Public Money for Public Purpose: Toward the End of Plutocracy and the Triumph of Democracy – Part VI

By Dan Kervick, a PhD in Philosophy and an active independent scholar specializing in the philosophy of David Hume who also does research in decision theory and analytic metaphysics. Cross posted from New Economics Perspectives.

I will conclude by proposing six social tasks for the rising generation – six challenging tasks whose successful pursuit will help us achieve a more just, equal and democratic society. It is my view that the resulting society will not only be fairer and more decent. It will also be more economically productive, and will better promote human happiness and flourishing by more effectively distributing the goods and services we produce. Most of us will be happier in such a society as well, because the practices of democratic equality do a better job satisfying the human desires for cooperation, solidarity, trust, stability and fellowship that are the foundation of the social life for which human beings are naturally framed.

Extreme laissez faire capitalism of the kind extolled off and on over the past two centuries, and increasingly preached by economists, financiers and conservative thinkers over the past four decades, is a perverse distortion of human nature, foisted upon us by cold and demented thinkers captivated by inhuman notions of efficiency and domination. In the end, it is a system that reduces each human being to an object whose value is nothing beyond what it is worth in the market. We need to restore a social balance, in which private property, entrepreneurialism and commercial activity do not dominate our lives and set all the rules for our existence, but function within a democratic social order framed by a politically coherent and effective commitment to the public good. In a democratic social order there exists an activist public sector controlling a substantial store of social goods, and channeling democratic energies and intelligence into the ambitious perfection of such goods.

The six proposed tasks are not intended to be in any way exhaustive. They all pertain to the economic sphere of life alone. But the realization of a genuinely democratic society will require efforts that transcend the economic sphere. We need to rejuvenate the democratic spirit in America, educate ourselves and our fellow citizens on the unfulfilled potentialities of democratic existence, recapture the salvageable institutions of our threatened but still existing democracy, and further expand the institutions and habits of democratic practice. There is much to be done, but the prospect of doing it is exciting.

Task One: Full Employment

The first task is to employ all of our people and end unemployment as we know it. We must commit our societies to the goal of full employment, and build an economic order in which a job is always provided by either a public or private sector enterprise for everyone willing and able to work. We must be willing to invest continually in human development in order to provide everyone with the skills and knowledge they need to contribute meaningful work to our productive activities, and participate meaningfully as fellow citizens in our democratic society.

Unemployment should not be regarded as some sort of inescapable curse visited upon us by the mysterious providence of the invisible hand and the hard tutelage of the business cycle. It is not an essential economic medicine or purgative that we are required to swallow for the sake of our long-term economic health. It is a social choice that we have made. And it is a bad social choice. Yes, private sector enterprises rise and fall, and their employment needs are constantly shifting. But we have it within our power to organize the public sector to absorb workers who have been released from their private sector employment, and employ them immediately in useful public enterprises. Then as private sector activity picks up and generates a demand for more workers, we can release public sector workers back into the private sector economy. Human needs and desires always far exceed our capacity to satisfy those needs and desires, and that means that there is always plenty of work to be done.

The system of persistent unemployment we have now is a bad social choice, but it is the social choice many plutocratic power-brokers prefer. So long as mercenary private wealth is permitted to call the shots in our economy, many of those at the top will find it preferable to dispose of unwanted human beings and their labor by jettisoning surplus workers from the active economy from time to time, just to put them on a low cost dole. The alternative – in which a democratic government is permitted to exercise its organizational power and pool social resources in order to employ the unemployed – is a threat to the power and wealth of plutocrats. By preserving a permanent pool of unemployed workers, the plutocracy ensures a permanent buyers’ market for labor, keeping wages down and worker bargaining power at a minimum. This allows the owners of private sector enterprises, working together with their most well-paid executive employees, to steer a greater portion of the revenues of the enterprise into the hands of the owners and top executives. A full employment economy, on the other hand, would restore bargaining power to workers, and permit those workers to retain a greater share of the firm’s revenues as wages.

The plutocracy also wishes to preserve the myth that if there is work that could be done, but that some private sector firm is not performing already, then it must be unprofitable work that is just not worth doing. But that’s an error. For one thing an immense amount of the goods in this world are owned by the public at large or by nobody at all. Private capital will be invested only when it can bring about improvements in someone’s private property, the property of those who are investing their own capital or investing capital they have borrowed from others. This usually generates a surplus that can then be sold on the market. That’s the only way the investor can profit from those improvements and productive processes, and that means that private capital has no interest in investing in those things from which no private individual or firm profits. But the public owns or draws value from a great many goods that lie outside this sphere of profitable private investment. It can add substantial, usable value to the world by organizing public investment in these goods.

Look around and ask whether or not there is valuable work to be done. Of course there is. There is always far more work to be done than there are people to do it. Human beings are mortal and limited, and when we succeed in achieving something new, that only frees us up to move on to something else that we were not able even to begin to address before. When we fail to employ ourselves in doing that work because of our ideological commitments to an existing system of private enterprise, we stupidly deprive ourselves of the productive efforts of many unemployed people who are willing to work. The existence of needless mass unemployment within the present system only shows that the existing system is incomplete and inefficient, and that it is not the full answer to the satisfaction of human needs.

Adam Smith, a much more moderate and reasonable man than is sometimes painted by the crazed disciples of laissez faire who have adopted Smith as their patron, also recognized that the system of private enterprise is not sufficient to satisfy all social needs. He recognized the need for public employment, because he recognized that there are ends we can pursue that, “though they may be in the highest degree advantageous to a great society, are, however, of such a nature that the profit could never repay the expense to any individual or small number of individuals.”

We always possess the capacity to do what we need to do in order to employ the unemployed. The monetary system should never stand in our way. Since the public’s money is only a tool, and since these monetary tools can be produced and wielded by a democratic society in whatever quantities are needed to pursue public purposes, it is absurd to argue one cannot afford to generate real value in the world because of a lack of money. As we create additional real value in the world, we can concurrently create the additional money we need to measure that additional value, to efficiently manage the entry of that added value into the existing economy, and to pay those who produced the additional value. Since the process adds new goods and services to the economy, rather than simply creating more money to chase existing goods and services, the additional money we bring into existence in this way does not exert significant inflationary pressures and destabilize prices.

Unemployment has tremendous social and individual costs. It leads to the loss of skills and capacity over time as a changing economy moves further and further ahead of the workers who have been jettisoned from it. These abandoned workers are then increasingly transformed into a burden on others. Unemployment also leads to psychological depression, shame and humiliation, and creates invidious social caste distinctions between the employed and the unemployed. Our current social practice of deferring all employment decisions to private sector entities, and permitting massive unemployment for long periods of time, is not just unnecessary. It is cruel, barbaric and stupid.

It is notable that during the current economic crisis, the national government in the United States decided early on to turn its attentions away from employment and toward the plutocratic agenda of public debt reduction. The government was willing to tolerate official unemployment standing between 9% and 10%. That, of course, is only the misleading official number. That this national policy direction of forced and recession-intensifying austerity was partly set by a Democratic administration, which rammed a deficit and debt reduction agenda down the throat of the national debate by appointing a “Deficit Reduction Commission” headed by committed conservative deficit hawks from both parties, is an indication of just how deeply both major national parties are now embroiled in the game of protecting the interests of the wealthy and neglecting the interests of tens of millions of desperate Americans.

So the young Americans who take on this first task of employing all of our people can expect to face a broad and bipartisan front of resistance from politicians in the employ of private corporations and financial interests. There are, to be sure, good people in government as well. But they are in the minority, and will need the kind of support that only a mass movement can provide.

Task Two: Public Investment in Our Future

The second task is actually an extension of the first task, and further develops the insight from Adam Smith quoted from the previous section. The private sector does a good job with the day-to-day management of, and innovation in, productive processes that make new goods and useful technologies and services available to markets. Entrepreneurs who want to develop these new products, or make old products in a better and more efficient way, can very often work out the means of creating a viable and sustainable business operation around their production, and can thus attract the private sector financing they need to build those businesses and market the products. We all benefit from much of this entrepreneurial creativity and industriousness. But we need to recognize that many of the larger scale investments a society needs to carry out in order to sustain progress and build prosperity do not just happen by themselves through the hubbub of entrepreneurial innovation. They often possess a scale, scope and degree of organizational thoughtfulness and planning that cannot or should not be carried out by private sector business enterprise.

Even if some of these major national-scale infrastructure projects can be carried out by private sector corporations commanding massive supplies of private capital, it might not always be a wise social decision to allow those corporations to assume those responsibilities. Note that what Smith said is that some highly advantageous social ends cannot be carried out in a way that brings profit to some small number of individuals. But of course, if we allow large oligopolistic private corporations to acquire ownership and control of everything that is important to us, then those corporations might be able to profit by investing in the satisfaction of large social needs. Yet any enterprise with the power and capital and political muscle to build, say, an entire national infrastructure for electric car use, or a national electrical grid or a system of mass education maintaining national standards, will possess too much power to place in corporate hands. Allowing such vast quantities of economic power to flow into oligopolistic or monopolistic corporations is likely to bestow on those corporations the power to dominate politically the democratic communities they have been chartered to serve.

