    Except the government-backed credit cartel has financed the automation away of very many jobs. And it has done so with the stolen purchasing power of the workers, among others, it has dis-employed!

    Purchasing power MUST be ethically created or there is hell to pay sooner or later. Is that so hard to understand?

  5. Keynes was of course basically right to say that a general cut in money wages does not cure unemployment. However, there is actually a grain of truth in the idea that a totally free market in wages would reduce unemployment and it goes as follows.

    Where an INDIVIDUAL person becomes unemployed, that can only be because of a lack of demand for their skills in their area, or their inability to find a job that uses those skills. And those in that situation often choose to live on benefits till a suitable vacancy appears.

    But an alternative – an alternative that would tend to occur in a totally free market – would be for the unemployed person to take a relatively UNSUITABLE job at a very low rate of pay (the low rate of pay would reflect the unsuitability).

    Very low TAKE HOME PAY is regarded as socially unacceptable in many countries. However, there’d be nothing wrong with inducing the unemployed to take relatively unsuitable jobs with the employer contributing little or nothing to the wage, while the state pays the “wage” instead of paying benefits.

    And that’s the basic reason why JG in the private sector would work: i.e. improve the unemployment / inflation trade off. It also explains why JG works in the public sector: that is, the popular idea that JG in the public sector can raise aggregate employment because no increased aggregate demand is needed to create public sector jobs is actually nonsense. That’s for reasons I set out here:

    • Ralph, it seems to me that if a specific kind of private sector job can only be kept alive via a government subsidy, then unless there is a compelling strategic national purpose behind preserving that job and the industry it pertains to, that’s a job that we might want to allow to die anyway. If we subsidize the jobs instead, all of those decrepit businesses and industries will grow accustomed to government subsidization of their workforce costs and become an unstoppable lobbying faction keeping a zombie economy alive. We don’t want a government job program to become a state planning system that breathes life into a dinosaur economy with its outmoded forms of employment, vainly satisfying in the 21st century the consumption and fixed capital needs of a vanishing 20th century economy.

      We can provide some general support for aggregate demand during demand a downturn with countercyclical helicopter drops. But beyond that, there are so many unmet public needs in construction, maintenance, education and health, that it would be better to create the needed additional public enterprises and move people into the public sector when their private sector jobs are dying a natural death.

      • Hi Dan,

        I quite agree that we don’t want to keep decrepit industries afloat. And what I’m proposing doesn’t involve doing that. I’ll explain in more detail.

        Vacancies are all different, and the people trying to fill them are all different: they have different skills, experience, etc. Getting 80% or 90% of the workforce into jobs that suit them is relatively easy. But the big problem comes with the remaining 5% – 7% or so. The fewer unemployed there are to choose from, the more difficult it is to find suitable applicants for vacancies. And that applies to vacancies in highly efficient firms and “decrepit” ones.

        But that problem can be solved (at least in theory) if people are subsidised into relatively unsuitable jobs till they find something more suitable: and that equals JG in the private sector.

        Re your second point, and “unmet public needs”, that’s a broader political point: everyone has their own views on what proportion of GDP should be allocated to the public sector. The decision as to what that proportion should be is taken at election time.

        Having taken that decision, I don’t a strong case for concentrating JG jobs or “temporary subsidised jobs” (call them what you will) in either the public or private sector. I.e. if a public sector employer can make use of a half qualified plumber when they really want a fully qualified one, and they’ll take the half qualified one with the assistance of a JG subsidy, that’s OK by me. But if a private sector employer can do the same, why not let them employ the half qualified plumber for a couple of months?

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  7. Welfare, whether born out of pity, collective guilt or a sense of responsibility to one’s fellow members of the society, consumes no more resources than those consumed by the recipients. However, attempting to create jobs to give them a sense of dignity will consume more resources than they consume from the income. If these works were always felt needed, but had to wait until human resources were available at low rates, as happens in an economic downturn, fine. If not, the cost of the non-renewable resources required to provicde this dignity becomes a serious factor to take into account when creating those jobs. In either case, there isn’t much dignity in working on a public task of lowor no social priority.

    One way to solve it is to expand the public sector until the private sector becomes insignificant (in employment percentage terms) and ensure it stays that way. So any changes in the employment potential of this insignificant sector can be easily accomodated the large public sector. There need be no loss of dignity when returning to the public sector when cast out by the private sector, since most people are employed there anyway.

    • GRP, it seems to me that there are certain social tasks for which private enterprise functioning in a competitive environment performs well, and generally performs better than governments functioning in a non-competitive environment. There are other tasks that governments can perform that either private enterprises in the aggregate can’t perform at all, or can’t perform as well. We should try to arrange things so that these tasks are properly divided between the private and public sectors.

