MMT

Sunday Housekeeping Jan 24th 2021

January 24, 2021 By graham stewart Leave a Comment

Notes from a snowy afternoon

I joined a call this afternoon organised by GIMMS (The Gower Initiative for Modern Money Studies). As I had that very morning finished Pavlina Tcherneva’s latest book — The Case for A Job Guarantee — it seemed perfect timing to listen to her in conversation with Phil Armstrong.

It was as I expected. Ms Tcherneva was eloquent, convincing, and, better still, interesting. For me, the best part of the call was when she responded at length to Phil Armstrong’s question about how she ended up in the MMT world — and what keeps her there.

I’m not going to summarise what she said here. The whole talk was recorded and will be up on the GIMMS YouTube channel in the near future.

In addition to the recording, there was a live transcript of the call. As in most live transcripts, some of the translations from the vocal into the verbal were less than accurate. Perhaps most tellingly, whenever the term MMT was used, the transcript recorded it as ‘empty’. I’m sure many of the critics of MMT would call that accurate. I’m happy to laugh along.

In a later transcript blooper — and one for all the teenagers out there — when Pavlina Tcherneva used the phrase “emancipatory”, it became “masturbatory”. This happened more than once. Perhaps the most striking example was when she was describing workfare and especially its use by the authoritarian right. Tcherneva wanted the left to wake up and see that there is a democratic and emancipatory way of pursuing direct employment. Unfortunately, the transcript told us to wake up and see the democratic and masturbatory way.

Oh, how we laughed. But, hey, it was a Sunday afternoon and I was on a call about MMT. I’m allowed to find something to smile about.

And that’s it. It’s possible I may be writing this simply to keep my daily posts going. Never, you say.

And the book that slips into the reading list to replace Tcherneva is The Great Fortune, the first volume of Olivia Manning’s The Balkan Trilogy.

Britain’s Labour party responds to the looming financial crisis

January 15, 2021 By graham stewart Leave a Comment

…..by proposing the same old tired neoliberal sh*t

So there you have it. The Labour Party under Sir Keir (the Strimmer) Starmer has finally found its financial policy. It’s going to threaten the Tories with a plan to become economically competent. This radical policy — of basically following the traditional neoliberal playbook of balanced budgets and austerity — was announced by Shadow chancellor Anneliese Dodds in the annual Mais Lecture on January 13th.

Now follows a rant.

This is a return to playing by right-wing economic rules. It’s a commitment to drain useful money from the economy and ensure it filters upwards. Balanced budgets — or treating the national economy like a household budget where spending should match income — is simply a guarantee of stunted growth, low wages, poor services, inadequate housing, and ever-increasing inequality.

Labour, by returning to this failed notion — this economic illiteracy — is simply showing that they are no longer the party of the working majority of this country. Fiscal responsibility is code for asset stripping. True economic competence would be about ensuring that money is spent where it is needed most. Housing, health, jobs. We have a fiat currency, which means we cannot go broke. There is no direct relationship between tax and spending. Tax is a tool to combat inflation and to manage levels of employment. To pretend otherwise is to commit to increasing the wealth of the plunderers of the national treasury and to lead us further down the road to a right-wing authoritarian nightmare.

It is both depressing and furthering that our main party of opposition has no expert in economics who can guide our shadow chancellor away from making the usual errors of judgment and bowing to the Daily Mail’s view of how an economy works. Couldn’t Labour perhaps think outside the box for once and try to hire someone like Stephanie Kelton?

That it fails to do so sentences the majority of us to a future of greater need, little protection against the climate crisis, and the threat of fascism as the anger of the deprived is used by those benefiting from the growth in inequality. Instead of blaming ignorance of economics, of course, the wealthy will have us blame someone or something ‘other’. Immigrants, the ‘undeserving’ poor, benefit ‘scroungers’, the disabled, ethnic minorities, the plain old unemployed. These all become categories to be despised and targeted. Instead of treating the nation as a community, the right want us to see only competitors for scant resources.

