Episode 84 – African Sovereignty and a Global Green New Deal with Fadhel Kaboub

Macro N Cheese – Episode 84
African Sovereignty and a Global Green New Deal with Fadhel Kaboub

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Fadhel Kaboub [intro/music] (00:00:03):

Developing countries tend to have government-issued exclusive licenses to import food or medicine or fuel. And the companies that have that exclusive license have no interest in seeing a domestic industry develop that would compete with them. So they’ll do whatever it takes to eliminate the competition.

Monetary sovereignty is something that you acquire. It’s not just something that you declare. ‘Hey, I’m a monetary sovereign. I’m going to float my exchange rate.’ You can’t do that. It’s something that you acquire through hard work.

Geoff Ginter [intro/music] (00:00:41):

Now let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.

Steve Grumbine (00:01:35):

Alright, and this is Steve with Macro N Cheese. Today I have Fadhel Kaboub, returning. Fadhel is an Associate Professor of Economics at Denison University and the president of Global Institute for Sustainable Prosperity. He held research affiliations with the Levy Economics Institute at Bard College and the John F. Kennedy School of Government at Harvard University.

He is an expert on Modern Monetary Theory, the Green New Deal, and the job guarantee. His work focuses on public policies to enhance monetary and economic sovereignty in the global South, build resilience, and promote equitable and sustainable prosperity. You can follow his work on Twitter at @FadhelKaboub and @GISP_tweets. And with that, let me just kick this off real quickly.

We had spoken several times now about monetary sovereignty in developing nations, and one of the previous times we spoke with Fadhel, we had Ndongo Samba Sylla, another excellent modern monetary theorist who has deep understanding of monetary sovereignty issues, especially in Africa and other places that have marginal monetary sovereignty. And Fadhel is really doing some great work.

He’s probably doing the most work I’ve physically seen within the political space and educating people and so forth. So I wanted to find out what’s been going on and lo and behold, Fadhel has been a very, very busy little boy here lately. He has done incredible work, getting a letter out that they’re working on, bringing about a full understanding in many languages, et cetera, about monetary sovereignty and about what we can do to create an economy around the world that works for all people.

And so I thought what better time than now to bring Fadhel on and have a talk about what he’s been up to. And with that Fadhel, welcome to the show, sir. Thank you so much for joining me today.

Fadhel Kaboub (00:03:40):

Thank you for having me back on the show. It’s a privilege to communicate again and again with your listeners. So thank you.

Grumbine (00:03:47):

Absolutely. So I kind of laid it out there. You’ve been working on this letter. Tell us about the letter real quick.

Kaboub (00:03:55):

So this is an open letter that, you know, at the time of this recording is not public yet, but will be public by the time we release this podcast – which I think is set for September 5th – the letter will be available publicly. But the letter is available right now for people to sign and I’ve been circulating it with my colleagues all over the world. And as of today, we have close to 500 signatures, endorsements from all over the global South, the global North, the African continent and the diaspora.

So a little bit of context about how we got here: almost two years ago, maybe two and a half years ago, a few of my colleagues and I started talking about bringing the economic and monetary sovereignty discourse and the MMT lens to the African context to the developing world. And this small group included our colleague Ndongo from Senegal, who you just mentioned, my two colleagues from Tunisia, Ines Mahmoud and Maha Ben Gadha and our colleague from Germany, Kai Koddonbrock.

So we started this conversation and then we said, well, maybe we should organize a conference to introduce people to this theme – scholars, activists, policymakers, journalists, and just open the conversation. We didn’t really have high expectations about changing the discourse right away, but at least we said, let’s start the conversation. So that led to the conference that we had in Tunis in Tunisia last November, 2019. And it was a great success in the sense that it really went beyond our expectations.

There was a huge amount of enthusiasm and engagement from the labor movement, the food sovereignty movement, from policymakers, not just in Tunisia, but from all over the African continent. And the immediate kind of feedback we received was ‘how can we continue building on this theme?’ Because there was really a thirst for alternative ways of thinking about economic development beyond the standard IMF, World Bank, Washington consensus view of the world. So there’s a book that’s currently being edited that came out of that conference.

We decided to do a second iteration of that conference, but because of the pandemic, now this is not going to happen until November of 2021. Hopefully by then we’ll have this pandemic situation under control. And then as soon as the pandemic hit, you can start seeing all the issues that we’ve identified, you know, with the MMT lens, in terms of the lack of food sovereignty, a lack of energy sovereignty, the global supply chain being so extractive, especially in the African continent.

All of that was exposed during the shutdown during the pandemic, not just in the global South, but including in the global North. So there were a handful of open letters that came out from the African continent, some by a large group of public intellectuals and academics, not necessarily economists, essentially calling on African leaders to reconsider the priorities. Because it sounded like the priorities were: do we choose public health or do we choose the economy? Right?

And we are calling on African leaders that we can do both. That it’s not one or the other. And then there’s another open letter that came from African feminists, that was also signed by dozens of scholars from all over the continent, also hinting and focusing partly on economic issues.

So we thought that we really need to play our role in bringing a coherent economic development alternative to build these synergies with all of these scholars and public intellectuals and grassroots movements to continue building on the work we’ve been doing over the last two years. So we drafted this letter and because of our linguistic capabilities, I started the draft in English and then my colleagues added to it and critiqued it and cleaned it up. And then it’s finalized.

Then we said, okay, let’s translate this to French, Arabic and German, because these are the languages that we all speak. And then we said, wait a minute, we’re trying to build a grassroots movement and we’re writing in the colonial languages for the elites of these governments? We want to engage with the grassroots people in their own language.

