By Lynn Parramore, Senior Research Analyst at the Institute for New Economic Thinking. Originally published at the Institute for New Economic Thinking website
A Nobel Prize-winning economist and the second-most-famous democratic socialist in America sit down together
New Yorkers crowded into historic Riverside Church on Monday evening where Anya Schiffrin of Columbia University’s School of International and Public Affairs joined New York’s 14th Congressional District candidate Alexandria Ocasio-Cortez and Columbia Business School Professor Joseph Stiglitz, who is Schiffrin’s spouse, to discuss the country’s political and economic trajectories.
The 28-year-old Ocasio-Cortez, a democratic socialist, recently sent shock waves through the Democratic Party when she snatched a primary victory from powerful incumbent Joe Crowley. Stiglitz, a Nobel Prize-winner and author of several books, including The Price of Inequality, has been sharply critical of policies that exacerbate the divide between the rich and the rest.
Ocasio-Cortez spoke of the frustration she had witnessed of working class Americans sliding into poverty. She criticized the Democratic Party for not being more responsive to the problem of economic inequality and observed that many “reluctant” Trump voters shared anger with her supporters over the country’s economic divide.
“There’s consensus that the rich are getting richer and poor are getting poorer,” she said. The candidate noted that the party and the people have been parting ways too often, observing, for example, that 70% of all Americans and 84% of Democrats currently support an improved and expanded Medicare for all.
“So why aren’t 84% of Democratic members of Congress cosponsoring this legislation right now?” asked Ocasio-Cortez. She also called upon the party to develop “a more comprehensive and intersectional argument for working people.”
Among the topics discussed were climate change and fate of Puerto Rico, which suffered devastation from Hurricane Maria in 2017. The candidate blasted politicians and financiers whom she said were trying to drive Puerto Ricans away so that they could turn the island into a resort, adding that what was needed instead was a “new Marshall Plan for Puerto Rico” and a future-based program of 100% renewable energy. (See Martin Guzman: “Puerto Rico is Getting Squeezed).”
The issue of racism threaded many of the evening’s discussions. Ocasio-Cortez accused President Trump of opening racial wounds in order to distract from “runaway income inequality.” During an exchange on Mexico, the candidate said that Trump had opened “Pandora’s Box” of racial tension. When Stiglitz asked for her view of the North American Free Trade Agreement (NAFTA), she did not mince words.
“We know that NAFTA really set up the slide of the Democratic Party for thirty years,” she said, faulting the policy for creating environmental imbalances and exacerbating economic inequality. “Gains of trade should be enjoyed by all workers who helped create those gains,” she insisted.
Both Stiglitz and Ocasio-Cortez emphasized that issues of race, the economy, and the environment were intertwined. The candidate cited Hurricane Katrina, which battered New Orleans in 2005, as “disaster capitalism at its finest.” She decried a situation in which a city was allowed to be ravaged by a storm, neglected in recovery, and its people left worse off than they were before. She criticized the Federal Emergency Management Agency (FEMA) for focusing on rebuilding what was there before the storm instead of looking for sustainable solutions and a “just transition” that focused on people’s needs and updating infrastructure.
On racial and economic justice, Stiglitz added, “Martin Luther King put it very strongly that those two are really two sides of the same coin.”
Schiffrin observed that programs like Medicare for all and free college tuition would not be possible in a world in which companies refuse to pay taxes. Stiglitz added that the Republicans’ 2017 tax bill, when fully implemented, would raise taxes on the majority of people in the middle class “to finance a tax cut for the corporations and the billionaires.” He said that the same people who resisted a stimulus in 2009-10, citing fears of the deficit, were now fine with adding trillions to the deficit to finance a tax cut for the rich.
Ocasio-Cortez, calling the tax bill a “wealth transfer” from working people to the very rich, asked why it is that this type of transfer was “business as usual” when any wealth transfer in the reverse would be deemed inconceivable.
