There was a ‘Guest Editorial’ published on the UK site Renewal last week – Modern money and the escape from austerity – by one Joe Guinan, who lists himself as a Senior Fellow at The Democracy Collaborative and Executive Director of the Next System Project. He is a journalist by background. Renewal is a “A quarterly journal of politics and ideas, committed to exploring and expanding the progressive potential of social democracy”, so it would seem to be wanting to head in the right direction, which reflects my values. The article’s central message is that “Modern monetary theory destroys the intellectual basis for austerity but needs a more robust political economy”. It is a serious embrace with our ideas and it is welcome that Modern Monetary Theory (MMT) is entering the progressive debate in a thoughtful manner and being advanced by others than the small core of original developers (including myself) who, in turn, built the ideas on the back of others long gone. The problem is that I don’t necessarily agree with many of the propositions advanced in the article. Here are a few reasons why.
I should note that the author does not directly refer to any of my own work in his piece and while I am not precious about that I have always been reluctant to discuss attacks on MMT that are based on a very partial reading of the literature.
Further, some of the author’s main assertions reflect the fact that he hasn’t read some of my work – especially in the area of the Phillips curve and buffer stocks – or has chosen to ignore it in putting his article together.
In terms of the economics, the article correctly notes the historical significance of August 1971 for the operation and understanding of monetary systems.
Most people are unaware that a major historical event occurred in 1971, when President Nixon abandoned gold convertibility and ended the system of fixed exchange rates. Under that system, which had endured for about 80 years (with breaks for war), currencies were convertible into gold, exchange rates were fixed, and governments could expand their spending only by increasing taxes or borrowing from the private sector.
After 1971, most governments issued their own currencies by legislative fiat; the currencies were not convertible into anything of value, and were floated and traded freely in foreign currency markets.
A flexible exchange rate releases monetary policy from defending a fixed parity against a foreign currency. Fiscal and monetary policy can then concentrate on ensuring domestic spending is sufficient to maintain high levels of employment. A consequence of this is that governments that issue their own currencies no longer have to ‘fund’ their spending.
They never need to ‘finance’ their spending through taxes or selling debt to the private sector. The reality is that currency-issuing governments such as those of Australia, Britain, Japan and the US can never run out of money. These governments always have the capacity to spend in their own currencies.
Most of the analysis appearing in current macroeconomics textbooks, which filters into the public debate and underpins the cult of austerity, is derived from ‘gold standard’ logic and does not apply to modern fiat monetary system.
Economic policy ideas that dominate the current debate are artefacts from the old system, which was abandoned in 1971. Students of macroeconomics are misled very early in their studies.
Their textbooks typically use the flawed analogy between the household budget and the sovereign government ‘budget’ to argue that the same principles that constrain the former apply similarly to the government. The analogy is false at the most elemental level.
The government issues the currency, which the households use. As a consequence, households have to seek funds before they can spend.
Fiscal surpluses do not give a government any greater future spending capacity and fiscal deficits do not limit that capacity.
Once you appreciate that historical event, then the foundations of MMT are within your grasp and firmly embedded in a real historical context.
Within that context, Joe Guinan correctly notes that:
The difficulty lies in the fact that we have yet to comprehend this fully – and to demand that it is used properly.
The ‘we’ should be defined to include most of the citizens who vote but exclude, for example, central bank officials who have a complete comprehension of the opportunities presenting a currency-issuing government.
When the German Bundesbank chief told the audience in Frankfurt during a 2012 speech – Money Creation and Responsibility that:
… the fact that central banks can create money out of thin air … many observers are likely to find surprising and strange, perhaps mystical and dreamlike, too – or even nightmarish …
He was revealing his understanding as a central banker of the unlimited capacity of the currency issuer to create create as much money as they like. But his ideological bias, like most of those in the know, leads him to declare such a capacity taboo. Why? Because he erroneously believes that exploiting such a capacity will lead to accelerating inflation.
