Modern Monetary Theory and economic revival

THE EDITOR, Madam:

It would be advisable that Dr Nigel Clarke examine the contribution that MMT (Modern Monetary Theory) could play in reviving the economy, and in particular employment and disposable family income.

No matter what the ideologies might suggest, recovery cannot be solely led by the private sector. Even before COVID-19, Prime Minister Andrew Holness said, on more than one occasion, that the Jamaican private sector was not responding to the ‘solid platform for growth’ created by years of austerity.

The government needs to step in and finance a renaissance in both agriculture and agri-processing and construction. The farming and construction skills are available in abundance.

The food import bill can be halved (which can fix much of the forex challenge); Jamaicans can have affordable food, thousands of jobs and livelihoods can be created. In construction, we have half a million people improperly housed, many of them are living on captured land.

MMT says that in times such as these, deficit spending should be the order of the day. Deficit spending not financed by borrowing, but simply by the central bank creating money for such programmes. Given the reduced disposable income owing to COVID-19, such a measure would not be inflationary. Instead, it would generate the effective demand that so many businesses need right now, businesses that depend on people having money to spend.

A ‘Wall Street’ rather than ‘Main Street’ version was tried in response to the 2008-9 crash in the form of quantitative easing through the banking system. MMT does more or less the same, but more effectively, by putting money directly into the hands of those who need it, while at the same time boosting the rest of the economy via a multiplier effect.

PAUL WARD

Campaign for Social & Economic Justice