The debt hawks are to economics as the creationists are to biology. Those, who do not understand monetary sovereignty, do not understand economics. Cutting the federal deficit is the most ignorant and damaging step the federal government could take. It ranks ahead of the Hawley-Smoot Tariff.
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A personal musing. What is the future of jobs? Are we wrong to focus on job creation? Here is an excerpt from an article that ran last year:
CBS Reports; WALLINGFORD, CT., Jan. 5, 2009
The Future of Jobs in America; Innovation, R&D, and Education are Keys to Job Creation, By Anthony MasonFor 23 straight months now, the U.S. economy has been hemorrhaging jobs. . . One in six Americans, 17 percent, is underemployed. That’s nearly 25 million people who are out of work, have given up looking, or been forced to take a part time job. The recession has wiped out 15 percent of our manufacturing workforce. That’s more than 2 million jobs that will likely never come back.
Here is an excerpt from a recent article:
Jobs in China, By ANDREW JACOBS, The New York Times, 12/12/2010
In 1998 . . . Chinese colleges produced 830,000 graduates. . . . Last May, that number was more than six million and rising. . . The economy, despite its robust growth, does not generate enough good professional jobs to absorb the influx of highly educated young adults. And many of them bear the inflated expectations of their parents, who emptied their bank accounts to buy them the good life that a higher education is presumed to guarantee.
It widely is believed America suffers from a shortage of jobs. I suggest that may not be true. Rather, America suffers from a shortage of money.
It began with the Industrial Revolution. Since then, machines have done more work that people once did. Machines chased people off labor-intensive farms to manufacturing and white collar work. Then, machines run by people, chased people off those jobs. Soon, machines run by computers began to take over. But someone had to build and program the computers, so jobs in electronics industries expanded. Now computers have begun to build and program computers.
So from where will the next jobs come? And does it matter?
Most people really don’t want a job; they want money. Yes, some jobs may offer personal satisfaction, and may occupy otherwise dull hours, but for most people seeking jobs, money is the primary goal.
Wait, Rodger. People do not want money. They want what money will buy. They want more security, better shelter, food, clothing, health care, education. They want admiration. They want envy. They want accomplishment. They want to win.
O.K.., money can’t buy everything, but it can buy much of what people want. A jobs is a means to obtain money, which in turn is a means to obtain the things we want. And that Rube Goldbergian “means-to-a-means-to-a-means” connection is being superseded by machines.
Those who have seen the “Star Trek, The Next Generation” TV series are familiar with the “replicator.” It can synthesize any non-living product, seemingly out of thin air. If such a device existed today, our money and job needs would decline radically. Yes, we might continue to work for satisfaction, for creativity, or to fill otherwise-empty hours – but not so much for money, since there would be little need for money other than perhaps to pay for some services. The replicator could supply our product needs.
Replicators may seem far off, but we are evolving in that direction, where machines supply more and more of our product needs. And as that happens we butt up against what will be increasingly difficult questions: Why must we work to obtain money – and why must people struggle to find jobs to obtain money – especially since money is free?
That’s right. Money is free. The U.S. federal government has the infinite ability to create money out of thin air. In essence, the U.S. government is a “money replicator.” At the touch of a button, the government could supply each of us with unlimited money. Want $1 trillion? No problem. Here, take $2 trillion. There is no physical money; it’s all just data, and data is infinite.
Extreme amounts of money creation would reduce the value of money (aka “inflation”), but the point is this: There is no fundamental reason why anyone in America should lack food, clothing, shelter, education, health care simply for lack of a job. There is no job-related reason for poverty in America. Our “money-replicator” government has the power to lift everyone from poverty and supply all their basic needs.
This brings us to an important difference between why people want to work and why the economy wants people to work. While people work to obtain goods and services, the economy wants people to work to create goods and services. If we all owned replicators, and if no one worked, eventually we would have no progress and no services, and the economy would collapse.
There may be a compromise, between where we are today and an economy with no jobs at all. I’m not sure exactly where that compromise is, and surely it would change over time, but here are a couple of “what-ifs.” What if:
–The government’s “money replicator” gave every man, woman and child enough to pay for food, clothing, home, health care, entertainment and education through college — i.e. ended poverty?
–Those who wanted more than basics could work, but the standard, legal work days were lowered from 8 hours to 6 hours to 4 hours or less, providing more jobs for all who wanted them?
–Federal taxes, being unnecessary, were phased out?
Of course, the devil is in the details. What about Inflation? Motivation? Progress? International relations? I have some thoughts on these, which I plan to provide in later posts. I believe we eventually will loosen the connection between jobs to money to goods and services. It won’t be “if” but “when,” and it will be an improvement over our current situation of too much joblessness, poverty, illiteracy, homelessness, sickness and struggle.
