by
Robert Cauneau
9 July 2025
Abstract
The fear that Modern Monetary Theory (MMT) could become a weapon in the hands of unscrupulous governments is as widespread as it is legitimate. This article aims to address this concern by showing that it is based on a misunderstanding.
Far from conferring new power on the state, MMT describes monetary mechanisms already at work in sovereign states, often used in an opaque manner, without effective democratic oversight.
Through historical examples (such as Nazi rearmament), political examples (the interest of the Tea Party), and economic examples (the massive deficits generated by the Thatcher governments in the United Kingdom and the Reagan administrations in the United States), we show that MMT is not an ideology: it is a neutral conceptual tool, the understanding of which is essential to grasping the true room for maneuver of governments, whatever they may be.
Its essential contribution is to shift the focus from false budgetary constraints, often used to justify inaction or austerity, to the true limits of productive capacity and real resources.
The article concludes that rather than being a threat to democracy, understanding MMT principles constitutes one of its prerequisites. By shedding light on real economic choices, it enables an honest public debate on collective priorities, no longer based on accounting dogmas, but on the political and social goals of a sovereign state.
Introduction
« I have great respect for MMT, but I am wary of it. What would become of it in the hands of a Trump, a Milei, or worse? » This concern, expressed by a growing number of democracy-loving citizens, is as legitimate as it is essential. It goes to the heart of our relationship with the state, money, and power. In a world marked by the rise of authoritarianism, the fear of endowing governments with monetary « superpower » is not only understandable, but healthy. It forces us to question the safeguards of our democracies.
This fear is often accompanied by a preference for what are perceived as « more complex control systems, » a belief that self-imposed financial constraints, such as bond market discipline or public deficit and debt ceilings, constitute a necessary and effective barrier against political excesses.
Yet this distrust, while well-intentioned, stems from a fundamental misunderstanding of the very nature of MMT. It assumes that MMT is a political program that can be « applied, » like a recipe, thus offering new and unlimited power on a platter. The objective of this article is to demonstrate that this view is an analytical error. MMT is not an economic policy to be chosen, but a description of the functioning of the political economy in which we already operate.
We will see that MMT does not give monetary power to the state; it reveals a power it already possesses and uses, often in an opaque manner and in the service of particular interests. Drawing on examples as extreme as the financing of Nazi rearmament, the favorable reception given to MMT by the American Tea Party, as well as the use of massive deficits produced by the Thatcher governments in the United Kingdom and the Reagan administrations in the United States, we will establish its character as a seemingly neutral tool. Therefore, the real question is no longer whether we should reject this interpretation for fear of its implications, but rather to understand that, like any social science, MMT is not there to dictate political choices, but rather to shed light on the true terrain on which they operate and the levers of power that are truly at play.
1. MMT is primarily descriptive, not prescriptive (the « How » before the « What »)
To deconstruct the fear of MMT, we must first make a crucial distinction, often absent from public debate: the difference between a description of the facts and a prescription for action. MMT, in its essence, falls into the first category. It is not a political program to be « implemented, » but a framework that exposes the real functioning of money in sovereign economies.
A Map of the Monetary Territory, Not a Prescribed Route
Let’s imagine MMT as a detailed topographical map of our economic system. This map shows the mountains (real resource constraints, such as labor or raw materials), the rivers (money flows), and the plains (untapped production capacity). Such a map is invaluable. It tells us what is possible and what is not. It prevents us from wanting to build a highway across an impassable peak.
However, the map tells us nothing about the destination to choose. Should we build a hospital, a weapons factory, a wind farm, or a casino? This decision does not belong to the map, but to travelers, that is, to political and civic debate. Rejecting MMT out of fear of its potential use amounts to refusing to look at the map on the pretext that some might choose a destructive route. The danger comes not from knowledge of the terrain, but from the ignorance or bad faith of those behind the wheel.
This map describes mechanisms so fundamental that they even predate the political system in place. Indeed, MMT highlights a reality more generic than that of capitalism itself, which appears only as a particular case of social organization. The constant is that money is a state monopoly, and it is this phenomenon that MMT, as a social science and not an ideology, seeks to describe.
