The Transition to a Freer Society: BIG or JG?

One issue that has come up in recent threads is the challenge of adjusting to a future in which there may be far less compulsion to work in the formal economy and an increasing separation of income and employment. This is not inevitable, but is one possible response to the widespread mechanization of production that is likely to occur in coming decades. A dramatic rise in productivity can open the way for people largely to be freed from formal employment to pursue their preferred vocations either individually or in voluntary association with like-minded individuals. But since the experiences of many have not necessarily prepared them for this transition, it raises challenges. I thought it might be worth discussing this issue in relation to the main policy options that seem to present themselves; namely, a basic income guarantee or a job guarantee.

The potentially liberating effects of mechanization are summed up nicely in a recent comment by Tom Hickey in a thread at Mike Norman Economics:

With a different mindset, humanity could step forward to a new level of distributed prosperity, including the option of greater distributed leisure. However, I suspect that most people would not opt for greater recreation but more creative endeavor.

Most people can’t lie around on the beach for too long before they get antsy. And most people also find that their creative juices flow better when working in cooperation and coordination with others.

Then the difference between work and play would become the difference between process and result. Pure play is only concerned with process, and pure work is only concerned with results. The meeting point is in creative endeavor freely engaged in. Then leisure and work get combined, so that process and result are served simultaneously.

Really the only thing inhibiting this now is a collective mindset that is obsolete.

In relation to this, I suggested in the comments section of my previous post that it will be important to provide scope for people to occupy themselves in socially productive ways to the extent that this is their desire. In response, Neil Wilson hit on an important point:

Yes. But you have to realise that many people find that very hard to do and end up depressed because of it.

Once you lose the external motivation of starvation you have to find some internal motivation to do something else. And our school systems are designed to churn out robotic mass production workers not people who routinely explore their inner motivations and then work out how they can act on that to fulfil their desires while considering the needs of others.

So we have a society full of worker bees with a smaller and smaller hive to maintain.

I think that this transition can be a happier one if accompanied by intelligently designed policies, but could easily cause suffering and go haywire if managed poorly.

A basic income guarantee unaccompanied by the creation of opportunities to participate in organized volunteer activities of various kinds would not provide sufficient support to individuals who might struggle to adjust from formal employment, in which motivation is external, to a life dominated by free time in which it is up to each individual to determine his or her own activities and find their own internal motivation.

There are also dangers associated with a job guarantee if applied, contrary to the intentions of its proponents, in a minimalist or even draconian manner (e.g. workfare, or worse, conscription). A job guarantee that operated as little more than punishment for being a victim of deficient aggregate demand not only would provide little improvement over the current system as a safety net, but would in some ways be a backward step in terms of empowering people to learn self-motivation and self-discovery of what really interests and fulfills them. It is true that even a minimalist job guarantee would keep people in the habit of turning up each day and, for some, help to ward off feelings of emptiness, but this is no preparation for a future in which we could be free from such external motivations if only we can make the transition.

In contrast to these negative scenarios, well designed versions of the same policies could do much to empower people and raise consciousness over time.

A basic income guarantee that was combined with active policies to create outlets for organized volunteer work could accommodate not only people who were already happy to make use of their own time without further assistance (and so felt no need to participate in externally organized activities) but also those who needed additional assistance in keeping themselves occupied or staying socially connected.

A job guarantee introduced along the lines intended by its advocates would entail less freedom for the individual initially, because it would entail a degree of compulsion for anyone without access to an independent income. However, there would be scope over time to broaden the types of activities that are considered socially productive. The broader the accepted activities became, the closer the job guarantee would come to resemble volunteering alongside a basic income scheme, because eventually people would be able to choose activities they would have chosen even in the absence of the job guarantee mechanism.

In either case, an important aspect of policy would be providing outlets for socially productive activity. Perhaps one advantage of the job guarantee over a basic income guarantee, in this respect, is that the broadening of the definition of socially productive activity occurs at the pace societal attitudes are developing. This might be expected to generate less resistance and resentment amongst those in regular employment, although decades of mass unemployment may well have enabled the development of a more tolerant and progressive attitude on this issue.

