Randall Wray-ri egindako elkarrizketa, 2020an

OK, Boomer. Great Again Isn’t Good Enough with L. Randall Wray


Feb 29, 2020

It’s always a treat to welcome L. Randall Wray, one of our favorite economists and guests, to Macro n Cheese. This episode is an added treat because, in a bit of a departure, Randy talks to Steve about politics and policy, looking through the lens of MMT while putting today’s issues in a historical context. Who better to bring that perspective than someone who lived through it? Maybe he wasn’t around for the Great Depression or World War II, but as a baby boomer, he witnessed first hand much of the massive growth and expansion of the postwar years and talks about what made America great and not-so-great during that period.

Randy states the only reason the policies proposed by Bernie Sanders seem so far outside the mainstream is because the mainstream has become so regressive. The ideas aren’t radical — the Democratic Party is conservative.

Steve asks him why our society is so regressive. Much of the answer lies in the rise of finance capitalthe financialization of the economy. Wall Street has its fingers in every aspect of society, yet it doesn’t produce anything, so the net value added to the economy is massively negative. Randy likens them to the rentier class. They take a percentage of corporate profit right off the top. A percentage of one’s paycheck goes to the FIRE sectorfinance, insurance, and real estate. (Obamacare is a recent example that furthered the process.) Obviously they’re not going to support democracy.

Randy says that in order to assess a policy proposal we shouldn’t ask how much it will cost. The correct questions are: do we know how to do it and do we have the resources. He and Steve go down the list, from free college and daycare, to Medicare for All, to the greening of the economy and public ownership of utilities — the answer to those questions is “yes.” We have historical examples of some major successes. We also have examples of failures, like JFK’s “war on poverty,” from which to learn and craft more systemic approaches.

They consider the likely deflationary bias of Medicare for All and Randy explains why economists are talking about offsets. This is an episode that will interest everyone who’s interested in real possibilities for shared prosperity.

L. Randall Wray is a Senior Scholar at the Levy Economics Institute of Bard College.

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    Randall Wray


    Macro N Cheese – Episode 57 
    OK Boomer.  Great Again Isn’t Good Enough with L. Randall Wray
    Feb 29, 2020

