Wednesday, March 15, 2023

Discussing Kyle's video on the federal reserve, and why jobs will never be the answer to our economic woes (repost)

I posted this as a topic on a secular talk related forum, but I figured it would make a good blog post too, as it encapsulates so many thoughts I've been wanting to express lately but I've been struggling with doing.

So, Kyle had this video today going on about the fed raising interest rates and trying to increase unemployment in order to reduce inflation, and it showed Warren blasting them for throwing people out of work, and then kyle covered it.

I decided to make my own topic to soapbox about this as it's a topic that I'm highly passionate about, and I really want to hammer a point home that much of the left seems to not get.

Kyle sometimes gets glimpses of the economic reality as I see it, going on like "gee, it's as if capitalism is designed to always screw over a certain number of people" and that's...kinda sorta true. And that's kind of the direction I wanna go with this.

Discussing the fed, monetary policy, and the phillips curve

So, let's talk the fed and monetary policy in this country. The federal reserve is, in essence, the pacemaker of the economy. It has two mandates, which run directly counter to each other, and normally needs to position the slider at just the right point on the scale. On the one hand, the fed has a role to minimize unemployment. It aims to bring the economy as close to full employment as possible. On the other hand, it also needs to keep inflation down. It does both by manipulating interest rates to reach the ideal point on the fulcrum between the two. Generally speaking, raising interest rates makes it harder for new businesses to start and to hire new workers, and lowering them makes it easier. And generally speaking, we aim for something like a 4% unemployment rate, with a 2% inflation rate, give or take.

The inverse relationship is known as the phillips curve, denoting an inverse relationship between unemployment and inflation, which I feel a need to lay out here.

Discussing why the inverse relationship between unemployment and inflation exists

So, in this country, we tend to value jobs and work. We see jobs as THE way to get out of poverty. And both sides, left and right, they talk nonstop about jobs. Jobs jobs jobs. During the recession, what did the debate over policy look like. The right worshipped the concept of the glorious "job creators", ie businesses, and the idea that we need to give them more money so they can create jobs. But...here's the thing. Businesses dont create jobs for our interest and well being, they create them to do things and turn a profit.

And of course, Obama talked about "shovel ready" jobs, and our recovery from the great recession has largely been a matter of service jobs. many of which pay poorly, arent unionized, etc.

During the great recession, inflation was very low, and the fed got so loose with its monetary policy that it literally had to pump money into the economy via quantitative easing just to keep the entire system from collapsing. Unemployment reached as high as I think 10%, and that means that for every 100 people looking for a job, 10 people can't find one.

That makes the market extremely hostile to workers, which is why we had people applying to hundreds of jobs, and businesses were very choosey about who they hired, if they hired at all. Often times, people ended up being told that they were lucky to have a job at all.

But...let's face it, the ideal to the economy isn't 0% unemployment, it's 4%...why? Simple, it's all that can be sustained. if you go under 4%, businesses start having trouble finding workers. And that means they have to raise wages. Which often increases input costs, which leads to prices rising, which leads to calls for higher wages, which the workers get, which leads to higher input costs, which leads to prices increases, which leads to higher wages. This is known as a wage price spiral, and is very bad for the economy too. basically, the economy reached peak productivity, it cant create more stuff, there isnt a pool of workers for the economy to keep expanding, so you end up with money chasing goods that don't exist.

I will be honest, Kyle is right in saying that that's not EXACTLY what's going on here. As we've seen from the economic policy institute, it's not really worker bargaining power and wage price spirals driving this, it's mostly supply chain issues and corporate profits. But...the fed is largely going to respond to any inflationary spike with "we need more workers out of work to drive consumption down". And it will work to get inflation under control long term probably, the real question is, at what cost to workers and consumers in the economy?And that's a good question. It's gonna suck if we go this route. But that's how the fed thinks. High unemployment, lower interest rates and even pump money into the economy to keep it afloat. High inflation, raise interest rates and create unemployment to drive down consumer spending.

Focusing on how screwed up this weird game of musical chairs is

So, let's go back to this phillips curve relationship thing. So....at the best of times, unemployment is 3-4%. That means for every 100 workers, 3-4 can't find jobs. And that's not including the people who are discouraged, that's not including the people who take on jobs, and those jobs suck and don't pay a living wage.

