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Episode 215 – The Misery of Austerity with David Fields
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Austerity is a potent weapon of class warfare. Political economist David Fields talks with Steve about the ways austerity serves to discipline labor, as it has been doing since the Bolshevik revolution. They touch on the reasons capitalism cannot risk full employment, as explained by both Karl Marx and Michal Kalecki.
David wants people to read Adam Smith’s The Wealth of Nations or The Theory of Moral Sentiments. Even Smith, the father of the “invisible hand,” said government is instituted for the security of property — for the rich against the poor.
The discussion touches on the current inflation, comparing the true causes to the mainstream narrative.
“There’s been a very coordinated, calculated campaign with well-known economists. Call it neoliberalism. Call it what you want, financialization… The concepts, terms, economic principles that we take for granted are not value-neutral.”
We are embedded in a system of winners and losers and we’re meant to believe there’s no other way. Workers must be prevented from understanding the trifecta of austerity – fiscal, monetary, and industrial.
Bio: David M. Fields, Political Economist, Utah. From a critical realist & genetic structuralist ontology & epistemology, David’s scholarly work centers on the intricacies concerning the interactions of foreign exchange & capital flows with economic growth, fiscal & monetary policy, and distribution, whereby attention is paid to the nature of money and international political economy. He has published in the following journals: Review of International Political Economy, Review of Political Economy, American Review of Political Economy, the Review of Keynesian Economics, and the Review of Radical Political Economics. Additionally, he has provided book chapter contributions to The Encyclopedia of Post-Keynesian Economics, The Encyclopedia of Central Banking, and the Wiley-Blackwell Encyclopedia of Globalization. David received his graduate degree from the University of Utah; his bachelor’s from the University of Massachusetts, Amherst.
@ProfDavidFields on Twitter
Macro N Cheese – Episode 215
The Misery of Austerity with David Fields
March 11, 2023
[00:00:00] David Fields [intro/music]: When you look at all this together, it’s actually not that complicated, but it’s made very complicated because if workers generally understood that what is happening is an all out class war to undermine their potential, we would have revolution in the streets.
Austerity should be called deprivation. Austerity is deprivation. Austerity is murder, like you said, because that’s what it is when put in practice on behalf of a system which is based on profit, which is capitalism. Austerity is a mechanism to ensure that deprivation is promoted so that order can be sustained and propagated.
[00:01:34] 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.
[00:01:43] Steve Grumbine: All right. This is Steve with Macro N Cheese. It’s another return from Covid. It’s been almost two weeks since I’ve done any recordings, and, as you can hear, I’ve lost a full octave of my voice, but I’m back. And if you can deal with baritone Grumbine, baritone Grumbine can deal with you. So, today I have a guest. His name is Dr. David Fields and David Fields is a political economist from the state of Utah he comes from a critical realist and genetic structuralist ontology and epistemology.
David’ s scholarly work centers on the intricacies concerning the interactions of foreign exchange and capital flows with economic growth, fiscal and monetary policy and distribution, whereby attention is paid to the nature of money in the international political economy. And, so, one of the things that is wonderful is that David also writes at the Monetary Policy Blog. And one of the things that really jumped out at me is their recent dive into monetary austerity.
And as you know, austerity, to me, is one of the most important subjects we can talk about. So, I brought David on to, in fact, talk about austerity, and I’m hoping we can make the case to you that austerity is an absolute planned approach to cripple labor. It is not a gentleman’s policy disagreement. These are people that are, literally, trying to make life hell for people. And, so, reading the work that David’s done, I felt like this was the appropriate guy to have this conversation with and my conversation prior to bringing us live, made that very clear, as well. So, with that, David, thank you so much for joining me today, sir.
[00:03:35] Fields: Thank you very much for having me. It’s an absolute pleasure to be here. Thank you.
[00:03:40] Grumbine: This subject is near and dear to my heart. Not in a positive way but I feel so compelled to stay focused on it, to not leave it.
[00:03:48] Fields: Yeah.
[00:03:49] Grumbine: And it seems to be the most important aspect of why nothing gets done around here, why nothing we claim to want or need ever happens. And, as you know, I spoke with Dr. Clara Mattei on her book The Capital Order, and she made a compelling case that, after the Bolshevik Revolution, the capital order reflexively overreacted. And by doing that, with the help of economists, basically, created an institutionalized version of the trinity of austerity, which is monetary austerity, fiscal austerity, and the power of the sack through interest rates and NAIRU. And your work seems to dovetail right into this, does it not?
[00:04:31] Fields: It does. It does, fits right in.
[00:04:34] Grumbine: Tell me about your work. What are you guys doing over there at the Monetary Policy Blog?
[00:04:39] Fields: Sure. What we’re trying to do is break through all the esoterica, so to speak, all the fluff, all the standard language that the appropriate way to beat back inflation. Now, I’ll tell you what type of inflation is ensuing, but before I tell you that the approach is, well, we just have to raise interest rates because it’s gonna cause all sorts of disorder. And that goes back to what Clara says, that all of a sudden inflation became a big problem. But there’s actually a political intention involved in that.
Now, going back to what’s the actual inflation that’s happening? Well, everyone thinks that its demand pull, wages arising too fast, the economy’s overheating. So, pundits like Jason Furman and Larry Summers says, well, the only way to deal with that is we have to raise interest rates, which, when we raise interest rates, it tanks the economy. Why? Because it increases the cost of finance, and finance is the primary tool for economic growth. Businesses, entities, if they’re gonna gauge in long run investment finance is primary.
In fact, you can check out my chapter in the Elgar Encyclopedia of Post Keynesian Economics on credit money, which deals with that. So, that’s more of a detailed analysis. But, for now, let’s say that interest rates, which ties to finance, is the primary mechanism for future growth. And if you increase the cost of finance, the only way for business, corporations, capital, et cetera, to make up for the increased cost of the means of production, which is finance in this case, is to either lay off or engage in nominal wage suppression.
And that’s what’s starting to ensue. So, they’re raising interest rates to tank the economy because they’re thinking the economy is overheating. Well, sorry, Jason. Sorry, Larry Summers. Sorry, the folks who are parading this mainstream tagline, inflation is actually cost push markup. And we’ve been arguing at the Monetary Blog, what we mean by cost push markup is that inflation’s actually being caused by supply chain bottlenecks, rising after COVID, and entities, capital corporations taking advantage of that bottleneck, which it is, by having heavy revenue on top of that.
Call it price gouging, call it whatever. And that’s what I mean by the markup. So, cost push because of supply chain bottlenecks, which is increasing difficulties with respect to coordination of production, and, then, adding revenue on top of that, we have cost push markup inflation. And since inflation is not rising from an overheating economy, raising interest rates doesn’t make sense. So, then the question is, well, what’s really going on? And that’s where we plug in.
Well, what’s really going on is to make up for this cost push markup inflation which is causing some issues and some problems for folks in the economy is to have labor pay the cost . And how do you make labor pay the cost? You cause a recession. And how do you cause a recession? By increasing interest rates, even if the economy is not overheating. In fact, it’s not because, if it were, we’d be at full employment, which we’re not. We’re actually far from it.
So, that’s what we’re trying to do and make it very simply be able to understand that what is happening is a direct assault on working people to pay for inflation which they have not been contributing to. Wages are not rising faster than productivity. It’s not full employment. It’s just having labor pay the cost of contradictions in the economy, which is part of the overall system that, whenever capitalism has contradictions, the weak must suffer, and the weak are the ones who don’t have capital, and that’s working people who have to sacrifice themselves for a wage for sustenance, unlike those who have capital, which don’t have to.
[00:08:41] Grumbine: So, let me ask you this.
[00:08:42] Fields: Yeah.
[00:08:43] Grumbine: In light of current events, I know Warren Mosler has been spending an incredible amount of time trying to help folks see that they get the interest rate story wrong.
[00:08:52] Fields: Yep.
[00:08:52] Grumbine: That interest rates going up are simply a means of transfer to the wealthy. And, during this time, where you see what looks to be austerity on the fiscal side in terms of cutting spending and benefits to regular people, you’ve got money still coming into the economy that presents, basically, a false positive. We’re not in recession, the economy’s still moving. How do we let regular people know as they’re listening to the news and they’re reading all these garbage takes from Zero Hedge and all the other right wing economic discussions. And I think the long debunked quantity theory of money from Milton Friedman is still in everyone’s head. What do you suppose is the antidote to helping regular people understand this phenomenon?
[00:09:43] Fields: Well, first and foremost is to break down this religious acceptance of the quantity theory of money. That, if you push money into the system, that’s what’s causing inflation, and that’s what causes all these problems of overheating, et cetera, in order to solve it. You take money out by raising interest rates. But let’s go beyond that surface and understand that the interest rate is a distributed variable.
And what I mean by that is that, when you lower interest rates, which decreases the cost of finance as it proposedly leads to long run investment, that, ultimately, benefits working people with job opportunities and with job opportunities to increase productivity and increased wages. And when you raise interest rates for the benefit of those who have wealth, because if you have wealth, you extract surplus based on the interest rate, that ultimately goes up to the top. Now, let me stop there and clarify.
Well, interest rates have been zero for a long time, yet we didn’t see that long run growth that you’re talking about. Well, yeah, because we have a system which is based on speculation. So, even if we had a interest rate at zero, there was enough fiscal spending, enough social investment or product investment to allow that cheap money to, ultimately, benefit working people when it’s a short-termism like real estate and all other sorts of financial instruments. So, let’s assume that we did those things. Well, the interest rate, as a distributive variable, is readily manifested.
If you increase the interest rate to cause a recession, it benefits capital and labor loses because it caused recession. And ultimately the wages will go down because you have an increase unemployment, which undermines the bargaining power of workers to increase wages, and the rest is self-fulfilling prophecy. And that goes back to, you mentioned before, of the so-called NAIRU, the non accelerating inflation of unemployment, which is essentially a bunch of hoopla, a bunch of nonsense to really say what Karl Marx said.
To maintain a reserve army of labor enough people unemployed so you don’t reach full employment and wages don’t rise, which will ultimately undermine a profit share of those who have capital, et cetera. So, when you look at all this together, it’s actually not that complicated, but it’s made very complicated because if workers, generally, understood that what is happening is an all out class war to undermine their potential, we would have revolution in the streets. And that goes back to Clara’s argument that economists got involved because they don’t wanna have another Bolshevik revolution.
[00:12:32] Grumbine: I do.
