A Marxist viewpoint on Krugman v. Keen (and MMT)

It's really an examination of MMT from a Marxist perspective. The author incorrectly seems to think that Steve Keen is MMT.

Read it at Michael Roberts Blog | blogging from a marxist economist

Paul Krugman, Steve Keen and the mysticism of Keynesian economics

by Michael Roberts
(h/t Clonal Antibody via email)

But the Marxist theory of money makes an important distinction from the MMT guys.  Capitalism is a monetary economy.  Capitalists start with money capital to invest in production and commodity capital, which in turn, through the expending of labor power, eventually delivers new value that is realised in more money capital.  Thus the demand for money capital drives the demand for credit.  Banks create money or credit as part of this process of capitalist accumulation, not as something that makes finance capital separate from capitalist production.

I would not say that there is an enormous gap here. It is an established fact that investment has been and remains the primary use of credit in capitalist economies and that interest rates are the cost of obtaining capital through acquiring debt. Most economists would agree with this, I believe, including MMT economists.

And they would also point out that consumer credit was virtually unknown in the day of Marx, other than for the wealthy and powerful. Since the introduction of the credit card and widespread home ownership made government policy, credit extended to workers rather than the ownership class has soared. So when Marx was writing industrial capital was paramount, whereas now finance capital is becoming dominant, with the financial sector responsible for a growing share of GDP. Michael Hudson has observed that Marx never expected that industrial capital would be challenged by finance capital. This is a new phenomenon that is characteristic of a stage of capitalism that Marx did not anticipate, since "capitalism" for him meant industrial capitalism. Financial capital served industrial capital at that time. This is no longer the case as finance capital becomes an ever bigger player.

But according to Roberts, the largest divergence between MMT-PKE and Marxism is that the former focuses on Minskian financial instability and Keynesian "animal spirits," which he sees as entangled in the mysticism of expectations, i.e., subjective,  whereas the latter is based on falling rate of profits, which is objective.

On the other hand, Wynne Godley was able to accurately predict the coming crisis based on his three sector model, which finds antecedents in the work of Keynes, Kalecki, Kaldor and Robinson on prices, wages, profit and capital accumulation. Godley attempted to "objectify" the Keynesian narrative in stock-flow consistent modeling based on accounting principles and national accounting identities in developing a fresh approach to macroeconomic modeling.

So there seems to be more significant agreement on monetary economics between MMT and Marxism that difference in that they both agree that mainstream economists have this entirely wrong.