For many years now we have had Negative GDP so we were not Growing in the absence of Debt

wipe out over three years yeah speaking
of kind of bad situations we are not at
the end so we don’t have complete
clarity of the hindsight but there’s
been a lot of what I’ll just call bad
behavior in the market that led to a lot
of this so whether it’s the
over-leveraged of corporations or even
hedge funds at the key talks right at
one point a lot of the debt fueled
buybacks the CEO departure is kind of at
the top all of these things what’s your
take at this point in time right so
we’re kind of going into this situation
we’re not out of it but like how do you
view a lot of that be
right now so I got it I got an email
this morning actually from my prime
broker so hedge funds were at 99 to a
hundredth percentile of their historical
max leverage literally February 20th and
now we’re at you know the 20th to 30th
percentile historically so you know we
were probably at 7 or 8 turns of
leverage and now we’re probably down to
one and a half to two or three I think
that this next go-around you’re going to
have to realize government will have to
realize that in 2008 all they did was
allow financial institutions to pass the
buck they were able to take the leverage
off balance sheet and when you subtract
out debt as a function of GDP for many
years now we have had negative GDP so we
were not growing in the absence of
people issuing debt and most of that
debt unfortunately was not towards R&D
but it was towards things that
superficially propped up stock prices
which really only benefited a handful of
people and I do think we have to
restrain people from being able to do
that in the future I don’t think it
makes a lot of sense and I don’t think
it adds a lot of value and I think that
it’s not that it was obviously
responsible for the coronavirus but I do
think that when you look at how much
devastation we are encountering and when
we do the final tally on the amount of
buyback oh sorry the amount of bailouts
we need the bailouts are directly
correlated to how stupidly run and badly
run these companies were you know why is
it that California is legally mandated
and you’ll say oh because it’s a
nonprofit but legally mandated to have a
rainy day fund but a company isn’t and
then the company is the first one to
knock on the door of the government and
we’re just waiting for the next shoe to
drop or California Mississippi Alabama
Louisiana to all do the same thing and I
would much rather see the money go to
the states and the cities in an in an
fair even
then the money go to a private company I
think that those private companies
should be wiped out the equity should be
wiped out and they should need to
restart it’s one thing I’m a hundred
percent in alignment with you on this
but the part that I don’t understand is
how do you continue to benefit from the
elements of capitalism if you take out
the risk moving forward it everyone
knows I can quote unquote take this like
fake risk and if anything goes wrong I
can just run to the government and get a
bailout you changed the dynamic of what
happens and I actually think you
incentivize even more bad behavior right
it’s almost like there was bad behavior
and then there was no punishment for it
and therefore you just encouraged that
to continue you know when we get out of
this thing well I it depends on what you
view capitalism as I think if you view
capitalism as a game of risk I think
you’re right I’ve always viewed
capitalism as money becomes a fulcrum
instrument for change what do you want
to see in the world okay
money is your lubricant you decide and
the person with more money or the person
who’s willing to put more money into
something and who can be more clever
basically has the opportunity to win so
I I think it’s a game that puts
ingenuity and money at the forefront
that’s what to me that’s what capitalism
is and so when companies are doing
things that are fundamentally not
advancing that forward they should
disqualify themselves from them being
able to run to the government so it
would be a different thing entirely if
all the airlines had invested let’s just
say 96% of free cash flow dollars on
supersonic flight failed and then came
to the government and said look I took a
big bet on the future to help advance
humanity it didn’t work and I need a
bailout I would be the first one to say
okay but when 96% of free cash flow
dollars go back to buying back shares
and then you basically claim the same
thing I think you should be punished and
punished financially so you know you you
you took the money that you had you
refused it you refused to multiply it by
a good smart bet on the future and I
think that there should be consequences
for that
yeah I don’t disagree with you at all
last question for you
been incredible kind with your time here
if you were the president over the next
six months
what’s your playbook so president Shamus
got full control can do whatever was it
within the presidential powers what’s
your playbook to kind of weather the
storm and get us out of this
I would first stand up every single
voting site that we would use in the
November election
and I would schedule every single man
woman and child to come through all of
those testing facilities and I would
basically deploy a rapid test to figure
out whether they had coronavirus in that
moment okay and families could come you