Time and energy devoted to the creation of jobs may take us down the wrong path. Perhaps we should focus on the creation and distribution of money.
What are your thoughts?
Rodger Malcolm Mitchell
http://www.rodgermitchell.com
No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind me of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”
#Monetary Sovereignty - Mitchell 
I wonder if, in the course of US history, our early development was aided by the huge amount of counterfeiting that went on in our country. Back then banks could still print their own money. It was illegal to counterfeit money officially printed in your state but it was not illegal to print money from another state. Hence, for instance, you could print New York money in Philadelphia and get it quickly to New York, not far away.
Could all the money available for use, including the counterfeit kind, have aided economic development?
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Excellent point. In one sense, all paper money could be termed “counterfeit” in that it merely represents “real” money.
What is real money? That’s the puzzler, because real money isn’t real, at least not in any physical sense. Real money is as real as numbers. How real is ten? How real is pi?
Real money is just a series of balances in a series of electronic accounting statements. Real money is the electronic balance in your checking account.
When you write a check, you do exactly the same thing the government does when it prints a dollar: You create a physical representation of the real money in your account. In essence, you print money.
If you write a check greater than the amount in your account, the recipient of that check will treat it as real money. He might endorse it to someone else, in exchange for goods and services, and that person also will treat it as money.
If your check bounces, it ceases to be money, though its physical form has not changed. But, if you have a deal with your bank not to bounce your overdrafts, that check remains money.
The point is that all paper representations of money only become what we call “counterfeit” when they are discovered and rejected. Dollars, checks and counterfeit money all are identical. If there are a few billion counterfeit dollars floating about, that’s a few billion dollars added to the economy.
During WWII, Germany had a plan to create counterfeit dollars and spread them around America, thinking this would destroy our economy. They would have succeeded only in enriching us.
Rodger Malcolm Mitchell
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Money is claim on real resources. In a market economy scarce resources are allocated on the basis of price, therefore distribution of money. In such an economy, money is distributed two ways, income and economic rent. I don’t have to go into the mechanics of this because the outlines are obvious to everyone.
The upshot is that this mechanism is becoming obsolete and getting in the way. Owing to vested interests and economic ignorance, opportunity is being forgone at great economic expense and considerable human suffering.
Money is the means for allocating real resources and the present mechanism for allocating money is no longer appropriate to circumstances. The present system is leading to the production of too much of the wrong stuff and too little of the right stuff because the price signals are misdirected.
One of the reasons for this mispricing is ignoring externality and another the disproportion between income and economic rent. These are leading to socio-economic conditions that are unsustainable and leading to systemic breakdown that will have political consequences if not corrected. This is not working.
MMT shows that money is not a problem. Money is a creation of the state and the right amount of money to balance the capacity of the economy to produced can always be created and maintained at the appropriate level. The problem is the distribution of money and that is a political question, and it will ultimately be decided by political means, as it always has been, crises resulting in readjustments.
The last great transition was from feudalism to capitalism. The next transition will be from capitalism to whatever system evolves from it. Just as the transition from feudalism to capitalism took quite a while to transpire, so too with the coming system, whatever it will look like in the end and whatever it will be called.
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I beg to differ. People do want jobs. They want to work. It’s not just about the money.
People may not want to work as much as they do. They may not want to have to drive to an office five days a week. They may not want to be told what work to do. They may not want to have to press the button to get the pellet. Still, most find their self-worth through work. Work is fundamental to the human spirit.
Just listen to reporters who have doggedly gone after the story, miners who have toiled underground for 30 years, scientists who have committed thought and soul to discovery — see what they have to say.
People want jobs. We just need to enable and inspire people to create their own jobs without having them worry about the pellet.
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A job is work for hire or profit. I suspect what people really want is a vocation – something they would gladly do voluntarily.
Once you take money out of the work equation, then you can concentrate on work nourishing the soul.
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A brilliant piece that hits all the bases.
Money is just a proxy for what we need. Society must be organised so that it can produce what we all need for the minimum amount of inputs. Everybody should be lifted from relative poverty as a matter of right.
Once you crack that then we can move into wants, and that can be more of a free-for-all.
I don’t think replicators and fusion energy would cause the economy to collapse. I have a feeling it would move us onto the next level, because we would have time – the most precious commodity of all.
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http://www.thevenusproject.com/
http://www.thezeitgeistmovement.com/
You’re almost there, Rodger.
We’re nearly at the point, technologically, where all labor will be obsolete. When we get there, what are we going to do with all the people? Or should I say, what are THEY going to do with all of US?
