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Well, today, I'm speaking to Fadhel Kaboub, who's an Associate Professor of Economics at Denison University in the United States. He's also the President of the Global Institute of Sustainable Prosperity, which is a think tank that does work in developing economies. His research interests are Monetary Economics and Development Economics with a particular emphasis on full employment and how developing economies achieve full employment.

Now Fadhel, as MMT's been gaining prominence, I noticed a lot of people are saying that it really only applies to the United States because of its reserve currency status. And I know you've done a lot of work on defining and scoping out the limits of currency sovereignty and what the consequences of those limits are for less advanced economies.

So what do you say about that proposition that it's USA only?

Well MMT has been very clear that we have a spectrum of monetary sovereignty and some countries have a very high degree of monetary sovereignty, like the US, Japan, Canada, Australia and some countries have very little or no monetary sovereignty like Ecuador that completely dollarised.

Most developing countries are sort of in the middle and what determines the degree of monetary sovereignty or the lack thereof is the fact that a country issues its own currency, taxes its population in the same national currency, issues bonds or issues debts only denominated in its national currency and that's where developing countries lose monetary sovereignty and follows a flexible exchange rate regime.

So most developing countries have to fix their exchange rate to the dollar or the euro for reasons that will go into in a minute. So if you're a developing country, it's very likely that you're further down in that spectrum with weaker degrees of monetary sovereignty. And when you zoom in and try to identify what determines that weak level of monetary sovereignty, it has to do with 3 basic categories - 1 is lack of food sovereignty, 2- lack of energy sovereignty and 3 - a structural deficiency in the way those countries try to industrialise which produces a situation whereby the value-added content of their exports is low and the value-added content of their import is high.

So those 3 structural deficiencies is what keeps developing countries trapped into that lower degree of monetary sovereignty, which suffocates their spending capacity and emphasises the inflation constraint which MMT always emphasises. So 2 observations here - one is that the only way to address that structural deficiency is to address it at the roots and at the roots means you have to develop sustainable agricultural policies in order to plug that hole in your external constraint that comes from the lack of food production domestically.

Number 2, you have to invest in renewable energy domestically so that you stop importing fossil fuels and applying that additional pressure on your exchange rate. Number 3, you have to apply what the UN has called the big push in terms of development, which is investing in infrastructure, education, technical skills, research and development over a long and sustained period so that you actually develop the industries and the workforce that can produce higher value-dded content as opposed to lower value-added content - a kind of assembly line for the global economy.

So those are the solutions from an MMT perspective. The problem is that the standard solutions that are applied by governments around the world and emphasised by the World Bank and the IMF and mainstream Economics tend to be solutions that appear like solutions.

I call them bandaids, but they're really traps in the long term.

So I'm going to mention briefly 5 of them and leave you with these thoughts. So tourism - you know, bring a lot of tourists. They bring foreign currency. They'll help the country generate resources to buy capital, equipment and food and energy to fuel economic growth. The problem is tourism means you have to feed the tourists. So you end up importing even more food. You have to transport them - heat and cool at the hotel - so you have to import even more energy. And when you do that, you're also competing with 120 other beautiful countries that try to attract tourism. So you're racing to the bottom and you end up with government subsidising the tourism industry, and that becomes the long term trap. Yes, it does create some jobs for hotels and restaurants and so on. But in the long term, it's a structural trap.

Number 2 - remittances from your workers that you're sending abroad. Remittances tend to go away during bad economic times in Europe, especially in the US and Australia. Remittances means that you have to fuel the brain drain. You have to send the best and the brightest to the western world, to the Global North, which means all the investment in education and health and infrastructure that you put up front is leaking out of your economy. It's just not sustainable, especially with very aggressive anti-immigration policies in the Global North, it's no longer a solution that you can rely on.

Number 3 - export oriented growth. It turns out that if your strategy is assembly line manufacturing, then you're guaranteeing that you're importing high value-added content, intermediate goods and capital and energy to fuel your economy. And you're exporting low value-added content. Again, you're competing with another 120 developing countries or so, racing to the bottom, subsidising workers' pensions, subsidising energy, subsidising all kinds of resources,

And number 4 - foreign direct investment, which is the next cousin of export oriented growth. Same thing, you're racing to the bottom to attract outsourced jobs from the Global North and you're subsidising and specialising in the assembly line type of manufacturing.

Number 5 - deregulating your financial markets, setting up a mini-Wall Street, hoping to attract foreign capital to your financial market. Again, you're trying to cater to speculators by raising your interest rates, deregulating your financial markets, lowering taxes on foreign capital, removing capital controls. It's an open invitation to speculators. You get hot money immediately. Your market goes up for a little bit and then they're going to speculate against you. You have a stock market crash, you crash your economy. Typically takes you another 10 years to recover from just that shock.

So these are the standard solutions and MMT says these are traps and the structural solutions that we actually need to focus on investing in food sovereignty, energy sovereignty and long term sustained economic development based on value-added content, research and development, education, skills, health, broadband infrastructure - all the things that actually strengthen your economy internally. And you can do it gradually by shifting away from subsidising all the bad things and supporting the solutions that will actually strengthen your economy. So this is a brief kind of outline what the MMT lens allows us to see and in terms of economic development in the Global South.

That's excellent and I'm sure that's given students a lot of well - will raise that curiosity to steer your work even further. So thanks very much for that. I appreciate that. (Thank you.)

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