Monday, 30 September 2013

David Korten

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Longview, Washington
OccupationEconomist, professor, environmentalist, activist, and author
Alma materStanford University Graduate School of Business (MBA, PhD)
GenresLocalized economies, ecological economics, environmental economics, alternative energy, living economies, sustainability, climate change
Spouse(s)Frances Fisher Korten
David C. Korten (born 1937) is an American economist, author, and former Professor of the Harvard Business School, political activist, prominent critic of corporate globalization, and "by training and inclination a student of psychology and behavioral systems".[1] His best-known publication is When Corporations Rule the World (1995 and 2001). In 2011, he was named an Utne Reader visionary.[2]

Early life and career[edit source | edit]

David Korten was born in Longview, Washington in 1937 and is a 1955 graduate of Longview's R. A. Long High School. He received a Master of Business Administration and PhD from the Stanford University Graduate School of Business. He says: "My early career [after leaving Stanford in 1959] was devoted to setting up business schools in low-income countries - starting with Ethiopia". He served during the Vietnam War as a captain in the United States Air Force, undertaking US-based teaching and organizational duties;[1] and for 5½ years was a visiting professor in the Harvard Business School. While at Stanford in the 1950s, he married Frances Fisher Korten, with whom he now lives on Bainbridge Island near Seattle, Washington.

Career and main body of work[edit source | edit]

Korten served for five and a half years as a Visiting Associate Professor of the Harvard University's Graduate School of Business where he taught in Harvard's middle management, M.B.A. and doctoral programs.
He also served as the Harvard Business School adviser to the Nicaragua-based Central American Institute of Business Administration. He subsequently joined the staff of the Harvard Institute for International Development, where he headed a Ford Foundation-funded project to strengthen the organization and management of national family planning programs.
In the late 1970s, Korten moved to Southeast Asia, where he lived for nearly 15 years, serving as a Ford Foundation project specialist and, later, as Asia regional advisor on development management to the United States Agency for International Development (USAID), which involved him in regular travel between Pakistan, India, Bangladesh, Sri Lanka, Thailand, Indonesia, and the Philippines.[1]
Korten says he became disenchanted with the official aid system and devoted his last five years in Asia to "working with leaders of Asian non-governmental organizations on identifying the root causes of development failure in the region and building the capacity of civil society organizations to function as strategic catalysts of national- and global-level change".[1] He formed the view that the poverty, growing inequality, environmental devastation, and social disintegration he was observing in Asia was also being experienced in nearly every country in the world, including the United States and other "developed" countries. He also concluded that the United States was actively promoting—both at home and abroad—the very policies that were deepening the resulting global crisis.
He returned to the US in 1992 and has assisted in raising public consciousness of the political and institutional consequences of economic globalization and the expansion of corporate power at the expense of democracy, equity, and environmental protection.
Korten is co-founder and board chair of the Positive Futures Network which publishes the quarterly YES! Magazine. He is also a board member of the Business Alliance for Local Living Economies, an associate of the International Forum on Globalization,[3] and a member of the Club of Rome.

The Great Turning[edit source | edit]

Korten's 2006 book The Great Turning: From Empire to Earth Community argues that the development of empires about 5,000 years ago initiated unequal distribution of power and social benefits to a small portion of the population they controlled. He also argues that corporations are modern versions of empire, both being social organizations based on hierarchies, chauvinism, and domination through violence. The rise of powerful advanced technology combined with the control of corporate as well as nation based empires is described as becoming increasingly destructive to communities and the environment. The world is shown as about to face a perfect storm of converging crises including climate change, peak oil, and a financial crisis caused by an unbalanced economy. This will cause major changes to the current economic and social structure. These crises present an opportunity for significant changes that replace the paradigm of "Empire" with one of "Earth Community". Korten's "Earth Community" is based on sustainable, just, and caring communities which incorporate mutual responsibility and accountability.

