In a recent post I discussed both Modern Monetary Theory and the New Economy Movement.
As that and a subsequent post indicated, MMT reflects a distinctly macroeconomic perspective, focused as it is on macro-level account balances; aggregate demand and price levels; a realistic view of federal deficits incurred by governments that issue their own floating, non-convertible currency; and the powerfully-constructive role of federal spending, including in support of a job guarantee for all those involuntarily unemployed.
In contrast, the New Economy Movement adopts a mainly microeconomic perspective, focusing on localism, sustainability, organizational systems that embody democratic principles (e.g., cooperatives)…or, in more general terms as described on the New Economics Institute web site, “new ways of organizing and understanding the economy which puts people and planet first.”
In a recent post on his “billy blog,” Australian economist and leading MMT thinker Bill Mitchell made the argument that the flourishing of a New Economy, as advocated by Gar Alperovitz and others, can be best achieved when macroeconomic policies reflect the kind of job- and demand-supporting perspective embodied in MMT. It cannot flourish, argued Mitchell, in an environment constrained by macroeconomic policies favoring fiscal austerity, as is very painfully the case today in Europe and also, to a large degree, in the U.S.
Progressives have to understand that the macroeconomic policy settings are crucial to achieving these more local goals. Too often, the new economy is held out as being a local solution. Well it can only be that if the aggregate solution allows it to be.
While expressing support for much of what it proposes, Mitchell cites what he considers a key failing of a recent article written by Alperovitz, a leader in the New Economy Movement:
Nowhere in the article is there any reference to fiscal policy nor to the role of the currency-issuing government in maintaining macroeconomic conditions that would allow these localised initiatives to bloom and become the base for democratic revival.
Mitchell also thinks Alperovitz misses a key point when he describes a key constraint facing the New Economy Movement as:
…the enormous entrenched power of an American political economic system dominated by very large banking and corporate interests—and bolstered by a politics heavily dependent on the financial muscle of elites at the top.
In Mitchell’s view:
…the real constraint is the poor economics education within the population. The elites, mentioned above, exploit this collective public ignorance and hold out neo-liberal free market economics as the only alternative.
Imagine if everyone understands the fundamental principles of macroeconomics (developed by MMT)? How long would the Wall Street elites maintain their lobbying sway? How long would politicians who advocate undermining our fortunes and the future of our children via fiscal austerity last in office? Answer: not very long.
Noting that even the Mondragon Cooperative Corporation, a large and respected federation of worker cooperatives based in the Basque region of Spain, is struggling to deal with the deep Spanish recession, Mitchell contends that:
Localism can only flourish within an appropriate fiscal environment that maintains aggregate demand at levels consistent with full employment. That is the same however production is organised.
He then closes his post with what sounds like a plea for solidarity between the microeconomic perspective of The New Economy Movement and the macroeconomic perspective of MMT (and their respective advocates):
I support the New Economy initiatives but implore the leading lights to educate themselves about MMT and why macro matters.
I’d like to second Mitchell’s call for solidarity, and for a more economically-informed populace. And I’d suggest that the New Economy and MMT perspectives be presented to the American people in a unified way as an alternative to the economic and institutional models that dominate our economy and political discourse today (e.g., overemphasis on and excess control by the financial sector; large-scale crony capitalism under the guise of “deregulation;” privatization of profit and socialization of risk and environmental damage; misguided and cruel support for fiscal austerity during a deep and extended recession).
And I’d go a bit further in my call for solidarity. I’d also add to it a focus on eliminating the money-based political corruption destroying the health of our democratic republic, along the lines of what’s being proposed by Larry Lessig (and others), which I briefly discussed in a recent post. As Lessig notes, this political corruption is a “root” problem that, if not addressed, will mean that the federal government will remain an obstacle to–or even an active opponent of–the kinds of reforms envisioned by the New Economy Movement, MMT advocates and other progressive forces in society.