But you can see the debate should never be about the capacity of the currency issuer (post 1971) to create spending power for the government without the need to raise tax revenue or borrow from the non-government sector – that fact is taken as given by central bankers and most treasury officials.
A legitimate debate, implied by the reference to the capacity being “nightmarish” (according to Weidmann’s blurred vision), is that using that currency-issuing capacity will have consequences – including increasing aggregate spending, stimulating output and employment, reducing unemployment, increasing imports, and, perhaps stimulating an inflationary spiral.
Whether the government spending increase has real effects (on output, employment etc) or nominal effects (on the price level) depends on the circumstances that the particular economy finds itself in. There may be no price effects or large price effects.
The debate then should never be about the government running out of money but whether it is desirable to spend more or less at any given time according to the motivation to achieve national goals.
But it is true, as Joe Guinan notes that:
Few matters of economic importance are as woefully misunderstood as modern money. It can seem a fiendishly complicated subject, even to economists.
The vast majority of economists do not understand the full significance of August 1971 and the lazy ones just reiterated ideologically-loaded textbooks, which have little relation to reality, to their students as if they were educators.
All they succeed in doing is to indoctrinate the students with their neo-liberal propaganda. And they might not even do that, given how turned off most students are after studying economics for any time.
The motivating claim by the Article is that:
Money, it is argued, is by its very nature political – who has it, how much, and at what price.
And that is correct but as you will see not a compelling part of the development of MMT as a ‘theory’ of how the monetary system operates.
Joe Guinan notes that the “crisis is being used to shrink the state, while virtually the entire mainstream left has been rendered powerless, caught in the grip of widely held but erroneous beliefs concerning money and finance”.
Yes, the ideological attacks on government activity and economic involvement as a threat to the neo-liberal mantra that self-regulating markets deliver the best outcomes, are just disguising the ‘political’ nature of what underlies the so-called economic debate.
We recall the predictions about an inflationary Armageddon where governments would run out of money and the poor would lose all incentives to seek work as a result of the pitiful welfare cheques that they received, became a regular occurrence in 2009 and after as government stimulus packages were introduced as a desperate measure against the likely collapse of the world monetary system.
The public was told that the ‘excessive’ deficits would lead to a massive rise in interest rates, which would make home mortgage commitments intolerable. The daily narrative had the US or the UK morphing into Greece.
None of these predictions have come to fruition. If the medical profession had displayed incompetence of this magnitude then authorities would have withdrawn their certificates to practice and large damages claims would have been awarded against them.
But an extremely biased, neo-liberal media, failed to bring these economic zealots to account and the public were increasingly persuaded that the crisis was not one of excessive private debt driven by massive market failure, but was rather a sovereign debt crisis brought on by profligate government spending.
At that point, the attack on government fiscal activism became almost manic in its intensity and the politicians bought into the fray. Why was there so much resistance to abandoning the failed economic theories? The mainstream economics paradigm is more than a set of theories.
Mark Blyth in his 2013 book – Austerity: The History of a Dangerous Idea – (page 100) notes that these mainstream economic theories:
… enshrine different distributions of wealth and power and are power resources for actors whose claims to authority and income depend upon their credibility …
Which explains, in part, why there was such resistance to abandoning them, even though it was clear that they were bereft of any evidential standing.
So I don’t dispute the political nature of austerity. That is its central motivation and intent. The ruling hegemony which now includes financial capital (replacing the dominance of industrial capital) uses austerity for its own purposes – and will, as we say in 2008, exploit the currency-issuing capacity of government if that also serves them well.
Which makes it all the more surprising that considerable hostility to MMT comes from the so-called progressive left. Joe Guinan is also perplexed:
The notion of a revenue-constrained government budget in a monetarily sovereign state may be a useful fiction for conservatives and rentier capitalists, but it should not have gone unchallenged by the left.
