Monetary policy is ultimately based on a theory of money: A Marxist critique of MMT

By Costas Lapavitsas and Nicolás Aguila

During the last two decades, Modern Monetary Theory (henceforth MMT) has won wide academic recognition and public influence. Its most prominent achievements include shifting the public debate on the conduct of economic policy and reviving interest in the theory of money. The former tends to attract most of the attention of both advocates and critics of MMT, but this is unjustified. MMT policy conclusions result from its underlying understanding of money, as some of the more illuminating MMT thinkers make abundantly clear (Bell, 2001; Tcherneva, 2006; Wray, 2010, 2014). A far richer assessment of MMT economic policy proposals would result by first considering the foundations of its theory of money, that is, neo-Chartalism.

In a recent article, we contrasted MMT with the Marxist theory of money. We showed that there were four important points of disagreement between these two schools of thought, namely on: (i) the ontology of money, (ii) the state and money, (iii) state economic policy, and (iv) world money and monetary sovereignty. We supported our argument with historical examples that we omit here for reasons of space.

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