    [excerpt] L. Randall Wray:  We had public housing in the 60s. I think that it was done poorly.  We learned a lot about the design.  You don’t serrate poor people in their own neighborhood, that was always a bad idea. But, instead of tearing up all the public housing which is what we’ve done, we need to build new ones.  We need to do it right this time. 
    [excerpt] L. Randall Wray:  Buying a house has been a path to the middle class in the post-war period. If you have a lot of student loan debt, you have to postpone buying a house for many years. 
    [intro music compilation] 
    Geoff Ginter (intro): Now let’s see if we can avoid the apocalypse altogether.  Here’s another episode of Macro N Cheese with your host, Steve Grumbine. 
    Grumbine:  Alright, and this is Steve with Macro N Cheese.  Today I have guest Randall Wray.  Randy Wray has been one of the premier early adopters, the forerunner within the Modern Monetary Theory school of thought.  Randall Wray has written many books, from “Why Minsky Matters” to basically the book on Modern Monetary Theory [MMT].  He has been one of the earliest writers working with Warren Mosler dating back to the ’90s.  Folks, I’m very happy to have Professor Wray joining me today.  Professor Wray, welcome! 
    Wray:  Good to be back. 
    Grumbine: So, I know that your specialty is not politics, which is what makes this discussion we’re about to have even more juicy.  [laughs] Going back as far as I can remember, your writing, in particular, has been very instrumental in shaping my politics. Though that probably is not exactly what you had in mind – you’ve been fighting for economics – it has informed my politics. And as we’re watching this major surge within the progressive movement, the Bernie Sanders movement, and watching these bold progressive policies come into the forefront where they’re starting to say “how you gonna pay for it?”, and stuff like that.  These are questions you’ve been answering for 20 years plus.  Here we are finally on the precipice of something truly spectacular where these ideas are suddenly becoming more mainstream, people are starting to adopt them, starting to grab hold of them.  As recently as yesterday, Paul Krugman was complaining that “well if this all happens, if Bernie Sanders becomes president, I’m probably not going to be needed anymore.” To which I would say “that’s correct, Paul, you finally figured it out.” 
    What is your take on where MMT is at today and what are your feelings as you watch these things occur?  A little outside your bubble for sure, but within this period of time, what are your thoughts on that? 
    Wray:  Well, yes.  We are on the verge, I think, of an opportunity for progressive policies. I just want to say, you know, part of the reason why they seem so progressive is because the Democratic Party mainstream has become so regressive.  A good deal of the policies that Bernie is pushing and that are part of the broad agenda of the Green New Deal, so going way beyond tackling climate change, but also inequality and so on.  These would not have been radical when I was younger, for a democratic party member to be pushing.  They have become radical because the democrats have moved so far to the right that, I don’t know – even Republicans in the later 60s were to the left of our current mainstream democrats.  And so Bernie’s been calling them corporate democrats.  You could just as well call them neoliberal democrats.  They seem so far outside the mainstream because the mainstream has become so regressive.  But yes, I think we do have this big opportunity.  We are recovering ideas that used to be progressive, but the democratic party was progressive at one time.  And, we’ve got an answer to the “how you gonna pay for it” question that is so popular with the mainstream democrats – the republicans accept when they’re talking about a tax cut for the rich – and all the media.  But in the early post-war period, everybody knew how we paid for the war.  There was no question about it at all.  Nobody thought that you paid for the war with taxes, because that was plainly wrong.  That is not how we paid for it; we paid for it with government spending.  So MMT has been reviving these ideas that were lost because the mainstream became so conservative. 
    Grumbine: Wow. This is a great point here for me, because I’ve been alive since ’69 and a lot of this stuff I’ve only read in a book.  What would progressivism look like were we not sitting here in a radically fascist society today?  What would you say would make Bernie Sanders’ plans, for example, even more like a real left-wing revival? 
    Wray:  Well, if we just go down the list of what many people include in the Green New Deal.  Student debt relief – ok, the people who are still in college, but also the people who have graduated from college have HUGE debt.  And, the notion that we ought to relieve them of debt.  Pete the mayor thinks this is a radical idea, we shouldn’t do this at all. Hold it – my cohorts went to college for free! If we took out loans, they were government-issued loans at a 3% interest rate, and if you did public service afterwards, such as teaching elementary school – which was my goal – they forgave half the debt.  And, we had no tuition in California at the state schools.  So what’s crazy is that we’ve indebted students.  Relieving them one the debt isn’t crazy. It’s good economics.  It’s good social policy.   
    Free public education – we used to have that.  We still have it up to grade 12, we’ve had that for decades.  We have to recognize that a high school education is not good enough anymore for the vast majority of the workforce.  They need college.  Why shouldn’t it be free?  So public education through at least 4 years of college ought to be offered.  Universal child care.  Women have come back into the labor force. At the end of World War 2, we actually encouraged them to leave the labor force.  I’m not saying that was a good policy, but they’ve come back into the labor force.  And to give them an equal opportunity at good jobs, we’ve got to provide universal childcare.  It oughta be free, in a way that’s extending education back to age zero. 
