As I noted yesterday, last evening I accepted an invitation to speak on a panel…
Financial services agreements – the EU as a neoliberal, corporatist project
I have been reading the new book by Costas Lapavitsas – ‘The Left Case Against the EU’ – which has been recently published. It is solid and clearly explains why the EU is not an institution or structure than anyone on the progressive Left should support or think is capable of reform any time soon. It has become a neoliberal, corporatist state and hierarchical in operation, with Germany at the apex bullying the weaker states into submission. Divergence in outcomes across the geographic spread is the norm. It is also the anathema of our concepts of democracy both in concept and operation. It is more like a cabal of elites who are unelected and, largely unaccountable. By giving their support to this monstrosity, the traditional Left political parties (social democrats, socialists etc) have been increasingly wiped out such is the anger of voters to what has become a massive coup by capital against labour. These are the themes that Thomas Fazi and I also explored in our recent book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017). I also just finished reading an interesting report – Financial Regulation challenged by European Trade Policy – published by the Veblen Institute and Finance Watch (October 2, 2018), which examines “the impact of European trade policy on financial regulation”. It is essential reading for those progressives who still think that Britain should remain in the EU. If they understand the research findings they would change their minds.
Finance Watch “is a European NGO founded in reaction to the last financial crisis, when policymakers realised that there was no counter-power to the lobby of finance”.
It aims to outline and advocate for essential finance reform” that “challenge the financial lobby’s fallacious technical arguments” and “defend the public interest in the making of financial regulations”.
It receives a significant proportion of its funds from the EU and other European institutions (for example, the EIB).
I do not think they go far enough but their intent is to be applauded.
The Veblen Institute for Economic Reforms is a Paris-based group that “strives for a sustainable society in which respect of our planet’s physical limits goes hand in hand with well-being, social solidarity and an economy built upon more democratic rules than at present.”
It seems to be supported by donations.
Their joint report, cited in the Introduction, examines the ways in which the trade policies pursued and legislated by the EU impact on the capacity of Member State governments to invoke financial regulation and maintain financial stability within their nations.
They introduce the notion of “‘new generation’ trade agreements” which:
… seek to increase trade between major global powers whose economies are already well integrated. Going far beyond the remaining tariff peaks and a few classic negotiation topics (government contracts, protection of intellectual property etc.), these agreements aim at opening service markets and eliminating “non-tariff trade barriers” – that is, discrepancies relating to rules and norms of protection …
… they create mechanisms for dialogue that will make it possible to deepen and expand their content even after their formal adoption. They contain, moreover, mechanisms for protecting investments and provide for the implementation of the highly controversial mechanism for settling disputes between investors and states.
So they are like a moving feast for corporations who can use these arrangements to challenge anything an elected government chooses to do in the interests of the nation that the corporations feel infringes or undermines their own self interest.
The EU is also currently negotiating the “Trade in Services Agreement (TISA)”, which:
… seeks to circumvent existing logjams in the World Trade Organisation (WTO) to open service markets beyond what is provided for under the General Agreement on the Trade in Services (GATS) of 1994.
The services covered by TISA include:
• all banking services, including deposit-taking;
• insurance and reinsurance services;
• securities and derivatives trading, including OTC trading;
• pension fund management;
• fiduciary services and tax consulting;
• transfer services and financial data processing services;
• commercial banks;
• investment banks;
• speculative funds and capital investment funds;
• stock and commercial exchanges;
• and financial counselling of all kinds, including credit rating agencies.
That is, “almost all financial services”.
The question the Report considers is whether the global integration of these services allows the sector to adequately “respond to the real economy’s needs”.
One might broaden that concern and substitute ‘society’ for ‘economy’.
One of the the hallmarks of the neoliberal era has been the way it has pushed the concept of ‘society’ to the background. People live in societies not economies. Economies are meant to serve those societies (and us) not the other way around.
The Report notes that:
Over the past three decades, financial globalization has produced a highly interconnected but deeply unstable financial system.
And we should always remember that almost all of the transactions that this sector is engaged in are unproductive – wealth shuffling.
The problem is that when the players get ahead of themselves the folly they create spills over into the real economy and starts damaging the well-being of all of us.
We do not need a financial system that is that pervasive to extract the sort of services that are of benefit to the broad population.
The old banking systems were fine at creating intermediations between savers and borrowers to permit the purchase of homes etc.
