The Guardian has an editorial this morning that I recommend reading in full, but which I will discuss here nonetheless.
Of most note in their introduction is the observation that:
Jeremy Rudd of the US Federal Reserve writes scornfully in his latest book, A Practical Guide to Macroeconomics, that economists' role today is to justify “what elite interests want to do anyway: deregulate, pay fewer taxes, keep wages as low as possible”.
There is, I think, considerable truth in that assertion.
What, however, they go on to say is that:
One school of thought attempting to rewrite the textbooks is called modern monetary theory, whose face is Stephanie Kelton, a former economic adviser to Bernie Sanders. She argues that there is no financial constraint on government spending; money can be created and invested so long as there is capacity in the economy to absorb the cash. If not, inflation will follow. This shouldn't be controversial. John Maynard Keynes said as much in his 1940 book, How to Pay for the War. The theory is not just about deficits: a strong exporting nation should pursue fiscal surpluses – an insight attributed to Prof Kelton's tutor and ex-Treasury adviser Wynne Godley.
That is spot-on, including the suggestion that inflation is one of the core concerns of MMT, which those macroeconomists who serve elite interests, always seek to deny.
As they also note:
Her current argument that rising US interest rates might be inflationary finds her agreeing with her sharpest critic, Larry Summers. Such challenges should be welcome in Britain. The US debates have produced an industrial policy powered by government deficits – and the world's fastest growing advanced economy.
That argument that the raising of interest rates has, itself, caused inflation is something that will be familiar to readers of this blog because I have rehearsed it here on several occasions.
As the Guardian then notes, all current mainstream political and economic opinion does appear to be aligned against such thinking at present. But as they also noted, one voice has suggested that this should automatically mean that the outliers should be listed to, when saying:
The history of British policymaking in the last hundred years has taught us that on all the other occasions when major economic misjudgements were made, broad-based political, media, financial and popular opinion was in favour of the decision at the time, and the dissenting voices of economists were silenced or ignored.
Ed Balls said that in 2010. But he's mainstream now, serving the interests of the elite with an agenda that will tick all their boxes.
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Sometimes outliers are just outliers. Every crackpot with a pseudoscientific hypothesis refers to Galileo, but it not enough to be opposing an orthodox consensus: you also have to be right.
For all of the ordure and opprobrium thrown its way, it seems to me that MMT is a better explanation of macroeconomics in a country like the UK than the unrealistic assumptions of (neo)classical (neo)liberal economics. Even the central banks quietly accept it. For some reason many economists and politicians don’t, or at least don’t accept its implications.
The next generation is will accept and adopt the truth (by which I mean an explanation that is better at explaining the facts) more easily than their elders (who often have a vested position). But equally the youth can be led astray by populist charlatans with simple answers to complex questions.
The whole point is not so much about “correctness” as to whether people serve the economy or the economy serves the people.
Anyone who accepts the ‘homo economicus’ fairy at the bottom of the garden can justify free markets.
The most obvious phenomenon is that we have passive hegemony, as identified by Gramsci, and which reinforces the power elite’s MO, which has been embedding itself into institutions and culture over 40 years of the dominance of neoliberalism.
So much so, that the main opposition party Labour accepts and plays by exactly the same rules.. with the same results.
The biggest issue then is how is this hegemony to be challenged and undermined.
Individual political economists, especially the heterodox grouping, presenting MMT and a different approach to sustainable growth, egalitarianism and social welfare, can have an impact, but change will not happen without a wider movement that presents a coherent and appealing alternative to plutocracy and oligarchy, poverty and social decay.
This is why the simplistic and authoritarian solutions of populists resonate.
They get their message across.
How come you are not described as the
“face” of MMT in the U.K.?
Does it matter?
In the eyes of the general population, maybe it does matter. If MMT is seen as an ‘American’ idea, there may be more reluctance to accept it in the UK. We seem to have a huge antipathy generally to accepting ideas from Johnny Foreigner.
I don’t sede that
In economics such thinbgs do not work that way, I think
“Does it matter?”
