We don’t need to regulate prices with the pain of unemployment. There are other ways.
We wrote recently about economic systems that inflict pain, our prime example being classic “free market” economics (as it existed before FDR) and also neoliberalism (as it exists today, in post-FDR world). That piece is here:
A number of people, including Paul Krugman, have noted that we may well be entering a world, certainly in the U.S., where there may not be enough good jobs to go around, either because of technical innovation or because of job export by the already-wealthy, likely both. Does that mean that people should be consigned to their fate, to unemployment, simply to regulate prices and inflation?
I want to offer three angles on that question, three pieces that together, add up to at least one solution and its rationale (and the suggestion of a second). The first piece of this argument involves the philosopher Bertrand Russell. The second, an implementation of his suggestion. And the third — why his alternative, or one like it, doesn’t get implemented? Curious? Read on.
Why use unemployment to regulate prices?
This is the morality of the Slave State, applied in circumstances totally unlike those in which it arose. No wonder the result has been disastrous. Let us take an illustration.
Suppose that, at a given moment, a certain number of people are engaged in the manufacture of pins. They make as many pins as the world needs, working (say) eight hours a day. Someone makes an invention by which the same number of men can make twice as many pins: pins are already so cheap that hardly any more will be bought at a lower price.
In a sensible world, everybody concerned in the manufacturing of pins would take to working four hours instead of eight, and everything else would go on as before. But in the actual world this would be thought demoralizing. The men still work eight hours, there are too many pins, some employers go bankrupt, and half the men previously concerned in making pins are thrown out of work. There is, in the end, just as much leisure as on the other plan, but half the men are totally idle while half are still overworked. In this way, it is insured that the unavoidable leisure shall cause misery all round instead of being a universal source of happiness. Can anything more insane be imagined?
If the ordinary wage-earner worked four hours a day, there would be enough for everybody and no unemployment — assuming a certain very moderate amount of sensible organization. This idea shocks the well-to-do, because they are convinced that the poor would not know how to use so much leisure. In America men often work long hours even when they are well off; such men, naturally, are indignant at the idea of leisure for wage-earners, except as the grim punishment of unemployment …
The fact is that moving matter about, while a certain amount of it is necessary to our existence, is emphatically not one of the ends of human life. If it were, we should have to consider every navvy superior to Shakespeare. We have been misled in this matter by two causes. One is the necessity of keeping the poor contented, which has led the rich, for thousands of years, to preach the dignity of labor, while taking care themselves to remain undignified in this respect. The other is the new pleasure in mechanism, which makes us delight in the astonishingly clever changes that we can produce on the earth’s surface.
Absorb that example. The same number of people, working four hours a day instead of eight, earning the same daily wages as before, will produce the same number of pins as will saturate the market, thus keeping prices stable and earning the same profit for the manufacturer. No one is unemployed; the price and quantity of available pins remains the same; nothing else changes for anyone. What’s wrong with that solution to technical innovation (i.e., increased productivity)?
The alternatives are (1) to keep everyone employed for eight hours a day, produce double the amount of pins — more than the market can bear, in fact — thus driving down the price of pins and hurting the manufacturer. Or (2) to lay off half the workers in order to keep prices stable, thus hurting the labor force. Obviously, Russell’s solution is much more reasonable, much less punitive to either party, a solution for “a sensible world,” as Russell calls it.
In a “sensible world” there is such a solution. It’s called Guaranteed Jobs.
The Job Guarantee proposal
In a nutshell, the Job Guarantee (JG) idea works like this. The work that’s available to keep prices stable is shared or offered around in a way that guarantees at least a living income for everyone who can work regardless of the number of hours worked. It includes the concept of an “employer of last resort.” Thus there’s always full employment.
(An alternative, by the way, that produces the same result for the citizenry is the Minimum Income proposal, in which the state gives a minimum income to its citizens regardless of the work they do. It’s not a function of deserving, and it’s not means-tested, since it’s not welfare. It what you get for being a citizen, like health care is in some civilized countries. Alaska has a “minimum income” regime through the Alaska Permanent Fund. No one in Alaska complains about it.)
Here’s more on how the Job Guarantee proposal works (my emphasis and paragraphing):
A job guarantee (JG) is an economic policy proposal aimed at providing a sustainable solution to the dual problems of inflation and unemployment. Its aim is to create full employment and price stability. It is related to the concept of employer of last resort (ELR).
The economic policy stance currently dominant around the world uses unemployment as a policy tool to control inflation; when cost pressures rise, the standard monetary policy carried out by the monetary authority (central bank) tightens interest rates, creating a buffer stock of unemployed people, which reduces wage demands, and ultimately inflation. When inflationary expectations subside, these people will get their jobs back. In Marxian terms, the unemployed serve as a reserve army of labor.
