By J.D. Alt
I spent the last couple days reading and contemplating “Political Aspects of Full Employment”, the transcript of a lecture―given in 1942!!―to the Marshall Society by economist Michal Kalecki. This was recommended to me by Nat Uerlich in his May 2 comment to my post “False Choice or Real Possibilities.” Many thanks to Mr. Uerlich for taking the time to make the comment. I urgently recommend Professor Kalecki’s lecture to anyone who feels a little fuzzy (as I have lately been feeling myself) about what we are up against as a collective society as we now confront, once again, how collective society itself is structured to inexorably be its own worst enemy.
As I pondered Professor Kalecki’s analysis, I was also trying to decide whether to go public with an admittedly “amateurish” video I’d put together to promote the book “The Millennials’ Money.” I was having doubts (having produced it with a miniscule budget) whether the quality of the video is good enough to be useful. Also, I was beginning to have doubts whether these ideas actually connect with, or fit into, any kind of potentially achievable future reality. Kalecki’s lecture erased any doubts about the latter―but it also makes it clear that the path to getting there is going to be overwhelmingly obstructed by the present dominance of the corporate economy over our collective governance.
In the end, I decided to go ahead and put the video out there, hoping that, in spite of its production shortcomings, it might become useful as a quick MMT introduction that is accessible enough to actually be absorbed by a lot of otherwise busy, distracted, or only peripherally engaged people. Here it is:
Nat Uerlich | May 2, 2016 at 8:39 pm |
” . . . why don’t we?”
Sad to say, Michal Kalecki may have provided a pretty good answer to your question in the early 1940s. See “Political Aspects of Full Employment” at http://mrzine.monthlyreview.org/2010/kalecki220510.html .
It is truly depressing that Donald Trump appears to understand MMT, but, Hillary Clinton either does not, or is too afraid to offend her Wall-Street donors to admit to it in public. At least there is some indication from what I saw of an interview of Green-Party-presumptive nominee Jill Stein that she at least now understands a little bit of MMT.
Don’t kid yourself. Trump does not understand MMT. He made a comment one time that “we print the money” but he sees that as a last resort only. He has no idea what it really means or what the implications really are. He’s made numerous comments that the USA is in serious trouble because it owes trillions to China.
On the way J. D. A. but a bit flat towards the end (arch. = bland modern)! If you had a few of those young millenials bringing some life and animation, a touch of humour, music to it – it would be really good!
Glad you went ahead and made the video available. Even a fourth grader can understand it, which gives some hope that members of Congress might eventually be able to grasp the concepts also. If they don’t we can at least hope to replace them in a few years with people who do, assuming we can survive their overall ignorance that long.
James, Please see the attendant in charge of Smack Down Congress and collect your Gold Star.
I’ll gladly donate mine to the first congressperson who sees the light, or the first to resign over the mounting “debt”.
Very nice presentation, thank you! The only place I stumbled was on the dollars only convert to dollars screen at 10:58. I immediately thought of all the other things I can convert my dollars into… Of course I realize you meant that the FG will only exchange dollars for themselves “on demand”, as you made clear on a previous screen. Nevertheless, I couldn’t help thinking, “that’s not right” when that screen came up.
The subsequent assertion that taxes drive the value of the dollar, though it didn’t cause me to stumble, falls a little flat. I took it as quite a revelation when I first encountered the concept… But while it is clear that taxing power could drive the initial acceptance of a sovereign currency, once the currency has been accepted and used for market exchanges, everything changes. This is especially significant when society itself transforms from a society of yeoman farmers to one of, first factory workers, and then increasingly service workers. I very much like how you framed this section around the question, “Why would we accept this exchange” (taking fiat dollars for real goods and services). But “everyone knows”, millennial or not, that in our current society we need dollars first and foremost to survive. We have no other means to gain our food and shelter, or at least to gain some modicum of control over our food and shelter; some shred of liberty. The fact of taxation may give some baseline value to the currency, but no one collects dollars in order to pay taxes. Especially since the main vehicle for collecting them is the income tax. In fact, some people collect fewer dollars than they might to reduce their tax liability, and many people pay no taxes (other than sales taxes) at all but still desire dollars. As burdened as we may feel at tax time and as much as we like to gripe about taxes, they do not drive us to collect dollars. I get that you have to simplify and I think you’ve done a bang-up job here… but I just know if I showed this to my daughter her reaction at that point would be to give up trying to understanding something so obviously wrong. On the other hand, all the diagrams are priceless, clear and enlightening. Don’t get me wrong: I love your work.
Bravo.
J.D. you’ve done it again.
I’ll spend a considerable amount of time posting this video every where I can.
Thanks for the video.
RB
I had read this before, and I couldn’t help thinking of Trump also when I read it. He’d have no qualms about financing employment with deficits, and as long as he spent the money on armaments, as Kalecki speaks of, he’d have no opposition from Conservatives. And the end result would lead where Kalecki indicates; war.