Note that there is an inherent tension between the corporate form of organization and the organization of a democratic society. Corporate decision-making structures are indeed the very antithesis of democracy: They are hierarchical, secretive, and profoundly undemocratic command systems. It is arguable that we need to permit such institutions to exist on smaller scales. Or perhaps we don’t. But in any case, if hierarchical corporations as we know them must exist, limiting the degree and scope of corporate power is in itself an essential public purpose for a democracy.

Vigilant preservation of those limits requires that democratic communities at the national, state and local level deliberate in an open and rational way on the future shape of their communities and on their desired way of life. They should atempt to achieve a broad consensus on those desired forms of life, and then retain sufficient control over real decision-making power so that they can carry out the plans that will determine the long-term shape of their community’s future. Democratic communities must also seek to retain ownership of substantial amounts of public land and infrastructure within their communities. In the end, the world is governed by those who own it. Building a decent and just future requires substantial public command of resources and a commitment to democratically organized public investment of those resources.

But it is not enough to invest in physical infrastructure alone. We also need to invest in our people. We are still making do with an antiquated education system in which we devote a great many resources to educating our youth, but then leave our citizens on their own for the rest of their lives to provide for any desirable remaining education. We should consider the possibility that such a system is no longer viable in an era in which technological and intellectual changes are constant and rapid, and in which fewer people are employed in types of work that do not require the continual improvement of knowledge and knowledge-based skills. We should consider moving to a system in which people are given periodic paid furloughs from work, say every five years, to return to school for six months for additional publicly-delivered education. There is no reason at all that a public education needs to be pigeonholed as a purely K-12 system. 21st century people require educational services spread across the lifespan.

We need to reaffirm community responsibility for most forms of education. Although some forms of education might be of benefit only to the individual who receives the education, most forms of education benefit all of us directly or indirectly. A prosperous and enlightened democratic community will develop the talents and unexpressed capacities of its citizens, and distribute these human development costs widely. And the more equal our society becomes, the more those human development costs pay off for all of us. In a society organized to preserve broad social and economic equality, the benefits of higher education aren’t all poured into generating extravagant incomes for the privileged class of high earners who happen to have received that education, and who profit from it individually, but are directed back into the community as the educated contribute the value of their enhanced skills and knowledge to generally beneficial production and activity.

These enhanced education programs can be integrated with the full employment commitments discussed in the first task. For all of our people – at certain stages of their lives, at least – we should regard teaching or learning, or both, as that person’s job. There are many useful things we can pay the unemployed to do, but among those things are the jobs of teaching others the things that these unemployed people already know, and of learning something from someone else so that new knowledge can be brought back into the world of productive activity to create value that couldn’t have been created before. Those people for whom the private sector is not providing employment represent a large treasure trove of unutilized skill and knowledge. We need to create the institutional frameworks in which those skills can passed onto others, while new skills are acquired at the same time, and in which these citizen educators and learners are then able to draw an income to support their participation in this vital area of public investment.

In thinking about the needs for public investment in our physical infrastructure and our people, we should never allow ourselves to be overwhelmed and dazzled by the complex instrumentalities of money and monetary tools. The only thing that ever stands between our desires for the world we want and the realization of that world is the existence of real resources. If the resources exist, we can always create whatever additional monetary tools and financial instruments are needed to command those resources and organize their allocation. We can adjust our monetary policies to give democratic communities the monetary powers they need to better direct their communities’ resources into the channels in which they desire them to flow. And besides additional monetary policy tools, there remain the traditional tools of taxation. Private sector systems for distributing income are sometimes wasteful and crude in the aggregate, and do not adequately reflect social needs and values that are not manifested in the marketplace by purely self-seeking customers. To advance such values, the public sometimes needs to take surplus savings that exist in wasteful and unnecessary abundance on the monetary scorecards of the most fortunate individuals, and direct those savings toward public purposes. Critics sometimes claim redistributive taxation of this kind is a mere zero-sum shift of productive economic activity in one sector of the economy to productive activity in another sector. But that is not true. In some cases it is a positive net shift of idle low-productivity savings into highly productive activity.

Task Three: Public Stewardship of the Financial Sector

The third task is to reassert public authority over the financial sector of our economy. The late economist Hyman Minksy persuasively argued that financial instability is not just an anomalous blip of temporary dysfunction in generally stable and self-regulating financial markets. Rather, Minsky said, a tendency toward financial instability is inherent in the normal functioning of a capitalist economy. Periods of financial stability, in fact, lie at the roots of instability. Robust systems of finance naturally evolve into systems characterized by higher and higher degrees of risky, speculative lending, and ultimately higher degrees of what Minsky called “Ponzi lending”. Stability is itself destabilizing. Preventing instability therefore calls for regulation, since a system that is inherently prone to instability does not regulate itself.

Few people these days are in need of further convincing that financial professionals are not always the sober and steady managers of money and investment funds that their defenders sometimes like to present themselves as being, or that they effectively regulate themselves through the discipline of market forces. The US financial sector blew up a bubble of overleveraged and toxic debt based on liar loans and runaway home prices leading up to the crash of 2007 and 2008, a bubble inflated by a combination irrational exuberance, irresponsible management and outright fraud. The banks and shadow banks crashed our economy into the ground.

Human beings come in many varieties. But there will probably always be among us those who seek to steal, defraud, scam, swindle, manipulate, chisel, plunder and exploit. The quantitative mazes and fine print of financial transactions and contracts provide fertile ground for such activity. The financial world is full of very clever people who devise increasingly clever ways of inserting taps into our society’s massive flows of money and siphoning off some of the flow for themselves. It is essentially money for nothing, but it can generate huge short-term rewards for some of the lucky investors, and huge compensation packages and bonus for the clever engineers of the leaky ductwork of money streams. Sometimes the complex movements of money and value are so mathematically complicated that even relatively sophisticated people who have had millions and billions stolen from them can’t even say for sure if they have been robbed, or if they just made bad decisions in purchasing legitimate services. To imagine that these dens of greedy money pillagers can be self-regulating if left to their own devices, and that market competition generates all the information that is necessary to enable investors and savers to make prudent decisions with the funds for which they are responsible, is naïve in the extreme. And in a modern economy, we are all entangled in the maze of money. Even the most frugal, modest and cautious people are dependent on the behavior of the guild of financial engineers. So in the end, not only do the schemers and scammers exploit individuals. Their destabilizing pyramids of monetary liabilities collapse and destroy whole economies.

The University of Missouri, Kansas City economist and regulator William K. Black has commented on the “three dees” – deregulation, desupervision, and de facto decriminalization – that helped bring our financial system to the ground:

Deregulation occurs when one reduces, removes, or blocks rules or laws or authorizes entities to engage in new, unregulated activities. Desupervision occurs when the rules remain in place but they are not enforced or are enforced more ineffectively. De facto decriminalization means that enforcement of the criminal laws becomes uncommon in the relevant industries. These three regulatory concepts are often interrelated. The three “des” can produce intensely criminogenic environments that produce epidemics of accounting control fraud. In finance, the central task of financial regulators is to serve as the regulatory “cops on the beat.” When firms gain a competitive advantage by committing fraud, “private market discipline” becomes perverse and creates a “Gresham’s” dynamic that can cause unethical firms and officials to drive their honest competitors out of the marketplace. The combination of the three “des” was so criminogenic that it generated an unprecedented level of accounting control fraud, which in turn produced unprecedented levels of “echo” fraud epidemics. The combination drove the crisis in the U.S. and several other nations.

I will leave it to people like Black and other experienced financial sector sleuths and regulators to recommend the specific regulatory policies that are needed to bend the financial sector back toward the public purposes it is supposed to serve, and to make sure large and risky financial ventures are not allowed to escape the regulatory watchdogs – perhaps by moving into the “shadow banking” sector. But I do want to suggest one specific item. We should take a close look at creating public options for banking: not-for-profit, public savings and lending institutions that provide low-cost, low-risk alternatives to private sector banks, and that can be used when appropriate to administer and subsidize programs of local public investment through the targeted issuance of low interest loans – and perhaps sometimes even negative interest loans.

Task Four: Reorganize Monetary Policy

The topic of banking naturally leads us into the fourth task: the reorganization of monetary policy. Under our present system, a quasi-independent and weakly accountable central bank is supposed to be responsible for all aspects of monetary policy, while Congress and the Executive Branch handle the fiscal policy operations of taxing and spending. The system has been with us so long that it is difficult for many people to conceive of alternatives. But such alternatives can and should be considered.

The division between fiscal and monetary policy is actually somewhat artificial. It is an analytical distinction useful for understanding different dimensions of macroeconomic policy. But in practical terms it is difficult to separate fiscal operations from monetary operations, and the fact that they are institutionally separated in our current governmental framework keeps economic policy makers from acting in as coherent and efficient a manner as they could. The institutional separation between monetary and fiscal policy also creates needless confusion in the mind of the public, and manufactures pseudo-problems from the needlessly complicated manner in which Treasury spending is partially funded by Fed purchases of Treasury bonds through private intermediaries. This puts relatively meaningless debt on government books, leading to public fears of budget crises, bond vigilantes and insolvency. The austerity mongers, doomsayers and enemies of progressive government then call out this debt in their endless attempts to manipulate public fears and crush public sector activism. These prophets of public penury are contributors to the plutocratic effort to subordinate democratic governments to corporate rule.