[00:12:33] Fields: Right? Oh sure. Yeah. I mean, preach. I’m on board. It all fits. So, there’s been a very coordinated, calculated campaign with well-known economists. Call it neoliberalism. Call it what you want, financialization. The point is concepts, terms, economic principles that we take for granted are not value neutral. They’re not, well, these are just standard orthodox scientific concepts that we should hold and use and practice wisely because that’s just how it works.
That’s epiphenomenal, which disguises, puts a veil of what’s really happening and that’s, call it Hobbesian Britishness, call it whatever. There’s winners and losers because of the system that we are embedded in. And that is to prevent workers or those who have to earn a wage from realizing that trifecta that you mentioned before, austerity, monetary, fiscal, and the sack that it is to prevent, like I said, that revolution from happening again, because it definitely created a rupture. And if you’re Bill Gates or if you’re Bezos, or if you’re that, I’m not gonna mention his name because I’m just tired of him, the new owner of Twitter. You don’t want that, because that, ultimately, means that your status could be significantly undermined.
[00:13:58] Grumbine: Let me tell you something funny about the guy who shall not be named.
[00:14:02] Fields: Yes.
[00:14:03] Grumbine: He has received $7 billion in US federal government subsidies, and that’s not including tax breaks, probably closer to $10 billion. This is a man who has fed off of the government teat that they would complain about constantly, and I would think of it differently. I would say while I don’t appreciate private property and private ownership of corporations,
[00:14:31] Fields: Yeah.
[00:14:32] Grumbine: I do appreciate the greatness that comes from the public purpose being served in research development and development of technologies to make society better. Unfortunately, because of this capitalist society that we’re in, instead of the government maintaining arpanet and darpanet for the people and give a people’s internet, instead, they gave it over to UniNet and MCI and said, here, go have at it. And, ever since then, it has been a capitalist dream. Think about the disruptive technology that gave Bill Clinton the ability to even run his surplus. That, by the way, destroyed the economy here.
[00:15:12] Fields: Exactly right.
[00:15:12] Grumbine: That came on the backs of a vibrant dot com bubble.
[00:15:18] Fields: You capture a very interesting point, and it goes back to, in fact, Adam Smith, which I wish more folks would read beyond the first chapter of Wealth of Nations, or read the Theory of Moral Sentiments, which, actually, he says that government so far is instituted for the security of property is an actuality institute for the rich against the poor, of those who have property against those who have none at all. And that’s Adam Smith.
That’s the so-called father of Invisible Hand. That’s straight from the horse’s mouth. And what he meant by that, he was arguing against mercantilism. Now, we don’t live in a mercantilist society, so to speak, but, if you look at it in between the lines, he was contesting concentrated capital where governing institutions, rather than providing social provisioning, are using societal resources for the privileged. And what you just said captures that you have all these subsidies which, mind you, never get subject to austerity interestingly.
[00:16:19] Grumbine: Ever
[00:16:21] Fields: It’s always aid, well it’s not called aid to families for dependent children, because Reagan destroyed that and Clinton, ultimately, ended it all and turned it to Temporary Assistance for Needy Families. Clinton ended welfare as we know it. Another shot at Clinton. It’s those programs and everything that follows suit that gets on the chopping block. It’s never the capital subsidies. It’s never the breaks or the incentives.
Those never get on the chopping block. Why? Because there’s a class intent. And there is a system at play that if you are on top of the socioeconomic order, the governing institutions are gonna protect it at all costs. And who is going to pay the price? Well, like I said before, those who are not at top, and those are the workers who will have to sell their labor power for sustenance.
[00:17:13] Grumbine: The great financial crisis that Obama had to preside over, and he did a very feckless job of getting us out of that subbed 1 trillion of investment that made this the longest non recovery ever.
[00:17:26] Fields: Right.
[00:17:27] Grumbine: But one of the things that was interesting, and I’ll bring a little bit of my own industry past to this. I was a senior consultant for a group that was going after a grant through the broadband electrification initiative by Obama, which was, basically, servicing underserved areas. We put a bid together to provide a data service provider in the lower anthracite region of Pennsylvania and we were gonna be providing fiber for these folks that had never experienced anybody taking care of them.
The Tea Party swept through and destroyed the shovel-ready jobs and all those grants that were going out that people were competing for. And, so, it never happened. So many opportunities throughout history where we could have done the right thing where regular people could have been made whole, where something that served communities could have happened. And instead, it’s dashed at the last minute, whether it be by the parliamentarian, whether it be done by Democrats or the Republicans. There’s always some plausible deniability for why they fail.
[00:18:39] Fields: I would change it to say that deniability, that prevention of positive developments, like you mentioned, is intentional.
[00:18:49] Grumbine: Yes.
[00:18:50] Fields: And what I mean by that is that, if it ultimately fails, it’s not a failure, it’s a success by the systemic dynamic in and of itself. And the one who captured that very clearly was Michal Kalecki in the political aspects of full employment article.
[00:19:05] Grumbine: Wow. Didn’t even think about Kalecki.
[00:19:08] Fields: It’s exactly what Kalecki talked to, and, obviously, he was talking about something different, like the reason we don’t want to reach full employment. It is similar saying that we don’t want full employment or progressive social democracy, socialism, whatever you wanna call it, because, ultimately, profit share, the strength of those who own capital would be weakened. So, there are forces embedded in the system that we live under to ensure that these flaws or contradiction are successful in destroying something that’s, ultimately, progress for the benefit of working people in the broader segments of society.
And, in the past, and this going back to what Clara had talked about and it highlights what Kalecki talked about, is that if all these attempts aren’t successful, what ends up happening as the final solution? I shouldn’t say that, but , it’s actually going to the direction of where I want to go is fascism.
[00:20:05] Grumbine: Yes.
[00:20:06] Fields: And Kalecki talked about it. Fascism came as a result of forces like the Bolshevik Revolution or forces like working class militancy or too much social investment undermining concentrated capital. So, if these forces are not gonna do it, well, the iron fist comes out.
[00:20:28] Grumbine: Wow. It’s painful because you fight tooth and nail. Trying to bring this to the forefront. We’re opposed by a million forms of oppression. And I think one of the ones that is really prevalent is starting in academia where the orthodoxy rules what is valid and make it to the public. What will be seen as peer reviewed. These fake models that look so real, how could you deny it? But yet it’s meant to decieve.
[00:21:00] Fields: Yeah, the intention is obfuscation. and it gets paraded in the academic circles because that gives it it’s christening and then you legitimize it, Nobel Prizes and other sorts of ranks. Take a simple model like the Marshallian Cross, which is also known as the supply and demand. And the amount of times folks will say, well, it’s a supply and demand. And they’re like, what do you mean by that? Well, it just is, that’s the way it works. So, on the seventh day, God said, let be the Marshallian Cross and we all have to be subject to it. Call me a critic, which I am. Why should we just readily accept it?
How can you assume that it’s a downward sloping demand curve or an upward sloping supply curve? And that’s how prices work. Isn’t the economy just like physical nature a lot more complex than that. Now, that’s a simple question. Why aren’t those questions being asked in your Harvard economics department or your MIT economics department or the infamous Chicago department? Because there’s intentions why you don’t see many alternative departments that engage in the kind of topics that we’re discussing now, maybe three in the entire country now.
[00:22:12] Grumbine: Maybe.
[00:22:12] Fields: That would delve into these topics. Now, you may say, oh, just they don’t have funding. I’m sure. because who wants to fund critical thought that can challenge the status quo? So, how does this stuff get out there and for people to understand and not just readily assume that, well, a supply and demand, if you just increase the supply, prices doesn’t go down. What? So, going back to what you said, there’s a reason, it’s an intention. It’s not happenstance. It’s not just a coincidence. And if the market doesn’t work, it’s not a failure. That’s what it was constructed to do because there are ways and arrangements that make it as such.
[00:22:51] Grumbine: I listened to James Galbrath, who spoke quite eloquently about how economists risk everything trying to put something out there because there’s only a handful of people that are actually on stage and in advisory roles. And, so, once you step out, the ex-communication of an academic renders you a YouTuber and a blogger as opposed to somebody who’s in position to advise kings. You are excommunicated. In fact, you may not even be able to teach university. And this is a form of message control. And while, certainly, there is a bourgeois element to academia, there’s also a worker element and, to me, if you work for a paycheck, you’re working class.
[00:23:41] Fields: Yeah. If you are selling your labor power for sustanance or you can’t rely on wealth to provide a sustainment of basic needs and luxuries, you are the working class.
[00:23:53] Grumbine: Amen.
[00:23:53] Fields: That’s it. If you are getting a paycheck and you depend on that, you are the working class.
[00:24:11] Intermission: You are listening to Macro N Cheese, a podcast brought to you by Real Progressives, a nonprofit organization dedicated to teaching the masses about MMT or Modern Monetary Theory. Please help our efforts and become a monthly donor at PayPal or Patreon, like and follow our pages on Facebook and YouTube and follow us on Periscope, Twitter, Twitch, Rokfin, and Instagram.
[00:25:02] Grumbine: I think that people do not have a knowledge of what the working class means. It’s seen as divisive, and here comes the socialist again.
[00:25:13] Fields: Don’t talk about class. It doesn’t exist. Come on.
[00:25:16] Grumbine: And all that red scare stuff crops back up. And then you get to hear every version of what the Bolsheviks were and what Soviet was. And Mao’s a murderer. And we don’t gauge the number of murders that capitalism has committed. The idea that austerity is murder. All the people without healthcare and can’t take care of their basic needs of survival. All the different places where we’ve gone to clear markets in the name of capital and have starved neo-colonial communities by making them give us their cash crops while they starve. The list of crimes capitalism is committed dwarfs, by any measure, anything that any speck in the eye of your communist friend. The capitalist log is absolutely devastating. What do you suppose it will take to help people see this?
[00:26:12] Fields: I’ve said to many folks, whether in general conversation or teacher, that, yes, this red scare is pretty paramount and prevalent and it’s obviously intentional, which negates any thinking of what could be a good alternative, not the idea that there is no alternative. What keeps us going are the folks who do think that there is actually a great alternative, in fact, a very effective alternative is that what belies that pessimism, is a modicum of optimism because, otherwise, why wouldn’t we be thinking like this in the first place.
So, it’s just keep plugging along and making these complex topics easier to understand. Like austerity is, in fact, murder. If we actually expose what, in fact, it does, it’s the ultimate source of deprivation, monetarily, physically, et cetera. Monetary because it causes unemployment, like we talked about, when we raise interest rates or if it’s used for short-termism when interest rates are zero.