Monetary power already exists, whether we name it or not.
The most fundamental point is this: MMT does not create any power for the state. It simply names and explains a capacity that any monetarily sovereign state (one that creates its own money and does not borrow in a currency it does not control) already possesses. This state can, and in fact does, spend by creating money before collecting taxes or issuing securities. Every euro spent by the state to pay a civil servant or build a road is a euro that did not exist before the expenditure was ordered.
Denying this does not change the reality of the operation, but it perpetuates the myth of the state as a household constrained by its budget. MMT lifts the veil on this accounting reality. Three historical and political examples, at opposite ends of the spectrum, illustrate this perfectly.
1. The Inconvenient Example: Hitler and the MEFO Bonds
It’s a historical fact, however uncomfortable it may be: the economic recovery and spectacular rearmament of Nazi Germany in the 1930s were financed by means that de facto reflected a logic of sovereign monetary creation. Faced with an economy in ruins, Dr. Hjalmar Schacht, Hitler’s Minister of Economic Affairs, established a system of « MEFO bonds. » These bonds, issued by a front company and guaranteed by the Reich, were used to pay arms companies, which could then use them as currency or discount them at the Reichsbank.
It was indeed a sovereign monetary creation, outside the classic circuits of taxation and borrowing, to mobilize the country’s real resources (shutdown factories, mass unemployment) in the service of a monstrous political project. Should we, on the pretext that the Nazi regime used these mechanisms, conclude that these mechanisms are intrinsically fascist? Absolutely not. That would amount to rejecting nuclear physics because it made it possible to create the atomic bomb. On the contrary, this example demonstrates one essential thing: the monetary tool is neutral; it is the political project it serves that is good or bad.
2. The Unexpected Counterpoint: MMT, the Tea Party, and the Critique of Crony Capitalism1
At another point on the political spectrum, the interaction between certain MMT thinkers and movements like the American Tea Party provides an illuminating example. At first glance, this rapprochement seems paradoxical: the Tea Party is a movement deeply hostile to state intervention, founded on a virulent critique of public debt and government spending. Yet, a partial convergence has emerged, not on objectives, but on monetary analysis.
As John Carney relates in an article relayed by Warren Mosler, Tea Party members do not necessarily oppose all public spending. Their main criticism is discretionary spending, which fuels what they denounce as « crony capitalism »: targeted spending, often perceived as clientelistic, benefiting well-connected interests in Washington, such as the 2008 bank bailouts.
However, MMT provided them with an unexpected analytical framework. It allowed them to distinguish between:
- Discretionary and clientelistic spending (the bailouts), which is a political choice and the target of their anger.
- Universal and automatic spending (such as Social Security or Medicare), which is perceived as more neutral and which MMT confirms is never threatened with bankruptcy, since the government can always create the dollars needed to honor its promises.
On this point, an unexpected bridge appears: the Tea Party, like MMT supporters, believes that the federal government cannot « run out of money » to finance its social commitments in money it creates itself. Hence Carney’s observation: « The experts are wrong; the proletarians are right. »
This convergence, however, remains partial. Carney regrets that some MMT advocates neglect the concrete circuits of public spending, limiting themselves to abstract aggregates. He emphasizes that allocation choices are themselves power issues, calling for a discourse more attentive to the « how » of spending.
This debate underscores a key point: MMT, as an analytical framework, can serve as a platform for critiques from opposing ideological camps. It does not outline a common agenda, but offers a common language for debating the use of monetary power.
Once again, the MMT analytical tool proves to be politically agnostic: it can be used to critique the current system from radically opposing perspectives, whether to justify a Green New Deal or to denounce bank bailouts.
3. The United Kingdom under Thatcher and the United States under Reagan: Massive Public Deficits
Other examples confirm this ideological neutrality of the monetary logic described by MMT. Thus, the United Kingdom under Margaret Thatcher, like the United States under Ronald Reagan, massively increased public deficits, not to finance social policies, but rather as part of programs to reduce the role of the welfare state, cut taxes, and rearmament.
