Our guest this week is John Harvey, the alter-ego of everybody’s favorite Cowboy Economist. While this cowboy would be at home in any MAGA rally, we find that behind his homespun wisdom is a great deal of planning and analysis. John talks to Steve about his approach to framing macroeconomics in such a way as to break through our preconceived notions.
In response to recent attacks on Modern Monetary Theory as a radical plan, John’s aim is to show that there’s nothing radical about it. It’s been with us all along. Who better than a cowboy to carry this message?
In explaining the Green New Deal and federal job guarantee, John’s first step is to point out that it’s not in the private sector’s best interest to hire everyone who is willing to work. The private sector minimizes the use of labor because labor is a cost, so there’s no reason to expect them to hire everyone who wants to work. This isn’t necessarily a bad thing; when businesses automate, it saves us money as consumers, but it puts people out of work.
So, on the one hand there’s a pool of labor that private sector won’t hire, and on the other hand there are services that our communities require. The police and fire departments are obvious examples and from there it’s not such a leap to think of others, like child protective services or environmental cleanup. None of these are profitable industries, so we can’t expect the private sector to meet those needs.
On to the big question: how will we pay for it? To answer this, John takes us back to World War II. When the US entered the war, after the bombing of Pearl Harbor, there was still massive unemployment. The government didn’t borrow money by selling bonds, then build factories and hire the workers. The sequence of events was pretty much the opposite. They spent the money, creating it in the process. They built the factories, activating idle resources and taking resources from the private sector. In John’s narrative, they took steel that would have been used to build Fords and used it to build Shermans. The role of war bonds was never to finance the war. Their main purpose was to deter people from spending the newly earned income that was burning a hole in their pockets on products that were no longer available due to the shifting of production priorities.
This episode will interest anyone new to MMT, as well as those who hope to introduce others to the concepts.
John T. Harvey is a professor of Economics at Texas Christian University
http://personal.tcu.edu/jharvey/cowboyeconomist/index.html
Follow him on YouTube
https://www.youtube.com/channel/UCL9PHjlPQ5wq0CD6vAibxYg/featured
Twitter
@John_T_Harvey
Read his blog
https://www.forbes.com/sites/johntharvey/#5935884b685c
