Tag: MMT

I recently saw Richard Murphy’s summary of green economics, the Green New Deal and MMT. This can be found at https://www.taxresearch.org.uk/Blog/2020/06/13/the-old-and-new-economic-orders/ and is reproduced at the centre of the systems dynamics diagram below. Rod White’s comment on Richard’s blog and his response pointed out that the Old Guard are in control and the current progressive parties are obsessed with the ‘How are you going to pay for it?’ question.

In this blog I am going to have a go at laying out a logical flow that reframes the argument. This is shown graphically below as a simple systems dynamics diagram. For each block you can construct a sentence which says, ‘if [input block 1] and [input block 2] then [block]’. The left hand side covers the Old Order and its consequences and the right hand side looks at the outcome of adopting the New Order.

The Old Order

The logic of the Old Order is as follows:

1. If a lack of money constrains everything we do and people aspire to live a live free from want and idleness then we value money and covet it.
2. If a lack of money constrains everything we do and people aspire to live a life free from want and idleness then we provide minimum support to those wo have too little money.
3. If we provide minimum support to those who have too little money and we value money and covet it then there are huge variations in life experiences.
4. If we value money and covet it and there are no physical constraints on what we can do as the planet is a free gift of nature then we create a consumption based economy
5. If we create a consumption based economy (and there are 7 billion humans) then over time the ability of the planet to sustain human life is jeopardy.

Even worse, there is a positive feedback loop where the huge variations in life experiences leads people to put all their energies into the acquisition of wealth and consumption to ensure that they are not in the left behind group relying on the minimal support provided by the system. And the purpose of consumption is only to generate money to avoid the possibility of falling behind with no societal purpose nor concern about the consequences for the planet and the survival of the human race.

The New Order

The logic of the New Order following from the fundamental assertions made by Richard is as follows:

1. If we have all the money we need to do things that are possible and we can only do what is possible with the constraints of that a living planet can sustain and people aspire to live a life free from want or idleness then we develop solutions that maximize wellbeing of people and the planet. (Green New Deal)
2. If develop solutions that maximize wellbeing of people and the planet then we delivery freedom from want and idleness and repair the planet.

However, as Rod points out the Old Order will be hard to dislodge, so:

1. If some people try to hoard money to continue to overconsume and we have all the money we need to do things that are possible then we use taxes to ensure people do not have too much money.
2. If we have all the money we need to do things that are possible and we deliver freedom from want and idleness and repair the planet then there is no incentive to hoard and covet money.
3. If there is no incentive to hoard and covet money and we use taxes to ensure people don’t have too much money then there are small variations in life experiences

We now have a positive feedback that reduces the incentive to hoard and covet money we create a purpose based economy in which there are small variations in life experiences and where progress is achieved through common effort and whose benefits are enjoyed in common.

A Manifesto for a Progressive Party

Converting this logic into a manifesto for a progressive party produces the following.

Our Purpose

Our purpose is to create a society in which,

1. Everyone can survive in comfort within the constraints that a living planet can sustain.
2. Enjoying a comfortable life does not depend on a person’s ability or williness to work.
3. Work is available to everyone who wants it.

Our Strategy

The progressive party implements the following policies to achieve the purpose.

1. The Government uses Modern Monetary Theory to operate the economy.
2. The Government creates sufficient money to deploy the necessary resources to achive the purpose.
3. The privates sector can make use of resources not used by the Government within the constraints that a living planet can sustain.
4. The Government provides work in support of the achievement of the purpose when work is not available in the private sector.
5. No-one gets left behind with respect to basic services, education, health and fitness and access to cultural and leisure opportunities.
6. Taxation is used to ensure that economy does not overheat and to ensure that individuals cannot get too far ahead in particular with respect to over consumption of scare resources (including releasing waste into the environment)
7. The nation does not consume more than its fair share of the constraints (depletion of resources and production of waste)
8. The nation works internationally to persuade other nations to do the same (including levelling up nations where the population are not able to survive in comfort)

Our Programme

Phase 1 focusses on operationalizing Modern Monetary Theory to deliver the Green New Deal and ensure that no one is left behind. Government creates money and deploys it in areas of the country where the people are not enjoying a comfortable life. Schemes are chosen based on the speed at which they can move the country to a position where it is respecting the constraints of (e.g. rewilding, reform of agriculture, converting existing vehicles to electric, on-shore wind, household solar and home insulation). In addition, phase 1 includes a revolution in well being in which self-care, life long education, work life balance and self-sufficiency are promoted as well as a promoting local and particpatory leisure and cultural life over passive consumption of elite sport and entertainment.

Phase 2 implements longer term solutions developed in phase 1 (converting from gas to green hydrogen for heating and industrial processes, reform of work and transport to reduce commuting, restoration of soil health, hydroponics, elimination of single use plastics, circular economy for consumer goods). Phase 2 goes beyond ensuring that we only do what is possible within the constraints that a living planet can sustain and actively repairs the damage done by during the fossil fuel period.