Under Thatcher, the 1980s were marked by a strict monetarist policy at first, quickly abandoned in favor of sustained budget deficits, a consequence of the recession caused by rising interest rates and mass unemployment. But these deficits, far from being perceived as taboo, were accepted as long as they accompanied the restructuring of the British economy according to neoliberal principles. In the United States, Reagan pursued a similar policy: cutting taxes on high incomes, dramatically increasing military spending, and thus widening public deficits. This period, often referred to as the « Reaganomics » era, is emblematic of a political use of budgetary power that makes no claim to balancing the books, but fully mobilizes fiscal and monetary margins to serve a conservative ideological agenda.
Neither Thatcher nor Reagan ever claimed to be MMT proponents, of course. But their policies perfectly illustrate what it describes: a monetarily sovereign state does not depend on its prior revenues to finance its spending. It can spend first and adjust later, which they did deliberately. This observation, which MMT makes explicit, clearly shows that monetary power is not inherently progressive. It can serve reactionary, authoritarian, neoliberal, or redistributive ends. Everything depends on the political objectives pursued.
This is why it would be absurd to reduce MMT to an ideology: it says nothing about ends, but everything about available means. It lays bare the power of the state, whether used to build social housing or finance missiles.
This is also why, on this basis, the question « Which country applies MMT? » is nonsense. It would be like asking, « Which human being applies the theory of gravity? » All humans are subject to it. Likewise, all sovereign states operate according to the mechanisms MMT describes. The examples of Hitler, the Tea Party, and the Thatcher and Reagan governments clearly demonstrate this: these actors used, or understood, the mechanisms revealed by MMT, without ever claiming to be part of it, like Monsieur Jourdain did prose….
The question, therefore, is not who applies it, but who understands and consciously assumes the levers it describes.
2. The myth of « too much state power » and « poor management »
A powerful, emotional barrier to the acceptance of MMT is the idea that it would amount to giving « too much power » to a state already perceived as invasive, inefficient, or potentially malevolent. If the state can create money « at will, » what will prevent it from becoming an all-powerful Leviathan, financing mass surveillance, or embarking on poorly managed, colossal projects? This fear, however visceral, is based on a double misunderstanding: about the nature of the power in question and about the real constraints that MMT highlights.
Power is not created, it is revealed.
Let us repeat: MMT does not give any new power to the state. It only brings to light a capacity that has always existed but has remained in the shadows, masked by the dominant narrative. The real danger, therefore, is not the knowledge of this power, but its exercise in ignorance or hypocrisy. Acting based on the erroneous analogy of the state as a household leads to destructive austerity policies, where hospitals, schools, and jobs are sacrificed on the altar of a financial dogma that has no place for a sovereign creator.
Understanding that financing is not the primary obstacle allows us to ask the right questions. It is no longer a question of accounting, but of political philosophy: what kind of society do we want? MMT doesn’t give the car keys to a drunk driver; it shows them the dashboard, showing them the fuel gauge (real resources) and the rev counter (inflation), where they were previously only looking at their wallet balance.
MMT shifts the constraint, it doesn’t eliminate it.
This brings us to an important technical point, which is an antidote to the fantasy of the « infinite printing press. » MMT does not claim that the power of the state is limitless. On the contrary, it asserts that we are setting the wrong limit.
- The current illusory constraint: financial constraint. Public debate is obsessed with questions that only make sense for a household or a business: « Where will we find the money? » « What will the impact be on the deficit? » « The debt left to our children will explode! »
- The real constraint according to MMT: real resources. MMT sweeps aside these false questions to focus on the only real limit: the productive capacity of the economy. That is, real resources: available labor and its skills, technologies, machines, raw materials, and, increasingly crucially, the planet’s ecological limits.
The penalty for spending beyond these real capacities is not state bankruptcy, but inflation. One cannot decree the construction of 1,000 hospitals if there are no healthcare workers to work in them, no cement to build them, and no beds to install. Attempting to do so by injecting billions into the healthcare sector without additional production capacity will not create more hospitals; it will cause the price of materials and salaries in the medical sector to soar, creating sectoral inflation. The role of the government is therefore to steer spending according to these real capacities, and not according to an accounting balance. The power is therefore very real, but its constraint is just as real.
