Yesterday, the Reserve Bank of Australia lifted the interest rate target for the ninth consecutive time (they didn’t meet in January) claiming that they had to do this to stop inflation accelerating and restoring price stability. Except inflation already peaked in the March-quarter 2022 as a result of the driving factors abating. Further, none of…
British Labour remains unelectable
What are the prospects for the British Labour Party? Since losing office in 2010, they have lost 3 subsequent general elections against one of the worst Tory governments in history. The government exemplifies bumbling incompetence. But that seems to be all that is required to outwit the Labour Party and its advisors. Since the disastrous December 2019 election, nothing much seems to have changed. Well, that is not exactly right is it. Things have become worse. They scrapped a leader that a significant portion of MPs could not support after having undermined him relentlessly in the leadup to the last election. It was as if they preferred to lose than have Jeremy Corbyn as Prime Minister. Then they kicked him out of party representation because he apparently has failed to ratify the dirty campaign against him. The new leader, was one of the most vehement proponents of the strategy that saw Labour turn its back on voters who had elected the majority of its MPS and keep harping on about a second referendum on Europe. The denial of the Brexit vote and failure to become the voice of Brexit cost Labour the last election no matter what those who try to manipulate the data to say something different might have you believe. The new leader also appears to be losing credibility over his purge of the previous leader. One can be as smooth and sophisticated as one likes. But if you don’t tell the truth, eventually, you pay the piper – even Trump has found that out, not that he exemplifies either smoothness or sophistication. And the other death knell – their fiscal rule – looks like it is now being recycled by the new Shadow chancellor. That means they will go to the next election in an unwinnable position because the citizens that they have conditioned to believe in the neoliberal macroeconomic fictions will, in turn, not believe that the Party can deliver a progressive agenda without causing financial chaos. You reap what you sow. So it doesn’t appear that they have learned very much so far.
Labour seemingly up to its old tricks
A Reuters report the other day (November 24, 2020) – Britain must rebuild economy with an eye on debt levels, Labour says – is bad news for any progressive Labour Party members who might have harboured ideas that the Party would jettison its fiscal rule nonsense that helped destroy its election chances last time.
I wrote a lot about the so-called Labour Fiscal Credibility Rule at the time.
You can see the sequence of blog posts by consulting this final comment on the issue – The British Labour Fiscal Credibility rule – some further final comments (October 23, 2018).
You will see links to 16 prior analyses of the Rule or rules in general.
I also had a meeting with the then Shadow Chancellor in October 2018 but his advisors just parroted the usual neoliberal nonsense about how powerful the City of London is and that government has to appease the financial markets lest they destroy the currency.
I left that meeting concluding that the British Labour Party hasn’t made much progress on the macroeconomic front since Dennis Healey lied to the British people about having to borrow from the IMF in the mid-1970s.
They were still wheeling out the same nonsense.
There was a followup post when it became clear that – Forget the official Rule, apparently, there is a secret Fiscal Credibility Rule (June 19, 2019).
As the election approached, I wrote this warning – Invoking neoliberal framing a language is a failing progressive strategy (British Labour) (November 19, 2019).
The point was that one cannot say that the Labour Party wasn’t warned about the stupidity of their ‘Rule’.
And, in the last weeks before the December 2019 election, they obviously worked out that the ‘Rule’ could not be delivered within the parameters of their proposed electoral manifesto and so, without fanfare changed it.
Please read – Impending British Labour loss may reflect their ambiguous Brexit position (November 28, 2019).
It was obvious that one doesn’t change a ‘Rule’ that is seen to be workable.
The point is that, by tying themselves into this neoliberal straitjacket, the British Labour Party limited the political space they would have to operate in.
The political debate would have become focused on whether the ‘Rule’ was being obeyed rather than what the government was actually doing with its policy parameters.
So, just days before the election, they changed the ‘Rule’ because so-called independent analysts agreed with my assessment that the policy manifesto and the ‘Rule’ were inconsistent.
So much for Labour’s team of experts and advisors who had pushed them into the ‘Rule’ corner, from which there was no where to go that was attractive.
Add in the Brexit calamity that Labour created for itself, and you have to 2019 election disaster.
The Reuters article suggests that the Party hasn’t learned much since December.
You can make your own mind up because the full video of the Reuters Newsmaker event (November 23, 2020) is available – HERE.
