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Reducing his analysis to MMT, as some here are doing, suggests that you don't know about Tooze's area of study. His magnum opus, probably one of the greatest bo

Reducing his analysis to MMT, as some here are doing, suggests that you don't know about Tooze's area of study. His magnum opus, probably one of the greatest books in modern economic history, looked at precisely these questions of govt spending being taken to the limit (in Nazi Germany). But, a bit like those who specialise in Japanese economic history, I feel like it is pretty misleading to base your argument for MMT on purely wartime measures: not only is the level of govt spending changing but the allocation of resources is changing...that is very different to a non-wartime economy where there aren't huge supply changes. After WW2, there was huge economic dislocation and inflation. But it seems very churlish to look at WW2 and say: there are no limits to spending. When: most economies in the world effectively shut down, trade shut down, there was massive destruction of supply, massive financial repression...financial repression in the US, by far the economy that was least negatively impacted, didn't end in truth until the mid-60s. The UK economy didn't recover in full until the 90s. Crowding out does occur. It isn't unusual. There is ample evidence of it occurring. It is dangerous to point out too that "there is no limit" and then fail to mention that your only sources for this claim are dictatorships or countries at war...there is a reason for this (it is often politically unpalatable to take control over production such that crowding out is prevented). The reason why there was no crowding out, to be blunt, is that these wars weren't very expensive. They provide no evidence to support the claim that: that we are nowhere close to the real limit on spending. Almost every industry right now has shortages, and the economy isn't close to full capacity because the labour participation rate is low? Rakakakakaka. I like Tooze but this is very weak stuff (it is worth pointing out though, that the last part of the previous paragraph is essentially the Fed's position...so we will likely find out who is right). It is also interesting that he didn't mention the 1920s more either...this is the ultimate "proof" that austerity makes no sense. But it is also worth pointing out that after WW1, lots of countries had the same issues after WW2. There were huge price changes in 1920 that basically felled the UK economy until the 90s (WW2 and US actions after were just the final nail in the coffin), it is quite foolish to suppose that the UK economy would have just magically recovered if the govt started spending...it was a supply-side issue, not a problem with demand (the US was the counter-point to this, the US started the decade with a relatively blank slate and this decade turned the US into a financial power competing with the UK...the UK was legacy, stuck with all the old industries that were shrinking, and struggled to retool after the war ended)...but yeah, usually every economic narrative that takes the Keynesian approach will mention 1920s UK...it is a classic (although misleading) example.

klelatti 5y ago
Not sure if it's your intention here but it sounds like you're saying Tooze only knows about fiscal policy because he's written a book on Germany in WW2. Apart from anything else he's written probably the best book on the 2008 financial crisis and the Eurozone crisis.
- hogFeast 5y ago
  Yep, I studied economic history, I have read all of his books (including his first book on statistics in early 20th century Germany). His latest book wasn't that well received, and it is very far from the best book on the 2008 financial crisis (it is far too early to say which book is the best, but Tooze framed that book in terms of the bete noires of the left at the time, Trump and Brexit, which massively takes away from the book's broader relevance...it happens, it is how publishers sell books, it is not how writers produce great ones). Deluge and Wages of Destruction are considered his best books, and Wages is clearly superior (Deluge and Crashed are really more popular history). Either way, I don't think I made any specific claims about the limits of Tooze's knowledge (I have no real idea what Tooze does or does not know). My point was simple: if you look solely at Nazi Germany fiscal policy between 1931 and 1944, it will appear very much like there are no limits to spending. He references this multiple times throughout the article. I also mentioned that the other very common place that you see this is is people who have studied Japanese economic policy in the 70/80s. If you take these periods and you want to believe that there are no limits in spending, these periods will allow you to make that argument (and it is common to see this generally: people who are experts in one period of history, often see everything through that lens...human nature). It is extremely common for people who believe in MMT or some variant of MMT to reference these periods (and again, not make any reference to other aspects of how that was possible i.e. politics). The problem with this is that this information does not generalize (and I have said specifically why this information doesn't generalize in these cases). He refers to post-WW2 as an example of there being no limit to spending but, again as I explain specifically, it is an example of the opposite. I made no claim about why that is: all I said is that Tooze's expertise is periods in which the limits to spending aren't clear, and he is referencing a period which is a the textbook example of limits to spending (post-WW2). I didn't say this but I know why he is making this argument: Tooze is left-leaning. Most economists aren't particularly familiar with the details of 1950s monetary policy (there are very few books on this subject, it isn't fashionable) but even if there were, people would still believe in MMT. The reasons why people in believe in certain things are not limited to evidence (Tooze was one of the public figures that was behind Corbyn's MMT-funded spending plans, he has taken a political stance on this). If this wasn't the case, I do suspect he would have a different interpretation of the post-WW2 period.

klelatti 5y ago

Not sure if it's your intention here but it sounds like you're saying Tooze only knows about fiscal policy because he's written a book on Germany in WW2. Apart from anything else he's written probably the best book on the 2008 financial crisis and the Eurozone crisis.

hogFeast 5y ago
Yep, I studied economic history, I have read all of his books (including his first book on statistics in early 20th century Germany). His latest book wasn't that well received, and it is very far from the best book on the 2008 financial crisis (it is far too early to say which book is the best, but Tooze framed that book in terms of the bete noires of the left at the time, Trump and Brexit, which massively takes away from the book's broader relevance...it happens, it is how publishers sell books, it is not how writers produce great ones). Deluge and Wages of Destruction are considered his best books, and Wages is clearly superior (Deluge and Crashed are really more popular history). Either way, I don't think I made any specific claims about the limits of Tooze's knowledge (I have no real idea what Tooze does or does not know). My point was simple: if you look solely at Nazi Germany fiscal policy between 1931 and 1944, it will appear very much like there are no limits to spending. He references this multiple times throughout the article. I also mentioned that the other very common place that you see this is is people who have studied Japanese economic policy in the 70/80s. If you take these periods and you want to believe that there are no limits in spending, these periods will allow you to make that argument (and it is common to see this generally: people who are experts in one period of history, often see everything through that lens...human nature). It is extremely common for people who believe in MMT or some variant of MMT to reference these periods (and again, not make any reference to other aspects of how that was possible i.e. politics). The problem with this is that this information does not generalize (and I have said specifically why this information doesn't generalize in these cases). He refers to post-WW2 as an example of there being no limit to spending but, again as I explain specifically, it is an example of the opposite. I made no claim about why that is: all I said is that Tooze's expertise is periods in which the limits to spending aren't clear, and he is referencing a period which is a the textbook example of limits to spending (post-WW2). I didn't say this but I know why he is making this argument: Tooze is left-leaning. Most economists aren't particularly familiar with the details of 1950s monetary policy (there are very few books on this subject, it isn't fashionable) but even if there were, people would still believe in MMT. The reasons why people in believe in certain things are not limited to evidence (Tooze was one of the public figures that was behind Corbyn's MMT-funded spending plans, he has taken a political stance on this). If this wasn't the case, I do suspect he would have a different interpretation of the post-WW2 period.