I have posted the Steve Keen video here before, but what's really interesting about this Richard Murphy article is the comments section underneath. Many people have trouble fully getting to grips with MMT.
MMT is a fantastic system for producing a fairer and wealthier society. Social democracy and capitalism can work together, strengthening both. We end up with far less suffering, a safer society, a well educated workforce producing more wealth; less crime, so less money spent on crime prevention; more people in work - so the tax burden is spread more widely; less ill health - because people are happier and less stressed; and excellent infrastructure, etc.
The job guarantee can get help people back into work, which won't be a grind but an enjoyable social experience, and a way of meeting new people instead of being stuck at home with nothing to do.
And the old and people with disabilities can get the help they require and need never be lonely either.
The countryside can be managed better with any litter being cleaned up.
Society can be a social system, not just a competitive environment.
If capitalism can't produce a greener society because the profits are too low, then the government can help out. Remember, there's no wealth without a sustainable green future. If the world dies, we all die.
Steve Keen on MMT
I have a lot of respect for Steve Keen. His book Debunking Economics is pretty much essential reading for anyone who wants to know the flaws in neoclassical economic thinking.
Like me, Steve buys most of MMT, not because it's a dogma (in contrast to the neoclassical view) but simply because it describes how things really are.
Like me Steve also has some reservations. Mine have been focussed on its attitude to tax (on which I may do more this weekend: it depends on the weather). Steve has focussed on MMT and the current account balance, where he thinks many's indifference is due to a US centric view.
This critically supportive podcast is worth listening to.
15 comments:
Meet the MMT smart arses
Comment on Kaivey on ‘Richard Murphy ― Steve Keen on MMT’*
The applause troll Richard Murphy introduces Steve Keen: “I think it fair to say that at a technical level you are quite right that Steve Keen is a smart arse: he is an incredibly intelligent man. … I don’t know Steve well, but I know well enough to be aware that what happens to the people and planet the matter to him, a great deal.”
The applause troll Kaivey introduces MMT: “MMT is a fantastic system for producing a fairer and wealthier society. Social democracy and capitalism can work together, strengthening both. We end up with far less suffering, a safer society, a well educated workforce producing wealth, less crime ― so less money spent on crime prevention ― more people in work, so the tax burden is spread more widely, less ill health ― because people are happier and less stressed ― and excellent infrastructure, etc. The job guarantee can get help people back into work, which won’t be a grind but an enjoyable social, work experience, and a way of meeting new people instead of being stuck at home with nothing to do. And the old and people with disabilities can get the help they require, and need never be lonely either. The countryside can be managed better, with any litter being cleaned up. …”
This, of course, are merely talking points for the MMT sales team. MMT claims to be a superior economic theory and therefore has to be seen against the background of present-day economics. The four major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal concept of the subject matter ― profit ― wrong.#1 Economics is a failed science and MMT as a relatively young approach fits in this pattern. MMT is NOT a scientifically valid theory but political agenda pushing for the Oligarchy in a scientific/social bluff package.#2, #3, #4
Accordingly, MMTers and their supporters cannot be taken seriously. These folks are not so much smart arses but either stupid or corrupt or both. For details about this motley crew of proto-scientific con artists see Stephanie Kelton,#5, #6 Richard Murphy,#7 Warren Mosler,#8 Ellis Winningham,#9 Bill Mitchell,#10 Lars Syll/Dirk Ehnts,#11 Clint Ballinger,#12 Brian Romanchuk,#13 Steve Keen,#14.
Needless to emphasizes that scientific standards do not exist for economists in general and MMTers, in particular.#15, #16, #17
Egmont Kakarot-Handtke
See References
Let's assume all Businesses make 5% profit.
Let's say the government creates the money and pays public workers and they spend their wages into the wider economy. Businesses now increase production and employ new staff and so there is less unemployed. The businesses take 5% profit and the rest goes out in expenses. Retailers but new products from the factories, and the factories buy more raw materials from the extractive industries and farms and they all take 5% profit of the money that passes through their businesses. The other 95% gets paid as wages to staff.
The new staff that has been employed now want more goods and services too. Every time the workers buy goods and services businesses take 5% profit, and as the money circulates businesses slowly take most of the money unless the workers save some of it.
