It's Wednesday and there are a few topics that caught my attention this week as…
Neoliberalism is likely to survive yet another crisis
Last week, the results of a survey of Australian economists was released which showed that the majority supported freezing minimum wages, which normally are adjusted annually in June. The minimum wage case is currently being heard in the wage setting tribunal (Fair Work Commission) and a host of antagonists have assembled arguments to stop millions of the lowest paid workers getting a pay rise. In effect, they are advocating a real wage cut for these workers given inflation is running at around 1.8 per cent per annum at present. The Australian government is also claiming it will not extend the already inadequate fiscal support measures that have left more than a million low-paid, casual workers without any wage support since the lockdown began. And they have started winding back support in key sectors like child care which will impact disproportionately on low-paid women’s employment opportunities. But, some are still claiming that neoliberalism will not recover from this pandemic. That all the myths we have been fed about government fiscal policy capacity have been exposed for what they are and we will come out of this with a new economic paradigm. Not so fast. Not a lot will change yet. The struggle goes on.
The survey of the economists (reported here)
A freeze in the minimum wage will support Australia’s economic recovery.
I did not participate because it was organised by The Conversation and I decline invitations from them to contribute in any way after they published the disgraceful article by one Richard Holden on MMT, which invented statements attributed to me to suggest I was an idiot and incompetent. The Conversation refused to retract the libellous article.
21 of the 42 economists polled agreed, “seven of them ‘strongly'”. 2 were uncertain.
The ABC report said that “Weighted for confidence, support grew to 51.6 per cent.” So a majority of Australian economists can’t get their heads around the fact that paying low paid workers a bit more will stimulate demand (and revenue) more than unit costs.
Which means that, despite claims that I see regularly from commentators that this crisis is creating the conditions for a fundamental shift in economic thinking among policy makers and the economists that advise them, the evidence tells a different story.
Holden, by the way, was one of the 21 and one of the seven who “strongly agreed” that minimum wages should be cut in real terms. And he purports to advise the Australian Labor Party on matters economic. No wonder they cannot win an election.
Further, the – Australian Government Submission to the Annual Wage Review – conducted by Fair Work Commission (April 3, 2020), didn’t demand a freeze but its arguments amounted to the same thing.
It wanted the FWC to:
1. “take a cautious approach, prioritising the need to keep Australians in jobs and to maintain the viability of the businesses, particularly small businesses, that provide those jobs.”
2. Accept “Research shows that the employment impacts of the minimum wage are most likely to be felt by vulnerable cohorts, such as youth and the low skilled, and that risks to employment from minimum wage increases are more pronounced during economic downturns.”
3. Understand “that Australia already has the highest real hourly minimum wages (in Purchasing Power Parity terms) in the OECD.”
In other words, don’t increase minimum wages.
I was in a meeting last week where one of the attendees declared that neoliberalism is dead and that we could not think of returning to the old narratives. I didn’t agree with that assessment.
Juxtapose that with the latest report from Eurofound.
On June 4, 2020, Eurofound published its most recent report – Minimum wages in 2020: Annual review
The European Foundation for the Improvement of Living and Working Conditions (Eurofound) is part of the EU “whose role is to provide knowledge to assist in the development of better social, employment and work-related policies”.
So while the European Commission at the macro level works relentlessly to destroy prosperity and jobs, Eurofound works hard to provide information that helps sustain better jobs.
As an aside, I saw an ABC news report at the weekend – Europe secures 400 million potential coronavirus vaccines from British drug-maker – which indicated that a “British drug-maker … [has] … signed a contract with Italy, Germany, France and the Netherlands to supply Europe with a vaccine against the coronavirus, with deliveries starting by the end of 2020.”
The report went on:
The European Commission received a mandate from EU Governments on Friday to negotiate advance purchases of promising coronavirus vaccines, the EU’s top health official said, but it was unclear whether there would be enough money available.
So, we are in a life-threatening crisis that is destroying jobs and lives at a rate not seen before in our distant memory and the EU’s top official is not confident there will “be enough money available” to purchase a vaccine, should one eventuate.
The ECB could buy enough vaccines for the entire world if it wanted to. One click of a computer key with sufficient numbers entered on the screen would do it!
But back to Eurofound’s latest report.
The Eurofound work is part of the – European Pillar of Social Rights (introduced in November 2017) – which aims “that by 2024 all workers in the EU should earn a fair and adequate wage, no matter where they live.”
So it is superimposed over the system of statutory minimum wages that many EU nations have in place. Six EU nations do not currently have minimum wage laws (Austria, Cyprus, Denmark, Finland, Italy, and Sweden).
The Pillar stated that:
Member States are free to go beyond the minimum standards set at EU level …
Of course, like everything that is European Union, there is no agreement among the Member States.
The Nordic states, in particular, reject the notion of an “EU-wide minimum wage” (Source).
Eurofound noted in its review that:
The trade union movement is divided on whether there is a need for the initiative, and, if there is, how to implement it. Employer organisations point to the principle of subsidiarity and state they are not willing to negotiate on the issue from their end.
And, combined with the opposition from “social partners and governments from the Nordic countries” the end result may not be what it should be.
But aside from these usual European-style disputes that hamper progress at all levels, the Eurofound report presents interesting arguments that bear on the question of minimum wages.