    Public housing – we had public housing back in the 60’s. I think that it was done poorly.  We learned a lot about the design.  You don’t segregate poor people in their own neighborhood, that was always a bad idea. But, instead of tearing up all the public housing which is what we’ve done, we need to build new ones.  We need to do it right this time.  And on and on.  Eliminating poverty, euthanasia of the billionaire class.  Well, we didn’t have this kind of inequality in the 1960’s.  Now we need to take action to eliminate it.  Public ownership of utility companies is part of the Green New Deal efforts.  Well, we used to have public ownership of much of the supply of utilities to households. And a lot of that has been sold off to private firms that operate like the monopolists that they are. Which is raise the price and reduce the quality and also kill the environment at the same time by choosing environmentally destructive sources of fuel.  So anyway, all of those things were not radical in the 1960s but now they seem radical because we’ve moved so far backward. 
    Grumbine: That’s absolutely terrifying. How in the world did that happen? I mean, was this the Mount Pelerin Society, was this the Powell Memo, was this [Milton] Friedman and the Chicago School? How did we go from being aware to literally falling asleep?  What a travesty.  What got us here? 
    Wray:  Well, I think those things that you mentioned did happen.  There was a huge effort at funding right-wing think tanks and so on, so that is part of it.  Part of it is the evolution of our form of capitalism away from what many people called social democracy in Europe for example or managerial welfare state capitalism was what my professor Hyman Minsky called it.  Where the government played a big role, unions also played a big role in the economy and they were countervailing powers to the big corporations.  So they sort of kept the big corporations in line.   
    But over time, the government, sort of acting as a countervailing power, shifted toward protecting the power of the corporations against the labor unions and the unions of course were decimated over the past almost 50 years.  So there is that.  And there also is the rise or actually return of what we used to call finance capitalism.  Today it’s more common to use the term financialization of our economy.  Where Wall Street got its fingers into almost every aspect of our economy and society. And of course Wall Street doesn’t produce anything. Their net value added to the economy is massively negative.  As Bill Black would say, they are more like a rentier class. They charge rent. They are rent-seekers. They don’t produce anything useful.  And so they take their 40% of corporate profit right off the top, take it away from the corporations, and they also take our paychecks with insurance.   
    The whole FIRE sector – Finance Insurance Real Estate sector – they take rents out of all of our paychecks.  Obamacare was just continuing in that direction to take more of our paychecks away from us and give it to Wall Street. So, the financialization of the economy also plays a role: it concentrates money and power in the hands of the very, very few.  So, obviously they are not going to support democracy.  They’re acting against the interest of the vast majority of the population. 
    Grumbine: It seems counterintuitive as I hear you go through that, that people would actually support any of this.  I mean, the sales pitch to basically give up everything – and that’s largely what happened here – it’s like some sale that “we’re all embarrassed millionaires waiting for our millions to come through the door,” and that, “my goodness, if we stop them then we’ll never become millionaires ourselves.”  I mean, I can’t imagine any other reason why this seduction into neoliberalism occurred. The media back then I guess in some ways was more concentrated because you really only had a couple channels to listen to on television.  Everybody waited for the morning paper and the evening paper and whatever was printed int he paper was the news.   
    Now, there’s a million sources of the news and that diversification, even though there are still only 5 maybe 6 main outlets, Somehow or another they’ve been able to maintain this stranglehold on the truth.  We seem to be breaking through that, and we’re having to use alternative means.  You guys have been largely shut out of the academic journals.  You’ve been shut out of public speaking engagements where other people are frequently invited who clearly don’t understand.  Or they do understand and they’re playing to a different master.  How do we put Bernie Sanders’ platform into a perspective that allows us to not stop there?  I mean, it seems like we’re all just so happy to see somebody fighting back against neoliberalism, that it’s almost like “ah goodness, that’s just such a big hill to climb”. But yet, from what you’re telling me and what I’m hearing, there’s much more that has to be done even beyond what’s being said here. 
    Wray:  Yes, we saw the dissatisfaction the last time around – in 2016. Trump got a lot of the “dissatisfaction vote”.  Bernie, of course, was also getting some.  The mainstream – the democratic party, of course – would do everything they possibly could to prevent Bernie from winning, and I think that played a big role in promoting Hillary over him.  And we’re seeing it again even stronger than in 2016 where it looks like Bernie is riding a major surge.  A lot of the disaffected people were fooled by Trump last time.  I don’t think as many will be fooled this time around, because he’s going around the country talking about how the economy has never done this well before [laughs], and for most people that is just obviously false. The economy is doing extremely well for the top 1%, and on down – probably the top 10% – but it’s not doing well for the bottom half.  And what we’ve seen, especially in the Nevada election, is that Bernie did very, very well with the working class of all races, all genders. Bernie did very well.  And I think that that reflects the reality of the economic situation of most Americans. 
