Modern Monetary Theory (MMT) is sometimes perceived as left wing or, in some way, specifically suited to the left. MMT in itself, however, is neither left nor right wing. It is basically silent on political matters. The only sense in which MMT is helpful to the left is in the same way as it is helpful to all currently alternative perspectives. It indicates that social possibilities are open and that there is more than one alternative. This may be inconvenient for defenders of the status quo, but it does not mean that MMT is of any particular assistance to the left other than to make clear that its preferred political choices are in the mix along with all other social possibilities.
For example, in MMT there is no default presumption in favor of markets. Rather, the choice between market and non-market provision, as with the choice between public and private sector activity, is regarded as a social choice, to be arrived at through the political process. This is different from neoclassical economics, which presumes that market provision is best except in specific instances in which it can be shown otherwise. Leaving out this presumption does not privilege one mode of social provisioning over another. It simply enables a level playing field.
An indication that the MMT framework does not privilege any particular political stance can perhaps be found in the resistance to it from sections of both the Marxist and liberal left.
The Marxist left sometimes resists MMT based on a perception that the theory suggests managed capitalism can be made sustainable. Actually, it is not clear at all that MMT suggests managed capitalism can be made sustainable. The answer to this question rests crucially on whether Marx’s ‘law of the tendential fall in the rate of profit’ is, or is not, operative. If Marx’s ‘law’ holds, managed capitalism in which government succeeds in averting crises will result in a falling rate of profit. At some point, the rate of profit will fall below the minimum level still sufficient to entice capitalist investment. Once this point is reached, there are two basic policy alternatives. One alternative is to permit a crisis. This will result in a collapse in capital values, revive the rate of profit, and restore a necessary condition for capitalist investment. The other alternative is for government to avert crisis by maintaining strong demand and levels of activity. An understanding of MMT makes clear that a currency-issuing government can always maintain demand as necessary to sustain strong levels of activity. But, with the rate of profit below the level necessary to entice capitalist investment, it will be necessary to organize progressively more production along not-for-profit lines. Rather than enabling managed capitalism to be preserved indefinitely, the first policy approach results in a crisis-ridden capitalism, while the second approach ultimately entails a transition to socialism.
From a Marxist perspective, then, the implications of MMT depend critically on the theoretical status of Marx’s profit rate tendency. Under a temporal single-system interpretation (TSSI) of Marx’s theory of value, the law holds. Under other interpretations, it does not. If Marx’s profit-rate law is thought to hold, an implication would be that sovereign currency offers a path to socialism, but not a means for preserving crisis-free capitalism. Of course, pursuing such a path to socialism would require a mounting of sustained grassroots pressure to that effect before government could be compelled to follow it.
For those who reject Marx’s profit rate law, whether for Marxist or non-Marxist reasons, the picture will be somewhat modified. There will still be a potential, latent in sovereign currency, for transitioning to socialism. But, equally, in the absence of a tendency for the rate of profit to fall, there would be no technical barrier to preserving crisis-free capitalism.
The liberal left sometimes resists MMT because of its implication that taxes do not (and logically cannot) finance the spending of a currency-issuing government. Once this implication is understood, it becomes clear that the reason for imposing higher taxes on the wealthy or cutting military expenditure cannot legitimately be financial “affordability”. Rather, it becomes necessary to mount more rational arguments for steeply progressive taxation and winding back of military expenditure. There are, of course, numerous rational arguments for both policy positions.
If anything, the only people with any power who currently appear to have embraced elements of MMT knowledge are in the establishment, and largely on the right. In the US, politicians on the right have used knowledge of the implications of currency sovereignty to expand the military and cut taxes on the wealthy, while failing to comprehend (or, perhaps, pretending not to comprehend) the fiscal capacity of a currency-issuing government when it comes to social security, health care, and other social expenditures. They understand the realities of currency sovereignty when it suits them. In Europe, this schizophrenic understanding is even more pronounced. The European Central Bank (ECB) provides financial assistance to member governments (and hence the banks) on the proviso that austerity is unleashed on general communities to “pay” for the assistance. The elites presumably understand that, as the currency issuer, the ECB could provide such assistance without attaching austerity conditions, but pretend not to understand the options available so as to stymie job creation, wage growth, education, pensions, and other features of the welfare state.
In itself, MMT does not privilege one political perspective over another. Even so, developing an understanding of its basic principles would be empowering for the broader community, including for the left. Once we come to understand the possibilities (and limitations) inherent in a sovereign currency system, we will be in a position to determine our preferred course and attempt, through collective action, to overcome the daunting political obstacles in our way. Whether that is a leftward, centrist or rightward course, it will at least be a self-determined one, and one that is actively chosen rather than passively accepted as the inevitable consequence of impersonal forces permitting no alternative.
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MMT is Politically Open and Applicable to Both Capitalism and Socialism
Modern Monetary Theory is Relevant to More than Just Capitalism
MMT and Capitalism from a Marxist Standpoint
