One of my favorite factoids about gold is that all that has ever been mined could all fit within a modest two-story townhouse (it’s too delicious to fact check, at least given the risks that I’ll get sidetracked from what is, after all, a diversion at the moment). The idea that such a paltry supply could oil and and grease the multitudinous transactions of the global economy seems so laughable I have trouble remembering how it’s possible that people, both now and in the past, take it seriously.

But they did (and they do) and it’s not entirely laughable: a metal as stable as gold and as hard to find and as (now) universally recognized as valuable—these are excellent attributes for an exchange currency that does not depend on government backing. Bitcoin and a plethora of other currencies are trying to do the same thing, but so far have not achieved the kind of pricing stability and ubiquitous markets that exist for gold.

The shift away from the gold standard, and from the Bretton Woods exchange rate system, makes the theory of money that we call modern monetary theory increasingly attractive as a way to describe macroeconomics and guide monetary policy. I first came across it through history of capitalism circles, and it has penetrated the policy circles on the left sufficiently that the man who came awfully close to winning the Democratic presidential nomination is at least MMT adjacent through his advisor Stephanie Kelton, even if he’s playing sphinx-like Franklin Roosevelt on the question.

Here’s what the American left loves about it: deficits, the national debt—it doesn’t matter! We can spend what we want! Even though this is not exactly what MMT says, that seems to be the reason for much of the enthusiasm for it. It’s a respectable way to waive off questions about how we finance universal health care, college education, or basic income.

MMT is not in fact a license to print money nonstop. It reframes the constraints of monetary policy around inflation rather than deficits. Its real value, I think, as currently described by its theorists, is that it nullifies unemployment. Its policy assumption is that you manipulate the money supply to zero out unemployment, rather than considering it a tradeoff along with inflation.

Interestingly, as described in the linked New Yorker article above, the regenerative proponent of MMT—Warren Mosler—has gone about it in a very Koch-like way, pouring money into academic networks to incubate MMT into a full-blown, respectable policy idea.

Reading Kelton and others describe MMT, though, I have trouble figuring out what is so different, besides the fact that the debt is no longer part of the economic dashboard. It still sounds like Keynesianism to me: pump up the monetary supply when the economy slows, soak up money to cool it down when it’s running hot. The federal jobs guarantees sound a lot like what a healthy chunk of politicians favored in the 1970s.

I think that Kelton is effectively arguing that—since the Fed will no longer really tinker with interest rates—Congress will have its job of worrying about unemployment and inflation. It will have to make fiscal policy moves in order to balance that objective, raising or cutting taxes, expanding or paring back public-sector programs.

I don’t think this is a better equilibrium. After all, there’s a lot of benefits to pulling these decisions from Congress and handing them off to a more politically removed (but not entirely independent) body like the Federal Reserve Board. Kelton might like the policy results from an AOC-led Congress, but might not a Republican-controlled Congress tighten its inflationary focus to the detriment of unemployment? It seems like this might just increase the undulations in monetary/fiscal policy, decreasing stability, creating more boom-and-bust potential, increasing business and labor market uncertainty.

What’s missing from the New Yorker article, at least to the level that I need, is a better explanation of how this works with international trade. Balance of trade, swapping currencies for imports and exports—this strikes me as the most muscular constraint on the “Magic Money Tree,” as MMT skeptics snidely refer to the theory. This morning on the BBC, I listened to first a story on runaway inflation in Zimbabwe and a second that discussed an inflationary spiral in Syria. I suppose that a U.S. deficit-denier could argue that we don’t face the same constraints as those countries because, as a large common market with a wealth of natural and human resources, we could operate more autarkicly.

But I don’t see that as a better equilibrium either. I think that trade is good for many reasons, both for the mutual benefit that trade among equals generates AND for the peace-keeping aspect that comes from interdependence. If we fall back into autarky, I only see more miasmas like Venezuela, Zimbabwe or Syria, imperialistic wars to gain resources outside common markets, new colonial holdings, and a replay of terrible moments in 19th and 20th century history.

The gold standard brought on more problems than it was worth. But it did lubricate the nascent global economy that Bretton Woods helped restore with more guardrails. I fail to see how MMT helps us address the shortcomings of our current global economy, with its deficient public governance to harmonize regulatory standards and ratchet up so that we generate fewer losers in developed countries who would blow up the system out of rage and spite.

I was eager to listen to Ross Douthat banter with Ezra Klein yesterday, though I found the conversation less enlightening than I had hoped. Douthat’s excerpt from his new book struck a few chords—most of them related to the kind of directionless malaise that I think does capture a significant chunk of American life. I too have worried about whether we’re heading towards a WALL-E-like future. My proposed solutions center less around space than climate change or required national service, and I would frame my worries less around decadence than an empty conception of the public good. Still, I can see the value in thinking about decadence as we make sense of screen warriors on twitter or reddit who most of the time are playing video games, making artisanal cocktails, and finding the best local burritos.

Via his New York Times excerpt, Douthat borrows a definition from Jacques Barzun:

we can say that decadence refers to economic stagnation, institutional decay and cultural and intellectual exhaustion at a high level of material prosperity and technological development.

I can see how the current American moment—well, at least the pre-COVID, pre-BLM protest wave still sweeping the world—fits this description. It captures a kind of weariness and fatigue that many of us feel. And I take his point that this could go on for a while—for a hundred years or more—rather than culminating in some more immediate disaster. In a way, it reflects the soullessness of liberalism that Yuval Harari fingers in his tomes.

