MMT does not presuppose a particular theory of value. In principle, it is possible to situate a subjective or objective view of value within it. The present focus is on Marx’s theory of value and, more specifically, his ‘law’ of value. Marx’s law of value, in which commodity production only occurs on the basis of profitability, and profitability derives from surplus labor, is compatible with MMT so long as it is understood that Marx’s law pertains only to the sphere of commodity production, a sphere that is embedded in a broader socio-institutional context. In a modern monetary system, the context in which commodity production takes place is shaped by currency-issuing government.
It is suggested in an earlier post that the presence of complex labor affects value creation in Marx’s theory, including at the aggregate level. The argument starts from Marx’s distinction between concrete and abstract labor. In making this distinction, Marx explicitly identifies productivity as a property of concrete labor and labor complexity as a property of abstract labor. Variations in productivity, since they relate to concrete labor, directly affect the aggregate production of use-values (‘real’ output) but not the aggregate creation of value (socially necessary labor time or nominal value). In contrast, variations in labor complexity, since they relate to abstract labor (the substance of value for Marx), directly affect the aggregate creation of value rather than the aggregate production of use values.
In principle, a currency’s command over any category of real input or output can be considered in terms of a suitably defined price index. The present focus is on the aggregate level and, in particular, a currency’s command over real final output. Earlier posts explore the topic in greater depth (links below). This is a crib notes version.
Modern Monetary Theory (MMT) can be applied to growing economies. Equally, as Jason Hickel rightly observes, MMT is also an appropriate macroeconomic framework for proponents of degrowth. The theory makes clear that a currency-issuing government always has the capacity to maintain full employment through implementation of a job guarantee, irrespective of the overall level of aggregate demand or rate of economic growth. As currency issuer, the government faces no financial barrier, nor has any need of profit. Whereas employment in an economy left to the whims of for-profit firms slumps whenever demand slumps – not least because private firms as currency users are financially constrained and subject to the profit criterion – currency-issuing governments have the capacity to maintain full employment at all times.
First acquaintance with MMT can bring clarity on key aspects of the monetary system that may previously have seemed unclear, yet likely also calls other questions to mind. For instance, if taxes do not finance a currency issuer, why are they necessary? And if banks create deposits ex nihilo (“out of nothing”), how is it that (other than the central bank) they are financially constrained and subject to risk? Or, considering that issuance of the currency is essentially costless to the issuer, how can the currency nonetheless have value to its users? MMT has clear answers to each of these questions.
This is not just a matter of markets requiring a system of enforced property rights, which presupposes government, at least in rudimentary form. In monetary economies, functioning markets also require a viable currency, one that is generally accepted in exchange. Government ensures a currency’s acceptance when it imposes and effectively enforces taxes that are payable only in that particular currency. This is true not only of exogenous taxes but of taxes on consumption, income and wealth so long as these are assessed in the government’s chosen unit of account.