What we have now is a sector that is way too large and which uses its financial clout to manipulate political systems to ensure policies structures allow it to get even larger.
On September 21, 2009, the UN Commission of Experts on Reforms of the International Monetary and Financial System, published a report – Reforms of the International Monetary and Financial System – considered the issue of “financial market liberalization” within the ambit of the “General Agreement on Trade in Services (GATS) under the WTO” and concluded that:
The framework of financial market liberalization … may restrict the ability of governments to change the regulatory structure in ways which support financial stability, economic growth, and the welfare of vulnerable consumers and investors …
Liberalisation has meant an enlargement of the sector, concentrated in a few “centres” around the world.
The problem is that, far from reining in the financial services sector, our politicians and their technocratic support are planning to give it more scope to create mayhem.
As the Finance Watch/Veblen Institute Report notes:
… current trade negotiations currently seek to pursue and deepen … [the sector] … The inclusion of financial services in the new agreements is meant to impose new discipline on state regulation at the national level and to promote capital movement and the supply of services at the international level, notably by encouraging the commercial presence of foreign suppliers.
The questions that arise are:
1. Are there “economic benefits” from this expanded and unfettered global sector?
The Report cites IMF evidence that “financial liberalization tends to increase inequality … increased vulnerability to external crises …”
2. What are the “negative effects”?
Such as “increased systemic risk” (financial meltdown) and the like.
And the reality is that the political climate at present is back “towards deregulation”.
For Europe, the reality is that the EU is pushing further “trade liberalization” in the financial services sector. The regulative aspects of the proposed agreements are being subordinated to establishing environments where capital can flow even more freely than now.
While the 1994 GATT is bad enough in relation to the financial services sector, the TiSA that the European Union is involved in at present is even more ‘liberal’ in its approach to “opening service-sector markets”.
The Report says that the:
The European Union is currently negotiating more than thirty trade and investment agreements with over sixty countries.
These “Mega” deals contain chapters on financial services which typically “reduce the leeway available to states for future financial regulation”.
The specific TiSA (Trade in Services Agreement) seeks:
… to circumvent the opposition of developing countries to further liberalize trade in services … to define restrictive and irreversible rules for services that could one day be multilateralized.
The concept of local rules would be prohibited.
Governments should not restrict digital trade.
And more …
While most of these negotiations are shrouded in secrecy, the excellent service provided by – Bilaterals.org – helps us keep track on the developments.
Some key measures in the draft agreements threaten our democracies.
1. The “list-it or lose-it approach”
If something is not explicitly agreed on to be regulated, then it is free from regulation.
In other words, as new products, technologies emerge, governments will not be able to regulate them because they were not listed.
2. “Public services are not protected as such by these agreements” so that outside “very limited exceptions”, public services “such as, as education, health, waste disposal or transportation” would be open to competition.
3. “Increasing regulatory capture”
New lobbying opportunities will arise as nations will be forced to signal any regulative intent to all signatory states and commercial ‘stakeholders’.
Governments are required to justify their interventions to all parties in a “‘reasonable, objective and impartial’ manner”
And, with so-called ‘mutual recognition’ in play, “foreign companies could be exempt from local prudential rules if the regulations in their home country were determined ‘equivalent’.”
4. “Financial regulations subject to investment arbitration”
This is the thorny issue of so-called ‘Investor State Dispute Mechanisms’ that are now appearing in bi-lateral agreements between nations.
I considered them in these blog posts:
– The case against free trade – Part 3 (November 22, 2016).
– So-called ‘free trade’ agreements should be strongly opposed (June 30, 2015).
The clauses set up mechanisms through which allow international corporations to take out legal action against governments (that is, against elected representatives of the people) if they believe a particular piece of legislation or a regulation undermines their opportunities for profit.
It is that crude. Profit becomes prioritised over the independence of a legislature and the latter cannot compromise the former.
In other words, a democratically-elected government is unable to regulate the economy to advance the well-being of the people who elect it, if some corporation or another considers that regulation impinges on their profitability.
Corporation rule becomes dominant under these agreements.
The agreements create what are known as ‘supra-national tribunals’ which are outside any nation’s judicial system but which governments are bound to obey.
The make-up of the tribunals is beyond the discretion of a nation’s population, and, are typically dominated by corporate lawyers and other nominees. The notion of accountability disappears.
These tribunals can declare a law enacted by a democratically-elected government to be illegal and impose fines on the state for breaches.
With heavy fines looming, states will bow to the will of the corporations. Corporation rule!
