Speaker 1: Hello, and welcome to another episode of the All Thoughts
Speaker 1: Podcast on Tracy Alloway and I'm Joe Wisenthal. So, Joe,
Speaker 1: I really enjoyed our m m T discussion from last week.
Speaker 1: I did too, and uh, you know, it was kind
Speaker 1: of interesting because we never really did like an introductory
Speaker 1: to m MT episode. We immediately started with a critic
Speaker 1: although you know, some people pointed out A the criticism
Speaker 1: wasn't too harsh, and B we did sort of introduce
Speaker 1: the concept. But now we're going to go backwards and
Speaker 1: sort of keep building the foundation. Right. Well, actually, actually
Speaker 1: I would argue we're going forward and we're picking We're
Speaker 1: picking up from where we left off in that previous conversation,
Speaker 1: which was I think at the end, we were discussing
Speaker 1: about whether or not MMT could ever work outside of
Speaker 1: the United States. Right, So obviously when people talk about
Speaker 1: how the US can have much higher sustained deficits than
Speaker 1: other places or than than we've had, they're like, well, yeah,
Speaker 1: sure of course the US can, but that's only because
Speaker 1: the dollars the global world reserve currency. And so the
Speaker 1: accusation towards mm T is that it's generalizing from the
Speaker 1: US example, to something that wouldn't be applicable to countries
Speaker 1: that maybe don't enjoy that same status for their currency,
Speaker 1: right exactly. The argument is that the US is in
Speaker 1: some way hashtag blessed with a number of financial attributes,
Speaker 1: such as the reserve currency status UH and the safe
Speaker 1: haven nature of U S treasuries relative to other assets,
Speaker 1: and that it is special in some way, and that
Speaker 1: you can't apply MMT to other jurisdictions, in particular developing
Speaker 1: or emerging market economies. There was one other thing that
Speaker 1: that conversation actually brought up, and this was the notion that, well,
Speaker 1: we haven't really seen any real life applications of MMT
Speaker 1: just yet, right. So the argument is that and of
Speaker 1: course this gets into the distinction between m m T
Speaker 1: as the descriptive framework. Basically, m m T s attempt
Speaker 1: to describe the money system how it actually is, versus
Speaker 1: the implications the prescriptions, where it's like, okay, well, if
Speaker 1: you know this is how the money system works, then
Speaker 1: this is the policies that you can do. And the
Speaker 1: argument is that we really don't know what it would
Speaker 1: look like for any country to adopt some of the
Speaker 1: prescriptive side of m m T and whether whether the
Speaker 1: sort of fiscal latitude that m m T s as
Speaker 1: many countries enjoy would actually improve the economy. Absolutely right.
Speaker 1: So there's two big questions that came out of that
Speaker 1: big discussion, one of which is whether or not mm
Speaker 1: T works outside the U S and the other is
Speaker 1: whether or not the prescriptive social policies of MMT could
Speaker 1: actually work in some capacity. So I'm really pleased to
Speaker 1: say that we have a guest on Today Show who
Speaker 1: can deal with both of those two very very large
Speaker 1: and complex topics. Our guest is going to be Fattle Kaboob.
Speaker 1: He's someone who's able to talk about both these things.
Speaker 1: He's an associate professor at Dennison University, and he was
Speaker 1: actually suggested by Nathan Tankus on Twitter as a possible guest.
Speaker 1: And I should say Joe, because we did get some
Speaker 1: blowback from people who said that our last MMT guest
Speaker 1: was too much of a critic. Fattle comes recommended by
Speaker 1: Stephanie Kelton as well, who said that he's doing some
Speaker 1: very very interesting work outside the US. Great. Well, these
Speaker 1: are I have a lot of questions, so let's get started.
Speaker 1: Cool Faddle, Thank you so much. For joining us, Thank
Speaker 1: you for having me on the show. So maybe just
Speaker 1: to begin, you could give us an overview of how
Speaker 1: you ut involved in this topic and why so many
Speaker 1: people on Twitter are pointing to you as the expert
Speaker 1: for m m T outside of the US experience. Well,
Speaker 1: when I was in grad school about twenty years ago
Speaker 1: at the University of Missouri, Kansas City at Young k C,
Speaker 1: where a lot of the you know MMT scholars were
Speaker 1: based there, Randy Ray, Stephanie Kelton, map for Stature, and others.