So we said, we need to translate this into local African languages. So I posted this message on social media and said, Hey, can we have volunteers translate this two page statement into as many African languages and global South languages as possible? And then in a matter of literally, maybe two or three days, we have 50 translations – volunteers from all over the world. Lots of other European languages, obviously, but quite a few African languages and Asian languages.

We even managed to have somebody translate this into Mayan, which is a native Latin American language spoken by not many people around the world these days. But even if it’s symbolic, the idea was: we’re not going to speak to the elite, we’re not going to speak to the academics alone. I mean, it’s important to engage with governments and media and the educated elite and everything, but it’s more important to send a message to the average person saying: you don’t have to be part of the elite government institutions and the powers that be, to engage in conversations about economic development.

Because this is what happens all the time – the elites will say, ‘We know better. We follow the scientific method and we’ll make this work for you.’ And that’s part of the dominant narrative that says there is no alternative. And we’re saying there is an alternative. So it’s not enough to fight for this alternative in academic circles and policy circles, but it’s important to build a coherent narrative for the masses because the masses are angry at the system.

We see this all over the world and that turns into populist movements and populist movements are okay, except they’re easily co-opted into right wing or left wing populism without a coherent framework and it turns into blaming ‘the other’ and divisions and things like that. And we want to do offer a popular narrative. that’s not that populist left and populist right that ends up where we are today, essentially, not just in the US and Western Europe, but in other places where the political spectrum is divided and there is no coherent economic plan that can really serve the masses.

So that’s a little bit of the context, and we’re hoping that this will open that conversation and help us continue and engage with academics, policy makers, journalists, but especially activists. We’re not expecting this to convince everybody at first or be the final solution to everything, but we want this to be the beginning of a public discourse that moves away from the IMF and World Bank mainstream narrative.

Grumbine (00:11:13):

That is absolutely amazing. And you brought up the IMF and mainstream narratives. I wonder if you might be willing to take a few minutes to discuss what exactly the IMF does today and why that is not good.

Kaboub (00:11:29):

Right. So with this, we’re taking this MMT lens to analyze what the IMF is doing, what the mainstream perspective is. So maybe for the first-time listeners, let me just start by saying, this is what the MMT lens allows us to see and move into the alternative. So the mainstream perspective tells us that government spending is limited by tax revenues and borrowing capacity. That’s what we call the fiscal policy space – how much spending capacity we have.

And MMT is saying, for most governments that fiscal policy space is actually much larger than that. It goes beyond tax revenues and borrowing capacity. It’s not unlimited – it has a real limit and that limitation on government spending is the risk of inflation. It’s what we call the inflation constraint. So then the MMT analysis tells us that that inflation constraint or the sources of inflation can be summarized in two components.

One is inflation can kick in when we have a shortage of productive capacity, which means when we literally run out of physical labor, skilled labor in a particular area, machinery equipment, natural resources to produce more. So when we hit that limit of production capacity, inflation starts to kick in. So that means that’s the spending limit. But that’s not the only risk of inflation.

The other source of inflation has to do with abusive price-setting behavior, has to do with market power. And that kind of inflation happens because you have key players in the economy who can raise prices simply because they can, because they’re too powerful because they dominate the particular industry – and because government regulators let them get away with it.

So that kind of inflation is not going to go away by spending less or spending more, that kind of inflation goes away when you tax and regulate their market power out of existence. The other kind of inflation, the productive capacity – the good News about it is that we can produce more, which means you have to have an industrial policy, a strategic decision-making process that allows you to identify the areas where you have shortages of productive capacity and train and invest in those areas.

So that’s really the MMT lens that tells us there’s plenty of spending room and it tells us that it has to do with politics and corruption too. It’s not just about production and strategic planning, politics and corruption – meaning that the lawmakers who regulate the abusive price setters, they typically tend to not bite the hands that feed them. So if you’re brought into power and maintained in a powerful position in government, as a Senator or Congressman or president or MP or whatever, your job is to regulate those markets.

But if you’re sponsored by the super-PACs – by the pharmaceutical industry or banking industry or insurance industry – you’re not going to regulate them, which means you’re going to let them abuse the system and constrain the capacity of the government to serve its people. That is true, both in the global North and also in the global South. And I would argue it’s even more pervasive in the global South because of corruption, because of other factors.

Because then it becomes not just key players who abuse the price system because they’re kind of massive industrial powerhouse, but in some cases, because they have exclusive monopoly power or exclusive licenses given to them by the government in the case of developing countries. So for example, developing countries tend to have government-issued licenses, exclusive licenses to import food or to important medicine or to import fuel.

And the companies that have that exclusive license have no interest in seeing a domestic industry develop that would compete with them. So they’ll do whatever it takes to eliminate that competition, whether it’s in sustainable agriculture or renewable energy or industrial development. So they play a key role in keeping the local economy underdeveloped because they get to dominate the market. And that’s corruption. And that’s not going to go away by spending more or spending less on education – that’s going to go away by going straight to the power structure and taxing and regulating it out of existence.

Grumbine (00:16:09):

You know, Mark Blyth the other day – I interviewed him recently and I know Mark is not an MMTer, but there’s some adjacency there. One of the things he raised with his concern about MMT was the fact that we didn’t really have an answer from monopolists. And it sounds like you’re saying we absolutely do have an answer for some of that. The issue with corruption notwithstanding, can you address MMT’s answer for monopolies and how we would deal with their ability to alter the entire economic landscape?

