There is no doubt that the on-going pandemic has left a trail of economic problems including major supply constraints, the growing problem of long Covid and other issues that are challenging policy makers. They have been exacerbated by the behaviour of OPEC+ and the Ukraine situation. We now have a period of inflation, real wage cuts and most central banks doing their best to make matters worse. However, we now have a phenomenon that goes like this. In the UK, everything ‘bad’ that arises is apparently because of Brexit even if the trends were there before the move or the problems are being shared across all countries. I imagine even if the English cricket team loses it is because of Brexit. This phenomenon has generalised however. Now, we have the claim that all bad economic news is because governments ‘followed’ MMT or something akin to it. Those who are insecure about MMT because it does better at explaining the real world than the mainstream theories are the same as the Remainers who predicted that the British economy would crash badly in 2017 and then every year after that. To soothe their worried souls they consider any ‘bad’ news to be because of ‘MMT’ or in the case of Britain because of Brexit. Neither proposition has any foundation.
There were two headlines on Australia’s national broadcaster, the ABC’s news site this morning that tell us that there has been little progress made in helping people better understand the way the monetary system operates and the capacities of the currency-issuing government within it. Both articles merely rehearsed the standard mainstream fictions, which makes them dangerous, in that they perpetuate the system that has held the world back from addressing its major challenges. By creating false ‘challenges’ and false ‘probabilities of crisis’, these stories delay action that is necessary to deal with the real problems of climate change, inequality, degradation of public infrastructure and services, the health crisis, etc
The other problem is that these ‘analysis’ columns pretend to be balanced with is a ruse to bestow legitimacy or authority on themselves. ‘Experts’, who are wheeled out to ratify the fiction, are just part of the Groupthink. It is a circular system of nonsense. Very disappointing.
The public debate is conditioned by who gets a platform in the mainstream media. Even those publications that purport to be informed and appeal to a more reasoned type of reader are highly selective in who they give a voice to. I see this as a huge constraint in advancing alternative ideas that challenge the mainstream narrative and the vested interests that support it. The problem is that on economic matters these vested interests have not only captured what we might call the conservative voice. They also dominate and craft the so-called progressive agenda such that Green groups and movements, for example, are indistinguishable on macroeconomic matters, which makes it hard to contest ideas that are abroad. The UK Guardian, for example, thinks it presents a progressive angle on issues and is ‘above’ the crudity of the tabloids. But it regularly gives voice to writers who promote macroeconomic fictions and refuse to give space to those who challenge these fictions. Today (September 26, 2022) for example, it published am article – Without radical tax reform, Australia faces an insoluble public finance problem – by one Satyajit Das, who gets regular Op Ed columns in the Guardian and appears regularly on Australian public radio. His analysis distorts the public debate. Selective platforming is a blight in our media.
It’s Wednesday and I have been digging a bit into what appears to be a growing coalition opposing lockdowns, mask wearing, vaccine rules, and vaccinations in general. The claims are that none of these things work and that the economy is better off without them. I am not writing today about these matters (I have in the past) but rather about the nature of these coalitions. One of the things that has held back progressive causes in the past is the tendency of social democratic type interests to adopt the mainstream macroeconomics, which not only limits what they can do but exposes them to accusations that the government will run out of money and cause inflation if they have ambitious programs. The pattern of progressive interests aligning with non-progressive voices is thus not new. I am seeing it again in the context of the public health debate, which, in part, explains why our world is in such a Covid-mess. It isn’t all bad today – there is some nice music to finish, being Wednesday.
One of the joys of living is reading brilliant writing and I read a lot as a consequence. Not all of my reading is brilliant though, as you might expect, given my profession. As a young postgraduate student, one of the best books I read, among many, was – Labor and Monopoly Capital – which was written by – Harry Braverman – and published by the Monthly Review Press in 1974. It was a prescient piece of writing and is still 100 per cent relevant to the struggles today for working people against capital – both industrial and financial. It provides us with a path to resistance. It also points us in the direction of identifying the problems in the world today. And those problems start at the most elemental level – us.