Speaker 1: At that stage in the early two thousands, most of
Speaker 1: the discussion around m m T was focused on the US, Canada,
Speaker 1: Australia countries that are you know, advanced countries, countries that
Speaker 1: have full monetary sovereignty. And I grew up in a
Speaker 1: developing country. I grew up in Tunisia, and I was
Speaker 1: always interested in, you know, how does this supply, how
Speaker 1: does this transfer? What are the differences, what are the
Speaker 1: adjustments that need to be made? And that's how it
Speaker 1: all started in terms of me trying to expand some
Speaker 1: of the MMT and the post Kayzee in literature in
Speaker 1: general in the context of developing countries. So one of
Speaker 1: the things that is still to this day appoint to
Speaker 1: confusion about what MMT says. It's it's a very basic
Speaker 1: definition of what monetary sovereignty is. And even though we
Speaker 1: keep saying monetary sovereignty, most people here pass it and
Speaker 1: they just hear sovereignty sovereign government, which is what the
Speaker 1: general public and even you know, mainstream economists understand as
Speaker 1: political sovereignty. A country that you know, has its own
Speaker 1: borders and its own flag, and its own army and
Speaker 1: its own currency, which is not completely what MMT is saying.
Speaker 1: So monetary sovereignty is defined as far as I'm concerned
Speaker 1: in the following way. It's it's four basic elements that
Speaker 1: need to apply. One is, yes, a country issues its
Speaker 1: own currency, its own sovereign currency. Number two, it's a
Speaker 1: country that imposes taxes and fines and fees on its
Speaker 1: population in that same currency, the national currency, And that's
Speaker 1: pretty straightforward. Most countries can do that. And then three
Speaker 1: and four is where developing countries become a category of
Speaker 1: their own and start losing some degree of monetary sovereignty.
Speaker 1: So number three, it's a country that only issues debt
Speaker 1: denominated in its own national currency. And as you know,
Speaker 1: most developing countries, because of trade deficit, they have external debt,
Speaker 1: which means they issue debt denominated in dollars, in euros
Speaker 1: in Japanese end, and that's where they start losing degrees
Speaker 1: of of monetary sovereignty. Number four is also related to that,
Speaker 1: which is, you know, fixing the currency or trying to
Speaker 1: stabilize the exchange rate at a particular level, pegging the
Speaker 1: exchange rate to the dollar, to the euro, to other
Speaker 1: strong currencies, and so both are related to the trade
Speaker 1: deficit issue. Both are related to the external debt issue.
Speaker 1: So that means that you don't have a binary where
Speaker 1: a country either has monetary sovereignty or doesn't. It's really
Speaker 1: degrees of monetary sovereignty. So when you look at that
Speaker 1: the US, Australia, Canada, these are countries that enjoy full
Speaker 1: monetary sovereignty. In Japan is is the same. Whereas you
Speaker 1: know countries that completely gave up their monetary sovereignty. You
Speaker 1: think of countries that dollarize, like like Ecuador completely, so
Speaker 1: the extreme other opposite of of that spectrum. But most
Speaker 1: developing countries are somewhere in between. And what what MMT
Speaker 1: allows us to do if we start from this basic
Speaker 1: definition is to ask the question what would allow a
Speaker 1: particular developing country to regain or reclaim its full monetary sovereignty,
Speaker 1: and the question of external debt becomes important. And that's
Speaker 1: where the distinction between the debt denominated in the national currency,
Speaker 1: the local domestic national debt versus the external debt becomes important.
Speaker 1: And unfortunately, most analysts just talk about debt as if
Speaker 1: it's the same thing. And that's where it becomes very
Speaker 1: clear that the US, when we talk about the US
Speaker 1: and the job guarantee or a green new deal, the
Speaker 1: comparison between a US debt and Venezuela's debt or or
Speaker 1: any other you know, developing countries that become irrelevant. And
Speaker 1: that's why for most mainstream economists, the case of Japan
Speaker 1: is a puzzle. As as bol Krugman said several times,
Speaker 1: it's just not they can't comprehend why massive national debt
Speaker 1: in the case of Japan doesn't lead to hyper inflation,
Speaker 1: doesn't need to default, and things like that. So, first
Speaker 1: of all, that was really helpful, and I think I
Speaker 1: had never quite heard monetary sovereignty articulated that well, because
Speaker 1: it is a term that gets thrown around a lot.
Speaker 1: One thing that I think is really important and I
Speaker 1: don't want to gloss over it is you know, in
Speaker 1: the intro we were talking about the US and it's
Speaker 1: reserve currency status, and I think it's striking that you
Speaker 1: didn't include that in any way in your definition. And
Speaker 1: so we have the full characteristics of monetary sovereignty obviously
Speaker 1: in the US, but as you point out, you also
Speaker 1: see him in Australia and New Zealand and Canada, and
Speaker 1: no one would consider any of those national currencies to
Speaker 1: be anything closed to reserve currencies exactly. So, so once
Speaker 1: you have, once you have your full monetary sovereignty, then
Speaker 1: or if you lose your monetary sovereignty like most developing countries,
Speaker 1: then the question is what is the thing that's leading
Speaker 1: to those structural problems? And it's hard to generalize, but
Speaker 1: I'll still attempt to generalize. In general, you'll find three
Speaker 1: structural weaknesses that most developing countries suffer from. It as
Speaker 1: a result, most countries that lose monetary sovereignties suffer from
Speaker 1: So when we talk about reclaiming monetary sovereignty or regaining it,
Speaker 1: you have to focus on those root causes. So number one,
Speaker 1: it's energy deficits, and this is even true for countries
Speaker 1: that are big oil exporters, and I'll explain in a second.
