Episode 214 – Surfing the Wayback Machine: 2017 with Fadhel Kaboub

Macro N Cheese – Episode 214
Surfing the Wayback Marchine: 2017 with Fadhel Kaboub
March 4, 2023

 

[00:00:00] Fadhel Kaboub [intro/music]: The fact that the US has monetary sovereignty doesn’t necessarily diminish the monetary sovereignty of other countries per se. So, it’s not like we have to have half the world with monetary sovereignty and the other half without.

Unemployment kills people, literally, in terms of killing their spirit, depression and mental health and all kinds of things, especially after this great recession with people who have been pushed out of the labor force for years. No employer will say, I’d rather hire that person. If anything, employers will always look for somebody who’s already working somewhere else in a competitor company and try to hire them away from them.

[00:01:35] Geoff Ginter [intro/music]: Now, let’s see if we can avoid the apocalypse all together. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.

[00:01:43] Steve Grumbine: All right. This is Steve with Macro N Cheese. If you’re familiar with this podcast, you already know how we feel about Fadhel Kaboub. He has been a good friend of Real Progressives since the very beginning, and I am absolutely honored to call him a close personal friend as well. He has done numerous webinars and speaking appearances for us. He’s always at the ready and he has been a guest on Macro N Cheese 11 times.

Fadhel and his family have moved to Addis Ababa, where he is taking a prestigious and important job, and it might be a while before he can come on again. So, this week we’re sharing with you my very first interview with him. This is going back to 2017 before we even had our YouTube channel. This was a Facebook live stream. As you know, Fadhel is timeless, but I think you’ll find it interesting to listen to how different my questions were, how undisciplined I was at the time, and I hope you see the growth from 2017 to present. But as always, Fadhel is spot on and I hope you enjoy this discussion.

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Good evening, everybody. It’s Steve with Real Progressives. I’ve got a very special guest, Fadhel Kaboub of the Global Institute for Sustainable Prosperity. And this is going to be a trip down a different path than we’ve been taking. Most of the time we’ve been talking about very large countries with robust monetary sovereign financial systems. But Fadhel is going to take us through a global paradigm through the spectrum of monetary sovereignty, from full sovereignty to completely non sovereign. And this is a very exciting moment for me because we’ve tried to touch on every aspect of macroeconomic reality, and this is a key component. Many ask, what happens with these smaller countries? What happens in situations outside the US and how has that impacted? So, without further ado, Fadhel, welcome to Real Progressives, sir.

[00:03:53] Fadhel Kaboub: Hi, Steve. Thank you for having me on the show.

[00:03:55] Grumbine: So, tell us a little bit about yourself. You’ve got a very interesting story to tell.

[00:04:01] Kaboub: Well, I did my graduate work at University of Missouri, Kansas City, at UMKC with a lot of the people you’ve had on the show, including Randy Wray, Mat Forstater and the whole UMKC MMT crowd that everybody’s familiar with. Prior to that, I grew up in Tunisia in North Africa. So, I come from a developing country with lots of questions about how does this MMT and job guarantee stuff work for countries that don’t have that full monetary sovereignty that the US or Japan or the UK enjoy.

So, that’s kind of what drove my research interests from the beginning. After UMKC, I taught at a number of places here in the US. Starting with Denison University, which is where I am today, but, also, at Drew University in New Jersey and Simon’s Rock College, which is part of Bard College in Western Mass. And a couple years ago, we had this opportunity to start the Global Institute for Sustainable Prosperity, which is a joint venture with UMKC, with Matt Forstater, who’s the research director based at UMKC and myself based here at Denison University in Ohio. And, as I say, the rest is history, hopefully. We’re still in the beginning of that history but I am confident that we’re building something that will last for a long time.

[00:05:22] Grumbine: Well, that’s wonderful. So, talk to me a little bit about your background in macroeconomic reality or MMT. What got you involved in even pursuing this understanding that you now have?

[00:05:39] Kaboub: Well, I came to UMKC right at the beginning of the MMT era, I guess, in Kansas City. I got to UMKC in January of 2000. So, taking classes with Randy Wray and all of us, the grad students at the time, were exposed to modern money and the idea of the job guarantee. So, I was part of that group of excited students who were interested in this fresh perspective looking at macroeconomics from a different perspective.

But, as I mentioned earlier, I was a bit frustrated with the thought that this is only good for monetary sovereign countries like the US and Australia. And it’s true, at the time, all the literature was based in the US and Australia and there was really no discussion of how this could work for developing countries. So, that’s what got me started on this. And, meanwhile, Argentina went through its great depression in late 2000, 2001, and they started a pilot version of a job guarantee program that very quickly employed more than 2 million people.

So, that got some of us to think about what happens in countries that have huge external debt, so, debt denominated in a foreign currency, not their own currency. And how do you wean yourself out of that external debt and manage to create an ’employer of last resort’ or job guarantee program? So, starting with Argentina, slowly you start seeing quite a few people interested in policy discussions about how developing countries can implement a full employment program like the job guarantee.

[00:07:13] Grumbine: We get a lot of questions because there are several notable cases of hyperinflation or very high inflation, such as places like Venezuela, Argentina. Can you talk a little bit about the conditions that make for these marginally sovereign nations going into such a severe death spiral like that.

[00:07:38] Kaboub: Well, the inflation and hyperinflation issues, first of all, none of those is associated with the full employment program or a job guarantee program. When you look at the history of the world and people ask, tell me about examples of a job guarantee. The way we describe the job guarantee, the way Minsky described it, the way all the MMT literature talks about the job guarantee, there’s really not a single country that has done that.

So, you have these experiments that tend to be introduced during times of severe crisis. So, these employment programs tend to be temporary. They tend to be limited to a head of household, so, one person per family. They tend to be part-time jobs, and then they tend to be eliminated very quickly as soon as things quote, unquote go back to normal. So, we haven’t seen the buffer stock program the way Bill Mitchell talks about it, where the government acts as an employer of last resort on a permanent basis so that we have permanent full employment.

