Modern Money Theory by Dirk Ehnts

Author:Dirk Ehnts
Language: eng
Format: epub
ISBN: 9783031535376
Publisher: Springer Nature Switzerland

Even the recent reduction in unemployment since 2005 has not been accompanied by rising inflation rates. In this respect, it is important to note at this point that an increase in employment does not in principle lead to more inflation! The 1970s wage-price spiral created by this struggle over distribution was ultimately ended by the USA shifting from oil to gas. The high interest rates of the Volcker era played only a minor part in these dynamics, whereas the reduction of the power of the trade unions was a real factor.

Public debt and distribution

If the distribution of income or wealth is a problem in society, it can be alleviated by an appropriate distribution policy. Those who want to eliminate inequality should use the economic policy levers (e.g., tax rates and financial market regulation) and curtail the power of the rich. Interest rates on government bonds have not been a major driver of inequality. After all, they have been falling to zero since the early 1980s while inequality was steadily rising.

Full employment and price stability are compatible with an equitable distribution of income and wealth, as the postwar period partly has shown. Sustainable management of resources should also be our goal. To reduce our ecological footprint, we must reduce and change our pattern of consumption. This cannot be done with more environmentally destructive employment, so working hours should be reduced and diverted into environmental work. The introduction of a 4-day week would result in a reduction in consumption of up to 20%, as long as nothing else changes. However, since more leisure time certainly leads to more consumption, we need to think about the production side of the economy. Before this happens in the following section on the Green New Deal, we now come to the third and final dimension of stabilizing economic policy: trade policy.

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