know 10 minutes apart so that you could
get back into your car and go etc etc in
step number one if you didn’t have
Corona so you weren’t shedding the RNA
in that moment you go to a second and
you get administered a finger prick
and you get tested for the antibodies
and within 15 or 20 minutes and you’re
held in an isolation
you know booth area where you you know
you’re on Instagram and when you’re done
you’re given a wristband and that
wristband basically says one of three
things well if you had tested positive
you get a red band you go home and you
isolate if you test negative and you
have the antibodies you get a green one
and if you test negative and you how
don’t have the antibodies maybe you get
a blue one green and blue are allowed to
go back to work right away red self
isolates you contact trace etcetera etc
that’s sort of the frontline of getting
the economy back to work and you have
some combination of the National Guard
and sort of like a whole infrastructure
then separately I think you introduced a
massive massive massive infrastructure
bill that starts to drive the
of the supply chain back in
to the United States and part of that is
incentives and part of that is
government spending and it has to cut
across many categories from you know
semiconductors in silicon all the way to
clean energy to actual physical
infrastructure like you know bridges and
and tunnels and roads and in that what I
think you’re mandating is a certain
percentage of things to be made
domestically in the United States and
you start to get people back to work so
the short term path I think is to kind
of baseline the disease and get the
people who are allowed to be working
back into a green zone of every city
every town where people with these green
and blue bands are allowed inside and
the red banded people have to stay and
quarantine themselves so that we can
start to restart this economy and then
longer-term is an infrastructure build
that basically resets incentives towards
resiliency towards inefficiency away
from efficiency I think that’s a pretty
solid plan I’m shot I’m actually shocked
that some of this hasn’t been instituted
already the lack of testing just blows
my mind I mean the stats I saw on
Saturday 895 thousand people I think
I’ve been tested at a 330 million in the
United States I think the other
reckoning that we have to do maybe just
to finish on this is that we’ve
politicized things that should never
have been politicized health should not
be politicized you know the problem is
that starting with Obamacare health
became something that was about the
Democrats versus the Republicans and you
can see how that’s sort of like you know
flowed into things like the FDA and the
CDC and history will tell what they
could have done better history will tell
what the w-h-o should have done
but I think what we can see is that
there are many points along the
evolution of this disease where logic
and open-mindedness and iteration ran
into bureaucracy and bureaucracy one and
I think that’s probably the most
generous way of describing it and we
need to figure out
where there are almost constitutional
level provisions you know you have the
right to bear arms great what about the
right to basically not you know not die
in a preventable scenario what does that
mean for how these organizations should
run you know we at a very basic level
have told the healthcare infrastructure
that we must do no harm and I think it’s
time to say look with 8 billion people
in the world and a 90 trillion dollar
economy that supports those eight eight
eight billion people do no harm doesn’t
work anymore it doesn’t scale we need to
do our best and there’s a lot of rules
that could change in a scenario where
you embrace do your best and I think
that that that has to happen but the
failures of the political infrastructure
and the healthcare infrastructure to use
bureaucracy as the thing that that
drives decision making I think is also
the a domino that has to fall after this
and we need to revisit because it’s a
you know we’ve we’ve done a lot of
unnecessary damage to ourselves and some
of this some of these self-inflicted
injuries we should figure out how to
prevent for the next time because it’s
gonna come again yeah I think we’re
living in incredibly uncertain in
chaotic times and you know one just
thank you for your time today but uh too
is uh think I speak for a lot of people
in that we’d love to see you go public
and kind of be along for the journey so
you’re doing an incredible job and I
just appreciate you uh
kind of going out there and sticking
your neck out there frankly because a
lot of people who they they’re gonna all
be the armchair quarterbacks right okay
two three years from now like I said I
told you that we should have done X or Y
but right now they’re they’re kind of
quiet so we’ll see how it plays out well
I really appreciate the fact that you
had me on and I just want to say that I
think you’ve been a really good person
in being out there in this moment the
reality is like in moments like this you
need people to be coalescing opinions
and I think that you’ve done that that’s
a really important service because it
allows people to get to ground truth so
I just want to say thank you for doing
thanks for including me
no problem at all all right sir well
thank you a teacher
all the best talk to you soon right bye

