The key to foreign trade is a sound currency. This is especially true for a country like the UK, which buys lots of imports. Exporters need to feel confident that the currency is worth accepting in exchange for exports.
Maintaining a sound currency is harder than it may seem. Various techniques have been tried. A classic one is the gold standard. The government maintains a buffer stock of gold and agrees to sell it for its currency at a fixed price. If its currency begins to look soft, people just swap it for gold. This stabilises the currency by sterilizing the excess. The policy also signals the government’s commitment to sound currency: if it tries to cheat by buying things with an inflated currency, all it ends up doing is draining its gold buffer.
There are many problems with the gold standard. It holds the government back from responding to periods of high unemployment with aggressive fiscal policy. It also drives a lot of pointless investment in gold speculation – pointless because gold isn’t actually useful for very much.
The job guarantee uses the same principle as the gold standard with labour instead of gold. By hiring everyone willing to work at a living wage, the government maintains a buffer stock of labour. If the currency looks soft, people will hire workers out of the buffer stock, effectively swapping cash for labour. Again this sterilizes excess cash, since the government is no longer issuing currency to pay the workers who are now privately employed. On the other hand, if people prefer to hold currency, they can leave workers in the guarantee programme and keep their cash.
Again there is an automatic stabilizer on the currency. Again, the government signals its commitment to sound money: if it tries to pay with inflated currency, it just ends up draining its labour buffer. The job guarantee has all the advantages of the gold standard, with the added bonus of guaranteeing 0% unemployment at a living wage and driving investment in people rather than gold.
It is the most effective sound money policy possible. The gold standard makes a nation’s currency ‘as good as gold’, by backing it with the promise of gold at a certain price. The job guarantee makes the nation’s currency better than gold, by backing it with the promise of labour at a living wage – far more useful than gold.
And sound money, again, is the key to foreign trade. This is worth mentioning because some people think that foreign trade grounds an argument against the job guarantee. They mistakenly see it as inflationary, overlooking the fact that it prevents inflation by providing a price-guaranteed buffer stock in which people can invest if they prefer not to hold cash. The buffer absorbs any currency rejection, ensuring that all currency in circulation is accepted at the going price-level.
The job guarantee is the key to sound money and successful foreign trade. Do you want your nation to have zero unemployment, a guaranteed living wage, and a favourable position in a global market? Then pressure your politicians to support the job guarantee.