It seems now very opportune that I recently posted three times on my blog my views on Modern Monetary Theory (MMT), an increasingly attractive theory for the left to justify government spending to meet the ‘needs of the many’. For just this week, left Democrats in the US Congress, led by the rising star Alexandria Ocasio-Cortez (AOC), a member of Democratic Socialists of America, launched what they call the Green New Deal (GND), an alternative programme for a future US government to adopt to provide proper public services in education and health and to deal with global warming and environmental pollution. And the GND and AOC make clear that funding for these badly needed government programmes can be achieved if we follow the policy conclusions of MMT.
The GND is a welcome attempt to reset the agenda for economic and social policy in favour of labour in America, for the first time since the New Deal of the 1930s. The GND wants to establish a national health service free to all at the point of use, as exists in most of Western Europe and other advanced capitalist economies. It wants to introduce free college education and end the heavy burden of student loans placed on working-class people; and it wants to create jobs at decent wages for environmentally sound projects through government investment. Such a programme may be modest and it will bet bitterly opposed by American capital.
The GND preamble notes that “the Federal Government-led mobilizations during World War II and the New Deal era created the greatest middle class that the US has ever seen” and frames the GND as “a historic opportunity to create millions of good, high-wage jobs in the United States.” Of the GND projects, investment in “community-defined projects and strategies” to increase resilience is the first; repairing and upgrading infrastructure is the second, along with “appropriate ownership stakes and returns on investment, adequate capital (including through community grants, public banks, and other public financing), technical expertise, supporting policies, and other forms of assistance to communities, organizations, Federal, State, and local government agencies, and businesses working on the Green New Deal mobilization.” So this is a New Deal like the 1930s, but designed for the 21st century to revive public investment, with the returns going back to the public. GND calls for the US to “meet 100 percent of our power demand through clean, renewable, and zero-emission energy sources.”
Also GND has what are called “aspirations” like “guaranteeing a job with a family-sustaining wage, adequate family and disability leave, paid vacations, and retirement security to all people of the United States.” In other words, the Job Guarantee as promoted by MMT enthusiasts (see my post). And more rights for trade unions to organise, “strengthening and protecting the right of all workers to organize, unionize, and collectively bargain free of coercion, intimidation, and harassment.” Another key aspiration is in “providing all members of society with high-quality health care, affordable, safe and adequate housing, economic security, and access to clean water, air, healthy and affordable food, and nature.”
So the GND involves a federal job guarantee, the right to unionize, action against free trade and monopolies, and universal housing and health care. In Europe and other advanced capitalist economies, these aspirations are not so radical(although in the neoliberal world, they are increasingly so), but in Trump’s America, where corporate interests are paramount and the main enemy is now ‘socialism’, the GND programme is an anathema.
But it is not just Trump and Wall Street who have thrown up their hands in horror at the GND proposals. Some orthodox Keynesians have wrung their hands. Noah Smith, the Keynesian economics blogger and Bloomberg columnist, let out a howl of anguish because he reckoned that GND, as promoted by AOC,”definitely seems to include: 1) universal health care paid for by MMT; 2) trillions of dollars in infrastructure spending paid for by MMT; 3) economic security for those “unwilling to work”, paid for by MMT and makes clear that it will ultimately rely on deficits to pay for the Green New Deal. As justification, it points to the basic ideas of MMT.” Smith is horrified by this because he considers the ‘nonsense’ of MMT will completely undermine the objectives of the GND. He wants the Democrat lefts to decide between work-based policies and redistributive policies.
It does seem that AOC and other promoters of the GND programme think that MMT can justify and explain where the money is going to come from to pay for all the aspirations and necessary public investment. For example, leading MMTer, Stephanie Kelton was asked: “ Can we afford a #GreenNewDeal? She replied: Yes. The federal government can afford to buy whatever is for sale in its own currency.” So there it is. The financing of the GND will apparently be achieved by government spending the necessary money, which it gets by running deficits and ‘printing’ whatever amount of currency required. Other means of revenue, like taxes, come later (if at all), and issuing government bonds for households or financial institutions to buy is not needed.
What is wrong with this? Well, I have argued in previous posts that MMT is a novel ‘trick of circulation’ (Marx) that ignores the whole circuit of money that goes from money through capital investment into production for profit and more money. The MMT argues that we can just start with the state printing money and then all will flow from that – more investment, more production, more incomes, more employment – as though the social relations of capitalism were irrelevant. MMT will deliver full employment at decent wages, healthcare, education and other public services without interfering with the big banks, the multi-nationals, big pharma and Wall Street. You see, because the state controls the money (the dollar), then it is all powerful over the likes of Goldman Sachs, Bank America, Boeing, Caterpillar, Amazon, WalMart etc.
Therein lies the danger of MMT as the theoretical and policy support for government spending and running deficits. Actually, it is not necessary to adopt MMT to deliver the GND programme. There are many ways to meet the bill. First, there is the redistribution of existing federal and state spending in the US. Military and defense spending in the US is nearly $700bn a year, or around 3.5% of current US GDP. If this was diverted into civil investment projects for climate change and the environment, and those working in the armaments sector used their skills for such projects, then it would go a long way to meeting GND aspirations. Of course, such a switch would incur the wrath of the military, financial and indsustrial complex and could not be implemented without curbing their political power.
Then there is the redistribution of income and wealth through progressive taxation to raise revenues for extra public spending on the needs of the many. The Trump administration has made huge cuts in the tax burden for the very rich and the big corporations; and it has encouraged and allowed the salting away of profits into tax havens around the world equivalent to 1-3% of US GDP. So the proposal by AOC and others to raise the top income tax rate to 70%, along with the idea of Elizabeth Warren to apply a wealth tax on the assets of the very rich, is another direction to go. The latter could raise up to $275bn a year. Of course, these measures would only scratch at the surface of the grotesque income and wealth inequality in America. Tax inequality expert Gabriel Zucman reckons that the Warren wealth tax would raise the total effective burden at the very top of the distribution from 3.2% of net worth to only 4.3%. This tax obligation would still be lower than the average burden of 7.2% of net worth paid by most other Americans.
The problem is that is the already high level of inequality in wealth and income before taxation: the US and the UK have highest degree of inequality in the advanced economies. The graph below shows inequality before and after tax and transfers. The US and the UK have the highest inequality before and, although their tax and transfers reduce that inequality considerably, they still remain at the top. The Scandinavian economies have high inequalities, but redistribute most, to end up with the lowest inequality ratios.
But again, to change things fundamentally on inequality would require a change in very structure of the economy ie capitalism. Warren, a supporter of capitalism, does not want to do that. Instead she wants, like other leftists (Joe Stiglitz), just seek to end of the ‘rigging’ of the economy in favour of the rich and the big monopolies.
The real way to find the finance needed to carry out the GND programme would be to deliver more revenues through faster economic growth. President Trump boasted that his administration would deliver 4% real GDP growth a year from his tax cuts and incentives to the stock market. Of course, this was an idle boast. At the end of 2018, US real GDP growth peaked at 3% in the last quarter and is now expected to slow fast (even if the economy avoids an outright recession). The long-term forecast for US economic growth made by the US Congressional Board Office is just 1.7% a year. That’s why Trump tax cuts for the rich have already created rising annual federal budget deficits – but something we need not worry about, according to him and to the MMTers.
I am indebted to Scott Fullwiler, a leading MMTer at the Levy Institute, for pointing out in a comment on my blog that MMT experts have simulated their own projections for the cost of delivering full employment at wages above $15 an hour and reckon that it would increase the federal deficit by 1.0-1.5% of GDP annually over the next ten years without incurring any significant rise in inflation. rpr_4_18
Let me be clear, Left Democrats and the supporters of MMT are rightly pushing for measures that really would help ‘the many’ in America. But, in my view, it will be an illusion to think the GND can be implemented, even in just economic terms, simply by following MMT and printing the dollars required. Yes, the state can print as much as it wants, but the value of each dollar in delivering productive assets is not in the control of the state where the capitalist mode of production dominates. What happens when profits drop and a capitalist sector investment slump ensues? Growth and inflation still depends on the decisions of capital, not the state. If the former don’t invest (and they will require that it be profitable), then state spending will be insufficient.
And even accepting that the MMT/Levy projections could be achieved, they would not deliver nearly as much as a doubling of the sustainable US growth rate would generate, which would be over $750bn a year. That would mean a tripling of investment growth. Over a decade, even a proportion of that would amply meet the financing requirements of the GND. But such a growth rate is impossible to achieve without a substantial change in the economic structure of the US economy. It is not going to happen when the 80% of all investment is done by the capitalist sector and depends on the profitability of capital. That tells me that the GND is only possible to achieve if 80% of the productive sectors of the economy are socialised and incorporated into federal, state and local plans for investment and production. That thorny question cannot and should not be ignored by MMTers.
Michael Roberts Blog 
MMT advocates often claim that their analysis is apolitical but this fails to comprehend that economics is always political. Many of the MMT school don’t appear to understand (or at least don’t admit) that the very existence of MMT as a body of knowledge directly opposes ruling capitalist class interests.
MMT illustrates that the nation states are the original source of and ultimate authority over the money that the bourgeois seek to accumulate through their direct and indirect exploitation of labour. This exposes an Achilles heel of capitalism. A working class which achieves state power has taken ownership of the lifeblood of the capitalists, the money supply. Owning the means of production, distribution and exchange is not an end in itself for capital. They possess and pay labour to operate these functions in order accumulate money as an end goal.
I believe MMT’s analysis and description of the capitalist monetary system is correct but the conclusions that many of their advocates draw from this knowledge is wrong as many (but not all) lack a class analysis of society as Marxists do.
An understanding of MMT demonstrates that the capitalist state already operates a significantly planned economy but one that is planned and managed in the interests of the capitalist class. Proposals like the Green New Deal and the Job Guarantee pose the question of the state acting in the interests of the majority labour class.