Every time the workers buy products private businesses make a profit, but they worked for it. Eventually, the private businesses capture all the money and it will be gone unless the government puts more in.
This is capitalism, and all businesses make a profit.
Even if people only borrowed money from private banks and there was no government money, business would still capture 5% in profit every time the money circulates in society until it's all gone. Every time workers get paid and they buy products the businesses will make 5% profit over and over again.
If only the private banks lent money into existence and businesses capture 5% of it every time people buy things, then they will end up with all the money. Unless the businesses, and their investors, put their money back out into society, how will people be able to pay back their loans? But even if businesses did reinvest their money back into society, all that money is still theirs.
So, even if the oligarchs do capture all of it in the end, the government money has generated wealth for the workers (who would have saved some of that money too). They got wages, bought the things they needed, and lived a decent life. But the oligarchs worked to provide the goods and services the people wanted. But much of that money is also captured by the workers when they buy homes or put money into a savings.
If we don't like the oligarchs getting too much money, we can consider putting more tax on them.
Okay, the rich but products and services too, and reinvest the rest of their money back into society to earn 5% on that too, and so on. It gets compounded. And from that reinvestment the workers can earn the money to pay off their loans. But on paper, the oligarchs still own all the money. So, the banks get all their money back, while the oligarchs own all the wealth. That's interesting, don't you think? The wealth is in the assets.
"If we don't like the oligarchs getting too much money, we can consider putting more tax on them. " I agree that the oligarchs need to be taxed but I don't agree that they create jobs. All the rich do is play in the asset markets and run up the cost of asset for the rest of us. It is called financial engineering. Jobs are created by the workers of a country who are the backbone of the economy. The rich simply extract wealth from the real economy and very little of that wealth is ever put back into the economy except to increase asset prices. So, the wealth extraction of the rich needs to be taxed at a very high rate.
The thing about MMT is that it describes how the government creates money and Prof. Mitchell constantly says that in order to end a recession all a government has to do is create more money. But, as I see it MMT is useless without a progressive tax to prevent the rentiers from sucking all of the money out of the real economy. When the Fed added money to the system during the GFC MMTers claimed that there was no inflation. That is completely wrong. There was inflation in the asset side of the economy. In fact, that was the reason for QE, to re-inflate the housing market. It helped the banks and hurt the rest of us.
Let me put this another way. There are two types of money, government currency and bank credit. Both add money to the economy but bank credit can extract money from the economy in the form of interest or usury. If that extraction is more than the government adds then we have a country that survives for a while on debt. That is where we are now. Our government debt isn't creating any consumer inflation because the increased currency is going to the 1% while the economy is expanding on debt created by private financiers. I don't believe that it will last forever, do you?
Kaivey
You say: “Let’s assume all Businesses make 5% profit.”
That’s your problem: you have no macroeconomic theory, to begin with, and therefore you have no idea how a 5% profit comes about.
The first question of economics is this: “How can they [the capitalists] continually draw 600 p. st. out of circulation, when they continually throw only 500 p. st. into it? From nothing comes nothing. The capitalist class as a whole cannot draw out of circulation what was not previously in it.” (Marx)
Marx did not answer the question correctly and neither did Walrasians, Keynesians, Austrians, and MMTers.#1 What all these fake scientists lack for a proper analysis are the correct macrofoundations.
The correct macrofoundations are given with this axiom set: (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X.
So, if the total wage income of the household sector Yw is 100 in a given period and the household sector spends all on consumption C=Yw, then the macroeconomic profit of the business sector Q≡C−Yw is zero. It does not matter whether there is full employment or unemployment. Profit is zero at any employment level.#2
If the total wage income of the household sector is 100 and the household sector spends C=105 on consumption then there is a one-off price hike and the profit of the business sector is 5. This is how the business sector makes 5% profit. Profit comes from deficit spending/dissaving of the household sector. The macroeconomic Profit Law says Q=−S for the most elementary case.
This is in essence how the monetary economy works. And economists including MMTers don’t get it to this day.#3
If the total wage income of the household sector is 100 and the household sector spends all on consumption and the government sector applies deficit-spending/money-creation of 5, then there is a one-off price hike and the profit of the business sector is 5.
