MMT is not conservative thought

Last night I sent the final manuscript of my Euro book to the publisher and felt somewhat downcast – that always happens after an intensive piece of work is finished. But this morning, I woke up free of that and focusing on the next task in the list. The list is always bubbling away and one juggles multiple projects at the same time, with more or less intensity. Curiosity demands that. But at some point more effort goes into one to complete it and the others wait in the queue for their turn. My next major deadline is an Modern Monetary Theory (MMT) compilation commissioned by my publisher Edward Elgar. The compilation will be my version of the roots of MMT and the development of its major ideas and influences. I have to write an overview piece explaining why I selected the literature and how it fits into the intellectual MMT tradition. It will obviously be an eclectic exercise and there is no certainty that my other original developers of what is now more broadly known as MMT will agree with my compilation or emphasis. I plan to start with Theories of Surplus Value – for reasons I explained in this blog – We need to read Karl Marx. I also do not plan to eulogise John Maynard Keynes, even though many of my colleagues think he is the most important link in the chain. It is here that I have to walk the fine line between technical detail and a broader reflection on how values intersect with what we might call the facts.

On July 2, 2014, the OECD published a report – Policy challenges for the next 50 years – which predicts:

a major shift of economic balance towards emerging economies, particularly those in Asia, with the share in world GDP of non-OECD countries rising well beyond that of the current OECD area by 2060.

In the period to 2060, global growth prospects seem mediocre compared with the past, with GDP in the OECD and the emerging G20-countries likely to grow by 2.7% in 2010-2060, compared to 3.4% in 1996-2010.

There is a summary page – HERE.

I won’t explicitly consider the OECD projections today. Suffice to say they are bizarre and rely on the application of deeply flawed econometric models, the sort which kept telling countries within Europe that if they imposed harsh austerity, their economies would grow like Topsy.

None of which happened. And, none of which would ever have happened given the circumstances. It was a case of the domination of ideology over understanding and evidence. But that is the modern day OECD.

Some of the assumptions the OECD make, which drive their simulations, are very unrealistic. The biggest driver assumed is IT-induced productivity growth, which defies recent history – the magnitudes assumed, at least, and probably the overall direction of the impact.

The OECD believe that overall growth rates in the advanced nations will slow dramatically because the so-called ‘catch-up’ effects of population growth, education, urbanisation, that trigger economic development start to wane. Advanced nations will be left with ageing populations as migration from poor to rich countries will evaporate. That will occur because the current poorer nations will start providing for their own populations.

They claim that unemployment will not rise in the face of the falling growth rates because the labour forces will shrink with the ageing of the populations.

But even with the ageing population, the OECD assumes massive population growth for advanced nations. This is one of the sleepers in the coming years. Environmental refugees will become a very large world issue. These are people who for environmental reasons can no longer survive where they currently live.

There are currently projections that “Fifty million “environmental refugees” will flood into the global north by 2020″ (Source)

So when Australia starts worrying about 30 to 100 people on a leaking boat trying to access our shores in search of a better life, what will be required in the future will be mind-boggling.

The OECD also consider that climate change could seriously erode growth opportunities as productive capital is wiped out by extreme weather events, coastlines disappear and agricultural land becomes so degraded that it ceases to be usable.

They also predict rising income inequalities between rich and poor within and between nations as the demand for low-skill workers evaporates (replaced by machines, robots etc). These rising inequalities will undermine growth in the advanced nations.

The OECD recognises that capitalism is facing a dilemma, even if they don’t express it in that way. They say (p.8):

With growth increasingly driven by knowledge and skills, growth in itself could keep generating rising tensions and inequalities. On current trends, earning inequality in the average OECD country may have risen by more than 30% in 2060 and would then face almost the same level of inequality as is seen in the United States today. Moreover, structural adjustment will continue, especially across firms within sectors (e.g. from low to high productivity and from polluting to less polluting firms) and in emerging economies, and the consequences for workers’ wellbeing will have to be managed. If left unaddressed, such increases in inequality and costs of adjustment could eventually backlash on stability and growth.

So to engender growth, there has to be massive structural changes, which will increase inequality and polarise urban centres in the advanced nations.

If a nation pushes for even higher growth rates to provide better real outcomes overall, then they have to accept even greater polarisation in incomes and opportunities.

But the rising inequality will inevitably undermine growth because the income growth will become concentrated at the top end of the distribution where saving rates are much higher. The financial markets will boom and undermine overall prosperity and social instability will increase.

Reading between the lines, one gleans a very grim ideological campaign is being started by the OECD. They claim there will be a need for more “effective redistributive policies, a strong focus on equality of opportunity and a review of the funding systems of public services and of tax structures” but then they advocate increased fiscal austerity, increased privatisation of public assets and infrastructure, and significantly more migration.

Fiscal austerity, typically worsens inequality and denies opportunities to the most disadvantaged. As the labour market polarises in terms of skills – with the private sector no longer desiring low skill workers, there will be a great need for very large-scale public employment schemes, which can utilise the labour shed by the profit-motive.

The beauty of public employment schemes is that they can be evaluated on totally different criteria than the decision by a private employer to take on an extra worker.

There will be a massive number of jobs in areas of environmental and personal care services over the next 50 years as the climate and land-use damage from capitalism takes its toll and the population ages. There is significant scope to offer well-paid and secure employment to those being rejected by the private sector as robots take over assembly line and other work.

