Professor Bill Mitchell on Modern Money Theory

This article is linked to a YouTube lecture on Modern Money Theory. Professor Bill Mitchell demonstrates in simple terms how language, especially metaphor, molds our thoughts and beliefs to accept Neoliberalism as the dominant economic and political paradigm of the United States.

The advent of neoliberalism as an accepted policy can be precisely determined as January 20, 1981, the day Ronald Reagan became president. Reagan (or his friends) appointed as his advisors economics professors sympathetic to the Chicago school, so labelled because some of its key exponents held academic positions in the economics department of the University of Chicago. As the unofficial policy of Reagan and his successor presidents, it has guided economic decisions through both Republican and Democratic administrations.

Neoliberalism, for all Americans not in the top income brackets, has been a dismal failure. In spite of that failure, those who have benefitted from neoliberalism policy—the superwealthy, in other words—have had the power to suppress alternative paths that lead to a more equitable and just society.

Neoliberalism has as its theoretical underpinning the neoclassical school of economics, which was started by Alfred Marshall (1842–1924), English Economist, as a response to Henry George (1839–1897), who proposed a land value tax in place of all other taxes. Almost all economists in government and academia today subscribe to neoclassical economics. If a candidate for an academic position is critical of its validity or its ability to predict future economic events, the candidate is simply not hired. Economists who subscribe to MMT (Modern Money Theory) cannot get their work published in prestigious academic journals. The profession has worked diligently to keep them non-persons.

There are scholars who fortunately have refused to drink the Kool-Aid, and one of them is Australian Bill Mitchell. His talks on YouTube are clear and understandable expositions of how the economy really works. His Australian accent is occasionally hard for Americans to follow, especially his vowels, but it’s not difficult to translate. Listen and learn.

Luca Ciarla, Violinist

This morning, as I was sampling old bookmarks from a folder named “Stack” which I started around fifteen years ago, I came across a link to violinist Luca Ciarla’s website. Born in Termoly, Italy, he performs and composes with an extraordinary breadth of style and expression, especially classical and jazz. He received his violin degree in 1993 and then studied at the Fiesole School of Music and the Scuola di Alto perfezionamento of Saluzzo. He has a masters degree from Indiana University and a doctorate in violin from the University of Arizona, where he taught for several years. He studied jazz with David Baker at Indiana.

This short introduction does not convey the delight Ciarla’s music inspires in both his live and media audiences[1]. His website, which contains several of his recordings and performances is www.lucaciarla.com. Many of his performances are posted on YouTube. (Search for “Luca Ciarla”)

Listen to this guy; his music is amazing.

---

1. In my case, envy. My training is classical and I never took the time to learn to play jazz. That’s one of my few regrets in life.  ↩

Recent Thoughts on the Future

Earth’s biosphere is amazingly resilient. Nature has worked out a multitude of checks and balances that stabilize the environment and protect it from excesses, including changes in climate, population, and availability of food. If a change occurs, for instance an increase in solar energy reaching the earth, the earth will warm up a bit, plankton in the sea and green plants on land start pulling more carbon dioxide from the atmosphere and replacing it with oxygen, thus reducing the greenhouse effect and cooling the Earth. If the temperature keeps rising, however, the negative feedback loops [represented by the plankton in the ocean and greenery on land] will eventually cease to absorb atmospheric carbon dioxide. The biosphere will no longer be able to compensate for the rising temperatures.

There is a possibility that higher temperatures will change the makeup of the biosphere so that it will reach a stable state, much in the way strange attractors form in a dynamic system. The problem with having a stable state at a significantly higher temperature is that it will probably render the biosphere unfit for human habitation.

Suppose that the average temperature of the Earth rises 10° Fahrenheit from its base level and then stabilizes. The sea will rise until all the ice melts, and then start falling, as it will be evaporating at a higher rate.

Water vapor is a greenhouse gas, an increase of which increases the heat retention of the atmosphere. At some point the oxygen-liberating plankton In the oceans will quit doing their job, so that the CO2 level in the atmosphere rises.

Some plants will survive, but it Is likely that new species will evolve to accommodate to the changed environment. Some of the plants will be nasty. Plants, especially food plants raised in traditional environments, will likely die off or evolve in such a way that they can no longer serve as a principal source of food for humans. Perhaps new plants will evolve as substitutes, but that is uncertain.