Kaboub (00:16:42):

Yeah. So to answer, Mark’s concern about MMT and inflation and market power. Let’s make this clear that the MMT intellectual movement is relatively new and has been dominated primarily by macroeconomists. But here I must give full credit to Fred Lee, the late Fred Lee, who was a professor of economics at the University of Missouri in Kansas City, where I went to grad school.

I was one of his students and like many students in my cohort, we were leaning more towards the macro and modern money work. And for a number of years, Fred Lee was the only micro person in that space. So he was sort of forced to interact with the MMTers via the students and Randy Wray and Stephanie Kelton and Mat Forstater, and everything.

And, you know, at first he didn’t see the direct connections. He saw them as, you know, we’re post-Keynesians and working on different parts. But slowly the students who are taking the macro stuff and the micro stuff, we started itching to connect the two, because we thought maybe there was a connection. So we started dragging Fred Lee into the money seminars with Randy and Mat and Stephanie Kelton.

And we also started dragging the macro people into his seminars, the methodology seminars. And it was painful for both sides. They didn’t like it. It was very clear. But the students, I think, at UMKC at the time – here I’m talking about the early 2000s – we thought that it felt like there is something here, some connection we didn’t know.

I personally didn’t fully see it until very recently, unfortunately. And one of those pieces of the puzzle was inflation and market power and how important it is to the MMT framework. Fred Lee in the last few years of his life, he did get to that connection and he started sketching it in his own written published work and presentations, but it’s just the beginning of a massive research agenda that we must continue.

So this is to preface the answer, built on that foundation which, I mean, it took me more than a decade, you know, almost all of my career to figure out the connection and to figure out that there is something on there. And I started building this narrative in some of my presentations in terms of the inflation constraint and market power. And I think it’s clicking.

It’s clicking for me and it’s making sense for people who are now saying, ‘Oh, so MMT does have something to say about inflation and something to say about market power and politics and corruption.’ So I can’t speak for all MMTers, but this is the way I see it. I think the other person who played a key role in dragging the MMT macroeconomists into this – and we must give full credit to his excellent work – is Bill Black, who is also a microeconomist and talking about these issues that we thought were complementary to the MMT frame, but not deeply integrated.

So this is a call from me to all the young economists who are interested in this to really dig deeper into these connections and help us build this. And maybe that will provide eventually a full satisfactory set of answers for concerns that some of our colleagues like Mark, for example, have. So that being said, it’s a shallow territory. I think we have the right framework to tackle it, but we need help from colleagues and academics who see the potential to join and keep building on this framework.

Grumbine (00:20:34):

That’s powerful, man. I wonder if Mark actually listens to this. Maybe message to Mark Blyth, you know, ‘here’s an opportunity take this area that you’re interested in and really reach out and collaborate with MMTers and find a way to come up with that coherent explanation for that area.’

Kaboub (00:20:51):

And it’s really not just Mark. I mean, here, I’m talking about other heterodox economists, even post-Keynesians, Marxists, Institutionalists. These are the issues that all the heterodox economists care about, and we’re hoping to contribute to a paradigm shift away from the mainstream, and we’re not going to do it just by saying, ‘Oh, it’s only MMT that does this.’ It’s really the full heterodox spectrum. And we’re talking about decades worth of struggle against the mainstream.

MMT broke sort of new grounds in terms of making a big splash in the public discourse and really exposing the weaknesses of the mainstream. But we couldn’t have done it without Fred Lee. We couldn’t have done it without Kalecki. Without the full heterodox spectrum.

That includes Minsky and others, but Fred Lee was the most heterodox person I’ve ever met. He was the most pluralistic person I’ve ever met, and he did so much work throughout his life to fully integrate the feminist, institutionalist, post-Keynesian, Marxist perspective. So again, speaking for myself, not for any other MMTers, I see myself as part of that Fred Lee tradition, even though most people know me as the MMTer or post-Keynesian, but I can’t deny my institutionalist route.

This is how I think about the world or, you know, influences that I have from so many other scholars. So I think it will be a mistake for the rest of the heterodox tradition to perceive MMT as a standalone school of thought, as opposed to a component of the broader heterodox tradition, where we can build towards this paradigm shift that I’m hoping is underway, but it’s not going to go anywhere unless we coalesce and really complement each other’s work. MMT just provides that one component of it. But there’s so much more to it than just the MMT.

Grumbine (00:22:44):

Absolutely. With the closing of the primaries here in the United States and Bernie’s exit, and then subsequent political choices backing Joe Biden, the concept of a Green New Deal has gone from the front to the back of the bus. And that’s obviously a very dangerous scenario for us in the United States. And since we have such an outsized position in the global framework, it poses a significant danger to the rest of the world as well.

So this concept of pushing for a Green New Deal in the United States is very important. But I understand that you are also working, not just on a US-focused Green New Deal, but you’re looking at the global Green New Deal, this concept of a global Green New Deal. Can you set the groundwork for that conversation?

Kaboub (00:23:38):

So if you think of the US Green New Deal movement that AOC and others sparked about two years, the core components of it are two. One is to decarbonize the economy to address climate change. And two is to restructure the economy to address inequality, structural inequality in the US. So that’s a US context. But it turns out that climate change is not a US issue – it’s a global issue. Inequality is not a US issue – it’s a global issue.