It does if the G knows it’s going out “on a limb” and doesn’t want to admit it’s known of MMT for a long time.
How better to introduce a new (!!!) idea to it’s readers than letting them believe it’s an outsider’s paradigm? MMTers will already know of the big names in the UK. Kelton has credentials to be investigated by those who like to be thought of as trend-setters…
Let them think it’s a new idea *they* have discovered… it might get over the incredulity and mockery evinced by the current sceptics. (Perhaps I should let my autocorrect go with “septics” there, after a weekend of bruising debate. Yeuch.)
🙂
But so hard to do
An interview between you and Ed Balls on Good Morning Britain would reach a lot of people who do not find their way here.
That would be fun
“and the dissenting voices of economists were silenced or ignored.”
Begging the question: why?
Perhaps a combo of self-interest (MMT could be characterised as opposing neo-liberal economics) and religion/tribe? Balls, LINO I & II and the tories are all in the neo-lib tribe and subscribe to its religious tenets & circular arguments. Individuals in such groups might dissent in private, never in public – & thus the show rolls on. One sees the same in Brussels, day after day, year after year, nice people doing insane things & admitting it ……in private. One supposes they buy their hypocrisy wholesale.
Richard, I’ve followed your blog for many years and I thank you for helping me understand MMT and how UK gov finance works. Unpicking years of indoctrination and financial propaganda (can I say that?) has been a challenge.
It was with interested I read this article in the Guardian which rang alarm bells (https://www.theguardian.com/business/2024/apr/28/thames-water-collapse-borrowing-whitehall-uk-finances-bonds-liz-truss). In particular the paragraph:
“The British state relies on being lent money by investors, often foreign, to fund its spending. These loans take the form of gilts. Prices for these IOUs fall as yields rise. A higher yield is generally an indication of the risk associated with the loan.”
I’m not sure I’m qualified to comment on the true ramifications of nationalising TW but the first statement in that paragraph is blatantly not true (the Gilts bit I believe to be correct).
Perhaps as part of your video series you could explain Gov borrowing?
Thanks again
That is on the list to be made this week
The truth is that if you truly care about others and the planet you’ll make the effort to find out how your country’s monetary system really works because it should be obvious a lot of caring is expressed through the use of money as a medium of transaction. You must certainly would not be one of the “lip service” politicians or journalists in respect to their caring who mindlessly dominate our country!
One of the criticisms of the Guardian editorial on X today was that the climate/nature crisis was not mentioned at all, which reinforces the fact that, even in a piece seeking to explore 21st century economics, the environment is still an externality.
Whilst it’s encouraging to see a seed of MMT sown in the mainstream media it will be powerless unless it’s partnered with seeds to tackle the other myth, that economic growth, the prime driver of climate & ecological breakdown, offers us the solution to climate & ecological breakdown.
MMT has been widely linked to the Green New Deal. This criticism is unfair.
@Richard – ref your reply, I specifically referred to the editorial and whoever wrote it. Nevertheless, I’d suggest that the majority of people linking MMT with the GND are those who support MMT.
For me, the more valuable and equitable link is that explored by Jason Hickel et al between MMT & Degrowth.
Richard,
Will you be attending the MMT conference at Leeds University coming this July 15-17th? Some MMT big hitters are.
Regards,
CH
The Gower Intitiative have not talked to me for some time as I do not get on with Bill Mitchell after he was pretty abusive about me in a book he wrote re tax and so they have ignored me for this event
A shame, and rather petty it seems
Economists are the greatest storytellers of all ~ Yuval Noah Harari
MMT is merely a parlor board game until it can be understood as a story. No amount of preaching to the choir of economists will move MMT to practical application. The story of how new money increases the availability of goods that is playing out in US infrastructure spending is unfolding beneath our feet. That story needs to get off it’s knees and reach our imaginations.
“all current mainstream political and economic opinion does appear to be aligned against such thinking at present. But as they also noted, one voice has suggested that this should automatically mean that the outliers should be list[en]ed to”.