Speaker 1: Number two it's food imports, food lack of food self sufficiency.
Speaker 1: And number three, which is the biggest problem for developing countries,
Speaker 1: it's it's a situation where countries find themselves imp boarding
Speaker 1: high value added content and exporting low value added content.
Speaker 1: So no matter how fast you accelerate your your exports,
Speaker 1: you're always digging yourself in a in a deeper hole
Speaker 1: because you're just adding cheap labor and you know, subsidized
Speaker 1: public policy to a production process. But you still have
Speaker 1: to import all the intermediate goods, all the capital goods,
Speaker 1: all the technology. So you end up losing in that
Speaker 1: game on on the energy front. So the solutions, obviously,
Speaker 1: if you want to reclaim monetary sovereignty, you have to
Speaker 1: plug those holes in your in your economic systems. And
Speaker 1: in this day and age, it becomes urgent to invest
Speaker 1: in renewable energy production sources in most developing countries so
Speaker 1: that you produce energy domestically and you stop not only
Speaker 1: fossil fuel emissions, but you stop the massive imports of
Speaker 1: petrochemicals and fossil fuels into the local economy. Number two,
Speaker 1: it's it's food self sufficiency. Food sovereignty is extremely important
Speaker 1: for monetary sovereignty for developing countries, and that obviously relates
Speaker 1: to a lot of international trade issues that we can,
Speaker 1: you know, spend another thirty minutes discussing um. Number three,
Speaker 1: it's this structural you know, import and export issue in
Speaker 1: in in the process of industrialization, where you end up
Speaker 1: importing a lot of capital goods and intermediate goods and
Speaker 1: high value added content and just export low value added content,
Speaker 1: so you're just an assembly line, you know, adding cheap
Speaker 1: labor to the production process and subsidized industrial development. Nothing
Speaker 1: is gonna address the external debt issue unless we address
Speaker 1: these three issues. And if you shift for a second
Speaker 1: to the US or Japan, you realize these are not
Speaker 1: these are not the issues, right. The fact that the
Speaker 1: US has a reserve currency doesn't really affect these three
Speaker 1: structural issues that are that I'm describing here. So if
Speaker 1: a developing country wanted to reclaim it's monetary sovereignty, this
Speaker 1: is where the job guarantee comes in. You can use
Speaker 1: the job guarantee as as a policy tool to reclaim
Speaker 1: that so that you're directing jobs in areas where you
Speaker 1: need additional productive capacity for food or for renewable energy,
Speaker 1: or for higher end production lines that add more value
Speaker 1: added to the process um than than the current situation.
Speaker 1: So this is this is where I would start, and
Speaker 1: this is where the MMT lens allows us a completely
Speaker 1: different way of looking at the process of economic development.
Speaker 1: What are the national priorities and at the same time,
Speaker 1: how to deal with inflation. Because if you're importing food
Speaker 1: and your trade deficit, your external debt is putting pressure
Speaker 1: on your exchange rate, then a currency depreciation means the
Speaker 1: next morning, where you're importing wheat, when you're importing medicine,
Speaker 1: you're importing inflation. So this is why the mm T lens,
Speaker 1: the job guarantee, the inflation issue are built into the analysis.
Speaker 1: You can't really separate one from the other. And I'm
Speaker 1: happy to talk more about this, you know so called
Speaker 1: political you know connection between MMT and the job guarantee
Speaker 1: and a political choice, because I have a few things
Speaker 1: to say about it if we have time, Well maybe
Speaker 1: just before that, foul, could you walk us through exactly
Speaker 1: how you think that the full employment or or the
Speaker 1: job guaranteed type program can affect. I mean, basically, you're
Speaker 1: talking about structural reform of developing economies. How does that
Speaker 1: work exactly? So you start looking at a particular country,
Speaker 1: you identify the particular items that are putting pressure on
Speaker 1: the exchange rate, putting pressure on on the external debt.
Speaker 1: In most cases, I said, it's it's food imports, it's
Speaker 1: um energy imports. So you're not going to switch the
Speaker 1: system structurally overnight. What you want to do is, you know,
Speaker 1: stop doing what you've been doing for the last thirty
Speaker 1: years that's been getting you deeper and deeper in trouble,
Speaker 1: and look for a new stratgy. The new strategy says,
Speaker 1: shift away from subsidizing fossil fuels, for example, which most
Speaker 1: developing countries do, because they imported at a higher cost.