There is a lot of talk about jobs, jobs, jobs (JJJ).
But then there is also talk about “eyewatering spending”, “taxpayers’ funds” and so we are immediately framed back into Fiscal Credibility Rule language and concepts.
Ms Dodds was asked whether the deficit was important? She played into the implication that the interviewer was intending – that it would be too big.
She said it mattered.
I was hoping she would say that it wasn’t nearly large enough given her JJJ agenda.
She was asked why the deficit mattered.
She said that it mattered because:
While we may be currently in a situation where there are low interest rates, of course that may not continue forever. We don’t know what kind of economic circumstances are likely to be facing the country in the medium to long term …
And then she started quoting “IMF experts” as her authority.
Eventually interest rates are apparently going to increase and the government will not be able to afford such a big deficit.
Fiscal Credibility Rule Mark 2!
She said that the speed at which the government would have to cut the deficit depended “on the interest rate context”.
What happened to JJJ?
She preferred a longer-term perspective for “putting the brakes on”.
Was debt too high?
Well she claimed it was under the conservative government and a future Labour Government would have to adopt “a sensible fiscal position given the risk of interest rates increasing” (paraphrased).
She was asked how the government could rein in the deficit.
Well, apparently it has to get a grip on its current spending.
The Reuters article claimed that Ms Dodds:
… is an important part of Labour leader Keir Starmer’s drive to rebrand the party following the departure of hard-left leader Jeremy Corbyn, under whom Labour lost two elections and made big-spending promises.
This is the strange world we operate in.
Jeremy Corbyn’s Labour Party killed its electoral prospects not only because it was a divided rabble with the Blairites refusing to accept the world has passed them by.
Its own internal politics required it to adopt the Fiscal Credibility Rule and all the destructive language and framing that supports that.
It could not credibly advance its progressive agenda while it professed to be obedient to that ‘Rule’. Everyone, other than the self important advisors who led the Party down that road, could see that.
Now, Starmer is trying to run a JJJ agenda which will require massive deficits for the indefinite future especially given the chaos that the pandemic is creating in a Britain where the government and (maybe) the people prefer large-scale deaths to well administered and finite lockdowns (Victorian style).
And he wheels out Ms Dodds who just rehearses the neoliberal framing that is being revealed as time passes to be flawed at the most elemental level.
I cannot see Starmer surviving anyway. The Party is deeply fractured and will not heal easily.
And if he continues to purge the Corbynist elements and play cute about Europe then those fractures will deepen.
Ultra conservatives seem to be more progressive than Labour
And the strangeness continues.
I laughed when I read this commentary (November 25, 2020) – Calm down, stay cool – and drop this talk of tax rises. It’s too early to know how everything will settle down – from one Ryan Byrne who is the “Chair in Public Understanding of Economics at the Cato Institute”, and I do not need to remind anyone of the bona fides of the Cato Institute, which was founded by the Charles Koch Foundation as part of the Powell Manifesto strategy to sink social democracy.
Anyway, Mr Byrne, writing from the “home of conservatism” tells us that any debate about fiscal austerity at present:
… is massively premature. Yes, this pandemic has caused masses of government borrowing-producing a deficit of 21 percent of GDP or around £400 billion, … But we are (still) in a once-in-a-half-century pandemic where we have knowingly kept shuttered swathes of the economy and paid people to sit at home.
There will obviously be “deficit reduction” next year, in the sense that the vaccines ending the pandemic will bring furlough to a close, make Covid-19 test and tracing redundant, and see the end of the inoculation and PPE scrambles. Like demobilisation at the end of war, so the government will de-Covidise its budget with drastic cuts to virus-related expenditure. Likewise, as things re-open, tax revenues will ascend again. So, the deficit will fall.
But anyone who claims they know what level it will settle at, and so what “needs to be done” to re-achieve pre-Covid borrowing levels, is, quite frankly, talking poppycock – including the Office for Budget Responsibility.
Okay. Get that.
What they should be doing
The Tories are spending big at present and have seemingly resolved, for the time being, the conflict that their manic conservative wing might have brought given their obvious discomfort for such fiscal adventure.
It is also clear that they are lining the pockets of their mates through very questionable consultancies and contracts etc.
