Money's Laws of Motion

Epicurus supposed that even in the midst of the void the atoms declined slightly from the straight line, and from this, he said, arose freedom.

-Pierre Bayle, quoted by Karl Marx

Money is no object.

-Stephanie Kelton

In previous contributions to Arcade, I have drawn sharp distinctions between the heterodox school of economics known as Modern Monetary Theory (MMT) and the Marxist tradition that dominates the critical humanities. My intention was neither to flatly oppose MMT and Marxism, nor to wholly discount the latter’s impulses and insights. Rather, I sought to illuminate MMT’s expansive conception of money as a limitless public instrument and develop its transformative implications for contemporary thought and practice. In so doing, I criticized Marxism’s preoccupation with decentralized exchange relations for barring such possibilities from leftist critique and contestation.

Working out these claims, I set aside the complex entanglements that link MMT's and Marxism's histories and methods. In this essay, I explore some of these entanglements and lay bare the divergent ontological commitments that, on my analysis, fundamentally separate MMT’s critical project from the Marxist one.

Viewed from afar, MMT and Marxism appear opposed. Contemporary Marxists such as The New School's Anwar Shaikh reject MMT and, typically, MMT is disassociated from Marxism when presented to the public. In truth, however, MMT and Marxism share an entangled history that thwarts neat distinctions and oppositions.

For one, Karl Marx’s intervention stands at the origin of critical political economy. Protesting that the modern money systems that mainstream economics deem natural and self-correcting are in truth politically constructed and destabilizing, Marxism functions as a philosophical torchbearer for the heterodox post-Keynesian tradition from which MMT arises. What is more, post-Keynesianism itself comprises a kaleidoscopic conflagration of Keynesian and Marxist impulses, which cannot be sharply disarticulated.

In terms of direct influence, MMT owes many specific insights to the history of Marxist thought. MMT relies heavily on post-Keynesian theories of effective demand and stock-flow consistency, both of which are traceable to the second and third volumes of Marx’s Capital. Moreover, MMTers such as Bill Mitchell, Mathew Forstater, and Peter Cooper regularly draw upon Marxist concepts and arguments in their writings, paying express heed to Marxism’s ongoing relevance for MMT.

Meanwhile, post-Keynesian circuitist theory has increasingly prioritized state credit money in their analyses of the monetary circuit (M-C-M) outlined in the first volume of Capital. Especially interesting in this regard are European Marxist circuitists like Riccardo Bellofiore who overtly utilize MMT’s insights. Forging novel connections between Marxism, post-Keynesianism, and MMT, Bellofiore and his followers continue to uncover important genealogical and theoretical linkages among these projects.

One might say far more about the linkages and discordances that riddle heterodox economics. For the time being, however, I indicate the folly of treating MMT and Marxism as unrelated or categorically opposed. To do so is to overlook post-Keynesianism’s paramount role within the history of heterodox economics and to repress the contested field of inquiry to which both MMT and Marxism belong.

Still, when it comes to questions of social ontology, it becomes necessary to reckon with what genuinely distinguishes MMT from Marxism and thus what cuts through the genealogical entwinements sketched above. Generally speaking, scholarly and public debates skirt around MMT’s and Marxism’s competing ontological commitments. Instead, they argue over the technical operations of political economy and the political responses various crises necessitate. Upon closer inspection, however, it turns out that tacit ontological divisions structure such contests from start to finish.

Ontology is embarrassing. It is embarrassing because it announces plainly what is uncouth to admit in ordinary discourse. Yet it is especially embarrassing because it means exposing the unexamined desires that drive everyday discursive struggles. For these reasons, ontological claims are often met with skepticism, disavowal, or scorn.

Nonetheless, I wish to risk articulating outright the underlying rift that cleaves MMT and Marxism. Marxism attributes the greatest degree of being to immediate material relations, imagining monetary abstraction as a volatilization and estrangement of conscious local associations. By contrast, MMT hangs collective existence on a community's political center and maintains that money is an inexhaustible government instrument for socializing relations of production and distribution at a distance. Instead of condemning money for disrupting and evacuating otherwise self-subsistent local activities, MMT treats a people's remote obligations to a centralized polity as ontologically prior to any immediate association and sees monetary abstraction as a powerful public mechanism for variously coordinating and enlarging such obligations. Hence, while Marxism assumes that money is a private, alienating, and crisis-ridden exchange relationship that ought to be overcome, MMT holds money to be a boundless public utility that, though by no means untroubled, is well-equipped to actualize radical collectivist ends.

This ontological cleavage becomes clearest in the ways that Marxism and MMT explain employment and unemployment. For the Marxist, employment comes into being through private wage contracts between firms and workers. Unemployment is then understood principally as a negative relation, functioning as a constitutive excess that reciprocally shapes capitalist production and exchange from the outside. For the MMTer, however, unemployment is a positive relation that results from the tax obligation. As Rohan Grey and Raúl Carrillo describe it, "the state creates unemployment by imposing a non-reciprocal liability (i.e. a tax) that can only be satisfied by obtaining its tokens (i.e. tax credits)." No unemployed person sits outside this public obligation. And since government is both the source of money and the cause of unemployment, it alone is ultimately responsible for determining the employment level.

As I have already noted, some Marxists embrace MMT's grounding of money in centralized governance and a handful of MMTers work in a Marxist idiom. Yet beneath this exchange of ideas looms an irreconcilable split over political economy’s center of gravity. That is, despite their shared histories and convergences, Marxism and MMT offer two very different Gestalts of the macro-economic order.

