Bill Mitchell — Elements in a strategy for the Left

Reuters reported (July 8, 2018) that the awful Madame Lagarde was in France last week lecturing people on how the “joint euro zone budget could be designed with conditions so that it does not become a no-strings transfer of rich countries’ cash to poorer members”. Meanwhile, Jürgen Habermas was lecturing all and sundry on how a “frightened retreat behind national borders cannot be the correct response to … the politically uncontrollable functional imperatives of a global capitalism that is being driven by unregulated financial markets” (Source). Meanwhile, in the UK, the ‘Remainers’ think staying in the corrupt EU is a good idea because the Tories are so incompetent and divided. The state of the world. Misperceptions, misinformation and just plain poor analysis. There are tremendous opportunities for the Left to make political gains. But if they don’t abandon the type of ideas and language that is exemplified by Habermas’s latest entreaty and if they don’t undermine the likes of Lagarde and the Remainers (the pan-Europe contingent) then they will, once again, miss the boat. 

In my recent book (with Thomas Fazi) – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017) – a central organising concept is that a progressive future is only possible if progressive citizens do two things:

1. Learn how the monetary system operates and understand the capacity of the currency issuer and the opportunities and constraints that the government has.In other words, educate ourselves so that we have the capacity to refute the neoliberal lies that sustains the current system that has seen progressive outcomes diminish markedly.

2. Take control of the political process and expunge neoliberal factions from progressive political parties (like the Blairites in the British Labour Party, almost all the Australian Labor Party, the Wall-Street embedded elites in the US Democrats, much of the traditional machinery of the European Socialist parties etc).Reclaiming the state is about reclaiming the legislative and regulative capacity of the nation state so that it is directed at advancing well being for the many rather than the few, to steal Jeremy Corbyn’s so excellent catch-cry....

For those to whom MMT may be new, it is important to realize that the operational description of monetary systems, being purely descriptive, is value-neutral and doesn't favor any political point of view or value system. From the aspect of operational description, MMT simply sets forth the institutional arrangements of different monetary systems and explains the fiscal space that is avialable based on these arrangements, which are mostly legally established and therefore subject to the policy decisions of legislative bodies. Therefore, they can be changed by the same bodies that created them as well as interpreted by administrators, regulators and courts.

When the data is analyzed and explained with respect to economics, it gets interpreted in terms of assigning causation to various variables as well as in parametrizing models. Here there is disagreement among economists, which gives rise to competing theories, which can be evaluated by comparing model to data, both economic data and institutional arrangements.

For example, if a model presumed operations under a different monetary system than the current one it is unlikely to be a faithful model worth of trust in either forecasting or policymaking. In addition, if causation is improperly imputed, the model will not be representational of what it purports to represent.

MMT from the vantage of theory is a so-called Keynesian model since it prioritized full employment. In this sense, MMT theory is considered to be on the left side of the political spectrum.

Those who recognize the correctness of operational analysis of MMT may take any political position that is consistent with the principles of the operational description. Those that accept the theory as well are likely to fall on the left of the political spectrum in prioritizing full employment.

However, those who accept all the aspects of MMT as both an operational description and a macroeconomic theory can be properly categorized as being "MMT." Here, there is leeway in both how the theory can be used to formulate optimal policy in various countries, as well as in the strategy for presenting MMT as a macroeconomic paradigm or framework for policy formulation and arguing for policy options compatible with it.

Bill Mitchell – billy blog
Elements in a strategy for the Left
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia