Episode 138 – The Lightbulb Moment with Malcolm Reavell

Macro N Cheese – Episode 138
The Lightbulb Moment with Malcolm Reavell
September 18, 2021

 

[00:00:05.290] – Malcolm Reavell [intro/music]

So it was quite clear that the currency question was going to be absolutely germane to any kind of independence campaign for Scotland in the future. And it’s something that people really need to know about.

[00:00:17.170] – Malcolm Reavell [intro/music]

Basically, it’s a union of two countries that goes back 300 years. And if we want to get out of it, Scotland should be able to vote to do that. And it should not rely on permission from England to be able to decide to leave this union when it wants to in the same way that England decided to leave the European Union.

[00:01:26.360] – Geoff Ginter [intro/music]

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

[00:01:42.700] – Steve Grumbine

Alright, everybody, it is Steve with Macro N Cheese. I have my friend Malcolm Reavell from Modern Money Scotland, one of the co-founders of what was then what was it called, Malcolm?

[00:01:58.600] – Malcolm Reavell

Well, initially Modern Monetary Theory for an Independent Scotland, and then it’s been through a couple of name changes since then.

[00:02:07.240] – Grumbine

Well, I think a lot of these groups start that way. Malcolm is one of my favorite posters out there. He’s got some wonderful insights inside of the way that he presents MMT. And it’s been a while and I wanted to get him on.

I’ve had Kairin Van Sweeden on, and we talked a lot about things that are going on in Scotland, but I wanted to bring Malcolm on because it’s Malcolm’s wit and his wry sense of humor, I feel like one of the things that’s missing with MMT activism, MMT evangelism, the MMT movement in many ways is that it can be sometimes a little bit tense, a little wonkish, and it can sometimes lack some of the fun and joy that people on the inside that are doing this when we talk to each other feel, and sometimes it doesn’t quite make it out to the world this way.

And I thought that it would be nice to have a more laid-back approach to discussing MMT for newcomers as well as people that maybe have been around for a while and tired of hearing the more buttoned-up approach. And so with that, I asked Malcolm to join me. He was very kind to agree to do it. And I’m so grateful because I think Malcolm is going to make you all very, very happy.

[00:03:28.580] – Reavell

Well, I hope so.

[00:03:29.590] – Grumbine

So without further ado, Malcolm, thank you so much for joining me today.

[00:03:33.910] – Reavell

Thanks. That’s quite an introduction, but it’s a pleasure to do it for you. You are one of the big names in MMT. And you’re doing an awful lot of activism here with Macro N Cheese podcast. It’s quite an honor to be invited on because you’ve had lots of big names on there.

[00:03:49.070] – Grumbine

The honor is all mine. I’m a host. I am an activist. I don’t know if I’d call myself one of the big ones, but I’m definitely a very passionate one. And I think that passion is something that defines MMTers in general. People that are attracted to MMT tend to find that nugget.

It’s kind of an esoteric, weird little world. We’re changing the way people think about money. We’re changing what could be. And they have a difficult time changing their paradigm. They’ve spent so much time doing it, they don’t want to let go of it.

[00:04:27.880] – Reavell

Oh, yeah.

[00:04:29.380] – Grumbine

I think that your work in Scotland, it’s really quite honorable. You guys started as a Facebook group. Real Progressives started out as a Facebook group, and then we became a page and you have a page.

You have your own channels and you’re doing YouTube now and you’re doing events and you’re working with different people. And I’ve just been really impressed. So do me a favor. Why don’t you tell the audience about how you came to learn MMT.

[00:04:57.070] – Reavell

Okay. I want to go back to 2014. In 2014, Scotland was allowed by UK government in Westminster to hold an independence referendum, and there was a bit of a campaign to get people to vote for it and to vote against it whichever way they wanted to go.

There were several events and debates. There was a television debate between Alex Salmond, the leader of the Scottish National Party, and Alister Darling, who was the ex-Labor Chancellor of the Exchequer from 2007 to 2010 under Tony Blair’s government.

And the question of currency came up. What currency are you going to use? And Alex Salmond didn’t really have an answer. He was, well, we could use the pound, we could use the euro, we could use whatever currency we want. It’s not a problem. I’m thinking it’s not quite right, surely.

And Alister Darling, he just smiled and sort of nodded and went, yeah, you can use the pound if you want. And I was thinking, Alex Salmond doesn’t really know what he’s talking about. And Alister Darling seems to know something, and he’s not saying anything. And the independence referendum failed.

Scotland stayed part of the United Kingdom, and I didn’t think much more about it. And it was when I was at work, in fact, when I was visiting one of our helicopter bases over in the Western Islands, there was a whole bunch of us on the project over there and in the hotel one evening I could hear one of the helicopter pilots was talking about “So what is money? Where does money come from?”

