Re: The crisis of bourgeois economics
Posted: Sun Dec 06, 2020 3:11 pm
Modern monetary theory
06.12.2020
Part 1: Chartalism and Marx
Michael Roberts is a renowned contemporary expert on Marxist political economy, author of several books and articles on the crises of capitalism. In his article, he examines modern monetary theory, a trend of economic thought that is gaining popularity among the left, including in Russia . - Ed .
Modern monetary theory (MMT) has gained popularity among leftist economic views in recent years. New Left Democratic spokeswoman Alexandria Ocasio-Cortez , her supporter and leading advocate, recently openly discussed the SDT and its political significance with Labor left-wing economic and financial opinion leader John McDonnell .
SDT began to occupy such a place in the left environment, since it offers a theoretical justification for the policy of budget spending financed by central bank money, as well as increasing the budget deficit and public debt without fear of crises - and thus supports the policy of public spending on infrastructure projects, creating jobs and industry in stark contrast to neoliberal mainstream policies of austerity and minimal government intervention.
In this and a number of subsequent articles, I offer my view on the value of the SDT and the political conclusions from it for the labor movement.
First of all, I will try to provide a general description of the SDT in order to identify its similarities and differences with Marx's monetary theory.
So, SDT is based on ideas called Chartalism. Georg Friedrich Knapp , a German economist, introduced the term "Chartalism" into his state theory of money, which was published in German in 1905 and translated into English in 1924. The name comes from the Latin charta , meaning "coupon" or "ticket". Chartalism argues that money emerged from the government's efforts to manage economic activity, not as a spontaneous solution to barter problems or a means to denote debt.
Georg Friedrich Knapp
Chartalism argues that generalized commodity exchange historically emerged only after the state was able to create the need to use its sovereign currency by taxing the population. For the chartalist, the ability of money to act as a unit of credit / debt accounting is fundamentally dependent on trust in the sovereign, or on the sovereign's ability to impose its will on the population. The use of money as a unit of account for debt / credit predates the emergence of an economy based on generalized commodity exchange. Thus, Chartalism argues that money first emerged as a means of accounting from debt, not exchange. Keynes was a very big fan of Chartalism, but the latter is clearly the opposite of Marx's views that money is analytically incomprehensible without an understanding of commodity exchange.
John Maynard Keynes
Could Chartalist / Modern Monetary Theory (MCT) and Marxist Theory of Money be compatible or complementary, or is one of them wrong? My short answers are as follows:
money precedes capitalism, but not because of the state;
yes, the state can create money, but it does not control its price, so that confidence in its currency can disappear;
the strict chartist position is incompatible with the Marxist theory of money, but the SDT has some aspects that complement Marxism.
Let me now try to expand on these arguments.
Modern money theory and the Marxist theory of money complement each other in the sense that both are endogenous theories of money. They both reject the quantitative theory of money, namely that inflation or deflation depends on the decisions of central banks to pump up the money supply with credit or not. On the contrary, it is the demand for money that drives the supply: i.e. banks issue loans, and as a result, deposits and debts are created to finance loans, and not vice versa. In this sense, both the SDT and the Marxist theory recognize that money is not a veil over the real economy, but the modern (capitalist) economy is monetary through and through.
Both Marx and MMT advocates agree that the so-called quantitative theory of money, as outlined in the past by Chicago School economist Milton Friedman and others, that dominated government policy in the early 1980s, is incorrect. Governments and central banks cannot soften the ups and downs of capitalism by trying to control the money supply. A gloomy report on current quantitative easing (QE) programs adopted by major central banks in an attempt to stimulate the economy confirms this. Central bank balance sheets have skyrocketed since the crisis in 2008, but bank lending has not increased, nor has real GDP growth.
Milton Friedman
But the Marxist theory of money has an important difference from SDT. Capitalism is a money economy. Capitalists start with money capital and invest it in production and commodity capital, which, in turn, through the use of labor (and its exploitation), ultimately brings new value, which is embodied in an increase in money capital. Thus, the demand for money drives the demand for credit. Banks create money or credit as part of this process of capitalist accumulation, but not as something that separates finance capital from capitalist production. SDT / Chartalists claim that the demand for money is driven by " animal spirits»Individual agents (Keynesianism) or a state in need of credit (Chartalism). On the contrary, the Marxist theory of money holds that the demand for money, and therefore its price, is ultimately determined by the rate of capital accumulation and capitalist consumption.