The « Bad Manager » State: An Independent Critique of MMT
Then there remains the argument of the « bad manager » state. Isn’t it true that bureaucracy is often inefficient and that public projects are sometimes financial drains?
This criticism, often based on real experiences, is nevertheless independent of the MMT analytical framework. A poorly designed, poorly managed, or corrupt project will be just as much so, whether it is financed by taxes, market borrowing, or sovereign money creation. The source of financing does not cure mismanagement. MMT does not suddenly make an incompetent technocrat brilliant.
The debate on the effectiveness of public action, on the relevance of privatization or public services, on administrative simplification, is an essential and legitimate political debate. But it is distinct from the debate on the nature of money. MMT simply says: « Once you, citizens and elected officials, have democratically decided to launch this public project, here’s how the ‘financing’ actually works, and here are the real limits (real resources and inflation) that you must monitor to keep it from getting out of hand. »
In short, linking criticism of state inefficiency to the rejection of MMT is a misunderstanding. It’s like refusing to admit that a car has an engine on the grounds that you don’t trust the driver. Instead, we should ensure that drivers know how to read a speedometer and that the keys can be taken away if they drive dangerously. And this is precisely what MMT encourages us to do: better democratic control.
It is therefore important to understand that MMT does not claim to provide a miracle solution to all the social tensions of capitalism. However, based on its descriptive analysis, it offers targeted and powerful responses to two major problems: unemployment and price instability.
The False Security of Complex Financial Constraints
Attachment to the current system is based on a seductive idea: financial constraints are an objective bulwark against political arbitrariness. The fear of a deficit, the judgment of rating agencies, or the sanctions of « bond vigilantes » are said to discipline governments, forcing them to practice « good management. » Maintaining this complexity would therefore be a form of wisdom.
However, this vision is an illusion that masks a triple reality:
- These constraints are political, not natural. The Maastricht criteria, the US debt ceiling, or central bank inflation targets are not laws of nature. They are political rules, created by humans, and can be modified or circumvented when the political stakes are deemed sufficient (as proven by the billions created during the 2008 crisis or Covid-19). They are a hindrance to funding hospitals, but rarely to saving banks or, as the Thatcher and Reagan eras demonstrated, to financing massive rearmament and tax cuts for the richest.
- This control is profoundly antidemocratic. Who are these « complex controllers »? Unelected financial actors, private rating agencies with commercial objectives, technocrats operating in a secretive environment. Entrusting control of fiscal policy to these entities is to dispossess citizens and their representatives of their sovereignty. It is to replace democratic debate on collective priorities with submission to private interests.
- This system of control is ineffective and harmful. Far from preventing crises, this framework fostered the financial deregulation that led to the 2008 disaster. And far from guaranteeing prosperity, it justified decades of austerity policies that weakened public services, widened inequality, and fueled the popular resentment that today breeds extremes.
In reality, the constraint MMT emphasizes—that of real resources and inflation—is far more robust, honest, and democratic. It is a physical constraint, not a political one. The question « Do we have the engineers, the steel, and the cement to build this bridge? » is a concrete, verifiable, and universally understandable question that calls for genuine democratic debate. The question « What will the markets think? » is an abstract one that subjects us to the arbitrary power of unelected actors.
Far from ignoring human complexity and irrationality, MMT offers a more robust framework. A physical constraint (‘do we have enough nurses?’) is far more difficult to manipulate politically than an abstract financial constraint (‘the deficit will exceed 3%’), which can be ignored with the stroke of a pen when political circumstances demand it, such as during bank bailouts.
3. The Risk of Electoral Abuse and the Strengthening of Democracy
The most cynical, but perhaps the most realistic, fear is that of political manipulation. If governments understand that they can « print money, » won’t they be tempted, as each election approaches, to distribute checks and launch clientelist projects to ensure re-election, even if it means leaving behind an overheated economy? This fear of the « political-economic cycle » is well-founded. But here again, MMT is not the problem; rather, it is part of the solution, because it proposes a transition from an opaque and hypocritical system to a transparent and accountable framework.
