This episode of Radio Active Magazine explores how net neutrality is necessary to counter mainstream media’s overreaching control of public policy. We will focus especially on two different issues: our political economy and the nation’s nuclear contamination problem. For both issues, we will briefly reflect on how the media distorts informed debate. In our first segment we will elaborate on one model of political economy, Modern Monetary Theory, also known by its initials MMT. In particular we will examine why MMT economists recommend a job guarantee. Then we will see why mainstream media have blocked discussion of such a policy and how net neutrality helps open the discussion.
RadioActive Host Spencer Graves begins by tracing the decades-long growth in income inequality. Then he explains how a job guarantee can produce faster, more stable and more broadly shared economic growth, and why the FCC’s attack on net neutrality limits serious consideration of MMT.
Modern Monetary Theory
The leading research center on MMT is the Economics Department at the University of Missouri at Kansas City. They have for years hosted international conferences about research into MMT and related areas. The last one ran September 21-24.
Stephanie Kelton, formerly a professor of Economics at UMKC and chief economist for the Bernie Sanders’ presidential campaign, is a leading MMT expert. Dr. Kelton contends that faster, more stable and more broadly shared economic growth can be achieved through a job guarantee in the US or in any other country with its own currency. In this episode we will explain why a job guarantee actually does produce better economic growth, and why MMT provides a better explanation of the behavior of things like Gross Domestic Product, unemployment, inflation, and capacity utilization during the Great Depression and the Great Recession and at other times.
To understand why MMT advocates for a job guarantee, we first review what the data shows us about income inequality. Government economic data reveals a discrepancy in the growth of average income versus the growth in median income. The average income is calculated by summing up all the economic activity in the country and dividing by the population.
The median family income is the middle value, so half of the families are below the median, and half are above. We can get data on this from a standard US Census report on family income distribution that starts with 1947.
Between 1947 and 2007, the average income grew at roughly 2 percent per year. The median family income also grew at roughly that rate from 1947 until around 1970. Between 1970 and 2010, the average continued to grow at roughly 1.8 percent per year, while the median increased at only about 0.5 percent per year. As a result, the average doubled while the median increased only about 23 percent. The gap between what the median family actually takes home today and what they would if the gains had been broadly shared is roughly $40,000 per year. If we round that down to $36,500, that’s $100 per day. Moreover, I claim below that Modern Monetary Theory suggests that this estimate of $100 per day is actually quite conservative
So, if the median stagnated while the average increased, that means that the incomes of people making more than the median increased faster than the average. It turns out that only the top half of a percent of the US income distribution grew faster than the average. And the top one hundredth of one percent increased at a rate that’s roughly double that of the average since 1970.
In other words, this is NOT a story of the 99 percent vs. the 1 percent: It’s the 99.5 percent vs. the top half of a percent.
So why did the median grow so slowly after 1970 when it had grown at the same rate as the average before?
Different experts would answer that question differently, but I see two major contributors:
- First, the power of organized labor began to decline in the 1970s, which made it harder for working people to bargain for better wages, etc.
- Second, the ultra wealthy followed the advice of Lewis Powell in the then-secret “Powell memorandum”: Powell told them to build a network of right-wing think tanks to produce scientific-looking reports providing a plausible rationale for giving more money to the wealthy and buy up the mainstream commercial media and suppress coverage of the cries for better wages, working conditions, environmental protection and product safety. Powell and his half-percent elites felt that Ralph Nader and the consumer and environmental movements of that day were out of control and leading the country down a slippery slope to socialism. That had to be resisted at all costs. Part of that project involved firing nearly all the investigative journalists from commercial television. A few popular programs like 60 Minutes were spared. Why investigative journalists? Because poor people can be libelled and slandered with impunity. However, investigative journalists are likely to find questionable favors that major corporations get from government. That threatens the people who control major advertising budgets that pay for television production and broadcast.
So how does this relate to net neutrality? Net neutrality is the principle that a traffic on the Internet should be treated equally regardless of the source or the type of data. It means that anyone with an Internet connection can compete in the marketplace of ideas based solely on the quality of their presentation.
Everyone officially agrees with the principle of net neutrality.
However, major Internet access providers want to block, throttle, alter and redirect users’ requests for information from the Internet so corporations that provide access can make more money selling users’ data and extorting higher fees to deliver content at the high speeds that everyone now expects. Violations of net neutrality like these since 2007 produced eight years of increasing activism that drove the US Federal Communications Commission (FCC) to adopt several reforms that were blocked in the courts. Finally, early 2015, the FCC adopted a Title II Order that allowed the FCC to enforce net neutrality.
Under the Trump administration the FCC is attempting to overturn this 2015 Title II Order. They are doing this with a Notice of Proposed Rulemaking (NPRM) with the Orwellian title of “Restoring Internet freedom.” This NPRM would officially transfer enforcement of net neutrality to the Federal Trade Commission and to the antitrust division of the Department of Justice. Opponents of the proposed rule change insist that the transfer would make enforcement practically impossible. And without enforcement, major Internet access providers like Comcast, Verizon, AT&T and Spectrum stand to make billions by blocking, throttling, altering (including stripping encryption) and redirection users’ requests for information from the Internet to extort higher fees for delivering content at the high speeds that everyone has come to expect.