And the conversation kind of intrigued me. So I went and joined this little group over the side there, and the guy speaking was a pilot called Richard Tye, a name you might recognize already.

[00:06:48.990] – Grumbine

Yeah. Yeah. Yes.

[00:06:51.500] – Reavell

Well, at that time, he hadn’t discovered MMT, but shortly afterwards, he had. And it was him that opened my eyes to MMT. And when I found out just a little bit about it, suddenly, that debate back in 2014 made sense. Of course, Alex Salmond was clueless.

He didn’t really know about how the money system worked. Alistair Darling clearly did have an idea how it worked, and he wasn’t going to let on. So it was quite clear that the currency question was going to be absolutely germane to any kind of independence campaign for Scotland in the future. And it’s something that people really need to know about.

The way that Westminster and the UK government treats Scotland because it’s a currency zone, basically, we get a transfer from central government for Scotland to use. And the Scottish government isn’t really a government. It’s just like a small, devolved regional authority, a colony if you like. It doesn’t have full control over taxation.

It doesn’t have control over all of its spending. And of course, its budget is limited because it doesn’t have currency sovereignty. So it became quite clear how the unionist campaign from England was actually able to manipulate people into thinking that Scotland can’t pay its own way, it can’t be independent, it can’t survive on its own.

It has to be supported by Westminster and so forth. So that was what started me to find out about Modern Monetary Theory. And then it was a question of at the time, Stephanie Kelton’s book wasn’t around, but there was a lot of stuff out there on the Internet. And the first influence I had was Steven Hail.

There was a lecture of his, which I found, and then I came across other people. Stephanie Kelton’s Angry Birds lecture was pretty good as well. And in the UK there was a chap called Alan Hutchison, who’d done some talks called Politics in the Pub, and some of his documents were available on the Internet.

Alan Hutchison now has a website called Matches in the Dark, and he’s put a lot of his material up there, and I recommend people have a look at it because it’s a very good source of teaching material. And I learned a lot from that. And then all sorts of things, obviously, things like the Macro N Cheese MMT podcast and things like that all sorts of stuff to listen to from thereon. And of course, the books Warren Mosler’s, “Seven Deadly Innocent Frauds,”

[00:09:23.470] – Grumbine

Yeah.

[00:09:24.010] – Reavell

Randall Wray’s book

[00:09:26.210] – Grumbine

Modern Money Theory. Yeah.

[00:09:27.840] – Reavell

So that’s how it all started. And I blame Richard Tye for this because it consumes quite a lot of my life since 2016.

[00:09:37.600] – Grumbine

Isn’t Richard Tye a helicopter pilot?

[00:09:41.080] – Reavell

Richard is. He’s one of the search and rescue helicopter pilots for the UK Maritime and Coast Guard Agency, and I was working in the same company that operates the search and rescue service. I was looking after the IT systems for them.

[00:09:56.700] – Grumbine

So we’ve got something else in common. I’m a project manager. I don’t do the IT work anymore, but it’s good work when you can find it.

[00:10:06.380] – Reavell

Excellent. We’ll have to have another chat about that sometimes.

[00:10:10.400] – Grumbine

Let me ask you a question. So people, because of the hegemony of the US dollar, you often think that MMT is just an American phenomenon, and we know that’s not true. But did that ever hit you? Was that ever something that you thought about?

It seems kind of crazy given the fact that you’ve got an MMTer, like Stephen Hail, who you listened to originally, and you’ve got Bill Mitchell, of course, down in Australia as well. You’ve got quite a few international MMT economists and activists.

I’m just curious, what do you think fuels that US centrism is it just because we’re so exceptional and everything we write, we always write in US dollars instead of thinking about the rest of the world, or do you think that there’s some mind tricks here that make people just assume that the US must be some different thing?

[00:11:03.640] – Reavell

Yeah. Two aspects to that. First of all, I think, there are some economists. Mark Blyth, Scottish economist, is one of them who thinks MMT only applies to the United States and China, and big economies because they can exert a lot of influence because the power of their currency gives them the ability to do whatever MMT says.

I know we don’t do MMT, but they can apply the principles of MMT without too much fear of anything, because they enjoy huge monetary sovereignty and huge international influence because they are a global reserve currency. And, of course, the work of Fadhel Kaboub when he’s talking about degrees of monetary sovereignty, especially in the global south.

There are lessons to be learned there about how MMT applies to a country or how you can use the insights of MMT to actually run an economy without running into problems of external debt and things like that. And then the other thing is the US influence. There are a few economists in the UK that are prominent MMT.

We don’t, for instance, have, like you do the Bard College and UMKC, where Stephanie and all the others are based. We do have people like Phil Armstrong and Steve Hall and Richard Murphy as well down in London. But of course, in Australia, you’ve got Bill Mitchell, Steven Hail, Phil Lawn and others.

