Assorted Articles VIII

I have another batch of articles on politics, economics and history that I’ve collected and want to share.

Rosemary Frei recently published a compelling piece on the cost of privatized infrastructure in Canada, the wordily titled “Canada’s infrastructure was once cheap and effective to build. Now, it’s a titanic transfer from taxpayers to the world’s biggest businesses and investors“at Boing Boing.

But while taxpayers are usually the ultimate payer for these projects, money from non-government sources increasingly is being used to finance construction. This is paid back to the financiers at interest rates that while relatively low at the moment, are higher than the governments themselves could get the money for — and add up to huge amounts over the long durations of the projects’ contracts.

Canada’s infrastructure was once cheap and effective to build. Now, it’s a titanic transfer from taxpayers to the world’s biggest businesses and investors

I’ve been hearing a lot about Modern Monetary Theory and what it means for how governments spend, control inflation and can influence markets. In Practitioner’s Guide to MMT parts 1 and 2, Kevin Muir lays out the broad strokes of the theory from the lens of a trader but in a way that makes it accessible.

MMT’ers believe there is no financial constraint but only a real resource limit (subject to certain restrictions – only for sovereign countries who issue their own debt and don’t have a pegged currency, yada yada yada). In essence, inflation is the real limiting factor.

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Still don’t believe me? Let’s think about war. Why is there always money for war?

Do you think that after the Japanese bombed Pearl Harbor the United States government went to the bond market to borrow money to build back their navy? And do you think that if the bond market had not provided those funds the United States government would have said, “sorry – we really want to enter the war, but we will have to wait until market conditions allow us to finance our deficit spending.”

Of course you don’t. The government spent first and did not worry about borrowing.

Practitioner’s Guide to MMT: Part 1

MMT’ers don’t believe in force-feeding more monetary stimulus in the hope that somewhere it will ignite and cause an economic rebound. Although at the time I didn’t understand that my views were consistent with MMT, during the financial crisis I felt like the government’s response was ridiculous. The problem was a lack of demand, not “overly expensive” money. I argued that if the bond market was begging for an investable riskless asset, why doesn’t the government give it to them? At the time the 30-year US Treasury was ticking just above 2%. Instead of doing more QE, why didn’t the government float a gazillion of 50 or 100-year paper (back then I thought the government had to borrow first) and install internet-fiber to everyone’s home? Or fix all the bridges and airports. You know, something productive. I figured that even the government could invest the capital at a rate which would yield a return greater than the 3% interest rate I reckoned the bonds would trade at.

Practitioner’s Guide to MMT: Part 2

What was most valuable for me, as a far-left, “what’s in it to improve all our lives” sort, was the framing that Cory Doctorow gave the articles in “A layperson-friendly introduction to MMT, a heterodox school of economics that could finance a Green New Deal“. In his own article he lays out the benefits for improving infrastructure and better employing people.

Modern Monetary Theory (AKA MMT) is the latest incarnation of a long-running current in economic thought, once called Chartalism, which has gained prominence in recent years as an alternative to austerity economics, whose dictates have immiserated millions, destabilized world politics, and threaten the extinction of the human race thanks to climate inaction in the guise of “fiscal restraint.”

MMT’s core precept is that governments first spend money into existence and then tax it out of existence (contrast this with the standard account that says that governments must tax citizens to pay for programs, which raises the question, “How did the citizens get the money to pay for their taxes unless the government first spent that money into existence, given that governments are the sole source of currency?”).

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And while government spending can lead to inflation, it’s not deficits that cause inflation, it’s government spending on things that the private sector is also seeking to buy — if the government is procuring materials, labor or goods that the private sector is already using, it creates a bidding war that drives up the prices of these things. But if there is stuff that the private sector is not using — notably, if there are unemployed people who want work that the private sector isn’t delivering — then the state can spend as much as it needs to mobilize that labor in service to public goals, like remediating climate change.

A layperson-friendly introduction to MMT, a heterodox school of economics that could finance a Green New Deal by Cory Doctorow

It’s an awful, right-wing publication, but The Washington Post back in 2015 published an article that pointed out that the western consensus that WWII was won by Americans and the British doesn’t align with reality and that it was actually Soviet Russia that did the work and paid the price of defeating Nazi Germany. “Don’t forget how the Soviet Union saved the world from Hitler” by Ishaan Tharoor gives an overview of what actually happened in the war, but is really just a hint at the complicated, horrific situation faced by the people of Russia.

The Red Army was “the main engine of Nazism’s destruction,” writes British historian and journalist Max Hastings in “Inferno: The World at War, 1939-1945.” The Soviet Union paid the harshest price: though the numbers are not exact, an estimated 26 million Soviet citizens died during World War II, including as many as 11 million soldiers. At the same time, the Germans suffered three-quarters of their wartime losses fighting the Red Army.

“It was the Western Allies’ extreme good fortune that the Russians, and not themselves, paid almost the entire ‘butcher’s bill’ for [defeating Nazi Germany], accepting 95 per cent of the military casualties of the three major powers of the Grand Alliance,” writes Hastings.

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“The Holocaust overshadows German plans that envisioned even more killing. Hitler wanted not only to eradicate the Jews; he wanted also to destroy Poland and the Soviet Union as states, exterminate their ruling classes, and kill tens of millions of Slavs,” writes historian Timothy Snyder in “Bloodlands: Europe between Hitler and Stalin.”

Don’t forget how the Soviet Union saved the world from Hitler by Ishaan Tharoor