Stiglitz touched upon the problem of student debt, noting that it has ballooned to one-and-a-half trillion dollars. “What’s striking over the last five to ten years,” he said, “is that there has been almost no new lending. It’s mostly just compound interest” on the debt that had already accumulated. Ocasio-Cortez expressed outrage that “an entire generation was delaying the milestones of getting a house, getting married, or buying a car” and that student debt was having “a profound dragging effect on economic activity.”
Stiglitz emphasized that other countries with fewer resources were able to give young people greater access to education, noting such investment was a matter of choice. “It’s not that we can’t afford it,” he said. “We’ve been making some very bad choices which are putting into jeopardy our future economy and the wellbeing of large portions of our country.”
When asked about what she could do in Congress to address the problems discussed, Ocasio-Cortez observed that much depended on the outcome of the midterm elections and the future composition of the House and Senate. But solutions, she noted, had to come from the “mass mobilization of organizing.” Women in Congress, she noted, were not leading the MeToo movement, but rather acting as part of it in response to the mobilization and protesting of constituents. That why people needed to stay, as she put it, “loud and active.”
Stiglitz pointed out that the types of candidates both parties were supporting in the midterms would set the stage for 2020. Ocasio-Cortez agreed, noting the importance of Democrats having messages that energize people and drive them to organize, much as Republicans had learned to do. “We need to be unafraid to take strong moral stances,” she said.
“If we don’t find a way to win against this administration? I mean, come on!” said Ocasio-Cortez. “This should be a slam-dunk, and we don’t have to be afraid of alienating people with morally reprehensible views.”
Schiffrin, noting that the Upper West Side, where the event was held, had been a bastion of American socialism, asked the candidate if she considered it a “moral choice” to be a socialist.
Ocasio-Cortez responded by stating her commitment to “acknowledge the world as it is but to fight for it as it should be.” “A moral economy is one in which a nation that is exceedingly wealthy can work towards the economic dignity of all people,” she said.
On an evening in which news of Judge Brett Kavanaugh, President Trump’s nominee for the Supreme Court, had flooded the headlines, Schiffrin asked the candidate to weigh in on this topic and the position of women in the country. Ocasio-Cortez said the situation with Kavanaugh had been “retraumatizing” for women. She called the MeToo movement an “awakening” because women were able to recognize behavior as abusive that had long been normalized. She described the actions of Senate Republicans who had sought to speed up Kavanaugh’s confirmation after learning of accusations against him as “unforgivable” and wondered at a party that “has a harder time nominating women than people accused of sexual assault. “
Stiglitz closed out the discussion asking Ocasio-Cortez to comment on how women were currently impacting the political scene. The rage of women, she said, had been concentrated in the political process and noted, to thunderous applause, that 256 women have been nominated for the House and Senate in 2018.
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“We need to be unafraid to take strong moral stances,” she said.
But nothing mentioned about our massively costly military misadventures? These “intersect” with many of the issues discussed.
I fear that Ms Ocasio-Cortez will be easy pickings for the folks who behave as though climate change can be stalled or even reversed by simply building wind and solar farms wherever one can find a place for them and to get everyone in an electric car. She will become an advocate (hope I’m wrong here) for the ongoing industrialization of rural America… fracking, hog and chicken farms right in the midst of communities, destructive wind farms and whatever else that may return a few dollars while trashing out the planet while claiming to be saving it.
And this at a time when even the dimmest intellect can grasp that the shore-lines of US America are becoming unlivable and folks are going to be forced to move. Even if some attempt to stick it out the eroding tax base will add yet another obstacle for that tactic.
A more sensible thing to advocate for would be to order that for the next five years the US military – every branch- reduce the volume of fossil fuels by 5%/year. Also, asking all professional and college sports teams to reduce their travel to play games anywhere in the US ( the pros are even flying two teams to places like the UK and Mexico to play games). And while we’re at it, how about doing something to curtail those floating feed-stalls ( otherwise known as cruise ships); who knows how much waste is dumped in the ocean and how much fossil fuel is needed to get those glorified garbage scows on the move.
