Image: Didier Weemaels, 2015, Unsplash License.

Fast Cars and Fiat Money

MMT, from neglected theory to influential movement

History of Chartalism Pt. 2

This is the second in a two-part series on the history of MMT. To fully understand its argument, we strongly recommend you read the first part before starting on this one.

Each idea and every trend we’ve discussed in the previous section was a minor perturbation in a vast academic sea. Chartalism, as we’ve told you, was in twilight. After the purge of the economics discipline in the 1950s, it – along with dozens of other heterodox theories of great importance – was relegated to the tiny handful of economics departments at obscure universities where ideas outside the mainstream could be openly discussed. The true history of money, the genealogy of chartalist ideas, the experience of the Keynesian planners, the theory of endogenous money, the models of the monetary circuit: oblivion was their fate. All, or much of these, may just have remained scattered, languished in weird corners, and then likely died alongside their creators, had it been up to the powers that be.

Would have, that is, were it not for the frankly bizarre series of events that led to their sudden and unexpected reemergence. The story of their rediscovery, refinement, and synthesis, which has not yet been adequately told, continues into the present day – and as we’ll see, this revived form of chartalism would soon assume a world-historical importance. 

Here at last we arrive at the birth of the so-called Modern Monetary Theory. We’ll be discussing this history in sequence. From the rediscovery of the chartalist intellectual tradition by an eccentric hedge fund manager; to the foundation of the first research institutes devoted to neo-chartalism; to the development of the theory over the course of the 90s so as to resolve contradictions and integrate new anthropological evidence; to the rise of a widespread social movement around its concepts; these unlikely events are key to understanding why MMT assumed the shape it did and how it eventually came to exercise its current decisive influence on leftish policy thinking.

The High-Speed Financier

We weren’t kidding you when we said it’s strange. In a way it could be said to begin in 1991, with (of all things) an unusually grandiloquent press release commemorating the launch of a new sports car:

The Consulier GTP is the beginning of a new era in sports car performance. It relegates all roadgoing Ferraris, Porsche, Corvettes, etc., ever made to vintage status.

For those not into cars, we can assure you these are fighting words. Ferrari, Porsche, and Corvette are among the most respected producers not only of top-of-the-line cars for normal people but supercars affordable only to the elite, who race them in highly prestigious speed races hosted in the great resort cities, money-laundering capitals, and tax havens of the world. But Warren Mosler, the man who wrote these boasts – or at any rate hired somebody to do so – liked a good fight.

Mosler had made his fortune as a bonds trader in the Greed Is Good years of Wall Street (he was one of the bond vigilantes, you might say) and eventually arrived at multi-millionaire status from running a hedge fund. But his passions lay elsewhere. His first love was cars. As a child, he once said in an interview, he’d been the kind of kid who disassembles lawnmowers and turns them into go-karts; a favorite game was to go to the side of the highway with his brother and name the make and models of the cars that passed them by. He has referred to his love of cars as a disease and a compulsion, playfully suggesting he’d rid himself of it if he could. Instead in 1985 he used his hedge fund money to spin off a small boutique car company called Consulier Industries, later known as Mosler Automotive.

The megalomaniacal marketing pitch for the Consulier GTP in 1991 points the way to Mosler’s second passion: proving other people wrong. Mosler wanted to make a $50,000 road car that could beat supercars typically worth more than twice as much in a race. The key to this, Mosler and his engineers wagered, was lightness. The Consulier GTP was made in an extremely unusual manner, with no metal in its frame. Instead it was the first car with a chassis made entirely out of a fiberglass-and-foam structural skin. Rather than build a new engine, they turbocharged one from a Chrysler minivan and mounted it in the middle of the car. Everything that was unnecessary for speed was stripped away. The base model of the GTP didn’t even have air conditioning! An infamous negative review in Car and Driver contained a number of choice descriptions of the driving experience: 

It was 85 degrees outside. It was 95 degrees in the cockpit. No air conditioning. No discernible breeze from the whining interior fan. No ventilation at all – even with the sliding plexiglass windows open the full four inches. The engine droned behind our ears. Sweat soaked our clothes. For a horrible moment we thought we saw someone who recognized us. We didn’t need this. What we needed was a shower and a beer…Anyone seriously contemplating building an original car needs to drive a Consulier. You will find yourself asking: How fast must a car be to justify an interior finish normally found on the underside of a hot tub? And can you really appreciate the tenacious grip of the mid-engined chassis on a fine summer day when the cockpit is doing a good imitation of a pizza oven?…C/D’s rules are strict: those who leave trash in a test car for the next staffer lose their driving privileges for a week. Now, a new punishment has been suggested: slobs who deposit stray fingernail clippings on the console or an errant french fry on the seat must drive the base Consulier.1For this and the previous quote, see Arthur St. Antoine, “Consulier GTP Sport Road Test.Car and Driver (October 1991) 37 (4): 95–103.

Mosler’s cars were also hypnotically ugly. There’s something almost poetic about their ever more deranged evolution: the GTP starts out with a square roof that looks like a box somebody dropped onto the rest of the car, the hood is awkwardly submerged, and they only get weirder from there. Later versions of the car, now called the Raptor, added in an apparently aerodynamic split window (the shape of which seems more appropriate on a spaceship or perhaps an early twentieth-century tank) and strange elongated rear-view mirrors that look like nothing so much as little bunny ears.2This eccentricity extended even into Mosler’s more commercial product-lines, which were equally unsuccessful at getting sales: he once designed a commercial van, like the sort an air-conditioning company might use, that was fully electric and cut off everything after the first nine feet, producing what can only be described as a Smart Car with a big van-like trunk. Mosler insists in an interview, with just a tiny hint of defensiveness, that his van also turned the seat into a single bench that could seat four, making its use of space more efficient than a normal one.

But hideous as they were, Mosler’s cars were fast. While they compared the Raptor’s split window to “an overturned rowboat” and made quips about its creator’s “inability to tell a beautiful car from a stack of pancakes,” even Car and Driver had to admit, in a later article from 2001, that it was virtually “unbeatable.”3Dan Neil, “Mosler MT900”. Car and Driver (March 1, 2001). Mosler had submitted the Raptor to a number of races for prominent supercars in famous courses like Sebring, Moroso, and Nelson Ledges, and won a series of first place trophies.

Mosler had bet $25,000 that no one could beat his speed-hungry monstrosities, and it took years for anybody to collect. Even when they did, it wasn’t exactly by fair play. As Car and Driver noted, the Consuliers “are routinely banned from endurance racing for being unbeatable.” And this was usually a last step after trying to put up other obstacles first. In one prominent instance, the speed racing authorities placed a 300-pound weight penalty on the car; when it won anyway, it was banned. This became the norm.

Now, it’s never quite explained in the auto journalism why Mosler’s cars got banned from these supercar races. After all, if the point of such vehicles is speed, shouldn’t the person who makes the fastest one be rewarded? Here, by way of speculation, we might make an institutionalist argument. The socialist economist Thorstein Veblen once outlined a famous theory of something called conspicuous consumption, which asserts that a great deal of a capitalist society’s economic activity is directed towards the production of articles which have no practical function and don’t necessarily improve industrial technique but can be consumed by the ruling class of absentee owners as part of their status games, to show off their prestige and compete within the intra-elite pecking order. According to the theory, this need for the wealthy to engage in “conspicuous waste” in turn influences “the sense of duty, the sense of beauty, the sense of utility, the sense of devotional or ritualistic fitness, and the scientific sense of truth” of the society as a whole. “No such evidence of skillful workmanship, or of ingenious and effective adaptation of means to an end,” Veblen asserts, will “enjoy the approbation of the modern civilized consumer unless it has the sanction of the Canon of conspicuous waste.”4Thorstein Veblen, Theory of the Leisure Class. New York: Viking Press (1899).

From this point of view, the point of a supercar isn’t to be fast: it’s to be a status symbol for oligarchs. The way they speed around on the race track is just part of their marketing. Their true function is to cruise lazily down Park Avenue or be parked by a valet in a prominent spot out in front of Mar-a-Lago, so that everybody can know that the man who owns them (it’s usually a man, car culture being deeply bound up with patriarchy) is the biggest and baddest around.5We don’t want to be unfair of course. There are, in fact, true aesthetes among the rich who actually appreciate how cars drive and what their performance is like, loving vehicles for their own sake. Mosler himself is obviously one of them. So are famous car collectors such as George Lucas and Jay Leno – both, incidentally, fans of the Mosler vehicles. These, however, form the exceptions and not the rule. It’s fair to say the luxury car market, like other high-prestige sectors such as the fine arts market, is overwhelmingly shaped by conspicuous consumption and not inherent quality – a common complaint of true connoisseurs, and one of several ways that capitalism spoils culture. Thus the GPT and Raptor profoundly missed the point in a way that was ultimately suicidal. Supercars don’t exist to win races, they exist to be seen. Yet by winning races against Porsches and Corvettes, the hideous Moslers endangered the illusion that these more beautiful cars were the best and fastest money could ever buy, when really their main function was to be shiny trinkets. So, this theory goes, from the point of view of the people running the luxury car companies and races, the Mosler cars had to be crushed. The bans and the bad press often followed. Ironically, the very capitalism which had provided Mosler the wealth to pursue his boyhood dream effectively guaranteed his super-fast ugly cars would never receive the recognition they deserved. Industry, as so often in the neoliberal period, had lost out to the imperatives of business. Sales never took off. By 2013, despite creating such innovative designs, Mosler Automotive had gone out of business. 

One need only follow the antics of Elon Musk with a sufficiently sober mind to know that the rich are often the worst judges of what to do with their riches. Too often they go into pet projects that feed personal obsessions. Warren Mosler was eccentric in many respects, some of them perhaps more useful to the world than others. He was largely apolitical, an enthusiastic amateur who cared little about credentialing and mostly about the analysis of technical problems and their creative solutions. And over the course of the 1990s, with some knowledge of the economic orthodoxy and none of the preceding chartalist tradition, he had grown more and more interested in a question that had shaped the budget politics of the Clinton era: how the modern financial system worked, and what this meant for government deficit spending. So, in much the same way he’d taken up supercar manufacturing, he took a dive into the world of those deemed by official economics to be money cranks. This would turn out to be the key moment in the phoenix-like resurrection of chartalism.


Mosler’s main intellectual contribution to economics is a short paper called “Soft Currency Economics, published in 1995. In it, Mosler lays out his case for why, at least for the US, the national debt is a function of the monetary authority (the Federal Reserve) supporting whatever interest rate level it intends to enforce.6See Warren Mosler, “Soft Currency Economics” (1995), Macroeconomics, University Library of Munich, Germany. According to Mosler in “Soft Currency Economics,” the national debt is nothing more than a record of how the net amount of money the Fed has had to siphon away from the commercial banking system in order to maintain its official interest rate; an activity it achieves by buying and selling short-term sovereign debt in financial markets. This process is called “open market operations”. Mosler: “Over the course of time the total number of dollars that have been drained from the banking system to maintain the fed funds rate is called the federal debt. A more appropriate name would be the Interest Rate Maintenance Account (IRMA). The IRMA is simply an accounting of the total amount of securities issued to pay interest on untaxed money spent by the government.” Much like the state-theory chartalists who preceded him (of whom he seems to have been ignorant when he wrote his paper), Mosler has what amounts to a theory of tax-receivability: he claims that, under specifically modern conditions (like those obtained in the US after Nixon abolished the gold standard) taxes do not fund government spending but rather create demand for the currency. He uses the term “soft currency” to describe the supposedly modern reality of fiat currencies such as the US dollar which are issued via keystroke and backed by nothing. Mosler also states that the existence of tax-advantaged savings plans at commercial banks and in brokerage accounts ultimately creates a need for deficit-spending by the government (to “fund” private sector savings, whether for discretionary or precautionary reasons). 

Reading “Soft Currency, you feel as though you’ve stumbled upon a handbook for how the economy works, written for central bankers (the supposed experts) by a hedge fund manager (a supposed macroeconomic amateur). Mosler uses stridently chartalistic language to show how actually, congress and the president needn’t worry about the national debt or budget deficits because the US government is the sole source of the fiat US dollar, and drives demand for the dollar via taxes and tax-advantaged savings accounts:

A government using fiat money has pricing power that it may not understand. Once the government levies a tax, the private sector needs the government’s money so it can pay the tax. The conventional understanding that the government must tax so it can get money to spend does not apply to a fiat currency. Because the private sector needs the government’s money to meet its tax obligations, the government can literally name its price for the money it spends. In a market economy it is only necessary to define one price and let the market establish the rest.

It’s interesting to note a tic of the rhetoric here that’s distinct from what we’ve discussed up to now. A classical chartalist would say that on a fundamental level money is a centrally issued credit that is received back; hence, especially from a Knappian state theory point of view, the government never needed its own funds. For Mosler it was only in 1971, after the US abandoned the gold standard for good, that the system he describes to us is supposed to have been fully operative. Mosler thus frames his chartalistic “soft money” theory as only describing how things work under a modern floating exchange rate regime. This becomes an argument for why you should establish a float in the first place, though you, the state, “may not understand” and mistakenly go for an old, antiquated peg to gold or a foreign currency instead.7One of the most confusing things about MMT – both in the sense that it’s confusing to understand, and that it confuses the discussion – is the way it oscillates back and forth in different papers between a classical chartalist view that money is fundamentally credit (whether state credit or credit in general) and a Moslerian view that the chartalist perspective is only valid under a fixed exchange-rate regime but, by implication, invalid under a metal standard. This is often dependent upon which MMTer you’re getting it from, who the MMTer in question is addressing, and whether the context is a discussion of financial operations or of monetary history. It also raises the question of what the hell the chartalist view of those periods of history where metal standards predominated is even supposed to be. We will address all these questions in our own critique of MMT below, and present our tentative framework for a solution to this ontological puzzle. And indeed such fiat money systems did become hegemonic in the late twentieth century, as we can see by the other previous operators of gold standards (such as the Bank of England, or Bank of Japan) following suit and getting rid of theirs. 