Marc Andreessen on the Need for Growth to Prevent Zero Sum Thinking

Many skeptics thought the internet would never reach mass adoption, but today it’s shaping global culture, is integral to our lives–and this is just the beginning. In this conversation, Kevin Kelly (Founding Executive Editor, WIRED magazine) and Marc Andreessen (Cofounder and General Partner, Andreessen Horowitz) sit down to discuss the evolution of technology, the new “Space Race,” and how measuring prosperity on a global scale is the key to our collective success. Learn why they share an optimistic view on the possibilities of the future.

Discussion on closing the digital divide [3:00]
The many possibilities of voice technology as an interface [9:59]
Moore’s Law vs. Eroom’s law [14:14]
Looking at 5G Technology as the next global driver [20:38]
New models for VC and company models [27:05]
How long-term thinking can be applied in Silicon Valley [29:53]
Measuring prosperity on a global scale [34:00]
The potential impact of cyber technology on global conflict [38:45]
The foundation of Marc’s optimism [41:05]

introspection about government but also
about capitalism and capitalism so far
has depended on growth and growth is
something that VC’s pay attention to but
we’re now wondering if what’s the
minimum amount of growth that you might
need to have prosperity can you have
prosperity with low growth can you have
prosperity with fixed growth do you have
any insights about about that at the
civilizational scale yes I think in
actually I don’t even say that the issue
is even more intense these days because
there’s now very prominent people in
public life arguing that growth is bad
right and in fact it’s it that it that
it in fact is ruinous and destructive
and that the right goal might actually
be they have no growth or to actually go
into negative growth then especially in
a very common view in the environmental
movement so I’m a very strong proponent
a very strong believer that growth is
absolutely necessary and I’ll come back
to environmental thing in a second
because it’s a very interesting case of
I think growth is absolutely necessary
and I think the reason growth is
absolutely necessary is because you can
fundamentally have two different mindset
views of how the world works
right one
is positive some which is you know
rising tide lifts all boats we can all
do better together and the other is is
is a zero-sum right where for me to win
somebody else must lose
and vice-versa
and reason I think economic growth is so
important at cores because if there is
fast economic growth then we have
positive some politics and we start to
have all these discussions about all
these things that we can do as a society
and if we have zero some grow if we have
if we have a flat growth or no growth or
negative growth all of a sudden the
politics become sharply zero-sum and in
the most in the most the most you just
kind of see this if you kind of track
you know kind of the political climate
you just basically it’s the wake of
every recession right it’s just in the
wake of every economic recession the
politics just go like seriously negative
on in terms of thinking about the
world’s is zero-sum
and and then when
you get a zero-sum outlook Impala
six that’s when you get like
anti-immigration that’s when you get
anti trade
that’s when you get anti tech
if the world’s not growing then all
that’s left to do is to fight over what
we what we already have and so my view
is like you need to have economic growth
you need to have economic growth for all
of the reasons that I would say right
wingers like economic growth which is
you want to have higher levels material
prosperity more opportunity more job
creation all those things you want to
have economic growth for the purpose of
having like sane politics like a
productive political conversation and
then I think the kicker is you also want
economic growth actually for many of the
things that left-wing people want one of
the best books this year new books this
year is a guy Andrew McAfee I was
reading a book called
I think more from less it’s actually a
story of a really remarkable thing that
a lot of people are missing about what’s
happening with the environment which is
globally carbon emissions are rising and
resource utilization is rising in the
u.s. carbon emissions and resource
utilization are actually falling and so
in the u.s. we have figured out to grow
our economy while reducing our use of
natural resources which is a completely
unexpected twist right to the plot of
what kind of if you lose
environmentalists in six years of
seventies like nobody predicted that and
it turns out he talks about this in the
book but it turns out basically what
happens is economies when economies
advanced to a certain point they get
really really good at doing more with
less right they get really really good
efficiency and they get really good at
energy efficiency they get really isn’t
about you use environmental resources
they really go to recycling in lots of
different ways and then they get really
good at what’s called dematerialization
which is what is happening with digital
technology right which is basically
taking things that used to require atoms
and turning them into bits weight which
inherently consumes consumes less
resources and so what you actually want
like my view unlike the environmental
issues is like you’ve got a global
problem which is you have too many
people in too many countries stuck in
kind of mid amid the Industrial
Revolution they’ve got to grow to get to
the point where they’re in a fully
digital economy like we are precisely so
that they can start to have declining
resource utilization right right I mean
the classic example energy like you know
the big problem of the energy emissions
global a huge problem of emissions and
with health from emissions is literally
people burning wood like in their houses
right to be able to eat and cook and
what you want to do is you want to go to
like hyper efficient solar or ideally
nuclear right you want to go to these
like super advanced forms of technology
so actually it so you want
that and by the way if you want like a
big social safety net you know and all
the social programs you want to pay for
that stuff
you also want economic growth because
that generates taxes of pace of that
stuff and so like growth is the single
kind of biggest form of magic that we
have right to be able to like actually
make progress and hold the whole thing
together and you know to your point
about the developing countries I think
the idea of leapfrog and technology is a
myth it doesn’t really work you actually
have to if you want to have a high-tech
infrastructure you actually need the
intermediate roads clean water you can’t
skip over that and so they all need to
be built out in order to have that