Can you cite a basis for your fears?
Sure. Take a look at these sources:
https://tamino.wordpress.com/2018/08/24/global-warming-how-long-do-we-have-left/
Above is a recent post, but the entire blog has lots of info.
Here’s another site by folks who identify themselves as working climate scientist
http://www.realclimate.org/index.php/archives/2004/12/about/
And the overall blog is replete with good info.
This links to a discussion of a recent NY Times article:
http://www.realclimate.org/index.php/archives/2018/08/musing-about-losing-earth/
This link is to the Climate Change page on The Guardian:
https://www.theguardian.com/environment/climate-change
I think hemeantwell was asking about your fears re AOC…
I think he meant your fear re: AOC’s eventual climate betrayal.
Ah! Big concern is that I’m 75 and she’s about 28 or so. She is an extraordinary person and my fears may be unfounded, but casting back to those days in my life I see someone not nearly as neat as they thought themselves to be at that time. It’s very hard to not succumb to the seductions of well financed lobbyist with a polished presentation. And if she does win in November she’ll be worked pretty hard by the Democrats; nearly all of which still shelter the Clinton virus out in their nerve endings.
From 2016:
https://www.youtube.com/watch?v=CxARROUvFAo
We passed the point where it even matters what people emit. The microorganisms are going to give us a delightful gift.
As we triggered the sixth mass extinction with our hubris, eternal desire for comfort, plastic pieces of trash, and idiotic arrangements of economics. Nature will exterminate us.
A fitting end for a species that has done essentially nothing but cause the extinction of so many species of wildlife. A society that profits off of death to all the other creatures on our planet does not deserve to live.
Such a peculiar system. Destruction is financially rewarded, conservation and careful planning is financially penalized.
Best to do what that Guy McPherson says, go be nice to your family and spend what quality time you have left with them and your friends. Something probably could have been done in the 80’s, but now it’s likely too late.
Frank – my rural ag state (Nebraska) is trying to balance wind power development with rural farm and ranch interests as well as environmental concerns. Nebraska is where the annual sandhill crane migration draws thousands of tourists – and their $$ – annually.
Seeing the Western US and Canada burn ferociously this year while also suffering severe drought and record-setting heat waves followed by Hurricane Florence’s drowning of the Carolinas only a year after Puerto Rico’s destruction… what the heck has to happen before Joe and Jane Sixpack wake up?
As a high school kid I participated in the first Earth Day in 1970, and studied pollution in debate class. Now as a Berniecrat teetering on retirement, we’re still arguing about it! Arrgh!
My Big Fear is that events like the fires and hurricanes will simply overtake us. For example: A bad drought in Syria sends peasant farmers to Syrian cities, unrest occurs followed by repression and civil war, which drives waves of Muslims to Europe… causing further unrest in EU countries. This is change caused by climate, folks!
Thanks for the great links BTW.
https://www.theguardian.com/environment/2018/sep/24/americas-era-of-climate-mass-migration-is-here
file this under if you can’t beat them join them, Stiglitz is a big government guy he wants to get in there and ruin any good ideas she might have
I liked what AOC said before her primary and how she said it – it appealed to my progressive nature and supported her by giving her my money, but if one interview with one bright guy can “ruin any good ideas she may have”, then how in the heck can she stand up to the republican’s part of the electorate who will try to do the same or worse?
I like what I have heard Prof. Stiglitz say in the past and I have to admit I didn’t do much more than skim the article but I think if she can’t stand up to his questions, how can she stand up to anyone who opposes her strenously?
Meeting with Stigliz is part of the process of turning her to the dark side. He is there to reinforce her bad ideas and short circuit any that might be good while cooing gently in her ear.
We don’t need more socialism , have enough rules already we just need to enforce them. Just you know prosecute , identify problem actors and send them to jail.
Actually, we need a lot more socialism. And a lot less harkening back to the failed tropes of the Reagan era.