We don’t have the kind of prominence over here. It hasn’t reached anything kind of like the level it needs to to have a University that’s going to have a heterodox economic Department with lots of MMT savvy people in it.

[00:12:53.550] – Grumbine

Yeah. I interviewed Mark Blyth a couple different times, and I like Mark a lot. He’s definitely MMT adjacent. I think he at some level, understands it, but I believe his work with Eric Lonergan and others that focus a lot of their thinking on interest rates and foreign exchange and the kind of balance of payment story is between countries, and they get kind of wrapped around the axle with understanding to your point that monetary sovereignty is a bit of a spectrum.

It’s not something you just have. It’s something you have to actively work towards and Fadhel is very explicit in laying that out. But there’s some joy here, right. This awakening that you went through, what was that light bulb moment like for you? There had to be some moment that it all just sort of came together.

[00:13:46.460] – Reavell

Yeah. It would flicker on and off for quite a while because you would suddenly think, “Oh, my God. Yeah, that can’t be right.” But then the light bulb would go off. You’d have to go away and say, “No, that can’t be right.” And you’d have to go and look for different sources or different ways of somebody explaining the same thing and then go away and think about it.

And then the light bulb would come on again. And then another doubt would creep into my mind and the bulb would go out. So, it wasn’t just one instant. It was actually a series of incidents. And eventually you begin to think, “Yeah, it’s right. It is actually right. I’m seeing it.”

And I have seen conversations on Twitter that Mark Blyth has had with one or two people, and you think, “Yeah, he’s got it. Oh, no, he hasn’t.” And then, “Oh, yeah, he’s getting it. Oh, no, he hasn’t.” And I think he’ll get there eventually. He’s a very smart guy and he’s very influential, and he’s come out with some really good stuff.

I would really love to get him completely on board with MMT and Steve Keen as well. He’s another one who’s been MMT adjacent. And I think he still has one or two reservations about things, but he’ll get there eventually I’m sure. These things will resolve themselves. Mark Blyth, of course, has just been appointed one of the advisors to the Scottish government.

[00:15:07.560] – Grumbine

I’ve interviewed both of them, and with Steve Keen, I know he adheres to the core tenants of MMT. The only difference, I think he and Warren  Mosler had a debate on this show a few years back. We were able to bring the two of them together. And one of the concerns was, as Warren would put it, that exports are a cost and imports are a benefit.

And Steve said, “Well, that’s absolutely preposterous.” But as an accounting identity, which is what Warren is talking about, you’re sending real goods and services out of the country on exports and you’re giving them pieces of paper in return. And the flip side of that is, I know Mark Blyth focuses more heavily on when a country doesn’t have its own productive sovereignty, like food or energy sovereignty, any number of real resource sovereignty, they are dependent on foreign markets.

And that’s when foreign debt kicks in. And this is when the IMF gets in and all the rest of them. So I think one of the concerns that they notice, in particular, Steve Keen is the lack of inclusion of real resources and energy consumption into the models. But he’s thinking more of in practice. In other words, I think he’s adding to it, whereas Warren would keep it much simpler.

He would keep it much more narrow in terms of its focus. And you can see a growing body of I don’t know if the right word would be broad MMT or post MMT. You see a new generation of folks tying together philosophy, the philosophy of MMT, as you go forward. Folks tying together a lot of different things that are maybe on a broader context, a departure from some of the standard ways the narrow MMT world would say it.

For example, I know Scott Ferguson and the Money on the Left folks are focused heavily on trying to get rid of the concept of monetary sovereignty and starting to think about sovereignty differently. Then, quite frankly, sovereignty hasn’t really benefited people of black and brown color in the United States in particular, and probably around the world.

So I think that sometimes the esoteric debates in the stratosphere can be challenging for everybody to wrap their head around, but in particular, Mark Blyth and Steve Keen seem to focus on certain aspects. I don’t think they in any way can reject it. I think that to their credit. And also, I think our chagrin, they’re trying to expand these areas that they see are critical.

I’m hesitant to say that their quote-unquote “not MMT,” but they’re looking at expanding that vision or gaining clarity. So to your point, I’m with you there. Let me ask you, Malcolm, when you guys started MMT Scotland, I remember the beginnings of this. It was one of those things where it was just a neat idea and some people had pushed you into it.

And I know you talked about Richard Tye. What was the purpose when it became more than a Facebook group? What were you planning to do with it? Did you have any goals or aspirations, or was it simply something that you were doing?

[00:18:22.620] – Reavell

Well, it was quite scary for me because I didn’t have any contacts at the time. So I just started this Facebook group. I asked Richard if I could make him join it just in case I needed some help because I was quite tentative about doing this and enrolled him to help out. And then people gradually joined.

Kairin Van Sweeden was one of the first people to join, and I didn’t have any big agenda or objectives I wanted to achieve with this. The only one thing I wanted to do was to spread the knowledge of MMT so that people in Scotland understood how currency worked, how the money system worked.