The OECD conception of growth is one driven by profit. My conception of growth is unrelated to that. If the population increases, then economies need to grow to provide income earning opportunities for all. But growth via public service oriented employment leaves a totally different footprint than that driven by private market incentives.

That is what I tell green-followers who demand no growth. There has be growth, the challenge for progressives is to channel it into green-consistent activities. The government sector has to lead the way in that regard and use its currency-issuing monopoly to mobilise productive resources that the private sector chooses to leave behind (lower skilled labour etc).

There is massive scope to redefine what we mean by productive work – artists, musicians etc – can become public servants on secure pay, which would transform the green-quotient of the real GDP growth rate.

Jazz and reggae concerts and art displays and circuses (without animals) are less environmentally damaging than smokestacks! But the dollars spent on them woud deliver the same growth rates as a dollar of coal exported.

Inequality can also be reversed if governments use their fiscal capacities to advantage and ensure that all workers have opportunities to earn decent incomes. Banning most of the financial speculation will also help.

This also ties in with infrastructure. The trend to privatisation and public-private partnerships has undermined the quality and scope of major infrastructure in the advanced world.

Governments should take back control of that development and use major infrastructure projects as vehicles for employment, wages growth, and altering the nature of urban centres. More public transport, better energy systems, better communication systems, etc can be spawned through public sector leadership.

One of the big claims that the privatisation lobby made was that private firms faced ‘unfair’ competition from public enterprises. I always found that ridiculous.

Using our real resources in the best way possible at the lowest cost is the aim of any economy. Waste is typically bad. So if a public firm can access funds cheaply relative to a risky private firm but produce something people want then that is to be applauded. Capitalists are always looking for subsidies as long as they only go to them! Leaving the market free to them is a form of public subsidy.

Overall, the UK Guardian article (July 8, 2014) headline – The best of capitalism is over for rich countries – and for the poor ones it will be over by 2060 – seemed apposite.

The Guardian concluded that:

The ultimate lesson from the report is that, sooner or later, an alternative programme to “more of the same” will emerge. Because populations armed with smartphones, and an increased sense of their human rights, will not accept a future of high inequality and low growth.

Which brings me back to Marx and Keynes.

Keynes was a conservative but not like the free market conservatives who I consider not to be conservative at all. Conservatives want to conserve things, which include jobs. Free marketeers consider (if you believe their narratives) that recessions will be worked out by private adjustments given that decision-making must have gone awry to create the over-production.

Keynes, clearly understood that the private sector will if left alone, be prone to get bogged down in recessed states with high unemployment and there is no dynamic within the private sector to move the economy on.

But he was pro-capitalist as well and realised that democracies cannot survive long periods of entrenched mass unemployment. His advocacy of strong macroeconomic intervention was to preserve capitalism and could hardly be considered a revolutionary set of ideas.

We used to talk about the ‘Keynesian Revolution’, in the context of his debunking of the perceived Classical thinking at the time (1930s) but it was replacing a flawed theoretical structure with a conservative set of ideas based on reality. Hardly revolutionary.

Bruce Bartlett recalls a 1991 Forbes interview with Peter Drucker the management theorist who recalled that Keynes had:

… two basic motivations … One was to destroy the labor unions and the other was to maintain the free market. Keynes despised the American Keynesians. His whole idea was to have an impotent government that would do nothing but, through tax and spending policies, maintain the equilibrium of the free market. Keynes was the real father of neoconservatism, far more than [economist F.A.] Hayek! (Source)

The interview was in July 1991 with Mark Skousen by the way if you want to read the whole thing. It is not available on-line but through electronic databases if you have access to them.

Keynes preferred growth to come via private profit. In the General Theory (Chapter 12 The State of Long-Term Expectation) he went into this at considerable length. In Section VII, he wrote:

It is safe to say that enterprise which depends on hopes stretching into the future benefits the community as a whole. But individual initiative will only be adequate when reasonable calculation is supplemented and supported by animal spirits, so that the thought of ultimate loss which often overtakes pioneers, as experience undoubtedly tells us and them, is put aside as a healthy man puts aside the expectation of death.

This means, unfortunately, not only that slumps and depressions are exaggerated in degree, but that economic prosperity is excessively dependent on a political and social atmosphere which is congenial to the average business man. If the fear of a Labour Government or a New Deal depresses enterprise, this need not be the result either of a reasonable calculation or of a plot with political intent; – it is the mere consequence of upsetting the delicate balance of spontaneous optimism. In estimating the prospects of investment, we must have regard, therefore, to the nerves and hysteria and even the digestions and reactions to the weather of those upon whose spontaneous activity it largely depends.

In contrast, Abba Lerner who was very partial to Marx noted in 1951 (page 15) that:

A kind of timidity makes them shrink from saying anything that might shock the respectable upholders of traditional doctrine and tempts them to disguise the new doctrine so that it might be easily mistaken for the old. This does not help much, for they are soon found out, and it hinders them because, in endeavoring to make the new doctrine appear harmless in the eyes of the upholders of tradition, they often damage their case. Thus instead of saying that the size of the national debt is of no great concern … [and] … that the budget may have to be unbalanced and that this is insignificant when compared with the attainment of prosperity, it is proposed to disguise an unbalanced budget (and therefore the size of the national debt) by having an elaborate system of annual, cyclical, capital, and other special budgets.

