“The beauty of public employment schemes”

More great blogging from Bill Mitchell today over at Billy blog. Bill somehow manages to produce 2,000+ words of daily economic analysis, and I often reblog parts of his posts for those without the time to read the whole thing. Today’s blog discusses some long-term economic projections published by the OECD. He offers an alternative to the implied future of continued austerity suggested by the OECD. Hidden behind the innocuous title “MMT is not conservative”, here is Bill on public employment schemes, which is a good antidote to today’s politicians who think governments “don’t create jobs”:

“The beauty of public employment schemes is that they can be evaluated on totally different criteria than the decision by a private employer to take on an extra worker.

There will be a massive number of jobs in areas of environmental and personal care services over the next 50 years as the climate and land-use damage from capitalism takes its toll and the population ages. There is significant scope to offer well-paid and secure employment to those being rejected by the private sector as robots take over assembly line and other work.

The OECD conception of growth is one driven by profit. My conception of growth is unrelated to that. If the population increases, then economies need to grow to provide income earning opportunities for all. But growth via public service oriented employment leaves a totally different footprint than that driven by private market incentives.

That is what I tell green-followers who demand no growth. There has be growth, the challenge for progressives is to channel it into green-consistent activities. The government sector has to lead the way in that regard and use its currency-issuing monopoly to mobilise productive resources that the private sector chooses to leave behind (lower skilled labour etc).

There is massive scope to redefine what we mean by productive work – artists, musicians etc – can become public servants on secure pay, which would transform the green-quotient of the real GDP growth rate.

Jazz and reggae concerts and art displays and circuses (without animals) are less environmentally damaging than smokestacks! But the dollars spent on them woud deliver the same growth rates as a dollar of coal exported.

Inequality can also be reversed if governments use their fiscal capacities to advantage and ensure that all workers have opportunities to earn decent incomes. Banning most of the financial speculation will also help.

This also ties in with infrastructure. The trend to privatisation and public-private partnerships has undermined the quality and scope of major infrastructure in the advanced world.

Governments should take back control of that development and use major infrastructure projects as vehicles for employment, wages growth, and altering the nature of urban centres. More public transport, better energy systems, better communication systems, etc can be spawned through public sector leadership.

One of the big claims that the privatisation lobby made was that private firms faced ‘unfair’ competition from public enterprises. I always found that ridiculous.

Using our real resources in the best way possible at the lowest cost is the aim of any economy. Waste is typically bad. So if a public firm can access funds cheaply relative to a risky private firm but produce something people want then that is to be applauded. Capitalists are always looking for subsidies as long as they only go to them! Leaving the market free to them is a form of public subsidy.”

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George Osborne’s false choice between spending on social security and spending on infrastructure

From the Telegraph:

“Britain’s welfare budget should be used to fund new transport links in the north which will bring a “real economic return” rather than “trapping people in poverty”, the Chancellor has said.”

The article goes on to quote Osborne as saying:

“I think the real choice in our country is actually spending money on this big economic infrastructure, trans-pennine rail links, Crossrail 2 in London and the like, and spending money on, for example, welfare payments which are not generating a real economic return and at the same time are trapping people in poverty.”

This creates the very strong impression that Osborne really wants to ramp up infrastructure spending, but is being prevented from doing so by people “trapped in poverty”. I’m not entirely sure what the ‘real choice’ means in policy terms, but it’s a completely false choice.

The social security bill is not preventing the Chancellor from increasing spending on roads and rail, if that’s what he wants to do. If there are enough skilled workers, spare land and building materials available, then we can afford to do it. If there aren’t, then cutting the social security budget further is not going to make much of a difference.

Osborne seems to misunderstand what social security is for. It functions  to prevent individuals from falling into penury, but it also has a macroeconomic function, in that it dampens economic shocks by stopping people’s incomes falling below a certain point meaning as people lose their jobs, they can still afford to buy things – sales which other people’s jobs rely on.

The flipside of this is that when an economy is recovering from a recession, the social security bill naturally contracts, as people find jobs and go back to work. Increasing spend on infrastructure will help aid this contraction further by creating additional jobs.

So far from needing to cut social security spending to be able to afford extra spending on infrastructure, the extra spending itself would actually contribute towards Osborne’s stated aim of reducing the social security bill.

Of course what actually traps people in poverty is low pay, which again could be partially addressed by creating decent paid construction and engineering jobs through – you’ve guessed it – additional infrastructure . Of course, this type of spending is not a solution to all problems. To really start to tackle low pay, the government should get serious about job creation and remember that governments actually can and do create jobs. A full job guarantee would be a more complete answer.