Mosler’s paper is ahistorical, dilettantish, and occasionally regurgitates false neoclassical ideas. Nevertheless, it has its own eccentric brilliance, since from a series of simple empirical observations of the actually existing payments system it was able to figure out a theory analogous to the old chartalisms more or less independently. And in some sections, particularly in the history of the so-called repo market of the Federal Reserve system, Mosler’s firsthand experience as a financial market participant shines especially bright.8A “repo”, or repurchase agreement, is an agreement where a dealer sells a government security to an investor or financial institution at one price, and then agrees to buy it back from them usually a day later at a slightly higher price. The difference between these two prices essentially represents the overnight interest rate which investors and banks pay in order to obtain very short-duration reserves from the Federal Reserve — think of it as a 1-day loan, where the government security (such as a treasury bond) serves as the collateral. The repo market itself was created in 1917 by the Federal Reserve, and has been in use almost continuously since that time to help the Fed meet its overnight interest rate goal (the difference between those two prices paid within a repo agreement). What this means theoretically for Mosler and the MMTers who came after him is that there is a powerful operational implication for government fiscal policy, namely, that it proves in the US and the Federal Reserve’s case how any new money spent into existence by fiscal operations for a program which Congress passes – say, from a congressional vote to create a national health care system – can always be accommodated financially. So therefore, any federal spending program under consideration by Congress should be evaluated based solely on non-financial grounds – that is, whether we have the raw materials, workers, skills, and processes in place to accomplish the program. This is a very functional finance-y result, and definitely in keeping with the works of earlier chartalists such as Abba Lerner or Marriner Eccles in the 1940s.

That said, if all MMT had ever produced were a 30-page paper by some random hedge fund guy that accurately described the fiscal and monetary operations of the US government, it would hardly explain the allure of the theory we see today. Mosler’s most critical role was never as a theorist; it was as a sugar daddy. 

To put it into simple dialectical materialist terms: knowledge is a product like any other made by workers through a particular process. Like all techniques, knowledge production can only occur by way of particular practices; knowledge workers need first to acquire the necessary resources and training, then maintain and transmit these somehow to future generations, if these practices are to survive and reproduce themselves at all; and the way they or their bosses go about doing these things and structuring the productive process, itself affects what kind of knowledge is created in the end. Chartalism, as we’ve seen, had no material basis: the only place it could have existed was academia, yet there it was purged and starved of resources. In the absence of institutional support, all there could be was a number of isolated academics holding separate pieces of a complex puzzle, with more of it being lost as they aged and retired.

The history of Modern Monetary Theory is fundamentally about how, through institutions largely funded by this eccentric capitalist, a pre-existing theory called chartalism received a second lease on life. It began as a research programme – a largely successful one, initially – much of which was dedicated to the recovery of what had long been lost. But a few decades later, it became much more than that: a social movement dedicated to the creation, more or less, of a planned economy. MMT, both as a research programme and as a social movement, can only be understood through this institutional and social history, which has seriously affected it in ways large and small. Understanding MMT is important in turn because of its implications for any possible transition, whether for better or for worse, beyond the neoliberal period of capitalism.

MMT as Research Programme: The “Kansas City Approach” and Its Thinkers 

The story of how the MMT research program during the 90s first came to be is almost comically circuitous.9For a journalistic overview of this history sympathetic to the MMTers’ self-narrative, see Atossa Araxia Abrahamian, “The Rock-Star Appeal of Modern Monetary Theory,”The Nation (8 May 2017). For a recent version of the MMTers’ own account of their origins, see L. Randall Wray, “The ‘Kansas City’ Approach to Modern Money Theory,” Levy Economics Institute Working Paper no. 961 (July 2020). It begins with Mosler having the initial idea for his manuscript “Soft Currency. In his 2010 book Seven Deadly Innocent Frauds of Economic Policy, Mosler relates a feeling of helplessness watching the congress in 1992 discuss deficit-reduction as the cure to economic malaise, and knew he had to act to get the word out that it was actually the other way around –  it was those federal budget deficits which were helping keep the private sector afloat. He asked his former boss from the investment bank William Blair & Company, Ned Janotta, for advice. Ned’s advice proved pivotal. In Mosler’s own retelling:

I discussed it with my previous boss, Ned Janotta, at William Blair. He suggested I talk to Donald Rumsfeld (his college roommate, close friend and business associate), who personally knew many of the country’s leading economists, about getting it published. Shortly after, I got together with “Rummy” for an hour during his only opening that week. We met in the steam room of the Chicago Racquet Club and discussed fiscal and monetary policy. He sent me to Art Laffer who took on the project and assigned Mark McNary to co-author, research and edit the manuscript, which was completed in 1993.10Warren Mosler, The 7 Deadly Innocent Frauds of Economic Policy (2010).

It’s worth clarifying the company Mosler was keeping. Donald “Rummy” Rumsfeld – a neoconservative apparatchik of Nixon’s who’d later become one of the architects of the Iraq War under the Bush administration – connected Mosler to two neoclassical economists. Art Laffer was the inventor of the Laffer Curve, a libidinally satisfying but empirically dubious11Kenneth Thomas, “The Laffer Curve Refuted.” The Daily Kos (2012). model meant to promote the idea that low taxes are actually “optimal” for generating tax revenue because of the trickle-down effect. Laffer got his research partner Mark McNary interested enough to edit and co-author “Soft Currency Economics” to completion in 1993. 

By this point, Mosler was feeling confident enough to solicit the work for comments in academia. He didn’t get much traction in the mainstream economics world, however, probably due to the resemblance Mosler’s ideas had to long-forbidden ones in the discipline. So, it seems, Mosler sought out a second opinion. He submitted his manuscript to an obscure heterodox mailing list called the “Post-Keynesian Thought” listserv. Once a member of this group, Mosler would get into contact with a particularly important, but obscure, batch of economists. The first was L. Randall Wray, a professor at the University of Missouri Kansas City; the second, one of his research associates and students, was none other than future “rockstar economist” Stephanie Kelton; and indirectly there was a third, for Wray in turn had been a grad student of none other than Hyman Minsky. Without knowing it, Mosler had stumbled upon the main bee’s nest of the lost heterodox tradition. Interestingly, it was by some accounts a bumpy interaction at first. Kelton initially disagreed with Mosler’s theory on taxes, and her mentor, Wray, encouraged her to write up a paper stating her disagreement for publication in Cambridge Journal of Economics.12Stephanie Bell, “Can Taxes and Bonds Finance Government Spending?” Levy Economics InstituteWorking Paper no. 244 (1998). Spoiler alert: they cannot.Examining the nuances of reserve accounting done by the federal reserve, Kelton goes step-by-step through the process the Fed takes in its role as the government’s fiscal agent to carry out whatever spending congress has authorized through its votes. The upshot of this close reading of Fed and treasury operations is proof that all federal spending is direct money-creation. Taxation and bond-financing are merely two different methods, which happen totally independently of spending, for draining away excess reserves created through the process of the money-creation at a later date. In the process of doing so, however, Kelton said she eventually arrived at the same position on taxes and deficit spending that Mosler did. In 1998, Mosler in turn also encouraged13L. Randall Wray, “The “Kansas City” Approach to Modern Money Theory”. Levy Economics Institute Working Paper no. 961 (2020). Wray to write a book synthesizing the economic theory and history of MMT discerned from the Post Keynesian Theory listserv and academic papers produced thus far (Mosler also provided financial support for the book, as noted by Wray in a subsequent historiography of MMT he wrote in 2020).14L. Randall Wray, Understanding Modern Money: the Key to Full Employment and Price Stability. Edward Elgar Publications (2006). Now, an important partnership was forged.

We should probably stop for a moment to appreciate the route taken to get to this point. A hedge fund manager slash supercar industrialist – a character out of Iron Man comics – has a chance meeting with Donald Rumsfeld in a sauna room, who connects him with Art Laffer, from whom Mosler eventually found his way to an obscure 90s webring of dissident post-Keynesian scholars? This frankly unreal turn of events represents the genesis of what would become the next phase in chartalism’s evolution. Its proper academic name is neo-chartalism, since as we’ll see it was both a recovery of old chartalist ideas and a new synthesis of them into an updated system. But for a complex set of reasons it would come to be popularly known as Modern Monetary Theory or MMT.15Like much else from the early years of the MMT story, the coinage of the actual name “Modern Monetary Theory” for this new and revived version of chartalism is a bit hazy because it seems to be, as with Minsky’s alleged chartalism, a matter of oral history by biased participants rather than documented sources. As we know from Part I of this series, “chartalism” was coined by Knapp and popularized through its use by Keynes in the Treatise on Money (1930) and Schumpeter in his History of Economic Analysis (1954). “Functional finance,” Lerner’s term for it in the 1940s, was often the reference point for Americans interested in chartalist ideas. There was also talk inspired by Mitchell-Innes of “credit theories of money,” especially among endogenous money theorists and, later, anthropologists. As we’ll see, “neo-chartalism” seems to have its roots in journal articles by Wray and Kelton circa 2000. But “MMT” itself is tricky. The idea of a “Modern Monetary Theory” – implying as it does the Moslerian notion that either the theory itself or the monetary system it describes are new, neither of which is necessarily true – seems to have its earliest usage in Wray’s book Understanding Modern Money (1998). According to the MMT economist Nick Rowe in a comment on some random blog called Worthwhile Canadian Initiative from 2011 (such are our sources for this important information), the complete coinage belongs to Bill Mitchell: “Keynes coined the term “modern money,” and Wray named his book after that. But we always have used the term neo-Chartalist to refer to ourselves in academic circles. Bill Mitchell started using “modern monetary theory” on his blog a few years ago, and it eventually stuck. I don’t know that the latter has actually been used by any of us to describe ourselves in an academic paper yet, though, and I don’t know if we will.”

From this point onwards, Mosler would work with Wray, Kelton, and eventually many other post-Keynesians associated with this listserv, as well as a few university programs friendly to their tendency, to develop MMT into what it would become today. Mosler acted as the moneyman, funding seminars and scholarly retreats, and calls for papers on themes that were chartalism-informed and essentially proto-MMT. Additional help eventually arrived from a second wealthy patron: Bard College’s Levy Institute for Economics, a think tank founded by the financier Leon Levy in 1986 to promote heterodox economics.16The Levy Institute has its own fascinating history involving its own eccentric rich guy. Its founder, Leon Levy, was the youngest son of the physicist-turned-businessman Jerome S. Levy, after whom the Institute was originally named. Jerome was apparently taken aback by the mass unemployment of early twentieth-century capitalism and tried to figure out where it came from. In 1914 he derived a remarkable equation which showed all profits ultimately must come either from capitalist consumption or investment and thus that there cannot be profits for anybody if enough firms fail to spend money, since one capitalist’s consumption is another capitalist’s profit. (In the absence of this consumption, it follows that only spending by the state can get the economy moving again.) Jerome Levy thus has a plausible claim to have invented the Profits Equation, a massively important heterodox economic concept modeling the interdependencies of the economy as a whole that is normally attributed to the Marxist/Post-Keynesian economist Michal Kalecki in Essays in the Theory of Economic Fluctuation (1937). Jerome’s way of wielding this remarkable discovery against unemployment was, let’s say, directed narrowly – the Levys started a family business in the form of a finance newsletter – but in 1986 Leon funneled some of their money into founding the Institute at Bard, which did employ a number of heterodox economists advocating social-democratic policies, including none other than Minsky. The Levy Economics Institute hosts a white paper series which was for a long time one of the few public venues in which MMTers published research; it remains an important platform for them to this day. These institutions not only provided crucial financial support for the research programme (it takes money to write about money!) but also helped spread MMT’s reputation as a brand, attracting new adherents and expanding the well of talent involved in the project.

The fledgling MMT world centered on the University of Missouri-Kansas City (UMKC) campus – long a mecca for heterodox economists fleeing the Red Scare – during the 90s and well into the 2000s. An important moment came when Mosler founded the Center for Full Employment and Price Stability at UMKC, in consultation with Wray and his grad students. The name of the institute borrows the phrase “full employment and price stability” from Hyman Minsky’s work on financial stability and macroeconomic policy. Wray emphasizes that Minsky’s thought was key to MMT’s development, and that it is essentially fitting that the center bears the mark of his work:

Minsky’s influence on all of those at UMKC who contributed to MMT was significant, indeed, critical. While I had read (and appreciated) Keynes before I went to study with Minsky, in truth I probably would have studied political economy and labor economics if I had not studied with him. And it was Minsky who introduced me to the main components of what became MMT: government cannot go broke in its own currency, taxes create a demand for the government’s currency, the sectoral balances approach, the Kalecki profits equation, the employer of last resort proposal, the benefits of floating exchange rates, the benefits to the private sector from government deficits and debt, and—yes—the financial instability hypothesis. While it is true that Minsky did not assemble them in the same way that MMT has done, without Minsky, it is highly unlikely that I would have been open to these fundamental building blocks when I later met Warren Mosler and Bill Mitchell. I do not want to speak for the others associated with the “Kansas City Approach,” but most of them were my students, either formally or informally. To deny Minsky is also to deny the role played by UMKC in the development of MMT.17L. Randall Wray, “Functional finance: A Comparison of the Evolution of the Positions of Hyman Minsky and Abba Lerner.” Levy Economics Institute Working Paper no. 900 (2018). Wray wrote this in the context of defending the interpretation of Minsky as a consistent chartalist. This may not actually be true: we have already, for example, “denied Minsky” in Footnote 49 of Part 1 in this series. See also this video of Hyman Minsky lecturing at Westminster College, Salt Lake City, UT on Oct 30, 1991. Skip to timestamp 00:45:15 for some dodgy language (from the point of view of a chartalist anyway) on a worrying increase in federal deficits as a percentage of GDP. Similarly, see timestamp 1:05:00 to hear Minsky appear to say that although the US gov’t could “validate” its debt with tax receipts in the past, today (1991) the US had “competitor” currencies like the Yen and the Mark which apparently made this more difficult in some vaguely specified way. This video helps support two very important historical facts about MMT – the importance to their project of the lineage they trace through Wray and Kelton back to Minsky (Wray himself addresses the video but admits Minsky did say some rather curious things that understandably confused some of his students), and the fundamental importance of the University of Missouri-Kansas City for incubating the MMT project. We hope the murkiness of the written record in the particular matter of Minsky’s chartalism helps illustrate to you a central difficulty we have had in writing this essay: very few intellectual histories of chartalism exist, and those that do are often either written by MMTers as a teleology leading inevitably to their ideas, or are hopelessly vague about who precisely was what kind of chartalist when, or both. It sometimes seems quite likely to us that the only people who know the truth about Minsky’s chartalism overheard it in an idle conversation at the Washington University faculty lounge 30 years ago, and didn’t even realize what it meant.

This “Kansas City Approach” would eventually coalesce into what we call neo-chartalism or MMT. But from the point of view of the broader history of chartalism, what did this research programme accomplish? Essentially three things.

