Stephanie Kelton's new books is only a day or so from publication now:
As Waterstones says of it:
The leading thinker and most visible public advocate of modern monetary theory - the freshest and most important idea about economics in decades - delivers a radically different, bold, new understanding for how to build a just and prosperous society.
Any ambitious proposal - ranging from fixing crumbling infrastructure to Medicare for all or preventing the coming climate apocalypse - inevitably sparks questions: how can we afford it? How can we pay for it? Stephanie Kelton points out how misguided those questions really are by using the bold ideas of modern monetary theory (MMT), a fundamentally different approach to using our resources to maximize our potential as a society.
We've been thinking about government spending in the wrong ways, Kelton argues, on both sides of the political aisle. Everything that both liberal/progressives and conservatives believe about deficits and the role of money and government spending in the economy is wrong, especially the fear that deficits will endanger long-term prosperity.
Through illuminating insights about government debt, deficits, inflation, taxes, the financial system, and financial constraints on the federal budget, Kelton dramatically changes our understanding of how to best deal with important issues ranging from poverty and inequality to creating jobs and building infrastructure. Rather than asking the self-defeating question of how to pay for the crucial improvements our society needs, Kelton guides us to ask: which deficits actually matter? What is the best way to balance the risk of inflation against the benefits of a society that is more broadly prosperous, safer, cleaner, and secure?
With its important new ways of understanding money, taxes, and the critical role of deficit spending, MMT busts myths that prevent us from taking action because we can't get beyond the question of how to pay for it.
Publisher: John Murray Press
ISBN: 9781529352528
Number of pages: 336
Weight: 540 g
Dimensions: 236 x 162 x 34 mm
And they note these media comments:
'Kelton is to modern monetary theory what Milton Friedman was to American conservatives for a half century - conversational, fierce, relentless.' - Financial Times
'Kelton's game-changing book on the myths around government deficits is both theoretically rigorous and empirically entertaining. It reminds us that money is not limited, only our imagination of what to do with it. After you read it you will never think of the public purse as a household economy again. Read it!' - Mariana Mazzucato, author of The Value of Everything: Making and Taking in the Global Economy
'In a world of epic, overlapping crises, Stephanie Kelton is an indispensable source of moral clarity ... the truths that she teaches about money, debt, and deficits give us the tools we desperately need to build a safe future for all. Read it - then put it to use.' - Naomi Klein
'The best book on rethinking economics that anyone will find right now.' - Richard Murphy, political economist and author of The Joy of Tax
'A remarkable book both in content and timing. A 'must read' that is sure to influence many aspects of policymaking going forward' - Mohamed El-Erian, chief economic advisor at Allianz
This isn't a review. It's just a promotion because that short review by me is enough to say all that's really necessary about this book: it is essential reading.
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Mine’s on order.
So is mine.
It’s right at the top of my list. Along with everything else that’s going on, it could be a critical element in the unravelling revolutionary mix. It will be interesting to read reviews from the mainstream economists. My feeling is that their inevitable discrediting will enhance the book’s authenticity and relevance to building a better future for everyone – which they have so spectacularly failed to do.
Surely the difference between Milton Friedman and Stephanie Kelton is that the former said what should be and the experiment of the last 40 years to show it has been proved to be wrong and the latter said what is and has been proved to be right.
Anybody can be conversational, fierce and relentless but the reality has to be how it has the capacity to impact on the lives of those who suffer, or not, from policy decisions and the motivation of those who expound their thesis.
History will be the judge.
Well said
I would just like to add that in this moment of radical challenge to ‘ the reproduction of the capitalist class and the perpetuation of its power on the world stage ‘ ( The Enigma of Capital – David Harvey ) the essential action taken by governments around the world to deal with the economic collapse resulting from Covid-19 renders the fiction of a separation between monetary and fiscal policy redundant . The Treasury hawks and the BofE monetary policy committee are welcome to take early retirement now and allow the creation of a new, and radically different body to oversee our country’s money creation and its destruction.
There is no such separation…..there is only economic policy with whatever instrument is necessary 0- and since money is the flip side of tax these two tools are essentially similar
Absolutely.
I’m hoping that Ms Kelton’s reasoning reaches the parts that John F Weeks apparently fell short of.
Is it a mistake on my part or do we need a definitive account of MMT and deficits? If so, will this be it? It seems to me to be all about credibility – especially if you want to bring Neo-liberalism down.
I realise that there will always be debates about economics and that is a good thing. But since Neo-liberalism has clear benefits for those already with money and has helped those with it consolidate their position over and over again, it calls for the new upstart thinking (MMT/DMF) to make a very sound bid for speaking truth to power.