I see MMT as a progressive body of thought and consider that progressives should first and foremost seek to educate the public about how the economy and money actually operates and what opportunities the government has to act on our behalf to advance our well-being

If we think in this way, then options that have been constructed by the neo-liberals to be ‘dangerous’, ‘radical’ or ‘taboo’ will start to appear reasonable and grounded in reality. The next step is that they eventually become the mainstream orthodoxy.

I see MMT as demonstrating the power of public economic endeavour to fundamentally transform the structure of the economy and the opportunities it provides, which will deliver a very different sort of growth than would be forthcoming if we just uphold the sanctity of capitalism and liberalism a la Keynes.


Keynes advocated government intervention to preserve private profit whereas I advocate it to reduce the importance of it to the well-being of citizens and overall prosperity which includes a concern for the natural world.

More on this theme as time passes.

Corruption in Newcastle politics – state and local

There is a major scandal going on at present in my town – Newcastle. Corrupt donations to political parties by property developers etc.

The Mayor is now being called to stand down – after allegations that he turned up outside the workplace of a member of parli

The local newspaper ran this story today – ICAC: Councillors seek urgent meeting with lord mayor Jeff McCloy, poll.

The local newspaper is running a poll – Should Newcastle lord mayor Jeff McCloy resign immediately? – I voted yes!

We need to clean out property developers from local government and implement a sensible urban renewal strategy that is not based on profit and privatisation of the harbour and beaches.

Current results of the poll (late Tuesday afternoon):

That is enough for today!

(c) Copyright 2014 Bill Mitchell. All Rights Reserved.

This Post Has 45 Comments

  1. Dear Bill,

    War is in. Therefore austerity is out. The Ems Dispatch is being delivered with 280 trucks. The “narrative” has changed.

    MOSCOW, August 12, /ITAR-TASS/. A convoy of up to 280 trucks carrying 2,000 metric tons of humanitarian cargo for the embattled southeastern Ukrainian regions has set off on early Tuesday from the Moscow Region, an Itar-Tass correspondent reported from the scene.

    S.2277 – Russian Aggression Prevention Act of 2014113th Congress (2013-2014)
    “Directs the Secretary of State to increase efforts to strengthen democratic institutions and political and civil society organizations in the Russian Federation.
    Directs DOD to assess the capabilities and needs of the Ukrainian armed forces. Authorizes the President, upon completion of such assessment, to provide specified military assistance to Ukraine.
    Expresses the sense of Congress that the President should: (1) provide Ukraine with information about Russian military and intelligence capabilities on Ukraine’s eastern border and within Ukraine’s territorial borders, including Crimea; and (2) ensure that such intelligence information is protected from further disclosure.
    Provides major non-NATO ally status for Ukraine, Georgia, and Moldova (during the period in which each of such countries meets specified criteria) for purposes of the transfer or possible transfer of defense articles or defense services.”

    I am not commenting on the insanity of the Islamist psychopaths mass-murdering people in Iraq. Someone allowed them to grow into a formidable force. Now there is a ripe excuse to send drones and bombers.

    But wait, there is more thoroughly-planned insanity hatching… in South-East Asia.

    The economy especially the high-tech sector will be thoroughly stimulated. It is high time for the USA as otherewise the Chinese could have technologically overtaken the US (or rather “us”, the Westerners) in a few years time and the game would have been over. Yes I know that some mainstream economist doubt in the macroeconomic benefits of military Keynesianism but these are obvious to anyone who has even slight knowledge of history of technology.

    The “narrative” on the both sides of the so-called “conservative-progressive” debate has to change.

  2. I really don’t get where Bartlett gets that idea from at all…

    “I expect to see the State, which is in a position to calculate the marginal efficiency of capital-goods on long views and on the basis of the general social advantage, taking an ever greater responsibility for directly organizing investment; since it seems likely that the fluctuations in the market estimation of the marginal efficiency of different types of capital, calculated on the principles I have described above, will be too great to be offset by any practicable changes in the rate of interest.”

  3. Bill,

    Jazz and reggae concerts and art displays and circuses (without animals) are less environmentally damaging than smokestacks! But the dollars spent on them woud deliver the same growth rates as a dollar of coal exported.

    Apparently the UK (as well as Italy and others) are going to change the way GDP is measured very soon (as well as changing it historically).

    “Prostitution and illicit drug use” will be added, and other components removed, like “non-paid work that adds to a society’s welfare like domestic work”.

    I’m trying to find out more about this, and if anyone her has more links about the changes to GDP could they post them.

    Two things stand out about the “illicit” activities to be included.

    1) If a democratic nation has declared something illegal, then it makes no sense to count it as productive (i.e. include it in GDP).

    2) If they are going to include illegal activity, why can’t they include “Jazz and reggae concerts and art displays ” as you mentioned above.

    Next they will be excluding all public goods and services and arbitrarily deciding that all government activity is not productive.

    Kind Regards

  4. Here’s another reference to the impending recalculation of GDP, which Robert Peston says will happen in September:

    For one thing, the Office for National Statistics is in the process of reworking how it calculates GDP. And it has already admitted that the number I gave you above, about how far output fell from its peak between 2008 and 2009, is wrong.

    The current officially recorded contraction of GDP exaggerates, a bit, the magnitude of the decline in output. Which implies that the previous peak for output was almost certainly surpassed some time ago – so long, that is, as there aren’t significant offsetting revisions to subsequent growth.

