This post continues my thinking and analysis of the issues relating to the design of a fiscal intervention by the Australian government to ameliorate the damaging consequences of the coronavirus dislocation. Today, I delve a little bit back in history to provide some perspective on the current fiscal considerations. Further, I consider some of the problems already emerging in the policy response. And finally, I consider the lessons of history provide an important guide to the sort of interventions that the Australian government might usefully deploy. While the analysis is focused on Australia at present, the principles developed are portable across national boundaries. And the underlying Modern Monetary Theory (MMT) understanding is applicable everywhere there is a monetary system. This series of blog posts are building up to the production of my 10-point or something plan to address the crisis.
Yesterday in my blog post – The coronavirus crisis – a particular type of shock – Part 1 (March 10, 2020) – I discussed some of the considerations that governments need to take into account when dealing with the economic damage that will result from the coronavirus crisis. I did not consider the health issues because I am unqualified to assess those other than to take into consideration what the health professionals are now saying as they gain more knowledge of the particular disease. In Part 2 today, I extend that discussion and outline some specific issues that bear on the size and design of any fiscal intervention.
I have long disagreed with Guy Standing about the solutions to unemployment. 20 years ago we crossed paths on panels and in the literature where he would argue that UBI was the way forward and I would argue that it was a neoliberal plot and that, instead, we needed to push for job creation. My view has always been that to surrender to the neoliberals on their claim that governments cannot generate sufficient jobs to satisfy the desires for work of the unemployed was a slippery slope. Standing continues to publish his fiction. In his latest Social Europe article (January 15, 2020) – Building a progressive alliance in Britain – he seeks to integrate UBI proposals with a recovery plan for British Labour. My view is that would not help Labour recover from the shots they fired into their own feet in the period before the December election by listening to the likes of Standing and those who advocated the Fiscal Credibility Rule and the reneging on the Brexit commitment. Standing’s aversion to job creation is in contradistinction with a recommendation from the Wetenschappelijke Raad Voor Het Regeringsbeleid (WRR or in English, The Netherlands Scientific Council for Government Policy) to the Dutch government to deal with the challenges of achieving “good work”, in part, by introducing a ‘basic job’ which in my parlance means by introducing a Job Guarantee. They are motivated by a deep vein of social science and medical research that extols the virtues of work beyond its obvious income generation qualities. Pushing a UBI in the light of that research is just a pitiful bailout.
A different blog post today. On November 29, 2019, I sat down with my friend Warren Mosler in Newcastle, Australia while he was on his more or less annual visit to see us. We decided to film a conversation we had about the origins of Modern Monetary Theory (MMT), how we came to it, the current state of MMT and future trends, including being part of the narrative surrounding the Green Transition. You will hear our concern about how the work we put in place at the outset is now being used in popular debates as well as other anecdotes. We consider the recent YouTube debate that Warren participated in in Italy and clear up the misunderstandings that followed that episode. We provide our own perspective on the way the GND debate is unfolding. I hope you find the 38 minute video that follows interesting.
Before Xmas, I published a two-part reply to Gregory Mankiw’s paper on Modern Monetary Theory (MMT) – A Skeptic’s Guide to Modern Monetary Theory (December 12, 2019). I was trying to get the response finished before the break and Part 2 had already become too long. So I decided to leave one issue that I didn’t get to address for a shorter third response once service resumed. I think this part of the response is necessary to set right on the public record. It exemplifies how critics need to work harder to actually understand what MMT is about. And while they try to claim that MMT is opaque and difficult to get to terms with, thereby sheeting the blame for their misguided renditions of our work back onto us, the issue I discuss today is very easy to come to terms with. It is front and centre and there have been many scholarly and other articles written about it. I refer, of course, to the Job Guarantee as MMTs response to the mainstream Phillips curve. The failure to appreciate where this sits in the MMT framework is not confined to mainstream economists. But this group know all about the Phillips curve literature and the place it holds in their macroeconomics. So there is no excuse not to understand it within a buffer stock framework and how MMT responds.