The tropics will become uninhabitable. Millions of refugees will migrate in desperation into what are now called the temperate and frigid zones. That will lead to fierce conflict between refugees and natives, especially after the food supply diminishes in the temperate zones. A substantial part of the world’s population will die from either starvation or war.

There is no assurance that a society stressed beyond its limits will not resort to nuclear weapons.

Until recently, I have been optimistic about humanity’s ability to put its environmental house in order, but with the Trump administration and the substantial following that has supported Trump no matter what he says and what he does, I am not quite so optimistic.

We live in apocalyptic times. Societies constellate apocalyptic archetypes but usually emerge from them, transformed into a radically different civilization. During the apocalyptic phase there are upheavals and general disorder. A large part of the human race will be seized by a destructive madness.

The poet Yeats summed it up:

Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

We are in the middle of apocalyptic times. The difference this time around is that we have the power to end humankind. A narcissistic fool has become the most powerful human being on Earth with his finger on the nuclear button. He is being either served or humored by a legislature that, having taken over the government, has become a wrecking crew, destroying or dismembering public institutions painstakingly built over 200 years by dedicated statesmen working for the common good.

It appears that no branch of the government, legislative, executive or judicial has any long-range plans for the future. Their absence of concern for climate change, nuclear war, pollution and extinction of species will, if it continues, destroy us in the not too distant future. This is a form of madness, especially among the misguided citizens that support the present regime.

The dangers that now confront the entire World can be ameliorated only by concerted action by all the nations of the World. Sadly, the United States has turned out to be the most uncooperative nation of all. If we are lucky, we will emerge from this convulsion before the biosphere has reached the point of no return, that we will have not waged war with nuclear weapons, and that we will have gained a modicum of respect for the Earth, our island home.

But don’t bet on it. Our capacity for self-delusion has no limits.

The British Labour Party and MMT

Both Bernie Sanders (like Obama) and Britain’s Labour leader Jeremy Corbyn (like Cameron and May) have painted themselves into an economic corner that they will be sorely taxed to escape. All of their political lives they have used the budget deficit to chastize their conservative and neoliberal counterparts as either budget busters or austerians. Having recently been introduced to MMT (Modern Monetary Theory), however, they are finding themselves unable to reverse themselves and tell the public that a governmental budget is not the same as a household budget and the government is not in any danger of going broke.
MMT economist Stephanie Kelton, Professor of Public Policy & Economics at Stony Brook University and an economic advisor to Sander’s 2016 presidential campaign, reports that although Sanders is convinced that MMT is the way to go, he dared not change his anti-deficit position because he risked political blowback[1].
Jeremy Corbin, while in a similar position, is apparently being advised by neoclassical economists advocating a continuation of the Conservative Party’s austerity policy. If he becomes prime minister, a real possibility, but fails to make good on his promises to restructure the British economy and make it fairer to the working class, he could easily relegate the Labour Party to a long period in the wilderness. Of course, he has the same problem as Sanders—reversing himself after decades of bashing Conservative, Liberal, and even Labour governments for balancing the budget on the backs of workers.
U.S. Republicans, however, have screamed about budget deficits for decades, but every time they took control of Congress and the presidency, they invariably increased expenditures and reduced taxes on the rich, creating deficits that dwarfed the deficits of their Democratic predecessors. In all but one case—Richard Nixon—the deficits did not lead to inflation, and to be fair, Nixon inherited a war that was itself inflationary[2].
The best political strategy for both Sanders and Corbyn is probably to mute their balanced budget talk during their campaign and change policies only when they get into office. Corbyn should have some serious talks with Ann Pettifor (a member of the Labour Party’s Council of Economic Advisors), and Steve Keen before he goes any further.

---

1. Stephanie Kelton Has The Biggest Idea In Washington  ↩
   
2. Nixon did err in repealing a 10% surtax on income enacted by the Johnson Administration to curb inflation. Almost immediately, inflation started rising. Nixon attempted to impose price contrals late in his first term, but they had no teeth and were for the most part ignored. Gerald Ford, Nixon’s successor, engaged in persuasion, to include distributing WIN (Whip Inflation Now) buttons, without result.  ↩