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Good point, Yuu
Although “nearly” may be an overstatement, theoretically there could come a time when machines can think and do everything better than humans, at which time evolution might finish the job. (Visualize a human zoo.)
I’m retired. I have no job. But my days are filled and my life is fulfilled. Maybe the machines will allow us that kind of life. If not, have you seen the Terminator movies?
Rodger Malcolm Mitchell
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🙂 Machines can never outperform humans in a “Terminator-like way” unless they will replicate sexually, as living beings do, to overcome information loss. In that case they would not be machines anymore.
Humans are the ultimate source of information that keeps the machine show running – automation remains partial. Humans will have always something to work on, to maintain the machinery functioning.
Our problems do not come from a lack of more sophisticated machines. Our problems come from our brains being unable to cope with themselves, mostly, at the social level.
The myths about money are one expression of such incapacity.
Another, not recognizing that the employer-employee relationship is not a healthy one.
http://www.ellerman.org/Davids-Stuff/Econ&Pol-Econ/Econ%20and%20Pol%20Econ.htm
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On your point about jobs not being necessary: No one wants to speak of this in public, but our modern form of globalized capitalism has created a world where 25-40% of a country’s population is not necessary to the operation of its economy. They are excluded and may or may not get state support or very low paying jobs. In either case they form a subculture of living to get the basics and survive. Globalization, when discussed, means the free movement of capital around the world, but it also means the free movement of jobs and joblessness around the world. This is not discussed though constantly observed in action.
A real revolution/evolution is a change of values, social and political structures and the economic system. It is not simply about economics or political control. Feudalism to merchant capital required a change of values, as did the move from unrestricted merchant capitalism to mercantile capitalism and then again from mercantile capitalism to finance capitalism. Finance capitalism as we have known it has no changed to something else. The system is not about raising and investing capital in profitable businesses. It is about spreading debt around through trading instruments (CFDOs, derivatives) in the hope that risk will be diminished. But in fact it serves to multiple debt and make the risk of collapses in the capital markets far more disastrous. Perhaps we should call this gambling/trading based capitalism “debt capitalism.” Our values glorify debt or ignore it rather than fear it.
Suppose, if everyone in a country, were given a modest but not bad trust fund. How many would choose to work, that is, get a job? Many would be busy with positive activities of interest, many would fill time with drugs and other ways of blanking out, and some would work in enterprises that make extra money off those who do not work and those who do, in all cases with no compulsion involved.
Suppose we started by giving everyone a Social Security fund at birth of, let’s say, $10,000, half in a very conservative annuity that could be tapped at 55 (or later), the other in a moderate growth annuity that could be tapped at 55 (or later). Social Security, as we know it, would be kept, but at a lower tax and pay-out rate starting at 70. How much income would a person typically have based on the Birth Fund only?
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Interesting thoughts, John.
One very minor caveat: You said, “Social Security, as we know it, would be kept, but at a lower tax and pay-out rate . . .” Actually, FICA does not pay for Social Security (See: https://rodgermmitchell.wordpress.com/2009/09/08/ten-reasons-to-eliminate-fica/ ). For a monetarily sovereign nation, taxes do not pay for spending. If taxes were $0, this would not affect by even $1 the government’s ability to support Social Security.
Rodger Malcolm Mitchell
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The idea of reducing hours and spreading the work around so that everyone will have work but work less has been around for quite some time(Andre Gorz is perhaps the best known exponent). Having the government create the money solves the financing problems that has traditionally plagued this approach. Such an approach requires a degree of centralized planning(this would be a legitimate use of such planning) and the separation of income from work will remove the power employers have over workers(a good thing). People would be getting money from the government for being citizens not workers. Of course, we can expect extreme hostility to this idea from businessmen, politicians and economists.
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We don’t currently have replicators to create anything that we want, and there are real constraints on production. So simply giving everyone money will result in wealth redistribution (bad if you currently control a lot of wealth) and it would be inflationary because you’ll hit real capacity constraints. I’m on board with MMT, but this is too far out to be believable.
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There are constraints on production, but we are a long way from reaching them, and there has been no relationship between deficit spending and inflation for 40 years, despite massive deficit spending.
I don’t understand how giving everyone money results in wealth redistribution.
What is the “this” that is too far out to be believable?
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PG,
I’m not predicting that machines become sentient enough to take over the world (though I’m not denying the possibility, either). Rather, machines each year do more of the things humans used to do, including care for other machines. And this will mean humans will be less needed, over time, for money-earning jobs.
As for your comment that the employer-employee relationship is not healthy, this merely is a subset of the leader-follower relationship which is built into the human genome.
Rodger Malcolm Mitchell
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