The Great Hypocrisy: Neoliberalism’s Critique of Modern Monetary Theory

There is something disingenuous, something hypocritical in the vociferous critiques of Modern Monetary Theory (MMT). The hypocrisy among neoliberal economists reveals itself in tacitly accepting quantitative easing (QE) while criticizing MMT. QE involves creating money to purchase treasury bonds and mortgage-backed securities, benefiting primarily asset holders. MMT involves creating money to employ people, attaining full employment. Neoliberalism rejects Keynesian interventionism, instead advocating using government to channel market forces in ways that benefit corporations and the affluent. The dynamic stochastic general equilibrium (DSGE) model incorporates the neoliberal vision in showing the irrelevance of fiscal policy in achieving full employment. Problems with the DSGE model revealed themselves in its inability to explain the great financial crisis. Nevertheless, neoliberal economists seek to retain the DSGE model while rejecting MMT. The article further contrasts QE with MMT, showing the similarities and difference between the Fed purchasing assets and the government engaged in functional finance. Governments throughout the world are resorting to creating money to increase employment and sustain their economies, policies advocated by MMT.