Responses[edit source | edit]

Korten's collaborator, Joanna Macy, has praised the book, writing "Here is the book we’ve been waiting for. We are not doomed to domination and suicidal competition. We can choose another story. This is the ‘Great Turning."[4]
The Unitarian Universalists for a Just Economic Community, has adopted The Great Turning as a major focus.[5]

Bibliography[edit source | edit]

  • Planned Change in a Traditional Society: Psychological Problems of Modernization in Ethiopia, 1972, Praeger Publishers
  • People-Centered Development: Contributions Toward Theory and Planning Frameworks, with Rudi Klauss, 1984, Kumarian Press
  • Bureaucracy and the Poor: Closing the Gap, with Felipe B. Alfonso, 1985, Kumarian Press
  • Community Management: Asian Experience and Perspectives, 1986, Kumarian Press
  • Getting to the 21st Century: Voluntary Action and the Global Agenda, 1990, Kumarian Press
  • The Post Corporate World: Life After Capitalism, 2000, Berrett-Koehler Publishers
  • When Corporations Rule the World, 2001 (2nd edition), 1995 (1st edition), Berrett-Koehler Publishers
  • Alternatives to Economic Globalization: A Better World is Possible, 2004 (2nd edition)
  • The Great Turning: From Empire to Earth Community, 2007 (2nd edition), Berrett-Koehler Publishers, 2006 (1st edition), Kumarian Press, Bloomfield
  • Agenda for a New Economy: From Phantom Wealth to Real Wealth – A Declaration of Independence from Wall Street, 2010 (2nd edition), 2009 (1st edition), Berrett-Koehler Publishers
  • Globalizing Civil Society, 2010, ReadHowYouWant

See also[edit source | edit]

References[edit source | edit]

  1. ^ a b c d Biography on self-promotional website.
  2. ^ "David Korten: Money Changer". Utne Reader, November-December 2011. Retrieved 19 October 2011. 
  3. ^ International Forum on Globalization
  4. ^ [1]
  5. ^ Unitarian Universalists for a Just Economic Community - information on their Great Turning program

External links[edit source | edit]

Popular Resistence....

