It's Wednesday, and as usual I scout around various issues that I have been thinking…
Apparently core MMT idea is now supported by the mainstream
It’s Wednesday and only a collection of snippets today. Today we saw some self-aggrandising hypocrisy with a short memory come out of the sewers, and a statement by a government denying that they are a “successful case of MMT”, an advertisement (call for help) and some music linked to a recent, rather significant death, when considered in the history of contemporary music. Pretty full day really.
Short-memory hypocrisy on display …
Recall this blog post – When mainstream economists jump the shark and lose it completely (January 23, 2017).
And this one – Marxists getting all tied up on MMT (May 1, 2019).
The central character (Richard Holden) is a Sydney economics professor who moonlights as a main economic advisor to the Australian Labor Party.
Which helps to explain their dramatic failure at the last federal election when they lost the unloseable election because they played cute about achieving larger fiscal surpluses than the conservatives at a time the economy was slowing rather dramatically.
Well having gone on the public record as being vehemently opposed to Modern Monetary Theory (MMT), accusing MMT economists (and me in particular) of being “a bunch of cranks” and characterised Modern Monetary Theory (MMT) in this way:
Modern monetary theory, a term coined by Australian economist Bill Mitchell, says the following: (1) Countries that control their own currency cannot default on sovereign obligations because they can always print more money. (2) Thus, said countries can provide unlimited resources, pay for whatever they want, and create full employment. Nirvana, here we come!
In the first cited blog post above I deal with this misrepresentation and the rest of his claims in some detail.
Holden also claimed MMT economists pushed “neo-charlatanism” – which was his final comment – clearly he had worked on that a bit and thought he was being very clever.
In the Q&A section of the Conversation article that blog post discusses we read these claims from the author “MMT proposals lead to inflation. end of story. why haven’t they been tried? because nobody serious thinks they would ever work.”
And then there was this sequence:
(Commentator A): There is no reason why we cant have a job guarantee with full employment … Australia had full employment before big business demanded unemployment be kept above 5% so they could control wages.
(Holden): i would like unemployment to be much lower, but when exactly did we have “full employment” as you say?
(Commentator B): When we had a full employment policy prior to 1975
(Holden): and what was the unemployment rate then?
(Commentator B): Avg unemployment from 1945-46 to 1973-74 was 2%
(Holden): not at all clear-please provide the data. but, arguendo, sure. is 2% too high? should we print money like crazy then? or 1.5%? or 2.5%? what is the right topology?!
(Commentator B): (link) Menzies nearly lost govt by letting unemployment rise above 2.1% why all those years of deficit spending ? Don’t mainstream economists study history anymore ?
Job Guarantee is MMT’s only policy so 0% involuntary unemployed is feasible, really should go back to school, Bill Mitchell is starting MMT University later in the year, you should enrol.
As I noted in the blog post cited above, this lack of knowledge of our Post World War 2 economic history is symptomatic of the new era of economic Phds.
The problem is that students of economics in the neo-liberal era are not required to study economic history as part of their education. So we have a generation of PhDs in economics, particularly those from most mainstream American programs, who have very little understanding of history and what has gone before them.
Holden disclosed that naivety when he demanded the commentator provide data to prove that the average unemployment was 2 per cent in the Post World War 2 period up to the mid-1970s.
It is just basic required knowledge for a professor of economics to know that Australia’s unemployment rate was at or below 2 per cent with zero underemployment for more than 3 decades following the Great Depression.
A stunning ignorance was revealed in that particular interchange.
Especially for someone who holds out his advice to one of our major political parties – the party that is supposed to represent the political voice of the trade union movement.
At the time he was holding forth against MMT, Holden had no published track record in macroeconomics or monetary economics and his teaching at that stage did not involve macroeconomics. So, his intervention was hardly from the perspective of the intellectual or research cutting edge and his reliance on simplistic mainstream textbook notions was evidence of that.
Anyway, he resurfaced in the press again this morning in this New Daily article (October 15, 2019) – Union calls for Great Depression-style ‘Green Jobs’ program – which if anything is about the key idea that MMT economists have been championing for 25 years, mostly as the sole voice in this advocacy.
One would find it hard to substantiate a claim that this idea has come out of mainstream economics in any way.
Over the years, the core MMT economists have taken massive flack in advocating for a Job Guarantee, which is a central aspect of our macroeconomic stability framework.
The article talks about a proposal from the Australian Unemployed Workers Union (AUWU) which was submitted to the – Jobs for the Future in Regional Areas – enquiry being conducted by the Australian Senate at present.