Speaker 1: And if it's not subsidized, then it goes into the
Speaker 1: economy as a higher cost of doing business, higher costs
Speaker 1: for transportation, higher costs for energy production, for heating, for cooling,
Speaker 1: and all of that, and that means riots on the streets,
Speaker 1: and in most countries, the same thing with food food imports.
Speaker 1: If it's if it's not subsidized, and your importing inflation.
Speaker 1: You have riots the next morning, food riots, bread rice.
Speaker 1: We've seen this in many countries. So what you want
Speaker 1: to do is start shifting the current subsidy system that
Speaker 1: you have in most developing countries away from subsidizing fossil
Speaker 1: fuels and into building more productive capacity for renewable energy.
Speaker 1: And the more you accelerate in that direction, the closer
Speaker 1: you get to reclaiming monetary sovereignty. When you get so
Speaker 1: called aid from the Western world from development agencies, the
Speaker 1: aid shouldn't be directed towards subsidizing the existing mechanics that
Speaker 1: gets you deeper in trouble. The aide should be directed
Speaker 1: towards building productive capacity that's encourages and enhances your productive
Speaker 1: capacity of renewable energy, of sustainable food locally, of moving
Speaker 1: your productive capacity from low end, low value added manufacturing
Speaker 1: to high value added manufacturing. So you restructure the national priorities.
Speaker 1: Because most countries have some sort of employment program, especially
Speaker 1: emergency employment programs that happened during economic crisis, they tend
Speaker 1: to be small scale, they tend to be temporary. They're
Speaker 1: not a job guarantee in the fullest sense. Of the
Speaker 1: term that that we talk about in the MMT and
Speaker 1: the post games in literature, and they tend to be
Speaker 1: phased out or canceled as soon as the economy goes
Speaker 1: back to normal, so called normal. So what we're talking
Speaker 1: about is directing these employment programs and increasing their effectiveness
Speaker 1: over time to build productive capacity in this area. Most
Speaker 1: mainstream economists will tell you, in the developing world especially,
Speaker 1: will tell you if we pay workers through some sort
Speaker 1: of public works program or a job guarantee program, those
Speaker 1: workers are going to take their wage, which is in
Speaker 1: the local and the national currency, and they're gonna go
Speaker 1: out and buy stuff. It's going to add to food demand,
Speaker 1: it's going to add to transportation, is going to add
Speaker 1: to demand for imports. So that money is going to
Speaker 1: find its way as a point of pressure on the
Speaker 1: exchange rate. So what they say we need to do
Speaker 1: is leave people unemployed. You know, what a what a
Speaker 1: cruel system to you know, use a buffer stock of
Speaker 1: millions of people unemployed and poverty and misery and not
Speaker 1: using the human capabilities that we have in the system,
Speaker 1: especially human capabilities that developing countries has spent hundreds of
Speaker 1: millions of dollars to educate, to raise in a healthy
Speaker 1: way and then leave a young population in mass unemployment
Speaker 1: instead of using it in a in a productive way. Fottel,
Speaker 1: I have a couple uh. First, a short question and
Speaker 1: that's slightly longer. On the short one, why does a
Speaker 1: country in your view like Saudi Arabia, which obviously has
Speaker 1: no problem on its energy balances, why does it seed
Speaker 1: monetary sovereignty byger definition in not letting the real float freely? Well,
Speaker 1: if you if you look at sat Arabia in particular,
Speaker 1: that's that's an interesting example because it's it's a massive,
Speaker 1: you know, oil exporter. But if you look at sat
Speaker 1: Arabia's imports, it's actually the extreme case of of what
Speaker 1: I've been describing. Um, most of the food that's that's
Speaker 1: consumed in sat Arabia probably close to a not exactly percent,
Speaker 1: but most, I would say, at least the eyeballing at
Speaker 1: here is imported food. And satur Abia also imports all
Speaker 1: the capital goods, all the intermediate goods for its manufacturing. Uh,
Speaker 1: satur Abia also import it's a lot of labor, foreign
Speaker 1: cheap labor, and Saturreby also imports refined petrochemicals to think
Speaker 1: about the interject But does MMT from this lens implicitly
Speaker 1: reject this sort of a popular view of trade, which is,
Speaker 1: you know, some countries are not are going to specialize
Speaker 1: in oil, some countries are going to specialize in food.