So, that’s one thing. The other thing about inflation in developing countries in the cases that you mentioned, it’s usually the case of external inflation that’s imported when you import food or fuel or whatever resources a particular country has. So, when you look at most developing countries, you realize that the reason they lose their monetary sovereignty is because they have structural economic issues, structural trade deficit issues. And when you zoom in, in most countries, those tend to be two reasons. One is a deficit related to food imports that just don’t have enough food production domestically.

So, they have to import food on a systemic basis. And number two, it’s energy or fuel trade deficit related. So, they have to import fuel to fuel their economy. And those are things that, no matter what you do as a central bank, you’re not going to eliminate those structural issues unless, as a country, you start investing in renewable energy so that you don’t have to import fossil fuels anymore. Or you invest in a sustainable agricultural policy so that you have food self-sufficiency.

So, if you have that hole in your trade deficit every single year, if you don’t borrow in a foreign currency, as a developing country, if you don’t borrow in dollars or euros, what’s going to happen is that your exchange rate is going to depreciate. And, then, the next morning or the next month, when you as a country try to import food or fuel, you’re going to import it at a higher price. So, you’ll be importing inflation into your domestic economy. Essentially, you’ll be calling for food riots and fuel riots in social and political instability right away, and that’s what you see in a lot of these cases.

The inflation is related to a weakness of the productive capacity of the domestic system, plus the imported inflation that happens because of a depreciation of the exchange rate. And none of this is relevant to the US, obviously, because we don’t deal with those issues. So, instead of dealing with the hyper inflation inflation, instead of dealing with the lack of domestic fuel and domestic food production, central banks in those developing countries end up issuing bonds denominated in dollars or Euros or Japanese yen, in order to keep the exchange rate artificially stable, in order to prevent the country from importing inflation.

And that becomes a permanent trap for those countries, a permanent debt trap. So, the debt of developing countries is very different than the US national debt or the Japanese national debt because the US debt is denominated in dollars. The Japanese debt is 100% denominated in Japanese Yen. But you look at a country like Tunisia or Egypt or any of the many developing countries, their debt is typically denominated both partially in their domestic currency, but the big problem is the debt that’s denominated in foreign currencies. And that’s the structural debt trap that they have.

[00:11:36] Grumbine: One of the things that is very concerning is many of the people in the United States are led by the nose into believing all sorts of crazy myths that have been peddled by people that just didn’t know any better and just made up things, to people that have a decided interest in austerity in our nation. And, so, something like the job guarantee here is sacrilege because they look at NAIRU and they have all these things that are built around the idea of we need some unemployment to keep a buffer stock of unemployed people. Whereas we, as MMTers, have a believe in the buffer stock of employed people setting the basement for the employer of last resort. Is that even possible in these developing countries? In your research, is such a thing possible or are they in such a situation because of the structural constraints that it makes it impossible to implement something like that?

[00:12:31] Kaboub: Right. Well, to add a little bit to some of the myths that you’re describing here, in the case of developing countries, the main thing that you hear from the IMF and other neoliberal organizations is that developing countries need financial resources. They need savings and they can’t afford to employ everybody or to increase employment. When you have those structural trade deficit issues that force your central bank to artificially stabilize the exchange rate, the entire focus of public policy turns towards stabilizing exchange rates in order to eliminate the threat of importing inflation.

And when you do that, you have essentially giving up everything else in terms of policy options. So, you have abundant resources in terms of human resources, and you can’t use them because you hear this sometimes explicitly for policymakers, say, well, if we employ all these people and we give them money, then, they’re going to start buying things and they’re going to start buying things from abroad, too. So, they’re going to increase imports and it’s going to put more pressure on the trade deficit and, as a result, it’s going to cost us even more in terms of external debt.

So, to me, the solution is to address the root cause of the problem. As I said a minute ago, the root cause of the problem is energy imports for many countries and food imports. And no matter what your exchange rate policy is, no matter how much you do as a central bank, you are not going to eliminate the root cause. So, as a country, the only way to eliminate the root cause is to direct and mobilize the abundant resources that you have, which is labor resources, towards eliminating the root cause of energy imports. And you do that by investing in renewable energy, especially for countries in the Middle East and countries in Africa.

It doesn’t make any sense in this day and age with the massive decline in the cost of producing renewable energy, not to be completely focused on going 100% renewable. You look at most countries, we’re not even close to 1%. So, we’re moving very slowly in that direction. And one thing that happens, once you move to 100% renewable, you’ve eliminated the root cause of your problem, which is energy imports. So, that’s one thing. The other thing you can do is directing, again, the abundant resources that you have, labor resources, towards renewable and sustainable agriculture and food production.

And that’s just not happening today in developing countries. And the deficit that we really need to worry about both in developed and developing countries is the deficit of ideas. It’s the deficit of creativity, of ingenuity. We just hear people completely feeling paralyzed with this sound finance perspective that says, we don’t have money, we can’t afford it, so we’re all into this collective suicide pact. And we’re going to let millions of people starve and die because we can’t think outside the box.

[00:15:41] Grumbine: Speaking of outside the box, in the United States as well as the UK and other places, in an effort to solve a problem that doesn’t exist, we’ve got this approach, now, that is attempting to distract from that which is macroeconomic reality, otherwise, known as MMT. And it’s this positive money American Monetary Institute approach that says, we’ve gotta democratize the dollar, green the dollar. Is there a fractional reserve system? Is this a myth? I’ve read Randy Wray. Randy spoke to it on our show. This seems like a giant nothing burger. And if their entire theology is based on this, why does it persist? Can you talk about that?

[00:16:31] Kaboub: Right. Well, the whole AMI group and Positive Money group, they’re well-meaning individuals who are frustrated with pretty much the aftermath of the 2008 crisis and frustrated with the gigantic banking system and it’s hold over the economy, in the UK and the US and other places. So, they’re coming from a good place, but I can assert that they’re completely wrong in terms of their understanding of the monetary system, of the banking system.

