Economic Update: Government Deficits; Why They Happen, Who Benefits From Them, and MMT
Richard Wolff mentions the printing of money occasionally, but he never squares that with the government supposedly needing to tax and/or borrow first before it can spend.
He spends the last two minutes talking about MMT, but not as a theory of fiat money; instead as a novel monetary policy proposed by “progressive-minded economists.”
Somewhere in there he also repeats the common fallacy that what banks lend is other people’s savings. They don’t. The money they lend is created out of thin air, and the “money multiplier” is a myth.
I’m just a technerd who’s never taken an economics course, and I grind my teeth every time this expert botches these fundamentals. Why Michael Hudson and Radhika Desai never push back on him when they do talks together is a mystery to me.
Can fiat money not be capital?
The idea behind MMT is that you can pay privatised government debt by printing it without raising taxes, right? Let’s do that. The government is now not in debt. What happens to the coffers of those privatised institutions? They have grown and you have not really changed the overall relationship between the bourgoisie and the proleteriat, unless it has been decided that money can now buy less labour (but marxists have a more sophisticated understanding of inflation beyond supply and demand curves, so we do not need MMT for this). Fiat money as we understand it now is after Marx’s time but the tools to analyse capital still useful. The government’s ability to print money and use it as it sees fit; do we really need MMT to explain this phenomenon?
That’s not quite how it works. The privatised government debt is in the form of treasury bills, notes and bonds that mature at different time periods: bills being short periods (weeks). Notes being up to ~10 years. Bonds being 20 or 30 years. The government pays interest on those bills, notes and bonds. So a portion of the yearly Federal budget is money to those investors.
The government has to pay those bond holders for decades. Treasury did buy back some bonds last June but it wasn’t really a large enough amount to effect the debt.
I understand that, it was just an abstracted simplifed example to acknowledge that MMT highlights that you don’t need to raise taxes for the government to “pay” for stuff.
Ah I see.
Yes under MMT, taxes don’t pay for government spending.
I think MMT is a great way to argue that government shouldn’t justify austerity measures because of public debt.
Unfortunately the privatization of that debt under an international capitalist treasury bond market system has fucked that up to a great extent.
I don’t think anyone is suggesting it isn’t. It’s no more or less capital than commodity-backed money is. They’re both money.
The idea is that neither debt nor taxes are needed for the state to pay for stuff domestically, because it can (and does) create money. The state may have other reasons for debts & taxes, but paying for domestic goods & services ain’t one of them. This wasn’t the case before 1971, never mind 19th century Europe (though it was the case in other places and times).
They’d get invested elsewhere, because the state stopped offering risk-free, interest-bearing debts that do nothing for the real economy, because they remove capital from circulation, from wages and capital investment.
The Chinese state seldom offers “free money” debt instruments, so the Chinese bourgeoisie can’t park their capital in them, and Chinese capital controls keep them from parking it in other states’ debt offerings.
Neither Hudson, Desai, nor I would suggest that it would change that relationship.
Call it MMT or call it late for dinner. Whatever you want to call it:
And that basically covers the first three bullet points of Wikipedia’s explanation of MMT. I’m sure the article devolves into liberal nonsense later on, but I’m not talking about any of that.
My dispute is not whether MMT exists but whether marxism supercedes it; I mean you made an excellent example of a socialist country using fiscal policy that subverts neoliberal economies supposed paradigms.
In other words MMT without the liberal fluff as you put is already encapsulated in Marxism.
I would like to be able to say that Marxism encapsulates MMT without the liberal fluff, but unfortunately it depends on which Marxist you talk to.
And that’s why I bring up MMT in the first place: to introduce the aspects of MMT that I think are encapsulated by Marxism, or at least ought to be.
I think Capital III is where Marx gets into what money actually is, and I think he gets as far as distinguishing between the commodity value of the metal in a silver coin and value of the coin-as-money. So perhaps he gets close to explaining that ultimately, all money is fiat money, but not having read it yet, I can’t say.