Public ideas

All you need to know about economics

Between them the ABC’s Gareth Hutchens and Korean economist Ha-Joon Chang cover a vast landscape of economic theory, in a post by Hutchens reviewing a recently-published documentary on Modern Monetary Theory (MMT).

It’s far more than a review. Before getting on to MMT, Hutchens reminds us that the discipline of economics is far from settled. To get that message across his post includes a link to an animated video by Ha-Joon Chang explaining the fluidity of economic thinking. It’s a masterpiece of explanatory conciseness – all in 11 minutes. It includes a description of nine streams of economics, captured in a 9 X 6 matrix, based on their different assumptions about society and human behavior, and their classification systems.

This is Hutchens’ way of reminding us that it’s wise “to stay humble and open-minded to different perspectives”, because MMT is one of those different perspectives.

He goes on to describe the basic ideas of MMT, emphasizing that just like monetary authorities around the world, MMT’s advocates are concerned to keep inflation in check, but in a more fine-grained way than as applied by central banks. Much of his article is about the details of how MMT works to create money, and about how, during the Covid-19 pandemic, our government, de-facto, was applying MMT.

He gets to the nub of MMT where he goes into the politics of budgeting. MMT counters the idea that voters, seeking improved public services, should be shrugged off with excuses such as “we’ve run out of money”. Rather:

[MMT] wants politicians to be forced to explain to voters why they don't want to dedicate more resources to helping people get the things they want, rather than being able to hide behind myths about supposed federal budget constraints.

That’s because MMT does not follow the usual fiscal process, where governments start by seeing how much fiscal capacity they have, and then rations out funding to competing programs – as would now be happening in the government’s Expenditure Review Committee.

Rather, its staring point is to consider what voters want, and then to assess if we have the physical and human capital resources to fill those needs. Provided we have those resources, allocating funds to pay for them won’t be inflationary. Hutchens quotes a MMT advocate Tim Hext:

The main idea behind MMT is a central bank like the RBA can create as much of its own currency as it wants. This means the federal government's budget is merely an accounting entry. The government can spend more than it drains via taxes, without needing to borrow from the financial sector.

In this focus on real resources, rather than on money, MMT brings fiscal and monetary policy together and it brings some hard physical reality to governments. If Whitlam’s cabinet had had an MMT mindset, it would have asked how long it takes to train a teacher before over-spending on education, and it would have had the public service assess the capacity of the construction industry before it splashed out on its ambitious urban and regional development program. That wouldn’t have reduced the government’s achievements in these areas, but it would have kept inflation in check.

We could imagine MMT’s application in relation to housing policy. The government is clearly concerned to see more houses, including public housing, being built, but is constrained by fiscal and monetary settings. If it goes into deficit the RBA will respond with higher interest rates, making housing less affordable. An MMT approach would see it assessing the extent of unemployed or under-employed resources relating to housing (how many skilled joiners are driving Ubers or stacking supermarket shelves, do our forest industries have the capacity to provide wood? and so on), and allocate funds accordingly.

Sounds simple, and it is, but it would require significantly different institutional mindsets and a different political environment. Monetary authorities would have to abandon the notion that labour is some fungible commodity that is linked to inflation by some simple equation. That is not to suggest that the RBA is so crude in its economic understanding, but its public statements and the media’s interpretation of those statements have ingrained in policymakers’ minds that there is a simple tradeoff between the unemployment rate and inflation. And politically, governments, opposition parties and media would have to overcome their obsession with deficits and debt, and take the attitude “it’s only money”.

Why are evangelical Christians attracted to political strongmen?

In the 2020 US elections 84 percent of people described by the Pew Research Center as “white evangelicals” voted for Trump, while voters of different Christian faiths were much more balanced, and voters of non-Christian faith and of no faith strongly supported Biden.

Similarly Americans describing themselves as evangelical Christians have tended to valorize Putin, in spite of his murderous brutality, while distancing themselves from social democrat political candidates and office holders, whose values and policies align much more closely with Christian social teaching.

On the ABC Religion and Ethics Report Rev Mike Bird of Ridley Theological College describes this phenomenon and explains the reasoning that leads some Christian believers to throw their support behind political thugs: Putin’s appeal among US evangelicals.

It’s because Putin doesn’t allow Russians to hold gay pride parades.

OK, it’s a little more complex, but the west’s tolerance of individuals’ sexual preferences has a lot to do with it. That tolerance is symptomatic of societies that have drifted into secularism and godlessness, away from “Christian” traditions.

In a short essay on the ABC site – Is the enemy of their enemy really their friend? Why American evangelicals’ veneration of Vladimir Putin is so dangerous – Bird explains how to evangelicals Putin is the defender of Russian Orthodoxy and its values, in opposition to secularist Europe and a progressive president like Biden. While Putin holds the line in Russia, Trump is expected to do so in the USA.

 As Bird writes “’Orthodoxy, Autocracy, and Nationality’ — a motto of Tsarist Russia — is easily translatable into the American vernacular as ‘God, Trump, and MAGA’.”

Bird is co-editor, with Tom Wright (also of Ridley College) of Jesus and the powers: Christian political witness in an age of totalitarian terror and dysfunctional democracies.

Who is Jürgen Habermas?

Jürgen Habermas is known among scholars as a prolific moral philosopher who has influenced our ideas on politics, the law, economics, and sociology. He has been closely associated with the discipline known as Critical Theory, associated with the Frankfurt School of philosophy. Some have drawn on the ideas of the Frankfurt school to go down the bleak and nihilistic path of postmodernism, for example to develop the idea of critical race theory. Habermas, by contrast, has held on to Enlightenment values and is a passionate believer in the power of rational communication to create a just and fair society.

One of Habermas’s most noteworthy contributions has been to analyse the relationship between everyday colloquial language and the language of philosophers. The relationship is fluid, characterized by interdependence, and the use of language and the nature of public discourse influence our social and political arrangements.

Writing in The ConversationJürgen Habermas is a major public intellectual. What are his key ideas? – Duncan Ivison helps us understand two of his two main contributions.

The first is what Ivison summarizes as “The unforced force of the better argument”. It’s an apt reminder that the rules we apply to public discourse, and our willingness to engage in public discourse, shape public policy – an important consideration in a time when the world is awash with fake news, lies, bullshit and scare campaigns, and when social media is largely free of guiding norms.

The second and related contribution is about deliberative democracy – a way of reconciling the possibly conflicting values of equality and liberty, which lie at the core of long-standing left-right conflicts. This reconciliation should take place in the public sphere, where the powerful can be called to account.