I thought it was a very lucid and well-argued piece on why Modern Monetary Theory (MMT)’s conclusions as to how money is created is factually correct and that is the case whether you are a Marxist or a Capitalist or somewhere in between. For me it also illuminated Marxist ideas (with which I have to imagine, Paul Mason presumably agrees).
I’m a Marxist political activist based in Ireland and I’ve been studying MMT for the past few years. I believe MMT does provide the correct description of the monetary system as it exists now. And that a correct understanding of the capitalist monetary system exposes the inherent illogic of the capitalist mode of production and starkly poses the question of a post capitalist planned economy as the alternative. In this way I firmly believe that MMT largely complements Marxist theory.
On the surface, MMT appears to offer a solution to the crisis of capitalism based on counter cyclical state intervention. On a deeper level however I believe MMT’s understanding of the monetary system lays the basis for the elimination of capitalism and the transformation to a planned economy as does our own Marxist theory of course – but from a different perspective.
The bulk of MMT is just the correct operational description of the monetary system which is radically different to to the illusions we hear in the mainstream economic narrative. Social democrats and liberals will draw reformist conclusion from the reality that MMT describes in their efforts to preserve the capitalist model. This doesn’t invalidate MMT’s analysis of money which I believe is objectively correct. We as Marxists can in sharp contrast draw our own revolutionary conclusions to assist us in moving to the next higher stage of societal development beyond capitalism. MMT’s description of the nature of money helps to reveal that capitalism has laid the basis for its own destruction making possible and absolutely necessary the urgent transition to a planned economy. In that planned economy money will be simply a unit of measure of economic activity which the working class uses to democratically plan production and manage resources to provide for human need.
From Marx we know that capital owns the means of production (e.g. factories, power plants), distribution (e.g. ports, trucks) and exchange (e.g. banks, stock markets) and the working class owning little or none of these is required to sell its labour to capital. This enables capital to lay claim to the surplus produced by the labour of the working class as the workers always receive less in wages than the value of goods & services that they have produced. The difference is the capitalists’ profit. That profit is realized in monetary form and the money represents a claim on the surplus produced by the entire global labour class. So the capitalists accumulate monetary claims on the surplus resources and their money allows them to take ownership of those resources as and when they require them in order to generate yet more profit in a continuous cycle.
MMT explains that under our present fiat currency system this money which the capitalists seek to accumulate originates in the nation state. The currency is brought into existence by the simple act of governments (central banks) pressing computer keys (or licensing the commercial banks to do so when thy issue loans). So it’s a colossal absurdity to allow this relentless pursuit of computer digits to destroy the habitable planet on which we all depend.
A shortage of money is never a problem at a macro level. The UK government for example issues its own currency. This means that when it spends, the government records numbers into assorted bank accounts stored electronically on computers and those numbers represent sterling money. The UK government cannot run out of numbers. The actual limitation is the availability of real resources such as skilled labour, energy, land, raw material and the environment. Sovereign governments spend their own currency into existence at will and then tax it back out of circulation. Government spending creates the money and taxation destroys it in a continuous flow. At a macro level the money is simply an accounting tool for measuring and allocating real resources. If a real resource exists (e.g labour) and is for sale in a particular currency then the currency issuer can always afford to buy that resource.
In contrast to the instant availability of money, the real wealth of goods and services that we all depend on is created by the labour and skill of the working class applied to the raw material of the planet. Everything from the food in our bellies to the clothes on our backs right up to the most sophisticated technology is made by the workers. Money is a claim on those material resources produced by the working class and this is where money derives its power. The capitalist system peddles the illusion that there is a shortage of money (balance the books, reduce the deficit, live within your means etc.) in order to oppress and control the labour class who are the real creators of wealth.