In their submission – Possibilities for a Regional Green Job Guarantee – you will see the document relies heavily on work done by myself, on work done with my colleagues at my research centre, the – Centre of Full Employment and Equity and on our textbook (Mitchell, Wray and Watts) – Macroeconomics.
Pure MMT.
It writes:
The Australian economist Bill Mitchell has developed a workable model of what a GJG would look like. Mitchell (2013) argues that as a first step to introducing a rights-based commitment to full employment the Australian government needs to introduce an open-ended public employment program. This would create a buffer stock of available jobs, into which workers would be shed when the mainstream labour market contracts, and from which they would be drawn when there is growth in employment demand.
And more.
I have had extensive discussions with the Australian Unemployed Workers Union over the years.
But all that seems to escape Holden, who was quoted in this morning’s New Daily article as saying:
According to University of NSW economics professor Richard Holden, the idea of a GJG has merit – especially given interest rate cuts are “running out of firepower”.
Dr Holden said such a scheme would provide a much-needed boost to the economy, as workers would likely spend most of their income.
He is quoted as saying the “scheme would have to satisfy two requirements to be successful”
The first thing is the jobs people are doing would have to be socially productive in some way – in other words, the environmental benefits would need to be real …
The second point is that you need to be careful with any of these job guarantees not to crowd out private-sector employment.
If your goal is to provide jobs for the unemployed, and you create some jobs in one part of the economy, but destroy jobs in another part of the economy, that’s counter-productive.
Core and pure MMT.
All of that is in our literature that we started developing together 25 years ago.
It was also in my fourth-year thesis from 1978.
So either Holden has had a memory lapse and forget his previous attacks on MMT or is just a self-aggrandising hypocrite.
Or both.
Well done to the Australian Unemployed Workers Union though!
And Japanese government issues statement …
Fancy a government that runs an economy that demonstrates that the fundamental principles of mainstream macroeconomics are incorrect and the dynamics of the monetary system ratify all the major insights provided by Modern Monetary Theory (MMT) issuing a statement that their economy is not “a successful case of MMT”.
The Bloomberg article (October 15, 2019) – Japan Denies Policy Influenced by Modern Monetary Theory In Any Way – reported a statement issued by the Japanese government that says:
As a government, we don’t implement policy based on the idea that Japan is a successful case of MMT because its inflation and interest rates are not rising despite massive debt … We are working to restore fiscal health
Bloomberg add that “The statement was issued in response to a lawmaker’s written request to clarify the government’s views on the theory”.
The Government hasn’t yet published its official answer on the Diet publications and I will comment further when they do.
But the question is publicly available and was filed by Japanese CDR politician Kazuma Nakatani on the opening day of the new Parliament (October 4, 2019) – Question No. 14: MMT (Contemporary Monetary Theory) Questions.
Hilarious.
I am off to Japan in two weeks and it looks like we will be having a lot of fun.
Call for financial assistance to make the MMT University project a reality
The – Foundation for Monetary Studies Inc. – aka The MMT Foundation serves as a legal vehicle to raise funds and provide financial resources for educational projects as resources permit and the need arises.
The Foundation is a non-profit corporation registered in the State of Delaware as a Section 501(c)(3) company. I am the President of the company.
Its legal structure allows people can make donations without their identity being revealed publicly.
The first project it will support is – MMTed (aka MMT University) – which will provide formal courses to students in all nations to advance their understanding of Modern Monetary Theory.
At present this is the priority and we need some solid financial commitments to make this project possible and sustainable.
Some sponsors have already offered their generous assistance.
We need significantly more funds to get the operations off the ground.
In order for FMS to solicit tax-exempt donations while our application to the IRS is being processed, the Modern Money Network, Ltd. (“MMN”) has agreed to serve as a fiscal sponsor, and to receive funds on FMS’s behalf.
MMN is a non-profit corporation registered in the State of Delaware, and is a federal tax-exempt public charity under Section 501(c)(3) of the Internal Revenue Code.
Donations made to MMN on behalf of FMS are not disclosed to the public.
Furthermore, all donations made to MMN on behalf of FMS will be used exclusively for FMS projects.
Please help if you can.
We cannot make the MMTed project viable without funding support.
Remembering Ginger Baker
He was not my most favourite drummer. Nor person really. But he was part of a massive band – Cream – who made sounds when I was a teenager becoming obsessed with guitars and bands that made my head spin.