So to me, and quite a few others, the last couple of years, I’ve been thinking about, well, if you think of it from an MMT perspective, from a monetary sovereignty perspective, from that fiscal spending capacity, the US can do it. Canada can do it. Japan can do it. There’s plenty of firepower, so to speak, in terms of spending capacity, that we should have implemented Green New Deals 10, 15 years ago, at least, if not since the seventies, when we’ve known about climate change and so on.

But now the question is how can the rest of the world, especially the global South, implement its own version of a Green New Deal, when we talk about developing countries who have very limited fiscal policy space. So the MMT lens here tells us, well, let’s identify number one: why are developing countries struggling with a very limited spending capacity?

Well, it turns out that struggle has to do with a massive amount of external debt that most developing countries have. And when you dig for the sources of that external debt, you discover that those sources are trade deficits that are concentrated primarily in the lack of food sovereignty, lots of food imports, a lack of energy sovereignty, lots of energy imports, especially fossil fuels.

And it turns out to be related to structural deficiencies in the industrialization process that developing countries followed in the sense that most developing countries export low value-added content and import high value-added content. In other words, you import all the technology and all the semi-finished components that will go into producing a toaster, for example.

And then what’s your contribution to the manufacturing process is assembling all the little components of that toaster with cheap labor, with in many cases, government subsidies for electricity and employees’ retirement and so on. And then you export the low value-added content. So when you do that, you’re constantly losing in the international trade system.

So we can’t really have a global Green New Deal where developing countries address inequality and address climate change if their spending capacity is limited because they’re constantly trapped and they’re constantly struggling to pay off their external debt. So it turns out this is what the mainstream of the economics profession, the World Bank, the IMF, the Washington consensus tells developing countries you should do. And this has been going on for decades.

They tell them, you should try to export even more, but if you’re following the same model, you’re still in that trap. It actually, it gets worse over time. Then they tell them, you should try to privatize your inefficient government enterprises. Well you sell them and you get a few hundred million dollars, you spend them in three years and then you’re back to square one.

Then they tell them, well, you can get a lot of tourists to visit your country and bring dollars to help you pay the debt. Well, it turns out when you bring millions of tourists, you have to feed them. So you import food, you have to transport them and heat and cool buildings for them. So you end up importing even more fossil fuels. So that’s a trap.

And you’re racing to the bottom because there’s dozens of other countries who are trying to bring millions of tourists too. So you have to constantly, you know, subsidize your tourism industry in that sense. They tell you rely on remittances. So workers from the developing world, going to Europe and the United States and Australia and sending money back home.

And that’s a huge brain drain in terms of productive resources in developing countries, so it’s not sustainable. So you have all of these strategies that the Washington consensus usually lays out: free trade, export-oriented growth, foreign direct investment. All of these things turned out to be a trap that leads to a rising level of external debt and that forces developing countries into a corner that when a pandemic hits, hey have these debt payments that they must make, and they have a public health crisis that they need to address, and they fear the retaliation, the isolation from an economic and geopolitical standpoint if they don’t meet the demands of their lenders – of their foreign lenders.

So that forces many governments essentially into a scenario where they have to throw their own people under the bus to keep chugging along in that global financial system and economic system. And we’re saying that’s not sustainable. Economically, politically ecologically is best an abusive extractive economic system.

Intermission [music] (00:29:13):

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Grumbine (00:30:02):

With that statement, one of the most controversial points that modern monetary theorists, such as Warren Mosler make to non-MMT folks, and even some who would say they’re MMT, is the concept that exports are a cost and imports are a benefit.

Can you explain that in the framework of the monetary sovereignty of these nations, and as we’re talking about the IMF approach to things and stuff, all this sounds so counterintuitive, and perhaps it is, or perhaps requires nuance, or perhaps there’s a deeper explanation. Can you frame that? Because it seems particularly germane when you consider these developing nations, especially.

Kaboub (00:30:48):

Yeah, well, I think Warren’s position on this is often misunderstood because when people hear that they hear it and they think in monetary terms. But I believe, and I don’t want to put words in his mouth, at least the way I interpret it and the way most MMTers understand it is that it is meant in real terms. So think of it this way, let’s say, you know, the US versus some other country.

When we in the US import consumer goods from some other developing country, their people are working hard to produce something that they don’t get to consume, don’t get to enjoy. They send it to us here, collectively the United States; we get to enjoy that particular consumer product, we get to increase our quality of life, standard of living, and so on.

 And then how do we pay them? We pay them in US dollars, but collectively as a nation, right? And that particular country that now has a trade surplus with the United States – what do they do with their dollars? They take those dollars and they typically invest them in US Treasurys. Think of China’s trade surplus, for example.

So think of it this way: in real terms, they worked hard to produce something that they couldn’t consume, they sent it to us to consume and enjoy, we sent them, you know, digits that they collectively, as a nation, decided to send back to the U S Treasury. Who’s winning and who’s losing in this transaction? Right? But I understand it’s beyond this particular nuance.

What some of the MMT friends and critics say about this, is, well, you’re not considering the exchange rate. There’s this claim that MMTers want all developing countries just to float their exchange rate and everything will be fine, which is not true. And I think this is also another nuance that needs to be clarified: when MMTers talk about monetary sovereignty, monetary sovereignty is something that you acquire.

It’s not just something that you declared. ‘Today I’m a monetary sovereign. So I’m going to float my exchange rate.’ You can’t do that. It’s something that you acquire through hard work. But what MMT is saying is that we need to have a strategic target to get there, and a strategic set of policies.