There have already been some astounding decisions in these ISDS under other agreements, which have denied governments the right to introduce policies regarding environmental protection (for example, toxic waste safeguards, forestry management processes, etc).
The Finance Watch/Veblen Institute Report says that typically:
… these excessive rights are not balanced by any duty for investors regarding the impacts of their activities on society and on the environment and their responsability in that respect.
There is never a case that can be made where a corporation has primacy over the elected government.
So there is never a case for so-called ‘Investor State Dispute Mechanisms’ in bi-lateral agreements between nations.
A nation state is defined by its legislature and that institutions sets the legal framework in which all activity within the sovereign borders engages.
Corporations have rights under that framework as do citizens. But the assumption is that the legislative framework should reflect the goals of national well-being.
There is never a case that a corporation should have institutional structures available that allow it to use ‘commercial’ arguments to subvert national legal positions.
5. “Refrain from regulating: new state commitments”
The agreements typically have so-called “market access clauses seek to limit the ability of states to intervene through regulation”.
Rules such as the limiting the “size of banks’ balance sheets” or “the share of their capital held by foreign investors” are prohibited.
So, for example, government ambitions to renationalise banks would be thwarted under these provisions.
6. “The diffusion of financial innovations”
The EU proposal explicitly requires any agreements to allow “the proliferation of new and uncontrolled financial products”.
The financial sector would no longer has to establish probity for its products.
7. “An incomplete safeguard clause”
The European Commission’s “safeguard clause” is seriously deficient in protecting “investors and depositors and the stability of the financial system as a whole”.
8. “Limits on rules relating to data localization and transfer”
We read that:
The freedom to hold and transfer data, however, is among the key demands made in current negotiations by the financial sector and e-commerce industries.
In other words, they want to retain secrecy and prevent governments from being able to find trails when assets disappear during a collapse.
9. “Outdated protection clauses on capital controls”
Agreements aim to restrict the capacity of governments to impose capital controls in an emergency or more generally to reduce speculative currency activity.
Overall, the Report concludes is that:
1. “TiSA and the integration of financial services in these so-called “new generation” bilateral trade agreements risk reducing the ability of states to fight effectively against financial instability and to promote a financial system that would serve the economy’s needs.”
2. “these new agreements may contribute to protecting speculative and risky behaviour against the so-called “excesses” of prudential regulation, thus fuelling future crises.”
3. “This risk is inherent in the new agreements’ very objective, which is to eliminate or reduce the scope of regulations that are perceived as trade barriers.”
4. “In the financial realm, treating regulations as obstacles to the market’s proper functioning goes against the lessons of the 2008 crisis.”
5. “several measures found in draft agreements could threaten existing rules pertaining to financial regulation – most importantly, these measures would condemn to failure any efforts to strengthen these regulations.” We have considered those measures above.
The Report recommends:
1. “Ensure transparency and effective democratic control over trade policy” – secrecy, lack of transparency, ‘commerical-in-confidence’ ruses, should all be abandoned by governments signing these deals.
2. “Leave out financial regulation from trade negotiations”.
These are not normal services and they should be dealt with separately.
3. “Leave out investor-state dispute settlement (ISDS) mechanisms.”
Clearly. The state is never to be subordinated to corporations.
4. “Stop using the ‘negative list’ method to grant market access for services”.
The state should have the power to consider what it regulates and when. Exclusion lists that then limit what can happen in the future are to be avoided.
5. “Ensure that public services and social security systems are explicitly protected.”
Always. Corporations should never compromise these activities.
6. “Protect the ability of States to regulate efficiently …”
Never compromise the capacity of the state to any sectoral interest.
7. “Include a clause in trade agreements to allow States to put in place effective checks on movements of capital when deemed necessary”.
The state should always have the right to invoke capital controls at its choosing.
This has to be a ‘risk’ of busines and is an essential policy tool for governments to ensure economic and financial activities are consistent with public purpose.
8. “Make trade and services agreements reversible”
And not subject to massive financial penalties if they are abandoned. Again, this should just be seen as a ‘risk’ of doing business.
Further reading: The blog post – So-called ‘free trade’ agreements should be strongly opposed (June 30, 2015).
Conclusion
This is another example of the EU acting to undermine democracy.
As Larry Elliot reminded us in his UK Guardian article (July 21, 2017) – Why the moaning? If anything can halt capitalism’s fat cats, it’s Brexit:
… neoliberalism …[is] … hardwired into the European project.
