Its Wednesday and so only a discursive type blog post (that is, very little actual research to report). I have been thinking about the so-called Marxist-inspired critiques of Modern Monetary Theory (MMT) and just the other day another one popped up in the form of the long article by Paul Mason. One of the things that I have noted about these critiques is that they deploy the same sort of attack against MMT that mainstream economics has traditionally deployed against Marxist economics. One would think they would at least be consistent. It won’t take me all that long to explain that.
On August 6, 2018, British tax expert Richard Murphy who is becoming increasingly sympathetic to the principles of Modern Monetary Theory (MMT) published a blog post, which recorded an exchange with one James Meadway, who is the economics advisor to the Shadow Chancellor John McDonnell in Britain. The exchange took place on the social media page of a Labour Party insider who has long advocated a Land Tax, which McDonnell is on the public record as saying will “raise the funds we need” to help local government. He called it a “radical solution” (Source). An aside, but not an irrelevant one. It reflects the mindset of the inner economics camp in the British Labour Party, a mindset that is essentially in lockstep with the neoliberal narrative about fiscal policy. Anyway, his chief advisor evidently openly attacked MMT as “just plain old bad economics” and called it a “regression in left economic thinking” which would ultimately render the currency “entirely worthless” if applied. He also mused that any application of MMT would be “catastrophic” for Britain. Apparently, only the US can apply MMT principles. Well, the exchange was illustrative. First, the advisor, and which I guess means the person being advised, do not really understand what MMT is. Second, the Labour Party are claiming to be a “radical and transformative” force in British politics, yet hang on basic neoliberal myths about the monetary system, which is at the core of government policy implementation. Astounding really. This is Part 1 of a two-part series on this topic, most of it will be summarising past analysis. The focus here is on conceptual issues. Part 2 will focus more specifically on Balance of Payments issues.
On June 15, 2018, the OECD released their report – A Broken Social Elevator? How to Promote Social Mobility – which provided “new evidence on social mobility in the context of increased inequalities of income and opportunities in OECD and selected emerging economies”. If you are still wondering why the mainstream progressive political parties have lost ground in recent years, or why the Italian political landscape has shifted from a struggle between ‘progressive’ and conservative to one between anti-establishment and establishment (the latter including both the traditional progressive and conservative forces which are now virtually indistinguishable) then this evidence will help. It shows categorically that neoliberalism has failed to deliver prosperity for all. While the full employment era unambiguously created a dynamic environment where upward social mobility and declining inequalities in income, wealth, opportunity were the norm, the more recent neoliberal era has deliberately stifled those processes. It is no longer true that ‘all boats rise on a high tide’. The point is that this is a situation that our governments have allowed to arise and which they can alter if they so choose. We should be forcing them to restore the processes that deliver upward mobility. And that is where the “truth sandwich” comes in. Progressive politicians that bang on about ‘taxing the rich to deliver services to the poor’ or who ask ‘where is the money going to come from’ or who claim the ‘bond markets will rebel’ and all the rest of the neoliberal lying drivel should familiarise themselves with the way the sandwich works. It is a very tasty treat if you assemble it properly.
I am travelling most of today with heavy commitments at the other end so only a short blog today with some great music to calm the soul. Yesterday, a group of high-profile, so-called progressives in Australia placed a paid-for advertisement in the leading daily newspapers as part of a new campaign for the government to increase taxes to get back into surplus so that (as their narrative goes) it can afford to maintain services for the needy. Yes, it was not the Right voices in our debate articulating this. The campaign is being led by a group that is often referred to as ‘left-leaning’ and calls itself the “most influential progressive think tank” in Australia. Modesty doesn’t exist it seems. But these sorts of descriptors are when the English language loses all meaning. The advertisement and subsequent follow-up interviews in the media yesterday by signatories and supporters of the “Letter” articulate a pure neoliberal line of deception about fiscal positions, the role of taxes and the virtuousness of fiscal surpluses. From my assessment, this headline-grabbing display of stupidity will set back the progressive debate in Australia even further. A total disgrace.
As background research to one of my book projects I have been reading a recent biography of François Mitterrand by Philip Short. Its title “Mitterand: A Study in Ambiguity” points to the capacity of Mitterand himself to blow with the wind but only when it suited his sense of personal ambition. Hiding behind his statesmanship was a man with “infinite shades of deviousness, an aesthete and intellectual, a sensualist, a crook”. The story of Mitterrand and his famous turn to austerity in March 1983 is very important to understand because it is used by progressives to justify their ‘austerity-lite’ stances with respect to economic policy. The New Labour politicians that are attacking Jeremy Corbyn’s policy proposals fit into this camp. The ‘left’ narrative is that the demise of Keynesian policy options was inevitable in the face of globalisation of capital and the growing importance of Transnational Corporations (TNCs). But, my argument is that there was nothing inevitable at all about Mitterrand’s poorly contrived shift into austerity. The progressives who advocate the inevitability thesis conflate the development of the TNCs with the emerging dominance of the neo-liberal ideology (which is concoction from economists intent on pushing the textbook competitive free market model with minimal state intervention). The development of the TNCs didn’t undermine the capacity of currency-issuing nation states. That has been accomplished by the imposition of the neo-liberal ideology and is reversible if the politics can be won. That is what I see as Jeremy Corbyn’s challenge – to win the politics. There is plenty of strong economic argument to help him do that.
