Something better at reducing poverty than Modern Money Theory (MMT)

Modern Money Theory (MMT) has captivated the imagination of many economists and political thinkers.  MMT is the idea that a government which has its own fiat money can never run out of money because it can always create more. 

MMT theorists have studied the economic effects of ‘quantitative easing’, a term used for the way state banks increase the quantity of money during a crisis.  State banks have created eye watering amounts of new money in their own fiat currencies during the financial crisis of 2008 and the Covid19 crisis (UK £895 billion, US $6.5 trillion, EU €1.8 trillion).  Central banks have bought government debt from banks and pension funds.  The banks were then able to lend money to customers and pension funds could buy other assets, such as shares and corporate bonds.  This flow of new money propped up the economy.  

MMT theorists argue that state banks should reduce poverty by creating new fiat money for governments to spend on creating new, guaranteed, jobs, like a permanent job retention scheme.

This sounds good in theory. Like all theories, it might work in some ways, but it might not. We can’t tell because complexity theory applies and makes forecasting economic outcomes as hard as forecasting the weather. 

Economic patterns can be observed and general predictions made but economic variables are too great to be able to reliably predict an economic outcome.  The slightest change of one variable, like the flapping of a butterfly’s wings, can cause vast, unexpected changes in the future.  The list of economic variables frazzles the mind.  Supply and demand, variable interest rates, money supply, tax levels, complex debt structures, national debt, inter-government debt, the savings ratio, the list of variables goes on and on.  Changes in population affect economics through birth rates, death rates, migration, marriage and divorce.   No super computer or economic model can predict the economic future.   MMT is too simple to guarantee the desired outcome. Creating new money could make some people poorer.

Predicting economic outcomes is made more complex by our human nature.  We tend to spend lots on ourselves when money is plentiful and hoard when it gets tight.  The boom-bust cycle is a product of human greed working, en-masse, in two directions.  All people are naturally self-centred.  Our frame of reference is ‘what will work best for me?’  The answers to this question result in all kinds of behaviour which render MMT, like other economic theories like the trickle-down effect of consumerism or the state organised communism, ineffective for fixing poverty.  Poverty is systemic but systemic solutions won’t make it go away, because the people in the system are programmed to think ‘what’s best for me?’  

‘Me first’ thinking plays out on the economic stage, like circus acts, in spectacular and unpredictable ways.  Greed, sloth, pleasure seeking, lack of compassion, unwillingness to share and stinginess all break the system.  We are each essentially like Ebeneezer Scrooge, no matter how hard we try to hide it, mask it or deny it.  And we all have a myriad of ways of convincing ourselves that we are more economically altruistic than we really are.

Yet altruism, generosity and other person centredness is the key to unlock the system.  It is a change of heart rather than a change of the economic system that we need.  

What if we refocus on new objects of love and desire?   Instead of loving money, and the belief that creating more of it will reduce our economic ills, we fix our hearts on something or someone else?  What if we love ourselves less and love someone else more?  What if instead of grudgingly paying tax and leaving everything to governments to run, those with money give generously to fund schools, hospitals, hospices, famine relief, drug and alcohol rehab and much more?  What if we chased down the most loving work, to serve others, instead of chasing work with the most financial gain?  What if, instead of clustering and clamouring for a better postcode we climbed down into poorer ones? What if we used what we gain to bring gain to others?  

MMT wants the socio-economic system to bring gain to others but what we really need is an ancient money practice (AMP).

As we approach the global celebration of the birth of Christ, we need to recover, en-masse, this ancient event. What if we grasp again, in wonder and awe, how he climbed down from glory in the highest to poverty in a manger.

Let him move our hearts.

Since you excel in everything—in faith, in speech, in knowledge, in complete earnestness and in the love we have kindled in you—see that you also excel in this grace of giving.  I am not commanding you, but I want to test the sincerity of your love by comparing it with the earnestness of others. For you know the grace of our Lord Jesus Christ, that though he was rich, yet for your sake he became poor, so that you through his poverty might become rich. (2 Corinthians 8:7-8)

We don’t need a new economic theory but loving and generous hearts. 

About neilrobbie

I am a 6'6" formerly ginger Scot, in a cross cultural marriage to my lovely Londoner wife. We've lived in SE Asia and since 2005, I have served as an Anglican minister in Wolverhampton and West Bromwich.
This entry was posted in The nature of grace, The nature of the giver and tagged , . Bookmark the permalink.

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