So in the case of developing countries, I was explaining earlier, if the roots of your problem, are the lack of food sovereignty and energy sovereignty and industrial development deficiencies, in terms of value-added content, then your strategic plan to acquire monetary sovereignty is to invest in renewable energy, is to invest in sustainable agriculture, is to invest in education and research and development, so that you increase the value-added content of your production.

At that point, gradually you’re going to build more and more economic independence. You’re going to build more monetary sovereignty. You’re going to build more resilience. At which point you can float your exchange rate and stand tall and stand ready, and be able to withstand an external shock without having to throw your people under the bus.

So monetary sovereignty is not something you declare; by definition it’s something that you acquire. So I think that’s at least my way of trying to respond to those concerns that some of our colleagues have raised about the exchange rate policy that MMTers sometimes referred to. I don’t think anybody in the MMT space says float the exchange rate tomorrow, and you’ll be fine.

We know what the consequences are. I talk about this all the time: if a developing country that has lack of food sovereignty or energy sovereignty floats its exchange rate today and stops borrowing to fix their exchange rate, they’re going to have food riots the next morning, they’re going to have energy riots the next morning, there’s going to be a revolution. We’ve seen this many times.

So it’s not like MMTers are ignoring those things. I lived in a country that had food riots and fuel and energy riots precisely because of external debt and these things. So I understand these things and I will never advocate for a developing country to float their exchange rate the next morning and everything will be fine, but we’re advocating for strategic policies that allow you to build that resilience.

So the way I see it, we have a standard mainstream approach that’s been promoting these policies that continuously weaken developing countries in terms of their economic and monetary sovereignty and force them further and further into that corner. And we have an MMT approach that says, we have a way out, and it’s not a silver bullet. We have a way out that requires strategic investments.

So now, to connect the dots to that point I made earlier about corruption and market power: if you’re a developing country and realize, oh, we need to invest in renewable energy. We need to invest in sustainable agriculture instead of importing all of our food through one monopolist that was given an import license to import wheat and sugar and coffee and whatever the country imports.

So now that particular monopolist who has the exclusive right to import wheat, do you think that particular individual or group of individuals will be happy to support small farmers to produce wheat domestically for food sovereignty? Of course not.

They are going to do whatever they can through their power and influence in politics, through their power and influence in the market system, and in some cases through physical abuse and violence against people who try to do things differently, and depending on how corrupt the system, how violent the system, we see this all the time in developing countries.

So this is for food, the same applies for energy. Do you think the guys who have the exclusive license for gasoline or kerosene or whatever chemicals the country needs to import, do you think they’re going to support government investment or entrepreneurs to invest in rooftop, solar or renewable energy? They’re going to fund whatever research that says this is pie in the sky, it’s not going to work.

They are going to do whatever it takes to make it impossible for real competition in the renewable energy system to democratize energy, to democratize the grid. So if we wanted to transition to more resilient economies in developing countries, that’s the kind of corruption and market power and economic abuse that we’re talking about. And a lot of it is domestic by the way, because it’s not just foreign colonial presence. A lot of it is also domestic economic power.

So this is a class issue. This is not about us with this nationality versus them with the other nationality. This is about market power. The same is true in the US; it’s not like the super-PACs of the health insurance companies are foreigners. They’re Americans, too. They’re abusing the American people.

So we have to unpack these layers of economic power. And that’s what allows us to go back to that idea of the fiscal policy space. If we are successful at targeting and weakening that abusive market power, then all of a sudden, we’ve just liberated the economy for additional fiscal policy space to invest in the national priorities.

Grumbine (00:38:14):

I want to talk about – just before we get back into the Green New Deal elements here – in recent readings, I’ve done from Sandy Darity and Kirsten Mullen in From Here to Equality, they talk about the systems that were used to create the wealth in the United States. And they were slave-based systems and they morphed, and they changed, and the language they used was different, and they would structure — but it was always the same thing.

And there was always an elite class that had the labor that was either free or low cost and they’re always driving for the same exact model. Not a whole lot has changed, except for the fact that we’re not quote unquote belonging to someone, but there’s still slave-like conditions around the world and there are still slave-like conditions even in the United States; we still see prison labor, we still see a lot of that stuff.

How do we take on a class-based problem like this, where you’ve got a Green New Deal, which is meant to keep us from the ravages of climate change and climate crisis, but it’s also meant to bring about a fuller life for all. There’s a fundamental flaw with the role of capital and the role of the individuals who are seeking to maximize their profits at any and all costs. How do we take that when you’ve got all the governments largely on the take – they’re cooperating with these units and they’re leaving us as the last in the pride to eat, so to speak. Can you talk about that from a class perspective?

Kaboub (00:39:50):

Yeah. So when you think about all of these mechanisms that Sandy Darity and others talk about in terms of slavery, back in the day, and then, you know, post contemporary slavery, these are things that happen in the U S system, but also globally. And the way I like to think about it in the context of a global Green New Deal to address structural inequality is the following: so we have countries that have different spending capacities, different levels of fiscal policy space.

You have the developed countries who have a lot of it, you have developing countries who have none of it. How do we do a global Green New Deal that allows everybody to participate? Part of it has to do with reparations. And I use reparations in the broadest sense of the term that includes reparations for slavery, reparations for colonialism, reparations for post-colonial abuse, reparations for climate debt.

And reparations are not one country to another alone; it’s also within countries because countries have abused their own native people and have abused their own environment and so on. So we’re talking about a global reparations model that goes beyond the United States. So every time you think about reparations, and this is I think true for all the scholars who think about the reparations and write about the reparations literature, reparations is the three step process.

