New Economy Journal

UBI versus the Job Guarantee: The New Political Divide?

Volume 1, Issue 7

November 3, 2019

By - Jane R. Goodall

Piece length: 2,951 words

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[1] The future in today
[2] UBI and the Jobs Guarantee: Wherefrom and whoto
[3] The commons

Suppose, in some parallel universe, we the people were faced with an electoral choice between two major parties: one committed to the introduction of an unconditional basic income, and the other to a nationwide job guarantee program. If this looks like a quantum leap from the cognitive world we have inhabited through four decades of neoliberal orthodoxy, we could draw the thought experiment into closer range. Suppose this not a parallel universe but our own world in the near future, about five years from now.

[1] The future in today

In this future, five years from now, the neoliberal endgame has played itself out in an orgy of austerity and corruption, unravelling at first slowly, then at a crippling pace, bringing us conditions not seen since the Great Depression of the 1930s. A year ago, the last of the ancient media oligarchs died, his empire on the verge of collapse. On social media, confusion reigns and factions proliferate. The leaders of Extinction Rebellion, recently graduated, have taken control of policy making in the realigned political parties.

In the United States, where the Republican party fell apart during Trump’s second term, Alexandria Ocasio-Cortez is running for President as an Independent, against Democrat nominee Andrew Yang. She is for the Green New Deal, with a Federal Job Guarantee (FJG); he is for Unconditional Basic Income (UBI), or Freedom Dividend. In Britain, Prime Minister Boris Johnson introduced both, but the consequences led to a wipe-out for the Tories in 2024. Under Johnson, what remained of the welfare state was replaced with a UBI that started at £25 GBP a week then, after a series of annual reductions, fell to £10 – enough to cover the cost of a two kilogram bag of porridge and enough electricity to boil a kettle once a day, if you are so fortunate as to have somewhere to plug it in. Those still able to work were assigned to mandatory employment programs with a plummeting minimum wage and no protections or benefits. This worst-case scenario has provided ammunition for both sides of the debate in Australia and the US: the job guarantee is a short-cut to becoming wage slaves of the state, argues one party; UBI is a neoliberal pretext for dismantling all forms of welfare, claims the other.

Now, to return to the present, where the elements of this scenario are all at least potentially in place. Neither option has yet made it into the mainstream of political debate in Australia, where the last election campaign erupted into a war over minor adjustments to the tax system. When it comes to transformative economics, we have some catching up to do.

Basic income is emerging as a central factor in the Democrat Debates in America, with Bernie Sanders promoting FJG as part of the Green New Deal, and outsider candidate Andrew Yang making significant headway with an agenda based on the Freedom Dividend. Both have advisers who are pre-eminent in the field. Since 2015, Sanders has been consulting with Pavlina Tchernova of Bard College and the Levy Economics Institute. Tchernova, with her lucid grasp of relevant economic modelling, strong social commitments and warm manner is America’s most effective advocate for the FJG. Yang is backed by Scott Santens, an independent, self-funded advocate who has dedicated himself full-time to campaigning for UBI. Santens anchors social media platforms and appears at conventions and debates around the world, specializing in providing substantive arguments and information in response to challenges about the viability of UBI.

The British Labour Party under Jeremy Corbyn committed to the Green New Deal at its Conference in September, where it was backed by delegates from all the major unions. It was, in the words of Duncan Wallace, “by far the most radical set of policies put forward by a party on the cusp of government in the Anglo world in my lifetime – perhaps even since WWII.” The job guarantee was not formally included in the motions passed at the conference, but it is being considered as part of a raft of policies to transform working conditions. The hard-core work of policy building in this area is managed by Shadow Treasurer John McDonnell, whose thinking on the job guarantee is influenced by the Skildelsky Report, issued by the Progressive Economy Forum. Its author Robert Skidelsky has been studying the FJG literature from the United States, and the report draws on economic modelling by Tchernova and a range of other leading American economists. Corbyn and McDonnell have also shown strong leanings towards UBI, commissioning a report from Guy Standing, co-founder of the Basic Income Earth Network (BIEN).

So we now have contenders for political leadership in both the US and the UK who are promoting these alternative models for economic transformation. But while the politicians do the work of selling the agenda through effective rhetorical strategies, we need to go to the arguments of their advisers - Tchernova and Skidelsky on the one side, and Santens and Standing on the other - in order to comprehend the depths of field in the thinking behind the policies. There are grounds for some concern about the ways in which political rivalry has led them to misrepresent each other.