First, it was through the MMTers’ research that chartalism was rediscovered in the first place, and the various components of the theory that had been languishing separately in obscurity were put together into a coherent system. 

But MMT also contained a number of important innovations in chartalism. The neo-chartalism of the 1990s was the first version of the theory to describe in detail the highly specific mechanisms by which government spending of its fiat currency happens, at least in an American context, through a highly detailed analysis of the monetary and fiscal operations of the Federal Reserve and the Treasury to carry out the will of Congress after it has passed some spending bill. This analysis was combined with an endogenous money account of money-creation through private banks to create a more or less complete account of today’s international financial system, one that is also compatible with Minskyan crisis theory and Leesian microeconomics. And, through the development of the Job Guarantee as MMT’s signature policy prescription, the theory tied itself to a political programme which, though amorphous, requires at a minimum a return to full employment policy, industrial policy, and other forms of economic planning.

Thirdly, the MMTers played a modest but important role in working with anthropologists to integrate the most important insights from the archaeological record into chartalist economic theory, many (though not all) of which confirmed their intuitions about the origin and nature of money.18In this work, Wray, Kelton, and the other neo-chartalists were often aided by the research of a group of anthropologists, archaeologists, historians, economists, philologists, and other interdisciplinary scholars doing research into the deep origins of money. Two key examples of writers in this tendency are Michael Hudson and Geoffrey Ingham, both of whose work we’ve relied upon extensively as well in our research, as well as organizations like International Scholars Conference on Ancient Near Eastern Economies (ISCANEE). They also proved a huge influence on David Graeber’s famous work in Debt. The work of these scholars is difficult to categorize in relation to the neo-chartalists. Their research, which began in the 1980s precedes neo-chartalism; it nevertheless had a huge impact on neo-chartalism, becoming the historical evidence base that neo-chartalists would draw upon in their papers; these writers often collaborated with neo-chartalists in books and conferences; and yet, not everything they write is in line with neo-chartalist principles, and this same evidence base points towards some of the anomalies in neo-chartalist theory. We sometimes refer to them as the anthropological chartalists in order to distinguish them, but as we’ll see this may be an imperfect label. At any rate, when Kelton, Wray, et al bring up the Mesopotamians and the like, it tends to be these authors they’re drawing upon. We cover this research in greater depth in our upcoming essay “Meet the Mesopotamians.”

Wray & Kelton: The Foundations of Neo-Chartalism

Neo-chartalism defined

Following their early interactions with Mosler in the late 1990s, Wray and Kelton continued to develop the operational description of the modern monetary system they had been working on in response to Mosler’s theories at UMKC. Wray published his landmark book Understanding Modern Money: the Key to Full Employment and Price Stability in 1998. 

In this book – which reads almost like a series of lectures – he describes the US monetary and financial system in greater operational detail and uses it to outline a general theory. He describes some of the history of money and monetary ideas; rehashes chartalist arguments (outlined by Lerner a half-century and Knapp a full century earlier) that money should fundamentally be understood as an IOU created by a currency issuer; specifies this through the idea of the state’s promise to accept the currency it issues back as payment of a tax obligation; and therefore concludes, using Lerner’s phrase, that money is a creature of the state. Employing a healthy dose of repetition, Wray hammers home the point that taxes – primarily and above all else – drive the value of a currency. It was here that many of the familiar MMT talking points were ironed out, albeit in a somewhat technical form. Years later in 2011, Wray (with the help of several other neo-chartalist scholars, Mosler and Kelton among them) would publish the MMT Primer to the blog New Economic Perspectives. For a long time, this summary of the 90s arguments was the definitive introduction for beginners to MMT.

By around 2000, Wray and Kelton were starting to venture into something more ambitious than a purely operational account of the contemporary monetary system. They began to flesh out the lost history they’d begun to uncover – the history of money and its origins, as well as the history of theories of money. And they did this from a committed position, aligning themselves with the long-suppressed chartalist schools. Wray introduces the term “neo-chartalism” into the formal MMT discourse in his 2000 paper “The Neo-Chartalist Approach to Money” and characterizes it as the dominant view of money for contemporary post-Keynesians. According to Wray,

The nC [neo-chartalist] approach begins with the recognition that no matter what might have been the case in the long distant past, the nearly universal situation today is one in which the nation state establishes the unit of account to be used within its boundaries.19Wray, L. Randall, “The Neo-Chartalist Approach to Money.” SSRN Electronic Journal: July 1, 2000

According to Wray, the mainstream heuristic about how money originated was fundamentally incorrect. It was generally accepted that barter emerged before money, and was successively replaced by more efficient media of exchange. Instead, he cites anthropological evidence spotlighted in the work of Mitchell-Innes and Keynes which proves that more often than not a unit of account emerged first (for example, the purely abstract shekels of the the temple debt ledgers in the Mesopotamian era), and then (perhaps) later a circulating medium of exchange. Wray also traces the history of banking, showing that banks developed not as mere intermediaries between savers and investors, but rather as private conduits of money-issuance; first issuing bank notes as during the free banking periods in the US, then later issuing demand deposits of the sort you or I would be more familiar with. Thus, the argument went, no matter which way you slice it, money is a credit issued by a central authority.

The Myth of Barter refuted

Soon, such arguments became ammunition for the neo-chartalists to launch assaults upon various pillars of mainstream economic theory. Notably, in 2000, Kelton and Wray together with the heterodox economist John F. Henry from Sacramento State University published an important essay applying neo-chartalism to the problem of the accumulation of property in John Locke’s Two Treatises of Government.20Stephanie A. Bell [Kelton], John F. Henry & L. Randall Wray, “A Chartalist Critique of John Locke’s Theory of Property, Accumulation, and Money: Or, is it Moral to Trade your Nuts for Gold?”. Review of Social Economy 62: pp. 51-65 (2004). Henry, incidentally, is somewhat the odd man out in this paper and is a rather obscure character. He wasn’t part of the core neo-chartalist clique, exactly – his academic specialties tended to be more microeconomic and historical – but he was a fixture in UMKC’s economics department and had a direct influence on Wray, who once contributed an essay to a book dedicated to the man and is listed in it as one of “many students” Henry “liberated…from the ‘illusions’ of our time” (see Tae-He Jo & Frederic S. Lee [eds.], Marx, Veblen, and the Foundations of Heterodox Economics: Essays in honor of John F. Henry [2016], p. xvi). Originally affiliated with California State University until he moved to UMKC in 2005, Henry taught and researched there until his retirement in 2014; he died in 2020. His academic work was wide-ranging but tended to cover the history of economic thought and political economy, for example the emergence of neoclassical economics or the transition from midcentury social democracy to neoliberalism, all from a perspective deeply influenced by the heterodox economist Thorstein Veblen. A brilliant interdisciplinary mind, he appears to have made a positive impression on every major coterie at UMKC, from the MMTers around Wray and Kelton to the heterodox microeconomists around Fredric S. Lee. Unfortunately, he also seems to have had shitty politics: despite being surrounded by democratic socialists of one sort or another, Henry appears to have been something of an unreconstructed Stalinist or Leninist. There are hints of this in his work, where he’ll tend to employ the Marxist stages of history in a rigid and mechanical fashion that recalls Soviet-era Marxist textbooks; but it’s most apparent in his “A General Reading List for Students of Economics,” a long unofficial syllabus Henry used to give his students to introduce them to what he regarded as the classics of heterodox economic thought. So much of this long list remains an incredible resource – an interdisciplinary potpourri from classical, Marxian, Institutionalist, and Post-Keynesian economics as well as the philosophy of science, history, literature, and socialist theory – but it’s blemished by its frequent and bizarre forays into Leninism of the most crankish and conspiratorial varieties. It not only dutifully lists all the major works of Stalin, Mao, etc, but such texts as A.G. Morton’s Soviet Genetics (1951) and Michael Sayers & Albert Kahn’s The Great Conspiracy Against Russia (1946) – old Stalinist defenses of Lysenkoism and the Moscow Show Trials, respectively – which are regarded even by left-wing historians today as fantasies on par with the works of Grover Furr. It’s unclear, but interesting to think about, what direct or indirect influence this crackpot authoritarian streak might have had on the budding neo-chartalist perspective.

Locke, an early theorist of classical liberalism, sought to align the institution of private property with the idea of freedom. In his day, however, property rights had come under attack from the most radically democratic factions of the English Civil War, the proto-libertarian socialist Diggers. These anarchist-communists before the letter rejected the landed oligarchy of aristocrats who’d controlled English life for centuries, demanding that absentee ownership be abolished and the land be held in common and self-managed by the peasants who worked it. Wray, Kelton, & Henry characterize Locke’s theory as a rearguard defense of the big property owners against threats by movements like the Diggers. “In light of the claims that property disadvantaged the larger, non-propertied portion of the population,” the authors write, “Locke established a workmanship standard as the foundation for legitimate property rights, where ‘honest’ labor working on its own land would promote the interests of society as a whole.” As a concession to radical movements, in other words, Locke needed to create a labor theory of property, saying that land ownership could only be justified to the extent the owner worked it himself, and that furthermore he could not be justified in owning any land or any of his output beyond that which he could consume himself, since this would lead to a concentration of land ownership which could potentially deprive others of their right to land ownership and thus subsistence. The neo-chartalist authors call this theory “a fairly clear nod to the more radical elements of the period in attempting to develop a politically acceptable rationalization for property.”

On the surface, this is a big win for someone like the Diggers; it suggests at least extensive land reform. But since Locke ultimately wanted to defend the big property owners, our authors contend, he needed to wiggle his way out of the very constraint he’d created as a rearguard defense of property, and he found a most interesting tool for the job: our old bugbear, the myth of barter! Locke argues that the original motive for the barter which (supposedly) led to the origins of commodity money was the desire of the more industrious peasant farmers, who produced more than they could consume, to give up some of their excess supply in exchange for things others made or grew. This purely voluntary exchange hurts nobody and doesn’t prevent anybody from growing things on their own. And since money is just the one commodity that was picked as a universal equivalent for all the others, accumulating it is just an extension of this purely voluntary exchange; any inequality in how much money people own is just a product, Locke argues, of innate differences in their industriousness. Thus the massive inequality of English society could be justified even within the constraints of the supposedly Digger-proof labor theory of property.

But having outlined this context for Locke’s theory, the neo-chartalist authors point out an important problem: from what we know historically about the origins of money, none of that actually happened. Circulating currency of any sort, much less commodity-money, followed purely account-book-based money by hundreds of years. (Before that there’d been gift economies which, even if you call them a form of barter, don’t resemble Locke’s account of how barter supposedly worked.) This earliest accounting system emerged as a planning system measuring and regulating the obligatory donation of biophysical resources to a central authority – indeed, the religious authorities at the head of the Mesopotamian temple system! One could even call this imposed obligation a tax.21Some of this terminology is likely to be confusing in isolation. For more on the historical emergence of money in the Near East, see our upcoming essay “Meet the Mesopotamians.” The result, our authors claim, is that history reveals Locke’s story to be an ideologically motivated myth:

It is our position that money originates with a form of indebtedness that is forced on the lower classes during the transition from a classless to a privileged or class society. The dominant theory, which traces the emergence of monetary relations to exchange relations, abstracts from any such system of power and, thus, cannot provide a theory of money based on social debt relations. The chartalist theory, in contrast, incorporates a system of political power into a social and historical account of the origin of money. (…) The individualism that appears in Locke’s story is not at all necessary as a precondition for the existence of money, taxes, prices, and markets. Moreover, the efficiency standard that Locke imposes represents a kind of thinking that derives from capitalism and not from the period of the development of money. The upper class took the surplus to wastefully consume it—no efficiency would have been required or desired. But these points are of secondary importance.

And the ultimate upshot? Money, from this view, is revealed to be inherently a social technology rather than an individual invention; a system for measuring and discharging people’s social obligations to one another, rather than a naturally occurring set of exchanges between atomized individuals that just as naturally and justly produced inequalities between these individuals; and it is a creature of the state, since it’s ultimately the state and its laws which regulate our social interdependence. Here – if you assume a truly democratic state, anyway (a big if!) – is a basis for the notion that money simply is, by its historical nature, a sort of public utility; and that it ought, as a result, to be wielded for the public good.

Reconciling Credit and State Theories in the Pyramid of Money

The next task of neo-chartalism was to reconcile the two divergent strands of chartalism. As we’ve seen, MMT inherited two overlapping but distinct sets of approaches to thinking about money purely as a token. One tradition, whose figurehead is Alfred Mitchell-Innes, thinks of money as a credit – issued by any one of several centralized institutions (e.g. banks) – that circulates and is received back in order to accomplish particular goals. The other tradition, whose figurehead is Georg Friedrich Knapp, sees the monetary circuit in broadly similar terms but thinks that money is fundamentally a creature of the state due to centralized state control over the unit of account and the decision of what it’s willing to accept as taxes, the most important financial obligation. Both these traditions influenced the generation of Keynesians who used chartalist ideas to do economic planning in the mid-century period, but no one ever really sorted out the precise relationship between credit theories and state theories of money on the level of theory.22For a more detailed account of this history, see Part I of this series. As they saw it, this task fell to the 1990s MMTers.

The neo-chartalists ultimately decided to reconcile chartalism’s distinct branches into a single system by expanding the state theory of money to encompass the old credit theories. Specifically, they used a notion of a Pyramid of Money to integrate the insights of the Circuitists and other endogenous money theorists into a model where the state is fundamentally in charge.23Interestingly, these endogenous money theorists didn’t just disappear – and they didn’t always take kindly to the way in which neo-chartalists integrated their theory (of credit money brought into existence by banks) into the state-centric model of MMT. Often, the interactions between the neo-chartalists and those Post-Keynesians influenced by credit-money theories (like Circuitism or endogenous money theory) have taken the form of highly vociferous and esoteric debates over who really sets interest rates and controls the money supply: the financial sector as a whole or the central bank. But in the most general terms, these debates are also really about a profound philosophical question: which kind of currency-issuer is ultimately more important, the state or the nonstate kind? Phrased that way, you can see how such debates blur together disagreements about what is (i.e., which is predominant in causing things to happen, whether in our system or in any historical system) and disagreements about what ought to be (i.e., which ought to have more power and in what proportion). You can generally find these conversations by searching for debates between “Horizontalists” (the endogenous money people) and “Verticalists” or “Structuralists” (the neo-chartalists, generally). For the horizontal/vertical debate from the point of view of the former, see Basil J. Moore, Horizontalists and Verticalists: The Macroeconomics of Credit Money (1988); for the neo-chartalist point of view, see L. Randall Wray, “Endogenous Money: Structuralist and Horizontalist,” Levy Institute Working Paper no. 512 (September 2007); and for a summary of the debate from the mushy middle and an attempt to synthesize the two perspectives, see Giuseppe Fontana, “Bringing Together the Horizontalist and the Structuralist Analyses of Endogenous Money” in Philip Arestis (ed.), Microeconomics, Macroeconomics, and Economic Policy (2011). The structuralist view seems largely to have won out as MMT has grown more mainstream, but there are still many open questions here. And given the disagreements MMTers have with the very theorists of endogenous money who first modeled credit-issuance by banks, it’s curious to see the latter’s existence erased by occasional comments from MMTers that, for example, “MMT economists were the first in the modern era to point out that loans create deposits not the other way around” – see Bill Mitchell, “Paying interest on excess reserves is not constrained by scarcity” (16 July 2019). Of course, as we have seen throughout this history, that simply isn’t true by any rigorous definition of “MMT economists” or “the modern era.”

