MMT and Politics: A Brief Explanation

Cross-posted from Ellis Winningham

MMT and Politics: A Brief Explanation (1)

    “I see my role as an academic to provide the knowledge to expose the arguments that are used to stack the cards and hide the fact that they are being stacked. That is my role. It is the role of the progressive political scientist to then use the insights that MMT provides to research and advocate for changes to the way policy is formulated and implemented… The link between MMT and the policy making process are the activists. It is their role to take the knowledge and start influencing the political debate.” – Bill Mitchell

    “I’ve argued for a while that MMT informs and that the political people then have to use that information to derive policies and a way of selling them.” – Neil Wilson

    “I teach MMT. It is up to you to take what you are learning and do something useful with it.” – Ellis Winningham

I: Introductory Facts Concerning MMT

– MMT itself is just a description of how the monetary system works in the UK, US, Canada, Australia, the EMU – everywhere there is a monetary economy.

– MMT itself is apolitical.

– What MMT implies might be political, but that doesn’t mean MMT is political nor progressive for that matter. Implications can be employed by both progressives and conservatives to suit their agendas.

– MMT is not a political movement.

– MMT is not a cult; it’s currency analysis.

II: What Knowledge of MMT Implies

I do not intend to cover every aspect in this article. I only intend to get to the heart of the matter. With that, let us begin.

An understanding of basic MMT provides the person learning it with genuine hope, where before there was none. It is an unavoidable consequence. If progressives who are learning or who understand basic MMT are behaving in a zealous manner, their behaviour is driven by what MMT implies, not by MMT itself. Put simply, they are zealous progressives, not MMT zealots.
Progressives (and, yes, some conservatives too) who understand MMT realise that things the mainstream says about public purpose spending simply aren’t true. For instance, they realise that to have universal health care, we are not dependent upon the rich agreeing to ‘pay up’ to fund it, because the monetary system doesn’t work that way. It works in the exact opposite way that people are told. The federal government funds the private sector with dollars. We are not dependent upon any private entity, rich or poor, to ‘pay for’ anything that the federal government does.

Put simply, these progressives understand that the mainstream deliberately focuses on the ‘money’ to mislead people into thinking that we can’t do X unless Y coughs up its ‘fair share’. Naturally, people either give up or demand that the 1% ‘cough up’ the money, and in turn, the 1% never ‘coughs up’ the money because 1.) the government must make them do so, 2.) they pay our current crop of politicians to maintain tax policies favourable to them, and 3.) the 1% know full well that they don’t actually ‘pay for’ any programme or initiative that the federal government enacts. All federal spending is dollar creation.

When it comes to full employment, universal health care, etc., it’s never a question of ‘money’; it is always a question of real resources. The ‘money’ comes directly from the federal government and its supply is infinite, so we do not have to worry about how we will ‘pay for’ things in terms of dollars and cents. The actual worry is whether or not we have enough real resources (human and non-human materials: labour, steel, concrete, water, land, machines) to achieve what we set out to accomplish.

For instance, to have universal health care, you’re going to need doctors, nurses, hospitals, medical equipment, medicines, research, and technology. Do we have enough of these things to meet the needs of the entire nation? If the answer is yes, then we can afford universal health care. If the answer is no, then a new question arises: Can we manage to find more doctors and nurses, and can we build more hospitals, manufacture more equipment and medicines, build and staff more research facilities? If the answer is yes, then we can afford universal health care.

Again, it’s never a question of ‘money’. The federal government is the only supplier of dollars. The only time that ‘money’ becomes a question with regard to federal spending, is when the initiatives that we want the federal government to fund threaten to exceed the production ability of the economy.

All federal spending must result in output, so if that spending cannot result in output, then inflationary pressures could arise. And in that case, we would simply begin making cuts to other initiatives which are excessively and inefficiently occupying the real resources that are needed. We make room in the economy for great things that benefit everyone, not just the few. We simply undo all of the bad and inefficient stuff the government has been doing. We unfund those things to free up the resources for the public purpose.

I’ll give you two examples to clarify what I am saying. If inflationary pressures might result from the implementation of a progressive agenda, we could reduce military spending to appropriate peace-time levels, not in an effort to save money, but to free up resources. Producers who used their facilities to manufacture excessive amounts of military-related products for the government would now not be doing so. This frees up labour, machinery, raw materials, and production facilities. Manufacturers could then retool for other types of production. Instead of tanks, these facilities could, say, build battery-powered cars or the batteries themselves.

The second example is oil. We could direct favourable legislation and government incentives towards manufacturers who produce or who are willing to produce electric cars, solar collectors, solar roofs – sustainable energy products, and at the same time, repeal favourable legislation for oil producers. Subsidies and incentives for these producers are gone and we make demands on them by offering these producers new, different incentives. We make it clear to them that if they are willing to retool for green energy, they will receive handsome incentives and support. Labour and materials are now redirected to sustainable energy production.

The thing to remember here is that the federal government is always in charge. If actual, unswerving progressives control it, capital will be made to submit. Capital simply will not be able to get around it. So, what the 1% does know is that should progressives who understand MMT take control of the federal government, they’re going to face some unpleasantries.

1.) They’re going to be taxed, not to pay for things, but to reduce their wealth in terms of dollars simply because they are too damn rich. They will be given a simple choice: Either invest a large number of your dollars back into the economy immediately, or watch as a large number of your dollars are destroyed in front of your eyes through federal taxation.

2.) They’re going to see fiscal policy redirected away from them and towards full employment and the public purpose. They will wring their hands and gnash their teeth as full employment through a job guarantee and decent wages, in addition to other appropriate macroeconomic policy legislation, moves GDP back towards working men and women and away from them.

3.) They will witness social production become the norm. Old myths about job creation and work; myths and political propaganda that kept them in the seat of opulence and power over the nation’s real resources will die before their eyes.

4.) As prosperity abounds for everyone, they will pity themselves because the masses now realise that they are not, and never were, dependent upon the 1% for anything. The 1% are totally irrelevant to anyone’s prosperity. Their ‘money’ is not needed, their approval is not required.

In short, the 1% are going to face a reduction in their control over the nation’s real resources, and watch as progressives hand over control of those resources to the people.

Having said all of this, you must understand that the things I’ve discussed in section II are things which MMT implies.

So, as an observer, what you are seeing with regard to MMT is not some kind of ‘MMT movement’. Such a thing is irrational and completely impossible. You are seeing a progressive movement and nothing more. It is progressives doing what progressives normally do and advocating for things that progressives typically advocate for, with one exception: They are also asking that progressives everywhere adopt a new economic narrative to achieve what progressives want to achieve. That new narrative is built on an understanding of MMT – nothing more. MMT lies at the core of the narrative. Once again: MMT itself is just a description of how the monetary system works in the UK, US, Canada, Australia, the EMU – everywhere there is a monetary economy. MMT itself is apolitical. What MMT implies might be political, but that doesn’t mean MMT is political nor progressive. What MMT implies can be employed by both progressives and conservatives to suit their agendas.

MMT is not a political movement. Those who claim it to be a movement, or accuse it of being one either do not know what they are talking about, or they are deliberately misleading you.
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(1) The arguments and reasoning here apply only to countries with a sovereign currency. The EU countries do not have one.