The Political Economy of Modern Monetary Theory: A Marxist Critique

Abstract

Modern Monetary Theory (MMT) has emerged as a significant heterodox challenge to neoclassical orthodoxy, arguing that sovereign currency-issuing governments face no intrinsic financial constraints and can use fiscal policy to achieve full employment. MMT offers important critiques of austerity and captures genuine operational realities of contemporary monetary systems. A systematic theoretical examination of its foundations, analytical coherence, and policy implications from a Marxist political economy perspective is therefore required. MMT’s framework exhibits four interconnected limitations: a methodological ahistoricism that universalizes historically specific monetary forms; absence of a value theory capable of explaining what money quantifies beyond state authority; insufficient attention to capital accumulation dynamics; and an underdeveloped theorization of class relations and state power within capitalism. MMT tends to mistake money’s form for its substance, circulation for production, and state capacity for class power. While MMT’s policy proposals carry progressive intent, their primary effect is to stabilize rather than transform the capitalist order. MMT thus remains within the historical lineage of monetary reformism. Marxist Political Economy is therefore essential for understanding money and state finance in contemporary capitalism.