Thursday, March 7, 2019

John Christensen - ‘The Magic Money Tree:’ From Modern Monetary Theory to Modern Tax Theory - Updated


Modern Monetary Theory (MMT) has gained prominence since the global financial crisis. The rising star US politician Alexandria Ocasio-Cortez said recently we should be “open” to its ideas, and some mainstream economists have given it a (qualified) endorsement.  For many, it offers a powerful critique of the damaging austerity policies that were implemented in the western world since the global financial crisis, and an important plank of new progressive thought.  MMT also has many critics.
For the tax justice movement, however, MMT opens an important debate about the role of tax. One of the MMTers’ central arguments — that governments don’t need tax revenues if they want to spend money — seems to conflict with our argument that governments must tax rich corporations and crack down on tax cheating and tax havens in order to pay for roads, schools, teachers and hospitals.
To illustrate this clash, take the words of UK Shadow Chancellor John McDonnell during the Panama Papers tax haven scandal that “every pound avoided in tax by the super-rich is a pound desperately needed by our National Health Service, our schools and our caring services.”  We’d strongly agree with this statement — though Bill Mitchell, a prominent MMT economist, attacked it as “dangerous and misguided narrative for progressives to engage in,” because it “fuels damaging myths” about how the tax and spending system works.
This blog asks some big questions about MMT.  Is it ”correct“? If not, how not? But if so, is it compatible with tax justice – and could it even be useful?  Is tax justice useful to MMT? We’ve given MMT a partial endorsement and suggest there is no real conflict between MMT and tax justice — that tax justice doesn’t especially need MMT, but without tax justice, MMT is incomplete. You can listen to a discussion here exploring these issues in this Taxcast Extra below: (our monthly podcast, the Taxcast is available here)
Tax Justice
John Christensen - ‘The Magic Money Tree:’ From Modern Monetary Theory to Modern Tax Theory




Modern Monetary Theory offers a powerful critique of the damaging austerity policies that were implemented in the western world since the global financial crisis, and it's an important plank of new progressive thought. BUT one of its central arguments — that governments don’t need to raise taxes in order to spend money - contradicts what we know to be true at the Tax Justice Network - that governments must tax the rich, and corporations, and crack down on tax cheating and tax havens in order to pay for roads, schools, teachers and hospitals. In this Taxcast Extra Naomi Fowler discusses Modern Monetary Theory, its contributions and its limits, with Professor of Practice in International Political Economy, City, University of London Richard Murphy (also of Tax Research UK) and John Christensen of the Tax Justice Network.


3 comments:

Jure Jordan said...

Now you should discus if there is any work backing up a price raise of a house that has no work done on but because few houses close by were remodeled and sold at much higher price (prices of nearby houses is how appraisals of a house get a price level) or a high school nearby got a winning streak in football league (that affects the house prices nearby). There was no work done on a house but next selling will create much larger loan. What about there money matching work in economy?

I always wandered about personal bankruptcies, how they work financially? When the debt of a bankrupt person is forgiven by bankruptcy judge, is the banks' liability erased or funded by state? I would prefer that only bankruptcy judge has the power to allow banks to simply erase the liability (debt of the bankruptor) instead of being funded by state. that way is at no cost to anyone nor making the state debt larger. It would be a benefit to society to simply erase those debts and banks liabilities and leave money circulating.
Inflation is a necessity to a debt society to slowly eat away at debts making them a less of a burden, Otherwise i can see how the economy could run out of money by paying interest to banks.
Inflation is a debt forgiveness en mass over time while bankruptcies are the individual debt forgiveness. Deflation is a real danger to society as we have seen, deflation or low inflation and i believe i have given the reason why. Without moderate inflation, the debts become unpayable, too heavy of a burden. Also it is a sign that more money is being destroyed then created by new loans.

Kaivey said...

"Now you should discus if there is any work backing up a price raise of a house that has no work done on but because few houses close by were remodeled and sold at much higher price"

The house grew in value but no work was done. But when someone buys the house they have to borrow more from the bank because of the price rise. They then work and it turns the money into real money.

I was thinking that if you find oil in your back garden, you can then get an oil company to do work to extract the oil and pay you a percentage of the profits. You have now done no work at all and yet you can use the money you got from the oil to purchase work.

But other people will work for the oil and will give you some of the money they have earned. Also, the oil can be made to do work.

Money can get complicated.

Jure Jordan said...

Money is not complicated. Imagine what we do now as if money does not exist. We gift each other with our labor. Money is only a motivation for us to gift each other as if we are a family. One large family that use the same token of gifts. Money as a record of gifts/ debt to each other. That observation comes from money as only an abstract value while our gifts have the real value.