I want to stress that because people often do not realise it. And more broadly, both MMT and Marxism offer a challenge to the aggressive capitalism of the last four decades.
However, there are crucial differences between us, which Nicolás and I brought out in our paper. They also go back a long time. The most fundamental difference has to do with what money is, and that is not a minor issue. People might think it is a bunch of academics disagreeing about ancient history or abstract ideas. Far from it. The bottom line is this: MMT argues, in the line of previous chartalist theories, that money is created outside the market, that it is the creation of the state, of some sort of a social authority. And, therefore, money in in the power of that authority. In contrast, Marxism argues that money is the creation of the market: it is an unplanned and unintended outcome of spontaneous market interactions. Money emerges when commodities interact, whether you like it or not.
Of course, this is not what MMT says at all. According to MMT, state money has been the dominant financial economic institution for thousands of years. A sovereign has the ability to set and issue the unit of account and ensures demand for it by those who use it by accepting only its currency in satisfaction of financial obligations it imposes, chiefly taxation, but also tariffs, fees and fines. In so doing, the sovereign exerts a monopoly on the currency as issuer. Demand creation for the currency through taxation constitutes a sufficient condition for a state currency to be accepted in the market to transfer privately owned goods to public use. It is, however, a necessary condition for a state to be fully sovereign, which is why those who oppose state power oppose chartal money. If a state has to obtain that which is necessary to transact rather than create it, e.g., under a metals standard, then the state is subject to the dynamics of a monetary system it doesn't control. This limits the fiscal power of the state.
See also
Another take by a Marxist involving MMT.
Magpie's Asymmetric Warfare
Bill Mitchell’s Uphill Battle (Updated).
Bill Mitchell’s Uphill Battle (Updated).
12 comments:
Of course, this is not what MMT says at all.
Q.E.D.
"Everybody has long known that the state can create money to finance expenditure, and that can happen without necessarily leading to inflation"...etcetera..."MMT can hardly explain that since it is a theory which is supposed to hold at any time. "
MMT economists are very careful to point out that most of what they claim applies when there is a government that issues its own non-convertible currency and is able to impose taxes in that currency. Yes MMT says that applies when those conditions are met- but that is not 'any time'.
"This is important: for us money is something specific to capitalism, while for MMT it is not." Money has been around a lot longer than capitalism.
"Taxation is very important because it is how real resources are obtained." No- the government spends money to obtain real resources. Taxes create a demand for that money.
"If you do not have a theory of how to increase real resources, but merely to redistribute the few existing ones that developing countries have, that is not enough." Yeah, they are right that MMT does not explain how to make countries with very few resources into rich countries. Does anyone?
Well I started reading that article till I got to the bit that said "“Second, and more crucially, the policies adopted have driven interest rates down to zero and there are negative consequences to that, which MMT ignores. But they cannot be ignored – we are living through them!”
Actually MMT explicitly advocates a permanent zero rate on govt liabilities (as did Milton Friedman). At that point I gave up reading the article. I'm not interested in Marxists who drone on about something they are not cluded up about.
Yeah, they are right that MMT does not explain how to make countries with very few resources into rich countries. Does anyone?
Actually, some MMT economists and allies like Michael Hudson advise developing countries on how to to use the fiscal space they have available and how to expand that space if they are not sovereign in their currencies.
Fadhel Kaboub (Dennison University) is very involved in this, for example. See Modern Monetary Theory: A Tool for the Global South?
Well step1 would have to be a head shot for all their USD zombies… see where it goes from there…
Speaking of zombies...
I watched this week the 1964 classic "The Last Man on Earth," starring Vincent Price. It's one of them post-apocalyptic stories with lots of zombies. The newer version is "I legend" which stars Will Smith.
I liked the film and thought that this was one of Price's best acting performances (nice to see him in a role where he is not the villain). But what struck me was how attractive the female zombies looked. Then I realised that the movie was shot in Italy so all those sexy female zombies were Italian women :)
Very interesting discussion but irrelevant. Marxism and MMT are two totally different worlds. The former tries to explain capitalism’s operation and internal contradictions and why it is doomed to collapse motivated by normative values. While the latter looks at the operation of a particular type of capitalism, monetary sovereign, it is value free and asserts that the state through fiscal policy and JG has the power to simultaneously target full employment and price stability. As far as the origin of money is concerned is not central for policy making, although interesting from an academic perspective.
Money is a unit of account, not a thing.
All issues stem from that.
“ Money is a unit of account, not a thing. ”
They are making a very common cognitive error Neil…
https://psychology.wikia.org/wiki/Reification_(fallacy)
Competent teachers should be immediately correcting them on this and very publicly…. Harshly…
"Competent teachers should be immediately correcting them on this and very publicly…. Harshly…"
Is there anyone under 30 years of age who cares about Marxism? Every time I hear the damn word I have visions of those dreary yellow sickle and hammer symbols emblazoned on a red background.
As for the "competent teachers," they need to do a better job of teaching math to students.
Damn. Kids graduate from high school and they still don't freakin' know that the opposite of an exponential is a logarithm (opp. of a logarithm is an exponential). How scary is that!
Opposite = Inverse in math world?
https://www.mathsisfun.com/numbers/inverse.html
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