What good am I then, to others and me,
If I’ve had every chance and yet still fail to see?
If my hands are tied, must I not wonder within,
Who tied them and why, and where must I have been?
I’m in a bind and have been for years. Neoliberalism, the political-economic doctrine to which most of the world has for some forty-five years been subjected, is as dysfunctional as it is unfair. Thinking people recognise this, and their apparent impotence in the face of that recognition is but one of many ways of demonstrating that, far from living in democracies, the “free world” is ruled by and for tiny elites. 1
Denial of the existence of these ruling elites, routinely accompanied by philistine jeering, I liken to denial that the earth orbits the sun. Here’s how I’ve expressed the human predicament more than once on this site:
- Our world is capitalist in its advanced stage of imperialism – the export of monopoly capital from global north to south, and the south to north repatriation of profits.
- The prime beneficiaries of this world order are rentier elites in the most successful imperialisms: i.e. most of the former colonial powers (including the USA) but also the Antipodes, Canada, Scandinavia and an EU led by Germany.
- In its initial progressive phase capitalism freed humanity, albeit at terrible cost, from feudal ties and slavery while hugely advancing human productivity. Now its structures (means of wealth creation in ever fewer hands) and laws of motion (prioritising above all else of private profits and insatiable accumulation) demand unsustainable levels of narrowly defined and grossly distorted ‘growth’, condemning the world to:
I’d now tweak the above to add, largely as a result of my readings of Michael Hudson, the key role played by indebtedness in the FIRE dominated Western economies. This critical omission aside, I stand by that assessment. So why do I speak of being “in a bind”?
There are two parts to this answer. The first, also articulated more than once on this site, is that none of the main strands of resistance in the West – whether alone or, where there is sufficient compatibility of worldview, acting in concert – has the capacity to effect change of the nature, scale and timeliness our bleak circumstances require.
Social democracy? As modern monetary theorist Richard Murphy argued just yesterday, the British Labour Party is in thrall to neoliberal orthodoxy, effectively giving veto power over economic decisions to those “masters of the universe” who wreaked havoc in 2008, only to profit further from the misdirected quantitative easing introduced on the back of it. This surrender of agency – to that supreme deity, “The Markets” (invoked in tones so reverent you expect the Keir Starmers of this world to perform the Sign of the Cross) – is duplicated in social democrat economic policy across the Western world.
Trade unionism? Vital, but crippled not only by decades of statutory restriction but by a worldview stubbornly nationalist (at best) when capital is internationalist. (Witness union objections to nuclear disarmament on the ground of job losses!)
Revolutionary sects? Apart from being miniscule, these remain oddly silent on the matter of how power can be seized from states armed to the teeth, versed in counterinsurgency skills honed in the world’s hell holes from Aden to Belfast to Gaza, and spying on us with technologies beyond the wildest dreams of 20th century totalitarianisms.
Direct action? I applaud the imagination and chutzpah of groups like XR and Occupy, but history shows over and over that such loose alliances of bricklayer and banker’s niece, single mum of Slough and Disgusted of Tunbridge Wells, are easily infiltrated and even more easily split by bourgeois regimes that do divide and rule in their sleep.
I see the only viable challenge to neoliberalism in the rise of China as an economic superpower. Here too I’ve given my reasons more than once on this site. Less than a week ago I wrote:
The rise of China … poses the most significant – indeed, the only significant – alternative to neoliberalism. And it not only challenges Western hegemony in global markets long deemed “ours”. It also offers the global south an alternative to the conditionality – “yes we will lend you money to pay your debts to us but only if you privatise your economies and float them on Wall Street” – of IMF and World Bank loans.
Which leads me to the second part of the “bind” I’m in. While I find it easy to argue my corner against those to the right of me, and scarcely less so against ultra-leftist critics of China’s use of capitalism given that …
China’s capitalists (a) have been instrumental in lifting hundreds of millions from what the World Bank calls extreme poverty, (b) are subordinate to state policy – in the West it’s the other way round – and (c) exist precisely because the failure of the West’s Left to make its own revolutions obliged China to adapt to global conditions of entrenched neoliberalism.
… I was more challenged by a comment on this site by bevin, mentioned several times in the despatches this week, that it ill becomes socialists in the West to cry, “we must wait for Uncle China to come to our rescue”.
Well as this site shows, I hadn’t exactly been doing that, and bevin was swift to reassure me that I was not at all in his sights on that score. But questions of my own shortcomings aside, he has a point. If we accept the assessment set out above – and are not content to throw hands in the air and join the SINO Club (socialists in name only) – what is to be done?
After all, Uncle China has problems of his own.