Assuming that either policy approach was to be implemented in good faith along the lines briefly sketched out above, I do not personally have a strong preference for one approach over the other, although I lean towards the basic income approach. In terms of the transition to a freer society, a basic income scheme in conjunction with organized volunteer activities appeals more to my left-libertarian sensibilities than the job guarantee. I also worry that, in the event that policy implementation was not always in good faith, a job guarantee seems more open to abuse in the way workers are treated and how the program might be exploited politically.

Of course, proponents of the job guarantee point to other benefits, and from a macroeconomic perspective I do find these appealing. In particular, the automatic stabilizing and nominal price anchoring effects of the job guarantee are clearly superior to the current NAIRU approach, and probably also somewhat more effective than a basic income scheme even when combined with organized volunteer activities.

The job-guarantee wage sets the floor on all wages. This makes it an anchor for other wages because the cost of losing jobs in the regular economy depends partly on the difference in wages, and this can be expected to influence wage negotiations. The fixed wage also provides a floor on demand, providing stabilization for the broader economy.

Even here, though, the difference between a job guarantee and basic income scheme should not be overstated. Under the job guarantee, the domestic value of a unit of the currency can be regarded as the amount of job-guarantee labor time it takes to obtain it. Alternatively, we could consider it to be the average amount of socially necessary labor time required. The job-guarantee wage anchors other wages and hence the average socially necessary labor time required to obtain a unit of currency.

Under a basic income scheme, the value of the domestic currency can likewise be considered in terms of average socially necessary labor time. The basic income, rather than the job-guarantee wage, will provide the floor under demand and will also influence wages because it helps define the cost of losing employment. There would be a once-off reduction in the domestic value of the currency because no labor time is worked in exchange for the basic income payment. This will affect the average socially necessary labor time required to obtain a unit of currency. But once this initial adjustment has played itself out, it seems that a basic income scheme could play a similar role as a floor on demand as well as having an indirect effect on wages.

Even so, it might not match the effectiveness of the job guarantee in this aspect if job-guarantee workers were more “job ready” for employment in the regular economy. This would occur if the volunteer activities developed alongside a basic income scheme were of less relevance to employers in the regular economy. The extra “job readiness” of job-guarantee workers means that they would exert more competitive pressure on wages in the regular economy. In that case, the inflation-control mechanism would be somewhat more effective.

Then again, perhaps this could be addressed by ensuring that some volunteer activities were essentially of the same nature as those that would be provided in a job guarantee program. Workers who were keen to regain employment in the regular economy could opt for these volunteer options. The more demand there was for these volunteer activities, the more they could be provided.

Clearly, I am rather ambivalent in my attitude towards these policy alternatives. It should be emphasized, though, that I have not been comparing a job guarantee with a basic income guarantee in isolation, but rather a basic income guarantee in conjunction with the provision of opportunities to volunteer for productive activity. I think this latter combination could enable more freedom of choice while still serving a similar function for those who intend to re-enter employment in the regular economy. That said, I think either policy approach, handled well, could assist in the transition to the kind of society that seems possible in coming decades. This may be true whether the present wage labor relation remains in place or is replaced with something else.

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23 thoughts on “The Transition to a Freer Society: BIG or JG?

  1. Shorthand response: I disagree. I’m more with Bill Mitchell on this one.
    The transition you describe is fine from employment to say recreation or creative endeavour but absolutely useless as transition from unemployment, especially long-term unemployment.

    Except for its likely higher income, the BIG with volunteer activities does not differ in any significant way from Work for the Dole.

  2. Thanks for your thoughts, Senexx.

    I don’t see why there would necessarily need to be any difference whatsoever in the activities designed on a voluntary basis instead of as part of a job guarantee to the extent that the former were intended to cater for those wishing to re-enter employment in the regular economy. But over time, I don’t see the point in trying to require people to undertake formal employment when technological advances will enable people to be freed to do other things (including socially productive things of their own volition) to the extent they desire.

    There would already be many people, in my opinion, who would prefer to determine their own productive activities rather than remain in formal employment if they were given the opportunity to do so. They would not need any assistance, through organized voluntary activity, in adjusting to more free time. But the voluntary activities would be intended for those who either wanted it as a means of staying in the hunt for regular employment when the economy picked up or desired some assistance in learning to make use of their own time. As technological improvements make this more and more possible, I don’t see preserving the compulsion of wage labor as a good thing.

