I am surprised at the hostility that Part 1 in this series created. I have received a lot of E-mails about it, many of which contained just a few words, the most recurring being Turkey! One character obviously needed to improve his/her spelling given that they thought it was appropriate to write along the lines that I should just ‘F*ck off to Terkey’. Apparently Turkey has become the new poster child to ‘prove’ Modern Monetary Theory (MMT) wrong. Good try! I also note the Twitterverse has been alight with attention seekers berating me for daring to comment on the sort of advice British Labour is receiving. Well here is Part 2. And because you all liked it so much, the series has been extended into a three-part series because there is a lot of detail to work through. Today, I revisit the fiscal rule issue, which is a necessary step in refuting the claim that MMT policy prescriptions (whatever they might be) will drive the British pound into worthless oblivion. And, you know what? If you don’t like what I write and make available publicly without charge, then you have an easy option – don’t read it. How easy is that? Today, I confirm that despite attempts by some to reconstruct Labour’s Fiscal Rule as being the exemplar of progressive policy making, its roots are core neoclassical economics (which in popular parlance makes it neoliberal) and it creates a dependence on an ever increasing accumulation of private debt to sustain growth. Far from solving a non-existent ‘deficit-bias’ it creates a private debt bias. Not something a Labour government or any progressive government should aspire to....Bill Mitchell – billy blog
MMT is just plain old bad economics – Part 2
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
4 comments:
How Bill Mitchell stalks Jeremy Corbyn
Comment on Bill Mitchell on ‘MMT is just plain old bad economics ― Part 2’
The general public has no proper understanding of what economics is all about. Therefore, the first thing to do is to distinguish between political and theoretical economics. The main differences are: (i) The objective of political economics is to successfully push an agenda, the objective of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.
Theoretical economics had been hijacked from the very beginning by the agenda pushers of political economics. Political economics has produced NOTHING of scientific value in the last 200+ years. The four major approaches — Walrasianism, Keynesianism, Marxianism, Austrianism — are mutually contradictory and materially/formally inconsistent. Economics is a failed science. Most people have the impression that economics is, roughly speaking, a fight between the pro-capitalist/anti-communist side against the pro-communist/anti-capitalist side.
This impression is confirmed on all channels of public communication and this shows that the agenda pushers have taken over economics and have weaponized economic theory. Since Adam Smith/Karl Marx, economic policy guidance NEVER had sound scientific foundations. To this day, economists are not competent scientists who are committed to scientific truth but stupid and corrupt story-tellers/agenda-pushers.
How does MMT fit into this scheme?
See part 2
Part 2
• MMT claims that neoclassical = mainstream economics is garbage. That is provably true.
• MMTers claim, in particular, that their monetary theory is superior. That is correct especially in comparison to mainstream economics.
• MMT claims to be politically progressive, that is, to promote the cause of the ninety-nine-percenters.
• This seems to imply that MMTers and the Labour Party harmonize with regard to economic policy. This, though, is NOT the case.
• In a speech, John McDonnell, the Shadow Chancellor, said that: “Austerity is not an economic necessity, it’s a political choice … We will tackle the deficit fairly and we can do it … Labour’s plan to balance the books will be aggressive … Where money needs to be raised it will be raised from fairer, more progressive taxation.”
• To call austerity a political choice is characteristic MMT terminology, however, this does NOT satisfy Bill Mitchell: “So in this framing, the Labour Party was signalling that it would continue to construct the macroeconomic debate within the standard neoliberal (mainstream economics) framework. The language and concepts of that flawed approach would be retained.”
• According to Bill Mitchell, the Labour Party’s economic program hides “the fact that the proponents do not want governments to do what we elect them to do ― that is, advance general welfare.”
• This smacks of treason but is merely incompetence of the current leadership: “In my view, it would be a better strategy, … to spend time reframing the debate away from the neoliberal obsession with deficits and public debt, and, instead, elevating progressive goals of full employment, environmental sustainability, equity etc to the centre stage.”