prosperity at the end so you know the
simplest you know seems like you don’t
worry about much I don’t worry about
much but one thing I do worry about this
cyber conflict cyber war partly because
I think we have no consensus about
what’s allowable does this worry you at
all so I think there there’s a lot of
unknown as to it I think people are
trying to figure this out but it’s it’s
a complication to grapple with I will
make an optimistic argument which is
going to sound a little strange if you
kind of project forward what’s happening
with with generally cyber with
information you know operations of
different kinds but also with drones
you know UAVs and then also with you
know unmanned you know unmanned fighter
jets right um and you know ships
increasingly being built
it’ll be unmad submarines at some point
if you projected stuff forward you start
to get this very interesting potential
world in which basically the way I think
about it it’s like all human conflict
between peoples are between
nation-states up until now has been
basically throwing people at each other
right throwing soldiers at each other
and like letting them make the decision
of who to shoot and like hoping they
don’t get shot like with very serious
repercussions of all those individual
human decisions you do have the prospect
of basically a new world of both offense
and defense it’s like completely
motorised completely mechanized
completely software driven and
technology driven and a lot of people
it’s just immediately like oh my god
that’s horrible
you know Terminator like you know Skynet
like you know this is just the worst
thing ever there’s a novel called kill
decision if you wanted to snow Pinsky
okay there’s a novel called kill
decision by daniel suarez dinosaurus
then extrapolates the the drones forward
and a little it’ll keep you up late at
night but the optimistic view would be
like boy isn’t it good that there aren’t
beings involved isn’t it good like if
the machines are shooting at each other
like isn’t that good isn’t that better
than if they’re shooting at us by the
way and by the way yeah I would go so
far as to say like I don’t know that I’m
in favor of like the machines making
like kill decisions like decisions on me
to shoot but like the one thing I know
it’s humans do that very badly like very
very very badly I’m the opposite of
pearl war I don’t want to see any of
this stuff actually play out but if it
has to play out there maybe having it be
software machines it’s gonna be actually
better outcome right I mean this kind of
weird that we don’t allow we don’t want
machines to kill humans we want other
humans to kill you but we want 18 year
olds we want to take 18 year olds out of
their homes right we want to put a gun
in their hand and send them someplace
and tell me decide who to shoot like it
that that is gonna go down to history’s
haven’t been a good idea okay it just
strikes me as like unlikely so we have
only time for one last question which is
I’m usually I claim to be the most
optimistic person in the room but with
you sitting across to me I don’t think
that may be true what is your optimism
based on so my optimism okay so get
cosmic for a second why not I guess
we’re here it’s the last question last
question so the science fiction author
science fiction science fiction authors
always talking about was good they
called the singularity this constant
singularity answer it’s a singularities
basic what happens when the machines get
so smart than all of a sudden everything
goes into exponential mode and all of a
sudden you know the entire world changes
so I am I reading history is actually we
actually were in the singularity already
and that it actually started 300 years
ago mm-hmm and if you look at basically
if you look at basically any chart of
human welfare over time and you can look
at no child mortality is an obvious one
but like there’s you know there’s many
many many others and you just look at
progress on that metric so your telomere
tality as an example and it’s just
basically flat flat flat flat flat flat
flat for only fifty thousand years right
is everything and you know if this is
the family offices at Thomas Hobbes you
know life is you know nasty brutish and
short right it was just like the thing
like everything was terrible everywhere
all the time forever the end until 300
years ago when all of a sudden there’s
this me and the curve and then all the
indicators of human welfare not
uniformly across the planet but in
societies that we’re making progress the
societies weren’t making progress first
all of a sudden all those indicators of
human welfare went up into the right
right I don’t know of course bonded by
the way to economic growth but it was
also right it was the Enlightenment it
was the rise of democracy it was the
rise of markets was the rise of
rationality of the scientific method by
the way human rights free speech free
thought right and they all kind of
catalyzed right around around around 300
years ago and and they’ve been making
their way into the world you know in
sort of increasing concentric circles
kind of ever since and so we have you
know I would argue like we have the
answer it’s like we actually don’t need
new we don’t need new discoveries to
have the future be much better we
actually know how to do it is to apply
basically those systems and and and
basically contra the sort of constant
temptation from all kinds of people to
try to you know compromise on these
things or subvert these things you know
basically double down on these systems
that we know work right so double down
economic growth double down on human
rights double down on markets on
capitalism double down on the scientific
method fix science like we got as far as
we did with science actually being
pretty seriously screwed up right now
with the replication crisis like so we
should fix that and then science will
all of a sudden start to work much
better technology right used to yeah use
of technological tools so we should we
literally have the systems like we know
how to do this we know how to make the
planet much better in every respect and
so what we just need to do is is keep
doing that and then what I try to do
when I read the news is notwithstanding
everything’s going on is basically try
to look through whatever’s happen at the
moment try to look underneath and kind
of say okay are those fundamental
systems actually still working like is
the world getting more democratic or
less right this is free speech spreading
or receiving right or markets expanding
or falling right are more more people
able to participate in a modern market
economy or not and you know those
indicators generally are all or all
still up into the right mm-hmm
so let’s go out and make the world
better yeah thank you
thanks everybody

