Good post. I'd add that while MMT may be technically coherent as a description of how sovereign currency issuance works, it provides no real policy guidance on its own — as you note. The problem is that its most vocal promoters aren't really interested in the accounting mechanics; they're using it as intellectual cover for an expansionary spending agenda. During the recent inflation spike, rather than acknowledging any demand-side component, many MMT-adjacent commentators pivoted to blaming "corporate greed" and monopoly mark-ups. In Australia, this translated into political pressure on the ACCC to pursue the major grocery chains — a spectacle that generated plenty of headlines but little actual evidence of systemic price gouging.
The deeper issue MMT ignores is that government is systematically worse at allocating resources than markets. When spending is explicitly directed at labour-intensive sectors to shore up voter blocs rather than productivity, the result is a structural drag on economic output. And this isn't merely theoretical — since the GFC, Australian consumption has increasingly been propped up by subsidised non-market spending in housing, aged care, childcare, and the NDIS. These aren't investments that expand productive capacity; they're transfers that sustain demand while the underlying supply-side weaknesses go unaddressed.
This connects to a broader point I've been thinking about. I recently spoke with some environmentalist friends who insist they don't want people to be poorer — they just want humanity to consume fewer resources. But this distinction collapses under scrutiny. Money is, at its core, a claim on resources. If your dollars progressively command fewer real goods and services, the currency becomes worthless. You can't simultaneously maintain living standards and restrict the energy and resource base that underpins them. The MMT framing, ironically, should make anyone more sceptical of progressive policies — carbon restrictions, limits on fossil fuels, barriers to nuclear — that constrain the productive capacity required to give government spending any real meaning in the first place.
Firstly I would say the reason this movie largely needs to exist is because of the national debt scare campaigns undertaken by right-wing major parties post-GFC to claim that any spending proposed by a left major party that isn't budget neutral/positive is a burden to future generations and will drive governments to bankruptcy, which is great politics but of course highly misleading, especially when there was a lot of spare capacity post-GFC. The Rudd/Swan "debt bomb" campaigns did huge amounts of economic damage in preventing the government from being able to do adequate deficit spending. And while this may have changed during Morrison's "good debt / bad debt" reframing for political expediency, the risk that debt will be politically weaponised again after the next crisis is very real as the orthodox foundations for concerns about "sound finance" of government spending still predominate in government and through most economists pumped out of Universities. I don't think we can just hand wave that away and claim "ah no one cares about debt anymore, that was never an issue". Maybe not right now, but the same play book of weaponising stimulus spending during a recession is ripe for reuse come the next crisis.
Secondly I understand where you've missed the logical jump to the Job Guarantee - it was always conceived of as a macrostabiliation alternative. To dig into that concept and why MMT is a break with the orthodoxy, you need to look into the NAIRU and the idea of the buffer-stocks. All economists agree there are limits to real capacity, but neo-classical economics adopts an arbitrary NAIRU concept and asserts that a significant level of unemployment must exist to prevent inflation (which is well above labour market friction) - meaning structurally some people must be forced onto welfare in order for the system to function (which ironically changes the narrative around individuals being doll bludgers).
The MMT economists (starting from Bill Mitchell) assert that the NAIRU is not as rigid as proposed and is empirically falsifiable (consider inflation was still falling despite unemployment being below 4% when it should be accelerating). He proposed instead of managing inflation with a buffer-stock of people on JobSeeker, that we do direct job creation for minimum wage level entry level positions in a price anchored segment of the labour market as an employed buffer stock, to create the "Non-Accelerating Inflationary Buffer Employment Ratio" (NAIBER).
Instead of using welfare as the price anchor for macroeconomic stabilisation, minimum wage community/public jobs could perform that function. So when inflation is high and fiscal/monetary contraction is needed, instead of more people being forced on to Jobseeker, many of them could instead choose to move into the price anchored minimum wage sector. Jobseeker could remain, but anyone who wants to work in those public/community sector jobs could alternatively do so at minimum wage (which is some what higher and also an active labour market policy). Maybe you can label it workfare in return for a bonus rate of Jobseeker, but jobs are supposed to be formal terms of employment that come with the same rights, security, expectations, training and development.
