Unlock Real Freedom: Exploring Poverty, Full Employment & Price Controls
Now you know my story, I thought we would continue with my views and influences
Let's start with my definition of “Full Employment”.
FULL EMPLOYMENT
Full Employment: when aggregate spending is sufficient to elicit output levels, which at current productivity levels will provide enough jobs (measured in working hours) for all the workers who desire to work and all who want to work
I could arguably accept 5% under utilisation as “full employment”
You know how the NMC/NEC1 like to on average to call 5% unemployment full employment if we change that to 5% underutilisation (unemployed + underemployed) I can live with that. It won’t be technically accurate but I can deal. Call 5% underutilisation full employment, I can deal,
Here is an example:
Five per cent unemployed and zero per cent underemployed is highly unlikely. That said, not having a single person underemployed would be terrific.
PRICE CONTROLS
Now let’s talk about price controls.
In some economic circles, there are complaints about price controls saying they don’t work but price controls are everywhere right now & work correctly every day.
Price controls are everywhere!
Minimum wage
Bulk billing medicare
Reserve bank discount rate
The maximum penalty for a fine
Medication on the PBS
Concession Eligibility for PBS
Can you think of more?
Maybe these ones:
Minimum "award" wages
NDIS vouchers
HECS/HELP fees
Did you know we always used price controls to fight inflation?
The involuntary unemployed at a floor wage of $0 is one example.
The discount rate at a central bank as a ceiling for the ‘price’ of money is another.
Price controls are implicit in the economy, as are buffer stocks.
Also this, from the 1981 winner of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, James Tobin:
“On stopping inflation: We are not going to have successful disinflation without some kind of wage and price controls”
And don’t forget back on June 22 AEMO did implement price caps (ceiling) aka price controls.
They worked. We might have them again soon.
POVERTY
Now for some thoughts on poverty through an MMT lens.
Amartya Sen proposed five general freedoms that underpin capabilities and whose violation results in deprivation or poverty:
1. Political freedom including civil rights;
2. Economic facilities which includes access to credit;
3. Social opportunities which include arrangements for access to health care, education and other social services;
4. Transparency in relations between people and between people and governments; and
5. Protective security which includes social and economic safety nets such as unemployment benefits and famine and emergency relief.
Through this lens, poverty is no longer confined to the issue of income and education but rather looks at the idea of whether an individual is able to enjoy the full range of choices and then have the actual ability to realise the choice that the individual has made.
In this lens, poverty is now seen as a deprivation of choices available for an individual to live the life they have reason to value and also the deprivation of the individual’s abilities to exercise that choice.
You will note this does not deny income being a specific factor but not the only factor.
For me, this leads to Philippe Van Parijs and his idea of “real freedom” which is usually associated with Basic Income.
This to my mind makes the case for Universal Basic Services as described by
Anna Coote. I believe the UK is now calling it a Social Guarantee. And the case for a Job Guarantee as presented by Pavlina Tcherneva.
All this together, in my opinion, leads to Philippe Van Parijs’s Real Freedom.
To have real freedom an individual must:
not be prevented from acting on their will
possess the resources or capacities actually to carry out their will.
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NMC = New Monetary Consensus, NEC = New Economic Consensus