But instead of just saying that the Tories are corrupt and wasting spending, they should be out there on the front line congratulating the government on jettisoning its austerity narratives and using the currency capacities it possesses to help overcome the dual problems of Brexit and the pandemic.
They should be constantly noting that the old narratives about deficits and debt leading to chaos and insolvency are obviously without foundation and congratulating the Government on getting beyond those destructive myths.
They should be urging the government to spend even more and be comfortable about a much bigger fiscal deficit.
They should be congratulating the Bank of England for purchasing a high proportion of the new debt being issued by the Treasury.
They should be pointing out that this means the government can always control yields on any debt it (unnecessarily) issues so the future course of interest rates is really irrelevant to the viability of fiscal deficits.
They should be urging the Bank of England to go the next step and write off all the government debt it holds – and outline to the British people that it is just a number in a computer system that can be changed to zero as much as £100 billion, or whatever.
They should inform the British people that this would not change the viability of the Bank of England, and the inflation risks of the deficits have already manifest – they are in the spending growth not whether that spending is matched with debt issuance, and not variant to who holds the debt issued.
They should tell the British people how the Treasury actually spends – that is, that it instructs the Bank of England to type numbers into bank accounts on its behalf.
Type, type, type, JJJ.
And given the Government has already increased the Ways and Means account allocation, they should explain to the British people what that means and then urge an even greater increase to reduce the debt-issuance charade.
They could show the British people that using the Ways and Means facility doesn’t increase inflation and just makes the process of government more transparent and reduces the creation of corporate welfare (the debt-issuance charade).
Instead of claiming that they will have to worry about the debt, why not just show the debt up for what it is – previous deficits that have not yet been taxed away.
They should be advocating large-scale public sector job creation.
If they are serious about JJJ then they need to have a large-scale jobs plan.
All of this is what we call education!
It is also what we might consider to be leadership.
And the political pay off would be enormous because it would wedge the Tories well and truly.
It would open the fiscal space for a future labour government.
But, instead of taking advantage of the Tory abandonment of its traditional austerity mindset (albeit temporarily), the Labour Party looks like it is reverting to its Blairite form – its macroeconomic neoliberalism.
If it only realised that there is a tremendous opportunity to wedge the Tories while they are in a dissonant state (relative to their DNA).
By ratifying the large deficits etc, the Labour Party could make it much harder for the Tories to revert to form.
But by restating the sort of macroeconomics that underpinned the Fiscal Credibility Rule, all that Labour is doing is following the same track that has made it unelectable.
They should initially review all their advisors and clean out the ones that think the ‘City’ is dangerous.
Aside – Risk of Inflation
An interesting byproduct of the pandemic is that it has impacted on supply chains, which should increase the risk of inflation arising from bottlenecks, in the face of substantial fiscal support on the expenditure side.
The fact that no such price pressures have emerged after nearly 12 months of disrupted supply chains suggests that inflation is a difficult beast to provoke.
And then we get to the EHRC Report and the shocking way that has been handled.
Assessment: Unelectable as they currently stand.
PS: I caught my first flight today in 6 months. Very bizarre. But it is great to be back in Melbourne.
That is enough for today!
(c) Copyright 2020 William Mitchell. All Rights Reserved.
This Post Has 32 Comments
The moderate left is infected by the neoliberal vírus and pursues right-wing policies when in power.
Remember Shroder in Germany and Blair in Britain. They betrayed their voters; Workers don’t trust those parties anymore.
The SPD is as unelectable as the Labour.
Labour has something else aggainst them: brexit. The British lower classes were fed-up with the EU nightmare and nobody understood the position Corbyn assumed during the long discussion that took two Tory governments to take.
“They should tell the British people how the Treasury actually spends – that is, that it instructs the Bank of England to type numbers into bank accounts on its behalf”
Specifically under the authority of section 15 of the Exchequer and Audit Departments Act 1866 https://www.legislation.gov.uk/ukpga/Vict/29-30/39/section/15
(There’s also section 13 which authorises “Standing Services” – which would likely be the legal source of Job Guarantee wage payments).
“(1) This section applies in respect of sums which Parliament has authorised, by Act or resolution of the House of Commons, to be issued out of the Consolidated Fund.
(2) The Comptroller and Auditor General shall, on receipt of a requisition from the Treasury, grant the Treasury a credit on the Exchequer account at the Bank of England (or on its growing balance).
