Zipriztin ekonomikoak (7)

(i) DTM-ko Mathew Forstater (eta Karl Marx)

TAXATION AND PRIMITIVE ACCUMULATION: THE CASE OF COLONIAL AFRICA1

The history of direct taxation in colonial capitalism also has some wider theoretical implications. It shows, for example, “that ‘monetization’ did not spring forth from barter; nor did it require ‘trust’ – as most stories about the origins of money claim” (…). In the colonial capitalist context, money was clearly a “creature of the state.

(ii) DTM, zer da berri? (1)

Bill Mitchell-en Modern Monetary Theory – what is new about it?2

(a) Paul Krugman-ek ez du ulertzen bankugitzazko transakzioak3

Paul Krugman-ez eta DTMz, ikus oharrean dauden linkak4.

(b) DTM-k analizatzen dituen lau arlo5

(iii) DTM, zer da berri? (2)

Bill Mitchell-en Modern Monetary Theory – what is new about it? – Part 2 (long)6

(c) Bi indargetzaile stock7

(d) Job guarantee edo lan bermea8

(e) Langabeziaren ondorioak9

(f) NAIRU10 delakoaren markoa: langabezia/inflazio erlazioa11

(g) DTM-ren markoa: enplegu osoa eta egonkortasuna12

(h) Randall Wray eta lan bermea13

(i) DTM eta inflazio/langabeziaren erlazioa14

Ondorioak:

(1) Lan bermea ez da soilik sektore publikorako enplegu-sormen bat15

(2) Lan bermeak egonkortasun makroekonomikoa hornitzen du16

(3) Phillips kurba deuseztatuta geratzen da17

(4) Langabezia/inflazioren arteko erlazioa desagertzen da18

Lan bermeaz, Mitchell-en garrantzi handiko lana!

Karitatezko ‘errenta banaketatik’ eta ‘errenta unibertsaletik’ oso urrun.

Gogoratu: Errenta unibertsala? Ez, lan unibertsala! eta Errenta unibertsala: noizean behin zapatak garbitu behar


3 Ingelesez: “Krugman seems to misunderstand the banking operations that occur when governments spend and issues debt. (…)

The only difference between the Treasury ‘borrowing from the central bank’ and issuing debt to the private sector is that the central bank has to use different operations to pursue its policy interest rate target.

A simple way of understanding this is that the funds used by the non-government sector to purchase the debt represented a part of its saving and was therefore not being spent anyway.

Further, the banks are able to create as much credit as they can find credit-worthy customers to hold irrespective of the operations that accompany government net spending.

All components of aggregate demand carry an inflation risk if they become excessive, which can only be defined in terms of the relation between spending and productive capacity. It is totally fallacious to think that private placement of public debt reduces the inflation risk.

5 Ingelesez: “The four areas we focus on here are:

1. The introduction of buffer stocks into a theory of inflation and the juxtaposition between employment guarantees and unemployment.(…)

2. The importance of the consolidation of the treasury and the central bank and the emphasis on banking arrangements. A thorough understanding of the way the banking system operates within the macroeconomic flow of funds has largely been ignored by mainstream macroeconomics and Post Keynesian economists.

MMT has provided new insights into the way these arrangements influence the impact of fiscal deficits on bank reserves and interest rates and the role played by the central bank.

(…)

3. The explication of the dynamics of fiscal deficits and public debt. We consider the difference between deficit doves, who consider fiscal deficits are appropriate under some conditions but should be balanced over some definable economic cycle, which we argue has been the standard Post Keynesian position, and the MMT approach to deficits, which considers the desirable deficit outcome at any point in time to be a function of the state of non-government spending and the utilisation of the productive capacity of the economy.

Fiscal rules in MMT are only meaningful if related to the state of non-government spending and the utilisation of the productive capacity of the economy. They are never meaningful if expressed as some target percentage of GDP or some balance over a cycle.

4. The importance of language and its relation to ideology. MMT authors have also incorporated developments from cognitive linguistics and social psychology into their work to emphasise the role that metaphors play in reinforcing perceptions.

While the MMT authors did not develop these understandings they were the first to apply them to macroeconmomics.

We contend that the extant mainstream and Post Keynesian Theory, despite protests to the contrary, have not considered these significant aspects of the fiat monetary system and, as such, MMT provides important new perspectives that should be incorporated into a unified macroeconomic theory.”

7 Ingelesez: “MMT and buffer stocks

While the previous discussion has highlighted that the Monetarists, Post Keynesians and even Marxists have developed theories of inflation that relate unemployment to price level changes in some way, MMT economists have introduced a new idea – the use of employment buffer stocks.

(…)

The two broad buffer stocks we will compare and contrast are:

  • Unemployment buffer stocks: Under a NAIRU regime, inflation is controlled using tight monetary and fiscal policy, which leads to a buffer stock of unemployment. This is a very costly and unreliable target for policy makers to pursue as a means for inflation proofing.

  • Employment buffer stocks: The government exploits the fiscal power embodied in a fiat-currency issuing national government to introduce full employment based on an employment buffer stock approach. The Job Guarantee (JG) model is an example of an employment buffer stock policy approach.”

8 Ingelesez: “Under a Job Guarantee, the inflation anchor is provided in the form of a fixed wage employment guarantee.

(…)

MMT argues that a superior use of the labour slack necessary to generate price stability is to implement an employment program for the otherwise unemployed as an activity floor in the real sector, which both anchors the general price level to the price of employed labour of this (currently unemployed) buffer and can produce useful output with positive supply side effects.