He died last week (October 6, 2019).
But I remember him less kindly (he was an aggressive character who hated Jack Bruce, who in my view was one of the great bass players) than I remember Cream and Blind Faith the band that followed from the wreckage of Cream, only to die a short term death from too much ego.
Here is a story about him – Ginger Baker, the drummer for rock supergroups Cream and Blind Faith, dies at 80 (October 7, 2019).
But here is a classic – White Room – which was written by Jack Bruce with the lyrics by Pete Brown.
It appeared on their 1968 double album – Wheels of Fire – which was released on August 9, 1968.
That is enough for today!
(c) Copyright 2019 William Mitchell. All Rights Reserved.
Bill. are this a typo.
“It’s Wednesday and only a collection of snippets today. Today we say [saw?] some self-aggrandising hypocrisy… ”
Yes, I agree he is an example of self-aggrandising hypocrisy.
Yes, Japan is trying to fool somebody. Bond buyers? The Japanese people? Who?
Ginger Baker was also drummer for Hawkwind – which was where I first encountered him in 1981. I saw him most recently in 2013 with Ginger Baker’s Jazz Confusion which was a better night than I expected – ego still in evidence.
(Hawkwind are playing at the Albert Hall in London next month – oh yes!)
Ha,
” They knew all along ” routine that continues to show the lack of morality in your profession.
More work to do in Europe it seems Bill.
Mike Pompeo was in France on the 4th April. Days later Le Pen said she no longer wants to leave the Euro and is no longer a Eurosceptic. Mike was barely back in the plane when she did this massive U turn.
Mike Pompeo is in Italy and Salvini is in the Telegraph today saying he no longer wants to leave the Euro and is no longer a Eurosceptic. He now says it is impossible to leave the Euro and will never be mentioned again in Italy.
Geopolitics ?
I can barely imagine how galling it must be for Bill, as an educator, to have to witness the (to all appearances) self-important windbag whose antics he charts execute his brazen volte-face without even the slightest hint of acknowledging that he’s disowning all the criticisms he earlier leveled at what he in unabashed ignorance misrepresented as being MMT’s ideas. And – worst of all – waltz away, still pontificating, with his reputation intact (in the minds of his clueless dupes at least).
There are all too many of his kind at large, who flourish on the back of others’ ignorance (which they have helped to foster and, as Bill points out, largely share – which is nothing short of scandalous) and resulting credulity. The degree of arrogant dogmatism they usually exhibit is in direct proportion to the extent of their ignorance. (It’s easy to think of one or two examples closer to home).
It’s almost enough to make anyone nostalgic for that robust era in American politics when types like these, engaged (albeit vicariously) in political activism as they are, who behaved in such a mendacious fashion risked being punished by an irate public by being summarily tarred-and-feathered and ridden out of town on a rail! Even then however the public had first to have got wise to what the miscreants had truly been up-to, which I’m sorry to say doesn’t look like happening any time soon – conclusively anyway – in regard to the constant deliberate misrepresenting of MMT.
Was wondering why we’d not heard from Holden for a while. The last utterance from him I’d seen was his calling for your stuff at NewcUni to be stripped of funding.
How did the Disraeli Gears title come about? Apocryphally Cream’s roadie/driver. The 3 band members were talking about getting fit. One of them alluded to getting a bicycle. Driver chips in ‘oh yeah, one of those ones with disreali gears’ (dérailleur). As bob ellis borrowed from Kurt Vonnegut… ‘and so it goes’.
Looks like the paradigm shift is starting Bill
https://www.reuters.com/article/usa-economy-debt/rpt-in-planning-for-next-us-recession-economists-say-dont-fret-about-debt-idUSL2N26W1F0
Bloomberg and Reuters now on board.
It seems the ”we knew it all along” crowd is coming out of the woodwork. Although it seems this Holden character isn’t even bothering to acknowledge he’s talking MMT.
Here in Canada we have seen the same shift as elsewhere (see Derek Henry’s link above). Our general election is less than a week away and the Liberal government (Justin Trudeau) has no plan to reduce the deficit which next year is projected to be the highest since he got elected in 2015 (ca, 1.3% of GDP). The New Democratic Party (NDP), ostensibly social democratic, which lost the last election after it said it would balance the budget plans on spending big and doesn’t seem worried about the deficit much. The Green Party plans on spending even more although oddly it claims it will balance the budget after 5 years. Only the Conservative Party says it will balance the budget in 5 years and reduce taxes. It will ”pay for” it all by cutting spending on infrastructure. Brilliant! The party’s backwardness is not going over very well. The public here has lost its fear of deficits and while the media does pander to debt/deficit fear mongering it is much less intense than over the past 30 years. Today it looks like we’ll get a Liberal government with the NDP holding the balance of power. If so we may finally get a national public drug plan and publicly funded child care. At long last! It’ll be nice to finally join the 20th century. However a Conservative government is also a possibility so a return to the 1950s is not impossible either. We’ll know in a week.