The Best Economic News No One Wants to Talk About

Something’s happening to wages that neither Democrats nor Republicans care to acknowledge.

Stop me if this sounds familiar: For most American workers, real wages have barely budged in decades. Inequality has skyrocketed. The richest workers are making all the money. Earnings for low-income workers have been pathetic this entire century.

These claims help drive the interpretation of breaking economic news. For example, the Labor Department yesterday reported that the unemployment rate fell to a 50-year low, while wage growth stalled. “The wage numbers here are INSANE,” the MSNBC host Chris Hayes tweeted. “The tightest labor market in decades and decades and ordinary working people are barely seeing gains.”

So, let’s play a game of wish-casting.

  • Imagine a world where wage growth was truly stagnant only for workers in high-wage industries, such as medicine and consulting.
  • Imagine a labor market where earnings growth for low-wage workers, such as those who work in retail and restaurants, had doubled in the past five years.
  • Imagine an economy where wages for the poorest Americans were rising twice as fast as hourly earnings for high-wage earners.

It turns out that all three of those things are happening right now.

According to analysis by Nick Bunker, an economist with the jobs site Indeed, wage growth is currently strongest for workers in low-wage industries, such as clothing stores, supermarkets, amusement parks, and casinos. And earnings are growing most slowly in higher-wage industries, such as medical labs, law firms, and broadcasting and telecom companies.