Some recent research highlights the point I have made in the past that who your parents are matters for your future prospects. We all make choices as we emerge into the adult world, but the constraints that are dished up to us by our parents are in many cases more important in determining our future outcomes than the choices we make. The mainstream neoclassical explanation for income differentials focus on the choices – for education, training, and other career development pathways. From a policy perspective, I think it is more sensible to focus on the constraints as they are in many cases fairly easily altered by sensible government intervention. However, in the real world, not only are the constraints that individuals face conditioned by the circumstances that they are born into, but those circumstances also influence the choices the individuals make. Recent research has found that educational programs for parents in disadvantaged situations to show them what determines child development not only improves the lives of the adults involved but also delivers much better outcomes for their children. They are able to make better decisions which, in turn, improve the environment in which they are learning and building their skills. The policy implications are clear.
Australia has a dire housing crisis, particularly in the low-income or social housing end. Since the 1990s, successive federal governments, who fund the social housing, have abdicated from their responsibilities citing a lack of funds and the need to run fiscal surpluses in order to save money for the future. While it has been starving the social housing sector, it has been investing billions of dollars in its Future Fund, ostensibly to cover future liabilities. So instead of spending funds on hospitals, education, housing and other important infrastructure needs, the government has been spending on speculative financial assets in global markets, some of which have been scandalous (see below). The whole narrative has been based on the falsehood that the government is like a household and has to save to expand its future spending possibilities. That logic has killed off many valuable initiatives, including maintaining adequate social housing stocks such that now low income Australians are increasingly becoming poor or homeless due to the high cost of private-provided housing at market rents. Today, a new proposal was launched by a think tank advocated that the Australian government should borrow to build the Future Fund so it can deliver speculative returns to help fund the dramatic shortfall in social housing. That is, they are using the same logic (the government is financially constrained) to solve a problem the logic created. It would be hard to make this stuff up.
It’s Wednesday and today, apart from presenting some great music, I am commenting on the ridiculous notion, that even progressive greenies propagate that we need to harness the financial resources of the markets (Wall street types) to help governments decarbonise their societies. The narrative that has emerged – that the financial CEOs with “trillions in assets” (all at COP26 because they could smell lucre) are a key to solving the climate challenge – is as ridiculous as progressives saying we need to tax them to fund schools and hospitals. Both narratives reflect the dominance of mainstream macroeconomics which has convinced us that currency-issuing governments are like big households and can ‘run out of money’. That is fiction but is part of the reason we have a climate crisis. Read on.
Last week, I did a seminar with a Melbourne financial market group (Wattle Partners), who I regularly help in their education programs. It took the form of an informal (somewhat structured) conversation about Modern Monetary Theory (MMT) and more practical applications of the MMT understanding. There were several questions from the audience that we didn’t get time to answer in the allotted time so today I am honouring my agreement to provide answers, which might be of interest to the broader readership, if only to reinforce knowledge. The video of the interaction is also available now and you can watch it here.
Everybody is concerned with ‘herd immunity’ at present as the pandemic continues on ravaging our social and economic lives. But I have been studying the concept of ‘herd mentality’ for some years, aka – Groupthink. Mainstream macroeconomics is sustained, not by any internal logical consistency (on which it fails), by close congruency with the empirical data (on which it fails), which are the usual qualities of a dominant system of ideas, but, rather, by (using modern terminology) its long-standing and on-going cancel culture. So it is rather amusing to read one of the leading voices in that paradigm, Kenneth ‘Spreadsheet’ Rogoff, whinging on the Internet that ‘cancel culture’ is being used to undermine the reputations of one of his mates (Larry Summers). Both continue to get platforms in the world media without trouble to push their vapid ideas into the narrative. The antithesis of cancel culture it would seem. What is going on is that more people are realising that the prognostications of mainstream macroeconomics are deeply flawed, and, while many may not know the technicalities and the theoretical complexities, they can see the empirical dissonance, and that means they know a – lemon – when they see one. And social media has given more people a voice and they are using that to call these characters out for what they are. And the sense of invulnerability that pervades all disciplines riddled with Groupthink is being questioned.