Bill, The less said about Richard Holden the better. Ginger Baker wasn’t my favourite drummer either, but I agree he was part of a wonderful band in Cream. Because of his involvement with Cream I did remember him on Facebook for a friend who was an avid Cream fan.
Buddhism talks about “the bramble of opinions, the thicket of opinions,” which can strangle the growth of genuine knowledge and thus block the path to wisdom. The internet and other forms of mass communication, despite their many virtues, provide the perfect soil for the profusion of this bramble/thicket of promiscuous and superficial egotism. Bill and his colleagues work decades to develop and refine a stunningly accurate view of macroeconomics, only to be met with knee-jerk opinions offered by one jerk after another who has arrogantly failed to study the work before holding forth on it. Surely this is a fruitful subject for meditation.
Hi everyone,
What are some book recommendations on economic history? I want to learn more.
—
Blog content comments:
-I love how any discussion of OMF and the like automatically goes to hyperinflation.
-Even though MMT lets us know there is no constraint, Holden should have known by 2008 bailout that the myth of governmental financial constraint has been shattered.
Just leaving a comment so I can be notified about book recommendations as well.
@Tom, not a book about economic history, but about pedagogy – Pedagogy of the Oppressed, by Paulo Freire. I’m recommending it because it describes exactly how felt when I started to learn about MMT, and I hope it sparks something inside you.
We had a contract fight at our university at UCLA in USA.
Our technical, healthcare, and research union hired this organizer. I asked him to recommend me some books when he told me in passing that he loves to read.
The first book he recommended me was pedagogy of the oppressed. =)
It was very powerful when I was reading it and going on strikes.
“You should enroll” 🙂 Just brilliant.
White room is pure genius.
@Tom
“Even though MMT lets us know there is no constraint …”
There are real constraints for all governments. And there are financial constraints also for non-sovereign governments (Eurozone members, etc).
The economics columnist in our most liberal paper, The Toronto Star, talks about “rock bottom” unemployment of 5.5%. Here is my letter to editor (with footnotes) recently sent. Tip of the hat to Bill Mitchell!
Re: Employment numbers don’t speak to affordability worries, Heather Scoffield, Oct. 15, 2019
https://www.thestar.com/politics/political-opinion/2019/10/15/employment-numbers-dont-speak-to-affordability-worries.html
Today’s unemployment rate of 5.5% may be considered “rock bottom” but unemployment after WWII until the mid-1950s averaged less than 3%, and had dropped to 1.4% during WWII itself. However, the rise of neo-liberalism in the 1980s coincided with the normalization of higher unemployment rates. Fiscal and monetary settings that led to more jobless, and new laws relating to minimum wages and labour standards, union organizing and strike rules, and import of foreign workers, all combined to reduce pressure on wages. The link between higher productivity and concurrent wage gains was broken, and consequently more profits accrued to capital.
The suppression of wages had another benefit, since workers could be enticed to borrow to order to maintain lifestyles, leading to another source of increased profits for the financial industry. And indebted workers in a tepid economy are fearful of leaving their jobs since replacements may be hard to find.
Affordability worries today are by no means the result of the boom-bust nature of Canada’s economy or other factors beyond the control of politicians. On the contrary, the squeeze on working and middle class families was carefully engineered by Conservative and Liberal governments to benefit the economic elites which they represent.
Footnotes:
1. A note on Canadian unemployment since 1921
http://www.statcan.gc.ca/pub/75-001-x/1992003/87-eng.pdf
“From 1927 to 1929, and again during and after the Second World War, unemployment rates dropped to 3% or less……”
2. William Mitchell is Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), University of Newcastle, NSW, Australia
roductivity growth and real wage growth such that in some countries real wages have barely grown it all over the last 20 to 30 years whereas productivity growth has forged ahead.
***
The only way that the system could continue to grow as the purchasing power of workers lagged behind the capacity of the system to produce more and more output was to foist increasing levels of credit onto the workers.
