The NZ ‘What if?’

Continuing the series on American Exception .

What if NZ had Gone MMT Solo?

By this I mean fullbore Anti-Neoliberal MMT Solo, back around 1970–1975. Could’ve been a thing, since neither Norm Kirk nor Rob Muldoon were complete Neoliberal ℭ𝔘𝔑𝔗𝔰. (But David Lange kinda’ spoils that idea. He was not a neoliberal either, but led an aggressively neoliberal administration.)

Counterfactual it is then.

What’s the point of writing this counterfactual history? You will see!

New Zealand could never be communist nor socialist, it is not “in our bones.” If we do ever go communist it will be organic, since that’s more our style. We are a deeply conservative nation and culture, and we respect the Tangata Whenua. But our conservatism is tempered. I wrote recently about the 1951 Waterfront workers lock-out, which shows the depth of our fascism too, it is not so deep that it can be ignored. Our conservatives do not know themselves to be fascistic — but were prepared to starve the families of locked-out workers for about 151 days. Correct. Grocery shopping at one point in NZ history was a night-time underground activity.

Well, it’s hardly nazi occupied France, you say. That’s part of our conservative bias problem, too many people just think class hierarchy is natural. We do not need brown-shirts under such acculturation parameters.

Today this is not just at a farmer and petty bourgeois level, but also in the well-credentialed educated “elite” level. I’d say some of our farmers are now almost marxists by comparison to some of the pompous condescending nobs that get extruded by our universities. (If there is such a thing as comparative marxism, I guess not, but I’m inventing it here: degree to which you value labour over thinking pure nonsense and UBI.)

Counter to our conservatism Aotearoa–New Zealand is also deeply egalitarian. Even our Tories want us all to be rich ℭ𝔘𝔑𝔗𝔰.

(It’s not a contradiction!! Remember what I wrote a while back, if you think there is a contradiction then you are missing something. In this case it is that our Tories are Twits. Sort of like the British inbred variety. When the twit nob is dialed hard it is easy for a conservative to be quite pleasant and egalitarian. If people just “save up and be thrifty” then our janitors, wood cutters, and bicycle couriers can be rich ℭ𝔘𝔑𝔗𝔰 too.)

Whoa, that was a long introduction, apologies putting you through all that.

Neoliberal Praetorian Guards

Let me take a possibly denuded neoliberal guard assumption. Suppose Chile was not possible everywhere, then much of the neoliberal putsch was in the intellectual realm, and so was not as powerful as it should have been, and could have easily been defeated. This is the thesis today. “How?” is the punchline — which I wrote in advance, so if you later miss it read again. Also I am going to reveal it slowly, but clearly I’m not a gamer or SciFi drama writer, so it’ll be a bit grungy.

Let’s also simplify a little and say that the main weapon of the neoliberal praetorian guard was foreign indebtedness, mixed with the perennial “Watch out! The national debt is exploding!” fiscal nuke myth-making. Powerful weapons are myths.

Convincing a monopoly currency issuer civil servant collective to advise government to accept foreign currency is a mighty amazing evil power. I still cannot figure out how it works, honestly, but that’s probably because I did not learn macroeconomics from a textbook.

The fractures between political science, legal professions and macroeconomics is part of the answer I think, these disciplines lacked people in all departments who understood the Whole. If the objective is fairness, egalitarianism and prosperity for all then no person studying macroeconomics is ever going to accept the neoliberal myths. Only an economics student devoid of any moral conscience could get thought the mainstream economics courses (or someone prepared to swallow a lot of vomit to get the certificate).

For those better souls, economics school must have been like a 𝖍𝖊𝖑𝖑 of a long protracted Fear Factor multiple season, tutored by a whole bunch of Joe Rogans.

Anyhow. In our counterfactual history the whole point is that we are conceiving that the New Zealand State did not accept the macroeconomics myths of neoliberalism, and were not subject to the weaknesses of post-Keynesian orthodoxy or heterodoxy. But our population instead had been informed by a Doctor Who in the regenerative form of a Warren Mosler or Bill Mitchell.