Some countries still do this implicitly in their labour market policies such as Japan, where they do direct entry level job creation in certain segments of their economy to keep unemployment permanently low. Denmark is able to do this through local government via through services like parks and gardens etc. The problem is we outsourced and privatised a lot of these areas so cannot currently do that to the same extent. It's possible we could replicate this type of framework through social procurement policy and social enterprises. However a true bufferstock program if institutionalised would be a much more effective macroeconomic stabliser than patch work government spending on direct job creation in social procurement etc.
Also a personal note about the JG. The thing that frustrates me about the debate is too often the people who oppose or are ambivalent towards the program are the ones who aren't the target demographic who will benefit. Tertiary educated, relatively privileged professionals with decent incomes like us aren't the target of a JG - we are more likely to become "wait unemployment" in a higher segment of the labour market.
The people who benefit the most are the ones on the fringes of the labour market: the old, the youth, CALD and asylum seekers, those in rural areas, those with physical/mental conditions, first nations people's, single mums. The people who are always fired first and hired last (or in some cases not at all). It is all well and good for us to lecture to those people about how giving them guaranteed entry level non-market jobs would be "workfare" and demeaning. But we are not them, and I don't think it's right for us to deny those people the opportunity when as developed society we have the means to do it. We can offer those people a way of socially contributing within their capacity and monetarily recognising that contribution through the institution of "employment". The exact nuts and bolts of how we do that is amendable, but really that should be a goal of inclusive macroeconomic stabilisation policy. Our current macro stabilisation policy is pretty inequitable by comparison.
I take your point. But people can choose to work for free and socially contribute in any way they choose while on a generous welfare payment. Why should they be told what to do for the money?
Yes it makes sense for people like us with our perspective when you've got those internal drives to make a contribution, but it turns out that studies on happiness show that most people lose happiness from unemployment that goes far beyond income loss, especially long term unemployment. The problem runs deeper. It ignores a lot of sociological factors that come from paid employment. There's a whole literature on the social and psychological benefits that come from employment in terms of a sense of value and purpose, social connection etc. that go beyond income. It's all well and good to tell people "you figure out how to contribute to the community and structure your work/life, here take this cash", but the reality is a lot of those marginalised people face exclusionary barriers that make that difficult.
I am not meaning to patronise people to say everyone is incapable of their own self directed work, but there is a significant minority of people who do not have that discipline or drive (or perhaps even the means). The institution of employment (i.e. monetarily rewarding contribution/work/effort/participation) creates that dynamic that is not replicated from handing marginalised people a cheque and telling them to figure out how to constructively participate in society.
I would suggest studying the literature on differences to happiness and outcomes from employment vs income support before making a value judgement.
In fact I can give you a first hand real world example I witnessed. I visited Afri-Aus Care in Springvale, an organisation that (among many things) tries to assist African mothers to integrate into the community. A lot of them are single mothers, and have really struggled to integrate into society, with self-esteem, with family life, with so many things. They were already on income support and already volunteering for the organisation in some capacity.
You really cannot fathom the joy and change that was made to those women's lives when the organisation partnered with Cleanaway to provide a pathway into employment (through State government social procurement program) in the waste industry. Those women were literally dancing in the car park. The lady who runs the organisation tells me those African mamas are so excited to go to work that they are all busy now working full time and she has difficulty getting them to participate in programs or volunteer.
Seriously before you dismiss the benefits of employment, I would go talk to the people who's lives are changed by those job creation programs. We are really doing ourselves a disservice when we sit in our armchairs pontificating about what is or isn't good for those marginalised from the labour market.
