Inspired by discussions our Capital Vol. I Chapter 3 discussions on money I decided to finally set down and give this article by Michael Roberts, The Modern Monetary Trick a read. Especially since we had discussion contrasting Marx’s theory of money with that of MMT. I thought I’d share the article here, and give a brief rundown of Robert’s main points as I understood them.
I am no expert in money, and I’m still developing my own understanding. This is just another article that I’m in dialogue with, but I thought I’d share it as MMT explicitly came up in our comments on Capital.
Article:
My comments below:
Roberts provides a Marxist critique of MMT and its exponents. The most important part of Robert’s critique is that MMT has no theory of value and hence it is incorrect in arguing that a state can run up a deficit without real consequences under any conditions.
Roberts does admit that certain MMT exponents mention real limitations to money-printing, but do not appear to focus on them sufficiently. There is also a comparison of MMT and Marxist understanding of taxes, as well as a brief discussion toward the end about the American Dollar as the international reserve currency.
MMT has traction among the left because there is a desire for a theory against balanced budgets and austerity. MMT lends support to the fiscal spending funded by central bank money without fear of budget deficits and debt resulting in a crisis.
MMT adds to the Keynesian idea of government boosting demand that a sovereign government cannot run out of its own currency. The argument is that since a state has a monopoly over fixing its unit of account it can print as much money as needed and boost demand. And as long as there is no full employment (no fully utilized resources), this demanded can be boosted.
Michael Roberts critiques MMT and its theorists in this paper in three parts:
- On a theoretical level: Is MMT the correct theory for how money is created?
- On a practical level: Is there no need to worry about deficit spending?
- On a goal level: What problems does MMT hope to solve?
For Roberts, MMT …
- … is a theory to justify unrestricted government spending to sustain or restore unemployment. But even the job guarantee that some MMT theorists push have jobs below the minimum wage. Even more, there is no push to change the social structure of capitalism. Hence, MMT obscures the social relations of labor exploitation for profit.
- … doesn’t sufficiently analyze the capitalist sector - the lens is reduced to “state” vs “non-state” actors.
- … doesn’t analyze the contradictions in the capitalist mode of production and hence the causes of crises. Their analysis is similar to those of orthodox Keynesians. For Roberts, the crises are caused by the profitability capital accumulation, not by lack of demand or even austerity in public spending as claimed by MMT and/or Keynesianism.
- … is a US-centric theory in practice. It offers no practical policy for nations that lack sovereignty (either formal or informal)
- …doesn’t have a theory of value. This is Robert’s most important criticism. There isn’t enough of an emphasis on the real productivity capacity of an economy, and the limitations that it brings (though some MMT advocates mention this). Roberts claims that since value is objective, it is not a product of the law or up to the dictates of the state. MMT ignores value and states that since the state can set the standard of price it essentially can also set value. Any increase in money must be backed by productive capacity, i.e. real value, else there will be consequences to deficits.
- MMT is the iteration of using “tricks of circulation” to save Capitalism, similar to views espoused by Proudhon which Marx critiqued in Capital and the Gundrisse.
The main thing to understand about ALL modern monetary theories is that all monetary systems practically borrow from the future based on the idea that initial investments into a technology/product/service are the most expensive and future developments lower the cost of production.
This idea is patently false, because it assumes that the economic inputs into those production systems themselves are:
Systems built on the Labor Theory of Value also typical fall into this trap as the underlying labor cost changes due to technological advanced tended to decrease in the last several centuries. The practical issue here is that most monetary systems and theories are built from small example bases of limited experiences (especially in the post WW2 West) and then supposed to work in the abstract. Having a theory of value is not actually important in a capitalist society. Having a theory of value is actually detrimental to the economics of a capitalist society because it binds arbitrage, and it prevents capitalist societies from uneven extraction and development (also not inherently a bad thing). Most argumentation against theories of value doesn’t come from a scientific place to be honest. Speculative value isn’t inherently wrong or bad either it just has different side effects. Labor theory says that changes in labor cost change the value of a commodity, speculative theory says that changes in attitudes or needs for a commodity change its value. Labor theory of value cannot fully encompass waste, and when it creates waste it creates waste because of the attitudes/needs of the people in the economy (e.g. we make expensive widgets no one buys because we need jobs – remember the Soviet Union needed to create make work jobs because unemployment was illegal and just giving people money did not sit well with societal values the way they were. Arguably state capitalist societies would do better with speculative value and just giving people money and letting them decide how to spend their time – given good communal opportunities – rather than creating make work jobs. The issue is that labor theory of value requires the bootstrap of a developed industrial economy, every single person’s basic needs met, a socialist society that isn’t driven through individual envy, and voluntary vocational system to work properly without falling into contradiction. That’s a tall order, the social aspects of which, need generations to be built without resorting to punitive legalism.).
MMT itself falls into the above traps, but I think the interpretation here is incorrect. MMT is not money printer go brrr. MMT says that money printer is going brr and the government refuses to change who can access the print tray. The vast majority of money in the US is created not by the federal government but by the constituent banks of the federal reserve. This is quite literally the apex definition of “private capital” a group of unelected, unaccountable organizations headed by defacto oligarchs that effectively can decide for what purpose society creates money. MMT in practice has the same guard rails and pitfalls as the existing system. MMT simply says because monetary creation is happening in the private sector the government is de facto backing that creation through various programs, new legislation, and other assurances. In essence the government is creating this money by proxy anyway and it should take an active role in money creation for the purposes of social benefit.
I think the biggest criticism of MMT is that it cannot work in an under developed country, and arguably it cannot work outside the specific parameters of the United States and the petro dollar, that is absolutely correct.
This also absolutely correct but it is not a bad thing. The reality to “building” socialism is that societies must keep advancing, MMT despite being riddled with contradictions, overly specific to the US empire, and ultimately a rhetorical accounting trick does seek to create an evolution of spending on public good rather than a devolution of the US monetary system where both the federal government and the constituent banks of the fed are simply being exchanges where public money is funneled into private coffers.
I think it’s really important to separate the theoretical complains from the practical purposes here. In order to align systems without destroying them you have to make changes in steps. For a Marxist perspective, MMT is simply a step. So ultimately from a Marxist perspective what is the use of MMT?
If you boil it down all Marxist critiques of MMT are “it’s not communism”, which is true on its face. Ultimately neither was any state capitalism under Soviet like systems and neither is the current Chinese economic system. We can argue about the “intent” of various MMT theorists if we want to put this discussion into a China-style frame (e.g. we intend to build communism post capitalist development), but that’s putting the cart before the horse.