Jul 25, 2021
Welcome to episode 86 of Activist #MMT. Today's part two of my two-part conversation with systems consultant and GIMMS associate, Neil Wilson. Neil is also the co-author of the 2020 paper, An Accounting Model of the U.K. Exchequer, which is published by The Gower Initiative for Modern Money Studies (or GIMMS). Today's episode is also part five of a larger seven-part series with all three co-authors; first individually and personally, and ending with a joint interview with all three, where we discuss the paper in depth.
(A link to all seven parts can be found here.)
In part one, Neil and I talked about how he came to MMT, how he led a lawsuit against the U.K. government in the name of 10,000 people, and MMT on the social media platform, Reddit. Today in part two, I learn a whole lot from Neil. I read several of his blog posts and I ask several questions about them. You'll notice me experience more than one lightbulb. (Neil's blog is called the New Wayland blog, and links to each of the posts we discuss can be found in the show notes of part one.
To share one example, I knew that the neoclassical assumption of full employment also requires the assumption of balanced trade. What I learned today is that although I'm correct, it's bigger than that. The assumption of full employment requires no leakages of any kind. In other words, if even one dollar of income is not spent, or it is spent but not in the United States, then demand in the United States will, of course, less-than maximized. This means that firms will respond by lowering production, which puts workers in danger of being let go. This means that full employment is no longer possible. So if a dollar of income is saved or invested, that's a dollar not spent at an American firm – this is called a leakage. If ten dollars is spent to buy something from a company in Italy, but only five dollars are spent at American firms, then that's another five dollar leakage. So, neoclassical economics requires every dollar of income to be spent, and for those dollars to be spent in the United States. There's some more to this, but I'll leave it there. You'll find a link to a post where I discuss this topic (written before talking with Neil) in the show notes: The neoclassical assumption of full employment requires balanced trade.
We end today's episode by discussing Neil‘s role in the U.K. Exchequer paper, including how he discovered it and came on board. He also gives a brief summary of the paper and its concepts, which serves as a nice preview for next week's episode, where I talk with all three co-authors and ask them a bunch of questions on the paper itself.
But for now, let's get right back to my conversation with Neil Wilson.