So the next time there was an independence referendum, people would be able to hold politicians to account, would be able to answer the questions, and then those in policy development, like Kairin herself now, they can take these ideas forward and use the insights of MMT to develop progressive policies if Scotland ever does become independent, which it will eventually.

But originally, I didn’t have any great ambitions for it apart from to educate people in MMT. And that’s where I see my sort of purpose in the group with MMT as it is.

[00:19:35.380] – Grumbine

We have a hashtag that we started years ago that was each one to each one.

[00:19:41.020] – Reavell

Yes.

[00:19:41.560] – Grumbine

And we think it’s a really important mindset because we are the true one percenters in the world with this knowledge. Yes, it’s gaining acceptance. Yes, there are more people, thanks to Stephanie’s book getting this. But we are still a very small band of passionate, activist, agitators, educators, what have you.

I’m curious, given that if I were in Scotland and I ran into you at a pub or wherever and we were just talking, and you heard me say something that I clearly didn’t understand about money, how would you present the MMT story from a Scottish perspective? I sit down next to you. We’re having a beer and you’ve got your opportunity. Steve doesn’t understand MMT. How does that story go?

[00:20:28.640] – Reavell

Okay. It just depends. The first thing I would do is I would triage you and say, “Oh, okay, then.”

[00:20:36.660] – Grumbine

I need a lot of triage.

[00:20:39.830] – Reavell

So it’s just a little ask a couple of questions like, so what do you think of Scottish Independence or what do you think of Nicola Sturgeon? So do you think we should be selling more oil so that the country gets more money to right its finances and things like that, just to see where you were on the spectrum.

And if you’ve got some ideological opposition to Scottish independence, you hate the Scottish National Party, and you think that Boris Johnson is a wonderful Prime Minister, I wouldn’t take it any further. I would just say, enjoy your drink and leave and talk about something else. But if you showed any kind of inquisitiveness, I would try and find out what kind of angle to take with you on it.

If you don’t know the person at all, it’s really difficult. But if you can find some way of explaining it to them. Football. Okay. Where do all the goals come from in football and you like football? Soccer? Where do the goals come from? Well, you just mark them up. Yeah. Okay. Well, just imagine this. If all the goals ever scored had to be paid back, who would you pay them back to?

If all the goals that had ever been scored had to be debited from the Football Association’s account in wherever the Football Association live. Supposing they had a ledger. And every time a football team scored a goal, there was a mark debited if they had a goal scored against them, then there was a debit marked against them.

And every time you scored against another club, then there was a credit marked against you. Then if you ended up with a net balance, you had more goals scored against you than you’ve scored, how would you settle that account? It gets people thinking in terms like that. Where does all the goals come from? Every time you score a goal, somebody has to issue it to you, hmm.

Something like that would lead into conversation. But it just depends on the person’s interests and things like that. It’s really difficult to give an elevator pitch, and I’m much better doing it writing about it than I am talking about it. But you can just start off saying to somebody, as Richard did in the pub. Okay, where does money come from?

Well, we have to earn it. Okay. But where does your employer get the money from and so on like that and see where it leads. It’s a question of thinking on your feet, trying to lead the person into an area where you think, okay, now I can see a way in. There’s all sorts of different ways of doing it. I don’t think I’ve ever succeeded yet.

[00:23:23.530] – Grumbine

Interestingly enough, from my vantage point, when I started doing this thing, there was no ‘deficit myth.’ There were very few memes. There were no great podcasts. There was New Economic Perspectives. There was Credit Write Down. There was BillyBlog, Naked Capitalism was another one.

And then there was maybe a couple of others just off the wall blogs. But that was it. There was very few real consistent places to learn this stuff. And so you just sort of had to talk to people and talk to people a lot.

[00:24:03.660] – Reavell

Yes.

[00:24:04.320] – Grumbine

And so most of the MMTers of 10 years ago, eight years ago, seven years ago, everybody knew each other. And everybody talked, talked in Facebook groups, talked in different email lists. Now, the Modern Money Network has grown and done its own thing.

And then you’ve got Stephanie, and you’ve got Pavlina, and you’ve got Fadhel and Global Institute for Sustainable Prosperity and CofFEE and CFEPS, and all these different groups that popped up. And now we’ve got GIMMS and MMT podcast, and, of course, Macro N Cheese. So it’s come a long way.

Guys like Matt Forstater who were in the very beginning, talks about how Warren Mosler would call them up and say, “Well, how many do you have now?” And he’d be like, “I think we got five. I think we got six,” or something like that. But you had to really want to learn this stuff.

This wasn’t something that just had tons of stuff that you could dig into. And so we’re surrounded by really crazy conspiracy theories and lots of nonsense about the Rothchilds and all kinds of bizarre theories about money.