Physically, because it’s ultimately putting social provisioning on the chopping block, which, ultimately, leads to more deprivation, loss of childcare, loss of healthcare, loss of housing, and, then, there’s some more outright warfare which is, literally, killing people for cash crops or, literally, killing people for resources which I would put under the context of austerity, because austerity should be called deprivation. Austerity is deprivation. Austerity is murder, like you said, because that’s what it is. When put in practice on behalf of a system which is based on profit, which is capitalism, austerity is a mechanism to ensure that deprivation is promoted so that order can be sustained and propagated.
[00:27:58] Grumbine: I wanna bring something up, and I think this is not really well thought through, but it doesn’t take much, it’s not hard to see this. Throughout the United States, we have allowed our infrastructure to crumble over the last 50 years. And one of the things that came out, was the study on the condition of bridges throughout the United States. And the vast majority of bridges were derated, like, take your life in your own hands. And why would we let that happen?
Anybody that’s owned a car knows that you’ve got a plan for some maintenance on the car. We’ve allowed our cities, our power grid, our water systems to crumble. And by part of our reach for Empire and this use of the IMF through structural adjustments and exporting neoliberalism around the world, as the world has clapped back and said, we’ve had enough, we are now in a position where we had to do something to buy time. We screwed up.
We didn’t plan and we didn’t do this stuff and, so, now we’ve got Russia and China as demons. When in reality Russia’s just been doing its thing while China, and this is probably the most salient point, for the last two years, SCOTUS (sic) and hIs State of the Union, has gone out of his way to talk about how China is the bad guy and they’ve been ramping up Cold War and a proxy war. And why is that? When you allow austerity to infect your homeland and you don’t take care of the necessary upgrades, people end up dying.
Whether they die from the falling apart of the infrastructure or from the false narratives that go into creating war, to bring about military keynesianism to allow investment to be made by stealth through palatable ways with flag waving and parades. And, so, to what degree do you feel we have any chance of exposing this? Because, right now, I see a anti-war movement that is up in arms about war, but do not fundamentally understand the economics at play that are driving said war.
They always say follow the money, but I don’t see them mentally following the money. I just see them seeing the bullets and the bombs, and I sympathize with that tremendously but I also have an austerity understanding. I understand the economic angle. It feels like a much bigger picture that people just can’t get their mind wrapped around.
[00:30:25] Fields: Here’s why I would link what happened in Ohio to what you just said, politically.
[00:30:30] Grumbine: Perfect.
[00:30:31] Fields: This is where I would link that. So, whenever we have, whether it is war on terror, which now transitioning to the new Cold War, I forget who said it, but when one war ends, another one begins. And that’s just a product of a system that depends on divisiveness in conflict to perpetuate. Now, if the new Cold War was the anti-terrorism with the red scare in the past, it all fits a consistent tagline. Make sure the system is divisive and conflict-ridden to maintain markets abroad and pacification at home.
Now, this is where I’m being optimistic and actually can help the anti-war movement, which you mentioned. If we can break the pacification by linking the austerity that, ultimately, revealed itself in Ohio with a toxic bomb because of neglect on infrastructure, which allowed a train full of poisonous gases to go off its rails and plague an entire community. This is revealing that this was institutional benign neglect, face value. This is it.
And if we can link this. So why are we paying attention to bringing freedom and all that junk abroad and preventing the big, bad monster that is Russia and Ukraine, which is actually a lot more complex than what the establishment says it is, or China raiding Taiwan, which is actually more complex, actually has to do with resources in the South China Sea. But that doesn’t get talked about just like energy and the Nord Stream doesn’t get talked about in Ukraine, but there’s a reason.
Because if you can just focus on the ideological hegemony that supports foreign policy, you can deny plausibility of the institutional benign neglect that’s happening at home with our infrastructure being the way it is. If we can link that, I think that is a tremendous opportunity to show WTF. It’s very academic to say wtf, right?
[00:32:32] Grumbine: I love it.
[00:32:33] Fields: But it is, it’s, literally, a WTF moment. That, what’s that city that still doesn’t have clean water?
[00:32:41] Grumbine: Flint, Michigan.
[00:32:42] Fields: Yes. Flint, Michigan. Thanks. Hello? There are people that still don’t have clean water in the United States of America. So, I’m not, ultimately, defeatist saying that, well, nobody can link this up. I think the forces are revealing itself that we can link this and if we make it more of an effort to connect the lack of drinking water in Michigan, the environmental disaster by the train derailment in Ohio and even the toxic gas bomb, which is gonna hit Salt Lake with the depleting salt Lake.
If we can link those, there’s a chance that a divisiveness that comes with the militarism, which the system depends on, can, effectively, be unraveled by a burgeoning, strengthening anti-war movement, which should just be a strength and be a weakness, which seems to have an ebb and flow. I think that’s the maintenance of its consistency if found, if that can be engendered.
[00:33:38] Grumbine: I go back to a quote from a movie called the Cross of Iron with James Coburn. It’s a quote that I think is very pertinent here, and that’s by Carl von Clausewitz which says, war is not an independent phenomenon, but the continuation of politics by different means. This is why I say austerity is murder, because that is the essence of what von Clausewitz is saying.
[00:34:03] Fields: You’re right, you’re spot on. That’s exactly what Clausewitz said. That is exactly the definition.
[00:34:10] Grumbine: I wish that there was a place that I could scream that people would hear and make them consume this, and, fundamentally, change the way they function based on knowledge of this, because there is no war greater than this. Everything from the environment to healthcare to the way we go and fight smaller countries in pursuit of extraction. Books like Confessions of an Economic Hitman, which have been knocked for being somewhat over the top, I’m not sure that they are, and I’ve talked about this with several people.
I really have come to believe that, if we are not, stridently, trying to bring forth the impact of austerity and neoliberal neo-colonial actions, We will never fully understand the war that we’re in. We’ll just keep going through life thinking that we can just vote for the next progressive and everything will change.
[00:35:06] Fields: Yeah.
[00:35:08] Grumbine: The very people that I wanna reach are gonna get wrapped up in the next election cycle.
[00:35:14] Fields: Case in point, and I’m not gonna mention their names, and maybe they were just caught by the whim of the situation that they were in, but progressives that we had trusted, helped the administration suppress a strike with the rail workers. Progressives that we were entrusted would be the protectors that would advance our interests, essentially, followed suit. All they wanted was sick time, for bloody sick time. So, you’re right to say, like, the progressives that we are entrusted to reach out, are they in fact to be entrusted? Well, I don’t know. The system got the best of them.
[00:35:57] Grumbine: The system reinforces itself at every step. Going back to 2015 with Bernie Sanders, when Nevada, basically, threw out what everybody had voted for and said, it doesn’t matter, we’re still gonna go for Hillary. And that gut punch, I still feel it because I believed that Bernie Sanders could bring about this thing, because I’d never seen anything like it before. And, then, sure enough, the system self-healed.
Obama gave him the talk. Bernie looked like a defeated man and he stopped asking Hillary about the transcripts with JP Morgan and Wall Street and Iraq, all the things that really made Bernie, Bernie. He had to backpedal and I don’t want to get into a debate about whether Bernie’s a sellout. I believe the system, itself, is so big. They’re not gonna stop doing what they do unless something strong enough, powerful enough, and willing enough to stop it, we’ll do it. And I’ve seen international governments laugh and fall apart and not do anything. I’ve seen the domestic US, basically, facilitate it. There is no champion. We’re not valued.
[00:37:12] Fields: Well, it goes back to what folks like Karl Marx and other classical political economists, Ricardian socialists, say, that you can have theory, but you have to have praxis, praxis, praxis, praxis. And, in fact, and this goes back beyond to what Clara talked about, the reason economics became the way it is, is that the classical political economist like Marx, like Ricardo, and others. Revealed capitalism’s inherent laws of motion that can cripple agency and cripple wellbeing and cripple our potential.
That gave the impetus to a so-called science of economics, which Veblen called neoclassical, to deny that, ignore all of that. It’s just mathematical models of supply, demand and methodological individualism and exchange relations. That’s intentional. So, you don’t look at the massive machines in China being what they are. The engineers of a system that relies on austerity murder or denying that if you go see a tent city in the city that you live in, that, oh, they just must not have the wherewithal and the skills and they just gave up.
There’s systemic force that’s engineered by the dogma that is the economics that’s mainstream, to denying us from realizing that actual conditions, which is inherently violent. So we don’t ask those questions. So, how do we transcend that? Well, we advance a science that the study of how people are able to survive and extract from nature for the ability to have sustenance, because that’s what economics is, or political economy is, and all the politics and institutions involved in that.
If we can make it understandable what is actually happening on the ground, not hidden by mathematical models or stupid curves or, pathetic ideations of, well, we’re all just Hobbesian brutes. We can understand that there’s an inherently violent system where somebody’s benefiting at our expense and we need to challenge that. Now, why is that not the dominant frame of the science that we’re discussing? Because if you’re a benefit of a system, why would you want people to be exposed in learning that?
It reminds me of Bowles and Gintis’ book, very famous book called, Schooling in Capitalist America. It was published in late 1970s. The purpose of education or the way it is, is to reproduce passive submissive suppliers of product because why would you want a large scale working class, or anyone with the knowledge and capacity to, effectively, challenge a system that’s, ultimately, depressing you every single fricking day. If more people were able to understand that with a basic education, well, we would have multiple revolutions, multiple constatations, which the system has been tweaked to, ultimately, suppress which Claire talked about in her book.
[00:40:27] Grumbine: For me, at this point, there are so many fronts to this war,
[00:40:32] Fields: Yep.
[00:40:33] Grumbine: but, yet, if you have the ability to see through macro lenses, and I’m not just talking about economics, I’m talking about if you’re able to see the way the system works instead of being trapped in just your local community. This is one of the most misunderstandings of how austerity works, and I want to throw this by you and see what your analysis of my layperson version of this is.
[00:41:01] Fields: No, but that’s a good thing. That’s a very good thing because we need that in order to make more folks, I mean, because nobody is trained in advanced microeconomics where they can do constrained optimization problems up the wazoo. In fact, that’s just nonsense. But I can go and have a discussion about that, which I’m not going to, but there’s too much wasting, like that’s academic science or we should cherish, which is bull in my view. No, we need that understanding of what you just said because, if more folks have the understanding, they’ll realize the war that we’ve been talking about.