(3) Where a credit has been granted under subsection (2) issues shall be made to principal accountants from time to time on orders given to the Bank by the Treasury.”
Note there is no legal option for the Bank to say “no”.
Once you realise that the British Labour Party exists precisely in order to *prevent* socialism in the UK, everything it does makes perfect sense.
There’s no point even moaning about its behaviour – for socialists, it’s a lost cause beyond redemption, and, if we are to be honest with ourselves, has been for most of its history.
Dodds is particularly inept, coming across as timid as a rabbit, and way out of her depth; it’s best to expect nothing of any use from her Shadow Chancellorship, or the Labour Party in general.
Any new leftist movement or political party that might emerge as a result of earlier and ongoing purges will inevitably face the same media and political onslaught that Corbyn faced – but at least it will not be subjected to appalling betrayal and sabotage by some of its own MPs and senior party workers, working shamefully and unforgiveably against its own electoral victory – and making a mockery of Parliamentary democracy as a result.
“The fact that no such price pressures have emerged after nearly 12 months of disrupted supply chains suggests that inflation is a difficult beast to provoke.”
The other side of that is that we’ve produced all this with quite a lot of a workforce out of action and supported.
Which suggests that quite a lot of previous private sector activity was adding no more net value to the economy than government sending out a furlough payment cheque.
I share Bill’s deep frustration about British Labour’s abysmal failure not just to represent the interests of their traditional “working-class” constituency but even of a good slice of the cohort up to and including even the moderately-affluent – many of whom could be detached from support for the Tories if only Labour would learn from their mistakes.
Because the Tories really are incorrigible: nothing, not even this pandemic, will make them change their spots. We have just had Rishi Sunak’s first Autumn Statement, which because of Covid-19 has not been able to be the usual pre-budget dress-rehearsal affair but a much more sketchy stop-gap.
According to BBC News its key points include:
⦁ The UK economy is expected to shrink by 11.3% this year
yet – incredibly –
⦁ An estimated 1.3 million public sector workers will see their pay frozen in 2021-2,
⦁ Unemployment is expected to reach 7.5% next spring, with 2.6 million people out of work
You couldn’t make it up!
Absolutely all of the BBC’s analysis leading up to and accompanying this farrago has been couched in terms of the national accounts being analogous in all essential respects to those of any household. So their journalists are no less incorrigible than the Tories.
But so is Labour – with even less excuse (if that were possible).
“It was as if they preferred to lose than have Jeremy Corbyn as Prime Minister”: they quite clearly did – witness the leaked report. Labour would have won in 2017 if it hadn’t been for Labour MPs/staff and the MSM. For what it’s worth, my view is that Labour may well win in 2024 for the same reason as they won in 1997 – voters fed up with the tories.
I don’t despair about getting the truth out there. It won’t be long before the fact becomes clear that, despite huge money creation since the GFC and even more since the pandemic, the dreaded inflation has never occurred – indeed the opposite.
I participated in a CLASS webinar yesterday where I raised the only substantial question: when will Labour stop promoting the myth about money creation – government constrained like a household or business? All 4 panellists agreed the false analogy and mentioned MMT, although the only professional economist (friend of Meadway who unfriended me last year because I challenged his concept of land – snowflake) showed the most ignorance. I tried today to contact the MP who was on the panel and will keep trying. He’s owed me a meeting on LVT for several years. I met him first at a Labour CND conference. I have hopes…
“Once you realise that the British Labour Party exists precisely in order to *prevent* socialism in the UK, everything it does makes perfect sense.”
Exactly ! It’s purpose is to keep the middle ground on the right wing spectrum. US democrats strategy is exactly the same.
I don’t think the neoliberals realise they are in the last chance saloon. Biden has breathed life back into them. However, they always double down on their mistakes it is an inbuilt mechanism with them. The best thing that could happen is Starmer is destroyed at the next election but every media in the UK will be behind him supporting him.
Way I see it only one thing that saves the neoliberal parties from the populists. That’s the top end of town. The top end of town might wake up, get together and recognise they are being exposed every day by Neoliberalism. Actually reign in them in as they become more threatened.
The top end of town will reign three neoliberals in it’s becoming dangerous for them. Allow a few more scraps to be laid on the table for the serfs. Unti, everything calms down a bit. Try and make things blow over for a bit before they revert back to type and lurk in the shadows. The top end of town can wait until this generation dies out before imposing their will on the next generation. The top end of town always play the long game.