Call me self satisfied, but I do believe one contribution I make is that of challenging to the best of my ability the neoliberal West’s criminally insane warmongering on states disobedient to or haplessly standing in the way of the US Empire and its satellites. All the more so when the said recalcitrant states are themselves nuclear powers.
But what is to be done closer to home? On this front my interest in Modern Monetary Theory is growing. And if the current post has taken an inordinate length of time to get to this point, well, I ask indulgence on the ground I had to set out the steps of reasoning which brought me here.
I’ll start (and finish this first instalment of) my inquiry into whether MMT really does stand for ‘magic money tree’ – or whether that’s just more philistinism from the economically clueless – with an account by the Positive Money crowd. Though there are points of significant difference between PM and MMT, for most purposes there is even more significant shared ground. Here then, with admirable succinctness, is Positive Money.org:
Politicians often like to point out that there is no “magic money tree”. But that raises the question, where does money actually come from? The answer is more complicated than many people realise.
If you listened to some government ministers, you might assume that there’s a fixed amount of money in the economy, or that the amount is strictly controlled by the Bank of England.
But in fact, money is being created out of thin air all the time. And this process has hugely important implications for issues like housing, inequality and the environment.
Most of the money we use comes in digital form, as the numbers we see on our bank statements. This money is created by private banks like HSBC and Natwest when they make loans. They create it by simply typing numbers into a computer – some might call this magic!
Sound implausible? You don’t have to take our word for it – the Bank of England itself has confirmed that “whenever a bank makes a loan, it creates a deposit in the borrower’s bank account, thereby creating new money.”
Unfortunately, banks direct most of their lending towards property and financial speculation, which pushes up house prices and makes financial crises more likely. Banks prefer lending to the ‘financial’ economy than the ‘real’ economy, where most ordinary people would see the benefit. This means they do a bad job of lending to businesses which create jobs and grow the economy in a sustainable way.
And because commercial banks were slow to start lending again after the 2008 crisis, the Bank of England stepped in with its own money creation programme called quantitative easing. It’s chosen to pump this new money into the financial sector, which is pushing up the value of assets like houses, shares, and corporate bonds.
This policy has done very little for ordinary people, but the Bank of England’s own research has shown that quantitative easing made the richest 5% over £128,000 richer.2 So at a time when politicians are using the absence of a “magic money tree” to justify austerity, the Bank of England policies are enriching a wealthy few.
All of this exposes how dysfunctional our money and banking system is. But we know it doesn’t have to be this way. We can reform the system so that it supports a fairer and more sustainable economy.
Instead of the Bank of England pumping new money into financial markets through quantitative easing, it should be spent via the government into infrastructure, green technology, or as a cash transfer to help households pay off their debts and improve their finances.
And we need to transform our banking system so that banks lend money to support investment and jobs in the real economy. This means having a more diverse range of banks and government policies that encourage lending for productive purposes. 3
The alert will have noted that, while the above goes nowhere near as far as Michael Hudson, the ground it does cover is consistent with the latter’s deeper and far wider analyses of the fix the perilously financialised West is in. The hyper-alert will note too that many PM/MMT pundits display naivety as regards the West’s power structures, and that this is frequently coupled with a seeming indifference to those states – mostly in the global south, with the eurozone a glaring exception – which, formally or de facto, are not sovereign issuers of fiat currencies.
Or to put it another way, few MMT gurus show awareness of imperialism. Does this render them irrelevant for those of us who recognise the dire straits in which humanity finds itself? I think not and, funnily enough, my starting point for saying so is in the “impossibilism” of Leon Trotsky’s Transitional Program.
But that will have to await Magic Money Tree? Part 2.
* * *
- Another way of showing the same is through this syllogism. Democracy implies consent. Consent is meaningless if uninformed. Informed consent implies independent media. That last we do not have when, as Chomsky observed, “media are large corporations selling privileged audiences to other corporations. Now the question is: what pictures of the world would a rational person expect to emerge from this structure?” See Britain decides!
- A friend emailed: surely that £128k cited by Positive Money is a misprint, several decimal points short of the mark? My reading is not of typo but sloppy ambiguity. I read it as the richest 5% getting richer still by an average of £128k per head. Needless to say, that will rise dramatically for the top 1% and even more so for the top 0.1%.
- A few hours after posting, an opinion piece by Josh Ryan-Collins – associate professor of economics and finance at the UCL – appeared on the Guardian site. Without explicitly mentioning MMT or PM, that is the professor’s unmistakeable thrust. Is modern monetary theory about to emerge from the margins as an idea that’s found its time? After fifteen years of ‘austerity’, with the most credible – I mean least incredible – contender for a UK prime ministerial coronation promising more to come; as is Keir Starmer’s hollowed out Labour Party, it just might be the political-economic answer a public cheated and insulted in equal measure so badly needs.