By
Robert Cauneau
5 October 2025
Introduction
What if everything we thought we knew about government financing was wrong? Modern Monetary Theory (MMT) doesn’t just correct an economic error; it also disrupts one of the very foundations of our social contract: the sacrosanct link between contribution and citizenship. By demonstrating that the state creates the necessary money before levying taxes, this theory paves the way for a refoundation of our understanding of social justice, solidarity, and political legitimacy.
I. Taxation, a historical pillar of the social contract
Since the Enlightenment philosophers, and particularly Rousseau, the social contract is based on a simple and powerful idea: citizens agree to pay taxes in exchange for the protection, public services, and rights guaranteed to them by the state. This pact, at the heart of modern democracies, inextricably links individual contribution to collective prosperity: to pay is to belong. Taxation has thus long embodied citizenship, solidarity, and an ideal of distributive justice.
Historically, taxation was one of the first instruments for asserting power. From Mesopotamian tributes symbolizing sovereignty to the Athenian eisphora, exceptional taxes on the wealthy for civic participation, taxes have always structured society. However, it was with the French Revolution that it took on a resolutely political dimension: Article 13 of the 1789 Declaration of the Rights of Man and of the Citizen made it a principle of equality: « a common contribution is indispensable; it must be equally distributed among all citizens, according to their means. »
Taxation then became the intangible pillar of the republican pact. For Rousseau, it stemmed from the general will; for Tocqueville, it was « the price of civilization. » In the 20th century, with the advent of the welfare state, taxation took on a new function: financing redistribution and cementing social cohesion. The Keynesian model is based on a virtuous circle: taxes fuel public spending, which supports demand and employment, and citizens, in turn, strengthen their trust in the state. This intrinsic link between contributory effort and collective benefit has profoundly shaped the modern democratic imagination, establishing the fear of deficits as the guardian of budgetary orthodoxy.
II. When MMT reverses the fiscal logic
This implicit pact, etched in our collective imagination, is nevertheless based on a persistent illusion: the idea that the state can only spend what it has previously collected. It is precisely this age-old belief that MMT is striking head-on. According to its principles, a state that creates its own currency always spends first. 1 It does not « seek » money; it creates it through a simple accounting transaction, crediting the private sector’s bank accounts. Taxation, from this perspective, only comes afterward, not to « finance » the state, which has no need for it, but to withdraw a portion of the currency in circulation and thus regulate the economy, control inflation, and guide behavior.
The state, in reality, does not seek prior resources: it generates them. Taxation is not the sine qua non of financing, but rather the sine qua non of the legitimacy and value of money itself. This concept, formulated by Warren Mosler2, the father of MMT, is in line with chartalism at the beginning of the 20th century by Georg Friedrich Knapp: money only has value because the state requires it to be used to pay taxes. It is this fiscal obligation that establishes the demand for money. The state is no longer a mere collector or manager of funds; it is the creator of the medium of exchange that makes all economic activity possible.
This reversal of perspective radically transforms the political function of taxation. While it does not « finance » anything in the traditional sense, it is nonetheless useless. Its role becomes profoundly institutional: it structures the monetary space, creates a demand for money, and allows the state to exercise its economic sovereignty. Taxation no longer symbolizes contribution to a common pot constrained by scarcity, but voluntary membership in a monetary community. Social cohesion is no longer based on the anxiety of financial scarcity, but on confidence in the state’s ability to mobilize money to meet collective needs.
III. From Contribution to Participation
This reversal calls into question the traditional logic of the social contract, based on financial reciprocity: I contribute, therefore I have the right to public services. If the state spends first (financially speaking), it no longer needs to wait for citizens’ contributions before acting. The real constraint then becomes real—the availability of labor, raw materials, and skills—and no longer budgetary. From then on, the question is no longer « how much does it cost in euros? » but rather « how do we collectively want to use our real resources: our talents, our energies, our materials? »
From the MMT perspective, social justice is no longer simply about redistributing existing wealth, like dividing up a cake. It invites the creation of new real assets: jobs, infrastructure, public services. The role of the state is no longer to divide up a fixed cake, but to increase its size. A job guarantee program, for example, could ensure everyone has useful and decently paid work, financed by monetary creation, without requiring the prior imposition of new taxes. Justice no longer involves ex post redistribution, but rather the ex ante creation of shared prosperity.
