Don’t build a ‘new economics’ without properly understanding the old

James Meadway, economic adviser to Shadow Chancellor John McDonnell, has written in the ourEconomy section of Open Democracy on the necessity for ‘building a new economics’:

Some parts [of new economics] are half-remembered, and then placed together in peculiar (and often largely useless) new ways, like “Modern Monetary Theory” – a reconstruction of post-war Keynesianism minus the mass workers’ movements and international political economy that helped deliver it.

Which is gloriously dismissive of Modern Monetary Theory without offering any evidence of its ‘uselessness’! Still, he has a point in mentioning the power shift in the international political economy (at least he has gone back to basics -that it is political) and a lack of worker power, meaning that power is unbalanced rightwards.

He continues:

But the great danger here is not that we won’t be able to provide answers to current questions……we will lack the trained imagination needed to think not only about today’s problems, but tomorrow’s – and where tomorrow’s solutions might lie.

There is an urgent, pressing need to develop that imagination. We can know the rough shape of at least some of the problems bearing down on us (climate change, digitisation) and some of the answers (working time reductions; common ownership). But we have far more work to do in developing those answers, on one side, and in winning a wider understanding in the movement of the tools needed to answer them. [My italics].

A mass, popular programme of education in economics (or, perhaps better, call it political economy) is called for. … We need reading groups and dayschools in every town and city; websites like ourEconomy to host and help shape the arguments; and events like The World Transformed up and down the country.

He proposes building a ‘new economics’ but seems not to realise that it would be much less effort to properly understand the old economics. And then use that to advantage. Think of Quantitative Easing or the £2billion bung – and counting – to the DUP. No tax raising required.

There are lots of interesting ideas out there but they are all going to fall at the first hurdle when he’s asked ‘how are you going to pay for it?’, and he has to admit that all the money will come from corporations and the privately wealthy, who, he’ll be told, might emigrate in consequence….

Certainly education is needed but the ‘work developing those answers and winning a wider understanding’ starts with understanding how the system works now – something he appears to have little grasp of. Then you can start to focus on what the economy is and what it is for, and that same education should surely take on board as a first principle: that the economy is a common endeavour to provide greater security and wellbeing for all of society by building on the advantages of the mutuality principle. Then it becomes clearer that money is an integral part of the economy and not its master, and even though the things it is used for can be in short supply, it can itself never be. And finally it can be properly understood that we actually spend and tax, not tax and spend.

Then people might really begin to think in a freer fashion – even out of the box. Enabling a proper rebuilding of economics.




  1. Andrew Dickie -

    Such a pity the proponents of MMT used the word “Theory”, rather than “Analysis” or better still “Operations” or “Observations” – anything that would show it’s the result of fieldwork, not “Ivory Tower” speculation, as it’s critics imply.

  2. Andrew Dickie -

    Blasted autotext – changing “its” to “it’s”! Grrr!!;

  3. Graham -

    One really has to wonder whether people like Meadway, who obviously consider themselves to be some kind of expert, really have the intellectual calibre or imagination to develop anything new when they so clearly fail to “[understand] the old”. Maybe they are resentful that they are not the flag bearers for MMT and that’s why they resort to juvenile disparagement.

    I don’t think there’s a political party in the UK that has really taken MMT onboard. One wouldn’t expect the Tories to, but Labour and SNP should, but haven’t.

  4. Peter May -

    Andrew and Graham- that ‘Theory’ is obviously a handicap and I wonder if they think they have to accept, as necessary to the ‘theory’ all the Job Guarantee stuff as well (which tomorrow’s blog is likley to suggest is not fit for purpose anyway). But I agree – wasn’t Meadway the former director of the New Economics foundation? You would have thought he had a deeper and less immediately dismissive understanding of anything new – or even modern – theory or not!

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