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Modern Monetary Theory Is An Old Marxist Idea – OpEd

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There is nothing new under the sun

Modern Monetary Theory, or “MMT”, has been getting a lot of attention lately, often celebrated as a revolutionary breakthrough. However, there is absolutely nothing new about it. The very basis of the theory, the idea that governments can finance their expenditures themselves and therefore deficits don’t matter, actually goes back to the Polish Marxist economist, Michael Kalecki (1899 – 1970). 

MMT as a centralisation tool 

MMT says that the national debt means that we owe the money to ourselves, so the central bank in combination with the approval and blessings of the political branch can now together spend as much as they want without facing any consequences. In other words, we can print our way to prosperity. The only real problem according to the theory is that there is not enough money and not that resources are scarce and therefore limited. To understand the basic idea behind this, let’s use the game “Monopoly” as an example. If players decide to double the amount of monopoly-money to play with, the logical outcome will be that people start to pay much higher prices e.g. for the same amount of locations. Whenever more money is chasing the same amount of goods, prices will rise. Another lesson is that the bank will always win, especially when it has the power to change the rules at any time during the game.

The main cause for most of the problems of our days is the current central banking system. But how many people have ever thought about what money is, or how did it came into existence? How many know whether it was always used a debt security by government declaration or if it once was a property title, as it still pretends to be? Well, I can tell you that over the past decades, I haven’t met a lot of people who really thought about these questions. At the same time, our public education system and the mass media ensure that the next generation won’t think about them either. Meaningless distractions, alternative facts and daily doses of fear effectively crush most inquisitive instincts. It’s a process that Immanuel Kant recognized a long time ago and described in the following way: “First, these guardians make their domestic cattle stupid and carefully prevent the docile creatures from taking a single step without the leading strings to which they have fastened them. Then, they show them the danger that would threaten them if they should try to walk by themselves. Now this danger is really not very great; after stumbling a few times they would, at last, learn to walk.” However, examples of such failures intimidate and generally discourage all further attempts.”

With MMT, a massive shift in terms of centralization of power will take place. Drastic changes in our current system would be possible, with a massive push away from the private sector and from individual freedom towards more government control. This is extremely dangerous. History is our witness that centralization in the hands of government, particularly when coming from a so-called “morally superior” ideology, never had a good outcome for the people. State officials, institutional actors and those closest to the top of the power pyramid were the only ones to ever benefit from such systems.

MMT essentially gives carte blanche to those interest groups to boost government spending to astronomical levels. At the same, it allows within a very short period of time a government-enforced, massive redistribution of wealth and a gigantic misallocation of capital.

Over the next few years, the biggest growth potential anywhere in the market, besides the military-industrial complex, will be found in everything that is related to climate change. You can be sure that governments will just print massive amounts of money and flood this sector with it, where you will find a tremendous number of formal politicians and bureaucrats creating artificial and well paid government-sponsored jobs. The European Union alone wants to spend EUR1 trillion until 2030 on this new sector. If Trump loses the next election, Americans can also be sure that MMT will finance the same moves over there too, most likely with the “New Green Deal”.  

Let me quote Joan Robinson, who used to be a friend of Kalecki, MMT’s inspirer, during his days at Cambridge University. She summarized his theory as follows: “the workers spend what they earn and the capitalists earn what they spend”. Interesting, isn’t it? This is how the original Marxist thinkers defined capitalism. You might have understood that in their eyes the individual is the worker and when everything is under government control, the politicians and bureaucrats become the real capitalist. This is exactly the opposite of my understanding of capitalism, which is also only possible in a free and decentralized society. Of course, it is important to understand that the term “capitalism” has been purposefully misdefined and hijacked from the beginning by Marxist thinkers. 

Far-reaching consequences 

MMT, also conveniently facilitates other dangerous policies and ideas, that so far seemed unrealistic, like Universal Basic Income and “helicopter money” that have been particularly propagated by government-sponsored economists for the past few years. It sounds pretty cool that people will not have to work to make a living – they can lay back and enjoy money for free provided by the government. But as we all know every coin has two sides, and to me as a fan of history, and monetary history in particular, an old saying comes to my mind: “Gold is the money of kings, silver is the money of the bourgeoisie, barter is the money of peasants – and debt is the money of slaves.”

It would seem that the only thing history actually teaches us is that we learn nothing from it. Nevertheless, there is hope, due to the decentralized and open-source internet and the increasing connectivity and access to knowledge. These ensure the competition of ideas, the emergence and evolution of different schools of thought, and the means for millions of people to learn about the world and to become conscious individuals with their own opinions. In addition to that, our financial system is also being challenged and pushed towards a more positive and healthy direction, as hard assets, blockchain applications and cryptocurrencies are laying the foundation for a decentralized approach, where financial sovereignty is key and privacy is respected.

