The Real Movement

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Public Debt and Financial Accumulation: The fascist implications of the MMT two sector model

NOTE FOR THE READER: I want to reiterate that fascism, in the sense I use the term, only describes a state managed economy. I need to clarify again that my argument is not that modern money theory (MMT) is wrong, but that it correctly describes how fascism works. Nor do I wish to suggest that fascism means MMT is Nazism — many people who could never be described as Nazis embrace MMT insights. A fascist state, as I use the term, must be contrasted with a commune of the social producers, not with ‘democracy’ or a bourgeois republic. In fascism the bourgeois state manages the economic activity of the whole society, while a commune of social producers is self-managed. If the reader fails to keep these critical ideas in mind when reading this post, nothing much of my argument will make sense to you.

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Continuing with my critique of Tymoigne’s and Wray’s defense of modern money theory, which can be found here. In my last post, I argued that MMT has no explanation for how the state became monetarily sovereign and thus avoids PICTURE: MMTexamining the implications of this development. The very way the paper is organized leads to the conclusion that consumption must come before production and buying must come before selling.

This is explains why Tymoigne and Wray begin their discussion with an examination of the monetarily sovereign state and then proceed to introduce the so-called private sector into their analysis. This method of presentation of their argument makes it appear as if the state’s activities precede that of society. In fact, the premise of the state’s activities is the overproduction of real capital — a mass of excess capital in the form of money, means and labor power. We can trace this excess not to some distant historical event, surrounded by the mists of time, but to the Great Depression. In the paper, however, the writers never discuss this ‘prehistory’ of the fascist state because they begin with the assumption the fascist state already exists.

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Catastrophe: Modern money, the state and labor theory

1. Modern Money Theory, or the state as monetary sovereign

I am reading, “Modern Money Theory 101: A Reply to Critics by Eric Tymoigne and L. Randall Wray”. I like this paper because it is a comprehensive defense of the ideology of the modern money school (MMT). Because it is a comprehensive statement of this school, it is possible to show modern money theory is a theory of fascism on steroids.

teapartyI want to state at the outset that by fascism I do not mean Nazism or any other peculiar manifestation of fascist politics from the 1930s. (Indeed, the ideas associated with modern money theory are popular across the entire spectrum of American politics — from the Tea Party to the progressive Left.) Rather, I will show that MMT expresses a fundamental tendency inherent in the capitalist mode of production toward the displacement of the capitalist class as managers of the production of surplus value by the state.

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Ten common questions about the revolutionary potential of reducing hours of labor

According to this note by Warren Mosler of the modern money school, more income inequality will require bigger deficit by the state to maintain full employment.

This implies we need a larger deficit than otherwise to close the output gap/sustain full employment, has higher income earners tend to generate more unspent income/more savings than lower income earners.

emp-survey-small

Looks to me like the “1.2 million who lost benefits at year and took menial jobs” narrative has run its course, and consequently H2 employment gains will be that much weaker than H1, as suggested earlier…

The idea that increasing income inequality requires larger state deficits points to the basic irrationality of the modern money school’s policy recommendations. As income becomes more unequal, more excess capital is being produced, this excess capital cannot produce a profit unless it is lent to the state, thus the total output that must be unproductively consumed by the fascist state constantly increases.

But this increase in unproductive state consumption does not do away with the inequality; it simply acts as a savings account for excess capital. The state not only absorbs the excess capital, it begins to pay interest on the capital, adding to the income inequality.

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Will a $15 minimum wage create jobs in Seattle?

According to this article, “Thinking Bigger in Local Minimum Wage Campaigns: The Fight for $15 in Seattle”, raising the minimum wage to $15 would reduce poverty in Seattle from 13.6% to 9.4%. The increase, we are told, would affect more workers than any NLRB action in US history. The increase will have positive effect on the entire economy because “more people with more money means more customers for more businesses.” It is based, David Rolf asserts, on a “commonsense ‘middle out’ argument about how economics works”.

large_advanced_burger_flipperOf course, if this is actually “how economics works”, how did we get to a situation where poverty has been increasing for most of the last 40 years? Suppose a higher minimum wage actually means fewer businesses, i.e., suppose it wipes out the fast food industry. If this turns out to be the outcome of an increase in the minimum wage, would Mr. David Rolf then suggest the minimum wage must be reduced? If raising the minimum wage results in the collapse of a host of marginally profitable businesses, would he change his tune?

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Capitalization, Rupture and the future of capitalism

I am reading, “Systemic Fear, Modern Finance and the Future of Capitalism” by Shimshon Bichler and Jonathan Nitzan and my head is exploding as I try to grasp the implications of their argument. I will try to cover this paper in two parts.

