Modern Monetary Theory (MMT) has been gaining more attention in Australia in recent weeks. I have been shifting my face-to-face speaking commitments slowly to on-line presentations. I will be announcing more systematic MMTed classes beginning via the Internet soon. And I will do some Live Youtube presentations as well. Last week, the well-known financial market journalist Alan Kohler used his weekly column in The Australian newspaper to discuss MMT – It’s Modern Monetary Theory time as the state steps in (March 23, 2020 – subscription required). Apart from his private corporate work in the financial markets (he writes a regular briefing and does an inflight business report for Qantas), Alan presents the finance report on the national broadcaster ABC nightly news program. He is also a regular columnist in the business pages. So he has high profile. I discussed my concerns with Alan’s representation of MMT in this blog post – It’s Modern Monetary Theory time! No, it always has been! (March 23, 2020). We made contact soon after that – I E-mailed him to tell him I had written a response to his column and he rang me and we arranged to talk further. On Wednesday last week (March 25, 2020), we spoke as part of Alan’s regular podcast – published at Eureka Report (which is a subscription business service). The 48-odd minute is also published here with some additional commentary.
First, I am grateful to Alan for giving me permission to republish the podcast interview on my YouTube account. I added some photos and some brief information but did make any edits to the audio. I usually would edit out the umms and aahs but because it was not my audio I chose to leave it as it was recorded.
Second, we did the interview by mobile phone (at my end) and that explains the different quality of the audio when shifting from Alan to me.
Third, as a follow up to the interview, in his lastest weekly column for The Australian – (March 28, 2020) – Accepted wisdom out the window as government takes control – he gave his reactions to our discussion.
There is quite a difference between the March 23, 2020 article cited above and Saturday’s article.
I think we are now making progress when we can have these sorts of conversations and widen understanding of our work.
Here is the podcast.
I want to follow up on the last part of the conversation.
In his article, Alan wrote that we do not want the RBA purchasing Treasury debt directly.
we don’t want to do that because we don’t trust politicians. They need to be handcuffed by the idea that all spending must be funded by taxes or debt. Otherwise where would we be? In the land of the Magic Pudding, that’s where.
But that is a fabrication designed to prevent politicians using unlimited cash to buy votes and entrench themselves in power.
The interesting question now is whether that fabrication will survive the virus or become one of its casualties.
And this is a very interesting question.
I have written about this in the past.
I use the term a ‘veil of ideology’ to describe the way that the neoliberal monetary myths distort the political process and compromise the quality of our democracies.
I have noted often that MMT is a lens (a perspective or framework) for achieving a better understanding of the way the fiat monetary systems operate and the capacities and options that a currency-issuing government has within that type of monetary system.
It exposes the monetary myths that are used to suppress those capacities and options.
I consider it renders the ‘veil of ideology’ transparent. Once we all understand the principles of MMT, a politician will no longer be able to hide behind claims that “there is not enough money”, or that “we have run out of money” to preclude policy action that might improve the well-being of the majority or protect our natural world.
To create a policy layer on top of that understanding we obviously exercise our value judgements and aspirations. So someone like me, who maintains collective, progressive Left values, will propose quite different policy interventions than a person who extols a world view based on neoliberal individualism.
Those value differences are out there. But by lifting the ‘veil of ideology’, MMT understandings make them more obvious.
A neoliberal politician in a world full of MMT understanding would have to explain why, for example, unemployment was necessary; whereas people with my persuasion would know it was highly damaging, wasteful and unnecessary.
The typical MMT critic that has come out of the wood work in recent months fails to make the distinction between the ‘lens’ and the ‘values’.
Even if they understand that distinction, it is not in their interests to explicate it to the wider public because then their own values will come into focus. It is better to keep people in the dark.
Some critics have been explicit about that in fact. There have been papers that have argued that there is utility in keeping the wider population uninformed and functioning under the false construction that their taxes pay for government spending and all that sort of lying, because it places a discipline on politicians, who because they are untrustworthy, would otherwise go wild in their spending.
These critics acknowledge the validity of core MMT principles but think they are to dangerous for people to broadly share in that knowledge.
Because we apparently have reached a point in history where we hate dictators and eulogise the benefits of democracy (à la Churchill in the Commons on November 11, 1947 – “democracy is the worst form of Government except for all those other forms that have been tried from time to time”), but don’t want the politicians we elect to have the flexibility to advance our well-being.
Or in simpler language – “because we don’t trust politicians”.
This has been a long standing view.
Remember the famous quote from American economist Paul Samuelson in the interview he did for the film – John Maynard Keynes: Life, Ideas, Legacy – where at the 52:50 mark into the film, he said:
I think there is an element of truth in the view that the … the superstition that the budget must be balanced at all times … aah … Once it is debunked … takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have … aah … anarchistic chaos and inefficiency. And one of the functions of old fashioned religion was to scare people by … aah … sometimes what might be regarded as myths into behaving in a way that long-run civilised life requires. We have taken away a belief in the intrinsic necessity of balancing the budget if not in every year … in every short period of time. If Prime Minister Gladstone came back to life he would say ‘oh, oh what you have done’ and James Buchanan argues in those terms. I have to say that I see merit in that view.
This amounts to a world where the elites can manipulate the fiscal capacity of the state to advance their own interests (procurement contracts at will, bailouts when they mess up, etc) but if we want to do something about unemployment or poverty then the rest of us has to be held in this fictional world that appeals to our instincts of fear and uncertainty.
And, of course we then are encouraged to distrust politicians and so it goes.
My view is that once we expose these myths, more sensible political discourse can take place.
And if we do not like our government – that is they go crazy with their spending capacity – then we throw them out of office (in Australia, every three years of so).
They can hardly destroy the nation in three years.
I also think that if the standard of political dialogue was improved, higher quality candidates would seek election and push out the time-serving careerists who dominate all political parties.
It is an extraordinary world where we accept a deception because knowing the truth might require us to act differently (become more politically engaged and demand quality political behaviour).
I don’t accept that proposition.
Tomorrow, I will have more to say on the latest fiscal stimulus (an extra $A70 billion) – which means we are up to about 7 per cent of GDP.
Still more is going to be needed and the intervention needs to be designed differently. That will be tomorrow.
That is enough for today!
(c) Copyright 2020 William Mitchell. All Rights Reserved.