There is a quasi-consensus among progressives that the solution to most of the social ills of modern capitalism – poverty, income insecurity, unemployment – lies in the provision of a universal basic income (UBI): that is, an income unconditionally granted by the state to all citizens on an individual basis, irrespective of income. This idea has gathered strength in recent years due to the widespread belief that we are on the verge of a ‘second machine age’ that, unlike the first machine age – the industrial revolution – will render obsolete most of human involvement in the production process, not simply in the manufacturing sector – where the process has been ongoing for a long time – but also, crucially, in the service sector, potentially taking over millions of jobs for which human ‘cognitive functions’ were hitherto deemed indispensable, thanks to the development of highly intelligent software-driven machines and robots. It is claimed that the capacity of these new machines to replace human tasks is unlike anything that we have previously witnessed and exceeds the ability of humans to envisage and create new jobs that will replace those displaced by robots.
The IMF recently published an article arguing that the second machine age or ‘robot revolution could have profound negative implications for equality’.1 The conventional economic argument deployed by the IMF is based on a competitive labour market framework where the introduction of robots, which are perfect or near-perfect substitutes for human labour, effectively increases the supply of ‘labour’ and thus inevitably leads to higher unemployment and lower wages – hence the term technological unemployment. According to this line of reasoning, the second machine age raises the question – even from a mainstream perspective – of how to maintain sufficient levels of income and aggregate demand in the face of massive unemployment and declining wages. According to the IMF – and, interestingly, to most progressives – the solution lies in taxing the rising income on capital and then redistributing that income via the introduction of a UBI guarantee. As we will see, however, there are serious problems both with the ‘machines will cause mass unemployment’ narrative as well as with the notion that the solution to this (alleged) problem lies in a UBI.
With regard to the former, the American economist David Autor, who is a leading authority on the issue of automation and employment, recently concluded that the substitution process is likely to be finite ‘because there are many tasks that people understand tacitly and accomplish effortlessly but for which neither computer programmers nor anyone else can enunciate the explicit “rules” or procedures’.2 He refers to this as ‘Polanyi’s paradox’. In his 1966 book, The Tacit Dimension, the economist-turned-philosopher Michael Polanyi wrote that we should ‘reconsider human knowledge by starting from the fact that we can know more than we can tell’.3 Accordingly, he conjectured that much of human knowledge is ‘tacit’ in nature and that the rules that allow us to ‘know’ things ‘cannot be put into words’.4 In a sense, we don’t know why we know things. Much of our knowledge is the product of culture and tradition that is infused into our subconscious and filters reality in particular ways that we are not immediately aware of. This is the tacit dimension. Polanyi’s thesis, if correct, has significant ramifications for the claim that robots will take over the labour market. Autor says that ‘[f]ollowing Polanyi’s observation, the tasks that have proved most vexing to automate are those demanding flexibility, judgment, and common sense – skills that we understand only tacitly’.5
Accordingly, he notes that the implications about the use of robots go beyond a discussion of the extent of substitution of machine for labour. He argues that ‘jobs are made up of many tasks and while automation and computerisation can substitute for some of them, understanding the interaction between technology and employment requires thinking about more than just substitution’.6 In other words, there are tasks that rely on our tacit knowledge, which constrains the capacity of robots to replace humans in the workplace. Those who argue that the second machine age is somehow different must also demonstrate that the new wave of technologies has been able to overcome the Polanyi constraint. Autor expects that ‘a significant stratum of middle-skill jobs combining specific vocational skills with foundational middle-skill levels of literacy, numeracy, adaptability, problem solving, and common sense will persist in coming decades’.7 As we will see, the state has a central responsibility in this regard.
More generally, the ‘robots will rule the world’ argument sidesteps entirely the question of human and political agency. Of course, robots are becoming increasingly advanced and will probably be able to replace humans – particularly unskilled and low-skilled workers – in a number of areas. However, this is not a new phenomenon – it has been ongoing since the capitalists worked out better ways of securing the surplus production. But just as children were banned from the workplace in advanced nations as an act of social policy, the state has the capacity to determine how new technologies are deployed. We produce highly technological vehicles that can reach dizzying speeds but we force them to obey limits that are well below their overall capacity. Why? Because we empower the state to protect our common interests. If robots and computers threaten our very survival then it is rather far-fetched to expect that we will allow states to be totally compliant and allow robots to take over and completely drive out humans from the workplace. There will always be options and alternatives; it is the role of the state to create a legal framework that advances the overall interests of citizens.
While innovations in technology will free humans from repetitive and mind-numbing work and improve productivity in those tasks, there is no reason to believe that robots are destined to develop outside the legislative framework overseen by the state. Such arguments are in denial of the basic capacities of the state to legislate in the common interest. In this sense, the claim that robots will inevitably cause mass unemployment and wage stagnation is just as deceptive as the mainstream claim that the divergence between productivity growth and employment and wage growth witnessed from the 1970s onwards – the so-called ‘great decoupling’ – is an inevitable and unavoidable consequence of the ‘changing nature of technological progress’.8 In fact, as seen in Chapter 5, this divergence has much more to do with the war on labour waged by capital in the neoliberal era – which has succeeded in generating high levels of labour underutilisation as a way of disciplining workers – than with technological change per se. In other words, it was a political choice. The same is true today.
A more appropriate question when confronting the issue of disruptive innovation is how to help those displaced, unskilled workers transition into alternative skills and jobs. A progressive state needs a framework to support those transitions – what we call a ‘just transition framework’. Where possible, workers should be assisted through education and training structures to find work in new high- and middle-end jobs. This would ensure that the costs of economic restructuring due to the second machine age – and to other challenges, such as the shift to more sustainable production processes to deal with the issues of climate change and environmental degradation – are shared across society rather than shouldered solely by specific categories of workers and their communities. Moreover, should it not prove possible to transition all workers into private sector high- and middle-skill jobs, then alternative jobs will need to be created directly by the state, and alternative visions of productive work developed. This is where the job guarantee comes into play, which we will talk about further on.
