Getting the Bigger Picture: From Life-Disabling Neoliberal Traps to Life-Enabling Opening Up of Public Policy Fiscal Spaces

James K Galbraith Reviews Modern Monetary Theory

Nov 2, 2017

Some sage advice from an elder at the First International Convention of Modern Monetary Theory 2017

Presidential Lecture Series: Stephanie Kelton –
“But How Will We Pay for It? Making Public Money Work for Us”

Oct 18, 2018

Our nation’s finances are a blistering topic. Democrats blame Republicans for “blowing up the deficit” with tax cuts, while Republicans insist that programs such as Social Security and Medicare are the real drivers of our fiscal mess. As politicians fight over who’s at fault, an important debate is getting lost in the fog.

Professor Kelton casts a different light on these fiscal feuds and the budget deficit, arguing that both sides are missing the bigger picture when it comes to paying for our future.

Stephanie Kelton is a professor of public policy and economics at Stony Brook University. Before joining Stony Brook, she chaired the Economics Department at the University of Missouri—Kansas City, where she taught for seventeen years. She served as chief economist on the U.S. Senate Budget Committee (Democratic staff) in 2015 and as a senior economic adviser to Bernie Sanders’s 2016 presidential campaign. She is a former editor-in-chief of the top-ranked blog New Economic Perspectives and member of the TopWonks network of the nation’s best thinkers.

Fadhel Kaboub – Green New Deal Fixes Climate Change and Good Jobs for Everyone

Apr 6, 2019

“A Green New Deal for Newark:Climate Action, Social Justice & Jobs” Keynote speech by Fadhel Kaboub.

Why Government Spending Can’t Turn the U.S. Into Venezuela

When poor countries fall prey to inflation, it’s not because they’re “too socialist.”


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Fadhel Kaboub is an associate professor of economics at Denison University, and president of the Global Institute for Sustainable Prosperity.

Developing countries’ trade deficits are the product of fundamental economic shortcomings, themselves often a legacy of colonial rule.

This piece is a response to “PAYGO Is Based on a Fallacy” and “The Best Way to Argue Against PAYGO.”

The rising popularity of modern monetary theory (MMT) has inevitably brought misconceptions. Critics across the political spectrum often claim that MMTers want sovereign governments to “just print money” with no concern for the national debt or, as Max B. Sawicky suggests, inflation. Some, especially on the Right, point to Venezuela and Zimbabwe as classic cases of hyperinflation.

But MMT points to a different primary cause of inflation in developing countries: not domestic spending, but foreign debt and a resulting lack of “monetary sovereignty.”

A country has full monetary sovereignty when it has its own national currency that is not fixed to the value of gold or another nation’s currency; it uses that currency to impose taxes, fees and fines; and all its debt is payable in that currency. Countries that meet these criteria, like the United States and Japan, face no external constraints on government spending, as Pavlina R. Tcherneva explains. The risk of inflation remains under control so long as government spending does not outpace the economy’s real productive capacity—the availability of physical resources, skilled labor, equipment and technical know-how.

For developing countries, the problem begins with trade deficits and resulting debt owed in foreign currencies.

Those deficits are the product of fundamental economic shortcomings, themselves often a legacy of colonial rule. Postcolonial countries are typically unable to produce enough food and energy to meet domestic need, and they face structural industrial and technological deficiencies. Because of this, they must import food and energy, along with essential manufacturing inputs. For example, Venezuela lacks refining capacity, so—while it exports crude oil—it must import more expensive refined oil, contributing to trade deficits.

Importing more than they export causes these countries’ currencies to depreciate relative to major currencies. With a weaker currency, new imports (like food, fuel and medicine) become relatively more expensive. This imbalance is the real driver of inflation, and often of social and political unrest.

The International Monetary Fund (IMF) historically steps in at this point with emergency loans coupled with painful austerity measures. To get out of IMF conditions, even progressive policymakers typically prioritize acquiring foreign currency reserves in order to honor external debt payments. They promote tourism (tourists bring foreign currency) and design agricultural and manufacturing policies to support export industries. Meanwhile, industries that would build self-sufficiency (and thus fix the trade imbalance), like food crops for domestic consumption, receive little government support. All of this decreases self-sufficiency and reinforces the dependence on foreign goods that caused the debt in the first place.

Most developing countries looking for foreign currency also open their economies to investment from foreign corporations, agreeing to low environmental standards, weak labor regulations and tax exemptions, going deeper in the hole.

So what would an MMT-informed solution look like to help developing countries regain monetary policy and their ability to spend on domestic priorities? The goal is to reduce imports, secure a favorable trade balance and pay off their debts, so countries would focus on the root causes of trade deficits: invest in sustainable agricultural practices (like aquaponics) to restore food sovereignty; build renewable energy (like solar) to secure energy sovereignty; and invest in education and research and development to increase productivity and gain the ability to manufacture more valuable products. Such development would also increase the real productive capacity of the economy, meaning that governments would have more room to spend before inflation.

By illuminating the origins of postcolonial economic struggles, MMT shows us how to overcome them.

The New Postcolonial Economics w/ Fadhel Kaboub

July 07, 2018

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Scott and Max are joined by Fadhel Kaboub, associate professor of economics at Denison University and President of the Global Institute for Sustainable Prosperity: Fadhel outlines a new critical approach to postcolonial political economy, arguing that re-gaining financial sovereignty is a crucial next step for postcolonial nations hoping to achieve social, economic, and environmental justice. We talk specifically and at length about the CFA franc currency union, a system with violent colonial roots that continues to constrain the economic and political agency of its member states in West and Central Africa.

Fadhel Kaboub: Monetary Sovereignty, Colonialism and Independence

Jan 27, 2019

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Patricia and Christian chat with economics professor and president of the Global Institute For Sustainable Prosperity, Fadhel Kaboub about the meaning and importance of monetary sovereignty, MMT in relation to developing countries, Venezuela, colonialism, Scottish independence, and the MMT Job Guarantee.

This Is How MMT Applies To Emerging Markets (Podcast)

April 5, 2019

Reproduced from:

In discussions about Modern Monetary Theory (MMT) you often hear that while it may be true that the U.S. has the space to expand its deficits significantly, that it doesn’t apply to emerging markets. On this week’s episode of the Odd Lots podcast, we speak to Fadhel Kaboub, a professor of economics at Denison University, who examines emerging markets through the MMT lens. While it’s true that emerging markets don’t have the same kind of fiscal capacity as nations like the U.S., Canada, and Australia, the theory still offers insights into how EMs can pursue development policies that are different from the mainstream prescriptions.

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