In reply to my post on James Meadway’s critical ‘Tribune’ piece, our own Charles Adams considers that “the MMT [Modern Monetary Theory] debates do not get to the nub of the issue, which is really that it is all about the distribution of power. The state has real power but may choose not to use it in the way that would be most beneficial, and they may use fictional monetary constraints to justify their action or inaction.”
I have no difficulty with agreeing with this, but it still does seem odd that Labour supporting people like James Meadway argue against MMT, in effect (as suggested in the article), simply because they want the support of other economists and less criticsm in the media – a policy lacking robustness and of really nascent despair….
Where I think an MMT outlook is more helpful than I properly grasped earlier is that it completely destroys the myth that, in Stephanie Kelton’s lovely phrase ‘money grows on rich people.’ It highlights that the state creates money and that rich people have simply been more successful in capturing its supply than is either fair or justified. It also draws attention to the falsehood that value is created only in the private sector, by pointing out that, (with the arguable exception of private banks) money is not.
Further, it easily and clearly facilitates the obvious conclusion that in privatising state assets or in creating private income streams from the state, we are enabling a private minority to extract rent from the state. This is the surest form of money – money that is never in doubt because the state can never go bust since it creates the money in the first place. When we added ‘Private Finance Initiative’ facilities, where the same state both pays someone to lend it money (which it never actually needs – because it creates it) and pays also a rent to use those same facilities, then that is a double helping from the state to the private sector. Whilst the private sector maximises ‘shareholder value’, the democratic state is somehow presumed to have no shareholder members at all.
So I agree that distribution of power is important but I do think that knowing exactly where money comes can be mighty helpful in torpedoing that actual power, by better exposing its bogus ‘justification’.
That is why I imagine many consider MMT to be progressive; not because its understandings are inherently so in themselves. But simply because, in order to avoid a fair and logical left of centre conclusion, you have to lie about your intentions.
MMT helps to draw attention to the John Maynard Keynes dictum that, for a nation, it is wrong to say ‘we cannot spend more than we earn’. By contrast, as a nation ‘we cannot earn more than we spend’.