Situation Clarification B

 

So, we're in this anomalous situation where we're claiming one thing, but have another: "we're working systematically in the clear direction of the best efficiency" versus "our enterprises are phenomenally inefficient at providing their services" and never the twain shall meet. They are efficient, but in which ways? They're efficient at providing income for private owners and shareholders, perfect working for that model. They are inefficient, but in which ways? They're inefficient at providing for the public purpose, a bad result for that aspiration. So in effect the claims above are coming from different angles, and it therefore comes down to: which are we trying to do? Do we want an NHS, for example, which treats the public for its medical ills? If we assume that we do, why is the way we're undertaking that job so contributory to inefficiency? Do we want a rail system that gets the maximum amount of people where they need to go in an efficient manner, where the notion of maximisation needs to include the larger numbers of the less well off, and therefore pricing needs to be low to reflect that? Then why is there such fracturing of the system and unaffordable ticket-pricing? Each time we follow the principle of 'including the private sector will increase efficiency' we get inefficiency and far from maximised performance. And again, this is obvious to see. But somehow not seen. It's like we somehow need to blind ourselves to these simple facts. Some deep inner need means that we can't look these things in the face, just for what they are.

Working on the assumption that some of us can indeed see these things (if I can, then hopefully loads of other people can too), what is possible? What can we do, and how? This is where Modern Monetary Theory comes in. It says that the supply of funds for public purposes is not unlimited, but is far greater than currently imagined. The government, through its agencies like the Treasury and the Bank of England, can fund all sorts of public programs simply by creating the money necessary to do so. If one has been schooled in orthodox economics, an immediate warning light will go on. "But you can't just print any amount of money, because this flood of money will cause inflation: all the extra cash in people's pockets will find an equal and answering extra in prices, since we will be able to afford them, and pricers won't be blind to that." But Modern Monetary Theory answers this with: "to an extent this is true, but the extent is limited. Many of us have optimal levels of consumption without even knowing that we do. There's only a certain amount of anything that we want, or need. Inflation is calculated generally across all sectors, whereas, specifically, the greatest inflation can often occur in luxury items which are not the province of many, and will remain so even if we have extra money in our pockets. Also, all the spending for public projects is spread quite evenly among the workers who contribute, each worker getting a comparatively small boost, so big spending is not predicated - the inflationary effects are there, no doubt, but really reflective of how things currently already are in terms of extent." Basically, Modern Monetary Theory states that those price increases that there will be, will be minimal and perfectly 'digestible' by our economy. 

But the picture of hyperinflation that can be drawn by orthodox economics is that of the last stages of Weimar Germany i.e. people wandering around with wheelbarrows of 'useless' currency in order to try to buy loaves of bread. There is a practical example which illustrates this as an error: Japan. On the orthodox paradigm, Japan should have been a basket case forty years ago. It should indeed have collapsed into a Weimarian nightmare. They have consistently provided funds for public purposes in a large way - but this provisioning has not inaugurated a hell-period, in fact quite the opposite. They have remained remarkably stable as an economy. I'm sure there are subtleties in this story that I'm not including, associated with specificities of the Japanese situation, but I think the general takeaway is stunningly clear: spending money (and creating it to do so) is not inherently catastrophic in inflationary terms. 

In the few examples in history where inflation has occurred to a catastrophic level, rather than an ordinarily expectable one, there have been very specific reasons for it happening, not that of general public-purpose spending. These reasons are associated with limitations to resources - in Weimar's case, put simply, it was the phenomenal level of war reparations, and the destruction of productive capacity as a result of the First World War. It's important to look at those kinds of things in terms of their function as imperators of catastrophic inflation, particularly how rare they are. One, because their rarity should give the lie to the orthodox claim as applied to our non-rare circumstances, two, because they send a valuable lesson about how inflation at a catastrophic level really comes about, and it's not what orthodox economics says it is, and three, how the fear of these rare catastrophic circumstances is 'managed' by those who have skin in the game to dampen down responsible efforts at change for the better. The fear-claim is, after all, very 'useful'. The problem is that this dampening is spun as the responsible iteration - but the evidence out there in the real world proves the opposite.

And of course there are examples of the falseness of this narrative in our own situation. Note that spending on a suddenly arising need, like the pandemic, or perhaps a military conflict, is always passed through with strong intent, and quickly. "Well, we have to do that." But when spending on a similar level is mooted for something like the NHS or rail or education or....whatever it may be, up comes the objection that we can't do it, because too much spending will cause inflation. Even though, having spent what we have done on the pandemic and other 'critical' causes, we are still not wheeling out our barrows of currency to the supermarket. Make no bones about it, inflation has occurred, and has been occurring for all of our lives, at varying levels. But somehow the idea of the ordinary-level inflation that it is (not joyful at the moment, for sure), and always has been, is able to be co-opted so as to prevent spending on many things which would not particularly cause that scenario to change at all, and certainly not to catastrophic levels. This should make it clear that what we are dealing with is what is called a "straw-man" or "bugbear" - a falsehood designed to dampen us, to frighten us off from the territory.