Modern Monetary Theory: the economic basis for expanded social spending and greater shared prosperity

The last 40 years has seen a steady rise of deficit-hawking, in which the world’s postwar social safety nets are shredded because the state “can’t afford” them — think of all the times you’ve heard of national debt being money that “the taxpayers” will have to pay back, and misleading comparisons between sovereign governments (who print their own money) to households and businesses (who don’t), as though sovereign state finance was just a scaled-up version of balancing the family check-book.

But a pushback has been quietly building against this trend, based in economic theories that treat money “not as a finite abstraction, but a limitless public utility that can be used to meet human needs.” These ideas started to move outside of wonkish economic circles with David Graeber’s Debt: The First 5000 Years, which became required reading during the Occupy Wall Street years. Graeber sets out the theoretical underpinnings of Chartalism, which holds that “money does not emerge from barter-based economic activities, but rather from the sovereign’s desire to organize economic activity. The state issues currency and then imposes taxes. Because citizens are forced to use the state’s currency to pay their taxes, they can trust that the currency will carry value in day-to-day economic activities.”

Chartalism became “Neo Chartalism,” AKA “Modern Monetary Theory,” whose core premise is that “The state can spend unlimited amounts of money. It is only constrained by biophysical resources, and if the state spends beyond the availability of resources, the result is inflation, which can be mitigated by taxation.”

MMT is the key to understanding how governments can pay for pensions, public education and universal healthcare, creating universal prosperity instead of brutal, wildly unequal, unstable states. It’s gained so much currency that even archconservative economists are pushing its policies, even when they dare not speak its name.

These ideas have been around since the early 1900s, growing up as a dissenting counterpoint to Keynesianism, pointing out that Keynes and the neoclassical economists assume that markets will be dominated by “active owners” — companies run by the people who owned them. But the reality of corporatism is that the majority of companies are owned “passively,” by investors whose interests are generally short-term and narrow, and who are willing to destroy the companies they invest in, provided they get a payday in the process.

Modern Monetary Theory is the key difference between the “tax and spend” of GW Bush (in which the state assumed trillions in debt to enrich a tiny minority) and of, say Bernie Sanders (who proposes much smaller levels of spending to create broadly shared prosperity and growth).

To counter this distressing vision, we as individual members of Democratic Socialists of America call forth a vision of maximal democracy that can be operationalized through a heterodox economics framework. We envision a democratic socialism with four policies at its core that each appeal to distinct constituencies:

1. Medicare for All: All would have universal access to health care, with a structure that also allows for effective input by patients, medical practitioners and other stakeholders.

2. Multi-Stakeholder and Workers’ Self-Managed Job Guarantee: The state creates unemployment by imposing a monetary survival-constraint through various financial obligations (such as taxes, duties, fees, fines, etc.). One partial but significant solution to unemployment issues is that a job be offered to anyone who wants one. Yet, for democratic socialists, this job must approximate from and towards socialist relations of production — rather than hierarchical exploitative relations of production, as was common under many prior experiments in state-socialism.

3. Financing Enterprise Conversions to Democratic Employee-Ownership: Due to a wave of 2.34 million retiring Baby Boomer small business owners, nearly 25 million workers could lose their jobs over the next 10 years. What would otherwise amount to a crisis could amount to an opportunity to save jobs and create millions of enterprises that operate according to “one worker, one vote.” Furthermore, soon-to-be retirees would have be given financial exit options that preserves their legacy and can only amount to an extension of community.

4. Free Public University: Degrees and certifications are increasingly structuring employment. As MMT demonstrates, the issue is not one of fiscal means, but technical. The casualization of academic labor shows there rapidly growing pool of educators available to meet the growing desire for university instruction.

Unlike the claims of Soviet economists and social scientists, job satisfaction surely is important if one wants to create a truly democratic socialist society. And such a society will only exist if workers not only own the means of production, but also have control in and through the management of their workplaces and lives at large. MMT and heterodox economics paves the path forward for us to get there.

“But How Will We Pay for It?”: Modern Monetary Theory and Democratic Socialism [Sean Keith and Alexander Kolokotronis/Truthout]

(via Naked Capitalism)

No Comments, Be The First!

Your email address will not be published.