The no no jobs city of the future?
The no no jobs city of the future? Charles Mudede

Before I explain why Seattle should adopt a zero unemployment program in the manner it adopted Sawant's call for a $15 minimum wage in the middle of the previous decade, I want to provide the needed background, which is related to my post from last week, "American Voters Are Angry About Inflation Because the Rich Told Them to Be Angry About It."

There's been lots of talk recently about modern monetary theory (MMT), a school of heterodox economics that relocates thinking about government debt from its orthodox location, which is entirely negative, to a completely new and radical foundation, which is positive.

The basic thinking, which the neo-Keynesian economist Paul Krugman unfairly describes as "the cryptocurrency of macroeconomics," is this: If a state controls its currency, then it can never not pay its debts.

The problem the Greek government faced during the crisis of 2010, for example, was that it didn't have control of its currency, the Euro. The European Central Bank (ECB) did, and so Greece could not print its way out of debt. However, the US, the UK, and China can. Though the logic of MMT can't be easily dismissed, there are cases where command of currency evidently isn't enough, such as South Korea in 1997. And so, it seems the theory works best if there's a combination of state control of currency and state economic/military power.

Another key theory of MMT is that a government should worry about inflation, not debt or deficits.

Currently, the Federal Reserve tries to keep inflation at 2% by adjusting interest rates, but this strategy is too weak and, in a sense, too religious to be meaningful. But the Fed keeps using it because they operate under a theory that began, oddly enough, with center-left economists in the mid-century Keynesian school. That theory is called the non-accelerating inflation rate of unemployment (NAIRU), and it was successfully promoted by Milton Friedman, the father of monetarism (a school of thought about managing the economy by managing its supply of money).

NAIRU basically claimed that the Keynesians were wrong about the trade-off between labor power and prices, because the economy always needed a certain amount of unemployment to keep inflation down. The Phillips Curve, a policy tool capitalist states could use to manage demand-pull inflation, avoided this fact by kicking it down the road with the short-term benefits of full employment. The long-term, and therefore ultimate truth, according to monetarism, is a natural rate of unemployment. This, of course, is not science, or even philosophy. It is, if I may borrow an expression from the Marxist historian Eric Hobsbawm, theology. It's basically the same thing as sacrificing young bodies to a temple of some easily angered god.

As the leading proponent of MMT, Stephanie Kelton explains in her 2020 manifesto, The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy, that there is no evidence in the economic record of the existence of a natural rate of unemployment, let alone its connection to inflation, a fact that's damning to both monetarism and Keynesianism alike.


In December of 2015, the Fed raised its interest rate target from 0 percent to 0.25 percent, even though the inflation rate remained below its 2 percent target. Over the next three years, the Fed raised its policy rate another eight times, despite persistently undershooting its inflation target. Some people criticized them for raising rates when inflation was clearly not expected to accelerate. But the Fed believed the rate hikes were justified to bring the unemployment rate back to its NAIRU estimates and preemptively keep inflation at bay. Although the Fed was trying to cool things off, unemployment continued to decline further below their estimates, and inflation didn’t accelerate.

Another key MMT concept is the job guarantee (JG). The Bard-based MMT economist Pavlina R. Tcherneva has written, I think, the most about JG, which is basically to the job market what a public option would be to the health insurance market. With a JG, the government promises a job to anyone who needs one. This proposal is truly radical, though Tcherneva and Kelton claim it's not. It's something Sweden does on the regular, and it's something FDR attempted to realize with his Four Freedoms.

JG was brought up during the civil rights movement and can be seen in the thinking that went into the Great Society. But what one must keep in mind is that MMT, for the most part, is a standard heterodox theory, a branch of economic thinking that's moderate when it's neo-Keynesian (quasi-theological), social democratic when it's post-Keynesian or MMT (quasi-philosophical), and far left when it's Marxian (philosophical). Anything to the right of this thinking, e.g. orthodox economics, is just theological.

But the idea of JG is really left field. It means that the government cannot only drain the power of the market—which often socializes the wider and long-term disadvantages of low wages—but it can also offer millions of people work that the society really needs done. JG could enervate the market's exploitative externalities and inefficiencies by presenting wages that are socially realistic, and it can direct work to projects that are socially meaningful. Such a program would pressure the market to pay wages that are high enough to compensate for the meaningless task of, say, flipping burgers.

But the realization of JG at a national level is a pipe dream at present. I would argue, however, that a jobs guarantee program is feasible at the city level, a reading that Kelton would certainly disagree with. She thinks that JG can only work within a state-space that includes state control of the currency. But one might have also said the same of the $15 minimum wage movement in 2012: Only the state can impose a universal minimum wage. But the City of Seattle activated a high-wage standard within its limits in 2014, and it spread not only across the county but the rest of the state and nation. It's now no longer politically controversial (and is even outdated) to peg $15 as a living wage.

It is in this way MMT's JG can be taken seriously. Seattle, during the next mayoral race, makes zero unemployment a thing. It says, with the goal of ending low wages in its job market: "If you need a living-wage job, there is one to be had, because, in all honesty, there is lots to be done around this city."