“The rules have changed,” said President Obama in his recent State of the Union address, referring to the loss of job security for American workers. No longer is the willingness to work hard a guarantee of a stable job, decent benefits, vacations and a pension. More and more workers, having played by the rules their whole lives, having gotten an education and lived responsible lives, find themselves unemployed. Today the official U.S. jobless rate hovers at around 9%, while the real figure is much higher — over 22%, including short- and long-term discouraged workers.
That rate is not so different from the shockingly high rates in much of Europe, such as the 22% unemployment rate (and 45% youth unemployment rate) that has sparked demonstrations across Spain. No wonder politicians everywhere, on both sides of the political spectrum, are talking about creating jobs. Though they disagree on how it is to be done, they agree on the necessity of boosting economic growth to increase employment.
It is becoming obvious now, though, that the rules, indeed, have changed, and this rule change goes much deeper than Obama or almost anybody else thinks. What is changing is the deepest ground condition upon which our economic system depends: growth.
We are nearing the end of growth. The argument is quite involved, going beyond the usual bogeymen of Peak Oil and environmental collapse, but suffice it (here) to say that without growth, there is little lending. With less lending, there is less money to invest in new production. Without new production, there are no new jobs and no room for raises, so income stagnates. Without income growth, there is no growth in demand. Without growth in demand, there is no economic growth.
We live in an economic paradox: those in greatest need cannot afford to buy, and therefore cannot generate “demand” and hence increase employment; meanwhile, millions cannot find jobs because those who DO have money have few needs to be met, and would rather save than spend. There is, after all, no lack of money in the system. After two rounds of quantitative easing, the base money supply is at unprecedented levels. The problem is that the money is not reaching those who need to spend it: poor people for one, but also such things as ecosystems, the oceans, and the atmosphere that lack economic agency.
Politicians representing the interests of the wealthy, such as today’s deficit hawks, typically oppose fiscal stimulus, because it dilutes their supporters’ relative wealth, either by increasing the effective money supply and causing inflation, or by shifting the relative tax burden onto the rich. Their opposition is short-sighted, however. Unless economic growth is extremely high, as in a frontier society or newly industrializing country, the interest rate always exceeds the growth rate, leading to concentration of wealth and the debt crisis described above. If debtors — people and nations — cannot pay, then eventually they will not pay. At some point, the authorities will have to choose between catastrophic system-wide defaults and transferring wealth to the debtors, either directly through relief payments, or indirectly through government jobs programs. This was essentially the solution of the New Deal in America and the social welfare state in Europe: transfer the minimum amount of wealth to the debtor class so that they can continue servicing their debts.
Yet this solution too only works in an underlying context of growth. That is because of the way money is created to begin with — even for the federal government, it comes into existence as interest-bearing debt. That means that the new money the government gives directly to workers is actually just another loan, in this case from bondholders and, ultimately, from the Federal Reserve. As with any other debtor, the government can repay these loans either from income, assets, or with new loans. These correspond to taxation, privatization of government assets, and deficits. Unless the economy grows by at least the interest rate on government debt, taxes will lag behind spending growth and, as privatization and spending cuts are exhausted, deficits will eventually spiral out of control. This is why the Keynesian solution offered by left-leaning economists cannot work in the long run. It works fine to reignite growth after a bubble collapse, but only if renewed long-term growth thereafter is possible.
As a matter of fact, Keynes never advocated fiscal stimulus as a permanent measure, but only as a short-term device to escape a deflationary spiral. If deflation, or at least a non-growth economy, is to be permanent, then we need another kind of money system, one not based on interest-bearing debt. This is one of the primary themes of my book, Sacred Economics. Would non-growth really be that bad? Would it be so bad if we held consumption constant henceforward and worked less and less?
Until we have such a system, or unless I am wrong and there is still some new dimension of nature, culture, or relationship that can be turned into money, the unemployment problem will not go away. If we are indeed nearing the end of growth, then, absent radical monetary reform, we are also in an era of high and growing unemployment. It is no accident, and no temporary glitch, that the unemployment rate is so high. It is symptomatic of a profound shift in human economy and our relationship to the planet.
Ultimately, we need to reframe the whole question of labor. Another word for unemployment, at least when it is distributed evenly and dissociated from economic survival, is “leisure”. If only money were not an issue, I am sure many working people would welcome a bit of unemployment. And better even than leisure would be the freedom to pursue our noblest and most generous impulses to heal the hurts of the planet and its people. The high unemployment rate is a harbinger of a transition in the nature of work.