In a 2001 essay titled “The Role of the State and the Hierarchy of Money,” Kelton introduced this notion of ranking different monies into the MMT model. It’s an idea originally expounded by Minsky and Wray, but never fully integrated into MMT as Kelton does here. Taking Minsky’s powerful intuition that “everyone can create money, the problem is to get it accepted” as a starting point, Kelton’s basic idea in this work is that a state-issued fiat currency is the most widely accepted type of money within that polity, existing at the top of a hierarchy of debt-based moneys. In this Pyramid of Money, state-issued fiat currency is at the top, with other forms of money (bank deposits, credit card debt, personal loans, etc) necessarily subordinated to it. Additionally, the subordinate monies can also be denominated in terms of the state money.

The state unit-of-account money is defined as the top because it is the only thing the state will accept back to extinguish one’s tax liability. In order to pay your taxes, you can’t directly do so with bank deposits. It may seem that way from the point of view of the consumer, of course – the money we have in our bank accounts, most of which initially entered the economy through banks issuing loans, seems perfectly good to us, and don’t we use it to pay our taxes just fine? Well, according to Kelton – and empirical research bears this out – what’s technically happening behind the scenes in a tax payment is that the bank-created money is being exchanged at par (1:1) with the state currency in order to satisfy tax obligations at the end of a tax period. Thus, for Kelton, the receivability of bank-created money – its acceptability as a means of payment, and thus its desirability for those who have to make payments –  is fundamentally driven by how easily it is exchangeable for the state-issued currency. And this, for her, is true of any credit instrument issued by any currency-issuer: in neo-chartalism, how easily that credit converts to state money determines how many institutions will receive it as payment in the general economy and thus how much people want to hold it. Now, all that said, it’s worth noting that in this framework bank money holds a special position – it’s nearly as acceptable as the state-issued money in large part due to the at-par tradability between the two:

Thus, the legal obligation to pay taxes and the state’s proclamation that it will accept its own currency at state pay-offices elevate the state’s liabilities to the top of the pyramid, rendering them the promises with the highest degree of acceptability. Although the state’s liabilities reign supreme among promises, certain bank promises, as a consequence of their acceptance at state pay-offices, also come to serve as means of payment and media of exchange. In particular, ‘[d]emand deposits have attained a special status in our economy because of the special role commercial banks have come to play’ (Wray, 1990, p. 291). Because the central bank guarantees that demand deposits will trade at par with government currency and because they are accepted in payment of taxes, bank promises (demand deposits) are nearly as liquid as state money and therefore occupy the second tier in the pyramid.24Stephanie Bell, “The Role of the State and the Hierarchy of Money”, Cambridge Journal of Economics, Volume 25, Issue 2, March 2001, pp. 149–163.

Kelton’s contribution to MMT in this essay cannot be understated. She integrated endogenous money theory into MMT by way of the concept of hierarchy of money, and in the process, turned MMT into a more complete and updated macroeconomics. She shows that through the state’s ability to make and enforce tax law, it renders its own money the most acceptable form of money in the financial system. In other words, the dollar is at the top of the hierarchy of money because it is the only money which will always satisfy tax obligations such that they exist now or into the future. This argument would prove hugely influential and remains a central dogma of MMT to this day.

Unearthing Historical Precursors

The MMTers did not stop fleshing out the history of chartalist thought in one-off investigations. Powered by Mosler’s cash and support from other institutions such as the Levy Economics Institute, they continued this research agenda well into the 2010s. In that time, they began to do some of the work of unearthing the history of chartalism, making connections between different thinkers who had ideas similar to their own.

Wray wrote two papers on chartalist ideas, formulating the topic in an increasingly complete story. In “Introduction to an Alternative History of Money,” Wray leverages comparative anthropology to answer some more fundamental questions on the nature of money, banks, and the monetary system.25L. Randall Wray, “Introduction to an Alternative History of Money”, Levy Economics Institute Working Paper no. 717 (2012). In a separate work, Wray cites anthropologist Michael Hudson for evidence from the Mesopotamian unit-of-account money which denominated transactions in wheat or barley. He also clarifies an important distinction from Schumpter’s writing on the monetary theory of credit (the idea that credit moneys exist ultimately to be settled in some more real form of money) and a credit theory of money (the branch of chartalism we have discussed at length, which sees money as credit). Wray links the early theorists Mitchell-Innes and Knapp to the mid-century chartalists Keynes, Lerner, and Schumpeter, as well as some of the modern thinkers Hyman Minsky, Charles Goodhart, and Geoffrey Ingham. By his own admission, Wray couldn’t present anything like a full intellectual history running through the thinkers listed above in this one short paper he wrote for the Levy Institute. Nonetheless, it represented a step towards a comprehensive history.26L. Randall Wray, “From the State Theory of Money to Modern Money Theory: An Alternative to Economic Orthodoxy.” Levy Economics Institute Working Paper no. 792 (2014).

Tcherneva: The Job Guarantee as MMT’s Signature Policy

The reason one ought to give a damn about all these different theories of money is that they make different predictions about what’s possible – what kinds of crises are likely to come about from which causes, how exactly the various social and productive practices which compose the economy hang together, and above all what kind of actions you can take with success given the real constraints of the monetary system. There’s no doubt that what chartalism gets right has radically expanded our sense of what is possible. This is part of why MMT is so militant not just as a theoretical project but as a policy programme. In particular, they have often pushed a very specific scheme that has become something like their signature policy proposal: the job guarantee.

But just what is a job guarantee (JG)? As Wray puts it in a 2009 blog post:

A job guarantee program is one in which government promises to make a job available to any qualifying individual who is ready and willing to work. Qualifications required of participants could include age range (i.e. teens), gender, family status (i.e. heads of households), family income (i.e. below poverty line), educational attainment (i.e. high school dropouts), residency (i.e. rural), and so on. The most general program would provide a universal job guarantee, sometimes also called an employer of last resort (ELR) program in which government promises to provide a job to anyone legally entitled to work.27L. Randall Wray, “Job Guarantee,” New Economic Perspectives (23 August 2009).

It’s worth lingering here for a few clarifying observations. First, note the voluntary nature of the program, at least when taken by itself. This isn’t a form of labor conscription where people are being drafted into an industrial army. Rather, it’s a public option for labor. If you want a job, you can go to your local Department of Labor and get one. There will be a list of jobs (populated through some process, ideally democratic) from which to choose. And many particular job guarantee schemes emphasize that if none of these are a good fit, there should be some way of creating a job on the spot for people with particular skills and needs. MMTers sometimes encapsulate this ideal with a slogan: “not matching people to jobs, but jobs to people.”

Second, and following from this first principle, the job guarantee can be expected to have certain macroeconomic effects. It expands and contracts automatically as people “vote with their feet” – in good times fewer people will go for JG jobs, in worse times they will move out of unemployment or low-wage private sector jobs into JG jobs. (Which is why MMTers often refer to the JG as countercyclical – meaning, in this case, that it produces jobs in a downturn when employment is down but supposedly shrinks in a boom when private sector employment goes up.) This has a number of consequences for the broader economy, the most important of which is that whatever the lowest wage for a full-time JG job is effectively becomes the minimum wage. As in health care, the existence of a public option while private options remain would put pressure on private providers – in this case providers of jobs, i.e. employers – to at least match the public version. Hence the JG wage, JG working conditions, the effects a JG has on the relative sizes of the private and public sectors, etc. would all become fixations of political debate were it to be implemented.

In addition, take care to note how starkly a JG differs from other direct employment programs pursued by states in the name of “full employment.” Often social-democratic and developmentalist governments pledge themselves to pursue the goal of “maximum possible employment,” with a handful of individuals arguing for the pursuit of true full employment (and usually getting shot down). This was especially true in the postwar period – see for example the Employment Act of 1946 in the US or the UN’s proclamation of a “right to work” in its 1948 Universal Declaration of Human Rights. But such pledges are little more than the statement of broad policy goals, to be pursued by whatever means prove necessary. The actual manner in which states acted on these intentions tended to be much more piecemeal and underwhelming – spending on large public works projects employing people on a project-by-project basis, usually in domains chosen by the central planners, at a large enough scale that the planners hoped it could “soak up” all the currently unemployed workers. In reality, only the most severe total-war mobilizations via forced conscription – such as those undertaken by all combatant nations during World War II – truly approached anything like actual full employment.28And even then they fell short – unemployment remained a social problem during such total mobilizations. In 1944, the US experienced the lowest official unemployment rate on record: 1.2% (see Kimberly Amadeo,  “Unemployment Rate by Year Since 1929 Compared to Inflation and GDP,The Balance (April 3, 2022). This equated to approximately 790,000 individuals looking for work (see U.S. Department of Commerce, Bicentennial Edition: Historical Statistics of the United States, Colonial Times to 1970, Part 1: Chapter D (“Labor”) (1975)). And since the neoliberal period, even these inadequate goals have been abandoned, with economists proposing a fictional rate of unemployment below which inflation would supposedly begin to accelerate upwards, meaning that states should actively avoid any situation where everyone has a job.29See James K. Galbraith, “Time to Ditch the NAIRU,” Journal of Economic Perspectives (11:1 Winter 1997), pp. 93–1.

The JG, by contrast, creates a permanent institution for eliminating unemployment without conscription. Its voluntary nature is in a way its greatest strength, since it means that people self-select to enter the program. As a result, the JG is likely to briskly abolish involuntary unemployment – people will come to the JG in search of work on a continual basis, and if the JG is followed to its logical conclusion the unemployment rate will tend towards 0%.30We recognize that the basic definitions of “employed” or “labor force” are not without their own methodological issues, and that this impinges notably upon what is meant by a JG. The Bureau of Labor Statics (BLS) defines an unemployed individual as any respondent to their “Current Population Survey” who has indicated all of the following to be true for themselves: (1) They were not employed during the survey reference week; (2) They were available for work during the survey reference week, except for temporary illness; (3) They made at least one specific, active effort to find a job during the 4-week period ending with the survey reference week OR they were temporarily laid off and expecting to be recalled to their job. Using this definition, a more technically accurate (in the academic economist sense) goal of the JG would be 0% unemployment. However, in more common sense usage you will find some heterodox economists writing in nonacademic settings about the JG say that the goal is the elimination of only involuntary unemployment. There are many different definitions of what counts as an unemployed person (many of them with merit). See for example the concept of a “discouraged worker”: someone who is indeed looking for work but who gave up and dropped out of the workforce completely by some measures, but who would gladly accept paid work should they be offered it and thereby rejoin the labor force later on. The BLS definition of being “employed” is not without its own analytical difficulties (consider for example the fact that for the BLS, an individual can be “employed” if they have worked just one hour of either paid or unpaid labor as part of a job within the 4-week survey period). No matter what specific definition one chooses, for socialists who want to use a JG for their own ends, the goal in ordinary language ought to be to arrive at a situation where everybody who wants a job can get one in fulfilling and socially useful work; where those unable to work can still get what they need; and where people’s ability to meet their basic needs is divorced from the work obligation. Thus, in contrast to project-based direct employment projects of the classical variety – the New Deal’s Works Progress Administration, for example – the JG has a mechanism for continually funneling anyone in search of a job into work. Indeed, it can become a continual feeder of people seeking work into the sort of public works projects which old direct employment programs only staffed on a case-by-case and often temporary basis. And the program’s resulting decentralization can, if paired with a governance scheme that places the power to determine which jobs get created in the hands of local communities, lead to yet further democratization of the economy – hence the common MMT slogan that a JG would be “federally funded but locally administered.”

Finally, it’s worth noting the history of job guarantee schemes. As we’ve seen, a job guarantee is a more involved and permanent solution to unemployment than public works spending; the former is also much more recent than the latter, going back perhaps to the nineteenth century at most (whereas public works arguably go back to the earliest antiquity). But, importantly, the history of the job guarantee is also distinct from (but intersects with) the history of chartalist theories of money. MMTers (neo-chartalists) draw their inspiration for the JG from a number of sources. As we’ve seen, MMT seems to have gotten its idea for the JG from Minsky (remember Wray’s words above: “it was Minsky who introduced me to the main components of what became MMT…[including] the employer of last resort proposal”), mixing this pre-existing proposal with their chartalist theory of money to produce a new synthesis. Other precedents for a job guarantee scheme exist as well. In recent years it has become common for MMTers to associate their version of the proposal with that of the civil rights movement in the 60s and 70s – powerfully expressed both in the Freedom Budget of A. Philip Randolph, Bayard Rustin, and Martin Luther King as well as the later advocacy of Coretta Scott King and the National Committee for Full Employment/Full Employment Action Council (NCFE/FEAC). And from a socialist point of view, something that looks strikingly like a very early job guarantee was put forward by the French democratic socialist Louis Blanc in his Organisation du travail (1839), which proclaimed a “right to work” (droit au travail) – and in order to provide that work, he further proposed a policy of state support for cooperative “national workshops” (ateliers nationaux) under the direct control of workers themselves. 