[00:41:37] Grumbine: So, in terms of the way I view the world, and it is to an MMT lens, it’s a lens that I am trying desperately to merge with some flavor of Marxism, the most left of the world, the people that are truly striving for equality in a classless society. I wanna appeal to them as they ignore a lot of monetary operations. The way I see this, the federal government in the United States, we’ll use that. We can use more general terms like currency issue or currency user.
But in the United States, for example, the federal government as the currency creator, currency issuer, it has the law on its side. The constitution, which gives Article one, section eight powers to the Congress, that Congress alone has the power of the purse. And when Congress writes a law, money, because it’s not a piece of paper, it’s not a digit in an account, it’s a law. It’s a unit of measure. When Congress writes a law, it is, thus, authorized the creation of currency once it is appropriated that to whatever bill they’re doing.
And so the federal government as the currency issuer is the wellspring from which all money cometh, other than, of course, private debt, which we can leave off to the side for a moment. The states are not currency issuers. The states are currency users, highly dependent on bonds, investments, tax revenues, because the state itself is like a business in many ways, like you and I to some degree, with a little bit of extra powers, of course.
[00:43:11] Fields: You can think of it in a way that the states in the United States are the periphery in the world economy. Since they can’t issue debt in their own currency, they have to rely on a centralized entity. Countries like Brazil have to rely on dollar denominated currencies. Well, the states have to rely on the federal government to provide the fiscal transfers.
[00:43:32] Grumbine: Exactly, and, so, within that framework, we have these folks that will focus their attention on local politics. And while that sounds good and for social things, yes, you can make life a little bit more bearable at the local level. However, without money coming in, the cost of unfunded mandates from the federal government to the states creates what I call a race to the bottom.
[00:43:58] Fields: Correct.
[00:43:58] Grumbine: The states begin competing with each other. They begin fighting tooth and nail to bring somebody’s headquarters into their back yard. By doing that, they cut the tax base dramatically to lure that business in, thus diminishing the impact that it might have of bringing revenue to the state. And, so, the average person think that, oh, we could just have Medicare for all at a state level. No, you can’t.
And they don’t understand why you can’t. This is the austerity model. It has been baked in and you don’t even see it. And that’s its power is that you’re oblivious to it and you can’t figure out why nothing gets done. And they focus on that local level without understanding that in order to get the currency, they need either block grants from the federal government or some form of funding that they don’t have to pay back.
[00:44:48] Fields: Bingo.
[00:44:49] Grumbine: And, as a result, most people start doing what always kills progressive legislation. We’ll just tax these people. We’ll get it that way.
[00:44:58] Fields: Yeah. It becomes a tax and spend myopia.
[00:45:00] Grumbine: Exactly. We’re right back to the old seventies version of the Democrats. And good people that do know better cannot stay on message and bad people who are intentionally trying to screw us know this message and intentionally obscure it, as well. And, so, by using this approach to starting with that first dollar out the federal door, to Boeing, to Haliburton, to BlackRock, the United States government has, by extension, created unelected oligarchs that run our lives. I see no way of voting your way out of that.
[00:45:39] Fields: I forget the author. This author called it the hidden development state, and what he meant by that is that, yes, you have all these ways and means and intricacies that the federal government will hold the state hostage. Whether it be military or other sorts of federal transfers or block grants, but it’s not generally for social benefit, it’s for corporate extraction or for the military industrial complex that you talked about.
And when you say, well, why can’t the federal government provide the necessary assistance to this state? Well, it’s intentional, like we talked about before. You allow a race to the bottom to happen. You’re gonna go towards bringing in an Amazon headquarters or allowing a base to expand. That’ll be the only way we will allow the federal government to provide the necessary transfers. But if it’s to help you provide social services, have to run local pathetic tax and spend, forget about it, because the federal government could very easily monetize all state debt, and there’d be no issues of relying on taxes and deficits and revenue, et cetera at the state level. Very easy. Just like how the federal government does quantitative easing to ensure financial markets don’t go awry depending on what happens, it very well could do that for the state. The reason it doesn’t is purely political, so, you can allow that race to the bottom, like you said, to ensue.
[00:47:00] Grumbine: Well, David, you’ve been a dream guest. I’m sorry it’s taken us this long to get together.
[00:47:05] Fields: I really appreciate it. Thank you so much.
[00:47:07] Grumbine: Well, I want to give you a final opportunity to pitch. I know you guys got some big stuff going on. I’ve seen some really happy posts over there.
[00:47:15] Fields: Yeah.
[00:47:16] Grumbine: I wanna give you an opportunity to tout your own work and where we can find more of it.
[00:47:21] Fields: Okay. Well, look out for more posts on the Monetary Policy Institute Blog, also called the Monetary Blog. My colleagues, Louis-Philippe Rochon, Dan Smith, and myself and others like to contribute. And if there’s any time that you would like to post something, please don’t hesitate to reach out. We are more than happy to allow that. As far as my own work, you can check on my ResearchGate site, just do David Fields researchgate.net.
That’s where all my works are posted. And you’ll see me out there doing my post to try to negate all the obfuscation that’s involved with monetary policy and inflation, and, also, fiscal policy and understanding the economic system that we’re in, and to show that if we rely on standard models of TSCE and Marshallian Cross and all that junk, that is the ultimate stick preventing us from reaching our luminous summits that can reach our potential, which, the only way it can happen, in my view, or actualized, if a great contingent can contest the system that we have succumbed to.
[00:48:27] Grumbine: Very good, very well stated, sir. My name’s Steve Grumbine with my guest, David Fields. This is Macro N Cheese and we are out of here.
[00:48:44] End credits: Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts and promotional artwork by Andy Kennedy. 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.
David M. Fields is a political economist in the state of Utah. Coming from a critical realist & genetic structuralist ontology & epistemology perspective, David’s scholarly work centers on the intricacies concerning the interactions of foreign exchange & capital flows with economic growth, fiscal & monetary policy, and distribution whereby attention is paid to to the nature of money and international political economy. He also delves into the political economy of regional development to study patterns with respect to housing, social stratification, and community planning. He has published in the following journals: Review of International Political Economy, Review of Political Economy, American Review of Political Economy, the Review of Keynesian Economics, and the Review of Radical Political Economics. Additionally, has provided book chapter contributions to The Encyclopedia of Post-Keynesian Economics, The Encyclopedia of Central Banking, and the Wiley-Blackwell Encyclopedia of Globalization. David received his graduate degree from the University of Utah; his bachelor’s from the University of Massachusetts, Amherst.
Monetary Policy Blog
https://medium.com/@monetarypolicyinstitute
ResearchGate
https://www.researchgate.net/search/publication?q=David+fields
Background
“…the mission of austerity is to protect capital as a social relation that governs our society, and it is in fact the social relation that allows for capital in the money form, all the commodities we see to even be produced. And this social relation requires constant protection. In some moments more than others. And I think, historically speaking, now we are in a phase in which, even if economic experts try to hide and deny this truth, they are very well aware of how much the labor market is, in a way, going through a phase that is definitely a phase of crisis, in the sense that there is deep questioning of the very conditions people find themselves in.”
-Clara Mattei, Macro and Cheese episode 198, The Trinity of Austerity
People
Milton Friedman
https://www.econlib.org/library/Enc/bios/Friedman.html
Warren Mosler
Karl Marx
“Karl Marx (1818–1883) is often treated as a revolutionary, an activist rather than a philosopher, whose works inspired the foundation of many communist regimes in the twentieth century. It is certainly hard to find many thinkers who can be said to have had comparable influence in the creation of the modern world.”
https://plato.stanford.edu/entries/marx/
Adam Smith
https://www.econlib.org/library/Enc/bios/Smith.html
Parliamentarian
https://www.house.gov/the-house-explained/officers-and-organizations/parliamentarian-of-the-house
James Galbraith
http://www.utip.lbj.utexas.edu/JG/default.html
Carl von Clausewitz
“War is the continuation of policy with other means,” (“Der Krieg ist eine bloße Fortsetzung der Politik mit anderen Mitteln“)
https://www.britannica.com/biography/Carl-von-Clausewitz
David Ricardo
https://www.econlib.org/library/Enc/bios/Ricardo.html
Atari Democrat
https://jacobin.com/2016/02/geismer-democratic-party-atari-tech-silicon-valley-mondale
Events
Bolshevik Revolution
https://www.history.com/topics/european-history/russian-revolution
The Tea Party Movement
https://www.britannica.com/topic/Tea-Party-movement
The Red Scare
https://www.britannica.com/place/United-States/The-Red-Scare
Concepts
NAIRU
https://www.investopedia.com/terms/n/non-accelerating-rate-unemployment.asp
Quantity Theory of Money
“According to the quantity theory of money, if the amount of money in an economy doubles, all else equal, price levels will also double. This means that the consumer will pay twice as much for the same amount of goods and services. This increase in price levels will eventually result in a rising inflation level; inflation is a measure of the rate of rising prices of goods and services in an economy.”
https://www.investopedia.com/insights/what-is-the-quantity-theory-of-money/
Reserve Army of Labor
https://www.tutor2u.net/politics/topics/reserve-army-of-labour
Mercantilism
https://www.investopedia.com/terms/m/mercantilism.asp
Marshallian Cross/Supply and Demand
https://en.wikipedia.org/wiki/Supply_and_demand
Ricardian Socialism
“The Ricardian socialists reasoned that labor is entitled to all it produces, and that rent, profit and interest were not natural outgrowths of the free market process but were instead distortions.”
https://en.wikipedia.org/wiki/Ricardian_socialism
“Hobbesian”
Pertaining to Thomas Hobbes
“The main practical conclusion of Hobbes’s political theory is that state or society cannot be secure unless at the disposal of an absolute sovereign.” -Wikipedia
https://plato.stanford.edu/entries/hobbes-moral/
Publications for Further Exploration
Elgar Encyclopedia of Post-Keynesian Economics
Edited by Edited by Louis-Philippe Rochon
https://www.e-elgar.com/shop/usd/elgar-encyclopedia-of-post-keynesian-economics-9781788973922.html
Theory of Moral Sentiments
Adam Smith
https://bookshop.org/p/books/the-theory-of-moral-sentiments-adam-smith/6422858?ean=9780143105923
Wealth of Nations
Adam Smith
https://bookshop.org/p/books/the-wealth-of-nations-adam-smith/192410?ean=9780553585971
The Political Aspects of Full Employment
Michal Kalecki
https://jacobin.com/2018/05/political-aspects-of-full-employment-kalecki-job-guarantee
Confessions of an Economic Hit Man
John Perkins
The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism
Clara Mattei
Schooling in Capitalist America
Samuel Bowles and Herbert Gintis
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Show Notes
Transcript
Extras
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Austerity is a potent weapon of class warfare. Political economist David Fields talks with Steve about the ways austerity serves to discipline labor, as it has been doing since the Bolshevik revolution. They touch on the reasons capitalism cannot risk full employment, as explained by both Karl Marx and Michal Kalecki.