    Grumbine:  That’s a very, very powerful insight.  What just occurred in Las Vegas – I mean, Bernie got almost 52% of the vote.  He outclassed the entire field, all of them put together.  If you look at the mainstream media, they keep putting these narratives up there, these graphics, infographics, with “see, Bernie is still losing to the establishment” and they show eight people running against him.  They stack all of them.  In what universe does that actually work?  It’s not the race at all.  But he does, he clearly has captured the heart and mind of the nation.   
    And I think one of the biggest challenges, obviously, is you’ve got the old guard in Nancy Pelosi and others who are still advancing the very concept of “pay-go,” the ultimate scarcity narrative that keeps us trapped in a zero-sum game environment.  And then you look out at the republicans and they are even more recalcitrant, more opposed.  I think for the rank and file, you see a lot of individuals who just genuinely are looking for fairness and they’ve stopped trusting government to serve them. And there are very valid reasons for not trusting our government of late, and probably for much longer than “of late”.  
    If you were talking to a regular voter, and they were asking you questions about “how do I know if this is a good policy?” “how do I know if this is a bad policy?” “help me assess this policy”.  From an MMT perspective, how would you approach analyzing and assessing whether a policy is good for the people or bad for the people? 
    Wray:  Yeah, so I would start by, let’s say, we take some example – greening the economy – or it could be free public education through four years of college.  Forget about the hysterical estimates of the dollar costs.  Just forget about that for a second, and think about it this way:  Do you think that we know how to provide public education to anyone who wants to go to college?  Do we know how to do it? And I think the answer to that is yes, we know how; we are educating tens of millions of people every year.  We do a pretty good job of it.   
    So then the question after that is – do we have the resources to do it?  Well, the reality is around the country, most colleges are operating well below capacity.  When faculty retire, they’re not being replaced.  I go to our big annual meeting, called the ASSA, and 20,000 economists attend that and about half of those are new graduates or people who’ve been out for a while and don’t have a job yet and are looking for a job.  We’ve got thousands of graduating PhDs all over the country who would like to have a job teaching economics to students.  The problem is, there aren’t enough students.  So we’ve got the resources to do it.   
    If you think about the Green New Deal, the question is not some ridiculous estimate of trillions of dollars of costs of greening the economy.  The question is – do we know to green the economy and do we have the resources to do it? The scientists – and I’m not one of them – but the climate scientists say that we do.  We know how to do it and we’ve got the resources to do it; some of that requires shifting resources out of destructive use and putting them into constructive use though.  Stop the fracking and start building solar panels and so on.  So we’ve got the know-how and the resources.   
    So, the financing isn’t the problem, the resources aren’t the problem.  People then will say “how you gonna pay for it?”  We’ll pay for it the same way we paid for World War 2 which, in terms of a challenge, was much bigger than the Green New Deal.  We’ve got an estimate up at the Levy Institute that the net resource challenge is about 5% of GDP.  The World War 2 challenge was 50% of GDP. So, this is one-tenth the size of WW2.  Could we afford WW2?  Obviously yes, we afforded it and we did it.  We didn’t say “oh, it’s just too expensive.  Let’s just not bother to fight to preserve democracy and the United States and just let the Nazis take over.”  We didn’t do that. We rose to the challenge, we paid for it, and we won.  The GND – maybe it’s 10% the size of the challenge.  Can we do it?  Of course we can. 
    Grumbine:  So let me ask you this question.  Medicare for All… You know, I spoke with Warren [Mosler] some time ago, and Warren had mentioned that what seems counterintuitive to the average person, that Medicare for All would have a deflationary bias and it would possibly require a tax cut to make it flow, to make it work.  Can you elaborate on that? Is that a position you stand with and if so, what does that mean? 
    Wray:  Yes.  So again, if we forget about dollar costs, and we look at what’s shifting from our pretty crazy healthcare system, which, unlike any other country in the world, relies heavily on a for-profit private insurance sector.  If we move from that to a system similar to the way we run Medicare, in which there is a single-payer, which is the national government.  This is very similar to the way other rich developed countries do it – not all of them, but many of them.  We are certainly going to reduce total spending by a significant amount.  We took a very, very conservative estimate of the savings, and we put it at about 3.7% of GDP – let’s call it 4% of GDP – reduction in spending.  And, if that’s all we did, if we reduced spending by 4% on our healthcare system, and nothing else, that could be deflationary.   
    Now, if we’re doing it at the same time as we’re implementing all the other parts of the Green New Deal that I mentioned, those could help offset the reduction of spending so that we’re not gonna get that deflationary impact. But I agree with Warren that if we only did the Medicare for All, the reduction of total spending in the United States, the way it would hit the economy it would be like a very, very deep recession.  We would have lot of workers laid off, we would have lots of reduction of spending by those workers and by their firms and that would depress demand.  So, we would probably need a tax cut.  But if we phase it in with the Green New Deal, then it helps offset the increased use of resources for other things, like the childcare provisioning, the increase of spending on public colleges and the greening projects.  Those would offset that reduction. 
    [music, intermission]
