Why does the Shadow Chancellor of Britain have a WWW page entry at the Institute for Fiscal Studies? HERE. Perhaps when you read this you will have the answer. What follows is bad. It won’t make anyone happy – my critics or those who agree with the analysis. But that is what has happened in the progressive world as lots of ‘progressives’ added the neoliberal qualifier to their progressiveness and paraded around claiming technical superiority and insights on economic policy that the old progressives just could not grasp. They have become so enthralled by their own cute logic that they cannot see they are handing the opposite side of politics electoral victory on a consistent basis. After you read this you might understand why I say that the British Labour may as well just not turn up at the next election.
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.
In Monte Python’s Life of Brian we were introduced to the “People’s Front of Judea”, which was “one of many fractious and bickering independence movements, who spend more time fighting each other than the Romans”. The segments featuring the Front were very amusing. It was humour but redolent of the sort of historical struggles that have divided the Left over the centuries. In Australia, the history of the Communist Party, for example, is one of many factions, splintering into new parties and leaderships after disputes about Bolshevism, then the Communist International and Stalinism, then the so-called “imperialist” war by the Allies against Nazism, then Krushchev’s revelations about the crimes of Stalin, then the Soviet invasion of Hungary, then the split between the Soviet Union and China and the rise of Mao, then the Soviet invasion of Czechoslovakia, and so on. This sort of division is mirrored around the world on the Left side of politics and struggle. I have been reminded of this history in recent weeks as the ‘war’ against Modern Monetary Theory (MMT) has been ramped up from so-called progressives. However, this ‘war’ seems different to the sort of internicine struggles that have historically bedevilled the Left. We now have all manner of strategies emerging, ranging from classic Association fallacies to ridiculous claims that MMTers perpetuate ‘anti semitic tropes’, and on to plain invention, a.k.a. straight out fabrications or lying. There is no real attempt to embrace the body of work we have created over the last 25 years. Quite the opposite – the ‘critics’ haven’t an original thing to say about the substance of MMT. They have instead decided to smear us with increasingly hysterical assertions. Which raises the interesting question for me – what is driving this aberrant behaviour? Fear, a sense of irrelevance, jealousy, Brexit, spite, … what? I have conjectures but no real answers.
The week before last, Thomas Fazi and I had a response to a recent British attack on Modern Monetary Theory (MMT) published in The Tribune magazine (June 5, 2019) – For MMT. In effect, there were two quite separate topics that needed to be discussed: (a) the misrepresentation of MMT; and (b) the issues pertaining to British Labour Party policy proposals. The article we were responding to – Against MMT – written by a former Labour Party advisor, was not really about MMT at all, as you will see. Instead, it appeared to be an attempt to defend a policy approach, that I have previously criticised as giving to much back to the neoliberals. Whenever, progressives use neoliberal frames, language or concepts, it turns out badly for them. Anyway, the published article only allowed 3,000 words, which made it difficult to cover the two topics in any depth. In this three-part series, you can read a longer version of our reply to the ‘Against MMT’ article, and, criticisms from the elements on the Left, generally, who think it is a smart tactic to talk like neoliberals and express fear of global capital markets. In this final Part, we focus explicitly on Labour Party’s Fiscal Credibility Rule – which uses these neoliberal frames – and we show that it would fail in a deep recession, causing grief to a Labour government should it be in office at that time.
Last week, Thomas Fazi and I had a response to a recent British attack on Modern Monetary Theory (MMT) published in The Tribune magazine (June 5, 2019) – For MMT. The article we were responding to – Against MMT – written by a former Labour Party advisor. In – Part 1 – we considered how the MMT critique was not really about MMT at all. We provided a more accurate summary of what MMT is and what it is not. In this second Part we consider the way the former advisor’s article misrepresented MMT authors on issues such as taxes, inflation and democracy. Not that this three-part series is not just a point-by-point response to the attack on MMT noted above. In part, that article was not really about MMT but some concoction the author created to make his argument easier to sustain.
Last week, Thomas Fazi and I had a response to a recent British attack on Modern Monetary Theory (MMT) published in The Tribune magazine (June 5, 2019) – For MMT. The article we were responding to – Against MMT – written by a former British Labour Party advisor, was not really about MMT at all, as you will see. Instead, it appeared to be an attempt to defend the Labour Party’s Fiscal Credibility Rule, that has been criticised for being a neoliberal concoction. Whenever, progressives use neoliberal frames, language or concepts, it turns out badly for them. In effect, there were two quite separate topics that needed to be discussed: (a) the misrepresentation of MMT; and (b) the issues pertaining to British Labour Party policy proposals. And, the Tribune only allowed 3,000 words, which made it difficult to cover the two topics in any depth. In this three-part series, you can read a longer version of our reply to the ‘Against MMT’ article, and, criticisms from the elements on the Left, generally, who think it is a smart tactic to talk like neoliberals and express fear of global capital markets. I split the parts up into more or less (but not quite) three equal chunks and will publish the remaining parts over the rest of this week.
Over the last weekend, it seemed that we had a return of the Spanish Inquisition with a prominent British academic, who by his own words designed the fiscal rule that British Labour has unwisely adopted, repeatedly demanding that MMT Tweeters confess to knowing that I was completely wrong on my interpretation of the fiscal rule. It is apparent that my meeting with the British Shadow Chancellor in London recently and my subsequent discussion of that meeting has brought the issues relating to the fiscal rule out into the open, which is a good thing. It is now apparent that British Labour is still, to some extent, back in the 1970s, carrying an irrational fear of what financial markets can do when confronted with the legislative authority of a sovereign government. I am not a psychologist so I cannot help them heal that irrational angst. But the claims that I misunderstood the fiscal rule – which are being repeated daily now by the fanboys of the rule are just ludicrous. The rule is simple. And it will bring Labour grief politically. Rolling windows or not!
It is Wednesday and I am reverting to my plan to keep my blog posts short on this day to give me more time for other things. Today, I will briefly outline what happened last Thursday when I met with Shadow British Chancellor John McDonnell in London. As I noted yesterday, I was not going to comment publicly on this meeting. I have a lot of meetings and interactions with people in ‘high’ office which remain private due to the topics discussed etc. But given that John McDonnell told an audience in London later that evening that he had met with me and that I thought the proposed fiscal rule that Labour has adopted was “fine”, I thought it only reasonable that I disclose what happened at that meeting. I did not think the rule was fine and I urged them to scrap it and stop using neoliberal constructs.
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.
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.