And now for something completely different:-Putting the DC into deceit.... (Part One)
Economics as a branch of political misinformation
I was a recent guest on the Macro N Cheese Podcast. Macro N Cheese (MNC) is a production of Real Progressives, a volunteer organization dedicated to propagating economic, societal and political information and knowledge. Here’s a link to the discussion-
One of the key tenets of Real Progressives is supporting the message of Modern Monetary Theory (MMT). MMT is a heterodox macroeconomic approach that has become increasingly popular in recent years, while increasingly attracting the criticism of mainstream economists, whose frameworks have been largely debunked by MMT. Paul and MBMG have long promoted many of MMT’s main empirical aspects, even before the term MMT was coined and long before Professor Stephanie Kelton's seminal book, The Deficit Myth. Rather than a narrow discussion of MMT, for which many other past and future MNC guests are far better qualified, MNC's Steve Grumbine took the conversation into a wider ranging exploration. As Steve pointed out, to many in the MMT community, "capital markets, they're the boogeyman", an uncomfortable topic.
While sharing Steve’s frustration at dysfunctional current state of socioeconomic affairs, Paul pointed out that soundbite solutions, like 'eating the rich', are infeasible due to the complexities that characterize societal power structures, complexities that have evolved from series of individual decisions, policies and choices since the dawn of mankind. During the discussion Paul reflected on the minor epiphany that he experienced when he became aware of the gap between the narrative and reality of capital markets, and between the narrative and reality in pretty much everything else too. Paul concluded the discussion by explaining-
"Capital markets are just the lens through which we can look at things. Just as economics is. Just as politics is. Nothing is quite what it purports to be, including the idea that capital markets are somehow free and that this freedom is somehow related to democracy and rights of representation and everybody having equal value in society. One thing that I’ve learned in recent years is that you have to be careful when talking about democracy. It's not necessarily what you think it is.”
Paul explained that learning about the original Greek model of democracy, something that America's founding fathers were deeply reverent about, when framing The Declaration of Independence and the Constitution, had been an eye-opener-
“Classical Greek democracy is really as much of a myth as the Gods on Mount Olympus. There
was no transfer of power to the people as we now understand it but basically a carve up between different autocratic interests in ancient Athens who, until that time had basically been at each other's throats, alternately in power or in exile before the exiles would return, war would ensue and there'd be a regime change.”
The handful of main Greek autocratic families (or eupatridae) carved up rights to rule between them in order to guarantee that they’d have a shared in the spoils of running Athens. Of course, they had to persuade the masses to accept this change-
“One problem was that having whipped the people into such a frenzy at each other’s throats for so many generations that the only way to sell it to the people was to say, ‘we're giving you the power'. But that was never the case – there really wasn’t any transfer of power to the people.”
Paul related this to the misrepresentation inherent in capital market narratives, noting that Dutch merchants who founded the Dutch East India Company (or VOC) provided one version of the origin story of capital markets, having banded together to share the risk of their enterprises. If a voyage failed or ship was lost, the leading families retained their wealth and power by more than offsetting that through gains from other trade voyages. This served to empower the narrow group of founders of the VOC, further increasing their concentrated wealth relative to the vast majority of Amsterdam society.
Paul had earlier explained how his son Henry, in recently completing his undergraduate dissertation about the politics of the superhero genre, had discovered that Noam Chomsky refers to the American Declaration of Independence as the first superhero text. For all the rousing language, the Declaration of Independence primarily acted as a form of propaganda designed to exert control over the mass of the early colonists and settlors, in order that a small group could ascend to or rather maintain power, could exercise control, and create an absolute dependence on them, reinforcing the need for dependence through the idea that Americans, like pretty much the citizens of every other state, need a protector who will save the day when needed. Paul drew a line from this dependence to the perpetuation of myths of how economies and markets operate because if most people really understood ‘how the world works, with extreme power and wealth concentrated in such few hands, then it's like Henry Ford's quotation about if people knew how banking and monetary policy were, there would be a riot in the morning.’ In other words, societal and socioeconomic structures are predicated on perpetuating and more deeply embedding the kind of social structures that increase inequality and inequity.
“Capital markets have played a huge part in that. I think probably in the eighties, nineties and noughties then capital markets were one of the biggest drivers of inequality. Today there's a real argument that maybe technology and social media are perhaps even bigger drivers or just as big drivers of inequality in the way that they're able to concentrate power through information into a very small number of hands.”
Steve appreciated the superhero analogy, confessing to having previously flirted with Libertarian politics and ideals, noting that the seductive power of such philosophies is the idea that “maybe one day I'll be a maker as opposed to a taker.” Paul agreed that this is “exactly how it works…how it sucks you in with the idea that if you do all the good stuff, you end up becoming the maker….getting all the good stuff and you deserve it. And if people who don't get that….they don't deserve it.” Paul and Steve both noted that this ‘just world fallacy’ is both compelling and overarching and dates back through human existence, even to ‘Biblical times and the Garden of Eden and serpent.’ Steve linked this to a more financial track, specifically, the origin story of currency, which prompted Paul to acknowledge his personal debt to another Steve – Paul’s economics mentor, Professor Steve Keen-
“He's not only a great teacher, but also a really good friend and a wonderful human being…..which occasionally leads him to get a little bit excited about issues like climate change and the people who are doing their best to disguise the realities there. The eureka moment that Steve patiently led me to helped me understand why the world that economic models described wasn't the world we actually lived in. Traditional macroeconomic models exclude money, claiming that money is not a significant factor in the economy, merely a medium of exchange. Traditional macroeconomists don't regard money creation as an economic factor, just seeing money as literally a form of exchange from capital to labour, to goods to services. That's such self-evident nonsense that it's just ridiculous but this isn't stupidity. This is a useful tool for ensuring that most people can’t understand how monetary policy works. Henry Ford was right. If they understood how it worked, they'd understand what the consequences of it are. 20 years ago MMT wasn't a formalized movement in the sense that it has become today. There was no MMT Bible (if we want to look at The Deficit Myth in those kinds of terms: - I hesitate to call it a Bible because I think most of what's in Deficit Myth is true, so it's probably not a Bible). But it's just nonsense to ‘ analyse’ any modern economy without including the role of money in that economy…I often say the single thing that really proves MMT right more than anything is when you hear politicians say ‘no, we don't have enough money in the kitty for single payer health service and we don't have enough money for the social housing and the government hasn't got enough money for education.’ But ask politicians for tax cuts or ask them to go fight an imperialist war. Suddenly they have the money to do that. And that is the ultimate proof. Nobody ever asks them, when it was hospitals, why we don't have the money. But when it's creating weapons to put people into hospitals, we seem to have plenty of money for that. Nobody ever seems to ask that question [where the money comes from]. To me that's the ultimate proof that MMT is on the right track.”
The concluding summary of this discussion will be posted tomorrow.
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