Significance of MMT for Progressives and the Left

Demands on time in the MMT community include (i) providing “simple as possible” explanations of “basic MMT” for public consumption and (ii) exploring theoretical and policy ideas informed by an understanding of those basics together with insights from related approaches to economics. Although the latter task is perhaps more enticing for those who have by now (mostly) absorbed the basics, and is certainly an area worthy of pursuit, the former task remains politically pressing and so equally deserving of time. It doesn’t matter what progressive policies, institutional reforms or plans can be devised if the public believes they are “unaffordable because the nation is bankrupt” or “impossible because capitalists won’t stand for them”. This indoctrination has occurred over decades and clearly many in the community are not freeing themselves of it easily.

Although confusion over “money” is immense, it seems fairly common on the left to view the topic as superficial compared with study of “real” stuff. I think downplaying the significance of money is a mistake. Downplaying its connection to the real is also a mistake. And imagining the analysis of money is any less threatening to the powers that be than analysis of the real is a bigger mistake. Probably the only topic as taboo as money in orthodox economics would be the identification of profit with surplus labor. The reason for money’s taboo status seems clear. Understanding existing monetary institutions and operations points to a way of undermining the profit system and exploitation of labor.

This is not, of course, to attribute such a focus or motivation to the Modern Monetary Theorists themselves, most of whom appear to favor managed capitalism (although see Bill Mitchell’s MMT is not conservative thought for a left-leaning perspective from a leading proponent). It is rather to suggest that the Modern Monetary Theorists’ careful and, as far as possible, objective institutional description and analysis of monetary and fiscal operations in a sovereign currency system arguably brings to light a radical democratic potential inherent in sovereign money, waiting to be seized upon. It opens the way to managed capitalism or social democracy or socialism or beyond, however far (or not so far) we wish to take it. This democratic potential may have been what drove European elites to take currency issuance out of the hands of democratically elected national governments and empower, instead, the unaccountable European Central Bank.

In the present economic system, real resources are mobilized only on the say-so of the issuers or possessors of money, and only on their terms. No production, even for profit based on the exploitation of labor, takes place until finance is secured. It makes a great difference whether money is made available on our terms, by a democratically accountable currency-issuing government, or on the basis of private interests motivated narrowly by profit, enabled by an unaccountable government. The issuers and possessors of money determine what production will and won’t take place, the nature of the production process, the nature of work itself, access to productive resources, distribution of income and leisure, and more. The channel through which money is created (public or private) and the terms on which it is issued (democratic or undemocratic, interest free or rentier friendly) strongly influence whether institutional reforms and regulatory measures contrary to the interests of capitalists, including measures capable of re-shaping the sphere of production, are viable or not viable.

Except to the extent that production is freed from the profit imperative — is allowed to proceed without reference to it and without a need to answer to it — attempts to base enterprise on a different social basis and re-shape the sphere of production, including the nature of work, seem likely sooner rather than later to revert to the same methods of operation and priorities as capitalist corporations. But freedom from the profit imperative, when desired, is always near at hand in a modern money system. A prerogative of a currency-issuing government is to ignore the profit criterion and to proceed on a different basis. The absence of a revenue constraint means that real-resource availability (in relation both to the inflation barrier and environmental sustainability) is the only hard constraint. There is no need to generate a profit. There is no need to provide a flow of interest income to rentiers. If the production is something that the majority would consider socially beneficial, and is within resource limits, the main obstacle to its going ahead is the electorate’s own failure to understand the options available to it.

An understanding of modern money makes clear that a democratically accountable government with the backing of the greater part of the electorate would already, under present institutional arrangements, be in a position to begin an extensive transformation of social and economic institutions. But it would require going against the interests of the rich and powerful. To do that successfully, government needs the overwhelming backing of the electorate. And, for that to happen, the electorate needs to be liberated from its confusion over “money” and comprehend the viability of following such a course.

That, perhaps, is why close scrutiny of monetary operations is taboo among orthodox academic economists just as acknowledging the origin of profit is taboo.

14 thoughts on “Significance of MMT for Progressives and the Left

  1. “… the electorate needs to be liberated from its confusion over “money” and comprehend the viability of following such a course.”

    Glad to see you back at work Peter!

  2. Profit can be seen as the wages of profiteers for their ability to organise the means of production. In a lot of larger companies that is quite literally the case – salaries for managers with bonuses.

    Interest can be seen as the wages of project assessors.

    I see no problem at all with having wages for those that organise and wages paid for those that objectively assess which projects are most likely to use real resources the best.

    It’s when it goes beyond that into undeserved rents extracted from artificial monopolies that we get a problem.

    There is a long standing myth amongst progressives that everybody can be a ‘self-starter’ and that things ‘self-organise’. That can never be the case with human beings. The different personalities amongst us need to be provided with different things to allow them to be their best.