In this part I want to show why Bichler and Nitzan are concerned only with a certain sort of capital — superfluous or excess capital. In the next part I will show why this capital, since it has no productive purpose, i.e., because it does not produce surplus value, can only function as capital if it lent to the fascist state. My argument has implication that I will develop in part two.

Capitalization and ‘rupture’

According to Bichler and Nitzan, capital is finance capital and is only concerned with the present value of future stream of profits:

“In its modern incarnation, capital exists as forward-looking capitalization, a universal financial ritual that discounts expected future earnings to a singular present value.”

rupture__by_shutter_shooter-d4xvpw7This perspective ignores the “duality” between real and fictitious capital; between material production and finance. In terms Marx might put it, Bichler and Nitzan proposed that the reality of capital in the 21st century is not M=>C=>P=>C’=M’, but the truncated formulation of fictitious capital, M=>M’. In short, this is the capital that Marx says knows nothing about production; It is a speculative capital that makes its home solely in the sphere of fictitious profits.

For this reason, perhaps, Bichler and Nitzan do not speak of a capitalist mode of production at all, but a ‘capitalist mode of power’.

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Memo to Tsipras: SYRIZA will have all the tools necessary to fix Greece’s crisis

icfNWXWz7v28If the polls hold up, it looks as if SYRIZA has emerged as the most likely party to form the next government in Greece and this is a good thing.

If the party can get its shit together, it has all the tools it needs to address the prolonged crisis imposed on Greece by the troika — the European Union, European Central Bank and International Monetary Fund — and chart a different path forward for all of Europe.

My optimism might seem utopian, since by all accounts SYRIZA will be dependent on the European Central Bank for much of policy required to extract Europe from its crisis. Essentially, it would appear the Left is dependent on the very people who created the crisis to fix it.

I will show in this post why this is not true.

The crisis and the crisis of fiscal policy

The policy problem SYRIZA will face once it has formed a government is often framed the way it is in a recent article by Blyth and Lonergan, “Why Central Banks Should Give Money Directly to the People”. The article, which appeared in, of all places, Foreign Affairs magazine, the propaganda organ of the Council on Foreign Relations, purports to explain how a central bank might facilitate the creation of a basic income scheme.

Like Billy Mitchell’s recent piece on his misconceived job guarantee apparently it never dawned on Blyth and Lonergan that having a central bank just hand out money to the citizens of a country implies that enormous political power has become concentrated in the hands of an unelected financial oligarchy.

If we assume for the sake of argument the respective plans suggested by the Mitchell and by Blyth and Lonergan are technically feasible, we still have to explain how this sort of political power has become so concentrated in the hands of private, unelected, banking cartels? Moreover, we have to ask ourselves what impact this concentration economic power will have on political relations if both the general management of economic cycles and ‘social entitlements’ like a jobs guarantee and a basic income scheme now appears within the purview of unelected financial oligarchy?

If these programs can work technically why can’t the central banks simply print up currency and fund education? NATO? Social Security? Infrastructure ‘investment’? In fact, why can’t we just turn all of the economic management functions of the state over to the banking cartel to manage it for us?

Ignore, for a moment, that the roots of Blyth and Lonergan’s basic income scheme are anchored deeply in the writings of some of the most notorious post-war fascists, like Friedman and Hayek, why is the Left so willing to overlook the enormous shift in political power into the hands of a financial oligarchy that their plan implies? Bill Mitchell, who touts himself as a Leftist, never appears to even notice that the European Central Bank is not an elected public authority. The central banks are private cartels that have been handed control of monetary policy in much the same way many other state military and police functions have been outsourced to Blackwater and G4S. Functions of the state have been outsourced piecemeal by Washington and other national governments to private interests in one after another sphere.

Blyth and Lonergan admit that government can boost spending through both its fiscal and monetary policies. However the writers explain fiscal power in the United States — the power of the state to tax and spend — has been crippled by party squabbles and lack of consensus. Meanwhile government has outsourced its monetary authority to a private cartel of banks. Thus, with fiscal policy tied up in knots, elected officials have come to rely almost exclusively on the monetary policy conducted by central banks:

“The shift has occurred for a number of reasons. Particularly in the United States, partisan divides over fiscal policy have grown too wide to bridge, as the left and the right have waged bitter fights over whether to increase government spending or cut tax rates. More generally, tax rebates and stimulus packages tend to face greater political hurdles than monetary policy shifts. Presidents and prime ministers need approval from their legislatures to pass a budget; that takes time, and the resulting tax breaks and government investments often benefit powerful constituencies rather than the economy as a whole.”

A suspiciously convenient explanation

There is something suspiciously convenient about this alleged explanation that bears closer examination. Permit me to argue that it is not the lack of consensus on fiscal policy; rather, the situation is the opposite: there is a consensus for a concerted effort to prevent fiscal policy from operating. Fiscal policy is not crippled because of party squabbles, but because national governments have no desire to use fiscal policy.

