This is my short Wednesday offering, which will be quite short considering the last two days have been (necessary) epics. My three-part series created somewhat of a social media storm, which means people are interested in the topic and I think that is healthy. Democracy is strengthened if people educate themselves and contest propositions that are abroad in the debate. But, as I noted yesterday, social media storms have a way of getting out of control and out of the realm of being complementary to a more considered educative process and interaction. What the recent Twitter storm has demonstrated is that key people are just willing to make spurious accusations (aka lies) without having taken the time to consider the depth of the literature that is available on any topic. That is not helpful to democracy. It undermines it. Anyway, in this short blog post, I consider some of the responses to my three-part series. As a footnote, I have now retitled the three-part series “MMT is just plain good economics” rather than using the quotation from the British Shadow Chancellor’s advisor who said that “MMT is just plain bad old economics”. Framing. I took the points of several commentators on this blog seriously in this regard. Thanks.
Twitter was twittering away at a fast rate over the last few days on this topic.
And some of the claims being made by those defending the Shadow Chancellor’s advisor’s remarks, which I quoted faithfully were astounding and dishonest.
Here is a selection with my annotations.
First up is academic economist Jo Michell, who seems to want to make accusations about my work but not base them on what I actually write.
Here he is with one of his ‘smart-guy’ summaries of my blog where he accuses me of criticising British Labour by claiming that public “capital investment is ‘neoliberal'”.
Here is his tweet (August 13, 2018):
What I actually said was that the Labour Party’s Fiscal Rule is framed within neoliberal concepts and language. That is entirely different matter.
My points about the Golden Rule component of the Rule were fourfold: (a) there is a problem distinguishing capital from current expenditure; (b) in a deep recession, the Golden Rule may not be flexible enough to prevent significant output and employment losses; (c) in a recession, it would make it virtually impossible to meet the debt commitment within the Rule, and (d) it creates a private-debt bias.
Nothing in what I wrote indicated that I was “focusing on capital investment is ‘neoliberal'”.
I also did engage in Labour’s Manifesto including its investment program by going through it issue by issue and agreeing with most of it.
On the same day (August 13, 2018), Michell tweeted:
He was soon met with a torrent of responses. The first to point out that Michell was lying came from Rohan Grey as follows.
Then a range of people including those in the core academic MMT group (such as Pavlina Tcherneva, who has done so much excelelnt work on the Job Guarantee) followed up.
As the quoted section in Rohan Grey’s Tweet from my blog post – The scourge of youth unemployment (October 21, 2011) – indicates, I have always been careful to make that point.
One of the things that an academic is trained to do and required to do before entering public debate is to make sure they have read the relevant literature.
We are not paid to be attention-seeking, social media heroes who tweet our heads off by making stuff up.
We have a responsibility to the public to speak with authority and knowledge.
Michell just made his Job Guarantee put down up. He hasn’t read the literature that now spans 24 or so years (at least). He was just mouthing off.
I note that after the torrent of objections from those who have either produced the primary literature on this topic or who have taken the time to read it and understand our position on the Job Guarantee that Michell stepped back a bit and wrote something about his panacea accusation “went too far”.
No, it didn’t “go too far”. It was an untrue statement not supported by anything we have written. Plain and simple.
Next up is Jonathan Portes who was Gordon Brown’s chief economist and then took over as Director of the NIESR. His contract there was prematurely terminated by the Board. He is now employed as an academic. His 2014 paper with Simon Wren-Lewis mapped out Labour’s Fiscal Rule .
I commented in some detail on that paper in this three part series:
1. The New Keynesian fiscal rules that mislead British Labour – Part 1 (February 27, 2018).
2. The New Keynesian fiscal rules that mislead British Labour – Part 2 (February 28, 2018).
3. The New Keynesian fiscal rules that mislead British Labour – Part 3 (March 1, 2018).
In other words, I took some time (as an academic should) to understand their modelling and narrative.
In the current Tweet storm, Portes indulgently tweeted (August 14, 2018):
So, opinionated without having actually read my work. Another academic making false claims without actually checking the work he was criticising.
