Theories of money, labour, and power

| August 08, 2020

When it comes to Modern Monetary Theory (MMT), I tend to take a rather less aggressive position than some from the classical (Marxian/Marxist) tradition. There are some holes in the theory and its view of the economy is irksome, but others have debated these to their fullest extent (a debate that is at least 100 years old). And, in the end of the day, arguing over the degree to which a theory is wrong is not very interesting. Anwar Shaikh does a very good job of putting the limits to MMT's ideas. Basically, there is a limit to MMT and the question is: what then?


A discussion about the future

Before the Canadian left gets into a broader conversation on MMT, we should remember that this policy frame has been adopted by the (Centre) Left in the US for a reason. It is to get around talking about taxes, redistribution, class, and the role of debt/money/investment. It is similar to the idea of a universal basic income in those circles: it is a device that allows them to have conversations about "what ifs" without talking about the substantial issues that no one really knows anything about but have strong views on.

It goes like this:

  1. We need new investment X!

  2. But, we don't have the money! Who will pay for it?

  3. Well, hopefully the market will provide?

  4. End of discussion.

With MMT, number 4 becomes "What if we had all the money we need and no one is affected through increased taxes?"

Then they think they can have an open conversation about investment in a different future. Unfortunately, all they have really done is started yet another debate about yet another economic theory that people do not understand.

I think that the pandemic has shown that the conversation about these things just slows us down. Governments/states have many different tools in their tool box. There are even more that we are not implementing. Focusing on one of these tools (basically understanding that, yes, there is room for expansion of money supply) is somewhat apolitical – it can be applied no matter who is in power. At the same time, it is about supporting the economy without dealing with Capital and power.

Many unions have historically taken the positions that spending public money on bailing out Capital is generally a good idea, regardless of where the money comes from. Bailouts are about protecting jobs. However, unions have also taken a cautious approach against local policies that drive inflation (or variations of currency value) given the international nature of parts supply chains and international wage competition.

But, see, this is why I tend to take a step back when folks go down this road: you cannot help but start a debate about the potential pitfalls of this policy – a policy that is either already partly implemented and/or will never actually be implemented. A theory of a policy that is not at all our biggest concern right now.

Surely, a more interesting (and necessary) conversation is the impact of all the current money in the financial markets and the complete lack of coordinated investment into real/useful production. There does not seem to be a lack of money, just poorly managed investment.

Finance capital is currently debating whether this excess liquidity is helping drive people away from bonds/fixed income to equity markets and/or private equity investments because of the massive differences in returns. This is said to be part of the reason (retail investors using their bailout cheques) that is driving the financial asset bubble we are now seeing.

That much of this money is being put into just a few advertising company stocks is also very concerning. Just looking at the geopolitical potential impacts of US-China movements concerns me. Chinese companies make up the second largest stash of Facebook ad revenue (even though it is banned in China). If the Chinese state were to respond to the latest attack on US-listed Chinese companies by banning ad purchases from Facebook, that would have an effect on stock prices and wipe out much of that bubble. And, we are not even talking about the Alibaba-Amazon competition or the ownership of tech production that is tied into this.

Policy goals

There is also the very real problem of ownership and control over important parts of our economy: intellectual property; pharma; health infrastructure; medical devices; transport; manufacturing; energy production, transport, storage and use; wage subsidies/replacement; and our poorly managed and anemic private social services. We need to solve these and not just with more money.

The goal for the broader workers' movement is not just support for capitalism and the state, it is redistribution of profits and democratic control over work.

The goal of the climate justice movement is also not just support for capitalism and the state, it is about re-directing investment, redistribution of profits (from climate damaging energy), and democratic control over energy production and use.

MMT does not really help us with those questions since it can only offer part of the money necessary to do just the new investment (even if it could work, which it likely cannot in Canada or other developing economies).

The discussion about MMT is a little like the discussion of tax avoidance. If we had the political power to fix the problem, we would not really need to fix the problem.

Beyond fantasies that printing money for free will save us, there are real issues facing our countries' economies and their workforce that need to be solved. The international labour movement should focus on some of the real world solutions to these things and put forward a program strengthening democracy and gaining (some) of that political and economic power we are currently without.

It is those ideas about their future that people want to have, not the conversation about where this or that dollar comes from. And, if we get power, the question of where the money comes from will not be answered with a single acronym and will not be static.

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