In a conversation about "fiat money" recently, OEN writers expressed some confusion about the topic, and it is an important one, particularly relevant today. The question of "fiat money" or "sovereign currency" arises when we see unimaginable sums dumped on Wall Street institutions that then sit on it, leaving the rest of us heading for a worse crash than we've ever been through. When we ask that similar largesse be showered on people who really need it to survive, let alone buy another yacht or private jet or personal island, we're told there isn't enough money for that. This article touches on the absurdity of this cruel economic fiction.
Professor Richards is part of a group developing a concept called "Unbounded Organization," proposed by Gavin Andersson in South Africa, after Mandela was elected President. At the time, there were many NGOs working toward that goal, and they had been aligned and effective across disciplines and economic sectors. But after the goal was reached, they began to squabble over funding sources, and became secretive and isolated into stovepipes and silos. With Unbounded thinking and practice, organizations open up and welcome ideas and relationships in areas that might seem unrelated to their charters, with results that can seem miraculous.
Unbounded Organization, with Howard's economic theory of "Moral Realism," are presented here as interlocutors in a conversation with proponents of Modern Monetary Theory. The result is a fascinating insight into how money works, and new possibilities for an inclusive, caring system that doesn't leave (or force) anybody to or over the edge.
Professor Richards writes:
"A main point MMT (Modern Monetary Theory) makes is that more fiat money is not inflationary where there is unused capacity. This principle was used successfully when Felice Micheli was finance minister of Argentina in touch with Randall Wray. Here is an excerpt on this from ch 10 of our Economic Theory book."
An excerpt from "Economic Theory and Community Development" by Howard Richards with the assistance of Gavin Andersson -- forthcoming from Dignity Press
7. Remarks of Randall Wray, Senior Scholar, Levy Economics Institute
On February 7, 2019, Representative Alexandria Ocasio-Cortez of New York introduced in the House of Representatives Resolution 109, 'Recognizing the duty of the Federal Government to create a Green New Deal'. It demanded benefits Americans in the twenty-first century lack that Northwestern Europeans enjoyed back in the 1960s, and Americans seemed to be on track toward getting during the Roosevelt years. It demanded high wages, paid vacations, increasing life expectancy and universal access to high quality health care. Her Green New Deal put special emphasis on cleaning up pollution and reversing global warming. It called for net-zero greenhouse gas emissions by 2050.
'Green New Deal' has become a rallying cry in many countries, including South Africa. Two prominent European movements, T-DEM chaired by Thomas Piketty and DiEM25 chaired by Yanis Varoufakis, made detailed proposals that are also called Green New Deals. One of the authors of DiEM25, Ulf Clerwall, described it as 'basically an investment boom " And yes, the European Deal will be debt-financed, but by a debt to ourselves and that will rapidly pay back with a high rate of return in financial, economic, social and environmental terms.'
The Green New Deal of the Piketty group, similar but more tax-financed describes its funding as follows: 'This Budget, if the European Assembly so desires, will be financed by four major European taxes, the tangible markers of this European solidarity. These will apply to the profits of major firms, the top incomes (over 200,000 Euros per annum), the highest wealth owners (over 1 million Euros)" and carbon emissions.
Randall Wray, a leading exponent of Modern Money Theory, and an advocate of a realist definition of fiscal constraint, working with Yeva Nersisyan, a younger co-author with a bright future, has proposed a better way to pay for Green New Deals. We drop in for a chat with them at Wray's office at the Levy Institute of Bard College, located a hundred miles up the Hudson River from New York City. The words attributed to Wray and Nersisyan are paraphrases of what they write in their plan for funding the Green New Deal, working paper 931 of the Levy Institute, mostly from page one. Their conversation partners are unbounded organization and moral realism (UO and MR).
Wray and Nersisyan: We follow Keynes' method in his famous plan for paying for World War II. We propose that the Green New Deal can be paid for the same way.
UO and MR: For the most part, Keynes' approach was similar to the policies actually implemented. It worked. The Allies won the war. The way they paid for it did not set off runaway inflation either before the war or after it. Prima facie, therefore, following Keynes seems like a good idea.
Wray and Nersisyan: Like Keynes, we estimate the 'costs' of the Green New Deal in terms of real resource requirements. As Keynes estimated how many warships Britain could build with the workers, raw materials and machines available, we estimate how many doctors and hospital beds it would take to provide universal high-quality health care and how many trained workers with what tools and materials it would take to reverse global warming.
UO and MR: Why (in your article) do you put the word 'costs' in inverted commas?
Wray and Nersisyan: Instead of simply adding up estimates of the government spending that would be required, we assess resource availability that can be devoted to implementing Green New Deal projects. This includes mobilizing unutilized and underutilized resources, as well as shifting resources from current destructive and inefficient uses to Green New Deal projects. We put 'costs' in inverted commas because it is conventional to think first of money. It is conventional to think of natural resources and human resources as if their purposethat for which they are 'resources'were capital accumulation.
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