1. It finds that since the turn of the century, “Statutory minimum wages have become fairer as compared to other workers’ wages” across the EU nations, although the exceptions were in Belgium, Ireland and the Netherlands.
2. But “Despite this upward trend, minimum wages in the majority of countries remain below 60% or even below 50% of median wages.”
3. And levels matter more than relativities:
… increases in the relative level of minimum wages within a country on its own may not be sufficient to decrease the share of workers who report that they find it difficult or very difficult to make ends meet. It’s the level of minimum wages and what they can buy that matters more.
The research is clear – countries with “a higher absolute level of minimum wages in PPS … have lower proportion of workers reporting difficulties” in making ends meet. PPS is purchasing power standards (a sort of composite measure to aid comparison).
4. “The latest research on minimum wages confirms that the employment effects of minimum wage increases are relatively small but decreases in working hours can occur.”
In particular, the introduction of a minimum wage in Germany in 2015 has given researchers a good dataset to assess the impacts of such an initiative.
A number of research studies have shown that:
… there were no negative employment effects other than a small reduction of marginal part-time jobs (mini jobs) … There has been no effect on labour productivity … but there has been some reallocation of workers to more productive, higher-paying firms …
Interestingly, there have been a lot of academic papers making predictions about negative employment impacts but subsequent applied research covering many countries, finds that the theory did not match the empirical reality.
Eurofound surmise that:
This is due to the high dependence on this type of study’s underlying theoretical economic model. Neoclassical economics predict that employment will decline, whenever wages rise above workers’ marginal productivity. The expected effect can be different under an alternative economic reasoning.
Over my career I have been an expert witness in wage tribunals on many occasions and prepared many research reports for trade unions as part of their submissions to these tribunals.
I have never been surprised by the mindless evidence that employers submit (drafted by mainstream economists) who predict drastic employment cuts which never materialise.
I learned, at a young age, about the GIGO principle.
I wrote about the latest scam – cuts to penalty rates in Australia for the lowest paid workers – in this blog post – Employer groups in Australia lied about the impacts of penalty rate cuts (July 5, 2018).
The coronavirus pandemic is now bringing out these arguments again – the neoliberal agenda is far from done.
Solutions to the economic impacts of the virus are focusing on the low paid – as Eurofound point out “wage freezes or cuts” to low-paid workers while adopting a “wage cushion” approach to “higher-ranking jobs”.
The impact is to reinforce the rising incidence of the working poor and increasing the already appalling wage inequality.
Remember my rule of thumb – cleaners and lower paid health professionals (nurses, orderlies etc) should be the highest paid workers given the importance of their work, which the pandemic has brought into relief.
Eurofound argue that:
While it is of utmost importance to ensure that companies stay afloat and can afford to retain and pay their workers, wage cuts or freezes are not the first tool to resort to …
Why?
Because protecting workers’ incomes, especially those with a high marginal propensity to consume (as in the case of low-paid workers):
… is important to avoid that peoples’ incomes and expectations of their future earnings will aggravate recessionary forces, as demand declines. In the context of this sudden ‘external shock’ or ‘black swan’ to the European economies, minimum wage policies can also play a role in acting as stabiliser of demand; particularly in cases, where other social protection measures are linked to the minimum wages rates.
Clear as one can be.
Cut the pay of the low-paid in times when the non-government sector needs to sustain spending is the worst thing a nation can do.
We should disregard the worn-out opinion of the mainstream economists who cannot get beyond the chapter on labour demand in their irrelevant labour economics textbooks.
This is all relevant to the discussions I keep hearing about ‘game changers’ and the ‘death’ of neoliberalism.
So far 423 thousand people have died from the coronavirus ((Source) but to say neoliberalism is dead is another matter.
As Modern Monetary Theory (MMT) gains in presence in the public debate and proponents/supporters declare ‘victory’ (yes, I have heard that said) I remind everyone that a paradigm shift doesn’t occur until the academy is full of MMT economists with PhDs, the undergraduate programs are based on our textbok, and postgraduate economics programs have jettisoned the mainstream religious studies they offer.
We are some distance from that.
No matter how may activists there are supporting a view, until the academy shifts, the mission is not complete.
That is because the policy makers and decision-makers come out of the academic programs and reflect what they have absorbed from that participation.
On this theme, there was a useful discussion by Michael Pascoe in the New Daily today (June 15, 2020) – The neoliberals back in charge – let ‘market forces’ rip – where he makes the case that:
… the Morrison government will leave the problem of high unemployment to market forces – the fling with major Keynesian stimulus is over. Don’t expect any more serious economic support. The neoliberals are back in charge.
It was always obvious that the fiscal stimulus was less than half that required to stop unemployment (and hidden unemployment) from rising sharply during the lockdown.
Further, the fact that they excluded more than a million casual workers who are mostly on low-pay and have their penalty rates cuts by the FWC from the so-called JobKeeper wage subsidy scheme signalled their intent.
Michael Pascoe rehearses the findings of the OECD released last week in their latest – Economic Outlook June 2020.
The OECD made it clear that in – Australia’s Case:
(a) “Strong fiscal support is warranted … to support the most vulnerable and provide the investment needed for a sustainable recovery”.
(b) “There is ample fiscal space to support the economic recovery as needed.”
