Public Enterprise, National Development and Unemployment

By Dan Kervick

Bill Mitchell has a really great piece up today at his wonderful blog, billyblog.  After briefly discussing the Modern Monetary Theory (MMT) emphasis on the operational realities of the monetary system, and asking whether or not it is important to situate those discussions of operations and macroeconomics in broader debates about ethics and morality, Bill lays out his own view:

The “operational reality” is factual and sufficient is one view. Just the massive loss of national income is a sufficient political motivation to do everything possible to avoid mass unemployment.

According to this narrow view, no further discussion about the other personal and societal costs (damage to physical and mental health; family breakdown; increased incidence of alcohol and substance abuse; increase crime rates; skill loss, and the rest of it) is needed and only leads to the accusation that MMT is mired in a contest of values rather than being about the cold, hard operational reality.

The alternative view that is expressed is the tolerance of mass unemployment and the pain and suffering that accompanies it is immoral and unethical and is a significant extra dimension that should inform the policy debate.

Why should we disavow our “bleeding heart” views? Why should we be defensive about the fact that we seek to use our understanding of the cold, hard operational reality of the monetary system to truly expand human potential?

Why should we be uncomfortable with our view that we think full employment, for example, is good and moral and an expression of our view that suffering from unemployment is bad?

Why is it politically naive to deny all of that and fail to educate the popula[ce] that when we think of the self (thereby denying the “other”) then we really, without knowing it, reduce our own capacity to grow as humans and prosper in a moral sense?

I strongly recommend the whole piece, which includes some important philosophical reflections on power and violence in social relationships, and on the ways in which we conspire to ignore and rationalize the reality of suffering.   I have written in the past on the moral outrage of systemic mass unemployment and the suffering it causes, and Bill Mitchell’s writing and research were part of the inspiration for that writing.

The phenomenon of joblessness and the violence of unemployment also cannot be separated from questions of political and social philosophy.  Issues concerning the level of employment and unemployment in society, and concerning the quality of employment in addition to its quantity, are inextricably entangled with questions about the ownership and social control of the resources that are available for production; about the decisions that are made over how those resources will be mobilized into productive enterprises; and about the political processes that determine how choices are made over the ownership and management of those resources.  I don’t believe that we can ever get full employment by relying on private enterprise alone.  Nor do I think we can assure full employment by attending only to aggregate financial or monetary phenomena, such as the size of the federal government deficit.  If control over resources and enterprises is too unequal and too concentrated, and if the government supply of monetary and other financial assets to the economy is too accommodating of those existing inequalities and power relations, then the provision of additional assets will only accrue to the balance sheets of plutocrats while leaving the workforce stuck with persistent unemployment and underemployment, and with a raw deal for many of those fortunate enough to have work of some kind.

A plutocracy will always find it economically convenient and efficient, from the point of view of the plutocrats’ personal economic goals, to leave large numbers of people unemployed and to concentrate their labor investments only in that portion of the workforce that happens to serve their specific and limited ambitions.  The more concentrated is the power of capitalist ownership and finance, the more limited those ambitions will be in the aggregate, and the less adequate they will be to the task of delivering broad and equitable prosperity.  From the point of view of the owners of the means of production, the actual size of the population and of the available potential workforce is an external variable whose value is meaningless beyond that level that they choose to employ.  There is absolutely no reason to think that a plutocratic system based solely on the concentrated private control of productive capital will ever achieve full employment of the surrounding population in which that plutocracy happens to be embedded.

So one thing that is needed in order to end involuntary joblessness is a national commitment to full employment, with the public standing ready to organize and provide work opportunities for all people who are willing and able to work, and whom the system of private enterprise has left unemployed.  The permanent availability of work, along with the normal benefits that should go along with that work – a decent income, competent and equitable health care, secure retirements – must be guaranteed to all citizens.  Not only will such a public system address the most acute personal problems of the degradation and misery of unemployment, it will also greatly improve the bargaining position of labor in our society, and compel employers to reduce the return that currently goes to financial investors and their most highly compensated employees, and to deliver a higher return to the workforce.  This is part of the point of what MMT’s developers have called a job guarantee program.

But while such a program is absolutely necessary, I don’t think a job guarantee program is in itself sufficient to get genuine full employment and a social system in which all of our people are working in a way that really lives up to our potential, secures everyone a full and equitable share in the output of the country, and takes a long view of sustainability over time. We need to be more ambitious than that, and recognize the further role of government and an economically engaged democracy in the economic development of society.  We need to shake off the neoliberal obsession with private enterprise and markets, and become more aware of the need for vigorous public enterprises playing an expanded role alongside private enterprise, and helping to set the strategic direction for the nation – and the globe.  That’s why I’m so excited to see that L. Randall Wray, one of the leading lights and founders of the MMT approach, is now working with Mariana Mazzucato of the University of Sussex, and author of the new book The Entrepreneurial State, to help bring the MMT focus on operational details and macroeconomics together with Mazzucato’s interest in the historical importance of state involvement in growth and innovation.