This is a good example. Thanks. The macroeconomics question for MMT is surely more an about how to keep aggregate demand up so that these types of opportunities exist more broadly, no? For example, in the US at the moment the criteria for hiring is getting more lenient, more ex-criminals are working, and incomes in the bottom part of the distribution are rising fastest. That’s the result of more overall spending in the economy and not a specific jobs program. I don’t really have an issue with jobs programs as a micro-economic program, and your example shows the benefits that can arise. But it still seems a strange way to try and manage the macroeconomy, and a bad idea to replace welfare with it, as some have suggested.
Yeah it's not meant to be a welfare replacement, for example Bill Mitchell never claimed it should replace income support.
Yes a political macro goal using the knowledge of MMT could be to keep labour market demand as tight as possible without accelerating inflation (although the business community would likely oppose that value judgement). However if you read the first Bill blog link I put in the first comment, you'll understand the JG policy framework was developed in response to manage stagflation.
The problem is when the economy overheats, you need to engage in contractionary fiscal/monetary policy - MMT doesn't change that. However the social costs of contractionary policy are highly uneven/inequitable, as well as inefficient in a cost sense since putting people out of work reduces the supply side, output and creates labour market hysteresis. So MMT proposes macro stabilisation frameworks like the JG, so the major equity and efficiency defects of contractionary policy are mitigated.
I just don’t think getting agreement of 10s of millions of people on a fundamental legal change to their biggest asset would work (voluntarily of course)
The underlying issue causing a drop in productivity of capital in modern economies is the creation of new money to transfer existing assets instead of using existing money to transfer existing assets. Lending to transfer houses is "easy money" for banks. Lending to invest in productivity improvements is much harder work. The Reserve Bank could have much greater control over the economy by changing the amount of interest on each payment taken off the Capital owing for low risk loans rather than changing the interest rate. They could set a goal of zero-inflation and achieve it. Sharing interest this way is a trivial book-keeping change for banks and does not require any action by millions of people.
It would make the concept of shared local ownership very attractive as all interest can be eliminated when a person moves from one house to another. People would move voluntarily.
Saving unnecessary interest on debt can increase returns to savers while reducing the cost to buyers making for a more productive economy. (less money needed for the same goods and services).
In response to your article I wrote another article pointing out how the amount of money in the economy will better reflect the amount of wealth (or assets). This "solves" the balance sheet problem you point out.
If we share profits then wealth is spread and it better reflects the assets in a society - hence the financial wealth will be closer to the real wealth not this nonsense where we count financial assets as being the same as real assets. In particular the Reserve Bank can start the process by getting the Banks to share the interest on home loans and make housing affordable. https://medium.com/@kevin-34708/increasing-productivity-85ca11836b20
Further to sharing profits. I should have written sharing future profits. There is no point in reducing immediate profits as it does no allow reciprocal sharing. Reciprocal sharing is a social act that incurs a future obligation. It is the obligation of a future benefits that provide the glue that holds societies together because both the buyer and seller want the asset to continue to produce. Competitive markets still remain to give buyers and sellers a choice but both buyers and sellers wanting a business to continue helps prevent predatory extractive capitalism with all the issues it brings. Knowing the profit (or loss) on any transaction removes the need for markets to set prices but does not remove the ability to have a choice. It also allows socially responsible monopolies and allows governments to fund loss making enterprises for the benefit of all. Even better its implementation is "soft" meaning any existing enterprise can use it without changing the physical operation of trading the goods or service. (See my attempt at a sharing substack journal https://open.substack.com/pub/kevincbr/p/an-economic-commons?r=298zv&utm_campaign=post&utm_medium=web.
