A recent bulletin from Resilience addresses the topic of "Modern Monetary Theory." What is that?
One short definition is as follows: "Anything we can actually do, we can afford."
I don't see that claim being made very often, when I read my newspapers every morning. You are probably not hearing much about Modern Monetary Theory, either.
Let me remind anyone who is a longtime reader of this blog that I have written about Modern Monetary Theory, also called MMT, on several occasions. For instance:
This theory means that social goods can be achieved by a political choice to spend the money necessary to achieve them. If we want to upgrade and repair our infrastructure, we can do it. If we want to provide a college education to those who can benefit from that, we can simply do that. Health care? Mental health care? We can have the kind of health care system we ought to have. Housing? We can build the housing we need to make sure no one has to fight off other homeless persons to be able to sleep under a bridge. Money, says MMT, is not a constraint! Obviously, if this is true, you can see the appeal of MMT!
How will you pay for it? is the wrong question to obsess over. The right question is the more difficult and important one about the impact of government spending on the economy. Did it generate income inequality? Did it cause inflation? Or did it help build an economy that works for all? MMT economists favor policies for shared prosperity, like a federal job guarantee, a Green New Deal, tuition-free college and Medicare for All.
This brings me to the Kelton/Keynes assertion that "anything we can actually do, we can afford." I think there is a problem with this assertion. The problem is that we can't afford to do everything we can "actually do," all at the same time. We need to pay attention to that "opportunity cost" problem that I mentioned back in January. The problem isn't with the money, per se. We can afford to do anything we can actually do - but we can't "actually do" them all simultaneously.
Why is that? That is because our economy isn't, in the end, about money. It's about people. And while you can print money, you can't (not yet, at least) print out people. No matter how much money we have, there is only so much we (collectively) can do, all at the same time. That is why "politics," which is how we decide what we are (collectively) going to do, is always and necessarily about choice.
Individually, as I am fond of saying, "you can't be both a ballerina and a brain surgeon." You're going to have to make up your mind. You might have the ability to do either one of these things - but to be any good at either one of these activities, you will have to dedicate yourself to it, and you won't have anything left over to embark on the other potential choice.
Our society is the same. We can build the biggest military machine in the history of civilization, and we can provide health care for all, and a college education for all who want it, and child care, and housing for every person. But we can't do all these things simultaneously. It's not the money that's the problem. It's the limited capacity of our society to do too many significant things simultaneously. So, we have to choose.
Billionaires are buying whole islands in Hawaii. Billionaires are asserting a private right to conquer space and build cities on Mars, where homeless persons won't be able to exist. Let us direct our protests at those who are responsible, and do something about it. And I don't mean the billionaires, either. I mean all of us! Modern Monetary Theory says that we can afford anything that we can actually do. We can, actually, provide a place, a space, a home for every person in this incredibly rich country we call our own.
I recommend that article from Resilience that I mentioned at the beginning of this blog posting. The article is dated October 7, 2022, and it is titled as follows: "Degrowth, Decolonization and Modern Monetary Theory." Click that link to read the article. If we want to address the climate crisis, and if we want to hold our nation (and the world) together as we face the huge economic, social, and political challenges that are coming along with the climate crisis, we need to figure out how to deploy Modern Monetary Theory.
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