Under a 1946 law the FCC must give the public a period of time to comment on proposed changes in rules like this. This requires agencies of the federal government to issue two deadlines: for comments and for replies to other people’s comments. The initial comment period ended July 17. The reply comment deadline was August 30.
Almost 22 million public comments were filed by the August 30 deadline. I was involved on filing comments for both the Friends of Community Media and for EffectiveDefense.org both for the July 17 and August 30 deadlines. I also discussed this in episodes of Radio Active Magazine broadcasted on July 25 and August 22.
Media and net neutrality
Meanwhile, the mainstream media have published very little about the FCC’s proposed attack on net neutrality. Why? Because the mainstream media do not want competition from the bottom 99.5 percent. Moreover, the ultra wealthy who control advertising budgets do not want their messages contested on an open Internet by those with fewer resources. To the extent that the mainstream media control the message, they also control public policy, and their favored elites reap greater wealth.
What can the 99.5 percent do about this?
What can we do about this? A number of organizations concerned about this notice of proposed rulemaking have formed a coalition called “BattleForTheNet.com” These organizations are mobilizing people to contact their representatives in the US House and Senate to convince them to oppose the FCC’s proposed rule change. If enough members of Congress support enforceable net neutrality, we will keep it regardless of what the FCC does.
Why does this matter? Whatever substantive issue you might be working on for reform, net neutrality is fundamental for your efforts. Progress on every substantive issue I can think of is currently blocked, because every proposed countermeasure for reform threatens someone with substantive control over the media.
That’s the current status. If you don’t want Comcast, Verizon, AT&T, and Spectrum blocking, throttling, altering or redirecting your requests for information from the Internet, you are encouraged to educate yourself on this issue, including visiting “BattleForTheNet.com.” There is also a summary of these issues in the Wikiversity article on “Net neutrality and ‘Restoring Internet freedom.”
As part of this effort, I joined perhaps a dozen others in meeting August 31 with a person working in Representative Kevin Yoder’s office in Overland Park, and I exchanged emails with Representative Yoder and Kansas Senators Moran and Roberts. All three declared their support for the FCC’s proposed rule change to “restore the freedom” of the Internet, a rule change that would allow corporations to block, throttle, alter and redirect your requests for information from the Internet.
Permit me to spell this out a bit more clearly: If your Internet access provider runs software that can redirect your requests for information from the Internet, some hacker might use those capabilities of your Internet access provider’s software to redirect your connections to your bank’s web site through the hacker’s mirror. While you are managing your finances, they are capturing your keystrokes without you seeing anything unusual. There is a very small chance that this could happen to you today with net neutrality, but it could be substantially more likely if the Internet access providers are secretly redirecting your traffic for other purposes, as some of them did before the 2015 Title II Order allowed the FCC to enforce rules against it.
Now let’s look at the connection between net neutrality and Modern Monetary Theory.
MODERN MONETARY THEORY
As mentioned above, UMKC Professor Stephanie Kelton says that the US (or any country with its own currency) could have faster, more stable and more broadly shared economic growth with a job guarantee. This better, more broadly shared economic growth would make everyone better off in an absolute sense: Everyone would on average live longer and have more control over their lives.
On the other hand broadly shared economic growth might reduce the relative privileges of the top one half of one percent. They are threatened by MMT. As a result, MMT gets relatively little coverage in the mainstream media.
A job guarantee sounds like pie in the sky — just another utopian fantasy that could not possibly work.
So let me explain how it would work and why MMT experts seem to have models that provide better explanations for the available macroeconomic data than more traditional economists.
First, a key thing to note is that most organizations are not operating at capacity but well below that. Since 1967 the US Federal Reserve Board has been asking manufacturers about “the maximum level of production” they could reasonably attain. The resulting estimates of “capacity utilization” have ranged between 66 and 89 percent.
In other words, even at the peak of 89 percent capacity, the nation as a whole could produce 10 or 11 percent more goods and services without investing in new plants and equipment. To see that, note that the average cost per unit nearly always declines as more units are sold. With a job guarantee consumers could obtain and spend more money. As capacity utilization increases to 99 percent, producers’ profit margins will in most cases increase. The extra profit will encourage them to hire more people and invest more in designing new products or services and production capacity.
This means moreover that this increased production could be accomplished without inflation.
Profit margins might not increase for producers who do not currently pay a living wage and who might be forced to pay workers more to compete with the job guarantee. However, we should not use that as an excuse to avoid promoting the general welfare.
This sounds great, but how would we pay for it?
Easy: Just print the money — or issue the comparable electronic funds transfer.
That sounds crazy. Wouldn’t the federal budget deficit go through the roof?
