Interview with Tom O’Brien: One Marxism, MMT, and the Eurozone Crisis.

Originally published here. 

Tom O’Brien is the host of the From Alpha to Omega.  This interview was completed just before the Cyprus banking crisis and thus was not mentioned. 


C. Derick Varn: Your podcast topics seem to vacillate between sort of “left” Keynesianism and more traditional Marxism, what in your experience of the Irish economic crisis led you to see the two as more complimentary than it may seem from a distance?

Tom O’Brien: The current crisis from an Irish point of view seemed to have been caused by a massive buildup of private debt, aided and abetted by the usual neo-liberal deregulation and regulatory capture.After the crisis erupted, we also found out about the flaws in the monetary architecture of the Euro – how it operated like a gold-standard and prevented national central banks from funding their government expenditures. My reading on the topics of debt and monetary matters led quickly to the current work of radical Post-Keynesians, who predicted this monetary crisis as early as 1992 – the famous British economist Wynne Godley laid it all out in an article for the London Review of Books. The work of Steve Keen, on the acceleration of the growth in private debt as an accurate predictor of crisis was also particularly important in understanding the Irish situation. The Post-Keynesian view of why such debt bubbles occur, is the Hyman Minsky view that stability is itself destabilizing. That seemed a little convenient and not as convincing an argument as Marx’s ‘Tendential Fall in the Rate of Profit’, which gives a more direct causal explanation as to why there was such a shift from industrial capitalism to financial capitalism and outright speculative behaviour in the western developed economies. This, I think is probably closer to the real root of the problem, and works well as explaining the current neo-liberal experiment, which can be seen as a massive drive to basically increase the rate of profit. The work of the radical post-Keynesian school seem to have developed important insights into the nature of money, that might have very important implications for Marxist economics,and indeed for those seeking to understand how to alleviate the current Eurozone crisis.

C.D.V.: Do you think that Keynesian or Post-Keynesian insights are limited to circulation problems?

T.O’B.: As a non-economist, I would have to say that what I see as the main Keynesian / Post-Keynesian insights are the stabilizing effects of government deficit spending, the role debt plays in the boom-bust speculative cycle, and the ‘Chartalist’ or ‘Modern Money Theory (MMT)’ school which tries to describe the workings of our modern floating fiat currencies. The standard Keynesian deficit spending insight, when allied to the MMT school of thought, lead us to radical conclusions as to what we can achieve in capitalist economy. They shine us to a path where government deficits don’t matter, where the economy can be managed to grow in a reasonably smooth fashion. It could also lead, I am tentative to state, to a scenario where the falling rate of profit can be endlessly jacked up in nominal terms, and thus help to avoid that Marxist crisis of capitalism. Convincing these individual, isolated, ideologically hide-bound capitalists of the merits of these policies for the system as a whole, has been something pretty difficult to achieve for these Post-Keynesians, as their policies play more into the hands of the workers and the industrial capitalists than the financial capitalists currently in charge of the system. However, even if all the Post-Keynesian insights were put into play, all they would in reality likely achieve would be the stabilizing and speeding up of the existing capitalist system, enabling it to chew through all our dwindling natural resources at a quicker pace than ever. Their insights say little about the alienation of workers, the meaninglessness and arbitrariness of capitalist production, or the inherent exploitation of the capitalist mode of production.

The Karl Marx credit card.

C.D.V.: What role do you see social democracy as having in the current EU crisis?

T.O’B.: That’s a very difficult question. It seems most of the social democrat type parties across Europe have been in bed with the financiers for years now. In the UK Tony Blair and Gordon Brown let the city run riot, so they could fund their health and social spending increases. In Greece we see how the Socialists have imploded over their support for Austerity and inability to stand up to the ECB and the Germans. In Ireland we have seen the perennial party of power, Fianna Fail, lose 75% of their seats. The neoliberal mindset seems to be as deeply rooted in the social democratic parties as in those of the conservative/right parties of Europe. With the parties of both the left and the right in Europe essentially offering the same unwanted medicine to the people, we are likely to see major radical political changes in the make-up of our politics in the coming years. It seems pretty doubtful that Social Democrats can survive as power political parties in their current form unless they break from their bank-friendly policies. The policies of the ECB/IMF/EU troika are a huge destabilizing force in Europe, and the likelihood is for years more of depression-like economic performance. But if South America is any guide, it may take decades until we have the formation of new dominant left political movements capable of taking power.

C.D.V.: Have your opinions on this fiscal matters changed since you began your podcast?

T.O’B.: Not since I started the podcast, no. But over the last 3-4 years I have read a great deal about monetary matters, the design of currencies, and the role of money creation in societies. I have been interviewing a lot of the best people on these matters about their work on the show. I must say, however, that the Modern Monetary Theory people do have a reluctance to talk about the risks of endless stimulus. They say that deficits don’t harm us once there is the raw materials and human labor to absorb all the issued debt/currency, but talk little about what are the limits to these very raw materials. Most of the good scientific research I see, like the Limits To Growth studies, which show major problems in the coming decades and probable economic collapse, point towards the likelihood of catastrophic resource constraints in the near future. I often find myself wondering: ‘What Marx would have made of the likely coming material conditions?’

C.D.V.: Do you think there is an ideological blinder on that part of MMT?