Think about what happens when the government credibly announces it is building an interstate highway – as it did frequently in the 50’s and 60’s – and announces the route of that highway.  Following  the announcement, everybody knows that there will be a a new market for rest areas, restaurants and hotels along that route. They know that locations within easy access to the highway will be good places to live and commute, and so investment in housing and community in those areas is unleashed.  A similar mobilization of national energies and development of national talents was driven forward in the 60’s by the space program.  When the government takes the lead and sets a strategic direction, and also invests in the most expensive and key infrastructural components of that strategy, it reduces confusion, guesswork and risk in the private economy, and liberates the productive potential of private enterprise. Another beneficial result is that the key infrastructure is left lying in public hands, rather than the hands of private profiteers who then extract perpetual fees for the use of that infrastructure.

Without a resurgent public sector animated by an newly engaged democracy, we are headed for years of economic stagnation, and will see the perpetuation of many outmoded and globally destructive forms of organization in the way we relate to our environment, meet our energy and transportation needs and educate our people. Without vigorous public intervention, these decisions will be left in the hands of the wealthy stakeholders in the antiquated order.  And with that stagnation we will see persistent unemployment and underemployment, further erosion of democratic social norms and the creation of new caste systems based on cruel hierarchies of economic dependency.

Here in the US during our most recent period of history – a neoliberal period of national decadence and social fragmentation and degradation – Americans have been encouraged to think that we Americans are too smart for all of that state intervention, and that progress, justice and prosperity can be assured by adhering to our brilliant laissez faire ethos and hatred of government at all levels. Only those poor developing nations on other continents, it was said, must resort to a significant state role in national development and progress. Hopefully the crisis of 2008, with the many forms of economic unraveling it has revealed, has cured many of us of those illusions. There is no fundamental difference between developing and developed nations, and we in the US have begun to see ourselves falling behind in one category of social achievement after after another as we have neglected public investment in community, long-term prosperity, social solidarity and grand economic strategy in favor of a riot of radically self-interested and destabilizing profit-seeking.  The “developed nation” complacency is a fraud.  We are all developing nations and need to think that way again.

Cross-posted from Rugged Egalitarianism

Follow @DanMKervick

19 responses to “Public Enterprise, National Development and Unemployment

  1. Sunflowerbio

    Thanks, Dan, for making the case for a leading role for government in an economy devoted to developing the full potential of every citizen. Can you recommend any author(s) who tackle the issue of maximizing individual freedom within a communitarian state as opposed to a laissez faire one? Neoliberal critics of MMT don’t seem to be satisfied with insuring that every citizen has food, housing, health care, and educational opportunities, though these are, IMO, prerequisites for maximizing the development of human potential. Is MMT missing something here, or is this just a straw man to scare away the timid?

  2. How would you view New Zeland economy from after WWII to the 1984 election in light of the government doing whatever it takes so that any person is looking for work and can work would find a job, did that policy not make New Zeland one of the richest countries in the world?

  3. charles fasola

    An emphasis on local level enterprise, which serves local needs and then state and national needs are ideas left out of these sort of discussions for the greater part. Instead of a globalized system that takes advantage of low tax, low cost production serving the needs of multinational corporate interests, and insatiable profit our government must be made to serve the interests of those who they are supposed to serve. This is bottom up thinking; rather than top down. Until the true costs of production are made visible to and accepted by the public, the public will not be served by its leaders. In amerika the chances of creating an equitable system remains a pipe dream. It will be so until our spending on goods and services is directed toward what is ethically and morally produced rather being directed toward what is cheapest. Crony capitalism is about exercising power over others and taking advantage of those perceived as weakest, only. The amerikan way.

  4. Bill Mitchell’s was actually the first MMT blog I came across even though he’s a continent and an ocean away. I have admired him for his assertions on being able to using MMT for the “common good” and value his blog for his insights and critical analysis of economic issues globally. Especially were it comes to the Neo Liberal sleights and assaults on reason which are in play everywhere.

    Without Billy Blog, New Economic Perspectives and Mosler’s “7 deadly innocent frauds” I would not as a non economist be able to articulate what I have felt at an intuitive level has been going wrong with economies for a few decades now. MMT is like Occam’s razor cutting right to the root of our biggest problems.
    MMT ‘s greatest value is it’s political neutrality and the surprising revelations when analyzing political platforms and assertions (the apparent ignorance is astonishing!) There is something in it for everyone except those benefiting primarily from the Neo Liberal advances which are morally wrong.