And yet, listening to Douthat and Klein, I think of Admiral Hyman Rickover, whose claim to fame was overseeing the nation’s first atomic submarine. From the 1950s to the 1980s, Rickover captured the attention of a number of policymakers, a darling of congressional committees, someone you could always count on for a biting line about the many insufficiencies of America, from its military to its education system. He worried quite a lot about decadence: about American frittering away their time and money on innervating entertainment and flashy material goods—while the Russians toiled, studied, worked, advanced. He gave the Cold Warriors what they wanted, a view that the Commies could beat us, would beat us if we didn’t value knowledge over mindless distractions. And the elitists loved him too, for he focused on the need to nurture the best and the brightest rather than fussing over the mediocre middle.

Rickover thought America was decadent during the period that American policymakers today pine for, whether for its unionization rates and commitments to public welfare, or for its male breadwinner social structure and the low rates of immigration. It’s easy to mythologize the shared purpose that the fight against communism imparted on American life, and the milkshakes and fancy televisions struck the Rickovers as significant signs of decadent decay and numbing frivolity—even when we were putting a man on the moon.

Economist Robert Gordon’s critique of the education system—and part of his rationale for pessimism about America’s future, along with his much-more discussed technopessimist perspective—is that it does a lousy job teaching “cognitive abilities and problem-solving” (this is Michael Walden’s gloss in North Carolina Beyond the Connected Age… my copy of Gordon’s Rise and Fall of American Growth is in my work office).

This is not a new critique of the American educational system. The idea that the U.S. needs to teach critical thinking in public schools goes back a long way. In many respects, it’s central to John Dewey’s thinking about the purpose of schools in society, but we can more clearly see that effort in the 1960s and especially the 1970s. It became much more mainstream in the 1980s and by the 1990s, it was a common place. My own introduction to the history of education came through John Taylor Gatto, writing in Harper’s Magazine, who bottled many of these ideas, of the old rote education system to produce factory cogs that needed to teach more creative, independent workers for the future.

If we move into the academic literature on education, we see how damn hard it is to teach critical thinking. Certainly it’s hard to measure, whether we’re trying to measure critical thinking in students and especially if we’re trying to measure whether teachers are doing a good job of it.

And yet, despite these long-standing concerns that we fail at teaching critical thinking, we need only look at Korean, Chinese, and Japanese critiques of their own education systems to see that they think the U.S. does a much better job at producing free thinkers, innovators, inventors.

All of this is a way of saying that I struggle to imagine what it is that our schools should be, when it comes to critical thinking. I design my own courses to foster it, but I have a hard time judging whether students have made progress. At best, I try to impart habits of inquiry, of skepticism, but not nihilism. Still, I’m not completely confident that I’m doing students a service by developing the nagging skeptic, always demanding to see the original evidence, liable to unravel a confident ball of energy into a puddled thread incapable of contributing to the work we need done.

This morning, I stumbled on a conversation between Amanda Fischer, policy director at the Washington Center for Equitable Growth, and Mehrsa Baradaran. I’ve seen Baradaran present at a history conference, and I’ve been impressed by her historical work on black banks and the racial wealth gap.

In this conversation, Baradaran and Fischer discussed “why crises help the wealthy and harm everyone else,” the gist of which is captured in this pithy line that Baradaran mentioned: “When Wall Street gets a cold, Harlem gets pneumonia.” And this rings true. Certainly, that was the impression that I had after reading Katherine Boo’s Behind the Beautiful Forevers, which showed how the 2008 financial crisis reverberated in the Annawadi slum that she describes in such rich ethnographic detail.

As Barahdaran says of that same crisis:

really only the top 20 percent or 30 percent of society recovered. A ton of Black families lost their homes. They never got those back. Black communities lost 53 percent of their wealth during the financial crisis. I studied the same effects during the Great Depression, which hit Black communities much more acutely, took them much longer to recover then the White community, and part of that is because the New Deal made explicitly racist recovery decisions. But also, part of that is because it’s just harder to recover from blow after blow when you don’t have those buffers.

And yet, I also felt a nagging skepticism, given what I’ve read about inequality. Don’t our major leveling periods follow major crises? Wasn’t the Age of Compression in the postwar period created by the destruction of depression and war, by the tax and fiscal policies that followed? Doesn’t inflation, the expansion of the money supply, hurt creditors and help borrowers? And didn’t the share of income at the top percent decrease following the financial crisis?

It is possible, I suppose, that all of those things were true and yet the setbacks of these crises were more profound for groups at the bottom of the economic ladder than those at the top. But I still find it hard to believe that the answer to the question of crises and inequality is so obvious, given the leveling possibilities of the past.

So, some quick research. Publishing in the Harvard Business Review, I see that Moritz Kuhn, Moritz Schularick, and Ulrike Steins (all at the University of Bonn) suggest that the 2008 financial crisis increased inequality, largely because of the varying performance of the major assets held by the middle and upper classes (they draw on data from the Historical Survey of Consumer Finances):

Our research demonstrates that wealthier and less-wealthy people own different types of assets: the middle class has a higher share of its wealth in housing, whereas the rich own more stock. An important consequence of this finding is that housing booms lead to wealth gains for leveraged middle-class households and tend to decrease wealth inequality. Stock market booms primarily boost the wealth at the top of the wealth distribution where portfolios are dominated by listed and unlisted business equity, thereby, increasing wealth inequality. The existence of these different portfolios means that wealth inequality is essentially a race between the housing market and the stock market. Over extended periods in postwar American history, that race has been the predominant driver of shifts in the U.S. distribution of wealth.

While a report from the World Bank (broken apart here by the Financial Times) suggests that inequality mostly plateaued following the crisis. But as interesting is that inequality between countries continued to decline, and that growth fell more precipitously in developed than in emerging economies.

More to chew on here when I have the time.