Paul Krugman and Modern Monetary Theory, yet again
It’s disappointing to see Paul Krugman continue in his refusal to honestly engage with MMT / Functional Finance.
But there’s a bigger issue here that Paul and some MMT’ers sometimes overlook. The reality of our political economy is that wealth is controlled by a fantastically small number of people. They control the means of production and they control the money supply (via the practice and ideology that society cannot spend unless it taxes or borrows from wealth). The MMT idea is fully correct, and obviously so, in my opinion – society doesn’t need to beg for funds from the wealthy in order to spend. But it’s correct in the same sense as saying that society doesn’t need to beg from the owners of the means of production in order to produce. Completely true, but for it to be true, capitalism will have been overthrown.
As long as we wish to continue in a system called capitalism, where only a few are in control of the prosperity of society, then those few must control both the means of production and the supply of money. MMT is, when you get down to it, a back door attack on capitalism and it wouldn’t at all be surprising to see the owners fight against it, perhaps even leading to the hyperinflation that Krugman claims to fear. Where Krugman misses the boat is in his implication that hyperinflation would arise from a calculus of neutral economic theory. That’s an absurdity – MMT is completely right in claiming that no sound economic theory predicts hyper-inflation when society is producing below its potential. But the power element is missing not just in Krugman’s views but in the MMT’ers as well who seem sometimes to overlook the fact they’re attacking the very roots of power in today’s society. That’s not necessarily wrong if the goal is to move economics to the left via academic scholarship but I can’t help but feel the lack of a deeper critique.
Nevertheless, in opposing MMT, Krugman is arguing in favor of oligarchy since there’s little alternative given the reality of modern capitalism. If our only option is to beg from the oligarchs, then we’re lost and we might as well be serfs. By defending the status quo in this most important area, Paul is aligning himself with a very long list of undistinguished apologists of an immoral socio-economic system. It’s what mainstream economists have done for almost two centuries now.