In reaction to MMT statements that government spending must occur before taxes can be paid, it is sometimes noted that a household could pay taxes by borrowing from a bank that subsequently obtains reserves from the central bank. Whether this is true from inception of a modern money system will depend on the terms set down by the central bank in advancing reserves to banks. But supposing the terms are permissive, would it change anything of macroeconomic significance? Let’s take a brief look.
This post concerns ten recent Marxist claims about MMT and one about Kalecki (a forerunner, in certain respects, of MMT). Some Marxists claim that:
- MMT fixates on the monetary, ignoring the real.
- MMT ignores social structure in favor of tweaks of the monetary system.
- MMT is incompatible with Marx on money.
- MMT falsely claims that fiat money changes the role and nature of money.
- MMT ignores the value of money.
- MMT-informed policy would destroy the value of money.
- MMT-informed policy would be inflationary.
- MMT-informed government spending would crowd out private investment.
- MMT supports a preservation of capitalism and opposes socialism.
- Government spending fails to stimulate private investment and employment.
- Kalecki is confused on causation between profits and capitalist investment.
This is a stylized list of claims that have appeared in various posts and articles written by Marxists. Claims (6) to (8) have also been made by non-Marxists. The chief motive for Marxist criticism seems to be a perception that MMT, in itself, somehow favors capitalism over socialism (claim 9), and so threatens to misdirect political energies on the left. There may also be a perception that MMT is incompatible with Marx and so poses a theoretical challenge to Marxism. These are misperceptions, in my view, for reasons to be explained.