Rather than engage in histrionics over what is obviously a supply-side or cost-push (rather than demand-side or demand-pull) inflationary period, I have been pondering Marxist resistance to MMT. When viewed from the standpoint of Marx’s theory of value, the resistance makes little sense, since there is nothing in MMT necessarily incompatible with a conception of value based in labor time. When viewed from the standpoint of politics, it also makes little sense, because there is nothing in MMT necessarily incompatible with the Marxist view that capitalism is irredeemable and a transition to socialism/communism the only worthwhile alternative. MMT in itself does not rule out that possibility; it is simply agnostic on the matter. Upon reflection, the sticking point may be Marx’s retention
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Rather than engage in histrionics over what is obviously a supply-side or cost-push (rather than demand-side or demand-pull) inflationary period, I have been pondering Marxist resistance to MMT. When viewed from the standpoint of Marx’s theory of value, the resistance makes little sense, since there is nothing in MMT necessarily incompatible with a conception of value based in labor time. When viewed from the standpoint of politics, it also makes little sense, because there is nothing in MMT necessarily incompatible with the Marxist view that capitalism is irredeemable and a transition to socialism/communism the only worthwhile alternative. MMT in itself does not rule out that possibility; it is simply agnostic on the matter. Upon reflection, the sticking point may be Marx’s retention (with modification) of the classical distinction between ‘productive’ and ‘unproductive’ labor. Marx’s criteria for distinguishing productive from unproductive activity is not obviously applicable in a state money system.
The productive/unproductive distinction and state money
According to Marx, labor is ‘unproductive’ when it (1) does not directly create surplus value and (2) is not exchanged directly with capital.
Criterion 1 is problematic because it is impossible, from observation, to determine whether labor of a specific firm or sector creates surplus value. Just because a firm or sector realizes surplus value in exchange does not imply surplus value was created by that sector or firm. Conversely, the firm or sector could create surplus value yet not realize any surplus value. Surplus value created by (the workers of) one firm or sector may be realized elsewhere in the economy.
While a for-profit firm or sector will not persist with production unless it can realize surplus value, this is not true of government or not-for-profit producers. A public sector enterprise, in particular, can certainly persist with production irrespective of whether it realizes surplus value. And whether or not the enterprise realizes surplus value says nothing about whether its workers created surplus value. These workers may create surplus value that is realized elsewhere in the economy (i.e. by private for-profit firms).
Regarding criterion 2, Marx wrote:
This … establishes absolutely what unproductive labour is. It is labour which is not exchanged with capital, but directly with revenue, that is wages or profits (including of course the various categories of those who share as co-partners in the capitalist profit, such as interest and rent). (Marx, 1969, Theories of Surplus Value, Part 1, Progress Publishers, Moscow, p. 157)
Under a gold standard, or in a system with a currency-using government, it may be valid to claim that public sector wages, for example, come out of revenue, and therefore are payments made to unproductive workers. A currency-using government requires revenue prior to spending.
But the “labor exchanged against revenue” criterion does not apply to a currency-issuing government, since such a government does not spend out of revenue but, rather, issues currency in the act of spending – in fact, cannot receive payments to itself in the currency of issue until it has spent (or lent) the currency into existence. If a private firm’s purchase of labor power qualifies as labor “exchanged with capital” – purchases that ultimately depend on access (via banks) to ‘government money’ in the form of reserves, of which government is the original source – so too does a currency-issuing government’s purchase of labor power.
Even where government employs workers to produce goods or services at zero price, this provides no evidence one way or the other as to whether surplus value has been created in production. It may be that surplus value has been created only for government to permit its realization elsewhere in the economy.
Similar problems with Marx’s distinction apply in the case of supposedly unproductive private-sector activities. The labor of private firms is not exchanged directly with revenue if, for instance, the firm takes out a bank loan. The funds used by the firm for the purchase of labor power are created by the bank in the act of lending – loans create deposits – and, if necessary, the central bank stands ready to supply reserves as needed by the banking system.
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Is Public-Sector Labor ‘Productive’ in a State Money System?