David wants people to read Adam Smith’s The Wealth of Nations or The Theory of Moral Sentiments. Even Smith, the father of the “invisible hand,” said government is instituted for the security of property — for the rich against the poor.
The discussion touches on the current inflation, comparing the true causes to the mainstream narrative.
“There’s been a very coordinated, calculated campaign with well-known economists. Call it neoliberalism. Call it what you want, financialization… The concepts, terms, economic principles that we take for granted are not value-neutral.”
We are embedded in a system of winners and losers and we’re meant to believe there’s no other way. Workers must be prevented from understanding the trifecta of austerity – fiscal, monetary, and industrial.
Bio: David M. Fields, Political Economist, Utah. From a critical realist & genetic structuralist ontology & epistemology, David’s scholarly work centers on the intricacies concerning the interactions of foreign exchange & capital flows with economic growth, fiscal & monetary policy, and distribution, whereby attention is paid to the nature of money and international political economy. He has published in the following journals: Review of International Political Economy, Review of Political Economy, American Review of Political Economy, the Review of Keynesian Economics, and the Review of Radical Political Economics. Additionally, he has provided book chapter contributions to The Encyclopedia of Post-Keynesian Economics, The Encyclopedia of Central Banking, and the Wiley-Blackwell Encyclopedia of Globalization. David received his graduate degree from the University of Utah; his bachelor’s from the University of Massachusetts, Amherst.
@ProfDavidFields on Twitter
Macro N Cheese – Episode 215
The Misery of Austerity with David Fields
March 11, 2023
[00:00:00] David Fields [intro/music]: When you look at all this together, it’s actually not that complicated, but it’s made very complicated because if workers generally understood that what is happening is an all out class war to undermine their potential, we would have revolution in the streets.
Austerity should be called deprivation. Austerity is deprivation. Austerity is murder, like you said, because that’s what it is when put in practice on behalf of a system which is based on profit, which is capitalism. Austerity is a mechanism to ensure that deprivation is promoted so that order can be sustained and propagated.
[00:01:34] 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.
[00:01:43] Steve Grumbine: All right. This is Steve with Macro N Cheese. It’s another return from Covid. It’s been almost two weeks since I’ve done any recordings, and, as you can hear, I’ve lost a full octave of my voice, but I’m back. And if you can deal with baritone Grumbine, baritone Grumbine can deal with you. So, today I have a guest. His name is Dr. David Fields and David Fields is a political economist from the state of Utah he comes from a critical realist and genetic structuralist ontology and epistemology.
David’ s scholarly work centers on the intricacies concerning the interactions of foreign exchange and capital flows with economic growth, fiscal and monetary policy and distribution, whereby attention is paid to the nature of money in the international political economy. And, so, one of the things that is wonderful is that David also writes at the Monetary Policy Blog. And one of the things that really jumped out at me is their recent dive into monetary austerity.
And as you know, austerity, to me, is one of the most important subjects we can talk about. So, I brought David on to, in fact, talk about austerity, and I’m hoping we can make the case to you that austerity is an absolute planned approach to cripple labor. It is not a gentleman’s policy disagreement. These are people that are, literally, trying to make life hell for people. And, so, reading the work that David’s done, I felt like this was the appropriate guy to have this conversation with and my conversation prior to bringing us live, made that very clear, as well. So, with that, David, thank you so much for joining me today, sir.
[00:03:35] Fields: Thank you very much for having me. It’s an absolute pleasure to be here. Thank you.
[00:03:40] Grumbine: This subject is near and dear to my heart. Not in a positive way but I feel so compelled to stay focused on it, to not leave it.
[00:03:48] Fields: Yeah.
[00:03:49] Grumbine: And it seems to be the most important aspect of why nothing gets done around here, why nothing we claim to want or need ever happens. And, as you know, I spoke with Dr. Clara Mattei on her book The Capital Order, and she made a compelling case that, after the Bolshevik Revolution, the capital order reflexively overreacted. And by doing that, with the help of economists, basically, created an institutionalized version of the trinity of austerity, which is monetary austerity, fiscal austerity, and the power of the sack through interest rates and NAIRU. And your work seems to dovetail right into this, does it not?
[00:04:31] Fields: It does. It does, fits right in.
[00:04:34] Grumbine: Tell me about your work. What are you guys doing over there at the Monetary Policy Blog?
[00:04:39] Fields: Sure. What we’re trying to do is break through all the esoterica, so to speak, all the fluff, all the standard language that the appropriate way to beat back inflation. Now, I’ll tell you what type of inflation is ensuing, but before I tell you that the approach is, well, we just have to raise interest rates because it’s gonna cause all sorts of disorder. And that goes back to what Clara says, that all of a sudden inflation became a big problem. But there’s actually a political intention involved in that.
Now, going back to what’s the actual inflation that’s happening? Well, everyone thinks that its demand pull, wages arising too fast, the economy’s overheating. So, pundits like Jason Furman and Larry Summers says, well, the only way to deal with that is we have to raise interest rates, which, when we raise interest rates, it tanks the economy. Why? Because it increases the cost of finance, and finance is the primary tool for economic growth. Businesses, entities, if they’re gonna gauge in long run investment finance is primary.
In fact, you can check out my chapter in the Elgar Encyclopedia of Post Keynesian Economics on credit money, which deals with that. So, that’s more of a detailed analysis. But, for now, let’s say that interest rates, which ties to finance, is the primary mechanism for future growth. And if you increase the cost of finance, the only way for business, corporations, capital, et cetera, to make up for the increased cost of the means of production, which is finance in this case, is to either lay off or engage in nominal wage suppression.
And that’s what’s starting to ensue. So, they’re raising interest rates to tank the economy because they’re thinking the economy is overheating. Well, sorry, Jason. Sorry, Larry Summers. Sorry, the folks who are parading this mainstream tagline, inflation is actually cost push markup. And we’ve been arguing at the Monetary Blog, what we mean by cost push markup is that inflation’s actually being caused by supply chain bottlenecks, rising after COVID, and entities, capital corporations taking advantage of that bottleneck, which it is, by having heavy revenue on top of that.
Call it price gouging, call it whatever. And that’s what I mean by the markup. So, cost push because of supply chain bottlenecks, which is increasing difficulties with respect to coordination of production, and, then, adding revenue on top of that, we have cost push markup inflation. And since inflation is not rising from an overheating economy, raising interest rates doesn’t make sense. So, then the question is, well, what’s really going on? And that’s where we plug in.
Well, what’s really going on is to make up for this cost push markup inflation which is causing some issues and some problems for folks in the economy is to have labor pay the cost . And how do you make labor pay the cost? You cause a recession. And how do you cause a recession? By increasing interest rates, even if the economy is not overheating. In fact, it’s not because, if it were, we’d be at full employment, which we’re not. We’re actually far from it.
So, that’s what we’re trying to do and make it very simply be able to understand that what is happening is a direct assault on working people to pay for inflation which they have not been contributing to. Wages are not rising faster than productivity. It’s not full employment. It’s just having labor pay the cost of contradictions in the economy, which is part of the overall system that, whenever capitalism has contradictions, the weak must suffer, and the weak are the ones who don’t have capital, and that’s working people who have to sacrifice themselves for a wage for sustenance, unlike those who have capital, which don’t have to.
[00:08:41] Grumbine: So, let me ask you this.
[00:08:42] Fields: Yeah.
[00:08:43] Grumbine: In light of current events, I know Warren Mosler has been spending an incredible amount of time trying to help folks see that they get the interest rate story wrong.
[00:08:52] Fields: Yep.
[00:08:52] Grumbine: That interest rates going up are simply a means of transfer to the wealthy. And, during this time, where you see what looks to be austerity on the fiscal side in terms of cutting spending and benefits to regular people, you’ve got money still coming into the economy that presents, basically, a false positive. We’re not in recession, the economy’s still moving. How do we let regular people know as they’re listening to the news and they’re reading all these garbage takes from Zero Hedge and all the other right wing economic discussions. And I think the long debunked quantity theory of money from Milton Friedman is still in everyone’s head. What do you suppose is the antidote to helping regular people understand this phenomenon?
[00:09:43] Fields: Well, first and foremost is to break down this religious acceptance of the quantity theory of money. That, if you push money into the system, that’s what’s causing inflation, and that’s what causes all these problems of overheating, et cetera, in order to solve it. You take money out by raising interest rates. But let’s go beyond that surface and understand that the interest rate is a distributed variable.
And what I mean by that is that, when you lower interest rates, which decreases the cost of finance as it proposedly leads to long run investment, that, ultimately, benefits working people with job opportunities and with job opportunities to increase productivity and increased wages. And when you raise interest rates for the benefit of those who have wealth, because if you have wealth, you extract surplus based on the interest rate, that ultimately goes up to the top. Now, let me stop there and clarify.
Well, interest rates have been zero for a long time, yet we didn’t see that long run growth that you’re talking about. Well, yeah, because we have a system which is based on speculation. So, even if we had a interest rate at zero, there was enough fiscal spending, enough social investment or product investment to allow that cheap money to, ultimately, benefit working people when it’s a short-termism like real estate and all other sorts of financial instruments. So, let’s assume that we did those things. Well, the interest rate, as a distributive variable, is readily manifested.
If you increase the interest rate to cause a recession, it benefits capital and labor loses because it caused recession. And ultimately the wages will go down because you have an increase unemployment, which undermines the bargaining power of workers to increase wages, and the rest is self-fulfilling prophecy. And that goes back to, you mentioned before, of the so-called NAIRU, the non accelerating inflation of unemployment, which is essentially a bunch of hoopla, a bunch of nonsense to really say what Karl Marx said.
To maintain a reserve army of labor enough people unemployed so you don’t reach full employment and wages don’t rise, which will ultimately undermine a profit share of those who have capital, et cetera. So, when you look at all this together, it’s actually not that complicated, but it’s made very complicated because if workers, generally, understood that what is happening is an all out class war to undermine their potential, we would have revolution in the streets. And that goes back to Clara’s argument that economists got involved because they don’t wanna have another Bolshevik revolution.
[00:12:32] Grumbine: I do.
