Reform or Revolution, MMT or Marx

Marxists often point out that whereas Keynesian economists of all persuasions tend to advocate reformist policies to stabilize and manage capitalism, Marxists call for an end to the capitalist system itself. Reflecting on this specifically in relation to modern monetary theory (MMT), it occurs to me that taking a position on reform versus revolution is actually a separate question from that of accepting the MMT understanding of currency sovereignty, its possibilities and implications. For this reason, I think there is an analytical compatibility between MMT and Marxism (or for that matter between MMT and Post Keynesianism or Sraffianism) that is separate from the political position a person adopts.

One implication of MMT, in my view, is that currency sovereignty, in principle, enables the logic of capital to be confined within whatever limits society deems appropriate. The reason is simply that a sovereign currency issuer, who faces no financial constraint, only resource and political constraints, need not spend on the basis of private profit considerations, nor be dictated to by private markets. This makes a mixed economy, in which some activity is for private profit and some is not, potentially sustainable. Equally, it makes the complete elimination of production for private profit potentially sustainable.

Consider what is involved whenever it becomes necessary for the government to deficit spend to stabilize effective demand under capitalism. On the basis of private profit and the logic of capital, the real productive activity that is initiated by the deficit spending would not actually have occurred. However, once it does occur, it adds, by accounting identity, to realized aggregate profit for the period (see this post). The apparent intention of many Keynesians is in this way to restore profitability so that capitalists will once again be prepared to undertake private investment activity.

Although, from a Marxist perspective, the apparent intention and actual effect of the policy is undesirable – the preservation of the capitalist system – it remains the case that the policy action itself runs counter to the logic of capital and the dictates of private profit. As long as there is a desire (at least among the elites) to maintain a role for the profit motive, it will be necessary for profitability to be propped up in this way. The Keynesian, like the Marxist, recognizes that capitalism is inherently flawed and that left to its own devices it cannot stand. It is only by overriding its internal logic, whenever necessary, through the implementation of deficit spending not dictated by the profit motive that the system can be preserved for the benefit of capitalists, and most Keynesians apparently choose to support policies to prop up the system in this way.

MMT indicates that in those situations where it is deemed desirable to override the logic of capital, sovereign currency-issuing governments have more policy freedom than other governments. Yet, although fiscal policy can be used in the way advocated by many Keynesians – i.e. merely as a means of preserving what is, from a Marxist perspective, an undesirable system – it is equally clear that fiscal policy need not be used in this way. It could instead be used to initiate economic activity along lines altogether different, for instance through the public provision of free goods and services, or for that matter the complete elimination of wage labor. The fact such alternative social systems are not advocated or openly countenanced by modern monetary theorists means that such policy or systemic proposals are not ‘MMT’ – since, as we have learned in recent months, MMT comes with a particular suite of reformist policy prescriptions – but, nonetheless, an understanding of MMT makes clear the potential sustainability of such social alternatives.

It seems to me, then, that Marxism is compatible with the understanding of currency sovereignty that is provided by MMT. The differences in perspective are in what to do with that understanding when it comes to policy and/or choice of social system. On the latter question, I am very much in the camp of those who wish to overturn capitalism. However, the insights of MMT seem invaluable, because they make clear possibilities not only within capitalism but beyond it if and when we wish to take that step.

 
Related Posts

I have begun to consider the way in which currency sovereignty may open up paths to a post-capitalist society in the following short series of posts:

Fiat Money is Logically Prior to Capital

(NB. This first post was already linked to above in relation to the meaning of the ‘logic of capital’.)

Money and Paths to a Post-Capitalist Society

More on Money and Social Possibilities

MMT is NOT a Theory of State Capitalism (!)

(NB. The title of this fourth post is perhaps misguided, since MMT may actually be best understood as a theory of state capitalism, but this is immaterial to the argument presented in the body of the post.)

Getting From Here to There

Fiat Money Socialism vs Lower Form Communism

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22 thoughts on “Reform or Revolution, MMT or Marx

  1. Interesting post. I am interested in the relationship between Left Keynesianism and Marxism, and it seems that both schools can utilize the insights of MMT. Any books that you could recommend? Great blog by the way.

  2. I have to say that I am never quite sure what exactly Marxists mean when they talk about the “capitalist system”, so I really don’t know what it does or doesn’t mean to “end it” or what it would or wouldn’t mean to “preserve it.” There are hundreds of institutions related to the production, distribution, exchange and enjoyment of wealth in the contemporary world. How many of these are essential to what Marxists mean by “capitalism”? How many would have to change before they said we were no longer “preserving capitalism?”

  3. Peter,

    “Reflecting on this specifically in relation to modern monetary theory (MMT), it occurs to me that taking a position on reform versus revolution is actually a separate question from that of accepting the MMT understanding of currency sovereignty, its possibilities and implications. For this reason, I think there is an analytical compatibility between MMT and Marxism (or for that matter between MMT and Post Keynesianism or Sraffianism) that is separate from the political position a person adopts.”

    I could sign under this, as I totally agree.

    Now, think about this other bit:

    “Yet, although fiscal policy can be used in the way advocated by many Keynesians – i.e. merely as a means of preserving what is, from a Marxist perspective, a despicable system – it is equally clear that fiscal policy need not be used in this way. It could instead be used to initiate economic activity along lines altogether different, for instance through the public provision of free goods and services, or for that matter the complete elimination of wage labor, or in fact any form of monetary economy that could be conceived”

    I’ll be frank: I wish things were as easy as that. I really do.

    But think about it: all of this implies policy decisions. Who makes these decisions?

  4. Vive La Revolution, Baby!

    Sure as hell beats mumbling to myself when walking down the street, occasionally yelling at stop signs. I’m gonna need a new outfit though.

  5. @ Dan’s question

    “I have to say that I am never quite sure what exactly Marxists mean when they talk about the “capitalist system.”

    Capitalism = capital labour relation grounded in doubly freed labour. Freed from the means of production and free to sell their labour power to whichever capitalist they choose. The first proposition implies they will eventually choose a capitalist.

    So if you abolish the capital wage labour relation you abolish capitalism. But the abolition of the that relation does not = socialism.

    To get a sense of what Marx was driving at in terms of what socialism should look like see:

    http://www.marxists.org/archive/marx/works/1844/james-mill/

    It is a very good read and Keen quotes from it in his cavaliers of credit. Towards the end Marx speaks directly about what non-alienated socialist production ought to look like.

  6. To the general topic,

    If you can’t think about how to reform capitalism how can you think about moving beyond capitalism? And if you can’t identify the structural limits to reform how can you develop a cogent critique of reformism?

    That said the opposition to reformism (socialist) by revolutionary socialists was the idea that as reforms progressed it would blunt the revolutionary spirit and set the stage for a counter reformation. I am going to go out on a limb and argue that, with the benefit of hindsight, the revolutionaries were right.

  7. I would put it somewhat differently, which I think captures the sprit of Marx as a libertarian of the left, to whom individual freedom in a social context is paramount.

    Marx’s basic move is presuming that under oppressive systems, of which capitalism is one example and feudalism another, property rights trump human rights and the driving socio-economic objective is collection of economic rent by property owners, whereas in a system in which all are truly free, human rights trump property right and the driving socio-economic principle is maximization of the potential of individuals as social beings. Marx argued that this could best be achieved by abolishing the right to private property, which would result in ideal community if an appropriate institutional structure would be instituted. This is the basic paradigm of his thought. Interestingly, Plato came to a similar conclusion, although he only abolished holding of private property by the ruling class.

    This is the opposite of Libertarianism, which sees the institution of property rights as paramount, supposing that as little intrusion by institutional factors as possible and following strict methodological individualism will result in maximization of individual freedom.

    This is still the basis of the left v. right distinction, with other options along the spectrum. Right now, mixed economies predominate,generally with government captured by the ruling elite, and there is no pure capitalism. It’s just a slogan to maintain and expand the reach of the elite. Notice how in the US, the back stop rhetoric of the right when all else fails is shouting “socialism,” Marxism,” or “communism.” It’s getting to be a daily occurrence by the GOP and has been on Fox and other Murdoch-owned properties forever. And the rubes always respond to it, or have so far.

  8. “there is no pure capitalism.”

    What I was saying is that once the wage labour form is predominate you have pure capitalism. The states vs markets position makes the hand waving of libertarians and Austrians possible.

  9. Thanks, CA. Interesting stuff. I’ve started browsing some of the other posts on the blog.

    And thanks, Trixie. Friedrich had Karl’s measure in the beard stakes!

  10. re. Tom Hickey on Marx and property

    The property debate has a lot of issues and the debate between Proudhon and Marx needs to be elaborated in full to appreciate some of the issues.

    for example..

    If it’s discovered that a person has unique DNA that is medically beneficial, does society (by implication the state) have the right to extract tissue for medical research? What if this harms the person?

    If it’s discovered that a person has made intellectual discoveries that benefit humanity, does society (by implication the state) have the right to force someone to disclose the information? What should happen if they refuse?

    If a person secretly invents a machine that is beneficial for humanity, is it acceptable for society (by implication the state) to take the machine by force? What if the person defends the machine?

    Proudhon’s answers are clearly no, no and no but Marxist thought gets trapped in arguments around the slippery slope, the argument of the beard and who watches the watchers.

  11. Yes, this is the slippery slope debate going on in the US now about the use of torture to obtain information vital to national security and putatively saving thousands if not millions of lives and preventing untold property damage.

    Amazing at the number of people that have no problem with this.

  12. Generally, IMO, a true Marxist/Socialist/Anarchist economy is the gift economy. But a gift comes from the “originator” or the “owner” of the gift. The gift is generally an acknowledgement of prior debts and gifts from individuals or the community at large.

    However, Marxists often get trapped between communal ownership and individual ownership.

  13. I think the slippery slope issues with Marxism are part of a more general problem with trying to apply utilitarianism in practice. When observing real people using utilitarian logic, there is a noticeable tendency to create self serving utilitarian arguments. Therefore, from a utilitarian perspective it’s better to adopt human rights because human rights use propositional logic to infer that things are either right or wrong. Therefore, from a few simple concepts of rights you can infer a complex system of rights. I accept utilitarianism in principle but suggest that utilitarianism demonstrates the benefit of human rights. This is why I still believe that concepts of rights developed by Voltaire, Rousseau and Proudhon are fundamental.

    Also, I think Marx’s rejection of philosophy in favour of science is unscientific because it assumes a mechanistic view of science rather than an informational view. There’s plenty of evidence of information processes in science and philosophy is just one of these processes. I can reason in this way because I live in the 21st century. Science hadn’t developed sufficiently in the 19th century for Marx to take this view. If Marx were alive today, I think there’s a good chance he would take genetics, neurology and computer science into account.

    I’d go further on the gift economy and say that it’s the most natural form of economics. Gift giving creates a social bond. The giver of the gift says “I like you enough to give you a gift”. The receiver of the gift says “I like you enough to be in your debt for the gift”. It’s similar to a credit and a debt in the financial system, the difference being that the point of the gift is not to repay the debt because the debt is part of a social bond. When social bonds break down, gifts are often returned. Blogging is an example of a gift economy. I would never have understood the problems of reserve ratios without a chartalist explaining it to me (Charles Jurcich on the BBC blogs). I’ve always been a bit sceptical of the scalability of gift giving, but now I think about it there are some circumstances where gift economies scale well. Education could be considered a gift from the state and may work to strengthen the social contract which is a type of social bond. If this is true, the expansion of market ideology within state education damages the social contract and increases anomie.