    Grumbine: When I look at the boldness of this, it’s nice to see it coming in a package, because each of these things could take years to try and fight through Congress, and they probably will, unfortunately.  But that said, I really do believe that aside from some of the backdoor shenanigans that the wealthy are trying to maintain their power base, I think a lot of people have the fear that the nation is still broke and that it can’t afford these things.  Stephanie Kelton has shifted some of her language away from the funding and more so towards the term “offsets.”  You just mentioned offsets as well. Can you explain the framing of the use of the word offset? So that people understand the difference between quote unquote taxes actually paying [for] or financing these programs, and the term offset or the use in the economy, so that people understand that relationship. 
    Wray:  What matters is the demand on resources, so if we reduce the demand for resources in the healthcare system, we can offset that with an increased demand for resources for the greening of the economy.  That’s the idea. Taxes don’t really pay for spending. I know that that’s the way that people think about them.  We could go through US history and I could show you that this was well understood even back in colonial America.  The purpose of taxes is to release resources.  So, if you tax the private sector – households and firms – they can’t spend as much, which means that resources will be released, they won’t be devoted to satisfying the desires of households and firms.  Those resources then become available, and we can use those in the public interest for things like provisioning and paying for healthcare, and provisioning and paying for the Green New Deal. It’s not that the government needs the tax revenue to spend, it needs resources to be freed up so that the government can employ them in pursuit of the public purpose without competing with private sector demand which might cause the prices of those resources to rise and give us inflation.   
    I won’t go all the way back to colonial America, but let me just talk about World War 2.  We knew back in the early 40s that WW2 was going to be a huge demand on the US resources – labor, plants, equipment and so on. We knew we were going to go way beyond full employment because if you start pulling workers out of the labor force to put them in the military and if you start producing tanks in the factories that used to produce cars, you are generating a demand for those resources and also you’re increasing the income of all the workers that are employed to replace those in the military, so you are going to greatly increase the demand for consumer goods. And, since we would already be at full employment, there was no way to increase the production of consumer goods.  In fact, you would have to reduce the production of consumer goods to make way for production for the war effort.  
    And so what you have to do is figure out how are you going to reduce the demand for consumer goods.  One way was taxes. So you increase taxes in order to reduce consumption spending. But, we knew that taxes alone would not be enough.  And taxes are a permanent reduction of people’s income.  They don’t get that income back. So, following a proposal of John Maynard Keynes – who is the father of Keynesian Economics – you can’t rely only on that.  You need a combination of other policies that will help reduce demand.  One is “patriotic savings,” so that’s why we had the war bond. This was not because the government needed to borrow its own money back from the population, but if you could convince people it was their patriotic duty to buy bonds, that reduces their consumption because the money they spent on bonds won’t be spent on consumption.   
    In addition, we did have rationing. That’s another way to reduce demand.  We had some wage and price controls, and then finally, we postponed consumption which is a bargain that you strike with workers. You say look, if you will forego wage increases during the war, then after the war we’re gonna give you compensation and that would come in the form of retirement and health benefits that were supplied by their firms.  And we could do boosting social security payments.  All of these methods were used in WW2 and we might think about using the same sorts of methods when we implement the Green New Deal if the demand on resources is too high. 
    Grumbine:  So it appears when you look across the spectrum, that the Boomer crowd, the crowd that grew up during the depression [sic], folks that long since heard of McCarthyism and lived through all the anti-socialist propaganda that has been spread throughout US history. They are the biggest drawback right now to change.  For various reasons – and I’m sure some of them are heartfelt and some of them are just propagandized into their heads, etc – they’re looking at social security, and they’re holding on for dear life.  They’ve paid into it in their minds.. And so we’ve got a situation where all of these things are playing against them.  What would your message be to an older community that has these beliefs that have been pounded into their skull forever? What would be your message to them in terms of being able to help them better understand not only the financing, the battles they have with age-old propaganda, but also just helping them understand that this is in their best interest and they’re not losing here, they’re winning? How would you present this to that crowd? 
    Wray:  [laughs] Well, first, I’m one of the Boomers.  We didn’t live through the great depression. We were born after WW2. [laughs] Well, one thing is that we need to help them to understand what we did in WW2 because we were born after WW2.  We don’t have a memory of that.  We grew up in a booming economy.  We’re baby boomers and we enjoyed a booming economy, and the reason we enjoyed the booming economy was because we had successfully fought WW2 and we had developed our economy.   
    We had gotten out of the great depression. We had increased our capacity to produce tremendously during the war and then after the war we needed to keep things going because we transitioned this massive capacity that had been built up to prosecute the war to produce consumer goods.  And in that environment when we’re sort of celebrating the victory and also we’re enjoying rising living standards and rising wages, and we start having lots of kids – 3.7 kids per household. There’d been a baby bust during the depression, so now we had a baby boom.  And then all those babies needed hospitals, and then they needed schools and they needed roads and they needed bigger houses and we built the suburbs.  