If the total wage income of the household sector is 100 and the household sector spends all on consumption and if the government sector puts hitherto unemployed to work for cleaning up the environment and pays them 5 and these additional workers fully spend their income on the unchanged output O of the consumption goods industry, then there is a one-off price hike and the profit of the business sector is 5.
Note well that this deficit-spending/money-creation has to be repeated in subsequent periods, otherwise, employment and profit fall back to their initial levels. This has the effect that public debt grows continuously. The mirror image of growing public debt is growing financial wealth of the Oligarchy. This is what the smart arse MMT policy of deficit-spending/money-creation amounts to.#4, #5
There is a better way to achieve full employment.#6
Egmont Kakarot-Handtke
#1 The Profit Theory is False Since Adam Smith
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2511741
#2 Essentials of Constructive Heterodoxy: Employment
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2576867
#3 Refuting MMT’s new Macroeconomics Textbook
https://axecorg.blogspot.com/2019/03/refuting-mmts-new-macroeconomics.html
#4 Keynes, Lerner, MMT, Trump and exploding profit
https://axecorg.blogspot.com/2017/12/keynes-lerner-mmt-trump-and-exploding.html
#5 MMTers make Capitalism work
https://axecorg.blogspot.com/2018/07/mmters-make-capitalism-work.html
#6 Full employment through the price mechanism
https://axecorg.blogspot.com/2017/11/full-employment-through-price-mechanism.html
Somehow, the References for the first post got lost.
See
https://axecorg.blogspot.com/2019/03/meet-mmt-smart-arses.html
Thank you, GLH. An Indian Marxist economics professor said on TRNN, that in the 70's the rich had saturated the market with goods and with the intense competition between companies profits were getting very low, as Karl Marx predicted, so they turned to financialization instead. By driving to asset prices they can make more profit.
I wondered how it worked, as most people can't afford luxury homes, businesses, factories, office blocks, so what the higher asset prices must do is to force companies to increase their prices. But if one company did not finacialize then it would win all the market share, so the financial class must be running a cartel.
Just my thoughts.
Thank you, Egmont. Your reply was quite interesting and well written.
To make a profit Richard Wolff says the capitalists have to mark up prices more than they cost to produce, and so the wages of the wages will never be enough to buy all the products they make, and this leads to unemployment and poverty. Richard Wolff is saying that they will only be able to buy, say, 95% of what they make, but what you're saying is that if the government deficit spends, then this supplied to society the extra money to buy 100% of what they produce.
In the 1930's Clifford Douglas started the Social Credit movement and said the government should print money and give it to the workers, or spend it into circulation, so that they could afford to buy the products they made in the factories. He thought it was a good idea, but you say this runs up the national debt.
I have much to think about.
Thank you again, Egmont.
Kaivey
You say: “Richard Wolff says the capitalists have to mark up prices more than they cost to produce, and so the wages of the wages will never be enough to buy all the products they make, and this leads to unemployment and poverty.”
To recall, the elementary production-consumption economy is for a start defined by three macro axioms (Yw=WL, O=RL, C=PX), two conditions (X=O, C=Yw) and two definitions (Q≡C−Yw, S≡Yw−C).
Given the two conditions, (i) the market clearing price is P=W/R (= macroeconomic Law of Supply and Demand), and (ii), monetary profit Q is zero because of C=Yw (= macroeconomic Profit Law).
The Law of Supply and Demand says that the price P is the dependent variable. On the other hand: “Richard Wolff says the capitalists have to mark up prices …”
In this case, the price is NOT the dependent variable but the independent variable. By consequence, the quantity variable has to adapt. So, the condition of market clearing X=O has to be skipped. With a markup price P>W/R, the business sector obviously can no longer sell the whole output, i.e. XYw.
MMTers, though, have not realized anything. The proof is in the MMT sectoral balances equation which reads (I−S)+(G−T)+(X−M)=0. In this equation, the balance of the business sector Q ― the key variable of Capitalism ― is missing. No so smart, the MMT smart arses.
Egmont Kakarot-Handtke
The smaller-sign has scrambled the text. Correction:
In this case, the price is NOT the dependent variable but the independent variable. By consequence, the quantity variable has to adapt. So, the condition of market clearing X=O has to be skipped. With a markup price P>W/R, the business sector obviously can no longer sell the whole output, i.e. XYw.