I have had many conversations with so-called progressive politicians, leaders of community organisations etc and it becomes very frustrating when they start talking about ‘increasing taxes on the high income earners’ to pay for more public infrastructure, or express worries about the government ‘running out of money’.
The worst is when they claim that austerity is necessary but that they would do impose it more gradually – aka British Labour Party, Australian Labor Party, US Democrats and more.
When one tries to explain MMT to a progressive person of this bent they just look at you as if you are speaking in a foreign language, one they haven’t mastered, and, typically, revert to form – ‘how can the government pay for it?’, no ‘that is impossible’ etc
Revert to form = utter mindless neo-liberal phrases they do not understand fully but think are correct because everyone considers them to be true. All but those marginalised MMT types! After all, that is why they are marginalised, n’est-ce pas?
We (Louisa Connors and myself) outlined the progressive challenge in this paper last year – Framing Modern Monetary Theory
Please read my related blogs – How to discuss Modern Monetary Theory – and then Framing Modern Monetary Theory – for more discussion on this point.
The argument we presented was that MMT has a coherent story to tell about the operations of the macroeconomy and provides new insights into the opportunities available to a government and its citizens concerning full employment, and accessible high quality health, education and other infrastructure.
But MMT has struggled to gain traction in wider economic and political debates due to:
1. An incomplete understanding of key macroeconomic terms amongst economic commentators, especially journalists, and the wider community (lack of education); and
2. The deployment of key macroeconomic terms (incorrectly) in the context of pervasive cultural metaphors to support policy interventions that effectively benefit a privileged few at the expense of the majority.
That worked provided a conceptual basis for understanding how the language we use constrains our thinking and examine some of the key metaphors used to reinforce the flawed message of orthodox economics.
We also examine the key ideas of modern monetary theory – an apolitical model of macroeconomic operations – and propose effective ways of expressing those key ideas in a progressive social and economic framework.
That is – MMT is a framework for understanding how the monetary system operates and the opportunities it presents. But it is not intended, nor should it, to be a ‘Manifesto’ for a progressive social and economic policy platform.
Manifestos are the domain of politics. Economic theory is to help us understand how things work so we can apply whatever ‘manifesto’ we support to the conduct of politics and policy.
Joe Guinan correctly notes that:
The immediate difficulty we face is the contradiction between our current economic problem, which is that deficits are too small, and political understanding of the problem, which is that deficits are too large.
And, clearly, that lack of understanding – “Widespread economic illiteracy” – allows those who do understand and have power to use the capacity of the currency-issuing government to “to boost the value of financial assets held by banks and creditors, while austerity bites ever deeper into the lives of ordinary people”.
But the two aspects of this – the lack of understanding, on the one hand, and the capturing of the polity by vested interests, on the other hand – are separate even though the latter exploits the former as a strategic tool to further their own interests and entrench their influence on the decision-making apparatus in society.
In this regard, Joe Guinan considers that MMT:
poses a devastating challenge to the reigning orthodoxies. Viewed through the lens of MMT, almost every popular assumption about money and public finances is misguided or outright mistaken – at least in those instances where governments retain a sovereign currency … [but] … To first encounter MMT is akin to falling down the rabbit hole and emerging into a looking glass world in which all hitherto seemingly settled opinion about money and banking turns out to be wrong and exactly the opposite holds true.
That is correct, although I am incapable of knowing what a belief in the mainstream economics ideas feels like in a cognitive sense because I was always a heretic. But the looks of disbelief I get from otherwise sane and caring progressive thinkers when these issues are raised tell me that they don’t want to fall down the “rabbit hole”.
