Sunday, January 3, 2021

Just Give People Money

I think it's helpful when thinking about economic matters to simplify and imagine a smaller group of people on a deserted island.

Let's imagine 100 families find themselves stranded on a large deserted island.  A cruise ship has sunk and nothing could be salvaged.  A tough situation, but they find that if the heads of household work on the necessities of life and a caretaker at home manages the kids they are able to provide just enough to meet everyone's needs.

The 10% of the smartest workers create some inventions that make work easier.  Now only 60% of the workers are needed to address just the critical needs.  The 10% that created the initial inventions get a privileged status.  They get to be called the "owners" of the machines.  Let's suppose also the 10% invent a system of money that is robust.  They create a sufficient quantity of money and set its value so that the remainder of non-owners are paid a wage.  The 60% address critical needs and the 30% start to focus more on luxuries.  Making spices to make food yummy, creating recipes.  Working on more inventions like stoves and washing machines or ways to make the work of the 60% more efficient.  Everyone is happy because there is more than enough for all, plus some additional wants are being thrown in.  The 10% get the extra awesome life though because they don't work any more.

Time passes and work becomes more efficient, especially with further inventions of the 30%.  The owners realize they could lay off another 10 families and maintain output.  If they lay people off then that's less they need to pay in wages, they can store more money.  So they go for it.  Now they find that their store of money is enlarging.  And also the laid off people are not consuming as much.  So there's a glut of stuff building up.  Which means every now and then the workers can be idled.  But when they are idled they consume less, which creates more idle time because less is produced when there is less demand.  And you end up with a larger and larger amount of people with free time and no job, but with a lot of unmet needs and wants because they are no longer collecting a wage.

One thing that you will see is that the laid off people just try to think of other things that could be created and sold in the market.  And they might achieve a successful product eventually and put themselves back to work.  But it does take time.  The stall is not good, the suffering they and their families endure is a grind, and as this process continues with more and more efficiency gains it does get progressively harder to do this as there is really only so much consumption the employed families and ownership families are going to want to engage in.

What's to stop the owners right after the layoff from just minting some more money and handing it to the unemployed people?  The only concern is inflation.  But inflation happens because there is more money in circulation than there are goods that people want to buy.  The inventors have created a system that allows you to create a book with the press of a button (like Amazon does now, it used to take a whole army of people to create a book).  The inventors have created 3D printers.  With so much efficiency in creating things and so many goods available the truth is the price associated with things is coming down, so if you just hand the unemployed person newly minted coins such that the total money matches what was being spent earlier on wages, I don't think there should have to be inflation.

This is kind of the system we are in.  We're just getting too good at creating things.  So a glut of things builds up, and this causes people to lose their job.  This causes suffering and intermittent contractions in the total amount of goods being produced.

It seems to me that the lack of money should not be an issue.  Money is literally created from nothing.  Money is just a tool that facilitates the activity (work and consumption) of people.  Money can be used to take all those idle people and put them to work doing things that are beneficial, even if they are not being demanded in a market driven by profit.  The money supply needs to increase commensurate with the increase in the number of goods being produced.  It seems to me that if it doesn't then problems are created.

How does China manage to have such high sustained economic growth?  They didn't even slow down in 2008.  The Soviet Union had continuous unbroken economic growth.  In the depths of the Great Depression in the US the Soviet Union was charging ahead and by 1936 they had gone from being the poorest country in Europe to a world super power.  I think they were able to do this because they understand this issue I'm describing.  As things get more efficient and a glut emerges they don't just have homeless people sitting around doing nothing.  They say "Hey, you know that money you used to make growing crops?  Now that we have machines we don't need that same work, but here's the same money as a salary, it's money we just created.  Start helping to build roads, bridges, apartment buildings.  Help build facilities where research can be done.  We'll put even more people out of work due to the gain in efficiency and they can then join you building all these things, and we'll see everyone's life get better really fast."  It's Ok to have more money flowing in the system anyway because more goods are being produced with less every year.  Since there are more goods available for purchase more money in the system chasing those goods does not necessarily cause inflation.  To avoid inflation we just have to ensure that economy continues to get more and more efficient, more and more productive, so that there is an expanding quantity of goods that the money is chasing.  So why not use the creation of additional money as an opportunity to put idle hands to work creating things that the world needs and wants?  Putting the idle hands to work is exactly how you ensure gains in productivity.  The idle hands can work on the things that will make the economy more productive, instead of sitting around in misery and hunger, being homeless.