Capital accumulation
Theory and history of money
This shows the basic contradiction between modern monetary theory, its chartist origins and the Marxist theory of money. Marx's theory of money is specific to capitalism as a mode of production, while SDT and Chartalism are ahistorical. For Marx under capitalism, money is a representation of value and therefore of surplus value. In the scheme "M - C ... P ... C '- M'" [money] M can be exchanged with [commodity] T because M represents C and M 'represents C'. Money could not have made exchange possible if the capacity for exchange was not already inherent in commodity production, if it were not a representation of socially necessary abstract labor and, therefore, value. In this sense, money does not arise in the course of exchange, but are the monetary expression of exchange value or socially necessary labor time.
Marx's theory analyzes the functions of money in the capitalist commodity economy. This is a historically specific theory, not a general theory of money throughout history or a theory of money in pre-capitalist economies. So, if it were true that money appeared for the first time in history as a unit of accounting for taxes and payments on debts (as the Chartists and Keynes argue), this would not contradict Marx's theory of money in capitalism.
David Graeber
Anyway, I have significant doubts that historically the government debt was the cause of money (I will return to this in a future post). David Graeber , an anarchist anthropologist, seems to make this point in his book Debt. The first 5000 years of history ”, although it doesn't fit very well for me. Marx argues that money arises naturally as commodity production is generalized. The state simply approves the monetary form, but it does not invent it. Indeed, I think that Greber's quote from Locke in his book summarizes this argument well:
"According to Locke, it will no longer be worth the price of a small silver coin to be called a shilling, just as a short man will not grow taller if it is announced that from now on it is fifteen inches away."
In a classic assertion of Chartalism, Knapp argued that states have historically designated a unit of account and, by requiring taxes to be paid in a particular form, ensured that that form would circulate as a means of payment. Each taxpayer would have to get his hands on a sufficient amount of arbitrarily determined money and thus would be involved in money exchange. Joseph Schumpeter refuted this approach, saying:
“If Knapp simply said that the state can declare any object (receipt, ticket or token) legal tender, and added that from proclaiming this fact, or even proclaiming the fact that a certain payment token or ticket will be accepted for tax purposes, it is still far from giving any value to this payment sign or ticket, then this would be true, but rather trite. If he said that such an action by the state determines the value of this payment token or ticket, it would be an interesting, but erroneous statement ”[History of Economic Analysis, 1954].
Joseph Alois Schumpeter
In other words, Chartalism is either trivial and true OR interesting and incorrect.
Money as a commodity or out of thin air
Marx argued that money in capitalism fulfills three main functions: as a measure of value, as a medium of exchange, and "money as money", which includes payments on debts. The function of the measure of value derives from Marx's labor theory of value, and this is the main difference from the Chartalists / SDTs, who (as far as I can tell) have no theory of value at all and therefore no theory of surplus value.
As a result, for SDT adherents, value is ignored due to the primacy of money in social and economic relations. Let's take this explanation of one of the supporters of the SDT of her relationship to Marx's theory of value:
“Money is not just an 'expression' or 'representation' of aggregate private value creation. Instead, the SDT assumes that the monetary fiscal framework and the macroeconomic cascade together actualize a common material horizon of production and distribution ... Like Marxism, SDT justifies value in building and maintaining a collective material reality. Accordingly, she rejects neoclassical utility theory, which associates value with the play of individual preference. The only thing, unlike Marxism, SDT argues that the production of value is conditioned by the abstract fiscal power of money and the hierarchy of intermediation that it supports. SDT does not at all reject the physical force of gravity in our reality. Rather
If you are able to understand this scholastic jargon, I think you can understand it to mean that MMT differs from Marx's theory of money in that it claims that money is not tied to any law of value that attracts it to a position like "Gravity", but have the freedom to increase and modify the value itself. Money is the primary causal force affecting value, not the other way around!
In my opinion, this is nonsense. This echoes the ideas of the French socialist Pierre Proudhon in the 1840s, who argued that capitalism is bad only in the monetary system itself, and not in the exploitation of labor and the capitalist mode of production.