How are outliers to be heard? The language is important. The Taxing Wealth Report is an important contribution to current issues, close to a General Election. A weakness we all share, i think is that exploring the best arguments we do not think sufficiently about the words that frame the ideas for general, electoral consumption; the use of a neat aphorism, a resonant phrase; something that catches attention. The “mainstream” was built on bad ideas, pithily presented, and repeated by an obedient media, and especially the Press.
The value of “Taxing Wealth” is misaligned with the mainstream, so is likely to struggle to be heard as it should. It is only two words, but that is my point. I do not claim to have a brilliant alternative, with the answer; but I suggest a great deal of thought is needed about the title. I now think the “Fair Tax” Report is much better; but i am sure there is something pithier still. The word “Tax” is a turn-off (no ‘Joy’ for most people, its an anorak term, i’m afraid). But everybody relates to fairness (and not so many to being ‘de-wealthed’). It is as basic as that; first impressions instantly establish a mind-set, but do not make room for an argument to be comprehended. The switch in the mind is instantly on, or off.
Even Gordon Brown in the Guardian today criticising EU limits on investment – as playing into the hands of the far right .
He seems to be moving in the right direction, although far too late.
Agreed
I fundamentally disagree ref: Brown.
He does a “Dance of the 7 veils” – plenty of description of what is wrong, vague mention of “investment” but at no point does the imbecile say …….where the money comes from. He could have noted that when there was a big problem with Euro banks in 2014, – the ECB stepped in and…….printed Euro60bn/month …….for a couple of years. As the neo-lib Draghi (and Pres ECB) said, at the time “the ECB has enough resources to meet any emergency”.
Sadly, whilst Gordon-the-moron was capable of describing the problem. and he is a neo-lib to his finger tips, the idea of, you know, printing (investment) money could never ever occur in his brain, let alone pass his lips: e.g. EIB issues very low interest bonds, ECB buys em & EIB spends the money on……the investments described by Brown. But that would go against all the precepts of neo-lib control of central banks that are their to help bankers – not industry, not citizens.
So funding industry, even indirectly would upset the neo-lib apple cart & we can’t have that. Brown is & always has been part of the problem. He was an idiot & useless as a chancellor, as a prime minister & now demonstrates that he is not even a has-been – but rather a never were. Stipid, doctrinaire and an ideologue.
When I last saw him person, just before Covid, neolib to the core was definitely true.
I suppose I was thinking his heart was in the right place – re the challenge of the far right – and he was trying to struggle out from under his own ideological baggage.
But, although you put it very starkly it is difficult to disagree with you. I think his finest hour was supposed to be when he moved very quickly in the financial meltdown in 2008. The money was spirited up then, but he seems to have learned little from the experience.
And why he kept saying in the early 2000’s that ‘we have abolished boom and bust’ have never understood. Might as well have said ‘we have abolished black and white’.
Thank you for the supportive comments.
The G’ has given him space for several columns & he is being portrayed as some kind of “elder statesman”. People are being deceived (is “gaslighted” the right phrase?) – his record is ignored/brushed under the carpet (1st chapter of 1984 – winston burning stuff). Something similar with Camoron – now foreign sec & with Gidiot, directly responsible for the deaths of 130,000 UK citizens and god knows how many in Libya. Yeah but he’s Ok as a Lord & foriegn sec. The only place from Camoron is in the Foriegn Legion.
There is an utter and complete failure by the MSM (almost certainly intentional) – & by extension citizens, to see politicos & their total & often lethal failures for what they are. But how can citizens see poeple/their actions with the correct framing – when the MSM wants to whitewash them?
Last comment: Gordon-the-moron before being elevated used to spend his holidays (late 1980s and 1990s) in the USA absorbing the tenets of neo-liberalism. He is far too gormless to have dreamed it up himself (source: ancient G article of the 1990s talking up Brown – outline retained in brain for later use). That should have been a warning – but it was not recognised as such at the time.