    Chances are, however, that this terrible depression actually ended some while ago, probably last year. Fingers crossed we will know more about this – I won’t say the truth of it (nebulous concept in economics) – in September.

    Kind Regards

  5. “Yes I know that some mainstream economist doubt in the macroeconomic benefits of military Keynesianism but these are obvious to anyone who has even slight knowledge of history of technology.”

    I have an idea: instead of sending troops into combat in an actual war it would be more effective to send them into a fake war where they secretly go on some kind of spring break. back home, government controlled media would do their part of the conspiracy to instill the conservatives with fear in order to get them to agree to spending for the “war effort”.
    You may also be able to up the effectiveness of this scheme by producing tractors disguised as tanks, and chemical plants producing fertilizer under the guise of producing explosives.

  6. Oh Jaysus Phil.
    More Crass Keynesian Materialism.
    His Grand Theory of Stuff wrapped up in complex Embroidery

    Consider this from the Irish economy blog.
    Where are the pots and pans?

    By Stephen Kinsella

    “Since 2008, Ireland has experienced a profound multi-faceted crisis, stemming from the collapse of the financial and property sectors. Despite enduring six years of neoliberal austerity measures in response to this situation, popular protest has been muted.”

    Anything wrong with this would you think ?

    Well the since 2008 meme for starters.
    Maybe people did not function very well in the ecosystem of stuff before reaching the event horizon of 2007/8.
    Maybe Ireland was a marginally nicer place to live post 2008.
    Maybe some people became glad that the scarcity engine spluttered and slowed down just a tad.
    What is the function of yield , of stuff making.

    “The only radical cure for the crises of confidence which afflict the economic life of the modern world would be to allow the individual no choice between consuming his income and ordering the production of the specific capital-asset which, even though it be on precarious evidence, impresses him as the most promising investment available to him. It might be that, at times when he was more than usually assailed by doubts concerning the future, he would turn in his perplexity towards more consumption and less new investment. But that would avoid the disastrous, cumulative and far-reaching repercussions of its being open to him, when thus assailed by doubts, to spend his income neither on the one nor on the other”

    Keynes is giving the individual no choice so that a centralized corporation can get a yield.
    That is demonic.
    Overproduction in his model is needed no matter what the true cost to the society or economy.

    Surely the money system needs to flow from the bottom up and not a top down system that requires a yield.

  7. “Keynes advocated government intervention to preserve private profit whereas I advocate it to reduce the importance of it to the well-being of citizens and overall prosperity which includes a concern for the natural world.”

    Oh my gosh! Hasn’t any economist EVER taken biology 101?

    There is a 2-stage optimization process in ALL aggregates, by definition.
    Keep the components alive … AND … grow the system.

    Components and aggregate are NEVER in civil war, but ALWAYS working together. We call it the evolution of social species and “culture.” There is no point in optimizing private sector or public sector in isolation. The name of the game is the 2-stage optimization task.

    Sustainable Success = SUM [(DistributedPrivateSector) +(AggregatePublicSector)]

    There’s simply no way to build sustainable success by championing either sector in isolation. That’s nonsense. Especially if taken too far.

    ps: No wonder Keynes sold out and accepted his peerage. The guy was a sucker for class, clan & caste privilege. Too cowardly to embrace his own logic.

  8. This is a very useful essay, but not nearly useful enough.

    I return to my original thesis of 5 years ago … war is too important to be left to the generals, and political economics is obviously FAR too important to be left to the economists.

    Surely EVERY process is too important to be left to the presumed process owners? Isn’t that the very definition of culture?

    And also the very definition of democracy, since none of us is as smart as all of us. Hence, no one discipline – whether finance or economics – can presume to know what constitutes good policy … without summing feedback (in real-time) from ALL existing disciplines, and from a sampling of the electorate proven to be at least statistically significant.

    Anything less than full-feedback sampling is delusion waiting to happen. It’s like the human brain trying to act without bothering to verify if the entire body is still present and adequately functioning. Political economics & our policy apparatus as we know it has gone well past the threshold of psychosis.

  9. Bill, while I would certainly not expect a eulogy about Keynes, and would be disappointed were you to provide one, I would expect a critical discussion of his General Theory and the ways it fits and doesn’t fit with his Treatise on Money along with the corrections and the like that he produced after publication of the General Theory in response to critics. These responses seem to me to clearly show that the General Theory was basically unfinished when it was published. He may well have been thinking, given the circumstances in which he found himself: Its time is now. Because you have a lot of material to go through, I would not expect this section to be extensive, though I would expect it to exist. This is in addition to what you have already said about Keynes. I would like more than polemical discussions in this book. We have enough of these already.

    I expect you will do this with Marx, for example, exploring the relationships between Marx’s theory of capital and his labor theory of value and assessing, e.g., whether these two theories are consistent. I use this only as an example, as Marx’s theory is rather complex.

    I agree with Phil. I don’t see Bartlett’s view of Keynes as accurate. One can understand Keynes’ disappointment with the American/Canadian interpretation of his ideas, as they were often misrepresented by those who had taken either a class of his or one taught by one of his “disciples”. Re the latter, this happened to John Kenneth Galbraith, though Galbraith said he was able to make the best of it.

    Lorie Tarshis, as an academic, probably received one of the worst treatments, having his book, Elements of Economics, where he explicated Keynes’ theory of effective demand, by no means the greater part of the book but restricted to Tarshis’s discussion of the theory of employment, banned from universities and elsewhere because it supposedly discussed the views of a dangerous “commie”.