The neoliberal praetorianism was false pretenses really (no, I mean in real reality, not just in my fantasy game here). Our alternative Aotearo knows this. They know that the tax return does not fund the NZ government, and that full employment is a policy choice (which is chosen) and that no Kiwi ever needs to hold a foreign currency, nor even cares about foreign currencies (except for forex arbitrage traders). Currencies are also the numeriare for prices, but are first and foremost the State’s tax credit unit of account. The NZ government tells us what the NZD is worth, or tells us how to get the scorepoints.

Thus we understood, thanks to the good Doctor, that no nation ever needed US dollars. They only thought they did. Inflation boogeyman. This counterfactual history needs telling I think, for future generations, and to avoid today’s historians from being seen by our descendants as idiots. So we should write a “suppose that…” alt-history.

Ah shoot… breaking the Fourth Wall of my game again — I am serious about the historians. They should be re-writing almost all history books so that the sources of the currency madness are uncovered, to what extent history data allows. Like why the Moghuls collapsed supposedly because they ran out of coinage metal? What the heck was that about? In my history study we’d try to see if the failure to enforce taxation was something else, other than otherwise worthless metals going abroad or whatever. They had pen & paper by then, so did not even need tally sticks. Including why they thought to stick tax credit stamps on metal that might have otherwise been alloyed for use in weapons. And of course, dig into written archives that might reveal they were all just goldbugs. That’d be a great Voila! that to my knowledge no historian has ever uncovered. Except of course we know the Europeans were gold & silver mad, to an insane genocidal degree. (Which is why you never want to return to New Hampshire, you listening Dr Aaron Good?!)

Suppose that some nation like this alternative Aotearoa had understood the monetary system, à la full bore serious MMT thought and policy leadership driven by public awareness thereof.

1. We know know how that might have played out without carnage, thanks to BRICS.
2. But Cuba is another example where we know how it could have played out for, say, New Zealand going solo.

So let’s make the counterfactual nation New Zealand. (Argentina would be too acute, given they’re too close to Chile, and infected with Peronist chauvenism.)

Had NZ not gone neoliberal, and instead had “done MMT”${}^\dagger$ — sorry, I could not resist the joke — then the USA and IMF would not have us in a debt trap, we could have run full employment in perpetuity. And given the middle finger to the Inflaton boogeyman.

${}^\dagger$A nation does not “do MMT”, They either run a fiat currency or not. If the tax credit is issued by fiat, and is not some stuff you can bake in an oven or dig up out the ground, then it is fiat. (Bit of a simplification, but this post is not the one for learning what MMT is in detail.) We should include the fullbore MMT case too, so also this alternative Aotearoa make the NZD non-convertible, run a floating exchange rate, and zero interest rate policy. Banks are either public waged, or if commercial could charge flat fees or share returns on profit made from credit to businesses. All citizens not owning businesses just get monthly overdraft allowances, cancelled at the end of the month. Mortgages are overseen by banks, but fully government backed at zero interest rate, and the repayments income flow ensured by a Job Guarantee. — ahem! … or something like this! Invent your own game ok!

${}^\ddagger$Footnote to the footnote: I did not bother modelling this one, I’d want to add mechanisms that prevent accumulation of NZD scorepoints, so would make it a Gesell currency. But I’m too lazy to write-up that version. You can think of it as all NZD bank accounts get slowly “burned” at a constant rate, say 10% per anum. Hence pretty much every household will be spending all their income. The country would handle big ticket items just like we do mortgages. (Your debt obviously does not get burned. But you’d better use those scorepoints to pay it off before they burn.) With zero interest rate the State can do the nasty “Daddy” thing and force the household to pay off a fixed chunk of the mortgage each month. Since this is all understood by Law, it is no disadvantage to anyone, so no cause for grievance. Savers are, of course, understood by an MMT informed population to be the vice, not the virtue. A healthy economy runs on sales, not on savings. I think no limit would be placed on holding foreign currency? Have not thought about that one. It could be a source of rising inequality, so I’d say holding foreign currency might be agreed civilly to be illegal. No one would need to anyway. Overseas family vacations and whatnot could be handled by a foreign currency shared credit ration system. You can use the credits any time, that sort of thing. Using the specific country exchange rate as the numeraire against the NZD. (You don’t want everyone hassling the Thai people just because Thailand is cheap. So no one vacationing gets more baht in real terms than they would USD.) That about exhausts my fantasy gaming specs. and keystrokes for today.