By contrast, in a job guarantee program, a buffer stock of employed people (employed in the job guarantee program) provides the same protection against inflation without the social costs of unemployment, hence (it is argued) fulfilling the dual mandate of full employment and price stability.
You can read more at the link, but you get the idea. Now, why doesn’t this sensible idea, or other non-punitive sensible ideas, get implemented?
What’s wrong with rewarding workers? Do the rich and the poor differ in their goodness?
Why aren’t proposals like Job Guarantee or Minimum Income enacted? Russell hints at the reason in the quote above:
[I]n the actual world this [proposal] would be thought demoralizing. … There is, in the end, just as much leisure as on the other plan, but half the men are totally idle while half are still overworked. In this way, it is insured that the unavoidable leisure shall cause misery all round instead of being a universal source of happiness. Can anything more insane be imagined?
The key word is “leisure.” In the world of the 18th and 19th century, the justification for the Industrial Revolution and its extremes of work and income — great rewards for the few, crushing deprivation for the many — is found in “moral” statements about the way leisure affects differently the rich and the poor, and in turn, what is needed to motivate the two groups to be “productive.”
For example (my emphasis and, again, paragraphing):
These beliefs [of classical "liberal" 18th and 19th century thinkers] were complemented by a belief that “labour”, i.e. individuals without capital, can only be motivated by fear of hunger and by a reward, while “men of higher rank” can be motivated by ambition, as well. This led politicians at the time to pass the Poor Law Amendment Act 1834, which limited the provision of social assistance, because classical liberals believed in “an unfettered market” as the mechanism that will most efficiently lead to a nation’s wealth.
Adopting Thomas Malthus‘s population theory, they saw poor urban conditions as inevitable, as they believed population growth would outstrip food production; and they considered that to be desirable, as starvation would help limit population growth. They opposed any income or wealth redistribution, which they believed would be dissipated by the lowest orders.
Note, “dissipated by the lower orders” (and only by them; the wealthy don’t dissipate, they “spend.”). I could have bolded the whole quote; I hope you have time to read it through. (The footnoted source for the explanation is this book.) Here’s more on Malthus, the Poor Law amendment Act of 1834, and the “morality” behind his ideas:
An Essay on the Principle of Population by Malthus set out the influential doctrine that population growth was geometric, and unless checked, increased faster than the ability of a country to feed its population. This pressure explained the existence of poverty, which he justified theologically as a force for self-improvement and abstention. As a political moralist he opposed the old poor laws as self-defeating, removing the pressure of want from the poor while leaving them free to increase their families, thus leading to an unsustainable increase in population. His views were influential and hotly debated[.]
It’s easy to see that operating in modern terms:
▪ The rich seek leisure because they’re more productive and deserve it (think, rewarding your the CEO with time to golf). Therefore, the best motivations for the wealthy are the incentives of leisure and money. They’re more productive that way.
▪ The poor seek leisure because they are lazy and don’t deserve it (think welfare queens, or in 21st century terms, shiftless immigrants, cashing food stamps and fifteen fake Social Security checks to buy steaks for illegitimate children who drive Cadillacs and deal drugs). Therefore, the best motivations for the poor are deprivation and need. They’re more productive that way.
We’re back to the 19th century, which we never really left. The wealthy can and should be motivated by ambition and the promise of a maximum reward (leisure and money). The poor can and should be motivated by deprivation and offer of the least reward; this keeps them from dissipating their lives. (There’s a history of the intersect between money and morality in Western thinking, by the way. It’s contained in Erich Fromm’s seminal book Escape From Freedom, but that’s for another day.)
Bottom line — We can change the minute we want to
So to answer our opening question, why isn’t Bertrand Russell’s “sensible” Job Guarantee proposal, or an equally sensible one, like Minimum Income, enacted broadly? Because we as a society have decided that we want to enforce a just-deserts regime, and the poor “deserve” what they get.
Why have we decided that? Partly because the idea has been “in the air” for literally hundreds of years, and has infected every aspect of our discourse, including many of our “Christian” churches. Partly because the need to torture is strong in too many of our fellows. And partly because, sadly, the mass in the middle don’t see themselves as poor — yet.
And also because, it must be said, the current system keeps the comfortable rich very comfortable indeed. In an age when the rich control the messaging — what’s “in the air,” including in the churches — we’re in a perfect loop. These ideas will be “in the air” as long as the wealthy want them to be.
When will this change, this forced unemployment? The minute we want it to change. If history is a guide, things changed radically in the 1930s, when the just-getting-along became the newly minted poor themselves. Can things change without that horrible pressure and pain? Yes, of course — because these truly are choices. We can change to a “sensible” solution the minute we choose to.
Yours in good choices,
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