Time for Plan B: Our Civilization Is on the Edge of a Systemic Breakdown
Plan A is business as usual, based on competition and control. Plan B is meeting the enormous challenge that humanity faces through cooperation and coordination.
From Scott Thill's preface to the interview with Lester Brown:
"Japan's bungled response to a mounting nuclear crisis, thanks to one of Earth’s most destabilizing earthquakes and tsunamis, has in a cosmological eyeblink reset the entire world's nuclear ambition. Uprisings in hotspots like Egypt, Libya, Bahrain, Yemen, Saudi Arabia and more, compounded by America's continuing quagmires in Iraq and Afghanistan, are squarely knitting together civilization's crappy experiments like preemptive war, biofuels and light-speed financial stratagems into one titanic mess that is demanding new theories of cleanup.
"It's no longer intellectually feasible to consider any of these events as separate, because they, like the warming climate, are interconnected nightmares that are keeping us more awake than ever, whether we like it or not. And no matter how we spin them, Plan B argues, we're eventually all going to have to work together to survive what is without a doubt an existential crisis of historical proportions. Only the depth and vigor of our mutual efforts and understanding separate us and every other failed civilization in the planet's incomprehensibly expansive history."
How does this relate to MMT? An oft-heard objection to MMT is that it reinforces Plan A — business as usual — because the central objective of MMT is full employment along with price stablity, and fiscal policy — deficits to offset demand leakage to saving — is used as the primary tool to secure this objective. The objection is that as a consequence of liberal government funding, Schumpeter's creative destruction is forestalled, and malinvestment in coddled by what is effectively a government subsidy for failure.
This is patently not the case. It generally results from the incorrect assumption that the whole of MMT is the description of monetary operations. However, MMT is much more than that. Many MMT proponents take sustainability into account, Prof. Bill Mitchell being a notable example. Warren Mosler often says that our primary problems are institutional and he has put forward proposals for institutional reform.
Prof. Randy Wray has written a paper, Government Deficits, Liquidity Preference, and Schumpeterian Innovation, in which "Wray asserts that rigorous analyses of the role played by innovation in economic development must acknowledge the contribution of Joseph Schumpeter. However, the author suggests that the current stagnation confronting most developed, capitalist economies "cannot be understood without synthesizing Schumpeter's insights with those of Kalecki and Keynes." Hence, Schumpeter's work alone is inadequate in explaining the links between government deficits in ensuring aggregate demand and corporate profits."
Prof. Wray observes elsewhere that if we are going to solve our problems, we have to recognize that the limitations we face are never financial, but always real. It is always possible to finance solutions to real problems under the current monetary system, as long as real resources are available.
Humanity's primary real resource is humanity itself and the best investment is in human recourses. Futurist Ray Kurzweil has posited the law of accelerating returns, that is, technological innovation increases exponentially. MMT would add, as long as technological advance is not stifled by false notions concerning "affordability."
Moreover, a great deal of the excess leading to malinvestment is due to lax credit, which provokes financial instability, as Hyman Minksy showed. Minsky's work is central to MMT, and MMT proponents have put forward proposals for addressing institutional arrangements conducive to financial instability. See Warren Mosler's proposals, for example.