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Rather than disasters providing cover for the implementation of dangerous capitalist policies that lower wages and increase the wealth divide, the disasters being caused by these dangerous policies have woken the public and are leading to a more active and empowered people.
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n her book “Shock Doctrine: The Rise of Disaster Capitalism,” Naomi Klein explains how crises are used by governments to distract and frighten people so that unpopular and exploitative policies can be pushed through
It seems that now there is a different reaction disaster capitalism. Rather than disasters providing cover for the implementation of dangerous capitalist policies that lower wages and increase the wealth divide, the disasters being caused by these dangerous policies have woken the public and are leading to a more active and empowered people. People are taking initiative rather than waiting for leaders.
Nafeez Ahmed states, “People are really hungry actually for answers, hungry for solutions, hungry for alternatives, so really this is actually an unprecedented opportunity. It’s an unprecedented crisis but it’s also an opportunity to dream-weave and say ‘well actually everything is going to go to pot over the next 20-30 years if we don’t change, so here’s an opportunity to think outside the box.’”
Enough people appear to recognize that the political system is dysfunctional and does not serve the public’s needs or interests. We saw this recently with the President’s call for an attack on Syria. The public demanded that the President go to Congress, that there be an investigation into the facts and that the rule of law be followed.  The attack was averted.
Screen shot 2013-09-21 at 9.04.48 AMUS foreign policy is rarely attacked but stopping the war on Syria shows that something may be changing. General David Petraeus has been a target of people opposed to war. On the way to his first class the retired General and former CIA director was chased down the street by people calling him a war criminal and threatening to protest at every class he taught at CUNY.  Then he was protested at a fundraiser. The protests keep growing. This week, when veterans announced they would protest a luncheon in Los Angeles, Petraeus cancelled his appearance. This is a major change as it is rare to see a former general called a war criminal in the United States.
This week, we are being told that there is a budget crisis and that we must accept more cuts, more austerity measures. But many Americans understand that austerity actually causes more economic decline rather than recovery. In response, nurses and health care workers in 13 countries had a global day of action against austerity, cuts to healthcare and for a tax on stock transactions. And there have been some victories. This week in New York City, nurses won a series of battles in the courts and electoral arena that will keep community hospitals open.
We know that the economy is rigged so that the working class is subsidizing the richest, that our wealth is trickling up.  An analysis published this week found the average U.S. family subsidizes Big Business by $6,000 annually.  This is outrageous at a time when most Americans are struggling to survive.
NC-NEA DelegationInstead of accepting cuts and declining wages, workers are fighting back. We’ve been reporting on the striking Walmart and fast food workers. Now people are realizing that they are fighting for all of us. And, in North Carolina where teachers are not allowed to unionize or strike, there is talk of a teacher walk-out.
Labor unrest is building and big labor needs to change to catch-up to American workers anger. There is lots of criticism of big labor for its ties to the Democratic Party and cautious lack of activism, but there are some good signs in labor as well.  United Students Against Sweatshops which has been winning victories, is allying with the AFL-CIO.  Our hope is the students pull the AFL-CIO toward more activism.
People are seeing that the Democratic Party is behind the neo-liberal economic agenda.Democrats are joining the GOP to privatize and log national forests and cut education funding.  And the husband of Senator Feinstein is selling our commons, in this case publicly-owned Post Office buildings, to his friends cheap in order to line his family’s pockets with our commonwealth.
On the bright side, as people speak-up, mobilize and take action not only is there a growing movement but the power structure is being divided. Divisions are occurring in the Democratic Party where some are being pulled away from Obama’s pro-Wall Street, market-based policies that undermine the social infrastructure.
1tppworkersWe hope that trend will continue, especially with regard to the mother of all neo-liberal policies, the Trans-Pacific Partnership (TPP) that has been negotiated in secret for more than three years. This is a rigged corporate trade agreement (falsely called “free trade” for marketing purposes) that will do very little to get the economy going but will add to many of the mistaken market policies that hinder the economy and make it unfair. Astudy published by the Center for Economic and Policy Research made some amazing findings about the TPP: (1) the impact on economic growth will be almost nothing, only a .1% increase in the GDP, but (2) the impact on most Americans will be negative with 90% of workers seeing their wages decline.  The TPP will add to the decline of the middle class, race to the bottom in wages and continue the expansion of the wealth divide.
As it comes down to the wire – we expect a push by the President for Congress to grant him Fast Track (Trade Promotion Authority) so that he can sign it before Congressional review –resistance to the TPP is growing. In Maine, where the state House of Representatives unanimously passed a resolution opposing “Fast Track,” Rep. Sharon Anglin Treat sees the a broad, bi-partisan opposition developing. The OWS made the TPP a focus of its anniversary protest with Adam Weissman of Occupy Trade Justice describing it as the “anti-Occupy” agreement, “a 1% power grab.”
TPP Three bannersIn Washington, DC, a coalition of unions, environmentalists and Public Citizen organized a protest against the TPP on Friday, while lead negotiators were inside discussing the agreement. Over the weekend as part of a TPP Training organized by Flush The TPP  (which includes both authors), activists produced light projections on a federal building.  And, then on Monday, protests escalated as activists  scaled the US Trade Rep’s building and covered it with four massive banners in order to expose their secret negotiations, as captured in this video.  The Washington Post said the “guerrilla theater . . . demonstration could rank among the best ever.” On Tuesday the activists celebrated with a “Don’t Fast Track a Train Wreck” March that began at the White House went to the US Trade Rep, World Bank, US Chamber of Commerce, through the business district, and ended at Congress. You can see a video of the Fast Track train march at the end of this article summarizing the spectacle protests.
Opposition to the TPP is going to continue to grow as more of the secret agreement becomes public knowledge.  This week information about the impact of the TPP on two of the hottest environmental issues – hydro-fracking and tar sands – came out. The TPP could allow an end run by the oil and gas industry around local opposition to fracking and gas exports. And, the US Trade Rep, Mike Froman, is pushing less regulation of the already inadequately regulated tar sands industry.
As environmental justice activists realize the TPP could undo all of their good work to stop extreme energy extraction, they will join the effort to stop the TPP.  Already 75,000 have threatened civil disobedience if Obama approves the KXL pipeline, and they reiterated that threat in letters to President Obama this week.
Tar Sands Oklahoma protest 2Activism for environmental justice has been constantly building in recent years, especially this summer.  There were protests across the country in recent weeks. Here are a few examples to highlight some of the diverse tactics used:  a renewable energy barn was built in path of Keystone XL Pipeline in Nebraska, activists in Montana stopped a coal train,student artists, activists are aiming for fossil-free investment at Washington University. This is a global movement as can be seen from the protests in Russia with an extreme reaction from the Russian government and in Ecuador this week.
A strong environmental movement that is independent of the corporate political parties is critical to addressing climate change effectively. Naomi Klein is seeing divisions between the Big Green environmental groups and the grassroots environmental groups; indeed, she says the Big Greens may be more damaging than the climate deniers.  And, the corrupt linkage between some Green groups and the Democrats can be seen in the Blue Green Alliance that is giving the environmentally-damaging governor of California an award, at which there will be protests.  In fact, the Big Greens and the Democratic Party are critical parts of the power structure that keeps the status quo in place.  For the popular resistance movement to be successful we need to divide those groups and pull people from them into the movement.
Bold Nebraska Draw the line at Clean ENergy BarnThis video produced by the Post Carbon Institute explains why our current way of life cannot continue. Access to fossil fuels is declining and their extraction increasingly destructive. It requires us to change our way of living but this can be a positive transformation. The current crises are activating more of us and are forcing us to work together to create new solutions, such as the ones described by Gar Alperovitz in Ten things You Can Do to Democratize the Economy. In fact, it is already happening. Cooperatives employ more people than multinational corporations. People are taking up the challenge. It is time for the people to lead and create the kind of world we want to live in.