Joe Guinan’s rendition of MMT is acceptable and we can skip that part of the article. Suffice with his overall asssessment:
The overwhelming conclusion of modern monetary theory is that there is no inherent financial limit to the spending of a monetarily sovereign government. Of course, such spending has consequences in the real economy, impacting inflation, interest rates, capital formation, and so on, and sustained over-spending beyond full employment and real production capacity is a certain path to hyperinflation … Today, with 48 million people unemployed across the OECD and so much capital lying idle, we are very far indeed from such a situation …
He then turns his attention to ‘political’ matters – where the “Austerity, the proclaimed need to cut back government spending to balance the budget and pay down the debt – expansion through contraction! – remains the dominant frame of mainstream politics, exerting a powerful hold over social democrats as well as liberals and conservatives in the UK and around the world.”
He acknowledges (as above) that so-called centre-left political parties “are imprisoned within austerity economics, promising at best a kinder, gentler management of public retrenchment and downward mobility”.
But apparently, MMT operates “mostly in descriptive, rather than prescriptive mode” and the claims that it is a progressive left manifesto is misplaced.
Please note: MMT proponents are clear in our serious writing that it is not a political manifesto.
The core MMT proponents hold out that MMT is a body of theory and inferences drawn from that theoretical structure that describes and explains the way the monetary system operates and the consequences that will likely follow different policy choices and non-government behaviours.
Joe Guinan correctly notes that comprehension is one thing but “the point, however, is to change” the system.
In this respect, he asked (by way of criticism because he provides the answer):
What, then, are MMT’s prescriptions?
Answer: none in the way he frames the question.
Is that a problem?
Answer: not in the least. Prescriptions belong in the political space. Theories belong in the knowledge space. Hopefully the latter informs and shapes the former. The problem in this neo-liberal period is the the prescriptions are driven by anti-knowledge – by pure ideology. The prescriptive space has been captured by the elites.
But as a theorist – that is not my problem. My problem is to work things out and to try to educate people in what I have worked out.
The capture of the prescriptive space by the neo-liberals is my problem as a citizen. The two aspects to my being are related but not identical.
Things get a little blurry in Joe Guinan’s article at this point. He thinks that because MMT traces “its lineage to Keynes” (which is an incorrect assertion, in itself) – that it:
… offers a policy framework largely oriented to the abolition of unemployment and the better management of instability in capitalist market economies …
In fact, the abolition of unemployment or the promotion of full employment is not unique to Keynes.
Macroeconomics is the part of economics that studies the economy in aggregate. The aggregates that concern us in this area of study are the level (and growth) in production, the rate of aggregate unemployment, and, the level and rate of change in the overall price level.
A central idea in economics whether it be microeconomics or macroeconomics is efficiency – getting the best out of what you have available. The concept is extremely loaded and is the focus of many disputes – some more arcane than others.
But my profession would be united in saying that developing theories about how efficiency is to be attained at any level is a core activity for an economic theorist.
At the macroeconomic level, the ‘efficiency frontier’ is normally summarised in terms of full employment. That has always been the case even if the jargon has changed over the centuries. There has always been a concern for waste of resources and the losses encountered by dint of having will labour resources idle.
The hot debate that has spanned the years is what do we mean by full employment but it is a fact that full employment is a central focus of macroeconomic theory.
Considering that issue doesn’t amount to a prescriptive preference – unique to me or other MMT theorists or otherwise. Using our macroeconomic resources to the limit is a key part of all macroeconomic theorists. The debate is what that limit actually is.
The neo-liberals also advocate full employment although they use all sorts of conceptual dodges and framing to manipulate the definition so that the level of unemployment that keeps wages growth at levels conducive to profit maximisation is the aim rather than what I would call ‘true’ full employment.
Please read my blog – Whatever – its either employment or unemployment buffer stocks – for more discussion on this point.
So the fact that MMT advocates full employment is not a venture into politics. It is stating the obvious concern of economists – that we hate waste and unemployment is waste.
Joe Guinan then steps into the Job Guarantee mine field. He claims that:
… the principal MMT policy proposal, following Minsky, is the job guarantee, by which the government steps in to serve as employer of last resort … The claim is made that, using MMT methods, full employment can be decoupled from economic growth and price instability …
First, the Job Guarantee proposal does not come from Hyman Minsky even though he advocated the policy idea.