As we will see, basic income proposals do not provide a coherent or progressive response to the challenges posed by technological unemployment. There is some truth to the claim that automation is likely to render the private sector structurally unable to provide full employment, particularly in the transition phase, regardless of governments’ efforts to retrain workers and maintain sufficient levels of demand in the economy through deficit spending. However, we will argue that it would be a mistake for progressives to passively accept the end of wage labour as an inevitable – even desirable, some would say – aspect of technological progress, as most proponents of basic income do; instead, the task of progressives should be to develop new types of employment, in accord with the human need to work and with inclusive societal goals, and more generally to develop a framework for radically re-envisaging the concept of productive work. We will now elucidate why we don’t consider basic income to be a progressive solution to the problem of income insecurity and why we consider it to be an acceptance of the inevitability of mass unemployment – and thus a surrendering to the mainstream narrative. We will illustrate why it is deeply flawed from both a theoretical as well as technical standpoint, and usually reflects a failure to understand the capacity of currency-issuing states to expand employment. Finally, we will demonstrate that a job guarantee, from a progressive standpoint, is a superior approach to basic income in virtually all respects.
The UBI – or basic income guarantee – proposal has been advocated by a diversity of interests on both sides of the political spectrum. Tracing the origins of the UBI proposal reveals that the motivations of its proponents at different periods of history have varied wildly, from those who desire(d) to cut government spending and push the responsibility of maintaining ‘welfare’ on to individuals, to those who believe(d) that unemployment is a violation of justice but there is little governments can do about it, to, more recently, those who invoke trepidation about the so-called second machine age. Voices from the left and the right weave various aspects of these motivations, often in overlapping ways, to justify their demands for a basic income to be paid by the state to all individuals. One of the pioneers of basic income was the British socialite and conservative activist Juliet Rhys-Williams. Rhys-Williams was a member of the Beveridge Committee, which sought to reform the British system of income support in the early 1940s and would later develop the framework that would become the post-war welfare state in Britain. The idea advanced by the committee was that a system of flat-rate social insurance contributions would underpin a flat-rate benefit scheme. Critics opposed to a large government arm claimed that these systems were complex, costly and promoted category bias (where a person would nurture characteristics that allowed them to ‘fit’ into one benefit category or another to ensure they gained the income support).
Rhys-Williams was a dissenting voice on the Beveridge Committee and resisted the proposed solution to income support. Instead, she put forward a negative income tax scheme, which in her view would eliminate the need for a welfare state by providing a guaranteed minimum income with tax incentives to earn further income.9 Her motivation was to reduce the size and footprint of government while at the same time providing a means for reducing poverty, a major concern for conservatives of her era (which has been lost in the neoliberal era). The former motivation also underpinned Milton Friedman’s later proposal for a negative income tax, where an individual would receive a refund of any unused tax deductions/allowances up to some small maximum amount (the guaranteed income component) and then face a declining subsidy up to the threshold where he/she would pay full taxes on earned income.10 For Friedman, the guaranteed component needed to be small because he argued that if the subsidy component was too generous the incentives would not motivate people to look for employment. Importantly, Friedman considered the cause of poverty to be excessive state intervention in the economy. Thus, he saw ‘basic income’ as a means to reduce the role of government to a minimum, by eliminating social programmes and replacing them with private welfare provisions. Friedman specifically argued that ‘if enacted as a substitute for the present rag bag of measures directed at the same end, the total administrative burden would surely be reduced’.11 Friedman went on to list some of the measures he would hope to eliminate: direct welfare payments and programmes of all kinds, old age assistance, social security, aid to dependent children, public housing, veterans’ benefits, minimum-wage laws and public health programmes, hospitals and mental institutions.
Not all basic income proponents see it as a way of shrinking the state, of course. On the left side of the political spectrum, progressive supporters of basic income are mostly motivated by a desire to solve the problem of poverty and income insecurity. They highlight the fact that if there is a lack of employment alternatives available to citizens, then the provision of an unconditional basic income would be the easiest and most direct means of eliminating poverty and income insecurity. However, an effective solution to the problem requires that we understand ‘the underlying rather than proximate causes of income insecurity’.12 How we construct the problem conditions the way that we attempt to solve it. In this sense, Mitchell and Watts note that ‘[i]t is easy to pose a “false problem” and then develop rhetoric to “solve it”’.13 Moreover, to assemble an array of possible solutions, we must understand the power that a currency-issuing state has in terms of solving the underlying causes. If we have an ill-informed understanding of those capacities we are prone to define the possible policy set too narrowly and thus exclude preferred solutions. As we will see, practically all basic income proposals fall short when it comes to identifying the structural causes of unemployment and the instruments available to governments to solve them, which in turn reflects a failure to understand the operational reality of modern fiat economies.
The basic income approach to income insecurity is based on what Mitchell and Watts call a ‘false premise and a curious inconsistency’.14 While basic income proponents concentrate on income security as an end in itself, those who promote the job guarantee consider income insecurity to be a manifestation of a broader problem in capitalism – a deliberately engineered lack of employment growth. The existence and persistence of mass unemployment and the link to income insecurity is generally recognised by basic income advocates, but the former is rarely explained. An exception is leading basic income advocate Philippe Van Parijs. Drawing on mainstream neoclassical economic theory, Van Parijs argues that unemployment arises because wage rigidities don’t allow wages to be reduced when there is an excess supply of labour (that is, unemployment).15 In his conception, unemployment exists because the going wage is too high relative to the productivity level, and therefore firms are unwilling to offer jobs to all those seeking to work at the current wage level; because wages cannot easily be cut, unemployment persists and becomes endemic. In short, Van Parijs considers unemployment to be caused by a departure from an alleged competitive equilibrium rather than any macroeconomic failure – that is, an aggregate spending deficiency. In other words, there is no recognition that mass unemployment is the result of a deficiency of total spending in the economy, resulting from the fiscal deficit being too low (or surplus being too high, depending on the circumstances in the non-government sector). This is reflective of a wider trend among progressive thinkers: by failing to understand that unemployment is largely the result of defective macroeconomic policy, they end up accepting job scarcity as an inevitability (without understanding what is driving the jobs shortage in the first place) and thus turn to basic income schemes to assuage their well-meaning equity concerns. Basic income proponents move in lockstep with the mainstream narratives in this regard.
