Some left economists have started to critique MMT, I have written a recent blog article but like the rabbit hole to Wonderland, there’s always more. Here are my notes.
Here are some links,
- Against modern monetary theory … by James Meadway, not all currencies are equal and thus not all currencies are sovereign and he defends Labour’s Fiscal Credibility Rule. The UK’s over engagement in the world’s capital/currency markets makes the UK overly reliant on political support from the US because of our dollar liabilities.
- I found this article above via, There are ways to end neoliberalism globally that are not progressive and this will increasingly be the terrain the left is fighting on which makes similar points on economic policy but also attacks MMT as not being of the left, and ignoring economic power, productivity and inequality.
- Brexit: the Slippery Slope of Left Sovereigntism, from Modern Monetary Theory to Spiked. at tendance coatsey explores the political inertia that MMT’s exponents may be riding; much of this article is based on the interview (See 2) with James Meadway, once John McDonnell’s economics adviser. For Coatsey’s regular readers, you will be unsurprised at his pugnacious attacks on Faizi’s endorsement of the Full Brexit and Spiked.
- Functional Finance and Full Employment: Lessons from Lerner for Today?, a relatively recent paper 1999 on “Functional Finance“. Functional Finance is ascribed (on wikipedia) to Abba P Lerner on whose page there is a partial bibliography, there’s also Functional Finance: Old and New at the Levy Institute, no relation. This is important as it first posed the proposition that fiscal policy should have a real world outcome, not reflect an accountant’s desire to balance the books.
- Modern Monetary Theory isn’t helping … at the Jacobin, dated 2019 by Doug Henwood edits Left Business Observer and is the host of Behind the News. I made a précis of this article, and also annotated it on diigo. The article is dated 2019.
Henwood
Firstly Modern Monetary Theory has no view on the production process nor on labour value. This means its policy prescriptions must be incomplete. This failing leads to multiple criticisms of the theory as a macroeconomic tool. In Henwood’s words,Here
Absent from Kelton’s paper, Wray’s book, and much of the subsequent MMT literature, is any sense of what money means in the private economy, where workers labor and capitalists profit from their toil and compete with each other to maximize that profit, a complex network of social relations mediated by money.
MMTers show a strange lack of interest in the specificity of capitalism — how production and distribution are organized, how demand for credit arises in the course of commerce, how people earn their living and under what conditions — and their rejection of earlier PK work on money renders nearly invisible any link between money and things or money and people (or people and things via money).
Doug Henwood – MMT isn’t helping: Jacobin Magazine 2019
Secondly, there is a clear risk of inflation, although I think the reviewer is harsh in his criticisms or MMT’s downplaying of the risk but their remedy would seem to be the same as most others, to depress the economy albeit by tax rather than interest. MMT would seem to say that there can only be inflation once full employment has been reached. I note that there may be a trade-off between full employment and inflation; the economy’s equilibrium point may not allow satisfactory values for both metrics.
Thirdly, not all monetary sovereigns can behave with impunity. While MMTers argue the problem is foreign held debt and argue that foreign exchange for imports will always be available, this is probably wrong. It’s clear that the US as the monetary sovereign of the world’s reserve currency has much more freedom of manoeuvre even than the UK, Germany or Japan.
Henwood also criticises the jobs guarantee on several grounds. Not the least being its sub-optimal use of labour. What would JG people do? Dig holes and fill them in. There is also a risk that it becomes a form of workfare, and a means by which good unionised public sector jobs are funded/fulfilled by unskilled or transient workers on minimum wage. On the Jobs guarantee, he says,
“if we had a political movement strong enough to force full-employment policies on the state, then why stop with a mere JG? What about democratizing the workplace, reorganizing production to be ecologically sustainable, socializing property via taxation and public spending, and eventually expropriating the capitalist class? If you’re going to challenge ruling-class power, as a JG would do, why stop there?”
Doug Henwood – MMT isn’t helping: Jacobin Magazine 2019
He concludes,
More broadly, we have a private economy driven by exploitation, overwork, asset stripping, and ecological destruction. MMT has little or nothing on offer to fight any of this. The job guarantee is a contribution, though a flawed one, and it’s not at the core of the theory, which proceeds from the keystroke fantasy. That fantasy looks like a weak response to decades of anti-tax mania coming from the Right, which has left many liberals looking for an easy way out. It would be sad to see the socialist left, which looks stronger than it has in decades, fall for this snake oil. It’s a phantasm, a late-imperial fever dream, not a serious economic policy.
Doug Henwood – MMT isn’t helping: Jacobin Magazine 2019
Prior to making this page, the two main sources proposing MMT, I had found were, Bill Mitchell’s blog and Reclaiming the State, at least part two.
I have another article on this wiki Modern Monetary Theory which annotates earlier theorists contributing to the theory and an article on International Trade & MMT which I believe to be the true constraint on the economy. The Henwood article also has a bibliography.
The featured image is from http://401kcalculator.org/ and is CC 2011 BY-SA, although the text on flickr documents it as CC0.
I have just read and annotated “MMT isn’t helping”.