I am away most of this week and have limited time for blogs and I am also concentrating on the Modern Monetary Theory (MMT) book I am working on that will be published later in 2015. I also do not want to use the blog space exclusively for that book writing like I did for a portion of this year when I wrote the book on the Eurozone (which will come out in May 2015). I can also say that an Italian version of the book is now going to be a reality and we hope to get it out as soon as possible in 2015 – more later on that topic – it tells a story in itself about the Italian left! So for the rest of the week we will be in Blog Light’ territory although only marginally. Today – a sad story of how progressives seem to lose their way. I would have thought the first progressive imperative would be to counter the neo-liberal myths about economics in order to liberate a range of other social and environment initiatives that will improve society and the world in general from the yoke of neo-liberal lies about fiscal deficits and the way the monetary system operates. I was wrong. After considering the material for this blog, I think I will file it under my – Friend’s like this … – series.
A few weeks ago (October 1, 2014), I wrote in this blog – British economic growth shows that on-going deficits work – that the British Chancellor was overseeing an expanding fiscal deficit and public debt ratio, which despite the rhetoric to the contrary, was supporting growth and helping private households increase their saving ratio. The national accounts and public finance data could not support the claim that it was austerity in the UK that was promoting growth. But in drawing that conclusion, I certainly didn’t want to give the impression that the conduct of macroeconomic policy in the UK was appropriate. The point was that growth, albeit tepid, was occurring in the UK and it was not in an environment where the fiscal deficit was being cut. The fact is that the UK economy is in a parlous
state and such that the word recovery is a totally misleading descriptor for what is happening.
There was a ‘Guest Editorial’ published on the UK site Renewal last week – Modern money and the escape from austerity – by one Joe Guinan, who lists himself as a Senior Fellow at The Democracy Collaborative and Executive Director of the Next System Project. He is a journalist by background. Renewal is a “A quarterly journal of politics and ideas, committed to exploring and expanding the progressive potential of social democracy”, so it would seem to be wanting to head in the right direction, which reflects my values. The article’s central message is that “Modern monetary theory destroys the intellectual basis for austerity but needs a more robust political economy”. It is a serious embrace with our ideas and it is welcome that Modern Monetary Theory (MMT) is entering the progressive debate in a thoughtful manner and being advanced by others than the small core of original developers (including myself) who, in turn, built the ideas on the back of others long gone. The problem is that I don’t necessarily agree with many of the propositions advanced in the article. Here are a few reasons why.
I received two E-mails yesterday informing me that at the upcoming NSW State Labor Conference (this weekend) the delegates would be asked to vote for the inclusion of a Federal Job Guarantee, along the lines that I have been working on since 1978 (more or less), in Labor Party policy. For readers abroad, the Labor Party is the major federal opposition party at present having lost government in 2013. It began life as the political arm of the trade union movement. Anyway, that was a pleasing development I thought. A little later, I received an E-mail and a follow up telephone call telling me that the same conference, the delegates would be asked to vote on a motion put forward by the Australian Manufacturing Workers’ Union, which is the strongest ‘left-wing’ union in Australia, that says that the ALP “should be focused on maintaining government solvency” and maintaining “low and stable Deficit to GDP ratios” and ensure the “tax base is adequate to fund Labor’s priorities”. Then I read a news report from the UK from earlier in the year about the Labour Party’s commitment in the upcoming election to shore up its “fiscal credibility” by eliminating the fiscal deficit with the leader Ed Miliband claiming that “When we come to office … there won’t be lots of real money to spend, things will be difficult”. Bloody hell! This is progressive politics – neo-liberal Groupthink style. At least there are a few truly progressive people who see that a federal Job Guarantee is the way forward as a first step.
The title is stolen from the UK Guardian article (July 29, 2013) – If you think you know what ‘debt’ is, read on – by one Alex Andreou. The title suggests he knows the real issues regarding public and private debt. We will see if he does. This is Part 10 in the theme – When you’ve got friends like this. Which should tell you that the article is full of misinformation even though the motivation is sound. This article is another example of progressive macroeconomic discourse which is essentially trapped in mainstream macroeconomics. The simple point is that a truly progressive social agenda has to be grounded in solid macroeconomic principles. Trying to carve out a progressive agenda within a mainstream macroeconomic framework undermines the credibility of the former and plays straight into the hands of the conservatives. So “If you think you know what ‘debt’ is, read on”.