      The tasks for government aren’t automatically carried out as a result of market demand and market forces. There is no automatic market signal to build more infrastructure or invest in our young people. The true measure of public need and optimal use of national resources isn’t just some kind of sum of 300 million individual consumer desires. A deliberating democratic community has to see the need and decide to carry out these tasks. My personal view is that we have been woefully underperforming as a polity in recent years, and so a number of vital and far-reaching public investment, consumption and regulatory tasks that we should be carrying out by creating the necessary public enterprises are not getting done. We’re failing as a society due to our over-reliance on the private sector, short-term consumer demand and private financing.

      I also start with the assumption that our economic desires always and necessarily exceed our current capacities, and so there is never an excuse for tolerating unfulfilled capacity with mass unemployment of people and resources. There are always more public tasks to organize and carry out if productivity growth frees up the resources that were formerly committed to other tasks.

      • Dan, I am not a champion of free markets and believe a mixed economy is the only realistic longterm plan for any society. I wholeheartedly support full employment, but I am not convinced job creation just to provide dignity is a realistic approach for the reasons I detailed.

        I get the impression that MMT supporters take a more reactive approach as if arguing with free market supporters. A more comprehensive and proactive approach is probably called for.

        For example, there is no reason why the number of people to be employed in a specific public endeavor should be fixed. It can be allowed to fluctuate between a minimum and a maximum. Individuals can even be allowed to reserve a position in a public endeavor where they live after receiving appropriate training and join the position when out of work in the private sector and have completed their waiting period. If during a slump in the private sector demand for human resources the employment in any government endeavor swells above an optimum, due to the reservists joining the ranks, the number of work hours per day or work days per week can be cut (without any reduction in pay), on a temporary basis. Such a policy would need no extra resources purely for providing employment and ensure that people are employed in actvities society always deemed important.

    • Sunflowerbio

      GRP, its true that some, perhaps many, public sector jobs will require more resources than they produce, at least in the short run. For example, infrastructure repair and replacement would initially consume large quantities of materials such as steel, concrete, fuel, etc. In the longer run, however, they should end up saving resources if they are well designed and executed. There are a number of public sector jobs that would require very little in the way of material resources. Child care, education, health care, social services, psychiatric care, prison rehabilitation, energy retrofitting, parole supervision, disaster recovery, elder care, police and fire protection, and local food production are a few that come immediately to mind. Most practitioners of these activities would consume only marginally more resources than they already do while being unemployed.

      • Sunflowerbio, All the activities you mentioned are high priority for any society that can afford them and they should not need an economic downturn to receive public funding. I was afraid of activities like new bridges to nowhere and militarization invoking fictitious threats as suggested by some MMTers/Keynesians. The non-renewable resources pumped into the new bridges to nowhere or military hardware are a complete waste of all resources including the human labor.

        We can and should be able to do better than that. But if the private sector demand for human resources can vary significantly, the public sector should itself be large to absorb the shocks and maintain economic stability.

  8. Making the unemployed desperate puts downward pressure on wages. Therefore, the federal government should provide indefinite income support to the unemployed, and it should be generous enough to keep every unemployed person out of poverty.

    Call it the “Living Wage Guarantee.” It would be the ultimate automatic stabilizer.

    • reve_etrange

      The idea of the jobs guarantee is to do exactly that, but to extract productivity from the guaranteed individuals while they are receiving the benefit.

  9. Great article, Dan. This would be a much better framing for the JG.

    It seems that politically speaking – which is all that matters at the end of the day sadly – we are looking out into a huge void. The deficit hysterians have been beaten back both here and abroad, and now seems like the opportune time for someone to step into the fray. Aren’t there any politicians in the MMT community, how’s your record Dan? 🙂

  10. Nice post Dan.

    Just to add to Keynes’s quote on wage flexibility, I’ll just mention that Robert Solow showed that even with full wage flexibility, sub-optimal processes will ensue in other parts of the economy. Here’s a good quote by Solow:

    “…wage flexibility can bring its own problems…In our example, an explicit intertemporal model, wage flexibility can maintain perpetual full employment but only at the expense of plainly pathological fluctuations of investment and output. This possibility had been loosely foreseen by Keynes in The General Theory: the temporary need for ‘equilibrium’ deflation can force up the real interest rate and thus choke off investment (and thus future output), even without the presence of involuntary unemployment”

  11. We have allowed multinational corporations to take over the policy-making function of government. Energy policy is a prime example: the obvious necessity for conversion to renewable energy sources, which is the most pressing issue of our time, has been largely stymied in the U.S. where corrupt government leaders and regulators permit monopoly money to determine the (mis)direction of resources. This is moving ahead full steam in several European nations and India and China. In this area of infrastructure development alone, we could be producing great numbers of new engineering, manufacturing and construction jobs, as well as moving toward true energy independence and protection of the environment.