Good post. I'd add that while MMT may be technically coherent as a description of how sovereign currency issuance works, it provides no real policy guidance on its own — as you note. The problem is that its most vocal promoters aren't really interested in the accounting mechanics; they're using it as intellectual cover for an expansionary spending agenda. During the recent inflation spike, rather than acknowledging any demand-side component, many MMT-adjacent commentators pivoted to blaming "corporate greed" and monopoly mark-ups. In Australia, this translated into political pressure on the ACCC to pursue the major grocery chains — a spectacle that generated plenty of headlines but little actual evidence of systemic price gouging.
The deeper issue MMT ignores is that government is systematically worse at allocating resources than markets. When spending is explicitly directed at labour-intensive sectors to shore up voter blocs rather than productivity, the result is a structural drag on economic output. And this isn't merely theoretical — since the GFC, Australian consumption has increasingly been propped up by subsidised non-market spending in housing, aged care, childcare, and the NDIS. These aren't investments that expand productive capacity; they're transfers that sustain demand while the underlying supply-side weaknesses go unaddressed.
This connects to a broader point I've been thinking about. I recently spoke with some environmentalist friends who insist they don't want people to be poorer — they just want humanity to consume fewer resources. But this distinction collapses under scrutiny. Money is, at its core, a claim on resources. If your dollars progressively command fewer real goods and services, the currency becomes worthless. You can't simultaneously maintain living standards and restrict the energy and resource base that underpins them. The MMT framing, ironically, should make anyone more sceptical of progressive policies — carbon restrictions, limits on fossil fuels, barriers to nuclear — that constrain the productive capacity required to give government spending any real meaning in the first place.
I don't know where this fits with MMT but Kocherlakota's idea that "Money is Memory" totally fascinated me when I stumbled on it several years ago.
https://www.minneapolisfed.org/research/staff-reports/money-is-memory
I liked the voice version as a companion for a walk
Hope you keep it
Good to hear!
Nice review Cam, I'll make a couple of comments.
Firstly I would say the reason this movie largely needs to exist is because of the national debt scare campaigns undertaken by right-wing major parties post-GFC to claim that any spending proposed by a left major party that isn't budget neutral/positive is a burden to future generations and will drive governments to bankruptcy, which is great politics but of course highly misleading, especially when there was a lot of spare capacity post-GFC. The Rudd/Swan "debt bomb" campaigns did huge amounts of economic damage in preventing the government from being able to do adequate deficit spending. And while this may have changed during Morrison's "good debt / bad debt" reframing for political expediency, the risk that debt will be politically weaponised again after the next crisis is very real as the orthodox foundations for concerns about "sound finance" of government spending still predominate in government and through most economists pumped out of Universities. I don't think we can just hand wave that away and claim "ah no one cares about debt anymore, that was never an issue". Maybe not right now, but the same play book of weaponising stimulus spending during a recession is ripe for reuse come the next crisis.
Secondly I understand where you've missed the logical jump to the Job Guarantee - it was always conceived of as a macrostabiliation alternative. To dig into that concept and why MMT is a break with the orthodoxy, you need to look into the NAIRU and the idea of the buffer-stocks. All economists agree there are limits to real capacity, but neo-classical economics adopts an arbitrary NAIRU concept and asserts that a significant level of unemployment must exist to prevent inflation (which is well above labour market friction) - meaning structurally some people must be forced onto welfare in order for the system to function (which ironically changes the narrative around individuals being doll bludgers).
The MMT economists (starting from Bill Mitchell) assert that the NAIRU is not as rigid as proposed and is empirically falsifiable (consider inflation was still falling despite unemployment being below 4% when it should be accelerating). He proposed instead of managing inflation with a buffer-stock of people on JobSeeker, that we do direct job creation for minimum wage level entry level positions in a price anchored segment of the labour market as an employed buffer stock, to create the "Non-Accelerating Inflationary Buffer Employment Ratio" (NAIBER).
https://billmitchell.org/blog/?p=44651
Instead of using welfare as the price anchor for macroeconomic stabilisation, minimum wage community/public jobs could perform that function. So when inflation is high and fiscal/monetary contraction is needed, instead of more people being forced on to Jobseeker, many of them could instead choose to move into the price anchored minimum wage sector. Jobseeker could remain, but anyone who wants to work in those public/community sector jobs could alternatively do so at minimum wage (which is some what higher and also an active labour market policy). Maybe you can label it workfare in return for a bonus rate of Jobseeker, but jobs are supposed to be formal terms of employment that come with the same rights, security, expectations, training and development.
