by It seems now very opportune that I recently posted three times on my blog my views on Modern Monetary Theory (MMT), an increasingly attractive theory for the left to justify government spending to meet the ‘needs of the many’. For just this week, left Democrats in the US Congress, led by the rising star Alexandria Ocasio-Cortez (AOC), a member of Democratic Socialists of America, launched what they call the Green New Deal (GND), an alternative programme for a future US government to adopt to provide proper public services in education and health and to deal with global warming and environmental pollution. And the GND and AOC make clear that funding for these badly needed government programmes can be achieved if we follow the policy conclusions of MMT.… What is wrong with this? Well,
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Mike Norman considers the following as important: GND, Green New Deal, MMT, MMT criticism, MMT critics
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It seems now very opportune that I recently posted three times on my blog my views on Modern Monetary Theory (MMT), an increasingly attractive theory for the left to justify government spending to meet the ‘needs of the many’. For just this week, left Democrats in the US Congress, led by the rising star Alexandria Ocasio-Cortez (AOC), a member of Democratic Socialists of America, launched what they call the Green New Deal (GND), an alternative programme for a future US government to adopt to provide proper public services in education and health and to deal with global warming and environmental pollution. And the GND and AOC make clear that funding for these badly needed government programmes can be achieved if we follow the policy conclusions of MMT.…
What is wrong with this? Well, I have argued in previous posts that MMT is a novel ‘trick of circulation’ (Marx) that ignores the whole circuit of money that goes from money through capital investment into production for profit and more money. The MMT argues that we can just start with the state printing money and then all will flow from that – more investment, more production, more incomes, more employment – as though the social relations of capitalism were irrelevant. MMT will deliver full employment at decent wages, healthcare, education and other public services without interfering with the big banks, the multi-nationals, big pharma and Wall Street. You see, because the state controls the money (the dollar), then it is all powerful over the likes of Goldman Sachs, Bank America, Boeing, Caterpillar, Amazon, WalMart etc.
Therein lies the danger of MMT as the theoretical and policy support for government spending and running deficits. Actually, it is not necessary to adopt MMT to deliver the GND programme. There are many ways to meet the bill. First, there is the redistribution of existing federal and state spending in the US. Military and defense spending in the US is nearly $700bn a year, or around 3.5% of current US GDP. If this was diverted into civil investment projects for climate change and the environment, and those working in the armaments sector used their skills for such projects, then it would go a long way to meeting GND aspirations. Of course, such a switch would incur the wrath of the military, financial and indsustrial complex and could not be implemented without curbing their political power.…Michael Roberts apparently doesn't understand that MMT describes the way that the existing monetary system currently works and how a currency sovereign as monopoly provider of its currency funds itself through currency issuance (although a subsequent admission that the government can "print as much money as it wants" shows that he does, at least sort of).
MMT describes how all appropriations are funded operationally now. Nothing needs to change other than the failure to understand monetary and fiscal operations, which MMT describes in detail based on institutional arrangements like, you know, laws.
It is true that policy is limited by the availability of real resources and that any plan must include how the necessary real resources will be supplied and deployed effectively and efficiently, with the priority on effectiveness.
BTW, military spending diverts spending away from consumables and investment in producing consumables. All military spending in excess of the actual national interest in terms of national security is "vanity," like pursuit of empire. Actually, the military is actually the "strong arm" of financial and business interests in extending their reach beyond national borders. Neoliberalism involves neo-imperialism and neocolonialism.
Military spending also exacerbates climate change, if only on account of the enormously wasteful use of fossil fuels it involves. It also diverts real resources, including human resources, from productive use in the economy to produce consumables and capital goods that produce consumables and other productive capital goods. A GND should involve a pruning back of the military in line with actual national interest based on a realistic assessment of national security, not the pursuit of empire and global hegemony as now.
Michael Roberts does offer a constructive criticism in response to Scott Fullwiler in this regard.
I am indebted to Scott Fullwiler, a leading MMTer at the Levy Institute, for pointing out in a comment on my blog that MMT experts havesimulated their own projections for the cost of delivering full employment at wages above $15 an hour and reckon that it would increase the federal deficit by 1.0-1.5% of GDP annually over the next ten years without incurring any significant rise in inflation. rpr_4_18
Let me be clear, Left Democrats and the supporters of MMT are rightly pushing for measures that really would help ‘the many’ in America. But, in my view, it will be an illusion to think the GND can be implemented, even in just economic terms, simply by following MMT and printing the dollars required. Yes, the state can print as much as it wants, but the value of each dollar in delivering productive assets is not in the control of the state where the capitalist mode of production dominates. What happens when profits drop and a capitalist sector investment slump ensues? Growth and inflation still depends on the decisions of capital, not the state. If the former don’t invest (and they will require that it be profitable), then state spending will be insufficient.
And even accepting that the MMT/Levy projections could be achieved, they would not deliver nearly as much as a doubling of the sustainable US growth rate would generate, which would be over $750bn a year. That would mean a tripling of investment growth. Over a decade, even a proportion of that would amply meet the financing requirements of the GND. But such a growth rate is impossible to achieve without a substantial change in the economic structure of the US economy. It is not going to happen when the 80% of all investment is done by the capitalist sector and depends on the profitability of capital. That tells me that the GND is only possible to achieve if 80% of the productive sectors of the economy are socialised and incorporated into federal, state and local plans for investment and production. That thorny question cannot and should not be ignored by MMTers.
The Green New Deal and changing America
Michael Roberts