Marxists will understand that the bourgeois will bitterly oppose any moves in this direction but this all the more reason to make these transitional demands on the ruling class to expose the nature of the system to greater numbers of the working class.
If the capitalist state is forced to take this overt and active role in managing the economy through a GND or JG then it is effectively implementing the first rudimentary planned economy which operates at least partially in the interests of the majority labour class. This would then quickly pose the question of a fully and rationally planned economy functioning on the basis of need rather than for profit accumulation. More people would begin to ask why do we need these capitalist entities exploiting labour and destroying the habitable planet solely to accumulate money when the state is the origin of that money?
I think it’s certain that many of the capitalist class strategists know that MMT’s analysis and description of their economic model is correct. But to acknowledge this would be to admit the bourgeois emperor is naked and lay the basis for their own demise as ruling class.
And for the same reasons of course they must deny the essential validity of Marxism.
MMT, at best, describes a frozen frame in time-space of a very specific historical period of the American economy. It certainly doesn’t describe correctly the capitalist economy as a whole.
I think we’ll have to agree to disagree vk. Marxism provides a holistic analysis of human society including the historical, political, economic and social aspects. But I strongly believe that MMT provides important insights into the capitalist economy as it exists now which we can fit into the great jigsaw of understanding that dialectic materialism has helped us to construct. It’s not a doctrine that we Marxists follow but a method and I think our method should be flexible enough to incorporate the objectively correct parts of MMT.
That is not to say we accept MMT uncritically in its entirety. The reformist conclusions that many/most MMT people draw from their analysis is wholly incorrect. We Marxists know that capitalism cannot ultimately be reformed or regulated to meet the needs of the majority as the system is fundamentally based on the exploitation of the majority labour class.
Any gains made by the labour class under a GND/JG will eventually be clawed back by capitalists who will always seek to recoup what they have lost if they are allowed to remain in position as the ruling class.
Rather the GND/JG should be seen as strictly transitional steps on the path to a fully planned, democratically controlled socialist economy and society in the hands of the working class.
I’m basically where Wally Mooney is on this. I think the JG, in particular, could be the first meaningful step to overthrowing capitalism. Of course, even getting a JG–and then sustaining its meaningfulness (in political terms)–will still be an epic struggle. But I think MMT helps explain, not only why it’s possible, but why it’s a moral imperative, because MMT demonstrates that the government itself is causing the unemployment that exists by its monetary practices.
“Government causes unemployment “. So not capital then?
The idea that it is the failure of governments to recognise that they can print money and spend as much they like to get full employment lets capital off the hook. From this idea, it follows that it is not capitalist accumulation or the capitalist mode of production that has irredeemable flaws due to the contradiction between investment and production for profit and social need. No it is just the stupidity or ideological bias of governments and the politicians that run them not realise that they can print money to infinity. This view is even more conservative than orthodox Keynesianism. It also divests one of Marx’s key concepts – modes of production and social relations. It doe snot matter whether we are in feudalism or capitalsim, or whatever. All that matters is whether governments print money or not.
Michael,
The capitalist state serves the capitalist class who benefit by keeping a section of the working class permanently unemployed and/or underemployed. This reserve army of unemployed is used as stick to discipline the working class in driving down wages and conditions under threat of unemployment and poverty as a means to control inflation through reducing aggregate demand.
MMT explains that the state as the currency issuer has the capacity to resolve the involuntary unemployment “crisis”. We as Marxists understand that it won’t as this would fundamentally contradict bourgeois interests.
In this context the JG should be posed as transitional demand. Capitalism cannot allow permanent full employment at a genuine living wage so the struggle for this aspiration will reveal the inability of the capitalist system to meet this basic needs of teh majority and pose the necessity of a public ownership of industry etc.
I think we need to distinguish between private capital and the capitalist state. The former is obliged to exploit labour in order to accumulate profit and is governed by all the imperatives that Marx described so accurately. The capitalist state in contrast is the origin of its own money and is therefore not subject to the laws of profit accumulation.
MMT helps to reveal that the state can concern itself only with the use value of commodities rather than the exchange value which is the absolute concern of the private capitalist. So this understanding of the state immediately poses the question of a planned economy where commodities are produced and jobs are provided on the basis of need rather than for profit accumulation. In this way the bourgeois in their formation of the capitalist state have created another potential gravedigger for themselves if and when the working class wins the struggle for state power.
Once the working class controls the means of production, distribution and exchange and the source of the monetary claims (the central bank) on those resources then the workers hold all of the components for a rationally planned, democratically controlled economy in their hands.
@ Michael,
Yes, government creates unemployment, but it’s a government run by and for capital, which is why it happily creates unemployment (reserve army of labor). Capital has been able to justify this by resort to myths about the government’s spending capacity, myths which MMT exposes. Fiat currency is, I think, a chink in capital’s armor, which is why the most hardcore capitalists crave commodity money and why the less hardcore are such advocates of “sound finance” under a fiat regime. (I view the euro area as basically an attempt to reimpose commodity money rules, which are now being used there to undermine European welfare states and labor bargaining power across Europe. I don’t think any working class in the developed world is currently being attacked more viciously and relentlessly than in Europe.)
Once it gets out that the government is in control, and not “the market,” the capitalists are in danger of losing control over the state. All the worry about the financial markets and their power melts away once it is realized that the finance sector is dependent upon the government for access to its currency, and not vice versa. There are no bond vigilantes (except in the euro zone!), and there is nothing to fear. The government is fully empowered to provide for the public, including ensuring that everybody who wants a job has one, notwithstanding what the markets (capital) want.
Back up there, comrade. You’re making claims on behalf of MMT that are, at the least, a bit exaggerated.
“MMT illustrates that the nation states are the original source of and ultimate authority over the money”
Clearly not the case as a nation-state is a relatively recent development in human history, unless of course you want to collapse categories and call ancient Egypt, Greece, Africa, Sumeria “nation-states”
Logically, and historically, money precedes the nation-state, and exchange precedes money. Cowrie shells, anyone? That a nation-state establishes standards for money is what the bourgeoisie at a certain point in the development of their dominance, their cohesion, require. The bourgeoisie requires the propagation of standards for weights and measures to rationalize all exchanges. The establishment of a standard currency is part of that same process. Look at the history of the US, the congress of which authorized the production of a national currency during the 18th century, without such a currency gaining real traction as a national currency until the Civil War and after.
“This exposes an Achilles heel of capitalism. A working class which achieves state power has taken ownership of the lifeblood of the capitalists, the money supply.”
A working class that has achieved state power cannot delude itself that controlling the money supply is going to abolish capitalism. A working class that achieve state power faces the task of seizing control of the forces of production, abolishing the property relations, that circumscribe those forces, which means physically eliminating not just “ownership” but the owners and their agents. There is a distinction, and an opposition, between the emancipation of labor and the manipulation of the currency, in volume or value.
Owning the means of production, distribution, exchange is not an end in itself for the bourgeoisie? Yes and no. Try taking any bit of the bourgeoisie’s property away and watch what happens.
It is precisely to the degree that those means expand that ownership of that class that makes private property, private accumulation so essential to capital. Because of that specific meaning, determinant, characteristic of bourgeois property, you can’t “buy off” the bourgeoisie; you can’t utilize money as a foundation for the new relations of production, for the new condition of labor.
” Proposals like the Green New Deal and the Job Guarantee pose the question of the state acting in the interests of the majority labour class.
Marxists will understand that the bourgeois will bitterly oppose any moves in this direction but this all the more reason to make these transitional demands on the ruling class to expose the nature of the system to greater numbers of the working class.”
Get a grip. This romance with the “New Deal” is absurd. Varoufakis wants a “new New Deal for Europe” forgetting of course that Europe never had an old New Deal. Now Ocasio-Cortez, when not voting to approve supplemental appropriations for the Department of Defense, or additional money to the Department of Homeland Security, flogs a Green New Deal. You think that’s a contradiction? You’re wrong. It isn’t. No more than the first New Deal, and the Federal government support for the organization of labor was incompatible with sacrificing millions of those workers and poor in World War 2.
The Green New Deal is not a “transitional demand” because it does not a) pose the question of class power in its own articulation b) speak to the unity of the working class around organizations of its own making c) identify the actions of the state, whether its deals be new or old, green or brown, as actions to maintain the exploitation of labor as wage-labor.
“If the capitalist state is forced to take this overt and active role in managing the economy through a GND or JG then it is effectively implementing the first rudimentary planned economy which operates at least partially in the interests of the majority labour class. This would then quickly pose the question of a fully and rationally planned economy functioning on the basis of need rather than for profit accumulation. More people would begin to ask why do we need these capitalist entities exploiting labour and destroying the habitable planet solely to accumulate money when the state is the origin of that money?”
Sure thing. Except this is the same argument social democrats have used for 100 years or more, this gradualism, this “stages” theory, this emergency of “class consciousness” through stealth or osmosis is the same old same old wrapped in the new paper (!) of MMT.
“I think it’s certain that many of the capitalist class strategists know that MMT’s analysis and description of their economic model is correct. But to acknowledge this would be to admit the bourgeois emperor is naked and lay the basis for their own demise as ruling class.”
And I don’t think the capitalist class, as a class, as owner of the forces of production, and owners of property, give a damn. They know they’re not naked. They’re dressed in paper, all right, but the paper has a ballistics rating.
Whatever the historical origins of money it’s correct to say now that the nation states are the original source of and ultimate authority over their own currencies. Forms of money existed prior to the state certainly but in the present time the state determines what money will be used by both the capitalist and labour classes under its authority.
The currency is an instrument of state power. A fiat currency like the dollar has no intrinsic value. It’s just pieces of paper, metal and mostly electronic account entries. What gives the currency “value” and makes people accept it is the government imposed tax liability. The state names a monetary unit of account e.g dollar and grants itself the sole right to issue this currency. (Though it does license the commercial banks to create new money in the form of bank deposits when they issue loans).
