Wray: MMT Primer – Blog #46

The Job Guarantee – Program Manageability

by L Randall Wray

http://neweconomicperspectives.org (April 15 2012)

As mentioned earlier, critics have argued that the program could become so large that it would be unmanageable. The central government would have difficulty keeping track of all the program participants, ensuring that they are kept busy working on useful projects. Worse, corruption could become a problem, with project managers embezzling funds. We will briefly look at some methods that can be used to enhance manageability.

First, it is not necessary for the national government to formulate and run the program. It can be highly decentralized – to local government, local not-for-profit community service organizations, parks and recreation agencies, school districts, and worker cooperatives. Local communities could propose projects, with local agencies or governments running them. National government involvement might be limited to providing funding and – perhaps – project approval. That is the way that Argentina’s program, as well as the new program in India to some extent, is run.

To be clear, the level of decentralization will vary across countries and even across regions within countries. In some developing countries, there may be no alternative to the central government – there may be few indigenous not-for-profits, and local government might be too ineffectual (for a variety of reasons). In some developed nations, the central government might be sufficiently competent and respected to run the whole program. However, in a place like the US, there is probably too much distrust of the central government – but, fortunately, the US has hundreds of thousands of local alternatives in the form of community service organizations and local governments.

In order to reduce the likelihood that funds are embezzled, the national government could pay wages directly to program participants. This can be facilitated by using something like a social security number – and paying directly into a bank account much as social security programs pay retirement. If project managers never get their hands on government funds, it will be difficult to embezzle them. To be sure, there will be some cases of fraud, such as paying social security to someone who is not working, or who is dead. Transparency is one way to fight corruption – public recording of all participants and all payments, through use of the internet, for example, with rewards for whistle-blowers. Argentina used the internet in this manner.

While there are privacy issues surrounding participation and income received, that is probably outweighed by public interest concerns. Even in the US, it is common to make the wages and salaries of public employees available. Further, since our formulation of the Job Guarantee (JG) includes uniform wages and benefits, there are no distinctions – all full-time employees receive the same amount – so there is less potential for embarrassment. Further, unlike welfare payments, the program is not means-tested. As mentioned in an earlier blog, to the extent that participation in the JG becomes something of a “rite of passage” for young people (and, indeed, for people of all ages) the program won’t necessarily taint workers.

To cover management and materials costs, the national government might provide some non-wage funding to projects. In direct job creation programs, an amount equal to 25% of the wage bill has been common. The greater the payment, the greater the adverse incentive for project managers – who might create projects simply to get funding. For this reason, non-wage funding should be kept small, and the national government should require matching funds to cover non-wage expenses. And, again, all such payments should be transparent and publicly available – published on the internet.

While it is tempting to include private for-profit employers in such a program, adverse incentives are even greater. A private employer might replace employees with JG/ELR employees to reduce the wage bill. Worker cooperatives might work better. A group of workers could propose a project designed to produce output for sale in markets. The JG/ELR program could pay a portion of their wages for a specific period of time (say, for one year) after which time the cooperative would have to become self-supporting. If it could not stand on its own, the workers would have to move into regular JG/ELR projects. (Again, Argentina provides a useful example of successful co-ops included as part of the Jefes program.)

Obviously, there are many more management issues that must be explored. There are many real-world examples of direct job creation programs funded by government. We can learn from mistakes made. Programs must be adapted to the specific conditions of each nation. There will be many trial-and-error experiments. One of the advantages of decentralization is that the whole program is not tainted by the failure of some experiments.

Look at it this way. We know that most new for-profit businesses do not make it. Firms fail every day. Yet, the “market system” is not tarnished by these unsuccessful experiments. Indeed, that is said to be the beauty of the “competitive system” – losers get punished. We should, and do, hold our government to a higher standard. We will never accept a failure rate of fifty percent or 75% by government, even though we accept – even welcome – such dismal results in the private sector. We readily overlook all the social costs generated by business failures (including those imposed on workers who lose their jobs because of management’s mistakes) on the belief that the relatively few successes compensate.

We should have the same attitude about JG projects – albeit with an expectation of much lower failure rates. We know the ideological opponents will seize on every single mistake, so we need to have many, many successes to counter them.

Still, some JG projects will not be successful – in terms of providing useful jobs that produce socially useful output. Some will have low rates of transition by workers out of the program. The project managers must be held accountable. Just as projects must be approved before they can receive government funding of JG workers, they must show results to continue to participate in the JG program. Constituencies (workers and communities served) must be part of the evaluation process. JG workers must be free to quit work at poorly managed projects to seek more fulfilling work at other JG projects.

There is a bias in societies like the US that the “market test” is the best way to distinguish successful from unsuccessful firms. Yet, as all economists know, the market does not work well in many important areas: public goods and other cases where social benefits and costs are not reflected in market prices. Even in the most favourable circumstances, “market efficiency” does not equate to “social efficiency”.

There are wide open areas in any economy where social costs can be reduced and social benefits improved by “extra-market” provisioning – by purposeful and organized action. Some of this is the proper role of government, some can be funded by government, and some can be done without government. But there is no justification for believing that the market can “do everything” and that the market test is the only test of value.

I will have more to say about this in a few weeks. In truth, every successful business required help. There is no such thing as a “self-made man” (or woman). And every failed business squandered the help provided by government and society more generally, at least to some degree.

So, yes, problems will be encountered in any real-world JG program; some of these can be foreseen and others will surprise us. There will be failures. There will be some waste. The program design will need to be adjusted. There will be an element of trial and error.

But what must always be kept in mind is that the alternative – unemployment – is, arguably, far more socially wasteful.


The Only Logical Response to the Ecological Crisis:

Rapid, Enforced  Economic Contraction

by Dennis Riches

https://litbyimagination.blogspot.com (October 07 2019)


Revolution is not a runaway train but the application of the emergency  brake. It is capitalism which is anarchic, extravagant, out of hand, and  socialism which is temperate, earth-bound and realistic.

– Walter Benjamin {1}


A quote from this book appears at the end of this blog post.

The discourse of global warming flows with terminology that is born from  the existing economic system, which is driven to quantify and  financialize nature: ecosystem services, biodiversity offsets, carbon  offsets, carbon credits, carbon footprints, carbon swaps, cap and trade,  subsidies, penalties, tax incentives, tax credits, climate accords,  reduction targets, protocols, investments in renewables, green jobs,  green new deal, energy transition, fourth industrial revolution, and so  on. It is an approach that has a long history, as the English elite in  the 17th century also argued that the enclosures that dispossessed  commoners would allow for better preservation of natural resources.  While proponents of this approach accuse defenders of the status quo of  being “in denial of the science”, they themselves are in denial about  what needs to be done to put an end to the fossil fuel economy, assuming  the matter is as urgent as they claim. The denial can also be found  among radical socialists who assume a drastic reduction of fossil fuel  emissions can be managed while material progress continues. It may be  possible, but the results of that experiment are yet to come.

In the prevailing neoliberal economic order, the belief in a particular  definition of freedom is so deeply rooted that solutions to even the  direst crises have to be framed in a way that does not encroach on this  value – the freedom to get rich, the freedom to buy whatever one can, the  freedom to “make something of yourself” (the self-made man syndrome),  the freedom to take big risks to gain a big reward. This deeply held  value is of course extended from the individual level to gangsterism, to  business enterprises, and to multinational conglomerates.