Some countries still do this implicitly in their labour market policies such as Japan, where they do direct entry level job creation in certain segments of their economy to keep unemployment permanently low. Denmark is able to do this through local government via through services like parks and gardens etc. The problem is we outsourced and privatised a lot of these areas so cannot currently do that to the same extent. It's possible we could replicate this type of framework through social procurement policy and social enterprises. However a true bufferstock program if institutionalised would be a much more effective macroeconomic stabliser than patch work government spending on direct job creation in social procurement etc.
Also a personal note about the JG. The thing that frustrates me about the debate is too often the people who oppose or are ambivalent towards the program are the ones who aren't the target demographic who will benefit. Tertiary educated, relatively privileged professionals with decent incomes like us aren't the target of a JG - we are more likely to become "wait unemployment" in a higher segment of the labour market.
The people who benefit the most are the ones on the fringes of the labour market: the old, the youth, CALD and asylum seekers, those in rural areas, those with physical/mental conditions, first nations people's, single mums. The people who are always fired first and hired last (or in some cases not at all). It is all well and good for us to lecture to those people about how giving them guaranteed entry level non-market jobs would be "workfare" and demeaning. But we are not them, and I don't think it's right for us to deny those people the opportunity when as developed society we have the means to do it. We can offer those people a way of socially contributing within their capacity and monetarily recognising that contribution through the institution of "employment". The exact nuts and bolts of how we do that is amendable, but really that should be a goal of inclusive macroeconomic stabilisation policy. Our current macro stabilisation policy is pretty inequitable by comparison.
I take your point. But people can choose to work for free and socially contribute in any way they choose while on a generous welfare payment. Why should they be told what to do for the money?
Yes it makes sense for people like us with our perspective when you've got those internal drives to make a contribution, but it turns out that studies on happiness show that most people lose happiness from unemployment that goes far beyond income loss, especially long term unemployment. The problem runs deeper. It ignores a lot of sociological factors that come from paid employment. There's a whole literature on the social and psychological benefits that come from employment in terms of a sense of value and purpose, social connection etc. that go beyond income. It's all well and good to tell people "you figure out how to contribute to the community and structure your work/life, here take this cash", but the reality is a lot of those marginalised people face exclusionary barriers that make that difficult.
I am not meaning to patronise people to say everyone is incapable of their own self directed work, but there is a significant minority of people who do not have that discipline or drive (or perhaps even the means). The institution of employment (i.e. monetarily rewarding contribution/work/effort/participation) creates that dynamic that is not replicated from handing marginalised people a cheque and telling them to figure out how to constructively participate in society.
I would suggest studying the literature on differences to happiness and outcomes from employment vs income support before making a value judgement.
In fact I can give you a first hand real world example I witnessed. I visited Afri-Aus Care in Springvale, an organisation that (among many things) tries to assist African mothers to integrate into the community. A lot of them are single mothers, and have really struggled to integrate into society, with self-esteem, with family life, with so many things. They were already on income support and already volunteering for the organisation in some capacity.
You really cannot fathom the joy and change that was made to those women's lives when the organisation partnered with Cleanaway to provide a pathway into employment (through State government social procurement program) in the waste industry. Those women were literally dancing in the car park. The lady who runs the organisation tells me those African mamas are so excited to go to work that they are all busy now working full time and she has difficulty getting them to participate in programs or volunteer.
Seriously before you dismiss the benefits of employment, I would go talk to the people who's lives are changed by those job creation programs. We are really doing ourselves a disservice when we sit in our armchairs pontificating about what is or isn't good for those marginalised from the labour market.
