Monday, June 3, 2019

James Meadway - Against MMT

Modern Monetary Theory disorients the Left by peddling simplistic monetary solutions to complex problems of political power.

James Meadway is an economics adviser to the British Labour Party, who in this article is very critical of MMT. James Meadway says MMT can only work well in the US because the dollar is the world's reserve currency and it wouldn't be so effective in Britain. 

MMT is also far too soft on the financial sector, says James Meadway, which is in need of serious reforms as powerful as those that Thatcher implemented but in reverse. 

Well, whatever your views on MMT, I found James Meadway's article to be a very powerful read. I'm fed up with halfway measures and the sort of compromises that led to New Labour. It's time to sort this out, and the military industrial complex with all its swamp creatures. 

Here's an excerpt to whet your appetite. 

Worse, the very existence of a large financial system, vulnerable to shocks, creates a domestic pressure to reduce public spending. The logic is simple, as described by the former Chief Economist of the IMF Maurice Obstfeld: if we have a bloated financial sector, it is at increased risk of the kind of crash that will require bailouts in one form or another — either directly to financial institutions, or indirectly through vast deficit spending by government. The risk of this future crash drives austerity today, which is what the Tory chair of the Public Accounts committee meant when he said there was not enough ‘national borrowing capacity’ to cope with our ‘exposed and vulnerable’ financial system.
To end austerity permanently, we have to transform how our financial system works, reducing its exposure to the risk of a major collapse. And to transform finance, we need a slow, methodical process akin to defusing a bomb — not a further explosion. It will mean ‘structural reforms’ to our economy — building new institutions to deliver investment, like the regional development banks; changing the ownership and control of productive assets, for example through the Inclusive Ownership Funds — issues on which MMT advocates are usually silent.


Unknown said...

James Meadway and Martin Feldstein should go potholing together:-

Ralph Musgrave said...

As followers of Mike Norman Economics will know, I’ve taken a close interest in hundreds if not thousands of articles, economists etc etc over the years. But I never heard of James Meadway till now.

He seems to be a member of a tribe which has far too many members: people with no ideas, but who are good at wind, waffle and hot air, and who, despite not being able to think, manage to get themselves jobs with think tanks.

I particularly “like” this passage towards the end of his article where he invokes “….fiscal responsibility”, i.e. having taxes fund all public spending. He says, “we must establish clear lines of tax funding for day-to-day spending, and set out a path for future deficits to follow.”

He is quite obviously clueless.

Kaivey said...

What holds leftist parties back is the percieved extra tax burden. The magic of MMT is that it has a solution to this.

Andy Blatchford said...

Are you living under a rock up there in Durham Ralph?

Meadway was chief economist of the New Economics Foundation (not an exactly an unknown thinktank to you or Positive Money. Lawrie Macfarlane was employed there and was at that meet up with Warren, Meadway was at the time Lawries boss) Advisor to Galloways Respect party, involved with the Radical Independence Campaign in Scotland, often published in Counterfire, Guardian etc. until recently he was Mcdonnells chief advisor as Bill Mitchell mentions in this blog

AXEC / E.K-H said...

My post got somehow lost. See