Modern Monetary Theory Goes Global

(Bloomberg Businessweek) -- Cristina Lindblad and I did a video webcast yesterday (July 25) with Modern Monetary Theory economist Randall Wray as part of the BW Talks series. Here’s a link.

I thought I knew a lot about MMT, but Wray told us two things that came as a surprise. One is that tax-cut enthusiast Arthur Laffer, of all people, was instrumental in launching MMT by making a timely introduction. Turns out this is not breaking news. The Nation, for one, wrote about it in 2017:

Then along came Warren Mosler, a wealthy financier who, as a result of his banking work, had come to some unorthodox and complementary ideas about money. Eager to share his views, Mosler finagled a meeting with Donald Rumsfeld in the steam room of the Chicago Racquet Club. Rumsfeld led him to Arthur Laffer, the right-wing economist who came up with the “Laffer Curve” theory promoting low taxes, and Laffer, in turn, connected Mosler with his future collaborator, the economist Mark McNary.

The other surprise is how much traction MMT is getting outside the U.S. Wray said that Mosler has filled stadiums in Italy. I couldn’t confirm that in a quick perusal of the internet, but I did see that he’s drawn some pretty big indoor crowds. I also saw a recent tweet by MMTer Stephanie Kelton about getting mobbed in Japan. It’s been big for a while in Australia.

Wray was a great subject for me and Cristina to interview. (Cristina is editor of the Economics section of the magazine, and I write about economics for the magazine.) Wray is a professor of economics at Bard College in Annandale-on-Hudson, N.Y., and a senior scholar at the school’s Levy Economics Institute. He’s also a co-author, with Australians William Mitchell and Martin Watts, of the first MMT textbook, which was published earlier this year and is called, simply, Macroeconomics. I mentioned the textbook in an article with Bloomberg News colleagues Katia Dmitrieva and Matthew Boesler called “Warren Buffett Hates It. AOC Is for It. A Beginner’s Guide to Modern Monetary Theory.”

One of MMT’s core arguments is that a country that owes money in its own currency doesn’t have to worry about running up big debts because it can always print more money to cover them. The only constraint on government spending in MMT theory is the risk of overheating the economy and causing inflation.

About 25 years ago, Wray was one of the original theorists of MMT, an outgrowth of post-Keynesian economics. He told me and Cristina that Mosler used to ask him periodically how many people in the world “got” MMT. One year, Wray’s answer was five. Then it got up to 10. The theory gained popularity after the financial crisis and then got another surge after Bernie Sanders’s presidential campaign (which Kelton advised) and after freshman Representative Alexandria Ocasio-Cortez, the Democratic Socialist from the Bronx, embraced it.

Now, Wray says, there are probably tens of thousands of people who understand MMT well enough to hold their own in a debate with a mainstream economist such as Paul Krugman.

That’s a strong statement, to be sure. Krugman would argue that there are zero MMTers who could hold their own in a debate. Like it or not, though, MMT is catching on.

To contact the editor responsible for this story: Eric Gelman at egelman3@bloomberg.net

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