The government then imposes the tax liability by force if necessary which is only payable in its currency. The tax liability creates a demand for the currency, ensures it is widely accepted and so gives the currency legitimacy. Everybody needs to obtain the currency in order to pay their tax bill which is only payable in the state’s currency and no other currency. Therefore everybody accepts the currency in return for the goods and services they deliver, including their labour. Taxes are in reality what “backs” a fiat currency and gives it value.
In this way the state is able to lay claim to the real resources of the nation and society without resorting to visible coercion. So there is no need force people out to work in the police, public service etc. as they will work voluntarily for the state money. The currency issuer can always afford to buy any real resources which are for sale in the currency it issues. At a macro level the money is simply a tool to manage and distribute those real resources.
As Marxists we understand that in the final analysis the state exists as “armed bodies of men” directly protecting the capitalist property rights. But MMT also lets us see that the state near monopoly on coercive force (IRS, police, courts, prisons, military etc) indirectly defends bourgeois property rights by imposing taxation and so validating the capitalists accumulated monetary claims on the collective resources of society. Which of course have been accumulated through the direct and indirect exploitation of labour. The bourgeois states now go one step further and load much of the tax liability on to the backs of the working class while the free movement of capital and its political/legal clout allows it to avoid/evade much of its tax obligations through loopholes (actually design features) tax havens etc. in a double blow to labour.
“A working class that has achieved state power cannot delude itself that controlling the money supply is going to abolish capitalism. A working class that achieve state power faces the task of seizing control of the forces of production, abolishing the property relations, that circumscribe those forces….”
Strawman argument. Nowhere did I claim that control of the money supply was sufficient in itself to abolish capitalism. On the flip side if your class enemies control your money supply as is the case in the Eurozone for example then defeat is inevitable even if the means of production, distribution and exchange are seized by the working class.
Other strawman arguments include those relating to Varoufakis and AOC as I make no defense of their reformist positions.
The GND/JG is a transitional demand as outlined to Michael Roberts above.
“you can’t “buy off” the bourgeoisie; you can’t utilize money as a foundation for the new relations of production, for the new condition of labor.”
Leon Trotsky might disagree:
“In essence, Trotsky is repeating the same method that Marx and Engels applied when they said that, under certain conditions, the proletariat might consider offering to “buy out” the capitalists, on condition that they handed over the factories peacefully, without resistance”
http://www.marxist.com/marxism-and-the-state-part-one.htm
The proletariat might present the bourgeois with a stark choice. You can choose to fight us but you may die in the struggle and if you lose we will take everything. Or relinquish your claims on the real resources of production, distribution and exchange and you will be allowed enough money to live out your life in relative comfort and peace. Once the working class controls the material resources and the source of the monetary claims (the central bank) on those resources then the workers hold all of the components for the planned economy in their hands. The bourgeois can then wither away into irrelevance like we see now in the vestigial remains of the aristocracy.
“which means physically eliminating not just “ownership” but the owners and their agents.”
Can you elaborate on what you mean by “eliminating….the owners” ? An understanding the nature of money provides some clues as to how the transformation to a socialist system might be achieved with the minimum of violence. In a socialist revolution the working class will be expropriating the capitalist’s factories, banks etc. but in the event that a working class party comes to hold state power it would be entirely possible (even trivial) to partially compensate the capitalists in monetary terms for these resources if the working class chooses to do so in order to avoid bloodshed.
The aim of socialists should be to effect the peaceful transition to the democratic socialist society . This is possible if the working class can be sufficiently organized and united across national, religious, ethnic, gender etc. boundaries. Such a force controls virtually all functions of production, distribution, exchange, energy, transport, communications etc. and so has the capacity to overwhelm the ruling class to take power bloodlessly.
Of course it’s more likely the capitalist class may make the peaceful transfer of class power impossible. If however the ruling class initiates violence in an attempt to maintain the murderous status quo then the working class is fully justified in defending itself as it replaces the current barbaric model with a more civilized one. If innocent people are harmed in the necessary transformation of society it will be entirely the fault of that degenerate capitalist class as it clings to power.
P.S. You should as a Marxist try to keep the discussion more cordial and less aggressive if you want to win people to your side.
Ever so briefly: “Strawman argument. Nowhere did I claim that control of the money supply was sufficient in itself to abolish capitalism.”
Not so. You claimed that seizing state power gave the working class a stranglehold on the lifeblood of the bourgeoisie and that lifeblood was the money supply. That more than implies controlling the money supply is sufficient to the historical elimination of the bourgeoisie and its organization of property, unless there’s another meaning to “lifeblood.”
“Other strawman arguments include those relating to Varoufakis and AOC as I make no defense of their reformist positions.”
No, whether or not you defend AOC or YV is not the point. I’m sure your “New Deal” is much better and different than theirs. But that’s irrelevant. In using the term “New Deal” you are seeking to establish a continuity with the previous New Deal as if that represents and represented a moment of “progress” or advance of the working class as a whole, and a “weakening” of capital. The New Deal was none of those, and its ultimate payback to both the bourgeoisie and workers proved it– that being WW2. You don’t want to be associated with others who use a term to curry favor with those seeking to accommodate to, and be accommodated by, capitalism? I support your desire. So don’t use terms, or advocate programs that strengthen the bourgeoisie’s state apparatus.
“Can you elaborate on what you mean by “eliminating….the owners” ? An understanding the nature of money provides some clues as to how the transformation to a socialist system might be achieved with the minimum of violence.”
History has already elaborated on what it means, and what it takes, to overthrow an established class rule, and controlling the money supply has little enough to do with it Your entire argument seems to have an implicit bias, or assumption, that in fact, money is a “neutral” tool, like a screwdriver that can be used by anyone with the proper digits for the task. Moneyhas always embodied, the expropriated labor-time of others, something we’re supposed to abolish.
If capital is self-expanding value, if money’s existence, its importance to the bourgeoisie, is as the relation that embodies that necessity, and the means to achieve that necessity, then we should know that “buying off” or compensating the bourgeoisie is, like new New Deals, trading in an illusion, because they need more. If Marx was right about capital’s universalizing impulse, and its requirement for expansion, we should stop this silliness about compensating the bourgeoisie, or allowing them to a nice little island in the Caribbean wear white gloved servants can keep them soaked in daiquiris. The money has NO value, no MEANING without the relations of production, without the production of VALUE.
“Leon Trotsky might disagree:
“In essence, Trotsky is repeating the same method that Marx and Engels applied when they said that, under certain conditions, the proletariat might consider offering to “buy out” the capitalists, on condition that they handed over the factories peacefully, without resistance”
Appeal to authority argument. And a bad one at that. Trotsky organizes a military-type overthrow of the provisional government, organizes the Red Army and wages a war where brutality is met with brutality, writes a book justifying using terror as a revolutionary weapon,reimposes capital punishment in the military for “cowardice,” and comrades want to appeal to THIS quote as an authoritative resolution of the issue?
“If.. the ruling class initiates… If innocent people…”
There are no “ifs” about it. We don’t have to go around glorifying violence, or the use of terror, but let’s not be dishonest about it and pretend a proletarian revolution can be achieved without the organization of itself into a STATE, not for the purposes of controlling the stock of money, but as bodies of armed men and women fully willing to wage a civil war. History has elaborated on that, too. Positively, and negatively as in Chile, Argentina, Greece, and now Venezuela.
As for “more cordial”– I didn’t attack you. I challenged your ideas.
just in the middle of Hudson’s outstanding ”and forgive then their debts.” From what I have read debt historically precedes money.
Interesting but Hudson is wrong
”Interesting but Hudson is wrong.” Then ‘Fiat tua lux’ Michael!
Briefly?
I’ve stated clearly in several of my comments that control of the money supply is not sufficient in itself. That the working class must seize the means of production, distribution and exchange. The money is the lifeblood of the bourgeois in the sense that the accumulation of money is that class’s ultimate objective. Owning the means of production etc. is not an end in itself for the capitalists. The accumulation of money through their ownership of those means is the end goal.
I did not defend AOC or Varoufakis and that is certainly is the point. And I am not trying to establish continuity with any previous New Deal. I’m from Ireland and the term has no historical resonance here.
I’m referring to the present Job Guarantee and Green New Deal proposed by the MMT school and AOC. Neither of these measures can be implemented without profoundly contradicting capitalist class interests and can therefore be classified as transitional demands. I don’t need to be lectured on what terms to use. I will express my ideas as I see fit and you can do the same.
“Money has always embodied, the expropriated labor-time of others, something we’re supposed to abolish.”
Correct and if the labour class controls the money supply then it has the means to take back its stolen labour time.
“History has already elaborated on what it means, and what it takes, to overthrow an established class rule”
Nothing is definitive and a mass slaughter is not inevitable. As above, a relatively peaceful transition is possible if the labour class can be sufficiently organized. This occurred in the Russian revolution when the soldiers, mostly from the working class of course were politically engaged by the Bolsheviks and convinced not to attack the workers, strikers, demonstrators etc. as they shared a common cause against the exploiter class. So the October revolution was achieved almost entirely without violence. It was a victory for socialist ideas, politics and the organized working class rather than a military victory. That is what we should be aiming for again today at a national and international level.
And please don’t accuse me of dishonesty because I disagree with your assessment of the inevitability of wholesale violence. (An accusation of dishonesty is an attack by the way). Indeed you seem to acknowledge yourself that civil war may not be necessary here:
“but as bodies of armed men and women fully willing to wage a civil war.”
Though the working class must be prepared for one and I agree with that. The working class must organize itself into a state as you describe and one which controls the means of production and distribution and must ultimately hold the near monopoly on violence as the bourgeois state currently does.
But the worker’s revolution will still fail having achieved all of these things if the internal or more likely external bourgeois class enemies control the means of exchange, the money supply. This has particular relevance in the case of the Eurozone.
If we are going to successfully overthrow capitalism then we must understand all of the components of that system and Marxism has done most of the work in this regard. But the money as it exists now under the authority of the state is a key component of the bourgeois socioeconomic model and a powerful yoke around the neck of the working class.