The top end of town can always put Biden in and Starmer very easily. No problem to them.
Reset the geopolitics of the EU and continue to expand against Russia and China. Whilst throwing a few extra crumbs around until they are ready to cause another crises. Cause the crises which puts the right back in charge and then act as if the preceding Biden and Starmer years never happened.
Biden and Starmer will be based effectively by the top end of town to serve their purpose, protect them. Which is why the two of them where hand picked by the top end of town and put exactly where they are.
I agree with Carol, i could see a scenario where Starmer does win in 2024, very unlikely but possible. Tory overreach and popular fatigue with lies and Trump-lite rhetoric is a way they could lose it. Most likely though the LP will be out of power until at least the end of the decade, maybe forever.
Essentially Starmer has crossed the rubicon now, he either fully purges the left or he won’t be a viable candidate in 4 years time. What that means is a further lurch to the right, in tone and policy, no point appealing to the left you’ve just purged. Risk averse, they will present themselves as the ‘sensibles’ – there’s virtually no chance of this incarnation of Labour increasing the public understanding of money.
I’d be quite happy to see them go the way of Pasok and all the other centre left detritus in Europe, they’re hopeless.
“There’s no point even moaning about its behaviour – for socialists, it’s a lost cause beyond redemption, and, if we are to be honest with ourselves, has been for most of its history” (Mr Shigemitsu)
Isn’t that a mite sweeping? The postwar Atlee govt did pretty well, under extremely difficult circumstances. I’m struggling to imagine what more you think they ought to have done.
Depends what “most of its history” means, I suppose.
Yes interesting times. Just a few years ago it was considered to be ultra -left to be anti-austerity. Now it’s all quite respectable. The Starmerites are racking their brains to think of ways of reversing all the recent progress made but, at least for now, we have Dodds and co saying that an economic recovery has to be in place before the ‘public finances can be restored’. It’s not perfect but its somewhat better than what she would have said 10 years ago.
The so-called “progressive left” now has the problem that a newly discovered disdain for economic austerity can’t really be reconciled with their love of a very austerity inclined EU. More interesting times to come in the EU, I expect. The Germans and the Dutch will lively want to see a swift end to using what they see as a Covid induced excuse to break all the EU fiscal rules. However, they’ll need to be broken for a lot longer if we are to see a general economic recovery in the EU.
In my darker (perhaps more lucid) moments, I reach the point where I think that the radical left, including many MMTers, should abandon direct political engagement altogether. To quote Mr Shigemitsu (out of context): “for socialists, it’s a lost cause beyond redemption, and, if we are to be honest with ourselves, has been for most of its history.” What I think should be our new strategy (in these darker moments) is to provide an unending torrent of novel and constructive ideas–in a non-threatening, non-confrontational manner–to the neocons/neolibs who have won the war in the political arena. Not new political parties and candidates but rather new socioeconomic concepts and proposals should become the forte of the radical left, including the MMTers within it. Has not Bill already blazed this trail, albeit while retaining some rather sharp edges? Like it or not (and I hate it), humankind seems to have returned to a form of feudalism, and in such a hierarchical system, the only way to work for progress for the masses is by constant appeal to whatever intelligence and better instincts may exist within the royalty. Protest and civil disobedience remain, at best, occasionally useful political tools, neither to be abandoned nor unrealistically emphasized. The consolation in this kind of resignation is that it has always been creative ideas, not brute political power, which have driven socioeconomic progress since we came down from the trees. Don’t worry, tomorrow I’ll probably feel better and go back at the bastards with everything in me.
In Canada Justin Trudeau, candidate in the federal election in 2015, made the startling and daring suggestion the government run a $10 billion deficit (0.5% of GDP). The Conservative Party and the nominally social democratic party (NDP) denounced this as irresponsible. Trudeau won and attributed his win to the deficit promise. Once in power his government actually ran deficits close to $20 billion.
Now 5 years later the deficit is literally dozens of times greater without catastrophic results. Quite the contrary in fact. It has saved the economy and rescued millions of people. The economic power of our central government is now out there for all to see. Pro-austerity forces are finding it difficult to respond, for now.