This leads them to commit another mistake. Because they fail to understand the reality of modern money – that is, they operate under the assumption that currency-issuing governments are financially constrained – their proposals for remedying income insecurity are also deeply flawed. One of the sensitive issues for UBI proponents, for example, is its perceived ‘cost’. Accordingly, the mainstream UBI literature advocates the introduction of a basic income within a so-called ‘fiscally neutral’ environment – that is, by financing it through taxation rather than deficit spending (with differing opinions as to who should ‘fund’ the programme). Given that mass unemployment is the result of inadequate aggregate spending, a basic income proposal of this nature would solidify or lock the nation into entrenched states of capacity wastage and merely replace the income support for the unemployed with the basic income. Furthermore, focusing on the ‘cost’ of the programme is likely to lead the basic income to be set at a level too low to lift people out of poverty.16 It is also highly unlikely that labour participation rates would fall significantly with the introduction of a modest UBI, given the rising participation of women in part-time work (desiring higher family incomes) and the strong commitment to find work among the unemployed. So the suppression of net government spending that would accompany the introduction of a ‘fiscally neutral’ basic income would likely increase, not reduce, unemployment.17 However, there could be an increase in the supply of part-time labour via full-timers reducing work hours and combining the UBI with earned income.
In that context, employers in the secondary (casualised, part-time) labour market will probably utilise this increase in the part-time labour supply to exploit the implicit UBI subsidy to further reduce wages, thus implying a redistribution of income from labour to capital. Even basic income advocates have acknowledged this probability.18 Thus, the introduction of a basic income guarantee is likely to exacerbate the trend away from full-time work towards low-wage, low-productivity part-time jobs, deskilling and, ultimately, falling average material living standards. Thus, even a substantial basic income guarantee, if introduced in a ‘fiscally neutral’ environment, would have a relatively small impact on aggregate spending and employment; high levels of labour underutilisation would be likely to persist. This kind of basic income proposal thus has little to offer those that, if given a chance, would choose to work rather than take the basic income. Mitchell and Watts conclude that ‘[o]verall this strategy does not enhance the rights of the most disadvantaged, nor does it provide work for those who desire it’.19
It was recently reported that the CEOs of various big IT companies are beginning to fear ‘a backlash when it comes to jobs’ as they introduce new job-destroying technologies.20 We are back to the ‘robots are coming to take all your jobs’ story, which has become one of the distractions that conservatives and progressives alike have fallen prey to, further distancing the issue of unemployment from government responsibility. As a result, many CEOs are now calling for a UBI because ‘tech firms could be in the “firing line”’. It is argued that this ‘will provide a bare minimum of living. Instead, workers will still want to get a higher standard of living by working.’21 The logic is hard to follow, however: if the UBI is justified because robots are taking all the jobs, where will the supplemental labour income come from to ensure that the UBI is not a poverty confinement? The motivation of CEOs is clearly to maintain social control – to offer people enough food and other things to keep them alive so they won’t rebel and challenge the biases in income distribution that have led to dramatically increased shares taken by capital and high-income cohorts.
Many of these problems, of course, could be overcome if the basic income were introduced within a functional finance paradigm – that is, if it were accompanied by a net government stimulus (deficit), in the knowledge that a currency-issuing government faces no revenue or solvency constraints when making its spending decisions. In this scenario, persistent unemployment could be avoided if the income guarantee was sufficient to motivate the unemployed to drop out of the labour force and take the income guarantee. But this implies a bizarre concept of full employment: mass unemployment would be solved by engineering an artificial withdrawal of the available labour supply, so that some of the unemployed are reclassified as not in the labour force and in receipt of a basic income allocation instead. Moreover, a basic income of this kind – sufficiently generous and funded by an increasing fiscal deficit – would raise serious issues from an inflationary standpoint. In a modern monetary economy, the inflation risk is related to the relationship between nominal spending growth (demand) and the capacity of the economy to respond to that demand with an increased supply of real goods and services. Within a functional finance paradigm, the government uses its fiscal capacity to increase overall spending in the economy to avoid mass unemployment. The target is output and employment growth rather than any particular fiscal outcome (in monetary terms). We have seen that mass unemployment arises when the fiscal deficit is inadequate to offset the desire of the non-government sector to save overall. Following that logic, if there is mass unemployment, then the solution is for the government to expand its net fiscal impact (spending over taxation) and allow the deficit to rise.
To reduce unemployment, the introduction of a basic income would therefore require a net government stimulus (that is, an increasing fiscal deficit). A deficit-funded UBI of this kind, however, would lack any in-built price stabilisation mechanisms (inflation anchor) and would thus lead to inflationary pressures. Let us see why. Workers who draw income from the production cycle have also added output (via their labour) to that cycle. For a given level of productivity (output per unit of input), the more people that have access to income without adding input (that is, are supported in real terms by the production of others), the greater the inflation risk. To put it differently, the greater the share of income generated in any period that is received by people who offer nothing in return, the higher the inflation risk. Under these circumstances, the more people pursue the ‘freedom’ of non-work under the basic income guarantee, the worse the situation becomes, because this means that the supply side of the economy keeps shrinking while the demand side remains stable (depending on the level of the stipend). The real resource space available for the stimulus is thus reduced. Moreover, the excess demand for goods would be increasingly met via imports, with consequential effects for the exchange rate and the domestic price level, which would accentuate the inflationary pressure. To minimise the inflation risk, the basic income stipend would have to be relatively small, which, in turn, would mean that the scheme would be unable to offer a dignified and/or independent life to the recipients. They would be freed from work but not poverty. These economic outcomes are consistent with indiscriminate (generalised) Keynesian policy expansions of the past. The conclusion is that the introduction of a basic income policy is likely to be highly problematic with respect to its capacity to deliver both sustained full employment and price stability.
The job guarantee, by way of contrast, is designed to provide an explicit inflation anchor and allows the government to continuously maintain full employment and provide a decent wage to those whom, from time to time, will be in the job guarantee pool. It does not rely on poverty wages or unemployment to maintain price stability. That alone is a fundamental advantage of the job guarantee over the basic income guarantee – it is sustainable.
