I did an extended interview over the weekend and during that interchange it became obvious that when a newcomer encounters the concept of the – Job Guarantee – for the first time, they may only see it in a narrow way, as a job creation program and fail to see it the way that the concept was developed as an integral part of Modern Monetary Theory (MMT). When I started talking about the era in which I had first started thinking about using buffer stocks to maintain full employment, it became obvious that the sort of considerations that went into the concept of the buffer stock employment model (the Job Guarantee) had not been fully appreciated by the interviewer. That is no criticism. It is just an observation and a reflection of how long we have been pushing this MMT barrow. At the moment, all the talk is of ‘flattening the curve’ and that is exactly the function that I saw for the Job Guarantee as I toyed as a young postgraduate student and nascent academic with new ways of thinking about macroeconomics that would fight the Monetarist scourge that was dominating in the late 1970s. It was a different era and the challenges from a economic theory perspective were different. I think it is important to understand this context because, as the interview demonstrated, new ‘light bulbs’ go off when the concept of a Job Guarantee is put within the historical exigencies that were dominating when I came up with the idea. So the Job Guarantee flattened the curve long ago – the Phillips curve and that was, in my view, a highly significant development in the context of macroeconomics and makes MMT very different (in addition to a lot of other aspects). Unfortunately, while we knew how to flatten the curve back then, the Monetarist viral infestation continued and we have suffered the shocking consequences ever since.
Today is Wednesday and I have been tied up a lot with various meetings – all on-line these days. I don’t enjoy them as much as face-to-face, given that I spent a considerable part of each day in front of my computer or with my head in books and so the human contact is a welcome variation. But needs must, as they say. Anyway, just a few snippets today, being Wednesday. I can say that in between all this Zooming and writing, I have now nearly put together a complete on-line learning system which I am now trialling. This will be the support platform for – MMTed – which I hope to make operational sometime in the coming months. One of the issues that I touched on yesterday, which is now starting to crawl out of the slime, is the “what will happen to all the debt when the crisis is over” story. And, it is not just a narrative being promoted by the Right or the conservatives. The Federal Labour Party spokespersons and those hanging around the edges have started to push the narrative. As the Prime Minister told us the other day in relation to the people who are panic buying “Stop it! It’s Ridiculous!” I think he was actually talking about those (morons) who are starting the deficit hysteria before the deficits have even actually risen much. For their own health, I urge them to “stop it”. Imagine how apoplectic they are all going to be once the deficit goes to 10 per cent or more and the RBA is buying up all the debt. My god.
When the Remain vote lost the June 2016 Referendum there was a sense of denial. They had lost but only because of the ingrates that voted the Leave. And sooner, rather than later, those dolts would soon have the so-called Bregrets and another vote would be held and the Remainers would win. That sense of denial persisted past the 2017 General Election, which should have consolidated Jeremy Corbyn’s leadership, but didn’t. The biting sense of privilege that the Remain camp seemed to construct for itself slowly but surely ate into the Labour Party leadership, regularly feeding news stories to the press and social media about the impending doom facing the British economy (Project Fear), and pushing the myth (supported by all sorts of interpretable public polls) that a ‘peoples’ vote’ (I am not sure what they thought the Referendum was) was inevitable and would reverse the 2016 choice and restore equanimity. And the Labour leadership crumbled in the face of this onslaught from within and abandoned their previous commitments to their constituencies, which the majority of their elected MPs represented, and went along with this ‘peoples’ vote’ nonsense. The Tories, meanwhile, realised that the underlying sentiment that drove the Brexit choice was consolidating and pushed through a General Election which categorically demonstrated that the Labour Party were nowhere near the mark. That was a disastrous loss in any one’s estimation for Labour. But, still in denial, the apparatchiks in the Party, the hangers on, the wannabees, whatever you choose to call them are out there on social media now claiming that, in fact, despite the humiliating devastation at the December 15 polls, that the Labour Party’s agenda has been accepted as the norm – ‘we won the argument’ – and that they as good as won the election. And meanwhile, the leading contender for the leadership is suggesting they will campaign to be readmitted to the European Union. It is hard to make this sort of stuff up. A lost generation for Labour coming up unless it gets real.
It is Wednesday and I have a long trip by plane and road to Victoria where I am speaking at a major business conference in the mountains outside of Melbourne tomorrow morning. So only a few things today that I have been thinking about. Remember the 2010 film – Inside Job – which documented how my profession had become corrupted by the financial services sector into producing, allegedly, independent research reports extolling the virtues of deregulation etc and not admitting they were being paid for by the beneficiaries of the propaganda masquerading as research. It shows how corruption runs deep in the economics profession to accompany the incompetence that mainstream macroeconomists display. Well, I have been following an unfolding story about how Uber has decided to draw on that corrupt tendency for their own gains. It is not a pretty story. And then we have the so-called social media trend of cancel culture which is meant to be about matters of principles but leave the proponents caught up in a rather dirty pool of hypocrisy.