MMT have a better understanding of the present capitalist monetary system than any Marxist theorist I have read and for that reason alone they should be studied. We should not be so arrogant as to believe that we have nothing to learn or gain from others outside the Marxist tradition.
“Military and defense spending in the US is nearly $700bn a year, or around 3.5% of current US GDP. If this was diverted into civil investment projects for climate change and the environment, and those working in the armaments sector used their skills for such projects, then it would go a long way to meeting GND aspirations.”
But as the USSR example showed, converting one sector to another is not simple (assuming it is possible). Infrastructure is not finance: you can’t just say “well, this produced ICBMs: now it produces maglevs”. The real world doesn’t work like the idealized and abstract (in the Kantian sense of the word) world of vulgar economcs.
–//–
“I am indebted to Scott Fullwiler, a leading MMTer at the Levy Institute, for pointing out in a comment on my blog that MMT experts have simulated their own projections for the cost of delivering full employment at wages above $15 an hour and reckon that it would increase the federal deficit by 1.0-1.5% of GDP annually over the next ten years without incurring any significant rise in inflation.”
There’s just one problem with Fullwiler’s calculations: who said US$15.00 per hour is “living wage”?. Even for today’s USA, US$15.00 per hour is only barely liveable in some smaller cities of the nation, and only for one person (so, no biological reproduction allowed in the world of MMT!). For cities like LA and NY, you can start by US$ 50.00 per hour, if not more (thin about the US$60.00s-70.00s). And that’s — as mr. Roberts well notices — considering production magically accompanies this rise of the minimum wage (which it will not).
Yes $15 an hour is pretty low for living anywhere. Diverting resources from arms and military production to civil production can be done – there are examples – but it requires working class control and agreement in those industries and a plan of production. That will not happen in the military-industrial complex of the US now.
Yes, it can be done — the Soviets did it to some degree (that’s why the bloated 17% “GDP” figure on military spending — many products used for civilian purposes were still accounted at the military sector in Soviet accountancy) — but it won’t be 100% convertibility (even 75% would be a very optimistic scenario). For example: civilian planes and plowing tractors for agriculture still fell under military spending in the USSR because they were produced by military factories (the so-called “dual use” technology).
FDR also converted many “civilian” industrial infrastructure to military use during the socialist phase of the New Deal, and then it was converted back to civilian use after WWII.
But not all military technology will ever be converted into civilian use for the simple reason they can’t be used. The “real economy” is limited by the laws of physics.
Just do an empirical exercise: if a significant portion of military technology really can be converted to civilian use, why hasn’t the USA already done it? Why doesn’t it quickly use it to close its domestic infrastructure deficit of US$ 1.1 trillion right now? After all, why would it give up the “carrot” it had in 1946 and try to fight China’s OBOR asymmetrically? Yes, profitability would plummet — but there’s a new socialist boogeyman on the other side of the Pacific, so you could posit there’s a sense of urgency typical of the post-war era.
Yes that is the contradiction which makes the demand a reasonably useful transitional one.
I don’t necessarily disagree that 15 isn’t fantastic but (1) it is what is being fought for right now and, more importantly (2) note that the program they modeled would include health insurance and childcare. That would boost total compensation substantially higher than 15/hour in real terms.
I think you both missed the fundamental here: US military budget is still not that significant in GDP terms. Alonf finance and its international arms (IMF, World Bank, etc), what is significant is the purpose it serves for maintaning worlwide hegemony, in collaboration and counterposing US subordinates, and of course, protecting capital accumulation of the core countries globally. Revenues from UK arms sales is 0.27% of GDP. Yet, that small amount, helps project power and defense of geo-political and geo-economic interests globally.
It seems to me that there is no discussion by Mr Roberts of the international dimension. How does domestic and foreign capital react to the enactment of such measures as MMT policies and GND? Are we assuming that the dollar remains the international currency and what effect does MMT style money printing have on that? What kind of trade policies are envisaged by the GND – if it is the pursuit of “fair trade” what effects will this have? Let us be clear – even the very moderate redistributive measures pursued by the original New Deal were the result of the most catastrophic crisis capitalism had faced to date and only another world war was able to finally secure full employment and a grudging albeit temporary recognition of the benefits of government economic intervention by capital. The structure of international capital today is vastly different from what it was in the thirties – what impact does this have?
The problem with all such proto-Keynesian policies is that they start from a particular national economy and then generalise to the rest of the world. As Mr. Roberts noted in an earlier post, MMT is largely confined to the Anglophone world.What we need is to start from a marxist understanding of the global political economy – that gives us the understanding we need to begin to build a global alternative to global capital. Unfortunately Mr Roberts and his ilk, despite their valuable interventions, remain wedded to a conception of “Socialism in One Country” and hence pursue implausible policy proposals like “80% public ownership of the economy” and retain illusions in the “non-capitalist” nature of countries like China.
I am not ‘wedded’ to socialism in one country. Socialism as I understand it, is an economy of super-abundance where labour hours are reduced to the minimum and most production is free to consume and use at the point of use through common ownership and democratic control of the means of production, This is only feasible on a world scale. But you have start somewhere – the replacement of the capitalist mode of production cannot unfortunately be achieved simultaneously across the globe. A big start would be for one or a few of major advanced technological economies to establish a planned democratically run economy that curbs the law of value (replacing the big monopolies, banks etc that rule now). That is the first task of the transition to socialism.
My view on China is that is not a capitalist economy (yet) because the law of value does not dominate in the economy. But it is also nowhere near socialist and it is not even on a path to socialism which is only possible internationally, as you say. It is a ‘weird beast’, stuck in the middle , if you like. But that is some times nature of dialectical change. But what I would say is that though China is huge, industrial and economically still growing, it will never move towards socialism while workers are not in control.
That socialism is only possible as an irreversible historical process towards communism internationally is consensus nowadays.
The “socialism in one country” was a desperate invention by the Stalinist faction of the Bolshevik Party to save what was left of the Russian Revolution after the revolution in Germany was crushed by the soon-to-be NSDAP dominated government.
Lenin’s strategy was: the Russian Revolution would be just the first domino in Europe. He knew a socialist revolution in backwards Russia was not sufficient, but he bet a revolution would happen in Germany — which was already a superpower by the turn of the century — and Germany, with its industry, would give the definitive spark to a long-term socialist revolution. The WWI was seen as a window of opportunity for a world revolution.
After the tragedy of Kronstadt (1921), Lenin officially recognized the Soviet Union would have to give up socialism in exchange of what he called “State capitalism” (I think it was the first time even this term was used). The NEP was a result of this, and he died in 1924 — just a little over one year after its implementation.
However, it is fantasy to think socialism will be born like Athena: ready and perfect, directly from the head of Zeus. The most likely scenario is that socialism will be born from one epicenter and slowly spread as capitalism tries to contain it through counter-revolutions at the same time it collapses over its own weight.
Mao Zedong already had precisely this thesis: that in late capitalism, the task of rising of organic composition of capital in the periphery (the “Third World”) and thus developing it (against the will of the “First World”) was that of socialism.
It is, thus, a dialectic operation: a socialist revolution in the periphery must, at the same time, accelerate the development of capitalism and build socialism. There’s no other possible way: if an event of the scale of WWI didn’t spark a simultaneous international socialist revolution, it likely won’t happen ever (specially now, that nuclear weapons are a reality).
The debate over whether socialism is possible or not in a single country is a phantom debate.
It is completely out of the question that socialism at once conquers all countries over the world. In every realistic case there will be a “socialist camp” and a “capitalist camp”. Economically, this means that within the socialist camp, self-managed production can be geared, on the one hand, to needs and, on the other hand, to existing possibilities. On the other hand, the socialist camp must also produce a certain amount of marketable commodities for exchange with the capitalist camp.
I call that a “double economy”.
Wal Buchenberg, Hannover
“China … is not a capitalist economy (yet) because the law of value does not dominate in the economy.” Of course it does. If you read the news from and about China, you will find all the financial mechanisms of capitalist economies. You will find that the government uses very much the same fiscal, monetary, and financial-regulatory tools that capitalist governments use. These all presume the law of value. Surely this is familiar to an economist who had a career serving the financial markets. On the flip side, there is no overall Plan, no uniform allocation of investment. The difference between China and the UK, US, Germany, etc. is that the Chinese government uses these mechanisms to steer China Inc. on world markets much as Japan did in the 30 years after World War Two.
Was China a capitalist economy after the 1949 revolution? Was the Soviet Union a capitalist economy after 1917? If not, when did they become capitalist and what is your criteria for deciding the moment of change? If they were still capitalist under Mao and Lenin and Stalin, what is your criteria for a non-capitalist economy? The law of value operates in all economies at present, but is it dominant in all economies?
All these questions are a matter for debate at another time. So you dont need to launch into a long comment now. But see my post: https://thenextrecession.wordpress.com/2018/06/07/china-workshop-challenging-the-misconceptions/
Michael replies: “When did (China) become capitalist and what is your criteria for deciding the moment of change?” But he bars a thorough answer now. Agreed, comments under an article have their limit. The change of China’s economy from socialist to capitalist was done over a generation from 1978 on. I briefly outline it at https://youtu.be/ePoUoWUzKBQ in the segment from 16:45 to 35:34.
”I am not ‘wedded’ to socialism in one country. Socialism as I understand it, is an economy of super-abundance where labour hours are reduced to the minimum and most production is free to consume and use at the point of use through common ownership and democratic control of the means of production, ”
So an economy neither of ‘abundance’ nor ‘super, super abundance’ but of ‘super abundance’!
”The debate over whether socialism is possible or not in a single country is a phantom debate.” Surely rather metaphysical! Moreover in my opinion at any rate it has directed scrutiny from where the real problem lies, namely in the persistence of the state, which no socialist country could dispense with when surrounded by enemies.