(…)

… the government offers a fixed wage (that is, a price) to anyone willing and able to work, and thereby lets market forces determine the total quantity of government spending that would be required to satisfy the demand for public sector jobs under the Job Guarantee.

Spending on a price rule provides the government with a superior inflation control mechanism. When the private sector is inflating, a tightening of fiscal and/or monetary policy can shifts workers into a fixed-wage Job Guarantee sector to achieve inflation stability without causing costly unemployment.”

9 Ingelesez: “It is well documented that sustained unemployment imposes significant economic, personal and social costs that include:

  • loss of current national output and income;

  • social exclusion and the loss of freedom;

  • skill loss;

  • psychological harm;

  • ill health and reduced life expectancy;

  • loss of motivation;

  • the undermining of human relations and family life;

  • racial and gender inequality; and

  • loss of social values and responsibility.

These costs are very large and are irretrievable. (…)

10 NAIRU: Non-accelerating inflation rate of unemployment.

11 Ingelesez: “The overwhelming quandary that the unemployment buffer stock approach to inflation control faces is whether the economy, once deflated by restrictive aggregate demand management, can be restarted without inflation.

If the underlying causes of the inflation are not addressed a demand expansion will merely reignite the tensions and a wage-price outbreak is likely. As a basis for policy the NAIRU approach is thus severely restrictive and provides no firm basis for full employment and price stability.

It success as an inflation anchor requires a chronic pool of high unemployment.”

12 Ingelesez: “MMT shows that the Job Guarantee – which operates a buffer stock of jobs to absorb workers who are unable to find employment in the private sector – is a superior alternative to the unemployment buffer stock approach.

The capacity to run a Job Guarantee follows from the unique characteristics that the government has as the issuer of the currency under monopoly conditions. This is core MMT doctrine.

While MMT clearly owes a legacy to the past influences (Marx through Lerner and beyond) it has also uniquely brought together the characteristics of the currency with the theoretical challenge to maintain macroeconomic efficiency, which for all time has been described in terms of full employment and price stability.

The introduction of employment buffer stocks (the Job Guarantee), while influenced by the earlier work by Benjamin Graham and the agricultural price support schemes common in Australia in the 1970s, is a significant new innovation in macroeconomics because it challenges the entire notion of a Phillips curve (trade-off or otherwise).

For a progressive agenda, it shows how an understanding of how the currency is, in fact a public monopoly, allows us to understand that the monopolist in this context (currency-issuing government) can always set the price to address the major constraints on activist fiscal policy posed by the NAIRU-NRH school.

In this way, the introduction of employment buffer stocks has directly challenged the dominant orthodoxy by proposing a way to achieve full employment with price stability.”

13 Ingelesez: “As Randy Wray noted in a 2011 Keynote Speech – MMT: A Doubly Retrospective Analysis – that the “buffer stock employment”:

analogy to commodities price stabilization schemes added an important component that was missing from Minsky: use full employment to stabilize prices. With that we turned the Phillips Curve on its head: unemployment and inflation do not represent a trade-off, rather, full employment and price stability go hand in hand.”

14 Ingelesez: In this way, the body of theoretical work now known as MMT directly and intrinsically addresses the major macroeconomic debate about the trade-off between inflation and unemployment in a way that no other macroeconomic approach (mainstream or Post Keynesian) had before.

And the way MMT does that is intrinsic to its theoretical framework and logically consistent with it. It is crucial to understand that notions of price stability all have some buffer stock underpinning them.

The theoretical offering that MMT provides is that if we are concerned about efficiency and price stability then there is a superior buffer stock available to a public currency issuing monopoly.

That is, if we really understand the way the currency works and the way the labour market works then we can have both full employment and price stability by using an employment buffer stock rather than an unemployed buffer stock.

One might still understand the capacities of a currency-issuing government yet dislike the idea of an employment buffer stock being used.

By integrating the Job Guarantee into their macroeconomic framework, MMT economists can show that it is far better to conduct fiscal policy by spending on a price rule. That is, the government just has to fix the price and ‘buy’ whatever is available at that price to ensure price stability.

The price the government fixes is the price it offers labour to enter the employment buffer stock.

So in a fiat monetary system, price stability is maximised using employment buffers rather than unemployment buffers.”

15 Ingelesez: “It should be noted that the Job Guarantee is not just a public sector job creation scheme. If it was just that then we would have no claim to novelty.”

16 Ingelesez: “The Job Guarantee in the body of work known as MMT provides a macroeconomic stability framework and avoids using unemployment as a means of achieving price stability.”

17 Ingelesez: “While the mainstream theory of inflation and the extant Post Keynesian approach has been constructed within the Phillips curve framework, where the debate centres on the existence (and the nature) or otherwise of the trade-off between inflation and unemployment, MMT departs significantly from either approach.

By constructing the understanding of inflation within a buffer stock theory, the promotion of employment buffer stocks, allows MMT to reduce the Phillips curve to a single dot or point within the unemployment-inflation space.

18 Ingelesez: “Through the use of employment buffer stocks, a government can maintain what MMT calls ‘loose’ full employment with price stability.

In other words, the trade-off between unemployment and inflation disappears.

That insight is a clear advance on the previous ways of dealing with the relationship between unemployment and inflation in the literature – mainstream or Post Keynesian.”

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