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This Year’s Underground Sensation: Modern Monetary Theory

The economic ideas that once fueled deficit mythbusters and provided hope for a pandemic recovery have spawned a vibrant political subculture.

Timothy A. Clary/Getty Images

At the close of 2020, it’s hard to think of another year in living memory that has forced such a radical rethinking of our politics and social life. The Covid-19 pandemic will be remembered as a dire time in American life, but its disruption may yet open us up to new ideas and social possibilities, especially when it comes to the power of the government to spend. Modern Monetary Theory posits that a governing body like the United States federal government, which borrows and spends in the same currency it issues, can never run out of money and that taxes serve to take excess money out of circulation rather than to fund the government. MMT was considered fringe a few short years ago. It’s edged closer to a bipartisan centrist policy in the wake of the Cares Act and the Federal Reserve’s swift action to buoy securities markets; everyone but the most reactionary cranks wanted to turn on the money hose to prevent the spring Covid-19 shock from turning into a Great Depression.

Though the core concepts about currency-issuing governments have existed in certain academic pockets since the early twentieth century, the theory gained significant public visibility in June when economist Stephanie Kelton released her book The Deficit Myth, the first attempt to bring MMT to a general audience. Kelton isn’t a household name like Milton Friedman, but her book reached The New York Times nonfiction bestseller list. Beyond this new lay audience, MMT has gained a growing network of adherents. A smaller coterie of thinkers has started to develop these unorthodox economic ideas into something much broader than a mere explanation as to why we shouldn’t sweat government deficits. There’s a vibrant subculture being spawned around MMT that reminds one of the old adage about the seminal underground band The Velvet Underground: Not many people saw them play live, but everyone who did started a band of their own.

The players in this next wave of MMT enthusiasm include an interdisciplinary group of economists, legal scholars, and humanities Ph.D.s convened by the Modern Money Network project. The Modern Money Network is staking out a more capacious leftist, social, political, and cultural theory centered on money and its governance. They are explicitly competing with Marxism’s focus on class struggle and the strictly Marxist-socialist left associated with Jacobin magazine, which rose to prominence with Bernie Sanders’s presidential runs. The network has put together conferences and scholarly volumes under the title Money On The Left, along with an interdisciplinary interview podcast of the same name. The Modern Money Network’s “Humanities Division” puts out the Money On The Left podcast as well as a more conversational offering called Superstructure, which operates in the same freewheeling, Extremely Online register as scores of popular left-wing podcasts such as Chapo Trap House.

Where conservatives, liberals, Marxists, and fascists alike cast politics as a distributional fight over scarce resources, the MMTers are more concerned with the political and legal frameworks that structure money creation, credit, and debt. In other words, politics and the economy aren’t fundamentally defined by the exchange of stuff or the mastery of nature; rather, what matters are peoples’ obligations to one another. The terms of those social obligations can be more or less productive, equitable, or sustainable. Crucially for the MMTers, because credit, debt, and money are political and legal creations, they can be changed through political processes without limit. As MMN Humanities codirector Scott Ferguson put it, “We are committed to a non-scarce, non-zero sum politics and relationship to culture, social forms, and aesthetics, and MMT resonates with that.”

Nathan Tankus, the research director for the Modern Money Network, has championed the broader ways that MMT can be applied to political questions. Tankus insists it’s a mistake to understand current political and economic fights as primarily determined by supposedly objective material constraints. Rather, resources are “always constructed by our social understandings of the world, subject to very different interpretations,” Tankus explained. “This isn’t to say that MMT has a more ‘idealist’ account or something like that, but to reject the idealist/materialist dichotomy all together.” In layman’s terms: We collectively decide just what counts as a resource, economic base, or productive work. Though Tankus is best known for his technical analyses of Federal Reserve policy, his own thinking here draws as much on ancient history or anthropological research into religion and kinship as cold, hard economics.

Money, for Tankus and the Modern Money Network, isn’t just a representation of how much of one thing it takes to buy another thing—it’s the expression of our politically molded collective understanding of what’s truly valuable. For these MMTers, our economic arrangements are shaped by ideas as much as seemingly “objective” material facts. Those arrangements can change much more readily than even others on the left may be ready to acknowledge and by very different means than, say, the long grind of one labor struggle after another. For this reason, some of the Money On The Left/Superstructure hosts joke about “turning Marx on his head,” reversing Marx’s famous line that his materialist philosophy turned the arch-idealist Hegel on his head.

The Modern Money Network’s effort to broaden MMT’s horizons picked up steam in response to the end of Bernie Sanders’s second presidential campaign, a moment of despair and hopelessness for many on the left.

