I read an article in the Financial Times earlier this week (September 23, 2023) -…
It’s Wednesday and only a collection of snippets today. Today we saw some self-aggrandising hypocrisy with a short memory come out of the sewers, and a statement by a government denying that they are a “successful case of MMT”, an advertisement (call for help) and some music linked to a recent, rather significant death, when considered in the history of contemporary music. Pretty full day really.
Short-memory hypocrisy on display …
Recall this blog post – When mainstream economists jump the shark and lose it completely (January 23, 2017).
And this one – Marxists getting all tied up on MMT (May 1, 2019).
The central character (Richard Holden) is a Sydney economics professor who moonlights as a main economic advisor to the Australian Labor Party.
Which helps to explain their dramatic failure at the last federal election when they lost the unloseable election because they played cute about achieving larger fiscal surpluses than the conservatives at a time the economy was slowing rather dramatically.
Well having gone on the public record as being vehemently opposed to Modern Monetary Theory (MMT), accusing MMT economists (and me in particular) of being “a bunch of cranks” and characterised Modern Monetary Theory (MMT) in this way:
Modern monetary theory, a term coined by Australian economist Bill Mitchell, says the following: (1) Countries that control their own currency cannot default on sovereign obligations because they can always print more money. (2) Thus, said countries can provide unlimited resources, pay for whatever they want, and create full employment. Nirvana, here we come!
In the first cited blog post above I deal with this misrepresentation and the rest of his claims in some detail.
Holden also claimed MMT economists pushed “neo-charlatanism” – which was his final comment – clearly he had worked on that a bit and thought he was being very clever.
In the Q&A section of the Conversation article that blog post discusses we read these claims from the author “MMT proposals lead to inflation. end of story. why haven’t they been tried? because nobody serious thinks they would ever work.”
And then there was this sequence:
(Commentator A): There is no reason why we cant have a job guarantee with full employment … Australia had full employment before big business demanded unemployment be kept above 5% so they could control wages.
(Holden): i would like unemployment to be much lower, but when exactly did we have “full employment” as you say?
(Commentator B): When we had a full employment policy prior to 1975
(Holden): and what was the unemployment rate then?
(Commentator B): Avg unemployment from 1945-46 to 1973-74 was 2%
(Holden): not at all clear-please provide the data. but, arguendo, sure. is 2% too high? should we print money like crazy then? or 1.5%? or 2.5%? what is the right topology?!
(Commentator B): (link) Menzies nearly lost govt by letting unemployment rise above 2.1% why all those years of deficit spending ? Don’t mainstream economists study history anymore ?
Job Guarantee is MMT’s only policy so 0% involuntary unemployed is feasible, really should go back to school, Bill Mitchell is starting MMT University later in the year, you should enrol.
As I noted in the blog post cited above, this lack of knowledge of our Post World War 2 economic history is symptomatic of the new era of economic Phds.
The problem is that students of economics in the neo-liberal era are not required to study economic history as part of their education. So we have a generation of PhDs in economics, particularly those from most mainstream American programs, who have very little understanding of history and what has gone before them.
Holden disclosed that naivety when he demanded the commentator provide data to prove that the average unemployment was 2 per cent in the Post World War 2 period up to the mid-1970s.
It is just basic required knowledge for a professor of economics to know that Australia’s unemployment rate was at or below 2 per cent with zero underemployment for more than 3 decades following the Great Depression.
A stunning ignorance was revealed in that particular interchange.
Especially for someone who holds out his advice to one of our major political parties – the party that is supposed to represent the political voice of the trade union movement.
At the time he was holding forth against MMT, Holden had no published track record in macroeconomics or monetary economics and his teaching at that stage did not involve macroeconomics. So, his intervention was hardly from the perspective of the intellectual or research cutting edge and his reliance on simplistic mainstream textbook notions was evidence of that.
Anyway, he resurfaced in the press again this morning in this New Daily article (October 15, 2019) – Union calls for Great Depression-style ‘Green Jobs’ program – which if anything is about the key idea that MMT economists have been championing for 25 years, mostly as the sole voice in this advocacy.
One would find it hard to substantiate a claim that this idea has come out of mainstream economics in any way.
Over the years, the core MMT economists have taken massive flack in advocating for a Job Guarantee, which is a central aspect of our macroeconomic stability framework.
The article talks about a proposal from the Australian Unemployed Workers Union (AUWU) which was submitted to the – Jobs for the Future in Regional Areas – enquiry being conducted by the Australian Senate at present.
In their submission – Possibilities for a Regional Green Job Guarantee – you will see the document relies heavily on work done by myself, on work done with my colleagues at my research centre, the – Centre of Full Employment and Equity and on our textbook (Mitchell, Wray and Watts) – Macroeconomics.