All these proposals by working-class movements were remarkable, brave, and forward-thinking; MMTers are right to say that, to the extent chartalism is correct, its insights help make implementing a JG more tractable; and so the neo-chartalist synthesis makes a lot of practical sense. But it’s worth noting that, on a purely historical level, there is no necessary relationship between chartalism and the job guarantee. You can have job guarantee proposals which are not grounded in chartalist theory (as in the case of Louis Blanc, the various programs proposed by the civil rights movement, and possibly – given his inconsistent chartalism – even Minsky’s ELR),31One need only read the primary and secondary sources on these early JG proposals to see that they’re not chartalist. Rather than believing in the use of currency issuance to mobilize resources without any need to collect revenues, these schemes clearly contain provisions for how the state can collect revenues in order to fund the program in something like a loanable funds model (i.e. the mainstream economic theory of money – see our definition in Part 1 of this series). Consider Blanc, for example, with his “right to work” scheme organized through a series of state-supported national workshops under the cooperative control of the workers. Blanc, we’re told, “wanted the social services, to which he assigned a large place, to be carried on mainly, not by the State, but by these workers’ associations, which were to set aside a proportion of their revenues for maintaining them”; and while “[t]here was to be, as the Saint-Simonians had demanded, a publicly owned Bank to act as the chief distributor of credit,” it both played a secondary role and was conceived of as a bank making loans out of its reserves and deposits rather than bringing credit money into existence as in chartalism. We know this because “[t]he surpluses achieved in the ateliers were to accrue to the associated workers, but not until proper deductions had been made both for capital development and for payments into an equalisation fund” – see GDH Cole, History of Socialist Thought v1: The Forerunners 1789-1850(1953), pp. 169-172. The same thing holds true of the JG proposals that emerged out of the Civil Rights movement. The original Randolph-Rustin-MLK Freedom Budget white paper, for example, explicitly introduces the JG like so: “What the Freedom Budget proposes is this: Budget a fraction of the $200 increase in Federal tax revenues to provide jobs for all who can work and adequate income of other types for those who cannot.” And in case it’s ambiguous what those taxes are doing, it’s clear from context: “If all our nation’s wealth were divided equally among all us Americans, each share would be worth roughly $3,500. Of this, we grant to the Federal government a slice equal to roughly $500 in the form of taxes, leaving us an average of about $3,000 to spend on other needs.” And later, in a Q&A section where someone asks whether “taxes have to be raised to provide money to implement the Freedom Budget program,” the response is that “If total output expands – and it will if Freedom Budget proposals are enacted – revenues to the federal government will rise by $10 billion each year” – a perfectly mainstream Keynesian multiplier argument from the General Theory, which still assumes the government needs tax revenue to pay for things and thus contains no chartalist content whatsoever. See A. Philip Randolph & Bayard Rustin, “A Freedom Budget for All Americans: A Summary,” A. Philip Randolph Institute (January 1967), pp. 11, 18. The non-chartalist nature of the civil rights JG proposals continued into the Coretta Scott King era: one historian tells us that “To pay for such programs [Scott King and her allies] demanded a transfer of governmental spending away from the defense and space industries by at least 50%, as well as progressive taxation” and quotes Scott King as saying that “our present tax and welfare structure is such as to encourage the wealthy to speculate and the poor to vegetate,” all implying a revenue constraint for government spending – see David P. Stein, “‘This Nation Has Never Honestly Dealt with the Question of a Peacetime Economy’”: Coretta Scott King and the Struggle for a Nonviolent Economy in the 1970s,”Souls, 18:1, 80-105. For all that, however, it’s quite typical for MMTers to present their theory of money alongside this history as if there were no contradiction – e.g. Fadhel Kaboub, “Honoring Dr. King’s Call for a Job Guarantee Program,New Economic Perspectives (28 August 2013) – which, while it deserves props for supporting a crucial aspect of the struggle for Black liberation, can (perhaps unintentionally) mislead people into thinking chartalism played any role at all in that movement historically. And that’s not the first time MMTers have played fast and loose with people’s chartalist credentials, as we’ve seen: for Minsky’s inconsistent chartalism, see Footnote 17 above and Footnote 49 of Part I of this series. and you can have “full employment” schemes inspired by chartalistic ideas which are not job guarantees (e.g. the “WTB Plan” rejected by the German Social Democrats in the 1920s).32The “WTB Plan” – so called because of the three social democrats who supported it, Wladimir Woytinsky, Fritz Tarnow, and Fritz Baade – was in fact influenced by something sort of like chartalism. Faced with mass unemployment in the wake of the Great Depression in Germany, Woytinsky (the main architect of the plan, and through whose memoirs we know most of the details) tried to convince the German Social Democrats to adopt a policy of “full employment” where it directly hired unemployed workers to build public infrastructure – and he specifically proposed to do this by having the German central bank issue a bunch of new credit-money and put it into the workers’ pockets via new construction jobs (something the central bank was all too willing to do because it was run by our old friend the Knappian and future Nazi “money magician” Hjalmar Schact!). Unfortunately, the SPD – influenced in this regard by their guru, the Marxist economist Rudolf Hilferding – rejected the plan as a slight against the Labor Theory of Value, despite the fact we now know from subsequent experience and Keynesian theory that it likely could have worked and saved the republic. At any rate, what’s important for our purposes is that this wonderful proposal, though seemingly influenced by chartalism and certainly a “full employment” scheme, was very distinctly not a job guarantee but rather one of those classic public works programs that hopes to “soak up” all or most of the unemployed on projects predetermined by planners. Woytinsky himself is quite clear on this front: “Active economic policy, with large-scale public works as its cornerstone, remained my obsession.” Later he reveals the scale of the program: “To accelerate the start of the program, I set a very modest immediate goal – jobs for one million workers. This would be the first step” ([Wladimir Woytinsky, Stormy Passage; a Personal History Through Two Russian Revolutions to Democracy and Freedom: 1905-1960 (1961) pp. 466-468]). To give you a sense, there were at least six million unemployed people in Germany at the time (Richard J. Evans, The Third Reich in Power [2005], p. 328). Woytinsky’s proposal was extremely noble and good, but it was basically analogous to the WPA’s programs during the New Deal, and thus had none of the characteristics and advantages of the job guarantee. In principle, a JG could be impractical while chartalism could still be true, and chartalism’s being false would not make a JG impossible. The two are analytically distinct, and neo-chartalism’s JG was a self-conscious synthesis rather than being natural or of necessity – though quite a fruitful one. In MMT’s hands, the JG has often been proposed as a tool for expanding the public sector and increasing democracy.33Often – but not always. To be clear, the main MMT JG proposals (of which the most prominent is Tcherneva’s) all seek to expand the public sector and the welfare state in the long run. But it must be said that, historically, versions of the JG have been proposed that very much treat it as a way of replacing (and so, severely cutting back) the welfare state. This is particularly evident in certain moralistic critiques in early MMT JG proposals against “the dole” – by which they mean cash transfers, generally, though the arguments seem to extend to anything which is provisioned unconditionally to everyone as a human right, as opposed to being attached to a work requirement. Such right-wing arguments were deployed by some JG supporters as an excuse to use the JG to cut back on existing programs, much as UBI is used by other right-wingers for a similar purpose. Minsky is a good example: “A most striking aspect of the irrelevance and wrong-headedness of policy has been the recourse to the dole, not only in response to the current recession but over the long run. A dole is the handing out of cash or services where nothing is required in exchange for the hand-out….The principles which should underlie the [job guarantee] reform are an affirmation of both the dignity of labor and the social value of receiving income as a right because it is earned” (Hyman Minsky, “The Poverty of Economic Policy” in Ending Poverty: Jobs, Not Welfare [2013]). One particularly disturbing example comes from a 2010 Fiscal Sustainability Conference at which most of the principle MMT economists were present – Wray, Kelton, Tcherneva, and Mitchell – in which Wray in particular, in a conversation about how to pitch the JG to conservatives, was pretty blunt: “Anything that a private employer can legally do to their employees, the employers in this program will do. Okay? And just, socialism – I think if you tell most Americans, ‘What we’re gonna do is we’re gonna require that people who ought to be working – okay? Define disabilities, I think, very narrowly – they’re gonna have to work, instead of welfare,’ and if you ask them, ‘what would you call that system?’ All Americans are gonna call that, ‘Oh, that’s capitalism.’ They wouldn’t call it socialism” (“Even Conservatives Should Support a Job Guarantee” [2016] on YouTube, 2:31 – 3:08). Socialists of course wouldn’t disagree – but for us that’s hardly an endorsement. And note the line about disabilities – while paying the lightest lip service to the idea that the disabled might be given a free pass from the work obligation, Wray breezily adds that disability will be defined “very narrowly” so as to avoid almost anybody getting anything without spending a labor-hour, a sentiment which would make any Republican Party apparatchik proud. This chilling exchange suggests two things to us. First, that the JG is only a socialist policy if designed in a socialist manner (to place workers in charge of the workplace, to expand the cooperative and public sectors at the expense of the private sector, to raise living standards and working conditions through the JG’s bare minimum versions of each, and – in conjunction with cash transfers and free public provisioning of basic needs, not in spite of these – to decrease dependence upon wage labor under bosses for survival). And second, that as of 2010 at least some major MMT economists were not above selling their services to right-wing politicians in the most cynical and anti-worker manner possible if it meant they could get a hearing for their pet policies.

MMT seems to have gotten the idea for the JG from Minsky, as his ideas on an employer of last resort were also picked up by his students and colleagues at UMKC and elsewhere. Today, there is perhaps no stronger intellectual champion for the idea of a job guarantee than Pavlina Tcherneva. 

Tcherneva was a member of the group at UMKC who initially came into contact with Mosler and developed the theory from its earliest days. Having earned her Masters and PhD there, she became a professor at Bard College (former hosts, you’ll recall, of the Levy Institute). Tcherneva would go on to spend a great portion of her time researching the history of direct job-creation programs and designing implementable job guarantee programs of her own based on these real-world examples. 

One outgrowth of this research was the discovery of a formerly little-known model: Argentina’s Plan Jefes (also known as “El Programa Jefes y Jefas de Hogar Desocupados”). At the height the Argentine fiscal crisis in the early 2000s, this program – which ran from 2002 to 2005 – guaranteed jobs for some 5% of the country’s population. The plan wasn’t perfect, particularly because it wasn’t a true full-employment program so much as a mini-JG: it guaranteed jobs only to one “head of household,” and then only in homes containing a dependent (a minor, a pregnant woman, a disabled person, etc). Nonetheless, the program had a huge impact – participants signed up at their kids’ public school and proceeded to receive 150 pesos a month in exchange for four hours of work a day in community service, small-scale construction, or other public employment on the local level. It also attracted the attention and participation of women on a massive scale (they made up 60-75% of the program), increasing their financial independence in a major challenge to patriarchal norms. Along with Wray, Tcherneva co-authored a study surveying low-income participants in this direct job-creation program. The survey recorded decreases in household poverty, with relatively high participant satisfaction with the program –  particularly those households with women as heads.34“The Jefes program provides a payment of 150 pesos per month to a head of household for a minimum of 4 hours of work daily. Participants work in community services and small construction or maintenance activities, or are directed to training programs (including finishing basic education). The household must contain children under age 18, persons with handicaps, or a pregnant woman. Households are generally limited to one participant in the Jefes program. The program was intended to be one of the government’s primary programs to deal with the economic crisis that gripped Argentina with the collapse of the currency board. Most other safety net programs were eliminated or reduced in order to shift funding to Jefes. The Ministry of Labor also operates another employment program, Programa de Emergencia Laboral (PEL) with a design very similar to that of Jefes—monthly benefits are the same, but it includes some beneficiaries that do not qualify for Jefes.” Pavlina Tcherneva & L. Randall Wray, “Gender and the Job Guarantee: The Impact of Argentina’s Jefes Program on Female Heads of Poor Households.” Working Paper No. 50, Center for Full Employment & Price Stability(2005).

Tcherneva would take her observations on real world job guarantee programs to build plans for the US case. As with Minsky, Wray, and a multitude of other chartalists and MMTers, Tcherneva recognized that involuntary unemployment was incorrectly theorized by neoclassicals as being economically necessary in order to maintain price stability. But we have seen in places like Argentina (with the Jefes program) or the US (with its dramatic wartime mobilization in the 1940s) that this is not so. In another paper, she tackles the question of inflation due to direct job-creation induced full employment head-on, noting that instead:

The policy choice before us is the following—we either have a buffer stock of unemployed people or a buffer stock of employed people. That is, either we continue under the status quo, where the pool of unemployed people expands and shrinks with recessions and expansions, or we allow the JG’s pool of employed people to shrink and expand countercyclically. Since unemployment is already “paid for” in real and financial terms, diverting these financial and real resources to running the JG program is a far superior option to the status quo. Furthermore, with the JG in place, which is inherently a countercyclical employment policy, the economy can operate at a higher level of non-inflationary output than with mass unemployment (i.e., than with an unemployed buffer stock).35Pavlina Tcherneva, “The Job Guarantee: Design, Jobs, and Implementation” (2018), Working Paper no. 902, Levy Economics Institute. With assistance from her UMKC colleague Scott Fulwiler, Tcherneva goes on to state they have used what’s called the Fair Model (one of the most mainstream macroeconometric models in existence) to show that a hypothetical job guarantee program of Tcherneva’s design for the US would not result in high inflation: ”Using the Fair macroeconometric forecasting model, Fullwiler (forthcoming) estimates that the implementation of a very large program that employs between 11–16 million people will permanently increase private sector employment by up to 4 million jobs and real GDP by $313 billion to $560 billion a year.” Tcherneva also created a “Job Guarantee FAQ” available on her website, which provides answers to 50 common questions asked about job guarantee programs, including whether it would cause inflation.

By “buffer stock”, Tcherneva is referring to the use of employed people (rather than an “unemployment buffer stock”) to achieve “a higher level of non-inflationary output than with mass unemployment” – that is, to achieve a higher level of output without causing inflation than would be possible if you just accept unemployment as inevitable.36This raises the obvious question: what causes inflation, or what even is it? These are basic questions of which unfortunately require too detailed a response to answer here. Luckily, you can seek out “Notes Toward A Theory of Inflation” by Steve Mann (Strange Matters 2022) for our initial thoughts on what inflation is, how it operates, and what we think is a better theory of inflation based upon supply chains. Naturally, and arguably morally, in this framework the government is obligated to employ everyone who wants a job on the spot and use the added productive capacity created thereby to mediate any inflation which may develop – rather than choose to keep 3-5% of the workforce unemployed without any income even in “good” times, as our governments have typically done in the neoliberal period. Instead of running an “unemployment program” where we as a society pay real costs of all the social ills related to being unemployed for any length of time, Tcherneva argues, should use the state fiat money to spend on a federal job guarantee that raises incomes, empowers workers, and grows the productivity of the economy as a whole. 

