Seeking Full Employment Without Falling Prey to Neoliberal Traps

LYNN FRIES: Hello and welcome. I’m Lynn Fries producer of Global Political Economy or GPEnewsdocs. Today’s guest is William Mitchell. He will be talking about a progressive vision of society for a post neoliberal world.

William Mitchell is a Professor in Economics and Director of the Centre of Full Employment and Equity, at the University of Newcastle, Australia. Some of his recent books include Eurozone Dystopia, and Reclaiming the State. Welcome, Bill.

WILLIAM MITCHELL: Thank you. Thanks for having me.

FRIES: We are going to be discussing a progressive vision of society, as opposed to that of the neoliberal world. The obvious place to start seems to be the role of workers. What would a progressive concept of productive labor look like in the private and public sector respectively?

MITCHELL: If you go back to the sort of 1930s, when a lot of these ideas started to be developed, there was a concept called the gainful worker. And a gainful worker was defined as someone who really contributed to the creation of private profit through their labor.

So already it was a biased or a loaded concept that was explicitly associated with capitalist surplus value production and realization of profit. And so, if you think about that, then it excluded a whole lot of other things that, uh, people could do with their labor power, that didn’t contribute to private profit. And that really became the, the dominant concept of productive work.

That if you weren’t doing that, then you were unproductive. And so, a whole lot of biased concepts and opinions about, for example, public sector employment that aims to provide services to the community. That was considered to be somewhat suspect.

And going one step further, if the government sought to use its fiscal capacity to introduce job creation programs when in times of high unemployment (then was the sort of work that we saw during the Great Depression and subsequent downturns), that work was dismissed as make work or boondoggling or leaf raking. You know, a number of pejorative descriptors that were designed to bias the opinion of the listener or the reader to: well that work is useless and it’s not productive.

And that’s really biased the way we’ve thought about what prospects we have for solving mass unemployment and the options that governments have. Because governments then, particularly in this neoliberal era, have become incredibly fearful of being dismissed as supporting make work schemes. And it’s really turned our attention away from really useful policy implications.

Now if you then take that orthodoxy and think about, well, what’s wrong with it? Well, what’s wrong with it is it evaluates worth in terms of private costs and benefits. So what’s good for the bottom line of a corporation is equated with what’s good for society. Now there’s a whole body of literature that tells us that that can’t possibly be true.

That there are so many things that can be done in a societal sense that don’t have anything really to do with advancing the profit potential of corporations that add value to our lives and our society which can be undertaken. And so in my view, we have to broaden our concept of worth into social benefits and social costs and consider things not in terms of private terms but in terms of social terms.   

Now there’s a whole range of activities then that immediately become productive and worthwhile, that will never be done as an outcome of the calculus of whether it’s profitable for private companies or not, and are incredibly beneficial to society.

So once you start thinking like that, a very broad concept, then the options that open up to policy makers and our response to those options in a political sense become quite different to the way we think now.

FRIES: Explain how we got to this way of thinking. How as you say our way of thinking about work has changed from thinking of work as something that’s beneficial to society to thinking work is only valuable if it contributes to profits in the private sector, so private profit. And that public sector work is worthless, a boondoggle. 

MITCHELL: Well, I think in the immediate post Second World War period, the role of the state was really different to what it is now. The state in my view in broadly the 30 years after the end of the Second World War was a mediator in the conflict between labor and capital.

And so it stood between those two conflict conflicting classes and sought to appease that conflict in various ways, but with a definite bias towards lifting the material prosperity of labor. Through a number of ways but broadly through ensuring there was true full employment. That everybody who wanted a job could find a job. Ensuring that there was a safety net for those who for some short period couldn’t find work.

That was then broadened into concepts of welfare states that ensured the people who couldn’t work were able to be supported in sickness, in incapacity of some sort or another through age. And the expansion of public education, public transport, public health systems.

All the things that we identify with that period of material prosperity, falling inequality. And, you know, pretty strong economic growth, and very high levels of employment, and major reductions in poverty after the destruction of the Second World War.