Bunker’s analysis is not an outlier. A Goldman Sachs look at data from the Bureau of Labor Statistics found growth for the bottom half of earners at its highest rate of the cycle. And even among that bottom half, the biggest gains are going to workers earning the least. A New York Times analysis of data from the Federal Reserve Bank of Atlanta found that wage growth among the lowest 25 percent of earners had exceeded the growth in every other quartile.

In fact, according to Bunker’s research, wages for low-income workers may be growing at their highest rate in 20 years.

What’s happening here? Donald Trump hasn’t sprinkled MAGA pixie dust over the U.S. economy. In fact, his trade war has clearly diminished employment growth in industries, that are sensitive to foreign markets, such as manufacturing. Rather, a tight labor market and state-by-state minimum wage hikes have combined to push up wage growth for the poorest workers. The sluggishness of overall wage growth is concealing the fact that the labor market has done wonderful things for wages at the low end.

One reason you haven’t heard this economic narrative may be that it’s inconvenient for members of both political parties to talk about, especially at a time when economic analysis has, like everything else, become a proxy for political orientation. For Democrats, the idea that low-income workers could be benefiting from a 2019 economy feels dangerously close to giving the president credit for something. This isn’t just poor motivated reasoning; it also attributes way too much power to the American president, who exerts very little control over the domestic economy. Meanwhile, corporate-friendly outlets, such as The Wall Street Journal’s editorial pages, have reported on this phenomenon. But they’ve used it as an opportunity to take a shot at “the slow-growth Obama years” rather than a way to argue for the extraordinary benefits of tight labor markets for the poor, much less for the virtues of minimum-wage laws.

Democrats don’t want to talk about low-income wage growth, because it feels too close to saying, “Good things can happen while Trump is president”; and Republicans don’t want to talk about the reason behind it, because it’s dangerously close to saying, “Our singular fixation with corporate-tax rates is foolish and Keynes was right.”

But good things can happen while Trump is president, and Keynes was right. “Tighter labor markets sure are good for workers who work in low-wage industries,” Bunker told me. “This recovery has not been spectacular. But if we let the labor market get stronger for a long time, you will see these results.”

George Monbiot: How to Really Take Back Control

Every successful movement relies on a restoration story.

In 2008, no one had a new restoration story.

Globalization (no capital controls) has made Keynesian impossible. (25 min)

A growth-based system can not be sustained (27 min)

(28 min) A New Restoration Story

Modern Monetary Inevitabilities

ALEXANDRIA, VIRGINIA – In a recent Project Syndicate commentary, James K. Galbraith of the University of Texas at Austin Modern Monetary Theory and corrects some misunderstandings about the relationships among MMT, federal deficits, and central-bank independence. But Galbraith does not explore what is perhaps the most important issue of all: the political conditions needed to implement MMT effectively.

MMT owes its newfound relevance to the fact that deflation, rather than inflation, is becoming central banks’ main concern. For a high-debt, high-deficit economy like the United States, deflation is an especially serious threat, because it delays consumption and increases debtor anxiety. Consumers forego major purchases on the assumption that future prices will be lower. Homeowners with mortgages cut back their spending when they see home prices falling and the equity in their homes declining. These cutbacks worry the Federal Reserve, because they add to deflationary pressures and could trigger deeper spending cuts, stock-market declines, and widespread deleveraging.

The Fed’s inability so far to reach its 2% target for annual inflation suggests that it lacks the means to overcome persistent disinflationary forces in the economy. These forces include increased US , which diminishes aggregate demand by weakening employee bargaining power and increasing income inequality; population aging; inadequate investment in infrastructure and climate-change abatement; and technology-driven labor displacement. Making matters worse, US political gridlock assures continued commitment to economically exhausted strategies such as tax cuts for the rich, at the expense of investment in education and other sources of long-term growth. These conditions cry out for significant changes in US government spending and tax policies.

MMT is seen as a way to accomplish the needed changes. It holds that a government can spend as much as it wants if it borrows in its own currency and its central bank can buy as much of the government’s debt as necessary – as long as doing so doesn’t generate unacceptably high inflation. Both tax-cut advocates and supporters of public investment find little not to like.