Second, the Job Guarantee does not break the link between full employment and economic growth. With an expanding population and labour force, by definition, there has to be economic growth to ensure everyone who wants a job has one.
National accounts measures economic growth in three major ways – how much expenditure there is per period, how much income has been generated, or how much output has been produced. Given the nature of the framework, the different ‘views’ on growth deliver the same result.
If there are more people employed over time as the labour force expands then there will be higher incomes generated, more output produced and more government and private spending. That is, economic growth will expand.
It is false to claim otherwise.
The question that must be answered in relation to other goals such as ensuring human economic activity does not trammel the capacity of the natural environment relates to the composition of that growth. But never think that economic growth can be zero and full employment can still be achieved with a growing population.
Third, to claim the Job Guarantee is the prescriptive component of MMT is to miss its essential role in the theoretical debate. I suspect Joe Guinan hasn’t understood that, given he hasn’t referenced any of the relevant academic work in this regard of which I have been a major contributor.
It is tempting to consider the Job Guarantee to be just a guarantee of jobs for everyone – that is, a government job creation program.
However, that characterisation fails to fully embrace the buffer stock thinking that is unique in MMT and how it fits in with the History of Economic Thought.
Those who haven’t come to MMT from a solid background in macroeconomics can easily just think the JG is a tacked-on ‘leftist’ or ‘social democratic’ policy aimed at providing jobs to those who cannot find them.
So I often get the view expressed in E-mails etc that the Job Guarantee is all very nice but peripheral to the deep financial and monetary insights that MMT provides and should be culled from the writings or de-emphasised so as not to alienate the hard financial market types.
The progressives who support an income guarantee (for example, Basic Income proponents) also play down the importance of the Job Guarantee (an employment guarantee).
The reality is that the Job Guarantee is a central aspect of MMT (that is, theory) because it is much more than a job creation program. It is an essential aspect of the MMT framework for full employment and price stability.
To understand the role that the Job Guarantee plays in MMT and its place in economic theory, one has to grasp the concept of buffer stocks.
I started work on these ideas during my 4th year of undergraduate studies at the University of Melbourne in 1978 but left them simmering until the 1990s because I was doing other work.
My colleague Randy Wray spoke of this work in his keynote speech at a CofFEE Conference in Newcastle in 2012. He said:
And then there was the job guarantee, which I immediately recognized as Minsky’s employer of last resort. I can’t remember what Warren called it but Bill called it BSE, buffer stock employment.
I had never thought of it that way, but Bill’s analogy to commodities price stabilization schemes added an important component that was missing from Minsky: use full employment to stabilize prices. With that we turned the Phillips Curve on its head: unemployment and inflation do not represent a trade-off, rather, full employment and price stability go hand in hand.
The government can thus choose – of all the ‘steady state’ unemployment-stable inflation equilibria (combinations of values) available – one that provides a job for all when the private market fails.
For those well-versed in the history of macroeconomic thought rather than the day-to-day financial market trends, this MMT insight is crucial and relates to the need for an economy to maintain a nominal anchor (that is, maintain price stability).
As I explained in this blog – Modern monetary theory and inflation – Part 1 – that there are two broad ways to control inflation and the use of buffer stocks are involved in each:
Unemployment buffer stocks: Under a mainstream NAIRU regime (the current orthodoxy), inflation is controlled using tight monetary and fiscal policy, which leads to a buffer stock of unemployment. This is a very costly and unreliable target for policy makers to pursue as a means for inflation proofing.
Employment buffer stocks: The government exploits the fiscal power embodied in a fiat-currency issuing national government to introduce full employment based on an employment buffer stock approach. The Job Guarantee is central to MMT and is an example of an employment buffer stock policy approach.
Full employment requires that there are enough jobs created in the economy to absorb the available labour supply. Focusing on some politically acceptable (though perhaps high) unemployment rate is incompatible with sustained full employment.
