Why does all this matter?

Why does anything matter?

I will always consider spiritual economics (which Ōhanga Pai is all about) as way above and beyond MMT.

The thing about cold hard MMT is that it is open to the critique of “fetishizing work.” Although plenty of MMT scholars point out that’s a false bad-faith attack — and I agree, most MMT economists and activists also share the same spiritual lens I do, they are just too sheepish to admit macroeconomics is more about justice than “distribution of output.” Economists do not get trained in morals and ethics, so do not know how to speak that language, except like babies. They’ll “go to the data” before sound morals. (Spiritual economics does not put morals ahead of data nor the reverse, they’re the same, use of good data is a moral commitment, checking data is accurate is a moral commitment to trustworthiness.)

Here I’ll quote my favourite MMT’er, Warren Mosler:

“Either you believe in an informed electorate or you do not. I prefer an informed electorate.”

In one sense that can be taken as a rationalists attitude, but it is deeply spiritual. The reason nations tolerate poverty and unemployment is because they do not understand their monetary system is both the cause of all unemployment and the means to completely eliminate that same unemployment. So if we do not have an electorate informed about MMT basics, I think we have a nation that is living well below it’s means.

Mosler is mainly referring to the economists like Samuelson and Krugman who believe strongly in an ignorant electorate (see the Samuelson interview here .) These idiots believe$^\ast$ in keeping citizens ignorant because they think it is a good idea to hide the truth about government power and responsibility from the citizens, and they believe in creating artificial scarcity. (As do the cryptocurrency libertarian clowns.)

The imposition of tax liabilities is already artificial scarcity enough. At least MMT recognizes this type of scarcity is only in place to then immediately eliminate the scarcity. That’s the whole idea of a tax driven fiat currency. The state creates the vacuum, then fills it. To leave a vacuum (involuntary unemployed workers) is tantamount to a crime against humanity.

$^\ast$ To be fair, Paul Krugman probably does not believe this, he is just one of the ignorant. Samuelson was obviously not ignorant and did believe there was a need to keep citizens ignorant about the MMT system. Samuelson understood a lot of what is now called MMT, but did not want MMT informed policy. He was a sociopath, pure and simple.

The only “excuse” I’d give to Samuelson was that he had the fixed exchange rate/gold standard mental disease. If your framework is fixed exchange rates (Bretton-Woods or a gold standard) then you are going to inform politicians they may need an unemployed buffer of labour to fix the exchange rate and prevent inflation. MMT tells you it is possible to have full employment (absolute full employment, so NAIRU = 0%) and price stability if; (1) the exchange rate is floated, (2) central bank runs ZIRP, (3) a job guarantee as the employed buffer of labour, (4) government allows the deficit to float. It is fair to say Samuelson was truly ignorant about the advantage of this set of policies.

Another way of saying this is that the neoclassical economists do not really understand the role of buffer stocks and automatic stabilizers. In an equilibrium barter model there is really no such thing as a buffer stock or automatic stabilizer, since if the tendency is towards equilibrium within a month or week time frame, what stabilizers are needed? None. This is near proof by contradiction that neoclassical thinking is plain wrong.

The usually defence is that neoclassical economics is only a toy model, that is nonetheless useful in informing policy. But this is so false it’s laughable. All models in economics are toy models. Being a toy model is not a singularly great accomplishment. The aim, if economics is to be considered any sort of “science”, is to find models, actively search for them, that better correspond to reality, not to grab the fist model available that can be analytically solved on a chalk board and claim “that’s that.”

To understand more about this, first let’s define,

• f-MMT as just “The MMT framework” — this is the macroeconomics lens you get when you understand raw MMT, as in Mosler's books or Bill Mitchell's brilliant blog (even Aussies are useful for some things, but I’m not so sure Bill is an “Aussie,” he’s more like a gangly hairy human unicorn who talks like he’d smell of weed but probably smells of 1960’s aftershave dude).
• p-MMT as the policy space one can adopt in an MMT economy (so if you are Australia, Canada, Japan, NZ, UK, USA,…).