This is a once in a lifetime chance for the non-right to focus on the kind of society we could have using the economic power of our central government. However as soon as the economy is secure for big business interests their spokespeople (Conservatives, think-tanks, media) will begin beating the austerity drums using the usual tropes. It’ll be important for the non-right to point out how self-serving they are. In Canada that will be a little more difficult than in some countries because no direct subsidies have been given to business. Subsidies have gone to the unemployed and workers and rent subsidies for small business. Nonetheless it will crucial to underline that business interests want austerity not because it is necessary but because it keeps wages low and provides profit opportunities for investors in private services that should be public (healthcare, long term care, etc.).
Re Newton Finn, Nov 27 @ 0:49.
I disagree, as I am sure you will tomorrow! Our ruling elites are not monolithic. They too have divisions and weaknesses that we can exploit. At times they are weaker than usual or divided or confused and that is when the progressive side can make advances. Progressive forces face the same challenges, and a vast propaganda machine, and when they are weak regressive forces push us back. These forces play out together, opening and closing possibilities.
Public healthcare (Medicare) in Canada came about when the labour movement was strong, there was a minority government and the social democratic party held the balance of power. Today we are in the same situation at least politically, and it looks like we are about to get a national prescription drug plan and a national childcare program. We’ll see if it really happens or not but it’s looking good, for now.
I should add that our public healthcare programs, in effect for 50 years, have not come under attack by big business interests. Business actually benefits because the programs help keep their costs low and the same would be true for new programs for prescription drugs and childcare. But all Canadians, especially low income earners, benefit greatly as well. The attacks have come from low level profiteers such as particularly greedy doctors, and low tax seeking conservatives.
Clearly these are not programs that threaten capitalism but they do greatly benefit almost the entire population, say 90%. They make a big difference in day to day life. In Canada we need only look to the country to our south (USA) to see what their absence means. For the bottom 50% it is a nasty brutish place. Even many of the top 9.9% (minus the very elite 0.1%) suffer considerable insecurity (see “Predatory precarity” at Interfluidity, August 20, 2019; the comments are interesting too; several disagree!)
Mr S, I don’t think you should call someone timid when you yourself hide behind a nom de plume.
My hope is that there will be a left-of-centre political grouping of some sort, hopefully eventually inside, though initially more likely outside, of Parliament. It could be made up of disaffected ex-Labour Party members who left post-Starmer, and topped up by those who may wish to leave as a result of Corbyn’s suspension, others in the Trades Union movement, and beyond.
I beleive that Chris Williamson is becoming involved in just such an initiative, and the great news about that is that he is on board with MMT.
Whilst it could expect the usual media and political reaction – initally ignoring it, then ridiculing it, then attacking it – a really powerful influence could emerge whereby, if it put up Parliamentary candidates in Labour marginals, a revived leftist movement could be a real threat to a centre-right “liberal” Starmerite party, and may well force a change in Labour Party policy and awareness in order to defuse the threat.
This is effectively what UKIP managed to do to the Cameron-led Tories on the single issue of Brexit – the “Left/MMT Party” equivalent might be to proselytise for the Job Guarantee, and an acknowledgement that deficit reduction simply for its own sake is damaging and unnecessary, should always be avoided – and clearly explaining why.
In the light of Sunak mooting some tax increases on the wealthier and corporations, to “repay” the so-called borrowing, wiser heads in the affected elite might eventually start to ask, “Who are we actually borrowing from, and to whom are we actually repaying this debt?”
Once it becomes clear that Sunak is increasing their taxes in order to pay back…absolutely no-one, there may well be a willingness to appreciate MMT, especially when it acknowledges that “money doesn’t grow on the rich”, and that we don’t actually need their taxes in order to spend money on the poor.
That might defuse the expected opposition somewhat – why have more (powerful and influential) enemies than you need to? Running against a Labour Party that still thinks you have to make the rich pay for everything may give an MMT-promoting party something of an edge with the top end of town, especially when increased profits from greater public spending is on offer.
(As an aside, I’ve never understood, since becoming MMT-aware, why the wealthy and corporations profess to dislike budget deficits so much, when money so conspicuously floods up, rather than trickles down! )
Mr Shigemitsu: The corporations dislike budget deficits because austerity = unemployment = cheap and meek labour.