That is addressed in the book I have read so far…by which I mean I did not read the final version
I did offer comments to Stephanie and I think some were taken on board
I note Amazon are saying it’s currently their top in demand book in the economics section despite one more day for publication release. That is heartening. Stephanie Kelton has worked very hard to change the discourse on understanding modern fiat monetary systems. I’m also slightly heartened that she is economic advisor to Joe Biden who I still regard as a Neoliberal dinosaur but maybe he realises times are “a-changin” and this is a band wagon he needs to be on. We’ll see!
These guys are selling the book too if you want to avoid Amazon:
https://www.fishpond.co.uk/Books/Deficit-Myth-Stephanie-Kelton/9781529352535?utm_source=googleps&utm_medium=ps&utm_campaign=UK
Thanks Richard.
One thing I have noticed all Neo-libs doing is ‘holding the line’ – not deviating from the message, putting on a united front. It is a strength and a weakness that plays well in public.
Agreed
Hardback for £16 from Hive.
https://www.hive.co.uk/Search/Keyword?keyword=The%20Deficit%20Myth&productType=0
Modern monetary theory is certainly not modern*, and to call it a theory is to devalue the meaning of ‘theory’, which should denote some degree of internal coherence and external correspondence with reality. Does it really sound plausible to you that a reforming government can freely print as much money as it likes to finance wage increases, new hospitals or whatever, without any negative consequences?
The fundamental problem with MMT is that money only has value because it can be exchanged for commodities. Isn’t this blindingly obvious? Isn’t it obvious that unless money can be exchanged for useful objects it has no value? In other words, that money has no value in itself, but instead it represents values generated in production? Note that by ‘production’ we mean capitalist production, since these values are commodities produced for sale. MMT rejects this; instead of recognising that the value of money is generated in capitalist production, it believes that money is invented by the state and that the value of money is determined by decision of the state.
Since money has no value of its own, since it merely represents the values of useful objects generated in production, to print money as MMT ‘theorists’ advise leads to exactly what happened in Weimar Germany, Mugabe’s Zimbabwe and Venezuela under Maduro. Capitalists hate this policy because so much of their wealth is bound up in maintaining the value of money; MMT would lead to enormous asset destruction, which of course I’m not opposed to in and of itself, but the resulting economic dislocation could only be resolved by fascism or social revolution, something MMT ‘theorists’ are blissfully ignorant about and totally unprepared for.
Do the trillions of pounds and dollars spent by Central Banks to avert (read: postpone) an economic implosion provide support for MMT? No, not at all, as I try to explain in ‘Why coronavirus could spark a capitalist supernova’: https://www.opendemocracy.net/en/oureconomy/why-coronavirus-could-spark-capitalist-supernova/
*“MMT has its base in the ideas of what is called Chartalism. Georg Friedrich Knapp, a German economist, coined the term Chartalism in his State Theory of Money, which was published in German in 1905 and translated into English in 1924. The name derives from the Latin charta, in the sense of a token or ticket. Chartalism argues that money originated with state attempts to direct economic activity rather than as a spontaneous solution to the problems with barter or as a means with which to tokenize debt.” https://thenextrecession.wordpress.com/2019/01/28/modern-monetary-theory-part-1-chartalism-and-marx/
There are some comments so crass that they are not worth engaging with and which are instead worthy of posting only to be the objects for ridicule
This is one such comment
But I would suggest Mr Smith that you never go to A&E and say this. They could very easily demonstrate how wrong you are. They wouldn’t, because they have so much greater understanding than you. But they could, and you would pay a considerable price if they did. To suggest those engaged by the state cannot create value is beyond ridicule: it is worthy only of sorrow at the stupidity of the person who says it.
I’d like to understand this John – maybe I need Kelton’s book to do so!
I wonder if your piece on Open Democracy reflects a recent tension on the political/economic left – can MMT or some other thing save capitalism from itself (reformist) or must capitalism be pushed (revolutionary)? The dilemma we are left with is that capitalists might well be opposing any reform now, but it’d be easier to achieve than destroying it entirely.
I call myself a socialist, but replacing capitalism wholesale is a long-term risky project, and I wonder whether other things are worth trying in the meantime? Of course, this is not an abstract discussion – there are a global poor who will be impacted – who will live or die – based on the course we take.
John
I wonder whether your spat with Richard has got you banned. I would understand a ban – I think you made errors of presentation in your first post that made it a waste of energy, and detracted from the core of what you wish to say.
I often find myself on social media and blogs being as interested in the dialectical method as I am about the subject at hand. In my earlier comment I wondered if I might squeeze in some notes about your presentation, so as to help us all aim for a more fruitful exchange of ideas, but refrained in the end, thinking of it as a distraction.
