Thursday, August 9, 2018

Bill Mitchell — MMT is just plain old bad economics – Part 1

On August 6, 2018, British tax expert Richard Murphy who is becoming increasingly sympathetic to the principles of Modern Monetary Theory (MMT) published a blog post, which recorded an exchange with one James Meadway, who is the economics advisor to the Shadow Chancellor John McDonnell in Britain. The exchange took place on the social media page of a Labour Party insider who has long advocated a Land Tax, which McDonnell is on the public record as saying will “raise the funds we need” to help local government. He called it a “radical solution” (Source). An aside, but not an irrelevant one. It reflects the mindset of the inner economics camp in the British Labour Party, a mindset that is essentially in lockstep with the neoliberal narrative about fiscal policy. Anyway, his chief advisor evidently openly attacked MMT as “just plain old bad economics” and called it a “regression in left economic thinking” which would ultimately render the currency “entirely worthless” if applied. He also mused that any application of MMT would be “catastrophic” for Britain. Apparently, only the US can apply MMT principles. Well, the exchange was illustrative. First, the advisor, and which I guess means the person being advised, do not really understand what MMT is. Second, the Labour Party are claiming to be a “radical and transformative” force in British politics, yet hang on basic neoliberal myths about the monetary system, which is at the core of government policy implementation. Astounding really. This is Part 1 of a two-part series on this topic, most of it will be summarising past analysis. The focus here is on conceptual issues. Part 2 will focus more specifically on Balance of Payments issues.

Bill Mitchell – billy blog
MMT is just plain old bad economics – Part 1
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

10 comments:

Konrad said...

.
--OFF TOPIC--

Congressional candidate Alexandria Ocasio-Cortez wants Universal Medicare, like every other industrialized nation has.

In a recent appearance on CNN, Ms. Ocasio-Cortez was asked, “How will you pay for it?”

Her response:

"Every other nation does this -- why can't America? People talk about the sticker shock of Medicare-for-all, but not of our existing system. When it comes to tax cuts and unlimited war, we invent that money very easily. We only have empty pockets when it comes to the morally right things to do. Congress can write unlimited blank checks for war, but when it comes to proposals that would help every American—such as Medicare for All—our pockets are empty. Why are our pockets only empty when we talk about 100 percent renewable energy that is going to save this planet and allow our children to thrive? Why are our pockets are only empty when it comes to education and healthcare for our kids?"

https://www.commondreams.org/news/2018/08/09/alexandria-ocasio-cortez-why-do-we-write-blank-checks-war-our-pockets-are-empty-when

Konrad said...

“It reflects the mindset of the inner economics camp in the British Labour Party, a mindset that is essentially in lockstep with the neoliberal narrative about fiscal policy…The Labour Party are claiming to be a ‘radical and transformative’ force in British politics, yet hang on basic neoliberal myths about the monetary system, which is at the core of government policy implementation.” ~ Bill Mitchell

-------EXACTLY-------

I have long accused Jeremy Corbyn of being a phony, because Corbyn, like neoliberals, favors gratuitous austerity. Corbyn, like neoliberals, favors deficit reduction and a balanced national budget.

For the U.K. this is idiotic -- i.e. neoliberal.

The British Labour Party is just like U.S. Democrats. They endlessly demand more political correctness (i.e. more special rights for militant feminists and homosexuals), but when it comes to average Britons’ financial conditions, the Labour Party / Democrats are neoliberals.

There are a few exceptions to this, but those exceptions are outliers. They are not among the Labour Party / Democrat leaders.

Konrad said...

Speaking of frauds and phonies, Paul Krugman is a typical example. Krugman says MMT is just “wrong.”

“The MMT people are just wrong in believing that the only question you need to ask about the budget deficit is whether it supplies the right amount of aggregate demand; financeability matters too, even with fiat money.”

Krugman admits that the U.S. creates its spending money out of thin air, yet Krugman thinks that this still means the U.S government has "financeability problems." If you could legally print infinite dollars in your house, would you have a "financeability problem"?

This kind of idiocy is what gets you a Nobel Prize in economics.

Krugman is a neoliberal elitist in “liberal” clothing. He had campaigned for Hillary, hoping she would name him as her Treasury Secretary. But alas, the Queen Bitch was not crowned.

Source of Krugman quote:
https://krugman.blogs.nytimes.com/2011/08/15/mmt-again/

AXEC / E.K-H said...