  14. The fundamental mistake of both Marx and liberal economists has been to deny, ignore or misunderstand the role of consciousness in general as the defining component of human nature, which is what the ancients means by rationality, as well the importance of collective consciousness and how it shifts over time, as Hegel brilliantly observed.

    Those insights lie at the basis of institutionalism in social science, including institutional economics, of which MMT is a branch. No evolutionary science is being integrated into economics, as well as cognitive science, and heterodox economist are paying more attention to biology, psychology, social science, engineering, computer science and information theory.

    Of course, Marx could not foresee this, and he like the rest of the advanced thinkers of his age were seduced into reductionism by the success of classical physics, which is still having a deleterious effect on mainstream thought in many areas, especially economics.

    To Mark’s credit he was not only a harbinger of sociology but also is recognized as one of the founders. Marx was a naturalism in an age when supernaturalism was moribund but not dead by a long shot. He was a product of his age and although at the leading edge, he was still bound by it. It’s “religious” to take Marx as doctrine, just as it is to take Adam Smith as dogma, as economic liberalism does.

    Time to move on, and recognize that the new frontier is consciousness studies with all that implies for all scientific disciplines. We are moving into an age that recognizes that subjectivity and objectivity are poles of consciousness and away from an age that glorifies objectivity (quantity), denigrates subjectivity (quality), and either denies or ignores consciousness and its seminal role.

  15. While I like the idea of gift economy and have lived in communities based on it, the idea has to be clarified. We tend to think economically in terms of exchange between individuals because that is what we are familiar with. But we have to remember that it is a bias we have acquired.

    Exchange of goods between individuals is only a very small part of what happens in communities based on sharing, especially those that do not recognize ownership at all. It’s really based on a different approach to live, a different way of seeing the world, and a different quality of collective consciousness.

    There can be quite a bit of difference among such groups, for instance, depending on the rule (institutions) adopted. I lived in a experimental community for a while in which we used to change the rules periodically to experience the difference in lifestyle. Very informative. Highly recommended.

  16. My scepticism on gift economics is the ability to build structural capital and this is needed for efficiency. There may be gift approaches to structural capital but I don’t have many ideas on this. Gift economics may work well for innovation because innovation is generally inefficient.

  17. Gift economies are generally also sharing economies and work through capital pooling wrt structural capital.

  18. From the various aspects of structural capital, I was thinking of bureaucracy and tightly coupled competences in particular. These aspects allow productive efficiency but not adaptive efficiency. As change accelerates adaptive efficiency should become more important and patterns of loose coupling will probably become common. I’m not sure how this relates to gift economies though.

    I haven’t taken part in any alternative communities but I’ve been in 4 co-ops up to now. I didn’t find them particularly co-operative. My experience is that anarchists have a good attitude to co-operation and I also like a lot of the popular education activism. British people are generally not very co-operative though. We like to be cynical.

  19. I know this is an old thread, but in response to this comment:

    “Yet, although fiscal policy can be used in the way advocated by many Keynesians – i.e. merely as a means of preserving what is, from a Marxist perspective, a despicable system – it is equally clear that fiscal policy need not be used in this way. It could instead be used to initiate economic activity along lines altogether different, for instance through the public provision of free goods and services, or for that matter the complete elimination of wage labor, or in fact any form of monetary economy that could be conceived”

    A good example of a practical proposal along these lines that would benefit from the integration of MMT thinking is Dean Baker’s Artistic Freedom Voucher, which could be introduced on a very mild level but ultimately have radical implications, as it limits the impact of investment to the world of zero-marginal-cost-of-reproduction goods – i.e. ideas.

    http://www.cepr.net/index.php/publications/reports/the-artistic-freedom-voucher-internet-age-alternative-to-copyrights/

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