Pierre-Joseph Proudhon
Here is what Marx said about Proudhon's view in his chapter on money in the Economic Manuscripts of 1857-1859:
"... is it possible, by changing the instrument of circulation - the organization of circulation - to revolutionize the existing relations of production and the distribution relations corresponding to them?" [Collected. cit. Ed. 2nd. T. 46, part 1, p. 61]
For Marx, a doctrine "which offers its focuses in the sphere of circulation in order, on the one hand, to avoid the violent nature of changes, and on the other hand, to make these changes themselves not a prerequisite, but, on the contrary, a gradual result of the restructuring of circulation", would be fundamentally a mistake and misunderstanding of the reality of capitalism.
In other words, separating money from value and actually turning it into the main driving force of capitalism does not allow us to recognize the reality of social relations at the heart of capitalism and production for profit. Without a theory of value, SDT adherents find themselves in a fictitious economic world, where the state can issue debt obligations and convert them into loans in the state account at the central bank at will and without any restrictions or consequences in the real world of productive capital, although this is never it is not as easy as it seems .
For Marx, money makes money through the exploitation of labor in the capitalist production process. The new created value is embodied in the goods for sale; the realized value is represented by the amount of money. Marx began his theory of money with money as a commodity, like gold or silver, whose value could be exchanged for other commodities. Thus, the monetary value of all commodities was tied to the price or value of gold. But, if the value or price of gold changed due to a change in the labor time spent on the production of gold, then the value of money, estimated in other commodities, also changed. A sharp reduction in the production time of gold and, consequently, a fall in its value would lead to a sharp increase in the prices of other goods (Spanish gold from Latin America in the 16th century) - and vice versa.
The next stage in the development of the nature of money was the use of paper or fiat currencies pegged to the price of gold, the gold exchange standard, and then, finally, the stage of fiat currencies or "credit money". But, contrary to the opinion of SDT or chartists, this does not change the role or nature of money in the capitalist economy. Their value is still tied to the socially necessary labor time under capitalist accumulation. In other words, commodity money has / contains value, while non-commodity money represents / reflects value, and therefore both can serve as a measure of the value of any other goods and express it in the form of price.
Modern states clearly play a decisive role in the reproduction of money and the system in which it circulates. But their power over money is quite limited - and, as Schumpeter said (and Marx might have said), these limits are most evident in determining the value of money. The Mint can print any numbers on its bills and coins, but cannot determine what those numbers indicate. This is driven by the myriad pricing decisions made primarily by private firms that strategically respond to the cost and demand structure they face in competing with other firms.
This makes the value of government-backed money unstable. Actually, this is recognized by the Chartist theory. According to it, the main mechanism by which the state provides the value of fiat money is to impose tax obligations on its citizens and declare that it will accept only a certain thing (no matter which one) as money to pay off these tax obligations. But Randall Rae, one of the most active authors of this school, admits that if the tax system collapses, "the value of money will quickly fall to zero." Indeed, when the creditworthiness of a state is seriously questioned, the value of national currencies falls and demand shifts to real commodities such as gold as genuine store of value, storing value. The price of gold skyrocketed with the onset of the current financial crisis in 2007, and an even larger increase occurred in early 2010, when the debt crisis in the southern Eurozone exacerbated the situation.
Randal Ray
Political conclusions
I often hear various statements of the adherents of the SDT that "money can be created from nothing." “Bank money does not exist as a result of economic activity. On the contrary, bank money creates economic activity. " Or this:
“Money for a bank loan does not exist until we, the clients, apply for a loan” (Ann Pettifor).
The short answer to this slogan is: “yes, the state can create money, but it cannot set its price,” in other words, value. The price of money will ultimately be determined by the movement of capital tied to socially necessary labor time. If the central bank "prints" money or lends money to government accounts, it gives the government the money it needs to launch programs to create jobs, infrastructure, and so on. no taxation or bond issue. This is a political conclusion from the SDT. This is a "way out" of the capitalist crisis caused by the decline in production in the private sector.
SDT and Chartalists propose to replace or supplement private sector investment with public investment "paid for" by "making money out of thin air." time and still dominate the economy. Instead, the result will be higher prices and / or lower margins, which will ultimately stifle private sector production. The policy of public spending through unlimited creation will fail until the supporters of the SDT are ready to jump to the Marxist political conclusion. namely, the nationalization of the financial sector and the "commanding heights" of the production sector through state ownership and the production plan, thus limiting or terminating the law of value in the economy. As far as I can tell, representatives of the SDT diligently avoid and ignore such a political conclusion - perhaps because, like Proudhon, they misunderstand the reality of capitalism, preferring to seek "foci in the sphere of circulation"; or maybe because they actually oppose the abolition of the capitalist mode of production. they misunderstand the reality of capitalism, preferring to look for "tricks in the sphere of circulation"; or maybe because they actually oppose the abolition of the capitalist mode of production. they misunderstand the reality of capitalism, preferring to look for "tricks in the sphere of circulation"; or maybe because they actually oppose the abolition of the capitalist mode of production.