Note the poor framing here. Their definition of ‘fiscal space’ is flawed and defined solely in terms of financial aggregates like public debt ratios.
Fiscal space can only be meaningfully defined in terms of the available real resources that can be brought into productive use.
Please read the following introductory suite of blogs:
1. Fiscal sustainability 101 – Part 1 (June 15, 2009).
2. Fiscal sustainability 101 – Part 2 (June 16, 2009).
3. Fiscal sustainability 101 – Part 3 (June 17, 2009).
If there are no idle resources, the real constraints on public spending emerge and the issue of diverting resource use away from the current users so that they can be deployed by the government sector through taxes etc become relevant.
But there is massive fiscal space in the Australian economy at present. The OECD get that right for wrong reasons.
(c) “The authorities should be considering further stimulus that may be needed once existing measures expire at the end of the third quarter 2020. Such support should focus on improving resilience and social and physical infrastructure, including strengthening the social safety net and investing in energy efficiency and social housing.”
But the emerging reality is that the government is trying to avoid having to extend the rather inadequate measures introduced to date when they expire in September.
The problem is there is no way, with the number of failed businesses that will not return after the lockdown ends, that unemployment will return to the already elevated levels pre-crisis.
So what to do?
Neoliberals say do nothing.
And it seems, from Michael Pascoe’s surmise, that this view dominates the government thinking – “the doctrinaire right wing has never been stronger in the Coalition.”
A senior spokesperson for the government said during an ABC interview yesterday:
People should be under no illusion that the tap is going to be turned off.
So the OECD position is being ignored by the government.
Conclusion
We are a long way from abandoning neoliberal thinking.
There is a lot more work to be done on that front.
That is enough for today!
(c) Copyright 2020 William Mitchell. All Rights Reserved.
Some other people and I ave viewed Neo-liberal economics as a Religion.
That is it is based on assumptions that are obviously false in many cases, but have become dogma.
It is not supported by observations of the real world, yet it is held to out of faith.
Now I’d like to go a step further.
Neo-liberal economics is not just any religion, most modern religions are at least not evil.
However Neo-liberalism is a lot like Medieval or early the Modern Protestant and Catholic religions.
Those religions believed in witches and tortured innocent people into confessing to impossible crimes.
Made them name names of other innocent people and then continued the process.
And burned them all at the stake.
Neo-liberal economics causes harm more slowly, but just as surely.
And or what? It has been proven that the conclusions Neo-liberalism has reached in many key cases are wrong.
Yet, they blindly adhere to the dogma.
It is sickening. It really is.
I wish to God they could grok the truth.
I recently had a conversation with some friends about what the Australian government had done for child support and the jobkeeper subsidy, where the stark comments I got echoed back were that ‘i don’t want my taxes that I pay going to those things, it’s not fair. And I don’t want to pay more tax to do it’.
Until the person in the street understands MMT, the government can manipulate them how they see fit. And that also means neo-liberalism is here to stay.
And trying to convince someone that everything they think they know about the government and how it spends is wrong, is a tough sell.
The economists can make these recommendations for wage freezes safe in the knowledge they never have to face the consequences of getting it wrong.
After lockdown there will be a huge fiscal error.
There is always a huge fiscal error. The previous fiscal errors made this current fiscal error, a fiscal error
They will balk at the numbers and tighten prematurely. Across the developed world.
Why JG has to be implemented
Same will happen all over the western world because the media is complicit in it all. In the UK the media are already turning to the same old voices who caused the mess and who’s ideology showed that economies were ill prepared for the crises.
It’s a class war – The only way it will change is if voters become aware of it and vote for change. Without power you can’t change anything.
Does anybody who reads the Sun or the Daily Express even know that any of the books we produce exist ?
If not what are we going to do about it ?
A proportion of all the money raised by all the MMT groups across the world needs to target letter boxes. Effective demand V aggregate demand, it needs to be targeted in my view.
Or are we in danger of just talking at each other in middle class echo chambers ??
Are the million upon million of voters who read the Sun or the Daily Express ever going to watch MMT ed Q and A ?
If they do not even know it exists ?
A marketing campaign is what we need in my honest opinion. Thatcher knew that before she gained power.
Can you-all read and comment on my post to last Saturday’s Q&A page?
I claimed that money must circulate in all *stable* economies.
There must be a way for money in *equal* amounts to flow from the rich to everybody else as fast as the people buy things from corps that the rich own.
Flows might be taxes going to the poor, elderly, and gov. workers. Or wages paid to people who work for the corps. Etc. The amounts must be equal over time. If it isn’t then the poor get so poor they starve or rebel.
People disagreed, so I made that analogy.
OR, they are arrested and convicted and enslaved to work for just food and shelter in a private prison.
“I claimed that money must circulate in all *stable* economies.”
That’s the usual neoliberal trope. It is incorrect.
The nub of MMT is this
delta (S -I) |-> delta (G -T)
In English, private net savings causes the government deficit. Neoliberalism then goes nuts trying to close the government deficit. They have the causality backward.
What they end up arguing about is how to eliminate the net private savings. The Robin Hood crowd want to strip out S, and the Free Market crowd want to ram loans down people’s throats to bring up I.
MMT says you can just accommodate the difference rather than trying to confiscate it.
MMT sees the economy more like an evaporation pond than a hot tub. Top up the pond with new water when the level gets too low, but otherwise let it get on with the job of extracting useful stuff from whatever it is sloshing over.