Tcherneva continues to be a leading world expert on the JG, having recently expanded her analysis into a book that cites not only Plan Jefes but additional real-world examples such as India’s National Rural Employment Guarantee Act (NREGA) and Brussels’s Youth Job Guarantee.37Pavlina Tcherneva, The Case for a Job Guarantee (2020) The call for a job guarantee is one of MMT’s most easily recognizable political demands today, thanks in large part to Tcherneva’s work.

Forstater: The Political Implications of MMT

Chartalism can be thought of as a social technology. It has immediate practical applications in running a centrally-administered credit or chartal money which can serve many planning functions. And like any technology, chartalism can be used for both emancipatory and oppressive ends. 

This is a point which has been drawn out with special clarity in the research of Mathew Forstater,  a professor in the UMKC economics department who often approaches the practical application of MMT principles from a more explicitly radical political perspective. 

Sometimes, this is by way of enthusiasm for the way chartalism can be a tool for leftists. In one paper, Forstater reminds us of the earlier attempts at direct job-creation in the US (such as the Works Progress Administration, the Civilian Conservation Corps, the 1946 Employment Act, the 1978 Humphrey-Hawkins Act) and abroad (India’s National Rural Employment Guarantee Act, and of course the Plan Jefes in Argentina), only to then boldly suggest a new theory: that the JG could play an active role in creating non-capitalist spaces and institutions on the municipal level. He argues that this is because existing elements of the MMTers’ JG proposals – particularly the “federally funded, locally administered” nature of the program – lend themselves to a local and communal approach. In particular, Forstater recommends that they be paired with the municipalist programme of the libertarian socialist theorist Murray Bookchin, who famously advocated that cities be transformed into communal federations, their present centralized governments replaced with federations of direct-democratic neighborhood councils. Forstater argues that organizing JGs communally and administering them along Bookchinian lines would likely produce more efficient solutions to some of the biggest challenges these communities face:

While local governments may play some role, it has already been noted that community and neighborhood organizations, NGOs, and nonprofit enterprises will be the primary institutions employing JG workers, and that workers themselves will have a voice in initiating and organizing the projects. In addition, current political boundaries often make no economic or ecological sense. Thus there is a need to learn from alternative institutional structures. The communal anarchist and social ecology notion of municipal confederalism (also known as libertarian municipalism) provides one possible framework.38Mathew Forstater, “The Job Guarantee and Municipal Confederalism: Exploring the National and Local Levels of Program Operation” in Michael J. Murray & Mathew Forstater (eds.), Employment Guarantee Schemes (2013). 39Elsewhere, of course, Forstater joins Mosler and the financial wing of MMT in a more nation-state-based perspective. Some of these works are also interesting! For example, he is a co-author on one paper that attempts to clue the Federal Reserve and its critics into the fact that for monetarily sovereign states that issue their own fiat currency (such as the US, Japan, or the UK), as long as there is sufficient demand for the central bank reserves in the banking system to settle tax liabilities, the natural rate of interest tends towards zero, unless the state monetary authority intervenes to raise it to a positive rate by offering to sell bonds that have a positive interest rate. See Mathew Forstater & Warren Mosler, “The Natural Rate of Interest is Zero,Journal of Economic Issues, June 2005.

But Forstater’s most important contribution to the discourse may well be a much darker and more pessimistic assessment of chartalism. As we have seen, neo-chartalists make enthusiastic arguments from a historical point of view that state money is fundamentally tax-driven money or money whose use is driven by tax-receivability – in other words, that people use a state’s fiat money because they can use it to pay their taxes, and this drives its use by those same people to make payments to each other. Sometimes, MMTers have framed this as a relatively benign process. But Forstater’s monetary history of the colonial powers in Africa shows just how brutal and violent the process of imposing a tax obligation can be. Perhaps motivated by his apparent sympathy to libertarian socialist ideas, he re-introduces the question of the state’s power to exploit ordinary people into MMT. Why are taxes the most important obligation, such that they drive the use of a currency? Perhaps, Forstater suggests, because such importance flows from the barrel of a gun.

Using Karl Marx’s concept of primitive accumulation40For an explanation of primitive accumulation, see Part VIII (Chapters 26-33) of Karl Marx’s Das Kapital Volume I (1867). Tl;dr, it’s a term describing the process by which capital accumulation was initiated in the dawn of capitalism: namely, by forcibly causing the means of production to become privately owned, usually through direct expropriation, conquest, dispossession, enclosure, and theft – all of which forces workers to sell their labor power in a labor market in order to sustain themselves. as a leitmotif, Forstater shows us in painful detail that chartalism has a dark side. Using direct taxation (a method of primitive accumulation, Forstater convincingly argues), the French colonial administrators in Nigeria and other French colonies imposed a tax liability that could only be repaid by harvesting a cash agricultural crop and selling it to European brokers. Direct taxation was very consciously employed without regard to revenue-collection specifically as a goal. The French were well aware that they didn’t need to collect as “revenue” the paper money they themselves poofed into existence in the first place. Rather, in arch-chartalist fashion, they understood full well that it was a tool for mobilizing resources from their new subject population. But not just any resources: above all, this fiat currency was a way of extracting forced labor from colonial subjects. This is shown by the colonial brokers’ own testimony, to which Forstater adds historical perspective:

First Governor General of the Colony and Protectorate of Nigeria, Sir Frederick Lugard’s Political Memoranda and Political Testimonies are filled with evidence regarding direct taxation: “Experience seems to point to the conclusion that in a country so fertile as this, direct taxation is a moral benefit to the people by stimulating industry and production” (Lugard, 1965a, p. 118). Lugard’s belief that “Direct taxation may be said to be the corollary of the abolition, however, gradual, of forced labour and domestic slavery” (1965a, p. 118), acknowledges the role of direct taxation in forcing Africans to become wage-laborers. Lugard was also clear that the “tax must be collected in cash wherever possible…The tax thus promotes the circulation of currency with its attendant benefits to trade” (…) Direct taxation was used to force Africans to work as wage laborers, to compel them to grow cash crops, to stimulate labor migration and control labor supply, and to monetize the African economies. Part of this latter was to further incorporate African economies into the larger emerging global capitalist system as purchasers of European goods.41Mathew Forstater, “Taxation and Primitive Accumulation.” Research in Political Economy, Volume 22, 51–65 (2005).

This is a point well worth stressing. As Forstater shows, the French were trying to mobilize the labor-power of African people – many of them former slaves, others with the means to produce their own subsistence (via farming, grazing, or hunter-gathering) – by getting them to engage in wage-labor growing cash-crops for export back to France or to France’s trade partners at a fat profit. But what is a money-wage to someone who can just survive by other means, for example by growing or hunting their own food? Very little, indeed. The chartalist policy existed precisely in order to destroy this economic independence and self-sufficiency among the African population, which is the essence of what Marx meant by primitive accumulation. By first imposing a tax obligation on pain of brutal punishment; then requiring that the tax be paid in the colonial fiat money (rather than in-kind with crops or some other easily produced good); and then making that fiat money available only as a wage paid on condition of the desired cash-crop farming – by these means the colonial administrators not only drove the wider use of their currency but made it an instrument for forcing Africans to become permanently subordinated to a capitalist wages system, selling their labor-power to the state or to private capitalists to grow crops that had nothing to do with their own wellbeing and everything to do with the profits of their European oppressors. And let’s be clear that the stick, and not the carrot, predominated as an incentive: punishment for evading the tax was severe. It ranged from fines, to seizure of property, to state-sanctioned arson of indigenous housing, or worse.42Elliott P.Skinner, “French Colonialism and Transformation of Traditional Elites: Case of Upper Volta,” in W. Cartey and M. Kilson (eds.), The Africa Reader: Colonial Africa, New York: Random House (1970): “If a man refused to pay his taxes, the Mossi chief was permitted to sequester his goods and sell them. If the man had neither the taxes nor the goods, the chief had to send him and his wife (or wives) to the administrative post to be punished. Sometimes, a man and his wife would be made to look at the sun from sunrise to sunset while intoning the prayer Puennam co mam ligidi (“God, give me money”). Other times a man would be made to run around the administrative post with his wife on his back; if he had several wives, he had to take each one in turn. Then his wife or wives had to carry him around.”

In Part I of our investigation, we saw how chartalism in the twentieth century was a tool that could be used by dramatically different sorts of political actor: Knapp’s state theory of money, for example, inspired both the Nazi plot to subjugate Europe by way of a reichsmark currency zone under its totalitarian control, as well as the Keynesian planners’ war planning and institution-design for postwar social democracy. Here again we see a similar dualism at play. Forstater shows that libertarian socialists can pair MMT’s job guarantee schemes with their own form of stateless self-governance to radically democratize the economy of a city, placing power over production and investment directly in the hands of workers – but also that it can just as easily be used by colonial administrators to strip colonial subjects they’d only just recently enslaved of whatever economic independence they had, forcing them by the most brutal methods into precisely the capitalist wage-labor from which socialists wish to escape. 

The lesson for us is stark. MMT is, of course, not totally politically neutral – one can imagine neoliberals making use of it only with great difficulty or hypocrisy, given their intellectual commitments to austerity and reduced government spending. But that still leaves quite a bit of wiggle room: anybody who wants to plan an economy, and isn’t terribly squeamish about using credit-money to do so, can make effective use of chartalist teachings. That’s a political range that includes socialists and fascists alike, along with any number of other factions good and bad. We further note that chartalist schemes also seem to have a consistent tendency to empower the state, a result which ought to be of concern even if a state is comparably democratic due to the inherently hierarchical nature of all states and hence their capacity quite easily to evolve into something far less responsive to the people. Hence, any libertarian socialist use of chartalist ideas would need to take these facts into account, designing systems that as much as possible devolve monetary authority directly to working-class people and have extensive checks against the consolidation of control in the hands of authoritarians of capitalist or statist or any other variety. Forstater’s research shows without a doubt that, even if chartalism is right about everything, having the correct theory of money does not by any means guarantee having a decent politics.

Other Contributions to MMT

To wrap up our summary, we’ll briefly list a few other major contributions to MMT’s development as a theory.

Tymoigne: Accounting

Eric Tymoigne, a professor of economics and research associate at the Levy Economics Institute, wrote a series of blog posts for the New Economic Perspectives website explaining the neo-chartalist model of banking and accounting.43Eric Tymoigne, “Money and Banking – Parts 1-21” (2016-17), New Economic Perspectives. The blog post series ended up being such a hit with readers that Tymoigne would go on to publish a book-length version of his posts. In it Tymoigne covers all of the areas you’d expect for an introductory textbook on finance: what’s a balance sheet? What is a cash flow statement? What is the Federal Reserve? How do businesses calculate their net income? Where he really shines, however, is in his description of the actual business of banking. Tymoigne not only describes the process of making a loan using the logic of endogenous money but also outlines how banks operate as a whole and interact with the Fed – all from a neo-chartalist viewpoint. Using simplified asset-liability ledgers, Tymoigne leads the reader step-by-step through the accounting – from accepting a promissory note from an accepted client of a bank, to crediting the loan proceeds (e.g., creating the deposit) after the security instrument is signed and the loan is closed.44Eric Tymoigne, The Financial System and the Economy: Principles of Money and Banking (2016).

Mitchell & Fazi: Economic Nationalism

Economist Bill Mitchell and political theorist Thomas Fazi, who are both MMTers, lay out their case for economic nationalism built upon full employment via job guarantees, and a return to state industrial planning in a 2017 book provocatively titled Reclaiming the State. Mitchell draws upon his earlier work in full-employment studies, to argue that  unemployment is unnecessarily wasteful, and something that must be avoided to recultivate a sense of community, rather than the impression that people live merely within an economy.45William F. Mitchell and Martin J Watts, “The Path to Full Employment,” The Australian Economic Review vol 30 no 4 pp 436-44 (1997).

Reclaiming the State is an interesting political application of MMT, to say the least – in ways both good and bad.  Mitchell works with Fazi to both reconceptualize contemporary macroeconomic policy making along the lines of MMT. They assess policy failures of the Thatcher years and unnecessary bouts of unemployment that at the time were deemed necessary by monetarist fanatics to control inflation, denouncing these as avoidable tragedies imposed from above by austerity nuts. They see themselves as carving out a new policy space – one governed not by arbitrary budget positions, but rather by the availability of biophysical resources of monetarily sovereign countries. They hope that progressive politicians, particularly in the West, will agree that these (and not the Washington Consensus) are the reasonable boundaries for debate. 

But the book is also firmly, even vociferously, committed to the ideal of nationalism, a political horizon which is both limiting and potentially dangerous. International institutions are invariably the tool of neoliberalism; national industrial policies instituted by central governments are invariably the solutions which Mitchell & Fazi put forward instead. But the pair seem to have an unmitigated faith in the power of the nation-state to solve all our most pressing problems – something we’re skeptical about not only because of the relative powerlessness of individual nation-states on issues like climate change, but also due to the corrosive cultural and political consequences of nationalism as an ideology. Given the rise of far right “populist” movements across the world, it isn’t terribly paranoid to fear that a stronger nationalism could mean a stronger fascism. 

Perhaps most unnervingly, parts of the book seem to celebrate precisely this right-wing resurgence as at least in part progressive. For example, they supply an analysis of the 2015-16 political moment in the West as a revolt not only of the masses against the rich, yes, but also against the ineffectual upper-middle-class neoliberal technocrats who serve them, who have no rootedness in the supposedly authentic national community, have sold their countries out to a transnational elite, and promote a platform of permanent austerity by using identity politics, feminism, and social justice to justify immigration and other nation-destroying calamities:

As societies have become increasingly divided between well-educated, highly mobile, highly skilled, socially progressive cosmopolitan urbanites, and lower-skilled and less educated peripherals who rarely work abroad and face competition from immigrants, the mainstream left has tended to consistently side with the former. Indeed, the split between the working classes and the intellectual-cultural left can be considered one of the main reasons behind the right-wing revolt currently engulfing the West.46William Mitchell and Thomas Fazi, Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World, Pluto Press (2017).