Under the neo-liberal policy regime, central banks have, increasingly, been given the responsibility by government for managing the price level. In conducting monetary policy to fulfill their major economic objectives, central banks manipulate the interest rate and attempt to manage the state of inflation expectations via aggregate demand impacts.
They now use unemployment as a policy tool rather than a policy target to discipline the inflation generating process. Where negative real effects from the operation of inflation-first monetary policy are acknowledged they are theorised to be necessary for optimal long term growth and employment and small in magnitude.
In MMT, a superior use of the labour slack necessary to generate price stability is to implement an employment program for the otherwise unemployed as an activity floor in the real sector, which both anchors the general price level to the price of employed labour of this (currently unemployed) buffer and can produce useful output with positive supply side effects.
So the Job Guarantee thus works on the ‘buffer stock’ principle.
Please read my blog – MMT is biased towards anti-crony – for more discussion on this point.
Now the question is whether that theoretical positioning of the Job Guarantee is also ‘prescriptive’. The answer is that if we accept that macroeconomics is concerned with ‘efficiency’ that is no waste and price stability, then the application of the buffer stocks principal is essential.
In that context, the Job Guarantee is a superior option whether it accords with your value system or not.
You can argue against it – for example, if you don’t think full employment is desirable. But you are prevented from using arguments relating to the incapacity of governments to afford such a scheme as a defence.
What MMT forces upon the debate is increased transparency. A person who opposes the idea of a Job Guarantee has to argue that the private sector will create sufficient jobs and that cyclical bouts of high unemployment (that might last decades) are better than having everyone employed.
That is a different debate to the simple but erroneous assertion that ‘the government cannot afford it!’.
Joe Guinan says that:
Although individual MMT thinkers express their views on a range of other economic issues, MMT per se often tends toward agnosticism. Given present circumstances, the adoption of even the limited MMT programme indicated above would amount to something of a revolution in economic and political affairs. Still, MMT as a theory has relatively little to say on a number of critical questions – not least among them the matter of what to do about the private banking sector.
So the point is this – MMT per se is a theoretical framework backed by knowledge. It is there to be used either progressively or not. But it is not a prescriptive framework about what should happen.
Nor is it a theory of evolution, nor does it provide any insights into kinetic molecular theory, or, for that matter, any insights on who will win the football match next week, or whenever.
Being prescriptive is not the role of a theoretical framework focused on the monetary system. That role is to be assumed by the activists. MMT aims to educate the activists and provide them with the knowledge necessary to justify a progressive (or otherwise) policy stance in the political fora where such things have to be justified.
As an individual, my prescriptive ‘take homes’ from MMT are fairly clear to regular readers. I hate inequity and want everyone to be able to reach their potential. I don’t want that potential blighted from a young age because of poverty. I understand from MMT that poverty can be largely eliminated and so I prescribe policies that would achieve that.
But I also realise that a right-winger could also think, from their own peculiar values, that poverty was a virtuous state, because it provided and incentive structure for human endeavour and all the rest of the ‘shoelace lifting’ nonsense. In that case, they would use MMT to maintain high unemployment and give tax breaks to the high income earners and maintain as low a deficits as were possible (given the high unemployment) by imposing austerity on low income earners and income support recipients.
They would understand exactly how to achieve those aims. And all the rest of us, who by now had understood MMT would realise what was going on. The resolution would be a political matter as the different ideologies struggled for political supremacy.
The accusation that MMT is agnostic about “what to do about the private banking sector” given that (apparently) “It is this production of bank credit-money that sociologists of finance like Ingham see as giving capitalism its distinctive structural character” is also curious.
First, I disagree that bank credit-money is the defining characteristic of capitalism. I am Marxian in background and the defining character of capitalism is who owns the capital.
Second, it is not bank credit-money that is the problem. I have written about that a lot. For example, please read my blogs – Operational design arising from modern monetary theory and Asset bubbles and the conduct of banks – for more discussion on this point.
