I had the pleasure of filming feminist economist Rania Antonopoulos for the The Modern Money Network back in 2013. She is now SYRIZA’s second place MP candidate. To give a sense of what sort of policies a SYRIZA win could usher in, here is her presentation on an “Employer of Last Resort” program for Greece.
These two questions have fueled my dilettantish but somewhat obsessive study of Modern Money Theory (MMT) for the past few years. But I’ve struggled for a way to concisely explain what MMT is, and why you should care about this (decreasingly) obscure economic theory.
Much of the MMT literature is focused on an intra-discipline fight within Economics. This is a worthy battle but creates an extra challenge for the non-economist, who must first learn a bunch of econ speak just to be able to understand the arguments for unlearning it. The below essay is my attempt to bypass that step and explain MMT directly in language accessible to such a reader. If you find it helpful, please share. Criticism is also welcome.
Many thanks to Mike Konczal, who had the idea of looking outside academia for an MMT explainer, and invited me to write this piece.
The World According to Modern Monetary Theory
The New Inquiry Vol. 27, April 11, 2014
Too often the origins of our economic ills are cloaked by a mystical reverence for some autonomous money spirit. The economists behind Modern Monetary Theory (MMT) seek to lift money’s veil by studying the specific actions that occur as money is created, circulated, and destroyed.
For those seeking a grand, unifying sociopolitical economic theory, MMT will disappoint. But as an analytic tool, MMT clarifies who holds genuine power—sovereignty—within society, and how they organize the money system to serve their interests. Unsurprisingly, this is often a story of tremendous cruelty and exploitation.
But the revelation that the rules of money are not immutable laws of nature but are instead created and constantly modified by people opens up possibilities beyond the scope of our current political imagination. The questions become: What sort of society do we want? Do we have the physical resources to support that society? And finally, how the hell do we muster the political will to get there?
I wrote a layperson’s introduction to Modern Monetary Theory in this month’s issue of The New Inquiry.
I’ve finally uploaded the video of a seminar I shot back in March, GUARANTEED INCOME OR EMPLOYMENT: ECONOMIC RIGHTS FOR THE 21ST CENTURY. Of all 8 of the Modern Money & Public Purpose Lectures I attended & recorded, this one is perhaps the most important.
In particular, I recommend Pavlina Tcherneva’s lecture. She discusses her research on the Jefes program in Argentina, which provided government jobs to impoverished “Heads of Households” and is about as close as you can get to a real-life full employment program. The program was very successful on a number of levels. Contrary to the intentions of the program’s administrators, nearly 75% of the workers employed were women. They ended up socializing childcare, among other community services. The government preferred for women to stay at home and receive a basic income, but they could only get women to switch to a welfare system by shutting down the Jefes program.
Further reading can be found here & anyone interested in the subject should check out this semester’s schedule of Modern Money Network events. I’m the house videographer again this year, so if you can’t make it live, do check for the edited videos on youtube — hopefully I’ll be a bit more prompt getting them posted this time around!
Just noticed that the video I shot of the Modern Money Network’s MMT v. Austrian School debate was linked to in the New York Times. Unfortunately, the article it accompanies, a profile of Warren Mosler, is a bit of a hatchet piece, though no worse than you’d expect from such an outlet. And they published it on July 4, not exactly a day folks are eager to watch a two hour debate on macroeconomics.
Unless you are sympathetic to Austrian economics, I recommend Warren Mosler’s seminar with Stephanie Kelton over the debate for a (less painful) introduction to MMT:
The truth is simple and contrary to these views. Business will not hire more workers until it has more sales. Consumers will not spend more until they’ve got more jobs. A private-sector recovery requires 300,000 new jobs every month. But the private sector doesn’t need 300,000 new workers per month to meet prospective sales.
The new jobs can only come from the federal government—the only economic entity that can afford to hire. Obama’s 1 million infrastructure jobs is a nice down payment, but it is only three month’s worth. New workers will create the sales that firms need to justify new hiring. Still, we must think bigger if we are to create 20 million jobs.
There is a way to do that: The government could serve as the “employer of last resort” under a job guarantee program modeled on the WPA (the Works Progress Administration, in existence from 1935 to 1943 after being renamed the Work Projects Administration in 1939) and the CCC (Civilian Conservation Corps, 1933-1942). The program would offer a job to any American who was ready and willing to work at the federal minimum wage, plus legislated benefits. No time limits. No means testing. No minimum education or skill requirements.
The program would operate like a buffer stock, absorbing and releasing workers during the economy’s natural boom-and-bust cycles. In a boom, employers would recruit workers out of the program; in a slump the safety net would allow those who had lost their jobs to continue to work to preserve good habits, making them easier to re-employ when activity picked up. The program would also take those whose education, training or job experience was initially inadequate to obtain work outside the program, enhancing their employability through on-the-job training. Work records would be maintained for all program participants and would be available for potential employers. Unemployment offices could be converted to employment offices, to match workers with jobs in the program, and to help private and public employers recruit workers.
Funding for the job guarantee program must come from the federal government—and the wage should be periodically adjusted to reflect changes in the cost of living and to allow workers to share in rising national productivity so that real living standards would rise—but the administration and operation of the program should be decentralized to the state and local level. Registered not-for-profit organizations could propose projects for approval by responsible offices designated within each of the states and U.S. territories as well as the District of Columbia. Then the proposals should be submitted to the federal office for final approval and funding. To ensure transparency and accountability, the Labor Department should maintain a website providing details on all projects submitted, all projects approved and all projects started.