But as much purchase as MMT has found in this year’s fiscal policy debates, the attempts to extend the theory to larger political, social, and cultural questions have barely begun to attract any attention. The Modern Money Network’s Humanities Division only got noticed outside the ranks of the MMT-converted this fall and not necessarily positively.

As one listener put it on Twitter, their podcasts have “just enough Heidegger to confuse the economists. just enough economics to confuse philosophers. all of it not specific enough to even be wrong. an interdisciplinary mish mash making even the film theorists blush.” Likewise, another wrote, “*MMT humanities bro rips bong* MMT bro: the ontologic historical problematic mediates and reifies through the univocal application of a transhistoric monetary epistemology that mediates the primordial ooze that is ‘your hand’ and ‘toothpaste.’”

And even the more strictly defined theory of government spending power has its ardent left wing critics: Doug Henwood, a longtime left-wing commentator on economics and finance, wrote in Jacobin that MMT amounted to little more than magical thinking: “A few computer keystrokes and everyone gets health insurance, student debt disappears, and we can save the climate too, without all that messy class conflict.” This one neat trick solves society!

The impression may be a fair one. On one episode of Superstructure, host Natalie Smith audibly hit a bong before asking, “What is value?” (She maintains this was a bit, but she did actually hit that bong.) The discussions can be difficult to follow for listeners who haven’t spent time in a graduate humanities classroom or graduate students’ parties. The episode that brought them the widest attention, a debate with Chapo’s Matt Christman over whether or not politics is a zero-sum game, was littered with a frustrating cascade of misread rhetoric and a healthy helping of half-baked (or perhaps extremely baked) gotchas as these rival schools struggled through the fog of their differences.

But just because they may be stoners who throw around ten-dollar words doesn’t mean they aren’t on to something. There’s a lot of empirical evidence on their side: As the anthropologist David Graeber showed in his book Debt: The First 5,000 Years and John Maynard Keynes before him, money has always been a government project to account for credits, debts, and tax obligations. There’s no evidence that any society in history ever operated a barter economy with privately issued money as a mere medium of exchange, the common primal just-so story of economic life that informs both classical political economy and the work of Karl Marx. The Cares Act, perhaps the most effective anti-poverty policy since the Great Society, really was “a few computer keystrokes ... without all that messy class conflict.” Since the 1970s, and especially since 2008, central banks have become the most powerful centers of economic power in the world by making money out of thin air, without spurring runaway inflation.

Neither Tankus nor the Money On The Left crew necessarily thinks they’ve nailed down their grand MMT social and political theory. Skeptics doubt they’ll get to something beyond Keynesianism, or some monetary twist on Marxism. But they are giving it their best shot. They are working on policy proposals that are funded not by taking plutocrats’ stuff but by granting different institutions the right to create money. One paper by members of the Money On The Left project called for the creation of a Fed-backed, university-issued currency, known as “the Uni,” to both support operations and provide an academic jobs guarantee, insulating scholars from questions about whether their work is a worthy use of “taxpayer” money.

The Uni project is a model: Instead of funding the project by taking existing monetary wealth from rich peopleand thus ultimately granting the propertied classes the privileged place they enjoy in our politics as “tax payers”it undertakes public investment using the state’s unique money-creating power. This has some profound political implications: if investment in public projects like universities or infrastructure ultimately stems from the state’s money-creating powers, not taxes, then a politics that fully harnesses that power would make the rich politically irrelevant. The government still taxes, but to check inflation and accumulations of unproductive wealth.

MMTers have the ear of the left wing of the Democratic Party. Rashida Tlaib and Alexandria Ocasio-Cortez’s recent Public Banking Act owes more to MMT and ideas about money creation as a governance tool than the traditional socialist focus on expropriating already existing wealth. MMT also deeply informs visions of a path through the climate crisis: Ocasio-Cortez rests her case for financing the Green New Deal on its framework. Their ideas have begun to inform our political imagination: The superlative science fiction writer Kim Stanley Robinson’s latest novel, The Ministry For The Future, is essentially about using MMT to create a “carbon coin” that incentivizes keeping fossil fuels in the ground and wetlands preserved.

The advocates for a more expansive MMT return again and again to the danger of zero-sum political economy as a dead-end for the left. “If you’re thinking on zero-sum terms, you’re not going to out-exclude the right. They want it. They don’t have any moral anxiety about exclusion,” explained Maxximilian Seijo, one of the cohosts of Money on the Left and Superstructure. “As a mental health matter I’ve found MMT to be very therapeutic. It doesn’t take that easy path to self-loathing, assuming everything is always going to be horrible suffering. Everything isn’t always going to be horrible suffering, so we can look at the suffering that is existing and be outraged by it.”