I am now on a train heading back from Galway to Dublin for tonight’s event. This is Part 2 of my responses to the conversations I had and presentations I attended during the Second International Modern Monetary Theory which was held last weekend in New York City. In Part 1 I focused on the importance of starting an activist program with a thorough grounding in the theory and practice that the core Modern Monetary Theory (MMT) team has developed over the last 25 or so years. As MMT becomes more visible in the public domain and seems to offer much to those with progressive policy aspirations, there is tendency to adopt a stylised version of it (a sort of shorthand version), and sloganise MMT. Part 1 cautioned against that tendency. The latter part of Part 2 also introduced the idea that there is only one Job Guarantee and many of the multitude of employment guarantee proposals that have popped up like weeds after rain in recent years do not have the essential technical design features to make them consistent with MMT. I continue that theme in this blog post.



Clarifying the lens-value distinction

To begin, I noted a comment overnight that seemed to reflect a puzzlement about what I mean when I say that it is meaningless to talk about MMT’s prescriptions because MMT is a lens rather than a value system.

First, that does not mean that MMT is merely descriptive.

I hope that the blog post – Understanding what the T in MMT involves – leaves no doubt that the body of work we have created combines behavioural theory, history, culture, descriptive elements, and accounting structures to form what we call MMT.

Second, when I say that MMT is a lens for understanding the monetary system and the capacities of the currency-issuing government within it and explaining the impacts of changes in behaviour and policy, I am excluding using that understanding to develop policy interventions.

I was surprised to see that this point is still somewhat misunderstood out there.

I have, what I think, is a very coherent set of policy interventions, which I consider to be a progressive response.

My 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015) and our recent book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017) contains a strong policy emphasis.

The former concerns policies that would allow a Member State of the Eurozone to exit gracefully with minimum damage and the latter provides a broader discussion about how a progressive agenda to counter the neoliberal stronghold can be designed and implemented.

The policy and applied discussions in both books are conditioned or informed by my understanding of MMT. That understanding provides me, I think, with a solid grounding to make estimates (qualitative and quantitative) on what will happen if.

I believe that understanding also allows me to counter the standard claims that the type of policies I advocate will elicit from mainstream economists.

For example, I don’t believe a unilateral exit from the Eurozone by, say, Italy, would deliver worse outcomes that they are already facing as a Member State of the common currency.

The point is that the policies I advocate reflect my value system rather than my understanding of MMT. MMT becomes a tool for me to work out what would be the impact of applying my value system in the policy space.

However, someone with diametrically opposed values could have exactly the same grasp of MMT and come up with vastly different policy prescriptions.

The point I have made in the past about that is that MMT lifts the ideological veil that creates a smokescreen in the public debate.

Thus, in the current neoliberal environment, a right-winger can mount the case that the government cannot employ all idle labour because it doesn’t have enough money.

This chimes with the dominant frames that reinforce the neoliberal dominance and so militates against progressive policy implementation.

But if everyone understood MMT then that right-winger would be forced out in the open and would have to declare that they wanted mass unemployment because it served a functional role in reinforcing the hegemony of the elites, by suppressing wages growth and creating a sense of desperation and precariousness among the workers.

That would be a much harder position to sustain in the public debate and that is why they use smokescreens to hide their true motivation.

I hope that clarifies that issue.

There is only one Job Guarantee – continued

It was also said during the Conference that MMT is not the “soul” of the ‘right to work’ movement. The core MMT team has never claimed otherwise.

As I noted in Part 1, the concept of ‘right of work’ goes back to the C13th and the right-wing has always opposed it and at various points in history have deployed various ruses to thwart its application.

The core MMT team considers the ‘right to work’ concept in terms of efficiency of use of productive resources, quite apart from our individual attitudes to the moral and philosophical aspects of the concept.

While we, typically, adopt a broader concept of efficiency (emphasising social costs and benefits) the the mainstream economists tend to have what I call a ‘narrow’ concept of efficiency (based on private costs and benefits), the pursuit of this goal is based on a view that wastage is undesirable.

So from a technical perspective, MMT is designed to produce a special form of full employment, through the deployment of an unconditional job offer at a fixed price to anyone who desires to work. That is quite a different motivation to any values-based desire to guarantee a ‘right to work’.

Although, of course, they deliver the same outcome (well mostly).

Building on what I was suggesting yesterday and consistent with the heading in this sub-section – ‘There is only one Job Guarantee’ – it should be clear that the core MMT team has never claimed to have invented the term ‘job guarantee’.

That terminology goes back in time.

But what is indisputable is that the work of the original MMT team is responsible for bringing the concept and terminology of the Job Guarantee into the modern era in the form of a buffer stock mechanism.

That is our unique contribution.

The ‘only one Job Guarantee’ statement relates to the buffer stock mechanism, which ensures that the Job Guarantee is part of a macroeconomic stability capacity rather than just being an employment creation policy.

In turn, this means that there are very tight specification requirements for an effective MMT Job Guarantee, which go back to the core body of work we have developed.

So while there is no criticism here of the many employment guarantee proposals that have been circulating in the public debate over the last few years, the fact is that most of these do not have a ‘buffer stock’ mechanism at their heart.