We have already discussed how this situation can be changed. Fiscal policy need not rely to such a high degree on the issuance of debt to the private sector. Instead, we should enact monetary reforms that provide for the direct crediting of Treasury Department accounts by an amount to be determined each year, as economic conditions warrant and demand. We can expand deficits through purely monetary means when necessary. No added debt; no additional taxes – just money directly created by the sovereign monetary power of the United States government and the American people. But this is not a reform the Fed can enact on its own. Only Congress can legislate these changes. Activists need to take the case for monetary reform directly to Congress.

There are certain public purposes that are always best served by the public sector, no matter what else is happening in the economy. But there are other public needs which arise cyclically, and some which are entirely unpredictable. In a deep recession or depression, government needs to expand its spending dramatically. The most efficient and least confusing way to do this is through direct monetary operations: clean, unconfusing money creation without the complex dance of bond sales mediated by private sector dealers and auctions.

Elitists and ant-democratic central bank enthusiasts have usually argued that these kinds of reforms would put too much monetary policy power directly in the hands of a democratic rabble, and that reckless populist politicians wielding this kind of power would inevitably destroy our economy and spawn hyperinflationary chaos by succumbing over and over to the irresistible allure of free money. Bunk. These pessimistic warnings are only a stale replay of similar charges that have been levied against democratic government in generation after generation. Elitists and aristocrats in every era have always said that democracies can’t handle anything important: they can’t handle civilian control of the military; they can’t handle religious and political liberty; they can’t handle the selection of leaders; they can’t handle the legislation of laws; they can’t handle the writing of a budget and the management of public finances. They have always been wrong. Democratic countries around the world perform these tasks routinely, and the consequence of the rise of democratic government over the past century, and the defeat of aristocratic and authoritarian alternatives, has been a spectacular surge in global prosperity.

So now the question is the reform of monetary policy, and the elitists are wrong again. Decisions about the orderly creation, destruction and employment of the public’s money are no less amenable to routine democratic debate and thoughtful legislative decisions than are any other economic decisions carried out by a legislature. Despite the political ups and downs, democracies generally do a perfectly creditable job managing the public finances and the public treasury. Monetary policy is a matter of public policy and should be debated and carried out via the political process just like any other public policy in a democracy. We will surely make bad decisions from time to time, just as we do in other areas. But over the long run, democracy will do a much better job with monetary policy than do secretive central bankers, who answer mainly to the plutocratic elite, and who during a crisis quickly sacrifice the public interest to those elite interests.

Task Five: Promote Equality

The fifth task is to take significant and deliberate steps to promote equality of economic condition. Economic inequality rots the foundation of a democratic society.

For too long we have been told, or tried to tell ourselves, that democracy can coexist with profound inequalities in wealth and income, and that we can erect a wall of institutional structure that will protect democratic institutions from the encroachments of plutocrats. We have been told, or tried to tell ourselves, that even in a world in which a single wealthy person can buy more than can be purchased by a million of his poorer fellow citizens, that unpleasant fact does not keep us from adhering to a rigorous principle of one person, one vote. We have been told, or tried to tell ourselves, that even a society with gross inequalities in wealth can sustain a system of genuine equality of opportunity.

These are absurd and preposterously naïve views. And it is a real mystery how any significant number of mature and worldly people could ever have been induced to believe them.

The things in the world that we call “wealth” consist of all of those things that are produced either by nature or by human effort, that can be transferred from some persons to other persons, and that people desire to possess either individually or collectively. Wealth consists in the objects of human desire, and the value of these objects is measured in the end by the degree to which people desire them. Those who control wealth thus control the objects of desire; and those who control the objects of desire control people, since people are beings filled with desire. In other words, wealth equals power.

No system has ever been devised, or could be devised, in which a few participants in society are permitted to control most of the ultimate sources of human power, in far greater amounts than other people, but in which that privileged few does not succeed in exercising the power they possess to seek their preferred ends in the political sphere. Those who are permitted to own the lion’s share of wealth will always own the lion’s share of decision-making power. Since democracy consists in the equal distribution of decision-making power throughout the whole body of a self-governing people, no real democracy is possible in the presence of gross inequality of wealth. Inegalitarian democracy is a delusional doctrine; as unrealistic as the dream of a harmonious symphony orchestra consisting of 99 dog whistles and one tuba.

Similarly, no system can be devised in which people possess anything approaching a real equality of opportunity unless that system at least strives to create something approaching a real equality of condition. Opportunity in life depends on the resources with which one begins life. But inequalities of wealth and condition are passed on from one generation to the next, in one way or another, both among individuals and within communities. Unless we take steps to limit the grossly unequal accumulation of resources throughout a lifetime, we cannot prevent gross inequalities in the resources with which people in the next generation begin their lives.

There are many things we can do to promote a more equal society: We can restore income balance through redistributive taxation and much higher marginal tax rates; we can prevent those inequalities from arising in the first place by enacting maximum wage laws or wage ratio laws; we can restore the bargaining power of workers through a national full employment program and a revitalization of organized labor; we can reform corporate governance so that companies are chartered to exist primarily to provide incomes for the people who work and produce in them every day, not for the absent and invisible owners who do nothing but buy and sell pieces of those corporations; and we could reform inheritance laws to prevent inequalities arising in one generation from being propagated and multiplied in the next.

Task Six: Public Stewardship of the Environment and Our Common Wealth

The final task is to affirm and secure public stewardship over things of inestimable value that profit-seeking commercial enterprises are always threatening to ravage, exploit and destroy.

We have discussed a great many things that pertain to the goods we produce and exchange, the things of value that we make out of what already exists, and whose production and distribution is organized through the medium of money. But it is important to remember that the most supremely valuable things in life were made either by no living human being or by no human being at all, living or dead. The sublimities of the natural world; the beloved natural human habitants in which we make our homes and feel ourselves at home; the marvelous and diverse fellow creatures with whom we share our world; the ancient and powerful seas, mountains, forests and winds; and the innumerable products of human art, industry and intellect that have been passed down to us from earlier generations of earnest and optimistic human beings, and that are now the common inheritance of every one of us – these things comprise the all-too-frequently ignored foundation of value in a meaningful human existence. They usually cost us little or nothing to acquire; but the cost of destroying them is immeasurable.

The pursuit of the good requires not just the creative production of new forms of value from the resources we possess; but the preservation of those sources of great value that already exist. These springs of value speak to us and comfort us in voices that transcend the capacities of our very finite and predominantly instrumental everyday intelligence, and they are the ground that brings forth and nurtures all of the myriad objects of everyday use. These fundamental goods are as irreplaceable as they are beloved. Human commerce has contributed greatly to the improvement of our life on Earth. But the commercial life and its exigencies can also reduce us to a mean, blinkered and mercenary relationship with the things and beings that surround us. Commerce thoroughly unleashed, commerce that is not directed by wise and deliberate stewardship and foresight, can result in the thoughtless destruction of what is great in the manic production of what is merely transiently useful. The primordial goods belong to all of us, the great democratic community of humanity. Part of the task of democratic reform, then, must be to preserve for ourselves and our fellow citizens what is sublime and great. We must ensure the equal and sustained access for all human beings to the common inheritance of all human beings.

This is the sixth and final part of the essay. Previous installments are available here: One, Two, Three, Four, Five

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  1. jake chase

    It sounds like Lenin with a smiling face: give government even more economic power (because we know how to control politicians) and make everyone equally miserable. Why not break up monopolies, tax corporations on their total capitalization, end regulation of human beings, force banks to pay their own losses (and create ten or twenty thousand out of the nine that now control the Fed), end the income tax, dismantle the phony regulatory bureaucracy and let people see to their own welfare? Haven’t one hundred years of boondoggles, war, inflation, bubbles and crashes been enough for you?

    1. Ray Phenicie

      “tax corporations on their total capitalization, end regulation of human beings . . . . and let people see to their own welfare”
      You have just proven that you got nothing out of the previous five essays nor most likely have you read any of L. Randall Wray’s essays on MMT

      Taxing anyone is not needed unless the overall spending of the private sector needs to be pulled back.
      See to their own welfare? So the strongest would bullies and thugs could go back to running things they way the English upper classes did?

      Are there no prisons?” asked Scrooge.

      “Plenty of prisons,” said the gentleman, laying down the pen again.

      “And the Union workhouses?” demanded Scrooge. “Are they still in operation?”

      “They are. Still,” returned the gentleman, “I wish I could say they were not.”

      “The Treadmill and the Poor Law are in full vigour, then?” said Scrooge.

      “Both very busy, sir.”

      “Oh! I was afraid, from what you said at first, that something had occurred to stop them in their useful course,” said Scrooge. “I’m very glad to hear it.”

