The central argument of this book is that the foundations for sustainable prosperity lie in an approach to economic management based on modern monetary theory and a job guarantee. This approach builds on the work of Keynes, Kalecki, Minsky, Davidson, Godley and other Post- Keynesian economists—as well as research by behavioral economists including Simon, Kahneman and Loewenstein—to explore the role that a permanent, equitable job guarantee could play in building an inclusive, participatory and just society. Orthodox (neoclassical) economics, in its various forms, has failed to deliver sustainable prosperity. An important reason for this failure is its lack of realistic foundations. It misrepresents both human nature and economic institutions, and its use as a frame for the development and assessment of economic policy proposals has had disastrous consequences for social inclusion and the quality of life of millions of people. This book discusses an alternative, more realistic and more useful set of economic foundations, which could deliver the opportunity of a decent quality of life with dignity to all.
Mentions John Maynard Keynes
Kalecki is really considering a fully employed private sector that is prone to inflation rather than a mixed private-Job Guarantee economy. The Job Guarantee creates loose full employment rather than tight full employment because the buffer stock wage is fixed (growing with national productivity). The government never competes against the market for resources in demand when it offers an unconditional job to any unemployed workers under a Job Guarantee. By definition, any worker who takes a Job Guarantee job has zero bid in the private market (that is, no private firm is prepared to pay for their labour at the prevailing wages and prices).
The issue comes down to whether the Job Guarantee pool is a greater or lesser threat to those in employment than the unemployed when wage bargaining is underway. This is particularly relevant when we consider the significance of the long-term unemployed in total unemployment. It can be argued that the long-term unemployed exert very little downward pressure on wages growth because they are not a credible substitute.
The Job Guarantee workers, however, do comprise a credible threat to the current private sector employees for several reasons: […]
We already have the financial wherewithal needed to afford whatever is technologically possible. We do not need to go hat-in-hand to rich folks to get them to pay for it. We do not have to beggar our grandkids to pay for it. We do not have to borrow from China to pay for it. We do not have to get the Fed to “print money” to pay for it. All we need to do is to remove the self-imposed constraints, the myths, and the misplaced morality; then budget for it, approve the budget, and spend. No new spending process is required. Follow the normal procedures that the Fed and Treasury have developed. That is how you pay for it.
As the great J. Fagg Foster (1981) said, “Whatever is technologically possible is financially feasible.” There is really no other reason to have a financial system. If you know how to build houses but your financial system cannot find a way to make them affordable, then you must replace that system with one that will.
It is possible that we will need to constrain domestic consumption in order to release resources for the GND effort in a noninflationary manner. The problem is not that we cannot financially afford the GND—government can always bid resources away from private use by paying higher prices—but spending on the GND will generate private income that can support higher bids in competition with the government for scarce resources. This is the real reason that tax hikes might be desirable: to reduce private income and thereby remove competition for resources.