+1
You just won Teh Interwebz.
I thought that was what Mueller is trying to do……..identify problem actors and send them to jail.
So far the comments on their presentation are governed by worries the commenters themselves generate out of very thin air. What’s going on here? I feel like I’m witnessing disinfo generation in real time.
I read through the article again – and they were all softball questions.
I like them both and think they have something to contribute.
I don’t understand your comment about disinformation nor the shade being thrown at Stiglitz….
but through dialog is how we learn and grow.
What article are you talking about? What questions exactly? There wasn’t a single direct quote, just paraphrases. Who knows what was going on exactly… I’m with hemeantwell, this is BizarroWorld. There isn’t near enough meat in this article to either get the vapors *or* get happy.
>When asked about what she could do in Congress to address the problems discussed
That would be a “paraphrase”.
don’t understand your point (if there is one) but from reading this article (full of paraphasing) there was a meeting between two intelligent people who ASKED each other questions and conducted a discussion of topics that are relevant.
Simple point.
Get a hold of a transcript and see what was said – guarantee there were questions.
exactly. nobody bothered to read the transcript? she sounded very articulate and thoughtful, and this at only 28 years old. stiglitz was also on her side. i saw nothing in there that would have turned me off from either. stiglitz is just about the only mainstream economist worth listening to, unless you consider dean baker to be mainstream.
What transcript. Didn’t see one and went to New Economics Perspective page and found nothing. May be I’m missing something.
Isn’t Jeff Sachs recently turning to the brighter side or is he just obfuscating? Just wondering…
Specifically, what good idea(s) is he going to ruin?
In fact, this interview actually emphasizes Stiglitz’s agreement with Ms. Ocasio-Cortez on every issue.
Stiglitz, some may remember, was one of the few economists who foresaw the 2008 financial crisis and he was a consistent and accurate critic of the Obama administration’s handling of its aftermath.
Both of them rely on the mistaken assumption that taxes must be collected before federal dollars can be spent. Too bad.
they also wryly noted that when it comes to handing money over to the wealthy they always find a way to add to the debt, concluding, accurately, that if the political will were there, it could be done for social programs as well/instead.
Precisely. The continuing failure of many on the progressive left to grasp the elegant simplicity of Modern Monetary Theory–and the extraordinary opportunities it opens up for building a better, more beautiful society–is as unnecessary as it is tragic. Any intelligent high school student, paying attention, for example, to Stephanie Kelton’s “Angry Birds” video, could easily absorb the self-evident, common sense axioms of MMT. One reads an interview like this and is left to wonder what the hell is going on.
That’s odd. I understand that Ms OC is aware of MMT, as is Prof Stiglitz. However, politically, I think MMT an argument best saved for later. Most people have trouble getting their heads around MMT. But people who believe that taxes fund govt spending can understand this as-is, and MMTers can agree that increasing taxes on corps and the rich 1.) *reduces their out-sized voice* via political donations and 2.) reverses, to some extent, the *wealth transfer* tide.
To start with MMT — that’d be like requiring flat-earthers to subscribe to the round earth theory before asking for a boat loan.
That’s odd. I understand that Ms OC is aware of MMT, as is Prof Stiglitz. However, politically, I think MMT an argument best saved for later. Most people have trouble getting their heads around MMT. But people who believe that taxes fund govt spending can understand this as-is, and MMTers can agree that increasing taxes on corps and the rich 1.) *reduces their out-sized voice* via political donations and 2.) reverses the *wealth transfer* tide.
To start with MMT — that’d be like requiring flat-earthers to subscribe to the round earth theory before asking for a boat loan. Meanwhile, nothing that Prof Stiglitz or AOC said is wrong or in any way a bad idea.
Maybe MMT is actually true and a viable process but what is its answer to corruption and graft ? If you use MMT to create money and 99% winds up in the pockets of the elite what was the point?