MMT Primer


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The posts from the MMT Primer series have been collected and organized into Randy’s latest book, Modern Money Theory. It makes for a much more coherent read and is highly recommended for anyone seriously interested in the MMT perspective. (Available from

Each Monday we will post a relatively short piece, gradually building toward a comprehensive theory of the way that money “works” in sovereign countries. We will then collect comments through Wednesday night, and will post a response to the comments on Thursday. The comments should be directly related to that week’s blog. Since we are trying to develop an understanding of Modern Monetary Theory (MMT), we especially encourage commentators to let us know where we have been unclear. Since we will be presenting the Primer over the course of the coming year, we will sometimes have to beg for patience—obviously we cannot present the entire theory all at once.
These blogs begin with the basics; no previous knowledge of MMT—or even of economics—is required. The blogs are sequential; each subsequent blog builds on previous blogs. The blogs will be at the level of theory, with only limited reference to specific cases, histories, and policies. That is intentional. A Primer should provide a general overview that can be adapted to specific national situations. The regular pages of NEP will continue to discuss current real world policy issues. The Primer will remain on a different plane.
  14. IOUs Denominated in the National Currency: Government and Private
  15. Clearing and the Pyramid of Liabilities
  16. The Unusual Case of Euroland
  17. Accounting for Real vs Financial (Nominal)
  18. Fiscal and Monetary Policy Operations in a Sovereign Nation
  19. The Effects of Sovereign Budget Deficits on Saving, Reserves and Interest Rates
  20. The Effects of Sovereign Budget Deficits on Saving, Reserves and Interest Rates, (continued)
  21. Government Budget Deficits and the “Two-Step” Process of Saving
  22. Reserves, Government Bond Sales, and Savings
  23. The Debate About Debt Limits (US Case)
  24. What if Foreigners Hold Government Bonds?
  25. Currency Solvency and the Special Case of the US
  26. Sovereign Currency and Government Policy in the Open Economy
  27. What About a Country that Adopts a Foreign Currency? Part One
  28. Government Spending with Self-Imposed Constraints
  29. What About a Country that Adopts a Foreign Currency? Part Two
MMT: A Doubly Retrospective Analysis
  1. What is Modern Monetary Theory?
  2. Functional Finance: Monetary and Fiscal Policy for Sovereign Currencies
  3. Milton’s Friedman’s Version of Functional Finance: A Proposal for Integration of Fiscal and Monetary Policy
  4. Functional Finance and Long Term Growth
  5. Functional Finance and Exchange Rate Regimes: The Twin Deficits Debate
  6. Functional Finance: A Conclusion
  7. What Government Ought to Do: An Introduction
  8. The Public Purpose
  9. MMT for Austrians
  10. MMT for Austrians II: Disagreements Among Reasonable People
  11. MMT for Austrians III: How Do YOU Propose We Deal With the Elderly, Disabled, and their Depts?
  12. MMT for Austrians IV: Is Description Without Theory, Ideology or Policy Desirable? Is it Even Possible?
  13. Introduction to the Job Guarantee or Employer of Last Resort
  14. Job Guarantee Basics: Design and Advantages
  15. Job Guarantee and Macro Stability
  16. The JG and Affordability Issues with Special Considerations for Developing Nations
  17. The Job Guarantee: Program Manageability
  18. The JG / ELR and Real World Experience
  19. Is the Job Guarantee Necessary?
  20. Should Growth Drive Jobs, or Jobs Drive Growth?
  21. MMT Without the JG? Conclusion
  22. The Efficiency Fairy and Inflation Goblins
  23. Conclusion: The Nature of Money

What is Modern Monetary Theory, or “MMT”?