Thus we read in Trotsky: ”The Labour State considers itself empowered to send every(sic) worker to the place where his work is necessary. And not one serious Socialist will begin to deny the Labour State the right (sic) to lay its hand upon the worker who refuses to execute his labour duty” ( ”The Militarisation of Labour”). All with the aim of raising the level of productivity above that of capitalism. But what happens when the party oligarchs decides to use the State to restore capitalism. Any evidence of the “Labour” State lining up with the workers against the oligarchs in Russia or China?
Trotsky and Mao are failures for all their fulminations about the betrayal of the Revolution. Russia has declared the last Tsar a ‘saint’ while China follows the policies of Chiang-kai-Shek.
It is not lack of abundance, whatever that might mean, that we need to consider, but the nature of a transitional state appropriate to a society in transition from capitalism to socialism. So far, so bad!!
In response to Mr. Roberts, yes if it occurred in a few countries (especially big, advanced ones) then it might succeed in spreading. But in one country? I don’t think so. Any such country would be isolated from the world market unless it produced what is dictated by the world market. If Venezuela does not produce oil, or Russia did not produce grain during the New Economic Policy, it will be starved of capital so the only alternative to producing what the world market dictates in order for a country to be able to import what it needs is autarchic isolation from the world economy, stagnation of productivity, domestic unrest and bureaucratisation and ultimate relegation to “basket case” status.
The Left, including the marxist left, has for too long held a stateist conception of socialism where political action is seen as co-terminous with the boundaries of the nation-state. This may have been true once (although even in the aftermath of the Russian Revolution there were a whole host of international actions in emulation or support of it) but today the prospects of internationally coordinated action are much more promising. Imho what we need to theorise and act upon is rejection of the state and state-centric action and if that is called a Deleuzeian flight from territorialisation then so be it. The best way to challenge the nation-state is to refuse to accept its legitimacy by promoting coordinated political action which does not respect the boundaries of nation states. Ironically, despite the fantasies of finance capital about escaping from the concreteness of labour and nature, it is capital which is tied to the nation state as we are seeing with its inability to create a “United States of Europe” more than a hundred years after the slogan was originally raised. We should be theorising global solutions for global problems.
Why is it that after so much of MMT discussion you still do not get that “printing money” means the same as “deficit spending. MMT uses it this way when talking about deficit spending.
There is only when encountering the congressional block and blackmailing in debt level raise that the term “printing money” is used properly and in not metaphorical way.
Printing money, deficit spending by borrowing or printing money has absolutely no difference. State borrows mostly from banks that printed that money from long way around. More accurately, banks printed it with deficit spending and then lend it back to state.
When government borrows it does not borrow from people and economy, it borrows it from banks that nobody else can use, only the state. Government borrows what it printed by deficit spending in previous turn. Bank reserves are borrowed which were increased by deficit spending.
You are right that it is the circulatory, but that is the way it is now. MMT only explains how it works. MMT does not propose nothing new in financial transactions that is not being done regularly. It only explains it how it works for hundreds of years.
Now you introduced value of money as being eroded by printing money. Of course when private banks print money which they do much more then governments, then there is no question of eroding the money value. Why?
Is it because you do not know how much money printing by banks is going on?
So money is created by banks and by deficit spending by the state and it goes round in a circle from state to non-state (banks, households) and back to the state. So money is circulated (and presumably value – although MMT does not have a concept of value). But how is MORE value created ie more output of things and services that people can sell for more money for buy more things for life? Well, MMT says it is by the state or the banks making more money! Really? So money makes more money (value) by just printing more money (out of thin air). MMT may describe how the circulation of money operates in a modern economy but that is facile. MMT does not explain how more money that can purchase more goods is created. Apparently people working longer or harder or with better technology etc do not create more money (or to be more exact, more value). More money is created by the state – an exogenous outside agent. This cannot be an explanation of a capitalist economy. It does not explain profits, crises, inequality, nothing.
Because we’re talking about fiat money, which is a pure abstraction (unit of account), we don’t have to stick to describing it as the operations make it appear, which are deceiving. Fiat money in the government’s hands is incoherent. It literally has an infinite “supply” of the stuff, because it’s an abstraction. You don’t even need to account for it in the government’s hands (e.g., “government savings” has no real world meaning when referring to a currency-issuing government, because its savings are always infinity).
So what we do is we look at points of contact between the government and the non-government (private sector). When we do that, we see the Treasury issuing US dollars by spending them into existence. If the Treasury is spending a dollar, it is creating it ex nihilo on the spot. But the Treasury does not just spend dollars, it also receives them. These are taxes. When you pay a tax, the government does not hold onto that money (government savings is incoherent, remember). The money is just gone. Revoked. Ceases to exist. The currency issuer is a black box when it comes to the currency it issues.
The difference between what the Treasury spends and what it receives in taxes is left out in the private sector for it to do whatever it wants with. These are its currency savings, which it circulates amongst itself. These dollars are the oil of the economy. They are its base without which it cannot go. The reason why adding money into the economy helps produce output is because demand drives output in a capitalist economy. Firms do not make things to sell to people without money to spend. When you put money in people’s hands, they seek to purchase things with the money, and firms seek to meet that demand. So if there’s any excess capacity or slack in the society at any given time (idle capital, unemployment), the government can always, always, always inject its currency (deficit spend) to tighten it.
Banks do not create US dollars. They create bank credit that is denominated in and which leverage US dollars in the private sector. Banks cannot add net financial assets to the private sector. They can only create credit which has assets and liability that net to zero. The private sector is never any *financially* richer from bank lending. But the credit can nevertheless be used to marshal resources to create additional output. Over-reliance on this method of production is called “neoliberalism,” which results in outsized financlal sectors, financial instability, and periodic financial crises. It is wildly inefficient and volatile. But it has the virtue of making the finance sector (the head of the modern capitalist snake) very wealthy, at the expense of the rest of society (including other capitalists!). Anyway, bank lending occurs on top of the monetary base of the government’s currency. It supplements it, if you like.
“Demand drives output in a capitalist economy”. Government savings are always infinity”. Hmm does everybody agree with these propositions?
Michael,
The problem isn’t whether everyone agrees with the bizarre fantasizing but that some do.
We saw quite a lot of it during the occupy movement. It will get much worse when crisis really gets a grip. At present there is no left and negligible understanding of economics among workers. Fantasy is always popular among populists and Trumpist and similar fantasies are already more popular among workers, not just in the US, than “green” fantasies. “Left” populism will also be easier to propagate than scientific study of how to actually transition from capitalism.
When there was a small left in the sixties it did not have much understanding of economics either but it was less necessary to deal with bizarre fantasizing about economics (other bizarre fantasies were more of a problem).
The sheer lunacy being expressed in comments on this thread is discouraging. But its better than being unaware that this really IS the level of ignorance out there.
In answering the MMTers of his time, Proudhon and Rodbertus, Marx argued that even if there was enough money and even if there was enough demand, there would still be unemployment under capitalism, for two reasons: 1) technological unemployment because of ‘capital bias’ in capitalist accumulation creating a ‘reserve army of labour’ and 2) recurring slumps in investment and output from a fall in profitability and profits. For Marx it is profits not demand that drives investment, employment and output. Money can be printed infinitely as dollars etc (fiat money) but the value of that money (in purchasing commodities will fall accordingly when increased value (socially necessary labour time) cannot match that increase. Government savings (revenues less spending) has clear limits. Governments, like companies and households, can borrow to increase spending and run budget deficits – but not to infinity.
No, of course not. Demand is manufactured,conditioned, created, mediated by, in, through the economy.
When in 2008-2009 the price of milk paid to the dairy farmers in Europe dropped from 45 cents a liter to 25 cents a liter, and the farmers responded by dumping millions of liters into sewers, onto streets etc, was there a failure of demand? Of course not.
Government savings are always infinity? I guess that’s one way of making the category meaningless. But in the real world, the government exists not only to suppress the exploited, but to claw back any gains the exploited might have made. And what is the mechanism of that big “claw back”?
As is painfully clear to the most casual observer, it’s the public debt.
The state and its institutions are there to undertake projects of various sorts that will add revenue streams extracted from the population through the mediation of the government to the accounts of the bankers.
Reading the comments of the MMTers, I’m reminded of Ripley’s testimony before the board of inquiry in Aliens– you know the part where she says, “Did IQs drop sharply while I was away?”
@Arthur,
I find your comment ironic because I see a lot of neoclassical (neoliberal) ideas about the economy being expressed in the comments here by critics of MMT. This is understandable, because the only understanding Western society has of money and the monetary system is the neoclassical one (which is the view the finance sector promotes). And, no offense, but trained economists sometimes have the hardest time understanding this, because they can’t reconceptualize virtually everything they know, which is necessary to “get it.” MMT turns everything economists know on its head, but it can do this because fiat money, as a unit of account, is a pure abstraction that can be conceived in different but mathematically equivalent ways.
If you’d like to take on anything I have said substantively, you’re welcome to try. You won’t be able to do so. Money is a social construct, not a finite natural resource. It is a creature of law, not a creature of economics. This is one reason lawyers–I am one, although with an engineering (math) background–often grasp MMT more quickly than economists who were taught mostly myths throughout their education about how the monetary and banking systems operate in the modem era. See this interesting piece about that here: http://neweconomicperspectives.org/2017/07/memo-mmts-legal-department.html
At the start of the comments I recommended:
https://www.marxists.org/archive/marx/works/1859/critique-pol-economy/index.htm
It includes a thorough study of the actual history of fiat money, long before Knapp. “Marxians” don’t read it but anyone interested in developing a substantive theory of how modern finance actually works certainly should.
Also worth studying by people taken in by lawyers belief that the state determines social relations rather than social relations giving rise to the state would be the actual history of double entry (“Italian”) book-keeping and the actual history of the enclosures of the commons. The sheer fantasizing in the legal article recommended by pigswiggle certainly confirms that there is no point attempting substantive argument with this stuff.