The initial observation is that the job guarantee (JG) is designed on the basis of an explicit recognition that a monetarily sovereign government is never revenue- or solvency-constrained because it is the monopoly issuer of the currency. Starting from this point conditions the narrative that can be developed to support the introduction of a JG. It frees its proponents from arcane debates about whether the government can ‘afford’ the scheme or not – a problem most basic income proposals suffer from. The JG is a simple concept with far-reaching consequences. It involves the government making an unconditional job offer to anyone who is willing to work at a socially acceptable minimum wage and who cannot find work elsewhere. It is based on the assumption that if the private sector is unable to create sufficient job opportunities then the public sector has to stand ready to provide the necessary employment. This creates a buffer stock of paid jobs that expands (declines) when private sector activity declines (expands).
To avoid disturbing the private sector wage structure, and to ensure that the job guarantee is consistent with stable inflation, the JG wage rate is set at the minimum-wage level, defined to ensure the worker is not socially excluded. The government thus purchases labour ‘off the bottom’ of the non-government wage distribution. Since the JG wage is open to everyone, it effectively becomes the national minimum wage. The minimum-wage level should be an expression of what any given society deems to be the lowest acceptable material standard of living. Similar considerations should determine the appropriate basic income stipend, although the capacity of the government to maintain such a stipend without inflation is limited at best, as we have seen. JG workers would thus enjoy stable incomes, and their increased spending would boost confidence throughout the economy and underpin a private-spending recovery. By maintaining a buffer stock of employment, the JG operates according to what economists term ‘a fixed price/floating quantity rule’. This means that the government’s unconditional job offer is at a fixed wage (the fixed-price rule) and the buffer stock of jobs fluctuates in accordance with the strength of non-government sector spending (a floating quantity). Given that the JG hires at a fixed price in exchange for hours of work and does not compete with private sector wages, employment redistributions between the private sector and the buffer stock can always be achieved to stabilise any wage inflation in the non-JG sector. So the fundamental difference in relation to inflation between the basic income proposals and the JG is that the former spends on a quantity rule (the stimulus competes with other market prices), while the latter spends on a price rule (spending is in the form of a fixed-price offer to idle resources with no market bid).
Once the scheme is in operation, the anti-inflation mechanisms are easy to understand. If there are inflationary pressures developing in the non-government sector as it reaches full capacity, the government would manipulate its fiscal and monetary policy settings to constrain non-government sector spending to prevent the economy from overheating. This would see labour being transferred from the inflating non-government sector to the ‘fixed wage’ JG sector and eventually this would resolve the inflationary pressures. Clearly, when unemployment is high this situation will not arise, since by definition this means that there is no non-government sector demand for idle resources. In general, there cannot be inflationary pressures arising from a policy that sees the government offering a fixed wage to any labour that is unwanted by other employers. By not competing with the non-government market for resources, the JG thus avoids the inflationary tendencies of traditional Keynesian pump-priming, which attempts to maintain full capacity utilisation by ‘hiring off the top’ – that is, by competing for resources at market prices and relying on so-called spending multipliers to generate the extra jobs necessary to achieve full employment. Of course, it is likely that without the threat of unemployment, private sector workers may have fewer incentives to moderate their wage demands, which may lead to wage–price pressures. But JG workers would retain higher skill levels than those who are forced to succumb to lengthy spells of unemployment. The JG workers would thus constitute a more credible threat to the current non-government sector employees than those who languish in the unemployment pool. When wage pressures mount, an employer would be more likely to exercise resistance if he/she could hire from the fixed-price JG pool. The only question facing the JG is whether there is enough real capacity in the economy – available resources and output space – for the extra government spending. The existence of idle workers in most countries is strong evidence that there is ample non-inflationary scope to spend. Further, the government knows when it has spent enough. Under the JG, the last person who seeks a job on any particular day defines how much government spending is required to ensure that there are enough jobs available.
While it is easy to characterise the JG as purely a public sector job-creation strategy designed to reduce income insecurity, it is important to appreciate that it is actually a macroeconomic policy framework designed to deliver full employment and price stability based on the principle of buffer stocks, where job creation and destruction is but one component. It is thus a macroeconomic stability framework rather than an ad hoc crisis response. The JG also provides the economy with a powerful ‘automatic stabiliser’ – a characteristic missing from the basic income guarantee concept. Government employment and spending automatically increases (decreases) as jobs are lost (gained) in the non-government sector. The JG thus fulfils an absorption function to minimise the employment and income losses currently associated with the flux in non-government sector spending. When non-government sector employment declines, public sector employment will automatically react and increase its payrolls. The nation always remains fully employed, with only the mix between non-government and public sector employment fluctuating as it responds to the spending decisions of the non-government sector. In short, the JG provides the government with a powerful inflation control mechanism, while avoiding the massive costs of unemployment. In this sense, it represents a minimum spending approach to full employment. Importantly, the JG does not replace conventional use of fiscal policy to achieve social and economic outcomes. The government should indeed supplement the JG wage with a wide range of social expenditures, including adequate levels of public education, health and childcare, etc. Further, as we will see, the provision of large-scale public infrastructure remains crucial; the introduction of a JG does not undermine the capacity of the government to pursue these projects.
What kind of jobs would/could the JG offer? First and foremost, it could provide jobs that are inclusive to the most disadvantaged. Gregg and Layard recognise that there is a ‘mass of low-tech maintenance which needs to be done on public housing, schools, hospitals and roads’.22 Extensive research has been done in a number of countries to identify suitable JG jobs.23 The jobs must be accessible to the least skilled workers, who typically bear the greatest burden of unemployment. The jobs should ideally not substitute existing government or private employment. Within those constraints, JG workers could still contribute in many socially useful activities, including urban renewal projects and other environmental and construction schemes (reforestation, sand dune stabilisation, river valley erosion control, etc.), personal assistance to pensioners and other community schemes. For example, creative artists could contribute to public education as peripatetic performers. As we will see further on, a crucial aspect of the JG lies precisely in the fact that it offers an opportunity for radically rethinking the very concept of work. Moreover, future labour market policy must consider the environmental risk factors associated with economic growth. Possible threshold effects and imprecise data covering the life-cycle characteristics of natural capital suggest that a risk-averse attitude is wise. Indiscriminate (Keynesian) expansion falls short in this regard because it does not address the requirements for risk aversion. It is not increased demand per se that is necessary, but increased demand in certain areas of activity. The JG would thus be ‘green’ because it would provide jobs in environmentally sustainable activities that are unlikely to be produced by traditional private sector firms.