    The problem is that we see ‘following’ as inferior to ‘leading’. Yet without followers a leader is nothing and nothing gets done. What we really need to do is big up the role of followers, and assure them that the way they want to operate will still be permitted in the brave new world.

    Otherwise they will vote for the capitalists who, if nothing else, are offering them the leadership they desire.

  3. Interest can be seen as a wage for “waiting” too … land rent a wage for being hospitable.

    There’s no suggestion that the labor of managers, supervisors, planners, analysts, etc. is not labor.

    Leadership is important, but I would prefer it to be democratically accountable.

  4. Re: “the main obstacle to its going ahead is the electorate’s own failure to understand the options available to it.”

    That might be true if you are writing from Iceland or Switzerland, where there is some semblance of democracy.

    It is not true in the US where the so-called electorate have almost no influence on government policy.

    This essay repeats a common MMT myth — that economic progress is blocked by economic ignorance, that if only people understood MMT, then all our problems would be solved and we would live happily ever after.

    I disagree with this view and instead agree with Kaleckian perspective that economic progress is blocked by the elites who effectively control government, that the elites deliberately oppose full employment because they don’t want the 99% to get “uppity,” that there will be no major economic progress until the political problem is addressed.

    That does not mean that educating the public on fiat money is a bad thing. Education could definitely play a role in a movement to change the political system (see Ian Welsh’s recent blog on “Belief” http://www.ianwelsh.net/belief/ ).

    I agree with Ian that changing the political system will require a movement that PEOPLE ARE WILLING TO DIE FOR. People died to get a minimum wage, to get a 40 hour week, to get the right to unionize, to get the right to register to vote, to get the right to sit on a bus, etc.. Now ask yourself, are you willing to die for a minimum wage grunt job as promised by MMT? I’m not. And this is part of the problem with MMT — it’s not a people’s movement, it’s an ivory tower movement. MMT would merely replace Kalecki’s pool of groveling unemployed people with a pool of groveling minimum wage grunts. Nobody is willing to die for that.

  5. Hi Peter, you can count me in with Bill Mitchell on the distinctly leftist nature of MMT thought. You don’t find it much in MMTers writing about operational details of the banking. But when it comes to policy proposals, some of us are more left wing than anyone in mainstream American politics and pretty much agree with the policy positions Bill takes.

    Dan Lynch, how high would the minimum wage have to be for people to be willing to go into the streets for it? Also, why do JG jobs have to be “grunt jobs” and what do you classify as a “grunt” job? Finally, I agree with you about the elites, but what makes you think that spreading around MMT more broadly won’t impact the understanding of the 99% and undercut support for austerity policies?

  6. Peter…I just read this post following a link (from Naked Capitalism?). As you can see if you check out my (currently dormant) blog (evolvinghumansystems.com) I’m also excited about the progressive potential in promoting understanding and implementation of MMT (as my blog posts suggest, one area of my focus has been on investments in open, high-speed Internet infrastructure and applications).

    For now I just wanted to introduce myself and encourage you to keep up the good work.

  7. There’s a lot more too elite control worth hitting the streets for other than “grunt jobs” through adoption of an MMT JG. The question is what comes afterward if the revolt is successful.

    Occupy got it right refusing to make up a list of demands, but rather just saying that the existing situation is unacceptable. People were willing to take to the streets for that and some took a hit for it.

    There needs to be alternative scenarios on the table, rather than one overarching plan. It’s easy to get people to the barricades against what they perceive is an existential threat to their way of life. Not so easy to get them to agree in advance on a fix, overhaul, or replacement.

  8. “”An understanding of modern money makes clear that a democratically accountable government with the backing of the greater part of the electorate would already, under present institutional arrangements, be in a position to begin an extensive transformation of social and economic institutions.””

    If by “An understanding of modern money” in any way is meant to impart a real understanding of our modern money SYSTEMS as currently operated, then nothing could be further from the truth.
    Point One – The government, no matter how shoehorned – is NOT the monopoly issuer of the nation’s currency (money). The big decision for government-issued money is “heads or tails?”…… because the only money issued by government (Treasury) is coinage.

    Point Two – Under existing institutional arrangements, it is the private banks, WITHOUT the backing of ANY of the electorate, but rather the greatest Congress their MONEY can buy, who are in a position to maintain the status quo viz our social and economic institutions. And this is why Minsky, very late in his career, called for a new National Monetary Commission to explore these possibilities. Besides, I would like to be wrong on this, but MMT proposes ZERO reform to today’s financial institutions.
    Where you are correct is here:
    “”. ….it (Change, and real reform) would require going against the interests of the rich and powerful. To do that successfully, government needs the overwhelming backing of the electorate. And, for that to happen, the electorate needs to be liberated from its confusion over “money”……””
    Sorry, MMT offers nothing toward our monetary understandings that can be turned into reform and change. Rather, more ‘fog around the money’.
    For a perspective on what modern sovereign money really is and how it could become the vehicle for change and reform to our society you call for, readers should join the ‘sovereign money’ perspective here….
    http://sovereignmoney.eu/sovereign-money-in-critical-context
    Thanks.