    Todays lesson for me is that what works for all works for the individual ,while the reverse, Mosler’s fallacy of composition, usually doesn’t work at all.

    Thanks for the help to all!

    • I definitely agree with your comments John C. I speak and write to a lot of people about MMT outside of these blogs, and haven’t yet found anyone who is familiar with the theory. They can’t seem to get over the hang-up of looking at government budgets as being the same as household budgets. I guess the brainwashing has been pretty successful over the years. I use Warren Mosler’s 7 Frauds book (with links) which I have summarised in a short article and added an 8th Fraud in comparing government budgets with household budgets. It seems Warren’s book is beyond the comprehension of 90% of the people and the other 10% claim it is all poppycock.
      Seems MMT is faced with a huge educational challenge from the reaction I have experienced. I would guess most of the people simply don’t want to upset the thinking they have been brought up with. The few that have been prepared to argue the issue really don’t have, in my opinion anyway, a logical and rational case for their opposition to the “theory”. I personally, don’t consider MMT as a “theory” – it is a far more realistic explanation of how the monetary system can, and should, work. Obviously, putting it into practice is the “problem”.

      • Yes Guggzie, that is what I have found too. They are so caught up in the falsity propagated about national debt and it’s relations to personal taxes. The step beyond is like Armstrong’s giant leap for man. If they can just get past that they can understand easily what an economy is really about: our wellbeing!
        I am seeing a bit of progress as the result of persistence with a few conservatives, some of whom tell me tell me I should run for office if I can promise a jobs guarantee without a federal tax increase. That is huge!
        While I direct people to the MMT literature, it’s important to connect with people on an almost personal level as best I can. That way you can use the same language to communicate. It’s a bit depressing really but we almost have to get the message out there one person at a time.
        Baby steps, baby steps. Keep trying and Good luck!

      • Oh, and I forgot to mention probably the biggest problem, which is the younger people who are definitely sold on the whole intergenerational debt thing. They are even more difficult to reach. So deeply ingrained is that programming! You really have to wonder who they heard that from?
        Whomever it was should go straight to jail for injecting such destabilizing thoughts into the meme pool. I’m afraid of getting any older.

  5. Dan,

    Your claim that more public spending brings large benefits doesn’t quite square with the fact that public spending has RISEN relative to GDP since the 50s and 60s, a period which you claim derived big benefits from public spending.

    Personally I think the proportion of GDP allocated to public spending has very little effect on employment levels.

    • It depends on the type of spending. Read the Mazzucato book.

    • Although government spending as a share of GDP might have risen overall, US government consumption and gross investment has fallen as a share of GDP from the period between 1950 through 1970, when it averaged between 22% and 24%.

      • Whats a good way to make the gov. spend on the things that are needed? I dont see how the status quo will change unless the system of lobbying and banking are reformed. The gov seems totally captive.

      • It is not clear to me this matters at all. If private spending decreases, an increase in government spending merely offsets it. What we need is enough spending to escape the recession level of employment. It is only rational to say we should focus that spending on something for the public purpose, like roads or space projects, and not to more military spending that gets us nowhere except more wars and spook shops in Utah. The fact we have not rescued Detroit and the state government has not is a disgrace to me. Economic maladies befall our cities regularly. That is where our culture lies. If you can’t fix that, what the hell are you doing? No wait, I know. We tell each other about the “free market”.

  6. We need to empower people so they rise out of their ignorance and apathy. We need to change the monetary system which dominates everything so that it is dominated by the people. Make the fed create new money directly with the people when they conduct monetary policy. Take the power away from banks and give it to the people. If people receive the new funds when they need to be created the banks will work for them and so will the government. Public spending on infrastructure, health care, education etc… will happen becuase it is what people want. A monetary system by the people for the people. Not just for the banks and their cronies.

  7. According to Larry Sabato’s Crystal Ball, the Democrats are not going to come close to regaining control of the House of Representatives next November.

    • It’s worse than that. There is a very good chance the entire government will be Republican under Rand Paul. It will become an Ayn Rand libertarian paradise. And we thought Obama was bad news.

      • I think Hillary is definitely not going to be elected president. She has so much corruption in her past, of which her supporters are unaware.

        I’d say that Rand Paul is too far right to win, but the last forty years have shown that he is not. In addition, he’s a great communicator like Reagan.

        • Sunflowerbio

          I am all for a woman president, but I don’t think the Democratic Party could survive four (let alone eight) more years of Billary. Elizabeth Warren is their best hope.

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