MMT and the case of Finland

[meye...@gmail.com]

Like a lot of you, I have been reading about MMT this past year or two.  Central to the theory is that large deficits are healthy and trying to balance the budget robs a country of its maximum output potential.  But what are we to make of countries like Finland that have very low unemployment, low debt and by many measures close to the highest standard of living in the world?  According to MMT, Finland is competing with one arm tied behind their back.  But they still leave everyone else in their dust?!  How can this be so?

[Joe Leote]

TAXES (Are the high taxes in Finland worth it?)

http://scandinavianinterlude.blogspot.com/2014/03/why-does-finland-pay-some-high-taxes.html

Taxation in Finland

https://en.wikipedia.org/wiki/Taxation_in_Finland

MMT says taxes and borrowing are not necessary to offset government deficit spending. But then MMT says taxes are the means to control inflation. And MMT says government debt is a means to support monetary policy which is also a potential means to control inflation. MMT says you do not have to tax the rich to offset deficit spending by the government. But if you don't want the rich to capture the government via lobbyist efforts then use progressive taxes to cap their income and reduce their rate of wealth accumulation.

Joe

On Sat, Sep 26, 2020 at 5:41 PM meye...@gmail.com <meye...@gmail.com> wrote:

Like a lot of you, I have been reading about MMT this past year or two.  Central to the theory is that large deficits are healthy and trying to balance the budget robs a country of its maximum output potential.  But what are we to make of countries like Finland that have very low unemployment, low debt and by many measures close to the highest standard of living in the world?  According to MMT, Finland is competing with one arm tied behind their back.  But they still leave everyone else in their dust?!  How can this be so?

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[meye...@gmail.com]

Big spending "supported" by equally big taxes.  But the obsession they - and other northern Europeans- have with balanced budgets would be a major obstacle to their citizens well being if MMT is to be believed.  Of course it doesnt appear that it slows them down any in reality.  Being high tech export driven economies is their recipe for success.  Can it be replicated with the financial shortcut of MMT?  I am skeptical.

[John Hermann]

As a matter of interest I looked up information on the Economy of Finland
in Wikipedia ( the link:  https://en.wikipedia.org/wiki/Economy_of_Finland )
There is an interesting table of data, which I will not reproduce here. 
However there seems to be a good correlation between increasing GDP
per capita and increasing government debt. 

In regard to unemployment, I noticed that this statistic (which I presume is an
official figure, and therefore almost certainly an understated statistic) has
averaged at between 8% and 9% during the past 20 years.  Not exactly "very
low unemployment".  Perhaps a greater level of government spending (and
especially a job guarantee, which would require a significant level of deficit
spending) would have reduced that number significantly.  And I fail to see
how any measure of "standard of living" that does not take into account an
unemployment rate of 9% can be useful or relevant.

It is also unclear what the term "government debt" refers to.  Does this include
all levels of government or only the central government? 

Remember too that Finland is now part of the Eurozone, meaning that its
central government is not a monetary sovereign, and is bound by Eurozone
budgeting rules.  
    
- John Hermann



On 27/09/2020 7:11 AM, meye...@gmail.com wrote:

Like a lot of you, I have been reading about MMT this past year or two.  Central to the theory is that large deficits are healthy and trying to balance the budget robs a country of its maximum output potential.  But what are we to make of countries like Finland that have very low unemployment, low debt and by many measures close to the highest standard of living in the world?  According to MMT, Finland is competing with one arm tied behind their back.  But they still leave everyone else in their dust?!  How can this be so?--

[Joe Leote]

John makes good points and I am not aware of the actual conditions. Regarding taxes Hyman Minsky was a professor of MMT proponent L. Randall Wray. Minsky made some efforts to identify which taxes are inflationary (drive up prices) and which taxes can be used to reduce inflation. MMT argues that taxes may be used to reduce inflation but to my knowledge no MMT expert describes the two types of taxes, inflationary versus inflation fighting, as discussed by Minsky in Stabilizing an Unstable Economy. So if taxes drive the price of beer up, and customers can afford to keep up demand for beer, then taxes in this case would not curb inflation in the cost of beer. During World War II the United States government ran high deficits and hired experts to manage price controls for key goods and raw materials in the national economy. Economists in general do not favor price controls or taxes as the means to control inflation in combination with government deficits to promote full employment.

Joe

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[John Hermann]

I should also add that GDP is not, in itself, a good measure of
standard of living.  For example, a high GDP figure can be quite
compatible with a high level of unemployment.      -John

John makes good points and I am not aware of the actual conditions. Regarding taxes Hyman Minsky was a professor of MMT proponent L. Randall Wray. Minsky made some efforts to identify which taxes are inflationary (drive up prices) and which taxes can be used to reduce inflation. MMT argues that taxes may be used to reduce inflation but to my knowledge no MMT expert describes the two types of taxes, inflationary versus inflation fighting, as discussed by Minsky in Stabilizing an Unstable Economy. So if taxes drive the price of beer up, and customers can afford to keep up demand for beer, then taxes in this case would not curb inflation in the cost of beer. During World War II the United States government ran high deficits and hired experts to manage price controls for key goods and raw materials in the national economy. Economists in general do not favor price controls or taxes as the means to control inflation in combination with government deficits to promote full employment.

Joe

On Sun, Sep 27, 2020 at 8:27 PM John Hermann <her...@chariot.net.au> wrote:

[Jean Erick]

     Before Rome, the temple (government) had the Jubilee “amargi”, return to the mother.  The son

 

who had been taken in slavery to pay his debt had his debt (from the temple) forgiven and any

 

lands taken returned to him as he was returned to his mother.  Modern China seems to do this

 

in a low key way.

 

   About the time of Rome, the private parties took over the lending, eliminated debt

 

forgiveness and got the government to be the debt collector for them.  Lending of “more”

 

Money that the bank had was illegal until lately when the abrogation of the Roman Law

 

of the loan and deposit was “legalized”.  Legalizing the illegal.  Gives inflationism.

 

    Inflationism could be described as simply a means to an end.  Issue debt.  Bondage.

 

Indenture.  Ala Hudson’s “neo-feudalism.  Creating collateraless money, described as

 

“fiduciary media” by von Mises, was previously based entirely in the greed for the

 

profits gained from it, but now has been a power play by the %1 (or less).

 

 

 

BTW  Minsky seems to hanging in there as having something to say.

 

 

 

James

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