If we needed evidence that Modern Monetary Theory (MMT) is open to different political viewpoints, it has been forthcoming lately in the blogosphere. In itself, this is a good thing. To be a useful framework for debate over policy and political alternatives, there needs to be an openness to different perspectives. From my vantage point, one effect of the emerging debates has been to reveal a seemingly large group who want to do less with MMT than the academic developers envisaged, while another (probably much smaller group) want to do more. Needless to say, I fall into the latter category. My concern is that MMT is at risk of becoming just another tool for those who wish to preserve the status quo.
Lately, I find myself somewhat distant from the worldview many (though certainly not all) MMTers seem to espouse. The debate over the job guarantee (JG) can serve as one illustration of what I have in mind. There are other examples I could have selected, but this one seems topical.
Recently, various right-wing arguments have been leveled against the JG proposal. Sometimes these reflect a form of Social Darwinism. Other times they reveal a faith in the efficacy of private markets that has no basis in anything established in economic theory. In responding to some of these arguments, one leading Modern Monetary Theorist wrote:
It sounds to me like much of the opposition to the JG is due to its “permanency”. A temporary jobs program is fine, many readers argue, but a permanent arrangement to absorb those that are periodically “released” by private firms into the pool of the unemployed isn’t considered necessary or efficient. I wonder whether some of the opposition rests on the mistaken notion that supporters of the JG want to offer a government job for life. The job, itself, is supposed to be temporary — a resting place that affords our fellow citizens the opportunity to continue to work for a basic income even when there is no demand for their services in the private sector.
Although I am sure I agree much more with Modern Monetary Theorists on policy than the right-wing critics, I must admit to finding this response almost as underwhelming as the criticism it is addressing. Increasingly, my impression is that the intention of many MMTers is merely to preserve capitalism. Part of this project is to increase the functionality of the reserve army of labor by maintaining “buffer stocks” of humans to be shuffled back and forth between JG and regular employment in a manner suitable to capitalists.
Later in the same comment, the Modern Monetary Theorist wrote:
There will be economic booms and the private sector will create millions of jobs during the upswing. But there will also be busts — Enrons, AIGs, bubbles, etc. — and millions will become unemployed. A JG is the impersonal mechanism that absorbs and releases workers in response to these endogenous cycles. We can (and should) attempt to limit the size of the JG by preventing the kinds of bubbles, failures, etc. that have avoidable causes (e.g. control fraud). But we will never eliminate the business cycle, I have not encountered a better way to deal with the resulting (involuntary) unemployment than the JG. I am open to suggestions.
The business cycle is tied up with capitalism. An end to capitalism could mean an end to the business cycle. So the claim that “we will never end the business cycle” amounts to a farsighted prophecy into the distant future of humanity, or perhaps a recognition that under capitalism we have no sustainable future. Considering many MMTers seem to place strong faith in the virtues of private markets, other than in the FIRE sector, perhaps capitalism forever is a good outcome in their minds?
Many appear to cling to misconceptions when it comes to the supposed merits of private markets and their alleged benefits in terms of allocation of resources and productivity.
In what sense can private markets be said to allocate resources in a way that reflects social productiveness?
Answer: In no meaningful way whatsoever. Assertions to the contrary are really nothing more than ideological blather until those making the claims mount a legitimate theoretical case.
Even if private markets worked as advertised, this would only mean that the pattern of demand for goods and services encouraged a particular allocation of resources that reflected the prevailing distribution of income. A different income distribution would generate a different pattern of demand, different sectoral outputs, and by implication a different evaluation of social productiveness. Unless the prevailing distribution can be defended, this is no useful evaluation of social productiveness at all.
But as the neoclassical orthodoxy understands, the presence of externalities means private markets cannot even deliver on this worthless promise. Nor do private markets encourage basic research, the real foundation of technical progress. To the contrary, private markets result in chronic underinvestment in basic research or anything with a public good element or positive externality. Apparently the preferred solution to this chronic underinvestment, for many MMTers, is little different to the neoliberal solution: socialize the costs and privatize the benefits.
Notions of “creative destruction” do little to strengthen the flimsy arguments advanced in favor of private markets. Any creation and destruction, to the extent it is the verdict of private markets, will simply reflect the prevailing distribution of income and be impervious to externalities in just the same way as the market allocation of resources in general.
In my view, it is time for those who embrace private markets for ideological reasons to present their theoretical case. Otherwise, the claims are just hot air.
At a time when the challenges facing society are so great – none greater than the environmental calamity we seem to be inviting – and the possibility of alternative democratic solutions and distributed leisure seemingly within our grasp, especially in view of likely upcoming waves of mechanization, the aims of many MMTers strike me as narrow. The focus seems to be almost entirely on how we can continue to tie our activities as closely as possible to the partisan interests of capitalists. This is a self-imposed constraint if ever there was one! For many, it seems that only when workers are excess to capitalists’ requirements or an activity is not directly profitable should there be an unfortunate resort to non-market activity, and even then the activity should be tailored to the private profit-making interests of the dominant class.
This is little different than the apologetic neoclassical presumption in favor of laissez-faire capitalism, in which private markets rule unless a specific market failure can be demonstrated.
We can do better than this. This kind of thinking does not do justice to the tremendous democratic potential open to us in a modern money system.