Speaker 1: And one country sells the other country oil, the other
Speaker 1: sells food and they both when when I mean, it
Speaker 1: doesn't really make sense for a country that's essentially in
Speaker 1: the middle of the desert to expand energy on turning
Speaker 1: its land uh into good farmland when there maybe a
Speaker 1: nearby neighbor that can grow food uh much more efficiently, right,
Speaker 1: And nobody's arguing that satur Abia should start growing food
Speaker 1: in the desert. Although you know, if if we're talking
Speaker 1: about aquaponics, which doesn't need to use any soil and
Speaker 1: uses less less water, especially the more advanced forms of
Speaker 1: you know, high tech equaponics these days, then you can
Speaker 1: grow it anywhere, including and especially in a country like
Speaker 1: sat Arabia. I've been advocating this actually for for a
Speaker 1: number of years now. Um. But from an MMT perspective,
Speaker 1: the kind of the simplistic international trade framework is not
Speaker 1: the right way of looking at things because specializing and
Speaker 1: low value added content is a trap. It's it's not
Speaker 1: about efficiency, it's about a trap that leads to loss
Speaker 1: of monetary sovereignty, and it leads you into a public
Speaker 1: policy framework that keeps you locked into that situation. It
Speaker 1: doesn't actually move you higher up. Think about the countries
Speaker 1: that really made it in terms of the process of
Speaker 1: economic development, like like Korea, like UH, Singapore, UM. They
Speaker 1: didn't make it by specializing and low value added content.
Speaker 1: They made it by having a very clear industrial strategy
Speaker 1: of moving up higher and higher up in terms of
Speaker 1: value added content and not specializing in the cheap stuff.
Speaker 1: And the countries that specialized in you know, um UH,
Speaker 1: low value added agriculture and low value added manufacturing, they
Speaker 1: went deeper and deeper into external debt and deeper and
Speaker 1: deeper into trouble. The countries that have been blessed with
Speaker 1: massive amounts of oil, they you know, they managed to
Speaker 1: move closer to a higher level of degree of monetary sovereignty.
Speaker 1: In the case of saut Arabia, saut Arabia lacks monetary
Speaker 1: sovereignty because of the currency peg with with the US dollar.
Speaker 1: It has massive amount of reserves that are you know,
Speaker 1: depleting in the last few years, but it still has
Speaker 1: a massive buffer of of foreign currency reserves that give
Speaker 1: it some privileges. But by twenty eight, which is when
Speaker 1: most estimates that have seen say that satur Abia will
Speaker 1: become a net oil importer. If we continue at the
Speaker 1: current pace, then sat Arabia will you know, quickly burn
Speaker 1: through its foreign reserves and move into a classic case
Speaker 1: of a developing country that imports all of its food
Speaker 1: and imports you know, energy, and it specializes in little
Speaker 1: value added manufacturing as simply line type of stuff. And
Speaker 1: that's really you know, a disaster for most developing countries
Speaker 1: that are trapped in this situation. So then what are
Speaker 1: your public policy options? If you're developing country, then you
Speaker 1: become obsessed with accumulating foreign currency reserves, so you try
Speaker 1: to accelerate your exports. It doesn't work because you the
Speaker 1: more you export, the more you have to import and
Speaker 1: capital and energy and high value added content. Number two,
Speaker 1: you you start to increase your tourism. Where you bring
Speaker 1: more tourism, it means you bring more energy consumption, more
Speaker 1: food consumption, more water consumption, and some parts of the world,
Speaker 1: so it's a it's a trap, and you're competing with
Speaker 1: two hundred other you know, a hundred and fifty plus
Speaker 1: other countries who are also racing to the bottom because
Speaker 1: they too want more tourism. Then you become obsessed with
Speaker 1: foreign direct investment. But what kind of foreign direct investment
Speaker 1: are you going to be able to attract as a
Speaker 1: developing country that has, you know, not advanced so much
Speaker 1: in terms of value added content you're gonna attract. It's
Speaker 1: going to be a race to the bottom, and there's
Speaker 1: gonna be another hundred plus countries who are also competing
Speaker 1: for you know, outsourcing jobs from from the US and Canada.
Speaker 1: You're not going to be Germany or Japan, you know,
Speaker 1: competing for the high end skilled manufacturing stuff. So all
Speaker 1: of these are traps that most developing countries are stuck
Speaker 1: into because they need the currency reserves, because without currency reserves,
Speaker 1: their currency will depreciate, and it means the next morning
Speaker 1: they're going to import food and medicine and capital at
Speaker 1: a higher cost, which means they're importing inflation. It means
Speaker 1: in two days they're gonna have riots on the streets
Speaker 1: unless there's an IMF intervention to put a band aid
Speaker 1: on this situation and start over again with higher levels
Speaker 1: of external debt, with lower degrees of monetary sovereignty. So
Speaker 1: as as Warren Mosler sometimes says, if if you're stuck
Speaker 1: in a in a hole, the first thing you do
Speaker 1: is you stop digging and figure out a different way
Speaker 1: to get out. And and that's really where the MMT analysis,
Speaker 1: you know, shines a light on this, on this deep
Speaker 1: hole that most developing countries are stuck into, and says
Speaker 1: stop digging, stop using the traditional policy advice, and think
Speaker 1: of real strategies to reclaim monetary sovereignty UM and focus
Speaker 1: on the root causes that are leading to this situation.
