Just over a week ago there was an online spat between two high-profile left-wing bloggers, Grace Blakeley and Richard Murphy. The disagreement began after Blakeley left a comment on one of Murphy’s blog posts and centred on the relationship between Marxism and Modern Monetary Theory, or MMT. (I won’t explain what MMT is here – you can read my previous blog post on this for an intro.) In her comment, Blakeley, a Marxist, criticized MMT on the basis that it is naive and does not take into account the struggle between classes. Murphy, an MMT advocate, responded to Blakeley’s comment with two further blog posts, accusing her of making bad-faith arguments and attempting to undermine MMT. Blakeley then responded with a blog post of her own, doubling down on her position.
So who is right, Blakeley or Murphy? The short answer is: both and neither. Both bloggers rightly accuse the other of attacking a straw man; but both are also wrong precisely because they are attacking a straw man! In this blog post I will attempt to pick apart their arguments and in so doing, argue that their disagreement is at best pointless and at worst actively harmful. Let’s start with Blakeley. In her original comment on Murphy’s blog, she wrote that proponents of MMT “… seem to argue that, *if only everyone else would just listen to them*, all the questions, debates and struggles around economic policy would simply disappear overnight”. This is our first example of straw man argument. I am not aware of any proponent of MMT ever making such a claim, or even implying it.
She goes on: “If everyone woke up tomorrow suddenly accepting all of [Murphy’s] arguments, the structure of our society would not change…”. This is another straw man, as nobody is saying that it would (at least nobody I know). Henry Ford did once famously state that “If the American people only understood the corrupt nature of our money system, there would be a revolution before morning”. Ford was (presumably) being tongue-in-cheek, but there is more than a kernel of truth to his statement. MMT is obviously not going to fundamentally change society on it’s own; only a revolution will do that. However, a widespread understanding of MMT might lead people to start realizing that they are being lied to by the ruling class and their media-political lackeys, which would be helpful in raising class consciousness.
Blakeley rightly criticizes Murphy for stating that “The public most definitely does not want class war… They want… a competent government that delivers”. In a way Murphy is right, as I’m sure the public doesn’t want class war; but as Blakeley points out, they are in one whether they like it or not! This is just the nature of capitalism, as Marx realized over 150 years ago. Murphy clearly does not understand that – but he is not a Marxist, and doesn’t claim to be. In fact he seems quite scathing of Marxists in general, for reasons that are difficult to fathom (we are on your side Richard!). But this doesn’t mean he is wrong about the nature of government spending and taxation; on the contrary, he is generally spot on when it comes to these things.
Much as Murphy’s disdain for Marxists is difficult to fathom, so is the disdain many Marxists seem to have for MMT. After all, MMT is just an accurate description of how government spending and taxation work in modern capitalist societies – and why should anyone have a problem with that? In my view, to criticize MMT on the basis that it includes nothing on class conflict is to miss the point entirely. It is not a theory about class conflict, nor is it meant to be. We don’t need a theory of class conflict in capitalist societies as Marx has already provided us with one which is perfectly adequate. What Marx didn’t do was provide a theory of fiat money – that is, money with a value that is not linked to the value of a commodity such as gold – which isn’t surprising as fiat money didn’t exist in Marx’s time.
The antagonism between Marxists and Modern Monetary Theorists is unfortunate because the two theories complement each other. Marx provided a comprehensive account of capitalism which is still relevant to modern capitalist societies, with the exception that it doesn’t include anything on fiat money. If fiat money had existed at the time, I’m sure Marx would have written about it. MMT is a theory that neatly fills this gap. Not only that, I think there is clear crossover between the labour theory of value advocated by Marx and the tax-driven nature of the value of fiat money advocated by proponents of MMT. (Recall that Marx’s version of the labour theory of value says that the exchange value of commodities is proportional to the social necessary labour time required to produce them.)
Fiat money is a unique commodity in that it has no use-value, only exchange value. The existence of fiat money seems to contradict the labour theory of value as it requires zero labour to produce, yet still has exchange value. But MMT explains that the value of a fiat currency is derived from taxes. Governments levy taxes on their citizens which are only redeemable in the currency they issue; and the only way most people can get hold of this currency is by selling their labour-power. Thus, combining the labour theory of value with the theory of tax-driven money provides us with a complete theory of why fiat money has value. This shows that the only way fiat money can have value is by forcing people to sell their labour-power in order to obtain it, which tells us something fundamental about the nature of money.
There are other ways in which MMT can help reinforce Marxist ideas. MMT demonstrates that governments are far more powerful and have far fewer constraints on them than we are usually led to believe. A widespread understanding of MMT will not bring about a revolution on its own, but it might help people to imagine a society existing beyond capitalism – and surely that can only be a good thing.