Money can be seen as the scoreboard of capitalism. The big capitalist class have just accumulated a large money score in their bank accounts. But ultimately in a sovereign floating currency issuing state like Britain, the government is the scorekeeper. It can change the scoreboard at any time to give itself or anyone else access to the real resources that society has produced collectively. This knowledge is toxic to the capitalist class whose power and privilege rests on having a lot of accumulated keystrokes while the majority have little.
In contrast to the parasitic capitalist class, the productive working class has produced more than enough real resources to provide everyone on the planet with proper nutrition, a decent home, healthcare, education, recreation and a job. It’s a political and ideological choice to deny people these basics.
So following the logic, society as a whole has no requirement for and can no longer sustain a system of productive activity with the sole purpose of accumulating money. The money that the capitalists seek to accumulate is instantly available at a government/central bank level and is merely a unit of measure to allocate the real resources that society has produced collectively. So society already has the all of the necessary components for a rationally planned economy while the capitalists still insist on pursuing these money numbers to the point of destruction of our species and much of life on the planet. Instead of this suicidal socioeconomic madness we urgently need a radically different model which democratically plans its use of resources and production in order to meet human and environmental & ecological requirements. This is the sustainable future for humanity and it’s called socialism. Or we can continue down the current path towards escalating barbarism and destruction of the global environment.
Our dialectic materialist method looks at things in their connections as well as how they change. Marx of course analyzed the connection between Capital, Labour and money in his Labour theory of value.
What MMT has done is to analyze the connection between money and the state. Money has no intrinsic value. It’s just computer entries and pieces of paper. Money exists and is accepted because the state names a unit of account (currency) and then imposes, by force if necessary, a tax liability payable only in that currency.
Capitalism is at its core simply the pursuit of this money through exploitation of labour, the environment and everything else it can. So the money itself which is the cornerstone of capitalism is a product and an instrument of the state. Therefore capitalism depends utterly on the authority of the state for its existence both to establish the monetary system and to enforce the capitalists’ property rights which are denominated in the state’s unit of account.
There can be no capitalist system without the state first establishing the monetary system. The surplus value is misappropriated by the capitalists primarily in the form of money. And the money is a claim on the real wealth produced by the working class through its labour and also on the labour itself. The money allows the capitalist to lay claim to labour, goods and services as and when he needs them. But he doesn’t need to permanently own and so bear the cost of maintaining the labour force as was the case in slave society. Nor does he need to hold all of his wealth in real assets like land, houses etc. as the aristocracy of old did. The modern capitalist buys what he wants and needs at his own convenience with his accumulated money.
Before capitalism developed the productive forces the state money was limited by the availability of real goods and services. The king cannot buy what does not exist. But now the productive forces are at such a peak that there is an abundance of real wealth. And the money is a claim on all of this real wealth.
The point of analyzing and understanding human society is to change it is as Marx explained. I think MMT gives us an insight into a great Achilles heel of capitalism and so the potential to undermine its entire foundation. The capitalists have just managed to collect a lot of keystrokes on the scoreboard of capitalism. And that scoreboard can be changed at will by those in charge of the scoreboard. The money is created at will by those entities that issue the currency. So a central bank under the democratic control of the working class will never face a shortage of its own money. The actual limitation is the availability of real resources. And the money can simply be an accounting tool, a unit of measure to allocate and manage those resources under a democratically planned economy to provide for the wellbeing of all of humanity.
I was rather surprised that there was so much to agree with here – yes there are a few controversial and, for me, dubious ideas such as “there can be no capitalist system without money” which I’d suggest should be: no proper economy without money, and “from Marx we know that capital owns the means of production, distribution and exchange” whereas the system of exchange in the form of banks owns pretty much everything now and I think Marxists seem preoccupied with the so called class struggle as well as materialsm (dialectical or otherwise) whilst overlooking finance’s parasitical role which has transformed what we still seem to call capitalism (now ‘new bankism’ perhaps?) so significantly.
Anyway, I sensed common purpose in the idea that because we are so deluded about the origins of money we have lost our collective power and, however you think it should change, that goes to the heart of democracy.