Right, but… Cuba. The USA not only may have stopped shipping us goods, they may have convinced many other global north nations to similarly boycott “those Kiwi upstarts,” to “teach us a lesson.”

((What lesson was that again? That crushing workers is good for one’s soul?))

Neoliberal 𝔅𖧥𖨚𖢧𖧥𖦪𖦧: “Prosperity is not the goal chaps, the goal is control over the dirty workers and civil servant parasites blood sucking our tax dollars from us who are wanting higher wages.”

Well, NZ could still have gone it alone, just not with fancy refrigerators and automobiles and whatnot. We would have hardly been worse off than Cuba though.

Right, but Chile!!!

To imagine a scenario where New Zealand would have been absolutely crippled, short of some false flag color revolution by our UK-imported native fascists to warrant a US fleet invasion and coup, we would have to also imagine no USSR, and many other nations willing to go along with a trade blockade. Semi-realistic then it would have had to have been more like Chile.

So we are already deep into fantasy neocon right-wing lala land. Because New Zealand is structurally, and of course geopolitically far too different to Chile.

Otherwise more realistically, we send USSR high quality timber, aluminum, sheep, beef and butter, they send us steel and oil. Not that the USSR needed our produce, but we have to offer something in return to offset their real goods loss.

We would be on floating exchange rate with respect to ruble, so no bad monetarist consequences whatsoever, and no nominal employment constraint whatsoever.

Could an NZ color revolution have occurred anyway?

Or the fascist coup like Chile?

I doubt it, but then we are stretching the bounds of my particular credulity.

Would the USA have even cared?

Hard to say. Thing is, that would just reveal the dormant fascist underworld behind the US security state all the sooner, since NZ was not communist, so there would not be any Cold War pretenses possible for a military invasion. So while terrible for Kiwis, for the rest of the world it would have been the canary in the coal mine — never trust the USA. So like today’s knowledge, but say 70 odd years before today. Which would have been a darn good thing, even eventually for Kiwis.

More realistically now, since this is not supposed to be a pure SciFi fantasy game of history, if people in New Zealand had understood MMT then many other people around the world would have too, so much of the trade sanctioning and economic warfare would have been impossible — I want to believe, and so it’s now a setting in my game! Play it again uncle Sam!

It’s more interesting if New Zealand is the first country to fully “get it” though. Reach a critical MMT mass of sorts. Note my only Miracle Exemption allowed is Doctor Who, via either Newcastle or the Virgin Islands. I engineered this with Warren Mosler, whom I am today discussing spacetime theory with (no, that’s for real, I really am!)

Apologies for stealing MMT Doctor Who from the Scottish, who probably need him back in 1970 more than we do. But.. you know… we’re not Ayn Rand Great Men flavoured lunatics here.

Fairy story over.

But you have to be a really ꖀ𐝥ꗍꖡꕯꖦꗞꖹꕷ piece of work (don’t you?) to try to convince me that would be not unlike it might have played out. NZ is not Cuba or Chile, so we just do not know what it might have been like. And Cuba and Chile were not an MMT aware population, and it is the mass of the population that needs to roll over and die in the face of a Pinochet. Unfortunately many thousands of Chileans did die, and 200 thousand were horribly tortured, imprisoned or exiled — because they did not roll over, but it would have been something to behold if NZ had resisted neoliberalism at the same time as Chile. We don’t have much of a desert to disappear thousands of people into, nor did we have any significant fascistic elements in our military and police.

But we once did have a government willing to starve waterside worker families for 151 days, so “there is that!” Would that have been possible with a population who all understood MMT? Regardless of how Tory Twit-like they were? I seriously frickin doubt it.