[00:12:33] Fields: Right? Oh sure. Yeah. I mean, preach. I’m on board. It all fits. So, there’s been a very coordinated, calculated campaign with well-known economists. Call it neoliberalism. Call it what you want, financialization. The point is concepts, terms, economic principles that we take for granted are not value neutral. They’re not, well, these are just standard orthodox scientific concepts that we should hold and use and practice wisely because that’s just how it works.
That’s epiphenomenal, which disguises, puts a veil of what’s really happening and that’s, call it Hobbesian Britishness, call it whatever. There’s winners and losers because of the system that we are embedded in. And that is to prevent workers or those who have to earn a wage from realizing that trifecta that you mentioned before, austerity, monetary, fiscal, and the sack that it is to prevent, like I said, that revolution from happening again, because it definitely created a rupture. And if you’re Bill Gates or if you’re Bezos, or if you’re that, I’m not gonna mention his name because I’m just tired of him, the new owner of Twitter. You don’t want that, because that, ultimately, means that your status could be significantly undermined.
[00:13:58] Grumbine: Let me tell you something funny about the guy who shall not be named.
[00:14:02] Fields: Yes.
[00:14:03] Grumbine: He has received $7 billion in US federal government subsidies, and that’s not including tax breaks, probably closer to $10 billion. This is a man who has fed off of the government teat that they would complain about constantly, and I would think of it differently. I would say while I don’t appreciate private property and private ownership of corporations,
[00:14:31] Fields: Yeah.
[00:14:32] Grumbine: I do appreciate the greatness that comes from the public purpose being served in research development and development of technologies to make society better. Unfortunately, because of this capitalist society that we’re in, instead of the government maintaining arpanet and darpanet for the people and give a people’s internet, instead, they gave it over to UniNet and MCI and said, here, go have at it. And, ever since then, it has been a capitalist dream. Think about the disruptive technology that gave Bill Clinton the ability to even run his surplus. That, by the way, destroyed the economy here.
[00:15:12] Fields: Exactly right.
[00:15:12] Grumbine: That came on the backs of a vibrant dot com bubble.
[00:15:18] Fields: You capture a very interesting point, and it goes back to, in fact, Adam Smith, which I wish more folks would read beyond the first chapter of Wealth of Nations, or read the Theory of Moral Sentiments, which, actually, he says that government so far is instituted for the security of property is an actuality institute for the rich against the poor, of those who have property against those who have none at all. And that’s Adam Smith.
That’s the so-called father of Invisible Hand. That’s straight from the horse’s mouth. And what he meant by that, he was arguing against mercantilism. Now, we don’t live in a mercantilist society, so to speak, but, if you look at it in between the lines, he was contesting concentrated capital where governing institutions, rather than providing social provisioning, are using societal resources for the privileged. And what you just said captures that you have all these subsidies which, mind you, never get subject to austerity interestingly.
[00:16:19] Grumbine: Ever
[00:16:21] Fields: It’s always aid, well it’s not called aid to families for dependent children, because Reagan destroyed that and Clinton, ultimately, ended it all and turned it to Temporary Assistance for Needy Families. Clinton ended welfare as we know it. Another shot at Clinton. It’s those programs and everything that follows suit that gets on the chopping block. It’s never the capital subsidies. It’s never the breaks or the incentives.
Those never get on the chopping block. Why? Because there’s a class intent. And there is a system at play that if you are on top of the socioeconomic order, the governing institutions are gonna protect it at all costs. And who is going to pay the price? Well, like I said before, those who are not at top, and those are the workers who will have to sell their labor power for sustenance.
[00:17:13] Grumbine: The great financial crisis that Obama had to preside over, and he did a very feckless job of getting us out of that subbed 1 trillion of investment that made this the longest non recovery ever.
[00:17:26] Fields: Right.
[00:17:27] Grumbine: But one of the things that was interesting, and I’ll bring a little bit of my own industry past to this. I was a senior consultant for a group that was going after a grant through the broadband electrification initiative by Obama, which was, basically, servicing underserved areas. We put a bid together to provide a data service provider in the lower anthracite region of Pennsylvania and we were gonna be providing fiber for these folks that had never experienced anybody taking care of them.
The Tea Party swept through and destroyed the shovel-ready jobs and all those grants that were going out that people were competing for. And, so, it never happened. So many opportunities throughout history where we could have done the right thing where regular people could have been made whole, where something that served communities could have happened. And instead, it’s dashed at the last minute, whether it be by the parliamentarian, whether it be done by Democrats or the Republicans. There’s always some plausible deniability for why they fail.
[00:18:39] Fields: I would change it to say that deniability, that prevention of positive developments, like you mentioned, is intentional.
[00:18:49] Grumbine: Yes.
[00:18:50] Fields: And what I mean by that is that, if it ultimately fails, it’s not a failure, it’s a success by the systemic dynamic in and of itself. And the one who captured that very clearly was Michal Kalecki in the political aspects of full employment article.
[00:19:05] Grumbine: Wow. Didn’t even think about Kalecki.
[00:19:08] Fields: It’s exactly what Kalecki talked to, and, obviously, he was talking about something different, like the reason we don’t want to reach full employment. It is similar saying that we don’t want full employment or progressive social democracy, socialism, whatever you wanna call it, because, ultimately, profit share, the strength of those who own capital would be weakened. So, there are forces embedded in the system that we live under to ensure that these flaws or contradiction are successful in destroying something that’s, ultimately, progress for the benefit of working people in the broader segments of society.
And, in the past, and this going back to what Clara had talked about and it highlights what Kalecki talked about, is that if all these attempts aren’t successful, what ends up happening as the final solution? I shouldn’t say that, but , it’s actually going to the direction of where I want to go is fascism.
[00:20:05] Grumbine: Yes.
[00:20:06] Fields: And Kalecki talked about it. Fascism came as a result of forces like the Bolshevik Revolution or forces like working class militancy or too much social investment undermining concentrated capital. So, if these forces are not gonna do it, well, the iron fist comes out.
[00:20:28] Grumbine: Wow. It’s painful because you fight tooth and nail. Trying to bring this to the forefront. We’re opposed by a million forms of oppression. And I think one of the ones that is really prevalent is starting in academia where the orthodoxy rules what is valid and make it to the public. What will be seen as peer reviewed. These fake models that look so real, how could you deny it? But yet it’s meant to decieve.
[00:21:00] Fields: Yeah, the intention is obfuscation. and it gets paraded in the academic circles because that gives it it’s christening and then you legitimize it, Nobel Prizes and other sorts of ranks. Take a simple model like the Marshallian Cross, which is also known as the supply and demand. And the amount of times folks will say, well, it’s a supply and demand. And they’re like, what do you mean by that? Well, it just is, that’s the way it works. So, on the seventh day, God said, let be the Marshallian Cross and we all have to be subject to it. Call me a critic, which I am. Why should we just readily accept it?
How can you assume that it’s a downward sloping demand curve or an upward sloping supply curve? And that’s how prices work. Isn’t the economy just like physical nature a lot more complex than that. Now, that’s a simple question. Why aren’t those questions being asked in your Harvard economics department or your MIT economics department or the infamous Chicago department? Because there’s intentions why you don’t see many alternative departments that engage in the kind of topics that we’re discussing now, maybe three in the entire country now.
[00:22:12] Grumbine: Maybe.
[00:22:12] Fields: That would delve into these topics. Now, you may say, oh, just they don’t have funding. I’m sure. because who wants to fund critical thought that can challenge the status quo? So, how does this stuff get out there and for people to understand and not just readily assume that, well, a supply and demand, if you just increase the supply, prices doesn’t go down. What? So, going back to what you said, there’s a reason, it’s an intention. It’s not happenstance. It’s not just a coincidence. And if the market doesn’t work, it’s not a failure. That’s what it was constructed to do because there are ways and arrangements that make it as such.
[00:22:51] Grumbine: I listened to James Galbrath, who spoke quite eloquently about how economists risk everything trying to put something out there because there’s only a handful of people that are actually on stage and in advisory roles. And, so, once you step out, the ex-communication of an academic renders you a YouTuber and a blogger as opposed to somebody who’s in position to advise kings. You are excommunicated. In fact, you may not even be able to teach university. And this is a form of message control. And while, certainly, there is a bourgeois element to academia, there’s also a worker element and, to me, if you work for a paycheck, you’re working class.
[00:23:41] Fields: Yeah. If you are selling your labor power for sustanance or you can’t rely on wealth to provide a sustainment of basic needs and luxuries, you are the working class.
[00:23:53] Grumbine: Amen.
[00:23:53] Fields: That’s it. If you are getting a paycheck and you depend on that, you are the working class.
[00:24:11] Intermission: You are listening to Macro N Cheese, a podcast brought to you by Real Progressives, a nonprofit organization dedicated to teaching the masses about MMT or Modern Monetary Theory. Please help our efforts and become a monthly donor at PayPal or Patreon, like and follow our pages on Facebook and YouTube and follow us on Periscope, Twitter, Twitch, Rokfin, and Instagram.
[00:25:02] Grumbine: I think that people do not have a knowledge of what the working class means. It’s seen as divisive, and here comes the socialist again.
[00:25:13] Fields: Don’t talk about class. It doesn’t exist. Come on.
[00:25:16] Grumbine: And all that red scare stuff crops back up. And then you get to hear every version of what the Bolsheviks were and what Soviet was. And Mao’s a murderer. And we don’t gauge the number of murders that capitalism has committed. The idea that austerity is murder. All the people without healthcare and can’t take care of their basic needs of survival. All the different places where we’ve gone to clear markets in the name of capital and have starved neo-colonial communities by making them give us their cash crops while they starve. The list of crimes capitalism is committed dwarfs, by any measure, anything that any speck in the eye of your communist friend. The capitalist log is absolutely devastating. What do you suppose it will take to help people see this?
[00:26:12] Fields: I’ve said to many folks, whether in general conversation or teacher, that, yes, this red scare is pretty paramount and prevalent and it’s obviously intentional, which negates any thinking of what could be a good alternative, not the idea that there is no alternative. What keeps us going are the folks who do think that there is actually a great alternative, in fact, a very effective alternative is that what belies that pessimism, is a modicum of optimism because, otherwise, why wouldn’t we be thinking like this in the first place.
So, it’s just keep plugging along and making these complex topics easier to understand. Like austerity is, in fact, murder. If we actually expose what, in fact, it does, it’s the ultimate source of deprivation, monetarily, physically, et cetera. Monetary because it causes unemployment, like we talked about, when we raise interest rates or if it’s used for short-termism when interest rates are zero.