The point of MMT is to show how money is created and thereby demonstrate that there is plenty available, on the federal level, to solve political and social problems from corruption and graft to unemployment/underemployment and climate change. MMT makes financial room for agency and political will to build a better society. It provides the necessary answer to the perennial conversation-stopping question about how we will pay for universal health care, student debt relief, conversion to green energy, and all the other wonderful things that so many want to see. And answering that conversation-stopping question that has bedeviled the left for decades is YUGE.
agency is what ? Oligarch 1 – 5000 stuff their pockets with MMT money? My point is there would be plenty of money if it wasn’t relentlessly misdirected or stolen outright. Regardless of its creation , given that it exists already there is more than enough laying around now if we don’t need drones and F-35’s and aircraft carriers and subsidies to everyone and their brother. All those things will rise up and protect their loot to the death
It’s important to remember that MMT has two parts:
The first is a correct, in fact obvious, description of how fiat money works. (I might quibble with some details, but they aren’t central.) It is as you describe – money, an abstraction, is alway plentiful, if the political will is there. Critically, that isn’t true of physical resources; those are the limits. Herman Daly pointed that out a long time ago.
The second is a very liberal (in the New Deal sense) set of policy prescriptions, things we could do since we don’t have financial constraints. Crucially, those are independent of the nature of money. We already have full-blown MMT – for the military and the Security State. For the people, not so much. Since real resources go into “national security,” curtailing that spending really would release the resources we need for “concrete material benefits.” Not too much concrete, though: making it releases CO2, which is locked up in limestone.
Under LBJ, the federal government actually used its money printing power to send funds to the states, which really are income constrained. It was called, misleadingly, “Revenue Sharing.” Unfortunately, LBJ’s insistence on the imperial war in Viet Nam wrecked both the economy and the New Deal Democratic Party. Ironically, that’s why Nixon took us off the gold standard and introduced full blown fiat currency.
Admittedly, this is not a direct reply to your point, but there would be much more available if we just stopped wasting our blood and treasure on wasteful, immoral, and ineffective overseas occupations. Bloomberg today has an article on the allegedly growing sense that a military takeover is called for in Venezuela, for goodness sake. When do we begin to confront this? Anyway, it bothers me if MMT as an argument ends up being an excuse for not opposing the massive weight on our budget created by “defense” spending. This point can be combined with the one from bronco above about what happens if all of the MMT cash just gets funneled to a corrupt bureaucracy.
#Exactly
I took exception to the article from that point of view as well.
Stiglitz should know better than to indulge the attendees, his wife and #AOC in the fallacious tax to spend trope. It’s never about affordability, it’s about CHOICES. The current administration is CHOOSING to give money to the top 1% in the form of tax cuts while CHOOSING to reduce social welfare programs under the economics-illiterate cover of taxes being needed to pay for things.
#TaxesForRevenueAreObsolete
Yep. Political will vs. Political won’t. We get the best political decisions big money can buy. Worldwide. Nothing more.
That’s exactly what I thought when I read this:
Schiffrin observed that programs like Medicare for all and free college tuition would not be possible in a world in which companies refuse to pay taxes. Stiglitz added that the Republicans’ 2017 tax bill, when fully implemented, would raise taxes on the majority of people in the middle class “to finance a tax cut for the corporations and the billionaires.” He said that the same people who resisted a stimulus in 2009-10, citing fears of the deficit, were now fine with adding trillions to the deficit to finance a tax cut for the rich.
Anya Schiffrin is Stiglitz’s wife! If there is anyone who should be aware of MMT, the most exciting thing that has happened in the economics field in 50 years, it would be her. As I understand, both Stiglitz and AOC (and anyone worth their weight in thought leadership) are familiar with the game-changing perspective of MMT and given any opportunity to speak about social programs would make this the cornerstone of their discussion. It’s become much easier to see who the fauxgressives are with MMT as arbiter.
Now, having criticized everybody above for over-reacting, here is your chance to take a shot back at me :)
>On racial and economic justice, Stiglitz added, “Martin Luther King put it very strongly that those two are really two sides of the same coin.”
