Monday, June 25, 2012

Warren Molser on politics and the JG

From a comment at The Center of the Universe:
Warren Mosler Reply:

June 25th, 2012 at 9:23 am

I was the first to show how an employed buffer stock policy was a viable option back in ‘soft currency economics’, and that in the context of our political goals- full employment and price stability- it was my opinion that it was obviously a far superior option vs the current policy of using unemployment as a labor buffer stock, and that the only reason it wasn’t our policy was the usual deficit myths. I still hold that position and I think most who understand MMT do as well.

But to your question, I’d say it’s a fundamental understanding. The term ‘essential component’ itself seems to miss the point of MMT?

This is not about promoting a political ideology. It is about analyzing what’s happening and the ramifications of various policy options.

I don’t tie MMT to a political ideology.

I personally don’t have any use for either political party at this point in time.

Nor do I feel good about any of their candidates.

They are all out of paradigm and as such are part of the problem, rather than part of the answer.

That said, it makes perfect sense for people who understand MMT and have political agenda to formulate policy that’s in paradigm and support it as such.


Dan Lynch said...

Well said by Warren, as usual.

Clonal said...

Also Bill Mitchell on India's Rural Job Guarantee - Employment guarantees should be unconditional and demand-driven

Anonymous said...

The MGNREGA has been a program filled with corruption and helping contribute to a growing inflation problem in India. The currently collapsing currency is not unrelated to this.

I wonder why MMT never talks about the abject failure of this program in India and its many negative side effects?

Clonal said...


Did you read the article and the associated World Bank report? Or is this just you speaking, or something you overheard somewhere that you are repeating?

y said...

Yeah I suppose giving people enough money that they can afford two meals a day instead of one or zero might possibly cause some inflation. India's inflation problems are probably due to the fact that not enough peasants are starving.

The best solution therefore is to get the rural poor back to their previous one-meal a day regime. Zero meals would be even better - less inflationary.


Corruption is a problem in India in general, in all areas. It's not specific to any government program.

Inflation is high in India and the currency is depreciating, but GDP growth has been pretty strong. I don't know what the root of their problems is, but I doubt removing government jobs from the very poorest in their society would improve things. They probably need more investment to expand their productive capacity. The inflation is probably coming in part from supply 'bottlenecks'.

Although the NREGA gives government jobs to rural people, it's not actually an MMT job guarantee type of program.

India does not actually run its economy in accordance with MMT as far as I can tell.

y said...

I think a problem with NREGA is that the government tries to use it to build important rural infrastructure like roads and irrigation canals.

These things should really be built by appropriately skilled people with the right tools. Using unskilled labour to make up for a lack of proper investment is not ideal. Better than nothing though.

Anonymous said...

Clonal, Mitchell's post reads like an excuse for a program that is failing in a nation where the currency is collapsing and problems are becoming increasingly apparent.

It seems like MMT likes to adopt certain views of the world and then when the world falls apart they abandon that view and claim it wasn't "in paradigm". Mitchell supported the NREGA previously and used it as an example asking why Australia couldn't follow their lead. Now, as the program helps contribute to inflation, currency collapse and falls under due to corruption MMT is saying the NREGA is not in accordance with MMT standards.


Tom Hickey said...

One of the endemic problems in India, and not only India, is cronyism and corruption. So executing programs is problematic. No reason to abandon welfare, however.

y said...

Hey Anonymous,

Do you recommend cutting off government support to millions of impoverished people in rural India?

Do you really think "the currency is collapsing" because the Indian government is providing a small income and some work to the poorest people in its society, who are in desperate need?

Or might it be a bit more complicated than that?

Are you capable of "a bit more complicated" or is that too much to ask?

Matt Franko said...


Another thing that so-called 'models' do not take into account is corruption.. it's a big factor in economics so it probably should be included in any economic model...


Unforgiven said...

Anon -

Lots of people post lots of things about MMT here. Often it's just their observations and opinions. If you take it as an official MMT stance, you're likely to become confused or even just yum it up as troll food.

Warren Mosler said...

isn't india's currency down about 20% over the last year? while at the same time the $US index is up from about 73 to 82, or about 12% or so?
And it was when the dollar index was at 73 i posted a blog about why it likely would strengthen due to QE being a 'crop failure' for those who recall. so some of the indian depreciation is better viewed as dollar strength, etc? Anyway, it's hardly a 'currency collapse'.

(and after what they did to custer why should we care?...)

Clonal said...


About a 20% shrinkage - mostly due to dollar appreciation, and the rest due to the collapse in demand from the Euro periphery - which was a buyer of Indian manufactured goods including clothing and footwear.

Unforgiven said...

So, what (by and large) is done with the money collected by corrupt officials? Are we talking demand leakage (they're saving it) or is it redistribution?

David said...

and after what they did to custer why should we care?...

If you can say that with a straight face you could be a star on Fox.

Carlos said...

"and after what they did to custer why should we care?..."

Oh dear......I'm inclined to call them native Asians and save all this confusion.

Tom Hickey said...

"So, what (by and large) is done with the money collected by corrupt officials? Are we talking demand leakage (they're saving it) or is it redistribution?"

Hard to say due to loose accounting and money laundering. It "disappears."

Unforgiven said...

Wikipedia says that it's been estimated that 1.5T of "Black Money" has been stashed abroad. So at a cursory glance it looks like a fair bit of demand leakage. Black Money seems to include all money made on the black market, not just the take that corrupt officials get. Looks to be estimated at 40-50% of GDP.

Ryan Harris said...

"it makes perfect sense for people who understand MMT and have political agenda to formulate policy"

The line gets blurry, especially on a blog like this, between what is MMT and what is political agenda. Old stalwarts know the difference but for new comers, MMT turns the world on its head and makes people dizzy on its own. To have radical politics mixed in makes folks get motion sickness. Messy, Messy.

Unforgiven said...

Well said, Ryan.

Far easier to knock the discussion off purpose when you throw in political ideologies. Mea Culpa.

Darmok and Jalad at Tenagra.

Tom Hickey said...

Look, applied economics is about policy. We do both theoretical and applied here. If you can't keep them straight yet, pay attention in class.