But, perhaps some notes on diplomacy might be helpful. I say these things as a socialist, so I am politically closer to you than to Richard, even though I am here to see what he and Professor Skelton have to say. I admire the purity of Marxism, but I am conscious that the people who have genuinely been oppressed by capitalism do not have time for purity – they just want enough money to feel their children well, and to have safe neighbourhoods to live in. We in the pontificating middle classes can afford to wait it out until capitalism collapses under the weight of its own contradictions; they cannot.
So, I learn from you that MMT is not “modern”. It is not “coherent” either – it is nonsense, in other words. The problems with MMT are “blindingly obvious”, though I am not certain why. I, your reader, experienced a small burst of psychological pain. I thought to myself, am I being regarded as an idiot here? Is the writer looking for a fight? Is the hurt I am experiencing inflicted on me – or Richard – intentionally?
No matter, I press on. MMT proponents are ‘theorists’, with quotes, to indicate that they are not really theorists at all. Does that mean they also have a 5G/coronavirus theory to sell us? Maybe they’re antivaxxers too! The effect of this is that we’re set up to believe that all thinking people should regard MMT proponents as ludicrous, beyond the pale. But I am aware I am being manipulated. As much mud is being slung here as argumentation, and it feels – I don’t know – dirty. Or that politics is only the business of men in sharp suits and power stances.
And I don’t have a sharp suit +or+ a power stance, sadly. Am I “blissfully ignorant”, or am I just ignorant? I no longer know. For what it’s worth, I want the coffee workers to get their fair share too. But when I see good ideas burnt up in a fire that their proponent started themselves, I get frustrated: that idea was wasted, because you can’t force ideas on people, and if it comes with a side of violence, then the conflict is the only bit we see.
If John Smith had made his points in reasonable manner he’d still be here
He didn’t
And candidly, if he’s a socialist I’m French
Marx would turn in his grave
He came to abuse and I have blocked him for that reason
I have a life and do not need abuse
@John Smith
“Does it really sound plausible to you that a reforming government can freely print as much money as it likes to finance wage increases, new hospitals or whatever, without any negative consequences?”
MMT says a govt is always free to undertake unlimited amounts of non-inflationary spending.
That’s it.
It’s not actually something which can be argued against. It’s a simple fact.
The practical difference between this and the household budget model, where taxes pay for spending (a literal impossibility), may in some cases be slight. At other times it might open up a whole new policy space for growth, employment, and delivering real value.
Professor Kelton talks about the “speed limit” of an economy. This is what MMT understands so much better than the traditional view.
It also must be said that the orthodoxy is deliberately designed to favour a specific type of economy: an extractive, exploitative model which squats on top of the real economy. In the real economy people earn by doing real work and creating real value. In the extractive world of overpaid executive salaries, tax avoidance, economic rents and financialisation, they do not.
Thus much of the criticism against MMT is not made in good faith. The idea of the economy being managed to create the most good for the most people terrifies a certain type of person. If we spend too much on ordinary people, there will be nothing left to steal!
Thank you
Well put Noel. Financial crises which the neoliberalists want us to believe are brought about by too much government spending upsetting ‘ the markets ‘ are in fact a feature of the financialisation of economies around the world. For the thirty years between 1945 and 1970 financial crises were unknown in the west. .The huge inflation in the price of financial assets since 1980 is out of proportion to all increases in wages earnt in the productive economy of goods and services since that time.This is the mechanism that has produced the massive inequality of the wealth we have seen develop over the same period and has created the financial instability inherent in all neoliberal economies. And, as each inflationary bubble peaks it is followed by a crash . After the GFC of 2008 the inequality was made even greater by bailing out the banks which had caused the crash by unregulated speculation ‘ paid for ‘ by implementing the wholly unnecessary policy of austerity – ‘ socialising the losses and privatising the gains ‘ .
Richard, read my comment again. And apologise for your vituperative ad hominem remarks.
Nowhere do I suggest that “those engaged by the state cannot create value”; I merely point out that the state cannot create value simply by printing money.
Can those engaged by the state create value? The short answer to this is yes, but this depends crucially on what we mean by ‘value’.
A good or service is valuable if it fulfils a social need. This is completely independent of whether or not this good or service is produced for sale, still less for profit. Domestic labour, just like that of doctors and nurses in the A&E department of a socialised healthcare system, does not produce goods and services for sale, yet it certainly does produce use-values. The measure of these values is need and utility; this is not and cannot be a monetary measure. How can you measure the value of childcare for healthcare in monetary terms? To even attempt to do so is grotesque — or, to use Richard Murphy’s words, stupid. What can be measured, of course, is the cost of producing these goods or services — but the cost of providing a good is one thing, and the usefulness of this good, its use-value, is very different. Conflation of the two is the hallmark of bourgeois economics, of which MMT is a part.
