Saturday, March 2, 2013

A clueless Stephanie Kelton on the Thom Hartmann show: Modern Monetary Theory as Marxism lite

MMT Queen Stephanie Kelton was on the Thom Hartmann show this week asserting that "infrastructure" cannot be provided by "the private sector" and because the government can never run out of dollars, it  can never really run out of the ability to construct "infrastructure".  Similarly, the government can never run out of funny money with which to pay for anything, like $200 trillion in diaper changing costs for 70 million senile baby boomers.  Just as with the Marxists, production happens "SOMEHOW", and the only thing holding it back is a mistaken belief that we still live under a "gold standard".  The law of scarcity and the problems of economic calculation and pricing magically disappear as the result of the unlimited supply of funny money dollars (actually, MMTers lack the mental capacity to recognize and/or understand the concepts of scarcity, economic calculation and the pricing process).  

For a comparison to Marxism, let's examine this review of Thomas Sowell’s Marxism: Philosophy and Economics:

Perhaps the most telling example of Marx’s ideas in practice is the results of Lenin’s early acceptance of the SOMEHOW approach to all but labor, as indicated by this quote from State and Revolution cited by Sowell:

Capitalist culture has created large-scale production, factories, railways, the postal service, telephones, etc., and on this basis the great majority of the functions of the old “state power” have become so simplified and can be reduced to such exceedingly simple operations of registration, filing, and checking that they can be easily performed by every literate person, can quite easily be performed for ordinary “workmen’s wages”, and that these functions can (and must) be stripped of every shadow of privilege, of every semblance of “official grandeur.”

In fact, Sowell observes that:

The early history of the Soviet Union provided the most dramatic empirical refutation of the Marxian assumption that management of economic enterprises is something to be taken for granted as occurring SOMEHOW. When economic incentives were drastically reduce or abolished in the heady egalitarian period following the Bolshevik revolution, the Soviet economy ground to a halt. Widespread hunger and a halt to vital services forced Lenin to resort to his “New Economic Policy” that restored the hated capitalist practices. The later nationalizing of all industry under Stalin and his successors did not restore egalitarianism. Quite the contrary. There were highly unequal rewards to management, including today whole systems of special privilege stores to which ordinary Soviet workers have no access. Moreover, the managers of Soviet industry have been disproportionately the descendants of the managerial class of earlier Soviet and czarist times (193).

Then comes the noteworthy conclusion:

Many observers have seen these developments as mere betrayals of Marxist ideals, missing the more fundamental point that a crucial false assumption must be corrected in practice if people are to survive. Its continuing sacredness in theory can only produce hypocrisy. The betrayal may be real, but in Marxian terminology, “no accident.” A similar process is occurring in China, to which many Western Marxists transferred their hopes after disillusionment with the Soviet Union. This too is seen as simply a betrayal of Mao by Deng, rather than a nation’s painful learning from experience that a key assumption of Marxian economics is false (193-4).

The gross falsehoods of Marx’s communism is why the lament commonly heard from so many communist sympathizers — that “true” communism was never put into practice — ought to be rejected. In fact, the ideals of communism — collectivism, dialectical materialism, the evils of capitalism, the idea of labor as the source of all surplus value, the goal of reshaping of man’s nature, the principle of “from each according to his ability to each according to his need,” and so on — were substantially put into practice by the communist regimes of the 20th century. The fact that the result was widespread starvation, forced labor camps, unbearable misery, totalitarian police states, and mass death is hardly a reason to think that the more consistent application of these ideas would result in blissful paradise.

I have pried and prodded these MMTers until I'm blue in the face. While they understand how the various squirtings of funny money appear within our nefarious fiat money system, they have no conception of how the underlying economy actually works because they do not understand production or pricing and they believe that the entire society is held together by these allegedly essential squirtings of funny money by the fiat funny money system.