This fact is most clearly demonstrated by looking at the European Union.

As Mitchell has pointed out, the European Union was deliberately created without any facility for countercyclical fiscal policy. While in Washington or Tokyo the political conflict among elected officials over fiscal policy appears to  result from a lack of consensus, no such explanation can account for how the EU works. We have to account for the fact that the EU somehow was created without any facility for fiscal countercyclical policy.

Now, how was that possible? How did some of the best minds of Europe just forget crises happen? Clearly, no one just forgot to include the capacity to conduct countercyclical fiscal policy in the EU’s structure. A fiscal countercyclical mechanism was left out intentionally, so that all countercyclical policy would be conducted through an unelected monetary authority — the ECB.

When you look at the EU’s structure, the apparent political impasse over fiscal policy in the US and Japan becomes easier to understand. This is because there is no legacy institutional explanation for the lack of countercyclical fiscal policy in the EU in the present crisis. The EU, from its inception, was created without the capacity to implement countercyclical fiscal policy. Monetary policy was placed in the hands of the unelected European Central bank, which is characterized as “politically independent” — that is, not subject to democratic will — and able to implement policy, “with a single conference call”.

In the EU, there is no facility for fiscal policy, while monetary policy has been removed from democratic control altogether and placed in the hands of an unelected financial oligarchy.

Fiscal policy has been deliberately crippled

When Bill Mitchell and Blyth and Lonergan advocate for their pet projects — a jobs guarantee for Mitchell, basic income for Blyth and Lonergan — each bases their proposal on the explicit assumption governments have, for whatever reason, no capacity to implement any fiscal policy, while an unelected central bank controls monetary policy. But, leaving the eurozone aside, it is not as if the writers are unaware of the fiscal power of national governments, rather they simply assume this power is effectively dysfunctional and unable to be employed for their policy purposes.

However, the experience of the EU suggests something else is at work: a deliberate effort to constrain or prevent national governments from conducting fiscal policy. And this is set against the backdrop of the outsourcing of monetary policy — inconvertible state issued fiat — to a private cartel. First, monetary policy was outsourced, then fiscal policy was crippled.

Okay, so now I am beginning to sound like a gold bug conspiracy theorist, right? Well, that is not likely to convince anyone, so let’s broaden the discussion beyond the outsourcing of monetary policy and the crippling of fiscal policy to another, broader, conflict at the heart of state economic policy.

No one in power want to end unemployment and poverty

Why was fiscal policy crippled? Why was monetary policy outsourced? According to the writers, fiscal policy was crippled because of the lack of political consensus. And, again, according to the writers, monetary policy was outsourced to insulate monetary policy from (democratic) political pressure. In both cases the conduct of fiscal and monetary policy has been influenced by a consistent political aim: to prevent economic policy from reflecting democratic will.

The problem is not that government cannot conduct its own fiscal and monetary policy; rather it seems that no one in Washington wants this. Yes, the Fed could, in theory, print up some fiat and hand it out in the form of a basic income, but so could the elected government in Washington. Since the Fed has been delegated the power to conduct monetary policy by elected officials in Washington, it has no power not that is not already in the hands of the elected officials.

Thus, if the aim of the elected officials was to eliminate unemployment and poverty, the officials could do this directly and get all the credit. In the next election, they could run on their accomplishments: Yay! We ended poverty and unemployment! Re-elect us!”

Which is to say, the Left needs to consider the possibility that monetary policy didn’t end up as the function of a private cartel to fix poverty and unemployment; it ended up there in order to NOT fix them. And fiscal policy was crippled in order to NOT fix them as well. If you don’t want to fix unemployment and poverty, you cripple fiscal policy and outsource monetary policy to a private cartel. You try, in other words, to insulate policy tools from democratic political pressure to address unemployment and poverty.

Further, fiscal and monetary policy only exist to avoid directly tackling the problems of unemployment and poverty in the first place. There is, for instance, nothing that prevents Washington, Tokyo or Athens from tackling unemployment and poverty — all they have to do is reduce labor time until no one is unemployed and raising the minimum wage until no one who is working is in poverty.

If people are unemployed, you just cut hours until no one is unemployed; if people are in poverty, you just raise the minimum wage until no one working full time is in poverty. Between these two policies, everyone has a job and no one is in poverty. It does not require any fiscal or monetary policy tools to accomplish this.

Which means, politicans rely on fiscal and monetary tools only because they DON’T want to eliminate unemployment and poverty.

Fiscal and monetary policy began in order to relieve pressure for reduction of hours of labor in the 1930s — that was the sole purpose. After the depression of the 1970s, fiscal policy itself was discarded in order to relieve pressure for increase spending to employ people.