  9. Dan Lynch:
    the Kaleckian perspective that economic progress is blocked by the elites who effectively control government, that the elites deliberately oppose full employment because they don’t want the 99% to get “uppity,” that there will be no major economic progress until the political problem is addressed.

    A mix of good and bad ideas. Yes, economic progress is blocked by elites who deliberately oppose full employment. Absolutely right. But that is what MMT is saying. And I would say that Keynes thought deeper than Kalecki on these points – look at his notes to Kalecki’s famous paper.

    But how is the political problem to be addressed? The way, the only way to address it is to realize that the entirety of the political problem IS the “economic ignorance”. I for one, do agree with your satirized view that ” if only people understood MMT, then all our problems would be solved and we would live happily ever after.” Just the same way that a society that truly believed every illness should be treated by bleeding people of half their blood volume would live happily ever after if they just got rid of this belief. Mainstream economic beliefs are far more irrational and destructive than that, and are believed in. You have to hand it to the elites capable of creating this much poverty and inflation and misery amidst such easily reachable plenty – and never underestimate their infliction of popular,amnesia and ignorance.

    Dan, can’t you see how strange some of what you are saying is?: changing the political system will require a movement that PEOPLE ARE WILLING TO DIE FOR. People died to get a minimum wage

    So you think people dying to get a minimum wage makes sense. But what did they die for? The abstract proposition that nobody should be hired at below a certain wage, but they didn’t actually care about whether anybody actually got a job and a wage or not? Absurd. But that is what you are saying if you think that the minimum wage is worth dying for – but an actual job at a minimum wage is not.

    Now ask yourself, are you willing to die for a minimum wage grunt job as promised by MMT? I’m not.
    Perhaps because you are too comfortable, not poor and desperate enough to think logically. Many are not so lucky.

    And this is part of the problem with MMT — it’s not a people’s movement, it’s an ivory tower movement. MMT would merely replace Kalecki’s pool of groveling unemployed people with a pool of groveling minimum wage grunts. Nobody is willing to die for that.

    Completely wrong. It’s this sort of view that is an ivory tower belief of the comfortable. MMT is a people’s movement. Even more it is, to use an unpopular word in an unpopular way – “True” with a capital “T” . The poorer people are, the more they support the JG. It is not because they are filled with resentment – which is beneficial and not destructive, and has little to do with the JG & MMT in any case. It is not because they are not thinking and don’t understand how things work. It is because they are thinking logically and coherently about economics, and the comfortable middle-class is deluded and irrationally contemptuous when they deride minimum wage grunts and minimum wage grunt jobs and insult people as groveling, whether employed or unemployed.

    In any case, it is easy to point out thousands of people who died for the JG. Look at the revolutions of 1848 and the ateliers nationaux.
    Look at Victor Quirk’s great paper on “The Job Guarantee of 1848”. The predator capitalist assholeocracy may not have learnt anything. But they haven’t forgotten anything, and their opponents have forgotten so terribly much.

  10. “Kaleckian perspective that economic progress is blocked by the elites who effectively control government”

    That is very true.

    But also what is very true is that *you can’t do anything about that*. Because they won’t let you, and they have bigger guns, better communication technology and access to more resources than you have. But most importantly the ability to organise and stand behind a single goal – something the left simply cannot do because they’re too busy being angry and hopeless.

    What you are taking about is the usual ‘come the revolution’ nonsense, which is the same ‘attack the rich’ ideas that have been banging around for decades. Never goes anywhere, never changes anything.

    But I’m quite glad that this sort of ‘attack the rich’ stuff is kicking off, because it means that a more reasonable compromise – that we pay the excess labour to do useful stuff that they’d like to do in return for money that can be spent with business – will be appealing to the people that you actually have to convince. The existing wealthy.

    And the way you do that, is the way they’ve done it to us. By dividing and conquering them. You offer some of the less rich the ability to be the most rich in return for helping you bring about the change that helps the majority.

    What MMT does is show how you can do that because tokens are just tokens, not anything real.

    MMT is a monetary theory. It is not a perfect description of a brave new world. Asking MMT to do anything other than describe what is possible with money is like asking a physicist to build a bridge.

  11. The issue is really political, which implies social, rather than economic, although many of the chief factors are economic and the motivations also.

    This requires an approach to social change. I wrote a master’s thesis in social and political philosophy on this back in the early Seventies concurrent with the countercultural revolution and anti-war movement going on at the time. The title was Revolution or Evolution?: Toward a Theory of Social Change.

