The term ‘neoliberalism’ refers to an economic program of deregulation, privatization, trade liberalization, corporatization and small government – a project to subject more and more economic activity to the whims of “the market”. At its core, neoliberalism is an attempt to make profitability the governing principle in all economic calculation. For this neoliberal aspiration to be approximated in reality, government must behave as if it is just another market participant. It must pretend to be subject to the same financial constraints as private corporations and to share their need for revenue. It requires maintaining the pretense that government has no capacity to act independently of markets; that there is no capacity for autonomous social action independent of markets; in fact, that there is no such thing as society. In short, obey the market, because there is no alternative. We are powerless to stand in its way. Or so the superstition goes.
It is quite common to hear that “we should not live beyond our means”. Well, in Australia, we have just voted to do so. Our most recent vote says, “we need to live beyond our means so that the government sector can move into surplus”. The LNP promises to balance the budget or put it into surplus by 2020. This means a vote for the LNP was a vote to be living beyond our means by 2020. Likewise, the ALP promised to balance the budget or put it into surplus by 2020. A vote for the ALP was equally a vote to be living beyond our means by 2020. The Greens adhere in their constitution to a principle of balancing the budget on average over the business cycle. A vote for the Greens was therefore a vote to live beyond our means on average. Taken together, these three parties attracted about 87 percent of first-preference votes. So, at the very least, 87 percent of us have voted for the country to live beyond its means, no later than 2020.
The following is a video featuring Bill Black and Stephanie Kelton speaking to activists at the People’s Summit in Chicago, June 17-19. Bill discusses banking and financial fraud. Stephanie debunks the misleading “government as household” analogy and emphasizes resources, not money, as the constraint on a currency-issuing government.
J.D. Alt has put together an accessible video explaining fiat money, intended for a general audience. (Hat tip to jrbarch in the comments.) For additional background, comments and links see J.D’s post at New Economic Perspectives.
Note: Content-wise the video is very good apart from a minor quibble. (See the first comment.)
“Lerner’s argument is impeccable but heaven help anyone who tries to put it across to the plain man at this stage of the evolution of our ideas.” (Keynes to Meade, April 1943)
“The need to balance the budget is superstition … a myth. It’s like a religious doctrine that is used to get people to believe a certain thing.” (Paul Samuelson)
Election time serves as a reminder of how difficult it is to break through the popular illusions clouding public debate. Try as we might – and this goes for anyone seeking to dispel prevailing neoliberal dogmas – the public perception, if it budges at all, appears to do so painfully slowly.
A global search to uncover the World’s Biggest Idiots has succeeded almost before beginning. It’s barely dawn as these words are written and, already, it is mission accomplished! Take a bow, Australians, with a special nod to three thousand Herald Sun readers. The extent of our idiocy leaves the rest of the world not completely in the shade, yet somewhat humbled.
Part of the opposition to MMT, at least when it comes from the left side of politics, seems to stem from a desire to believe that taxes actually finance government spending. When confronted with the observation that, as a matter of logic, taxes (and government bonds) do not – and cannot – finance the spending of a currency-issuing government, many appear to recoil. In terms of framing, and as a way of “giving taxpayers their due”, perhaps it is worth highlighting that we, as taxpayers, do indeed pay something for the functions and expenditures of government. It is just that what we pay does not finance the government’s spending.
MMT makes clear that a currency-issuing government can always spend sufficiently to ensure full employment alongside low, stable inflation. It can always purchase what is available for sale in its own currency. The point – which, on a little reflection, should be obvious – is that the availability of real resources, not revenue, is the constraint on a currency-issuing government’s fiscal policy. Or, put another way, inflation is the constraint.
In the comments section of the previous post, which considered the idea of labor as the sole creator of value, a participant provided a link to an interesting lecture by Steve Keen. Although I had not seen the lecture prior to posting, broadly speaking I have been aware of Keen’s developing perspective on Marx’s theory of value since reading the first edition of Debunking Economics. It may not have been evident to most readers, but partly I had Keen’s critique in mind when writing the post. It seems to me that his analysis highlights a need for those of us who defend Marx’s theory to explain why it is correct to consider labor the sole creator of value. In entertaining one possible rationale, the previous post was not intended as a proof of anything. Otherwise, I would have titled it a proof rather than a musing. But now it might be worth backtracking a little to provide some background on the rationale for that post.
I am pondering the legitimacy or otherwise of Marx’s claim that labor is the sole source of value in capitalist commodity production. It is not clear that such a claim can be proved. Sometimes it is simply presented as an assumption. Other times various motivations or intuitions are offered. Here are some thoughts of that nature.