T.O’B.:I do think there is an ideological blinder in MMT on this issue. But it is far from just MMT economists who ignore the likely upcoming resource crunch. The net energy we receive from our oil, gas, and coal production after getting the stuff out of the ground and into our cars and homes is dropping steadily. More and more of our oil and gas is coming from difficult to reach places, and we have to put more and more energy in, to get our new energy out. This should be a very stark warning to us that our economic system is about to undergo tremendous strain. It should be noted, that the Soviet system’s oil production peaked in the 1980’s, which is likely to have played a very important role in the collapse of Soviet Union. Indeed, Egypt’s oil production peaked in 1996 and became an oil importer in 2007, so I think we can expect many more of the Middle Eastern power structures to fray as the energy surplus from oil and gas production begins to drop.

We must realize that just because when we ran out of trees for firewood we could use coal, does not mean we can easily find ourselves a new energy resource. In fact it means just the opposite – that we have one less energy source left to exploit. Economists are acting like the beer-drinker who thinks there will always be more beer in the fridge, because for the last 6 times he went to get a beer there was always one there. Just like the beer-drinker, they won’t be too happy when they find out all we had was a six pack. None of the existing replacement renewable energies look like they have the ability to scale up to meet this challenge. Economists assume that technology will rescue us, but this is a pretty big assumption.

It’s fairly easy to see that the dominant schools of economic thought largely reflect the interests of those in power, so we can’t expect the high-priests of capitalism to preach too loudly about the contradictions at the core of their belief system.


C.D.V.: Well, many green thinkers also accuse most Marxists as being blind to the resource depletion issue. There are some strong exceptions, I think, including Marx himself, but in general, this has been the case for reasons that don’t have anything to do with capitalism. What do you see as a valid answer to resource problems?

T.O’B.: One of the core insights Marx gave us into capitalist economies is that capital always seeks to grow through productivity increases. Growth is the eternal mantra of economist from both the right and the left. Now with our resource constraints in clear sight, the options left to us are pretty stark. We either have to drastically cut our consumption levels, or our population, or maybe both. The distribution of how those resources are spent are extremely inequitable as well. But such a vast reduction in consumption levels would create absolute havoc for those who own the means of production, so it’s unlikely they will voluntarily give up control. They still might get lucky, some new energy source could materialize  or the science could be flawed. So, I expect we will see those in charge of the current system just plough along merrily with their fingers crossed until we get to such a stage as the conditions get so bad and they are overthrown, or the whole global system of production kind of peters out. But the problem with any such new system that comes into power, is that it will have to be based on a new kind of production not based on growth, and most likely not based on value production. There is quite large scope for theoretical work on how such a system would work. Many of the left-movements today speak of a ‘Green New Deal’, which doesn’t deal with the core expansionary drive of capitalist production in the slightest. Robin Hahnel has an interesting new book, Of the people, By the people – The Case for a Participatory Economy, describing how such a participatory economy could work, which is well worth the read and does a fine job of talking of how such a system could work. It offers little though, in how we should work to get there. When it comes to the demographic problem, the only country I know of with a vastly reduced population today compared to 1840 is Ireland, and that only happened through that oh so benign a mix of imperialism, famine, and mass emigration. It doesn’t bode well.

C.D.V.: Anything you’d like to say in closing?

T.O’B: I would like to point to some of the tentative positive political ideas that are starting to take shape around the world at the moment. The emergence of the Occupy movement globally, the Indignados, and the 5-Star Movement in Italy all in their own way are pointing to failure of our liberal representative democracies to work for their citizens. It’s starting to become more and more obvious to more and more people that the corporations and the banks control their politicians and stand in the way of the radical change that is needed. I think there is a great desire for a sustainable society where wealth and power is equitably distributed. Hopefully these movements are the sparks that will fire the neurons of those involved to come up with new theoretical works that can help us to lay the foundations of the new societies that we seek.


C.D.V.: I find the last bit interesting, if you would forgive a one last follow-up: What exactly do you see as the promise of the 5-Star movement?

T.O’B: Over the last 150 years we have seen many nationalist revolutions succeed. Some of these new governments may even have enacted fairly radical policies, like the welfare state or land reform. But over the years, as the original revolutionaries grew old and left the political stage they gradually became replaced by a managerial class of politicians, lacking the political spine of their predecessors. Countries like Ireland, for example, experienced a new wave of career politicians, of varying levels of corruption and a willingness to suck up to the capitalist class to gain power. The citizens of these countries have learned that the problem wasn’t just that they didn’t have self-determination as a colony, but that the structure of society and it’s political superstructure also plays a critical role. In the words of The Who – ‘Meet the new boss, same as the old boss’.

The 5-Star movement, is essentially expressing what a hell of a lot of people in the capitalist west think of politicians – they are a bunch of lying, power hungry, money grabbing, turn-coats. And they are sick to death of it. This is a real blast against the political superstructure, if not, perhaps, the base-structure of production. I see in this the germs of a possibly revolutionary change in how we govern ourselves. Noam Chomsky always talks of how power is terrified of real true direct democracy, because those in power can’t let people actually vote as they wish. Even redneck republican voters in the US. when polled on individual issues are basically social democratic in nature. I don’t think that the 5-Star movement is perfect in its structure, or that I agree with it’s policies – I don’t know enough about it to have a definitive opinion, but I think it does shows us exactly where the political pulse is right now – decentralized structures of power devoid of politicians and their games. It seems to be a return to the libertarian socialist tendencies of the past. It is also a rejection, I believe, of the old vanguard party model of the radical left parties, and left-theorists out there should be taking note.


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