So, when you talk about the fractional reserve banking and the money multiplier and all that stuff, any serious research into this specific question has been, essentially, on the MMT side. You look at the research coming out of the Bank of England a few summers ago, maybe two or three summers ago, a series of papers and a series of video that they’ve posted on their website, essentially, explaining that banks don’t lend reserves. You look at even somebody from S&P, Standard and Poors, they published a paper a couple years ago.

The title of the paper is Repeat After Me. Banks Don’t Lend Reserves and they go through the mechanics of its step by step and it’s not rocket science. It’s pretty straightforward. All the ideas that MMT have been advocating and explaining, really describing, not really theorizing for a long time now, there isn’t a single argument that I’m aware of that was able to legitimately question the MMT perspective. So, I’ll just leave it at that.

[00:18:06] Grumbine: And I appreciate that because the goal here is this, for me, for what I do, my role is more of an activist. I’m the guy that’s not in academia, so I’m able to say things because I’m talking politics, I’m speaking to activists. I’m trying to change the world from the bottom up. Whereas I know the academics are trying to discuss it amongst each other to get general consensus. So, I’m trying to destroy the orthodoxy and, as a heterodox guy, this is where the energy is.

And, unfortunately, most people, even when you go through an MBA, even when you get a master’s in economics, you’re taught monetarism. You’re taught all the wrong things, Milton Freidman and gold standard logic, and they never have raised the bar to bring you up to speed to where we are today. So, you can’t blame people, necessarily, for being ignorant about it. But, once you present information, there’s got to be some momentum and that’s what I’m trying to create.

That’s why I have you on here. You have a perspective that I think our listeners really need to hear because the questions that we get, many people have a very great sensibility for, is the US, by having its dollar hegemony, are we by proxy crushing the soul of these other countries? What about their monetary sovereignty? And, so, we can definitely be the bully in the playground if we do this. Great power is there to be abused or used properly. Can you talk a little bit about the arrangement that the United States imposes on developing nations?

[00:19:44] Kaboub: Well, the fact that the US has monetary sovereignty doesn’t necessarily diminish the monetary sovereignty of other countries per se. So, it’s not like we have to have half the world with monetary sovereignty and the other half without. So, in practice, And this is really my interest in my work, is to think of how developing countries, countries that have lost financial sovereignty over the years, how can they reclaim it and move back into a full monetary sovereignty space?

Of course, international trade is a big part of that and the external debt of developing countries is really the main impediment towards that. So, when you have countries that have unsustainable external debt and they’re receiving financial aid from the IMF or the World Bank or international organizations, and those organizations dictate that the aid must be used in a particular way, and that the economic policy of that country needs to be directed in a particular way, that’s where we see the neoliberal hegemony of the IMF and the World Bank, which is dominated by the US and the UK, the US essentially having a veto power in the IMF.

That’s where that power infiltrates. And that’s why a lot of people are interested in addressing the roots of this ideological domination in the United States. Because imagine the United States reclaiming and understanding that it has full financial sovereignty, that it doesn’t have to live with mass unemployment in the US. Once you have that established and we have established full employment in the US, then that’s going to translate into US foreign policy through the role of the US as a dominant member of the IMF and the World Bank. And, then, we are going to have a different world.

[00:21:36] Grumbine: Yeah.

[00:21:37] Kaboub: So yes, I work on developing countries, but I also realize that we have to work here, too because we have to change the political system, the public policy culture that we have in the US and this fear of the freedom that monetary sovereignty gives you. When you talk to Warren, he tells you it’s like having a runner and then you put a plastic bag on their head and you say, well, they’re not performing well. Well, because we chose to suffocate the economy, artificially, for no good reason.

So, that’s my answer to this, is we have to work on both sides. Number one, get developing countries to move towards using their own domestic resources as much as possible to move towards sustainable energy production, renewable energy production, and domestic food production. And number two, also work on moving things forward in the US so that we have both full employment in the US and a more progressive agenda for the rest of the world. Keynes had a plan for this in 1945 when the IMF, and the World Bank were being created at the Bretton Woods meeting. This is the year before he died.

The debate at the time was a proposal from the US, it’s called the White Proposal named after the Secretary of Treasury at the time. And the Keynes Proposal which is the British proposal, the White Proposal, essentially, won which is what gave us the World Bank and the IMF. The Keynes Proposal was to have the World Bank and the IMF in addition to a third institution that would act as, essentially, the international Central Bank that will clear international transactions without punishing countries that have trade deficits. So, essentially, this is described sometimes known as the Bancorp proposal or the Keyne’s Proposal.

So, when you have countries that accumulate massive trade surplus, obviously, as a globe, as a planet, we can’t have every single country with a trade surplus. If somebody’s running a surplus, somebody out there must be running a deficit at the global level, unless we’re trading with a different planet, then, we all can have a surplus and the other planet can have a deficit. So, by definition, there’ll be countries that will be structurally in deficit, and those are developing countries, mostly.

So, the Keynes Proposal was to establish a system whereby countries that have a trade surplus will be forced to spend it or lose it. So, spend it meaning they can spend it, domestically, to create full employment for themselves or spend it somewhere else in developing countries to create full employment in those deficit countries. While the US opposed this, obviously, in 1945 because it was very clear that the only country that will be coming out of World War II with strong industrial and export capacity was the US. Europe was going to be the deficit.

They didn’t really care about developing countries at the time because they were mostly colonies. So, it was the US and Europe. So, the US didn’t want to have an international organization force it to give up its surplus. So, the US opposed it but, in practice, the US did precisely that. It’s called the Marshall Plan. The US took most of its trade surplus and gave it to Europe, invested it in Europe to rebuild productive capacity in Europe. If the case proposal was put in place today, the US would love to have that, but China would oppose it.

Japan will oppose it. Germany will oppose it because it means some international organization is going to take their trade surplus and give it to the trade deficit countries. But again, the Keynes Proposal doesn’t force you to give it away. You can spend it domestically for your own economy to create full employment, but it’s a very political thing. And this proposal comes back every now and then. Every time we have a major international crisis, you hear a little bit of the discussion of this, and then as soon as things go back to quote, unquote normal, the whole thing disappears again. So, it’s a political thing, but the mechanics of it is pretty straight forward.

