This short video answers the question many have asked: how can you talk about Real Capital without talking about money? Or how can you talk about money without talking about Real Capital?
The video explains how government budgeting impacts the four capitals. And visa-versa. Do, if you haven’t already, check out the explanation of the four capitals on this blog.
The main points to look for: when a government releases its budget, it is expecting to get expenditure back as taxes. These taxes come from organisations, mostly corporations, that deliver products and services using real capital.
The effects on real capital, however, are not in the budget – neither the plan nor the follow up.
There is a real risk that politicians, economists and planners are, by focusing too narrowly on state finances, inadvertently drawing down the very capital that the state relies on to deliver services to its citizens.
As Randall Wray points out in number six of his ten-point explanation of MMT,
..finance should be “functional” (to achieve the public purpose), not “sound” (to achieve some arbitrary “balance” between spending and revenues). Most importantly, monetary and fiscal policy should be formulated to achieve full employment with price stability.
I should add, policy should be formulated to achieve levels of Real Capital concomitant with the politically agreed levels of functioning of the economy at sustainable levels.
Stephen Hinton Consulting 