Neil Wilson, as usual you and I can’t communicate.
Did you read my post 1st. I spoke about saving, but not investment.
I created the analogy to talk to people who use neo-liberal thinking.
I can’t understand you, so I’m positive that your way of talking will not change anyone’s mind.
Changing their mind a little is the *necessary* 1st step.
@Neil Wilson at 20:33
“private net savings cause the government deficit”
Yup, which is why it always amuses me to hear the tired squawking of the deficit/debt chicken-hawks — they don’t realize that were their most cherished dreams ever to come to fruition net private savings would go to zero.
@ eg,
“private net savings cause the government deficit”
“Yup, which is why it always amuses me to hear the tired squawking of the deficit/debt chicken-hawks – they don’t realize that were their most cherished dreams ever to come to fruition net private savings would go to zero.”
Yes, and then they would blame the people for not saving for retirement.
If net savings is always zero (with no Gov. deficit), then Mr. A can only save more if Mr. B saves less.
One way for Mr. B to save less is to borrow and later go bankrupt.
Then Mr. A will complain about all the bankruptcies, that he caused because he saved more.
@Derek Henry
I suspect you’re right. My social circles are full of people with relatively socially progressive views who continually vote conservative – all the while complaining about their dog-whistle politics, but justifying their votes because “at least they won’t bankrupt us … which means we’ve got cash in our pocket to support charities”. It’s thoroughly depressing.
I’m starting to think that the most significant roadbloack to social and environmental justice is not the idealogues in gov’t or the far-right in all their guises, but the average ‘middle class’ person who is trapped in the ‘Government as a household’ metaphor and who can’t see that their quality of life is slowly gurgling down the drain.
Neoliberalism isn’t based on truth – it’s based on the blindness that comes from selfishness.
“I can’t understand you, so I’m positive that your way of talking will not change anyone’s mind.”
Yet most other people can understand me. Even to the point of praising me on it. Where does that suggest the problem actually lies?
What you have discovered is that you can’t save for a pension. Nobody can. The entire concept is as silly as putting on a jumper in August to save heat for January. What you find is that when you “save” for a pension, what you are actually doing is paying a private sector tax that is immediately given to whoever has a pension in payment by the pension fund. Then some internal pointers on non cash assets are changed to make it look like you’re saving something and the prices inflated to make the numbers add up.
Pension are, always have been and always will be a current production issue. How much of the share of current production is to be reserved for those not involved in the production process?
No pension ‘savers’ when you’re drawing your pension = no pension. Hence the slow and steady move towards compulsory pension contributions.
In short pension saving isn’t saving. It’s spending by proxy.
“The entire concept is as silly as putting on a jumper in August to save heat for January. ”
I should apologise for the Northern Hemisphere bias in that statement.
I have self-flagellated appropriately.
Perhaps the most depressing of all of Bill’s posts. If he’s right, we’re sunk, because if neoliberalism does not go down at this propitious moment, then oppression and ecocide will continue unabated, at even more intense levels, and you can kiss humanity’s backside goodbye. But let me suggest that Bill is not right and provide the reason, which he states in his own post. “As Modern Monetary Theory (MMT) gains in presence in the public debate and proponents/supporters declare ‘victory’ (yes, I have heard that said) I remind everyone that a paradigm shift doesn’t occur until the academy is full of MMT economists with PhDs, the undergraduate programs are based on our textbook, and postgraduate economics programs have jettisoned the mainstream religious studies they offer. We are some distance from that.” Here is where, I believe, Bill confuses an academic victory with a sociopolitical one. Rarely have academics ever led a major sociopolitical evolution/revolution. The driving force always comes from the people, not the professors, who as a class are among the most conservative clingers to old, traditional ideas. Indeed, well I remember how back in the late 1960s we radical college students had to drag the more liberal professors, often kicking and screaming, into even tacitly supporting our demands and causes. No, the task is not to convert the academy but rather to convert the people, who have far less to unlearn with respect to the “benefits” of neoliberalism. They know, from the living of their daily lives, that neoliberalism is evil, relentlessly consuming both people and planet, and that time is short. Right now, the piece of neoliberalism at the forefront is police brutality and racism, and it alone is wreaking havoc. But soon, as the Greatest Depression (dwarfing the Great Depression our grandparents knew) further immiserates and enrages all but the elite, when it becomes obvious that neoliberalism intends to do nothing more to address the post-Covid collapse than to again bail out the wealthy and leave the rest of us hanging in the wind, the burning issue of police brutality/racism will swell like a flood into a universal, unequivocal demand for a more humane socioeconomic order. The unifying cause will be democratic eco-socialism; the victory will be brought by the invincible force of overwhelm (we are many, so many; they are few, so few); and already there are signs of it everywhere. We blew it back in the 60s/70s, as too many of my generation sold out by climbing aboard career ladders within the existing system, but those ladders have now been removed from the reach of the vast majority of today’s young. They cannot sell out even if they wanted to. And with no viable future in the neoliberal world, does anyone really think that they will take this utter devastation, humiliation, and despair–that millions upon millions upon millions of them will take all of this–lying down? No, I think that BTO had it right in that old song: “You ain’t seen nothin’ yet.”