Speaker 1: And that's where directing job creation and incentives towards building
Speaker 1: productive capacity in the areas that you identify as the
Speaker 1: weaknesses becomes the important strategy of creating jobs, developing a
Speaker 1: country on a sound foundation, and at the same time
Speaker 1: dealing with the inflationary pressures, the real inflationary pressures that
Speaker 1: are existing in the system in most developing countries. And
Speaker 1: that's why I keep saying you can't separate the MMT
Speaker 1: analysis from the structural policy solutions that need to be
Speaker 1: in place to deal with the inflation, to deal with
Speaker 1: an employment, to deal with climate change to So how
Speaker 1: easy is it though, to start digging yourself out of
Speaker 1: that hole? Because, as you describe it, the entire existing
Speaker 1: system of trade and global capitalism, I suppose, is pushing
Speaker 1: you in one direction, which is that race to the bottom,
Speaker 1: and you're fighting against that, trying to shift productive capacity
Speaker 1: again as you put it into areas where it hasn't
Speaker 1: naturally been shifted before. How do you do that? How
Speaker 1: hard is it to do that? And where does the
Speaker 1: money come from in order to make that happen? Right? Well,
Speaker 1: it's nobody says it's easy. Because number one, you have
Speaker 1: to fight the ideas of the mainstream policy makers, the
Speaker 1: mainstream economists. That's that step number one. Number two, you
Speaker 1: have to fight the power structures, the the interest groups
Speaker 1: because in most developing countries there is you know, licensing
Speaker 1: systems for importing food, for importing energy, uh, and those
Speaker 1: are those are quite profitable. So people are going to
Speaker 1: oppose that with with whatever power they have. Then you
Speaker 1: have the global trading system, the w t O rules.
Speaker 1: I mean, we live in a in a free trade world, right,
Speaker 1: so you're not gonna be able to exit from from
Speaker 1: those trade relations easily. Uh, you're gonna fight, you know,
Speaker 1: domestic business interests that you know from from an individual perspective,
Speaker 1: UM gain from from the existing system, but then comes
Speaker 1: to you know, if if you deal with all of
Speaker 1: these issues, then it becomes how do you do this?
Speaker 1: You're not going to be able to switch it overnight,
Speaker 1: especially with the structural low value added exports, high value
Speaker 1: added imports stuff, because in order to shift to higher
Speaker 1: levels of value added production, you need to invest in
Speaker 1: UM infrastructure. You need to invest in education, vocational training,
Speaker 1: you need to invest in research and development. And that's
Speaker 1: not going to happen overnight. It takes a generation or
Speaker 1: two of consistent investment in those areas to move up
Speaker 1: to that higher level. In terms of food production, no
Speaker 1: country can move to you know, full food sovereignty in
Speaker 1: in one or two years or even a decade. But
Speaker 1: you have to start somewhere, and you have to demonstrate
Speaker 1: that you're actually making progress, and you need to dedicate
Speaker 1: more resources. This is where sacrifice becomes important. You may
Speaker 1: have to impose capital controls, you may have to restrict
Speaker 1: certain imports or or use your taxes them your RIF
Speaker 1: system to incentivize uh, certain kinds of consumptions and certain
Speaker 1: kinds of behavior in the domestic economy. It's really hard
Speaker 1: to do it as a single developing country. It's slightly
Speaker 1: easier to do it as a block of developing countries.
Speaker 1: So this is where the idea of you know, uh,
Speaker 1: competition and in a national system and free trade is
Speaker 1: is an important concept to look into because everybody says
Speaker 1: competition is is good, it's fair, it's healthy, it's efficient,
Speaker 1: like in like in sports, like if if you're in
Speaker 1: a boxing game, we we have heavyweight, you know, boxers
Speaker 1: fight heavyweight boxers and lightweight go with with lightweight. Nobody
Speaker 1: would watch, you know, it's it's illegal to have a
Speaker 1: heavyweight champion, you know, beat the hell out of a
Speaker 1: lightweight boxer. It's ugly, it's illegal, Nobody would watch it.
Speaker 1: And yet we allow that to happen in the international
Speaker 1: trade system. When we say it's healthy, it's competition, well
Speaker 1: it's not. So nobody says competing with countries that have
Speaker 1: equal levels of economic development is not a good idea.