[00:25:17.600] – Reavell

Oh, yeah.

[00:25:18.500] – Grumbine

What are some of the things that you guys got?

[00:25:21.240] – Reavell

Yeah. All this stuff, you can go down all sorts of rabbit holes. And this is the scary thing about it. There are always ways of attacking MMT and the Rothchilds owning the central banks and all that sort of stuff. There are so many different ways that people can come at you with criticism.

And this was one of the fears I had when I started out on this and I started the Facebook group as well. Like you say, to start with, there were a few people. I was really, really pleased when we got 20 people out of the Facebook group. Today I just checked it to see how big it was. We are one person short of 1200 members and that’s not bad. It’s going up about one person

[00:26:04.380] – Grumbine

Not at all.

[00:26:04.380] – Reavell

per day. No, that’s not bad, but it is a slow, steady rise and there are always different questions coming up. People asking questions about this guy in Germany is saying that it’s the total collapse of the financial system and fiat money is coming to an end and things like this. How can you unpack all of the things that they’re saying in these articles or YouTube video interviews that they’ve made?

No, no, you have to start from going away and doing a lot of reading, asking a lot of questions, finding out everything you can about all these possible attacks. Hyper-inflation is a big one that keeps coming up all the time. And there are so many people with different takes on that.

And there are an awful lot of ways of coming back to them and trying to condense it down to a slide with six bullet points on it to keep handy for an answer is a really useful way of doing it. Have an armory of little graphics to put out there. I do do talks occasionally. Hopefully we’ll be able to start doing more talks for independence groups and things like that in Scotland when COVID abates somewhat and we’re allowed to meet in person again.

I started doing those a couple of years ago and I was fortunate enough to do one just before lockdown started. Lorna Slater, one of the co-leaders of the Scottish Greens who’s now been appointed a cabinet post in the Scottish Parliament, was there and I did a two-minute chat to her and she is now happily on board with Modern Monetary Theory. And she’s also given up her ideas about universal basic income in favor of the job guarantee, which is fantastic.

[00:27:48.170] – Grumbine

Yeah.

[00:27:48.170] – Reavell

I think that’s really good. The first two Green cabinet members anywhere in the world, I think I’m not sure, someone will correct me on that, but it’s the first in a government over here anyway. And you maybe want to take that out. Otherwise, people. Oh, no, somebody will know there’s a Green Party. Okay, so it is gaining momentum there. We are getting more people following along, finding out about it.

But again, spreading the message. I have had success giving talks. Bill Mitchell, in fact, when he came over on his second visit, he’s had two visits to Scotland and Lorna Slater turned up at his second visit, and it was only like six months after that that she turned up at the event I was talking at as well. I found out then, yep, she’s on board with MMT now, which is really good. So we are making progress, but it’s very slow.

[00:28:57.860] – Intermission

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[00:29:47.000] – Grumbine

Who are some of the economists that you guys end up having to deal with? Because I see so many names when I’m trying to track on what’s going on in the UK, in particular, and by extension, a lot of Scotland and some of the other folks that are fellow travelers there’s all these names, MP this, MP that, and for people that aren’t in the know about the way that England does HMS.

I know Her Majesty Service or whatever. It’s all kind of different, right? It’s like out of a Monty Python movie for us in the US. And so who are some of these people? Because it almost seems a bit comical at times in the way that these debates go back and forth.

And I am curious who are some of the antagonists out there that seem to be the common kind of adjacent, but really not adjacent? I don’t want to say the bad guys, but the guys that are making it challenging for you.

[00:30:49.240] – Reavell

The ones who are challenging. Well, they have a certain number of economists and we have think tanks like you do over there. You’ve got the Cato Institute and all these things that are funded by dark money and get funding from the Koch Brothers and whoever else. And there is a link through whatever networks they have for that money to find its way into, we call it Tufton Street.

Tufton street is a street in Edinburgh where all these think tanks seem to have their registered offices and people like the Institute of Economic Affairs. But then they also have the Institute for Fiscal Studies. In Scotland, the problems that we have are from, for instance, a group called These Islands and Kevin Hague is one of the people on the board of that.

They also have the academic economists like Ronald McDonald, Frances Cairncross just trying to think. Sam Taylor from These Islands. Recently, Professor Jim Gallagher and these people are there. And then Jim Gallagher worked for Gordon Brown’s number ten team when Gordon Brown was Prime Minister. So they’re there to help the Unionist cause.

And they get prominent articles in national newspapers and things like that trying to spread fear and doom and gloom about the Scottish economy. And the thing is that they all use the tax and spend narrative. They all use the taxpayers money paradigm in which to criticize Scotland. So there’s that that MMT has got to be able to break through.

[00:32:26.470] – Grumbine

When it comes to folks like Frances Coppola and Eric Lonergan and others who seem to be folks that actually take fights with the MMTers over there, what is typically the debate about? I know in the US that we’re dealing with our own Paul Krugmans, but it seems like you guys have your own fair share of them. Is that the positive money crew?