      1. Birch

        I think in the broader context of MMT, taxing corporations – and rents in general – is a method of wealth distribution rather than revenue generation. Inequality of wealth and income is pretty extreme these days; an effective method of re-distributing that wealth – as the Single Taxers would have it, for example – would be a wonderful thing.

        Pump money into main street and siphon it off wall street, to use the going phraseology and trickle-up theory.

        1. Ransome

          Extreme wealth disparity means system is broken and needs a repair, not a patch. Taxes tend to be patches. Of course there are multiple desired effects. Reasonable income spreads are fine but excessive wealth accumulation is the problem. Executive management model requires repair, since the entire model is broken; management by a team of outsiders with ultra short and conflicted worldviews. We no longer produce products, we produce revenue streams. This all reminds one of Brandeis, with bankers making a mess of everything. Now MBA’s and CEO’s think like investment bankers, economists think like investment bankers.

          What is interesting is that when you do a project, money is ascertained and the project tracked against milestones including expenditures. But 99% of the effort is managing the human resources to maximize effectiveness. You assign tasks based on capabilities and pick up loose ends yourself. But all the big picture people worry about is money, money, money, exclusively. “Maximizing shareholder value”, what a bunch of nonsense. Same as our economy, we waste 14 million workers’ output and skills. The idiots in Congress wail about the deficit. And they are supposed to be super-managers.

    2. Elizabeth Cook

      End regulations of human beings…like ending how regulations as to how they treat the environment? Like end the EPA? THis libertarian crap would lead us further down the road of environmental/economic disaster. We take the money out of politics, eliminate corporate personhood, end the wars and invest in our infrastructure and clean energy technology, in other words, summoning the collective will to do the right thing for ourselves and our world. Libertarianism is another form of me first, I got mine.

    3. Observer

      Lots of pretty general statements there. What does “end regulation of human beings” mean, exactly? And to which “phony bureaucracy” do you refer? Libertarians want to apply laissez faire to everything; not just economics. But if the current economic crisis has taught us anything, it’s that 30 years of laissez faire didn’t work as applied to economic policy, so why would it work as applied to anything else? It would be nice if the Libertarian notion that behavior needs no regulation were true, and if the Republican notion that a rising tide lifts all boats were also true. But ideals and reality are two different things.

      1. marcos

        It is not like nobody has been talking about this stuff from various perspectives for quite some time. This insight is useful, always important to democratize the knowledge.

        But now that we know, what are we going to do about it? Speaking the truth to power doesn’t tell them anything they don’t already know.

  2. Susan the other

    Thank you Mr. Kervick. This begins to fill the void for a policy paper. I like your tasks, one thru six and I like the consecutive nature of them as well. First things first – get people back to work. I also like your approach to the problems by solutions that do not totally disrupt what we have so far created as “civilized”. Your inclusion of William Black’s wisdom is gratifying. And most gratifying to me is your concern for the environment. It has been over 40 years of ongoing grief for me and many in my generation as we watched the environment become ever more devastated. No. THis is not Lenin. Lenin was such an ideologue he could never have written such a hopeful message.

    1. Dan Kervick

      Thanks for the moral support, Susan.

      It’s a long essay, but if you go back to Part One, you can see I began with the idea that there is a new hopeful spirit emerging. I’m trying to build on that and look forward with optimism, rather than just engage in more of the usual angry blogospheric railing and griping. The bitter circle of negativity is paralyzing, disempowering and self-perpetuating.

      There is a big new generation of young people who seem eager to step up and actually do something, and haven’t been ground down yet by political disappointment and failure.

      1. The Heretic

        An excellent group of essays Mr. Kervick. These works should be required reading for all persons concerned about government and finance. To the credit of the NC community, the blog comments and debates have also been enriching for me.

        Thank you Yves for selecting this excellent writter.

      2. jake chase

        Negativity apparently means pointing out that enabling politicians with rhetorical flourishes and grandiose phrase making is a recipe for more disasters. Negativity apparently means understanding why good intentions are always turned back upon the well meaning by special interest jujitsu. Negativity apparently means having a sense of history and how things actually work.

        Break up the monopolies and return the banking system to post Bretton Woods dimensions and Glass Steagall limitations. Tax the corporations on total capitalization and repeal the personal income tax. Repeal the drug laws. Reinstitute tariffs on the product of coolie labor. These are prescriptions which might actually help. In what way do you find them negative?

        1. Dan Kervick

          Nothing really negative in most of those proposals at all jake chase. But they are also a tall order filled with a lot of “good intentions”. And things like reinstating and enforcing Glass Steagall and shrinking the financial sector back to post WWII dimensions, for example, are calls for additional government regulation of a fairly extensive and aggressive kind.

          My view is that it is the deregulatory mania and contraction of the power of the public sector characterizing the neoliberal era of the past four decades is responsible for blowing up the bubble of debt, generating extreme income disparity and rotting out the foundations of what once was an actual American society. That rightward, market-loving movement finally culminated in the catastrophic collapse of 2008, put tens of millions of Americans out of work and poured a bucket of black paint over the hopes of the generation to come.

          I’m 52 now. I’ve already gone through one round in my life of listening to the beguiling songs of the laissez faire market fundamentalists, the government-haters and the crazy Ayn Randist and Rothbardian libertarians like Alan Greenspan tell us that the problem was too much government, and how we needed to “get the government off our backs” so that private enterprise would be freed up to build a more prosperous, innovative and secure future. It failed. Big time.

          But a whole new generation of libertarians are at it again. Faced with massive obvious evidence of the failure of poorly regulated free market capitalism, they are desperately trying to cook up rationales to support their theological belief that all of the evil is the fault of the “state”. Whether it’s the theory that the big bad government forced all those poor bankers to lend money to armies poor people, or the theory that the financial sector who work just fine if it weren’t for the evil machinations of the Fed standing behind it, I think it’s all been debunked and its all rot. The government devil didn’t make the greedy and anti-social capitalist freebooters do it. The scoundrels did it all by themselves.

          The new libertarian market-lovers remain totally naive about human nature, just like the Greenspans and other free market fundamentalists who came before them before them. They don’t understand that capitalist finance – all by itself – quickly turns into an out-of-control jungle of swindlers and exploiters unless you have a “state” backed by a vigilant democratic public ever ready to take the wood to them and keep them in line. Even the Democratic Obama administration is ready to sell us all out to the bankers now (read Bill Black’s piece posted here today) and give thousands of players in the massive control fraud which is Wall Street finance a walk. This is a lenient policy of tolerance for cowboy capitalism which will only make another round of fraud, bubbles, chaos and collapse 100 times more likely. We need more federal officials enforcing the laws and regulating these pirates. “But no!” the libertarians tell us, “No more government!” “Stop regulating people!” “Let us be free!”

          Never again with this stuff for me. The market fundamentalists already destroyed one fairly decent society in my lifetime, and I’m going to work pretty hard to make sure they don’t get the chance to destroy another one.

          Both parties are run now by private sector corporations and bankers controlling mountains of wealth. It’s time to put the American public and their old American democracy back in charge, and show the plutocrats and corporatocrats who’s the boss in this society.

          1. Anonymous Jones

            That comment was excellent. Not that I didn’t like your posts, but that was to the point, well argued and completely sensible.

          2. Ray Phenicie

            I have also found this series very exciting and it has motivated me to collect as much as I can about MMT so I can take it to other people and work with them to change our society. I believe every period of change in human history that has worked towards moving human society in a positive direction has started with people gathering together to talk and work through their ideas. Unfortunately power seekers and mongers too often try to take over and capitalize on the movement as has already happened with the OWS movement.

            No one segment of our society has a monopoly on working evil-just a general comment and I believe your essays point this out very carefully. Unfortunately some of the comments have gone off track into the deep end and take positive the potentials for demagoguery.

          3. wendy davis

            “Even the Democratic Obama administration is ready to sell us all out to the bankers now…”


            “The Democratic Obama administration is as committed as ever to selling us all out to the bankers now and making sure they will never be prosecuted for control fraud or any other sort of criminal financial activity. He’s not sure about the illegality of any of it, though he believes maybe, just maybe, some of it may have been immoral.”

            Fixed it a li’l bit, Dan.

            Pretty big deal for ya to be posting at New Economics Perspectives; a good group there, even though I don’t understand monetary policy, so MMT is another language to me.

            Congratulations on the series; I love it that the discussions are widening so much these days, and even Ron Paul has helped that, IMO. Public banking, employee-owned factories and other businesses…new sustainable energy sources and efficiencies; lots more stuff going on than we read about or hear about in the MSM.

          4. Ransome

            What has changed recently is the interaction between the political locusts and the government bureaucrats. Not long ago they stayed out of each others sandbox. The political locusts would descend on Washington, send earmarks home and poke each other in the eye, getting as little done as possible. Lately, especially with Bush Junior, the bureaucrats were invaded by political agents to make sure government stayed on message. With political parties flipping every few years, you end up with a situation akin to the chaos and dysfunction of constant mergers and reorganizations. The ways of the dysfunctional politicians spills into the guts of what is supposed to be efficient government. The government needs professional managers to manage the projects and the politicians need to move elsewhere. There are no successful companies modeled around Congress but I have worked at unsuccessful companies that resembled Congress.