One is telling the truth. And for that, you often need something like a truth and reconciliation commission. We’ve seen these commissions, you know, post-genocide and post-conflict where the purpose of the truth and reconciliation commission is it’s not a court system. It’s not like you’re sending somebody to prison at the end of the process.

It’s meant for a large scale national collective healing as a process to listen to the victims of the abuse, listen to people who participated passively or not always so passively in the abuse. And it’s a restorative justice type of exercise that allows the nation as a whole to heal and move on. Of course, people who are the criminals in that abuse go to court – they don’t go to a truth and reconciliation commission – and should spend the rest of their lives in prison. So that’s the first step is telling the truth.

Step number two in that process is offering a public apology so that we can heal and move on. And step number three is the reparations part. And here you’re talking about repairing the damage. Some of that reparations involves a monetary compensation, so an actual monetary restitution, but the deeper part of the reparations is repairing the broken structure, right?

So here, we’re talking about debt cancellation, when you’re thinking of the global financial system. We’re talking about redesigning the global financial system, introducing global climate mitigation programs that include transfer of technology to developing countries, to accelerate the de-carbonization.

That includes taxation and regulation of the abusive market structures globally and domestically. So to me, these are the components of that reparations model. So now the question is, how do you make the economic legal ethical case for this? And it turns out that there’s lots of evidence globally for how we want to Institute something like a global Green New Deal.

That includes reparations that will help developing countries with the weakest degree of monetary sovereignty, fully participate in a global Green New Deal, through transfer of technology through debt cancellation, through monetary compensation to address climate change and inequality from a global South perspective.

So for example, one of the worst broken structures that we have in the global system today, the most abusive, the most extractive structures we have today is the global financial system and trading system. I’ll give you one piece of data just to illustrate this. So imagine for a second, we’re going to divide the world into two groups, rich countries, and poor countries, just two groups.

And then we’re going to track all the financial transactions between the two groups – exports, imports foreign direct investment, remittances from workers, interest payments, loans, charity, foreign aid, all the transactions – and then just do the net amount of all the transactions. Most people, their intuition is that we have money flowing from the rich countries to poor countries.

That’s most people’s intuition, but it turns out it’s actually the opposite: money flows from the poorest countries of the world to the richest countries of the world. And it’s not the new structure; this has been in place for decades. When I was in grad school and I first learned about this – this was in the early 2000 – the number was $500, $600 billion a year.

And I thought that was massive, that was unsustainable. And it’s been steadily growing since then. The last data that we have available for this, we’re talking about $2 trillion a year of money flowing from the poorest countries to the richest countries. And it means we’re never going to have a global Green New Deal. We’re never going to address climate change. We’re never going to address global inequality unless we fix that broken structure.

This is abusive, it’s extractive, and we haven’t done anything structural to undo it, which means the trend will continue. We have this conversation in 10 years, it’ll probably be three, maybe $4 trillion a year. So we need to completely redesign the global economic infrastructure. So I see that as a core component of reparations, as in physically repairing, so to speak, the broken structure.

So I don’t think we’ve done enough in the Green New Deal movement yet to go beyond national boundaries. There’s discussions in Europe, there’s discussions in South Korea and other parts of the world. Some countries don’t necessarily call it the Green New Deal, but they’re talking about inequality and climate change in a serious way.

But we’re not doing this on a comprehensive scale that can save the planet on time for next generations. We need to go beyond national boundaries because we’re leaving this to developing countries to figure out on their own, how are they going to deal with climate change? How are they going to deal with inequality? And that’s just a collective suicide pact. If that’s the implicit agreement, we can’t afford that.

Grumbine (00:46:38):

No kidding. That is kind of the craziest thing ever is these people that don’t have technology, they don’t have the resources, they don’t have food sovereignty, they don’t have monetary sovereignty, but hey, let’s leave it to them to try and work this out on their own. That makes all the sense in the world.

Kaboub (00:46:56):

And we have a long track record that would justify the reparations for colonialism, for genocide, for post-colonial extractive economic model. And we have precedence for these; it’s not like we’re inventing a new legal framework. There were postwar reparations, post-genocide reparations. There is a legal framework for canceling debt that was given to dictators, for example.

There’s this principle or concept of the odious debt doctrine, which was developed by a French-born Russian legal scholar about a hundred years ago. And this doctrine was used many times in the past. And it essentially says this: It says you have to have three conditions to cancel the debt. Number one, if the debt was given to a country, a dictator, without the consent of the people – in other words, if it’s not a democratic process.

Number two, if the money was used by the government and it didn’t benefit the people – and that’s typical in dictatorships. And number three, the most important part, is when the lenders know about it, when the lenders know that the money went to a dictator and it didn’t benefit the people. If you have these three conditions, under international law, that debt should be canceled, completely canceled.

And that principle was used before in international law, was used by the US to cancel the Iraqi debt, by the way, after the Iraq invasion, James Baker flew all over Eastern Europe and went to all those governments and told them, “Hey, you lent money to a dictator, who abused his own people, and you knew about it. So we’re not paying you.” So this was used by other countries.

So this is the time to use this, to cleanse and free up developing countries from a lot of the colonial and post-colonial debt that was abusive. So there’s lots of legal arguments to be made. There’s a lot of economic and moral and ethical arguments to be made, to put together a coherent global Green New Deal framework. And I’m not naive. I don’t think I’ll snap my fingers, and this will happen tomorrow.