The carelessness mainstream economists towards economy is quite astounding. They just assume full employment willy nilly. It’s insanity.
I think that academia just serves whoever is winning the class struggle. The people have to lead. I went out to protest with the graduate students at UCLA in demanding break-even wages but not a single professor showed up except a labor studies professor. I think the problem with the professor here is that he assumes everyone is like him. In reality, he is the exception, not the norm. We cannot expect our current academia to do anything. they can’t even pay their workers break-even wages and consistently rely on parents’ income to keep our institution going (talk about being independent!). At least in America, the point of mainstream education is to increase one’s capacity to follow orders and put up with BS. I can’t count how many times I had to twist my mind to believe in certain concepts even though I thought they were BS (and I am in science!). Believe me though, our graduate students are figuring out the game is rigged.
The professor has read Marx Capital at a young age. I am only reading it now. If you read Marx, its very clear what the standard expectation from a capitalist society should be, and capitalist society is even failing to provide the basics. Its so arrogant that it shames you for thinking you deserve more than being a 2nd class citizen. If you don’t read Marx, then you still put capitalism on a pedestal and won’t touch it because you are scared of it.
You are right about the ladder. Thanks for being one older person that actually take the time to be say something thoughtful and not blame us youth for everything.
There are no ladders for me but It is time to educate, agitate, and organize! Onwards!
Re Neil Wilson:
Neil I enjoy your comments. Occasionally I don’t follow your logic so I think harder, read your next comment and then it comes to me. I find your approach interesting and useful. So thank you.
Re the survival of neoliberalism:
Bill had a post a few weeks ago linking to a blog-post by his co-author Thomas Fazi who worried neoliberalism would survive COVID if people didn’t organise to put an end to it. So we should all get out there somehow and somewhere and help make a different world actually happen rather than just talking about it.
Re Newton Finn:
It’s true academics won’t make neo-liberalism disappear on their own but they have the very important role of educating people. The fewer students polluted by mainstream gibberish the better. After learning of MMT through Bill’s blogs It took me three months of deprogramming by Marc Lavoie to overcome my prior belief in the government budget constraint. I have since been equipped to counter neo-liberal tropes much more effectively in my work, both before and after retirement. It is a challenge though as others have pointed out above.
Re Tom Y:
I don’t know what parts of Marx you’re reading, but you might find old articles by Paul Sweezy and Harry Magdoff in the US publication Monthly Review less of a slog.
Keith, you couldn’t be more right about the crucial work that Bill is doing. To cite but one of many examples, “Reclaiming the State” (written with Tom Fazi) is one of the most important books out there right now–essential reading to fully grasp how and why we find ourselves up to our necks in neoliberal quicksand, AND how the only way out is to take back our various nations, reclaim their sovereign powers (especially their issuance of currency), and then transform them into something closer to the ideal of nationhood described in the Preamble to America’s Declaration of Independence. That’s precisely why I took issue with Bill about this most recent post. Reclaim the state? Has there been a more promising time in the last 50 years to do this, to pull off what we tried and failed to do in the 60s, and to do it with eyes wide open thanks to the clarity of the MMT lens? Millions among the young are ready right now, many more millions, young and old, will follow suit as the post-Covid depression radicalizes them. Again to allude to the 60s, has there ever been a more powerful opening, with neoliberalism rocked to its foundation as it was merely 12 years ago, to SEIZE THE TIME?
What MMT needs is a good Publicity Agent. Academics posting 5,000 word diatribes that ain’t ever going to be read by the proletariat; and, do not include a good “hook line” that the tabloid press can use as a headline; should make sponsors of MMT wonder if they are getting value for money. “Too Long; Didn’t Read.” (TLDR) is sadly where MMT is today.
Re acorn
I’m always reminded of the late Joe Bageant. His collection of blogs published as ‘Deer Hunting With Jesus’ is a terrific read. He grew up among rednecks in the US yet turned out to be a lefty. He often wondered why rednecks voted Republican, the party least likely to help them. The same could be said of the ‘battlers’ of Australia. The best answer that he came up with, and the one which resonates today, is that the Left does not know how to talk to the people.
Acorn, YES, MMT desperately needs a highly-skilled popularizer/publicizer, someone like a Thomas Paine who took lofty Enlightenment ideals and crafted populist political positions based upon them that could AND DID appeal to the masses. At this moment, the JG is probably the most potent and doable idea that MMT has put on the table, and yet the JG remains confused in the public mind with the far less effective, far less powerful, far less revolutionary, guaranteed annual income proposal.
@Keith,
My mind works differently. I don’t know if it is just me or that my behaviors apply to more people. I need to “slog” through these readings to get a conviction steel myself to a cause. The brainwashing as a young person in America has been so deep such that even when I know organizing worker is right, i still doubt myself.
Marx originally wrote Capital as a solid rock for the working class. How can I not read through that?
I’m just reading capital, now just finished chapter 7. P.299 and P300 were pretty funny when Marx mocked the excuses your standard capitalist make.
” I think that academia just serves whoever is winning the class struggle. ”
Which is why Thatcher hired Saatchi and Saatchi.
Near the very top of her list of what needed to be reformed after Saatchi and Saatchi
Won her the election was academia.
Dear acorn (at 2020/06/16 at 4:05 am)
Thanks for your comment.
