Yves here. This essay is a reminder that the supposed scarcity of spending power of America’s Federal government and other fiat currency issuers is being used as an excuse for cutting social programs as well as to justify privatization, “public/private partnerships” and other forms of looting by monied interests.
Bear in mind that Modern Monetary Theory does acknowledge, indeed, stresses the importance of real resource constraints. And tackling climate change is as thorny issue, since many supposedly “green” energy sources make use of decidedly dirty materials like rare earths. Moreover, building new facilities and equipment also has an energy cost. So radical conservation of energy use ought to be part of our future but does not appear to be happening (witness the failure to criminalize the use of Bitcoin and other cryptocurrencies for the profligate energy costs of mining them).
There is a lot more riding on our understanding of modern fiat money than we typically consider or discuss. Human society is now confronted with three epoch-defining challenges and, in each case, the understanding and strategic use of modern fiat money holds out the ONLY real possibility for constructively engaging the them.
The challenges are:
- Climate change & ecological collapse
- Assault on democracy
- Mass migration
In each case, the challenges are, first, aggravated, amplified, and intertwined by our ignorant, unimaginative clinging to the old rules and norms of “commodity” money. These old rules and norms tell us, basically, that money is (a) a finite resource that people must compete to have a share of; and (b) that a sovereign democracy must collect some portion of its citizens’ “finite” money-share (as taxes) for democracy to have money to spend for its collective goals and needs.
It is precisely because sovereign democracies cannot collect enough taxes that it appears climate change and ecological collapse cannot be addressed—the “cost” is simply too high for tax-dollars to cover. Worse, we are in a Catch-22 which demands that to increase tax-dollars collected, it is necessary to expand the business development that is the root cause of the climate change and ecological collapse we seek to correct.
It is precisely because progressive democracy continuously threatens to collect MORE taxes than the citizens are willing to pay (in order, for example, to ameliorate climate change and restore ecological habitats)—it is because of this that democracy, itself, must be challenged, threatened, held in check, to protect the pocketbooks of a wealthy class that loathes and fears, above all else, the taxation of their wealth.
It is the complex interaction of failing democracies, collapsing ecosystems, and the corrupt, profiteering, manipulation of the old “commodity” money-rules and norms, that drives failed states and mass migration—which, in turn, are rapidly giving rise to national bigotries and the marginalization of hundreds of millions of men, women, and children forced to flee from unlivable conditions while being provided no place to go.
In the case of each of these challenges, a constructive confrontation can only begin with a sweeping acknowledgement that the old “commodity” money-rules and norms are no longer applicable to our modern social economy—nor have they been for over half a century. Modern fiat money, we now understand, moves in a direction opposite the old mercantilist “commodity” money: instead of moving from the citizens to the democratic state—in the form of taxes—it moves from the democratic state to the citizens (and subsequently to the “mercantiles”) in the form of sovereign spending. And it is precisely this democratic sovereign spending, well considered and strategically directed, that can indeed:
- Begin to address climate change and ecological collapse—by paying citizens to design and build new zero-carbon infrastructures, technologies and habitat restorations;
- Quell the assault on Democracy, by eliminating the perception that democracy’s spending is to be paid for with citizen’s tax-dollars—and transforming the strategic understanding of what taxes, therefore, can and should be made to accomplish;
- Ameliorate mass-migration on two fronts: (a) by repairing the failed states and rescuing the collapsing local economies that are producing the migrations; (2) integrating what necessary migrants there are into the local social economies of their adopted locales—by paying them living wages to provide useful services to their local and regional communities, wherever they may be.
We can make excuses that it is simply the greed of profit-making global corporations which holds back efforts to address global warming–(largely true!); that it is profit-making business interest and the wealthy who want Democracy in their back pockets so they can control what it taxes and spends—(definitely true!); that it is authoritarian populism (whatever that might be) which creates failed states and mass-migration (sadly, a true statement as well). But the real, underlying reason these threats are now growing large and unmanageable is because we find ourselves unwilling, or afraid, to openly discuss—in the mainstream political conversation—the simple topic of what modern fiat money is, how it works, and what it can accomplish. So long as progressive leaders are allowed to back-pedal on this topic—to try, somehow, to go forward based on the old economics of “commodity” money—little progress can ever be made to address the Big Three challenges that are growing more formidable every day.