Perhaps the best way to make sense these contrasting pictures is to take seriously the turn of phrase center of gravity. For all its dubiousness, Marxism has adopted a literal and curiously pious relation to physical gravitation. Strewn with gravitropic metaphors meant to exhibit the value-form’s concealed “laws of motion,” Marxist criticism tends to subordinate macro-economic reality to material gravity, whereby far-flung abstractions always come down to material interactions between particular individuals.

In The German Ideology, for instance, Marx repeatedly insists that critical political economy must attend to production's "earthly" bases. He ridicules German idealists for fleeing from social reality, arguing that they proceed as if material gravity were merely a superstition. And he characterizes communism as the impulse to gather abstractly dispersed social activities back to their immediate tellurian origins. “The reality that communism creates," Marx writes, "is precisely the true basis for rendering it impossible that anything should exist independently of individuals, insofar as reality is nevertheless only the product of the preceding intercourse of individuals.”

To be sure, Marx's own critical methodology is comprised of abstract concepts and complex dialectical reasoning. Yet, for Marx, this abstractive method is no end in itself. It is, rather, a way to expose the terrestrial injustices precipitated by money's abstract movements. It also means to make way for a directly associated, free society that is liberated from monetary alienation and its diremptive phantoms.

Eschewing Marxism’s gravitropic metaphysics, MMT locates the center of macro-economic activity in an abstract legal rapport between the currency issuing center and the body politic that depends upon the currency to physically survive and thrive. On this model, the totality issues from money’s governing center and unfolds as an interlocking cascade of mediation that conditions economic life as a whole. “[T]he hierarchy of money can be thought of as a multitiered pyramid where the tiers represent promises with differing degrees of acceptability,” explains Stephanie Kelton (née Bell). “As the most acceptable money in the hierarchy, the state’s debts serve as both a means of payment and a medium of exchange in private transactions.” Despite its “ideal” status, money’s topological hierarchy is no second-order phenomenon, according to MMT. Money is not a mere “expression” or “representation” of aggregate private value creation, "ascend[ing] from earth to heaven," as Marx asserts in The German Ideology. Instead, MMT supposes that money’s featherweight fiscal center and macro-economic cascade together mobilize a shared material horizon of production and distribution.

There is no treatise on physical gravitation in the MMT corpus. The term “gravity” appears nowhere in MMT’s myriad publications, as far as I have seen. Yet a careful reading of MMT’s texts reveals a subtle inversion in the topological relationship between the ideal and the real that not-so-subtly downgrades gravity’s metaphysical import for critical political economy.

Like Marxism, MMT situates value in the construction and maintenance of a collective material reality. It accordingly rejects Neoclassical utility theory, which roots value in the play of individual preferences. Only, in contrast to Marxism, MMT contends that the production of value is conditioned by money’s abstract fiscal capacity and the hierarchy of mediation it supports. MMT hardly dismisses the pull of physical gravitation on human existence. Rather, it implicitly de-prioritizes gravity’s causality in political and economic processes, showing how the ideal conditions the real via money’s distributed pyramidal structure.

As a consequence of this inversion, MMT lends greater acuity to economic analysis. Still more important, it radically expands the political horizon concerning what is possible under a modern money economy. Indeed, by abandoning physical gravitation as the origin and telos of politics, MMT keys the struggle for political power to a commodious public abstraction, while refusing one-sided denunciations of money as some inevitable fall from grace.

Such ontological distinctions matter for critical work in the humanities. Humanists take pride in scrutinizing the terms and logics that make historical realities intelligible. Frequently, however, when humanists take on the history and potential futures of monetary relations, Marxism’s gravitropic materialism severely contracts the voluminous topology that MMT strives to hold open.

Take the recent work of David Harvey, “Marx, Capital, and the Madness of Economic Reason,” a talk based on his forthcoming book of the same title. Harvey has made important contributions to the overlapping realms of humanities scholarship and social criticism, from his historical-geographical critiques of modernity to his widely-read examinations of postmodern ideology and neoliberal political economy. I have little doubt that Harvey has much to offer us in the future. What worries me about Harvey’s latest project, however, is that it doubles-down on the Marxist laws of motion. In so doing, it blocks the capacious macro-economic Gestalt that MMT makes perceptible, along with the radical political possibilities it makes immediately actionable.

Rather than affirming state spending as the macroeconomic backbone of production and distribution and a powerful weapon for political transformation, Harvey deems decentralized private exchange the threshold of value’s realization and public money as mere “anti-value” and “fictitious capital.” As a result, he imagines the contemporary money relation as an unruly global flux and renders government money just as reckless and ineffectual as private speculation.

Worst of all is the explicit metaphor that anchors Harvey’s forthcoming publication: the water cycle. Appealing to a punishingly gravitropic image, Harvey at once metaphorizes and diagrams the monetary circuit as a water cycle that is spiraling out of control. Drawing on G. W. F. Hegel’s terminology, he brands money’s endless unraveling a “bad infinity,” an infinite regress that leads nowhere but into further crisis. With this, Harvey surmises that our collective future becomes like so many underwater mortgages after the 2007-8 financial crash: foreclosed.

In a sense Harvey is correct: contemporary neoliberalism is grim. Seen through the eyes of MMT, however, the future hardly looks foreclosed. Private debt can become a “bad infinity.” But public money is the best kind of infinity and it constitutes the center around which this forsaken system turns.

Marxism is a rich, heterogeneous project that continues to bear fruit across disciplines. Yet I fear that, unless critical humanists begin to relinquish their own gravitropic attachments, and learn to perceive and think otherwise, Harvey’s bleak diagnosis will almost certainly turn into a self-fulfilling prophesy.

An earlier version first appeared on the site Radical Political Economy.

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