Some observations:
1. You misunderstand the purpose of my blog. While they are rarely 5,000 words as you infer (they are mostly around 2,000 words) they are not written as ‘publicity’. They are my academic work – to provide a logic and evidence base for others to use if they see fit. They are also my creative writing which serves another need.
2. I don’t write ‘hook lines’. I am not into marketing. I am an educator and education is about depth of knowledge.
3. You write that this “should make sponsors of MMT wonder if they are getting value for money”. When was the last time you paid to read my blog posts, paid for my labour time and work? No-one sponsors my blog. Over the 16 years it has been offered I have received no financial support from anyone to make it available.
If you are inferring that the donations I have sought for the MMTed project are funding this blog then you are completely wrong. Not a cent of the donations received fund the blog in any way. I absorb all the costs of the producing this blog personally, without recourse to advertising, sponsorship or any other financial reward.
The donations to MMTed are exclusively being used to develop that educational initiative and I do not take a cent of that money personally.
4. Perhaps you will better enjoy Twitter or something similar which offers the ‘depth’ of analysis you think is appropriate.
best wishes
bill
Richard Holden mmmm. I remember reading an article of his some years ago and wondered then which planet he was on. He is a very good example of a product of the Chicago School of economics doctrine. And of professors who do not like to think. They can scramble the most esoteric mathematical formulas but thinking is not high on their agenda. I have a brother and a cousin, both of whom are very intelligent but neither like to think. Shouting someone down is their forte. It is very exhausting but as has been said, economics progresses one funeral at a time. Unfortunately I think that it will take another twenty years for neoliberalism to be recognised as the terrible world experiment it is.
Bill, I think the reason why the Nordic unions are against legislating for a minimum EU wage, is that their system of collective bargaining gives them higher wage outcomes compared to most European nations. If there was a standard EU minimum wage, below current Nordic wage rates, Nordic unions are frightened that it could encourage Nordic employers to push harder for lower wages in their industries.
Neoliberalism is still with us , the question is can its central premises be used against it to defuse it, to a point of making it look irrelevant. In Aikido you use the force of your opponent to defeat them. Time will tell.
Neil Wilson.. re pensions.
Can you point to an expanded argument please…thanks.
Re Bill:
“Not a cent of the donations received fund the blog in any way. I absorb all the costs of the producing this blog personally, without recourse to advertising, sponsorship or any other financial reward.”
Hopefully my recent purchase of ‘Macroeconomics’ will put a well-deserved shilling in your pocket. sadly it is unlikely to be a best-seller among other non-academics with a personal interest in understanding this stuff. Maybe we need a more engaging title… “Harry Potter and the Secrets of Gringotts” perhaps?
Re acorn:
When I was a full-time lecturer teaching the complexities of broadcasting engineering I frequently listened to other far more capable engineers than myself explaining complex subjects and often thought that ‘if I didn’t know what he was talking about, I wouldn’t know what he was talking about’. Explaining the basics of MMT to the masses needs not only an articulate and engaging presenter but also someone who can remember what it was like to be a beginner struggling to understand a complex topic and can avoid talking over everyone’s head from the start. Maybe we need a stand-up comedian who can make everyone laugh out loud at the ridiculous nonsense they have previously always believed because it’s what those in power have always said. As you may have noticed I’m a strong believer in the power of humour. Much preferable to riot anyway.
“Here is where, I believe, Bill confuses an academic victory with a sociopolitical one. Rarely have academics ever led a major sociopolitical evolution/revolution. The driving force always comes from the people…”. (Newton Finn)
I respectfully disagree.
“The people” is an abstraction. The driving force comes, always, from ideas, which are the products of the minds and imaginations of the specific individuals who are their begetters. Whether and how widely those ideas then get spread and taken-up depends on a multitude of factors of which the most important is whether they chance to come to the fore just when the time for them is most ripe but, even then, without political action they get nowhere. Only at that stage (if at all) do “the people” get to play any part – classically (though not inevitably) by the violent and bloody overthrow of the existing order. By revolution in a word, channeled by whoever or whatever group succeeds in gaining leadership. I must say I struggle to imagine MMT’s ideas following that kind of course (I’m not suggesting that that’s what is being proposed here).
Nor did the existing order, neoliberalism. Interestingly, one of its most prominent aims from the very start was the patient building-up, through publications, seminars , colloquia and – especially – think-tanks of a “thought-collective” as a bridgehead from which to infiltrate (by influencing appointments through sponsorship) the economics departments of the great majority of prestigious universities throughout the non-communist world (except Germany, where ordo-liberalism held, and holds, sway). Which just goes to show how wrong it is to suppose that “the people” necessarily have any hand at all in the success of such movements.
@Robert H
As usual you display your fatuity.
You response is based an the ‘there’s no such thing as society’ which appears in various guises. You biases are revealed when you start creating a polarity between the Ayn Randish conception of the ‘individual’ and posit the ‘people’ in a revolutionary framing as if only those polarities actually exist.
No one comes up with ideas divorced from the social forces (education, cultural streams) that they live in and often one notices ideas, inventions popping up simultaneously in different parts of the world. Indeed many ideas evolve out of collaborations and plagiarisms yet it is in the interests of the Right to posit some ‘supreme’ individual, popping out of nowhere as the sole , patented creator.
I refuse to engage with anyone who is temperamentally incapable of abstaining from ad hominem attacks.