If it quacks then it is a duck! If it uses neoliberal frames, narratives, language and concepts then it is neoliberal. Framing a lie just privileges the lie – and we get nowhere. The Progressive Economic Forum purports to bring “together a Council of eminent economists and academics to develop a new macroeconomic programme for the UK”. Their goals have some overlap with what I consider to be reasonable – reducing economic insecurity and inequality, climate action, etc. Some of their policies approaches are anathema (for example, UBI). Many of their council have been close advisors to the Labour Party at various times, including most recently. And they promote a macroeconomics that is not only incorrect but dangerously coincident with the mainstream thinking that has been part of the problem they claim eager to solve. And the failure of the Labour Party to win the December election against a Tory government that had inflicted awful austerity on the people is testament to the fact that their progressive narrative is in need of a radical change. The latest example of how this ‘progressive narrative’ really just reinforces the neoliberal frames they rail against is an Op Ed from a senior PEF council member (January 24, 2020) – – which was a promotional piece for his latest book. I do not recommend anyone purchasing the book.
When I was a relatively junior academic, one of the things I was interested in was how labour market prejudice is influenced by the state of the economic cycle. This was a period when Australia was undergoing a deep recession (early 1990s) and it was clear that hostility to immigrants had risen during this period. I was interested to see whether this was related. The interest goes back to my postgraduate days when I was studying labour economics and we considered labour market discrimination in some detail. Then, it was clear from the literature, that employers who used racial profiling to screen job candidates would lose out if the labour market was strong, but could indulge their negative views about different racial groups without loss in times of recession. But we didn’t do much work on supply-side attitudes – that is, what do other workers think? In more recent times, I have done detailed research projects with mental health professionals studying the best way to provide job opportunities for young people with episodic illnesses. The research revealed that one of the problems in placing these workers in conventional workplaces is the prejudice that other workers displayed towards them. We worked on ways to attenuate that resistance. So I have had a long record of studying and being interested in these matters. In this blog post, I consider whether prejudice is counter-cyclical. In the UK, for example, the British Social Attitudes survey found that in 2014, around a third of British people were racially prejudiced and this ratio spiked during the GFC. Clearly, there are many factors contributing to this rather distasteful result, but if austerity is exacerbating the underlying factors, then we have another reason to oppose it. This research also bears on the Brexit debate.
Over the years it’s been clear to me that we live in a fictional world when it comes to economic matters. The mainstream has created this world that bears little relationship to reality and which serves the interests of a few at the expense of the majority. But the way in which this fiction is inculcated in the framing and language of our public debates leads the majority to think that the conduct of economic policy is somehow in their best interests, even if, at times, governments claim we have to swallow a bitter pill in order to get well again. The bitter pill always punishes the lower to middle-income groups, rarely the top-end-of-town. The fiction is so deeply ingrained that even progressive political campaigns are framed within it. I have railed against that all my career because I cannot align a belief that democratic choice requires accurate information with the reality that we make these choices in a fog of fiction. I have always considered the role of the progressive forces in politics, as a matter of priority, should be to be the agents of education, so that these democratic choices reflect our realities. I have never supported so-called ‘progressive’ parties that choose, for ‘political’ purposes, to lie to the electorates by adopting neoliberal framing and language as a way of minimising any difficulties that might arise, initially, from the dissonance that accompanies exposure to the truth, after years of believing in lies. It seems that the British Labour Party continues to promote a false narrative to support and otherwise stellar plan for national renewal. But, as history tells us, a plan built on false financial foundations, falters when circumstances change and the false foundations become the issue rather than the plan.
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 Part 2 (and final part) of my series on printing money, debt and power. The two-part series is designed to draw a line through all the misconceptions and errors that abound on the Internet about the Modern Monetary Theory (MMT) treats deficit spending and bond issuance. The social media debate about MMT is at time nonsensical, thriving on falsehoods and fantasy. I get many E-mails after some robust Twitter exchange between some self-proclaimed expert who has found the latest fatal flaw in our work. Often these characters have just stumbled across MMT for the first time and, full of dissonance, wade into the discussion without thinking for a moment that we have been working on this Project for 25 or more years and, just may have, come across these points before. In other cases, the critics just make stuff up to make themselves sound erudite. In the process, well motivated readers get confused. In the first part I dealt with the ‘money printing’ story about MMT. Today I want to discuss the issue of bond issuance and whether MMT economists are Wall Street stooges who want to perpetuate the interests of the financial sector over all else. Seriously!
There are continual Twitter type debates and Op Ed/Blog-type articles going on about whether MMT says this, or that, or something else. The critics are refining their attacks by hammering on about “printing money” and hyperinflation, and, more recently that MMT ignores ‘power’ (whatever that is). The latter leads them to conclude that MMT is thus a naive approach and is inapplicable to a political agenda aiming at changing things for the better. These debates (if you can call them that) are also a very American-centric sort of to and fro, which exemplifies the tendency of the US to think the world and all ideas stop at its borders. In this two-part series, I seek to clarify some of the points that are raised (not for the first time) (-:, which, in turn, demonstrates how poorly constructed these attacks. I know it is often said that attackers haven’t read the literature. But in these situations it is a fact. In part 2 tomorrow, I will also touch on why I think some MMTers are becoming defensive in the wake of these attacks. So, in Part 1 I consider the ‘money printing’ story. Specifically, is MMT just about ‘printing money’? The answer is obvious – profoundly no, but we need to understand where these types of allegations come from (which swamp!).