A common critique of large-scale public sector job-creation programmes (such as the JG) is that they are inefficient – wasteful schemes that lead to the economy’s resources being utilised in suboptimal ways. This critique is based on a very narrow conception of efficiency – the type that dominates mainstream economics. However, there are a number of ways in which the concept of ‘efficiency’ can be understood, which in turn informs the way in which one evaluates the propositions that we are advancing. Thus, in the following section we will show why the mainstream private cost-and-benefit construction of what is and is not efficient is bereft of credibility in a progressive vision that evaluates things in terms of society rather than economy, and human well-being rather than private profit. In the following sections we will therefore present what we consider to be a progressive vision of efficiency.
According to the dominant neoliberal view, ‘people and nature exist primarily to serve the economy’.24 In the 1980s, as the neoliberal narrative gained supremacy, we began to live in economies rather than societies or communities. It was also a period during which unemployment persisted at high levels in most OECD countries. The two things are not unrelated. We have been indoctrinated to believe that government is a burden rather than being the essential facilitator for economic well-being. We support governments that deliberately constrain aggregate spending below the level necessary to maintain jobs for all, which in turn creates a class of unemployed who become dependent on increasingly pernicious welfare regimes. Income support for the unemployed used to be considered a right of citizenship and, typically, one of brief duration, as new jobs emerged with government fiscal support. In the neoliberal era, income support is vilified as skiving off the hard work of others. This narrative is reinforced on a daily basis by a virulent media, which heaps scorn on the victims of the jobs shortfall, as if the unemployed individuals were to blame for their own plight. This ridicule of the unemployed is not confined to the popular press. For example, at a November 2011 meeting of the US Federal Reserve Bank’s Open Market Committee, the discussion turned to whether the unemployment problem was one of excessive drug use and poor work habits. At one point, one committee member reported that ‘60 percent of [job] applicants failed to answer “0” to the question of how many days a week it’s acceptable to miss work’. At which point, the committee members burst into laughter.25
We have been dumbed down to eschew previous understandings – that systemic constraints in the form of the failure of the system to create enough jobs renders these individuals powerless to change their circumstances. We now deny a basic reality of macroeconomics: that if there are insufficient jobs being generated, someone will miss out. Instead today we lay the blame on the attitudinal deficiencies of those standing desperately in the jobless queues. We have been schooled to think in individual terms and ignore the collective. The demise of collective will in the public setting has been a principal casualty of the rise of neoliberalism. As Margaret Thatcher famously remarked: ‘There is no such thing as society.’26 Unfortunately, this mentality has also infested progressive movements and their political organisations.
In the mainstream vision, the economy is elevated to the level of a deity, whose purpose is somehow removed from the people, even though this deity recognises our endeavours and rewards us accordingly. We serve the economy: that is our purpose. This narrative engenders a particular concept of efficiency. Students learn by rote that a ‘freely competitive market’ will maximise efficiency because individuals determine how much they value particular goods and services through their desire to buy, and the prices firms offer for these goods and services are an indication of the cost of resources used in their production. The desire of consumers is to maximise their satisfaction from the goods and services they buy, while the desire of producers is to maximise their profits by minimising their costs while supplying what the consumers demand. By coming together, the two sides of the market (demand and supply) ensure that the available productive resources are allocated to production in such a way that the economy maximises the production of goods and services at the lowest cost. This is what mainstream economists consider to be a state of efficiency. It is based on the ‘costs’ that the private producers incur rather than the total costs of production (and so-called negative externalities, such as environmental pollution and resource depletion) and is focused on private profits and the satisfaction of those who have the resources available to facilitate purchases.
Within this framework, the plight of mass unemployment is ignored or redefined as a maximising outcome of free choices taken by rational individuals seeking to achieve the best outcomes for themselves and their families. Accordingly, mainstream economists claim that unemployment is largely a voluntary state reflecting the free choice of workers to trade off income for leisure (non-work). Rational individuals consider the benefits they gain from not working, which they construct as enjoying leisure against the costs arising from the loss of income. They are conceived as continually monitoring the wages on offer and adjusting their labour supply to maximise satisfaction. There is no hint that the economy may not offer sufficient jobs, which would render these choices, if they do indeed occur, redundant. Mainstream economists further claim that this individual choice is often distorted by the provision of income support payments by governments to the unemployed. They claim that if the government withdrew these benefits then it would alter the calculation individuals make when choosing to remain unemployed – that is, leisure would become more ‘expensive’ relative to work once the subsidies against job search (the income support) are withdrawn. Moreover, complex models are elaborated to demonstrate that double-digit unemployment levels, such as those registered in many eurozone countries, reflect the economy’s ‘natural rate of unemployment’ – that is, the level of unemployment above which inflation would inevitably start to rise.
Further, economists measure success in terms of GDP, which measures the total flow of spending on goods and services over any given period valued at market prices. We continually use GDP as if it measures something that really matters. It is a vastly imperfect measure of societal well-being. According to this measure, an economy can achieve high rates of GDP growth by producing large quantities of military equipment, while polluting its natural environment, subjecting its workers to gross violations of human rights and enduring mass unemployment, high levels of income and wealth inequality, and elevated levels of poverty. Another economy can achieve low rates of GDP growth, but provide high levels of first-class health care, education and quality of life, with reduced negative impacts on the natural environment, an advanced appreciation of human rights, reductions in income and wealth inequality, and full employment. The mainstream vision tells us that the former economy is the most successful. This narrative is so powerful that progressive politicians and commentators have become seduced into offering ‘fairer’ alternatives to the mainstream solutions rather than challenging mainstream assumptions root-and-branch. For example, progressives timidly advocate more gradual fiscal austerity – the so-called ‘austerity lite’ approach – when they should be comprehensively rejecting it and advocating larger deficits to solve the massive rates of labour underutilisation that burden most economies.