    This massive amount of spending on the babies is what led to unprecedented growth in the united states and also around the world as a whole. That period was because of all the government spending. That is why the economy did so well.  And what we’ve been going through for the past generation has been very slow growth that has been depressing expectations and depressing the prospects for these new generations for decent jobs and rising living standards.  The first generations that will have a lower living standard than their parents – that has never happened in US history before.   
    So the age of depressed expectations – it’s killing our society. It’s why we have the rise and return of racism and anti-immigrants and all the Trump phenomenon is at least in part due to this – what Krugman and Larry Summers call secular stagnation.  We’ve got to reverse course. And the government has a big role to play. All these things that I talked about at the very beginning, all those elements of the Green New Deal, these cannot be done without major participation by the federal government.  Just as the boom after WW2 couldn’t have taken place without a major role for the federal government and also state and local governments to play.  This wasn’t a boom led by the private sector, it was a boom led by the government sector. 
    Grumbine: That’s amazing. [laughs] And I gotta tell you, the term boomer is just sorta like the “past generation” and I’m just like wow, ok, egg on the face there.  With that in mind, the obvious issue here is that there is a generational war going on here.  The idea of hard work, the Calvinism, the idea of “I paid my debts” as we’re trying to talk about getting rid of student debt.  There’s a lot of moralizations going on as well that really are not economic messages, they’re more “shoulda” messages.  “You should” this, “you should” that. And it’s a framing issue in my opinion.  How would you explain the student debt crisis to someone of a previouus generation that maybe has that tough love/bootstrap mentality? 
    Wray:  Again, the baby boomers didn’t have to pay for their education individually.  The public colleges were virtually free, and if you looked at the tuition of private schools – my undergrad degree actually was at a private school.  I went there on scholarship, but I know what the price was. The full tuition my senior year was $4000, and now universities are $60k, private universities.  There’s a lot of reasons for the big increase in costs – it’s really not faculty salaries, it’s amenities have gotten better.  It’s administrations and high pay of the administrations. So college has gotten very much more expensive. And also remember that we had the veterans from the military, the GI Bill, Uncle Sam paid for their educations and that was a huge portion of college students in the 60s. So returning from the Korean War, WW2 – by the 60s I assume most were done with college, and then the Vietnam War with lots of people coming back on the GI Bill.  The size of the military is very much smaller now, so we still do have that.  I don’t know if it’s as generous as it used to be, I’m not up on that but that was a huge proportion of the student body in the 60s and early 70s, the GI Bill.   
    Part of the reason for the student debt is the rising cost and the transition to student loans.  Much heavier reliance on student loans.  We’ve sort of gone back and forth over the years between government-provided student loans and privately provided student loans.  So students today usually have a combination of the two.  Private student loans have really hard terms for the student — higher interest rates and fees and interest on interest.  If you miss payments or in some other way get into trouble — and questionable practice by private lenders that induce students to consolidate government-provided student loans with better terms into private-provided student loans with much worse terms, so the students actually end up worse off when they consolidate.  
    What I’m saying is the Boomers got treated much better than today’s students do in terms of the amount of debt they’ve got to take on to get through college. So that’s one thing I try to impress on them.  And once you’re heavily indebted in student loans, lots of the other things that came relatively easy for the people of my generation become very difficult for today’s students. Buying a house has been a path to the middle class in the post war period. If you have a lot of student loan debt, you have to postpone buying a house by many years. I don’t know what the average is, I’ve seen it but I forgot the number of years you’ve got to postpone buying a house.  That sets you way back.  Typically you would expect that you’ve got your house paid for by the time you retire.  Along the way you’ve used your house to borrow when necessary maybe to send your kids to college or to pay some medical bills and you could use your house as collateral for borrowing.  If you can’t buy a house because of student loan debt, you don’t have that cushion; and if you’ve got your own kids and you’ve got to put them through school you may not have a house that you can borrow against to put them through school so they’re going to get a lot of student debt themselves.  We had it much better.  We did all this in an economy that was growing relatively rapidly and had wage increases relatively rapidly.  The last couple of generations haven’t graduated from college into that kind of environment. 
    Grumbine:  Would this be a case of quote unquote leveraging the right’s argument back and say “hey man, let’s make America great again”?  This, to me, there’s an opportunity here if you will to use their own marketing, their own logic to really focus this on truly making America great again for the right reasons, and maybe even doing it a little bit better.  It just seems like a real opportunity to take that marketing.  Whether you like the guy or not, it was clearly effective.  It seems like an opportunity to maybe drape a little bit of the nostalgia if you will of the “greatest generation” and so forth and be able to wrap it into a new 2020 kind of marketing pitch that allows people to feel like “hey, ok, we’re capturing some of what the American dream is all about”.  I don’t know.  It just seems like a possible way to marry disparate communities in their own space with their own sensibilities and the things that matter to them.  What do you think, do you think that’s dangerous territory? 