In that sense, these proposals are not related to MMT at all, although the tendency to see MMT as a slogan also promotes a tendency to align these proposals with MMT. I reject that and want to discourage it.

Whether these policy proposals have desirable aspects is beside the point. If they are void of a ‘buffer stock’ mechanism then they open the MMT approach to criticism that is undeserved.

For example, at the conference I heard people claim they would have a structure of wages built into the ‘jobs guarantee’.

Note I use lower case here which is a pointed distinction from a MMT Job Guarantee.

I have no problem with proposals that argue that we should introduce more public sector employment and offer those jobs with a skills-based wage structure.

But such a plan would not be remotely like the MMT Job Guarantee.

The latter is a buffer stock mechanism which unconditionally hires at a fixed priced in order to redistribute labour resources from an inflating sector to a fixed price sector or from a zero bid state to a fixed price state.

A wage structure would see the government buying labour resources at market bids, which defeats the price stability characteristics that are intrinsic to the MMT Job Guarantee.

It is crucial that activists who wish to organise around the MMT school of though understand the full implications of that.

The MMT Job Guarantee is a macroeconomic concept that replaces the conventional Phillips Curve (and the discussion about trade-offs between inflation and unemployment) with the capacity to achieve ‘loose’ full employment with stable inflation rates.

It also seemed from the discussions I had or witnessed during the Conference that many thought that any public sector employment initiative (such as employing engineers on public infrastructure projects) could easily be called a ‘jobs guarantee’.

This undermines the meaning and specificity of the MMT Job Guarantee.

Even the use of the term ‘jobs guarantee’ discloses a lack of precision about what we are talking about.

Language aside, this plethora of proposals can never be compliant with the MMT Job Guarantee.

That point was not uniformly understood by delegates at the Conference and needs to be.

The original MMT team does not want the plethora of non-MMT employment creation schemes to be associated with our work.

And to put a finer point on that, it is not even correct to think of MMT Job Guarantee as being mostly a job creation program. It is a macroeconomic stability framework and the job creation aspects are just one part of that framework.

Creating public sector jobs without the buffer stock mechanism does not conform with the stability features inherent in the MMT Job Guarantee.

There are things that have to be considered and thought about

During the Conference I heard many speakers say that there are lots of things that have to be considered and thought about in relation to the design and implementation of the employment guarantee.

I agree that we always need to keep an open mind and think all the possible angles that might arises. We always have to guard against so-called unintended consequences.

But, that doesn’t mean we have to continually reinvent the wheel.

Disturbingly, not one of the alleged uncertainties that I heard raised during the Conference about the Job Guarantee were new to the core MMT team.

Moreover, the fact that these issues were raised in this forum is indicative of the fact that people do not start at the beginning and become fully acquainted with what MMT is before they offer themselves as public commentators – in this context – as panel members – holding themselves out as ‘experts’ in one way or another.

I know that academics adopt a particular approach to things, particular those engaged in research. But that is no excuse for a non-academic to ignore the huge body of work that we have created over the last 25 years or so that have gone into all these issues in significant detail – both from a theoretical and operational perspective.

Optimism and realism

There was a massive wave of optimism at the Conference. Statements such as “We’ve won” were made. My own view is that we are not even close to ‘winning’.

My realist streak tells me that we are making good progress but systems of ideas don’t surrender their dominant position easily. It is a slow burn for a new set of ideas to establish congruency and for that congruency with the data to become visible and understood.

While the composition of the participants at the Conference confirmed that MMT has spread beyond the discipline of economics into other areas of academic activity (law, humanities, social work, etc), my view is that until it becomes mainstream in economics department no statement of ‘victory’ is justified.

The reality is that the economic policy process is dominated by economists in various guises. The graduates from these departments (and their programs) enter the public service, central banks and the economic think tanks, and dominate the economic policy making process.

The fact is that the mainstream undergraduate and postgraduate programs in economics are insensitive to change at the moment. Even in the aftermath of the GFC, very few changes have been made to the teaching programs and the textbooks that support them.

It is also important not to get ahead of ourselves. Groups have a tendency to build their own narratives, which can easily start exhibiting the signs of Groupthink. Staying grounded and open is a way to insure against that sort of tendency.

Need for on-going education

While the Conference demonstrated the significant progress that has been made in the MMT project and it is clear that we have developed a coherent body of work there is still much to be done.

There are various roles to play in this on-going effort.

The growing networks of activists now need to connect up on a global basis. Efforts are underway to accomplish that. There were many disparate groups (and individuals) of activists from a diversity of countries. Even Mongolia was represented (Hello to Bold!).

By bringing people together in this way for an immersion-session of MMT talk, the Conference is making a major contribution to widening and deepening the activist networks.

I thought during the Conference as to what my on-going role will be in the MMT Project.

As well as activism in the public domain, there is still an important and on-going educative role to ensure the practical manifestations of the Project stays connected to the body of work we have established.

Education empowers.

That is my role and is the reason I started this blog in the first place.