Speaking of which, we always hear stuff about how a higher minimum wage would increase unemployment. Even if it's true, we're simply choosing between a system in which we have more people working but unable to meet their needs, and more people working and meeting their needs, but also a lot of people who can't work altogether. But notice what we don't have. A society in which everyone can meet their needs through work.

Kyle was onto stuff in previous videos when he said that it's like capitalism is always gonna screw some people over. Because IT IS. It's literally impossible to have a society in which everyone is employed and meets their needs through work. You can't have it. it can't happen. All of this talk about creating jobs is like a carrot on a string. We talk all day about jobs jobs jobs, but at the end of the day, the reality is, that this is the best it's ever gonna get. An economy where most people who want work can find it, but is bordering on or flat out in high inflation is the best we're ever gonna see. Structurally the economy cant do better than that. Because capitalism is like a game of musical chairs. It doesnt work if everyone has a chair. We can talk about creating more chairs, but there will never be enough and if there is the entire game starts collapsing in on itself from high inflation.

So all of this talk about higher minimum wages, and jobs programs, and stuff like that are all window dressings. All of this talk of workers owning the means of production isn't really gonna help either. Because once all that surplus value is redistributed to workers, you get the same problem, a wage price spiral as money starts to chase goods that aren't there, and then workers want more money to keep up with the cost of living, and yeah. The fact is, capitalism, socialism, it's all window dressing to some extent to me. Because at the end of the day, both systems will have the same problems under markets. And if you do away with markets like the hard socialists want, uh...that's what the USSR and crap did, and I want NONE OF THAT. Market socialism is okay, but harder forms of socialism that do away with markets? well...good luck with that.

So what is the solution?

You know, everyone loves to talk about how in 1968 the economy was as good as it ever was, and how we had a liberal paradise and blah blah blah, but then a commission on poverty under Richard Nixon came out a year later and it more or less said, yes, this is as good as it's ever going to get. And the only way we're ever going to solve the problems is with a basic income.

Which is why I'm so gung ho on UBI. I know a lot of leftists are like ERMAHGERD ITS A RIGHT WING PLOT TO DESTROY WELFARE or whatever, but look at say, the child tax credit. Just increasing that from $2k to $3.6k a year CUT CHILD POVERTY IN HALF. Imagine what a UBI would do to poverty in this country, it would actually ensure that everyone had their basic needs met, especially if paired with other progressive ideas like universal healthcare and free college and stuff like that.

And yeah, I wanna note that I think that while UBI can replace SOME aspects of our safety net, mostly highly conditional low dollar programs like SNAP and TANF, it shouldnt come at the expense of things like social security or section 8 or healthcare for the most part. UBI isn't a silver bullet. But it would help a lot, especially when paired with other programs that would help solve poverty.

And then from there....we let the fed do its thing. Let it raise or lower interest rates all it wants, let it target full employment while keeping inflation in check, and let the market fall where it lies. We would have everyone having a solid bottom of income in this country not tied to work, while still having plenty of incentives to work for higher levels of income, and we would basically have our cake and eat it too. While the economy would continue to err toward it's normal 4-8% unemployment rate depending on where in the economic cycle we are, the idea of losing a job would be far less terrifying because people would be taken care of regardless of whether they worked. Ya know? "Oh noes I lost my job, but I still have $15k a year or whatever in UBI, and then I maybe get a reduced unemployment package, and the rest of my family collects UBI too, I'll be fine until I find something else i wanna do with my life." Isn't that better than what we have now?

And yeah. I just felt like I should talk about this. It's something that I've known for a while, and it just so frustrates me when I see the progressive left being so close to understanding the real issues with capitalism and the market system, and then they just miss the point....because they're too tied to things like "labor" and "jobs" and blah blah blah to understand that maybe there should be more to the economy than just work. Yes, work is socially useful in a lot of cases, but honestly, the purpose of work is to produce the things we need. It's not to employ people for its own sake. I feel like people on both sides of the aisle get enamored with this idea of jobs and work being THE way to get out of poverty, when it you do that, you're never going to improve society beyond what it currently is. Even if we got every progressive measure the Bernie left wants, universal healthcare, free college, $15 minimum wage, and "guaranteed jobs", we would not be in anything close to a utopia. Because as long as our idea of the future is tied to jobs and work, we're never going to improve things. Because that system as the sole long term source of getting people out of poverty is destined to fail. We really do need to look for ideas of guaranteed standards of living outside of work if we want to truly solve the poverty program. And for me, the UBI is my ideal measure to do it.

No comments:

Post a Comment