One of the stark facts about the academic economics discipline is its insularity and capacity to deliver influential prognoses on issues that affect the well-being of millions with scant regard to the actual consequences of their opinions and with little attention to what other social scientists have to say. The mainstream economists continually get things wrong but take no responsibility for the damage they cause to the well-being of the people. A 2015 paper – The Superiority of Economists – published in the Journal of Economic Perspectives (Vol 29, No. 1) by Marion Fourcade, Etienne Ollion and Yann Algan is scathing in its assessment of the economics discipline. They say that mainstream economists largely ignore contributions by other social scientists and consider them inferior in technological sophistication, have a “predilection for methodological and theoretical precision over real-world accuracy”, largely ignore”the basic premise of much of the human sciences, namely that social processes shape individual preferences”, and parade an arrogance and superiority that masks the sterility of their analysis. In this context, I thought the 2015 Report from the Joseph Rowntree Foundation – Sociological perspectives poverty – was a breath of fresh air in its approach to understanding poverty. The empirical base it presents refutes most of the major assumptions and conclusions of economists who work in the field of poverty. A mainstream professor who was supervising my economics graduate program once said to me: “Bill you are a bright boy but you should be doing sociology”, which was an example of the negative control mechanism designed to weed out dissidents (like me). It didn’t work. But I always considered the disciplines of sociology and anthropology (not to mention psychology, political science, social welfare etc) to be important in my journey to become ‘well read’. Most economists, however, do not think that. Perhaps that is why I was able to be part of the development of Modern Monetary Theory (MMT).
This is the third part of a four-part series this week, where I provide some guidance on some key questions about Modern Monetary Theory (MMT) that various parties in Japan have raised with me. Today I am in Tokyo and doing a day of press interviews and some TV filming to promote MMT within the Japanese media. I had been very clear in press interviews already (yesterday) that I hope they they represent our ideas correctly to the people of Japan. For example, at yesterday’s press conference, after my lecture in the Japanese Diet (Parliament), I said that I didn’t want any of the many journalists present to leave the room and write that ‘MMT thinks that deficits do not matter’ or that ‘MMT was about governments printing money and spending it’. I hope the message gets through. As I noted in Parts 1 and 2, many people have asked me to provide answers to a series of questions about MMT, and, rather than address each person individually (given significant overlap) I think that answering them in some depth is the more efficient way to help them to better learn and understand the essentials of MMT and real world nuances that complicate those simple principles. These responses should not be considered definitive and more detail is available via the referenced blog posts that I provide links to. Today, the question is another one about the Green New Deal and the Job Guarantee with a diversion into basic income.
This is the second part of a four-part series this week, where I provide some guidance on some key questions about Modern Monetary Theory (MMT) that various parties in Japan have raised with me. I have so far given two presentations in Kyoto and today I am in Tokyo addressing an audience at the Japanese Diet (Parliament) and doing some interviews with the leading media organisations in Japan. Many people have asked me to provide answers to a series of questions about MMT, and, rather than address each person individually (given significant overlap) I think this is the more efficient way to help them to better learn and understand the essentials of MMT and real world nuances that complicate those simple principles. In my presentations I will be addressing these matters. But I thought it would be productive to provide some written analysis so that everyone can advance their MMT understanding. These responses should not be considered definitive and more detail is available via the referenced blog posts that I provide links to. Today, the questions are about the Green New Deal and the Job Guarantee.
It’s Wednesday and only a collection of snippets today. Today we saw some self-aggrandising hypocrisy with a short memory come out of the sewers, and a statement by a government denying that they are a “successful case of MMT”, an advertisement (call for help) and some music linked to a recent, rather significant death, when considered in the history of contemporary music. Pretty full day really.
I was coming through the streets of inner Melbourne the other night after playing in my band. I couldn’t believe how many little scooters with those big boxes on the back were buzzing around, in and out of traffic, turning here and there, presumably, delivering food to people who preferred to stay in from the cold weather. I had sort of noticed these ad hoc cavalcades of cheap scooters before but never really assessed the extent of the proliferation. It represents an amazing and highly disturbing trend in our labour market. Okay, that sounds like something someone from another (older) generation might say. He who grew up when there was secure employment and wages and conditions were more tightly regulated. And I have seen Tweets from young people telling us ‘oldies’ to step aside. But what the scooter riders don’t realise is that they will get old themselves one day. And secure, well-paid work coupled with a broad spectrum of high quality public services is what makes that transformation liveable. In mapping out what I think are the essential aspects of a social transformation that we might call a Green New Deal, eliminating precarious work is one of the priorities – it is intrinsic to creating a more equitable society in harmony with nature. This aspect also calls in question the role of a Job Guarantee. Note the capitals – there is only one Job Guarantee but many jobs guarantees. I will explain today why the Job Guarantee will be an intrinsic part of the Green New Deal but by far a minor player in terms of the job opportunities that will be created by the socio-economic shift. Many commentators seem to think the Job Guarantee is sufficient for a Green New Deal. It is not and we need to understand its role in a monetary system to understand why.