Modern Monetary Theory in Historical Perspective

We argue that Modern Monetary Theory is an imaginative lens as well as theory. Its emphasis on the advantages of sovereignty in reference to money creation and government spending derives its current political attraction from a variety of collectivist issues pertaining to the environment, health, education and job security. It derives its current economic relevance from two modern historical conditions: (1) the long-term stagnation of investment growth begun in the late 1960s and early 1970s; (2) the combination of automation and globalization that has weakened labor and dampened inflationary pressures in the advanced capitalist world. Discussion of these two issues allows for historical contrast with Abba Lerner's Functional Finance in which MMT traces part of its' origins. MMT's outlook, however, could be much improved by a more robust analysis of the relationship between fiscal means and inequality.