MMT has been roundly criticized by economists across the political spectrum, from Kenneth Rogoff and Lawrence H. Summers of Harvard University to Paul Krugman of the City University of New York. All contend that it is a political argument masquerading as economic theory. But Galbraith and Ray Dalio of Bridgewater Associates see MMT differently. Dalio argues that MMT is real and, more to the point, it is an inevitable policy step in historically recurring debt-cycle downturns.

In his book Principles for Navigating Big Debt Crises, Dalio documents the steps that central banks have historically taken when faced with a booming economy that suddenly crumples under the weight of debt. The first step (Monetary Policy 1, or MP1) is

  1. to cut overnight official rates to stimulate credit and investment expansion. The second (MP2)
  2. is to buy government debt (quantitative easing) to support asset prices and prevent uncontrollable waves of deleveraging. If MP1 and MP2 are insufficient to halt a downturn, central banks take step three (MMT, which Dalio calls MP3) and
  3. proceed to finance the spending priorities that political leaders deem most essential. The priorities can range from financing major national projects to “helicopter money” transfers directly to consumers.

Achieving political agreement on what to finance and how is essential for implementing MP3 effectively. In a financial meltdown or other national emergency, political unity and prompt action are essential. Unity requires a strong consensus on what should be financed. Speed requires the existence of a trusted institution to direct the spending.

In the early 1940s, when the US entered World War II and winning the war became the government’s top priority, the Fed entered full MP3 mode. It not only set short- and long-term rates for Treasury bonds, but also bought as much government debt as necessary to finance the war effort. MP3 was possible because the war united the country politically and gave the Roosevelt administration near-authoritarian rule over the economy.

The core weakness of MP3/MMT advocacy is the absence of an explanation of how to achieve political unity on what to finance and how. This absence is inexcusable. Total US debt (as a share of GDP) is approaching levels associated with past financial meltdowns, and that doesn’t even account for the  associated with infrastructure maintenance, rising sea levels, and unfunded pensions. For the reasons Dalio lays out, a US debt crisis requiring some form of MP3 is all but inevitable.

The crucial question that any effort to achieve political unity must answer is what constitutes justifiable spending. Alexander Hamilton, America’s first Secretary of the Treasury, offered an answer in 1781: “A national debt,” he wrote, “if it is not excessive will be to us a national blessing.” A government’s debt is “excessive” if it cannot be repaid because its proceeds were spent in ways that did not increase national wealth enough to do so. Debt resulting from tax cuts that are spent on mega-yachts would almost certainly be excessive; debt incurred to improve educational outcomes, maintain essential infrastructure, or address climate change would probably not be. Accordingly, it will be easier to achieve political unity if MP3 proceeds are spent on priorities such as education, infrastructure, or climate.

The political test for justifying MP3-financed government spending, is clear: Will future generations judge that the borrowing was not “excessive”? Most Americans born well after WWII would say that the debt incurred to win that war was justified, as was the debt that financed the construction of the Interstate Highway System, which literally paved the way for stronger growth.

As the 1930s and 1940s show, MP3 is a natural component of government responses to major debt downturns and the political crises they trigger. We know much more about what contributes to economic growth and sustainability than we did in the first half of the twentieth century. To speed recovery from the next downturn, we need to identify now the types of spending that will contribute most to sustainable recovery and that in hindsight will be viewed as most justified by future Americans. We need also to design the institutions that will direct the spending. These are the keys to building the political unity that MMT requires. To know what to finance and how, future Americans can show us the way; we need only put ourselves in their shoes.

After Neoliberalism

For the past 40 years, the United States and other advanced economies have been pursuing a free-market agenda of low taxes, deregulation, and cuts to social programs. There can no longer be any doubt that this approach has failed spectacularly; the only question is what will – and should – come next.

The neoliberal experiment – lower taxes on the rich, deregulation of labor and product markets, financialization, and globalization – has been a spectacular failure. Growth is lower than it was in the quarter-century after World War II, and most of it has accrued to the very top of the income scale. After decades of stagnant or even falling incomes for those below them, neoliberalism must be pronounced dead and buried.
Vying to succeed it are at least three major political alternatives:
  1. far-right nationalism,
  2. center-left reformism, and the
  3. progressive left (with the center-right representing the neoliberal failure).