For now, however, we still live in a two-class society, divided between those who have to pay taxes and those who live off them. As you can imagine, the above-mentioned changes and shifts are not welcome by government and its servants. They see a return to a culture of public debate, based on respect and on the premise that we can “agree to disagree”, with the humble understanding that no one knows the truth, as a threat. Therefore they enforce a de-industrialization agenda in combination with mass-migration, using the climate hoax as an excuse to speed up a cultural suicide. They prefer to have a monoculture and are against the amazing beauty that lies in complexity, in different cultures, in different regions, with different languages and beliefs. By splicing it all together, they destroy all of them at once.

At the end of the day, what MMT, the Green New Deal, QE, NIRP, Helicopter Money or any other sort of government promise or intervention have in common is that they are all collectivistic by definition, aimed against the individual and based on the crazy findings of the “Economic School of Zimbabwe” – where everyone became a trillionaire. Henry Hazlitt described it best, in his “Marxism in One Minute“:

The whole gospel of Karl Marx can be summed up in a single sentence: Hate the man who is better off than you are. Never under any circumstances admit that his success may be due to his own efforts, to the productive contribution he has made to the whole community. Always attribute his success to the exploitation, the cheating, the more or less open robbery of others.

Never under any circumstances admit that your own failure may be owing to your own weakness, or that the failure of anyone else may be due to his own defects — his laziness, incompetence, improvidence or stupidity. Never believe in the honesty or disinterestedness of anyone who disagrees with you.

This basic hatred is the heart of Marxism. This is its animating force.”

Claudio Grass

Claudio Grass

Claudio Grass is a Mises Ambassador and an independent precious metals advisor based out of Switzerland. His Austrian approach helps his clients find tailor-made solutions to store their physical precious metals under Swiss and Liechtenstein law. He is the founder of www.claudiograss.ch and recognized as an expert on monetary history, economics, and precious metals. A financial and economic speaker and publicist. He writes about global markets, international finance, geopolitics, history and economics. Claudio is a passionate advocate of free-market thinking and libertarian philosophy. Following the teachings of the Austrian School of Economics, he is convinced that sound money and human freedom are inextricably linked to each other.

2 thoughts on “Modern Monetary Theory Is An Old Marxist Idea – OpEd

  • Avatar
    February 28, 2020 at 12:42 pm
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    This article is totally wrong and misleading. Kalecki has never believed that capitalist governments can solve their problems such as unemployment. He believed that unemployment is just a capitalist strategy to control labor. And the idea of deficit was supported by Milton Friedman for one reason in that the bigger the deficit will force politicians and government to eliminate social programs designed to help the needy people. Thus, Kalecki was correct in arguing the class conflict is the major contradiction under monopoly capitalism and it is the generator of all problems that no capitalist government can control.
    Finally, the issue of the monetary creation to increase aggregate demand was presented by Friedman as well. This was essential component of his monetary mechanism by the the increased in money supply can increase employment and the GDP. And the idea of the basic income was introduced by F. Von Hayek for the reason that people should receive a minimum income for protecting private ownership. That is to say, it is a payment for protecting capitalism from attacks and collapse by the marginalized people.
    In short, these policies and others including MMT are designed for the perpetual domination of capitalism. And this ideas has nothing to do with Marx and Marxist thinking which aim at the replacement of capitalism by a system that is democratic where means of production are owned and managed by the working people. And this new system will eliminate exploitation, imperialism, occupation, racism, immorality, poverty, unemployment, and the rest of problems created by capitalism and slavery.

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  • Avatar
    February 28, 2020 at 1:51 pm
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    This piece actually borders on being silly. I say this as someone who has always thought there is a fly in the basic premises of MMT. But firstly, when you critique a theory, start with understanding what the theory is. Some MMT theorists may claim Kaldor, Kalecki and Robinson as their theoretical roots, but no one the Cambridge group advocated unlimited Monetary expansion. Nor does the MMT crowd by the way. They claim you can expand up to the point of full employment. Kalecki would certainly have been surprised by claims that the flaws of capitalism can be resolved by printing money. This is certainly not the kind of idea Marx would have advocated either. The MMT theorists have a very tenuous link back to the Cambridge group as many of them were initially influenced by, or students of, Hyman Minsky, who was not a Marxist but could be called a Keynesian-Schumpeterian. On the whole this piece attempts to smear MMT by associating with something assumed to be bad-Marxism. It then critiques MMT on the basis of a misrepresentation of policy. It entirely ignores the descriptive analytic parts of the early Cambridge Keynesians, and proceeds to engage in guilt by hypothesized association. If you want to critique a theory, go for it but do better than just throwing rhetorical bombs at an idea you don’t like. After all, wouldn’t you ask that people critique Hayek and Mises on the basis of what they actually said and wrote, rather than just throwing negative associations at them?

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