Robert, I couldn’t agree more that the great ideas embraced by “the people” in any significant revolutionary/evolutionary movement come from significant thinkers, people like Bill. But Bill and others have already painstakingly developed MMT into a clear, coherent explanation of how fiat money, in a currency-sovereign state, operates and can be invested to bring about a better socioeconomic order, that investment being limited largely by only existing or readily obtainable resources. What I was suggesting is that traditionally conservative academia will likely not be in the forefront of following MMT’s lead, but rather that large groups of organized citizens must grasp the basics of MMT and understand the extraordinary agency it provides to federal government. They must then incorporate these axioms of MMT into their sociopolitical demands and agendas, answering at the outset the neoliberal question that has hounded and stymied such proposals time and time again: How will you pay for it? That’s where “a Thomas Paine of MMT” would come in, not in doing what Bill does so well, but rather in getting the masses behind the great ideas. Bill himself recognizes this need for MMT to directly influence public discourse, but he also knows that he is an academic, one of those vitally important significant thinkers, not himself a political animal. The saying is old but true: “If Paine had not lifted his pen, Washington would not have lifted his sword.”
Newton Finn- Love your stuff! Keep at it brother. Great discussion all around. Keep working on your elevator speeches everyone.
Agree 100% that the “regular people” have to understand. We need a good publicity stunt or two, I think.
@ Newton Finn
You’re right of course that MMT’s concepts aren’t uniquely hard to grasp (though IMO they are hard!) by – for the sake of argument let’s call her/him – “the average person”, and that there ought not therefore to be any greater difficulty in getting them understood and taken-up widely among the public than any other equally- or more-difficult sets of ideas – given only that the requisite leadership skills are deployed.
Perhaps we have to look elsewhere for an explanation as to why MMT’s ideas haven’t – despite such advocacy – “caught on” to any significant extent with the general public so far? Perhaps that has little to do with an absence of skillful persuaders and more to do with sheer luck – an accident of timing.
In contrast, the October Revolution for instance might never have taken place – either when it did or at all – if the Germans hadn’t transported Lenin in a sealed train like a bacillus from Switzerland to Sassnitz (whence he could make his way to Petrograd) in April 1917 – an extraordinarily propitious piece of timing. But then it wouldn’t have been propitious if there had been no WW I, and so no February Revolution ….
I understand that your frustration stems from your belief that an equally propitious time for neoliberalism’s dethronement, and replacement by MMT, has been (fortuitously) created by the corona virus and all that’s required is to “seize the day”. You may be right but for my own part I don’t see anybody analogous to Lenin and the Bolshevik Party ready and waiting nor – more importantly – anything remotely resembling the groundswell of rebellious mass-discontent there was in 1917 Russia waiting only, like a barrel of gunpowder, for someone to light the fuse.
MMT’s time will come, I’m sure – but I think that as Bill says it will be through patient perseverance, organisation and – above all – education.
While learning about mmt, one thought I had was “there is a magic money tree – it is owned by the government.”
Dear Newton
We are both in agreement that simplicity of the message is the key. It must be cogent, understandable and irrefutable. It also has to change the way we think about things. This may help. It is a question one of my long-deceased patients posed to me decades ago. Tommy was a squaddie at the Somme and had worked in the tunnels under German lines – the Balmoral crater at La Boiselle was partly his handiwork. He asked:
“Imagine a great catastrophe and all life on this planet was threatened with extinction. Right at the end we discover another planet, much the same as Earth – just as bountiful with an atmosphere, oceans and fresh water, with a rich variety of plants and animals – but no humans. We are able to send one spaceship containing a hundred children before life here is finally extinguished.
All they can take with them is our advice and guidance on how to survive and prosper in their new world. Principles and practicalities. What advice would you give?”
We don’t need a spacecraft to escape just yet, but I suspect the message people are desperate to hear, is very much the same one and we would give to the children, should the circumstances above ever arise. That is because we are very much in the same place.
I hope you are keeping well.
All the best.
“Neoliberalism then goes nuts trying to close the government deficit. They have the causality backward.”
They have the causality just right, they do not and never have the prosperity for all and sundry as their goal.
The core ideology is a counterrevolution on 20th century democratic movement and its partly economic democratisation, the sort of socialism that occurred under the 20th century.
An historical anomaly?
The main fear of the right and the few of democracy was that the many should take their “money” and power. They skilfully eliminated that risk inside the democratic system.
One must separate the sales pitch that attract the middle-class crowd and what is for sale.
Neoliberalism is a tremendous success, probably way beyond what was expected. A massive transfer of economic power and wealth from the many to the few have taken place under neoliberalism. Fewer and fewer control more and more economic power.
Its high time the lefty and do-gooders’ pundits stop analyse and talk as neoliberalism is or ever was an ideology aiming for the prosperity and well-being of all and sundry. The sales pitch is and always was a lie. An ongoing con-game.
Historically the normal state of affairs. The few control the many.
The fight isn’t about facts and logic, it’s a fight of who has the power in society.