    Is the aim to channel profits to capitalists or to liberate people from capitalist social relations? I don’t support any attempt to preserve capitalism by maintaining “buffer stocks” of humans to be shuffled back and forth between JG and regular employment at the pleasure of capitalists. This is not progressive in any shape or form. It would be a regressive step, in my opinion, from what we have now. Clearly, for this reason alone, I am not a supporter of MMT. So be it.

  3. Further to my factional split comment, Warren Mosler has recently mentioned that anyone that understands operations is MMT.

    This makes it fascinating if we analyse the split that way as Bill and Randy are on the left and Mosler is on the right but your policy suggestions are to the left of Bill and Randy, so perhaps it would be easier to place you on the libertarian right.

    Its not a perfect example of axes but you should get the drift.

    I’m sure the neochartalists will disagree with my political positioning but it seems a reasonable generic assumption.

  4. Yes, I seem to be in agreement with right-libertarians on the JG for different reasons.

    I’m tired of siding with the liberal and center left. I am not going to support the preservation of capitalism.

  5. Well said, Peter, especially the last paragraph. Couldn’t agree more. I can’t support an idea that reduces humans to “buffer stock”.

    It’s a bit odd, I think, to see the MMTers put such weight on this particular policy idea. There’s a whole lot of policies which could take advantage of the monetary freedom offered by fiat currencies. Are we to call each one a theory?

    Very sad to say, but I think MMT could become a pretty dangerous idea if it starts getting more publicity, which it seems to be doing.

  6. Peter,

    What about going to a 4 day work week (Wednesdays off) and lowering the retirement age where you can get a robust public pension with full healthcare?

    Seems that would “harvest” the productivity for us all…

    Resp,

  7. Thanks, Jim.

    Matt, I would certainly support reduction of the working day, week or life. This in itself, though, does not eliminate the issue raised by unemployment under capitalism. That is, there will still be demand-deficient unemployment. So there is still the question of how best to deal with the human consequences of fluctuations in private sector activity. NAIRU with benefit system? JG? BIG? End to capitalism? Etc.

  8. “I don’t support any attempt to preserve capitalism by maintaining “buffer stocks” of humans to be shuffled back and forth between JG and regular employment at the pleasure of capitalists”

    It’s not really at the pleasure of capitalists. What it does is turn the labour market into a real market. The individual can say no to any job offer knowing that they have an alternative.

    The capitalists have to bid individuals away from the JG.

    We are where we are and JG is a baby-step towards where we need to be – if defined properly.

    On the flip side you have to remember that the vast majority of the population like to be told where to turn up and what to do. One of the reasons I consider JG to be a positive step is that I have recently seen a man driven to drink and the near destruction of his family simply by losing his job and being out of work for a number of months. The transformation was appalling. Yet as soon as he was able to secure simple employment again he changed back.

    JG would provide a lot of people with some sort of purpose. Not everybody has a sufficiently developed sense of internal motivation to allow them to contemplate what they should do with a life free from labour. Just look at the health and mental problems amongst the legions of the early retired. It isn’t easy when our world is so centred around the work relationship.

    So first let’s make the work relationship equitable, then, in response to the non-job arguments, we can raise the issue of “what else are they going to do?”.

    The greatest gift our advanced production systems can give people is time. We all have a finite lifespan and time is one thing we’re all short of. But like all gifts it can be a burden if you are not sufficiently prepared to accept it.

    I have a feeling that our generations are going to have to operate with the work relationship for a little longer. But what we need to do is find a way of preventing the indoctrination of forthcoming generations. And I think that comes with making higher education free to all again so that they have the time to reflect on the human condition.

  9. A big plus for a BIG, in the US at least, is the very convenient fact that Milton Friedman and other prominent conservative and Libertarian economists have already proposed one, in addition to a bevy of liberal economists. A “negative income tax” is an economic policy idea that has legs in the US, whereas a JG is anathema to the right, who absolutely hate FDR’s New Deal programs like the WPA and CCC.

    Winners of the Nobel Prize in Economics who fully support a basic income include Herbert Simon[30], Friedrich Hayek[31][32], James Meade, Robert Solow[33], and Milton Friedman[34]. [Wikipedia-Basic Income Guarantee]

    “Politics [and therefore policy] is the art of the possible.” — Otto von Bismarck, remark to Meyer von Waldeck, 11 August 1867. Quoted in Heinz Amelung, Bismarck-Worte, 1918; as reported in The Yale Book of Quotations, Yale University Press, 2006. This is widely attributed to Bismarck but there is no firsthand account of his exact words, as discussed in Ralph Keyes, The Quote Verifier, Macmillan, 2006. [source]

  10. I don’t think that we thinking enough out of the box on this one yet by limiting the discussion to economics. The push for a permanent solution will be driven by technological innovation making working for income less and less necessary and the opportunity for distributed leisure more widely available.

    over fifty years ago, R. Buckminster (Bucky) Fuller showed that the technology and resources sufficient to create a utopia on earth were already available, but technology was being misdirected and resources were being squandered, especially on military applications. According to his analysis (“the World Game”) there are already enough “metaphysical” (Fuller’s terminology) and physical resources available to create heaven on earth, “metaphysical resources” being non-physical human resources like knowledge and skill, the application of which he called “design science.”

    Fuller showed that the obstacle is neither resources nor know-how, but resource allocation resulting from deficient collective consciousness as a species. Humanity is not living up to its already existing potential.

    This is a “metaphysical” problem in Fuller’s sense in that it is a deficiency of collective consciousness that can be overcome. I did a master’s thesis is political and social philosophy on this, submitted in 1972. There was an abundance of literature on it at that time, and knowledge and technological innovation have vastly increased since then.

    This is a “philosophical” problem in that it requires a comprehensive solution that draws on all disciplines, from the arts and humanities to the sciences. All of these factors contribute to the raising of collective consciousness.

    It is also an issue that the masters of perennial wisdom have dealt with since time immemorial, recorded in the world’s spiritual teachings. I have mentioned before that this is summarized nicely in Meher Baba’s “The New Humanity,” which is included in Discourses.

    This transition will involve not only new economic arrangements but also an overhaul of the social and political system, not seen since the transition to free market capitalism and liberal democracy that began in the 18th century. Stand by, it’s coming — inevitably. Humanity will either go forward to adopt this peacefully or it will be dragged by history, kicking and screaming all the way. That’s were we are going, and those are the choices.

  11. I see things similarly to Neil.

    The job guarantee would put a floor on wages, restore worker bargaining power in a big way, and create tremendous pressure for companies to direct a higher share of their earnings into the compensation of employees in the bottom echelons of their wage scale, rather than steer it all up to the top as has been the trend now for a couple of decades. Boards would have to accede to these new wage scales in order to keep their companies competitive in the labor market. And to hold down costs, they would have to start paying execs less. So I think it would have a salutary effect on the problem of inequality – at least for those who agree that inequality is a problem. In a way, the JG program would play some of the roles of a national union.

    The job guarantee would also be combined with a government-administered health care program, I assume, and that will have additional positive benefits on breaking the back of the wasteful and overly expensive employer-administered system we have now.

    Also, I don’t understand how the BIG would avoid the social strife and unraveling of the social contract that have attended the rise of social welfare programs in the US. Right now we have the weird phenomenon that people in households making only $50 K total sometimes seem to be angrier at people making $20 K than they are at people making $20 M. I believe that’s because low and moderate income workers are working hard hours at crappy jobs to fulfill social and family responsibilities. They are resentful of those people who seem to be receiving various kinds of freebies while providing no work in exchange. The JG helps restore the sense of a social contract which is common to many social and political outlooks. Even in communism, there is the “from each according to their ability” part.

    “A job guarantee that operated as little more than punishment for being a victim of deficient aggregate demand not only would provide little improvement over the current system as a safety net, but would in some ways be a backward step in terms of empowering people to learn self-motivation and self-discovery of what really interests and fulfills them.”

    That’s why a I think a job guarantee program should be combined with a program of expanded public education and human development. One way to implement such a program is to allow that at certain times during the lifespan at least, a person’s job would be to teach someone else some skills one already has, or to learn those skills from others. In that case, the costs of the job guarantee do not just play the other beneficial roles discussed above, but represent an important area of ongoing public investment in the quality of our workforce.