What this entails is setting aside the system that prioritizes profits and free markets.  That creates giant swaths of able bodied people willing and able to work, but unable to make it happen, or at least stalled in their ability to make that happen.  Plan the economy.  There are plenty of things that need to get done.  People need to get educated.  They need good roads, nice cars, health care.  We need renewable energy, or a carbon free source of energy (fusion).  Put people to work doing things regardless of what the market and what Wall St profiteers think.  The system we have is creating large numbers of people willing and able to do things that would make all of our lives better, but we're acting like the money supply can't be enlarged.  It can be and it must be.  More money is needed to reflect the additional things that humans are creating more efficiently every day.  Just mint more money and put people to work.  There is so much to do, we shouldn't let the fiction that money is limited prevent us from doing it.

That's the way it seems to me.  What am I missing?  Didn't our government just create something like $10T from nothing as stimulus?  And what did they do with it?  Most of it went to the rich.  It has gone to back corporate debt and to fund military adventures, things that don't directly benefit the population.  A bit went to the poor.  So the money supply needs to be expanded and we have a choice about how we stimulate the economy as we do this.  The choice in America is to give it to the rich, who won't spend much more, keep the idle hands idle and give just enough to the poor so they don't go crazy.  This is a recipe for slow economic growth.  It seems to me there is no good reason for it to be like this.

These thoughts were partly inspired by this discussion of Modern Monetary Theory.  Also this one.

Friday, January 1, 2021

What Is Socialism

Recently I've been watching commentary from Caleb Maupin that has me questioning some of my assumptions about what socialism means or what it should strive to be.  I got interested in Maupin after discovering that he's saying some things that I've come to realize over the last couple of years.  The first is that socialism works.  Really well.  It's absolutely bizarre that libertarians and others say things like "Socialism never works."  It flies in the face of reality, almost like you couldn't be more wrong.  Here's a commentary from Maupin discussing some of this.  If you are one of those people that says socialism never works, watch from the time stamp until about 32 minutes and see if you can avoid slipping into a state of cognitive dissonance.  Because if you can you might just be cured of this lie.

In any case Maupin has also shared some texts from Marx and Engels that suggest they do not have the same vision for the path forward that those who call themselves socialists in America have, and I just want to share those texts here.  Below is an excerpt from the Communist Manifesto.  The caps are mine for emphasis.  It's a statement about how we transition from a capitalist world to the world that Marx envisions, one of complete abundance and freedom.

The proletariat will use its political supremacy to wrest, BY DEGREE, all capital from the bourgeoisie, to CENTRALISE all instruments of production in the hands OF THE STATE, i.e., of the proletariat organised as the ruling class; and to increase the total productive forces AS RAPIDLY AS POSSIBLE.

Now, who in the world does this sound like today?  Which nation has SOME power in the hands of the state, a centralized plan, and rapid increase in productive capacity?  That's China.  China, who pays massive homage to Marx all the time, who is lead by the Chinese Communist Party, who has 5 year economic plans and what it considers a dictatorship of the proletariat.  And yet on the left so many act like China isn't socialist, or act like the Soviet Union wasn't socialist.

Let's go further, here's some discussion from Engels.  First I'll set a little context. He is talking about how in former times there were no classes of people because the productive forces were primitive. All people must work to provide the minimum requirements for survival. Imagine a hunter gatherer society barely scraping by.  With time there are advances in efficiency so that it is not necessary to require all people to work in order to meet essential needs.  This leads to the emergence of classes. Some must continue to perform the work functions and stay as working class and some enter the bourgeoisie class that manages the affairs of society, direction of labor, state, law, science. As the efficiency of production advances further we reach the critical point where class divisions are actually a hindrance to continued growth.

This point is now reached. Their political and intellectual bankruptcy is scarcely any longer a secret to the bourgeoisie themselves. Their economic bankruptcy recurs regularly every 10 years. In every crisis, society is suffocated beneath the weight of its own productive forces and products, which it cannot use, and stands helpless, face-to-face with the absurd contradiction that the producers have nothing to consume, because consumers are wanting. The expansive force of the means of production bursts the bonds that the capitalist mode of production had imposed upon them. Their deliverance from these bonds is the one precondition for an UNBROKEN, CONSTANTLY-ACCELERATED DEVELOPMENT OF THE PRODUCTIVE FORCES, and therewith for a practically UNLIMITED INCREASE OF PRODUCTION ITSELF. Nor is this all. The socialized appropriation of the means of production does away, not only with the present artificial restrictions upon production, but also with the positive waste and devastation of productive forces and products that are at the present time the inevitable concomitants of production, and that reach their height in the crises. Further, it sets free for the community at large a mass of means of production and of products, by doing away with the senseless extravagance of the ruling classes of today, and their political representatives. The possibility of securing for every member of society, by means of socialized production, an existence not only fully sufficient materially, AND BECOMING DAY-BY-DAY MORE FULL, but an existence guaranteeing to all the free development and exercise of their physical and mental faculties — this possibility is now, for the first time, here, but it is here.