Thus the approach to global warming, an emergency that apparently  requires drastic action within a decade, is to tweak human desires and  market demands, and use incentives and regulations to move the economy  in the right direction so that the present system gently slides into a  new “green” economy with little disruption to our lives. Even if this  approach could work, we must recognize that there is only an illusion of  freedom involved. This new regulatory system of rewards and punishments  masks the loss of freedom that happens as citizens are herded down a  path chosen by an elite that is hoping to profit from this supposed next  industrial revolution based on the phasing out fossil fuels.

Veteran energy journalist Andrew Nikiforuk pointed out in a recent  article that both the business-as-usual approach and the green-new-deal  approach fail to grasp the severity of the problem. The numbers just  don’t add up:



To appreciate the ambitious scale of the green-new-deal, consider the real global  energy picture as set out by Tad Patzek, a professor of petroleum and  chemical engineering in Texas. If we divide the days of the year up  based on total energy use, he writes, fossil fuels – oil, coal and natural  gas – powered the globe for 321 days in 2018. (Fossil fuels provide more  than eighty per cent of the energy we consume.) Dams and nuclear power kept  the lights on for fifteen days. Renewables or repeatables (solar panels and  wind turbines need to be replaced every fifty years or so) only energized  the globe for about 29 days. And most of that energy came from biomass  or wood burning. The green-new-deal wants to turn 29 days into 321 days of primary  power – in a decade. {2}


Obviously, a radical energy policy would be necessary to reach this goal  of 321 days. The green new deal is inspired by US President Roosevelt’s  New Deal in the 1930s and 1940s, but some tend to forget that that  program succeeded because the economy was oriented toward waging war and  the exploitation of fossil fuels. It was a time when consumers didn’t  have much to buy, and people sacrificed, suffered, and died. So far the  green new deal is being conceived as a gentle transition that will  require none of the suffering and personal sacrifice of war, with no war  measures, rationing, or submission to authoritarian rule. In the recent  climate marches, no one carried banners saying “ration our gasoline” or  “put a quota on our air travel”. Yet the need for urgent measures cannot  be avoided. The necessary change has to be imposed equally on everyone.  Presently, some people make voluntary sacrifices, but the majority look  at their own and their neighbors’ wasteful ways and see no point in  being the only person on the block to turn off the air conditioning or  give up a business trip or vacation. Military spending and the  lifestyles of the top one percent do even more to de-motivate the middle class  and the poor from giving up the comforts they have. The reductions  needed, if we truly have only a decade to turn things around, are much  more than a gradual reduction of a few percentage points every few  years. It is time to do what would really be necessary to slash fossil  fuel consumption in industrialized countries.

So imagine the following as a possible agenda, and hold off on your  outrage. It is intended to be provocatively extreme:

1. Severely ration gasoline and heating fuel until we learn how  much renewable energy can be produced and at what cost to the ecosystem,  and what our energy “needs” truly are.

2. Restrict the use of air conditioning.

3. Nationalize all exorbitantly large residences and partition  them for public housing.

4. Nationalize all unoccupied residences to make them available  for public housing.

5. Retrofit buildings for energy efficiency, and redesign urban  and suburban environments for high-density communal living.

6. Nationalize major sectors of the economy: banking, natural  resources, energy, health care, education.

7. Eliminate first class and business class air travel and private  jet travel.

8. Ban non-essential air travel, travel to academic conferences,  sports events, junkets et cetera.

9. Ban cruise ship tourism.

10. Ban international resort holidays and make citizens travel by  train and bus on vacations close to home.

11. Cut back on the use of laundry machines and dryers – do laundry by  hand, or by the power of stationary bicycles that spin the washing drum.

12. Restrict hours for television broadcasts and eliminate content  that serves no valuable social function.

13. Eliminate vending machines.

14. Outlaw bitcoin mining because of all the electricity it consumes,  make large cuts in the energy consumed by internet servers.

15. Establish a democratic system of governance that will decide which  important civil servants will have to travel by air, and which projects  of construction and deconstruction require the exceptional use of fossil  fuels.

16. Establish a system of oversight and punishments for civil servants  who abuse their powers.

17. Eliminate advertising, parasitic financial services, and all  non-essential commercial merchandise.

18. Reduce plastic waste.

19. Eliminate nuclear weapons.

20. Eliminate nuclear power plants.

21. Restore damaged ecosystems and manage polluted “sacrifice zones”  as safely as possible.

22. Stop producing nuclear waste and manage what exists in a  responsible manner that will protect the ecosystem for 100,000 years.

23. Reduce US military spending by seventy percent, and eliminate overseas US  military bases and the antiquated concept of global imperial reach – other  nations can de-escalate their military forces after the US comes down to  a level of parity with them.

24. Capture military capacities by popular revolt and rebellion in  military ranks, then shift military policy to achieving the de-growth  revolution, then to defending it from reactionary forces that want to  re-establish the capitalist growth economy.

25. Shift defense policy and international relations to helping other  nations deal with refugee flows and domestic chaos, especially in the  former petro-states which can no longer support their populations – large  urban populations in places like Alberta and Saudi Arabia may be untenable.

26. Re-educate citizens out of their habits of consuming non-essential  goods and services and energy-intensive entertainment; educate them to  engage in contemplative and artistic activities with the added leisure  time they will now have.

27. Prioritize equal distribution of the necessities of life. The era  of de-growth could easily become an era of panic and fascist reaction,  with more inequality arising from scarcity of resources. {3}

28. Reduce meat consumption by fifty percent.

29. Send the newly unemployed, resulting from de-growth and  de-carbonizing policies, to agricultural collectives for retraining and  employment in the new low-energy-intensive agricultural and  horticultural sectors of the economy.

30. Divert human resources toward education, medical care, and  equitable distribution of food and shelter and other essentials.

31. Give proper ideological education to the masses to help them  adjust to the new agrarian de-growth economy.

32. Determine what minimal level of global transportation and  communication links will be necessary to allow the peoples of the world  to maintain peaceful relations.

33. Establish a lifetime salary and social roles for all citizens  during and after the period of upheaval. Everyone who can work must be  given work.

34. Eliminate competing political parties – there is only one party: the  party of economic de-growth and de-carbonization – no competing, parties  wanting to go back to the old ways can be allowed to form. Remember,  it’s a matter of the survival of our species, isn’t it?

35. Carry out severe penalties and re-education efforts for all  dissidents who attempt to revert society to its former ways – such  re-education will be aimed at those who hold onto antiquated notions of  “freedom” involving ambitions to stay rich or get rich, gamble, or amass  private power through private enterprises, gangsterism, et cetera.

36. Outlaw prostitution, pornography, and surrogate pregnancy.  Commodification of the human body is incompatible with an ideology that  is against the commodification of nature.

37. Educate boys and girls equally, and protect women’s reproductive  rights. The population problem will resolve itself over the next century  if this is done, without any need for racist eugenics policies.

38. Focus agricultural policy on ending war, foreign interference and  plunder of poor nations by wealthy nations. Famines have a long history.  They occurred when the world population was much less than the present seven billion. The “breeding habits” of certain peoples is not the problem.

39. Revive the knowledge of indigenous people in order to teach  respect for rocks, soil, water, all living things; live low-tech and in  harmony with the environment and with all fellow creatures.

40. And of course, the most urgent measure of all: ban the use of  plastic straws!

It should be obvious that I have written these suggestions in order to  provoke a reaction, to make it clear that they may be necessary but are  also extremely unlikely to be welcomed, at least by people who are  prospering, content with the status quo, or fearful of radical change.  Everyone knows that revolutions run the risk of failing and descending  into reactionary and counter-reactionary bloodshed, with the revolution  discredited by the former ruling class’s propaganda once it gets  restored. A displaced ruling class will shed any amount of blood in  order to regain power. So I know this agenda will seem ludicrous to  many, but if we “listen to the science”, it is what the facts of the  situation demand.