So what would a progressive concept of efficiency look like? Just like mainstream theories, it would aim to get as much output as possible from the inputs mustered in the economy. No one wants to see human and natural resources go to waste – not even mainstream economists, in theory at least. The question is: what do we mean by ‘as much output as possible’? And what are the inputs that we are acknowledging? This is what sets a progressive vision of efficiency a world apart from the narrow mainstream concept of efficiency. By placing society rather than private firms at the centre of our framework, we gain a broader understanding of the costs and benefits, which then conditions how we assess the efficiency of an activity. A progressive vision of the relationship between the people, the natural environment and the economy leads to a solidaristic and collective approach to problems, which has a deep tradition in Western societies. It recognises that an economic system can impose constraints on individuals that render them powerless. If there are not enough jobs to go around then focusing on the ascriptive characteristics of the unemployed individuals totally misses the point. Above all, it shifts our attention back on to society rather than narrowing the focus to ‘the economy’ and the corporations operating within it. Corporations are just one part of the economy, which is one part of the human settlement. Once we work within this vision, our notion of efficiency becomes markedly different from that espoused by the neoliberal vision. Within this construction of reality, the economy is just one part of society and it is seen as being our construction, with people organically embedded and nurtured by the natural environment. As Anat Shenker-Osorio notes, a progressive vision of efficiency acknowledges that:
we, in close connection with and reliance upon our natural environment, are what really matters. ... The economy should be working on our behalf. Judgments about whether a suggested policy is positive or not should be considered in light of how that policy will promote our well-being, not how much it will increase the size of the economy.27
In this view, the economy is seen as a ‘constructed object’ – that is, a product of our own endeavours and policy interventions, which should be appraised in terms of how functional they are in relation to our broad goals. Those broad goals are expressed in societal terms rather than in narrow ‘economic’ terms. In the neoliberal vision, we are schooled to believe that what is good for the corporate, profit-seeking sector is good for us. Within the progressive vision, society’s goals are articulated in terms of advancing public well-being and maximising the potential for all citizens within the limits of environmental sustainability. The focus shifts to one of placing our human goals at the centre of our thinking about the economy, while at the same time recognising that we are embedded and dependent on the natural environment. In this narrative, people create the economy. There is nothing natural about it.
Concepts such as the ‘natural rate of unemployment’, which suggest that governments should not interfere with the market when there is mass unemployment and leave it to its own self-equilibrating forces to reach its natural state, are erroneous. Governments can always choose and sustain a particular unemployment rate. Within this framework, the role of the government is that of doing things that we cannot easily do ourselves; furthermore, we understand that the economy will only serve our common purposes if it is subject to active oversight and control. In the progressive vision, collective will is important because it provides the political justification for more equally sharing the costs and benefits of economic activity. Progressives have historically argued that the government has an obligation to create work if the private market fails to create enough employment. Accordingly, collective will means that our government is empowered to use net spending (deficits) to ensure that there are enough jobs available for all those who want to work. The government is therefore not a moral arbiter but a functional entity serving our needs.
How does the progressive vision expand our understanding of efficiency? Once society becomes the objective and we recognise that people and the natural environment are the major components of attention, with the economy being a vehicle to advance societal objectives rather than maximising the profits of the private sector, then our conceptualisation of what is efficient and what is not changes dramatically. This is especially the case once we understand that our national government is the agent of the people and has the fiscal and legislative capacity (as the currency issuer) to ensure resources are allocated and used to advance general well-being irrespective of what the corporate or foreign sector might do. It is clearly ludicrous to conclude that a society is operating efficiently when there are elevated levels of unemployment – people wanting to work who cannot find work – and large swathes of a nation’s youth are denied access to employment, training or adequate educational opportunities. It is inconceivable that we would consider a nation successful if income and wealth inequality is increasing, poverty rates are rising and basic public services are degraded. In each of these cases, the neoliberal definition of efficiency could be satisfied, despite the overall well-being of citizens being compromised by the behaviour of the capitalist sector and the policy responses of government.
The tolerance of high levels of unemployment, a relatively recent phenomenon, exemplifies the policy dominance of neoliberal ideology. The empirical evidence clearly shows that most advanced economies have not provided enough jobs since the mid-1970s, as deflationary policies have been foisted upon the working classes. While these have been effective in bringing inflation down, they have also imposed – even from a mainstream standpoint – huge unemployment costs on the economy, and particularly on certain classes and demographic groups that are rarely computed or discussed in official circles. It is well documented that sustained unemployment imposes significant economic, personal and social costs that include: loss of current output; social exclusion and the loss of freedom; skill loss; psychological harm, including increased suicide rates; ill health and reduced life expectancy; loss of motivation; the undermining of human relations and family life; racial and gender inequality; and loss of social values and responsibility.
Many of these ‘costs’ are difficult to quantify but clearly are substantial given qualitative evidence. Further, there is evidence that the ‘quality’ of the unemployed buffer stock (defined in terms of its capacity to discipline price pressures) deteriorates over time. Just as soggy, rotting wool is useless in a wool price stabilisation scheme, the quality of labour resources can deteriorate if unemployed for lengthy periods. The more employable are the unemployed, the greater is the price level discipline of the unemployment buffer stock. There is overwhelming evidence that the skill losses and related circumstances associated with long-term unemployment undermine the quality of the jobless buffer stock and require higher and higher levels of unemployment to be created to maintain the same downward pressure of prices. A JG, on the other hand, if well managed, would allow workers to maintain a continuous involvement in paid work, which would lead to improved physical and mental health, more stable labour market behaviour, reduced burdens on the criminal justice system, more coherent family histories and useful output. A progressive concept of efficiency thus leads to the conclusion that unemployment is incomparably more inefficient than any public sector job-section programme could ever be. In the simplest possible terms, an efficient economy is one where there is full employment – where everyone that wants a job can find one.
