There has been discussion in the economic blogosphere recently, from a left perspective, about the merits or otherwise of employing an understanding of Modern Monetary Theory (MMT) in debates over policy and efforts to transform the economic system. One interesting post By Dan of Pruning Shears (h/t Tom Hickey) suggests that MMT might be a “dicey bet for liberals”. In reading this and similar arguments presented elsewhere, I find myself agreeing on some (though certainly not all) points, but differing in the conclusion to be drawn from them.
While Dan does acknowledge the relevance of MMT to the austerity debate, and its significance in this respect, he writes:
Nothing about Modern Monetary Theory is inherently just or equitable. It is … just a description of the way the world works – which is why I don’t really understand liberals putting a whole lot of time or energy into it. If one’s priority is the establishment (or protection) of just and equitable policies, Modern Monetary Theory is a terrible place to start. Every bit of time and effort getting it broadly accepted will get you precisely zero percent closer to those goals.
I agree that MMT does not dictate a particular political stance. If we were all equally informed about MMT, the effect would basically be politically neutral (though, granted, no analytical framework can be completely neutral). Personally, I think that this is a good quality for a macroeconomic framework to possess. It enables competing policy and theoretical analyses to occur on the basis of a shared and hopefully accurate interpretation of present institutions and sound macroeconomic and national accounting principles.
But although MMT in itself is more or less politically neutral, at the moment we are far from sharing equally the understanding it enables. Unfortunately, “the powers that be” appear to understand MMT much better than the rest of us. This has made it easy for them to confuse and deceive many people in a way that, as Dan notes, suits their purposes.
Unlike many of us, some people in very powerful positions do appear to understand that there is no revenue constraint on government spending, and they make use of this knowledge to expand the military and pass tax breaks for the wealthy while at the same time leading the rest of us to believe that cuts in social spending are necessary and unavoidable. This is not a danger that might result from taking a “dicey bet” on MMT. It is the reality right now, and will remain so for as long as this knowledge is mainly only in elite hands and not ours. A benefit of disseminating MMT is to reduce the level of confusion and deception in the general community.
I don’t know about the circles others move in, but in “my circles” (Australia) there is plenty of confusion. It does not seem uncommon to encounter people who think the government has run out of money. They do often believe that much of the suffering caused by austerity is regrettable but unavoidable. They are not necessarily ideologically predisposed to austerity but have been deceived into thinking the government is like a household. Survey evidence appears to bear this out.
When we come to understand that a currency-issuing government faces no revenue constraint and sets the terms on which it spends (there is no danger, for example, of bond vigilantes impeding that process), it becomes clear that anything within resource limits is potentially on the industrial and political table. Yet, in complete contradiction of reality, the powers that be currently have many of us believing that government (and hence we) are beholden to the profit motive and helpless in the face of the demands of the major corporations, when in fact it is the currency-issuing government that sets the limits within which the profit motive is operative, if at all. Anything from hard left to hard right is possible, but right now many believe that only the neoliberal policy approach is viable.
Admittedly, mere knowledge of the possibilities does not help bring those possibilities about. That will take concerted effort from below. It will require an exertion of democratic pressure on government that, as we all know, is all too happy to serve elite interests. There is no easy solution to that problem. In this respect, Dan and others are undoubtedly correct to ask, “Suppose we did understand MMT, then what?” All the real problems would still be here. Although we would be better able to distinguish real challenges from fake ones, the real challenges would still remain.
There is no reason we can’t be pushing forward on those real challenges at the same time as disseminating MMT. Out of necessity, some will be more focused on disseminating MMT while others primarily or entirely focus on concrete struggles. Both tasks seem necessary, but one task does not need to be delayed until the other is completed. Some people will be receptive to certain concrete demands irrespective of any supposed fiscal concerns. Others might ask “what about the money?”, at which point the question can be addressed. I suspect it is a question that will arise often, and will need to receive a convincing answer.
If the charge is simply that it would be foolish to put on hold all concrete demands until MMT is widely disseminated and understood, it is clearly true, and I doubt any MMT advocate would disagree. We might be waiting for a very long time if that were the approach. It is extremely difficult to get any message out when up against powerful forces and the universal reach and perceived credibility of the mainstream media. And even if the message is conveyed, many in the public may not be receptive, even resistive. Who wants to accept the implication, for instance, that they lost their job for no good reason? Some will cling to the neoliberal deception that their misfortune is a necessary sacrifice for the long-term benefit of the community. MMT offers hope, but requires a change in thinking. Neoliberalism requires “noble suffering” but no change in belief.
Both tasks – an assault on false consciousness and pursuit of concrete goals – need to be tackled at the same time, even if largely by different people. Success in concrete struggle is partly contingent on making headway in the battle over ideas. The more MMT or similar insights from related approaches to macroeconomics cut through into the collective consciousness, the more we level up the playing field for making progress in our social struggles.
Conversely, overcoming false consciousness is partly contingent on securing victories in concrete struggle. Elite claims that the introduction of public health care will cause the sky to fall in might work before implementation, but once a program is operating smoothly and the sky remains up there, in the sky, the message gets across just a little bit more that perhaps the official position was a lie. Maybe the official position is, in general, a lie.
At the recent Rethinking Economics Conference (starting at about 4:46 in the video of part 3 of the Macroeconomics and Policymaking session), an attendee asked Paul Krugman for his thoughts on being a Nobel laureate. Krugman observed that it is a credential that helps to get your opinion taken seriously in public debate, but a credential that, unfortunately, sometimes goes to people you might wish were not so enabled.
In a way, it could be said that an understanding of MMT is similar. It is an understanding that empowers, but we can’t choose – and have no right to choose – who it empowers. It is knowledge, and, as knowledge, should rightly be obtainable by all. But, as it happens, it is not so much us who should be worrying about a possible empowerment of the powers that be. They are already empowered. Like so much of MMT, we need to flip things the other way round to see things as they actually are: it is us who stand to receive knowledge that the powers that be already possess and would prefer we never possessed.
So, the way I see it, we should be glad that Modern Monetary Theorists and others in related approaches to macroeconomics have developed an understanding that, if widely accepted, helps to tilt the playing field back on level terms. This is a gift. What we can make of it is up to us.