    Wray:  No. Not at all.  I wouldn’t use the “great again” term.  Not because Trump has grabbed that, but because we shouldn’t settle for that.  We can make it greater.  We can do it right this time. I was talking about how things were better for the Boomers, but I don’t want to gloss over everything. There was a lot of bad too.  It wasn’t inclusive, it wasn’t inclusive enough, so this time we have to do it better.  It’s got to be inclusive, everyone has to be included – all races, all genders have to be included.  Last time around, President Kennedy had a war on poverty.  It absolutely, utterly failed.  It did not reduce poverty in the US at all.  We have to have a real war on poverty.  We have to eliminate poverty.   
    You mentioned in passing that you’re not always for government.  In the 60s we had the Vietnam War.  Well, we always had a war.  There’s never a period without a war. So we have to make America greater.  We’ve got to end all of these forever wars and never engage in another one.  We’ve got to end this forever war.  We are always in one. We’ve gotta stop that.  So ending poverty, ending wars.  As I said we had a public housing experiment. In many ways it failed.  We have to do a better job this time.  We had reasonably low unemployment for white males, but we still had recession or depression level unemployment for African Americans.  Women had a tough time entering the workforce.  So if what they mean by “make America great again” [is a] return to that, that’s not what we want, it’s got to be inclusive.   
    And of course, then there’s the environment.  The 60s were sort of the start of this massive acceleration of destruction of the environment.  We can’t go back to that.  We’ve got to green all of our activities and that means sacrifices for a lot of peoples.  That’s why we can’t just do the greening alone.  Some people say let’s do the greening stuff first because if we don’t, that’s the end of human life and probably most animal life on planet Earth, which is true.  We absolutely have to start it. But, there will be sacrifices and we can’t ask people to make those if they’re already suffering with low wages, high unemployment, with racial disparities and so on.  We can’t ask for more suffering of them, so we’ve got to bring them up while we green the economy and make the sacrifices that are needed for that.   
    That’s why the whole thing has to be a package deal.  So yes – I don’t know if I should say this because it’s going to make me unpopular – yes, you’re going to have to give up your hamburgers.  We have to ban beef production.  Now, are you going to be willing to do that if we can provide you or your children with free public education, with childcare, with public housing if you need it, with jobs for all and we’re going to end the forever wars – we’re not going to draft you anymore and send you off for foreign interventions?  Can you give up your beef if we will do all that for you? I think people will be more willing to do it. 
    Grumbine:  That’s very, very, very, very powerful. Let me finish off with this one last question. I think this is kind of another major hurdle we have.  Obviously, the job guarantee serves a lot of purposes. Primarily to get rid of the buffer stock of unemployed people and turn them into a buffer stock of employed people.  It also has this Just Transition aspect to it, and with the move away from fossil fuels and the Green New Deal and eliminating “bad jobs”, jobs that are hurting us. A lot of people have their entire lives staked on being a coal miner, a lot of people have their entire lives being a beef farmer.  A lot of people have these roles that maybe were once really wonderful — their whole lives are staked around it.  Now all of a sudden we’re gonna take away those thing — in their minds.  Talk to me momentarily about a Just Transition and how to maybe message this to people who are extremely proud of their family lineage [where] grandpa and grandma always did this, 100 years of beef farming, whatever it may be.  How do we make that case? 
    Wray: Well, I think probably the biggest issue is the loss of those communities.  Since I taught in the middle of the country, I’ve seen [inaudible] don’t know as much about coal mining towns.  But you start losing the population.  You lose your school.  You lose your post office. That’s what they’re fearful of.  We’ve got to make it clear: no, you’re going to get good jobs where you are.  We’re going to rebuild your communities.  You don’t have to move anywhere.  That’s why the Job Guarantee has to create jobs wherever people are, wherever they want to live. The jobs have to be there. They have to pay enough so that the communities can be rebuilt.  So that’s what we have to do for them.  I understand that if you want the farming life, it goes beyond the community.  You want that kind of lifestyle, but we can go to sustainable farming.  So we would need to help them transition to that.  It has to go beyond the Job Guarantee. We need more active policies – additional active policies to ensure people can continue doing what they want to do.  Not destructive mining, not destructive ranching, but environmentally sustainable activities in their communities.  I think that’s the first step.  You have to convince them they’re going to be taken care of that way.  
    Grumbine: Very good, I really appreciate it. Randy, this has been amazing for me. I always love talking to you.  I know this probably is not the interview you expected – it always ends up being what it is. I really think that this was powerful. I’m walking away from this with so much to think about. I really appreciate the work you’ve done and continue to do.  Thank you so much for joining me today. 
    Wray:  OK, thank you. 
    Grumbine:  You got it, good-bye.  Folks, that was Randy Wray. Steve Grumbine with Macro and Cheese.  Have a great day everyone, we’re out. 
    [music, credits] 