Physically, because it’s ultimately putting social provisioning on the chopping block, which, ultimately, leads to more deprivation, loss of childcare, loss of healthcare, loss of housing, and, then, there’s some more outright warfare which is, literally, killing people for cash crops or, literally, killing people for resources which I would put under the context of austerity, because austerity should be called deprivation. Austerity is deprivation. Austerity is murder, like you said, because that’s what it is. When put in practice on behalf of a system which is based on profit, which is capitalism, austerity is a mechanism to ensure that deprivation is promoted so that order can be sustained and propagated.
[00:27:58] Grumbine: I wanna bring something up, and I think this is not really well thought through, but it doesn’t take much, it’s not hard to see this. Throughout the United States, we have allowed our infrastructure to crumble over the last 50 years. And one of the things that came out, was the study on the condition of bridges throughout the United States. And the vast majority of bridges were derated, like, take your life in your own hands. And why would we let that happen?
Anybody that’s owned a car knows that you’ve got a plan for some maintenance on the car. We’ve allowed our cities, our power grid, our water systems to crumble. And by part of our reach for Empire and this use of the IMF through structural adjustments and exporting neoliberalism around the world, as the world has clapped back and said, we’ve had enough, we are now in a position where we had to do something to buy time. We screwed up.
We didn’t plan and we didn’t do this stuff and, so, now we’ve got Russia and China as demons. When in reality Russia’s just been doing its thing while China, and this is probably the most salient point, for the last two years, SCOTUS (sic) and hIs State of the Union, has gone out of his way to talk about how China is the bad guy and they’ve been ramping up Cold War and a proxy war. And why is that? When you allow austerity to infect your homeland and you don’t take care of the necessary upgrades, people end up dying.
Whether they die from the falling apart of the infrastructure or from the false narratives that go into creating war, to bring about military keynesianism to allow investment to be made by stealth through palatable ways with flag waving and parades. And, so, to what degree do you feel we have any chance of exposing this? Because, right now, I see a anti-war movement that is up in arms about war, but do not fundamentally understand the economics at play that are driving said war.
They always say follow the money, but I don’t see them mentally following the money. I just see them seeing the bullets and the bombs, and I sympathize with that tremendously but I also have an austerity understanding. I understand the economic angle. It feels like a much bigger picture that people just can’t get their mind wrapped around.
[00:30:25] Fields: Here’s why I would link what happened in Ohio to what you just said, politically.
[00:30:30] Grumbine: Perfect.
[00:30:31] Fields: This is where I would link that. So, whenever we have, whether it is war on terror, which now transitioning to the new Cold War, I forget who said it, but when one war ends, another one begins. And that’s just a product of a system that depends on divisiveness in conflict to perpetuate. Now, if the new Cold War was the anti-terrorism with the red scare in the past, it all fits a consistent tagline. Make sure the system is divisive and conflict-ridden to maintain markets abroad and pacification at home.
Now, this is where I’m being optimistic and actually can help the anti-war movement, which you mentioned. If we can break the pacification by linking the austerity that, ultimately, revealed itself in Ohio with a toxic bomb because of neglect on infrastructure, which allowed a train full of poisonous gases to go off its rails and plague an entire community. This is revealing that this was institutional benign neglect, face value. This is it.
And if we can link this. So why are we paying attention to bringing freedom and all that junk abroad and preventing the big, bad monster that is Russia and Ukraine, which is actually a lot more complex than what the establishment says it is, or China raiding Taiwan, which is actually more complex, actually has to do with resources in the South China Sea. But that doesn’t get talked about just like energy and the Nord Stream doesn’t get talked about in Ukraine, but there’s a reason.
Because if you can just focus on the ideological hegemony that supports foreign policy, you can deny plausibility of the institutional benign neglect that’s happening at home with our infrastructure being the way it is. If we can link that, I think that is a tremendous opportunity to show WTF. It’s very academic to say wtf, right?
[00:32:32] Grumbine: I love it.
[00:32:33] Fields: But it is, it’s, literally, a WTF moment. That, what’s that city that still doesn’t have clean water?
[00:32:41] Grumbine: Flint, Michigan.
[00:32:42] Fields: Yes. Flint, Michigan. Thanks. Hello? There are people that still don’t have clean water in the United States of America. So, I’m not, ultimately, defeatist saying that, well, nobody can link this up. I think the forces are revealing itself that we can link this and if we make it more of an effort to connect the lack of drinking water in Michigan, the environmental disaster by the train derailment in Ohio and even the toxic gas bomb, which is gonna hit Salt Lake with the depleting salt Lake.
If we can link those, there’s a chance that a divisiveness that comes with the militarism, which the system depends on, can, effectively, be unraveled by a burgeoning, strengthening anti-war movement, which should just be a strength and be a weakness, which seems to have an ebb and flow. I think that’s the maintenance of its consistency if found, if that can be engendered.
[00:33:38] Grumbine: I go back to a quote from a movie called the Cross of Iron with James Coburn. It’s a quote that I think is very pertinent here, and that’s by Carl von Clausewitz which says, war is not an independent phenomenon, but the continuation of politics by different means. This is why I say austerity is murder, because that is the essence of what von Clausewitz is saying.
[00:34:03] Fields: You’re right, you’re spot on. That’s exactly what Clausewitz said. That is exactly the definition.
[00:34:10] Grumbine: I wish that there was a place that I could scream that people would hear and make them consume this, and, fundamentally, change the way they function based on knowledge of this, because there is no war greater than this. Everything from the environment to healthcare to the way we go and fight smaller countries in pursuit of extraction. Books like Confessions of an Economic Hitman, which have been knocked for being somewhat over the top, I’m not sure that they are, and I’ve talked about this with several people.
I really have come to believe that, if we are not, stridently, trying to bring forth the impact of austerity and neoliberal neo-colonial actions, We will never fully understand the war that we’re in. We’ll just keep going through life thinking that we can just vote for the next progressive and everything will change.
[00:35:06] Fields: Yeah.
[00:35:08] Grumbine: The very people that I wanna reach are gonna get wrapped up in the next election cycle.
[00:35:14] Fields: Case in point, and I’m not gonna mention their names, and maybe they were just caught by the whim of the situation that they were in, but progressives that we had trusted, helped the administration suppress a strike with the rail workers. Progressives that we were entrusted would be the protectors that would advance our interests, essentially, followed suit. All they wanted was sick time, for bloody sick time. So, you’re right to say, like, the progressives that we are entrusted to reach out, are they in fact to be entrusted? Well, I don’t know. The system got the best of them.
[00:35:57] Grumbine: The system reinforces itself at every step. Going back to 2015 with Bernie Sanders, when Nevada, basically, threw out what everybody had voted for and said, it doesn’t matter, we’re still gonna go for Hillary. And that gut punch, I still feel it because I believed that Bernie Sanders could bring about this thing, because I’d never seen anything like it before. And, then, sure enough, the system self-healed.
Obama gave him the talk. Bernie looked like a defeated man and he stopped asking Hillary about the transcripts with JP Morgan and Wall Street and Iraq, all the things that really made Bernie, Bernie. He had to backpedal and I don’t want to get into a debate about whether Bernie’s a sellout. I believe the system, itself, is so big. They’re not gonna stop doing what they do unless something strong enough, powerful enough, and willing enough to stop it, we’ll do it. And I’ve seen international governments laugh and fall apart and not do anything. I’ve seen the domestic US, basically, facilitate it. There is no champion. We’re not valued.
[00:37:12] Fields: Well, it goes back to what folks like Karl Marx and other classical political economists, Ricardian socialists, say, that you can have theory, but you have to have praxis, praxis, praxis, praxis. And, in fact, and this goes back beyond to what Clara talked about, the reason economics became the way it is, is that the classical political economist like Marx, like Ricardo, and others. Revealed capitalism’s inherent laws of motion that can cripple agency and cripple wellbeing and cripple our potential.
That gave the impetus to a so-called science of economics, which Veblen called neoclassical, to deny that, ignore all of that. It’s just mathematical models of supply, demand and methodological individualism and exchange relations. That’s intentional. So, you don’t look at the massive machines in China being what they are. The engineers of a system that relies on austerity murder or denying that if you go see a tent city in the city that you live in, that, oh, they just must not have the wherewithal and the skills and they just gave up.
There’s systemic force that’s engineered by the dogma that is the economics that’s mainstream, to denying us from realizing that actual conditions, which is inherently violent. So we don’t ask those questions. So, how do we transcend that? Well, we advance a science that the study of how people are able to survive and extract from nature for the ability to have sustenance, because that’s what economics is, or political economy is, and all the politics and institutions involved in that.
If we can make it understandable what is actually happening on the ground, not hidden by mathematical models or stupid curves or, pathetic ideations of, well, we’re all just Hobbesian brutes. We can understand that there’s an inherently violent system where somebody’s benefiting at our expense and we need to challenge that. Now, why is that not the dominant frame of the science that we’re discussing? Because if you’re a benefit of a system, why would you want people to be exposed in learning that?
It reminds me of Bowles and Gintis’ book, very famous book called, Schooling in Capitalist America. It was published in late 1970s. The purpose of education or the way it is, is to reproduce passive submissive suppliers of product because why would you want a large scale working class, or anyone with the knowledge and capacity to, effectively, challenge a system that’s, ultimately, depressing you every single fricking day. If more people were able to understand that with a basic education, well, we would have multiple revolutions, multiple constatations, which the system has been tweaked to, ultimately, suppress which Claire talked about in her book.
[00:40:27] Grumbine: For me, at this point, there are so many fronts to this war,
[00:40:32] Fields: Yep.
[00:40:33] Grumbine: but, yet, if you have the ability to see through macro lenses, and I’m not just talking about economics, I’m talking about if you’re able to see the way the system works instead of being trapped in just your local community. This is one of the most misunderstandings of how austerity works, and I want to throw this by you and see what your analysis of my layperson version of this is.
[00:41:01] Fields: No, but that’s a good thing. That’s a very good thing because we need that in order to make more folks, I mean, because nobody is trained in advanced microeconomics where they can do constrained optimization problems up the wazoo. In fact, that’s just nonsense. But I can go and have a discussion about that, which I’m not going to, but there’s too much wasting, like that’s academic science or we should cherish, which is bull in my view. No, we need that understanding of what you just said because, if more folks have the understanding, they’ll realize the war that we’ve been talking about.