Another criticism that is often levelled at the JG – particularly by progressive supporters of basic income – is that it aims to ‘enslave’ workers in pointless jobs, in contrast to basic income, which aims to ‘liberate’ human beings from the ‘tyranny’ of wage labour. Needless to say, we strongly disagree. Notwithstanding the theoretical and technical flaws of basic income proposals, these essentially view individuals as mere consumption units. However, human beings are much more than that. There is an extensive research literature that stresses the role of work in advancing the well-being of individuals and their families. David L. Blustein, one of the world’s foremost experts on the importance of work for psychological health, concluded that the empirical evidence shows that ‘working is important, and indeed can be essential, for psychological health’ and ‘can promote connection to the broader social and economic world, enhance well-being, and provide a means for individual satisfaction and accomplishment’.28 The literature is replete with analyses where ‘individuals who lose their jobs often struggle with mental health problems (such as depression, substance abuse, and anxiety)’.29 Blustein documents the findings of a plethora of research studies that have focused on the importance of work for psychological health. From an anthropological perspective, Blustein noted that ‘working is a central ingredient in the development and sustenance of psychological health. The nature of working is inextricably linked to our evolutionary past, as our survival was (and still is) dependent on our ability to locate food, find shelter, and develop a community for mutual support and nurturing.’30
In short, working is, in many ways, intrinsic to human existence. Proponents of employment guarantees share the conclusion of Bluestein and other researchers that for many people ‘working is the “playing field” of their lives, where their interactions with others and with existing social mores are most pronounced, with opportunities for satisfaction and even joy, as well as major challenges and, at times, considerable psychological and physical pain’.31
In other words, work plays a much more significant role in society and in the lives of individuals than merely providing an income. That said, a progressive vision clearly cannot ignore the historical context in which a discussion of the benefits of work is being conducted. Obviously, in a broad sense, the current mode of production, where workers are divorced from ownership of the means of production and have to subject themselves to the whims of capital in order to gain a living, is oppressive and coercive. In identifying the importance of work for psychological well-being, we are not oblivious to this oppressive aspect. However, it is also clear that people operate at multiple levels simultaneously. In this regard, Blustein argues that ‘working is the social role in which people generally interact with the broader political, economic, and social contexts that frame their lives, working often becomes the nexus point for social oppression as well as a source of rewards, resilience, and relationships’.32
In this sense, we recognise that work as an organised activity is an essential aspect of human well-being, notwithstanding the dominant socio-economic context. We therefore need to distinguish the specific form that work has taken under capitalism – where it is certainly oppressive and the anathema of liberation – from the intrinsic meaning of work for people. People will still seek ways to ‘work’ and will have to continue working even if we liberate ourselves from the yoke of capitalism. In this context, the case for the JG leaves two outstanding and important issues to be discussed: is a compulsory JG overly coercive, and does the UBI model introduce dynamics that can take us beyond the oppressive reliance on wage labour for income security? With regard to the first question, we should start by noting that a society can choose to have whatever transfer system it sees fit (including the provision of unemployment benefits) running parallel with the introduction of a JG. The latter does not demand a total abandonment of the existing income support schemes. But a strong case can be made that individuals in any coherent society have an obligation to give back to the community that is guaranteeing them a job and the broad benefits that accompany that guarantee. Most societies are not yet ready to create a class of individuals of working age and amenable health to draw a living income without directly contributing something back to society, irrespective of the macroeconomic problems that this would raise, which we discussed above. This premise conditions the way we might think about coercion within the context of a JG.
So is a compulsory JG overly coercive? One of the essential criteria for a sustainable full employment policy is that it not violate the current social attitudes towards work and non-work. Robert Van der Veen and Philippe Van Parijs argued that the introduction of a universal income guarantee can provide a ‘capitalist road to communism’, which relates to the need to move beyond the oppression of the capitalist workplace and ‘to move toward distribution according to needs’.33 However, they qualify that notion by noting that there is a ‘constraint on the maximization of the relative share of society’s total product distributed according to needs’ and that ‘some economies are unable to meet this constraint’,34 which means that the basic income guarantee is not a general path to a better future for all. Moreover, their interpretation of the communist conception of freedom is questionable. In 1851, the French socialist politician and historian Louis Blanc laid out a scheme whereby cooperative workshops under workers’ control would be supported by the state to provide guaranteed employment for the impoverished citizens in French cities.35 He wrote that, when assessing the practicality of such a scheme, we need to consider what the fundamental principles of a future society might be. As part of his view of the role of the state and the responsibilities of individuals, he noted that a fundamental principle should be the following: ‘From each according to his/her abilities, to each according to their needs.’36
Marx also incorporated that fundamental principle in Part I of his Critique of the Gotha Program.37 Basic income proposals completely ignore the ‘each according to one’s ability’ part. We don’t consider this to be a sound basis for a healthy society based on reciprocity. Thus, the basic income ‘capitalist road to communism’, by abandoning the principle that individuals who are able to work should do so for the benefit of all, would appear to be a very partial interpretation of the communist conception of freedom.
Furthermore, there has been considerable research done by social scientists that suggests that people still consider work to be a central aspect of life and hold deep-seated views about deservingness and responsibility. These views translate into very firm attitudes about mutual obligation (reciprocity) and how much support should be provided to the unemployed. While these attitudes are at times expressed in unpleasant ways, and are exploited by the right to divide and conquer the working class, the fact remains that they are deeply ingrained in our societies and will take time to change. More importantly, however, most unemployed workers indicate in surveys that they would prefer to work rather than be provided with income support. In other words, the poor and the unemployed want to work. In this regard, Amartya Sen has shown that what matters is not just freedom but substantive freedom.38 Thus, policy choices should first and foremost take into account what individuals themselves want and value, and should then provide them with the means to realise their aspirations. In this regard, the JG is a source of freedom, capitalist property relations notwithstanding.
Young people must be encouraged to develop skills and engage in paid work rather than be the passive recipients of social security benefits. The failure to ensure that there is enough paid work excludes the unemployed from fully participating in society’s economic, social and cultural life, which has highly detrimental consequences. There are substantial social benefits that arise from the provision of stable work with decent wages and health and retirement benefits. Moreover, by creating circumstances in which an individual’s opportunity to engage in paid employment and earn a living wage is guaranteed, the JG dampens any resentment that may be felt towards that proportion of unemployed people who are currently perceived as undeserving of state support and assistance. The JG approach thus overrides the free-rider option that is available under an unconditional basic income. In a society which accords value to the notion of reciprocity, the guaranteed work model ensures that no social group or individual is solely viewed as a consumption unit – to be fed and clothed by the state but ignored in terms of his/her social needs for work and human interaction within the workplace.
