I think modern monetary theory (MMT) matters. That is not because it is perfect, because no theory is. Instead, it is because it explains something that almost no one in mainstream economics has ever properly addressed, which is what money actually is. And once you understand money, you understand power. And once you understand power, you start asking what are considered to be dangerous questions.
In that case, I need to summarise what I think to be the threefold source of MMT's power.
MMT explains money
First, and most importantly, MMT actually explains the realities of money when conventional economics pretends money is something the government is short of, meaning that, in their opinion, a government must constantly struggle to find money through taxation and borrowing from markets.
That claim is nonsense. The truth is that the government issues a state's currency. The reality is that the government creates money every single day by spending it into existence.
Tax does not, then, pay for public services. Government spending pays for public services. Tax exists in that case to prevent inflation and shape behaviour.
The mainstream of economics has deliberately flipped this cause-and-effect relationship to suit its political agenda. MMT consciously and deliberately corrects that. It puts the facts back on the table:
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Government-created money is a public tool.
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It is not a private commodity.
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In that case, we can have what we need if we have the real resources and skills to deliver it.
Once you see that, the spell of the tale of government money shortages is broken.
MMT breaks the power of finance and neoliberalism
Second, MMT breaks the power of finance and antisocial neoliberal economics. If the government is not financially constrained, meaning we can build homes, staff hospitals, and decarbonise without having to send the begging bowl to “the markets”, then the City loses its favourite weapon, which is fear:
- Fear of “the bond vigilantes.”
- Fear of the credit-rating agencies.
- Fear of the foreign currency speculators.
MMT exposes these fears as political constructions. They exist to ensure that:
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Public services are rationed.
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Wages are kept low.
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Wealth is hoarded at the top.
The only beneficiaries are financial markets and the rentier class that has captured our democracy since the 1980s. What MMT says is that they are not sovereign: we are. Imagine what happens if people believe that.
MMT lets us ask the real questions
Third, and critically, MMT lets us ask the real questions. Once you know money is not scarce, different limits come into focus:
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What is our ecological capacity?
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What skills do we have, and how do we build more?
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What do we value enough to prioritise?
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Who holds power over resources, and why?
MMT removes the fake constraint (“we can't afford it”). It leaves only the real constraint, which is the need to decide what kind of society we want to build.
This is precisely why so many in the establishment hate MMT. It is not because it is wrong. That cannot explain the venom. It is because it invites democracy back into politics and economics.
What then becomes clear is that:
- If the NHS can be funded, then refusing to fund it becomes a political choice.
- If homelessness can be ended, then failing to end it becomes a moral choice.
- If we can decarbonise, then choosing not to is a planetary crime.
- If full employment is possible, why aren't we choosing to deliver it?
MMT forces those questions, and the possibility that they can be answered, into the open. That is the power of MMT.
In summary
MMT is, in reality:
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A theory that explains money as it actually operates.
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A challenge to the ideology that has handed power to the City of London.
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A lens that allows us to ask the questions neoliberalism and its economists have worked so hard to silence.
MMT does not promise a utopia. It does something more important. It removes the excuses that sustain the dystopia we live in. And that is why MMT matters now more than ever.
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Stephanie Kelton introduced me to MMT through her book The Deficit Myth which as a non economist engineer blew my mind. It just made sense. She in turn lead me to you and you to Steve Keen. We really need to find a way to get your channel and blog mainstream. Amazing work.
Thanks
MMT gives people a better understanding of the options available to them, and the power to choose more effective economic policies.
Of course with great power comes greater responsibility.
There is a blog post being written on that theme right now
“MMT does not promise a utopia. It does something more important. It removes the excuses that sustain the dystopia we live in. And that is why MMT matters now more than ever.”
Perhaps the most important paragraph you have written on MMT.
Thanks
“It removes the excuses that sustain the dystopia we live in.” Yes indeed.
Indeed, but those who want to sustain the deficit myth – seem to love “MMT” as a monica they can caricature.
Just asking ‘where did the money come from to bail out the banks in 2008 or fund the pandemic in 2020’ would seem to demolish ‘there is no money’ straight away.
It’s simpler than that. “Where does money come from?” is enough to trigger cognitive dissonance in many.
Essential reading for every politician or political activist which is why the myopic refusal to understand it by some on the left is so frustrating.
Thanks
The myopic dystopia of The Left can be regarded as a form of “intellectual rigor mortis serfdom” because as James K. Galbraith points out there’s a big failure to recognise “Bankers don’t like budget deficits because they compete with bank loans as a source of growth.”
https://www.researchgate.net/publication/265071141_In_Defense_of_Deficits
Very true.
We need to crowdfund “The Deficit Myth” and send a copy to every MP and influencer.
I am still of the opinion that most people have never heard of Modern Monetary Theory, and even fewer have read and researched it.
Accepted
You arrange the crowdfunder. I will promote it.
You can omit Alice Macdonald MP (Norwich North). I’ve already got a copy of The Deficit Myth to send to her.
🙂
I’ve read the Deficit Myth, follow Richard’s work and, to me, MMT makes sense. I’m perplexed then that, apparently, amongst our 650 MPs none of them are promoting it. Surely not all are captured by big money and neoliberalism? I’m sure the Green MPs are aware, because their leader seems to be and he says things that are consistent with MMT, and maybe a few other left-wing MPs. Carla Denyer MP chaired a debate at the GP conference, but it included economists who dismissed it. It offers clarity and, it seems, a way out of our deep pickle, so why is it not in our political discourse?
None of the Green MPs seem to get it. The Greens are in danger by platforming the likes of Meadway and his Marxist class war. The trans issue is already difficult territory for them. This could be worse.
Thank you for the recent explainers on MMT. They have been an eye-opener for me and – judging from the number of responses the other day – are clearly touching a nerve, perhaps in the way that the “tax wealth not work” message did a year or so ago. That message had some cut-through, despite the immense opprobrium heaped upon it by the RW media. What puzzles me is that Novara, ostensibly LW, seems to be leading the charge this time. Why so conservative?
They of all people should know that the broken neo-lib record desperately needs changing, yet what do they have lined up to replace it? More of Reeves’ hopeless tweaks on the console? It’s shaming.
You lick up issues I will be addressing. Hang around for more.