What p-MMT does for us — and here I’m speaking about the policy side, that policy which is well-informed by the MMT framework — is that the vision of both Marx and Keynes is already possible. We could have today a three day work week, with little decline in standard of living, and enormous cuts in power consumption (energy use is not the problem for the environment, it’s our rate of energy consumption that’s the problem, energy/time = power). (And most of that problem, the power consumption problem, is excessive power use by the top 10% of humanity, which if eliminated as a sub-species no one in the lower 90% of us plebs would miss.)

Got it?

So MMT shows us how to realize the vision of Keynes and Marx.

Keynes wrote that the human dignified work week could be reduced to around three days. Leaving people more time for leisure and getting along with their family. Marx and Engels wrote it in a slogan: From each according to their ability, to each according to their needs.

Those are solid principles. Only dorky pedants have criticized them, and they’re never in good faith.

I call this vision “the freakin’ opposite of fetishizing work.” The more workers we can employ, the less each individual worker needs to work each week. I call this core MMT from the working class (and both ’left’ and ‘right’ working class).

But it’s still less than spiritual economics can give you. It is still pretty cold grey MMT. You want some colour injected into this art.

Work as worship

What this all means I take from the Baháʼí Writings (do not read that reference if you’re anti-religion, if you think you have a decent sense of economic justice you won’t need to read it). ((Of course, if you have a decent sense of economic justice you really are “religious” in the non-denominational sense at least. Justice being an idealist’s spiritual virtue.))

(Aside: for what it’s worth, the above Baháʼí excerpt cited is as spiritual a view of the MMT Job Guarantee policy as I’ve read anywhere. It’s an example of what I mean by going beyond MMT.)

We can elevate in class consciousness work done in the service of humanity as a form of living akin to worship. The Baháʼí canonical Writings make this elevation. Something socialists have failed to grok.

We are however, crucially, no longer talking about wage-slave labour, make-work, or any of that gross sh*t (excuse the profanity any Baháʼí readers). No. What we are talking about is useful and dignified work. Not “a job” but more “a life.” A vocation, a craft, a profession, a skill, performed in service to humanity. We’re talking about things such as writing awesome pop songs, or just the lyrics, or that more sublime thing that Radiohead do.

We’re also talking janitors, farmers, nurses and teachers, as the top wage workers, because they’re the most important people in society (this is not an exhaustive list). They do not have to work more than three hours a day, if we have enough people who know janitorial work is dignified work then three hours a day aught to do it. (Clean up your room yourself you other lobsters.)

What we do not want to fetishsize is the wage form of work. The reason we should want to work is for the service, not the wage. The wage should be decent and reciprocal — that’s why the janitors and waste care workers should get the highest wages. So we’re no longer speaking about capitalism my dudes. Or at least we are talking about a greatly expanded and salary enriched public service sector. Pay them decent wages and we’ll have too many of them turning up, so some will need to be rejected and go back to writing pop songs.

By the way, by nature, science geeks and pop music writers will have to be permitted to work more than three days a week. So at the same wage rate as a janitor or teacher they’ll get a higher gross annual salary perhaps. If they want the extra work hours.

If you’ve ever been a song writer, or science geek, you’ll know what I mean. These people cannot be restrained to three days a week, they’d consider that barbaric and intolerable. The work time-energy for a scientist is not definable. They just do science, you cannot stop them. They do it in their sleep. The principle in a decent civilized society is to leave the scientists and artists alone if they want to work (with professional lab supervisors, so they do not sink the planet into a laboratory black hole). As long as they’re not doing anything stupid, entirely useless, or illegal, let them do science in freedom.

Who decides what is “useless science”?

This is pretty impossible to completely answer, people thought electricity was useless, and Faraday’s only retort was, “Yes, but someday the government will tax it.” Which was a clever retort, because it contained the implicit wisdom that he knew electricity was going to be incredibly useful, he just did not know how.