It’s not just taxes that make people want dollars. If I hit my baseball through your window and you sue me, the judgement for damages will be in legal tender, dollars good for all debts both public and private( not Pesos, gold, or wheat). Even with no taxes we still need dollars.
Very good video
The hardest thing to get people to accept is the FG not needing our dollars. We have been so brainwashed by Austrian, gold standard, monetarist thinking that the concept of money originating with the FG just sticks in our craw but this video treated that subject pretty well.
I have some further thoughts about the tax spigot and the undifferentiated PS pot. I know you want to keep it simple, but I wonder if you would consider for future efforts, noting that the PS is not actually a pot of liquid with an even distribution of dollars seeking their natural level in accord with gravity. The distribution of dollars in the PS pot is essential, especially with regard to where, exactly, the various spigots are located. For instance, does the tax spigot drain dollars from the wealthy (where the ‘water’ is deeper), keeping the distribution more even, or does it drain (as, for instance, through FICA) from the shallow end… I would love to see a final adjustment to the pot that puts in view the actual dollar distribution, showing that it matters where we put the tax spigot. Of course, where dollars are injected also matters… and perhaps you will consider this an unnecessary complication of the diagrams… I’ll certain trust you to be the judge. But just in case you didn’t already consider this and reject it as too complicating, I wanted to bring it to your attention. I think it might add something important to the lesson.
Excellent video! However, the US Treasury’s monthly budget statement:
https://www.fiscal.treasury.gov/fsreports/rpt/mthTreasStmt/mts0515.pdf
shows receipt of income tax revenue and, superficially, it could appear that the revenue is added to the TGA account and used for spending.
It is easier to say that income taxes are shredded than to get a conservative to believe it. Is there a link to a document that proves the case?
Can Taxes and Bonds Finance Government Spending?
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=115128
Thanks for posting the reference. Having just worked my way through the entire paper, I have a much better understand of the relationship between taxes, borrowing and spending. I also understand why this paper only has twenty some citations. As important as it is, some simplified presentation such as J D ‘s is the only way that the implications are going to be widely disseminated and accepted.
This is critical majorly important material that deserves a snappier presentation and it absolutely must be shouted from the rooftops and focused upon in all major media outlets and widely shared on social media. The first attack on this proposal is going to come from the “but won’t that create inflation” critics. I’m sure this issue is handled well on the rest of this blog and I will have to go find it. The whole dispassionate tone of voice thing though – really this is HUGE news to almost everyone and you are just slowly speaking about it in a calm and unexcited way like it’s no big deal. This concept deserves professional production planning and execution.
So to illustrate the level at which the propaganda we seek to counter operates at, sample this attack on Keynesianism (https://youtu.be/LcfaUlHBQp4). It speaks emotionally and sets up the Establishment of dominant Keynesians as the oppressors and we the free market Austrian school advocates as the underdog heroes valiantly struggling for liberty. We literally need to spread stuff at this simple a level. No kidding. That’s what people who were bored by History and Economics can relate to. Then we need to get it out there to compete.
Interesting video and contrast. History proves that Austrian economics makes more sense and is correct. Tell that to the Greeks, Italians, Spanish, Portuguese and Irish, or to those who lived through the Great Depression in the US.
I think the prime problem is that so many people do not understand that money is not a thing, but an abstract way of measuring real things, like points at a game, grades in a classroom, inches of lumber (as Alan Watts said long ago), ounces of gold (which is not the same ounce used for flour).
The Austrians and classical economists have a part of this right, with their insistence on ‘gold being real’, although they ignore the shifting relative values of commodities and the problems with limited quantities of any material — but fail at understanding how to properly use abstract measurements in principle. They are almost like religious literalists in this regard. It’s not simply a misunderstanding of facts but a more fundamental problem with cognitive processing and keeping levels of abstraction, metaphor, and analogy straight.
They also have a problem with understanding time, investment, and realistic expectations. One can print money in the same way as one clears space in a field for future planting or storage of crops or livestock: you can’t plant or raise animals without first having the space, but you can’t count you wheat or chickens as real until they actually exist. All the problems with inflation, usury, derivatives, debt deflation, and so on are based in the measurements of money going out of relation with the tangible wealth (or delusional expectations) — as if your tape measure was made from a big rubber band, or printed with too many or too few inches on it. (With wide deviations for actual vs expected tangible wealth, as from crop failure, being more the exception.) If you define inches as half of what they used to be, of course you end up many more inches of lumber, but you can still build only the same number of chicken coops from it.
The FG producing money is like making space for your chickens, and ‘issuing inches’ for you lumber, or ledger books for your accounts — just seeing that there is enough to accurately reflect the real wealth which be available. This is crucial for people to understand to understand MMT or any sort of economics — so basic that it seems to be often overlooked by people.