Thus, Mitchell and Fazi argue, the only way to move beyond neoliberalism is to reject the cultural intrusions upon a classical left-wing economic programme – such trivialities as human rights for migrants, feminist and queer struggles, the problems of ethnic and religious minorities, and other “social issues” – and reclaim the nation as the fundamental political community and the state as a way of implementing policies. The red-brown mode of argument employed in these passages could come straight out of the pages of a cryptofascist journal like American Affairs – for which, incidentally, the pair has written. Individually, the picture is concerning as well. Mitchell, for example, vociferously defended his MMT compatriot Stephanie Kelton’s highly ill-advised trip to advise explicitly fascist politicians in the ruling party of Japan, despite having been warned ahead of time her hosts’ politics – a warning which Mitchell dismisses with haughty contempt in his blog post. And Fazi has a disturbing history of opportunistic support for the far right, from his connections to the Five-Star Movement in Italy to his frequent use of fascist talking points online and in essays.47For the trip to Japan, see the “Statement Against Stephanie Kelton’s Meeting With the Far Right in Japan” (11 September 2019) by the Democratic Socialists of America’s Libertarian Socialist Caucus, which contains exhaustive evidence of the genocide-denying, homophobic, anti-immigrant, and racist nature of the fascists with whom she met; as well as Mitchell’s reply “On visiting Japan and engaging with conservative politicians” (11 September 2019) on his blog. For Fazi’s connections to Five Star as well as his history of employing far-right talking points and dogwhistles on immigration, George Soros, gender relations, Nazi Germany, and other topics, see the Twitter threads summarizing the relevant evidence by the council-communist web archive and the libertarian socialist writer Sean Keith. These issues echo our concerns, drawn from Forstater’s work and elsewhere, about the disturbing ambiguities in MMT’s political project – something we’ll be discussing at length in future critiques.

Lavoie & Godley: A Financial Map of the Economy

Finally, although they are not often included in the core MMT group, the two Circuitist economists Marc Lavoie and Wynne Godley’s Monetary Economics: An Integrated approach  to Credit, Money, Income, Production, and Wealth (2006) is certainly worth mentioning, as it represents a thoroughgoing, stock-flow consistent map of the economy using a chartalist paradigm with MMT insights. As we saw in Part I, Circuitists were interested in using a credit theory of money to create maps of the flow of money through the economy as a whole. Stock-flow consistent models are the most advanced and extensive versions of such maps, and they were pioneered by Lavoie & Godley. While this pair of brilliant economists aren’t MMTers (we would call them credit-theory chartalists, due to their roots in the endogenous money school and Circuitism), MMTers have often relied upon their excellent models for their own work.

Chapter by chapter, the authors build their map of the money-flows right in front of the reader, citing interesting findings at the end of each one. Often, their model supports core chartalist ideas. During one such debriefing examining the model they’d simulated thus far in the textbook, they determine that actually the money supply is better thought of as an endogenous variable, rather than an exogenous one. Banks generate the funds they need internally, and the central bank has little choice but to supply all of the base money (money created by the central bank) that is needed in exchange for the bank money, at a price set by the central bank. One of the implications of this finding is that it would not be in the interest of the state to seek a balanced budget as a rule, the system appears to be chronically in need of savings, even in good times. If the state were to pursue a balanced budget doggedly (e.g., if it only spent into existence as much money as it took in in taxes and subsequently destroyed), then eventually there would be no savings, at least not in the state’s money which is considered most receivable. Therefore, running government deficits is not only prudent, but necessary for financial stability, insofar as Lavoie and Godley have found running their simulations. This result matches many of the narratives generated by Wray, Kelton, and other more widely-known MMTers concerning the nature of federal debt and deficit spending. Stock-flow consistent models such as this one would become a central item in the MMT toolkit.48Wynne Godley and Marc Lavoie, Monetary Economics: An Integrated Approach to Credit, Money, Income, Production, and Wealth. Palgrave Macmillan (2012).

The Social Movement

This body of work, though extremely obscure for many years, laid the foundations for the rediscovery of chartalism and its synthesis with later Post-Keynesian innovations. But up to now, MMT was only a theory and a research programme. It would only be popularized after it became, in addition, a kind of social movement – one of many that emerged after the 2008 crash.

It’s difficult to overstate how important the 2008 Great Recession was for the rise of MMT, as indeed it was for the creation of other bold new ideas and the return of the radical Left more generally. We think we can best illustrate the stakes of that particular moment in history with a story.

Imagine it’s September of 2008 and you’re sitting in your economics 201 course as an undergrad at a small private university. The professor is attempting to deliver a lecture on monetary economics, specifically covering central bank operations and the history of ideas surrounding it, but it’s really a struggle even for him. Each new day’s events in financial markets seem more and more volatile; things are regularly happening that are starkly at odds with the staid textbook descriptions of the monetary policy options which are supposedly available to central bankers. This economics program, by the way, is mostly taught within the dominant neoclassical school of economic thought, so you’re listening bemusedly to a familiar but misguided story about banks generally as mere intermediaries, taking in savings and lending those same savings out to borrowers at a premium which they collect. The central bank, as your professor explains – with the proviso that they don’t personally agree with this interpretation but are “contractually required” to make sure you at least have heard it from them – is like a bank for the banks; managing the reserve ratio, facilitating the repo market only to the extent that it is necessary for the smooth functioning of an otherwise autonomous and quite efficient private credit market. As he says this, that private credit market is imploding into a chaos of its own making.

But one day after you file into class the professor stops, as though in deep thought, throws down the textbook in disgust, and announces, “I don’t really know what to teach you today, since the people who run the financial system are just changing the rules every single day now.” The professor admits their syllabus was designed for an older world where central banks and governments didn’t go around nationalizing banks and bailing them out, only to then let the very same bankers who got themselves and their customers into this mess retain complete control of the banks they’d run into the ground. The world has changed, and so too must the assigned reading. From then on, you, your class and the professor essentially have to rewrite the syllabus so that it matches the facts on the ground: you read Hyman Minsky’s Stabilizing an Unstable Economy; Capitalism, Socialism, and Democracy by Joseph Schumpeter; and a leader article or piece of reporting from the day’s Financial Times, to be discussed by the class in an open-minded roundtable format. The point isn’t to teach some fixed theory, because all the old theories have clearly been debunked. Rather, it’s to return to basics, asking the most fundamental questions and working through them as a group in the hopes that, together, you might be able to grope your way towards something like a usable truth.

This actually happened to one of us.49The professor was Bobby Horn, at the University of Tulsa in 2008, and these events took place in his History of Economic Thought class. In addition to being a beloved figure in the Tulsa economics department Horn has an interesting past: at an imposing 6’7”, he was at one time drafted to play basketball professionally in Italy. More to the point, some version of this story happened to every intellectually curious and observant person in the wake of the 2008 crash. All the old theories of how things worked were exploding, and the ruling class clearly had no idea what it was doing. A world order which had seemed until five minutes ago destined to be eternal had been shaken overnight, and radical change seemed possible. But change in what direction, and how? Why did the crash happen in the first place? What could be done about the new problem of mass unemployment and the forty-year-old problem of stagnating wages and deteriorating workers’ rights? What is neoliberalism, what is capitalism – and might these things be on the verge of falling, and turning into something else? If so, what? Is it possible we need some kind of socialism after all? People were looking for answers to these and other questions, and a veritable hoard of professors, journalists, sects, cranks, lunatics, and geniuses were lined up to sell you an answer.

So let’s fast forward the story. It’s a few years later, say around 2011. Maybe you’re a grad student; maybe you’re a kid or an artist or a retail worker surfing the blogosphere in your spare time; maybe you’re a freelance journalist. You might only be a goodie two-shoes liberal. But it’s increasingly likely you’re into Marxism, obviously, like everybody who’s trying to figure this stuff out. You might just be into anarchism too, whether thanks to the legacy of the alter-globalization movement, or because of this Occupy thing that’s happening in the park you can see from your window. Maybe to complete the picture, Ted Cruz or Marco Rubio or somebody else is shouting about the deficit on a TV within hearing distance. At any rate, while creeping through weird corners of the web you stumble upon obscure blogs making some truly mind-bending claims: that, actually, the US government can (and does) poof dollars into existence and then delete them through taxation, meaning the state can essentially spend as much as it wants without there necessarily being a threat of hyperinflation, and austerity politics is an empirically refutable superstition. It seems too good to be true, but the deeper you look into the facts these blogs marshall and the books they cite, as well as the impotent and unconvincing counterarguments of their enemies, the more it seems real. Even if your brain hasn’t yet gone through the meat-grinder of a neoclassical economics program – and perhaps especially if it has – this is heady and consciousness-expanding stuff.

In other words, in this critical moment when people were looking for answers, the MMTers were there waiting in the blogosphere of the early 2010s, armed with a seemingly endless deluge of posts and comments threads covering all sorts of earlier academic work put out by the UMKC Center for Full Employment and Price Stability, or the Levy Institute. Most importantly for this moment in history, they had answers to the most pressing economic questions of the day: Why did the crash happen? Could the government have done more? If so, what are the limits to what it can do? How does federal spending actually work? Unlike Marxism and anarchism, MMT seemed to have direct practical answers and prescriptions – the financial engineering know-how, as it were, that a Marxist or anarchist political movement could potentially use to implement their programme.50This is especially true given the fact that, until around five minutes ago, the new socialisms whether Marxist or anarchist were essentially in agreement that the short-term and immediate political programme for radicals was the rearguard defense and expansion of the institutions of postwar social democracy. In the Marxists’ case this was rather explicit, and was largely worked out in those years by writers like Seth Ackerman and Peter Frase in the pages of Jacobin. For libertarian socialists the process was more tortured and quiet: since the classical anarchist political programme of an insurrection and social revolution leading to direct worker control over production and investment seemed totally off the table, most libsocs’ direct action campaigns were, in practice, engaged in important single-issue fights that often amounted to being shock troops in defense of the old welfare state or fighting to expand its reach to marginalized communities. (This reformist or at any rate incrementalist strain of libertarian socialism is visible in much of the nonprofit space, the DSA Libertarian Socialist Caucus, the Symbiosis Federation, the Murray Bookchin revival led by the Institute for Social Ecology and influenced by the Rojava Revolution’s reception in the US, and magazines like Current Affairs and ROAR.) Social democracy’s high status as the de facto or readymade politics of your typical factory-issue socialist contributed greatly to MMT’s prestige within the Left, since much of MMT amounts to policy advice for some future social-democratic government. What it will mean for MMT’s clout in the long run now that the material situation significantly changed since 2020 – the crushing of the Bernie movement, the helplessness of the elected social democrats, the failures and successes of the pandemic response, the looming ecological collapse, and the immediate popularity and impact of the Floyd Uprising on the Left and the Capitol Insurrection on the right – is unclear. For more analysis of the current political conjuncture, see the collectively written editorial “Socialism With An Anarchist Squint” in Issue One of Strange Matters.


How and why exactly MMTers got so involved in the blogosphere is a bit murky. For a long time their output was limited to a few heterodox economics journals and, more often, outlets they controlled such as the Levy Institute papers or their books. But by the mid-2010s, there had nonetheless grown a vibrant MMT online community which was the only way you’d ever have heard of them until MMT’s meteoric rise in popularity.

A few of these online communities grew out of the blogs of MMT’s own economists. Bill Mitchell’s blog at, for example, was an early rallying point: besides his own vociferous and opinionated posts on a wide variety of political, historical, and economic subjects, the comments threads would often feature long, winding conversations on arcane subjects that featured a recurring roster of Internet randos “shooting the shit” with leading MMTers or arguing with brigades of trolls from a Ron Paul forum. Mitchell himself was intently focused on using the blog to educate as well as polemicize, going so far as to create a Weekend Quiz every Saturday that asked tricky multiple choice questions in the style of a law school cram course to make sure readers were really paying attention. There was also the New Economic Perspectives group blog, originally begun by Wray and others to explain the aftermath of the 2008 crisis in MMT terms, which became a kind of house publication of the UMKC economics department. It, too, was partly educational: posts about current affairs were interspersed with transcriptions of academic panels or conferences, one-off summaries of MMT books or concepts, and long explainer series providing a systematic overview of core concepts (both Wray’s MMT Primer and Tymoigne’s money & banking book started in this fashion).

But the greater MMT online sphere wasn’t restricted to their own few and limited outlets. In fact, much of MMT’s success came from the attention its ideas began to receive in places outside its immediate control. Through the early 2010s there was relatively little academic discussion of chartalism beyond the work of the MMTers themselves, but the response among bloggers was much more enthusiastic. Sympathetic articles started appearing around 2010 on Naked Capitalism, a groupblog dedicated to critical analyses of finance that was an important focal point of the online Left at the time and would soon become a vocal champion of the MMT perspective and a platform for its economists. That same year Naked Capitalism editor “Lambert Strether” put together a Fiscal Sustainability Teach-In and Counter-Conference in Washington, DC as a protest against a bigger pro-austerity conference put together by investment banking ghoul Peter G. Peterson. This was one of the very first high-visibility events featuring all the main MMT economists (Mitchell, Kelton, Mosler, Wray, and Tcherevna) and an important move towards educating a wider public.51For more on this conference, see Stephanie Kelton, “NEP Stands With Correntewire”. New Economic Perspectives (2012) and Bill Mitchell, “Washington Teach-In Counter Conference” Economic Outlook (2010), as well as the discussion in the comments sections for each. Incidentally, the online pseudonym “Lambert Strether” comes from the name of the main character in Henry James’s dense modernist novel The Ambassadors (1903). In the novel Strether, an instrument of a New England manufacturing concern, is sent by the mother of the family which owns the firm to fetch her errant failson from an aimless and hedonistic existence in the high-society salons of Paris, only for Strether himself to be seduced in turn and tempted to go astray. Both the son – who, we are delighted to report, is called Chad – and Strether are only ever tempted, however, and after certain immature indiscretions persuade themselves to return to their boring bourgeois duties in Woolett, Massachusetts. The idea of a life free from the necessities of profit-making and the brutality of the business world, the contemplation of which is entertaining as a sort of temporary hobby, ultimately for Strether proves little more than that: a pleasant distraction from the day job, an entertainment rather than a serious commitment to revolt.

Another crucial step was the original #MintTheCoin campaign of 2011. The proposal, to make a very long story short, was essentially a legal strategy for getting around the debt ceiling, the self-imposed and artificial limit on deficit spending enacted by Congress which the austerity-hawk Tea Party faction of the GOP was using at the time to paralyze the government. Based on the loanable funds theory that the government must borrow in order to spend, the debt ceiling places a limit on the maximum amount of debt the government can take out in a year; any legislation that would produce debt exceeding the ceiling cannot pass unless the ceiling is raised, which was usually done without debate until the Tea Party refused to do so. Since, however, the state doesn’t actually need to collect or borrow money to spend it – because after all its spending is what poofs money into existence in the first place – it’s perfectly legal for the Treasury to mint a coin with a big enough nominal value to “cover” the relevant legislation (in this case, a trillion dollars for the annual budget) without any borrowing and hence no debt, thus circumventing the debt ceiling entirely, obliterating the need for any cuts, and rendering the Tea Party’s hard negotiation tactics moot. The trillion-dollar platinum coin was therefore a practical way to apply MMT theories in a specific kind of legal-financial crisis.