Industrial civilization is not ripe for any such revolution also because  there has never been a revolutionary situation like it. Revolutions of  the past were driven by workers and peasants who wanted their share of  what the owners had, and the use of energy resources was going to make  it possible, which is why the first great national project Lenin wanted  was electrification. In contrast, this next revolution would consist of  the working class and everyone else asking to have less.

Nonetheless, we shouldn’t be too stressed out about losing our freedom,  or at least our odd concept of freedom. As a saying goes, “It is in  sickness that man becomes aware that he has limits and is not as strong  as he imagines” {4}. Gabor Mate has pointed out in his many lectures that  it is life within our strangely free society that makes us sick. He  notes, “Fifty percent of North American adults have a chronic illness, either  diabetes or high blood pressure, or heart disease or cancer, or any  number of auto-immune illnesses”. Thus it has got to the point where we  can no longer say (and never should have said, actually) indigenous  people lived miserable lives without modern health care and technology.  We could actually be healthier in a post-fossil-fuel economy. We might  need to adapt Hobbes’ dictum in order to realize that we must submit to  a nature-protecting authority (or belief system) in order to avoid lives  that will otherwise be “solitary, poor, nasty, brutish, and short” under  capitalism.

Gabor Mate reminded his audiences of another concept of freedom:



When Karl Marx talked about freedom, he talked about freedom in three  senses of the word. Freedom for him was, number one, freedom from  economic necessity, freedom from the threat to life, freedom from  interference by other people, and the freedom to express yourself, to be  yourself. That’s freedom. What freedom is there in this “free society”,  the “free world”, the “freest society in history”? What freedom is there  when people are not free of economic worry, where there’s tremendous  uncertainty and fear, and lack of control? When people lack control over  their lives, they have no freedom, and they’re physiologically stressed.  When they’re physiologically stressed, that’s going to manifest in the  form of illness. {5}


The 20th-century socialist revolutions adopted many of the measures  listed above and experienced a mix of successes and failures with them.  The Bolshevik and Maoist revolutions led to massive improvements in  social welfare, life span, industrial progress, and so on, but they had  to carry out massive reconstruction efforts after wartime, and had to  adopt repressive measures to react to internal and external  counter-revolutionary forces – including hostile nations’ refusals to give  food aid during famines, after which these same nations called the  famines genocide. As a result, for citizens of capitalist countries,  this repression became the single defining feature of socialism, which  makes a socialist solution to global warming seem absurd to  them – especially if they believe the myth that communism, not famines  with complex natural and human causes, killed a hundred million, or a  billion, or whatever number is conjured up so often by anti-communist  zealots. {6}

These revolutions have much to teach us about how to avoid their  mistakes and copy their successes in rebuilding society from the  ground up, but even socialist China now lives with the contradiction  presented by the need for a de-growth economy because it has invested so  much in promising material progress to its citizens. The American  socialist speaker and journalist, Caleb Maupin (whose knowledge of  history is laudable) has great faith in humanity’s ability to progress  beyond capitalism and find technological solutions to global warming. He  finds it regrettable that not more is being done to develop fusion  energy, but he appears to be ignorant of how it has repeatedly been the  ephemeral hope of technocrats for decades but always fails to deliver.  And even if it did, a consequence-free, limitless source of energy might  create a new kind of nightmare. What would humans do to the planet if  their appetite for energy met no limitations?

Many global warming activists underestimate the strength of the  reactionary forces that would strike back at any gains made by an  ecosocialist revolution. The entire 20th century was a civil war between  capitalism and socialism, yet the lesson seems to have been lost on many  now. The European Union recently declared that World War Two was a victory over  Soviet socialism, which it equated with fascism and blamed for being in  an “alliance” with Hitler (a gross distortion of the non-aggression pact  which came only after British and French rejection of Stalin’s offer to  form an alliance against Germany) {7}. Some activists are asking no  questions about the billionaires who have thrust a child to center stage  of climate discourse and then hidden behind her, and they are  marginalizing those who do ask questions, as if debate on this issue  should not be allowed.

Activists need to see the stark choice that lies ahead. In this  scenario, capitalism is the unstoppable force, and global warming is the  immovable object. But citing this old paradox is not so clever because  unstoppable forces and immovable objects cannot exist simultaneously.  The paradox is flawed because it exists only in the minds of  philosophers. If there exists an unstoppable force, it follows logically  that there cannot be any such thing as an immovable object and vice  versa. In the real world, the matter would be settled one way or another  by an unstoppable collision, and when it comes to man versus nature, nature  always bats last.

Capitalism, under a green new deal or business as usual, will lead to  collapse, war and chaos, and our eventual return to less complex ways of  life. The choice is to let that happen, with all the risks of  catastrophic war (including nuclear war) and social breakdown, or to  launch the necessary revolution to mitigate the chaos that will come on  the way to our destination – which is not the fourth industrial revolution  but rather a post-carbon world littered with abandoned tailings ponds,  plastic, oil wells, and nuclear waste.


Democracy for the Transition out of Fossil Fuels


In 2018, the Canadian geneticist and ecologist David Suzuki spoke to an  Australia vlogger and said the following about the ability of the  Chinese government to act on environmental problems:



We worked with the with the Chinese government for three years in an  area in Tibet, a big area the size of Italy, that is the source of four  of the great rivers … They’re logging the hell out of it, so we worked  for three years going to meet with officials and drinking and  negotiating, then after that they trusted us. We were saying there are  alternatives to logging. They understood that logging in the upper  waters caused floods and all kinds of down downstream effects, so we  convinced them that we have economic alternatives. They said, “Okay, we  agree”. Overnight the logging stopped! That’s what you can do when you  don’t have a democracy, but I prefer a democracy. I really believe that,  but it it’s only as good as how much people are going to be involved in  it, and right now we’re not … We also have to live in a very different  way. One of the major issues we have to face in the industrialized world  is that we are the hyper-consumers on the planet. {8}


What David Suzuki (a geneticists, not a historian or political  scientist) fails to note here is that his assumptions about democracy in  China are flawed. China has undertaken significant democratic reforms  since the Mao era during a time when the Western democracies have  undertaken none and come under the control of oligarchies, with  inexperienced intellectual mediocrities often being elected as heads of  state. In contrast, China’s system of governance has continued to  evolve. It is a meritocracy in which the highly educated and competent  rise to the top and policies are carried out consistently over many  years. Meanwhile, at the lower levels, the reforms allow citizens to  nominate and elect candidates at local, regional, and national levels.  Like all democracies, it is a work in progress. In any case, it is  interesting that David Suzuki noted in this instance the ability of the  Chinese system to act decisively without corporate interests obstructing  the necessary environmental protection. In this interview he clings to a  hope that Western democracies could be improved while he seems unaware  that not everyone in the world believes Western liberal democracy is the  pinnacle of achievement in systems of governance. If you doubt that  other nations have evolved better forms of democracy, just ask yourself  how Donald Trump ever could have become president if, as under the Cuban  democratic model, an elected assembly had the authority to elect the  head of state from a roster of qualified and experienced members who  rose through the ranks of educational institutions and government. {9}

China specialist Martin Jacques, author of the best-seller When China  Rules the World: the End of the Western World and the Birth of a New  Global Order (2012), wrote:



… most Westerners still regard China’s present political order as  lacking legitimacy and as ultimately unsustainable. In the post 1945  period, Westerners have come to believe that Western-style  democracy – essentially universal suffrage and a multi-party system – is  more or less the sole source of a government’s legitimacy. This is a  superficial and ahistorical position. Western-style democracy does not  ensure the legitimacy of a regime in the eyes of its people: Italy is  perhaps the classic example, with successive governments over a long  historical period experiencing a chronic lack of legitimacy. And what of  China? Although it does not have Western-style democracy, there is  plenty of evidence … that the Chinese government enjoys high levels of  support and legitimacy, much higher indeed than those of Western  governments. https://www.amazon.com/When-China-Rules-World-Western/dp/014311800510}


As stated above, the salvation of the global ecosystem depends on the  rise of single-party states that are founded on a de-growth,  non-polluting political economy. If moving beyond fossil fuel is  absolutely essential for species survival, then parties based on  contrary ideologies could not be allowed. Thus China’s or Cuba’s forms  of one-party democratic rule might be models that have something to  offer to the world. China’s success is relevant also because its path  was chosen as the way to rebuild after the complete devastation caused  by decades of foreign domination and war. If the green revolution  requires sacrifice, living with less and starting over from zero, surely  the peoples who rebuilt after total war have something to teach to  nations that lack that historical experience.

The ideas covered here were inspired by a book published in 2015 by  Richard Smith entitled Green Capitalism: the God that Failed. I conclude  with excerpts from the book. With the eyes of the world focused on the  teenager Greta Thunberg, it’s a good time to remember the work of people  who have been delivering her message since long before she was born. We  are all children trying to fix the world left to us by generations past.  We are all adults leaving the world to future generations. As a teenager  forty-five years ago, I was appalled to learn how many nuclear warheads  had been built. Everyone at some time in life wanted to say, “How dare  you?” or “We will never forgive you!” but such sentiments are really  beside the point – perhaps just a step in the loss of innocence. To quote  Gabor Mate again, “Would you rather be illusioned or disillusioned?” {11}

I’m not one of the bitter old men who denies Greta’s message and her  anger, or resents the attention she gets, but my hope is that as Greta’s  thinking evolves, she will break free of the people who brought her to  Davos and join a revolution against them. The movement is yet to reach  the moment of its tennis court oath.

Richard Smith, Green Capitalism: the God that Failed:




… it’s one thing for James Hansen or Bill McKibben of 350.org to say we  need to “leave the coal in the hole, the oil in the soil, the gas under  the grass”, to call for “severe curbs” in green-house gas (GHG) emissions – in the abstract.  But think about what this means in our capitalist economy. Most of us,  even passionate environmental activists, don’t really want to face up to  the economic implications of the science we defend. That’s why, if you  listen to environmentalists like Bill McKibben, for example, you will  get the impression that global warming is mainly driven by fossil  fuel-powered electric power plants, so if we just “switch to renewables”  this will solve the main problem and we can carry on with life more or  less as we do now. Indeed, “green capitalism” enthusiasts like The New  York Times’ Thomas Friedman and the union-backed “green jobs” lobby look  to renewable energy, electric cars and such as “the next great engine of  industrial growth” – the perfect win-win solution. This is a not a  solution. This is a delusion. Because greenhouse gasses are produced  across the economy not just by or even mainly by power plants. Globally,  fossil fuel-powered electricity generation accounts for seventeen percent of GHG  emissions, heating accounts for five percent, miscellaneous “other” fuel  combustion 8.6%, industry 14.7%, industrial processes another 4.3%,  transportation 14.3%, agriculture 13.6%, land use changes (mainly  deforestation) 12.2%. 16 This means, for a start, that even if we  immediately replaced every fossil fuel powered electric generating plant  on the planet with 100% renewable solar, wind and water power, this  would only reduce global GHG emissions by around seventeen percent. What this means is  that, far from launching a new green energy-powered “industrial growth”  boom, barring some tech-fix miracle, the only way to impose “immediate  and severe curbs” on fossil fuel production/consumption would be to  impose an EMERGENCY CONTRACTION in the industrialized countries:  drastically retrench and in some cases shut down industries, even entire  sectors, across the economy and around the planet – not just fossil fuel  producers but all the industries that consume them and produce GHG  emissions – autos, trucking, aircraft, airlines, shipping and cruise  lines, construction, chemicals, plastics, synthetic fabrics, cosmetics,  synthetic fiber and fabrics, synthetic fertilizer and agribusiness CAFO  operations, and many more. Of course, no one wants to hear this because,  given capitalism, this would unavoidably mean mass bankruptcies, global  economic collapse, depression and mass unemployment around the world …

And the thought of replacing capitalism seems so impossible, especially  given the powers arrayed against change. But what’s the alternative? In  the not-so-distant future, this is all going to come to a screeching  halt one way or another – either we seize hold of this out-of-control  locomotive and wrench down this overproduction of fossil fuels, or we  ride this train right off the cliff to collapse …

If there’s no market mechanism to stop plundering the planet then,  again, what alternative is there but to impose an emergency contraction  on resource consumption? This doesn’t mean we would have to  de-industrialize and go back to riding horses and living in log cabins.  But it does mean that we would have to abandon the “consumer  economy” – shut down all kinds of unnecessary, wasteful, and polluting  industries from junk food to cruise ships, disposable Pampers to  disposable H&M clothes, disposable IKEA furniture, endless new model  cars, phones, electronic games, the lot. Plus all the banking,  advertising, junk mail, most retail, et cetera. We would have completely  redesign production to replace “fast junk food” with healthy,  nutritious, fresh “slow food”, replace “fast fashion” with “slow  fashion” … All these changes are simple, self-evident, no great technical  challenge. They just require a completely different kind of economy, an  economy geared to producing what we need while conserving resources for  future generations of humans and for other species with which we share  this planet. {12}




{1} In Terry Eagleton, Sweet Violence: The Idea of the Tragic (2009), xi.

{2} https://thetyee.ca/Opinion/2019/08/21/Green-New-Deal-Battles/

{3} https://www.currentaffairs.org/2019/10/we-need-a-fair-way-to-end-infinite-growth?fbclid=IwAR2g1m4fqU-IVffId2D1lEPK3cMx2NHpQVQJAxdi6JA9PqCr6dXHRldod4M, “Since some fascists on the political fringe have begun to incorporate sustainability and material scarcity into their justifications for nationalist violence, there’s no reason to believe mainstream voices will side with a socialist postgrowth agenda over the fascist variety”.

{4} The quote has been attributed to Hacene Mazouz.

{5} https://www.youtube.com/watch?v=LpUNm6mF24Q&t=937s

{6} Lawrence E Wheelwright and Bruce J McFarlane, The Chinese Road to Socialism: Economics of the Cultural Revolution (1970). For achievements of the Great Leap Forward, an explanation of the famine, and a counter-argument to the notion that Mao carried out a genocide of tens of millions of people, see pages 38-39, 43, 45-48, 60-62. See this leaflet for a summary of responses to common anti-communist assertions: https://drive.google.com/file/d/1hC_UUPKk7EgzfZP7ydYX7ap-PK8oWSr5/view?usp=sharing

{7} https://www.strategic-culture.org/news/2019/09/01/the-canadian-prime-minister-needs-a-history-lesson/?fbclid=IwAR0d5sfZ90-sPqVRLzwaeirscfbBEVn2FUBRCtCs430RJrF8wDn1f8N4Z3U

{8} https://youtu.be/ktnAMTmgOX0 at 53:50~.

{9} https://www.globalresearch.ca/five-questions-and-answers-concerning-the-presidential-elections-in-cuba/5639230. This interview provides an additional information about how countries that are often condemned as undemocratic have evolved new forms of democratic governance.