MMTers, though, have not realized anything. The proof is in the MMT sectoral balances equation which reads (I−S)+(G−T)+(X−M)=0. In this equation, the balance of the business sector Q ― the key variable of Capitalism ― is missing. Not so smart, the MMT smart arses.
Doesn’t work. For full text see
https://axecorg.blogspot.com/2019/03/meet-mmt-smart-arses.html
"MMT is useless without a progressive tax to prevent the rentiers from sucking all of the money out of the real economy"
Exactly. And the battle against MMT and the clarity it brings to economics is being led by oligarchs and their moronic supporters like Egmont and his idiotic 'profit law' (there is no such thing).
MMT is useless without a progressive tax to prevent the rentiers from sucking all of the money out of the real economy
No, that's wrong. The rentiers and the MMTers are the only ones who understand what's going on. Sure progressive taxation is good, but what is really important is the job guarantee, the spending on the non-rentiers. That is what the rentiers hate above all, above progressive taxation.
As the Robinson-Kalecki saying goes, Workers spend what they get. Capitalists get what they spend. And the last includes capitalist, rentier spending on taxes. The tax take has to be put back into the economy or there will be unsustainable surpluses and depressions. Since they're rentiers, they will get it back. And it won't be enough to fully employ everyone; the capitalists are still in control. Progressive taxation without new spending takes a long time to do anything for equality.
New spending instantly can give people jobs, build housing, provide healthcare - outside of capitalist control. If they suck all the money and don't spend it - that just makes an MMT government spend more on the non-rentiers. If rentiers do spend it, then they are by that token decreasing the reserve army of the unemployed and weakening their own bargaining position. They have an insoluble dilemma.
Calgacus
You say: “As the Robinson-Kalecki saying goes, Workers spend what they get. Capitalists get what they spend. And the last includes capitalist, rentier spending on taxes. The tax take has to be put back into the economy or there will be unsustainable surpluses and depressions.”
The first point to notice is that the Kalecki profit equation is provably false.#1, #2
Secondly, you do not properly differentiate between wage income Yw and distributed profit income Yd. Roughly speaking, wage income goes to the ninety-nine-percenters, distributed profit income goes to the one-percenters.
It is generally agreed since Kalecki that the spending out of wage income is proportionally higher than spending out of distributed profit income. So, let us assume that the taxation of wage income is reduced and the taxation of distributed profit is increased by the same amount such that total taxes remain unchanged.
Because of the different spending propensities, the increase of spending of the ninety-nine-percenters is higher than the reduction of spending of the one-percenters and the net effect is an increase of overall demand which has a positive employment effect. So there will NOT be “unsustainable surpluses and depressions”.
The fact that tax-the-rich has before AOC not been a prominent element of MMT economic policy guidance#3 is another indicator that MMTers are, contrary to their social rhetoric, agenda pusher for the Oligarchy.
Your attempt to psychologically defuse the tax-the-rich issue is not very convincing: “Sure progressive taxation is good, but what is really important is the job guarantee, the spending on the non-rentiers. That is what the rentiers hate above all, above progressive taxation.”
You are in line with Bill Mitchell: “The ‘tax the rich’ call bestows unwarranted importance on them.” So MMTers, let’s forget taxation and crank up deficit-spending/money-creation.
You say: “The rentiers and the MMTers are the only ones who understand what’s going on.” Yes, these smart arses are well aware that Public Deficit = Private Profit.
Egmont Kakarot-Handtke
#1 Truth by definition? The Profit Theory is axiomatically false for 200+ years
https://axecorg.blogspot.com/2018/07/truth-by-definition-profit-theory-is.html
#2 The axiomatically correct macroeconomic Profit Law is given by Q=Yd+(I−S)+(G−T)+(X−M) with Q as monetary profit and Yd as distributed profit income.
#3 MMT: Distribution is the drawback NOT Inflation
https://axecorg.blogspot.com/2019/02/mmt-distribution-is-drawback-not.html
@Calgacus -
I'm guessing you assumed that I meant progressive taxation was the only "fix" necessary when what I was doing was agreeing with a single critical point.
Another benefit of truly progressive taxation would be the elimination of the great wealth that buys government favor and service for its own benefit,
#1 Truth by definition! Egmont is an Intellectual Midget
https://axecorg.blogspot.com/2018/07/truth-by-definition-Egmont-is-an-idiot.html
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