[00:25:37] Grumbine: Given the nature of what you do, what is the deal with Greece? Can you talk about Greece a little bit?

[00:25:45] Kaboub: So, on that spectrum of financial sovereignty or spectrum of monetary sovereignty, have the US and Japan and the UK on one side with full financial sovereignty, and, then, on the countries that have no financial sovereignty whatsoever, you have countries like Ecuador that completely dollarized and give up their national currency. But, also, you have some of the Eurozone countries, Greece being case in point here.

Germany has also given up its financial sovereignty, so they can’t print their own currency, but they have something else going for them that allows them to be a successful economy. They’re an export-oriented economy. Greece, if you look at their balance sheet, they’re a trade deficit country. They’re not able to accumulate surpluses. So, the countries that fall on that end of the spectrum, the countries that have no financial sovereignty, they have to operate like you and I like users of the currency.

So, they have to earn revenues in order to spend. They can’t spend money into existence. You and I can work hard, earn income, and spend it. And if you want to spend beyond that limit, we have to borrow from a bank or anybody who’s willing to lend you money. And when you borrow from somebody, there’s a limit to it. At some point, bankers will say, well, you’ve had enough and you’re not credit worthy anymore. You have too much debt.

And that’s where Greece is, Greece is now disciplined by the market, by how much international organizations or investors are willing to lend it. And once you reach that crisis moment, when you have a major recession in the private sector, the last thing you want happening is for the government itself to slow down its spending. And that’s exactly what the Troika has imposed on Greece is this austerity that’s starving the economy and, then, wondering why the recovery is not happening.

If you’re sucking money out of the system and not having any counter cyclical force to lift up the economy, then, of course, you’re going to push it into a massive great depression. And that’s really the tragedy of the Greek situation, is that there is no counter cyclical force in the economy to move things out of the great depression.

[00:27:58] Grumbine: Is there a way out at all? Is it going to require complete debt forgiveness for them to ever become debt free?

[00:28:05] Kaboub: Well, so the question is about staying in the Eurozone or leaving the Eurozone, ultimately. Staying in the Eurozone under the current policy prescription is a death trap for Greece and nothing is going to improve anytime soon. Again, because Greece is a trade deficit country, structurally, they’re net importers. So, their economy is constantly going into that deficit cycle. The only way for Greece to become like Germany, an export-oriented country, is to invest in education and vocational training and technical skills and invest in high value added industries, not low value added industries, because a lot of people are confused about industrialization.

Developing countries are also industrializing, but they’re industrializing in specializing in industries that produce very low value added content. Whereas Germany or Japan, they export the most high-tech, most high value added content in the world. So, it’s like you’re trading sophisticated computers for bananas and tomatoes. The value added content is not the same no matter how much you export in bananas and tomatoes is still going to be. A net deficit for you if you’re importing high-tech stuff.

So, Greece is in that situation, and the only way out is to actually industrialize in the same way that Germany is industrialized, which is to specialize in high-tech stuff, specialize in things that really improve your trade position. And that requires decades of investment in infrastructure and education and public health and logistics. All of this is not happening. If anything, Greece today is cutting spending on education and health and infrastructure, and these are the kinds of things that will set a country back decades.

We’ve talked about this in the MMT literature. When you think about the most obvious thing, which is the effect on the unemployed people themselves and their families, especially children and especially unborn children, prenatal effects that will set somebody back for the rest of their lives. And we’re talking about an entire generation of people in Greece who will be suffering the consequences of this great depression, let alone trying to move things forward in the way that I just described.

We’re supposed to be moving forward in one direction. Instead we’re moving backwards with the austerity policies that we see in Greece and developing countries and here in the US, too. But the extent of the damage, obviously, is much more severe in a country like Greece.

[00:30:47] Grumbine: Regarding Puerto Rico, Detroit, Buffalo, New York, all these small non sovereign entities within the United States, be it cities or states. Is this not a similar model? We can demonstrate this truth anywhere there’s a non sovereign entity or anywhere there’s a sovereign entity. What is the solution for somewhere like Puerto Rico? They’re a US territory. They are not monetarily sovereign.

[00:31:17] Kaboub: Right.

[00:31:17] Grumbine: An island nation that is a net importer. Talk to me about that.

[00:31:22] Kaboub: Well, the case of Puerto Rico, as you just described, it’s a colony. We call it a US territory, but that’s what colonies are. They’re territories of a bigger nation. And we’ve seen this in developing countries and Latin America throughout history. Colonies tend to get the short end of the stick in terms of economic prosperity. They’re there to serve as territories for extracting resources to serve as a market for the production of the mainland to serve as satellite military bases and things of that nature.

So, from a democratic standpoint, the US has to either let go of Puerto Rico and say, you’re on your own go figure out your finances or say, you’re fully part of this democratic republic. And, as a result, you have the federal government support and you have the attention of the Federal Reserve Bank, and you have the attention of Congress and Senate for intervention. And you can call Puerto Rico a small island nation because it’s a small island, it doesn’t have a lot of resources, but you can pinpoint anywhere on the US map and take any territory the size of Puerto Rico or even bigger than Puerto Rico, and isolate it for a few months, and it’s going to be in a worse situation than Puerto Rico.

If you don’t give it access to the support of the federal government, the attention of the Congress and the Senate, it’s going to be in the same thing. It’s that simple for me. You call it the US territory. It’s part of the US system. It needs to be recognized, fully, as part of the United States, and as a result, benefit from what economic policies the federal government can accomplish.

[00:33:17] Intermission: You are listening to Macro N Cheese, a podcast brought to you by Real Progressives, a nonprofit organization dedicated to teaching the masses about MMT or Modern Monetary Theory. Please help our efforts and become a monthly donor at PayPal or Patreon. Like and follow our pages on Facebook and YouTube and follow us on Periscope, Twitter, Twitch, Rokfin and Instagram.