Thanks, Mark. I have good days and bad days just like all of us, or as my more upbeat wife likes to say, good days and better days. Your scenario of the message we would send to those about to board the spaceship is a powerful one, cuts through all the BS that swirls around us…and inside us. The closest I’ve come to grasping an elemental, universal value has been in pondering what Albert Schweitzer called “reverence for life.” I know that Bill disagrees for good reasons, but perhaps MMT should claim higher ground, choosing to be not merely a lens through which to see reality but also a vehicle with which to change it, to instill in our socioeconomic existence a value along the lines of what Schweitzer distilled. I’ve always loved the tagline of E.F. Schumacher’s “Small is Beautiful;” i.e., “economics as if people mattered.” All the best back to you, my friend.
re: vote for pedro
While learning about mmt, one thought I had was “there is a magic money tree – it is owned by the government.”
Yes, it really is that simple! But as every housewife knows “Money doesn’t grow on trees”. Telling every housewife that 21st century fiat money doesn’t need to grow on trees because the government can make all the money it needs out of absolutely nothing isn’t going to convince them overnight.
For sure the NeoLiberals will use this crisis to further entrench their ideology. Me personally have never had a position of employment that has paid me a livable wage in my entire life.
This will not change and the current agenda will continue unabated.
Those who contract Covid-19 & die will be the lucky ones.
Dear Newton
Good things come in small packages. We shall see how the political class deal with the above later tonight. If you can tune into the BBC Radio 4 Any Questions in an hour, I’ll be asking them the same question. What expectations should I have?
Kindest
Mark
“But as every housewife knows “Money doesn’t grow on trees”.”
Maybe better stop talking about money and finances, as it was the “economy”, and start talking about the real economy instead.
The economy is human activities, the way we create value by using our knowledge and talents. Today’s waste of human resources has no place in the cynical world of finance.
What is called the left these days are obsessed with the neo-liberal framing of the importance of “finances”. Someone say we ought to activate available resources and even what goes for the left are concerned how it shall be “financed”.
Housewife’s used to be well aware that potatoes don’t grow on trees and you primarily need seed potatoes and soil and there will be no potatoes by sticking money in the soil.
Re /lasse.
I take your point about human activities being what really matters but if you consider money as the lubrication that allows the machinery of human activity to operate in an optimal fashion then it is a critical component.
re: Kitwn
Of course, money is an advancement in human interactions creating value. But in it can only be artificially scarce, it can never run out in real terms. Real material and immaterial resources can.
My point is that any normal person can understand this if it’s explained in the right way. When you focus on the money and finances you are playing in the neoliberal ballpark. Their reality description are deeply entrenched in people’s minds with the household analogy. People do not like to be told that their view of things been wrong, especially if it is right on the economy, real material resources are not in infinity supply.
The common perception of what money is must be hollowed out from the backside, not head on, by talking about the real stuff.
But what should people believe when for the new born MMT:ers all is about the “importance” of money.
There need to be some few simple images, like the household analogy, that can be used to draw from the sleeve hen people counter with “well, but where do the money come from”.
I do believe the Paul Samuelson had a point that there is a risk of some politicians not restraining them self (money creation) in advancing their cause. Therefore, the entire economic analysis and debate have to shift to what really matters.
My theory is that the 1% run things in the US and UK, etc.
They own the banks.
Banks are the main way new money is “created”. [Created as long as we ignore the loan contract (note) and the negative dollars it represents.]
Therefore, bankers create most new money and banks are controlled by the 1%, so the 1% control money creation.
If everyone understood that the Gov. cab create money too and the money it creates goes *not* come with an attached note of negative money; then the 1% lose one of their main sources of power.
If the people understood this, then the Gov. would control the creation of most money and the people would demand the Gov. do so in their interest . Not *just* to make the 1% richer.
This is the worry of the 1%.
It’s funny that this is the only active thread today on this blog.
There were people, e.g. progressive economics, in the 80s that said that when people just realised how false, detached from reality and against their interest this neoliberal ideology is they will reject it.
They hoped that there was a light at the end of the tunnel, but it was the headlight of an oncoming train.
Then it was merely a “mild” counter revolution on post war full employment society, now it has gone from bad to multiple times worse.
The release of banking and financialization in the 80s was skilfully used by the few.
They promised capitalist multiplicity that should benefit us all. What we got was an enormous concentration of who owns and control global business and capital.
With “money” created out of thin air by banks and financial institutions they bought “everything”.
“Then it was merely a “mild” counter revolution on post war full employment society …” (/lasse)
It was *never* mild. Have you not read The Powell Memorandum? It’s a war-plan (without munitions).
“… ‘money’ created out of thin air by banks and financial institutions …”
Isn’t that just what’s called “credit”? And doesn’t any modern economy need credit? I suggest credit-creation in itself is not the problem. It’s the use to which the credit is put that should be scrutinised and when all it’s used for is financial speculation and trading in already-existing assets such as real-estate adding nothing to society’s wellbeing the proceeds (classically termed “unearned income”) ought to be taxed away as to 90 or more percent.
Re robertH
The real argument seems to be between those who believe that new spending power should be created in the form of new money which does not automatically produce a future constraint or in the form of new debt which inevitably leads to large profits for the 1% and austerity policies for the rest of us. That’s an argument that might get some traction with the masses.
Much of the speculation on derivatives etc. can quite reasonably be described as no more and no less than gambling. But this is gambling which is subject to neither the legal controls nor the taxation applied to betting on horses or football. A small change in the legal definition of activities covered by the relevant legislation might be all it needs.