Friday, 8 January 2016

My criticism of Minsky's social policies & of some MMTers

Here's an excerpt from Minsky on the subject of inflation & welfare being a "significant" and "blatant" cause of it

I have to say, I agree fully with Lynch's criticism on Minsky's social policies. Indeed, Minsky doesn't provide references to back many of his claims about unemployment benefits "institutionalizing unemployment & poverty." WTF, which came first? The Food Stamps or the Unemployed?

Minsky sees "bringing into control food stamps" more important than ending foreign wars. He wants to excise the welfare system. Wants to get kids out of schools & to reduce retirement age wants child allowances to be cut and unemployment checks to vanish. He explicitly says that his WPA program is a SUBSTITUTE, not an add on on unemployment benefits. This line alone will turn off the entirety of the Left youth. Furthermore, his revised child allowance scheme is designed to end after 16 years old. With the wages he prescribed for the CCC & NYA I highly doubt people in these forms of JG would pull themselves out of poverty especially since youth in the CCC would be between 16-21.

All this rush to get people to work, out of school & out of their retirement.
Why not simply increase the immigration quotas? Honest immigrants want to work anyway be it minimum wage or below it full hours & extra hours because they have families to support back home. Minsky makes absolutely NO mention of the dismantling of the US Gov commodity buffer stock policies which Kaldor himself said, had the US gov not done that, it would have averted the Stagflation of the '70s.

Also, why do the people in the CCC have to be supervised by military personnel in the camps? Why not by folks from the national guard or the police? You'll laugh your ass off when Minsky refers to food stamps as "funny money" and "funny money printing." The infirm & people with children to raise have to go into the JG too. No unemployment check for them because it's inflationary. How would a cripple contribute to tangible output which one can eat? Are you going to put him in the field & tell him to farm? Unions have too big wages too. Gov should add taxes on buses, trucks, and automobiles in order to subsidize railways and mass transportation; this is what Minsky says.

Also, Minsky wants to imitate Sweden in energy efficiency; nice, but it strikes me odd that Minsky isn't advocating for a land tax or a progressive tax on huge property since he's against big business & big banks.

Unless Minsky is putting people through his WPA & NYA programs to farm, I don't see how this would stabilize food prices. I very much doubt people in the JG would be producing stuff for export to warrant the argument of "JG increases exports & is able to increase imports of food in consequence." The only way his reforms would "stabilize" prices of food would be via crunching demand. Get the bottom income brackets to consume less food, awesome policy.

I got into an argument with Fullwiler on Dan Lynch's criticisms of Minsky's social policies, and although I got Scott to concede that Minsky's claim that food stamps are inflationary is a poor argument, he nevertheless went on to call Lynch a jerk for "taking Minsky out of context." When I posted the GINI trend for the US during those years, Fullwiler & others said - there's no decrease in GINI. I told them I saw a W and you can't really say unemployment benefits were a failure when in '68, US had lowest GINI in history. Scott said, oh, 3 years is too short a period and that the Great society's reforms need to be looked at in a broader time-window.

When I suggested that other factors are contributing to inflation, and not food stamps, Fullwiler said that's a weak argument; he said that anything can be inflationary. With that reasoning in mind, why stop at welfare checks? Patents are inflationary too, rent extraction is inflationary too. Vietnam & other wars are inflationary too; waste of lives, resources, and labor on the means of death. Minsky is making a supply-side argument against social security. It's literally the exact type of arguments people make against the minimum wage. 'Minimum wage increases labor costs, leads to unemployment, and inflation'. It's the same tactic and with his social security reforms, I highly doubt they would alleviate poverty since he's not offering living wage and his reformed childcare benefits expire after the child is no longer 16. Instead of just focusing on attacking crony capitalism and the country's foreign policy, Minsky is attacking social security which is an easier sell to the monetarists & supply siders of his time. That excerpt is from his '75 book.

Minsky also makes no note that the US was under a fixed exchange rate prior to '71 and his comment about "What would OPEC do if the US had energy independence?" demonstrates, at least to me, that he was ignorant of how the US recycled the commercial surpluses of its trade partners.

Returning to "anything can be inflationary" excuse, lawsuits are inflationary too, advertising & marketing are inflationary too, bureaucracy as well; they add to the cost just like Pavlina responded in a tweet backing up Fullwiler. Food stamps are added to the cost. This is the sort of hagiography that I try to steer away from because it can affect anybody and it makes people launch unwarranted ad hominems and totally disregard criticisms/dissent. Criticism that's made in a polite way. Lynch was in no way being uncivil or outrageous when he criticized Minsky's social policies or a JG that doesn't offer living wage.
Anyway, I myself would wish MMTers (in general) would stick to being State Theory of Money 101 - i.e. a descriptive school, not a prescriptive one because it gives way to unnecessary confusion & friction. Inform the people about fiscal, monetary, and banking ops, then let them choose their own politics/policies with that knowledge in mind.

Here are some thoughts from Peter Cooper, who is absolutely spot on in my opinion.
"Can't say I'm surprised about Minsky's reactionary positions. I never paid much attention to him, to be honest, as I was never that impressed with his economic analysis. I perceive similar social chauvinism and paternalism when it comes to the MMT view toward basic income. The claimed nominal price anchoring advantage of the JG is overstated, not least because the MMTers fail to acknowledge that a lot of productive activity occurs outside the workforce and a lot of unproductive activity occurs within it. MMTers in effect are implying that paying academics $200k/yr to solve irrelevant puzzles is not inflationary because this occurs in a job; ditto for a JG worker on $30k/yr; but a single mother on $10k/yr in welfare payments spells the death of the currency because this is income without any labor force participation in exchange. Hyperinflation! The value of the currency needs to be understood on average (i.e. the average amt of labor power being commanded by a unit of the currency, economy-wide), not at the margin as the MMTers claim. Welfare benefits, in themselves, do lower this average amount of commanded labor power, and so do have some impact on currency value, when viewed in the narrow MMT way of only counting labor force participation as productive. But by the MMT marginalist logic on currency value, there should already be hyperinflation because some people are getting an income outside of a job. Measured at the margin, the value of the currency is already zero! Regarding Minsky's "funny money" nonsense, at least one leading MMTer also freely throws around "banana republic" hysterical comments when it suits him, just like Minsky, and just like the gold bugs who attack MMT. FWIW, I think the tide is against MMTers on these issues anyway, so I doubt it really matters much. I seriously doubt the JG has much chance of gaining broad political support. Conservatives prefer work-for-the-dole etc. A majority of liberals probably prefer the current arrangement or even a BIG to a JG. And over time technical progress and automation is going to make the idea of relying primarily on a JG increasingly ridiculous. (I do of course support the JG, if that is what is on the policy table, though prefer it to be combined with basic income.)"
 ~Peter Cooper
Make sure to check out his blog, as well. It's a super-rich source of heterodox knowledge.