And yet, with the exception of the progressive left, these alternatives remain beholden to some form of the ideology that has (or should have) expired.

The center-left, for example, represents neoliberalism with a human face. Its goal is to bring the policies of former US President Bill Clinton and former British Prime Minister Tony Blair into the twenty-first century, making only slight revisions to the prevailing modes of financialization and globalization. Meanwhile, the nationalist right disowns globalization, blaming migrants and foreigners for all of today’s problems. Yet as Donald Trump’s presidency has shown, it is no less committed – at least in its American variant – to tax cuts for the rich, deregulation, and shrinking or eliminating social programs.

By contrast, the third camp advocates what I call , which prescribes a radically different economic agenda, based on four priorities. The first is to

  1. restore the balance between markets, the state, and civil society. Slow economic growth, rising inequality, financial instability, and environmental degradation are problems born of the market, and thus cannot and will not be overcome by the market on its own. Governments have a duty to limit and shape markets through environmental, health, occupational-safety, and other types of regulation. It is also the government’s job to do what the market cannot or will not do, like actively investing in basic research, technology, education, and the health of its constituents.
  2. The second priority is to recognize that the “wealth of nations” is the result of  – learning about the world around us – and social organization that allows large groups of people to work together for the common good. Markets still have a crucial role to play in facilitating social cooperation, but they serve this purpose only if they are governed by the rule of law and subject to democratic checks. Otherwise, individuals can get rich by exploiting others, extracting wealth through rent-seeking rather than creating wealth through genuine ingenuity. Many of today’s wealthy took the exploitation route to get where they are. They have been well served by Trump’s policies, which have encouraged rent-seeking while destroying the underlying sources of wealth creation. Progressive capitalism seeks to do precisely the opposite.
  3. This brings us to the third priority: addressing the growing problem of concentrated . By exploiting information advantages, buying up potential competitors, and creating entry barriers, dominant firms are able to engage in large-scale rent-seeking to the detriment of everyone else. The rise in corporate market power, combined with the decline in workers’ bargaining power, goes a long way toward explaining why inequality is so high and growth so tepid. Unless government takes a more active role than neoliberalism prescribes, these problems will likely become much worse, owing to advances in robotization and artificial intelligence.
  4. The fourth key item on the progressive agenda is to sever the link between economic power and political influence. Economic power and political influence are mutually reinforcing and self-perpetuating, especially where, as in the US, wealthy individuals and corporations may spend without limit in elections. As the US moves ever closer to a fundamentally undemocratic system of “one dollar, one vote,” the system of checks and balances so necessary for democracy likely cannot hold: nothing will be able to constrain the power of the wealthy. This is not just a moral and political problem: economies with less inequality actually perform better. Progressive-capitalist reforms thus have to begin by curtailing the influence of money in politics and reducing wealth inequality.3

There is no magic bullet that can reverse the damage done by decades of neoliberalism. But a comprehensive agenda along the lines sketched above absolutely can. Much will depend on whether reformers are as resolute in combating problems like excessive market power and inequality as the private sector is in creating them.

A comprehensive agenda must focus on education, research, and the other true sources of wealth. It must protect the environment and fight climate change with the same vigilance as the Green New Dealers in the US and Extinction Rebellion in the United Kingdom. And it must provide public programs to ensure that no citizen is denied the basic requisites of a decent life. These include economic security, access to work and a living wage, health care and adequate housing, a secure retirement, and a quality education for one’s children.

This agenda is eminently affordable; in fact, we cannot afford not to enact it. The alternatives offered by nationalists and neoliberals would guarantee more stagnation, inequality, environmental degradation, and political acrimony, potentially leading to outcomes we do not even want to imagine.

Progressive capitalism is not an oxymoron. Rather, it is the most viable and vibrant alternative to an ideology that has clearly failed. As such, it represents the best chance we have of escaping our current economic and political malaise.