Meanwhile, take a look at Venezuela.
@ Michael,
Regarding government savings, a thought experiment may help. Imagine you have the power to issue currency. You have a shoebox-sized machine that spits out slips of paper at the press of a button and at zero cost to you, and everybody else accepted the currency as payment for goods (doesn’t matter why for purposes of this thought experiment). Let’s say you took 20 units of this currency and bought a pizza, and you got 5 units back in change. What would you do with the 5 units you got back? Would you put it in a safe or a bank account? No, you’d probably toss it in the trash, because as the currency issuer you have no need of accumulating or saving it. If you want another pizza, you can just press the button on the machine and get another 20. This is what it’s like to be a government that issues fiat currency. As long as your currency is accepted by others in payment, are you ever going to try to “save” it? You won’t have any need to, because you have access to a limitless supply of it on demand.
It seems to me the proposition that the government has no need of saving its currency (because it always has an infinite supply of it) can only be denied if you really don’t believe that the government operates a fiat monetary system. If you don’t think it operates a fiat monetary system, what kind of system so you think we have? Where do you think US dollars come from?
@ Arthur,
You were wise to avoid saying anything substantive.
Thank you.
You could acquire similar wisdom not to attempt substantive discussion of bizarre fantasies about money by studying the link given.
” So money is circulated (and presumably value ”
“Presumably value”. Why a value. Money is not a value but it has some value in general. Money is abstract value not a real value. Money has value in organizing and motivating people to organize and cooperate in larger organizations for the common goal.
Money has no intrinsic value and real values are priced different at different times. Products and services do not have fixed value not even fixed value relationships.
We can not assume that circulating money is the same as circulating value but that it motivates and makes it easier to circulate values.
This is from observation that we do not need money but we need what money can get us. So money is abstract value while products, labor and services have real values.
“MMT does not explain how more money that can purchase more goods is created.” MMT explains exactly that
But i would guess that your question is more like : “but MMT does not explain how more value is created” on Austrian school bent question.
No, MMT does not do that. MMT only explains how more abstract value is created, destroyed and distributed.
Money is abstract value and its only value is in motivating people to organize and share real values.
So, MMT explains how to motivate people to produce/create more value .
That’s only true for the USA, which issues the universal fiat money and, therefore, can increase its debt indefinitely.
But ask Macri (in Argentina) or Erdogan (in Turkey) how the MMT logic works…
For what it’s worth, MMT doesn’t purport to describe either of those countries. Both borrowed extensively in a foreign currency, which makes them not monetarily sovereign.
Argentina, from Reuters, June 7, 2018: “Nearly 70 percent of Argentina’s debt is in foreign currency.”
Turkey, from Business Insider, Aug. 15, 2018: “The amount of debt Turkey owes in foreign currencies is now equivalent to almost the entire size of the Turkish economy…”
Monetary sovereignty requires: (1) issue your own currency; (2) do not borrow in a foreign currency; (3) let currency float on exchange. Such a government can then afford to purchase anything for sale in its currency.
Those criteria for successful MMT rule out nearly all the countries in the world. As I said before, MMT is a US-centric theory with no universal application. And even the US and other G7 economies must consider the value of their currencies relative to others.
But those are just policy choices, although the poorer a country is, the harder the policy choices become. Everything’s always harder when you are poor, and MMT doesn’t allow poor countries to just become rich. MMT is entirely grounded in real resource constraints, and being poor by definition means resources are limited.
MMT instructs a currency-issuing government how to obtain full employment. A poor country can do this just as easily as a rich country if it floats its currency and does not borrow in foreign currency. The problem is that its import capacity will then be reduced. Governments of poor countries are (understandably) tempted to import “above their means.” They do this by borrowing in foreign currencies or pegging their currency. Then they (not infrequently) get in trouble, and in comes the IMF to steal their lifeblood. Most MMT economists I have read opine about this recommend that instead of trying to import above their means, these countries instead marshal their currency to create full domestic employment and develop their economies internally, although they recognize these are hard choices for developing countries.
“What happens when profits drop and a capitalist sector investment slump ensues? Growth and inflation still depends on the decisions of capital, not the state.”
Do profits drop when people get to earn more money or when to earn the same? It is so interesting that economists still can think that profits will drop if people can have more purchasing power i.e. more jobs to earn more money.
That is what false theories can lead false economists to think about; If people get to have better wages (better lives, better purchasing power) profits might drop.
It shows what magical thinking economists are capable of.
Growth and inflation mostly depends on the state.
Did not last 10 years show the largest economic experiment.
Monetary policy does not work. FED controls inflation. Globalization means that Quantity of products that US$ can buy is world supply of products. SO no matter how much US prints money the world would sell it to US.
So MV=QP it is the world supply of quantity that prevents inflation.
Yes, the inflation might shoot up when everyone gets employed. So why not employ everyone. Should we just go with Keynes’s: When storm calms….
Your argument is part Keynesian and part quantity theory of money, the major capitalist macro economic theories. For Keynesians, more wages means more consumption, more demand, more jobs and so more profits. So the answer to capitalist crises is for workers to get more wages delivered by the state printing more money and perhaps shoving it out of helicopters to all and sundry.
The Marxist view is the opposite. MV does not drive QP, it is the other way round. That is the real causal direction. Wages do not drive output and profit; it is the other way round. Value comes from labour expending energy to produce things and services. As capital controls the means of production, it can extract a surplus of value over and above the wages it pays to the labour force. That surplus is the key to investment and employment in a capitalist economy. So if wages rise, then profits will fall (ceterus paribus). If profits fall, capitalists stop investing and a crisis of unemployment and fall in wages ensues. Low wages is the consequence of crises, not the cause of crises. The Marxist view explains crises under capitalism from a periodic loss of profitability not from low wages. If Keynes was right, capitalism can save itself by paying workers more and the state running permanent deficits (MMT style). Those policies have signally failed to stop recurring crises, which is why the capitalist economists abandoned such policies when they appeared to stop working in the 1970s.
“So the answer to capitalist crises is for workers to get more wages delivered by the state printing more money and perhaps shoving it out of helicopters to all and sundry. ”
Nope.
The sentence should go like:
So the answer to capitalist crisis is for workers to get more JOBS delivered by the state going into more deficit /printing money and perhaps showing it out of helicopters (the real printing money) to all and sundry like Bush did in 2006 to delay financial crisis that came few months later.
So, it is a Keynesian answer which was done in New Deal at the largest scale ever.
But the real answer is to implement Jobs Guarantee with a decent wages and benefits to prevents private sector from abusing workers too much as in times of recessions. Give workers alternative offer that will keep the living standards up.
Add in the 90% marginal income tax to prevent wealthy from buying up politicians.
You logic is only valid for a closed system (i.e. equilibrium system). Capitalism is an open system, so your logic doesn’t apply.
Profit depends on labor productivity. And labor productivity is calculated over the total mass of variable capital (the sum of all wages of all workers of an individual or social capital, depending on what you’re calculating), never on individual wages (unless the individual capital is composed of just one worker).
Michael Roberts:But, in my view, it will be an illusion to think the GND can be implemented, even in just economic terms, simply by following MMT and printing the dollars required. Yes, the state can print as much as it wants, but the value of each dollar in delivering productive assets is not in the control of the state where the capitalist mode of production dominates. What happens when profits drop and a capitalist sector investment slump ensues? Growth and inflation still depends on the decisions of capital, not the state. If the former don’t invest (and they will require that it be profitable), then state spending will be insufficient.
If Marxists read a certain non-Marxist that MMTers love – (Hint – his initials are KHM) – they might understand that a job guarantee or a GND ends the domination of “the capitalist mode of production”. [BTW, that’s a good, precise way of putting it, thanks] I mean, that’s what he said.
So the value of the dollar in delivering productive assets becomes under the control of the state (where it really always was, mostly, implicitly, potentially) NOT the capitalists.
What happens when profits drop and a capitalist sector investment slump ensues?
Who cares? Why give a flying f-k? That’s the poor widdle capitalists’ problem. I’m in tears over their plight. And it only happens after decades of MMT/Keynes/Marx policy – FDR era to around 1970.
Growth and inflation still depends on the decisions of capital, not the state. If the former don’t invest (and they will require that it be profitable), then state spending will be insufficient.
The point that KHM & many until say 1950 understood, but Marxists have forgotten since is that no, once you have your MMT Green New Deal job guarantee – Le droit au travail – growth & inflation etc DOES NOT depend on the decisions of capital. It depends on the decisions of society and / through the state. Unlike most Marxists, the billionaire class has never forgotten this.
To merely say “state spending will be insufficient” is to contradict yourself, without making any argument for this contradiction. The premise of the whole exercise is that state spending IS sufficient.
Wally Mooney: Your comments have been spot on.
Many of the MMT school don’t appear to understand (or at least don’t admit) that the very existence of MMT as a body of knowledge directly opposes ruling capitalist class interests.
Ohh, they almost all understand and admit it.. They’re just quiet about it. Read them more than closely – read obsessively, and you’ll see that. Yes, the MMT program is a traditional “transitional demand” – but it’s more than that. More like a stake in the heart.
The state may print dollars but it does not control its value in exchange for other currencies of commodities under an international capitalist economy. Driving up employment and wages with JG and deficits will eventually squeeze profits in the capitalist sector. Then they will stop investing and crisis ensures. You say: who cares? Well, apart from the workers who lose their jobs etc as in the Great Recession, maybe we don’t. You would say that if workers lose their jobs in such a crisis, the state will print money and sweep up the unemployed and gradually the state will employ more than capital and eventually control or dominate the productive part of the economy. Well, maybe. But it is a weird way of imagining a transition for capitalism to planned commonly owned economy. But then it is not state spending that matters but state ownership and control of the economy. Kweyens reckoned you needed about 80% of investment spending ‘socialised’ to do the trick (as in WW2). At least that was straightforward. MTT is offering us a ‘quiet’ sneaky way to replace capitalism without them noticing it by gradually taking over employment through state creation of money. Does that really sound likely?