Speaker 1: And this is where South South trade becomes an important
Speaker 1: mechanism to enhance competition amongst equals and to use the
Speaker 1: complementary endowments of different countries within the region to enhance
Speaker 1: their the size of their market, access to markets, to
Speaker 1: enhance competition, and to build resources within the region that
Speaker 1: can secure a better level of economic development. UM, so
Speaker 1: we have to rethink international trade systems in that context. Thought,
Speaker 1: before we go, I want to make sure we touch
Speaker 1: on one other point in your characteristics of monetary sovereignty,
Speaker 1: which in my mind might have a lot of relevance
Speaker 1: in the e M world, and that was your number
Speaker 1: two point, which we haven't talked about much, and that
Speaker 1: is essentially the ability of a government to raise taxes
Speaker 1: levy finds within its own currency that it prints, and
Speaker 1: one of the things that developing countries might lack is
Speaker 1: essentially good government infrastructure. And a key part of government
Speaker 1: infrastructure is essentially the ability to do exactly that, to
Speaker 1: actually maintain tax compliance, to of eliminate tax evasion, stuff
Speaker 1: like that. Talk to us about that challenge and how
Speaker 1: important it is, and within the e M context, just
Speaker 1: this ability to build up stable institutions that aren't driven
Speaker 1: with corruption and that can actually enforce the use of
Speaker 1: the domestic printed currency. Absolutely. I mean the issue of
Speaker 1: tax evasion and corruption, especially in developing countries, is a
Speaker 1: key structural weakness and it's not something that that can
Speaker 1: be fixed overnight. I mean, we've tried, we've tried and
Speaker 1: tried with corruption, it's it's very easy for it to
Speaker 1: seep into the system and it's extremely difficult to to
Speaker 1: cleanse the system of it. But that doesn't mean we
Speaker 1: should we should give up. And and this is where
Speaker 1: international assistance, this is where enforcing the democratic institutions, transparency
Speaker 1: within within countries is extremely important. So MMT doesn't reject that,
Speaker 1: if anything, we want to enhance that. The the issue becomes,
Speaker 1: especially in developing countries, the the issue of progressive versus
Speaker 1: regressive taxation because most developing countries rely on value added
Speaker 1: tax UH sales tax and developing countries and that that's
Speaker 1: not ideal, but that's because there's a lot of informal
Speaker 1: transactions that happened in the system. There's a lack of
Speaker 1: effectiveness and and reporting and tax collection UH. There's also
Speaker 1: the issue of UM taxing the rich, taxing wealth versus
Speaker 1: taxing income UM. All of these issues need to be addressed,
Speaker 1: and some countries are doing a better job than others.
Speaker 1: But that's a that's a key aspect of the effectiveness. Uh.
Speaker 1: The point that MMTY highlights across the board for developed
Speaker 1: or developing countries is the purpose of taxation. The purpose
Speaker 1: of taxation is not to raise revenue to fund a
Speaker 1: particular program. The purpose of taxation is to offset some
Speaker 1: of the spending and to deal with the inflationary pressure.
Speaker 1: And in the case of you know, high marginal tax
Speaker 1: rates and wealth tax rates, it's also to protect the
Speaker 1: democratic process and to reduce the market power and the
Speaker 1: political power of the elites of the oligarchy and the
Speaker 1: political process and the democratic process. Not because we need
Speaker 1: their money to fund a particular program, but because we
Speaker 1: need to reduce their influence in the political process and
Speaker 1: reduce their influence in the market process, because let's not
Speaker 1: forget that, you know, political influences always for an economic gain.
Speaker 1: So that also has something to do with inflation, something
Speaker 1: to do with with the rentiers mechanism that that exists
Speaker 1: in most countries. So MMT acknowledges that, and it's an
Speaker 1: important thing. MMT is not a silver bullet to you know,
Speaker 1: fix everything, but it does acknowledge that there is corruption.
Speaker 1: It does acknowledge that their political issues, and the criticism
Speaker 1: that sometimes you hear from from some colleagues about MMT
Speaker 1: kind of going into a slippery slope of you know,
Speaker 1: political prescription or whatever is is really not a fair
Speaker 1: criticism because give me any theory or any analytical framework
Speaker 1: that doesn't have a political bent to it, or I mean,
Speaker 1: what is not political When you build a theory based
Speaker 1: on certain assumptions, those assumptions have an ideological bent, They
Speaker 1: have a political bent to them. And MMT is is
Speaker 1: not saying we're we're politically neutral. Nothing out there in
Speaker 1: terms of academic thinking and academic analysis is politically neutral. Uh.
Speaker 1: It's always a certain choice about how you organize a
Speaker 1: society and economy because it's organizing a society. Organizing economy
Speaker 1: by definition is a legal process, which means it's a
Speaker 1: political process. So you can't really divorce the economic thinking
Speaker 1: from the legal thinking, from the political thinking from the
Speaker 1: social realities. These are all intertwined, and m T S
Speaker 1: really prides itself for building a coherent interdisciplinary framework to
Speaker 1: address issues that are by definition multifaceted and require legal analysis,
Speaker 1: economic analysis, and political analysis. So there is no slippery slope.
