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Alternative View on Money- III

December 21, 2009 5 comments

This post suggests a heretical idea, namely paying people to consume and thereby maintain a functional economy. While the concept sounds like another keynesian idea, it is much more radical. In some ways, it takes off from minksy’s ideas on the government assuming the role of lender and employer of last resort. The previous post in this series is found here.

I will begin the argument for my idea with a question:

Why is your job indispensable for maintaining our current level  of civilization?

People usually come up with fairly bizarre and circular reasoning on why their job is indispensable, but other jobs are not. The reality is that gains in productivity, automation and semi-intelligent software have made us very productive, but simultaneously reduced the number of people necessary for producing a given amount of products or services. This has created the peculiar conundrum, where products and services are becoming cheaper but fewer people can afford to buy them without credit.

This problem stems from one basic feature of our current system, namely the necessity of having a job for earning money to  buy products/ services. Since post -1960 widespread automation, supply chain streamlining and technological advancements has slowly eroded real jobs from the west. These jobs are unlikely to come back, and infact are being lost to machines in those countries that initially gained them (from the west). While the west tried to fill this gap with housing, education, healthcare and financial bubbles in addition to an increased number of  government jobs, it appears that we have reached the day of reckoning for these bubbles. The need to create phony jobs stems from a belief that basic amounts of money should be earned, rather than given. While such a belief had utility in keeping free riding under check in previous ages of low productivity, we now live in an age if high productivity.  It is not easy or possible to employ every capable and wiling person.

High unemployment, job losses and a simultaneous credit contraction are the perfect conditions to create a deflationary spiral which will accelerate far more quickly than previous eras, in no small part due to technological diffusion. The only way to stop unwinding and reverse such collapse, is to pay people to spend.

The main objections to this idea arise from traditional thinking processes which came into being in a world unlike the one we live in today.These objections are based in conservative thinking, racialism, need to adhere to traditional beliefs and general incredulity. The zero sum ape mind of most people is also appalled by this idea, though most won’t admit it.

I will discuss the objections and suggestions to prevent abuse of such a system in my next post on this subject. Let me reiterate that implementing such an idea must take the peculiarities and limitations of human behavior into consideration.

The next part: Alternative View on Money- IV