On MMT

Does the left want paternalistic technocracy, or democratic socialism?

Richard Murphy wrote a blog post on Friday, naming me as someone who deserves criticism for failing to advocate Modern Monetary Theory (MMT). If you’re not familiar with the theory, Murphy has made a video explaining it here.

In his blog, he claimed that my failure to voice support for the theory comes from a ‘desperation to undermine Zack Polanski’, which is slightly strange given that I joined the Greens to endorse Polanski very early on in the leadership race. This kind of straw man argument has, unfortunately, become typical of MMT advocates online - and I wanted to take this time to, calmly and rationally, outline my issues with the theory.

Murphy claims that those who reject MMT tend to rely on five main arguments:

“First, they suggest that MMT says governments can “print money without consequence”, but that is absurd… Second, MMT’s opponents claim it ignores the role of tax… Third, they say that MMT denies the need for bond markets, and so it is irresponsible… Fourth, they argue that MMT would lead to runaway inflation, but there is no evidence to support this claim… Fifth, they insist MMT lets governments off the hook – that it tells politicians they can do everything without choices.”

Needless to say, I have never made any of these arguments. Those with a sophisticated understanding of MMT would find it easy to refute each any of these points - which is precisely why Richard chose them. As far as I’m concerned, MMT is an entirely internally-consistent theory - and one which largely describes the operation of fiscal and monetary policy correctly. My issue is that proponents of MMT have an utterly incoherent view of state power under capitalism.

Here is the comment I left in response to Richard’s article:

The issue with the entire discussion around MMT is that its proponents believe they’ve discovered the secrets of the universe. They 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 perspective assumes that decisions about economic policy are made based on rational, intelectual discussion - when in fact they are determined by class struggle between different interest groups. No one seriously believes its *rational* for the government to spend billions on corporate welfare for the fossil fuels or finance sectors - yet this is government policy precisely because the fossil fuels and finance sectors wield such immense power within the British state.

Even if you won the debate on MMT once and for all, capitalists would not cease to organise within the state for spending that benefits capital - because the state is a social relation, not a neutral tool some clever group of technocrats could simply pick up and use as they wish. The austerity regime pursued by the Tories never had any solid evidence base or theoretical backing - it was pursued preicsely because it augmented the wealth and power of those at the top, and crushed everyone else into submission. If you spend all your time lecturing people about how they’re “wrong” about how money is created, you’re not only alienating people, you’re achieving essentially nothing, becuase you’re not advancing an argument that helps to shift the balance of class power in favour of labour.

TLDR: If everyone woke up tomorrow suddenly accepting all of your arguments, the structure of our society would not change - the British state would continue to create money and dish it out to vested interests in finance, fossil fuels, and defence, while cutting social security and public services on the basis that such spending was wasteful and discouraged work. Fiscal policy is not some neutral, technocratic exercise in determining what’s ‘true’ - it’s a site of class struggle.

Over the weekend, Richard responded with two further posts, both directed at me, which you can read here and here. Both posts are very long (one is just a long list of questions that I believe he wanted to set me as homework?), but he writes one line that exposes his position:

The public most definitely does not want class war… They want… a competent government that delivers.

I hate to break it to Richard, but we already exist in a state of class war - and the ruling class is winning. Providing £17bn in subsidies to fossil fuel companies after meeting with fossil fuel lobbyists 500 times, while millions languish on NHS waiting lists is class war. Dishing out COVID loans to powerful businesses with connections to former prime ministers, while ordinary people lose their jobs and their lives is class war. Watering down a proposal to properly tax private equity profits, while reneging on promises to strengthen workers rights is class war.

We already live in a perpetual state of class warfare. It’s called capitalism. The socialist response is not to bury our heads in the sand and pretend that we could convince the ruling class to play nice if they just listened to us (or just ‘learned MMT’). The socialist response is to support people to fight back. As Bernie Sanders once put it, “If there’s going to be class warfare in this country, its about time the working class won that war.”

