MMT: overcoming the political divide.

Discussion in 'Economics & Trade' started by a better world, Mar 12, 2020.

  1. Reiver

    Reiver Well-Known Member

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    There is no free market though, there are only different forms of capitalism with different levels of market concentration (and labour market exploitation).

    Let's use Keynes to make my point. He's often portrayed as the last Great Liberal, with his analysis seen as the great defender of the capitalist order. Its through his analysis that the economy can be stabilised and capitalist profit maintained. I was certainly brought up on that logic. What folk ignore is that Keynes was a socialist. Involved with the Fabians, this quote indicated his political preference : "Conservatism is a far greater danger of the near future than a revolutionary socialism".

    The important point is that Keynes' contribution could be misrepresented as it is not a blueprint to deliver his socialism. It is a blueprint in understanding that we can't rely on microeconomic foundations to explain macroeconomic outcomes. However, if the purpose is to enable economic justice, we certainly then have to go beyond macroeconomic policy.
     
  2. a better world

    a better world Well-Known Member

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    But don't forget this comment made by Keynes, 7 years after presenting his magnum opus (in 1936) "The General Theory of Employment, Interest and Money, re Abba Lerner:

    Keynes, in a letter to fellow economist James Meade written in April 1943, said of Lerner*, His argument is impeccable. But heaven help anyone who tries to put it across to the plain man at this stage of the evolution of our our ideas”. ... 2) All economies, and all governments, face real and ecological limits relating to what can be produced and consumed".

    *Abba Lerner founded Functional Finance":
    Based on effective demand principle and chartalism, Lerner developed functional finance, a theory of purposeful financing (and funding) to meet explicit goals, including full employment, no taxation designed solely to fund expenditure or finance investment and low inflation.

    ...an obvious predecessor of MMT.
     
    Last edited: Mar 27, 2020
  3. Reiver

    Reiver Well-Known Member

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    That does not dispute my point. Even if we refer to optimal macroeconomic policy we do not deliver the socialism that Keynes supported. Too much focus on such policy can actually be damaging. It can encourage the same corruption as the neo-Keynesians with their exaggerated opinion over the Phillips Curve.
     
  4. a better world

    a better world Well-Known Member

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    I'm sure you are correct.

    But I think it important that the public come to understand the increased policy options that result from an understanding of the currency issuing capacity of the sovereign government, so we can move beyond permanent austerity, and beyond the nonstop garbage we hear on the MSM about the necessity for governments to balance their budgets, to "live within (the government's) means" - the way private citizens must do, deficits are bad, and financing the economy so that no-one becomes homeless or hungry in an imposed economic lockdown (as is necessary at present) will result in crippling government debt that will be a "burden on our grandchildren".

    It's all dangerous nonsense, a thousand times more dangerous than corruption which can be dealt with via open and transparent democratic elections.

    (eg, there should be NO private donations to political parties at all; elections should exclusively be funded by the public purse (treasury).
     
    Last edited: Mar 27, 2020
  5. Reiver

    Reiver Well-Known Member

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    I certainly see your point, but we also must recognise that macroeconomic policy is often used to hide from social change. It becomes misrepresentation of Keynes on tiresome repeat, often ensuring 'left wing parties' forget their origins and inch rightwards.

    Take Labour. I was all for their People's QE, but it needed to go hand in hand with socialist change. They've backtracked on the former and only given a watered version of the latter since. Its 'we mustn't look too radical if we want to gain power' abuse of the median voter model.
     
  6. a better world

    a better world Well-Known Member

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    Agreed; ….Keynes, Lerner, you, and I (an MMT'er).....and Marx.... are all 'socialist'; cf mainstream labour parties like those in Britain and Australia which are mainstream stooges whose only idea is to raise taxes on an unwilling electorate....and are becoming increasingly despised and unelectable. Corbyn's fate proves it; he was white-anted by his own party.
     
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  7. bringiton

    bringiton Well-Known Member

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    That's not an endorsement of socialism, just an (accurate) observation that revolutionary socialism is a fringe movement that has no significant risk of actually seizing power in any advanced capitalist country.
     
  8. a better world

    a better world Well-Known Member

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    [The above being bringiton's reply to the Keynes' quote: "Conservatism is a far greater danger of the near future than a revolutionary socialism"].


    Not at all, it IS an endorsement of 'socialism'; because towards the end of his life, after writing his greatest work 'Theory of Employment, Interest and Money' (1936), Keynes became a convert to a far more revolutionary concept, namely Abba Lerner's Functional Finance concept, of which Keynes wrote to a fellow economist, James Meade, in 1943):

    [Lerner's] "argument is impeccable. But heaven help anyone who tries to put it across [to] the plain man at this stage of the evolution of our ideas".

    (Functional finance posits government spending on specific programs, funded by its own currency issuing capacity, a forerunner of MMT.)
     
    Last edited: Mar 30, 2020
  9. kazenatsu

    kazenatsu Well-Known Member Donor

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    I believe the potential gains from harnessing the natural deflation rate, and trying to put it to work, are pretty minimal.
    The rate of economic growth is actually smaller than people commonly think, and the figures are inflated due to monetary inflation.
    Suppose a natural rate of deflation at 0.7%. That would mean the government could only get a free 0.7% of all the money in circulation that year.
    There is $1.75 trillion US dollars in circulation. (And about 60% of that is abroad, by the way, so it isn't reflective of the US economy)
    Let's assume 700 billion US dollars. 0.7% of that would be 4.9 billion.
    That's not a lot of money.
     
    Last edited: Mar 30, 2020
  10. Reiver

    Reiver Well-Known Member

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    An irrelevant effort. It's an example of Keynes' socialism. He was, after all, an early member of the Fabians.
     