      3. ebear

        >>There is a big new generation of young people who seem eager to step up and actually do something, and haven’t been ground down yet by political disappointment and failure.<<

        They'll get over it. We did.

  3. Hugh

    I would add single payer universal healthcare, reduction of our imperial military, and ending its wars. It should be that government should not only provide jobs, but jobs that pay a living wage. This and penalizing companies that export jobs to China would force private employers to compete for labor by raising wages. As you point out, unemployment, and weak unions, offshoring, and Fed policy I might add, work to keep wages low.

    It is again a mark of how successful the class war of the rich against us has been that any mention of the common good or social justice immediately elicits cries of Lenin and communism. It again shows how important it is that we unlearn everything that we learned and thought we knew during the last 35 years of history, politics, and economics.

  4. Bill G

    The easiest thing in the world is to be someone like Mr. Kervick. Commit to giving everyone everything with vacuous plaudits and no detail. Pay for it through confiscation of other people’s hard work, discipline, and prosperity. Sweet.

    1. F. Beard

      Pay for it through confiscation of other people’s hard work, discipline, and prosperity. Sweet. Bill G

      Most of which prosperity was financed with stolen purchasing power via loans from the government backed/enforced counterfeiting cartel, the banking system? Else how is it that we have hard working, disciplined poor people? Because they either chose not to borrow or were not considered as “credit-worthy”?

    2. joecostello

      Indeed, much better to have people’s hard work, discipline, and prosperity looted by a bunch of financial parasites!

  5. MontanaMaven

    Margaret Thatcher infamously said, “There is no alternative” to the Milton Friedman Flim Flam economics which was just feudalism renamed. But there are alternatives. Voices like yours, David Graeber’s and the OWS movement have opened up the discussion to those alternatives. We must relearn a lot because alternative voices have been sidelined by the MSM.

    Graeber says that we need to put the fashioning of humans and taking care of their needs as our first priority. The making of things for those humans is secondary. He says that money is just a promise to pay and that the promise to pay for the care of the elderly, the sick, and children takes precedent over the promise to pay a banker. He also said in a CNN interview

    But one thing I have noticed is that in periods dominated by virtual money, it becomes impossible to deny that money is just a promise, that it’s just a set of understandings we have with one another—and therefore, that you need some kind of watchdog institution in place to make sure things don’t get completely out of hand.

    Another cool thing he said in that interview:

    The most remarkable thing I discovered in my historical researches is that virtual money is nothing new. Actually, it’s the original form of money.
    Back in ancient Mesopotamia, people didn’t go to the bar or market with tiny bits of silver; they put things on the tab. Merchants used expense accounts. Commerce meant trust. What we now think of as cash, in contrast – gold and silver coinage, and with them, impersonal, cash markets – was basically invented much later, mostly to pay soldiers, and as a side-effect of military operations.
    If you look at the last five thousand years of history, what you find is an alternation of periods where money basically means credit, periods of mostly virtual money, and periods where it’s assumed to be a physical thing. It starts as credit.
    Then around the 7th century BC, you see, simultaneously in Greece, India, and China, the invention of coinage – and for maybe a thousand years after that, vast empires, with huge standing armies paid in cash, cash markets, where they’re among other things selling all the slaves conquered in the wars, most of whom end up working in the mines producing more gold and silver to pay the troops with.
    In the Middle Ages it all shifts back again – the great religions, which really started as anti-war movements, take over, the armies are disbanded, cash disappears, people go back to virtual money (both checks and paper money for instance were Medieval inventions.)
    Then, after 1492 it swings the other way, again – we’re back to gold and silver money, vast empires, slavery comes back (and some might argue its still here – if Plato or Aristotle were alive today I doubt they’d see much distinction between selling yourself and renting yourself, so they’d probably see most Americans as, effectively slaves). That’s the period of history that’s just ending now.
    This is epochal. Changes on this scale only happen once every 500 or even 1000 years.
    What will it mean? Well obviously it’s impossible to say for sure. And to a large degree it’s really up to us how it all turns out.

    It’s time for epochal change! Change we can believe in!

  6. craazyman

    There will be cynics who see this plan that Mr. Kerick has articulated as a Trojan horse for collectivist tyranny. They will see demonically possessed mobs, guillotines and gulags where Mr. Kerick sees gates of heaven. This concern is understandable and we have much empathy for such a state of hesitation. It almost make us reach for the Xanax when we contemplate the possibilities.

    But after the Xanax calms us down we see that this conclusion is an analytical error that fails to comprehend the nature of the Grand Inquisitor’s protean trickery.

    The Grand Inquisitor no longer arraings his forces into a singularity and reposes them in the Priest King Archetype, projecting a morphic field that ensnares the property-less and money-less in a delusion of divine obligation to obey his deceitful incarnation of the Pilot Wave. Instead, through his dramatic flair for impersonation and disguise he now reposes himself in the Promethean archetype, and creates the propertyless and moneyless victims among us as a consequence of his fraudlulent deification of the conquering hero.

    Mr. Kerick, we appreciate your noble efforts at Gnostic Wave promulgation. They are indeed more interesting and satisfying to us than the book we are currently reading on “Methods of Portfolio Attribution Analysis”, which we seem to search for any excuse to lay aside. Sadly, the internet gives us many such excuses.

    Mr. Mirowski has completely disappeared and we are now considering shopping for a donkey, perhaps on eBay. It will only be a matter of time before the women and wine of Spain our ours in a feast of the senses.

    We will ourselves vote for higher minimum wage laws and income limits and financial regulation, but it wil never get through congress, at least not today’s congress. Perhaps after the liberation.

    1. Dan Kervick

      I actually think my views are mostly a common sense and moderate versions of mainstream “social democracy” – a sensible combination of free markets and public guidance; civil liberty and social solidarity; private sector and public sector. For decades, people all over the developed world accepted some version of these mixed economy ideas. But America has drifted so fanatically into the direction of market fundamentalism, laissez faire, radical individualism and Social Darwinism during the last few decades that these formerly mainstream ideas now strike a lot of people as radical. Even democracy now seems dangerously radical to people captivated by the religion of unbridled personal liberty, unregulated market commerce and contempt for any notion of social obligation and social solidarity. Even people who are avowed disciples of a demented narcissistic psychopath like Ayn Rand are able to rise to positions of power within our government.

      1. craazyman

        It truly is amazing Dan. The wackos that rise to power and the rhetoric they rise on. Nobody would believe it if some storyteller fabricated it and then they made a horror film about it! When they show the old news reels you think “Shit, did that really happen?” It seems impossible.

        Then you see the morons on the TV now (if you have a TV) and you wonder how they manage to feed themselves, let alone make the kind of money they do.

        I don’t know quite how it happens, but I think it has something to do with DNA and the Dead Sea Scrolls, that is when it’s not just random fluctuations of thanatos.

        I don’t like those horse antidotes they’ve been running lately here. They make me nervous.

        1. craazyman

          I don’t take much care regarding my spelling but I see I mis-typed your name as Mr. Kerick. That was an inadvertent typo.

          I do appreciate your essays, Mr. Kervick, and respect the thought and effort and integrity behind them.

          1. Susan the other

            Craazyman: I’m beginning to appreciate your Quixotic quote about the women of Spain. Reminds me of that funny skit on Colbert with the faux investment advisor telling his clients to invest in “gold, women and sheep,” and he qualifies the investment in sheep by saying it is immoral to eat women, presumably because they have such a “good work ethic.” Gotta love it. I’m hoping this crazy feast is over.

      2. ebear

        >>Even people who are avowed disciples of a demented narcissistic psychopath like Ayn Rand are able to rise to positions of power within our government.<<

        The virulence of your attack puts the lie to any claim you have to common sense and moderation. Like yourself, Rand was simply an unconscious product of her environment. As for her influence, both followers and detractors assign far too much weight. Truth is, you have more in common with her than you think – offering unworkable schemes based solely on the power of your convictions, for a start.

        My experience is that people basically fit into one of two categories: Those who think they know better than I do what's best for ME, and that tiny minority of others who know better and will leave me the hell alone in return for same.

        From my perspective, you and Rand are both in the same camp.


      3. marcos

        “But America has drifted so fanatically into the direction of market fundamentalism, laissez faire, radical individualism and Social Darwinism during the last few decades that these formerly mainstream ideas now strike a lot of people as radical”

        America has not drifted, it has been pushed rightward, intentionally by determined interests to the point where Adam Smith is now radical in comparison.

        There has been a well organized and funded multi decade campaign to make this happen. Any challenge to those forces will require a similar level of organization and resources.

        I agree that the politics of the Cold War and second half of the 20th century are toxic and that the emerging Occupy movement should be insulated from the failed Democratic Party, labor, nonprofit and sectarian left political operators.

        Voting clearly does not work, if the Democrats could not make a go of it with 60 Senators and +60 in the House, we’re just not going to see anything near that good a hand dealt to us any time soon. We’re looking at ongoing mobilized grassroots organizing that gives electeds of all persuasions no choice but to do the bidding of the 99%.