By Dale Pierce
Modern Monetary Theory is a way of doing economics that incorporates a clear understanding of the way our present-day monetary system actually works – it emphasizes the frequently misunderstood dynamics of our so-called “fiat-money” economy. Most people are unnerved by the thought that money isn’t “backed” by anything anymore – backed by gold, for example. They’re afraid that this makes money a less reliable store of value. And, of course, it is perfectly true that a poorly managed monetary system, or one which is experiencing something like an oil-price shock, can also experience inflation. But people today simply don’t realize how much bigger a problem the opposite condition can be. Under the gold standard, and largely because of the gold standard, the capitalist world endured eight different deflationary slumps severe enough to be called “depressions.” Since the gold standard was abolished, there have been none – and, as we shall see, this is anything but coincidental.
The great virtue of modern, fiat money is that it can be managed flexibly enough to prevent *both* deflation and also any truly damaging level of inflation – that is, a situation where prices are rising faster than wages, or where both are rising so fast they distort a country’s internal or external markets. Without going into the details prematurely, there are technical reasons why a little bit of inflation is useful and normal. It discourages people from hoarding money and encourages healthy levels of consumption and investment. It promotes growth – provided that a country’s fiscal and monetary authorities manage it properly.
The trick is for the government to spend enough to ensure full employment, but not so much, or in such a way, as to cause shortages or bottlenecks in the real economy. These shortages and bottlenecks are the actual cause of most episodes of excessive inflation. If the mere existence of fiat monetary systems caused runaway inflation, the low, stable rates of consumer-price inflation we have seen over the past thirty-plus years would be pretty difficult to explain.
The essential insight of Modern Monetary Theory (or “MMT”) is that sovereign, currency-issuing countries are only constrained by real limits. They are not constrained, and cannot be constrained, by purely financial limits because, as issuers of their respective fiat-currencies, they can never “run out of money.” This doesn’t mean that governments can spend without limit, or overspend without causing inflation, or that government should spend any sum unwisely. What it emphatically does mean is that no such sovereign government can be forced to tolerate mass unemployment because of the state of its finances – no matter what that state happens to be.
Virtually all economic commentary and punditry today, whether in America, Europe or most other places, is based on ideas about the monetary system which are not merely confused – they are starkly and comprehensively counter-factual. This has led to a public discourse about things like budget deficits and Treasury debt which has become, without exaggeration, utterly detached from reality. Time and time again, these pundits declaim that hyperinflation is imminent, that interest rates are on the verge of an uncontrollable upward spike, and that the jig will be up for sure just as soon as the next T-bond auction fails. But even though, time after time, it is the pundits’ prognostications which fail, no one seems to take any notice. This must change. A reality-based economics is needed to make these things make sense again, and Modern Monetary Theory is here to put everyone on notice that a quite different jig is the one that’s really up.
The gold standard was finally and completely abolished over the course of a two-year period which started in 1971, when Richard Nixon ended the convertibility of the dollar for gold and devalued U.S. currency for the first time since the end of World War II. In 1973, the U.S. stopped trying to peg the dollar to any currency or commodity, instead allowing its value to be set on a freely-floating international currency market. The monetary system we inaugurated then is the one we still have now.
It is not the same as the one which has been adopted by most of Europe – and this very prominent source of confusion about the role of money in the world today will receive close scrutiny at the proper point. But first, we need to carefully unpack the implications of taking both gold and any sort of “peg” out of the monetary equation in the first place. In 1971, gold-linked money became fiat-money – not for the first time, of course, but for the first time in a long time. And it wasn’t just any currency. It was, by far, the world’s most important currency, economically. It was also the world’s reserve currency – the good-as-gold and backed-by-gold currency which the entire non-communist world used to settle transactions between various countries’ central banks. And yet, what everyone, and especially every American was told at the time was that it really wouldn’t make much difference. 
The political emphasis, at the time, was entirely on the importance of making sure that no one panicked. The officials of the Nixon administration acted like cops who had just roped off a fresh crime scene: “Just move right along, folks,” they kept intoning. “Nuthin’ to see here. Nuthin’, to see.” All of the experts and pundits said essentially the same thing – this was just a necessary technical adjustment that was only about complicated international banking rules. It wouldn’t affect domestic-economy transactions at all, or matter to anyone’s individual economic life. And so it didn’t – at least, not right away or in any way that got linked back to the event in later years. The world moved on, and Nixon’s action was mainly just remembered as a typical, high-handed Nixonian move – one which at least carried along with it the virtue of having pissed off the French.
But what had really happened was epoch-making and paradigm-shattering. It was also, for the rest of the 1970s, polymorphously destabilizing. Because no one had a plan for, or knew, what all of this was going to mean for the reserve currency status of the U.S. dollar. Certainly not Richard Nixon, who was by then embroiled in the early stages of the Watergate scandal. But no one else was in charge of this either. In the moment, other countries and their central banks followed Washington’s line. They wanted to forestall any kind of panic too. But, inevitably, as the real consequences of the new monetary regime kicked in, and as unforeseen and unintended knock-on effects began to be felt, this changed.