[00:32:53.300] – Reavell

No positive money. We had a couple of guys come to us from positive money. They have been members of positive money giving talks about positive money, but they suddenly realize there’s a couple of things about PM that weren’t quite realistic. I don’t know exactly. I can point out a couple of things that positive money and MMT do not align on.

But these guys came from the positive money side, and they’ve joined the MMT crowd now. So it’s winning converts in that way. People that you meet on Twitter, and you mentioned Frances Coppola. She’s a very forceful and very clever person. And some of the things she says as quite a lot of these economists do does seem to align with MMT up to a point.

But I think as with all academics, there is certain integrity which they have to protect about their careers and things like that. So it is quite difficult for academics who’ve built a career based on certain theories, ideas and the work that they’ve dedicated their lives to. It’s very difficult for them to change things. They will defend their body of work, their body of knowledge as they see it as they have every right to.

But it does make for really interesting and sometimes quite lengthy threads, especially on Twitter. I don’t tend to get involved too much. I’m not an academic, and sometimes these things get far too deep for me, so I leave them alone.

I have been blocked by one person that I’ve been [inaudible 00:34:29]  but that’s all. The rest of them you can argue with. But as soon as it gets beyond my depth, I call in some of the big guns and step out.

[00:34:39.220] – Grumbine

I understand that. I understand that completely. I remember because I don’t tend to bow out, but lately I have because I’ve been doing this for so long. I’m exhausted with the same old fight.

[00:34:50.660] – Reavell

Yeah.

[00:34:51.590] – Grumbine

And there are times where it just seems like foolhardy. In my area anyway, there are new debates, right. One of the core principles of MMT is the understanding of the currency issuer, currency user dynamic. And this is very crucial, Scotland as well, which you started to talk about earlier, but in the US in particular, one of the new battles that we’re fighting, it feels like Groundhog Day is they’re trying to put major policy proposals out at the state level, where the state is the currency user.

In particular, in the United States we have what we call a comprehensive annual financial report, and every state is required to produce one, and they present it to Congress, and that way Congress knows their fiscal position. Many States only have their pensions funded 50%. Many of them only have a three-week rainy day fund if that.

And our federal government imposes huge amounts of what we call unfunded mandates on the States. And so we have, by default, a kind of race to the bottom competition between States where famously, Texas will often poach businesses from other areas when other areas won’t capitulate to their tax demands. And as currency users, those States need that tax revenue to survive.

And fundamentally, that currency issuer currency user dynamic has been so fundamental to my understanding of how to even present MMT to anyone. I’m curious, given that Scotland is the epitome of a currency user, what are some of those battles you have in terms of proper tax policy and whatever programs you might be able to enact in your quote-unquote “colony.”

[00:36:48.400] – Reavell

Yeah, you’re quite right. Scotland is a currency user. It requires a transfer, which is calculated under what they call the Barnett formula. Every year they get a block grant from Westminster according to certain calculations, and that block grant is supposed to provide enough money for the Scottish government to do whatever it has to do.

It’s a totally artificial constraint, and it is used to prove that Scotland can’t manage its own finances and it’s too poor. And the criticism is leveled at the Scottish government in the mainstream media seem to equate Holyrood, the Scottish Government, Scottish Parliament of Hollyrood with Westminster, and they seem to hold them accountable to the same standards, which, as we know, is just wrong.

Westminster is the currency issuer. It can deficit spend. It doesn’t have to balance its budget. But Holyrood does have to balance its budget, and they try and say that Scotland is obviously unfit to be an independent country because it ends up with a deficit at the end of the year.

Well, the deficit is the money that Westminster has spent on behalf of Scotland and accrued that amount of money to the Scottish government and said that, “Okay, your share of Westminster spending is this. We’ve spent it on your behalf.” And so they say Scotland has a deficit. But in fact, Holyrood itself has very, very limited borrowing powers.

And of course, not being a currency issuer means that this is kind of a real debt in terms of Scotland’s Government. So comparing Scotland, the Scottish Government to Westminster is the one way that they can criticize Scotland. But of course, we know that it doesn’t make sense because Scotland is just like a state within the United States.

It doesn’t have currency sovereignty. It cannot do everything it’s expected to with a constrained budget. The most recent thing is, Scotland is being criticized for not taking all the action it possibly could in terms of climate change and it can’t do everything it needs to do, because we do have this problem that if they spend the money on one thing, they don’t have that money to spend on something else.

They get criticized for not properly supporting the health service, for not taking enough action on climate, for schools being underfunded. And every month there’s a new thing that they pick on Scotland for failing in one area of policy or another.

But when you understand that they don’t have the money to just correct these things, if the resources are there, they still don’t have the money unless they take it from some other budget. It’s really difficult to manage. And it’s very difficult for us to put this point across when people really don’t understand the money system.