        Occupy has been an exercise in a lot of people becoming comfortable comfortable and operating outside their comfort zones. Part of that is going to involve facility with direct action campaigns that slows the rate of increase of profitability in strategic sectors regularly.

        There will be risks because there will be pushback, the forces that organized to bring us here will not go quietly into the night, not after all of this work, not with all of that money and power at stake.

  7. joebhed

    Tasks 1 through 6 are uniquely achievable through a Bill currently before Congress, H.R. 2990 , albeit with a slightly differing monetary mechanism and priority than described here.

    Tasks 1, 2 , 5 and 6 are readily achievable just as they are presented.
    The goals of full employment, economic democracy, a sustainable environmental stewardship and public infrastructure investment are achievable readily through what the former President of the Center for Economic Stability (some 45 years before Steve Keen purloined the name) called “The Proper and Priority Use of the National Money Supply”.

    My Dad would be the first to recognize that the Kucinich Bill represents nothing less than his ‘proper and priority use’ monetary policy principle at work.

    Although my Dad was more often called a communist and a socialist by his banker friends, he was really more of a Friedmanite monetarist when it came to achieving our national social goals. He sought to achieve these goals by utilizing the money system as just what Lincoln described it – the supreme prerogative of any sovereign people’s government..

    My dad’s major difference from Friedman’s monetary economics was in the policy initiative to be used. Where Friedman sometimes called for direct money-creation by the government – yes, he did –(See his 1960 Program for Monetary Stability) he primarily advocated for using the interest rate mechanism as a policy tool. My Dad said if there’s enough money created, you can leave interest rates to the markets.

    So, we have tasks 3 and 4 that need redressing. As good as they are, as presented they remain the major stumbling block to achieving these other four goals.
    The gist of your reorganization of monetary policy is here in Task 4:
    “Instead, we should enact monetary reforms that provide for the direct crediting of Treasury Department accounts by an amount to be determined each year, as economic conditions warrant and demand. We can expand deficits through purely monetary means when necessary. No added debt; no additional taxes – just money directly created by the sovereign monetary power of the United States government and the American people. But this is not a reform the Fed can enact on its own. Only Congress can legislate these changes. Activists need to take the case for monetary reform directly to Congress.””

    Yes, yes, only an activist-moved Congress can enact such a reform. But why, pray tell, limit the ability of the government to meet these basic social needs listed above via a self-limiting mechanism that SHARES our monetary sovereignty RIGHTS with the private sector’s PRIVILEGE of fractional-reserve banking based money creation?

    That is an unnecessary, pro-cyclical private self-wealth generator that should be banished to the books of our failed economic history. Again, include the provision banning fractional-reserves contained in the Kucinich Bill, and your number 4 is home-free.

    Which brings us to Task Number 3, which would now become automatic.
    Once the moral hazard associated with fractional-reserve banking is removed from the private financial sector and we resort to a non-reserved, permanent money system long advocated by noted monetary economists, we can to a large degree forget about financial regulation.

    Of course we will need supervision just because we will have a financial system that is using nothing but real people’s real money. But the checks and balances need not include providing a public backstop like the FDIC that protects against bank failures and promotes risky lending by the immorality known as private profit and social loss.

    Adopt the Kucinich Bill, Dan, and you are home free.
    For the Money System Common.

    1. MontanaMaven

      Yes, it has worked before in the colonies before the Brits made them stop it. The trick is to spend money on what we really need and not things that blow people up. “The Lost Science of Money” is a great and very readable book by Stephen Zarlenga. We don’t need new theories, we’ve got history as a guide.

  8. psychohistorian


    Thanks for putting your thoughts out here for us to take pot shots at…..excuse me, be additive about.

    1. I agree with your belief that we should provide work for all who can/need to in an ever evolving mix of education, social/defense service, play, rest and work. I would expand your thoughts to add that the pressure on the American wage rate at the bottom is because of the globalization of low end labor combined with not enough jobs in world economy for all to have one in private sector.
    IMO, we need to take a big picture look at the continuum of each persons benefits, contribution and responsibilities to the society they live in through their life. This ties in with your thought which I agree with in your number 2 about investing in people.

    2. I agree with both your thrusts and think that this is area that maybe enough citizens could get behind to stand up as a group and say DO THIS!

    3. Of course, the benefits from any country’s fiat money system should accrue to the public, not our infamous puppet masters. It continues to amaze me that the public can be so brainwashed by the marketing and sales narratives the media pushes. Socialism for the rich is ok but not for the public….right.

    4. The fiscal/monetary conflation is the same as separating politics from economy. Obfuscation to cover for decisions being made behind the puppet master curtain.

    5. Nicely stated, even if no attention paid to the existing accumulated property situation reset needed going forward to re-establish the public coffers.

    6. I agree and it is short sighted decisions about the use of nuclear energy by those not feeling responsible for future generations that have given us Fukushima and other potential environmental nightmares like it.

  9. Dan Kervick

    I just want to take some time to offer a few thanks yous, and suggestions for further reading.

    First, thanks to everyone who took the time to read all six parts of this very long essay. When I started writing it about a month ago, I just planned to write a simple blog post. I never expected it would turn into such an extensive statement. Thanks also for the many comments – even the hostile ones, which make me think.

    Thanks to Yves Smith and the others who run this site for posting the essay. It really was more than I ever hoped that a blog with this visibility would devote so much of its valuable space to an unknown writer.

    Thanks to Stephanie Kelton, Mitch Green and the other folks at the New Economics Perspectives blog that is produced by the Economics Department at the University of Missouri Kansas City. Stephanie invited me to submit a post to the blog – a post which turned into the the monster you have been reading. But they ran it anyway! This essay has been running primarily at NEP this weeks, and was then picked up by Naked Capitalism. Mitch Green handles the daily technicalities of keeping the blog running. I’ve never been to UMKC, but it sure seems like a great place to study economics for those willing to venture just a bit outside the staid mainstream.

    For people who want to learn more about MMT, I would recommend three primary starting points. One is the New Economic Perspective blog I just mentioned. It’s located at They have been creating a free online textbook called Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems authored by L. Randall Wray. You’ll find the link in the left hand margin.

    Another primary source of MMT information is Warren Mosler’s blog The Center of the Universe, at Click on the Mandatory Readings link at the top of the page and you will find a treasure trove of key writings by various MMT authors. His short book, The Seven Deadly Innocent Frauds of Economic Policy is a great place to start.

    The third source is Bill Mitchell’s amazing Billy Blog at Mitchell is an extremely prolific blogger who who writes very long posts just about every day. Each one is like a book chapter unto itself, and he sprinkles each post with hyperlinks to all of his other posts. So start with any post and just follow the links on topics that strike your fancy. Mitchell is the Research Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the University of Newcastle, NSW Australia.

    Those three blogs contain links that will direct you to the other main MMT blogs. But if you’re googling, be sure to look up Cullen Roche’s Pragmatic Capitalism and Mike Norman Economics. There are also some amazing folks who produce mostly comments on blogs, sometimes anonymously, not blogs or papers themselves. If you are on an MMT blog be sure to search for any comments by beowulf.

    I want to emphasize that the political ideas in this essay are my own. They have been heavily influenced by my reading of the economic ideas of the MMT theorists, and I believe some of the MMT economists share a number of them, particularly the emphasis on full employment and financial sector reform and regulation. But I know that some of the main MMT figures would disagree with a lot of what I have proposed. MMT is primarily a school of Post-Keynesian economic thinking that offers a description of our existing fiat monetary system, and the policy options that are available given the way that system works. But which policies people then go on to advocate will always depend on a variety of factors and personal judgments that go beyond the descriptive and analytic framework provided by economic theory.

    Happy New Year everyone! Here’s hoping that 2012 will be a year of change and progress!

    1. Glenn Condell

      ‘Mitchell is the Research Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the University of Newcastle, NSW Australia.’

      Yes, and Steve Keen is at the Uni of Western Sydney, while Hudson, Wray, Kelton and Black are at UKMC. No slight on those institutions, which had the good sense to retain these sensible and far-seeing economists, but they are a long way from the citadel.

      That’s as it should be for an intellectual insurgency, but it would be nice to think, with Mankiw still promulgating falsehoods at Harvard, that the people who (a) get things right and (b) work toward a decent future for the majority of citizens might one day walk those halls, there to right wrongs and set some better agendas.

  10. ScottA


    You’re a really great writer.

    These are ideas which of course many of us are constantly thinking about and trying to talk about – but the occasions in history have been few and far between where someone manages to express these ideas in such inspiring terms.

    I will go back later and try to re-read your earlier installments where you delved into the complexities of how money is created – still a blind spot for me and probably for many others, as we have probably been propagandized so much in order for us not to be able to see how we could actually take control of this vital part of our world.

    – S

      1. JTFaraday

        It is interesting to me, that there is this bill in Congress, and yet we see nary a mention of it from the MMT fanboyz.

        Why is that, do you think?

        1. joebhed

          First, Bill Mitchell did a critique of the Kucinich Bill here:

          titled : A Full-Employment Bill – Sort Of.

          My reply to Bill’s post:

          But, as to WHY?….
          Hearken back to the day that Randy was writing his book.

