Criticism of MMT tends to come from two different directions. On the one hand, there are those who deny that governments in modern monetary systems have the fiscal capacity to maintain full employment and price stability. On the other hand, there are some who accuse MMT of failing to account for the environmental consequences of full-employment policies.
The criticisms of the first type rest on the inapplicable ‘government budget constraint’ framework of neoclassical economics, which suggests that ongoing deficit expenditure will impose a cost on future generations in the form of tax, interest-rate and debt burdens, as well as potential inflation. These issues have been the focus of most previous posts. However, the criticisms of the second type, if valid, would actually give far more cause for concern.
To anyone who has spent some time reading the work of modern monetary theorists, however, it should be clear that the approach in no way precludes full consideration of environmental factors. When modern monetary theorists say that the government is only constrained by the availability of resources and political factors, the resource limits include those imposed by the need for environmental sustainability.
Not only does MMT allow for such factors to be given full weight in assessing what activities should take place and how they should be conducted, but it clearly shows that society has the capacity to make these choices even if doing so is not profitable for capitalists. Subject to resource limits, the government can always use its fiscal capacity to undertake or encourage activity that is of social benefit, irrespective of the prospective private return to capital, provided any political opposition can be overcome.
In contrast, some politicians representing the environmental movement have succumbed to the orthodox misconception of a government budget constraint. This leads them to adopt policy positions that undermine their social and environmental aims (such as a misguided commitment to balancing the budget over the business cycle). Making this concession to “fiscal conservatives” allows the costs of policies to be presented in the public debate as financial rather than what they really are – resource based. This mystifies the nature of the policy challenges and gives political opponents leverage they would not possess in a transparent public debate.
Needless to say, MMT does not make the choices over resource usage and the related conflicts any easier to resolve. What it does do is put these questions front and center, where they should be, and frees us conceptually from the many mystifications of orthodox economics, not least of which is the superstition that our economic hardships can be due to a mysterious shortage of what the government can always freely create – its own fiat money.
When it comes to the political choices to be made, there is obviously plenty of room for disagreement. MMT does not dictate these choices. My own view – which is in no necessary relation to the views of leading MMT economists – is that we will need to become less obsessed with the acquisition of material possessions if we are ever going to avert the environmental calamity we seem to be inviting. More specifically, I think we as the consumers in capitalist societies should stop pursuing the accumulation of material possessions for its own sake, and the capitalists amongst us should stop pursuing the accumulation of capital for its own sake. But we cannot do that in aggregate without overturning the capitalist system itself.
It goes without saying that many are hostile to such an idea, and that includes many, perhaps most, MMT proponents. For that reason, I want to stress that the discussion that follows is not representative of MMT. It is my own perspective of where we should ultimately be trying to head as a society.
I’m sure everybody has their own pet notion of the ideal society. Mine goes something like this. The means of production should be owned in common and production planned to ensure everyone in the world is well fed, housed, educated, and supplied with appropriate care (including healthcare, childcare, old-aged care, etc.) as well as public communications, information, and recreational facilities. Environmental sustainability should be a central consideration in how production, transportation, and consumption items are designed. As much as possible, and increasingly over time, the menial aspects of the production processes involved in meeting these basic physical needs should be automated, freeing up individuals to focus on vocations of their own choosing, whether physical, nature-oriented, sporting, intellectual, scientific, artistic, social, spiritual, or whatever, as long as the chosen activities don’t infringe on the liberty of others or cause unacceptable harm to the environment. These vocations would be reward in themselves and not require material compensation. For instance, in this ideal society, scientists would work for the pleasure of the job and receive the same basic amenities as everybody else. Their minimum labor-time commitment could, however, be met through their research activities. Similarly, the recordings of musicians or the books of authors would be made freely available (e.g. though free internet download), but the facilities for producing the recordings or books would be made available free of charge to suitably qualified individuals (perhaps on the basis of proficiency, popularity of output, or some combination). There would also be facilities provided for dabblers in the various vocations, but not necessarily to the extent made available to the experts in the respective fields where cost in terms of resources remained a constraint. Even so, over time, technological improvements would tend to increase availability of desired facilities.
Of course, short of the general community undergoing something akin to a great spiritual awakening, it is hard to see how we could get from where we are now to anything remotely resembling such a society any time soon. In countries such as the US, for instance, it seems hard to imagine any move away from the private ownership of capital and the current system of property rights in the foreseeable future. For that matter, it seems hard to see how even a modest shift towards social democracy is likely to occur, given the mindset of the general community and the tenor of the public debate. Further shifts to the right seem at least as likely as shifts to the left.
Under capitalist conditions, if the authorities decide to give priority to environmental concerns, they would largely do so with some combination of new laws, quasi-market mechanisms, taxes, and subsidies. MMT shows how fiat money can facilitate such policies under capitalism, if that is what we really want. But it also seems to give some indication of how fiat money could facilitate a move toward whatever type of society we wish to create. Referring back to my own political preference, I think MMT shows how a gradual shift from private production for profit to social production for human need could be facilitated by fiat money.
That does not mean fiat money would play a role in the highest form of society. The eventual aim of such a society may be to do away with money altogether. In that case, fiat money would turn out just to be a stepping stone. There would be no necessary role for money in a society in which all needs were met in exchange for a minimal and declining labor-time commitment and in which the rest of the time individuals were free to live their lives in ways they found most fulfilling rather than doing jobs they often don’t like in order to produce meaningless “stuff”. There would be no need to save (financially) in such a society and no grounds for charging interest. In short, no need for money.
But all this appears rather remote here on planet earth. Right now, we seem to care more about accumulating meaningless stuff than having free and fulfilling lives. There is nothing in MMT that compels that choice. It is us making that choice.