The EU technocrats work away every day on strategies and rule designs and negotiations which explicitly undermine the capacity of elected governments to represent the best interests of their nation.
Their trade agreement negotiations are just one aspect of that behaviour.
This is core EU. If you were to eliminate it the ‘European Project’ as it has become would be terminated.
Brexit is about Britain withdrawing from that sort of structure and regaining its self-determination.
It is true that Tory governments might sign agreements that will tie their hands (as they have in the past).
It is also true that Labour could do the same thing.
But with Brexit, at least, an enlightened and truly progressive government will be able to abandon these pernicious arrangements (because they will be enshrined in EU law not British law).
That is why I support Brexit. It gives Britain a chance to get out of this corporatist, anti-democratic monstrosity that the ‘European Project’ has become.
That is enough for today!
(c) Copyright 2018 William Mitchell. All Rights Reserved.
It’s late in the day of neo-liberalism and the final coalescence of Finance’s monopolistic paradigm of Debt Only for the sole vehicle and form for monetary distribution. It’s urgent that we recognize the new paradigm and implement its policies.
I had been asking in this forum about why Brexit was such a great idea since Britain is not in the common currency, retains its central bank independence and agreed but is not subject to sanctions resulting from inflicting on the Maastricht treaty. Well, this is as good an answer I could possibly get and it is very hard to argue against these well made points.
The grounds on which Brexit was achieved remain, in my opinion, highly dubious. Not one of the loudest Brexit-criers had an anti-neoliberal argument to make. At best, they made the sovereignity argument, but it could easily be interpreted as the fight of british elites not to concede power to european elites by instigating resentment towards minorities and rabid nationalism. As is often the case, the UKIPs and BoJos of the world were right for all of the wrong reasons.
I agree that the demise of the former left parties is due to the abandonment of economical policy and the concentration of political discurse on “social matters”. Ironically, the result of focusing on those cultural/social talking points is the demise of actually socially progressive policies. The resulting backlash is framed as a culture war, but ultimately it is a social revolution triggered by economic concerns. Only that just like “sex sells”, emotion sells better than reason, therefore, it’s always going to be “Johnny Foreigner’s” fault instead of a highly technocratic corporatism that has highjacked all levels of public administration or globally active megacorporations partially supported by international military, political and financial action aiming to subvert smaller countries’ governments, i.e. modern financial and actual warfare in the context of neo-imperialism.
Arguing to people who have seen their productivity rise sharply and their income stagnate in the same period of time that they are the winners of globalization and should be willing to share their wealth is very hard to sell, thus the even harsher rebuke to this pseudo-humanitarian argument from the neoliberal pseudo-left.
Sadly, this iteration of the European Union needs to die to make place for a true union of good intentioned partners that benefits ALL of the people in ALL of the countries. However, I fear that a fallback into the former national states would fuel nationalistic resentment and I doubt that the smaller nations would fare well against the previously mentioned attacks from foreign capital on their (hopefully still existing) democracies.
TL;DR: Bill, I hereby abandon all hope of the UK helping “change” the EU from within and depressedly concede your point on Brexit.
Richard Murphy and other members of the Europhile left are having a brain melt over Brexit. They are invoking doomsday scenarios for the UK. I do not share their pessimism. I think they should be taking constructive steps towards supporting the election of a Corbyn Government that implements socialist policies, including active use of fiscal policy to mobilize all available resources (including labour) into socially useful, environmentally sustainable activities.
I believe that the Europhile left support the EU for reasons of sentiment and tribalism rather than carefully considered political and economic analysis. They consider Brexit to be an inherently far right project and they want to signal their complete separation from that enemy tribe. The possibility that there could be excellent left-wing reasons to support the dissolution of the EU does not occur to them.
Nicholas – I have also been commenting on Richard’s blog. Richard has done some good work in trying to improve MMT awareness but seems fixated with the EU as if there were an imaginary, ideational, Platonic EU existing behind the real one and ready to step in when we remove the neo-liberal version -the Left do this all the time, as if the EU is fundamentally progressive despite its fueling the Right.
I had to abstain in the referendum because of mis-information pouring out from both ‘sides’. The public can’t be blamed because they are treated like ‘mushrooms’ (kept in the dark and fed sh*t) with the copy-cat Trumpian Right (Johnson and Mogg) a bunch of misleading malevolent thugs and opportunists that try to manipulate human confusion and emotions. Labour have been hardly better at creating clarity with Corbyn, an instinctive anti-EU in the spirit of Benn person, trying to fence-sit whilst steering a divided party largely populated by the remnants Blairism who are partly self-gagged due to the election result and Labour membership.