Hope you get it: MMTers = Friends-of-the-People
Comment on Bill Mitchell on ‘MMT is just plain old bad economics’

Bill Mitchell recounts: “The exchange took place on the social media page of a Labour Party insider who has long advocated a Land Tax, which McDonnell is on the public record as saying will ‘raise the funds we need’ to help local government. He called it a ‘radical solution’ (Source). An aside, but not an irrelevant one. It reflects the mindset of the inner economics camp in the British Labour Party, a mindset that is essentially in lockstep with the neoliberal narrative about fiscal policy.”

Bill Mitchell has serious doubts about whether the present Labour leadership really has the people’s best interest in mind:

• “The British Labour Party has not crowned itself in glory in the last few weeks by proposing to consider adding a UBI to its policy platform.”

• “As many commentators have pointed out the problem with this proposal can be summarized by just considering the party’s own title – Labour Party. A party that is concerned for the welfare and aspirations of workers who work and their dependents.”

• “Why would a progressive ‘Labour’ party want to introduce a UBI to solve unemployment when in government it could always ensure that all idle labour is productively employed?”

• “Why would a progressive Labour Party want to surrender to the neoliberal idea that there will never be enough jobs to go round when there is patently millions of jobs that can be created to serve community and environment if the government funds them?”

There is social policy and there is the funding of social policy. And these are TWO ENTIRELY DIFFERENT things. The economic stunt is that one can pull social policy out of the monetary cylinder that does NOT benefit WeThePeople but WeTheOligarchy. And one can call oneself a real Progressive and present oneself as true Friend-of-the-People and stab the elected party leadership in the back.

Classical social policy is rather straightforward: increase social spending and balance the budget by increasing the taxes of the rich or, alternatively, increase social spending and balance the budget by lowering military spending while keeping taxes unchanged.

Progressive social policy does not bother with either. As Bill Mitchell said elsewhere: “Do we need the rich’s money?” “No”.#1 Progressive social policy does not need taxes because, in a fiat money system, the sovereign government solves all problems by deficit-spending/money-creation. MMTers correctly point out that, historically, ever-growing public debt has posed no serious problems and has never caused inflation. And this should tell everybody that all arguments against MMT are scientific and political BS.

In sum, Bill Mitchell argues that all available evidence confirms that Progressive social policy is superior to the obsolete social policy of the present Labour leadership which seems, moreover, to be mentally in bed with Neoliberals, Austerity sadists, and balanced-budget imbeciles.

See part 2

AXEC / E.K-H said...

Part 2

Fact is that Progressives/MMTers are NOT the true Friends-of-the-People. MMT is scientifically refuted on all counts.#2, #3, #4, #5, #6, #7 Because of the Profit Law, i.e. Public Deficit = Private Profit, MMT policy ultimately benefits alone the Oligarchy.

Politically speaking, Bill Mitchell is Wall Street’s knife in the back of the present Labour leadership.

Economics is scientifically worthless and politically corrupted since the founding fathers. This holds for Walrasianism, Keynesianism, Marxianism, Austrianism, and MMT.

Egmont Kakarot-Handtke

#1 MMT: academic snake oil for the people
https://axecorg.blogspot.com/2018/02/mmt-academic-snake-oil-for-people.html

#2 MMT, money printing, stealth taxation, and redistribution
http://axecorg.blogspot.de/2017/11/mmt-money-printing-stealth-taxation-and.html

#3 MMT is ALWAYS a bad deal for the 99-percenters
https://axecorg.blogspot.de/2017/12/mmt-is-always-bad-deal-for-ninety-nine.html

#4 Down with idiocy!
https://axecorg.blogspot.de/2017/12/down-with-idiocy.html

#5 MMT and the magical profit disappearance
http://axecorg.blogspot.de/2017/08/mmt-and-magical-profit-disappearance.html

#6 Keynes, Lerner, MMT, Trump and exploding profit
http://axecorg.blogspot.de/2017/12/keynes-lerner-mmt-trump-and-exploding.html

#7 MMT: So-called Progressives as trailblazers for Trumponomics
https://axecorg.blogspot.com/2018/04/mmt-so-called-progressives-as.html

Bob said...

It's like Alexandria Ocasio-Cortez is channeling Steve Grumbine. Yay!

Bob said...

AXEC,

Are you in favor of classical social policy?

Tom Hickey said...

It's like Alexandria Ocasio-Cortez is channeling Steve Grumbine. Yay!

Stephanie Kelton, actually.

Schofield said...


Simon Wren-Lewis doesn't appear to have figured out yet that a sovereign government like the UK can create money without incurring a liability on a balance sheet. This is a major failure in thinking for an Oxford University professor!

https://mainlymacro.blogspot.com/2016/03/a-much-better-fiscal-rule.html

Calgacus said...

That isn't true, Schofield. Nobody can do that. The money is the balance sheet liability. The government doesn't have to create another liability and play games with it, true.