  12. The other idea between the Job Guarantee and the Basic Income Guarantee is the Universal Pension.

    This is where an individual receives a basic income from the state as long as they work unless exempted from doing so by reason of age or infirmity.

    This is where the state essentially nationalises the minimum wage and all jobs – guarantee, public, volunteer and private have access to the workforce at ‘no cost’.

    So the private sector can then chase the wage down to zero and people still have an income coming in. Where job skills are at a premium, the private sector will pay a premium for them, but it never affects the Universal Pension.

    The difference with Job Guarantee is that it frees the guarantee from having to be careful about standing on the private sector’s toes. Since the wage costs are the same on either side, the transition from guarantee job to private job is likely to be less of a step.

  13. Following up on Tom’s point about perennial wisdom and the philosophical or spiritual dimensions of change, he posted this on his blog last week, and it was one of the more uplifting things I have read in a while:

    http://mikenormaneconomics.blogspot.com/2011/12/satyagraha-if-police-are-stepping-up.html

    During the earlier stages of the OWS movement, I kept hearing the protesters talk a lot about greed. In some way, that part of the message sailed right by me, and to the extent I thought about it, I thought it was naive. But as the weeks passed, I began to think, “You know, maybe they’re right, and part of the problem is that people are just too damn greedy these days.” I referenced the protest against greed in the first paragraph of my essay “Public Money for Public Purpose” which has been appearing on New Economic Perspectives this week, thanks to the kind support of Stephanie Kelton.

  14. Neil:”The difference with Job Guarantee is that it frees the guarantee from having to be careful about standing on the private sector’s toes.”

    Not sure how JG would stand on the private sector’s toes, unless JG is offering more than a private sector employer that is able and willing to hire.

    Seems JG would help set a floor for AD too, benefiting the private sector.

  15. A little off topic (but only a little), but in response to this:

    “Once you lose the external motivation of starvation you have to find some internal motivation to do something else. And our school systems are designed to churn out robotic mass production workers not people who routinely explore their inner motivations and then work out how they can act on that to fulfil their desires while considering the needs of others.”

    I think the truth of the matter is that many other people are not self-directed at all. They are other-directed. This has nothing to do with institutions or anything else — they just ‘is as they is’.

    Funny that some people call such a stance elitism (although advertisers know this well and it works for them to sell products) because I see it as totally the opposite. I think that modern history has been the history of self-directed people trying to turn other-directed people into self-directed people. I guess that’s what we call ‘Utopian politics’ (Rousseau, Robespierre, Lenin, Marx etc.). Any politics that tries to mold the Nature of Man through institutions. It always ends in despotism.

    The only reason I bring this up here is because we’ve been discussing similar aspects of politics and, as I’m sure people well know by now, I’m very conscious of resurrecting such a politics. As I’ve said before: certain strains of leftism appear to me to want to resurrect such a politics (neo-Marxism, but also certain strains of liberalism etc.) and so do certain forms of rightism (libertarianism etc.). Scrap it all and have done with it, I say. But maybe that’s unrealistic… Utopian even!

  16. Ha! You’ll think for yourself even if I have to make you do it!!! Well, there do seem to be leaders and followers. If we decentralize that, it would expose people to more points of view, perhaps avoiding the tyranny of ideology. Now, if there were an MMT for ideology….

  17. Philip Pilkington,

    I find your history a bit convoluted and funny to say, elitist. You say that people “is as they is” but aren’t people the way they is because of at least a wee bit of mass exploitation? From Roman times and before through feudalism to today? Maybe it’s better to say people is as they is because of how they’ve been beaten. And to criticize ‘utopian politics’ as despotic seems very odd given that the fight is and always has been against age old despotisms that exist to this day.

    How can one divorce man from institutions given that we’re social creatures to begin with? On what basis do you determine the nature of man?

    Scrap it all? What then do you propose?

  18. @peterc

    I don’t support any attempt to preserve capitalism by maintaining “buffer stocks” of humans to be shuffled back and forth between JG and regular employment at the pleasure of capitalists. This is not progressive in any shape or form. It would be a regressive step, in my opinion, from what we have now.