Just yesterday I posted an reply about how Neo-liberalism IMHO was created after 1971in response to Nixon taking the world off the gold standard. IMHO, the goal was not to reach truth, the goal was to hide the truth. I have seen were several economists have said something like, “I know it is true that Gov. can easily deficit spend, but I hope the people never learn this, because the people can’t be trusted with this truth.”
. . . I’m not saying every economist was in on the planned “con”, but many were. Then economists set about brainwashing all economics students. Because of the billions behind the plan they were very successful. The people with the billions want the US to function as if it was still on the gold standard. That was the goal of Neo-liberalism.
. . . Fellow students of MMT, (“people”) I keep trying to go back to basics. To dig down with some one to find the key place were his error starts. It usually is where they accept as proven some conclusion of Neo-liberal economics. Then I try to show them that the conclusion is only proven if all the assumptions used to prove it are true, and if even one is false then that conclusion is not proven. It rarely works with people I meet, and I think that it also will not work with people with power (because powerful people are constrained by other powerful people’s beliefs).
. . . IMHO, this is true with people I meet, because of human nature. Humans have evolved to form tribes (societies) who share a common culture. For this system to work we evolved to learn the culture and then to *not* change later. So, people resist changing. If people changed easily, then societies would fracture too often.
. . . People, you are doing the same thing as everyone else. You resist changing, also. You do not evaluate posts like this one in search of truth. At least, your actions indicate this. The lack of deep replies to almost all ideas here blocks the lively discussion that could change minds. How many of you are willing to change to help MMT thrive?
. . . And Bill, it would be useful if there was a forum for such a discussion. It would be useful if there was a private message feature, so that people could talk one on one. If the climate crisis is as bad as we are told, we do not have 2 decades to win. We must win in the next couple of years.
Mr Shigemitsu wrote:
“(As an aside, I’ve never understood, since becoming MMT-aware, why the wealthy and corporations profess to dislike budget deficits so much, when money so conspicuously floods up, rather than trickles down! )”
Then Matt B replied
“Mr Shigemitsu: The corporations dislike budget deficits because austerity = unemployment = cheap and meek labour.”
IMHO, a key part of our problem here is one of the assumptions or conclusions of Neo-liberalism is the homo Economan assumption. That all people seek to gain wealth while crushing others WITHOUT LIMIT.
I read in college Andrew Carnegie’s book that he wrote late in life where he explained why he funded all those libraries. He explained that adding to one’s wealth at some point becomes useless because you already can buy everything you want. The Koch brothers disagree. They know that it takes a lot to buy the Gov. Besides, the theory says that it is the best of all possible worlds where everyone tries to (without limit) exploit all others.
This BTW is one reason that a 90% tax bracket didn’t damage the economy. It discouraged the super rich from trying to get richer. Next time we need a 99.9% tax bracket. And, we need to graduate the taxes on corporations to discourage them from growing too big. And we need to extend the XIIi Amendment to corps. now that they are “persons” in more ways; that is, no corp. can own another corp. because that is slavery and slavery of “persons” is unconstitutional. This means that what each corp. owns and earns what is clear. I don’t care if this is a problem, slavery is illegal, period. I’m willing to let corps. be “slaves” of people, but that is it.
Re Mr. Shigametsu@5:08.
Elites fear if the public understood MMT and the power of the government purse, real resources would be allocated to support public purpose (good publicly funded healthcare, education, long term care, childcare, infrastructure in the broadest sense, etc.) which would lead to a reduction in the elites share of resources, as well as their influence in the political process and society in general (as per Kalecki 1943). It would also mean fewer outlets for private investment and profit.
Keith Newman wrote:
“… public purpose (good publicly funded healthcare…)…”
I love your whole point however, I think that ‘good health care’ is *not* good enough.
Back in the 60s I was in HS and one of the schools said that a grade of C was equal to “Good”.
I suggest the word “Fine” for typical free health care , and the phrase “Super Fine” for what the rich can get.
Americans claim that the US “is the greatest, richest nation the world has ever known.
I claim that if this is so, then it can give all Americans free “Fine” health care.
Some other possible words for this are –> Superior=a B and Excellent=an A.