[2] UBI and the Jobs Guarantee: Wherefrom and whoto

Tchernova credits Australian Economist Bill Mitchell with providing some valuable economic modelling of the job guarantee as it might work in a transition from a contemporary modern market-driven economy. Mitchell runs a blog, where he participates in unfolding debates in a freewheeling, gladiatorial style. He has come under withering attack for his unorthodox views, and much of his writing is concerned with refuting arguments that are, or are perceived to be, adversarial to his own. He tends to caricature the views of his opponents just as starkly as he claims they have caricatured him, but the blog makes good reading and at a time when parliamentary politics is ever more blinkered and reductive, it engages in the kinds of controversies that enlarge public thinking.

As Mitchell stresses in a 2019 paper the job guarantee plays an essential role in the conceptual framework of Modern Monetary Theory (MMT) as “it replaces the Phillips curve that is central to mainstream macro-economic theory.” As defined in Investopedia, the Phillips Curve is a concept “stating that inflation and unemployment have a stable and inverse relationship.” Higher inflation is brought by growth, which brings more jobs, thus full employment carries the risk of runaway inflation, and governments work accordingly to maintain a “necessary” level of unemployment – the NAIRU or non-accelerating inflation rate of unemployment. Yet, as Tchernova argues, unemployment levels tend to leak upwards, are typically understated by governments, and carry costs in public health and wellbeing that are never counted.

Rather than countering this expense by creating more jobs, governments like to preserve the threat of unemployment as an incentive to the workforce. Fear of losing a place in the workforce is seen as one of the drivers of the market economy; neoliberal governments work to intensify this fear, surrounding the predicament of the unemployed with polemics of shame and blame. Governments that specialize in this as part of an ideological agenda are in denial of the opportunities they have to control the situation.

MMT recognizes the unique power of governments to meet economic challenges, Tchernova says, because they have monetary sovereignty.

This was the principle on which the Commonwealth Bank was founded in Australia. King O’Malley, Minister for Home Affairs in the first federal parliament, made this statement to the House in 1909:

Power to dominate the operation of the money volume is power to do justice or injustice between debtors and creditors, employees and employers, purchasers and sellers, landlords and tenants… power to generate prosperity or panic, power to regulate industry and determine the distribution of wealth.

O’Malley set out to use the Commonwealth Bank to capitalize the nation and enable the development of a robust settler economy. Of course, the ability to replicate this depends on the wider economic environment. Bill Mitchell acknowledges that government expenditure on infrastructure will incur debt when it involves imported resources. Further, as he states, “if the economy was at full capacity and the government tried to undertake a major nation building exercise then it might hit inflationary problems – it would have to compete at market prices for resources and bid them away from their existing uses.”

In the MMT framework though, government provision of employment for public purposes should not be seen as expenditure. Rather, the job guarantee has a special economic function, in that it posits an hour of labour as a unit of currency. Tcherneva explains it as a “counter-cyclical” operation, which kicks in as there is a downturn in the economy, to replace jobs being shed from the market economy with jobs in programs for public benefit. It is, she says, “the perfect way to stabilize the economy” because it prevents slumps in spending caused by unemployment.

As promoted in the Sanders campaign, the FJG gains additional credentials as part of the Green New Deal. Responding to a leading question about his support for UBI at an Iowa rally on April 7 this year, Sanders said, “I have a better idea.” It was not just a matter of people needing employment, but rather of certain kinds of work becoming urgent and essential: “Transforming our energy system in terms of weatherizing homes all over this country, building a more efficient transportation system. Putting more money into wind and solar and other sustainable technologies. We can create millions of jobs doing that.” This is a forceful argument. If the new budget bottom line is not some set of abstract figures in a monetary economy, but rather the state of the planet itself, and the ecosystems on which we depend, green jobs are not a cost but an investment.

Andrew Yang counters the Sanders line on the future of work with a vision of the labour market decimated by robotics. He reels off statistics. There are 3.5 million truck drivers in America. Another 5 million work in the truck stops, motels and diners that serve the truckers and their vehicles. Ironically, the FJG is actually a much better answer to this concern than his own plan for the Freedom Dividend. If your primary concern is with the need for and right to employment, the job guarantee is the way to go. Inversely, UBI advocates (and here let me declare I’m amongst them) could also make the case that basic income is a better option for the Green New Deal than the job guarantee. Your primary concern is the state of the planet and the relationship between human economies and eco-systems? These are the philosophical underpinnings of UBI.

In recent years, advocacy for the basic income has become increasingly bound up with what I will call the commons principle, which forms the core of the argument in Guy Standing’s new book, Plunder of the Commons: A Manifesto for Sharing Public Wealth. The 2018 NENA Conference called for the restoration of the commons, defined as “the wealth we inherit and create together which includes the gifts of nature, civic infrastructure and knowledge in all its forms.” This shared heritage must be at the heart of the transition to a new economy. Historically, the commons principle has its origin as a form of land rights: every creature born on the planet has a right to draw the essential means of survival from its resources. For humans, responsibilities go along with these rights. The commons principle involves “the three Rs” – resources, rights, responsibilities - because we use resources in complex ways, collaborating with each other to manage them effectively.