What I’m hoping to do is provide a coherent framework that says there is a way out, there is an alternative, but it requires educating, organizing, mobilizing for this effort. And this framework that I’m trying to put together for a global Green New Deal, I’m not inventing anything new. I’m just taking bits and pieces of really important principles and kind of putting them together with an MMT lens in a coherent framework and hoping that it will empower people to fight for these transformative policies.

Grumbine (00:49:41):

So let me ask you what I consider to be a challenging question here. The military in the United States is one of the largest polluters in the entire world. And military actions have been huge polluters, as well as bad agricultural practices, you name it. But one of the key things that the United States has done, and whether it be a loose association or a direct one for one is the concept of military Keynesianism.

We have gone to war many, many times in our history where things have looked down in our markets and we’ve gone out there and we’ve created new markets. Whether that’s the primary purpose of these military excursions, or just a byproduct of them, it appears that much of the problems that we face today are brought on by rabid neo-con militarism. I’m wondering what the impact of that kind of thinking has done to the global economy, in both impacting the Green New Deal policy side as well as the reparations side.

Kaboub (00:50:47):

Yeah. Wow. That’s a huge question. So, no, but it’s an important question. So yes, the military is one of the biggest polluters and they know it. I mean, if you look at some of the best reports, not recently, but from years ago, some of the best reports about climate change were done by the military, trying to figure out how do we – obviously not from a Green New Deal perspective, but from a strategic perspective – how do you run a military that requires massive access to fossil fuels to win wars and to deploy all over the world?

So they’re thinking of it from a different perspective, how do we improve efficiency. But also from a national security perspective – and this is increasingly true now – the military recognizes that the effects of climate change are fueling more conflict in different parts of the world, so intensifying the global national security risks.

One of my favorite authors was a founding figure of institutional economics. His name is Thorstein Veblen. Fantastic scholar, by the way, wrote about all kinds of things a hundred years ago, he died in 1929, I think. One of the things that he said about the military as an institution is that it has this internal tension in it. He calls them like instrumental motivations or instrumental instinct, or something like that, versus ceremonial aspect.

And the instrumental side of the military, for example, is providing peace, providing security and to a large extent research and development to technological innovation. That’s kind of the instrumental part of an institution like the military. But it also has a ceremonial component, which is that military discipline that forbids critical thinking, that forces you into a routine type of thinking that doesn’t question the system.

And it’s destructive because of what the military can do in terms of its military and war activities is destructive. And he said many institutions that we deal with have this tension. And it really depends on which side will pull stronger, that will provide what he calls progress for human activity. So you can think of the military today, the US military as an institution that has these two things, because we can’t deny all the research and development and technology that came out of the space program and military activity and so on.

But we can’t ignore all the harm that was done to the planet. The harm was done to people around the world and people in this country too — PTSD and so on, and the abuse of military veterans when they come home and the neglect. So like any institution that needs to take a deep look in the mirror, so to speak and reflect on what it is, what it does, what its future is and what it stands for.

And that’s not going to be done by the military. When I say this, this has to be done by the nation. I mean, we live in a democracy. We have senators and congressmen and civilian democratic process that controls the military. The military is not its own government. So it’s that government that we need to force into deep reflection into what the role of the U S military is domestically and internationally.

And let’s face it, it’s not a secret, I’m not making this public announcement today — we’re talking about the empire. If we’re serious about climate change and inequality, if we’re serious about something that will look like a global Green New Deal, we have to address the role of the empire in this. Are we going to continue on the same trend of death and destruction globally?

Or are we going to transition into a more peaceful global system that requires the big superpowers to recognize their role in this and their role is not always leadership in the standard way that most governments think of leadership as in dominating and policing the rest of the world. We’ve tried that for hundreds of years now and look where we are.

Grumbine (00:55:02):

Absolutely. I mean, with the black lives movement in the United States, and you see other uprisings around the world at different times, it’s quite clear that the people are very dissatisfied, which you raised up in the very beginning of this podcast.

I guess the question is from a power perspective, when you look at where the power lies and you look at who controls where the military goes, and you look at where the police go and what the police are actually protecting, and you consider the concept of colonization and the colonial mindset, and you see its effects in the global South, but you also see the vestiges of it from slavery here in the United States and so forth.

I guess I’m interested in hearing, how do you see the power dynamic really changing? What vehicle by which do you see us, even if it’s a long game, what vehicle do you see us really, truly taking that power back if at all?

Kaboub (00:55:59):

Yeah. So I’m going to try to answer this from an MMT perspective, just because I think it will be useful for this whole conversation where… It’s an important question. For example, the debates about reparations in the U S context. There’s a lot of arguments obviously to be made for reparations and Sandy Darity, and many people in the field have done an amazing job laying out the arguments.

They’ve also done an amazing job at providing counter-arguments to the critics, which I will not go into right now, but I encourage everybody obviously to read this literature. But I’ll pick on one counter-argument that I think MMT has an important framework to provide, which is: ‘why should the government tax me and burden me with more national debt for generations to come to pay reparations for slavery or something that was done hundreds of years ago, had nothing to do with me personally, or my family or things like that?’

And the MMT framework says, you know, we’re not going to tax this to pay for that. And this is across the board. This is for social security. This is for reparations. This is for investing in education and so on. MMT decouples the taxing and spending functions at the federal level where we spend on national priorities. And that includes reparations because it’s the right thing to do.

You spend on fighting climate change because it’s the right thing to do. You spend on education because it’s the right thing to do. And so on. So that includes reparations spending on the priorities in terms of monetary compensation, but also structural reparations, spending on structure reparations.

