A Bad Version of MMT

There is a barely noticeable meme making the grounds that promotes the virtues of Modern Monetary Theory. As with other low-quality memes, it's basically a text screen saved as an image which, of course, sends anyone who knows even a modicum of systems programming into exasperation about levels of computer illiteracy. But what is also frustrating is the astounding ignorance of monetary theory.

The danger is that most of the meme is descriptively correct. It is true that governments are the monopoly issuer of currency, for example, and that they have no limit on printing money. It is true that taxes do not finance government spending, etc.

But what is glaringly absent from the meme, and incredibly dangerous for those who only have a little knowledge of the subject, is that it makes no mention of productivity and the relationship with public expenditure. To say that this is critically important cannot be understated, but can be illustrated by a counter-example - where public expenditure did not result in productivity.

Zimbabwe from 2007-2010 is a very illustrative example of this. The government instituted land reform involved the dispossession of skilled workers from the land, and people were employed to prevent them from working the land. The result was a collapse of productivity (causing more unemployment) and hyperinflation, reaching almost 2500% at one point. This is not theory, but evidence.

People had jobs (MMT position) were paid (MMT position) but (absent from the meme), they did not increase production, they reduced it. Hence, too much money and too few goods thus hyperinflation. A government can provide jobs and not have people employed in a useful manner. Such a policy will lead to economic collapse (and more unemployment) and hyperinflation.

In a nutshell, MMT without consideration of productivity, such as presented in this meme, is dangerous, ignorant, and not really MMT.