Here there is another Naked Capitalism connection. The campaign didn’t actually originate with the MMT economists, but rather with a series of comments on various left-wing blogs by Carlos Mucha – an editor of a groupblog called CorrenteWire in which Naked Capitalism’s “Strether” was also involved – that was almost certainly inspired by the chartalist ideas that were spreading in their milieu in the past year. The coin proposal was eventually picked up with enthusiasm by Warren Mosler and the MMT set, who discussed it extensively on their blogs and fortified the proposal with their thorough knowledge of the legal and financial structures which made it possible. Its initial coverage was in the small but networked radical press, with sympathetic coverage on alt-media shows like the Real News Network and retweets from the likes of libertarian socialist hacker Aaron Swartz. From there it spread far beyond their little circuit, disseminating through the transmission belt of the D.C. media elite: mainstream pundits as far afield as Joe Wiesenthal, Matt Yglesias, Paul Krugman, Tyler Cowen, Brad Delong, and Felix Salmon debated the coin proposal in prestigious venues like Reuters, Slate, CNBC, CNN, and the New York Times. Though most neglected to mention the economic theory underlying the campaign, the link-heavy nature of the news coverage meant that a blog post explaining the details was never more than a click or two away for the curious. While MMT was not yet on the map, #MintTheCoin was the first time vast numbers of people had a chance to stumble upon it.52For an overview and timeline of the #MintTheCoin campaign and its reception in the mainstream press, with plenty of links, see: user @Letsgetitdone, “Origin and Early History of Platinum Coin Seigniorage In the BlogosphereThe DailyKos. The original proposal: Carlos Mucha, “Coin Seigniorage and the Irrelevance of the Debt Limit”, FireDogLake (2011). The website is defunct; it was accessed via the Wayback Machine at the following URL:

But nothing in the end proved as crucial as the founding of a little-known nonprofit organization called the Modern Money Network in 2012. The most prominent of its initial founders are Rohan Grey and Raúl Carrillo.

This didn’t happen in Kansas, incidentally, but in New York City, its activist scene still reeling from the suppression of Occupy Wall Street by the state. No core founding member of MMN was directly involved in the development of core MMT ideas twenty years earlier in the 90s. In fact, they weren’t even economists! Instead, they were law students at Columbia University who had found out about the theory on their own and become captivated by it. But what they lacked in economic credentials they made up for in marketing savvy. They would become probably the single organization most responsible for MMT’s spread beyond the ranks of the already converted.

Becoming in effect a marketing department or agency for the theory,53Although the MMNers assumed this marketing role, they seem to have done so more out of necessity than by choice. The individuals who (it turns out) became some of MMN’s strongest marketing representatives are mostly legal scholars and practicing attorneys who have published in peer-reviewed law journals and elsewhere on a range of topics more or less germane to MMT. It’s worth noting their own contributions to scholarship, albeit from a more practical or policy-based point of view rather than any extensive theoretical development of neo-chartalism as such. Some examples: Rohan Grey, an assistant law professor at Willamette University in Oregon, has written extensively on digital fiat currency designs and the legal implications therein – see Rohan Grey, “Banking in a Digital Fiat Currency Regime” in Philipp Hacker et al (eds.), Regulating Blockchain: Techno-Social and Legal Challenges (2019). Robert Hockett is a law professor at Cornell University whose writing often focuses on deepening the legal theory behind common chartalist phrases such as “money is a creature of the state – for example Robert C. Hocket & Saule T. Omarova, “The Finance Franchise,” 102 Cornell Law Review 1143 (2017). Nathan Tankus is the research director of MMN, who combines MMT-based knowledge of the operational details of central banking with his scholarly interests in areas of law ranging from antitrust, to financial intermediation, and banking regulation – see for example his business newsletter Notes on the Crises, as well as Nathan Tankus, “The New Monetary Policy: Reimagining Demand Management and Price Stability in the 21st Century,” Modern Money Network / Our Money / Public Money Action (January 2022). Finally, although it is not an official MMT venue, many MMN-affiliated legal scholars have recently published work in the Law & Political Economy (LPE) Project, a group blog and research network housed in Yale Law School whose deputy director, Raúl Carrillo, is an MMN board member. MMN began by getting in touch with some of the Kansas City economists who’d come up with the ideas and bringing them out east for academic panels and seminars. Within an academic context, the importance of this can’t be overstated. Where before neo-chartalism had previously been confined to the small, limited, and largely insular world of heterodox economics journals due to the marginalization of anything non-neoclassical in that field,54This cliquish exclusion of heterodox economics (and of MMT in particular) from university economics departments, and other discipline’s respective heterodoxies’ exclusion from their departments within mainstream academia is systematically critiqued in our editorial “Words for Our Present Reality”, which is available online and in Issue 1 of Strange Matters. now they were being invited to give talks in events stamped by the imprimatur of the Ivy League. The Columbia name proved useful in wrangling a few big names, such as the Greek socialist party SYRIZA’s future Finance Minister, Yanis Varoufakis.55Marshall Auerback, Georges Ugeux & Yanis Varoufakis, “Design Defects and Policy Failures: An Institutional Analysis of the Eurozone Crisis.” Modern Money and Public Purpose. The Modern Money Network, 2012. In 2017, MMN organized the first of what would eventually be several International Conferences of Modern Monetary Theory on UMKC’s campus.

But more important than these initiatives was the more general role MMN began to play. If you were in the literary and radical politics scenes in NYC in the late 2010s, it gradually became more and more common to run into people advocating for MMT in what you might call an official capacity in left-wing spaces such as panels, parties, protests, and political education events. But these MMT advocates were almost never the economists of the “Kansas City approach” themselves; rather, they tended to be MMN board members. It was due to MMN’s extensive efforts that MMT penetrated into the bubble of the public intellectuals, through whom it disseminated through the broader Left.

A proxy for this process is the slow but steady growth of MMT’s appearances in a number of new contexts. First came articles marketing MMT in the little leftist magazines, largely due to the efforts of then-MMN board member Rebecca Rojer, including an essay she wrote for The New Inquiry, and a video she made promoting the Job Guarantee through Pavlina Tcherneva’s research on Plan Jefes in Argentina for Jacobin. MMN also tried to strike an alliance with more activist-focused alternative media, to mixed success – their closest relationship was with Steve Grumbine, a somewhat obscure online media personality with a show called Grumbine’s Political Mosh Pit, who eventually became the CEO of a nonprofit called the Real Progressives dedicated to making programming promoting MMT. Eventually, after MMT really took off, the alliances became somewhat more respectable – particularly the surprisingly fawning attention MMT began to receive in certain quarters of the business press. Its biggest ally there is probably Joe Weisenthal, the host of the podcast Odd Lots on Bloomberg, who has hosted MMN board members and MMT economists a great number of times. Perhaps this accounts for the sympathetic Bloomberg story about MMN Research Director Nathan Tankus which allowed the latter to launch his Notes on the Crises business newsletter, becoming a sort of chartalist equivalent to the Left Business Observer started by the Marxist Doug Henwood in the 90s.

But the biggest coup MMN ever scored was securing a private meeting at their 2018 conference with the recently elected Alexandria Ocasio-Cortez – an event which, though not documented, was much discussed among those present (including both of us). Shortly thereafter, in early 2019, the wildly popular socialist congresswoman was making international headlines for endorsing the theory publicly. More than anything else, it was this endorsement which took MMT out of the obscure fringes of heterodox econ academia, literary bohemia, social media, and the blogosphere and into the mainstream.


To summarize, then: after centuries of steady development, chartalism’s initial moment in the limelight was during the 1930s, when it surreptitiously became a key intellectual tool of many in the generation of Keynesian planners who helped build postwar social democracy (not least Keynes himself, despite his flip-flopping). Before and after this moment were periods of obscurity for the theory – a nineteenth century of generalized metallist common sense (spurred on no doubt by the brute fact of the gold standard), a twentieth century boxed in by dictatorial neoclassical hegemony over the discipline of economics after 1945. For all that, chartalism continued to develop under other names in the late twentieth century, absorbing influences from Post-Keynesianism and Marxism and developing components like endogenous money theory and the job guarantee scheme. But it would not be until the rise of neo-chartalist research in the 90s, funded and platformed by Mosler and the Levy Institute, that the chartalist tradition’s many strands would be first recovered and then synthesized into a single theory – albeit one whose stated lineage can sometimes prove to be questionable or ambiguous (e.g. the mysterious case of Minsky the chartalist, the independent history of the job guarantee). Finally, rechristened as “Modern Monetary Theory,” chartalism would after 2008 begin to be embraced by online social movements, particularly due to the savvy marketing of the Modern Money Network, eventually resulting in its widespread fame and notoriety today as a robust alternative to yesterday’s mainstream macroeconomic consensus. In a highly unlikely turn of events, many now see MMT to have “won” key policy debates; while others smolder with bitterness and eagerly await its downfall.

Having examined the history of chartalism in detail, what lessons can we draw as socialists?

The first is an observation that should by now be readily obvious to you, but which usually goes unsaid in discussions of MMT: what’s really at stake in chartalism – and, as chartalism shows us, in all theories of money – is the question of economic planning. Chartalism and metallism began as the question of what material money should be made of; but the reason this question mattered is because it impacted who could issue money, how much of it there would be to go around, what kinds of projects or pockets it would be fed into, and whether or how it would be received abroad. These are all fundamentally questions of how the economy is going to be structured and on whose terms, which no doubt accounts for the sheer ferocity of the debates between not only the schools of monetary theory but also the elite political factions they inspired. Chartalism tends historically to be associated with those who wish to expand the ability of the currency issuer, especially the state, to create new purchasing power, in order to bring about some form of economic activity or employment which wouldn’t exist otherwise.

A second observation is that this fiscal-expansionist agenda does not in itself have a definite political character. In the end, chartalists are interested in creating monetary tools for economic planning. But planning to what end? Here, you must get your answers from something outside of chartalism. There are certain kinds of politics that chartalism is probably incoherent with – neoliberalism, say – but beyond this, it has proven to be useful to all manner of regimes. The chartalist lineage that traces itself back to Knapp has its origins in the practical theories of Prussian militarism and proved a massive inspiration to Nazi economic policy; but a no less chartalist lineage, influenced not only by Knapp but also by Mitchell-Innes and the study of ancient Mesopotamia, was a powerful tool of Keynesian uplift and employment policy. You can use chartalist methods to build bombs, tanks, walls, and concentration camps; or you can use them to do basic research, develop infrastructure, recover from a slump, and build up a welfare state. Chartalism, in other words, is not a politics – and there are grave potential dangers to treating it as one.

Third, chartalism seems to have been invented multiple separate times in various periods and places due to similar observations of the institutions governing money-creation in certain historical epochs. As a result, it has something of a dual character. Some chartalists place their emphasis on the fact that money is fundamentally a credit or token issued by some institution or other; other chartalists insist that money is fundamentally not only this but specifically an issuance of the state. Neo-chartalism treats this as a distinction without a difference, using Kelton’s hierarchy of money arguments to say that private credit-issuance is always subordinated to the state’s unit of account. This claim seems pretty important, and we ought to try to suss out whether it’s actually true (not just in the realm of theoretical abstraction but in particular times and places). Because if, as we suspect, it isn’t, then chartalisms that tend toward being credit theories and those which tend toward being state theories are related but distinct, and some of them may hold up better than others in the light of detailed historical-materialist inquiry.

And our last observation is a pointed one, which comes from our perspective as libertarian socialists: chartalism is, historically, a theory that looks at the world through the lens of centralized power. All theories develop out of a particular set of practices which inform them, and those which gave nourishment to chartalist ideas were the arts of statecraft and high finance – in other words, central planning. This does not automatically make the theory wrong; it may, after all, be the case that those at the top of the economy see certain things we mere mortals do not. But it does suggest at least the outlines of what the theory’s blind spots may be: anything which is outside the immediate authority of the currency issuer, anything which someone who disagrees with them may want to do, questions of how to successfully plan particular productive processes in detail rather than merely financing them or commanding their output, questions of what you can do if you’re not the central monetary authority or no such thing exists. The key test of chartalism would be how well it holds up when examined in light of historical case studies focused on these areas.

So is chartalism true? Does it definitively beat out metallism as a theory of money? Are MMT’s claims about the true limits of the economy the ones by which socialists ought to guide their policy? Our current answers to these questions are complicated, and only by understanding the history we have outlined (a history which remains extremely little-known) can one have a solid enough grounding to follow us where we want to go in search of evidence. 

Chartalism has had a huge influence on us, and its research programme presents a striking forward advance compared to the crude metallism of the nineteenth century and its operationally useless descendents in modern neoclassical theory. However, in the essays that follow in this series, we will begin outlining our serious critiques of the chartalist framework as articulated by the leading MMT economists – a critique which we developed from within the bounds of the theory itself, in trying to understand it in light of the history of the real world as well as the contemporary geopolitical situation. When we began to look more closely at the history of monetary systems (as opposed to just the bits of it emphasized by the theorists), we started noticing anomalies that cast an absolutist or dogmatic version of chartalism into doubt. When we pulled on that thread, much unraveled. While chartalism’s account of money as an issuance that circulates and is received back still has much to commend it and forms the beginning of wisdom in monetary matters, we believe the theory has developed a consistent and potentially lethal series of incoherences when dealing with a number of important topics – among them the external economy, forex, exchange rates, economic development, imperialism, and the biophysical economy. And we believe that through these critiques we have also begun to develop the germ of something positive and constructive: a new unified framework for macroeconomic thinking from a socialist perspective. Whether this theory could still be “chartalist” is, as you’ll see, somewhat unclear. But this hardly matters so long as it’s the kind of theory the movement needs – one that can be of use not only to social-democratic governments but to social movements and dual power organizations independent of the state, a bottom-up economics that gives the working classes the tools they need to fight for their emancipation and build a better world.

[With this history, you are now equipped to understand the critique of MMT by Steve & JMC in their upcoming essay on Forex – coming soon to a screen near you. Stay tuned!]

Strange Matters is a cooperative magazine of new and unconventional thinking in economics, politics, and culture.