This logic shifts the focus of citizenship: it is no longer defined primarily by financial contribution, but by active participation in economic and social life. Taxation retains a central role, but is transformed: it becomes a tool for macroeconomic regulation, stabilization, and guidance. Taxing polluting activities or speculative profits no longer serves to « fill the state’s coffers » but to steer production toward socially and ecologically desirable objectives. It acts as an economic thermostat or a societal compass.
IV. Rethinking Redistributive Justice
This development also redefines distributive justice. As economist Justin P. Holt3 has shown, MMT does not render redistribution obsolete; it radically changes its nature and justification. In a sovereign monetary regime, the major problem is no longer so much the financing of public spending as the excessive concentration of economic power and wealth. Taxation then regains its original political function: to limit inequalities in wealth and influence, not to « fill the state coffers, » but to preserve social cohesion and the vitality of democracy.
Gabriel Zucman’s recent proposal to introduce a global tax on billionaires, analyzed through the lens of MMT, fits perfectly with this logic: it does not aim to create budgetary margins for sovereign states that can create their own currency. Rather, it seeks to forcefully reaffirm that no one is above the community that guarantees the value of the currency and the stability of the system. Taxation becomes a tool of democratic regulation, a means of containing power imbalances and ensuring a fair distribution of rights and responsibilities, far beyond its function as a simple financing lever.
MMT thus paves the way for a new, bolder conception of social justice. It echoes, on another level, John Rawls’s profound insight: a just society is, above all, a stable society, where everyone is guaranteed minimal material security and full participation. By allowing the state to finance full employment, universal healthcare, or the ecological transition without relying on fluctuating tax revenues, MMT creates the conditions for this stability. The « sense of justice » is no longer based on the fear of deficits, but on the certainty that institutions are indeed working for the common good, with the means granted to them by their monetary sovereignty.
V. Conclusion: A New Social Contract to Be Invented
This conceptual upheaval, however, poses a major challenge: if citizens no longer perceive themselves as indispensable financial contributors, could solidarity fray? The monetary social contract therefore requires increased transparency and exemplary governance. Money creation must be understood, debated, and controlled democratically, free from any technocratic excesses. Far from justifying facile fiscal irresponsibility, MMT instead requires demanding public governance, based on political accountability, education, and the judicious allocation of real resources.
Ultimately, MMT does not simply correct a fundamental economic error; it proposes a genuine political overhaul of our relationship with the state and the community. It reveals that the real constraint is not financial, but real; that taxes do not « finance » spending, but legitimize and regulate it; and that justice does not consist of balancing illusory accounts, but of directing collective abundance toward the common good.
If public spending precedes revenue, then the social contract can no longer rest on the myth of monetary scarcity. It must rely on our collective ability to decide what we want to produce, share, and preserve. The French debate, often mired in the rhetoric of public debt and deficits, would benefit immensely from integrating this dimension. For the question is not how to « finance » solidarity, but how best to use monetary sovereignty, when it exists, to make it effective and emancipatory. The day we accept that taxes are no longer the fuel of the state, but the instrument of justice, regulation, and cohesion, the social contract will cease to be a constraint and once again become a project of collective emancipation.
Notes
- The specific case of the Eurozone member states is presented here : https://mmt-france.org/2025/05/25/mmt-and-the-eurozone/
- Warren Mosler’s seminal book on MMT can be found here: https://mmt-france.org/2025/05/25/mmt-and-the-eurozone/
- See this article by Justin P. Holt available here: https://www.tandfonline.com/doi/abs/10.1080/00213624.2017.1391584
Illustration : https://mjp.univ-perp.fr/france/1789-20juin.htm
MMT France 