{10} http://www.martinjacques.com/articles/articles-geopolitics-globalisation/understanding-chinese-governance/.

{11} https://thegrayzone.com/2019/05/07/gabor-mate-russiagate-interview-transcript/.

{12} Richard Smith, Green Capitalism: The God that Failed (2015), 134. A shorter version of this book is available as a free download http://www.truevaluemetrics.org/DBpdfs/MDIA/Green-Economics-Paper-by-Richard-Smith-140109.pdf.

Other Sources on this Topic:

August, Arnold, Cuba and Its Neighbors: Democracy in Motion  (2013). From the book cover: “August illustrates  how the process of democratization in Cuba is continually in motion and  argues that greater understanding of different political systems teaches  us to not be satisfied with either blanket condemnations or idealistic  political illusions”.




Kunstler, James Howard, Too Much Magic: Wishful Thinking, Technology and  the Fate of the Nation (Grove Press, 2013).






When China Rules the World

A review of Martin Jacques’ book When China Rules the World (2009)

by Iftikhar Ahmed

The Daily Times (March 31 2019)

In his researched and far-reaching book When China Rules the World published in the United States of America in 2009, Martin Jacques argues that we have only barely begun to understand what life will be like when China rules the world. Being modern is not necessarily being Western. Based on his extensive research work focused on Chinese history and comparative studies in Japan, the United Kingdom, the United States, and some Asian study centres and his experience of writing columns for The Guardian and The Times of London, et al, Martin Jacques developed an insight into a frame of reference and a vision of the end of the western world and the birth of a new Global Order. He has been visiting senior fellow at the London School of Economics (LSE ideas) a centre for the study of international affairs, diplomacy, and grand strategy. Martin Jacques has been a visiting professor at the Renmin University, Beijing, the International Centre for Chinese studies, Aichi University, and Ritsumeikan University, Kyoto, and the senior visiting research fellow at the Asia Research Institute, National University of Singapore. When China Rules the World is the first book to explain how China’s meteoric rise will extend far beyond the economic realm, unseating the west, and creating an entirely new global order. The role of economic and cultural relevance will, in our lifetimes, begin to pass from New York and London to cities such as Beijing and Shanghai. The West is deeply mistaken in believing that China is becoming more like the west. And increasingly powerful China will seek to shape the world in its own image, believes the author of this book. In a way, Martin Jacques’ book is a groundbreaking investigation of how China’s rise as an economic superpower will alter the cultural, political and ethnic balance of global power in the 21st-century.

When China Rules the World, an important book, full of historical understanding and realism, is about more than China. As suggested by the author, the ideas and assumptions will be different, unlike that of the North Atlantic power. And that difference will define the influence of the expected new world order. The book is a look beyond China: full of bold but credible predictions. Only time will tell how prophecies pan out. Food for thought is plenty and hence the credit goes to the author for the foresight and insight. There is, however, need to follow the lines and accept the challenge to go in for serious research-based studies to formulate propositions and hypotheses that follow objectivity, data and assumptions that could be scientifically tested for unbiased and realistic workable conclusions. If assumptions are wrong, we can not arrive at objective, workable, and realistic conclusions. The taste of pudding is in the eating. The end of the western world and the birth of the new global order depends on the quality of the world leadership and their concern for the people and the need for security, peace, and justice, over and above basic human needs.

It is important to seriously attend to the content of the book to get a real feel of what the writer intends to communicate to the reader. One must get knowledge of major periods in Imperial China. One must understand the meaning of China’s Ignominy. One must grasp the concept of “contested modernity”. That mostly covers what the author has to communicate on the changing of the guard. Theme then takes the reader to the age of China: that is, China as an economic superpower; the civilization-state; the middle kingdom mentality; China’s own backyard; and China as a rising global power. Systematically proceeding the next theme is the main idea – when China moves the world. Questions like “how sustainable is China’s economic growth?” and “what is the environmental dilemma?” have been discussed in the book.


The reason for China’s transformation has been the way it has succeeded in combining what it has learnt from the West, and also it’s Asian neighbours, with its own history and culture, thereby tapping and releasing its native sources of dynamism.


There are many differences that define China. Economic change, fundamental as it may be, can only be part of the picture. This view, blind as it is, to the importance of politics and culture, rests on an underlying assumption the China, by virtue of its economic transformation will, in effect, become Western. Consciously or unconsciously, it sounds like Fukuyama’s “end of history” view: that since 1989 the world has been converging on western liberal democracy. The other response, in contrast, is persistently sceptical about the rise of China, always half expecting it to end in failure. In the light of Maoism, the collapse of the Soviet Union, and the suppression of the students in the Tiananmen square, the argument runs, it is impossible for China to sustain its transformation without fundamental political change: unless it adopts the western model, it will fail. This book is predicated on a very different approach. It does not accept that the “western way” is the only viable model. It should be borne in mind that the West has seen off every major challenge it has faced, culminating in the defeat after 1989 of it’s greatest adversary, Soviet communism. It has formidable track record of growth and innovation, which is why it has proved such a dynamic force over such a long period of time.

The reason for China’s transformation has been the way it has succeeded in combining what it has learnt from the West, and also it’s Asian neighbours, with its own history and culture, thereby tapping and releasing its native sources of dynamism. We have moved from the era of either/or to one characterized by hybridity. Central to the book is the contention that far from there being a single modernity, there will in fact be many. Over the last half-century, we have witnessed emergence of quite new modernities, drawing on those of the West but ultimately dependent for their success on their ability to mobilize, build upon, and transform the indigenous. These new modernities are no less original for their hybridity; indeed, their originality lies partly in that phenomenon.

The problem, as Paul A Cohen has pointed out, is that the Western mentality – nurtured and shaped by its long-term ascendancy – far from being imbued with cosmopolitan outlook as one might expect, is in fact highly parochial, believing in its own universalism: or in other words, it’s own rectitude and eternal relevance. If we already have the answers, and these are universally applicable, then there is little or nothing to learn from anyone else. While the west remained relatively unchallenged, as it has been for the best part of two centuries, the price of such arrogance has overwhelmingly been paid by others, as they were obliged to take heed of Western demands. But when the west comes under serious challenge, as it increasingly will from China and others, then such a parochial mentality will only serve to increase its vulnerability, weakening its ability to learn from others and to change accordingly.

Most of what is China today – its social relations and customs, its ways of being, its sense of superiority, its belief in the state, its commitment to unity – are all products of Chinese civilization rather than its recent incarnation as a nation-state. On the surface it seems like a nation-state, but it’s geological formation is that of a civilization-state. As China once again becomes the centre of the world, it will luxuriate in its history and feel that justice has finally been done, that it is restoring its the rightful position and status in the world. China is increasingly likely to conceive of its relationship with East Asia in terms of Tributary state, rather than nation-state, system. The Tributary state system had lasted for thousands of years and finally came to an end at the conclusion of the 19th century. The rise of the developing world was only made possible by the end of colonialism. For the non-industrial world the colonial era overwhelmingly served to block the possibility of their industrialization. The land of colonialism was a precondition for what we are witnessing, the growth of multiple modernities and the world in which they are likely to prove at some point decisive. Chinese modernity will be very different from western modernity, and that China will transform the world far more fundamentally than any other new global power in the last two centuries. The Western powers cannot, however, comprehend that the change is on its way. On the other hand, what looks obvious also needs to be researched and subjected to scientific investigation. Facts must be identified and verified, and sociology of science must be understood.