    This incident had serious historical repercussions, as it was a significant influence on Samuelson’s development of his “neoclassical synthesis Keynesianism” and his emphasis on mathematics. Samuelson may have been right to feel that mathematics would be viewed as being politically neutral. It could easily be argued that it has continued to be so viewed.

  10. Roger, I am afraid that I must vehemently disagree with your postscript as it does not really fit with the historical Keynes. Keynes never sold out and his class views were not entirely those of his contemporaries. No one of his time who was the sucker you paint him to be would have argued for the euthanasia of the rentier and for his grandchildren to be able to work less and enjoy life more by being able to go to the theater and participate in the arts and sciences. Nor would such a conformist have defied his Bloomsbury crowd and married Lydia. I would prefer to point out, in this respect, that not all his views fit together very well, an attribute not unlike the rest of us.

  11. Bill, when you say that “Keynes advocated government intervention to preserve private profit”, this is I think something of a distortion of his actual views, for when you go on to say that government intervention is important for “the well-being of citizens and overall prosperity which includes a concern for the natural world”, I don’t think Keynes would disagree with this. It is true that he was interested in saving capitalism from itself, but this was because he thought it the best system we had been able to come up with so far. He thought its collapse would have been the greater disaster to the common person, and the best way of preventing such a collapse was for the government to continually, when necessary, to intervene in its economic activities. This was not the view of many of his contemporaries, and without the influence of Harry Hopkins and Eleanor along with a couple of others, it would probably not have been Roosevelt’s view either.

  12. In response to Roger’s comment about Keynes, when I said “his grandchildren” I should have used Keynes’ actual words, which were “our grandchildren”. He wasn’t thinking of the offspring of his own class but those of everyone.

  13. This article reads like a panegyric to growth,albeit with qualifications.
    Why is it that even progressive economists can’t see that infinite growth in a finite system can’t occur?
    A lot depends on how growth is defined. GDP is not an accurate definition.

    But population increase is the primary driver of growth,usually extremely harmful growth. Therefore natural increase and immigration must be curtailed. The alternative is that we all suffer and the less well off will,as usual,suffer more.

    We have many urgent things that must be done if we are going to maintain something like a civilised society. One of them is that we must devise a plan to change our present unsustainable clusterfuck to a system which is environmentally and socially sustainable.

    Economists have a part to play in this.

  14. @Podargus:
    I disagree. I think labor productivity is the primary driver for growth.
    some of the growth comes from things that aren’t very demanding of real resources. intellectual goods for instance.
    some can even free up resources: recycling.

  15. “Why is it that even progressive economists can’t see that infinite growth in a finite system can’t occur?” – Podarguas.

    I agree. Of course, we must first define what we mean by growth. So far as physical or quantitative growth goes, growth must end. In other words, global population must be eventually (or soon) be stabilised and the amount of built infrastructure and fixed assets must also be stabilised.

    Qualitative growth is different though not wholly different. Qualitative growth, e.g. growth in knowledge and the application of knowledge (often technology), could continue well after the end of general quantitative growth. However, the sense in which quantitive growth and qaulitative growth are still the same is this. They still have a shared limiting factor. That shared limiting factor is exergy or the amount of energy available for useful work. Increases in infrastructure quantity and increases in knowledge (quantity and quality of knowledge) both imply an increase in order and complexity. This takes energy, from outside the economic system, to produce and maintain.

    The difference is that qualitative growth leverages exergy use better. You can get more results for the same exergy. This is to say qualitative growth stretches the same exergy further but it does not in the end completely break the linkage. It simply cannot break this linkage or the laws of thermodynamics would have to be broken.

    Having said the above, possible breakthroughs in genetics, nano-engineering and quantum physics / quantum computing (to name a few) could massively leverage technological power and if used properly greatly enhance human life. This could be done at exergy use levels modest compared to crude fossil-fuel age technology.

    But again, there are basic requirements of humans like food, water and shelter which will always require large infrastructures and large quantitiative inputs of materials and energy to obtain, create and maintain. We cannot get around this fact and this reality indicates that crude growth (of population and large fixed capital infrastructure must plateau. Current footprint analysis indicates we are well past the sustainable footprint already. Simply hoping for a transition to a sustainable future is now starting to look like wild optimism.

  16. Hi Bill, you’ve mentioned a number of times that we should stop financial speculation. But what about producers who rely on the futures markets to hedge the price on whatever it is they are selling, e.g. iron ore, gold, wheat, etc? For them it’s a type of insurance. Do we leave these folks to the vagaries of world prices?

  17. Andy said:

    “Will we get the lowdown on how you met up with Warren and Randy ?”

    I’ll take a stab and say via Post Keynesian influences such as Jan Kregal. But I’m only guessing.

  18. @Podargus

    Why is it that even progressive economists can’t see that infinite growth in a finite system can’t occur?
    A lot depends on how growth is defined. GDP is not an accurate definition.

    If it’s what we’re measuring then it must be an accurate definition. But what do you think we should measure instead?

    And why is it critics of growth are so keen to bring infinity into the argument? Do they really imagine the desirability of growth now depends on any way whatsoever on whether the same growth rate can be sustained indefinitely? I don’t think anyone expects China to maintain such high growth rates for ever. But that doesn’t make China’s high growth rate now any less desirable. And China’s growth rate disproves your claim that population increase is the primary driver of growth.