Why is he accepting a salary as an academic then?
And dishonest, because I went to great lengths in – MMT is just plain good economics – Part 2 (August 13, 2018) – to quote verbatim from Labour’s Fiscal Credibility Rule and from Speeches that John McDonnell had made outlining the Rule.
So his Tweet statement that I “couldn’t be bothered to read what our/Labour’s fiscal rule actually says” is an outright lie.
Then the Shadow advisor himself, James Meadway started tweeting about this topic. One tweet was demonstrative of the problem (August 15, 2018):
It is “absolutely farcical stuff” when someone says I haven’t read “anything” he’d “actually written, said, or done” when at the outset in the first blog post of the series – MMT is just plain good economics – Part 1 (August 9, 2018) – I quote written statements made by him about Modern Monetary Theory (MMT).
Those statements motivated the discussion.
So James are you now denying that those quotes were written by you?
Did you not write on Carol Wilcox’s Facebook page:
MMT is just plain old bad economics, unfortunately, and a regression of left economic thinking. An economy “with its own currency” may never “run out of money”: but that money can become entirely worthless.
Well, I disagree – in terms of what a genuinely radical and transformative Labour government would need to do on the economy, its prescriptions are close to catastrophic (for all that it has grasped some correct formal insights ahead of neoclassicism). Any country that isn’t the US trying to apply MMT’s prescriptions would find itself in the same position.
You cannot have it both ways. Either I have quoted you fairly and your tweet is untrue or you didn’t write that stuff.
In which case, did Richard Murphy in this blog post – Labour’s chief economic adviser confirms it is committed to the thinking that will deliver yet more austerity (August 6, 2018) – falsely attribute those statements to you?
In Part 1, I also note that I had read and commented on earlier work Meadway had been involved in at the New Economic Foundation, where he was previously employed.
I didn’t write the critique to get a response from him. But for him to suggest I was not basing the three-part series on what he had actually written seems to be a false statement.
Finally (and I could have listed stacks more), we have Portes again (August 15, 2018) who previously had told his Twitter audience he couldn’t be bothered reading my discussion, but then a day later says that I wrote that the Labour Party’s Fiscal Rule “requires deep cuts now”.
So Jonathan, where did I write that?
I wrote something entirely different. For example:
1. “At the time, I wrote that if we consider what John McDonnell said carefully, it may not be as bad as, for example, the Guardian headlines suggested”.
2. Adoption of the rule “would still provide Labour with some flexibility for government to avoid harsh austerity.”
3. After quoting the rule directly (contrary to Portes’ previous tweeet above), I wrote “it is important to understand that this doesn’t negate on-going fiscal deficits. It just means that so-called recurrent (or current) spending must be matched by tax revenue over a five-year period. So an application of the rule will also not stop a fiscal deficit on recurrent spending in say year 1 of a new Parliamentary term either. It just means that over a rolling five-year horizon the balance has to be zero.”
4. “It allows ‘current’ spending (whatever that is) to exceed ‘current’ revenue (from taxes) in Year 1, Year 2, Year 3 and even Year 4, but after 5 years it has has to balance. And that rolling average then starts in Year 2 and ends in Year 6 (another balance), then Year 3 to Year 7 (another balance).”
That is what I wrote among other things.
Nowhere do I say it “requires deep cuts now”.
You didn’t read that anywhere did you Jonathan? You just made it up. Jumping on the Groupthink bandwagon.
You didn’t check what I had actually written.
And for those who are claiming I have got the rule wrong, consider this sequence of statements – and the focus in on the rule conditions for the ‘current fiscal balance’ not the ‘capital balance’.
John McDonnell’s – Speech at the Royal Society of Arts (March 11, 2016)- outlined the Fiscal Rule:
Sound finances are the foundations on which everything else is possible … We know a rule for spending is needed. It should make clear the framework in which a future Labour government will make its spending decisions so that the public can trust those spending decisions …
We believe that governments should not need to borrow to fund their day-to-day spending …
And that is why we would commit to always eliminating the deficit on current spending in five years, as part of a strategy to target balance on current spending over a target five-year period …
While there are exceptional times when shocks from the private sector mean that government has to step in to help, everybody knows that if you’re putting the rent on the credit card month after month, things needs to change.