[00:39:48.660] – Grumbine

When I think about Scotland, it seems such a foreign land to me. But you have a long storied history. I’m curious, is this a holdover from the days of conquest when the British Empire stretched out and colonized the world? Is that how Scotland came to be or how did Scotland become this appendage to England?

[00:40:13.870] – Reavell

I’m not totally clear on the details, but if you look up the Darien Adventure, you’ll see, basically the English bribed a lot of Scottish lads to vote back in the beginning of the 17th Century, after Queen Elizabeth I of England had died, there was all sorts of political shenanigans.

They had to do some sort of bailout with this Darien venture in the West Indies. I don’t know all the details. I’ll let people go and look this one up. If I say too much about it, I’ll get it wrong. But they bribed a load of Scottish landlords. Some of them, they paid them as little £11 in all money in like 1605. I have no idea what that’s worth, but probably not a lot more today.

And they then voted to become part of the United Kingdom. And James VI of Scotland was sent down to England and became James I of England and also James VI of Scotland. So the two countries we joined at the hip at that point. It was supposed to be a Union. And there’s all sorts of ancient documents that refer to this. But I’m not totally on [inaudible 00:41:32] with all of the politics.

Basically, it’s a Union of two countries that goes back 300 years and if we want to get out of it, Scotland should be able to vote to do that. And it should not rely on permission from England to be able to decide to leave this Union when it wants to. In the same way that England decided to leave the European Union. The United Kingdom decided to leave the European Union.

[00:41:56.480] – Grumbine

Do we call the Scotsit? They have a term for that yet?

[00:42:01.640] – Reavell

No, you could call it the Scotsit. So it goes back 300 years. It’s not like the Scots hate the English. I was born and brought up in England. I lived in Scotland for more than half my life. Having seen what it’s like up here, I’m not terribly nationalist one way or another, but I do believe that I just do not want to be part of a country that is ruled by Westminster the way that the whole of the UK is being ruled by it at the moment.

And I think Scotland is a kind of a life boat to get away from what’s happening down there. And if Scotland does become independent, we don’t want to repeat the same mistakes of Westminster following the same neoliberal free market capitalist policies that are ruining the country at the moment.

[00:42:50.970] – Grumbine

What is the relationship to Scotland in terms of the European Union as tied to England and Brexit? How did that directly impact you guys?

[00:43:05.830] – Reavell

It’s impacted in the whole of the UK as well as the Covid Crisis, we also have the Brexit Crisis. And I don’t know if you’ve seen anything in the news or in the media about what’s happening over here, but it’s not entirely under Brexit and COVID combined, it’s down to a long-term lack of investment.

So basically we have supply chains in this country which rely as probably most countries do on a lot of trucks moving food and goods around the country. After Brexit, a lot of the I won’t say unskilled work because that’s unfair.  A lot of the work that’s classed as unskilled and it included a lot of transport drivers, lorry drivers, truck drivers.

They all decided we’re not going to stay here. We’re going back home to our own countries. So they left, and what we’re faced with at the moment, there is a shortage of lorry drivers. But if you look on the UK Parliament website, you’ll find that the transport industry knew that there was going to be a shortage of lorry drivers way back in 2015, before we even voted to leave the EU and nothing was done about it.

The transport industry wasn’t willing to invest in training and backfilling this potential shortage. And they were looking at about 40,000 lorry drivers short. But then what happened with Brexit? With the mass exodus of all these trained lorry drivers, we suddenly find ourselves tens of thousands of lorry drivers short.

So consequently, supermarket shelves are now not as full as they were. People are posting lots of photographs of supermarket shelves completely empty with just a few goods on them because they cannot get lorry drivers to keep the deliveries coming through on time. And this is just general free-market capitalism.

If they don’t have to train people and they can rely on immigrant labor, providing that service and fulfilling these jobs, they will because it means they don’t have to spend any money, they can make more profit. But then if they all decide to suddenly leave, whoa, there’s a big hole.

Suddenly deliveries don’t get through and we suddenly find we have to call in the army to carry out supermarket shopping deliveries and things like that. It’s affected the whole of the UK like this.

[00:45:32.450] – Grumbine

What would a job guarantee look like in Scotland? It sounds like you don’t even need one right now. You’ve got so many jobs that are just not done because the people have left. You just simply don’t have enough people to do the work. How do you remedy such a thing especially in the age of Brexit?

[00:45:51.440] – Reavell

Okay, the job guarantee. Well, you’ll have to speak to Kairin about that one because she’s just recently co-authored a paper with Cameron Archibald about a job guarantee for Scotland. They’d be the ones to talk about the specifics of that kind of thing. Public sector jobs, there’s always plenty of things that need doing.