Of course, none of this has been tested in real life, since the SDT policy has never been implemented (as, indeed, and Marxist politics in modern economics). So we don't know if inflation will explode from the endless creation of money to fund investment programs. SDT people say that "scarcity monetization" will end once full employment is achieved. But this begs the question of whether the private sector in the economy can be subtly manipulated by the central bank and government policy. History has shown that this is not the case and governments in no way can control the process of capitalist production and production prices in such a finely controlled manner.
Even leading SDT advocate Bill Mitchell is aware of this risk. As he wrote on his blog :
“Think of an economy coming back from a recession and growing a lot. In this situation, the budget deficit could still increase, which would make it clearly procyclical, but we could still conclude that the fiscal strategy was justified, since the growth of net public spending stimulates the economy to grow to full employment. Even when growth in non-government spending is positive, budget deficits are appropriate if they support the movement towards full employment. However, once the economy reaches full employment, it would be inappropriate for the government to increase nominal aggregate demand by expanding discretionary spending, as this could lead to inflation . ” (emphasis on M.R.).
It appears that MMT ultimately simply boils down to proposing a theory justifying unlimited government spending to maintain and / or restore full employment. This is her task, nothing more. That is why she finds support in the leftist labor movement. But this seeming merit of SDT hides its much greater vice - preventing real change. MMT says nothing about why cataclysms in capitalist accumulation occur, except that the state can shorten or avoid boom-bust cycles by judicious use of government spending in a predominantly capitalist accumulation process. So it is not proposing a policy of radical change in social structure.
The Marxist explanation is the most comprehensive because it combines money and credit in the capitalist mode of production and also shows that money is not a decisive flaw in the capitalist mode of production and that it is not enough to understand finance. In this way, Marxism can explain why Keynesian solutions do not work to maintain economic prosperity.
Michael Roberts
https://www.rotfront.su/sovremennaya-de ... a-teoriya/
Google Translator
06.12.2020
Part 1: Chartalism and Marx
Michael Roberts is a renowned contemporary expert on Marxist political economy, author of several books and articles on the crises of capitalism. In his article, he examines modern monetary theory, a trend of economic thought that is gaining popularity among the left, including in Russia . - Ed .
Modern monetary theory (MMT) has gained popularity among leftist economic views in recent years. New Left Democratic spokeswoman Alexandria Ocasio-Cortez , her supporter and leading advocate, recently openly discussed the SDT and its political significance with Labor left-wing economic and financial opinion leader John McDonnell .
SDT began to occupy such a place in the left environment, since it offers a theoretical justification for the policy of budget spending financed by central bank money, as well as increasing the budget deficit and public debt without fear of crises - and thus supports the policy of public spending on infrastructure projects, creating jobs and industry in stark contrast to neoliberal mainstream policies of austerity and minimal government intervention.
In this and a number of subsequent articles, I offer my view on the value of the SDT and the political conclusions from it for the labor movement.
First of all, I will try to provide a general description of the SDT in order to identify its similarities and differences with Marx's monetary theory.
So, SDT is based on ideas called Chartalism. Georg Friedrich Knapp , a German economist, introduced the term "Chartalism" into his state theory of money, which was published in German in 1905 and translated into English in 1924. The name comes from the Latin charta , meaning "coupon" or "ticket". Chartalism argues that money emerged from the government's efforts to manage economic activity, not as a spontaneous solution to barter problems or a means to denote debt.
Georg Friedrich Knapp
Chartalism argues that generalized commodity exchange historically emerged only after the state was able to create the need to use its sovereign currency by taxing the population. For the chartalist, the ability of money to act as a unit of credit / debt accounting is fundamentally dependent on trust in the sovereign, or on the sovereign's ability to impose its will on the population. The use of money as a unit of account for debt / credit predates the emergence of an economy based on generalized commodity exchange. Thus, Chartalism argues that money first emerged as a means of accounting from debt, not exchange. Keynes was a very big fan of Chartalism, but the latter is clearly the opposite of Marx's views that money is analytically incomprehensible without an understanding of commodity exchange.