          It was funded by Warren……..
          Whose only active role was to censor each chapter.
          I have no idea if it EVER came up because Randy always cites Innes’ definitions of money – the unit of account, always MUST be a debt/credit bookkeeping construct – but if their minds ever let the thought of debt-free money and full-reserve banking momentarily creep in, it could not have survived Warren’s oversight. For good reason.

          I love the MMTers as they advocate a somewhat radical break from traditional neo-liberal economics.
          They sometimes claim that they are ‘progressives’ politically.
          And I know Bill IS because I love his nouveau-reggae music.

          But they collectively are unable to take off their factionally-reserved blinders for an honest reading of the Kucinich Bill.
          They cannot even embrace the ‘currency and banking’ platform of the 1912 Progressives, who opposed the private central banking scheme of the Aldrich-Rockefellers.

          But, ultimately, they are some of the smartest kids in the room, and I always hope they will come around.
          When some Billionaire funds an economics department chair somewhere.
          At least some of them.

  11. SH

    Hi Dan:

    I don’t have time to read this essay, but I would like to share a good point I read today from Bastiat. The key point is public goods are not necessarily a complete waste

    This is the key sentence and it is the last one.

    “But the best way of combating and eradicating the abuses of taxation, is to steer clear of that exaggeration that would represent all taxation as being essentially and in itself, spoliation.”

    Bastiat is my favorite and he may have been the original blogger, but the point is, even in 1850, he knew what what was up which means we (stupid conserviatives like me or federalists) are not so original. In layman’s terms, to think that public goods are worthless is a critical mistake in any argument against public goods. The the quote…

    When a want assumes a character so universal and so uniform that one can describe it as a public want, it may be convenient for those people who form part of the same agglomeration (be it district, province, or country) to provide for the satisfaction of that want by collective action, or a collective delegation of power. In
    that case, they name functionaries whose duty it is to render to the community and distribute among them the service in question, and whose remuneration they provide for by a contribution that is, at least in principle, proportionate to the means of each
    member of the society.

    In reality, the primordial elements of the social economy are not necessarily impaired or set aside by this peculiar form of exchange—above all, when the consent of all parties is assumed. It still resolves itself into a transmission of efforts, a transmission of services. These functionaries labor to satisfy the wants of the taxpayers, and the taxpayers labor to satisfy the wants of the functionaries. The relative value of their reciprocal services is determined by a method that we shall have afterwards to examine; but the essential principles of the exchange,

    Those authors, then, are wrong who, influenced by their dislike of unjust and oppressive taxes, regard as lost all values devoted to the public service. This unqualified condemnation will not bear examination. In so far as loss or gain is concerned, the public service, scientifically considered, differs in nothing from private service. Whether I protect my field myself, or pay a man for protecting it, or pay the State for causing it to be protected, there is always a sacrifice with a corresponding benefit. In both ways, no doubt, I lose this amount of labor, but I gain security. It is not a loss, but an exchange.

    Will it be said that I give a material object, and receive in return a thing without body or form? This is just to fall back upon the erroneous theory of value. As long as we attribute value to matter, not to services, we must regard every public service as being without value, or lost. Afterwards, when we begin to shift about between what is true and what is false on the subject of value, we shift about between what is true and what is false on the
    subject of taxation.

    If taxation is not necessarily a loss, still less is it necessarily spoliation No doubt, in modern societies, spoliation by means of taxation is perpetrated on a great scale. We shall afterwards see that it is one of the most active of those causes which disturb the equivalence of services and the harmony of interests. But the best
    way of combating and eradicating the abuses of taxation, is to steer clear of that exaggeration that would represent all taxation as being essentially and in itself, spoliation.

    1. Dan Kervick

      To me, this just says that if a bunch of people want to buy the same thing, it will usually cost them less if they go in on it together. If four friends go to a pizza shop, it will cost them less to buy one large pizza and share it than it will cost them to buy two slices each at the counter.

    2. F. Beard

      “As long as we attribute value to matter, not to services, we must regard every public service as being without value, or lost.” Bastiat via SH

      So Bastiat was not a gold bug.

    3. Moneta

      So many people think government is useless not realizing how important socialism has been to our current way of life. Without capital sharing, we’d still be living in caves.

      When something works well, people don’t realize how important it is in the mechanism because it becomes invisible.

  12. Bernhard

    There is one thing missing. We need some garanteed basic income to realize a democratic political structure. If we want to keep freedom in our economic behavior it is important to finance it through some VAT (Value added tax)and not with income tax. The income tax make it more expensive to hire work, and helps forcing the substitution of human work with technology: creatinc more unemployment. To hire work must be cheaper in future!

  13. Wayne Gersen

    As an educational consultant with 29 years experience leading public schools I feel most qualified to comment on your second task…. you have a set of wonderful ideas but they aren’t going to be implemented any time soon for several reasons:
    1. Education is moving away from public control and toward corporate control. Poor performance on meaningless standardized tests is eroding support for public education and the highly regulated and unionized public schools are slowly being replaced by unregulated charter schools and on-line learning degree programs with low wage earning “educators” with no commitment to either their students or their institutions.
    2. The public still agrees with Ronald Reagan’s assertion that government is the problem… and your ideas for investing in the future require GOVERNMENT funding of “a failed system” (see #1, above)
    3. The public at large does not understand how unequal the current funding of schools is and how it currently contributes to the lack of equal opportunity. My fear is that even when they DO understand that reality, they do not support the redistribution of funds that is required to provide equal educational opportunity. Take a look at how many states are fighting lawsuits on this issue if you need evidence… my current State has resisted the provision of ample funding for decades.
    4. Higher taxes for education? Where are strapped states CUTTING? Colleges, community colleges, and K-12 education. Before we can begin funding NEW programs we need to reinstate the funds already lost and those soon-to-be-lost as the Congress shifts costs to States and local governments.
    5. Finally, a couple of questions regarding the notion that “…democratic communities at the national, state and local level deliberate in an open and rational way on the future shape of their communities and on their desired way of life… (and) attempt to achieve a broad consensus on those desired forms of life”
    ===>How have Obama’s efforts at deliberating in “an open and rational way” to achieve a “broad consensus” on worked for him?
    ===>What if the consensus achieved is “every man for himself”?
    ===>Who’s going to start this reasoned deliberation? When is anyone at the Federal level going to be honest about how, say, Medicaid cuts at the Federal level shift costs to the states? When is anyone at the State level going to say that cuts to education will require more taxes locally? It seems to me that until someone starts being honest we cannot have a rational conversation about any of these issues.

    1. Dan Kervick

      These are all good questions Wayne. But I just don’t think we are doomed to live forever in a perpetual conservative Zeitgeist, or that the recent trend toward selfishness and individualism will last forever. These things are cyclical. Americans have gone through eras before of civic and democratic activism, where they pulled together to accomplish great things and choose their future. They can do it again.

      It’s not a question of what powerful figure is going to start and lead the public discussion. It’s more a question of a building a mass popular movement that promotes and stimulates participatory democratic governance across the country, and makes energetic and engaged democratic government the norm.

      My feeling is that the OWS movement right now has a lot contrary internal tendencies pulling in opposite directions. But the core of the movement, as I see it, is the democratic mode of self-government itself. Ultimately they will build on the spontaneous surge in democratic decision making that the occupations practice, and develop it into a movement that revitalizes American democracy, and gives people the confidence once again to trust that they and their fellow citizens can break the backs of entrenched power, and once again commit to governance of, by and for the people. Once people realize they are the government, or at least have the potential to become the government, they will feel empowered. They will no longer say, “How can I get the government off my back?”, but will say, “Now that we ARE the government, what should we DO?”

  14. Moneta

    Before we had national currencies, we used barter and exchanged IOUs to effect trade. But we realized that barter was not always convenient and not everybody trusted those pieces of paper equally, so widely recognized currencies were created.

    However, to get more “trust” and a more easily tradable currency we gave away our individual money creation power to bankers and governement. Since they are not privy to all trades, they have devised their own IMPERFECT way of injecting money into the system, which is more often than not based on hard assets. But this system is highly unfair to new generations since all land and hard assets are already owned and there is no new continent to be colonized.

    Currently, the easiest way to move up the social ladder is to develop a skill that is desired by the owners of hard assets. And as wealth gets more and more concentrated, a larger number of people are being left out of the system.

    But there is no reason so many of these people should be left out. There needs to be a market that brings these people together. There are numerous services that could be exchanged without the need for dollars. Instead of having unemployed people staying at home depressed watching tv, they could at the very least be exchanging all kinds of favors (nursing, babysitting, landscaping, cleaning, etc.).

    Our current system is promoting underemployement. It favors materialism over relationships when at 7 billion we should be curbing our consumption of goods.

  15. Moneta

    Americans refuse to see that they have become the England the first immigrants left.

    Many are still clinging to the idea that they can still be part of the top 10%.

    Only when the vast majority finally understands it will never make it in the top bracket will we finally see some form of cooperation (i.e socialism).

    1. Moneta

      And in my mind, a well functioning government is impossible if a large segment of the population does not believe in it as it will do everything in its power to show that it does now work instead of making it work.