When childcare or healthcare are produced as commodities for sale, their exchange-value is determined by their cost of production, which can be shown to depend on the quantity of labour power required to produce all the goods and services consumed by the childcare or healthcare provider. Note that I said labour power, not labour. Labour power is a commodity sold in the marketplace by a worker to a capitalist. Labour performed within the family for no payment cheapens the cost of the labour power to the capitalist.
In capitalist society exchange-value and use-value at war with another. Recognising the distinction between use-value and exchange-value is the beginning of wisdom on this subject and is the foundation of Marx’s theory of value. MMT, along with the rest of bourgeois economics, falls at this first hurdle.
So, does the state create value? Workers in A&E certainly produce use-values. Since these use values are not produced as commodities for sale, by definition they do not produce exchange-value. More precisely, they do not produce *additional* exchange-value. This is so unless the state was to sell their services at prices above their cost of production, thereby making a profit. This is why the convention in GDP accounting is to assume that the monetary value of the goods and services produced by employees of the state is exactly equal to the monetary value of the goods and services these employees consume.
Measured in terms of exchange-value, the monetary value of the goods and services provided by workers in A&E is actually generated by the workers who produce their consumption goods. When we consider that, for example, just 1p from a £2.50 cup of coffee remains in the hands of the coffee farmer, and approximately £1 of it ends up in the hands of the state through taxes (some of it used to pay for ‘our’ NHS), Marxist economics explains that the ‘value’ Richard Murphy thinks is magically created when the state prints money is actually generated by super-exploited coffee farms in Central America, by workers in Chinese sweatshops producing PPE, and, yes of course, by capitalistically-employed workers here in the UK.* But all of this is far beyond the capacity of MMT ‘theorists’ to comprehend.
*Imperialism in a coffee cup: https://www.opendemocracy.net/en/oureconomy/imperialism-coffee-cup/
Withdraw?
You said this:
The fundamental problem with MMT is that money only has value because it can be exchanged for commodities. Isn’t this blindingly obvious? Isn’t it obvious that unless money can be exchanged for useful objects it has no value? In other words, that money has no value in itself, but instead it represents values generated in production? Note that by ‘production’ we mean capitalist production, since these values are commodities produced for sale. MMT rejects this; instead of recognising that the value of money is generated in capitalist production, it believes that money is invented by the state and that the value of money is determined by decision of the state.
It was truly one of the most ridiculous things I have read for a long term – and one of the hardest, most neoliberal expositions I had also suffered reading for the same length of time
If you knew anything about economics – which you clearly do not – you would know that a fiat currency sources its value solely through the government’s ability to tax, just as MMT says
But congratulations on being the first person on Open Democracy top say that only a capitalist can produce monetary value
I hope they know what nonsense they are publishing
And you are no longer welcome here – your comments do not meet the standards set by the comments policy
Nor do I welcome far-right economics of oppression which is what you are offering by promoting hardcore capitalism under the myth of being Marxist. I suggest you go and play with the ex Marxism Today crew
Hi Richard
I’m fairly new to your blog and to MMT.
I am in my mid 50s and I have worked in the public and private sector for 30+ years. I also have a degree in Economics and an MBA (though clearly neither of these have helped me understand how things really work in an economy but please bear with me:-) )
I think MMT is brilliant as a concept and can solve huge economic problems but I believe the langauge used is flawed and confuses & alienates people – MMTs (along with mainstream economists and politicians) talk about deficits and debt but, unlike the mainstream, MMTs say that these are not bad things as MMT is really just advocating creating money to provide wealth (I think) – but to most people the deficit and debt words have bad connotations and cannot ‘feel’ positive – is it time to fundamentally change the language? – a goverment bond is not a ‘debt’ – surely it is an investment in the future of an economy? Goverments with fiat currencies do not really ‘borrow’ they actually create/print money, therefore they don’t ‘owe’ anyone anything? Can we not change thinking by using language more effectively?
Also I confess I don’t undertand the taxation argument – why do govts need to tax people to make printing/keystroking £s credible? I think people struggle to accept the idea that a £ is not really worth anything and they certainly do not ‘get’ the idea the £s only have value if you tax people.
Can you please enlighten me so I can enlighten others?
Thanks
Neil
Neil
Can I recommend Stephanie Kelton’s new book as a primer?
It’s literally out now
Richard