Speaker 1: It's the whole thing from the beginning, start with the
Speaker 1: social reality in which we live, which has legal implications,
Speaker 1: of political implications and economic implications. Fat Out, I'm sorry,
Speaker 1: we're going to have to leave it there, but that
Speaker 1: was a really fascinating conversation. Fatal Kaboob, Associate professor at
Speaker 1: Dennison University. Thank you so much for coming on all thoughts,
Speaker 1: Thank you for having me on the show. That was great.
Speaker 1: Thank you very much so, Joe. That was a very
Speaker 1: interesting conversation sort of ended up in a very different
Speaker 1: place to our previous conversation with Colin Roche in the
Speaker 1: sense that I mean, Fottle is pretty out there about
Speaker 1: the notion that whatever economic system you choose, or economic
Speaker 1: theory you choose, comes with a set of political implications
Speaker 1: or beliefs along with it. Yeah, and I really like
Speaker 1: this conversation a lot because I think when people say that, oh,
Speaker 1: you can't apply the MMC framework to emerging markets, what
Speaker 1: they're really saying is you can't expect emerging markets to
Speaker 1: just spend a lot of money all of us sudden,
Speaker 1: overnight and produce beneficial effects. And what I think is, uh,
Speaker 1: what Fottle the point he was making is like, sure,
Speaker 1: that's true, but that's not really the idea, and that
Speaker 1: the idea is let's go to the root premises of MMT,
Speaker 1: the value of monetary sovereignty, and achieve that first. And
Speaker 1: I really like that reframing because of course, the US
Speaker 1: is different spending and fiscal capacity than a country like
Speaker 1: Turkey or anywhere else, But that doesn't mean that the
Speaker 1: overall framework isn't useful, both in terms of understanding Turkey
Speaker 1: but also sort of a policy path that might benefit
Speaker 1: these countries. Well, the approach is much more realistic than
Speaker 1: I thought it would be when we first started discussing
Speaker 1: the notion of applying MMT to emerging markets. But that said,
Speaker 1: it's realistic in that sort of reframing of the problem. Sure,
Speaker 1: but you know, when you listen to Fattle describe everything
Speaker 1: that needs to happen in order for a developing economy
Speaker 1: to actually climb out of the whole and start on
Speaker 1: the path to monetary sovereignty, it sounds like a huge,
Speaker 1: huge ask, right. They need to basically extricate themselves from
Speaker 1: the existing exploitative trading and international capitalist system, restructure their
Speaker 1: entire economy, deal with very controversial issues like taxation, um
Speaker 1: and subsidies for things like fuel and food, and then
Speaker 1: only then they'll be sort of at the beginning of
Speaker 1: what's going to be possibly a multi generational process. Absolutely,
Speaker 1: but I think what's useful about that, even though obviously
Speaker 1: any country will phase extraordinary difficulty, is just how much
Speaker 1: we've come to accept certain things about international development. Is
Speaker 1: facts like, oh, of course you ought to boost your tourism,
Speaker 1: or of course you start off by selling cheap stuff
Speaker 1: and that enables you to eventually sell higher value stuff,
Speaker 1: and then higher value stuff. Just these certain things that
Speaker 1: we sort of assume our iron facts about development, and
Speaker 1: that of course this is the way you're supposed to progress,
Speaker 1: and as he points there all sort of drawbacks and
Speaker 1: so obviously if you have a tourism boom, but all
Speaker 1: that does is accelerate your demand for oil and water
Speaker 1: and food to move and feed all those tourists. Are
Speaker 1: you just on a treadmill? And so I don't think
Speaker 1: it necessarily follows the tourism is bad per se, obviously,
Speaker 1: but just these sort of conventional wisdom about this is good,
Speaker 1: this is bad, this is what you do to develop
Speaker 1: at least they're challenging some of our assumptions on those things,
Speaker 1: which I really like. It could be a lot of
Speaker 1: food for thought. Absolutely, if if nothing else, MMT has
Speaker 1: definitely forced a lot of people to sort of reassess
Speaker 1: our starting point for economic theory. For sure. That agree
Speaker 1: and I think that all right, shall we leave it there?
Speaker 1: Let's there cool. This has been another episode of the
Speaker 1: All Thoughts Podcast. I'm Chasey Alloway. You can follow me
Speaker 1: on Twitter at Tracy Alloway, and I'm Joe Wisntal. You
Speaker 1: can follow me on Twitter at the Stalwart. And you
Speaker 1: should follow our guest on Twitter, follow Koboo. He's at
Speaker 1: Follow koboob and be sure to follow our producer to
Speaker 1: for Foreheads. He's at foreheads T, as well as the
Speaker 1: Bloomberg head of podcast, Francesca Leave at Francesca Today. Thanks
Speaker 1: for listening.