Responses to MMP Blog #46: The Job Guarantee – Program Manageability
Sorry, late yet again. One more week of teaching and then things should be less hectic. Note I had planned for 52 MMP blogs and we are nearing the end…… But it looks like we’ll need a few more. I’m going to be a bit lazy this week, cutting and pasting the comments and providing brief responses.
As mentioned earlier, critics have argued that the program could become so large that it would be unmanageable. The central government would have difficulty keeping track of all the program participants, ensuring that they are kept busy working on useful projects. Worse, corruption could become a problem, with project managers embezzling funds. We will briefly look at some methods that can be used to enhance manageability.
I am responding quickly because the Minsky-Levy-Ford conference in NYC starts today.
Q1: Philip: I’ve been thinking a lot about the problems with imports and the like because it directly affects, for example, Greece should they exit the euro. If they do so, their large dependence on imports will likely lead to a serious inflation. Another concrete example of heavy dependence on imports is (apparently) Argentina. A large amount of the inflation there — which, to my mind, could undermine the credibility of the Kirchner government if allowed run too long — is apparently due to the cost of imports. Is the most elegant solution to this not to work on the supply-side?
A: Agreed, especially for developing nations that do not produce much that is in demand outside their country. This is particularly true of nations that rely on subsistence agriculture. The JG can be used as a tool for development, including development of exports and/or tourism.
Posted in L. Randall Wray, MMP
Affordability Issues. As we have seen over the course of the previous 44 blogs, a sovereign nation operating with its own currency in a floating exchange rate regime can always financially afford an JG/ELR program. So long as there are workers who are ready and willing to work at the program wage, the government can “afford” to hire them. It pays wages by crediting bank accounts. If it credits more accounts than it debits through tax payments, a deficit results. This initially takes the form of net credits to the banking system, held as reserves. If the reserve holdings are excessive, banks bid the overnight rate down. The government can then either choose to let the overnight rate fall toward zero (or its support rate if it pays interest on reserves), or it can intervene to sell interest-paying bonds at the desired support rate; this will drain excess reserves. In no sense is the government spending on JG/ELR constrained either by tax revenues or the demand for its bonds.
Posted in L. Randall Wray, MMP
Tagged job guarantee, MMT, Modern Monetary Theory, modern money theory
There were a number of questions, but commentators dealt with most of them quite well. I’ll organize the questions and responses and then add a few of my own. I suppose the excellent comments show that we’ve made a lot of progress. I’m dropping the names and combining posts. Sorry this is late.
Posted in L. Randall Wray, MMP
The JG posts here at MMP have generated a huge number of comments. I have focused my responses at the comments more-or-less directly directed to the actual posted blogs. I can understand the impatience: many questions have not been answered. However many of these questions and comments concerned upcoming topics.
Let us move on to macro stability issues. I have given JG talks all over the world and the two main objections raised always refer to inflationary impacts and exchange rate impacts. It seems to me that those who respond with these fears have not paid attention to the set-up of the program and to the MMT arguments.
Posted in L. Randall Wray, MMP, MMT
Tagged Employer of Last Resort, job guarantee, Modern Monetary Theory, modern money theory
Thanks for the comments, many of which get ahead of the story.
I’d like to remind readers that we are ADDING the JG onto the EXISTING system. So the correct comparison is NOT against some UTOPIAN IDEAL in which we all live like Wall Street’s finest in some sort of Ayn Rand blissful Fountainhead. But RATHER to compare the existing system against one in which the JG is added. I realize this is a difficult mental gymnastic. I hope this will be clear as I respond to seven comments (the others concern upcoming topics; indeed, even these really are about topics we have not explored in detail but they are worth discussing).
Program Design. A JG or ELR program is one in which government promises to make a job available to any qualifying individual who is ready and willing to work. The national government provides funding for a universal program that would offer a uniform hourly wage with a package of benefits. The program could provide for part-time and seasonal work, as well as for other flexible working conditions as desired.
Posted in L. Randall Wray, MMP
Thanks for all the comments and the interesting discussions. Sorry this will be late as I’m in Brazil at a couple of conferences. A number of the comments were on topics we will discuss later—especially Vincenzo’s design of his own preferred JG. I am purposely keeping it general in the beginning, and gradually we will introduce the specifics. But note that the discussion made it fairly clear that no “one size fits all” will work everywhere. The real world program will need to be carefully designed to fit “conditions on the ground” (as our Pentagon warriors love to phrase it). We need to look at the general, universal program first so I will stick to that. Later I will argue that in some circumstances it might not be practical (due to political, institutional, sovereignty, managerial capability, or productive capacity constraints) to implement the universal program from the get-go.
Posted in L. Randall Wray, MMP
Tagged Employer of Last Resort, full employment, job guarantee, Modern Monetary Theory
This week we begin our series on the Job Guarantee or employer of last resort. Both terms have been used to refer to the same proposal; indeed we have also experimented with other terms: Buffer Stock Employment and Public Service Employment. Each of these terms has its own advantages and disadvantages—as each draws attention to a different aspect of the program. Henceforth I will use Job Guarantee (JG) in this series.
Posted in L. Randall Wray, MMP
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