What a mess, while Trump clones pop up all over the place like grinning jack-in-the-boxes.
“The grounds on which Brexit was achieved remain, in my opinion, highly dubious. Not one of the loudest Brexit-criers had an anti-neoliberal argument to make.”
With respect, Hermann, you need to spend 10 minutes walking in the shoes you don’t want to wear:
assume that the campaign to stay in the EU was funded by neoliberals.
“The possibility that there could be excellent left-wing reasons to support the dissolution of the EU does not occur to them.”
True.
Which makes them ill-informed about – or wilfully disregarding of – the history of their own parties.
Meanwhile, France’s finance minister said to the German press that the EU should become a type of peaceful empire.
He didn’t say a democratic one though…
https://www.handelsblatt.com/politik/international/europapolitik-frankreichs-finanzminister-macht-druck-auf-berlin-europa-muss-ein-empire-werden/23600498.html
Brexit will be a disaster because of the massive, self selected skills shortage in the political sector, plus the fact that the year zero types want as much chaos as possible to justify an emergency based reorganisation of the economy.
Brexit, in these hands, is just a more direct means to the same ends.
The goals of the EU listed in the article are pretty much the same as those of the brexiteers for,while they profess to hate the EU entity, the real focus of their anger is the uk population.
Those who Dominic Raab laments that ‘Can’t see past a national health service and council housing’.
Its hard (as in impossible) to see action taken by these incompetent and malicious people having any sort of silver lining.
Hermann, you make a perfectly valid point here:
‘The grounds on which Brexit was achieved remain, in my opinion, highly dubious. Not one of the loudest Brexit-criers had an anti-neoliberal argument to make.’
of course, the ‘Lexit’ voices were not heard. We had Farage telling people that the housing crises was partly to do with immigration and supply and demand-he made no effort to explain how housing has been financialised to the hilt by the banking system because he is part of that system.
The Brexit brigade never talked out monetary sovreignity, indeed, people like Rees-Mogg talked about ‘taking back control’ whilst preaching deficit reduction and gushing verbal diarrhea about the UK going bankrupt. All this suited his role as an asset manager handling the wealth of the UK’s richest people.
The only Brexiter who had a scintilla of honesty about them was John Redwood who at least tried to tell people that Q.E effectively cancelled debt and that debt to GDP was more like 60% but he’s a small Government-capitalist, so not much use.
Firstly Richard Murphy believes the EU rules are all easily circumvented by the UK at present under our existing EU Membership arrangements but successive UK governments have deliberately tied their own hands while pretending the EU tied their hands. Therefore he does not see why we should leave when that will cause some sort of temporary economic disruption at best and an incompetence/malevolence fueled disaster at worst.
Secondly Richard also believes there is the chance that if we stay in the EU bending the rules as we see fit we but keep trying to reform the system we’ll eventual get to a point where the EU reforms itself.
Personally I believe Richard is correct on the first part but wrong on the second.
I believe the first is simply a matter of historical record and a careful reading of the historic and present EU rules so really there should be no means for honest disagreement on that. Obviously these new EU rules may end up being applied to the UK so this situation could change for the worse but Richard is I think correct up to the present.
The second is obviously attempting to predict the future. No-one can do this with any accuracy so it’s really absolutely fine to agree to disagree for now.
Similarly Bill supports Brexit because a truly progressive UK government would be completely free to run Britain for the benefit of the majority of its residents. I agree with Bill, in principle. The fly in the ointment is the future prediction is that such a progressive UK government will ever exist. I’m doubtful at the moment. It would require a widespread understanding of MMT. The Labour Party as a whole has no such understanding. While the Conservative Party may in some quarters, behind closed doors, get MMT; it has no intention of using that knowledge for the greater good – intent as it is on serving a narrow clique of powerful vested interests.
To put it simply; we’re not getting a truly progressive government in the UK now or in the foreseeable future regardless what happens with Brexit. I do however take Bills point that if we at least get right out of the EU it will only be to our own government to whom we have to turn to set things right for ourselves. Never will Britons be dependent on the EU machinery for our fate if we just leave. That’s an absolute certainty.