The Australian economist Bill Mitchell has developed a workable model of what a GJG would look like. Mitchell (2013) argues that as a first step to introducing a rights-based commitment to full employment the Australian government needs to introduce an open-ended public employment program. This would create a buffer stock of available jobs, into which workers would be shed when the mainstream labour market contracts, and from which they would be drawn when there is growth in employment demand.
I have had extensive discussions with the Australian Unemployed Workers Union over the years.
But all that seems to escape Holden, who was quoted in this morning’s New Daily article as saying:
According to University of NSW economics professor Richard Holden, the idea of a GJG has merit – especially given interest rate cuts are “running out of firepower”.
Dr Holden said such a scheme would provide a much-needed boost to the economy, as workers would likely spend most of their income.
He is quoted as saying the “scheme would have to satisfy two requirements to be successful”
The first thing is the jobs people are doing would have to be socially productive in some way – in other words, the environmental benefits would need to be real …
The second point is that you need to be careful with any of these job guarantees not to crowd out private-sector employment.
If your goal is to provide jobs for the unemployed, and you create some jobs in one part of the economy, but destroy jobs in another part of the economy, that’s counter-productive.
Core and pure MMT.
All of that is in our literature that we started developing together 25 years ago.
It was also in my fourth-year thesis from 1978.
So either Holden has had a memory lapse and forget his previous attacks on MMT or is just a self-aggrandising hypocrite.
Well done to the Australian Unemployed Workers Union though!
And Japanese government issues statement …
Fancy a government that runs an economy that demonstrates that the fundamental principles of mainstream macroeconomics are incorrect and the dynamics of the monetary system ratify all the major insights provided by Modern Monetary Theory (MMT) issuing a statement that their economy is not “a successful case of MMT”.
The Bloomberg article (October 15, 2019) – Japan Denies Policy Influenced by Modern Monetary Theory In Any Way – reported a statement issued by the Japanese government that says:
As a government, we don’t implement policy based on the idea that Japan is a successful case of MMT because its inflation and interest rates are not rising despite massive debt … We are working to restore fiscal health
Bloomberg add that “The statement was issued in response to a lawmaker’s written request to clarify the government’s views on the theory”.
The Government hasn’t yet published its official answer on the Diet publications and I will comment further when they do.
But the question is publicly available and was filed by Japanese CDR politician Kazuma Nakatani on the opening day of the new Parliament (October 4, 2019) – Question No. 14: MMT (Contemporary Monetary Theory) Questions.
I am off to Japan in two weeks and it looks like we will be having a lot of fun.
Call for financial assistance to make the MMT University project a reality
The – Foundation for Monetary Studies Inc. – aka The MMT Foundation serves as a legal vehicle to raise funds and provide financial resources for educational projects as resources permit and the need arises.
The Foundation is a non-profit corporation registered in the State of Delaware as a Section 501(c)(3) company. I am the President of the company.
Its legal structure allows people can make donations without their identity being revealed publicly.
The first project it will support is – MMTed (aka MMT University) – which will provide formal courses to students in all nations to advance their understanding of Modern Monetary Theory.
At present this is the priority and we need some solid financial commitments to make this project possible and sustainable.
Some sponsors have already offered their generous assistance.
We need significantly more funds to get the operations off the ground.
In order for FMS to solicit tax-exempt donations while our application to the IRS is being processed, the Modern Money Network, Ltd. (“MMN”) has agreed to serve as a fiscal sponsor, and to receive funds on FMS’s behalf.
MMN is a non-profit corporation registered in the State of Delaware, and is a federal tax-exempt public charity under Section 501(c)(3) of the Internal Revenue Code.
Donations made to MMN on behalf of FMS are not disclosed to the public.
Furthermore, all donations made to MMN on behalf of FMS will be used exclusively for FMS projects.
Please help if you can.
We cannot make the MMTed project viable without funding support.
Remembering Ginger Baker
He was not my most favourite drummer. Nor person really. But he was part of a massive band – Cream – who made sounds when I was a teenager becoming obsessed with guitars and bands that made my head spin.
He died last week (October 6, 2019).
But I remember him less kindly (he was an aggressive character who hated Jack Bruce, who in my view was one of the great bass players) than I remember Cream and Blind Faith the band that followed from the wreckage of Cream, only to die a short term death from too much ego.
Here is a story about him – Ginger Baker, the drummer for rock supergroups Cream and Blind Faith, dies at 80 (October 7, 2019).
But here is a classic – White Room – which was written by Jack Bruce with the lyrics by Pete Brown.
It appeared on their 1968 double album – Wheels of Fire – which was released on August 9, 1968.
That is enough for today!
(c) Copyright 2019 William Mitchell. All Rights Reserved.