  11. Reiver

    Reiver Well-Known Member

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    I'd be careful with suggesting he was a late convert. He first mentioned he was a socialist back in 1907. The quotes give the game away somewhat: from "the progressive reorganisation of Society along the lines of Collectivist Socialism is both inevitable and desirable" to declaring himself "the only socialist present" at the 1930 Economic Advisory Council meeting.
     
    Last edited: Mar 31, 2020
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  12. a better world

    a better world Well-Known Member

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    Thanks for this information.
     
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  13. a better world

    a better world Well-Known Member

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    Let's assume that's all correct - in normal times......

    But why on earth would a sovereign, fiat-currency issuing government EVER borrow money?

    Case in point.

    Trump wants to spend $3 trillion over the next several months, to enable unemployed workers to pay for their food and accommodation.

    He (the government) can do this without borrowing, and without causing inflation, because the resulting spending by unemployed workers will not result in excess demand on the supply of food and accommodation which remains unchanged
    (and sufficient) from the quantum which existed before the crisis, a month ago.

    Do you really want to insist that Trump borrow the money, with the implication that government will need to spend less on social programs in the future, to pay for the borrowing.....
     
  14. bringiton

    bringiton Well-Known Member

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    I just proved it isn't.
    The Fabians were explicitly not revolutionary.
     
  15. Reiver

    Reiver Well-Known Member

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    I've quoted Keynes directly. You whined.

    So? I didn't say Keynes was a Bolshevik. He was, however, always a socialist from his early intellectual contributions.
     
  16. bringiton

    bringiton Well-Known Member

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    Functional finance isn't socialism. Stop makin' #!+ up.
     
  17. bringiton

    bringiton Well-Known Member

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    I proved you quoted him deceitfully.
    Wait, what? YOU are complaining that you did not say something, while falsely implying I said you did say it???

    How many layers of irony can you count up to...?
    Thank you for agreeing that you were wrong and I was right.
     
  18. Reiver

    Reiver Well-Known Member

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    You proved only your dissonance. I've already quoted twice more, both confirming his socialism. Your whine really is poor form. It, as if, your Georgist grunt doesn't help :)
     
    Last edited: Mar 31, 2020
  19. a better world

    a better world Well-Known Member

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    So let's pin this down.

    We know Keynes had socialist sympathies by his own mouth. eg "the progressive reorganisation of Society along the lines of Collectivist Socialism is both inevitable and desirable" and "[Keynes was] the only socialist present" at the 1930 Economic Advisory Council meeting.

    In any case his life's work was devoted to achieving the full employment that clasical economics often failed to do.....and occasionally, spectacularly failed to do.

    Functional finance, like MMT, also guarantees full employment, via the currency issuing capacity of the state.
    Keynes - a socialist by his own mouth - loved it: ("Lerner's argument is impeccable.....".

    Obviously, any macroeconomic theory that proposes government make use of its currency issuing capacity IS 'socialist' , in the sense that it grants much greater policy capacity to government (eg continuous full employment) cf with private sector market outcomes.

    No, that's YOUR false observation, nothing to do with Keynes who was a 'socialist' by his own mouth, as Reiver has demonstrated via actual quotes from Keynes himself.
     
    Last edited: Mar 31, 2020
  20. kazenatsu

    kazenatsu Well-Known Member Donor

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    The term 'Socialist' is a bit relative. You have to remember this was 1907. His position might be closer to the Conservative party in the UK today, for all we know.
     
    Last edited: Apr 1, 2020
  21. bringiton

    bringiton Well-Known Member

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    So you are going to weasel.
    He was pretty much a Fabian.
    If he had been interested in full employment, he would have focused his attack on its chief enemy -- landowner privilege -- instead of pottering around with monetary and fiscal policy.
    I.e., it's not socialist in the sense that socialism is socialist.
    The Fabians were not revolutionary socialists, neither was Keynes, and he was enough of a realist to know there was quite rightly no appetite for revolutionary socialism in advanced capitalist countries.
     
  22. Reiver

    Reiver Well-Known Member

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    Socialism has progressed in terms of deriving alternative schools of thought (e.g. anarchism versus market socialism), but understanding of its radical nature has not diminished. To refer to the Tories, who adopt a neoliberalism which is completely alien to socialist outcomes, only describes a complete lack of insight.
     
  23. a better world

    a better world Well-Known Member

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    Pass

    Pass

    Just because he wasn't a Georgist doesn't diminish his real effort on behalf of full-employment.

    Pass. ...I''ll stick to policy debate (I was tempted to ask if Georgism is 'socialist' or 'Libertarian', but these words are soon shown to be too indeterminate..... kazenatsu's post #170 above accidentally shows this only too well.

    What about any other type of socialism?

    And as for Keynes being "enough of a realist":
    Not long ago on PF, a debater told me Keynes was "utopian", for his global 'clearing union' and 'bankor' (international exchange unit) concepts, presented at Bretton Woods in 1944, 2 years before he died.
     
    Last edited: Apr 1, 2020
  24. bringiton

    bringiton Well-Known Member

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    Such effort without basic understanding is at best futile, at worst counterproductive.
    There are geoists who claim both allegiances. IMO it is clear that Henry George did not advocate collective ownership of producer goods, but did advocate public ownership and operation of natural monopolies such as utilities, policing, postal service, etc.
    Keynes was indisputably a Fabian socialist, though there is a question as to whether he was ever a registered member of the Fabian Society.
     
  25. Reiver

    Reiver Well-Known Member

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    Keynes founded the 1917 Club, named after the Bolshevik Revolution. He wrote "I was immensely cheered up and excited by the Russian news". He also remarked "The only course open to me is to be buoyantly bolshevik"
     

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