And I did a talk recently for the Traditional Music Forum in Scotland With Covid everybody’s being laid off. Now, musicians are by the nature of their job, self-employed, independent workers. The government’s furlough scheme did not cover them and because they could not go to work, but they weren’t classed as essential, so they weren’t getting any kind of support at all.

They found it really difficult to make ends meet. And there was a lot of talk amongst them about universal basic income. And I knew a few people in the traditional music world and I’d spoken to them about the job guarantee and about the problems with UBI.

I did a re-session for them on that, but it’s very difficult to put across points about job guarantee unless you understand how the money system works. Once you’ve understood that, it’s quite obvious what the faults of the UBI are, but it’s then very difficult to sell the idea of a job guarantee. And you’re right, we do need to work on specifics of how it can be implemented.

I don’t know what it would look like in an independent Scotland. Certainly, if they try and introduce it before independence, they will have difficulty without the currency sovereignty to be able to employ people on a public program. They’re going to really find it difficult to implement anything like that. But I have a chat with my colleagues Kairin, Archibald and Kairin about that one.

[00:47:40.450] – Grumbine

Oh, Kairin and I talked. It’s been probably about six months ago and it was a great talk and I learned a lot and it was nice just to get to know her. I talked to so many people over there. I guess I’m wondering, as we wind up here, if you had a message for people who are in the US, Scotland, what might you tell them?

Things are very dire right now with Covid and we’ve got climate change that is going to impact us all, regardless of what continent we reside on, maybe differently, but still impact us. What might you say to someone to encourage them to consider digging into MMT?

[00:48:23.610] – Reavell

Gosh, putting that in a nutshell is like the elevator pitch. Again it depends who you’re talking to and find out what they’re passionate about. Are they passionate about the environment? Do they have an interest in health care, anything like that? It’s really difficult because you, first of all, have to get across this message if you really want to start and get straight to the crux of it.

And I’ve had to do this talking to people. And I’m given, like, half an hour to do a talk on Modern Monetary Theory. How do you explain MMT in 30 minutes? So I’ve worked on various talks and I have got it down, obviously, with visuals. It’s a lot easier than purely just words going through it. And you can put up examples that help you with your narrative.

And if you’ve got a completely blank audience, you don’t know what their approach is. Generally, in Scotland, I’m invited to Independence Groups so that’s an approach there. And you can say, okay, you were starting a country from scratch. What do you do? What’s the first thing you’re gonna do? How are you going to raise money? Oh, well, you’re gonna sell things. Okay.

What are you going to sell it for? I’ll sell it for dollars. Okay, but [inaudible 00:49:41] won’t pay in dollars. I won’t pay in a currency that I can use here. You could take it that way. You could take it in any different way. Looking at the accounting, you can say if I need to hold a credit balance, that means somebody else in the economy somewhere has got to have a debit balance.

Who can sustain a deficit position and get them thinking about things like that? Try and get them to ask questions and then find out where you can drill down into their understanding to try and straighten things out for them and lead them where you want them to go.

Generally speaking, giving talks, I would start with a government spending chain and showing how much income if the government spends a thousand pounds or a million pounds, doesn’t matter. If it spends a thousand pounds show each transaction that a thousand pounds goes through and how it reduces to almost nothing.

And how that almost nothing that’s left at the end of it, is put into somebody’s bank account, but it leaves a deficit of the equal amount in the government’s accounts. And then I can put up on the screen, as I’ve seen for the United States, the quarterly Sectoral Balances, which show private and foreign sector and public sector.

We can download that from the Office of National Statistics in the UK, and it only takes five minutes to convert that from an excel spreadsheet into a chart. Put that on a slide. Once I’ve given an example of what happens with a thousand pound government spend, I can throw up this chart from the government statistics, and immediately it makes it real.

That’s real government data. That’s truth. What I’ve just shown you is here in the government’s own figures. That really helps get it across quite quickly. Actually, putting something into words . . . I could talk for hours.

[00:51:34.720] – Grumbine

Well, you know what? We’ll have to have you come back and we’ll do some more of that cause this was really fun. I wanted to talk to you for so long, and I’m really grateful that you took the time to be with me today and let everyone know where we can find your organization and any other links that we might be interested in letting the world come to.

[00:51:56.740] – Reavell

Yeah, sure. But if anyone wants to, they can go and look for Modern Money Scotland. You’ll find Modern Money Scotland has a website and a Facebook page. There’s two actually. There’s a Facebook page and a Facebook group. And the page is where people put all the information, but the group is where a lot of the activity takes place and the discussions. And we’re also on Twitter.

[00:52:17.230] – Grumbine

Very good. And with that, Malcolm, thank you so much for joining me today. It’s been a pleasure. This is Steve Grumbine and Malcolm Reavell. Thank you so much. Have a great day, everybody. We’re out of here.

[00:52:36.860] – Credits

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 Progressives Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.