  16. Dan Duncan

    “Smells Like Teen Spirit”

    Today’s fallacy comes courtesy of Dan Kervick. It’s called the “Don’t Come as You Are” Fallacy.

    The “Don’t Come as You Are” Fallacy is actually an amalgamation of several other fallacies in the muddled mind of a confused and lost soul.

    The unfortunate result of those so afflicted is the contradictory nonsense of Kurt Cobain—but without the Cobain recognition and frustration with respect to his own confusion

    Subjecting one’s self to the work of an author in the throes of “Don’t Come as You Are” thinking, is like “spending an evening” with the triumvirate of Kenny G, John Tesh and Josh Grobin as they “interpret” Nirvana’s Nevermind in an Easy Listening Elevator Musical without a trace of irony.

    The distortions bundled together in today’s “Don’t Come as You Are” Fallacy include, but are not limited to:

    1. Overcompensation.

    Kervick is so strung out on Hume and the “is-ought” problem that he reactively rails against any sentiment that speaks of Nature. In fact, his reactance is so profound with respect to Hume’s Guillotine that he slices any connection with reality and jumps right into bed with the Moralistic Fallacy.

    2. Moralistic Fallacy.

    The moralistic fallacy is in essence the reverse of the naturalistic fallacy.

    Naturalistic fallacy presumes that what is—or what occurs—forms what ought to be. Thus the observed natural is reasoned a priori as moral.[1]

    Moralistic fallacy implies that the undesirable opposes nature. It presumes that what ought to be—something deemed preferable—corresponds with what is or naturally occurs. The asserted moral is reasoned a priori as natural.

    3. Nirvana Fallacy.

    The nirvana fallacy is the logical error of comparing actual things with unrealistic, idealized alternatives.

    By creating a false dichotomy that presents one option which is obviously advantageous—while at the same time being completely implausible—a person using the nirvana fallacy can attack any opposing idea because it is imperfect. The choice is not between real world solutions and utopia; it is, rather, a choice between one realistic possibility and another which is merely better.

    4. Marble-o Man Fallacy.

    Opposite of The Straw man Fallacy. But that doesn’t mean this isn’t also a fallacy.

    When Kervick writes, “We need to restore a social balance”…instead of creating a fictitious, but weak straw man to attack, he simply creates an illusion in marble…and worships accordingly.

    When has mankind ever had a “social balance”? “Restoring a social balance”…what planet are you living on?

    Using the word “restore” here allows Kervick to maintain the illusion that he isn’t perpetuating his pathological denial of Nature in pursuit of addressing Hume’s “is-ought” problem.

    And there you have it.

    So, the next time you’re in an elevator, tapping your foot to the Easy Listening Goodness, think of Kenny G covering Kurt C…

    And Don’t Come as YOU Are”….

  17. Aquifer

    Great essay, pretty much sums up what we need to do. OK, so lets get to work and do it …

    For me one of the important steps is to use the political process to help us get there. What that means is be/find folks who promote/support those aspirations and put us/them in positions where we/they can effect the changes that need to be made at the governmental level.

    One might think that would be common sense, but it seems to be treated as pie in the sky. We got to the moon (and back) folks, once we decided to go there, is this pie so hopelessly further away ….

  18. Joe Rebholz

    Dr Kervick, You have written a great essay clarifying many things for me especially the comparison between how the US present money system works and how it could work more cleanly and directly through MMT.

    I have been thinking and writing about unemployment and education and I very much like and agree with your proposals for eliminating unemployment — zero unemployment — and your proposals for indefinite education.

    One possibility would be to provide the unemployed with education of their choosing (it could be within the constraints of some kind of “useful” and “productive” knowledge, but I would be as loose as possible about that). This would be for those who were otherwise not ready for a government job. Education would be a job of last resort for everyone. Since education is a job society needs done (as you said), it should be paid for like any other job with a living wage.

    I appreciate your very clear argument that it is absurd to have so many people unemployed, most of them not doing anything productive, while our societies need so much to be done. This is a clear failure of our present systems.

    Very well done. Thank you very much.

  19. Jim

    Questions for Liberals and Social Democrats:

    What if no political analysis can be considered “concrete” without taking into consideration the nature of the modern American nation-state?

    What if such a discussion about the nation-state has been completely overwhelmed by an historical narrative discussed solely in terms of the unfolding of the capitalist system?

    What if, in addition to the unfolding of the capitalist system over the past 200 years, there has also been unfolding of a concentration of political power within the nation-state?

    What if we can’t move forward politically without looking carefully at the issue of downsizing the nation-state to units small enough to allow for direct democracy?

    What if the only viable government today is one that can be held accountable and that would only be possible if we reduce governing structures to a politically manageable size?

    What if our lack of clarity concerning means to guarantee effective decentralization and real local autonomy is partially responsible for the paralysis in political realignment?

    What if, without taking on both Big State and Big Capital, we are only left with a situation where “the people” end up approving or disapproving whatever preconstituted agenda is placed before them?

  20. Jim Sterling

    Never forget that if you approach full employment, the employers will call it “labor shortage”.

    Full employment is labor shortage, and is a good thing. Don’t let employers frame it as a problem.

  21. Glenn Condell

    Thanks Dan. Deep thinking, great writing. The subject is so huge and overwhelming, and most of us are so (a) time-poor and (b) lacking in your persistence, balance and intelligence, that hopes for something resembling a Grand Unified Theory, complete with solutions, seemed a bit romantic. Reading Yves and co, Steve Keen, John Robb and Michael Hudson plus watching Max K’s interviews has educated me to a degree but I have often been frustrated by the narrow focus concentrating on particular issues entails. You have certainly joined some more dots for me.

    I remember participating on a few blog threads a few years ago with you (Dem fo-po hackocracy vis a vis Israel in general, M Cohen in particular) and urging you to ‘get a blog’! Great to see you posting on the net’s best premier example.

  22. Joe Firestone (LetsGetitDone)

    Thanks Dan. This was a great end to a great series.

    I liked this very much.

    “Note that there is an inherent tension between the corporate form of organization and the organization of a democratic society. Corporate decision-making structures are indeed the very antithesis of democracy: They are hierarchical, secretive, and profoundly undemocratic command systems. It is arguable that we need to permit such institutions to exist on smaller scales. Or perhaps we don’t. But in any case, if hierarchical corporations as we know them must exist, limiting the degree and scope of corporate power is in itself an essential public purpose for a democracy.”

    I also liked the 6 tasks you called and the way you wrote about each of them. Only one caveat about the whole series. I expected a bit more in these last two parts beyond the economic. Especially, since all the changes you recommend can’t happen without political change first. With the failure of the “yes we can” man, we’re still left where we were 3 years and some months ago, looking for a political system that will make all the changes to the economic system you’ve pointed to and also the One Hugh cited — Medicare for All.

    So, no end to plutocracy and the oligarchy until we get that political change; and how are we going to do that with the oligarchy repressing us? We need a good answer to this question or all the MMT writing in the world, including my own, will be for nought. My own answer to this question is to develop a web-based platform that will enable people to create a meta-layer of politics beyond the system of current institutions that will influence, regulate, and impact that system by infusing it with self-organizing activity and distributed knowledge processing and problem solving, continuously.

    There’s an effort underway to develop a platform that people can use to create that political layer. The place holder for the platform that provides a lot of information about its guiding ideas is here: and an analysis of three other platforms and the reasons why they won’t produce that meta-layer is here:

    We can get rid of the oligarchy by creating a web platform that will enable the U.S. electorate to use the Internet to create a new 21st century form of self-government, that cannot be corrupted by special interests or political parties and politicians beholden to these interests. Such a platform must empower voters to bypass the current system and circumvent the institutions that have corrupted it. It must do this by enabling voters of all persuasions to build voter-controlled online voting blocs and electoral coalitions that can get control of all the vital processes that determine what the nation’s legislative priorities are, who runs for office, who gets elected, and what laws are enacted.

    The platform must facilitate these blocs and coalitions working together outside its boundaries, on the ground, prior to elections, to democratize political parties so that their supporters control them rather than special interests. The blocs and coalitions must be able to form alliances with democratically-run parties while supplanting all parties as the driving forces of U.S. Politics, by providing them with a self-organizing foundation of participation and activism that renews and reinvents democracy and regulates and contains the tendencies for oligarchies to form, little-by-little, every day. In this way, the iron law of oligarchy can finally be overcome and true democratic, self-government can be achieved.

  23. ScottS

    I was following this series with rapt attention, hoping the six suggestions would be transformative. Finally, someone who gets it, and is willing to take a stab at a new direction!

    I was devastated by item #1 — the job guarantee. Is it not obvious that we are dealing with a unique problem that economics and politics aren’t able to handle by their very definition? The increase of productivity has led to the post-scarcity of labor. Any new direction that doesn’t account for the fact that we don’t, in fact, need the 7 billion people we have to do the daily grind for their pittance.

    Capitalism has achieved the Star Trek future where people only need to work to entertain themselves. We just can’t make the jump to an equitable distribution model because of moralizing about “lazy moochers” and gold-standard thinking.

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