Steve, your history of neoliberalism is faulty. It was alive and kicking albeit on the back foot, as it were, through the forties, fifties and sixties. Also during that time, neoKeynesianism, dubbed more accurately by Samuelson as neoclassical synthesis Keynesianism, was not doing well. Joan Robinson called if bastard Keynesianism. So, when Nixon took the world off Bretton Woods at a stroke without any consultation in 1971, neoliberal adherents were effectively then pushing at an open door, after which, over the next 40 years, the framework became the dominant mainstream economic narrative almost the world over. Perhaps it shouldn’t be surprising how difficult the framework has been to dislodge, but its adherents appear to cling to its tenets like glue.
Thanks for the correction.
I was a little over sure. On other sites I said that it may have existed before.
So, now I’ll reword my theory.
“Neo-liberalism was repurposed in 1971 to keep the people from understanding that going off the gold standard was a big change and opened many doors for more Gov. spending.”
I’ll let you into a little secret – I use that name in order to fool people on the internet, because I’m actually a dog called Fido in real life, but if everyone knew that, they wouldn’t take my posts seriously.
Please promise me you won’t tell anyone?
Re Steve American@Nov 27, 14:59.
“The denial of the Brexit vote and failure to become the voice of Brexit cost Labour the last election.’ Spot on Bill. Got it completely wrong and lost their base. Historic fail.
Great post. Keep up the good work.
There is a distinct air of destiny surrounding MMT now, with the capitalist model failing in the west, them up to their eyeballs in ‘debt’ to Big Finance and forced to get their reserve banks to hoover up bonds.
The right-wing mindset is that private sector trade or the marketplace must determine everything including money creation because government can’t be trusted not to interfere. This is why commodity based money lasted so long. Because it had bullion or precious metal content it was seen as particularly useful by the “top of town” in promoting global trade and funding wars for centuries.
A compromise point was reached where the medium of exchange leaving the country to be melted down as bullion because of the price premium over nominal coin value was restricting domestic trade and the use of paper bank notes was introduced.
It was, however, relatively recently in human being’s history that commodity money was abandoned just under fifty years ago by Richard Nixon. Now, of course, we have crypto-currencies as non-government based mediums of exchange to take the place of commodity money. Polarized thinking appears to be a particular weakness of human beings!
As far as I know, the history of money is complete opposite to what you said. It has been more like money, in which ever form, was conceived as debt instrument, like how it exists today.
Right down to the concept of crypto-currency, it cannot work, as it is based on the same fail logic. It cannot and will not work purely for the simple reason that when you base an economy, which is ever growing, with limited commodity, the system will always fail, or grind to a halt very quickly.
Not to mention that is a highly unfair system.
Not to mention that crypto currencies are “mined”, i.e. created, in computers that are using a huge amount of electricity that is made by burning coal in China.
Try reading Christine Desan’s book “Making Money: Coin, Currency and the Coming of Capitalism” to get a better handle on commodity money. This most excellent book provides much needed historical flesh for a better understanding of MMT.
Cryptocurrencies and the commodity view has always been a mistaken viewpoint – fooled by the banking abstraction.
“In short, the fact that some particular asset that serves as money in this or that case is not very interesting. What matters is the balance sheets. Money is just a means of recording changes on balance sheets, of making transfers between ledgers. If we take the ledger view, then there’s no difference between physical currency and an instrument like a check. In either case the social ledger maintained by the banking system has a certain credit to you. You want to transfer a part of that to someone else, for whatever reason. So you give that person a piece of paper with the amount written on it, and they take it to their bank, which adjusts the social ledger accordingly. It makes no difference whether the piece of paper is a dollar or euro bill or a check or a money order, any more than it matters what its physical dimensions are or whether it is one sheet of paper or two.”
The most recent capitulation to the City of London has shown the colours of Annelise Dodds. Anyone on the Left fighting this Party is wasting their time, that’s for sure. https://labour.org.uk/press/anneliese-dodds-full-speech-to-bloomberg/
I attended a conference in Imperial College London a few years back. It was one of those organised by John McDonnell. I sat in a room with a panel that included Annelise Dodds and Jonathan Portes plus a few others. I said that Bernie Sanders advisor, Stephanie Kelton states that we should balance the economy, not the books, as government issues the currency. Annelise Dodds stated that what Stephanie Kelton states is “true, but we still need a fiscal rule.” I think that showed for me at least, our new shadow chancellor is now just a self server and being dishonest. She says what the City want to hear at the moment. She said to me in front of an audience that she understands the truth. She has rejected UBI as well, which I do not mind, but with no job guarantee either.