Market Monetarism: a support mechanism for capitalism

Ranesh Ponnuru Reihan Salam has a thoughtful piece on Conservative Reformism in which Market Monetarism “sits at the high table”:

My sense is that Mike and his allies believe that only those who see the financial crisis as an indictment of U.S. capitalism ought to be taken seriously. This view has gained credence on the center-left, and it has helped foster an intellectual resurgence among more radical critics of U.S. political economy. I suspect that this is why Mike has devoted considerable energy to arguing against the “market monetarist” interpretation of the crisis and the post-crisis malaise — he seems to recognize that if the market monetarists are right, the Great Recession is better understood, in Robert Hetzel’s words, as a reflection of monetary disorder and not market disorder.

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Whereas most conservatives have struggled to find a post-crisis narrative, market monetarism, like the supply-side thinking of the late 1970s, gives center-right thinkers a “non-zero-sum” economic narrative. If one embraces the market monetarist thesis, one needn’t maintain that the only road to recovery is to endure high unemployment as we work our way through a skills mismatch. Rather, what we need is for the central bank to keep nominal output growing at a steady rate, as this will allow entrepreneurs, investors, and workers to make decisions about the future with confidence. There are, of course, conservative reformers who reject the market monetarist thesis, but I would argue that they are in a tougher position intellectually than those who do.

HT David Levey