3. A Leftist Economist Steps Aside As the Debate Shifts His Way
“As Mishel steps aside, he believes America needs a broad set of policies to rebuild worker power, things like raising the minimum wage to $15 an hour, empowering union organizing, ending worker misclassification in the “gig economy” to deny benefits and overtime pay, preventing arbitration agreements that limit worker options in a dispute, and banning non-compete clauses that stop workers from moving to similarly situated employers. These moves to strengthen worker bargaining power, collectively and individually, cut a path to robust wage growth for the 99 percent. “It will take bold proposals,” Mishel said. “If not, we won’t have a vibrant middle class, or a democracy.”
4. You know who likes lackluster economic growth? The rich. Jeff Spross
“Elites obviously don’t want to completely tank the economy. But it certainly works for them if it stays modestly stagnant, maximizing the growth of the pie while minimizing worker bargaining power.”
I find it quite appalling that mainstream economists and economic journalists can spend 1 day {it seems} learning about MMT and then think they are expert enough to make informed comments about MMT. It is appalling because the core MMT group of about 6 people has spent 25 years formulating MMT and have crossed all the T’s and dotted all the I’s. This is a total of 6 X 25 = 150 man/woman years of work. If we assume just 200 work days in a year, this becomes 150X200 =30,000 person days. So the mainstream experts cover or learn or study 30,000 days of work in 1 day.
I deduce that every mainstream economist and economic journalist who claims “I knew it all along,” is a liar. This is because either they are lying now or they lied to those who were suffering the large adverse consequences of austerity for many years when the experts told the masses that, “There is no alternative”,TINA. Either they lied then or they are lying now. It’s that simple. Actually, lying then is the worse of the 2 possible lies as it stretched over many years and hurt people a lot. Compared to one lie now to cover their butt.
I can see that sometime in the (near?) future we’ll turn into those smug individuals who’ll declare to everyone around them that we were into into MMT before it was popular.
Like early Human League, whose esoteric techno no-one had heard of before “Don’t You Want Me”, and suddenly after that everyone and their dog were into them – and you couldn’t turn on the radio without hearing that song, and even your granny knows all the words.
Perhaps we should enjoy being the cool kids while we still can!
Even Mario Draghi is on board if we have to believe Bloomberg:
“European Central Bank President Mario Draghi said the Governing Council should be open to ideas such as Modern Monetary Theory, [..]”
https://www.bloomberg.com/news/articles/2019-09-23/draghi-says-ecb-should-examine-new-ideas-like-mmt
Forgot about the topic of the post after that Cream song, which is funny because I was furious just minutes before that. I guess I’ll more often submit myself to some “Cream” therapy in the future.
I also absolutely love “Badge”, a Clapton/Harrison co-production for the ages.
Re The Cream:
I went to see the movie Joker last night. Toward the end of the film they play White Room by The Cream, a favorite of mine that I had forgotten.
The movie is a remarkable reflection of social breakdown in the U.S. Sadly many other developed countries are following in their footsteps.
@Keith Newman
Your assessment of the Canadian Federal party scene is apt, though you didn’t include the totally retrograde People’s Party of Canada which is hardcore neoliberal (and deservedly nowhere in the polls) nor the Bloc Quebecois, whose economic policies are something of a mystery in English Canada (being a Quebec sovereigntist outfit that only runs candidates in that province).
Our media landscape remains, however, a neoliberal horrorshow. Just last week I endured a morning radio segment on a prominent Toronto station wherein an entire panel, every last man and woman of them, deplored the absence of a “sound finance” option among the policy platforms available from the Liberals, Conservatives, NDP and Greens. They doubled down with bewilderment that the electorate wasn’t demanding as much from their prospective representatives. It was nauseating. And God help you if you have to read anything printed by the Toronto Sun, Globe and Mail, National Post or Financial Post — the macroeconomic illiteracy is wholesale and persistent.
Until that sort of nonsense is banished utterly from the airwaves and print media, I will not feel comfortable that the neoliberal vampire has had the necessary stake driven through its evil heart once and for all.
But we remain people of hope … 😉
As for a book on economic history you might have a look at:
An Economist’s Guide to Economic History, Blum, Matthias, Colvin, Christopher L. (Eds.)
https://www.palgrave.com/gp/book/9783319965673
I’m only a couple of chapters in, so cannot speak for the text as a whole
@Allan,
You are right. I really need to be more careful with choice of words.
Thanks eg for the recommendation.