  19. A corrupt Newcastle city government would explian the otherwise inexplicable desire to spend over A$200m more than required to convert the heavy rail line to light rail, if the aims.were actually the ones claimed. Hamilton Station has a tremendous amount of Cityrail owned land which could be used for a terminal and multi-modal transit cente, and a terminus at West Wickham would force the closure of the Railway St. level crossing, and increase gridlock at Stewart and Hunter. However, if the POINT of the project is to direct money to the onwer of a particular plot of land for building a West Wickham terminal, it would defeat the purpose to avoid having to buy land for the terminal transfer station.

  20. I agree with Philip Pilkington above that Bartlett’s view of Keynes is absurd. After all, even before his implicit MMT phase he wrote a book titled “The End of Laissez Faire”. He had an abiding concern with the dangers to economic stability of excess inequality – hence his desire for “the euthanasia of the rentier class”. Plus he basically organised Britain’s WWII economy – hardly a monument to unbridled capitalism. Really the only thing that might make you think he was a neoliberal was his scorn for Marx (“a minor post-Ricardian”) – but even there he was Sraffa’s patron.

  21. Aidan – I’m not in the slightest bit interested in measuring growth. I am interested in realistic policies and outcomes. GDP is not realistic.
    f you want measurements that faintly resemble reality then you should look at the GINI coefficient etc. Do some research.

    China is already so massively overpopulated that any growth is population related. In addition China’s population is continuing to grow in spite of a partially applied one child policy (now being relaxed). China is well past the point of no return. The only outcome for China is catastrophic depopulation.
    Ditto for the Indian subcontinent and some nations in Africa.

    We live in a finite system (planet Earth). The opposite of finite is infinite. As a stars in the eyes growth addict you seem to have no concept of finite. Therefore you believe in infinite growth (religious delirium) or you have a psychological/psychiatric problem – namely,cognitive dissonance.

  22. Bill,

    “But he [Keynes] was pro-capitalist as well and realised that democracies cannot survive long periods of entrenched mass unemployment. His advocacy of strong macroeconomic intervention was to preserve capitalism and could hardly be considered a revolutionary set of ideas.”

    Aren’t you conflating the terms ‘capitalism’ and ‘democracy’? Yes, we all want to preserve democracy. At least I hope so. Keynes was right, I believe, in thinking that extended periods of mass unemployment will kill democracy. That’s why the shambles of the Eurozone is of such concern. What is likely to emerge is going to be very much worse than the liberal democracy we had previously.

    All modern societies are a mixture of socialism and capitalism. The task is to preserve democracy so that we all can decide what that mix should be. Preserving democracy is not necessarily preserving the status quo.

  23. “As a stars in the eyes growth addict you seem to have no concept of finite.”

    The problem with the anti-growth movement is that they can’t see that there is an infinite supply of ideas and an infinite way you can think about them.

    As usual it is a stock/flow mismatch. There is a stock of resources. Growth is just how fast you circulate those resources around. Same difference as that between money and turnover.

    There is a finite amount of water and carbon on the planet, but evolution has found a way to make them infinitely recyclable. Hence life has subsisted on this rock for billions of years.

    That is how you get as much growth as you can evolve – using up only the energy injections from the star and the nuclear core of the planet to reverse entropy.

    I also find it amusing that the anti-growth/population control people never seem to want to start with themselves. If you think there are too many mouths to feed, why not get on and reduce it by one?

  24. Yes,it,s only polite today ‘you first’, after all the most concerned overpopulationists (the gates,turners et all) have had a pretty good share by the time they reach these opinions. But then I suppose you need that sort of wedge to get rid of a few billion fellow eaters.

  25. Anthony,

    Bill has stated (more or less) in the past that he thinks futures contracts should be restricted to parties engaged in real transactions and speculative use made illegal.

  26. Neil Wilson, a person puts forward a view you disagree with and you say in effect “go kill yourself”. You need to take a good look at yourself.

    As far as growth goes, I am a realist. Some growth is good, some growth is bad and endless growth in a finite system (the biosphere in this case) is impossible. It’s surprising how few people can see the really plain fact that endless growth is impossible.

  27. Podargus, GDP is a a measure of economic activity, not a policy or outcome. And as Neil pointed out, it’s a flow not a stock. You can look at GINI coefficient statistics if you like but that’s not a flow, and IMO it’s not even of much importance as an outcome. And there is no single measure that tells you everything.

    China has much less than half the population density of India. It isn’t much more densely populated than Europe. The only reason its population is growing at all is because people are living longer. There is no evidence at all to support your prediction of catastrophic depopulation.

    You are making the classic beginner’s mistake of assuming everyone who disagrees with you doesn’t understand the issues. But the assumptions you make highlight your own ignorance. For instance, just because I think (based on ample evidence) that growth is desirable now, you accuse me of being a stars in my eyes growth addict. Because you don’t understand the possibility of asymptotic growth you accuse me of having no concept of finite. You use congnitive dissonance to avoid considering the possibility that you’re wrong.

    And finally, are you familliar with the concept of something being semi infinite? I suspect you wrongly guess it means half of infinity (which is still infinity) so I’ll explain: what it really means is that something is finite but so abundant that there is no noticeable difference from what it would be if it were infinite.