@ James: “With respect, Hermann, you need to spend 10 minutes walking in the shoes you don’t want to wear: assume that the campaign to stay in the EU was funded by neoliberals.”
With respect, James, I’m confounded as to why you would infer from my comment that I wasn’t aware of this or that I lack sympathy for a true non-neoliberal option.My point was precisely that the Brexit campaign was ALSO financed by neoliberal/capitalist interests.
@Adam Sawyer: Just a couple of weeks ago I would have agreed with Richard on both of the points you mention. However, I have lost hope of this EU’s capability of reform. The current standoff over the Italian budget is just the hottest remake of the same old tired movie, one I just don’t feel like watching anymore.
Hermann, it is normal for apparatchiks to treat Greece and Italy similarly. That is their default response. They know that they are not smiliar, but that does not matter. I didn’t expect them to make another type of move. They have been captured by neoliberalism, as to a certain extent have their constituents. The Greeks did not seem to have distinguished between the Euro system and the EU, which may not have been their fault. The neoliberal apparatchiks approved of their error, as it benefitted them. i expect them to continue doing their thing, until they are stopped.
Bill thinks change in the EU is impossible. But is it? I wasn’t sure that Dems would again dominate the House. And some of the race results were astonishing. Beto lost the election in Texas, very Red, but possibly not for long. The race was closer than one could have expected it to be. Bill is probably right that political change in the EU is more difficult than it would be in a smaller nation state. Still, some are trying. I think it may not be out of court to wait and see what happens.
@larry: Groupthink is indeed heavily at play in the European Parliament, but also in the national governments. The recovery the dems seem to be witnessing is, in my opinion, more against Trump than in favor of a real progressive agenda. Even the highly praised Beto O’Rourke would be a bland lib dem or CDU member in the UK/Germany. Still, there is hope in the grassroots movements and the fact he was so successful despite not accepting donations from PACs. Cheers!
Hermann, re the Dems & Trump, i couldn’t agree more. But I don’t care about the reason. Although we must be careful, as Pence may be much worse than Trump. Also agree about Beto re Germany/UK. But it is the conservative Texas. It was astonishing that he did as well as he did. I can’t disagree with what you say.
If the Democrats want to defeat Trumpism they’re going to have to come up with an agenda that is an obvious and full throated improvement not the slow slide toward sefdom that conservative and liberal orthodoxies so suavely and deceptively will guarantee. This leaves out a milk toast compromise that is ineffective, goes nowhere and so solidifies the ongoing process of contention to the point of disintegration we see looming up around us. It requires an actual synthesis/integration of truths, workabilities, applicabilities and the highest ethical considerations of opposing perspectives.
But with Brexit, at least, an enlightened and truly progressive government will be able to abandon these pernicious arrangements (because they will be enshrined in EU law not British law).
I think this should be “because they would be enshrined in British law not EU law”.
Bill,
I remember years back when I first read your blog. It seemed very boring compared to say Warren\’s blog, he got to the point very quick, It was very interesting financially. After years passed I came to appreciate your blog more and more. Thanks man. Your current post is spot on in my opinion.
‘the EU rules are all easily circumvented by the UK at present’
Good look with that!-see you at the ECJ!
Nationalisation is possible but hedged in with caveats about the internal market, competitive tendering etc.
EU Law expert Danny Nicol produced an interesting book in 2011 called the COnstitutional Protection of Capitalism:
n 1945, the Labour government deployed Britain’s national autonomy and parliamentary sovereignty to nationalize key industries and services – such as coal, rail, gas, and electricity – and to establish a publicly-owned National Health Service. This timely, controversial, and provocative book argues that constitutional constraints stemming from economic and legal globalization would now preclude such a program. First, it contends that while no state has ever, or could ever, possess complete freedom of action, nonetheless the rise of the transnational corporation means that national autonomy is now severely restricted. Secondly, these economic constraints have been reinforced and legitimized by the creation on the part of world leaders of a globalized constitutional law of trade and competition. This has been brought into existence by the adoption of effective enforcement machinery, sometimes embedded within the nation states, sometimes formed at transnational level. With Britain enmeshed in supranational economic and legal structures from which it is difficult to extricate itself, the British polity no longer enjoys the range and freedom of policymaking once open to it. Transnational legal obligations constitute not just law but, in effect, a de facto supreme law entrenching an essentially neoliberal political settlement in which the freedom of the individual is identified with the freedom of the market. The book analyzes the key provisions of WTO, EU, and ECHR law, which provide constitutional protection for private enterprise. It dwells on the law of services liberalization, public monopolies, state aid, public procurement, and the fundamental right of property ownership, arguing that the new constitutional order compromises the traditional ideals of British democracy.’