The word “justice” needs to be retired. MLK is half a century ago now. To white people it *does not* mean “empowerment for all”, it does not mean “the ballot box”, it means “unelected judges telling everybody what to do.” I’m not saying people who use it have that intention, I’m just saying that’s what it’s heard as.
Use “equality” or something like it. Please.
As the countdown to the midterms continues, doesn’t NC keep saying “X days” is a long time in politics?
While AOC’s primary win has her traveling the country, Crowley is still on the ballot (along with two other candidates). Although Crowley has said he won’t campaign for the general, it is kind of a laying in wait campaign. Laying in wait for what?
AOC appears to be doing a national campaign for the votes of a district and how much of that has really been about developing and sustaining the development of an alternate party?
MMT needs to be promoted, but it does not have enough general support yet for candidates to run on it.
Often MMT is presented as though it means that the money supply could be increased without limit. I think it will help if it is explained that MMT allows us to print extra money up to the point where it balances out the shortfall in demand created by capitalism. Without that MMT just seems like something for nothing, which is a particularly hard sell for the majority of us, whose lives don’t work that way.
TLDR: Convincing people about MMT means changing how we think on a fundamental level, not a superficial one.
No candidate should run on MMT, because it is merely a description of how money is created and controlled by a currency-issuing government. Candidates should run on social programs and policies that benefit the general public, and candidates need to be able to explain how those programs and policies will indeed be of public benefit. But no matter how well that is done, there will then come the inevitable question that has been a show-stopper for the left for decades: “As beneficial as these programs and policies might be, how will we pay for them?” At that inevitable point, there is only one simple and elegant answer to that question, one built upon common sense axioms that even a high school student can easily grasp. THAT’S the vitally important role of MMT in our current political arena.
PS: One need only spend a little over an hour watching this video to learn all one needs to know about MMT for the purpose of everyday political conversation.
https://www.youtube.com/watch?v=d57M6ATPZIE
Neoclassical economics predates the GDP measure and so is not helping us grow the economy.
What is GDP?
The amount of money spent into the economy by consumers, businesses and the Government plus the income we receive from the trade balance with the rest of the world.
The aim is to increase the amount of goods and services within the economy at the same rate as the demand for those goods and services, whilst increasing the money supply to allow those extra goods and services to be purchased.
Milton Freidman understood the money supply had to rise gradually to grow the economy with his “Monetarism”. He thought that central bank reserves controlled the money supply and this is why it didn’t work.
The economists focus on supply (neoclassical economics) or demand (Keynesian economics) until the balance of supply and demand gets out of step. The economy stagnates due to either insufficient supply (1970s stagflation) or insufficient demand (today’s ultra low inflation).
Money needs to enter the economy to increase the supply of goods and services, while at the same time; the increased money supply enables the demand for those goods and services.
Banks and governments create money and this is now well understood outside the mainstream.
The banks have been creating money to lend into real estate and inflate financial asset prices. This is not what you want; they should be creating money to increase the supply of goods and services by lending into business and industry. Their lending hasn’t been increasing GDP.
https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.53.09.png
It all started going wrong when with financial liberalisation and a 1979 policy decision. The UK eliminated corset controls on banking in 1979 and the banks invaded the mortgage market. This is the start of the real estate frenzy.
You can let bankers do what they want, but they have no idea how to grow the economy with bank credit.
Supply had outstripped demand by the 1920s in the US and they used bank credit to maintain demand, but this can never work in the longer term as this money needs to be paid back. Government created money has to fill the gap as it doesn’t need to be paid back.
Governments can create money, jobs and wages in the public sector, building the infrastructure for the economy and looking after the health and education of the population to provide the economic framework necessary for the private sector.
The magic number is GDP, we need to focus on what increasing that number means.
Our main problem is an ideological Left who think the answer always lies on the demand side and an ideological Right who always think the answer lies on the supply side.