    If there are limits to economic growth, they’re so far away that they have no bearing on what is achievable now. Forget them! There are environmental problems that do need to be urgently addressed. There are also economic factors holding us back that have absolutely nothing to do with limits to growth (which is why MMT’s so important). ‘Tis time to start dealing with these, and leave those limits to growth to the people several generations in the future if they still see a need to grow.

  28. @Podargus
    “Why is it that even progressive economists can’t see that infinite growth in a finite system can’t occur?”

    We’re not at that limit yet. Sure if we landfill the planet with coffe pods and sonic electric toothbrushes that will happen sooner than later. 😉
    It follows that there is massive and i mean M A S S I V E improvements that need to be implemented in regards to:

    *fixing broken ecosystems.
    *greening cities (look up the amount of work needed to reduce the ‘urban heat island effect’ as this will become worse with higher average temperatures. Massive restructure and materials science improvements to say the least).
    *urban sprawl
    *transport systems
    *green energy

    And many of these things will push back the 2nd law of thermodynamics ‘finite’ death you’re referring to!

    And dont even get me started on something related to my field: Computers IT/Software. 😉 More work than ever there that has to be done with regards to efficiency and functionality on top of the usual technological progress.

    I hesitate to overstate but: never in history has more work needed to be done more urgently than now.

    Job guarantee anyone? Well funded blue sky scientific research?
    From the literature Bill has on that it helps at the very least because long term stuff can be done that the private sector wont bother with. (no profit).

  29. podargus we can all agree a billion years is not infinite
    closer to a year than an infinite amount of time
    so I settle for a billion years of growth
    but I do not expect the human species to last that long
    so I will settle for economic growth for as long as humans exist not remotely infinite.
    IN china in the Indian sub continent family size is falling
    there are very few countries left where family size is not falling
    we are working our way through a population bump which is likely to peak this century
    Already urbanized societies where women have educational and vocational opportunities
    indigenous depopulation is a problem.
    Even in the current population growth hump starvation is falling
    WHO believe there are 1 billion obese people in the world and the throwing away of food is a disgrace

  30. Sam, I agree that more work needs to be done than ever. It needs to be the right kind of work of course. We need better mass transit systems and less internal combustion autos. We need more solar panels and wind generators and less coal power stations. We need more scientific research and less wasteful circuses building pointless infrastructure like the Olympic games. We need more hospitals and less war machines. The list goes on.

    However, the other matter we do need to deal with is Limits to Growth. The world population does need to stop growing or we will damage the ability of the biosphere to support humans and other macro species. (Generally, the bacteria and virus biota will survive whatever we throw at them.) We are already damaging the biosphere and this being shown by climate change, deforestation, destruction of wild fisheries and so on. Then there is the depletion of key resources.

    If endless growth is our religion, as it appears to be for many, then we are headed straight for disaster. Let us hope it only a “salutary disaster” – a moderate disaster that teaches us an unforgetable lesson – and not large or cataclysmic disaster.

    There is a great deal of scientific evidence that suggests we have reached the limits of the earth’s ability to support us at the current population levels, consumption levels and modes of production we now use. I am quite astonished that otherwise educated people seem unaware of these issues and often are very angrily dismissive when one attempts to point them out. Anger and denial in the face of incontrovertible empirical evidence is a sign people are thinking ideolgically and religiouly not empirically and scientifically.

    I have already written (briefly) about quantitative growth and qualitative growth. I have indicated that quantitative growth needs to end now. Indeed we have overshot the earth’s sustainable capacity already. I have also indicated that qualitative growth could continue for a long time yet but theoretically even this could not continue for ever. I have been howled down in a manner which indicates some supporters of MMT (not necessarily its major theoretical proponents) have not the slighest idea of what I am talking about.

    It is very concerning when one of the more socially progressive economic theories (MMT) still attracts and even seems to sanction, in some minds at least, the uncritical embrace of an endless growth ideology. The idea of endless physical (quantitive) growth is an ideology, and even a religion, not a construct that survives empirical and scientific investigation.

  31. No one is denying that population growth needs to stop at some point.
    The main objections I have are with the notion that growth needs to be inextricable linked to population growth and depletion of natural resources.
    Though, I do have doubts whether “over-industrialization” is the cause current third world problems. Scarcity and Starvation is rather a political (lack of possible production) issue than a resource depletion one.
    I also object to the notion that “immigration must be curtailed”, we all in the same closed system after all.

  32. Ikonoclast, I am aware of arguments that do not deny the sort of problem you mention but contend that this is basically, at present, a distribution issue. It may not stay that way, but let me stick with this. There are new ways of growing crops naturally in skyscrapers. Not everything can be grown that way, but a great many crops can. There is a virtually infinite amount of fresh water coming out of deep sea volcanic vents. It only needs to be tapped. Not only will you obtain fresh water but the speed with which the water comes out of the vent will drive a hydroelectric system thus generating electricity. Not all these volcanic vents are in convenient places, but many are.

    The primary obstacles here appear to be initial expense, which could be high, but governments can afford this, design problems, and negotiation among competing users. For instance, one volcanic vent is near Saudi Arabia. There is no way that Saudi Arabia could use all the fresh water or electricity from the vents off its shores, assuming that they are not in international waters, which adds further difficulties. Forgetting the possible international complications, Saudi Arabia will undoubtedly sell off its surplus. One problem arises immediately: how much and to whom.

