Occasionally I will read a book and experience an epiphany. I now see the topic from a completely new perspective. Perhaps the most memorable of these was reading Richard Dawkins’ The Selfish Gene and discovering the purpose of life.
I recently enjoyed a similar insightful experience reading Stephanie Kelton’s The Deficit Myth. Kelton, professor of economics and public policy at Stony Brook University, is a prominent intellectual and a leading advocate of Modern Monetary Theory (MMT). I usually struggle reading economics, truly the dismal science, often giving up after the first chapter, but The Deficit Myth is eminently readable.
If progressives need an economics that can break free of the neoliberal morass were stuck in, MMT may be it. Kelton demolishes the mantra of balanced budgets that was reinforced by Margaret Thatcher and Ronald Reagan back in the 1980s. The two conservative leaders loved to emphasize that governments should, like responsible householders or businesspeople, balance their budgets. They were right about householders and businesspeople, but dead wrong in comparing them to national governments.
Kelton emphasizes a simple fact—national governments can’t go broke. At least not if they control their own currency. They can always print more of the stuff. They are currency issuers, the rest of us—citizens, businesses and lower levels of government—are currency users.
This does not mean governments can spend all they want. They face the constraint of inflation. Inflation will devour an expanding money supply and leave the government spinning its financial wheels.
But according to MMT, for governments that have currency sovereignty, deficits and debts are irrelevant. They can always pay them off. The balance sought should be low employment against low inflation. Kelton discusses how the obsession with budget balancing results in the underuse of resources leading in turn to the economy falling short of its potential to serve the public good. She offers a variety of ways in which resources—including labour—could be maximized applying MMT principles.
Would it all work in practice? I’ll leave that discussion up to the economists, who debate such things fiercely. As a lay person, I have always wondered why societies consistently fail to achieve the potential their resources offer. This book explains why, and offers MMT as an answer. At the very least it deserves a champion from the political class.
I strongly recommend the book, or at least checking out Kelton’s blog, New Economic Perspectives.
And, oh yes, back to Dawkins and the purpose of life—the replication of genes.