So we get this contradiction in capitalism of what might be called the glut. The absurd state where there is no consumption because there is too much stuff. Society is suffering under the weight of it's own productive forces. Like during the housing crash. People lose jobs because there are too many homes. And for this reason they can't afford a home. It would be like if I lost my job because there are too many cars produced.  We have such an abundance of cars that I lose my job, which is in automotive design. Now I can't buy a car because there are too many cars.  It's an insane contradiction, and when you burst the bonds of a system for profit that creates conditions where people can't buy cars because there are too many cars, now you can REALLY accelerate the productive forces.  Why should we let the need for a profit hold us back from making more and more things that could be beneficial to humanity? Breaking these bonds creates a constant acceleration of productive forces, leading to a life that materially is more full each day, ushers in that final stage of human development, a state of complete freedom for all, where now you only work because you feel like it, but the productive forces are so efficient you don't even need to work at all if you don't want to.

For Marx the goal is to increase the productive capacity of humanity so much that ultimately you exit socialism and enter communism (I'm using modern terminology here, not necessarily Marx's terminology, but this is the idea he is describing), which is a stage of maximum freedom. Do whatever you want, all your needs and wants are provided, you can work if you want, or not, and in the end there is no need for a state or for money even because there is no reason for fighting since everyone has everything they would need and more. China's goal is to increase the productive capacity of humanity so much, including neighboring countries, that conflict between them becomes less likely, and ultimately we reach a stage of hyper-abundance where class status and coercion are no longer a thing. Socialism is that transitional stage from capitalism/feudalism to communism where you might have some profits, you might have some billionaires, you will have some inequality for a period, but then ultimately that goes away and everyone has everything they want.

But as I say, many on the left don't see it that way, especially the left in the US.  They talk shit about places like China or the Soviet Union.  And this annoys the hell out of leftists in other countries.  Here's a great commentary from a Vietnamese woman.  You know what Americans?  You haven't achieved shit.  We can't even get a floor vote on Medicare for All, and even if we did and won Biden would veto it.  We can't even bring health care to our country in the middle of a pandemic.  We are living in a country that is rampaging to maintain imperialism throughout the world.  We can't even contain Covid.  Where China is bringing critical medical equipment to poor parts of the world we are bombing and starving them.  Where China sends it's military out to plant trees to address the climate crisis and has planted tens of billions, the US is tearing up climate agreements.  China is leading the world in solar, wind, and hydraulic energy development.  China is working on carbon free fusion energy.  China has just completed the most dramatic poverty reduction campaign in world history.

I've come to believe I have been misled by American leftists to think that socialism is about living in a shack, wearing rags, walking everywhere, maybe riding a bike.  Historically it appears it has more been about hyper-abundance, the exact opposite of what so many of the American left preach.  In fact it is capitalism that is holding back the advancements in economic growth, it is socialism that will set them free and cause the rapid growth, like we saw in the Soviet Union, like we see in China today.  Here's how Lenin put it.

This expropriation will make it possible for the productive forces to develop to a tremendous extent. And when we see how incredibly capitalism is already retarding this development, when we see how much progress could be achieved on the basis of the level of technique already attained, we are entitled to say with the fullest confidence that the expropriation of the capitalists will inevitably result in an enormous development of the productive forces of human society. But how rapidly this development will proceed, how soon it will reach the point of breaking away from the division of labor, of doing away with the antithesis between mental and physical labor, of transforming labor into "life's prime want"--we do not and cannot know.

This is the historical understanding of the transitional period after capitalism but preceding the period of the stateless, moneyless, classless society that Marx and Engels envision.  It's not running around in the woods in a loin cloth.  It's more like space ships and robots.  This vision of socialism is what drives places like China, Vietnam, Libya (before Qaddafi was murdered), Cuba, Nicaragua, Venezuela.  These are poor countries that have had stunning success making the lives of their people better, and they are driving to make them better still.  This is a more hopeful and optimistic view of the world that I think western leftists need to consider.  The fact that we have achieved so little for such a long period of time in comparison should give us pause.