Michael,
If the bourgeois refuse to invest and implement a strike of capital in response to a JG and/or GND then Marxists, the trade unions and the entire left should and must organize the working class to demand that the Federal government nationalize those industries in their entirety. The currency issuer can always outspend the private sector capitalists who cannot impose a strike of capital against the will of the state.
There was effectively an involuntary strike of capital after the global financial crash in 2008 and the nation states intervened to the tune of many trillions (across multiple currencies) globally to rescue the delinquent and endemically corrupt finance sector and allow their parasitic lending function to begin again. Had the Left been stronger and better organized at the time this would have been the catalyst to force the nationalization of the majority of the global finance sector.
Another example is the Federal government bailing out the Automakers with many tens of billions during the same period and partial nationalizations did occur. Again this should have been the pretext for the unions to force full nationalizations and the industry to be placed under the democratic control of the workers.
The working class has largely been on the defensive for the past 40 years. It’s time we moved to an offensive position and the GND/JG provides a possible way to squeeze profits and provoke the crisis of capital that you described and therefore an opening for the labour class to exploit and advance to a democratically planned socialist economy.
The state may print dollars but it does not control its value in exchange for other currencies of commodities under an international capitalist economy.
Really, again, who cares? So it goes down a little. Obsession about foreign currency exchange rates and the dominance of the international capitalist economy is a bane of the left. Basically, Stalin was right about that vs Trotsky, socialism in one country is quite possible. Just before he met Minsky at a party in Chicago, Lerner, basically the (grand)father of MMT, went to see Trotsky to tell him this, just float your currency and sing Que Sera, Sera. But he didn’t receive the warmest reception. For the g’damn USA to worry about this is crazy. I mean, I feel insulted by this idea just as an American. 🙂
Driving up employment and wages with JG and deficits will eventually squeeze profits in the capitalist sector. Then they will stop investing and crisis ensures. You say: who cares? Well, apart from the workers who lose their jobs etc as in the Great Recession, maybe we don’t.
Well, the profit squeeze will probably happen, it did in the postwar era. But it was slow, it took a loong time. At worst, people might have to change jobs once or twice in their lifetimes. I don’t think many would be worried about that – because they got these higher paid jobs because they refused the state’s lifetime cradle+-to-grave- guarantee of employment.
This sort of increasing “ratchet” control of the economy by the state is basically (Adolph) Wagner’s Law. Wray has some articles on the writings of the excellent and perceptive Keynesian economists Harold Vatter & John Walker on this.
Kweyens reckoned you needed about 80% of investment spending ‘socialised’ to do the trick (as in WW2). At least that was straightforward.
By the diligent MMTer James Galbraith’s calculation, the US is already at more than 50%. See his Predator State. Public vs Private was far more sharply defined in Marx’s or even Keynes’s day. Galbraith pere put the misperception of a sharp public/private distinction on his list of “innocent frauds.”
MMT is offering us a ‘quiet’ sneaky way to replace capitalism without them noticing
Oh, they notice it. They’ve always known it and had it in their gunsights. They haven’t learnt anything since the days of the Bourbons, or of Hegel & Ricardo, say. But they haven’t forgotten anything either – and the left has forgotten so very much.
Any ways, great blog!
“So the value of the dollar in delivering productive assets becomes under the control of the state (where it really always was, mostly, implicitly, potentially) NOT the capitalists.”
Yes, assuming the State is under a revolutionary government, and assuming it has full control of violence (the Armed Forces), and assuming it still has monopoly of violence (i.e. the private sector is unable to assemble a mercenary Army), and after much blood shed, yes, you’re kinda correct.
But, as I said, you forgot that between “dollar” and “delivering productive assets”, billions of people will have to die — because the capitalist class certainly won’t give up power willingly.
PS: the Fed is a private bank. So, there’s an extra layer of protection of the American capitalist class right there.
-//-
“The point that KHM & many until say 1950 understood, but Marxists have forgotten since is that no, once you have your MMT Green New Deal job guarantee – Le droit au travail – growth & inflation etc DOES NOT depend on the decisions of capital. It depends on the decisions of society and / through the state. Unlike most Marxists, the billionaire class has never forgotten this.”
You’re the one contradicting yourself. First, you posit the State as a separate entity from class struggle (therefore, society) to defend the MMT in its thesis the dollar has magic powers. Then, you go back to dialectic materialist territory and admit the State is a superstructure which is an amalgam of class struggle.
Yes, the State is an amalgam of class struggle. But one where the capitalist class is dominant. So, its interests dominate.
The Federal Reserve is not really a private bank. It is simply the central bank of the U.S in the same way as the Bank of England is the UK’s central bank. The BoE is notionally “independent” of government which is a nonsense. A central bank cannot operate in isolation from its host nation(s) no more than a hand can function independently of a body.
The deception that the Fed is a private bank forms part of the broader narrative which seeks to present the government/currency issuer as financially constrained in its own currency. This why we hear the national debt and deficit hysteria peddled endlessly in the mainstream. If it becomes understood that the Federal government cannot ever run short of it’s money numbers, if the dollar is simply a unit of measure of economic activity at a macro level, then the economic conversation turns to the availability of real resources.
And the bourgeois most certainly do not want to have that conversation in the public domain as it badly exposes their exploitative system. How would they justify for example the absence of a public health system in the U.S when far smaller and more resource constrained nations have this vital social support? E.g the NHS in Britain.
Is the U.S lacking in doctors or nurses? Or people wanting to train for these professions? Do we have a shortage of hospitals or the people to build those hospitals? Can we not obtain medical equipment or manufacture it ourselves? Is there a deficit of energy with which to run those hospitals? Can we not obtain drugs from domestic suppliers or import them from abroad?
The answer to all of these question is a firm No of course and more importantly the man on the street would understand this immediately. The working class would quickly come to understand that the poverty imposed on large sections of the population is in fact Republican and Democrat policy. The U.S. currently has or can obtain all of the real resources (skilled workers, energy, raw materials etc) necessary to provide everyone with a decent standard of living with a secure and affordable home, proper nutrition, healthcare, education, recreation and a job . This doesn’t happen because under the present capitalist model, increasing wealth for the few is achieved by escalating exploitation of the majority. Poverty is an ideological choice of the ruling class imposed on the working class and justified using the great macroeconomic lie that money is a scare commodity. It’s vicious class warfare disguised by bogus economics.
AOC has made it clear that her “wealth tax” applies “only at the margin” of annual incomes over $10M (the 1st dollar after $10M taxed at 70%). Income up to that threshold will remain taxed at the current rate. So you need to adjust your revenue yield figure for this proposal. Neither she nor Warren propose touching the military budget or actual wealth as opposed to annual “income.” These proposals were boilerplate for the Dems through the ‘70s and even for the party’s left wing a la Ted Kennedy til his death. While promising all sorts of good stuff “for the many” the GND refuses to seriously redistribute wealth at levels that would make its promises actually possible. For that we’d need the kind of proposals that you raise and not funny money MMT fantasy fixes.
Agreed.
The essential point of MMT is to simply pretend that printing money can solve all problems – not because the advocates believe it, nor because they hope others will believe it, but because they KNOW that proposals like “80% public ownership” of the economy are not on anyone’s agenda. They also KNOW that more traditional social democratic proposals for redistributive taxation don’t solve the problem either.
At some point one has to start discussing HOW the working class, globally is to actually run the global economy.
Meanwhile debating with advocates of “the power of prayer” on the basis that they too want a better life for all is pointless.
If the US takes out social insurance that has long been commonplace elsewhere, then it is a good thing for the wage laborers.
Instead of criticizing the excessive expectations associated with the Green New Deal, we should point out critically that in other countries of the capitalist core zone, these social security funds were built in times when profits were bubbling.
In the current phase of low growth and low profit rates, it will be difficult if not impossible to achieve the goals of the GND. Life punishes those who come too late.
I agree
You have still no answer to why profit rates are falling in the first place, if capitalists are in total control of production?
As a Marxist you should say: the profit rate falls because competition between capitalists raises the organic composition of capital.
But if you say that, then why is there a zero bound for profits? Why can’t we have a full employment economy producing use values without profits or even with negative profits?
The only answer I can come up with is: Gold. Marx presupposes a commodity money (gold) which allows capitalists to hoard social necessary labour time (accumulated dead labour). Through hoarding you get a crisis. This crisis then regenerates profitability and on it goes…
Today we are in a different monetary regime (fiat money). Capitalists can’t hoard unless we let them. There is no economic reason why we can’t have full employment.
You are projecting a power onto capitalists which they don’t have any more. Since the end of WW2 we are in a Keynesian warfare-welfare economy, since the end of the 70s we are in a privatized Keynesian regime, now banks are doing the money printing backed up by the central bank, creating asset price inflation. MMT is just a description of this world and a tool to get the power of money creation back under democratic control.
It is precisely because capitalists dominate investment and production that there is a tendency for the rate of profit to fall. The law of value operates. If the state were dominant, then the law of value would be curbed and weakened and falling profitability would be less likely to cause a slump (eg China?). In my view, we can only have a full employment economy if the law of value is not dominant and state planned production for need not profit dominates.
Hoarding is the result of capitalist crises NOT the cause of crises – the latter is the view of Keynes not Marx. Take your pick. A fiat money economy does not alter capitalist profitability crises except perhaps to increase the likelihood of inflation and fictitious capital. I dont agree that financialisation has replaced ‘old-style capitalism’ since the 1970s with ‘privatised Keynesianism’ and the profitability of productive non-financial capital is irrelevant. This is more post-Keynesian distortion, and is where MMT comes from.
see my recent post.
https://thenextrecession.wordpress.com/2018/11/27/financialisation-or-profitability/
“Hoarding is the result of capitalist crises NOT the cause of crises”
I get that, but this is not the point. The point is that a low or zero profit rate can only cause a crisis (rising unemployment), if capitalist can choose not to spend. Choosing not to spend = hoarding. This presupposes gold. Without gold, capitalist can’t hoard (=choose not to spend.)