The Battle of Orgreave, when Margaret Thatcher sent mounted police to beat striking miners, was a moment when the class war waged constantly by the British state against working people became visible for all to see. Credit: https://www.theguardian.com/artanddesign/2016/dec/16/battle-orgreave-lesley-boulton-photograph

Good policies are important - they can galvanize people around a shared vision, and help prepare a potential socialist government for office. But the merits of a socialist policy agenda should not be assessed based on whether it supports the creation of a “competent” government that can more efficiently manage the operation of a capitalist economy; it should be assessed based on whether it can undermine the power of capital and strengthen that of labour.

Policy is, of course, only one part of the equation for socialists, because we realise that politics means much more than elections. Political battles are fought every day - on the streets, on the shop floor, and in every part of the British state. Socialists know that we need to spend at least as much time and energy organising people in their workplaces, in their communities, and on the streets as we spend organising within political parties. Socialism is about shifting the balance of power in the whole of society - and winning state power is just one battle in that much larger war.

In the meantime, arguing with establishment apparatchiks about the technical operation of fiscal policy will change nothing. The people in power are cashing cheques written by capital, and they’re not going to adopt policies that undermine the interests of capital unless they’re forced to. Like they were forced to back in 1945 when organised workers pushed a reticent Labour Party to create the NHS and the wider welfare state.

Today, the Green Party is going one step further. Instead of pleading with mainstream politicians to adopt a marginally more progressive policy agenda, the Greens want to gain power within the British state and use it to demand change. When he won the leadership race, Zack Polanski told the Labour leadership: “We’re not here to be disappointed by you. We’re here to replace you.”

Gaining electoral power is one thing; changing the structure of capitalism from within the British state is quite another. The first will be challenging for the Greens; the second will be unimaginably difficult. The pressure leaders like Polanski will find themselves under when they enter the corridors of power will be immense. And this pressure would not lessen in the unlikely scenario that he manages to convince everyone that monetary financing is, in fact, a good idea.

The corporate executives, financiers, and lobbyists who have taken so many meetings with Rachel Reeves over the course of the last year and a half aren’t really worried about the size of the deficit. They’re worried that a genuinely democratic movement might figure out how to use all the levers of state power - from monetary, to fiscal, to military - to constrain their influence, and empower ordinary people. No amount of ‘learn MMT’ is going to convince them to lay down their arms and hand over the reins of the British state to a movement over which they have no influence.

I left a short response to Richard under one of his most recent posts, which I think adequately surmises the nature of our disagreement:

Thanks Richard – your post confirms my assumption that the argument for MMT is essentially a technocratic one – i.e. how do we make the existing capitalist system work more effectively, rather than how do we effect a systematic redistribution of wealth and power in favour of working people.

It’s not surprising that we don’t agree on this issue, because as you’ve clearly laid out here, you are not a socialist. There’s nothing wrong with that, but you also shouldn’t expect those who hold a fundamentally different view about the operation of capitalism to agree with every policy proposal you suggest.

Murphy is not a socialist. But you can still be a socialist and agree with many of the precepts of Modern Monetary Theory (I count myself among this group). A socialist, however, would realise that those precepts were secondary to the broader project of building power from below.

Socialists who sympathise with MMT have a strategic decision to make: do they spend decades trying to teach people how government spending really works, while much more powerful forces preach the common sense argument that the government is like a household, and can only spend as much as it earns? Or do they spend their limited time and resources supporting people to win the battles that they are already fighting in their communities, in their workplaces, and on the streets - and advance a policy agenda that supports them in these struggles? Less ‘learn MMT’; more ‘freeze the rent’, ‘strengthen workers rights’, and ‘public ownership now’.

I actually believe this question has a much broader relevance for the left. At issue is what kind of project the socialist movement really is. Is it a technocratic, paternalistic project, aimed at electing a new managerial class capable of administering capitalist institutions more effectively? Or is it a democratic, popular movement, aimed at supporting people to take back control over their lives? In my mind, it always has been, and always will be the latter. Which means socialists need to spend less time teaching, and much more time listening.