There was an interesting if not ego-centric interchange last week involving the New Keynesian economist Paul Krugman and others about whether the sort of macroeconomic policy positions one takes is more motivated by ideological motives (about the desirable size of government) rather than being evidence-based. Apparently, if you support austerity it is because you really just want smaller government and vice versa. This is an oft-stated claim made by conservatives. That if you support fiscal stimulus and government regulation that you are automatically in favour of big (intrusive) government. The point is not valid. Whether one supports a larger proportional government or smaller is a separate matter to understanding how the monetary system functions and the capacities and options available to the government. Modern Monetary Theory (MMT) provides the basis for that understanding but not a prescription for a particular size of government.Bill Mitchell – billy blog
Fiscal stimulus does not necessarily mean large government
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
16 comments:
Just one small qualification. If the government is too small (including transfer payments/Job Guarantee as part of government) as a percentage of GDP, it will not be able act like an automatic stabiliser. Minsky argued that the minimum size was 20% of GDP; that sounds reasonable, but I have never verified the calculation. The U.S. Federal Government was something like 5% of GDP heading into the Great Depression, and it was too small to act as a stabiliser. But once you are above that level (almost all of the developed countries are), I could not see any difference in business cycle volatility. If the government gets very big, you get recessions induced by policy shifts.
Technically you can run a "tiny" government on MMT principles, but you would still run into periodic depressions.
Good one, Brian. Maybe a post on it at your place?
That sort of depends on the definition of 'government'. MMT government includes the central bank and the 'small government' people are not general adverse to largess from the central bank.
If the central bank buys anything other than government bonds then it is essentially conducting fiscal policy and doing 'government spending'.
The whole of the NGDP targeting idea is about the central bank essentially buying things from the wealthy part of the non-government sector, maintaining prices above the counterfactual and relying on the magic of 'trickle down' to do the work.
It's a very poor auto-stabiliser, but one nonetheless.
'Small government' people are not really small government people. What they are really is small government spending by democratically elected bodies and large government spending by their mates in the central bank.
Neil Wilson is of course right that phrase "small government" is loaded. I wish people try to terminology in a more technical manner. People confuse "government" with "governance" when applying the adjectives "big" when meaning intrusive, obstructive, inclusive whatever stands against elite dominance in that movement is called "big." Government is the use of the mind to control society. Governance is the use of power and dominance to control society.
You want big government and small governance. Reactionaries are for big governance but against big government because they oppose more people involved with the making of the ideas that rule us believe that society is best ruled by an aristocracy.
Brian that would be about a 5x....
We have total net withdrawals running about $4.2T so 5x on that would put gdp above $20T so we are coming up short...
Probably Minsky never dreamed we would have the trade deficit we have these days with all the defeated Asian and Teutonic USD zombies mindlessly staggering forward seeking more... and more.... and more ... of our U.S. currency balances...
Rsp
This desire for foreign currency when you have your own float is bizarre psychology. I even heard the Russians stating that it was so that their businesses could borrow in US dollars!
The Russians really shouldn't be dealing with anybody that refuses to take Rubles and certainly shouldn't be bailing out private firms that hang themselves on foreign exchange risks.
Neil all the defeated nations act this way.... Hard to understand.... Rsp
People confuse "government" with "governance"
Left and right libertarians make this distinction, which Marx called attention to in distinguishing between the people and the state. When the state becomes separated from the people, then government of the people, by the people and for the people cannot exist. Rather the government is either autocratic or oligarchical, and there is a ruling class that controls government and whose interests government chiefly serves. This is the position expressed by first chief justice of SOCTUS, John Jay: Those who own the country should govern the country.
The anarchist conclusion is to abolish the state, while the socially liberal solution is popular sovereignty that ensures governance of the people, by the people and for the people rather than particular individuals or a privileged ruling class.
Tom, I'm working on it. It should be done by tomorrow.
Excellent.