[00:34:08] Grumbine: So, you’ve told me before we came on the air, and you’ve spoken about it in the beginning, that the job guarantee is really your primary focus. For people that are progressive, many of them have this notion that the job guarantee is make-work. They have this idea that it’s more right wing nonsense, forcing people to work. We want a UBI. Talk to our audience and explain the merits of a job guarantee and why this is so important to an economy of a developing nation or even a nation such as the United States.

[00:34:45] Kaboub: Well, a couple of things before I get into the logistics of how the job guarantee that our group of friends have been writing about and advocating for decades now, starting with Minsky, and even earlier than that. The main problem in a capitalist system is that capital left to its own devices, the free market, will not guarantee full employment. It will bring us, occasionally, close to full employment, sometimes by accident.

But most of the time we have a group of people who remain unemployed. Those individuals tend to be what we call the first to be fired and the last to be hired. The first to be fired when we hit a recession, and the last to be hired when the economy is booming. So, they tend to be women, minorities, people with disabilities, high school dropouts with lower skills and lower educational level, returning citizens, people with criminal records, those individuals who end up being stuck at the bottom of the labor market, so to speak.

And the job guarantee program is primarily designed to act as a safety net for that particular group of individuals who tend to be left behind by the economy. So, of course, when we talk about the job guarantee, you can think of high tech jobs for job guarantee. But engineers and doctors and people with skills in the economy, when they lose their jobs, sure, they can be part of the job guarantee, but, typically, they’ll be re-entering the labor market, the private sector very quickly. So, that’s one thing.

The other thing that we, as a society, have to be concerned about is when we have long-term unemployment, structural employment for individuals at the bottom of the skillsets of the labor market. Unemployment is correlated with all kinds of social problems that cost us the human lives and cost us economically and socially. Tons of studies in the social sciences showing that every time you have mass unemployment, you see an increase in domestic violence and child abuse and suicide, and crime, and health costs, and all kinds of issues that are happening today for no good reason, for those of us who understand MMT and understand what the job guarantee can do.

So, the way the job guarantee is designed, and I’m going to talk, here, specifically about the US and our proposal for the US, it is definitely not a make work program. If anything, it’s solely voluntary. So, the idea here is if we understand MMT, you recognize that the federal government is the issuer of the currency, so, it can finance the program. States and municipalities at the local level, they’re users of the currency. So, they’re limited, financially, by the tax revenues they can raise.

So, the idea here is to have local nonprofit organizations, and there’s hundreds of them with strong background and transparency and good work that they’ve been doing for decades, to have local nonprofit organizations act as the local agencies for the job guarantee program. So, for example, you have food pantries and you have organizations that deal with domestic violence and with environmental pollution and with after school programs for youth. All kinds of organizations.

Every single town in the US that have a strong track record of delivering services to the local community. When you ask them, if you have an opportunity to apply for a grant from the federal government for financing X number of dollars, how many people will you be able to hire to deliver the services that your community needs? And the answer is always, please, where is this check? There is so much need for these organizations because they’re constantly relying on philanthropists and generous donations from members of the community.

Those donations, by the way, tend to disappear during bad economic times during the time when they actually need it the most. And, at the same time, they also depend on volunteers. So, just staffing and organizing their work is a nightmare. When you have to deal with people coming and going on a two hour basis and three hour basis, they spend half of their time managing the volunteers, not doing the work that they need to be doing.

So, the job guarantee proposal is to have those organizations apply for federal grants and receive the federal grants to hire people in the same community that they’re serving, unemployed people from the same community, to deliver services to their own community. And who’s best to decide what are the needs of a particular community then organizations that are already established and connected in that same community.

So, we’re not talking about a big federal agency that will tell us which bridge we need to build and what we need to do in particular communities. So, it’s very decentralized. The selection of the projects, the implementation, the hiring, the firing, the assessment, everything is done locally at the micro level. The funding, however, needs to come from the federal government, from the issuer of the currency, from the sovereign. So, these agencies will issue a call for applicants and say, we need to hire people with these skills to perform these tasks and we’re not forcing anybody to work for anybody.

If you’re unemployed in the local community based on your skills, you say, I’m interested in this job. It pays a decent wage. Maybe it pays even benefits. So, the idea here is for these local organizations for the job guarantee to not compete with the private sector. We’re not going to build factories and produce cars and airplanes. That’s the job of the private sector. These agencies compliment the private sector but they’re underfunded and understaffed. So, now, we’re going to be complimenting the private sector, delivering social services and community development services in the communities that they need them the most by employing people from those same communities.

So, then the exercise becomes an exercise of matching the skills of the local unemployed population with the needs of the community in terms of which projects need to be delivered. And if there is a gap in those skills, we don’t have to close shop and go home and say, we have a problem. That’s not going to work. When you have a gap of skills, we train people on the job. This is what Minsky said. He said, take people as they are where they are and do on-the-job training.

And that’s the most empowering thing you can think of for a local community in terms of pride, in terms of sense of belonging, in terms of civic engagement. The list goes on and on. So, there’s definitely no forcing people to work. And even if you don’t believe in the MMT story, straightforward sound finance stuff, if you do the math, if you try to estimate how much this will actually cost, most people think this is going to be insanely expensive.

When you look at the estimates of providing full employment, true full employment in the US, the most generous benefits package and wage package that you can think of is going to be less than 4% of GDP. And I’m talking insanely generous. When you look at the most reasonable estimates, it’s 1% of GDP. It’s not even expensive, even from a conservative sound finance perspective. So, the people who argue that the job guarantee is somehow socialism or somehow inconsistent with the principles of freedom, there’s just people who don’t know what we’re talking about.

They haven’t read the stuff, they haven’t listened to a full presentation of what the job guarantee is about, and that’s unfortunate. If we as concerned citizens, regardless of political affiliation, are concerned about unemployment, are concerned about poverty, are concerned about all the negative consequences of unemployment, we should at least consider some of the alternative options. Because whatever we’ve been doing, it hasn’t been working, and I think everybody will agree on that.

Let’s think about alternatives and let’s think about them seriously, including UBI. So, not just brushing it off and saying, I read a tweet about it and it didn’t sound good. Well, that’s not fair. You have to read the details. You have to read the academic research, the policy proposals. And the job guarantee crowd, we’re not exclusively anti UBI. If anything, we argue for a job guarantee and a UBI, for those who can’t work, for those who shouldn’t work for family reasons, for health reasons.

