Modern Monetary Theory (MMT) is getting a lot of attention these days, thanks in large part to the excellent work of Stephanie Kelton and Nathan Tankus, two of the movement’s most effective communicators. Over the past few weeks a number of people inspired by their work have asked me whether there is scope for thinking about degrowth from a MMT perspective. My answer: definitely. In fact, the two belong together.
First, a bit of background. MMT may sound complicated but in fact it is remarkably simple (here is a good place to start). It points out that governments that control their own currencies are not like households. They do not have to “balance their budgets”, and, crucially, they do not have to tax or borrow before they can spend. In reality, they create the money they spend - and they can create as much of it as they want. This is clear to anyone who has been paying attention since the global financial crisis of 2008. Countries like the US and UK have created extraordinary amounts of money to prop up the banking system. The same thing is happening right now, in response to the COVID-19 crisis: governments are simply creating the money they need to respond. This has always been the case, of course, but right now it’s happening out in the open, for all to see. The notion of budget constraints has been revealed as a myth.