The Hypocrisy of the Current System: The Political-Economic Cycle Already Exists
Let’s be clear: governments already use public spending for electoral purposes. As elections approach, it’s not uncommon to see announcements of targeted tax cuts, exceptional bonuses, or hastily launched infrastructure projects. These expenditures increase deficits, but that has never stopped a government from doing so if it saw an electoral advantage in doing so.
The current situation is therefore the worst it could be. Politicians pursue expansionary spending policies when it suits them, while maintaining an anxiety-inducing public discourse about « fiscal austerity » and the « unsustainable debt left to our children. » This double standard has a devastating effect: it keeps citizens ignorant of the true mechanisms at work and deprives them of any ability to judge the policies implemented on sound grounds. The opposition is accused of wanting to « ruin the country » with its proposals, while at the same time writing deficit checks themselves. This is a fool’s game, perhaps reached its peak by the Reagan and Thatcher governments, which advocated austerity while increasing deficits to further their ideological priorities, keeping citizens in the dark.
MMT, a powerful tool for democratic transparency
Far from exacerbating this problem, a widespread understanding of MMT would make it much more difficult to perpetuate. By revealing how government funding really works, it would force public debate to become more honest and citizen oversight to become more relevant.
Its major contribution is to shift the debate from « How are we going to pay for this? » to « Should we do this? » The financial fog that paralyzes any ambitious discussion is dissipating. The « coffers are empty » fallacy is no longer a valid excuse for refusing to fund the ecological transition, the healthcare system, or education.
Politicians are therefore forced to take responsibility for their choices.
- A government could no longer say, « We can’t build schools, there’s no money. » It should tell the truth: « We are politically choosing not to allocate real resources (cement, labor) to building schools because we prefer to allocate them to tax cuts for the richest (or to buying new fighter jets). »
- Similarly, a populist leader proposing to give every citizen €1,000 before an election would no longer be judged on the deficit impact, but on the inflation impact. The question would become: « Does our economy have the capacity to produce the additional goods and services that these €1,000 per person will seek to purchase? If not, won’t this measure simply raise prices and cancel out the gain in purchasing power? »
This paradigm shift is fundamental. It transforms a technical and inaccessible debate into a political discussion on societal choices, priorities, and real consequences. Citizens are finally equipped to demand accountability for what really matters: employment, inflation, and quality of life.
Conclusion: From Fear of the Tool to Mastery of the Political Project
At the end of this analysis, the initial fear, however legitimate, appears in a new light. The fear that MMT will become a weapon in the hands of ill-intentioned governments is based on a confusion between the tool and its use, between the map and its destination. We have shown that MMT is not, in itself, a political program of the left or the right. It is a neutral description of the monetary power that the sovereign state already possesses, a power that has historically served projects as opposing as Nazi rearmament, the neoliberal revolution of Thatcher and Reagan, or the tax cuts so dear to the Tea Party.
Rejecting this framework for fear of abuse would amount to refusing to learn to read, on the pretext that some books contain dangerous ideas. The real threat to democracy comes not from knowledge, but from fostered ignorance and cultivated opacity. The current system, which hides the state’s spending capacity behind the guise of a false budgetary constraint, paralyzes public debate and fosters political cynicism.
This is where we must recall an essential distinction: that between political economy, which studies the structure of power and real constraints (real resources, inflation), and economic policy, which decides the direction to follow. MMT falls under the former. It does not impose any line of government; it reestablishes the terms of the debate. Once this framework is clarified, the question becomes fully political: Do we need a Job Guarantee? A Green New Deal? Reindustrialization? This debate can only be truly democratic if citizens understand the rules of the game.
The best defense against authoritarian excesses is not the denial of monetary power, but its democratic appropriation. Reclaiming knowledge of how money works is an act of popular sovereignty, not a carte blanche given to the state. It is not a matter of judging governments on their loyalty to accounting fetishes, but on their ability to achieve true economic balance: full employment and price stability.
The choice before us is therefore not between dangerous freedom and reassuring security, but between the false security of opaque financial constraints and the collective responsibility of democratically managing real resources. Fear of the state must not lead us to powerlessness or submission to the markets, but to a stronger, more enlightened, and more assertive demand for popular control.
Notes
Illustration : decolonialisme.fr
MMT France 