The world had a choice to make after the closing of the gold window, but even though it was a very important choice, with very high-stakes outcomes attached to it, there was no international mechanism for making it – it just had to emerge from the chaos. Either the U.S. dollar was going to  continue to be the world’s reserve currency or it wasn’t. If it wasn’t, the related but separate question of what to use instead would come to the fore. But, as things unfolded, no other choice could be imposed on the only economic powerhouse-nation, so all the other little nations eventually just had to work out ways to adjust to the new status quo.
Even after Euro-dollar chaos, oil market chaos, inflationary chaos, a ferocious multi-national property crash and a severe, double-dip American recession, the dollar continued to be the reserve currency. And it still wasn’t going to be either backed by gold or exchangeable at any fixed rate for anything else. But while the implications of this were enormous, almost no one understood them at the time, or ever, subsequently, figured them out. For the 1970s was the period during which Keynesianism was decertified as the reigning economic philosophy of the capitalist world – replaced by something which, at least initially, purported to have internalized and improved upon it. This too was a choice that wasn’t so much made as stumbled into. The chaotic, crisis-wracked world we now live in is the one which subsequent versions of this then-new economic perspective have helped to create.
Conventional, so-called “neo-classical” economics pays little or no attention to monetary dynamics, treating money as just a “veil” over the activity of utility-maximizing individual “agents”. And, as hard as this is for non-economists to believe, the models which these ‘mainstream’ economists make do not even try to account for money, banking or debt. This is one big reason why virtually all members of the economics profession failed to see the housing bubble and were then blind-sided by both the 2008 financial collapse and the grinding, on-going Eurozone crisis which has followed in its wake. And the current group-think among ‘mainstream’ economists is yet another case where failure is no obstacle to continued funding – or continued failure. The absence of any sort of professional, intellectual or academic accountability will be a theme here.
The public policy reversal that began with Margaret Thatcher and Ronald Reagan promised that the deregulation of capitalism would lead to greater shared prosperity for everyone. Today, even though the falsehood of this claim is brutally obvious, the same economic nostrums and stupidities that were used to justify it in the first place continue to be trotted out and paid homage to by a class of financial-media personalities who equate making a lot of money with understanding money. It does not seem to occur to them that financial criminals and practitioners of bank-fraud can get rich through sociopathy alone.
What needs to be said is this: Keynesian economics worked before, and the improved version – now generally called “post-Keynesian” – will work again, to deliver what the market-fundamentalism of the past three decades has patently and persistently failed to deliver *anywhere in the world*. Namely – a prosperity which is shared by everyone. The principal purpose of Modern Monetary Theory is to explain, in detail, why this this worked in the past and how it can be made to work again.
Here’s how: start with a 100% payroll tax cut for both workers and employers – one that will only expire (if it does at all) when we have achieved full employment. This will not de-fund Social Security. And yes, we’ll come back to this point and cover it in great detail in due course. But first, stop and think back on the effect which federal revenue-sharing had on the economy in 2009 and 2010. If you’re thinking there were fewer teachers, nurses, policemen and fire-fighters getting laid off, you are correct. If you’re thinking that more roads, dams, bridges and sewer systems were getting repaired, you’re right again. But if you think that adding 800 million dollars to the deficit over two years is a guaranteed way to generate hyper-inflation, double-digit interest rates and bond-auction failures, leading ultimately to a frenzied worldwide rush to dump dollar-denominated financial assets, well, now would be a good time to ask yourself why you believe this.
One more point – one more plank in this three-point program to restore fiscal and monetary sanity: let’s give everyone who wants to work and is able to work some *work to do*. A currency-issuing government can purchase anything that is for sale in its own currency, including the labor of every last unemployed person who is still looking for a job. So, a key policy recommendation of Modern Monetary Theory is the idea of a “Job Guarantee”. The federal government should take the initiative and organize a transitional-job program for people who just can’t find work in the private sector – as it currently exists in real-world America today. Because the smug one-liner that starts and ends with: “Government can’t create jobs – only the private sector can create jobs!” is about the un-funniest joke on the planet right now.
The government creates millions of jobs already. Isn’t soldiering a job? Isn’t flying the President around in Air Force One a job? What about all the doctors and nurses down at the V.A. hospital, and the day-care workers on military bases? They certainly all appear to be employed. When you go into a convenience store to buy some – uh – local-and-organic Brussels sprouts, say, how closely does the clerk examine the bills and coins you tender? Did any clerk or cashier ever squint or turn your five-dollar bill sideways and back and ask, “Hmm.. are you sure this money came from work that was performed in the private sector?” No. They didn’t. Because the money governments pay to public employees is exactly the same money everyone else gets paid in.
A guaranteed transition-job would need to be different from the familiar examples cited above in certain ways. It would be important to make sure that such a program always hired “from the bottom”, not from the top. That’s an important way of making sure that such programs don’t create real-resource bottlenecks by competing with the private sector for highly skilled or specialized labor. Hence, a transition-program job would more closely resemble an entry-level job at a defense plant. Such a job only exists because of Pentagon orders for fighter planes or helmets or dog food for the K-9 units. There is no sort of ambiguity about where the stuff is going or how it is being paid for. And when the people who mow the lawn or sweep the parking lot get paid, they know, without having to think about it, that their wages will spend exactly the same way down at the grocery store as everyone else’s.