    As you would probably expect, there is a nice deep sea volcanic vent off Iceland. This could pipe cheap electricity to the Scots and the English and the Norwegians without insuperable difficulty. I have been told by UK government figures that the cost of developing such fixtures is too high, even though they see the benefits. But the UK Treasury appears to be living in a 1920s mind set these days (akin to the neoclassical worldview but not quite).

  33. There is finite amount of energy in the universe, but still sun has been shining for billions of years, and will do so for billions of more.Amount of thorium it would take to power persons whole life is a size of a marble. I believe it is some sort of atomic energy that keeps our planets core molten. Intense power for insanely long times, I would be least worried over running out of energy.

    But some day it will be all over, maybe because sun run out of power. What are you sustainability warriors fighting for? You can’t win the sun.

  34. Meanwhile what we should to is to get as many human beings as possible to enjoy good life before our inevitable destruction. There is nothing else we can do, really. In the long run we are all going to extinct and life on the planet earth is going to end.

  35. Larry, exploiting those vents would be environmentally destructive and prohibitively expensive, and in most cases the water emitted isn’t exactly fresh anyway. There are much better ways of getting cheap electricity, and fresh water.

  36. @Ikonoclast

    There is a great deal of scientific evidence that suggests we have reached the limits of the earth’s ability to support us at the current population levels, consumption levels and modes of production we now use. I am quite astonished that otherwise educated people seem unaware of these issues and often are very angrily dismissive when one attempts to point them out. Anger and denial in the face of incontrovertible empirical evidence is a sign people are thinking ideolgically and religiouly not empirically and scientifically.

    Things are not always as they seem, and in many cases what people object to isn’t your pointing that out, but rather the enormous leap to the conclusion that we’re overpopulated. And what makes me angry is hearing that something can’t be made sustainable when I already know how it can.

    I have already written (briefly) about quantitative growth and qualitative growth. I have indicated that quantitative growth needs to end now. Indeed we have overshot the earth’s sustainable capacity already. I have also indicated that qualitative growth could continue for a long time yet but theoretically even this could not continue for ever. I have been howled down in a manner which indicates some supporters of MMT (not necessarily its major theoretical proponents) have not the slighest idea of what I am talking about.

    Again you assume they don’t know what you’re talking about, but it’s more likely they do and recognise you’re talking rubbish. Nobody is arguing for infinite quantative growth – what people such as myself want is a continued combination of quantative and qualitative growth with the burden shifitng to the latter. And IMO qualitative growth could continue for ever, though I think the point is moot because we’ll reach the stage when it becomes unimportant.

  37. @Ben Johannson
    Hi Ben, thanks. What you (Bill) have suggested sounds reasonable to me, but the question is how? For a producer to take a position (futures contract) you need someone to take an opposing position. For e.g. if I’m selling wheat and want to hedge myself, I’m going to take a position such that I’m thinking that the price will be X dollars at a certain point in time. But for it to work, I need someone who thinks the price is going to go the other way, i.e. a speculator. It’s not going to be another wheat producer. At least that’s my understanding of how futures work.

  38. Aidan,

    Do you have any references you can point me to re your mention of better ways of getting fresh water and electricity?

  39. @derrida derider,

    “Really the only thing that might make you think he was a neoliberal was his scorn for Marx (‘a minor post-Ricardian’)”.

    I’m sure you know it, but the one who said the minor post-Ricardian thing was Paul Samuelson, not Lord Keynes.

    And this is the other Lord, Prof. Skidelsky (Hayek versus Keynes: The Road to Reconciliation. In The Cambridge Companion to Hayek, edited by Edward Feser, Cambridge University Press, 2006; available from his website), comparing Keynes and Hayek (who was a liberal):

    “From a distance it is easy to see how many presuppositions they shared.
    “(1) They both came to their economics through philosophy.
    “(2) Neither believed that economics was like a natural science.
    “(3) Both emphasised the importance of subjectivism in economic thinking.
    “(4) Both were critical of econometrics.
    “(5) Both subscribed to procedural theories of justice.
    “(6) Both were inegalitarians, believing in the beneficial spillovers from pockets of wealth.
    “(7) Neither was an ardent democrat.
    “(8) When Keynes wrote of the market system in 1936 that it is ‘the best safeguard of the variety of life’, preserving ‘the most secure and successful choices of former generations’ it may have been Hayek
    “(9) Both believed in the overriding power of ideas, and rejected or ignored explanations of events in terms of vested interests and technology.
    “(10) Both men admired Hume and Burke and delighted in the paradoxical wisdom of Mandeville. (Keynes’s General Theory is full of ‘unintended consequences’, eg the
    ‘paradox of thrift’.) What Hayek would have called Keynes’s ‘constructivist rationalism’ was tempered by prudence and regard for tradition.
    “(11) Hayek called himself an ‘Old Whig’, and Keynes had a good deal of
    whiggery in him.
    “(12) Both came to believe that Western civilization was precarious, which they found hard to square with their jointly held conviction that it was an evolutionary success story.
    “(13) In short, both were liberals, and finally understood, that on the great issues of political philosophy and personal freedom, they were in the same camp. It was on the means needed to preserve a free society that they differed.”

    (I added the numbering and separated the lines).

    I am sure no one meant to insult the Prophet, sorry, Keynes.

  40. I do think GDP should be measured in GDP per population
    so relative growth over time can be measured more accurately
    just as we measure relative wealth between nations.

Leave a Reply

Your email address will not be published. Required fields are marked *

Back To Top