Now, you know, that didn’t appease; that didn’t satisfy the interests of capital. But they were really stuck because that social democratic era was a very powerful political force. That we were as voters and citizens, we were pretty engaged in ensuring that our governments would honor the agreements, you know, the visions that they had outlined in 1945, 46, 47.

Now towards the end of the 1960s, there was a major counter attack from capital. It was organized. In the United States, there was a so called Powell Manifesto that was released. And that manifesto outlined a multi pronged way in which capital could fund initiatives to restore the political balance in their favor.

And the rise of think-tanks and the infiltration of the media and the creation of what we now see as Fox News in America and, you know, the, the derivatives elsewhere. The infiltration into the education programs and, and a range of other strategies that were very well funded and very well executed.

And the state didn’t go away; it didn’t wither away with globalization. It just became reconfigured to serve the interests of capital. The accomplishments or the changes that we deem to be characteristic of neoliberalism were really accomplished through the legislative power of the state.

And the state has really become an agent of capital working to benefit that class and using the working class as fodder.

And, progressively what that strategy has done has created the so called gig economy; has retrenched a lot of welfare provisions that the state provided. Privatized a lot of the utilities and turned them into profit making bonanzas for capital. A range of other things that have accompanied that retrenchment of the social democratic era.

And that’s where we are now. And you know we’re in a parlous state because of it.

FRIES: So with the retrenchment of the social democratic era, you are saying the state did not go away. Bit in keeping with a planned strategy from the late 1960s, capital reconfigured the state to serve its interests. From the gig economy to the privatization of public utilities, you have given us a diverse range of examples of the outcome.

Your argument being a progressive framework would place society rather than private profits at the center of public decision making. And that to advance this kind of progressive vision, progressives will need to re-establish a core focus on the main contradictions of the neoliberal paradigm.

So expand on that and also give us a sense of whether or how such contradictions and so conflicts can be resolved within the capitalist system. Start with some history on how this paradigm became mainstream in the first place. And so what you see as deep roots to the current challenge facing progressives.

MITCHELL: I think the progressive side of the debate really sold out in the 1970s. And they bought the line that the pressures of global capital and the globalization of supply chains, etcetera, had rendered the state ineffective. And that the role of the state had to be modified. So that it initially appeased the foreign exchange markets or else those markets would retaliate and cause currency havoc within the countries.

And so at that point, the progressive side of the debate really abandoned the macroeconomic terrain as a contestable terrain. And started to focus research and activism on all sorts of things like identity and methodology and a whole range of important but distractions from the main game.

We evolved into progressive writers even saying that the old framework where class conflict was the organizing framework for discussion was irrelevant now. And so you had progressive writers sort of talking about, to use an example, saying that working class women had more in common with their female bosses than they did have with their fellow male workers.

And, you know, the abandonment of economic class as an organizing framework has been very pronounced. The issues about identity or race and sexuality and gender, they’re not unimportant areas of inquiry. But I don’t consider that they should subjugate the starting point as being economic class in a capitalist system.

And so what we’ve had is a few decades of progressive discussions that are really conducted within the framework set at the macro level by the neoliberals, by the mainstream, by the orthodoxy. And that becomes a straitjacket.

I’ve written today  about a former British labor prime minister saying that the governments haven’t got enough money to deal with climate change. And that we then have to tax petroleum companies to get the money. Well, that’s just absurd. You might want to tax the petroleum companies for another reason, but the advanced countries have all the currency power that they need to address climate issues.

So we’ve had this period where we’ve been in this straitjacket on the progressive side of the debate. Tinkering around the edges and talking about how we’ve got to facilitate financial markets to fund the climate challenge.

All of these distractions that have led us further and further into the abyss. Progressively I’m thinking now that the real issue, and I’ve probably always thought this, but I’m now articulating that as a senior sort of citizen in the academy is that the, the real problem, you know, human civilizations have collapsed historically.

