Without Government, Unemployment?

There is this issue libertarian nut-cases and MMT’ers might agree upon in crudest form: without government there is no unemployment. But MMT has a very different perspective. We want a good government and we want full employment, and we can in fact have both. It is a political choice, not a whim of natural markets.

The (correct) MMT statement is,

With government there is unemployment by design, from inception, but also with government all the unemployment generated should (morally and optimally) be immediately eliminated.

Question: Without Government $\Rightarrow$ Full employment?

Yes. But it is a bit more nuanced.

I had a private conversation with Prof Steve Keen on this, and he was disagreeing with Mosler and Mitchell. For what it’s worth I side with Mosler and Mitchell. But it comes down to definitions. I suspect Steve was thinking of “employment” as people working, which it is not.

People are working whether they are getting a pay check or not, typically. Maybe working hard watching YoutUbe and eating junk food, but if they are not actively seeking to exchange their labour for the currency then they are not unemployed. In Steve keen’s definition they would be “unemployed” — but what he means is idle.

In a monetary economy idleness does not equate to unemployment.

People often get this wrong about MMT. MMT uses a certain definition that others are perhaps not fully aware of:

Unemployment or to be unemployed is defined by seeking to exchange one’s labour time for the tax credit.

What makes this a truly important definition is that it is useful and has several concrete functional implications — implications for how the monetary system is governed…. or negligently governed.

In the olden days you could substitute an analogous definition, such as seeking not to be beaten to death by a slave owner, or seeking to not have one’s hut burned down by the colonists. I am pretty sure most people, even libertarians would see the MMT definition as the less evil. But that’s no fault of MMT that unemployment sounds pretty nasty. It is a fault of the currency monopolist. They have no reason to keep people unemployed nor any reason to make the work people seek to earn tax credits onerous.

How is the answer “yes”?

The answer is “yes” when you suitably generalize what the word “government” means. The MMT generalization is,

Government is the, or one of several, monopoly powers that are using tax liabilities to drive an otherwise worthless currency.

Let’s abstract and call this governing power simply $\mathfrak{G}$.

This applies even if the $\mathfrak{G}$ promises to redeem their scorepoints for gold or silver or pizza. This does not make the currency a real commodity, it is still nominal scorekeeping. Not just because $\mathfrak{G}$ could at any time (with monopoly power) decide to stop redeeming, but also because even when $\mathfrak{G}$ promises to redeem for a real commodity that is determined by their imposed rate of exchange. They tell you what their currency is worth. They set both the own price and the exchange price.

It is also true regardless of how weak the $\mathfrak{G}$ is, if they are puppets swayed by oligarchs, then all that really means is you’ve got a specific type of government, but still one of the generalized forms. In this case the form of government is a hybrid perhaps, but mostly an oligarchy. It is still a $\mathfrak{G}$.

How is the answer “no”?

If you do not have a $\mathfrak{G}$ — of some form, any form, — then you have no currency. Maybe you have some weird hybrid currency system, but whoever controls the scoprepoints is your $\mathfrak{G}$, or one of many. If they are not using a tax system — or something like it — to drive demand for the otherwise worthless scorepoints, then you have no currency, as MMT defines the currency unit.

If you have no currency then no one is seeking to exchange their labour for getting those scorepoints. So there is no unemployment in that currency but there could be unemployment in some other currency (namely whoever is imposing the obligations to earn that currency) but then they are some sort of $\mathfrak{G}$.

You now see the mental problem with those who think “unemployment” is a natural phenomenon?

Thus, no matter how you slice things, unemployment is created by $\mathfrak{G}$. Of one form or another. Steve Keen was wrong.

But of course, to be generous, Keen is using his own different definition of unemployment, which presumably has the idle rich being “unemployed” (not wage earning). MMT sees things differently. The existence of those people is a loss of real output, and an effective rent on the labour of everyone else who is producing real goods for society. But still, those idle slackers are not unemployed. They are just not working. If they are not seeking to exchange their labour time for the currency then they are fully employed.

Definitions matter for civilized discourse. But the point of this article goes beyond the word games and political linguistic gymnastics. The real point is to see how we can obtain a better society. It is clearly by producing real output everyone needs for a decent sort of life, not in excess, just decent. And by the Twentieth century we had the collective means to achieve this goal. It was political choice that prevented humanity from realizing this goal. Neoliberalism (of both left-wing and right-wing varieties) succumbed to the neo-darwinist disease of thinking competition is good, and if the evil hand of government was just relaxed more we’d find a decent society.

I am afraid that is not how political economy based on a monetary system ever works. I mean literally afraid because this ideology is a cause of so much unnecessary suffering. Base case suffering is involuntary unemployment $\Rightarrow$ people seeking unsuccessfully to exchange their labour for the currency. There is little indication this baleful ideology will be dying off any time soon. We are infested with neoliberals, and we have friends and neighbours who are neoliberals without even knowing it, it is soaked and dyed into the popular culture.

What Do We Really Want?

We want more than full employment. By MMT definitions full employment is desirable, but not necessarily optimal.

What is optimal is everyone contributing to real output according to their capacity, with mild tax obligation motives, but more importantly for the motive of desiring a healthier society. That means all work being done needs to be useful work, in terms of some ill-defined but meaningful sense of increasing the prosperity of society at all levels, not just for those at the top of the heap.