The writer is a former director, National Institute of Public Administration (NIPA) Government of Pakistan, a political analyst, a public policy expert, and a published author. His book Post 9/11 Pakistan (2014) was published in the United States. His latest book Existential Question for Pakistan (2018) discusses a large range of important issues related to governance and policy, having importance and implications for a variety of professionals, policymakers, academics, politicians and administrators.


America’s Political Implosion

by Finian Cunningham

Strategic Culture Foundation (October 09 2019)

Zero Hedge (October 10 2019)

The polarization in American politics has become so extreme there seems no longer to be any center ground. The political establishment is consequently imploding into an abyss of its own making.

President Trump is being driven into an impeachment process by Democrats and their media supporters who accuse him of being “unpatriotic” and a danger to national security.

Trump and Republicans hit back at Democrats and the “deep state” whom they condemn for conspiring to overthrow the presidency in a coup dressed up as “impeachment”.

The White House is being subpoenaed, the Democrat-controlled House of Representatives wants to access transcripts to all of Trump’s phone calls to foreign leaders; Secretary of State Mike Pompeo has blasted congressmen for “harassing the State Department” in their search of evidence to indict Trump. Trump calls the impeachment bid a “witch-hunt”.

Republican Representatives protest that the US is facing a dark day of constitutional crisis, whereby opposing Democratic party leaders are abusing their office by accusing Trump of “high crimes” without ever presenting evidence.

It’s an Alice in Wonderland scenario writ large, where the gravest verdict is being cast before evidence is presented, never mind proven; the president is guilty until proven innocent.

Trump, in his turn, has berated senior Democrat Adam Schiff, the chair of the House Intelligence Committee, for “treason” – a capital offense. Are federal police obliged to arrest him? Schiff is accused of colluding with a supposed CIA whistleblower in concocting the complaint that Trump tried to extort Ukrainian President Volodymyr Zelensky to dig dirt on Democratic presidential candidate Joe Biden.

There seems no end to this political civil war in the US. The American political class is literally tearing itself apart, destroying its ability to govern with any normal function.

So-called liberal media outlets, in lockstep with the Democrats, inculpate Trump for wrongdoing, while they staunchly assert that credible reports of Joe Biden abusing his former vice presidential office to enrich his son over Ukraine gas business are false. Many Americans don’t see it that way. They see Biden as being up to his neck in past corruption; they also see a flagrant double-standard of the establishment protecting Biden from investigation while hounding Trump at every possible opportunity, even when evidence against Trump is scant.

What Trump is being subjected to is the same “highly probable” paranoia that Russia has been subjected to by Washington over recent years. Guilt is asserted without evidence. It becomes a “fact” by endless repetition of baseless claims, such as Russia allegedly interfering in US elections, or allegedly destabilizing Ukraine. Hundreds of economic sanctions have been imposed on Moscow as a result of this blame game, a game that, ironically, Trump has also indulged.

Ironically, Trump and the very highest political office of president is getting the same phobic treatment. No matter that the two-year Mueller Report into alleged Trump-Russia collusion collapsed in a pile of dust for lack of evidence, the Democrats and their media, as well as their deep state patrons, have persisted to accuse the president of enlisting a foreign power, Ukraine, to boost his electoral chances.

The transcript of Trump’s phone call with Ukraine’s Zelensky back in July shows he did not make a quid pro quo demand linking US military aid to a requested investigation into alleged corruption by former Vice President Joe Biden. Nevertheless, Democrats and their political establishment allies are relentless in pursuing the impeachment of Trump. Based on such flimsy reasoning, this impeachment process looks like a euphemism for “coup” – to overturn the result of the 2016 presidential election. The so-called “Russiagate” debacle failed for lack of evidence; now it is “Ukrainegate” that is the pretext for pushing the coup attempt.

Under freedom of information release, Judicial Watch in the past week has uncovered categorical proof that the Mueller probe was a coup attempt to oust Trump. Unsealed communications between the Department of Justice, FBI, and liberal media outlets show a clear motive and deliberate orchestration to topple Trump based on no evidence of wrongdoing.

America’s democracy and constitution is being trashed by unelected shadowy forces, aided and abetted by prestigious media outlets like The New York Times. These forces presume to know better or have more privilege than their fellow Americans who “voted the wrong way”.

The inescapable conclusion is that powerful political forces within the US simply do not recognize the democratic rights of the electorate who voted Trump into office. Not only do these forces not respect democratic principle, they also, patently, do not respect due legal process or the high offices of their own government. This is a lurking ideology of dictatorship and fascism. Paradoxically, these labels are pinned on the maverick Trump. More accurately, they apply to the politicians and media who claim to be “liberal” and “democrats”.

The accelerating political implosion in the US nails the lie to oft-repeated American proclamations about their nation being the paragon of “sacred” democratic virtue and rule of law. And the people who are doing the damage to US politics and its constitution are “patriotic” Americans, not Russia or any other imagined foreign adversary.

Is that not poetic justice after all the decades of calumny, deception, and self-declared “exceptional” American vanity.

America is at war with itself. It is Americans themselves who destroying their own political system, and perhaps even the very society, with their own hands and their addled, paranoid brains – without any assistance from a “foreign enemy”.

Copyright (c) 2009~2019 ZeroHedge.com/ABC Media, LTD



MMT Primer – Blog #45 Responses

The JG and Developing Nations

by L Randall Wray

http://neweconomicperspectives.org (April 11 2012)

I am responding quickly because the Minsky-Levy-Ford conference in New York City starts today.

Q1, Philip: I’ve been thinking a lot about the problems with imports and the like because it directly affects, for example, Greece, should they exit the euro. If they do so, their large dependence on imports will likely lead to a serious inflation. Another concrete example of heavy dependence on imports is (apparently) Argentina. A large amount of the inflation there – which, to my mind, could undermine the credibility of the Kirchner government if allowed run too long – is apparently due to the cost of imports. Is the most elegant solution to this not to work on the supply-side?

A1: Agreed, especially for developing nations that do not produce much that is in demand outside their country. This is particularly true of nations that rely on subsistence agriculture. The Job Guarantee (JG) can be used as a tool for development, including development of exports and/or tourism.

Q2, Hepionkeppi: Inflation in Argentina is an enigma, government says one thing and then the media claims “no, real inflation must be double”. But, as Paul Krugman says, this would mean GDP deflator would have to double as well and that would mean all the growth in the Argentina for the last decade would have been mirage. There would have not been growth at all. “A large amount of the inflation there is apparently due to the cost of imports”. I would think it would be the other way around, that high nominal price pressures in domestic economy depreciate the currency, and that raises the cost of imports. Maybe these pressures could be the result of cost-of-living adjustments (COLA) in the labour contracts? Who knows. More research would be needed. And I would think that in the presence of these kinds of COLA contracts not even JG would bring price stability. Or in the presence of powerful unions outbidding each other. Continuing price pressures could lead to oversized JG pool, as inflation eats away value of government debt, “outside wealth” in Modern Monetary Theory (MMT), or right-wing backlash, as they seek any reason to make life harder for the poor. Inflation would be the perfect excuse.

A2: Agreed: automatic indexing can be a big problem – it builds inflation into the system. This was the Brazilian problem. It was a major point made by Bresser in his analysis of Brazilian inflation – especially indexing of government payments (government employees plus contractual payments for everything). Breaking this cycle is painful. Note we do not advocate automatic indexing of the JG wage; rather, periodic adjustment. The more frequent the adjustment, the less effective it is at stabilizing wages and prices.