Of course, we should strengthen the safety net, the traditional safety net which is supporting parental leave and family assistance and disability assistance. All of those things are extremely important features of the safety net. But UBI, by itself, will not address some of the structural issues that we’re dealing with. When you ask any employer, and I challenge everybody who’s listening today to go and try this in their own company or anywhere, you ask any employer, would you rather hire somebody who’s been unemployed for six months or one year or two years? Or hire somebody who’s been working in the job guarantee system?

Well, today we don’t have a job guarantee. So ask them, would you rather hire somebody who’s been volunteering in their local community for the last six months because they didn’t have a job and they wanted to do something productive with their time? Of course, they’re going to hire somebody who’s been active because their skills are up to speed with the world because they’re excited about doing something positive.

Unemployment kills people, literally, in terms of killing their spirit, in terms of depression and mental health and all kinds of things. And no employer will be interested in hiring somebody, especially after this great recession with people who have been pushed out of the labor force for years. No employer will say, I’d rather hire that person. If anything, employers will always look for somebody who’s already working somewhere else in a competitor company and try to hire them away from them for that particular reason.

[00:44:37] Grumbine: So, I’ve heard that 40,000 people die for 1% unemployment, I believe it is. I don’t know if it’s depression or sickness, but I’ve heard for every 1% there’s 40,000 deaths associated with it. Regardless of how that happens, that’s pretty ugly. I want to ask you a very specific question. I looked at the UBI as a subsidy for the capitalist, as they would say, like a school choice voucher. The only logical UBI is a job guarantee slash UBI, and I see them as very complimentary, but the vast majority of UBI people are not even willing to consider the job guarantee because of this idea that you’re forcing people to work.

[00:45:28] Kaboub: You definitely see a lot of what you just described, especially coming out of Silicon Valley with the experiment they have there in Oakland. And you read these news reports about this experiment and other experiments, and you hear people saying, well, this is great because we’re giving them $2,000 a month to live in Oakland because that’s a cheap place to live in. And what we’re seeing now is people have more flexible schedule and they can work for Uber.

So, they can compliment or supplement their basic income with an Uber job. And, so, we’re uberizing the economy. We’re driving people into a situation where we’re saying, here’s a little bit of money so you can pay rent, but, then, you still have to work for somebody else at a miserable wage to make a living so you can put food on the table. And, then, what are you going to do about healthcare? And what are you going to do about your student debt?

Because a lot of kids graduating college today are sinking in their student debts and they can find jobs. So, you give them a UBI to feed them and then you force them to work for Uber so they can pay the rent. And, then, who’s going to pay their student debt? This idea that somehow, because you give them a UBI, they’re going to sit in the back of their garage and invent the next big high-tech thing. Sure. Maybe a handful of people will do that. But that’s not how innovation works.

This idea that it’s somebody working in their garage and coming up with the next big thing. Read Marianna Mazzucato’s The Entrepreneurial State, and she demystifies this whole thing about the entrepreneurs in Silicon Valley and all of this private sector driven innovation is just nonsense. It’s utopia. So, this is not completely to dismiss UBI but to an exclusive UBI I system and say, we solved the problem. It’s just completely misleading.

[00:47:13] Grumbine: We talk about the job guarantee an awful lot here, and what I think is really powerful, and this is one of the most important things I want to capture from our discussion. When you get into policy prescriptions, you’ve just left MMT because MMT is a description of how currency works. It’s just a description. Republicans can come up with very NeoCon versions of MMT just like far left people can come up with far left versions of what to do with MMT.

MMT just describes the way the currency works. Now, the way the job guarantee is, in my mind, in terms of when I would be advocating, would be whatever the public purpose is. So, in other words, what could be more of a job and, at the same time, more beneficial to the society than, say, a mother or a father raising their child or taking care of a sick relative or possibly teaching kids at the local Y how to play guitar or even going surfing if they want to teach them surfing.

But what I heard from you was just a different version of that, and I heard Pavlina talk about something a little bit different. The bottom line is we’ve all got one thing in common, and that is that we’re in agreement on what macroeconomic reality is. What our policy prescriptions are, can be varied just as far across a spectrum as anything else. Being MMT knowledgeable doesn’t mean that you have the exact same ideas or what policy prescriptions. I think is a really important fact for people to get hold of. And it was a great point that they brought up because I do advocate a slightly different perspective than what you put out there. Can you talk a little bit about that?

[00:48:53] Kaboub: So, the implementation of the job guarantee doesn’t have to exclude the fact that states and municipalities that do traditional government services, they’re already underfunded. So the first thing we need to do is fully fund the traditional programs that are designed to build roads and fix bridges and fund schools and fund parks and all of these things. This is not job guarantee. This is main line government responsibility that’s underfunded.

And just for that, there’s plenty of hiring room. There’s plenty of spending. You’ve heard the Bernie campaign and the infrastructure projects and even the Trump thing about infrastructure. We’re not arguing about that. But even if we do that, that kind of massive infrastructure employment, that kind of mainline government employment sector, in and of itself, does not guarantee employment for all. So, we’re still going to end up with millions of people who will suffer and will be left behind.

So, that’s what the job guarantee is designed for. So, that means the variety of ideas that you’ve heard from the job guarantee people. Yes, we need to do infrastructure. Yes, we need to strengthen the safety nets, the traditional safety nets, and then leave it up to every single community at the local level to decide whether they want to teach surfing or whether they want to clean the environment or whether they want to advocate against domestic violence and child abuse or whatever the needs of the particular community are.

We’re going to direct resources to addressing that particular problem. So, we talked about the public purpose. We talk about the priorities of the nation and the priorities of every community are different. Not every community needs a new bridge and not every community needs a homeless shelter. So, that’s why at the local level, we don’t have to start from scratch. We start by building on top of the existing organizations that are already doing great work.

