Every few years someone discovers Modern Monetary Theory, likes the description of how money works, and decides they can keep that part while dropping the Job Guarantee. This exchange, from the comments under a March 2018 Bill Mitchell blog post, explains why that doesn’t work — in the words of Bill Mitchell, André, and Neil Wilson.
It started with a claim from André, that an MMTer could support other policy agendas instead of the Job Guarantee:
There are other alternatives and other agendas that a MMTer could support.
Neil’s response was typically direct:
There isn’t Andre. If you do not support the Job Guarantee, then you are just a pump priming Keynesian that will cause a wage price spiral and collapse just like in the 1970s.
In other words that approach has been tried and has already failed – leading to Monetarism and neoliberalism.
Mark Blyth calls this the ‘bug’ in Keynesian thinking. The Job Guarantee fixes the bug – and it is the only thing that will do – because it is automatic, instant and spatial in nature. It is an automatic stabiliser that stabilises the monetary circuit and the real circuit – leading to price stability and full employment.
Bill has been very clear about the centrality of the Job Guarantee
“The reality is that the JG is a central aspect of MMT because it is much more than a job creation program. It is an essential aspect of the MMT framework for full employment and price stability.”
Every generation that discovers MMT seems to think they can do without the Job Guarantee for some reason. Quite why that is I don’t know.
Bill then filled in a piece of history that gets lost in these arguments — where the term “Job Guarantee” actually came from.
When we started to develop what has become known as Modern Monetary Theory (MMT) around 1994 and 1995, my US MMT colleagues (Warren, Randy, Stephanie etc) used the term Employer of Last Resort (ELR) whereas I originally called the concept – which I developed in my Honours year at University (1978) – the Buffer Stock Employment (BSE) framework. The BSE terminology followed directly from the concept of buffer stocks of employment being used to stabilise the price and exhaust the quantity supplied (that is, create full employment).
Early on in MMT history, the two terms were interchangeable. I used BSE, the US colleagues used ELR.
Two things happened. First, I objected to the use of the term ELR because it was derived from the central bank’s capacity as Lender of Last Resort and I considered applying a term that was about the provision of inanimate reserves to human labour was not appropriate.
Second, Britain experienced the outbreak of mad cow disease (Bovine spongiform encephalopathy or BSE) in 1996, which rendered my BSE acronym somewhat dubious.
There was some usage (by Randy for example) of the term Public Employment policy, but I decided to use replace the BSE terminology with the Job Guarantee terminology and I started using that language in public presentations and academic papers from then on.
After a while, we (the original MMT team) all agreed either formally or implicitly to unify the terminology as so it became Job Guarantee – late 1990s. The Americans still occasionally lapse back into ELR but rarely these days.
André pushed back against Neil, arguing MMT is compatible with other routes to full employment and price stability, and that the Job Guarantee is only ever the best option, not the only one.
No, I’m not. MMT acknowledges other forms of guaranteeing full employment AND price stability even without a JG program. Do your research. And it is not Keynesian policy.
Is it? Why? Who says so? You?
I believe that the JG is the best way to do so, but not the only one. I believe most MMTers would agree with me, but I cannot talk for them. I guess you are the only one claiming that JG is the unique solution.
For example, let’s suppose we take the US, UK or Australian government as they are, making just two modifications: some kind of institution or law that strictly controls public wages and prices, so that they are carefully controlled by the central government; and you allow for a big or unlimited budget in some areas or public agencies, so that some public agencies will be able to spend how much they want, without restraint. However, the wages and prices they will be able to offer are fixed by the strict control, hence they will not actually be able to spend an infinite amount of money. However, they will be able to employ anyone willing to accept such wages.
With that arrangement, you could achieve both full employment and price stability even without a JG program. It is not a JG program, just big budget with public price controls. This is just one example. A full scale war is another.
MMT is a bigger concept than the JG policy. It explains how money (and the whole economy) actually works. With that kind of knowledge, you don’t need to restrain yourself to one kind of policy (JG). There is plenty of room for many other forms of innovative policymaking.
I would call someone a MMTer if he or she knows how modern fiat money works (that it is not like gold, that taxes drive currency, that the government is not like a household etc) even if he or she doesn’t agree with the JG program. I don’t see a contradiction in there.
He then took the argument further — that MMT describes how the monetary system works, and says nothing about what should be done with that knowledge.
If you define “Job Guarantee” as any policy that establishes (1) fixed public prices/wages and (2) big or unlimited budget, then I would agree with you that MMT foresees that such a JG is the only way to keep the specific agenda of both full employment and stable prices.
What I am disputing here is that this is not the definition of a JG Program, and also that this is not the only legitimate agenda (if such a thing exists at all).
If someone claims that solving environmental problems comes first than full employment, who am I to say that he or she is wrong or that he or she is not an MMTer? I am just one voter, one citizen, one social/political brain and mouth, and not more than that.
One day the Chartalist Theory will be mainstream and we will have liberal MMTers, anarchist MMTers, fascist MMTers, green MMTers, conservative MMTers, monarchist MMTers and so on. Yes, an absolutist monarchy is not incompatible with MMT theory. MMT is a theory about how money works. What you do with that is not MMT, it is political ideology.
Bill’s reply closed the argument.
You are welcome to call anything whatever you like whether there is an existing body of knowledge that calls it something else or not. But that won’t change things much.
Neil Wilson is correct that what the founders of MMT (including myself) have deemed to be the body of theory and practice they advocate includes the concept of an employment buffer stock as an integral component.
As Neil says it ‘fixes the bug’ that the Phillips curve opens up for conventional ‘Keynesian’ (heterodox) theory. You demand to know “Who says so?”. I say so. That has been the core of my work in this area of research and theoretical development for decades. The Job Guarantee solves the ‘missing equation’ problem of macroeconomics and is core to what we call MMT. It is one of the things that separates MMT from other Post Keynesian macroeconomic approaches.
As Neil noted “Every generation that discovers MMT seems to think they can do without the Job Guarantee for some reason.”
Over the 14 years I have been writing a blog and thus presenting my academic work in a more accessible format, this discussion has recycled several times. It has led to some people who in their rush of enthusiasm claim to be devoted MMTers then denouncing the approach a few weeks later once they realise what the body of work involves.
Then the cycle turns as more people ‘discover’ our work.
As I said, you can call something MMT as you see fit. But without the Job Guarantee stability framework embedded, what you think is MMT is not the genuine article.
André had the last word, if not quite the argument:
Haha well, that settles the point
The Job Guarantee fixes the bug in Keynesian thinking. It is the only thing that will do, because it is automatic, instant and spatial in nature. It is an automatic stabiliser that stabilises the monetary circuit and the physical circuit – leading to price stability and full employment.
It’s not MMT without a Job Guarantee.
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