John Maynard Keynes
Could Chartalist / Modern Monetary Theory (MCT) and Marxist Theory of Money be compatible or complementary, or is one of them wrong? My short answers are as follows:
money precedes capitalism, but not because of the state;
yes, the state can create money, but it does not control its price, so that confidence in its currency can disappear;
the strict chartist position is incompatible with the Marxist theory of money, but the SDT has some aspects that complement Marxism.
Let me now try to expand on these arguments.
Modern money theory and the Marxist theory of money complement each other in the sense that both are endogenous theories of money. They both reject the quantitative theory of money, namely that inflation or deflation depends on the decisions of central banks to pump up the money supply with credit or not. On the contrary, it is the demand for money that drives the supply: i.e. banks issue loans, and as a result, deposits and debts are created to finance loans, and not vice versa. In this sense, both the SDT and the Marxist theory recognize that money is not a veil over the real economy, but the modern (capitalist) economy is monetary through and through.
Both Marx and MMT advocates agree that the so-called quantitative theory of money, as outlined in the past by Chicago School economist Milton Friedman and others, that dominated government policy in the early 1980s, is incorrect. Governments and central banks cannot soften the ups and downs of capitalism by trying to control the money supply. A gloomy report on current quantitative easing (QE) programs adopted by major central banks in an attempt to stimulate the economy confirms this. Central bank balance sheets have skyrocketed since the crisis in 2008, but bank lending has not increased, nor has real GDP growth.
Milton Friedman
But the Marxist theory of money has an important difference from SDT. Capitalism is a money economy. Capitalists start with money capital and invest it in production and commodity capital, which, in turn, through the use of labor (and its exploitation), ultimately brings new value, which is embodied in an increase in money capital. Thus, the demand for money drives the demand for credit. Banks create money or credit as part of this process of capitalist accumulation, but not as something that separates finance capital from capitalist production. SDT / Chartalists claim that the demand for money is driven by " animal spirits»Individual agents (Keynesianism) or a state in need of credit (Chartalism). On the contrary, the Marxist theory of money holds that the demand for money, and therefore its price, is ultimately determined by the rate of capital accumulation and capitalist consumption.
Capital accumulation
Theory and history of money
This shows the basic contradiction between modern monetary theory, its chartist origins and the Marxist theory of money. Marx's theory of money is specific to capitalism as a mode of production, while SDT and Chartalism are ahistorical. For Marx under capitalism, money is a representation of value and therefore of surplus value. In the scheme "M - C ... P ... C '- M'" [money] M can be exchanged with [commodity] T because M represents C and M 'represents C'. Money could not have made exchange possible if the capacity for exchange was not already inherent in commodity production, if it were not a representation of socially necessary abstract labor and, therefore, value. In this sense, money does not arise in the course of exchange, but are the monetary expression of exchange value or socially necessary labor time.
Marx's theory analyzes the functions of money in the capitalist commodity economy. This is a historically specific theory, not a general theory of money throughout history or a theory of money in pre-capitalist economies. So, if it were true that money appeared for the first time in history as a unit of accounting for taxes and payments on debts (as the Chartists and Keynes argue), this would not contradict Marx's theory of money in capitalism.
David Graeber
Anyway, I have significant doubts that historically the government debt was the cause of money (I will return to this in a future post). David Graeber , an anarchist anthropologist, seems to make this point in his book Debt. The first 5000 years of history ”, although it doesn't fit very well for me. Marx argues that money arises naturally as commodity production is generalized. The state simply approves the monetary form, but it does not invent it. Indeed, I think that Greber's quote from Locke in his book summarizes this argument well:
"According to Locke, it will no longer be worth the price of a small silver coin to be called a shilling, just as a short man will not grow taller if it is announced that from now on it is fifteen inches away."
In a classic assertion of Chartalism, Knapp argued that states have historically designated a unit of account and, by requiring taxes to be paid in a particular form, ensured that that form would circulate as a means of payment. Each taxpayer would have to get his hands on a sufficient amount of arbitrarily determined money and thus would be involved in money exchange. Joseph Schumpeter refuted this approach, saying:
“If Knapp simply said that the state can declare any object (receipt, ticket or token) legal tender, and added that from proclaiming this fact, or even proclaiming the fact that a certain payment token or ticket will be accepted for tax purposes, it is still far from giving any value to this payment sign or ticket, then this would be true, but rather trite. If he said that such an action by the state determines the value of this payment token or ticket, it would be an interesting, but erroneous statement ”[History of Economic Analysis, 1954].