[00:41:37] Grumbine: So, in terms of the way I view the world, and it is to an MMT lens, it’s a lens that I am trying desperately to merge with some flavor of Marxism, the most left of the world, the people that are truly striving for equality in a classless society. I wanna appeal to them as they ignore a lot of monetary operations. The way I see this, the federal government in the United States, we’ll use that. We can use more general terms like currency issue or currency user.
But in the United States, for example, the federal government as the currency creator, currency issuer, it has the law on its side. The constitution, which gives Article one, section eight powers to the Congress, that Congress alone has the power of the purse. And when Congress writes a law, money, because it’s not a piece of paper, it’s not a digit in an account, it’s a law. It’s a unit of measure. When Congress writes a law, it is, thus, authorized the creation of currency once it is appropriated that to whatever bill they’re doing.
And so the federal government as the currency issuer is the wellspring from which all money cometh, other than, of course, private debt, which we can leave off to the side for a moment. The states are not currency issuers. The states are currency users, highly dependent on bonds, investments, tax revenues, because the state itself is like a business in many ways, like you and I to some degree, with a little bit of extra powers, of course.
[00:43:11] Fields: You can think of it in a way that the states in the United States are the periphery in the world economy. Since they can’t issue debt in their own currency, they have to rely on a centralized entity. Countries like Brazil have to rely on dollar denominated currencies. Well, the states have to rely on the federal government to provide the fiscal transfers.
[00:43:32] Grumbine: Exactly, and, so, within that framework, we have these folks that will focus their attention on local politics. And while that sounds good and for social things, yes, you can make life a little bit more bearable at the local level. However, without money coming in, the cost of unfunded mandates from the federal government to the states creates what I call a race to the bottom.
[00:43:58] Fields: Correct.
[00:43:58] Grumbine: The states begin competing with each other. They begin fighting tooth and nail to bring somebody’s headquarters into their back yard. By doing that, they cut the tax base dramatically to lure that business in, thus diminishing the impact that it might have of bringing revenue to the state. And, so, the average person think that, oh, we could just have Medicare for all at a state level. No, you can’t.
And they don’t understand why you can’t. This is the austerity model. It has been baked in and you don’t even see it. And that’s its power is that you’re oblivious to it and you can’t figure out why nothing gets done. And they focus on that local level without understanding that in order to get the currency, they need either block grants from the federal government or some form of funding that they don’t have to pay back.
[00:44:48] Fields: Bingo.
[00:44:49] Grumbine: And, as a result, most people start doing what always kills progressive legislation. We’ll just tax these people. We’ll get it that way.
[00:44:58] Fields: Yeah. It becomes a tax and spend myopia.
[00:45:00] Grumbine: Exactly. We’re right back to the old seventies version of the Democrats. And good people that do know better cannot stay on message and bad people who are intentionally trying to screw us know this message and intentionally obscure it, as well. And, so, by using this approach to starting with that first dollar out the federal door, to Boeing, to Haliburton, to BlackRock, the United States government has, by extension, created unelected oligarchs that run our lives. I see no way of voting your way out of that.
[00:45:39] Fields: I forget the author. This author called it the hidden development state, and what he meant by that is that, yes, you have all these ways and means and intricacies that the federal government will hold the state hostage. Whether it be military or other sorts of federal transfers or block grants, but it’s not generally for social benefit, it’s for corporate extraction or for the military industrial complex that you talked about.
And when you say, well, why can’t the federal government provide the necessary assistance to this state? Well, it’s intentional, like we talked about before. You allow a race to the bottom to happen. You’re gonna go towards bringing in an Amazon headquarters or allowing a base to expand. That’ll be the only way we will allow the federal government to provide the necessary transfers. But if it’s to help you provide social services, have to run local pathetic tax and spend, forget about it, because the federal government could very easily monetize all state debt, and there’d be no issues of relying on taxes and deficits and revenue, et cetera at the state level. Very easy. Just like how the federal government does quantitative easing to ensure financial markets don’t go awry depending on what happens, it very well could do that for the state. The reason it doesn’t is purely political, so, you can allow that race to the bottom, like you said, to ensue.
[00:47:00] Grumbine: Well, David, you’ve been a dream guest. I’m sorry it’s taken us this long to get together.
[00:47:05] Fields: I really appreciate it. Thank you so much.
[00:47:07] Grumbine: Well, I want to give you a final opportunity to pitch. I know you guys got some big stuff going on. I’ve seen some really happy posts over there.
[00:47:15] Fields: Yeah.
[00:47:16] Grumbine: I wanna give you an opportunity to tout your own work and where we can find more of it.
[00:47:21] Fields: Okay. Well, look out for more posts on the Monetary Policy Institute Blog, also called the Monetary Blog. My colleagues, Louis-Philippe Rochon, Dan Smith, and myself and others like to contribute. And if there’s any time that you would like to post something, please don’t hesitate to reach out. We are more than happy to allow that. As far as my own work, you can check on my ResearchGate site, just do David Fields researchgate.net.
That’s where all my works are posted. And you’ll see me out there doing my post to try to negate all the obfuscation that’s involved with monetary policy and inflation, and, also, fiscal policy and understanding the economic system that we’re in, and to show that if we rely on standard models of TSCE and Marshallian Cross and all that junk, that is the ultimate stick preventing us from reaching our luminous summits that can reach our potential, which, the only way it can happen, in my view, or actualized, if a great contingent can contest the system that we have succumbed to.
[00:48:27] Grumbine: Very good, very well stated, sir. My name’s Steve Grumbine with my guest, David Fields. This is Macro N Cheese and we are out of here.
[00:48:44] End credits: Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts and promotional artwork by Andy Kennedy. 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.
David M. Fields is a political economist in the state of Utah. Coming from a critical realist & genetic structuralist ontology & epistemology perspective, David’s scholarly work centers on the intricacies concerning the interactions of foreign exchange & capital flows with economic growth, fiscal & monetary policy, and distribution whereby attention is paid to to the nature of money and international political economy. He also delves into the political economy of regional development to study patterns with respect to housing, social stratification, and community planning. He has published in the following journals: Review of International Political Economy, Review of Political Economy, American Review of Political Economy, the Review of Keynesian Economics, and the Review of Radical Political Economics. Additionally, has provided book chapter contributions to The Encyclopedia of Post-Keynesian Economics, The Encyclopedia of Central Banking, and the Wiley-Blackwell Encyclopedia of Globalization. David received his graduate degree from the University of Utah; his bachelor’s from the University of Massachusetts, Amherst.
Monetary Policy Blog
https://medium.com/@monetarypolicyinstitute
ResearchGate
https://www.researchgate.net/search/publication?q=David+fields
Background
“…the mission of austerity is to protect capital as a social relation that governs our society, and it is in fact the social relation that allows for capital in the money form, all the commodities we see to even be produced. And this social relation requires constant protection. In some moments more than others. And I think, historically speaking, now we are in a phase in which, even if economic experts try to hide and deny this truth, they are very well aware of how much the labor market is, in a way, going through a phase that is definitely a phase of crisis, in the sense that there is deep questioning of the very conditions people find themselves in.”
-Clara Mattei, Macro and Cheese episode 198, The Trinity of Austerity
People
Milton Friedman
https://www.econlib.org/library/Enc/bios/Friedman.html
Warren Mosler
Karl Marx
“Karl Marx (1818–1883) is often treated as a revolutionary, an activist rather than a philosopher, whose works inspired the foundation of many communist regimes in the twentieth century. It is certainly hard to find many thinkers who can be said to have had comparable influence in the creation of the modern world.”
https://plato.stanford.edu/entries/marx/
Adam Smith
https://www.econlib.org/library/Enc/bios/Smith.html
Parliamentarian
https://www.house.gov/the-house-explained/officers-and-organizations/parliamentarian-of-the-house
James Galbraith
http://www.utip.lbj.utexas.edu/JG/default.html
Carl von Clausewitz
“War is the continuation of policy with other means,” (“Der Krieg ist eine bloße Fortsetzung der Politik mit anderen Mitteln“)
https://www.britannica.com/biography/Carl-von-Clausewitz
David Ricardo
https://www.econlib.org/library/Enc/bios/Ricardo.html
Atari Democrat
https://jacobin.com/2016/02/geismer-democratic-party-atari-tech-silicon-valley-mondale
Events
Bolshevik Revolution
https://www.history.com/topics/european-history/russian-revolution
The Tea Party Movement
https://www.britannica.com/topic/Tea-Party-movement
The Red Scare
https://www.britannica.com/place/United-States/The-Red-Scare
Concepts
NAIRU
https://www.investopedia.com/terms/n/non-accelerating-rate-unemployment.asp
Quantity Theory of Money
“According to the quantity theory of money, if the amount of money in an economy doubles, all else equal, price levels will also double. This means that the consumer will pay twice as much for the same amount of goods and services. This increase in price levels will eventually result in a rising inflation level; inflation is a measure of the rate of rising prices of goods and services in an economy.”
https://www.investopedia.com/insights/what-is-the-quantity-theory-of-money/
Reserve Army of Labor
https://www.tutor2u.net/politics/topics/reserve-army-of-labour
Mercantilism
https://www.investopedia.com/terms/m/mercantilism.asp
Marshallian Cross/Supply and Demand
https://en.wikipedia.org/wiki/Supply_and_demand
Ricardian Socialism
“The Ricardian socialists reasoned that labor is entitled to all it produces, and that rent, profit and interest were not natural outgrowths of the free market process but were instead distortions.”
https://en.wikipedia.org/wiki/Ricardian_socialism
“Hobbesian”
Pertaining to Thomas Hobbes
“The main practical conclusion of Hobbes’s political theory is that state or society cannot be secure unless at the disposal of an absolute sovereign.” -Wikipedia
https://plato.stanford.edu/entries/hobbes-moral/
Publications for Further Exploration
Elgar Encyclopedia of Post-Keynesian Economics
Edited by Edited by Louis-Philippe Rochon
https://www.e-elgar.com/shop/usd/elgar-encyclopedia-of-post-keynesian-economics-9781788973922.html
Theory of Moral Sentiments
Adam Smith
https://bookshop.org/p/books/the-theory-of-moral-sentiments-adam-smith/6422858?ean=9780143105923
Wealth of Nations
Adam Smith
https://bookshop.org/p/books/the-wealth-of-nations-adam-smith/192410?ean=9780553585971
The Political Aspects of Full Employment
Michal Kalecki
https://jacobin.com/2018/05/political-aspects-of-full-employment-kalecki-job-guarantee
Confessions of an Economic Hit Man
John Perkins
The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism
Clara Mattei
Schooling in Capitalist America
Samuel Bowles and Herbert Gintis