There’s a low-key, but fairly aggressive, discussion under way over whether or not the government should simply print money to get the country out of the current economic crisis – given, especially, the rise in unemployment. On the face of things it seems like a harmless thing to do, and for what it’s worth it has credible backing, much of which draws on Modern Monetary Theory, or MMT. 

Given my essayist leanings, where the writer weaves their own story – habits and predilections – into the narrative I should add, in haste, that I would not describe myself as an economist. From the very first introductory class in Economics (by Professor Meghnad Desai at the London School of Economics) and over the 15 years or so that followed, I have developed an aversion for economists to the extent that I would gladly have them trade places with lawyers in Shakespeare’s Henry VI. 

They do so love name-calling, coupled with what the kids would describe as “virtue signalling”, a habit which is especially pervasive among people with whom one may share any number of multiple affiliations. This approach of simultaneously holding multiple affiliations forces a break with the “clash of civilisations” notion that reduces the typically plural sense of identities or affiliations anyone may have to a single aspect – which tends to lead to a rigid either-or situation. 

“We have to see clearly that we have many different affiliations,” the economist Amartya Sen once said. Anyway, when you reach this point of binary rigidity, discourse is reduced to a belief that if you don’t stand on a street corner every day and shout, “I hate capitalism”, you’re a shill for neo-liberalism…. 

Nonetheless, I should say a few things about the rush to print money to solve our economic problems, the scientism that pervades the discipline, and the wilful obscurantism with which this work is sometimes presented. Let me start, as I am wont, with aphorisms, analogues and metaphors – if only to take the Mickey Bliss (as we would say in Norf Lahndin).

You’re dealing with people. Show some humility

In a discussion on entropy (a gradual decline into disorder and eventually death) a friend once asked if I would like to live forever. I gave a solid, “No!” “Why not?” she asked. Well, because then there would be no reason to get out of bed every day. There would be no motive to learn new things or do new and daring things and to look up at the night sky with an insatiable curiosity, marvel at everything out there, try to wrap my head around the Hubble Deep Field (13.2 million light years away) or the cosmic microwave background, and be thrilled by how much there is to learn about the universe. It’s a humbling experience.

I first developed an interest in cosmology and physics as a child because of Carl Sagan. It was Sagan who said: “It has been said that astronomy is a humbling and character-building experience. There is perhaps no better demonstration of the folly of human conceits than this distant image of our tiny world. To me, it underscores our responsibility to deal more kindly with one another and to preserve and cherish the pale blue dot, the only home we’ve ever known.” 

I’ve taken a long route to making a case for humility, caution and, as Sagan said, “to deal more kindly with one another”. That I am even drawing some comparison between the natural and social sciences irks me no end. Economics is not “like physics”. Economics is, also, not a “science” disembedded from the social world. When I do take the Mickey Bliss with economists and some wiseacres in the financial press I like to say: “When you take away all the people, there is no such thing as ‘an economy’ ”. So, when you want to solve problems you think are “economic”, imagine, always, that you are talking about people: the billionaire in Gauteng and the old woman working the fields in Cofimvaba to feed several mouths. 

And when you talk about “the market”, imagine, always, that it is people on telephones, at computer keyboards engaging in communicative action (based on mutual agreement between two or more people with vested interests that are not always rational and that “move markets”) and millions of other people buying and selling millions of small or big things around the world every day. It’s always people; whether it’s the billionaire in Gauteng or the woman in Cofimvaba.

How deep is a bottomless pit?

Never mind my silliness about physics and cosmology, above; economics is not like physics. I merely took a long route to suggest that there are so many things we don’t know about our universe, and about human behaviour (never mind “behavioural economics”) with all its irrationalities, divergences and our multiple affiliations, that we do need to approach things with large doses of humility.  

What then has living forever to do with printing money? Well, if you know you will live forever there is no need to be cautious, considerate, work and play within bounds. Moral hazard would be so high that you would probably not be able to afford personal insurance…. Somewhat similarly, if you know that there is a bottomless pit of money, there is no need to budget or save your pennies for a rainy day, because when the rainy days do arrive you can always dig into that bottomless pit.

Allow me to get serious for a moment. I am quite loyal to the idea that you should always take responsibility for the unintended consequences of your actions. I may have written about this before, but the drunk who gets into his car with the sole intention of getting home, and then runs over and kills a pedestrian along the way has to take responsibility for that – notwithstanding the fact that it was not his intention. So, when you print vast sums of money and inflation runs away you have to take responsibility for it. When printing money leads to a devaluation of currency you have to take responsibility for it. When freshly minted money ends up in personal savings accounts – and not in “the economy” – you have to take responsibility for it. 

Even if you prefer the structured route of quantitative easing (and South Africa is not at the point where it is necessary for QE), evidence from around the world has shown the wealthiest 5% gained the most. Quantitative easing immediately after the 2008 crisis did little to reduce inequality. Instead, it slashed the savings of retirees, and pushed up share prices and profits, with little impact on working-class incomes. After the global crisis the Boston Fed, the European Central Bank, and the Bank of England admitted that QE had failed to produce growth. 

Quantitative easing had some success in the US, but only as part of Barack Obama’s American Recovery and Reinvestment Act which included several instruments. It had only marginal early success. (Like that “new manager bounce” we talk about in football.) It has done very little to power the US economy, pull people into jobs and improve access to social welfare – all the things that South Africa desperately needs.

There are significant gaps between economics theories and economic policy-making. In terms of the first, we can argue about the pros and cons until we’re blue in the face, but when ill-conceived policies cause things to fall apart, and you need wheelbarrow loads of money to buy food, the public, the people will suffer.

My personal view on all of this is that taxation is a better instrument than simply printing money. And when MMTers turn to printing money (instead of taxation) they swing to the right and join the right-wing German economist Georg Friedrich Knapp, who published what may have been the first paper on MMT way back in 1905, the year that Albert Einstein first made reference to his epoch-making theory: energy equals mass times the speed of light squared. The MMTers also join libertarians like Randall Wray, notwithstanding his association with the truly progressive economist Hyman Minsky. DM