Note — Sep 27, 2020

Degrowth and MMT: A Thought Experiment

This one by Jason Hickel reads as almost too good to be true. Because it is? Or because classic capitalism, money, and dept are so engrained in the foundations of our thinking?

He explains some of the basic principles behind Modern Monetary Theory (MMT)—which is basically that dept for countries does not exist and they can print as much money as they want, as long as they keep inflation down—and shows how it could fit perfectly with degrowth—i.e. “reduce excess resource and energy use (specifically in high-income nations) in order to bring the economy back into balance with the living world” and reduce inequality.

Hickel would issue enough currency to “develop generous, high-quality universal public services,” completely replace fossil fuels with renewable energy within years, and “introduce a public job guarantee, so that anyone who wants to work can get a job doing socially useful things that communities actually need.” Then tax the rich (initially) to control inflation and consumerism, to reduce demand to levels the planet can sustain. Basically, he argues that “by reversing artificial scarcity—by providing public abundance—we can dismantle the growth imperative.”

Other than if all of that is actually doable, the thing I’m wondering about is; how does this work if one or a few countries do it? What do the others say? How does it “connect” with existing markets and treaties?

They do not have to “balance their budgets”, and, crucially, they do not have to tax or borrow before they can spend. In reality, they create the money they spend - and they can create as much of it as they want. […]

The key limit is inflation: if you spend too much money into the economy, demand gets too hot and risks driving excess inflation. MMT economists propose that we should use taxation to mitigate this risk. In MMT, the purpose of taxation is not to fund government spending (again: governments fund spending simply by issuing currency), but rather to reduce excess demand. […]

[A]s Thomas Piketty has pointed out, reducing the purchasing power of the rich is one of the single most effective climate policies we can deploy, because the energy use of the rich is way out of whack.