The average depreciation rate of real capital (not land) is 7 years. If capitalist want a safe store of value they need money which can’t be inflated away. This kind of money they don’t have anymore.
Keynes reckoned that hoarding of profit in the form of cash or other financial assets and not investing in production and employment did not depend on gold. Whether gold or fiat money is the dominant form of money as a store of value and means of production was not relevant. For Keynes, it was ‘animal spirits’ and the rate of interest on holding cash (liquidity preferences);for Marx it was the current rate of profit on productive assets compared to the rate of interest or the rate of profit on other financial assets. What sort of money operated was not the issue. Capitalist are hoarding now.
“Capitalist are hoarding now.”
Yes, because we let them hoard. There is no difference between fiat money and gold if central banks/treasury are not willing to create enough inflation. But that’s politics.
If I understood you right, you are saying, that they can’t create inflation (in contrast to not be willing to create inflation). Or if they could create inflation, unemployment wouldn’t fall. For you, it’s only three options: no inflation (pushing on a string) or stagflation or asset price inflation.
I disagree with the first two predictions. They can create inflation if they want to and there won’t be stagflation. But I agree that asset price inflation is the main problem.
“for Marx it was the current rate of profit on productive assets compared to the rate of interest or the rate of profit on other financial assets”
I think we both agree that profits through “investing” in financial assets are fictitious. You can’t raise the profit rate through financialisation. What’s happening is this: if profit rates are low or zero and private banks or central banks create credit money or base money, assets in limited supply which provide rents have to explode in price. Fictitious capital is just the net present value of future income streams. If interest rates go to zero, the net present value of assets which still have an income stream rises sky high. To end this mirage, we have to tax rents away. This will deflate fictitious asset prices. Then capital has no where to go than into productive investment and the state can use the tax on rent for productive investment in public goods like a green new deal.
So fictitious capital is allowed to grow and then we tax it back. Why not just take over the financial institutions and turn them into public services not speculating hedge funds..? It seems you want to keep the banks and just tax them when they are naughty.
No, the idea is to tax the underlying asset, not the derivative. Fictitious capital is just the net present value of future income streams. The lower the profit/interest rate, the higher the price of the remaining assets (in limited supply) which still provide positive income streams (rents). All you have to do is tax these future income streams away and fictitious capital can’t even grow. The net present value of zero future income streams is zero.
Fictitious capital is not the same as a financial bubble. Bubbles are irrational, they could happen under any system. Even under socialism democratically elected politicians could command to waste labour power on technology which is based on pure hype and turns out to have no use value.
@ Alex
Now I finally got the problem with your opinion (after your last reply).
The problem with the system you draw here is that you’re positing a capitalist society where the dominant class doesn’t dominate. You’re assuming the capitalist class, nowadays, have the economic, but not the political power. This is not true — we don’t “let them hoard”; they “hoard” because they can, because they have monopoly of violence. And, by “monopoly of violence”, I mean the US Armed Forces — specially its big fricking Navy (which controls the Seven Seas, therefore the flow of capital and goods) and its huge nuclear arsenal.
Behind the screens registering numbers of fictitious capital, there is sheer brutality.
My dispute with Michael Roberts is about economics. Is control of money capital and assets in limited supply enough, or do we need to control real capital (or at least 80% of the economy)?
Now, you are saying: it doesn’t matter who is right, cause we control nothing and never will, cause “they” won’t let us since “they” have a monopoly on violence: the US armed forces.
Okay, but what we are proposing here is in the economic interest of the overwhelming majority of US workers (so we think). “They”, the capitalist owners, are in the minority. So “they” can’t command 2 million US soldiers through force, on the contrary, having a monopoly on violence presupposes that 2 million soldiers agree to be commanded.
So in the end, the majority is ruled because they agree to be ruled. Since this is not in their economic interest, capitalist owners rule not primarily through force, but through ignorance.
Now, lots of people out there, reading this, would say: “The only one being ignorant are you. Socialism was tried and it was a catastrophe. This entails so called democratic socialism. Just look at Venezuela. There is no alternative to capitalism.”
So, maybe it’s better no to talk about ignorance and just say that lots of people out there are not yet convinced that we anti-capitalists have it right.
So I don’t buy the picture that the majority of US workers wants to abolish capitalism but fears the US army.
Regarding Warren and “leftists” like her (Stiglitz), a common rebuttal I’ve seen to the notion of “ethical capitalism” is the case example of the Nordic nations, where welfare and per capita happiness is very high but all the countries in that area are still fully capitalist, just with an expansive welfare state. To many observers in the US, this would seem like proof of the existence of “ethical capitalism” and that we(the US) just need to reform to that point and we can keep capitalism without the exploitation.
Do you have any key insights to share regarding this argument?
Intuitively I feel that the Nordic nations only exist in the global system of capitalism and not divorced from it and it is questionable whether their status can exist if every Western nation had their same laws but this is relatively shaky ground to be on. I’d like something more substantial to guide my thought process.
@halikon
1) These Nordic countries established the welfare state in times of a golden age of capitalism, when high growth rates and high rates of profit prevailed.
What did the US do during this time? They have waged wars: first in Korea, then in Vietnam and throughout South America.
2) All these Nordic countries have reduced the welfare state since the chronic stagnation in the rate of profit in the 1980s. Transfer payments have been cut, social transfers have been tied to ever new preconditions, reception times are shortened, and so on.
If leftists in the United States believe they can now introduce “ethical capitalism” to the US in this “lean years”, then they are 40 years late. Life punishes those who are late.
Wal Buchenberg, Hannover
These Nordic countries established the welfare state in times of a golden age of capitalism, when high growth rates and high rates of profit prevailed.
Quite false, reverses cause and effect, has the times wrong- for Sweden, the usual paradigmatic example and I think applies to the others. It’s not that rich country Sweden can afford a welfare state. Sweden is a rich country because it was a welfare state; from the 1920s-30s, before the golden age of capitalism. Before it was a socialist welfare state, it was poor.
Pro-employment welfare state policies are what made Sweden rich. Their more recent reduction of the welfare state has hurt their living standards. Most economics is insane raving, an insult to one’s intelligence. Ernst Wigforss wrote “Can we afford to work?” – which wasn’t. It lampooned the insane, but well-nigh universal anti-socialist idea that welfare state/ full employment makes a country poorer. Result: Sweden got rich.
One also sees such ahistorical nonsense about Norway, that oil made it rich. Actually it has used its oil wealth in an idiotic manner. Again, it was rich before the oil, which has next to nothing to do with its active wealth and living standards. The Norsemen could have just as well dug up banknotes in buried bottles.
I don’t see that supporters of MMTheory have understood what the value of money depends on. But I think they are intrigued by the fact that the US Federal Reserve’s quantitative easing has not led to general inflation – as it has not triggert a general inflation in Japan and the EU.
The explanation is simple: this extra money from QE has not arrived in the real economy. Neither has government debt declined in any country through QE, nor investment and private consumption have increased significantly.
Quantitative easing has flowed into the stock markets, causing inflation there (rising prices) and it has flowed in banks’ assets so that banks have been able to restore their bad balance sheets.
Neither the state nor the wage earners have become richer through QE. Neither the state nor the wage earners can become richer through QE. That’s the simple conclusion from QE.
Wal Buchenberg, Hannover
The USA can contract debt without rising inflation because the Dollar is the universal currency. Everybody needs dollars to trade; therefore, if more dollars are pumped into circulation, then the rest of the world must bank it to keep the flow of capital and goods going.
And the fact that money from QE hasn’t arrived on the “real economy” is essential for it to work: if the little guy gets the money, then what will happen is simply rising prices without rising values. Money printing only makes sense when it is unevenly distributed (so the people who get it first robs the rest of wealth, and so on, until the last person, who is only robbed and doesn’t rob).
you did not understand that either
The Economist, 2019.02.16: „Adherents of MMT note the lack of inflation seen since the financial crisis, despite big deficits and governments printing money to buy bonds trough ‚quantitative easing‘.“
Again, this extra money did not get into the real economy and therefore did not trigger inflation. Without access to the real economy, this money ends up only in the books of companies and brings no benefit to society.
Wal Buchenberg, Hannover
I know that you would disagree with Jason Hickel’s analysis of “neoliberalism”, but I think you should have a look at what he suggests as solutions, which go beyond the (neo)Keynesians’.
Click to access Hickel_-_A_Short_History_of_Neoliberalism_3.pdf
“The Scandinavian economies have high inequalities, but redistribute most, to end up with the lowest inequality ratios.” That has to be put more accurately and in perspective. Göran Thereborn and (Cambridge University) and Angus Madison (Oxford University) have reached a different conclusion: “The current Swedish income distribution bears some resemblance to the English one of 1688. The average member of the richest 0.1 per cent has a disposable income, after tax and transfers, 38 times greater than that of the median-income earner. At the time of the ‘Glorious Revolution’, England’s temporal lords had an income 30 times that of urban middle class merchants and traders. Wealth distribution has worsened even more, resulting in the most uneven pattern to be found in Western Europe, on a par with those of Brazil, South Africa or the USA. In 2002, Sweden’s top 1 per cent owned 18 per cent of all household wealth; by 2017, it had risen to 42 per cent.” New Left Review 113.
The GND is not a sustainable public policy proposal because BOTH the economy and energy have to be sustainable in order to be effective. Here’s Why the Green New Deal won’t work -The GND would disrupt the market system, seeking to eliminate all fossil fuels. Instead, market mechanisms should be used in order to transition energy and financial markets from fossil fuels to renewable energy. https://greencitytimes.blogspot.com/2019/04/why-green-new-deal-wont-work.html?spref=tw
Genuinely when someone doesn’t understand afterward its up to other visitors that they will help, so here it happens.|