Paul Krugman, Modern Monetary Theory, and the faux left
Paul Krugman’s March 25th and 26th posts against ideas identified by many as Modern Monetary Theory (MMT) are a clear example of how the faux left, per a previous post, serves the system by stifling radical change.
MMT’s seemingly self evident assertion is that society’s productive potential is limited only by its technological capacity and natural environment. Self evident but very subversive. As we see from our deficit and austerity debates, limits having nothing to do with technology or the environment are incorporated into our standard discourse and are widely accepted. We need to accept austerity, we are told, not because we’ve exceeded productive capacity but because of the danger of government deficits. MMT argues, in contrast, that society has control over its currency and is not at all restricted by artificial notions like deficits. Technological capacity is a true limit but it’s absurd to claim deficits in themselves are a cause for concern.
Capitalism at its most basic level is the power of money and MMT goes right to the roots by claiming power should rest with society and not private wealth. MMT is as subversive to capitalism as socialism since it favors a radical transfer of power. It’s probably even more threatening than socialist ideas of public ownership since socialism is deeply blemished in the public mind from historical communism. MMT attacks capitalism in a less obviously confrontational way but the logical end point is a vast diminution of the power of money and something resembling socialism.
Economists of the faux left such as Krugman are bulwarks of the status-quo when they argue deficits are real limits. They deflect the common sense wisdom that the only true restrictions are technological and environmental and they naturalize the power of money over society. Their theories cannot be considered science – they are nothing more than a set of orthodox, fundamentally undemocratic political beliefs.
(I recommend following the many excellent comments to Krugman’s posts to see the extent of his simplifications. I’ve discussed the ideas of MMT in posts filed under the Monetary / Fiscal tab.)