The point is that the only useful thing a bank should do is to faciliate a payments system and provide loans to credit-worthy customers.
Attention should always be focused on what is a reasonable credit risk. In that regard, the challenge is to regulate and supervise the banks more carefully.
1. banks should only be permitted to lend directly to borrowers. All loans would have to be shown and kept on their balance sheets. This would stop all third-party commission deals which might involve banks acting as ‘brokers’ and on-selling loans or other financial assets for profit. It is in this area of banking that the current financial crisis has emerged and it is costly and difficult to regulate. Banks should go back to what they were.
2. banks should not be allowed to accept any financial asset as collateral to support loans. The collateral should be the estimated value of the income stream on the asset for which the loan is being advanced. This will force banks to appraise the credit risk more fully.
3. banks should be prevented from having ‘off-balance sheet’ assets, such as finance company arms which can evade regulation.
4. banks should never be allowed to trade in credit default insurance. This is related to whom should price risk.
5. banks should be restricted to the facilitation of loans and not engage in any other commercial activity.
Further, I have advocated that government should outlaw all derivative trading that does not directly support the real economy. That would lead to around 96 per cent of all financial market transactions. Most of the financial flows comprise wealth-shuffling speculation transactions which have nothing to do with the facilitation of trade in real goods and services across national boundaries.
Please read my blog – What is Wall Street for? – for more discussion on this point.
Third, if a private bank is failing then it should be nationalised with deposits guaranteed and shareholders left to pick up the losses.
Fourth, my preferred position is no private banks – all nationalised and operating under the rules specified above.
But those policy prescriptions reflect my own values and are informed by MMT. But a person with different values, who also understood MMT, could easily come up with different policy prescriptions.
Finally, Joe Guinan claims that:
At a deeper level, modern monetary theory has a political economy problem. It is a somewhat technocratic theory, implying that if only the monetary and fiscal policy space open to monetarily sovereign governments can be properly grasped by policy-makers and the public then the means to bring about change will be readily available. This is a bit thin.
Thin? Because apparently we ignore the “the political nature of both the origins and functions of the linkage between state spending, taxes and bonds in the capitalist system”.
Not at all. But that is political theory rather than economy theory. None of the original MMT proponents (who remain my friends) are naive at all.
Each one of us knows that the cards are stacked against any government being able to abandon the voluntary (neo-liberal) constraints on their fiscal capacities that became irrelevant after August 1971.
I see my role as an academic to provide the knowledge to expose the arguments that are used to stack the cards and hide the fact that they are being stacked.
That is my role. It is the role of the progressive political scientist to then use the insights that MMT provides to research and advocate for changes to the way policy is formulated and implemented.
Joe Guinan claims that:
… if it is to become more than a counterintuitive abstract theory that can be safely ignored by the powers that be, MMT will need to be articulated to a much broader political audience.
Which is stating the obvious but hardly justifies the claim that MMT is “a bit thin”. MMT is what it is – a theory and explanation of the way the monetary system operates.
The link between MMT and the policy making process are the activists. It is their role to take the knowledge and start influencing the political debate.
As a citizen I might try to do that. But as an academic I have the educative and research role. The two are related but different.
Conclusion
The fact that the social democratic parties have failed to enunciate a progressive agenda is not because MMT has failed. Rather, it is because those political institutions have become infested with neo-liberal ideas as a result of the massive framing efforts made by the right-wing media and think tanks.
The link between MMT and the public debate is also mediated by the available resources and access to popular media. The right wing is funded by the likes of the Koch Brothers.
MMT researchers have sparse funds compared to this and little access to the mainstream media. It is a very tilted playing field.
If the progressives really want to help they could use their capacities to channel funds into our research groups to allow us more scope to build marketing and promulgation arms to our ventures. These capacities are evident in all the right wing think tanks.
That is enough for today!
(c) Copyright 2014 Bill Mitchell. All Rights Reserved.