I think that we’re now at the end game of neoliberalism. And probably the end game…and neoliberalism is probably the most advanced form that capitalism as a system of production and distribution can go. And I think that the conflicts and the inherent contradictions of neoliberalism, and hence capitalism, are reaching an end point.

We’re about to make some sort of change. Now, what I mean by that is that I don’t believe, in an existential way, that human society in its current form can survive, where the primary decision making   is based upon the pursuit of private profit. The privileging of private profit above all of the else I don’t believe is a sustainable method of running our world.

FRIES: The primary decision making calculus you refer to is of course part and parcel of the macro-economic framework and so policy options set by neoliberalism. You already cited some instances where the framing of debate being articulated by the traditional political left and even progressives has acquiesced to that framework. Talk more about the path taken by the traditional political left.

MITCHELL: Well in my last major research effort, which came out in a book called Reclaiming the State (Pluto Press 2017) and I wrote that with a co-author, my task there was to try to understand when the turning points occurred in history.

When did the social Democrats become neoliberals? What were the precipitating events in world history where these changes occurred? And you can trace them back, I mean, a lot of people think, for example, that Margaret Thatcher led the first monetarist government. Well, no, she didn’t. The British Labor government with James Callaghan as Prime Minister was the first monetarist government.

And you know, in the early 70s the ideas of Milton Friedman and the monetarists startedto take over the academy. And then they started to permeate out into central banking and Treasury Departments. Those ideas really, you know, the British Labor Party were the first to embrace them wholly under James Callaghan and Dennis Healey as his chancellor.

And you had that famous speech at the 1976 annual labor conference in Blackpool where Callaghan said that the idea that governments can create jobs by spending is over. Governments now have to manage inflation and have to appease foreign exchange markets.

And that was the beginning.

So in the late 1970s in France, the so called conservative government with Raymond Barr as the Minister for Finance and Economics, you know invoked very hard inflation first policies. Which of course didn’t bring down inflation, but caused increased poverty and unemployment and misery for the French people.

Now, Francois Mitterrand was a socialist and was elected to reverse all of that. H e came to power in that time on a fundamental socialist agenda with Jacques Delors as his minister for finance.

But by 1983 they had succumbed to neoliberalism.

You had the famous turn to austerity in 1983. Where the finance ministry overruled the planning ministry which was still Keynesian. And, uh, you had the so called ‘franc fort’ policy, the strong franc policy. Jacques Delors basically told the French people as Minister for Finance, that unless they behave like Germans, then France was going to become an impoverished state.

You know, the turn to austerity was the adoption of neoliberalism by a socialist government.

And Jacques Delors then went on to become a European Commission boss. And he led the way to create the Economic and Monetary Union, the Eurozone, with his work in the late 1980s. Whichhas become the exemplar of neoliberalism embedded in the legal framework even of the European Union.

And this was all driven by so-called left wingers, progressive socialists, whatever you want to call them, Social Democrats.

Progressive forces have become sidetracked in, as I said earlier, not unimportant issues, but sidetracked issues and have spent a lot of time with internecine intellectual battles and political battles between between ourselves about all sorts of things.

The main game the macroeconomics has just become an uncontested space where the progressive political forces will say: Oh, we’ll get the budget back into surplus slightly more slowly than the rest of them. And we’ll do it slightly more fairly than the conservatives, but we’ll still do it.

And not realizing that doing it, whether it’s quickly or slowly, is unviable and destructive.

FRIES: Give us a picture of a progressive vision of constructive and viable ways the state can act. And more specifically, the role of public sector enterprises.

MITCHELL: First of all, we’ve got to recognize that all the stories that my profession, the economics profession, tells us about the capacities of our governments are just fictions.

And one of the reasons why we have allowed the sort of principles of social democracy to go by the wayside is because we have all of these beliefs in the government going to go broke or if it spends too much it’ll tax us into extinction. And all of these fictions are just narrowing down our perception of what our governments can do on our behalf.

So that’s my principal role as an academic, to educate people about those fictions and to provide them with a much more realistic appraisal of what our governments can do and what the limitations on our governments are. They’re not financial limitations, they’re resource limitations.

