There has been discussion in the economic blogosphere recently, from a left perspective, about the merits or otherwise of employing an understanding of Modern Monetary Theory (MMT) in debates over policy and efforts to transform the economic system. One interesting post By Dan of Pruning Shears (h/t Tom Hickey) suggests that MMT might be a “dicey bet for liberals”. In reading this and similar arguments presented elsewhere, I find myself agreeing on some (though certainly not all) points, but differing in the conclusion to be drawn from them.
It was suggested in the previous post that the notion of ‘value of the currency’ adopted in Modern Monetary Theory (MMT) seems compatible with Marx’s theoretical framework, provided it is acceptable in that framework to consider a state currency, and not only gold or some other commodity, as “true” money. As was explained in the post, currency value in MMT can be defined as the amount of labor time a worker must perform in order to obtain a unit of the currency. An advantage of this definition, if applied in Marx’s framework, is that it offers an explanation for the value of fiat currency that can be expressed in terms of socially necessary labor time.
In Marx’s theory, formulated in terms of the gold standard of his day, the value of commodity money is taken to be the amount of simple socially necessary labor required to produce gold. This treatment of the value of commodity money is consistent with Marx’s treatment of commodity value in general, which always represents amounts of socially necessary labor time. Since the value of the currency under a gold standard depends not only on the labor time required to produce gold but the rate at which gold is exchanged for currency, the question arises as to whether it is gold that is actually “real money” in such a system, or, rather, state currency, issued and exchanged at a fixed rate for gold, that is real money. If it is gold that is real money, Marx’s theory would seem to suggest that there is no value underlying fiat currency, since fiat currency takes zero (or negligible) labor time to produce. If, instead, state currency can be real money in Marx’s framework, then fiat currency can be conceived as having value in much the same way as currency under the gold standard. In either system, the currency is produced with zero (or negligible) labor, but obtaining a unit of the currency requires a definite amount of socially necessary labor time to be performed by non-government. From non-government’s perspective, it is as if that amount of labor is required to “produce” a unit of the currency. There is no suggestion, here, that this was Marx’s view, or that there is textual evidence for it. But it is suggested that taking this interpretation enables Marx’s notion of the value of money as an amount of socially necessary labor to be extended to fiat money.