    • joseba

      Counterpoint: MMT’s Evaluation of AMI’s Positive Money with L. Randall Wray


      An alternate title for this episode could be “Back to Basics.” It reminds us why Randall Wray’s MMT Primer continues to be a definitive resource for the Macro & Cheese community.

      This 2017 interview came about when the American Monetary Institute (AMI) published an article critiquing MMT. Randy Wray was mentioned and quoted throughout, so Steve invited him on to set the record straight — and maybe shed some light on AMI and its theory of “positive money.” If you don’t come away with a clear understanding of it, it’s because Randy himself can’t always get to the bottom of AMIs logic. It turns out they have some less than pristine methodology. It’s hard to assess the strength of their theory when you can’t pin down the theory. They don’t even produce balance sheets.

      AMI wants the Treasury to print greenbacks because they posit that the Federal Reserve is private and independent, with full control over the US dollar. Randy explains that we do, indeed, have a sovereign currency, and suggests that we read the Federal Reserve Act of 1913. The Fed is a creature of government, under the control of the Congress. Its very limited independence consists of the freedom to set overnight interest rate targets.

      It’s easier for Randy to debunk AMI’s critique of Modern Monetary Theory, and a large part of the interview takes us through the fundamentals of MMT — how money is created, the differing roles of the Treasury and the Fed, the causes of hyperinflation, sectoral balances, and why the US will always have a trade deficit. In our lifetimes, at least.

      We end with a long discussion of solutions to inequality. Since taxing the rich is politically unfeasible, Randy says a better way to reduce their wealth is to attack it at its source, where vast wealth is amassed. He wants to forbid corporations from buying back their stocks. Corporate CEOs and upper management receive outsized compensation in the form of stock options. Corporations spend more on stock buybacks than on investment in plants and equipment, which would create jobs. The buybacks raise the value of the shares, then the CEOs exercise their stock options for huge amounts of money. There’s no reason to allow it.

      This is an episode you’ll want to listen to right before trying to explain MMT to your uncle. Better yet, send him the link.

      L. Randall Wray is a Professor of Economics at Bard College and Senior Scholar at the Levy Economics Institute.

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