Once you start thinking like that the scope for say fiscal policy, spending and taxation, broadens massively. And the options that we would start seeing are quite diverse and really adventurous if we really could embrace that sort of truth.

That’s the first step. Once we have that perception, we’ve got to start thinking of the state as an enabler rather than just an agent of capital.

That’s going to require, for example, renationalization of most of our large utilities; and huge public infrastructure investment, and a revitalization of our public health systems, and much tighter regulation of private corporations. And from my perspective, a fundamental outlawing of almost all of what goes on in financial markets now.

Okay, people will say pie in the sky and I agree. That’s why I’m leaning more these days to fundamental system change rather than being able to do that type of required adjustments within the scope of the capitalist ownership system.

FRIES: Comment now more about government policies to support full employment.

MITCHELL: Well if you go back to the true full employment period after the Second World War, there was strong private sector employment growth in the reconstruction phase and then subsequently as societies became richer and mass consumption became a norm. And there was strong public sector employment growth as we expanded the welfare state and management of public infrastructure and public services.

But those two sources of employment were still not sufficient to ensure that everybody had a job. What the third component was that the state stood ready to always provide jobs for anybody who wanted them. And they were inclusive to even the worker who had the most disadvantages.

And so you had a whole range of jobs in public infrastructure agencies like roads, railways. Local government in, you know, gardens, parks, a whole range of jobs all through the public sector that were relatively low paid through a minimum wage or around that. They were always available.

They didn’t discriminate on color, on gender, whether you were mentally ill or not. Whether you’d just come out of prison or not. Whether you were just wanting a short term job or not. They always were there to soak up the people who, for whatever reason, couldn’t find a job in the, let’s call it, the regular economy whether it be private or public sector.

Now, it’s the only reason we had that strong employment during that period. Of course, that was one of the casualties of the neoliberal attack on governments. And one of the reasons that attack occurred was because the corporate sector wanted a pool of unemployed that they could exploit to suppress wages growth.

And, you know, this was this beginning of the era of redistribution away from wages towards profits. In Australia, for example, in the 1970s, the share of wages in GDP was around 60%. It’s now below 50%. And that redistribution has gone to profits. And so, you know, that occurred as an attack on trade unions, on pernicious industrial relations legislation but also the creation of a permanent pool of underemployed and unemployed.

Now, my belief is that a society that aims to be sophisticated, inclusive, has to provide a safety net of jobs. So that anybody can walk up and have a job on any day that a person needs a job. And we have the financial capacity and the unmet community needs to make those jobs meaningful, to pay them at a socially acceptable, inclusive minimum wage.

Now what I mean by that is not a poverty wage. It’s a wage that allows a person to be included in society. To go to sporting events when they want to at the weekend, to have a holiday, to go to the opera if that’s their inclination, to provide risk manage for their families, and have adequate housing and nutritional standards.

Now, every nation has the capacity to do that and that would provide a sort of minimum level of security and sophistication for society and satisfy the human need to feel included and productive. And our concept of, you know, going back to our beginning point today, we can broaden productivity to be very inclusive.

So you know, the extreme example I use to make the point is that a major problem in Australia in summer are people drowning in our oceans because they go in and they’re unprepared. Now, who knows the oceans the best? Well, the surfers, who love to ride the waves off our east coast beaches.

Now I would then offer the surfers a guaranteed job. And say: okay, you’re living now at this guaranteed public sector job. Well, you can surf. Go for it.

What else are you going to do as a responsible reciprocation for that? Well, you can provide lessons for school children on the beaches about water safety. Teach them to learn to interpret rips in the ocean. And when to go in and where to go in and when not to do that.

Now would that be productive? Massively productive, it saves lives. It increases community enjoyment. It provides much more sustainability for our summer beaches and our recreation and our enjoyment. Now, under conventional productivity measures, that would be considered unproductive activity.

But under my broad concept of productivity, that’s a massive societal gain. Everybody becomes happier, safer, and has more enjoyment and more sustainable communities. And that’s an extreme example to push the debate out to the edge, as to what I mean by broadening out our concepts of effective use of our resources.