This is a good example. Thanks. The macroeconomics question for MMT is surely more an about how to keep aggregate demand up so that these types of opportunities exist more broadly, no? For example, in the US at the moment the criteria for hiring is getting more lenient, more ex-criminals are working, and incomes in the bottom part of the distribution are rising fastest. That’s the result of more overall spending in the economy and not a specific jobs program. I don’t really have an issue with jobs programs as a micro-economic program, and your example shows the benefits that can arise. But it still seems a strange way to try and manage the macroeconomy, and a bad idea to replace welfare with it, as some have suggested.
Yeah it's not meant to be a welfare replacement, for example Bill Mitchell never claimed it should replace income support.
Yes a political macro goal using the knowledge of MMT could be to keep labour market demand as tight as possible without accelerating inflation (although the business community would likely oppose that value judgement). However if you read the first Bill blog link I put in the first comment, you'll understand the JG policy framework was developed in response to manage stagflation.
The problem is when the economy overheats, you need to engage in contractionary fiscal/monetary policy - MMT doesn't change that. However the social costs of contractionary policy are highly uneven/inequitable, as well as inefficient in a cost sense since putting people out of work reduces the supply side, output and creates labour market hysteresis. So MMT proposes macro stabilisation frameworks like the JG, so the major equity and efficiency defects of contractionary policy are mitigated.
Your recent book The Great Housing hijack in chapter 2 has a paragraph starting “Although the logistics would be insurmountable….”
Why do you think that?
I just don’t think getting agreement of 10s of millions of people on a fundamental legal change to their biggest asset would work (voluntarily of course)
Thanks. That is very helpful.
The underlying issue causing a drop in productivity of capital in modern economies is the creation of new money to transfer existing assets instead of using existing money to transfer existing assets. Lending to transfer houses is "easy money" for banks. Lending to invest in productivity improvements is much harder work. The Reserve Bank could have much greater control over the economy by changing the amount of interest on each payment taken off the Capital owing for low risk loans rather than changing the interest rate. They could set a goal of zero-inflation and achieve it. Sharing interest this way is a trivial book-keeping change for banks and does not require any action by millions of people.
It would make the concept of shared local ownership very attractive as all interest can be eliminated when a person moves from one house to another. People would move voluntarily.
Saving unnecessary interest on debt can increase returns to savers while reducing the cost to buyers making for a more productive economy. (less money needed for the same goods and services).
In response to your article I wrote another article pointing out how the amount of money in the economy will better reflect the amount of wealth (or assets). This "solves" the balance sheet problem you point out.
If we share profits then wealth is spread and it better reflects the assets in a society - hence the financial wealth will be closer to the real wealth not this nonsense where we count financial assets as being the same as real assets. In particular the Reserve Bank can start the process by getting the Banks to share the interest on home loans and make housing affordable. https://medium.com/@kevin-34708/increasing-productivity-85ca11836b20
Further to sharing profits. I should have written sharing future profits. There is no point in reducing immediate profits as it does no allow reciprocal sharing. Reciprocal sharing is a social act that incurs a future obligation. It is the obligation of a future benefits that provide the glue that holds societies together because both the buyer and seller want the asset to continue to produce. Competitive markets still remain to give buyers and sellers a choice but both buyers and sellers wanting a business to continue helps prevent predatory extractive capitalism with all the issues it brings. Knowing the profit (or loss) on any transaction removes the need for markets to set prices but does not remove the ability to have a choice. It also allows socially responsible monopolies and allows governments to fund loss making enterprises for the benefit of all. Even better its implementation is "soft" meaning any existing enterprise can use it without changing the physical operation of trading the goods or service. (See my attempt at a sharing substack journal https://open.substack.com/pub/kevincbr/p/an-economic-commons?r=298zv&utm_campaign=post&utm_medium=web.