Joseph Alois Schumpeter
In other words, Chartalism is either trivial and true OR interesting and incorrect.
Money as a commodity or out of thin air
Marx argued that money in capitalism fulfills three main functions: as a measure of value, as a medium of exchange, and "money as money", which includes payments on debts. The function of the measure of value derives from Marx's labor theory of value, and this is the main difference from the Chartalists / SDTs, who (as far as I can tell) have no theory of value at all and therefore no theory of surplus value.
As a result, for SDT adherents, value is ignored due to the primacy of money in social and economic relations. Let's take this explanation of one of the supporters of the SDT of her relationship to Marx's theory of value:
“Money is not just an 'expression' or 'representation' of aggregate private value creation. Instead, the SDT assumes that the monetary fiscal framework and the macroeconomic cascade together actualize a common material horizon of production and distribution ... Like Marxism, SDT justifies value in building and maintaining a collective material reality. Accordingly, she rejects neoclassical utility theory, which associates value with the play of individual preference. The only thing, unlike Marxism, SDT argues that the production of value is conditioned by the abstract fiscal power of money and the hierarchy of intermediation that it supports. SDT does not at all reject the physical force of gravity in our reality. Rather
If you are able to understand this scholastic jargon, I think you can understand it to mean that MMT differs from Marx's theory of money in that it claims that money is not tied to any law of value that attracts it to a position like "Gravity", but have the freedom to increase and modify the value itself. Money is the primary causal force affecting value, not the other way around!
In my opinion, this is nonsense. This echoes the ideas of the French socialist Pierre Proudhon in the 1840s, who argued that capitalism is bad only in the monetary system itself, and not in the exploitation of labor and the capitalist mode of production.
Pierre-Joseph Proudhon
Here is what Marx said about Proudhon's view in his chapter on money in the Economic Manuscripts of 1857-1859:
"... is it possible, by changing the instrument of circulation - the organization of circulation - to revolutionize the existing relations of production and the distribution relations corresponding to them?" [Collected. cit. Ed. 2nd. T. 46, part 1, p. 61]
For Marx, a doctrine "which offers its focuses in the sphere of circulation in order, on the one hand, to avoid the violent nature of changes, and on the other hand, to make these changes themselves not a prerequisite, but, on the contrary, a gradual result of the restructuring of circulation", would be fundamentally a mistake and misunderstanding of the reality of capitalism.
In other words, separating money from value and actually turning it into the main driving force of capitalism does not allow us to recognize the reality of social relations at the heart of capitalism and production for profit. Without a theory of value, SDT adherents find themselves in a fictitious economic world, where the state can issue debt obligations and convert them into loans in the state account at the central bank at will and without any restrictions or consequences in the real world of productive capital, although this is never it is not as easy as it seems .
For Marx, money makes money through the exploitation of labor in the capitalist production process. The new created value is embodied in the goods for sale; the realized value is represented by the amount of money. Marx began his theory of money with money as a commodity, like gold or silver, whose value could be exchanged for other commodities. Thus, the monetary value of all commodities was tied to the price or value of gold. But, if the value or price of gold changed due to a change in the labor time spent on the production of gold, then the value of money, estimated in other commodities, also changed. A sharp reduction in the production time of gold and, consequently, a fall in its value would lead to a sharp increase in the prices of other goods (Spanish gold from Latin America in the 16th century) - and vice versa.
The next stage in the development of the nature of money was the use of paper or fiat currencies pegged to the price of gold, the gold exchange standard, and then, finally, the stage of fiat currencies or "credit money". But, contrary to the opinion of SDT or chartists, this does not change the role or nature of money in the capitalist economy. Their value is still tied to the socially necessary labor time under capitalist accumulation. In other words, commodity money has / contains value, while non-commodity money represents / reflects value, and therefore both can serve as a measure of the value of any other goods and express it in the form of price.
Modern states clearly play a decisive role in the reproduction of money and the system in which it circulates. But their power over money is quite limited - and, as Schumpeter said (and Marx might have said), these limits are most evident in determining the value of money. The Mint can print any numbers on its bills and coins, but cannot determine what those numbers indicate. This is driven by the myriad pricing decisions made primarily by private firms that strategically respond to the cost and demand structure they face in competing with other firms.