So the taxing part from an MMT perspective is not taxing in order to fund federal government spending, but you tax to reduce inequality, you tax to reduce the power and influence of the oligarchy, you tax to reduce inflation, you tax to decarbonize the economy, you tax to reduce speculation and abuse in financial systems. There’s lots of important reasons to tax – none of which is to fund federal government spending.

So once you do that decoupling, when it comes to the reparations discussion, then it becomes very clear. You’re not taxing any particular individual personally, so that you pay for reparations to another set of individuals. Those are completely separate issues. So the burden quote, unquote of paying for reparations is not born on individuals, working class, or whatever it is. There is a case to be made.

And a lot of people make this case that, you know, particular companies and particular families and particular individuals did benefit directly from slavery and should be taxed. And I’m totally fine with that, but it’s not really, you know, because we need their money or their permission to pay for slavery. It is okay to tax partially for those reasons, because that’s a just reason.

But my point is that we shouldn’t shy away or pretend like we can’t afford reparations because there is no tax revenues for it, or because some people will feel like they need to be personally taxed to pay for reparations. I think that MMT insight would be helpful for unleashing much more robust public discourse about reparations, and hopefully will move us beyond the discourse and into action because this is long overdue.

Grumbine (00:59:29):

So, you know, with your letter coming out here, what would you like to leave everyone with today as this will be released in conjunction with that letter?

Kaboub (00:59:38):

Yeah. So invite everybody to go to the website, which we’ll provide in the show notes here and join us and read the letter and sign it and share it with people who you think would be empowered by it and would join this movement.

So the letter is an invitation to learn and engage in a conversation. It’s not the end of the story. It’s the beginning of the story. And it’s an invitation to engage with the scholars and activists who are doing this kind of work here in the U S and Europe and the global South in general and Africa in particular, and to help us form a coherent framework for mass movements all over the world.

To number one, say that there is an alternative – number two, say that this alternative is within reach. And number three, to clearly identify what the obstacles are that are stopping us as a global community from reaching that better future. And if you listened to what I had to say in this conversation over the last hour or so, I think it will be clear what those obstacles are.

So for progressives all over the world, I think it’s important for us to be on the same page – that this is not us, this nationality versus them, the other nationality, or us, this ethnicity versus them, the other ethnicity – it’s really about class and power and influence.

Those are the real obstacles that divide people all over the world. And repeat this mantra that says there is no alternative other than sticking with the mainstream view of what we can afford and where money comes from and who your opponents are. So that’s what I’m hoping this will do. Join us and keep engaging with us and keep learning and keep building this momentum.

Grumbine (01:01:32):

Fantastic. Alright, Fadhel. Thank you so much once again. First of all, I want to thank you publicly for everyone who doesn’t know this: Fadhel has been a longtime supporter of Real Progressives and Macro N Cheese, literally since the beginning and his work has gone far and wide beyond anything, I think, anyone ever imagined.

Everywhere there’s a new candidate for office in the United States, anywhere that there is action, you can pretty much guarantee that you’re going to find Fadhel there, working his butt off seven days a week around the clock. I’ve never seen a harder working man in my life. And I just want to say what an honor it is to be able to spend any time with you, work with you. You’re a true inspiration. And I just want everybody to know that.

Kaboub (01:02:19):

Well thank you, Steve. You’re very kind, but we should also give full credit and thanks to literally dozens of people behind the scenes who have helped us in this process. We’re talking about at least 50 translators, plus at least 50 or more proofreaders who help, you know, give a second opinion. Dozens of others who offer to record the audio version of this open letter in multiple languages.

Because one of the things we acknowledged is that many languages are not written and are only spoken. So we want it to reach people in their own language. You have to reach them with an audio version. At least even if it’s symbolic, we want it to make that effort. And then a huge thank you to our own Andy Kennedy for taking those audio files and making them high quality recordings for the website.

And I encourage people to click on those audio files and listen to the beautiful harmonies that many, many languages provide. And I’ve never heard the word monetary sovereignty said in so many languages in my life. So I learned quite a few, quite a few words over time. But again, thank you for providing this platform and for doing all the good work that you’re doing to help us build this movement.

Grumbine (01:03:43):

Absolutely. It’s a family and a team and we’re all in it together. And that goes for you, the audience, we thank you so much. Please share this around. Please help us get the word out, help us share this podcast around and the overall platform.

Obviously the powers that be keep our platforms very much under wraps. It’s very hard to get beyond the little bubble of people that know who we are. So your help as an activist and sharing, this is one of the most important acts you can do to help get the word out.

Kaboub (01:04:13):

And one way, some of our listeners can help in this effort is take what you learned from this and write an op ed to your local paper, a letter to your elected official in any language and contextualize what this means in your own country.

So it’s not specific problem to African countries. Many of the translators from the EU region were like, this is one of our problems in the EU too, the European union and the Eurozone. So this goes beyond the global South movement that we’re trying to build.

Grumbine (01:04:48):

Thank you, I couldn’t have said it better. I want to thank you all. This is Steve Grumbine with Macro N Cheese, My guest, Fadhel Kaboub. Have a great day everybody. We’re out of here.

Announcer [music] (01:05:02):

Macro N Cheese is produced by Andy Kennedy. Descriptive writing by Virginia Cotts and promotional artwork by Mindy Donham. Macro N Cheese is publicly funded by our Real Progressive Patreon account. If you would like to donate to Macro N Cheese, please visit www.patreon.com/realprogressives.