Friday, August 5, 2011

Sow the Wind, Reap the Whirlwind

The word "West" used to have a meaning. It described common goals and values, the dignity of democracy and justice over tyranny and despotism. Now it seems to be a thing of the past. There is no longer a West, and those who would like to use the word -- along with Europe and the United States in the same sentence -- should just hold their breath. By any definition, America is no longer a Western nation.

The US is a country where the system of government has fallen firmly into the hands of the elite. An unruly and aggressive militarism set in motion two costly wars in the past 10 years. Society is not only divided socially and politically -- in its ideological blindness the nation is moving even farther away from the core of democracy. It is losing its ability to compromise.

America has changed. It has drifted away from the West.
Jacob Augstein in Der Spiegel. Read the rest at Once Upon a Time in the West

America destroying its global image?

You may ask, What has this to do with MMT? MMT is more than a description of the monetary system. It is also an economic theory that takes into account social, political, and economic consequences of action. These cannot be separated absolutely in an economic theory because they feed into each other. Most mainstream economic theory fails to include this insight in its preoccupation with numbers.

Vital US alliances and partnerships are blowing up. This will reduce trust and affect cooperation and coordination, which has far-reaching consequences in an era in which influences are international and global.


PaulJ said...


May I suggest replacing the word "theory" with "framework".

"Theory" leads the uninitiated (Austrians for example) into bizarre claims about what MMT is.

Stephan said...

>It is also an economic theory that takes into account social, political, and economic consequences of action.

I'm not sure whether this is true? Basically MMT is mute on these issues. Social and political choices and consequences belong to a separate domain. Actually I think it is the opposite way. Mainstream economics dreams up artificial constraints and rules which then feedback into the social and political domain by limiting choices to be made. For instance all this TINA rubbish. MMT liberates but also burdens society by moving the goals posts. Now society must answer tough social and politic question within the domain without recourse to some "economics" excuses.

Tom Hickey said...

I think that we are stuck with "theory," a word whose scientific meaning is grossly misunderstood by the public, which doesn't understand that a well-developed theory is made up of laws, i.e., statements of empirically grounded causal mechanisms. The theory is the context in which the causal mechanisms are interrelated and function as a system of explanation and prediction.

Classical physics, relativity, and quantum mechanics are scientific theories whose chief components are scientific laws, or "laws of nature," expressed as equations.

Tom Hickey said...

"I'm not sure whether this is true? Basically MMT is mute on these issues."

Not at all. MMT distinguishes the general case of different monetary systems from special cases due to imposition of political constraints. It holds, for example, that imposition of political restraints is not an actually operational constraint that changes the general case into something essentially different. Such restraints generate special cases that modify policy options.

MMT is also Minskyian and institutional. These aspects of economic theory recognize that policy and politics are integral to economics.

This is a difference between speculative economics and political economy. MMT is much more political economy than speculative economics. In fact, that is a major bone it has to pick with the mainstream. Think of Scott Sumner's complaint that MMT is too "realistic," i.e., not "theoretical" enough for his taste.

The MMT economists are sharp critics of the policies that led to the writing of the above post and others like it. They object to the imposition of a ideological agenda instead of dealing with actuality. That ideological agenda is not only economic, but also political and social.

There is no way to divorce economics from norms, policy, politics, etc. Those become behavior facts that influence the entire field, especially of national, international, and global macro, as institutionalism recognizes.

Viewing MMT through a narrow lens is not faithful to how MMT economists actually operate. MMT "theory" is broad in scope.

Matt Franko said...

"Oikonomia": stewardship, administration.

ie, it is not an "Invisible Hand" or a "Free Market" or "Self-Interest" other BS...


Shaun Hingston said...

IMO these two lectures best describe what money is. The concepts of Socially necessary labor time and the financial system are equivalent. So the importance of fiscal and monetary policy are equivalent. Hence there is only an arbitrary line that separates economics from politics.

Matt Franko said...

I would point out that the German author here does not recognize that for probably the first time in its history, the west is not at war among itself.

He writes: "The word "West" used to have a meaning. It described common goals and values, the dignity of democracy and justice over tyranny and despotism."

Since when? The last 10-15 years?

Hitler was in the west. What common goals did Nazi Germany have wrt the west? What dignity did the Fascists have or how did they promote justice over despotism? What is he talking about?

The Russians rolling into Czechoslovakia? Poland? The "Iron Curtain"?

Napoleon? French and Indian War? US Civil war? Spanish American War? WW1, WW2, Falkland Islands, Grenada? Yugoslavia?

Go back: Greece (Alexander), Roman Empire, all military systems.

The west has been at war among itself for the last 2,000 years (at least!). That is until now.

Now the west is perhaps turning the war machine around to exclusively attack outward. This is perhaps what the author may be really lamenting and I see his point but this is hardly a departure from the basic history and traditions of the west.

Tom Hickey said...

Matt, I suspect he means post-WWII, otherwise, as you say, it is a ridiculous claim coming out of Germany.