The answer is that we, the demos, get to decide what is useful science research. We might get it badly wrong. But so what? Public science labs can always be permitted some freedom to do useless research. We used to call it “blue sky research”. Sometimes it is fraudulent and wasteful, but we eventually figure that out and shut it down. (The Superconducting Supercollider (SSC) in Texas.)

(Aside: actually the SSC was not useless science. The administrators were the frauds, miss-using the government funds, throwing wild parties, and whatnot. Congress rightly shut the SSC down, and the physicists wept. However, Congress were briefed on the scientific merit and importance of the SSC, they just could not figure out a way to tame the bureaucratic administrators, because… you know… they were neoliberals. The lesson was for the physicists: your public purpose job is not just “do physics” you have a moral and ethical responsibility too.)

Anti-inflation: “run the economy hot”

The scholar Sam Levey wrote a nice article about bullsh-t jobs: To Fight Bullsh*t Jobs, run the economy hot.

This principle is well-known to Keynesian economists (the proper sort, not the fake chaps called New Keynesians who think they know Keynes but bastardize the great man).

If you want to squeeze employers and force them to compete for workers, keeping the real wage high, then you need some inflation. But the inflation needs to be demand-driven from the base. It’s no good if supply of goods is artificially constrained (a very stupid form of austerity no one subscribes to, not even neoliberals (or perhaps green fascists do?).

Inflation is not a single type of phenomenon, you see. Inflation can happen in many ways, some for the good (wage-led or demand-pull), some for the bad (supply-led or cost-push).

Here’s the trick though: not only does moderate demand-pull inflation help squeeze out bullsh-t jobs (employers cannot afford slack workers) it also eliminates real inflation.

What that means is that when workers are fully employed in non-bullsh*t jobs, we’ve maximised useful production capacity. The nominal (currency) inflation is then irrelevant, it can be continued indefinitely, since the currency unit is fiat it is not something a society can ever “run out of.” We can however run out of real resources.

Nominal inflation (defined as rate of change in how much stuff 1 unit of currency can purchase) is thus not necessarily of any concern. What matters for economic justice is real inflation — which is defined as rate of change in how much stuff your entire annual income can purchase.

Trick is: eliminating bullsh-t jobs increases the real wage. That’s what is important.

This is regardless of what happens to the nominal wage (which is correlated with CPI inflation, a largely non-important metric if taken out of real wage context).

Equivalence to Gesell Currency

In early 1930’s Austria, the town of Wörgl was suffering severe unemployment amidst national austerity. They had heard of Silvio Gesell, and figured it worth a shot to use Gesell’s system, which was to issue their own local currency, which was a labour certificate. The town council stamped the certificates. Anyone could earn any number of these certificates. And they were redeemed for both local and national tax payments.

The critical thing was the stamp was a timestamp, and the face value of the certificate (what it was able to redeem) would decrease over time with a simple formula anyone could work out, 12% per annum${}^\ast$, but continuously. So the certificate today was worth more at the local shop than it would be in a week. This meant people would not hoard their currency, they would spend it, or more rapidly redeem their tax liabilities if they earned more than they needed for a month’s groceries and whatnot.

${}^\ast$They were totally into the experiment zealously, you can tell, since why not make it 10% as Gesell had proposed?!!!

In amazing solidarity for Austrians (that’s a joke) the whole town agreed to the system. The result was full employment and relatively high prosperity compared to the surrounding Austrian country.

Critics have since argued this could never scale. But they have zero proof a Gesell currency could not work nationally. The problem is it worked too well. The Austrian Central Bank shut down the Wörgl experiment by force of law. After all, Wörgl was creating a potential exchange rate situation with the rest of Austria, the Wörgl labour certificate was appreciating against the Austrian schilling even as it was continually devaluing locally by design.