The mainstream orthodoxy considers all of those resources should be in the service of private profit. Whereas I see that our resources should be in the service of society and the well being of our planet.

And so it’s the objectives that you’re applying those, trying to minimize waste and applying those resources to that matters. And it’s a world of difference using labor resources effectively to help society as opposed to help some corporation rip everybody off and walk away with massive profits.

I think that’s the difference. That it’s what you apply the resources to that. We should be thinking about.

In Australia at the moment there’s 10 percent of the available and willing workforce who are either unemployed or underemployed.

And that’s a massive waste of resources and those people want to work. You know, often progressives say: Oh, well, we should have just guaranteed incomes because people don’t want to work. Well, the reality is that when you do surveys of the unemployed and the underemployed, they all want to work.

And progressives should be pushing governments to do everything they can to reduce underemployment and unemployment. There’s no doubt about it. The government can buy whatever is available for sale in its own currency, including all idle labor. So once you understand that, then you immediately understand that if there’s mass unemployment. As there is now, then that’s a political choice, not an inevitability.

And progressives seem to, you know, a lot of the basic income, uh, gang, uh, start with the presumption that the government can’t do anything about unemployment. So let’s find a solution given that there’s going to be mass unemployment. Well, my solution goes one step before that and says it’s a political choice.

For those that can work, I think we’ve got a moral obligation and a societal obligation to do what we can to improve the well being of our society in material terms without destroying our natural environment.

We’ve got to pressure politically our governments to provide jobs for all. And then, you know, for those who can’t work, provide adequate income and safety net security, that’s for sure.

FRIES: Expand on this issue you raise, that a job guarantee is better than a basic income. I am thinking here specifically of your argument that a Job Guarantee provides what you call a strong evolutionary dynamic in terms of establishing a broader transition away from the unemployment and insecurity intrinsic to the capitalist mode ofproduction. Whereas the basic income does not. Explain that.

MITCHELL: That’s right. I mean, you know, if you distill the basic income down to what it is, is it’s a consumption subsidy. It’s saying, it’s saying to society. Listen, we’re not, we’re not prepared to give you a job. We’re not prepared to allow you to contribute to, to, to society through your labor and production. But what we want is you to be, is not to starve and we want you to be able to buy goods and services so that capitalists can make profits.

And so really it’s reducing humanity down to a consumption unit. And not realizing that work is much more than earning an income.

Work is a way in which we identify with each other in, in, in the community. Which we get self esteem and, uh, you know, a feeling of worth. That we’re contributing to the broader social goals. And we’re part of a community of workers.

The basic income crowd sort of completely forgets about all of that. And they just want us to be consumption units.

The evolutionary part of the job guarantee that you referred to, I think is the key, because I don’t think we’re ready yet as societies to have people not working. Both individually, we’re not ready to do that ourselves, because our sense of worth is embedded in our work. But also our sense of looking at our next door neighbor. We don’t want them to be not contributing while we’re contributing. That’s the state in my view of society at the moment.

Also we need time to embrace the surfer example I gave you. So by introducing public sector work that really pushes the envelope out on what we consider to be productive work and what we consider to be of value to society, we can slowly but surely appreciate a much wider scope of human activity that takes us further and further away from a relationship to capitalism as worthwhile and not being related to capital as being worthless.

So we eventually get to an evolutionary stage where we understand that a whole range of activities that have got nothing to do with private profit are of extreme value to us and are to be promoted. I think that if we can engender that sort of evolution, we have the best chance of minimizing a chaotic end to all of this.

And those things, getting back to the beginning again, are incredibly productive in terms of a measurement system that values, that measures productivity by social worth and social value rather than private profit and private value. And I think that should be the progressive agenda. It’s not, but it should be. And it’s certainly my agenda.

FRIES: We haveto leave it there for today.William Mitchell, thank you.

MITCHELL: You’re more than welcome. Thank you for having me.

FRIES: And thank you for joining us.