Defence spending is actually quite a good analog to the idea of a transitional-job program – one that would provide work to any and every person who wanted it. The only time the American economy ever achieved an extended, years-long period with zero unemployment, low, well-controlled inflation rates and with no significant financial aftershock at the end was the World War II era – broadly defined to include the Lend-Lease buildup of 1940 and 1941. This solution to the problem of mass unemployment worked in the 1940s and it would work today. In the 1940s, of course,the jobs were almost all war-related. But, economically, this makes no difference.
The connection between war and economic prosperity has been noticed before. It led some 19th Century thinkers (and also Jimmy Carter) to wonder whether there could be a “moral equivalent of war”. Well, there can be – by way of the Job Guarantee. The biggest pre-condition has been met, because one result of most wars has been that they forced the combatant countries off the gold standard. Now, all countries have left it. What matters next is whether there are enough real resources available to produce goods and services that are equal in value to the government’s job-guarantee spending. If these resources are available – if they are not already being used to produce something else – then the increased demand that results from the payment of job-guarantee wages will not be inflationary, regardless of what they go to produce.  
Money is 100% fungible.  Whether the job-guarantee program makes fighter planes or wind turbines makes no economic difference – the workers employed by it will spend their wages on the same things other workers buy. What matters, economically, is whether there are sufficient real resources and labor available to produce these goods and services in line with the increased demand for them. If there are, no additional government intervention is necessary in order to mobilize them. The same private-profit motivation which induces a company to produce one widget can be relied upon to induce the production of another one.
Most popular misconceptions about job-guarantee work as inefficient “make-work” ignore these private-sector dynamics. It is simply assumed that if the publicly-funded workers don’t personally contribute to making shoes or soap, their wages will result in “more money chasing the same goods” – and that this will automatically cause inflation. This is an obvious fallacy which has been empirically falsified many, many times, but most people continue to treat it as an article of economic faith. So, one of MMT’s most pressing tasks today is to make the case that we can, indeed, end mass unemployment without undermining price stability.
There are many other economic problems and challenges in the world today. Modern Monetary Theory is not a panacea for them. Even if its insights and policy recommendations become widely known, and even if they are someday fully implemented, societies will still face challenges such as inequality, regulatory capture and predatory financial behavior, including the kind of predatory mortgage lending that led to the worldwide crash in 2008. In order to understand these additional economic problems and dangers, we need to look at economics in a larger context, and correctly situate Modern Monetary Theory within this wider frame.
Modern Monetary Theory is based on earlier work which also focused on the relationship between the state and its money – ideas which come under the generic designation of “Chartalism”. MMT also remains firmly within the Keynesian tradition of macroeconomnic theorizing, and recognizes an extensive interconnectedness with other economists whose work is categorized as “post-Keynesian”. Some of MMT’s other notable academic progenitors include Hyman Minsky, Abba Lerner and, more recently, the English economist Wynne Godley, whose emphasis on achieving consistency in the analysis of economic stocks and flows presaged the emphasis which MMT-orbit economists put on it today.
The label “Modern Monetary Theory” is not particularly apt. It became attached to its advocates through the informal agency of Internet comment-threading, not because anyone considered it either very useful or very descriptive. In other words, it “just stuck”. In fact, the identity of the first person to use the “MMT” label is lost to online history. So, to be clear, MMT is only modern in the broad sense in which virtually everything that got started in the Western world in the 19th Century is called “modern”. It is not exclusively monetary either – it has quite a bit to say about fiscal policy as well. And it was not, initially, theoretical – it started as a body of quite empirical observations about the dynamics of the monetary system and the many ways they are being misunderstood these days. For MMT has a dual pedigree which is itself quite remarkable.
On the one hand, it represents the patient, decades-long academic work of a cadre of perhaps eight or ten working economists (originally there were three or four, plus their students). But MMT was independently co-discovered by a single person. A person who had no specific training or academic background in economics at all – the American businessman and auto-racing enthusiast Warren Mosler. How he came to initially suspect and, ultimately, clearly understand that the spending of sovereign governments had become operationally independent of their taxing and borrowing is recounted in his 2010 book, “The Seven Deadly Innocent Frauds of Economic Policy.”  The 1996 publication of an earlier book of his, “Soft-Currency Economics,” launched MMT as a social, intellectual and online movement. And while the academic side of MMT was completely unknown to him at first, it was not long before the two camps discovered each other, and this has led to a very extensive collaboration in the years since.
Today, MMT is being discovered by a rapidly-growing worldwide Internet audience. And the public’s growing interest in MMT is evident in other ways as well. One of the movement’s leading spokespersons, Dr. Stephanie Kelton of the University of Missouri at Kansas City, has been a repeat guest on an MSNBC weekend show. She, and other MMT economists, are frequent guests on a number of popular, mostly-progressive radio programs as well – both in the U.S. and in English-speaking countries around the world. And Warren Mosler’s seminal 2010 book was recently published in Italian.
(For obvious reasons, the stressed and austerity-damaged countries of the Eurozone’s southern tier are places where people are becoming more open to fresh economic ideas. At a 3-day conference in Rimini, Italy in 2012, a panel of four MMT/post-Keynesian speakers lectured to a crowd of over 2,000 people in a packed sports arena. Many in the audience crossed multiple international borders to attend.) 

