How to Pay for Saving the World (Modern Monetary Theory vs. Degrowth) | DEGROWTHIFY #3
Degrowth can be a jarring, annoying, off-putting word, but is also intentional, mind-bending, culture-jamming, unavoidable, and necessary. So why then say degrowth and not the “feel good economy”, or “prosperity for all economy”? Because degrowth is not just about reducing consumption and production BY A LOT in rich countries, and SOON, but also dismantling the growth-imperative at the core of capitalism, which has led us the climate disaster we are in. Our current economic system is designed to grow and doesn’t know how to do it without growth. This is why we need degrowth specifically, in the short-term, to stabilize our relation with the environment.
This essay is about how we find the money to pay for degrowth.
I will go through a list of propositions based on this paper from August 2023. Before that, we need to talk modern monetary theory. MMT shows how states that issue their own currency are not limited by a budget or income from taxes. Those states do not need to collect taxes in order to have money to spend on social programs. The government spending happens FIRST, and taxes are collected AFTER, as means to keep the economy stable. The taxes are NOT the source of money for the spending. These states can create as much money as they want, unrelated to how much taxes they collect, as long as it does not have undesirable consequences, such as inflation. In other words, MMT basically says, there is plenty of money for everything we want to do, as long as: we don’t create inflation, there are enough people to do the work, and enough resources to build what we want, also known as the productive capacity of the economy which includes social and ecological limits. With this in mind, let’s go through the list.
# 1 Degrowth is against artificial scarcity of essential goods.
Important to remember a basic accounting equivalence. There is always enough money to buy everything on the market because somebody’s expense is always somebody else’s income. The problem is when purchasing power is not equally distributed. This creates artificial scarcity in capitalism through manufactured inequality. Capitalism has to grow to maintain this artificial scarcity. Degrowth says we don’t have to obey this unjust system, because it is not natural, and we can have enough for everyone, forever, by merging efficiency with sufficiency. Desires should not be infinite, and cannot be infinite. Purchasing power should not concentrate in the hands of few humans to the detriment of everybody else.
# 2 MMT is against artificial scarcity of money.
Governments do NOT need to balance their budgets, and cut expenses. That is a capitalist big lie. Central banks are not subjects to liquidity limitations because they can create new money at any time. Mind you, this applies to countries that have their own currency, like the United States, or Canada, or China, and even Russia. The European Union is a more complicated story but not entirely outside the scope of MMT. This is why countries with sovereign currencies can never go bankrupt in their own currency. They will always be able to pay their debts. This is part of the reason the dollar remains the top reserve currency in the world because the US government can always service its debts in dollars.
MMT describes how the state finances work, but from a different and more helpful angle. With MMT we can definitely say there is always enough money to pay for everything. The real problem is, who does the actual work? And do we have enough skills and tools to do the work?
# 3 Modernizing degrowth’s monetary theory
Okay. So, we do have the money to pay for a degrowth transition. However, there can be many types of money. One kind is “special purpose money” which can be used in a limited geographic area, or only for a specific purpose, for example to buy only goods produced locally. Other kinds are positive money, or full-reserve banking, which means banks will have to maintain reserves to the same amount as what the give out as loans. This will take power away from commercial banks and move it to the central bank, which may also have its disadvantages. To avoid this, at the same time, the banking system would become decentralized, and public.
When degrowth proposes a universal unconditional basic income for all citizens, regardless of the type of money used, whether centralized or decentralized, there is no intrinsic requirement to increase taxes. That is not where money is coming from. Yes, taxes will be needed, but for different reasons, not to pay for a universal basic income, or anything else.
What about inflation? Suffice to say, that the demand for energy and raw materials must be reduced as fast as their supply. Then the purchasing power of high-income household must also be reduced, with taxation, so they can no longer afford to demand products and services that are destroying the environment. This is one way to keep inflation in check.
# 4 Degrowing MMT
MMT alone is not enough to fix our problems. Even if we had enough money for anything we needed, as a society, it does not mean we have to continue business-as-usual and attitude-as-usual. In a world dominated by the dollar, the hierarchies of power between the high-income countries and low-income countries, must , must also disappear. Reparations for colonisation should be paid. Immoral debts should be cancelled. Green Special Drawing Rights should the established. Expenses by governments should be for projects that bring the economy back within planetary boundaries. There is a lot of work to do. There will be plenty of good paying jobs for everyone.
# 5 Policies to benefit people: tax wealth and resources, not labor
The main reason we need to increase taxes on the rich is to take away their purchasing power. In fact, the economy can function well if there were much less taxes on your labour, and more taxes on general wealth and consumption of resources and energy. We can build a new green economy by REDUCING taxes on your labor, and increasing the taxes on the wealth of the rich.