Of course, there will always be people who do not value work in any intrinsic sense, and if confronted with the choice between the JG and a basic income guarantee would always choose the latter option. A blanket JG is thus coercive in its impact on this particular group. Basic income advocates would likely suggest ‘merely’ making the JG voluntary within the context of a UBI guarantee. To understand this criticism of the JG we should note that the underlying unit of analysis in the basic income literature is an individual who appears to resemble McGregor’s theory X person. Theory X people are found in mainstream microeconomics textbooks and are constructed as self-centred, rational maximisers. Lester Thurow noted that this neoliberal conception of the X person views man as ‘basically a grasshopper with a limited, short-time horizon who, liking leisure must be forced to work and save enticed by rewards much greater than those he gets from leisure’.39 This is a staunchly libertarian conception of human freedom, which requires an individual to have free choice; in this regard, basic income proponents see the decoupling of income from work as an essential step towards increasing the choice and freedom of individuals. However, for the state to permit individualism at this level – to support individuals in their consumption but not require any reciprocation – severely limits the possibilities for social change and community engagement. Progressives should be at the forefront of collective engagement rather than advocating policies that smack of individualism.
Of course, the provision of a basic income guarantee does not preclude community action. Individuals may adopt a whole range of campaigns and activist agendas while being supported on the barest income guarantee. However, we cannot help but note that a characteristic of the neoliberal era has been the elevation of ‘volunteerism’ to some virtuous heights. Morality runs deep through neoliberal narratives when it works to reinforce the redistribution of income towards the top. The reality is that many functions that are now considered to be the ambit of volunteers, despite their value to society, were previously, in many cases, paid jobs. So if the basic income recipients are engaged in these activities why wouldn’t they want to be paid for their work? Basic income advocates see their approach as a way of rejecting the capitalist ‘gainful worker’ approach, by breaking the nexus between surplus value creation and income at the individual level. Now, we fully agree that the traditional moral views about the virtues of work – which are exploited by the capitalist class – need to be recast. However, we believe that a non-capitalist system of work and income generation is needed before the yoke of the work ethic and the stigmatisation of non-work can be fully expunged.
In this sense, the JG offers a great opportunity for radically, albeit gradually, recasting what is considered to be meaningful work. With private sector job opportunities destined to decline due to technological change, a central question becomes how can societies broaden the definition of productive work and reduce the stigma of not being engaged in traditional work? Clearly, there is a need to embrace a broader concept of work in the first phase of the decoupling of work from income. Basic income proposals fall short in this respect, since the stigma of being unemployed does not disappear when one is not working and is receiving an income guarantee. Current social norms are unlikely to digest this new culture of non-work very easily. The resentment currently directed towards the unemployed will only be transferred towards Van Parijs’ ‘surfers of Malibu’. By way of contrast, the JG would provide a means to establish a new employment paradigm where community development and other non-traditional jobs would become valued. Over time, and within this new employment paradigm, public debate and education can help broaden the concept of valuable work until activities which we might construe today as being ‘leisure’ would become considered to be ‘gainful employment’. Struggling musicians, artists, surfers, thespians and the like could all be employed within the JG framework. In return for income security, the surfer might be required to conduct water safety awareness lessons for school children; and musicians might be required to rehearse some days a week in school halls and thus impart knowledge about band dynamics and appreciation of music to young schoolchildren. Thinking even more laterally, community activism itself could become a JG job. For example, organising and managing a community garden to provide food for the poor could be considered a paid job. We would see more of this sort of beneficial activity if it were rewarded in this way.
In other words, through the JG, society can begin to redefine the concept of productive work well beyond the realms of ‘gainful work’, which in the current parlance specifically relates to activities that generate private profits for firms. Over time, productivity would become more of a social, shared, public concept, limited only by our imagination. In this way, the JG becomes an evolutionary force that provides income security to those who want it, but also allows us to broaden the very concept of work. Social attitudes take time to evolve; the social fabric must be rebuilt over time. The change in the mode of production through evolutionary means will not happen overnight; concepts of community wealth and civic responsibility that have been eroded over time need to be restored. In the UBI approach, the intrinsic social and capacity-building role of participating in paid work is ignored and hence undervalued. It is sometimes said that beyond all the benefits in terms of self-esteem, social inclusion, confidence building, skill augmentation and the like, a priceless benefit of creating full employment through job creation is that children see at least one parent going to work each morning. In other words, it creates an intergenerational stimulus that the basic income approach can never attain. Ultimately, the JG provides a strong evolutionary dynamic in terms of establishing a broader historical transition away from the unemployment (and income insecurity) that is intrinsic to the capitalist mode of production. It provides a short-run palliative and a longer-term force for historical change. The basic income guarantee is found lacking in this regard on all counts.
There is a final issue that remains to be addressed. As we have seen, government can, through the use of fiscal policy and particularly through the use of the JG, achieve and maintain full employment without major problems to the economy. However, as Kalecki insightfully noted in the 1940s and as the crisis of Keynesianism in the 1970s – examined in Chapter 2 – demonstrated, ‘although the achievement of full employment is essentially an economic matter, its maintenance becomes a political one’.40 That is because full employment tilts the balance of power in favour of the working classes and the masses more generally. It emboldens them to challenge the institutions of capitalist power, not only within the workplace but also, and more importantly, at the institutional level. This is what happened in the 1970s, as an increasingly militant working class linked up with other social movements to challenge the institutional structure of capitalist power and demand a radical democratisation of society. In other words, full employment represents a threat to the interests of the capitalist class, which are likely to respond to it by using their power – within the workplace and at the political level – to bring the working class under control once again.
One of the most powerful weapons at the disposal of the capitalist class, in this regard, is their control over investment. Given that, in a capitalist economy, investment is a fundamental prerequisite for growth and employment, by choosing not to invest – in what is known as a capital strike – capitalists can bring great pressure to bear on governments. From the 1970s onwards, capitalists made widespread use of this weapon to get governments to abandon their commitment to full employment. For Kalecki – but a similar opinion was expressed by a number of other thinkers, from Keynes to Minsky – the key to solving the underlying social and political tensions resulting from the maintenance of full employment in a capitalist economy lies in a degree of state control over investment (what Keynes called ‘a somewhat comprehensive socialisation of investment’), which would severely reduce the political and economic power wielded by the capitalist class and consequently its ability to derail a progressive political platform. In the 1970s and 1980s, as we saw with regard to the experience of the socialist governments of Britain and France, the left proved unwilling to go this way. This left it no other choice but to ‘manage the capitalist crisis on behalf of capital’.41 Any progressive government that wants to avoid taking the same ignominious path must thus be ready to target investment, not simply employment. This is what we will address in Chapter 10.