In that context, I have already indicated that in 2019 the ‘MMT University’ will start to offer courses to the public. Constraints imposed by various authorities on the use of the term ‘university’ will probably force me to rebadge the endeavour as ‘MMT Education’ or something like that.

The launch of the teaching programs is currently planned to coincide with the publication by Macmillan Palgrave of our textbook – Macroeconomics – in February 2019.

The core MMT team will support the academic activities of the effort.

We plan to offer very introductory ‘kindergarten’ level courses in MMT and then a range of courses in Macroeconomics up to graduate-level studies, which will be designed around the textbook.

Macmillan has also indicated it will be selling the textbook for $US75. I will find out what they plan to charge for the British and European market on Friday (tomorrow).

But this will be a very attractive price, although I know it will still preclude purchase for many workers and people of less means. I will be working on a solution to that equity access problem in the coming months.

The initiative will be a key part of the on-going MMT Project.

However, while I do not need large funding to support the endeavour, the reality is that I need some funds. My target is around $US150 thousand a year.

I also want to lock down financial support for a long period (say 5 to 10 years) so that we can plan ahead with some security of the resource base.

I thus am looking for sponsors who will be prepared to make a commitment to the this part of the project.

I am setting up a 501(c) not-for-profit organisation in the US in the coming month or so which will allow us to raise funds and channel them into ‘MMT Education’ in a way that can allow confidentiality for the donor if that is what they desire.

So if you are in a position to help then I would be interested in hearing. The financial support will be used to employ an administrative capacity and allow us to offer the programs for free to those interesting in learning MMT in a systematic way.

Accessibility of the core MMT academic team

At the final session, it was raised that the activists were in some way intimidated by the presence of the core academic MMT team at the Conference and were thus reluctant to make contact.

There were statements that we were “celebrities”, “heroes” and other exultory references, which presented a ‘social’ constraint against interaction between the activist community and the core academic MMT team.

That point was introduced explicitly at the last session while I was on the last panel.

My response was as follows.

I noted that use of the term ‘hero’ and the like was deeply discomforting to me.

I also think this is a curiously cultural tendency of the US. No-one in Australia would call me ‘sir’ or feel they were unable to address me by my first name (Bill).

However, whenever I am in the US, people call me ‘sir’ and ‘professor’ even if they have already made my acquaintance.

So in terms of accessibility, it works both ways. If a culture builds people up to sit on pedestals then it is no surprise that they will be considered unapproachable on a personal level.

I suggested that none of the core MMT academic team were resistant to approach.

We are all workers doing our job. We don’t consider the job we do is of a higher status than other jobs. It is just what we do.

In fact, I think low-wage cleaners, for example, are doing more important work and should be paid highly, because they prevent widespread health disasters.

Conclusion

I hope that these two blog posts have provided clarification to some of the issues I considered arose during the Second International Modern Monetary Theory which was held last weekend in New York City.

In general, I don’t want any of these ‘clarifications/criticisms’ to undermine the overhwelming sense of optimism, enthusiasm and energy that was clearly on display at the Conference.

My purpose is to continue my role as an educator, which is part of the overall effort to broaden the awareness of MMT and steer the policy applications that arise from this enhanced societal understanding in the progressive rather than reactionary direction.

Tonight I am back in Dublin for another public event and the details of that event and the ones to follow throughout Britain and Europe follow.

My current UK/European speaking schedule – update

Thursday, October 4 – Dublin – Reclaiming the State Workshop – at Wynn’s Hotel, 35-39 Abbey Street Lower, North City, Dublin 1, D01 C9F8.

Time: 20:00.

This is a public event

The event will be chaired by Dr Karen Devine from Dublin City University.

Organiser: Desmond Greaves Annual School.

Contact: Kevin McCorry – post@greavesschool.com

Friday, October 5 – London – Launch of the The Gower Initiative for Modern Money Studies portal.

Event Time: 12:30 to 19:15

Location: The Diskus Lecture Theatre, Unite the Union, 128 Theobalds Road, WC1X 8TN London.

Registration for the Launch is from 12.30 for a 13.00 start.

Afternoon seminars/workshops:

1. An introduction to Modern Monetary Theory (MMT)

2. The Job Guarantee.

Registration for the workshops is from 1600 onwards for a 1630 start.

There are a limited number of places. The launch is free, seminars have a nominal charge of £7.50. Booking is separate for the two sessions. Refreshments will be available.

At the Launch, I will be joined by Randeep Ramesh, Chief Leader Writer for The Guardian, who will he talking about the role of our media in shaping our economic narrative.

Sunday, October 7 – Lisbon – Details to follow. I will be talking about the Job Guarantee and UBI.

Saturday, October 13 – Wurzburg, Germany. Makroskop event.

I am on a panel at 13:15 with Heiner Flassbeck and Martin Höpner – topic Exchange rate regimes

Location: Tagungszentrum Festung Marienberg, Oberer Burgweg 40, 97082 Wurzburg

The workshop runs from 9:00 to 18:00 with several speakers discussing aspects of currencies.

Contact: rsvp@makroskop.eu for details.

That is enough for today!

(c) Copyright 2018 William Mitchell. All Rights Reserved.