If you are middle class, you can work less, pay less taxes, and enjoy even more quality public services. But if you are an upper-class human you may have to learn to live just like everybody else. It is not that hard, is it?
# 6 Policies to benefit people: degrow private finance
Commercial banks can now create money just by giving you a loan. That money comes from nowhere. This is, in fact, how most of the money is created, and not by government spending. A lot of this made-up money still goes to the fossil fuel industry and towards production and consumption of useless stuff. Proper regulation, such as no more loans for fossil fuels, or loans against stocks and bonds, can allow the economy do what is right for all humans, not just capitalists. Like we saw, there is plenty of cash just sitting in the wrong hands.
# 7 Policies to benefit people: price controls, complementary currencies, universal public services
Who says we cannot do price controls? Not the Soviet Union, but global crises such as the Covid pandemic. We can fix the price for a certain amount of energy consumed in a household, and allow the markets to determine the price above that amount. If complementary currencies were used more, then there will even less risk of inflation. A public provisioning system, which means providing needs and services for… the public, by the public, and of the public, will also not be affected by inflation or by price-gouging by greedy capitalists. Friendly reminder not to confuse the public with the government. The needs of humans can be, and should be satisfied as much as possible outside the market, paired with reduced working time, in the range of 15-20 hours per week in the traditional productive economy.
# 8 Policies to benefit people: job guarantee
Degrowth wants to free humans from the anxiety of unemployment and destitution. Under capitalism, waged work, and the labor market, have created perverse and stressful relations between two major classes of people: employers and employees. Job-seekers have to lie to get bullshit jobs so they can pay rent or mortgage. Employers lie about benefits, working hours, and working conditions. It’s a theatre, a farce. Everyone is pretending. We cannot talk like normal humans at work. And the vast majority of work serves an economic system of waste, destruction, privilege for the few, and misery for the many.
This can be fixed with the job guarantee, that is government-funded according to MMT principles, and is focused on public social provisioning rather than profit. These will be well-paying jobs that are meaningful. Jobs that create an economy that produces meaningful things and services that we actually need.
There are several ways to do a job guarantee. You can do a “last resort”-kind of program that is intended only for those unable to find a job in the current labor market. So, instead of going into unemployment, you are guaranteed a job. You can also have a “competitive”-kind of program where these government-funded public jobs will compete with the jobs on the current labor market, but the public jobs will come with guarantees: they will be well paid, they will be meaningful, they will have much less working-hours, and they will exist so nobody will be involuntarily unemployed. The idea is to move towards a kind of society where we all enjoy life, work efficient and sufficient, create something meaningful and sustainable.
#9 Policies to benefit people: maximum wage ratio, maximum capital income
Sometime ago I made a video where I talked about maximum income and maximum wealth. A maximum wage ratio is exactly the rapport between the lowest salary versus the highest salary at a workplace. These ratios today are out of control and are completely unregulated. This is why a CEO can make tens of millions while the lowest-paid worker can barely pay rent. All this, in the name of the free market, and so-called merit. But, as we know, meritocracy is yet another lie in our lovely economic system. Setting a limit to the wage ratio to something like 1:4 or 1:6 is actually very reasonable, and fair. Nobody needs, or deserves ten times or a hundred times more than their co-worker. No CEO is a thousand times more intelligent than any of their colleagues. They only makes so much because of this triad:
Same with capital income which is the result of how the system is designed. You are a shareholder of a company; you have the power to draw out as much capital income as you see fit. It is your sacred right, codified into law. It is legal but not necessarily moral. This can be fixed by taxing capital itself, for example taxing the ownership of stock, because it qualifies as an asset. Doesn’t matter if it is cash or not. It is real. And it’s property. We could tax the stock of billionaires and move the ownership of that stock not to the government but into a public trust that is run by citizens like you and me.
Conclusions
“Price stability depends on the relationship between total spending and total resource use, mediated by factors that include the resource efficiency of provisioning systems, the bargaining power of social classes, and the distribution of purchasing power. A degrowth transition will be stable only if total spending decreases in balance with the necessary reduction of resource use.” (Source)
In previous videos I’ve been talking about the triad of capitalism. If combined, MMT and degrowth, can seriously chip away at the triad. It will appear like a slow dismantling of capitalism, which is one way to do it, that is more palatable for the taste of the ruling class. Although, I suspect what we discussed here today is already too radical for some humans. To which I say tough luck. The pitchforks will be coming, sooner or later, and no billionaire bunker is safe enough.
See the video version of this essay here.