If you think economics is terribly complex, full of jargon and charts, dull and boring, only for professional economists-this book will change your mind. It will open your mind and make you understand how governments and their finances really work. As opposed to what we’ve all been persuaded to believe since around the 1980’s, which has been very useful to those who have governed the UK and other countries on behalf of the interests of the wealthy.
As the late distinguished, international Professor of Economics John F Weeks said in the preface to his 2014 book:
“Mainstream economists have been extraordinarily successful in indoctrinating people to believe that the workings of the economy are far too complex for any but experts (i.e. the economists themselves) to understand.”
“The mainstream of the economics profession achieves this indoctrination by misrepresenting markets, or to be blunt, systematically marketing falsehoods…….Among these reactionary absurdities is that gender and race income discrimination is an illusion, unemployment is voluntary, and sweatshops are good”.
Well, Professor Kelton’s book, a New York Times bestseller in 2020, changes all that.
A very quick summary of the book -why the obsession with “Budget Deficits”, “National Debt”, and “Pay for it”, is based on a false understanding of the reality. And allows policy choices which are very harmful to people and economies. Chapters cover Inflation (risk of), “National Debt”, International Trade, and Building a Better Economy, etc. It’s all there for us.
As she says on p31: “Once you’re able to see that the government’s ability to spend doesn”t revolve around the taxpayer dollar, the whole fiscal paradigm shifts. Or, as that journalist put it, “Once you get it, you will never see things the same way again”.
Hang on, I hear you say, this is an American book, it’s not how government money works here in the UK? Well yes, it’s written for America. But, it all works the same way in the USA, the UK, or any other country which has its own sovereign currency and central bank, such as Australia, Canada, China, Norway, or above all, Japan. (see note 1). Not the eurozone countries, because they have a shared currency, the Euro, and shared European Central Bank. OK, some details of how the U.S. does things in practice are different. But, the basis of it all is the same, as she explains. You will, I’m afraid, have to do a bit of transposing for the UK, such as read £ for $, Bank of England for Federal Reserve Bank, etc, but it gets easier as you go on. For “Uncle Sam”, read: the British Government. And, the book does directly talk about the UK in places, such as Chapter 1, (“Don’t think of a household”) p20, where Margaret Thatcher’s famous, but wrong, explanation of taxes and spending is discussed.
Here’s what someone, who has direct expert knowledge, said about the book:
Frank Newman, former Deputy Secretary of the US Treasury: “A robust, well-reasoned, and highly readable walk through many common misunderstandings.” (note, “highly readable”. The book is full of examples of things we all know and can relate to) “A must-read for anyone who wants to understand how government financing really works” (and here’s the killer) “how it interplays with economic policy”. (yes, it’s going to give you the understanding to see how government policy decisions, such as level of pay for NHS staff, could be very different from what we have come to see. For example, why pretending that there are “financial constraints” which influence NHS pay levels are, to put it kindly, misleading.)
What have British reviewers of the book said? “Kelton’s game changing book on the myths around government deficits…..reminds us that money is not limited, only our imagination of what to do with it. After you read it, you will never think of the public purse as a household economy again”. (Mariana Mazzucato, University College, London, author of Mission Economy). “The best book on rethinking economics anyone will find right now” (Professor of Political Economy Richard Murphy). Murphy, like Kelton, aims to write about economic matters in clear plain language, avoiding academic jargon as much as possible. For a UK explanation of how government finance works, here’s a good starter: https://threadreaderapp.com/user/RichardJMurphy. There are also videos on his Youtube channel, such as this one.) For other writers, see my Links page.
Stephanie Kelton born October 10, 1969) is an American economist and academic. She is a professor at Stony Brook University and a Senior Fellow at the Schwartz Center for Economic Policy Analysis at the New School for Social Research. She was formerly a professor at the University of Missouri–Kansas City. She also served as an advisor to Bernie Sanders’s 2016 presidential campaign. (Wikipedia)
Note 1: As you learn more about the modern understanding of how government finances work, what has happened in Japan’s economy over the last 20-30 years provides a very illuminating light on the themes of this book.
It would be nice if anyone, who reads this book as a result of this, would like to write to me (see contact page) and let me know how they feel about it. It may well be available free from libraries, and it’s sold by the usual sellers online or in shops (when open) and I believe for about £1 as a digital download. Not many secondhand copies available yet, perhaps because no-one wants to part with it!