And the irony, of course, is that there is no practical limit on the money to spend on public services. On housing. On transport. On health. It is always an ideological choice how money is spent and how it always seems to be spent upwards.

Is this a good time to discuss guaranteed jobs?

January 5, 2021 By graham stewart Leave a Comment

One of the things I want to do this year is to learn more about Modern Monetary Theory (MMT). Lat year I listened to a few episodes of The MMT Podcast and read a few articles about MMT that had me believing this was the missing piece that explained how the ideological foundations of austerity could be dug up and destroyed.

When Cory Doctorow appeared on The MMT Podcast not once, not twice, but four times….. and talked sense, as always, I was hooked. Listen here to the first of those episodes.

Two of the MMT books on my reading pile at the moment are Stephanie Kelton’s The Deficit Myth and Pavlina Tcherneva’s the case for A Job Guarantee.

Early on in chapter 2 of the Tcherneva, she discusses the way neoliberal idealogues have convinced us that unemployment is not merely an unfortunate by-product of a successful economy but, indeed, essential. This is both morally corrupt and completely wrong.

Tcherneva uses the examples of starvation, homelessness, and education to point out the stupidity off a policy that states that a level of, say, 5% unemployment is unavoidable. Here is how she relates that to some other measures of a successful society:

“Suppose you heard that, in a strong economy, the optimal level of children who wanted to but were unable to receive primary and secondary education was 5 percent; or that there was a natural level of starvation equal to 5 percent of the population; or that 5 percent of people would ideally remain without shelter.”

As she says, although — for the latter two categories, especially — our so-called advanced economies could do better, “we do not design or implement policy on the basis that there is some ‘optimal’ level for these social ills.”

On the other hand, it is clear that we do implement policies that keep a large number of people unemployed. This is likely to become a policy that becomes increasingly apparent as our corporate servants in government seek to reimpose austerity — possibly under a new name — to ‘pay’ for the cost of the Covid-19 pandemic.

I have skin in this game. My son is at home and unemployed. This is not a good time to find work, of course. It is especially not a good time to find work that he has trained for. His sense of self-worth diminishes by the day.

We have not always been so tolerant of an ‘optimal’ level of unemployment. And it’s worth asking; ‘optimal’ for whom? Although high levels of unemployment depress wages and lift profits, it turns out that unemployment has a detrimental effect, not only on the unemployed but also their families, their communities, and the economy as a whole. Go figure: economic policies are pursued that knowingly damage the economy simply to prevent wages from rising.

Of course, the old canard is that rising wages cause rising inflation and there is nothing that a central bank hates more than inflation. There are two things wrong with this belief now.

The first is that in the years since the crash of 2008 inflation has not been a concern. There were fears that great dollops of stimulus and quantitative easing would be followed by inflation. With low interest rates bordering on the negative, we’re more in danger of deflation now than inflation. No sign of increasing wages, of course.

The second is that, even in the old myth of inflation-driving wage increases, this happened when firms were competing for the same resources (i.e. workers). A policy of providing employment funded by the government at a living wage for the currently unemployed would not trigger competition with those employers who have no need of staff. (It might drive down the numbers of those forced into the gig economy — at what tends to be less than the living wage — or who are forced to hold down multiple part-time jobs but that does not feel like such a bad thing.)

Tcherneva makes a good case for the detrimental impact of unemployment beyond the unemployed worker. I don’t think this is new information or will come as a surprise to anyone with a modicum of awareness of our society. The issue is not so much how to pay for jobs for everyone as how can we afford not to?

It’s worth noting here that the points that Tcherneva makes about the cost of unemployment are valid regardless of whether you think MMT is a fantasy about a magic money tree or you see it as a mystery-dispelling antidote to the ‘there is no alternative’ brigade who believe in balancing the budget.

In the end, though, I suspect turning unemployment ‘benefit’ into employment benefit can only improve all our lives.