    I think what we have now is worse. Using a buffer stock of unemployed rather than employed to maintain price stability — very much at the “pleasure of capitalists”.

    Mass unemployment results in huge permanent losses every day in foregone output and income. Add to that the depreciation of human capital, increasing family breakdowns, child abuse, crime, medical costs, skill loss, psychological harm, ill health, reduced life expectancy, loss of motivation, racial and gender inequality and loss of social values and responsibility. The personal, family and community losses are enormous and persist across generations.

    There is nothing natural with unemployment. It’s distorted. Arguably, a more natural order is zero involuntary unemployment. Still, many people seem to prefer “what we have now”, in spite of the costs. I have yet to see convincing arguments.

  19. @ Jim

    Yes, institutions shape us. But they do not make us as we are. As I said, I think that people can be largely divided into self-directed and other-directed people — that’s advertising jargon; to put it in sociological terms we could say, with Gabriel Tarde: innovators and imitators.

    I don’t think you’ll ever change this. I don’t think that it’s possible. And I think all Utopian politics is geared toward this. To create the New Man — “An Aristotle, a Goethe, a Marx, ” as Trotsky put it. This to me is dangerous and misguided. This, to me, is people who are more innovative than others trying to turn others into something more so resembling themselves. The violence in such an act is implicit but it can quickly become explicit when such people gain power.

  20. Matt,

    On your 4 day work week, in the late 1990’s. in the semiconductor industry, 3 1/2 day weeks were seen — these are 40 hr/week 3 1/2 days a week. The employees loved it, and a few young enterprising fellows took on two jobs.

    How it worked was as follows – 12 hour shifts with a 3 day 4 day alternating week – with three shifts with 4 hour overlaps. So 3 day and 4 day weekends were common. Of course, the semiconductor plant was operational 24 hrs/day 7 days/week except over Christmas/New Year when skeletal operations were the norm.

    This format could very easily be adopted for lower than a 40 hour week.

    This sort of format can be easily

  21. Good points in the article. I’m with Tom Hickey. We need to take as multidisciplinary an approach as we can. And there is a yawning gap between our technological prowess, and our consciousness, or paradigm. The type of future we are confronted with (assuming the environment plays along) will consist of ‘a smaller beehive’ and more ‘leisure’ time (whatever leisure is). What humans need economically, can, for the most part, be automated today, is automated today. That dynamic is accelerating. And Consumerism is obviously unsustainable and very unfulfilling to boot. It won’t bewitch us forever, is fading already I feel. I.e. we’re passing through the end days of Perpetual Economic Growth. This is enormously disruptive, and yet the younger generation growing up today are, I suspect, far more aware of all this than forty-somethings struggling to adapt to very new socioeconomic demands. Hence, we’re talking about a (theoretically) manageable transition, not a sudden snap from one world over to a totally alien one.

    A question: Why would BIG cause people who do not want to, to leave their jobs? If many who are self-motivated feel finally freed by BIG to pursue their less economically useful path, then surely there would be more work for those who need external motivation?

  22. Good thoughts, Toby.

    In answer to your question, the people I had in mind are those who desire wage or salary employment but are unable to obtain it. In the absence of a job guarantee, they would remain involuntarily unemployed.

    The level of wage and salary employment depends on aggregate demand. To control inflation, the current neo-liberal policy approach involves an intentional curtailment of demand below the level necessary for full employment. A job guarantee is one means of controlling inflation without requiring unemployment.

    I take your point about the younger generation. It may well be the case that people are readier for the potential changes than I am imagining. However, there are still many people in the workforce in the middle-aged and older brackets. The psychological difficulties in coming to terms with unemployment would not be easy for many of them until there is a change in attitude that they themselves internalize. The evidence in the literature in psychology, sociology and related disciplines is clear on the immense human costs of unemployment.

    What I suggest in the post after this one is to provide a ‘Job or Income Guarantee’ (i.e. both a BIG and a JG) so that those who are ready for free time can take it and those who are not can opt for the JG rather than being forced against their will into unemployment. If you are right, and many already wish to embrace free time, that would make the transition quicker and less problematic.

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