    Historically, social change has been either sudden —revolution that overturns the status quo, or gradual —evolution that is incremental and iterative. The former is flashy and occupies primacy of place in the history books, and it is often the idea that advocates of social change aspire to. But the later is the “normal” process of development, which occurs at different rates geographically, and often in fits and starts rather than through linear progress. The tortoise and the hare.

    Revolutions have seldom been successful wrt to the goals of the revolutionaries. They usually took their own course, often only resulting in a change of power structure that may or may not have been in tune with the motivations and aspirations of those that participated in it.

    Developmental change is usually gradual but fairly stable. It proceeds dialectically, whether led by ideas (Hegel) or changes in material infrastructure (Marx). I would say it is a combination of both in feedback loops. As Hegel noted, it proceeds through historical moments against a constant background of time, often involving great figures that rise to the occasion. In hindsight, there are often dominant themes, which Hegel identified with predominant ideas that coalesce in the “Zeitgeist” or temper of the time.

    Moreover, history has shown a liberal basis overall, although with a big setback at the time of the transition to surplus societies and the emergence of class structure based on status and power.

    Some of the big advances have been sudden and revolutionary, but they were a long time building, too. Hegel would see sudden change as the crest of a wave as it breaks and falls, eventually dissipating itself and its energy on the beach of history.

    Populism can initiate change, but it usually fails to carry through because history advances through organization and it’s the organizers that sit at the top of the power structure. So change usually result in a different set of organizers, or even former organizers switching positions.

    My conclusion was that the chief factor in the quality of change is the level of collective consciousness, the measure of which is degree of universality v. narrow interest. A society cannot run ahead of its level of collective consciousness. Traditionalists vying with reformers and innovators keep the process more or less on center, with pendulum swings in both directions politically.

    MMT is of the party of reformers and innovators. The party of reformers and innovators is usually not as coherent as the party of traditionalists since there is a lot more disagreement over innovation than tradition. This makes it difficult for the parties promoting innovation to organize and agree on common objectives. This is a major reason that social change is slow. It tends to be incremental and iterative, since there is resistance to plunging headfirst into unknown waters.

    MMT is part of that the left calls “consciousness-raising,” that is, social, political and economic education of the populace that is a target for change. So a lot of what needs to take place falls into the category of informal education. But since this is sophisticated, it needs a more formal backup in terms of theory, empirical research, and testing to be convincing.

    This is all happening. Maybe too slowly for some, but there’s only so fast a project to change the world and construct a good society can go. Patience, persistence and endurance are necessary virtues.

    Moreover, informed debate among the parties is needed instead of assuming a party line as something doctrinaire. Innovation is always a work it progress.

  12. ” … the chief factor in the quality of change is the level of collective consciousness, the measure of which is degree of universality v. narrow interest.” [TomH]

    Elsewhere I have read – ‘the technology god will save us all’.

    I almost wish there were a category on every blog labelled [Consciousness].

    You know, the agricultural revolution was meant to ‘save us all’; give us more free time – and bring freedom. So too the manufacturing revolution – and then transport and technology; and now information and communication, systems and organisation – oh, onwards and upwards comrades!

    Here’s a school kid’s take on this: Our story in 2 minutes

    I think something very simple has been forgotten.

    We have less free time than ever before; and we are more caught up than ever before.

    Human beings do not respect each other because, fundamentally, they do not recognise who they are. Until that happens, the adaptive rate for stupidity far exceeds the adaptive rate for consciousness.

    How to become conscious? Well, for me – it is to recognise my thirst. Which leads me to the peace that emanates from within. Which hangs like a rope on which I may climb – back to the Self. On seeing which I know who and what I am. At which point I get totally blown away! And on feeling which, on listening to, on absorbing – my heart is filled, and sings a universal song.

    Only then can I say I am a human being. Before that I am a beggar, wandering around in the mind – just like in the video.

    The greatest challenge facing you and I, in the whole universe, you can see in a mirror. If there happens to be a crowd standing around you when you are looking in that mirror, you cannot quench their thirst. But you will see they are all exactly like you in their essence, and unique in their Nature. It becomes obvious it’s a matter of which aspect is in control.

    I sincerely believe, the human being needs to know the Self or it will never ever ever – become conscious. It will always be an unlit lamp, dreaming and scheming. A clay pot, knowing nothing of what it contains – but can never stop longing for. That not everybody is interested is also a fact. A wise man will look for a way to light his or her lamp! And that light, I believe, is the only light that can ever illuminate the human landscape, and bring with it peace.

    I think Prem Rawat will be in Australia around September (he offers a way to go inside, with no strings attached). Watch the TV4ME programming.

  13. Fascinating article and discussion. MMT may not be a broad people’s movement, but it looks like it can contribute some very valuable understanding to such a movement, should it arise. I think it will – as someone doing their little bit.

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