Governance and government really mean the same thing. The distinction between governance and government is a comparatively recent thing, dating from the late 1980s and 1990s. A relative, who wrote the first Canadian Government statement on good governance, recounts how the term gained currency in the late 1980s is tri-partite disussions between Canada, the UK, and the US. Canada and the UK (there may have been others) clung for a while to the traditional Westminster notion of "good government" -- as in Peace, Order and Good Government. That being the era of Reagan, US State Department representative demanded that the term "governance be used instead. But, fundamentally, the two expressions have the same origins -- "governing the ship of state". One can, and once did, talk as much about good corporate government, government of the union, SELF-government, government of the self. The distinction is entirely a false one developed by Republicans to counter the possibility that there might be something such as "good government".
There is no particular benefit to preferring "governance" for things such as community and civil society self-control and management. Indeed, it could be argued that the very distinction is in fact redolent of a grand surrender to the proponents of third way absurdities and the removal of accountability for financiers and large corporations. And in fact the expression governance lines up closely with the fallacious views of "new economy" proponents whose proposals are not MMT consistent, as Bill Mitchell pointed out in a post a couple of years ago mentioning the hypocrisy Mondragon in its treatment of part-time workers. Good government does not have to be large government, indeed, a key notion of good government was that it should remain limited, providing freedom "dialectically" for civil society. But the governance/government opposition is really muddled thinking, particularly when associated with anarchist absurdities, which really are absurd when MMT's description of monetary operations reinforces the notion that the state necessarily acts as that body within a polity holding a monopoly over the means of coersion.
Sociology, poli sci, and law all draw a distinction among government (institution, organization), governance (activity of ordering and organizing.) and governing (rules-based process). Governments govern iaw a particular type of governance. However, governing does not require governance by government separate form the governed, anymore than organizing requires an organization to do so. Many systems are self-organizing and self-governing. For example, the the New England town meeting is a form of popular, direct and participatory democracy in action where decisions are taken by the people at large after deliberation through debate in which all have an equal voice and all have an equal vote.
Government: the office, authority or function of governing. Governing: having control or rule over oneself. Governance: the activity of governing — David Fasenfest, Government, Governing, and Governance, Critical Sociology 36(6) 771-774
Difference Between government and governance at differencebetween.com
Governance = 'steering' 'regulating'
Government = 'machine'
Whether the machine is big or not is moot, if it is driven off a cliff and runs over people in the process ....
For me, better metaphor is 'Bull(s) of the Earth' fighting for herd dominance and propagation rights - lots of collateral damage because heat only sees in the infrared range. The positive is the urge to plod towards the light at the end of the tunnel. Next symbol Gemini: the heart and mind struggling for union. Next Cancer: 'I build a lighted house, and dwell within'. Even the Wizard of Oz says more about what is going on in this world ...!
Geez Pearce nice anecdote... Says it all about those people. Rsp
jbarch, Tom: again, the sources you cite are very recent, and only work within our current neo-Liberal context. Government is steering and regulating: that is what Good Government means. But the World Bank and IMF, when they impose conditionalities on countries under mandated so-called "Poverty Reduction Strategies", demands good governance -- i.e. closing down marketing boards and development banks, the adoption of sound finance, and privatization, adoption of international trade deals such as the TPP, which limit both government and civil society opposition to transnational corporate power... Good government is terrifying to neo-Liberals since it is premised on responsible government, i.e. the governed having a say, and therefore civil society organizations self-organizing in contradistinction to the state.
I agree the notion of corporate governance has some practical use as a concept.
In fact, to belabor the point tediously, I have no objection to people using the term governance, as long as good use can be made of it. But thus far too little good has come from use of the term, in my opinion.
Taking this in the US context, one wonders why the term's appeal has grown over the last 20 years. The US has a very old discourse around "administration" that means the same thing, basically, as most uses of governance. While or because the US does not have a constitutional system of "responsible government", it has long had in place Congressionally-mandated procedures for "administrative review" of the performance of civil servants and "administrators". Non-profit administration means the same thing as NFP governance. Maybe "Governance" actually is a better term! But it is helpful to reflect on the origins of its popularity in usage.
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