This post briefly describes how we are free to redefine the concepts of work, job, value, and productivity to whatever we want them to be. There is nothing natural about our current definitions for these words, each of which centers around the concept of profit and making a rich person even richer.
(Thanks so much to Rete MMT for translating [the original tweet thread version of] this post into Italian.)
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This post was last updated October 16, 2020.
Disclaimer: I have studied MMT since February of 2018. I’m not an economist or academic and I don’t speak for the MMT project. The information in this post is my best understanding but I don’t assert it to be perfectly accurate. In order to ensure accuracy, you should rely on the expert sources linked throughout. If you have feedback to improve this post, please get in touch.
(You should also know that this post is derived from the introduction to part two of my not-yet-released interview with original MMT developer L. Randall Wray*. Here is his response after hearing it: “Your intro is very good. I sympathize with all you say but some of it isn’t mmt. However they are your words so fine.” So take this post as you will. I’m also obviously taking the knowledge of MMT and applying my own progressive values to it.)
(*The interview with Dr. Wray will be released in late October and will be added to this post. If you’d like to hear it right now, however, consider becoming a monthly patron. Hint, hint.)
Injections must happen before any leakages can occur
Something cannot be removed from a container until something is first put into that container. This is the second law of thermodynamics: the entropy of a closed system can only increase. Another way of saying this is, a reaction always contains less energy than what caused it. This implies that no closed system can function in the long term unless it is powered by some external energy, which obviously must come from some external system. Perpetual motion machines do not exist.
As it relates to the economy, there must be an external source of new money in order to keep it going – not unlike the Go-spot on a Monopoly board. It is simply not possible for the same money to forever circulate around and around the economy. A leakage from the economy cannot happen until something is first injected into the economy. The only institutions that can make injections are commercial banks and the central government. Savings therefore cannot cause bank lending, and taxes cannot finance (federal) government spending.
Regarding productivity and the job guarantee, in a similar way, jobs can create skills but skills cannot create jobs. As Dr. Wray explained to me, washing my own dishes is not considered to be officially productive, but paying someone else to do it is. Why? Because they were paid, I wasn’t. In other words, productivity as officially measured is substantially a reflection of, not the production itself, but how much workers were paid in exchange for it. Despite consistently increasing output, wages have remained stagnant since around 1970 – nearly half a century. Have workers really been less and less productive? Or have they been more and more screwed?
Currently, the only thing that’s considered officially productive is what makes somebody else richer – who, by the way, is someone that seems to never be me. Productivity is essentially equated to profit because business owners are essentially the only ones who get to decide who is to be paid, what they will be paid for, and how much to pay them.
Instead of only paying people for making some business owners profit, perhaps we can also start paying people for making our world a better place. For helping other people. For cleaning our environment, for holding the hand of the dying, for recording the history of the old, for helping a child with homework, or a teacher in the classroom, or a youth soccer coach on the field.
Wages are not created by productivity, productivity is created by wages. How do you increase productivity? By paying workers more. By paying them at all. We don’t have to measure productivity with maths and models, we don’t have to equate productivity with only profit, and we definitely don’t have to leave these decisions and definitions to only business owners. We can redefine productivity to whatever we want it to be – and then we can start paying people to do it.