Conversation with Pr. Dr. Stephanie Kelton

Professor Stephanie Kelton teaches economics and public policy at Stony Brook University. On June 9, 2020, her new book was released: “The Deficit Myth: Modern Monetary Theory and How to Build a Better Economy (USA: PublicAffairs, $18.99; and UK: John Murray, £20). This is a groundbreaking work. It stands against everything conventional economics, and media, have been respectively teaching and raping on public finance. Blue World Media Network TV and “Femmes d’Afrique Magazine” interviewed Prof. Kelton on June 23, 2020, for the CONVERSATION TV show, exactly two weeks after the book was out. We invite you to watch that show. Prof. Kelton is turning economic science, upside down, particularly public finance. The tool she is using for this revolution holds in three letters: MMT, Modern Monetary Theory. A sentence summarizes Stephanie Kelton’s book: Government’s “spending should never be constrained by arbitrary targets or blind allegiance to so-called sound finance.” Wow! For decades, we’ve heard experts and economics professors raising their eyebrows on the vital importance for the government to keep “sound finance”, to follow “fiscal responsibility”, to “worry about debt.” On the conditions that: the government is a sovereign currency issuer, fiat money is the rule as it is, since US president Richard Nixon severed the gold-US dollar link on 15 August 1971, the government's spending and debts are in the national currency, concepts such as “sound finance”, "fiscal responsibility” are no more an issue. Furthermore, the very notion of government’s debt becomes a myth. Prof. Kelton goes as far as to advise to ban the term “government’s debt” since the government can never be unable to pay any amount of its debt when it comes due. How is that possible? For Prof. Kelton, nobody should be worried about the size of the government deficit. The concern should, rather, focuses on the debt’s purpose. What has the deficit funded? Bankers or students? Pharmaceutical groups or medicare? Not all deficits are born equal. For Professor Kelton, deficits should be used to build a better economy, as the book’s subtitle says. The book is out with two different covers. On one, Uncle Sam shows his empty pockets. The subtitle is “Modern Monetary Theory and the Birth of the People’s Economy.” The other cover has the subtitle already mentioned: “Modern Monetary Theory and How to Build a Better Economy.” One deducts that for Prof. Kelton, “better economy” is “the people’s economy.” According to Prof. Kelton, the current state of the American society is far from that better or people’s economy. To make her point she gives some figures: 97 million of Americans are uninsured or underinsured; 500 000 Americans sleep in the street; 40% of Americans cannot have 400 US dollars in case of emergency; half a million of Americans file for bankruptcy every year because of medical-related debt. She could go on with statistics on child poverty; real unemployment, particularly among minority groups. A better or a people’s economy, said Prof. Kelton, is an economy that works for all the people and doesn’t perform well only for a small set of privileged circles. Prof. Kelton’s new theory has four major implications for African countries. One, where are there with their monetary sovereignty? Is their government a currency issuer or a currency user? Two, they should avoid debts in any currency that they do not sovereignly issue. They should focus their policy on facts that really matter for people, for example, employment rate, real per capita revenue, free education, social security. Four, African governments should orientate their budget to solve their citizens’ real problems, without being paralyzed by sound finance prescriptions. Here too, Prof. Kelton’s lessons oppose mainstream economics represented among others by the International Monetary Fund and the World Bank Group. Her recipes counter the so-called Structural Adjustment Programs and the Washington Consensus doctrine that have been applied in Africa for the past four decades. With results everyone sees.