• “But then the Shadow Chancellor would need to get some better advice.”
• And here Bill Mitchell jumps in: “As I explained … the only appropriate deficit target is whatever is required to ensure the overall savings desires of the non-government sector are achieved at a full employment level of output.”
• Expressed in a formula, Public Deficit should be equal to Private Saving. What Bill Mitchell in his scientific incompetence/corruption does NOT know/does NOT WANT to know is that the macroeconomic Profit Law clearly states: Public Deficit = Private Profit.#1
• Since “Private Saving” is supposed to be positive most of the time, Bill Mitchell is arguing for permanent deficit-spending/money-creation and a steadily growing public debt.
• What is absolutely unacceptable for Bill Mitchell is that the Labour Party intends to “balance the books” with “more progressive taxation.”
• MMT is for social policy but only for a social policy that is NOT funded by taxes, and NOT by a reduction of military spending, but predominantly by deficit-spending/money-creation which amounts to stealth taxation of the ninety-nine percenters.
So, what MMT is all about is to steal the social image from the Labour Party, to undermine the current leadership, and to substitute Labour’s economic policy by a program that exactly fits the requirements of Wall Street/City of London.#2, #3
Egmont Kakarot-Handtke
#1 MMT and the magical profit disappearance
http://axecorg.blogspot.com/2017/08/mmt-and-magical-profit-disappearance.html
#2 Political economics: Who hijacks British Labour?
https://axecorg.blogspot.com/2018/03/political-economics-who-hijacks-british.html
#3 Hope you get it: MMTers = Friends-of-the-People
https://axecorg.blogspot.com/2018/08/hope-you-get-it-mmters-friends-of-people.html
MMT is for social policy but only for a social policy that is NOT funded by taxes, and NOT by a reduction of military spending, but predominantly by deficit-spending/money-creation which amounts to stealth taxation of the ninety-nine percenters.
MMT is opposed to the false proposition that social policy MUST be funded by taxes. The idea that spending not funded by taxes necessarily amounts to stealth taxation is very neoclassical, commodity theory thinking. It is quite wrong. Your arguments and everybody else's arguments for it are specious. As always, going through them more slowly allows one to see the holes.
In any case, what MMT proposes is generally speaking spending up to the point the "stealth taxation" of inflation occurs. This appears to be your proposal too. The sole difference is when this point occurs. Which is correct can be demonstrated empirically as well as logically- and the answer is MMT.
Calgacus
You say: “The idea that spending not funded by taxes necessarily amounts to stealth taxation is very neoclassical, commodity theory thinking.”
Axiomatically correct macroeconomics leads to the provable conclusion that deficit-spending/money creation has two certain effects (i) the ninety-nine-percenters are taxed in real terms,#1 (ii) the business sector’s profit increases because the Profit Law states Public Deficit = Private Profit.#2
MMT policy has massive negative effects on distribution.#3 The claim that MMT is progressive is laughable.#4
Scientifically, MMT is garbage and politically it is Wall Street’s attempt to hijack and neutralize genuine social movements.
MMTers are scientifically incompetent and politically corrupt. MMT is refuted on all counts.#5
Egmont Kakarot-Handtke
#1 MMT, money printing, stealth taxation, and redistribution
http://axecorg.blogspot.com/2017/11/mmt-money-printing-stealth-taxation-and.html
#2 The Magic Money Tree is real ― too bad that the magic is fraud
https://axecorg.blogspot.com/2018/07/the-magic-money-tree-is-real-too-bad.html
#3 Keynes, Lerner, MMT, Trump and exploding profit
https://axecorg.blogspot.com/2017/12/keynes-lerner-mmt-trump-and-exploding.html
#4 Hope you get it: MMTers = Friends-of-the-People
https://axecorg.blogspot.com/2018/08/hope-you-get-it-mmters-friends-of-people.html
#5 See cross-references MMT
http://axecorg.blogspot.com/2017/07/mmt-cross-references.html
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