Q3, Golfer1john:Jefes workers produce uniforms for the government. “Why a Job Guarantee/ Employer of Last Resort (JG/ELR) program to produce uniforms for the government? If there are clothing manufacturers in the economy, why not buy from them? Apparently there were none before, and the government uniforms were imported? Could the government not simply advertise that it would pay extra for domestically-produced uniforms, and a uniform company would be started? Maybe this company could then produce clothing for the domestic market as well, at a competitive price.

A3: This is horses for courses: developing nations typically do not produce everything that is required – indeed, in some cases they produce little beyond food for subsistence. The “private sector” is typically very small. It makes sense to use the JG to replace imports by producing things that are needed domestically. School uniforms for kids can be an important product; in such situations reducing imports can be critical. In Argentina the clothing sector had been foreign-owned and in the crisis the owners just abandoned the factories. See the excellent documentary on worker take-overs. Co-ops became an important movement and many Jefes projects were organized as co-ops. It is a good experiment.

Q4, Golfer1john: The floating exchange rate is critical in giving the monetarily sovereign government policy space to pursue full employment. More specifically, is it not actually a willingness to allow the exchange rate to deteriorate that gives them this policy space? But, isn’t a falling exchange rate harmful, too, perhaps just as harmful as domestic inflation? And would not the policies to prevent it, such as tariffs, import controls, and capital controls, be harmful, too? I can see that if every country emphasized full employment, and provided the deficits to support it, then exchange rates would all suffer equally, which is to say they need not change much at all. Is that where we need to be going? Can this stuff work, really, in one country at a time? Especially a really large and relatively free economy like the US, where tariffs, import controls, and capital controls are unlikely to be used

A4: Impossible to make a general statement on whether falling exchange rate is “good” or “bad” – depends on situation. It helps the export sector, but does tend to be inflationary. Note Australia deals with wide flux of its exchange rate and thus terms of trade (as do most commodity exporters that float). Read Bill Mitchell on this. Note also many developing nations do not float. I have tried to offer an analysis of JG even for these nations. If they do not float, imports and thus pressures on exchange rates are a much more serious problem. Finally, although I did not discuss it here, capital controls are available and probably should be used by small developing nations.


Wray: MMT Primer – Blog #45

The JG and Affordability Issues with Special Considerations for Developing Nations

by L Randall Wray

http://neweconomicperspectives.org (April 8 2012)

Affordability Issues

As we have seen over the course of the previous 44 blogs, a sovereign nation operating with its own currency in a floating exchange rate regime can always financially afford a Job Guarantee/ Employer of Last Resort (JG/ELR) program. So long as there are workers who are ready and willing to work at the program wage, the government can “afford” to hire them. It pays wages by crediting bank accounts. If it credits more accounts than it debits through tax payments, a deficit results. This initially takes the form of net credits to the banking system, held as reserves. If the reserve holdings are excessive, banks bid the overnight rate down. The government can then either choose to let the overnight rate fall toward zero (or its support rate if it pays interest on reserves), or it can intervene to sell interest-paying bonds at the desired support rate; this will drain excess reserves. In no sense is the government spending on JG/ELR constrained either by tax revenues or the demand for its bonds.

Nor will spending on the JG/ELR program grow without limit. As discussed earlier, the size of the pool of workers will fluctuate with the cycle, automatically shrinking when the private sector grows. In recession, workers shed by the private sector find JG/ELR jobs, increasing government spending and thereby stimulating the private sector so that it will begin to hire out of the pool. Estimates by Phil Harvey and Wray put net spending by the government on a universal JG/ELR program at well under one percent of GDP for the US; Argentina’s Jefes program (a limited JG/ELR program) peaked with gross spending at one percent of GDP (this figure undoubtedly overstates net spending because in the absence of the Jefes program government would have had to provide more spending on other anti-poverty programs).

As discussed, a floating exchange rate provides the “degree of freedom” that allows the government to spend without worrying that increased employment and higher demand will threaten an exchange rate peg – by possibly increasing domestic inflation and/or increasing imports. Thus, fiscal policy is “freed” to pursue other objectives, rather than being held hostage to maintenance of the peg. By the same token, monetary policy can set the overnight interest rate to achieve other goals, rather than being determined by the rate consistent with pegging the exchange rate.

This is not to imply that the government will necessarily avoid any consideration of impacts on exchange rates while forming fiscal and monetary policy. However, if achievement of full employment is believed to conflict with maintenance of a constant exchange rate, the government in a floating currency regime can choose full employment. On the other hand, on a fixed exchange rate, a government that has insufficient foreign exchange reserves may not be able to “afford” to spend to promote full employment if that might lead to loss of reserves. In the next section, we see how such a government could still implement a version of the JG/ELR program.

The JG/ELR for a Developing Nation

A small developing nation presents several challenges. First, it may produce a small range of commodities and import a large number of types of goods that it does not produce (although many of these may not directly enter the consumption basket of much of the population). Further, its exports might be limited to an even smaller range of commodities. Growth of monetary income could immediately pressure the exchange rate.

Second, the formal sector could be small, with most production and employment in the informal sector – and with a large disparity between wages paid in the formal versus the informal labor markets. Third, the administrative capacity of the national government might be quite limited. Domestic infrastructure might be inadequate to allow significant expansion of productive capacity. And finally, its exchange rate is likely to be pegged.

If a universal JG/ELR program is implemented nationally with a wage equal to the minimum wage in the formal sector, there would be a flood of workers from the informal sector. Monetary incomes would rise and the demand for consumption goods – including most importantly the “luxury” imports that had been beyond reach for most of the population – would increase. The trade balance would deteriorate and the government would quickly lose the international reserves necessary to maintain the peg. Domestic prices would rise (although direct pressures on prices of domestically produced goods would be limited if these were inferior goods, mostly purchased by poor families), but more importantly, import prices would rise as the currency depreciates. An exchange rate crisis would be likely to trigger an economic crisis.

Is there any way to avoid these consequences?

First, let us see how this nation can reduce impacts on prices, the exchange rate, and the trade balance. It will need to limit the program’s impact on monetary demand, which can be done by keeping the program’s monetary wage close to the average wage earned in the informal sector. Thus, rather than setting the wage at the minimum wage in the formal sector, it is set at the wage of the informal sector.

However, poverty can be reduced if the JG/ELR total compensation package includes extra-market provision of necessities. This could include domestically-produced food, clothing, shelter, and basic services (healthcare, childcare, eldercare, education, transportation). Because these would be provided “in-kind”, the program’s workers would be less able to use monetary income to substitute imports for domestic production. Further, production by the workers could provide many or most of these goods and services – minimizing impacts on the government’s budget, as well as impacts on the trade balance.

If the program directly provides basic necessities as well as monetary income equal to that previously earned in the informal markets, there will be some net impact on monetary demand. Further, production by JG/ELR workers might require imports of tools or other inputs to the production process. Careful planning by government can help to minimize undesired impacts.

For example, imports of required tools and materials can be linked to export earnings or to international aid. Because production techniques used in a JG/ELR program are flexible (production does not have to meet usual market profitability requirements – as Mat Forstater has shown), government can gradually increase “capital ratios” in line with its ability to finance imports. Further, JG/ELR projects can be designed with a view to enhance the nation’s ability to increase production for export. The most obvious example is the provision of public infrastructure to reduce business costs and attract private investment.

A phased implementation of the program will help to attenuate undesired impacts on formal and informal markets, while also limiting the impact on the government’s budget. Further, starting small will help the government to obtain the necessary competence to manage a larger program. For example, Argentina limited its program by allowing participation by only one head of household from each poor family.