And I know this for a fact in my own community here at Denison, and I teach a lot of service learning classes. So, my students work with dozens of organizations and this small community, traditional Midwestern, rust belt towns with all the things that come with that. And all of these organizations for years have been working as the last resort safety net once the government gave up on its safety net. But, again, they rely on volunteers and they rely on charitable donations.

They’re underfunded, massively underfunded. And what we’re saying is they know the community. They’re already doing the service, but they need to scale it up to address the root causes of these problems. Once you do that by eliminating unemployment, indirectly, you’re already eliminating the root cause of a lot of those problems.

[00:51:43] Grumbine: Yes.

[00:51:43] Kaboub: That’s the beauty of the job guarantee program, that it’s not a centralized system that dictates to every state and every community what needs to be done. It’s actually participatory. I mean, when you think about democracy these days, I always have to add the qualifier. We’re talking about participatory democracy because democracy lost its meaning over the last several decades, so, participatory democracy, participatory budgeting, participatory hiring, participatory selection of everything at the local level. That’s what democracy was supposed to be. Instead, we’ve moved into this whatever the system we have today.

[00:52:20] Grumbine: So, the Green Party offers up an amendment, Green Party amendment 835. Now, I like pieces of Green Party amendment 835 but it’s founded on, basically, knocking away the central power of the US dollars. So, they end up putting themself into some situations that I believe maybe are not as advantageous and knowledgeable about monetary sovereignty. However, what you’re describing, I’ve heard Jill Stein’s say, in the local communities exactly like this.

I think this marries perfectly with the Green Party’s Green New Deal and Bernie Sanders play, even though he didn’t actually come out and say this. I’ve heard Stephanie in an interview on the Real News Network, and they were talking, why doesn’t Bernie have a federal job guarantee program? I guess all the other things he put out there, it would’ve been too much to them. They already choked on, was it 33 trillion in new spending every 10 years? Imagine another 40 trillion would’ve made their heads explode.

But it sounds to me like this really is the bedrock of fixing Trumpism. By implementing a federal job guarantee, I believe you eliminate so much xenophobia in America, so much bigotry, eliminate so much hard feelings on the lower unskilled worker level, which a lot of uneducated people, who don’t have a lot of mobility, who haven’t experienced a lot of different cultures. They look for someone to scapegoat, and they typically find someone that doesn’t walk like them or is on TV. I believe this is the great equalizer that is the bedrock of making society function. I want to get your thoughts on that.

[00:54:05] Kaboub: Well, I completely agree with you in terms of the job guarantee having that potential. In terms of where we stand, politically, in the US, I think you’ll talk to people who tell you, I explained MMT and the job guarantee to senators and congressmen, and we get to high ranking people and public policy and public figures who, behind closed doors, they understand it, they get it, but then they say, show me the masses.

Show me critical mass of people out there who can get behind this and I’ll come out and endorse it. And we’re talking about people who understand this. So, the kind of work that you are doing and the kind of grassroots organizations that I’m connected with and our friends are connected with, we’re just in the beginning of this process of educating the public about MMT and its public policy potential. And I think once we have the critical mass of people, the political establishment is not going to be able to ignore us.

And you’re going to have a candidate like Bernie Sanders who is not going to hide behind, let’s tax the rich and the billionaires to fund this, that and the other. We’re going to be in a point where the political establishment will have to jump on this opportunity, and I’m talking both people from the left and from the right. This is not an ideology. MMT is just this trigger that allows you to exercise your privilege as a sovereign state to deliver what the public purpose is.

So, it’s not left or right. This is going to be, whoever’s going to jump on this first is going to be a leader. But I think we’re not there yet, but I think we’re moving very quickly and it’s one person at a time, one video at a time, one lecture at a time, one student at a time. We’re getting there and we are changing the public perception of what the possibilities are. So, I’m optimistic and I’m calling on all of our friends to keep working hard and talk to your neighbors, your friends, and your senators and congressmen. And put them on the spot. And, eventually, there’ll be plenty of us to make a real change.

[00:56:14] Grumbine: We would love to partner with you in any way we can to help get the word out. That’s all we do. That’s all I’m here for.

[00:56:21] Kaboub: You talk to anybody involved in our group and people are committed to this. It’s not just an academic or we’re not doing this for money and fame. We’re doing this because we truly believe in this and because we’re dealing with climate change and the catastrophe that is a slow motion train wreck that we’re in to. And if we don’t act, massively, with urgency, soon, we’re going to be doomed as the species. And when we’re gone, nobody’s going to miss us.

[00:56:49] Grumbine: Between the bedrock of getting this monetary system understood and debunking every single lie and myth out there, once we eradicate ignorance from the spectrum of the people that can at least make the decisions, we can do some of these things. How can we leverage our knowledge of sovereign currency? How can we leverage MMT to deliver a sustainable planet?

[00:57:17] Kaboub: It’s mind boggling, especially in this time and human history with the kind of variety and diversity of technologies that we have. We’re not just talking about solar panels, geothermal, all kinds of resources that we have and the kinds of skill sets, human skill sets that are available to us and the mass unemployment that we have in especially in developing countries, youth unemployment, the kind of waste that we have, huge waste of human potential.

And we’re sitting in our hands and saying, we can’t afford it. That’s the mind boggling thing. So, if we understand MMT and its public policy potential, then, we can easily leverage the resources that we have, the people who are unemployed, including young and skilled and talented people, and we can leverage the technology that we have and the natural resources that we have. We’re talking about the sun here.

We’re not talking about digging or mining for other resources, to very quickly and very rapidly on a scale of the intervention that we had during World War II in the US and in Western Europe. To that scale, we need to intervene yesterday if we’re hoping to address this issue of climate crisis. It’s not really climate change anymore. It’s a crisis.

[00:58:33] Grumbine: Yeah.

[00:58:33] Kaboub: So, that’s really one of the things that motivates many of us, especially dealing with the ecological aspect of this. It’s mind boggling when we have all the resources we need and we just decided, collectively, that we’re not going to do anything about it. We’re going to deny it. We’re going to postpone. We’re going to sign these non-binding agreements and wait and hope for the best. It’s just frustrating to be watching this train wreck in slow motion.