The Daily Mirror analysed John McDonnell’s Speech (March 10, 2016) – Labour launches a five-year plan to tackle the UK’s debt crisis:
The Shadow Chancellor will pledge to get the deficit down within five years of Labour coming to power.
Simon Wren-Lewis (March 11, 2016) – A (much) better fiscal rule:
It involves a rolling target for the government’s current balance: within 5 years taxes must cover current spending.
The Independent (March 10, 2016) – Labour bids to win back economic credibility as John McDonnell vows to balance Budget over five years:
The main elements of the new fiscal rules … will be to achieve a balance on the current budget over a rolling five year forecast …
The UK Guardian’s interpretation (March 11, 2016) – John McDonnell’s new fiscal rule is strong, but it’s no election winner :
… the Labour party believes governments should balance the books on day-to-day spending … it is to be applied over a fixed five years, and it can be suspended when the Bank of England has no other ways of stimulating the economy.
John McDonnell explaining the rule to the Press(Source):
A Labour Government will always balance day-to-day expenditure …
And in the related BBC news report (March 11, 2016) – Labour announces ‘fiscal credibility rule’:
… over a five-year Parliament borrowing would only be allowed for investment … Mr McDonnell said the deficit on “current spending” would be eliminated …
Paul Mason’s interpretation – The thinking behind John McDonnell’s new fiscal credibility rule (March 11, 2016):
A Labour chancellor will have to show at every budget, according to Office of Budget Responsibility (OBR) calculations, that s/he can balance the books in five years’ time.
On November 204, 2016, John McDonnell appeared on BBC’s The Andrew Marr Show and this exchange occurred (Source):
AM: … Explain to me again what the Fiscal Credibility Plan actually is.
JMcD: … so what we need is a fiscal credibility rule that actually says yes, you bring down the deficit on a rolling five year programme, when it’s …
AM: So you balance the books over five years?
JMcD: Yes. In other words you spend what you earn.
Briefing notes from the Resolution Foundation – The deficit the election forgot> with a quote from John McDonnell (May 2017):
The Labour Party last year set out a “fiscal credibility rule”, which would commit it to “always eliminating the deficit on current spending in five years, as part of a strategy to target balance on current spending over a target five-year period” …
Nothing I have written is in contradiction with any of those statements including those made by John McDonnell himself.
They are intending to balance at some point. For those who think they can just push out the balance period if things get bleak, that is not what the Rule says.
It says that when the Bank of England’s Monetary Policy Committee determines that monetary policy is no longer effective (for example, the zero-lower bound story), then, and only then, can the Government suspend the rule.
And a zero-lower bound is rare but crises where unemployment rises quickly and needs strong fiscal support (both current and capital) are much more frequent.
Music I am listening to today …
There are some pieces of music that always kill me. Slabo Day written by Peter Green is one of those pieces.
It came out on Peter Green’s 1979 album – In the Skies – which was his second solo album after leaving Fleetword Mac in 1970.
There was an 8 year gap between the two solo albums as he struggled with mental illness, rumoured to be triggered by taking too much acid at a hippy colony in Munich (reference).
The album is hard to get and is one of my favourites – some of the tracks (Proud Pinto and Apostle) are equal to Slabo Day.
Three chords (Am G F) have never sounded so good!
This version is from a live concert given by English guitar player Snowy White, (who has played in Thin Lizzy and Pink Floyd) and who helped Peter Green out on the 1979 album, given that Peter Green was not in a very good mental state at the time.
It was filmed in the Netherlands in September 2011 at de Bosuil (a live music venue) in Weert. I was at that concert having caught the train up from Maastricht. There was some beautiful playing all evening.
And here is the entire ‘In the Skies’ album. The playing is masterly.
Slabo Day is at 3:51.
Apostle is at 37:08
Listen to those two at a minimum if you want to get a feel for this period in Peter Green’s immense career.
That is enough for today!
(c) Copyright 2018 William Mitchell. All Rights Reserved.