The program can start even smaller than that, allowing each family to register a head of household, but allocating jobs by lottery so that the program grows at a planned pace. The best projects proposed by individual community organizations (for example, at the village level) can be selected to employ a given number of heads of households from the community (again, with selection of workers by lottery).

Decentralization of project development, supervision, and administration can reduce the administrative burden on the central government while also ensuring that local needs are met.

As another example, India implemented a JG only for rural workers, who now have the right to demand 100 days of work. Limiting the program to rural workers helps stop the migration of population to cities in search of jobs, and limiting the program to 100 days of work per year reduces the number of projects to be created (and also reduces disruption in the local agricultural sector that typically needs labor for only part of the year; the program employs workers when they are not employed in agriculture).

International aid agencies can provide some financing for the ELR program, as they did in the case of Argentina’s program. Of course, a sovereign government can always pay wages in the domestic currency. So international aid is not needed in order to pay the wages. However, if imports increase because of poverty reduction, international aid can provide needed international currency. Further, the program might need some tools or equipment that must be imported. For these reasons, international aid in the form of foreign currency could be welcome in some cases.

However, international borrowing should be avoided unless the JG/ELR program will directly increase exports to service international debt. Some of the output of the JG/ELR program can be sold in domestic and perhaps in international markets to generate revenue. For example, Jefes workers in Argentina produce clothing and furniture that is sold in formal markets. Further, some of the output of the program can substitute for government purchases; for example, Jefes workers produce uniforms for the government. Generally, however, JG/ELR production should not compete with the private sector. And government should avoid building up foreign currency indebtedness that would be difficult to service.

Finally, government can use the traditional methods of protecting its trade balance and exchange rate peg: tariffs, import controls, and capital controls. Remember: JG is an add-on program. To the extent that JG/ELR raises monetary wages and monetary consumption, its impact on the trade balance and exchange rates is similar to the impact of domestic growth more generally. The arguments for and against “intervention” in the area of international trade and capital flows are well-known and need no further discussion here. While there has been a strong bias against such intervention, the consensus has shifted somewhat in recent years toward the view that protection is acceptable on a case-by-case basis.


Battle of Military Drones has Begun!

by Vladimir Platov

New Eastern Outlook (October 10 2019)

Robot technology has long become an indelible part of our world. Robots are actively used in our daily lives, in production facilities and are playing an increasingly important role in the military sphere. Spellbinding scenes from Star Wars movies depicting battles involving thousands of military robots and various pieces of equipment that captured our imagination not too long ago are now part of our reality. And any country that will be able to conduct large-scale military operations on land, in the sky, in the sea, and in space first with the aid of unmanned military vehicles would, undoubtedly, enjoy a considerable advantage in any future armed conflicts and wars in comparison to its opponents.

This was evidenced by a recent attack by Houthi rebels on an oil processing facility in Saudi Arabia. The incident served to demonstrate the types of approaches and weapons that will be used in wars in the next decades.

For the past 170 years, the means of waging armed conflict was developing world-wide towards the possible use of military drones! After all, unmanned combat aerial vehicles (UCAVs) were first utilized on 12 July 1849, when the Austro-Hungarian Army deployed them (hot air balloons were chosen to carry shrapnel bombs with time fuses, the latter were used to initiate the dropping of the explosives) to suppress a rebellion in Venice. However, at the time, the UCAVs proved to be fairly ineffective on the battle-field, which is why their first use in armed conflict was not widely publicized.

When discussing governmental usage of drones, it is enough to remember that the United States Air Force alone has approximately 1,150 UAVs at its disposal. They are stationed in USAFE (US Air Forces in Europe) and PACAF (Pacific Air Force) areas of responsibility. In addition, the US Army, Marine Corps, and Special Operations Command have approximately 5,000 RQ-11 Ravens (small reconnaissance unmanned aerial vehicles or SUAVs). Moreover, US Army ground troops are equipped with more than 100 MQ-1C Gray Eagle attack and reconnaissance UAVs, and the Marine Corps has 275 RQ-7B Shadow 400 unmanned aerial systems for intelligence, surveillance, and reconnaissance and 1,400 small reconnaissance RQ-14 Dragon Eye UAVs. And there are far more UAVs at the disposal of the US Armed Forces than those listed above. Despite the fact that American troops are equipped with a wide variety of UAVs ranging from lighter (under nine kilograms) to heavier (over 600 kilograms) ones that are either used for intelligence gathering or in attacks, since 1991 the United States has had a preference for smaller UAVs. This choice is based on its experience in waging several local conflicts involving ground and Marine Corps troops, some of which are still raging in Afghanistan, Iraq, and Syria.

Nevertheless, the use of UAVs by Houthis in the attack on the oil processing site in Saudi Arabia showed that one does not need to have a technologically advanced military force (as, for example, that of the United States today) to conduct a strike resulting in considerable financial losses and distress using such weapons. Even a military unit that does not have access to cutting-edge weaponry or vast amounts of money can nowadays carry out an attack of this nature. In other words, if 100 years ago the global community feared terrorist bombers who used explosives as means of protest against governments and societies, today, anyone who simply has a moderately-sized UAV poses a considerable threat.

At present, even nations and terrorist organizations that are not very powerful can have access to modern weapons and conduct strikes against their opponents resulting in considerable damage. Terrorists, among others, can get their hands on such weaponry via various networks run by private and state organizations of different nations that wish to use terrorist groups for their own financial gain. We only need to recall a recent report by US television channel CNN stating that Saudi Arabia and its coalition allies (which are engaged in a military operation in Yemen) were passing on US-manufactured weapons to extremists linked to Al-Qaeda (a terrorist organization banned in Russia), thereby violating prior agreements with Washington.

Let us take US company Throwflame as an example. It began selling flamethrower attachment for drones this year. This particular manufacturer always tries to point out that its products are only meant for peaceful purposes, that is, first and foremost, for farmers, as a “flying flamethrower” is ideal for clearing fields of dry plants and weeds, and for destroying pests’ breeding areas. However, one does not have to be an expert to understand what kind of damage such flamethrower attachments for UAVs could cause to oil and gas processing facilities of an opponent!

Nowadays, the use of drones is heavily regulated in many nations considering the fact that they are capable of performing a wide range of functions and numerous tasks. However, there are no international norms and rules at present, primarily because of lobbying efforts made by the sellers and manufacturers of unmanned vehicles (aerial as well as other types), especially in the United States.

As for attack and reconnaissance UAVs, nowadays, any nation with an army has such drones, since its military staff have understood that in the future armed conflicts will be fought with this high-precision weaponry and not weapons of mass destruction as half a century ago. In 2015, English rock band Muse even released an album called Drones. On the world wide web, one can find any information about UAVs, such as possible means of purchasing them, their manufacturers, and even selling points. For example, anyone interested can learn that the benefit of miniature explosives-laden drones is their high precision (owing to GPS) despite slow speeds.

At present, a number of countries are using Artificial Intelligence (AI) and Neural network technologies in their work on unmanned combat aerial vehicles. However, we must not forget that despite their advantages, AI-equipped drones will not have a moral compass. Hence, a head of any terrorist organization who gets their hands on such a machine could reprogram it, thereby transforming the drone into means of inflicting terror and devastation, which could even lead to the Third World War.

In conclusion, since the use of UAVs in armed conflicts is becoming the norm, we must consider all the risks associated with this development. And we should also think about formulating an international agreement that includes measures restricting the use of drones, just as we did before with treaties aimed at limiting the spread of nuclear weapons and other weapons of mass destruction.


Vladimir Platov, an expert on the Middle East, exclusively for the online magazine New Eastern Outlook.