[00:59:01] Grumbine: Yeah.

[00:59:02] Kaboub: Especially for people who say they care about future generations and they care about children and the grandchildren, well, then, do something about it and think outside the box. Because clearly, whatever we’re doing, in terms of public policy, in terms of unemployment, in terms of clean water and clean air, it hasn’t been working. So, if you’re serious about thinking about these issues, at least do your homework and look a little bit outside of the mainstream, a little bit outside of whatever think tank, whatever policy makers you’ve been listening to, and say, we’ve listened enough.

Now give me a few minutes to look at some other options. And that’s what responsible civic engagement, responsible citizenship is about. It’s about being active, not delegating to policy makers and leaving this thing into their hands because they’ve ruined it for us clearly.

[00:59:50] Grumbine: Years ago, I used to be a systems engineer at Verizon. I used to work from home. I worked with a guy from this small ISP that sold remote work to the state of Maryland. Then, I sold it to Northern Virginia for the school systems and their continuous operations where they were able to telecommute teachers and all the various government officials. And eventually telecommuting has become rather passe now.

However, I came up with an idea a few years ago of layoff the building, not the people. This approach of going in assessing a company’s needs, finding out how many people they could push remotely to do work, wouldn’t be great to incentivize companies to provide remote work to these areas for people. Their states have no tax base anymore. There is no ability to fund their states, and so, they have no work and their trapped. This idea of incentivizing companies to hire into these distraught areas, what do you think about that?

[01:00:50] Kaboub: Well, when you describe it, the first thing I think about is how does this fit into the job guarantee? And I think it fits perfectly because one of the things about that job guarantee that I didn’t highlight is the fact that you don’t have to work full-time. You can opt for working part-time and using the rest of your time for family responsibilities, for learning new skills, going to school.

So, the flexibility of employment and the flexibility of the workplace, now being a telecommuting workplace, is extremely important for providing a buffer stock system that works both with the private sector and with the job guarantee sector. I see it as a good opportunity. Again, as long as people are getting decent wages and decent benefits, and we’re not substituting this for that.

[01:01:38] Grumbine: Sure.

[01:01:39] Kaboub: As long as it’s the case they can work from home and they can work on their own schedule so they can take a break and go pick up the kids from school and go watch the soccer game or whatever, then, obviously, it’s a win-win situation for the family and for the employer. But, also, as you mentioned, you can go into particular distant communities that have been isolated from the rest of the economic prosperity. You don’t have to have everybody moving to the headquarters in New York City to employ people.

[01:02:09] Grumbine: One of the big concerns I hear from people that don’t like the job guarantee is the fact that by working 40 hours a week, the opportunity costs you have by working these jobs, prevents you from gaining other skills or prevents you from participating in democracy, say. An activist moment where you want to go protest, it keeps you locked down, it keeps you docile. And now you’ve got a job so now you’re not going to protest. It’s a perfect opportunity. If you do a remote job such as this, you can still go to school, if you want. For the business, you’re no longer relegated to just the talent right there in that zip code. You now have the entire world to look at. If you want to incentivize a specific targeted hiring, what better way to improve the lives of people who are isolated?

[01:03:02] Kaboub: One more thing. People tend to forget what happens in the private sector, for example, with temp agencies. What do temp agencies do? They’re matching the skills of particular population, unemployed population with the needs of a particular business enterprise, and they’re taking a huge cut in the middle. They’re providing a great service to the market because they’re providing flexible employment and all that. What we’re talking about is the job guarantee’s going to do exactly that, but, now, for the public purpose without taking 50% of your paycheck.

[01:03:32] Grumbine: Amen.

[01:03:33] Kaboub: People forget about temp agencies and their role in promoting the precarious and miserable working conditions for a lot of people, especially in the Midwest and the rust belt area. There’s lots of stories and books to be written about that particular industry and the payday lending and all the private sector industry that’s sucking more of the resources from the most vulnerable people of the society.

[01:03:59] Grumbine: You have been a most impressive guest, your approach to everything. We have the same understanding of the foundation, and I love the angle by which you took things. I feel I’m leaving this interview on a high. I feel really good and really positive to know the work that you’re doing. Can you tell our audience how we can find out more about the work you’re doing?

[01:04:26] Kaboub: Well, the website of the institute, we can post a link. If you look at the list of research scholars and affiliates that we have on the website, it’s a lot of familiar names and familiar faces. We overlap quite a bit with UKMC and with the Levy Institute, but also we’re drawing on a variety of people who are outside of the traditional post Keynesian economics tradition. So legal scholars from the Modern Money Network, including people from Cornell and Columbia Law School and others. And people who are interested in thinking outside the box and delivering a different set of solutions. We’re not talking about political revolution and the utopian sense of the term. We’re talking about very simple solutions-oriented ideas,

[01:05:10] Grumbine: Actionable.

[01:05:11] Kaboub: actionable, exactly. Ideas that will move us away from the mainstream and allow us to open up to all of these possibilities to promote the fight against climate change, to promote full employment, monetary sovereignty, and to promote better quality of life. Economists have this obsession with economic growth for the sake of economic growth. This is definitely not what were interested in.

Whatever public policy we’re putting in place is not for the sake of increasing GDP, it’s for the sake of improving quality of life for people. And that’s really the main thing that we’re fighting for, and we’re happy to connect with anybody who’s working in this direction to educate and to empower and to work together. So, please find us online and social media. We’re active on Facebook and Twitter and everything else, so you’ll find us.

[01:06:03] Grumbine: Thank you. I hope you’ll come back. I really do. You are most impressive guest.

[01:06:07] Kaboub: My pleasure.

[01:06:07] Grumbine: I really enjoyed it. Fadhel, thank you so much and everybody please keep coming back. We’ll see you later. Thank you very much again for joining us, and we are out of here.

[01:06:24] End credits: Macro N Cheese is produced by Andy Kennedy. Descriptive Writing by Virginia Cotts, and promotional artwork by Andy Kennedy. Macro N Cheese is publicly funded by our Real Progressives Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.