Yes. But why should we care about that? MMT economists advise us to ignore the federal budget deficit. Yes, MMT recognizes that if demand exceeds 100 percent of capacity, it could drive up inflation. That has happened in war time in US history. However, it did NOT happen during World War II, even when the national debt exceeded 100 percent of GDP. With no inflation. Why? Because the Roosevelt administration was aware of this risk and took appropriate measures to avoid it.
The point here is that we can increase the deficit without inflation.
However, one impact of the proposal for a guaranteed job is almost certain. It will immediately generate a massive propaganda offensive – in the mainstream media – to defend established elites and destroy the careers of politicians who dare to support MMT. A massive propaganda offensive appears to be the most serious risk the nation would likely encounter from a job guarantee.
This is an example of a principle I mentioned earlier: Progress on promoting the general welfare among the nation’s poor is blocked, because a job guarantee threatens the social status of established elites.
When a critical mass of the electorate comes to understand this, we will have, as Kelton said, faster, more stable and more broadly shared economic growth. Everyone, including the elites will on average live longer, more healthy lives and have more control over how they spend their time, though the wealthy may not have as many personal servants — butlers and maids.
Permit me to explain how this would stabilize the economy: When one person loses a job, she or he generally spends less. If more people are laid off than are hired, the reduction in aggregate demand forces other companies to reduce their workforces. Without a job guarantee, that effect cascades through the economy causing other companies to reduce their workforces. A job guarantee reduces that ripple effect, because people who lose their job can readily find another. If they were previously making the same amount of money as offered by the guaranteed job, there may be no reduction in aggregate demand, and the initial business downturn is less likely to snowball through the rest of the economy.
What about reducing income inequality?
A job guarantee means that employees at or below the living wage always have an option. This makes it easier for them to bargain individually or collectively for better wages and working conditions. So called “job creators” may not benefit, except by reducing the risks of their investments because of the stabilization of the economy.
However, do we really need to reward so handsomely “job creators” who create so few jobs? As noted above, the benefits of productivity growth were broadly shared at least from 1947, the start of the US Census data commonly used for this kind of thing, until organized labor started losing strength around 1970. Since Ronald Reagan became president in 1981, the economies of the US and much of the rest of the world have been driven in part by “supply-side economics”, also called “trickle down economics”. The point here is that the available data clearly indicates that the designated “job creators” have not created enough jobs, and the benefits of productivity growth trickled down to the poor and the middle class BEFORE “supply-side” and “trickle-down” became part of the official political economic dogma — but not since. Without adequate demand, the designated “job creators” have not created enough jobs.
MMT provides a better explanation for the increase in inequality and for inflation and any other macroeconomic data I’ve seen than the traditional economic theories that have long been used to drive the US and international economies. A final word about the perceived threat of inflation. Inflation occurs in two scenarios:
- Inflation can occur when production is driven above capacity, as has happened in time of war. It did NOT happen during World War II, because the Roosevelt administration knew inflation could be a problem and took effect steps to avoid it.
- Inflation can also occur when a cartel or a company that dominates a market increases prices because they can. A major example of this is the OPEC price increases of the 1970s. MMT experts claim that these OPEC price increases were defeated after US President Carter deregulated natural gas. Natural gas consumption increased. The consumption of crude oil declined, and OPEC was no longer able to sustain their artificially high prices.
The conclusion from this is that the bottom 99.5 percent of the US and world’s population need to do what Lewis Powell secretly told the wealthy in 1971: Get control of the media, do more fact checking, and aggressively defend your interests.
One small part of this is defending net neutrality, as described in the Wikiversity article on “Net neutrality and ‘Restoring Internet freedom’” and at “BattleForTheNet.com”.
We now turn to the other major example announced in the intro:
Nuclear Contamination in Kansas City
The Coalition Against Contamination / Bannister Cover-Up is working to help workers get the just compensation mandated by the law. The Coalition will be holding a town hall at the Southeast Community Center on October 28 from 10 to noon to help workers and their families get the compensation they deserve.
Co-host Jamie Jackson interviews Barbara Youngblood, whose father worked at the Bannister Federal Complex for 26 years and recently passed away with health problems associated with the toxins at his work site. With no media coverage of this issue, Barbara learned quite by accident that she could file a claim on behalf of her father.
To understand this claim we need to understand the history of the Bannister Federal Complex on Bannister Road in Kansas City. Beginning in 1942, it produced parts nuclear weapons. The Federal government claims that no actual nuclear materials were at the Bannister site. However, it has recently become apparent that workers at Bannister and neighbors of the site were exposed to toxins without adequate safety protections, without being notified and without compensation when they became gravely ill.
Then in 2001 President Clinton signed a law that promised workers compensation for illnesses caused by exposure. Since 2001 the list of identified toxins at the facility has grown from 300 to over 2400. Unfortunately, workers’ claims for compensation have frequently been thwarted.
For more information, you can attend the town hall they are organizing on October 28, from 10 AM to noon at the Southeast Community Center.