The Left think Government is the answer and the Right think the private sector is the answer.
The Left want Keynesian, demand side, economics and the Right want neoclassical, supply side, economics.
You need both, due to the increased productivity of the private sector that cannot create the necessary demand for those goods and services through private sector wages alone.
The perfect economy.
Supply, demand and the money supply rise together.
Extra money is needed to consume the extra goods and services the economy now produces.
Robots are no problem; the Government just needs to create the money, jobs and wages to balance the extra supply.
There is always plenty to do in the public sector, e.g. advancing renewable energy technology, infrastructure, schools, hospitals, public leisure and care services.
Let’s focus on growth by understanding what GDP is.
Capitalism itself requires a more balanced approach and the economy can be limited by insufficient money, supply or demand.
The low inflation figure tells you where the problem lies.
The low returns on investment capital show there is an excess of investment capital at the top.
You can let bankers do what they want, but they have no idea how to grow the economy with bank credit.
That sentence perfectly encapsulates the failure of neoliberalism. You cannot grow the economy on bank credit. Period. The fact that turning the public sector into financial monopolies would decimate society was also a given:
“To allow the market mechanism to be the sole director of the fate of human beings and their natural environment…would result in the demolition of society.” ~ Karl Polanyi, 1944
The rogue private banking industry has done whatever it wants over the decades and it seems pretty evident that burdening the nation with private debt was always part of the plan to control the “excess of democracy” in the 60’s. Keep people preoccupied with self-preservation and they won’t have time to concern themselves with social issues. But they failed to realize that the personal is political.
Michael Hudson explains that monetary policy QE is an idea divorced from reality because it was never meant to actually fix the real economy:
MICHAEL HUDSON: Well, banks don’t invest. That’s a myth. The pretense is that rescuing the banks rescued the economy. But the banks don’t make loans to the economy. Banks don’t make loans to fund factories. They don’t make loans for infrastructure. They make loans to buy assets already in place. They’re privatizing the structure to take it private, raise the rates the people have to pay for services. Essentially they lend to raiders taking over corporations. They won’t help a corporation put in more equipment and hire more people, but they’ll lend to a raider to break up a corporation, downsize the labor force, smash it up and leave it a bankrupt shell. That’s the financial management plan. That’s what they teach in business schools.
So the financial management philosophy that we have is diametrically opposed to what’s needed for economic growth. That should be what people are talking about, because more and more economists are warning that given the rising debt ratios, there’s going to be another crisis. What we should be talking about when we look back on the anniversary of Lehman’s bankruptcy is how to handle the next crisis in a way that doesn’tbail out banks, that bails out the economy by writing down the debts.
If banks have bad debts, they’ve made bad loans. Banks used to be conservative and prudent. But if they make imprudent loans and they say, we don’t care the borrower can’t pay because we’ve sold the whole loan off to a pension fund or a German Landesbank, and somebody else is going to take the loss, you have to restructure the banking system and the financial management, and take it out of the hands of bankers to manage.
If you leave the Treasury Department and the Justice Department and the bank regulators in the hands of bankers, they’re going to loot the rest of the economy. They’re going to take everything they can. So you want someone who’s not a banker to actually do the regulation.
Part 2
Here’s another excellent explanation of debt by Michael Hudson:
Government Debt and Deficits Are Not the Problem – Private Debt Is
The $1.3 trillion albatross of student debt is now being considered for cancellation, because it never should’ve been created in the first place. Top heterodox economist Steve Keen says it’s time to cancel ALL private debt that the commercial bankers dishonorably extended, unnecessarily.
It’s not taxpayer money, Maggie. It’s public money. Time to unThatcherize the economy.
Redistributive taxation has always had a place in MMT. Along with taxation to reduce inflation.
There are always going to be the greedy and corrupt who accumulate too much money and its political power.
Even the weak public hand wringing about a skewed wealth divide indicates broad recognition.
It will probably take torches and pitchforks and some oligarchs hanging from lamp posts to do anything about it.