The idea that all this is ‘easily’ circumvented might prove naive.
‘Firstly Richard Murphy believes the EU rules are all easily circumvented by the UK at present’
Hmm..very different views available on that. EU Law expert Professor Danny Nicol:
‘The left’s change of heart over the highly-judicialised EU is yet more alarming. An opponent of every EU Treaty since the 1975 Referendum, Jeremy Corbyn switched to the ‘Remain’ cause on his third day as party leader. It is hard to imagine that this Damascene conversion was occasioned by any great change in the EU. Rather, it seems to have been motivated by considerations of placating the Parliamentary Labour Party – not a successful tactic, since Labour MPs passed a vote of no confidence in him anyway. It is difficult to envisage a legal regime more inimical to the socialist transformation of society than the rules of the EU single market. One insuperable obstacle (among many others) is the series of liberalisation directives that constitutionalise privatisation in crucial fields such as energy, postal services, rail, and telecommunications. These guarantee the rights of firms from all Member States to operate on the national market, thereby precluding sectoral nationalisation. ‘Socialism’ may only take the form of publicly owned companies having to compete in a market with private operators along with the state providers of other countries. These directives cannot be wished away; they can only be repealed by unanimity on the council, presupposing the miracle of a complete absence of neoliberal governments in all the member states.’
Bill or anyone,
If MMT were adopted by most nations pretty much world wide and the growth in private debt stopped growing as %age of GDP, would the business cycle stop cycling?
Would there be no more booms and especially busts?
Steve American
MMT is not a regime it is a lens through which to view and comprehend the realities of the existing macroeconomic system in sovereign currency issuing nations.
My limited understanding is that the private sector business cycle is driven by more than just private debt levels. I believe investment cycles and unpredictable technological/competitive/political change will always occur regardless what we do. However, if government were fully cognizant of macroeconomic reality as per MMT the frequency/levels and impact of private debt and business-cycles/disruptive-technology would be reduced.
This is because the Job Guarantee and social-outcome driven fiscal policy would maintain private sector incomes and capacity to work productively at some minimum level regardless the state of the private business cycle. This maintains private sector spending and allows individuals to move more smoothly and quickly between private employment and “unemployment”. Thus there would be fewer and less severe recessions and the results of those recessions would less painful.
This would actually allow more frequent and more radical market based changes because disruptive new entrants to the market can afford to fail and try again than is usually the case at present. At the same time longer term social/environmental endeavours can proceed while ever a democratic mandate exists in their favour: such projects would not be cut at the first sign of a private sector slow down. Quite the opposite: when the private sector stalls the Job Guarantee would take up the slack and a lot of the work carried out would be social and environmental projects that are kept ticking over during private sector boom times ready to absorb unemployed resources whenever required.
Understanding MMT is not a magic bullet to fix all economic ills. It is just the best understanding we currently have of our macroeconomic system. MMT allows wise and democratically minded people to make best use of all available resources for the greater good of society as a whole. MMT allows cunning and selfish people to manipulate the system to the benefit of whatever clique of vested interests they represent. MMT is ideologically neutral.
Ignorance of MMT leaves you flailing about ineffectively if you’re a policy maker but also leaves you at significant risk of manipulation by powerful cliques who do understand MMT.
Steve_American @18:24,
I think Adam Sawyer gave you the A+ answer there.
@ Adam Sawyer
Yes, MMT is certainly a description of how most economies work in reality.
However, some policies are either explicitly part of it or follow obviously.
1] The job guarantee, LYS.
2] Don’t worry about US Gov. deficits.
3] Almost never run a Gov. surplus.
4] Generally, run a deficit as large as or larger than the trade deficit, this balances it out so the Private Sector doesn’t go into deficit.
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My OP was incomplete. I need to add more points.
1] Reduce wealth inequality.
2] Tax the wealthy and give some of that money to the bottom half of the population [by income].
3] Enforce the Anti-Trust laws, break up the monopolies.
4] Enforce the labor laws, make unions stronger. OTOH, it is possible that they got too strong in the late 60s and early 70s. If so, change the laws to get a better balance.
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And, for now, almost all growth in the economy should be aimed at fighting AGW, i.e. climate change.