MMT has been mentioned, though not yet accurately described, in several of Paul Krugman’s columns for the New York Times. And certain aspects of it have been noticed even more widely in the media – for MMT is the theoretical basis of the “trillion-dollar coin” approach to fiscal cliffs. (The idea was first proposed and debated on Warren Mosler’s website.) In short, MMT is getting harder and harder to ignore. And since it really does have answers to some of the world’s most urgent and otherwise perplexing questions, it seems likely that MMT will soon become quite impossible to ignore. What follows is written to try to hasten that day.
This will be an intentionally simplified, non-technical exposition of the principal tenets of Modern Monetary Theory. The no-algebra version, in other words. It is intended as a guide for non-economists and other lay people who may have heard the phrase or seen a video clip about MMT and who wish to learn more. It is not a substitute for more complete and, necessarily, much more technical treatments that are available elsewhere, including the MMT Primer here at NEP.
Confining myself to examples and cases so widely known that no one will wonder where they came from accounts for the absence of footnotes in this. And since I make no claim to have learned knowledge of anything, I will just say, up front, that everything I know was thought of first by someone else. But rather than interrupt the narrative or complicate the process by trying to establish who said any particular thing first, I hope it is sufficient for me to just thank the MMT community at large for any material that I have borrowed or re-purposed along the way.
I also depart, here, from MMT’s mostly-neutral stance on contested political and ideological questions. For while MMT principles apply equally, irrespective of things like the size of government or the conceptions and misconceptions of people running governments, it has a policy bias no one can really miss.  I choose to emphasize rather than de-emphasize this bias – and I will sometimes even put it front-and-center. I hope no one will mistake this for any sort of rebuke toward those who choose not to do this. We have simply reached a point where practical applications need to be put on an equal footing with their theoretical underpinnings.
For somewhere – maybe somewhere in Italy – and on a day which may not be all that far off now, Modern Monetary Theory is going

The above comes from New Economic Perspectives

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