This was the whole purpose, for instance, behind the 1978 Humphrey–Hawkins Full Employment Act. The purpose of that act was to make “full employment” completely dependent on Federal Reserve monetary policy, i.e., to insulate the management of the economy from democratic political pressure. The 1978 act did not just insulate monetary policy from political pressure; more important, it insulated employment and wages from political pressure.

The fiscal and monetary policy debate is a distraction

The monetary power of the central bank is a distraction, since every government already has the power to address unemployment directly. What remains to be explained is why the Left has not made use of this capacity in the hands of the state in its agitation since the 1930s. Why does the Left not only ignore this capacity, but repeatedly dismisses it whenever they are confronted with the idea of reducing hours of labor?

This, I believe, cannot be explained by stupidity — although I often use this excuse. There is something deeper and more sinister at work on the Left than mere stupidity. It comes to the surface here in a particular way — evidence of a basic despotism on the Left — that the aim of emancipation is not to free society from labor but to regulate its activity.

SYRIZA has the opportunity to break with this despotic tendency on the Left and redirect the Left’s energy in the direction of a genuine social emancipation of society from labor. The tool will be in their hand, but will they use it?

Noumena deFanged: Ray Brassier’s toothless critique of Nick Land

180694754Ray Brassier’s take on Nick Land is jaw-droppingly silly for someone whose Wikipedia entry touts him as “one of the foremost philosophers of contemporary Speculative realism interested in providing a robust defense of philosophical realism in the wake of the challenges posed to it by post-Kantian critical idealism, phenomenology, post-modernism, deconstruction, or, more broadly speaking, “correlationism”.”

You would think with those sorts of credentials he could understand Land’s argument at least at the level of a recent entrant to university.

But you would be disappointed.

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Gaza: The class that puts an end to classes, will never realize it is a class

Earlier this week, in a response to my post, “The necessary incoherence of proletarian consciousness”, a tweep directed this question to me:

“I’ll ask you directly: Do you consider Gaza or Auschwitz intraproletarian conflicts?”

World News - July 21, 2014This is a really good question that goes to the implications of my post: why is proletarian consciousness susceptible to accepting the most outrageous behavior toward members of their own class? Why, in other words, is it so difficult to realize solidarity among proletarians?

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Fuck MMT: The Left had better start looking for an exit from capitalism

Bill Mitchell, an Australian blogger associated with the modern money (MMT) school, thinks the Eurozone has failed, but he is not clear whether the failure results from ignorance, stupidity or malice. And I feel his pain, since I go back and Photo0637-1forth on this one myself. It is difficult to figure out whether the European Union (EU) was designed to be ineffective in a crisis or if these people are just too stupid to be managing one of the world market’s most important regional institutions.

Mitchell takes exception with the idea that the European economic mechanism has been crippled by the crisis. According to him, this idea only makes sense if you assume the European Central Bank (ECB) has no role to play in facilitating the fiscal intervention necessary to fight the crisis — an assumption he doesn’t accept:

“The ECB boss [Mario Draghi] felt it his purpose at the gathering, which you can guarantee is plush in all respects (catering, wines, etc), to urge politicians to introduce more “growth-friendly policies”. He claimed in his speech – Unemployment in the euro area – that the so-called “sovereign debt crisis” had disabled “in part the tools of macroeconomic stabilisation”. Which is only true if one accepts that a central bank should play no role in supporting fiscal policy and that fiscal policy should be constrained by innane rules that deliberately prevent it from having sufficient latitude to meet foreseeable crises.”

If you think the ECB can support fiscal policy, then fascist management hasn’t failed — it is just being incompetently managed. But, Mitchell adds, ECB action is constrained by rules that appear to deliberately prevent it from meeting what should have been a foreseeable crisis. If the crisis was foreseeable, but the ECB was hedged in by rules to prevent it responding, this might imply the ECB is working just the way it was designed to work.

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The necessary incoherence of proletarian consciousness

A while ago, @graphlegmblop asked me a question: “what the hell does “behaving as a class” mean?” Both of us were disappointed with my response at the time. So I am going  to restate in a way we might both find more satisfactory.

The question was raised, because my contention is that Marx and Engels did not think the proletariat was capable of behaving as a class. If the proletariat is incapable of behaving as a class, much of 20th century Marxist political strategy is Bt-B_CgIQAAZUKOdefective because it assumes the opposite: that political strategy assumes the working class can act as a class, can acquire consciousness as a class and has a class interest to assert. If none of these assumptions are true, it would explain much about the course of 20th century politics and the emergence of fascism. I contend none of them are true and that proletarian revolution was always premised on an external event that is not given in the capitalist relationship — the development of a political consciousness among the working class.

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