April 9, 2019
The mainstream attack on MMT is nothing less than an attempt to disguise the glaringly obvious error at the center of the mainstream view of economic thinking. Mainstream economics is a nihilistic theory devoid of moral anchor. Mainstream economics ceased to explore the operation of the real economy decades ago and has become an intellectual exercise that assumes the organization of modern society is justified simply because that is how it is. While some mainstream economists may want to tinker around the edges to make the system more fair few really want to call into question the organizing realities. The biggest reality they do not wish to face is that money is a symbolic creation rather than an actual productive resource.
Mainstream economics abandoned any attempt to justify the payments to capital owners when they surrendered the field to Post-Keynesians at the end of the Cambridge controversies. Capital is not paid due to its productivity. Capital is paid as a residual that is left over after production occurs. Capital is simply another form of rent.
With the abandonment of any attempt to justify the role capital plays in the production process mainstream economists ventured further and further into the intellectual woods. They began to abandon any semblance of justifying the payments to capital. The distinctions between capital as machinery and capital as money blurred and the mainstream literature simply stopped caring about the topic. Money is capital, and control of money gives the lords of finance a right to call upon the income stream of society, why would anybody question that?
Machinery and money capital are the same thing in the writings of most mainstream economists. This line of thinking places the banking industry, not the engineering community, as the source of economic progress. The ability of the bank to make a loan is how the house is built. The ability of the bank to finance the creation of a new business is the origin of the value of that business. Or so the mainstream vision presumes.
The ability to fund the action is the power of capital. Capital, in this mainstream vision, is the power to fund the activities of the people who wish to take action. The mainstream has spent decades building up a theory based upon the assumption that funding of activities is the justifying reason for capital to be paid its income. The reasoning of the mainstream is simple: finance risks its wealth in order to pay people to take economic actions and that risk is the reason finance should be paid. Finance funds those actions through the selfless acts of savings done by the titans of finance and that savings is costly in terms of sacrificed personal consumption. The payment is clearly justified, within this perspective, because each act of financing risks the loss of that sacrifice.
MMT calls into question this fundamental justification of the power of the financial elites. By showing that money is a creation of the state and banks it threatens the very myth that underpins the massive stream of income diverted to the overlords of finance. MMT shows that government creates money through the act of spending and destroys it through taxation. MMT forces economists to admit that banks do not fund lending through savings. Instead MMT shows that savings is the result of borrowing and that the lords of finance literally create the money they lend with the wave if a hand. If the money is simply created by whim, it is much harder to justify the incredible payments these financiers obtain.
Mainstream theorists do not attack these fundamental points of MMT, they pretend that their actual issue is with the outcomes of uncontrolled government spending. Of course MMT would never justify such an inflationary policy. Instead MMT demystifies the true source of power in finance and this is what is feared. MMT points out that money is a creation of society and currently we have given a monopoly on that creation to the financial elites who have used that monopoly to extend their personal power. They have used that monopoly to build mansions and private jets while letting millions go without educations and healthcare. They have used that monopoly to empower themselves as economic overlords while indebting their fellow citizens without justification.
MMT has the gall to point out that society is only at the mercy of these titans for as long as we choose to be. Mainstream economists are afraid because MMT practitioners have pointed out that the emperor has no clothes. For as long as nobody was hearing what MMT was saying the emperor could dance, but now the emperor’s aides are afraid the citizens might be listening.
[This post was posted as anonymous as the author is a grad student who fears his professors.]