This makes the value of government-backed money unstable. Actually, this is recognized by the Chartist theory. According to it, the main mechanism by which the state provides the value of fiat money is to impose tax obligations on its citizens and declare that it will accept only a certain thing (no matter which one) as money to pay off these tax obligations. But Randall Rae, one of the most active authors of this school, admits that if the tax system collapses, "the value of money will quickly fall to zero." Indeed, when the creditworthiness of a state is seriously questioned, the value of national currencies falls and demand shifts to real commodities such as gold as genuine store of value, storing value. The price of gold skyrocketed with the onset of the current financial crisis in 2007, and an even larger increase occurred in early 2010, when the debt crisis in the southern Eurozone exacerbated the situation.
Randal Ray
Political conclusions
I often hear various statements of the adherents of the SDT that "money can be created from nothing." “Bank money does not exist as a result of economic activity. On the contrary, bank money creates economic activity. " Or this:
“Money for a bank loan does not exist until we, the clients, apply for a loan” (Ann Pettifor).
The short answer to this slogan is: “yes, the state can create money, but it cannot set its price,” in other words, value. The price of money will ultimately be determined by the movement of capital tied to socially necessary labor time. If the central bank "prints" money or lends money to government accounts, it gives the government the money it needs to launch programs to create jobs, infrastructure, and so on. no taxation or bond issue. This is a political conclusion from the SDT. This is a "way out" of the capitalist crisis caused by the decline in production in the private sector.
SDT and Chartalists propose to replace or supplement private sector investment with public investment "paid for" by "making money out of thin air." time and still dominate the economy. Instead, the result will be higher prices and / or lower margins, which will ultimately stifle private sector production. The policy of public spending through unlimited creation will fail until the supporters of the SDT are ready to jump to the Marxist political conclusion. namely, the nationalization of the financial sector and the "commanding heights" of the production sector through state ownership and the production plan, thus limiting or terminating the law of value in the economy. As far as I can tell, representatives of the SDT diligently avoid and ignore such a political conclusion - perhaps because, like Proudhon, they misunderstand the reality of capitalism, preferring to seek "foci in the sphere of circulation"; or maybe because they actually oppose the abolition of the capitalist mode of production. they misunderstand the reality of capitalism, preferring to look for "tricks in the sphere of circulation"; or maybe because they actually oppose the abolition of the capitalist mode of production. they misunderstand the reality of capitalism, preferring to look for "tricks in the sphere of circulation"; or maybe because they actually oppose the abolition of the capitalist mode of production.
Of course, none of this has been tested in real life, since the SDT policy has never been implemented (as, indeed, and Marxist politics in modern economics). So we don't know if inflation will explode from the endless creation of money to fund investment programs. SDT people say that "scarcity monetization" will end once full employment is achieved. But this begs the question of whether the private sector in the economy can be subtly manipulated by the central bank and government policy. History has shown that this is not the case and governments in no way can control the process of capitalist production and production prices in such a finely controlled manner.
Even leading SDT advocate Bill Mitchell is aware of this risk. As he wrote on his blog :
“Think of an economy coming back from a recession and growing a lot. In this situation, the budget deficit could still increase, which would make it clearly procyclical, but we could still conclude that the fiscal strategy was justified, since the growth of net public spending stimulates the economy to grow to full employment. Even when growth in non-government spending is positive, budget deficits are appropriate if they support the movement towards full employment. However, once the economy reaches full employment, it would be inappropriate for the government to increase nominal aggregate demand by expanding discretionary spending, as this could lead to inflation . ” (emphasis on M.R.).
It appears that MMT ultimately simply boils down to proposing a theory justifying unlimited government spending to maintain and / or restore full employment. This is her task, nothing more. That is why she finds support in the leftist labor movement. But this seeming merit of SDT hides its much greater vice - preventing real change. MMT says nothing about why cataclysms in capitalist accumulation occur, except that the state can shorten or avoid boom-bust cycles by judicious use of government spending in a predominantly capitalist accumulation process. So it is not proposing a policy of radical change in social structure.
The Marxist explanation is the most comprehensive because it combines money and credit in the capitalist mode of production and also shows that money is not a decisive flaw in the capitalist mode of production and that it is not enough to understand finance. In this way, Marxism can explain why Keynesian solutions do not work to maintain economic prosperity.
Michael Roberts
https://www.rotfront.su/sovremennaya-de ... a-teoriya/
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