by From Lars Syll Now we come to the core of Wolf’s objection. It is, as he admits, political. And it is that politicians might use their judgements. Heaven forbid! Wolf is very clearly of the school that created economics to impose constraint on that judgement so that full employment, rising real wages and a redistribution from capital to labour may not happen. And now he is petrified that the so-called economics that underpinned that heinous political system is shown to be wrong the constraints must still be imposed because politicians – and so, of course, those who elected them – cannot be trusted with the economy. Only bankers can have such faith placed in them, according to Wolf. But he is wrong, of course. The 1970s are not now. And the economics of that era, including the belief
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from Lars Syll
Now we come to the core of Wolf’s objection. It is, as he admits, political. And it is that politicians might use their judgements. Heaven forbid! Wolf is very clearly of the school that created economics to impose constraint on that judgement so that full employment, rising real wages and a redistribution from capital to labour may not happen. And now he is petrified that the so-called economics that underpinned that heinous political system is shown to be wrong the constraints must still be imposed because politicians – and so, of course, those who elected them – cannot be trusted with the economy. Only bankers can have such faith placed in them, according to Wolf.
But he is wrong, of course. The 1970s are not now. And the economics of that era, including the belief that money was still a scarce resource, are even longer gone. Instead we live in an era of perpetual underuse of labour, and of politics that, if given the choice to do something would rather not do it. We have stagnation, inequality and real poverty precisely because of the maintenance of the economics that Wolf now wants to perpetuate by fear alone.
And tacitly even he admits that. He has to acknowledge the power of the state to intervene. In his conclusion he says:
“The solution, nearly all of the time, is to delegate the needed discretion to independent central banks and financial regulators. Yet proponents of MMT are right that during a period of structurally feeble private demand (as in Japan since 1990) or a deep slump, a sovereign government must and can act, on its own or in co-operation with the central bank, to offset private weakness. There is then no reason to fear the constraints. It should just go for it.”
We are back to basic errors here. We have endured structurally feeble private demand for a decade now. And we need a Green New Deal. We could deliver that GND without problem precisely because there is structurally feeble private demand without there being a shortage of resources or inflation. But when a central bank is told it may not deliver such a programme it is an impediment to progress. The result is we need to sweep away the central bank and the independence it has that is this impediment to progress. Or we, at the very least, need to change its mandate.