US Presidential candidate Ron Paul released his – Plan to Restore America – yesterday, saying that it will deliver a balanced budget within three years – cutting public spending by $1 trillion in year one, slash “regulations” and “reign in the Federal Reserve and get inflation under control”. The 11 -page document has lots of tables and graphs and says that “America is the greatest nation in human history” (plaudits) but if you search for some theoretical framework or some evidential-basis for the numbers presented you will be very disappointed. You will read that Americans have a “respect for individual liberty, free markets, and limited constitutional government” and that returning (public) spending (mostly) to 2006 (nominal) levels is somehow good. Cutting federal employment by 10 per cent is also good. Cutting all regulations is also good. But that is about as far as the textual rendition goes before you hit the tables and graphs. When I read the document I couldn’t help thinking that someone had run wild with an Excel spreadsheet.

Today we learned that – China posts slowest GDP growth in two years – yes, the annual rate of growth has dropped to 9.1 per cent which was 0.4 per cent lower than the second-quarter and 0.2 per cent lower than the estimate provided by the Bloomberg News survey of 22 economists. The reason given for the “slowdown” was “monetary tightening and weaker export demand”. The anticipation of a slowdown over the last week has fuelled a host of doomsday projections about how the Chinese investment boom will crash and how it will cripple the rest of the world. My view is different. I consider the Chinese government to be totally on top of managing their economy, which sets them apart from the leaders in the advanced world. They will not let a major economic crisis occurring within their own borders. They have so much more scope to expand although all of us will rue the environment impacts of that expansion. Their problems are going to political – taming an increasingly rowdy middle class. For the rest of us, China provides an economic example – when all other sources of expenditure fail, turn on public spending and do it quickly and don’t err on the conservative side.

I did an interview in August with the Harvard International Review (published by Harvard University). It was finally published yesterday (October 16, 2011) – Debt, Deficits, and Modern Monetary Theory. I consider the principles that are outlined in that interview to provide a sound organising framework for progressive movements aiming to make changes to the current failed systems. I think Modern Monetary Theory (MMT) does provide insights to the general population that are not only obscured by the mainstream media but which if they are broadly understand will empower the 99% to demand governments redefine their roles with respect to the non-government sector. Part of that re-negotiation has to be to reduce unemployment and redistribute national income more equally. We will also be better placed to have a sensible discussion about the human footprint on the planet. The three goals – full employment, reduced inequality and environmental harmony – should be central to the current civic protests (such as OWS). But we also have understand that government has to be involved in the pursuit and maintenance of those goals. The problem is not government but the politicians we elect and the coalition between them and the corporate elites. An understanding of MMT can energise the progressive fight back.

I didn’t comment earlier this week on the recent decision to award the (not)Nobel Prize in Economics to Thomas Sargent. My thoughts were otherwise occupied but it is worth recording that Sargent has been at the centre of the mainstream macroeconomics literature which has been used to justify the claims that government fiscal interventions are ultimately futile and only generate accelerating inflation. His ideas helped my profession to claim authority in its campaign to pressure governments in deregulation, privatisation, inflation targetting and abandoning full employment as a primary policy target. The upshot has been three decades of policy development which really laid the foundations of the current crisis. If Sargent and his cohort had not been so influential the world economy might not have been in the mess that it finds itself in. And … millions might still have their life savings and be gainfully employed. The so-called Nobel Prize in Economics continues to reward those who are culpable.