(Similar to the way the UMKC Buckeroo has been appreciating against the USD for over a decade.)

Gesell currency is still misunderstood to this day by neoclassicals. One of them (here) advocates Japan can use a Gesell currency — in the form of negative interest rate — to get the inflation they seek. Complete idiot!

First, low interest rates are deflationary${}^\dagger$, so in driving their JCB rate to zero Japan are promoting anti-inflation. Second, if they raised their JCB interest rate it would promote inflation but only by enriching people who already have money.

${}^\dagger$More technically, a zero interest rate should be par, so neither deflationary nor inflationary, but machine automation and other tech advances tend to raise the productivity of labour and lower energy production costs more or less continuously. This means the zero interest rate has a deflationary effect over time because we hardly ever lower the wage bill, so we end up emitting the same wages for lower human time input but higher actual gross output. So that’s deflationary: the unit wage acquires more real purchasing power.

The purpose of the Gesell currency is not to generate inflation (making the currency like a hot potato) it is to promote full non-bullsh*t job employment.

The Gesell currency does not suffer inflation. The labour certificate is worth an hour of public duty work at all times. The devaluing is stamped, everyone knows it, so the labour certificate is a hot potato. That is not the purpose though, it is a means to an end. The end is full employment and prosperity.

Japan is better advised to boost their minimum wage and run a Job Guarantee program to promote full non-bullsh*t job employment. That way their firms will have to compete for skilled workers, which will give Japan the inflation they’ve been searching for in vain using low interest rates.

The point is, whichever way a government promotes full employment, provided it is not by slave labour, it will probably be fine and equivalent to a Gesell currency.

For a Gesell currency the mechanism is different to what I (actually Bill Mitchell originally) advocate for Japan. The Gesell mechanism is that the currency becomes a hot potato know one wants to hold for long, but which for every shop vendor has an “at point of sale” par value (given by the time stamp). The currency rapidly circulates, promoting sales and hence employment. People turn up for public sector work on offer because they need the currency.

The Wörgl experiment did not run for long, but if it had people would eventually want to save up for big ticket purchases. That’d be very easy to accommodate, simply offer term deposits. The term deposits would not be time stamped, so would not devalue. They would not need to pay any interest.

Why do the negative interest rates not work?

The problem with the neoclassical dork who thinks negative interest rates are the same as Gesell, is that negative interest rates are a tax without an injection, so they withdraw currency without replacement elsewhere. If banks have to pay interest on their assets as well as their liabilities, they will be forced to charge more interest on credit. So the commercial bank rates will go up, not negative. Or maybe every bank will try desperately to run over-draughts to get the free money from the central bank? It could get a bit crazy. Because if the entire banking system is in surplus someone gets left holding massive reserves if everyone else is in over-draught.

The reasons for the craziness of negative interest rates is the instability of any interest rate other than zero. The interest rate is a repeller in dynamical system terms, not an attractor. In other words, any non-zero interest rate drives the economy pro-cyclically, so is the opposite of an automatic stabilizer. This, in a nutshell, is why monetarist ideology is insane. The monetarists have never understood (or never correctly understood) dynamic stability and automatic stabilizers.

What counts as stupid or illegal or bullsh*t work?

It’s always struck me this is a question which is up to the demos to answer. And it can evolve in time according to human needs. I know that random arsony is a bullsh*t job, and so is being a CEO of a predatory financial firm, like a bank that issues fraudulent loans and messes in multiple layers of collateralized debt securities (which are aptly Orwellian named, since they’re the most fragile insecure financial instruments man has yet devised).

David Graeber identified enough bullsh*t job types to help a decent society eliminate as many as we need to eliminate. (Office cubicle guy playing Tetris all day. Goon who trawls for software patent litigation ops. Tax haven accountant (we at least know how to eliminate all that waste of human life, drop the corporate tax rate to zero).) We do not need to tax super rich people, we need to not have super rich people exist in the first place.