Modern Monetary Theory (July 12, 2020)

It’s not every day I get good news about a campaign I have been working on for decades.  My family home in Cape Breton was on the shores of the Gulf of St. Lawrence. The fossil fuel industry set its eyes on this environmentally sensitive habitat for whales and endangered leatherback turtles and healthy fisheries while I was still at Sierra Club.  First, the industry wanted near shore permits to drill for gas. That fight took years.  Then they wanted to drill for oil in the deep waters off the western coast of Newfoundland.

In this fight I developed a deep level of loathing for the two regulatory bodies – the Canada-Nova Scotia Offshore Petroleum Board (CNSOPB) and the Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB).  Created by federal-provincial accords and legislation, these bodies have a mandate to expand offshore oil and gas. They also decide who gets the permits. But ever since Stephen Harper (C-38 in 2012), with mild tweaks, Catherine McKenna (C-69 in 2019), they also assess the environmental impacts of the projects they have a mandate to promote.  The empirical problem of conflict of interest aside, my loathing comes from dealing with the CNSOPB and finding them actually dishonest.

My daughter’s summer job in 2013 was as an intern with Sierra Club in Halifax.  She asked her god-father, Farley Mowat, to become a spokesperson for the effort to stop the drilling of a deep-water oil well in the Gulf of St. Lawrence (yup, as deep and for the same stuff as the BP Deep Water Horizon in the Gulf of Mexico). The site for the proposed drilling was dubbed “Old Harry.”

Farley told the media, “The oil companies mistakenly – and I think this is wickedly sardonic – have called it Old Harry because they liked the sound of Old Harry. It has such a familiar, pleasant, uncle-y name.” Farley knew the term was used by sailors as the devil himself. He said. “They don’t realize that, what they are doing, is they are calling their company after the devil’s own domain.”

The off-shore boards have approved seismic testing in the most sensitive time of whale migration.  Whenever a fossil fuel company wanted some accommodation, they obliged. This week a coalition of groups, including my old organization, won an unprecedented victory against the CNLOPB.  The Supreme Court of Newfoundland and Labrador agreed that the CNLOPB did not have the right to extend the length of the permit for exploratory drilling for many years more at the request of the company.  The victory should also help similar efforts to extend license terms in the Arctic as well.  Score one for Farley – always on the side of the angels!

Sierra Club Article and Times-Colonist Article

As previewed in last week’s message, Bill Morneau provided his economic “snapshot” this week.  No surprises. Huge deficit. Huge debt.

So far, Greens are the only ones in Parliament suggesting really large scale changes so that we are not mired in debt forever.  As I call for us to really embrace Modern Monetary Theory, I have had a lot of questions about what that means.

What the proponents of Modern Monetary Theory argue is the same debate that has raged in Canada for years. That there is an alternative to borrowing from commercial banks and paying that billions in interest to banks. Many Canadians want to revisit the role of the Bank of Canada. Monetary policy could shift to reduce the high levels of interest-bearing debt. The counter- argument has always been that a country printing its own money is inflationary, and potentially dangerously so.  But in our current situation, we are at close to zero risk of inflation. We face a much larger risk of deflation.

The call for countries to be able to transfer assets within a domestic economy, much as a family can borrow and re-pay loans over time, is gathering strength.  The notion fits neatly among much of our ecological economics. For years we have talked about the “circular economy.” (As described here by the European Union

We can also look to making human well-being and ecological sustainability the highest goals of a society – measuring genuine progress instead of GDP.  We can imagine an economy aiming for a steady-state condition of prosperity. We can look to the “doughnut economy” described by Kate Raworth.

The current leading voice for MMT is Professor Stephanie Kelton. She argues that as long as the practice does not become inflationary, a country can print more money.  What Morneau has been doing to create needed liquidity is borrowing to buy bonds.  Kelton would say, no need. Just print more money.

It is certainly provocative, but is it wrong?  I cannot see how it is wrong as long as the central bank is carefully monitoring to ensure that if inflation becomes a risk, the brakes are applied. As I said this week in the House, humanity cannot re-write the genetic code of the COVID19 virus. Nor can we re-write the laws of physics and atmospheric chemistry that tell us we are perilously near the tipping point to unstoppable, self-accelerating global warming. We have to live within those laws.  But we can re-write the rules that govern the economy. Greens are calling for a new global evaluation along the lines of the post WWII Breton Woods Conference,

It’s about time.

Have a great Sunday wherever you are. Stay safe. Stay Well. Be kind.


PS This week in the House, I had a lot of speaking time and held two press conferences.  Find them at these links.


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