[3] The commons

Standing’s book begins by focusing on the commons tradition in British law, tracing it back to the early middle ages with the signing of the Magna Carta in 1215 and the associated Charter of the Forests in 1217. By the end of the thirteenth century, the Magna Carta was acknowledged by the English Crown as the common law of the land. With local barons cordoning off common lands as hunting grounds, the 17 articles of the Charter of the Forests were formulated to protect the rights of commoners who depended upon them for subsistence. These common lands included wooded lands where people could collect fuel and cut turf; streams and rivers that provided fish and reeds for baskets; fields where they could graze animals and grow vegetables. Over time, though, practices of encroachment and enclosure returned, and laws were changed in favour of the big landowners.

Peter Linebaugh, premier historian of the commons, writes forcefully on the impact of the criminalization of commons rights in his latest book, Red Round Globe Hot Burning. Through the course of the industrial revolution, measures of criminalization became increasingly pervasive and vicious. As rural trades collapsed and people were forced into the cities to look for work, they lost all rights of subsistence afforded by the land itself. Factory owners were ruthless in maximizing hours and minimizing wages, so that working families who had been well housed and fed in previous decades were reduced to starvation. Deprived of traditional subsistence, they resorted to petty theft in order to survive from one day to the next. Workers were prosecuted for “stealing” discarded scraps of leather or cloth that in traditional workplaces would have been allocated as part of their earnings. Linebaugh finds documented cases of a woman whipped and imprisoned for stealing sheets, which she intended to pawn for money to buy food, and others hanged or transported for “the horrid crime of cutting cabbage.”

Where was the real theft here? This is not just academic history. It is an account of ongoing legal conflict that is still being played out. Indigenous people in Australia and America continue to fight for their rights and authority as traditional custodians of the land. The forests, mines and waterways that are our common resources are under corporate control, managed for profit. The very idea of the common good is sidelined as if it were some sentimental throwback, rather than a fundamental principle with undiminished moral force. When the history is seen as one of dispossession, willful and violent, depriving people of the most basic needs for survival, the case for restoration of the commons is unassailable.

Increasingly, arguments for UBI are being made on these grounds. Since we are no longer in an economy that can afford every citizen a subsistence directly from the land, a monetary allocation is the most effective and flexible substitute. And it comes with responsibilities. As part of a Green New Deal, those would include contribution to ecological work such as recycling, regeneration and conservation. As part of a more broadly interpreted commons economy, they would include social and community work of all kinds. One of the key differences between basic income and the jobs guarantee is that basic income buys time - not just for individuals, but for communities, families and entrepreneurial collectives.

As with traditional commons rights, basic income is not expected to cover all our needs. It subsidises the efforts we make as wage earners, while making us freer to choose where and how we earn the rest of our living. Those who want to sweep aside the basic income concept typically start with an assumption that it is a way of enabling people to stop working. Work is good for us, they insist, we need it in order to function as a society. Well, exactly. Work is integral to the commons principle that underpins UBI. As commons advocate and strategist David Bollier insists, “commons” is the noun and “commoning” the verb. Commoning is the work of the commons. Without it, common pool resources fail, the social fabric frays and community life flat-lines.

Job Guarantee programs, conceived and managed with the strongest commitment to public purpose, overlap with a commons-based vision of UBI, but accord a much stronger role to the state as the provider of work and regulator of working conditions. Tchernova envisages localized employment plans and distributed administrative processes, but without the overarching control of government, the MMT framework could not be implemented. There are risks that the culture of employment would degenerate, as it did in Greece leading up to the debt crisis of 2009. Citizens do not always have great respect for the state as an employer. When they are asked to work for and with each-other, exploitative behaviours are much more obvious and less likely to be tolerated.

Of course, these risks could be addressed. One of the challenges of both these proposals is that we have to throw out the too-hard basket that has been a government stand-by for any issue with social or cultural dimensions. In the domains of corporate enterprise and technological enterprise, there is no such thing as a too-hard basket. There is an intelligent response to every challenge, and way to be found through every obstacle. We are quick to recognize this when faced with an imperative, and the commons principle lends UBI the status of an imperative.

This is the most significant point I want to make. The story of the commons is of the essence, because it alerts us to a legal precedent with a deep history and moral authority. It’s not just a matter of whether people have an entitlement to subsistence. It’s a matter of whether governments and those who control our economic policies have the right to withhold it. As austerity bites deeper under late-stage neoliberal governments, as in-work poverty becomes a norm and more and more people face hunger and destitution, the imperative glares at us in a way that can no longer be ignored.

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