Why is modern monetary theory so important?
Why MMT Matters: It Changes Everything
Modern Monetary Theory (MMT) is not just a different way of thinking about economics—it’s a complete reframe of how we understand government spending, taxation, inflation, and power. Critics often claim MMT changes nothing fundamental since governments still need to tax to manage inflation. But that misses the point. Just like Einstein’s relativity didn't negate Newton but expanded understanding where Newton failed, MMT doesn't deny conventional economics—it transforms it where it matters most.
Rethinking the Government's Relationship with Money
One of MMT’s most radical assertions is this: a government that issues its own sovereign, internationally accepted currency and operates its own central bank is never dependent on financial markets to raise money. It can always spend by instructing its central bank to create the currency it needs.
We’ve seen this in action during the 2008 financial crisis and again through the Covid-19 pandemic. Governments spent massively—without first taxing or borrowing—while central banks injected enormous amounts of money into the economy. The truth revealed by MMT is that governments don’t borrow in the way households or businesses do. Instead, they offer the financial markets a place to save. This upends the traditional power dynamic: the government leads, the bankers follow.
The Real Purpose of Taxation
MMT doesn’t dismiss taxes—it redefines their purpose. Taxes don’t fund spending in a currency-issuing nation. Instead, they:
Control inflation by pulling money out of circulation.
Reduce inequality through progressive taxation.
Guide behavior by taxing “bads” (like carbon emissions) and incentivizing “goods” (like education).
Build democracy by creating a transparent relationship between citizens and government.
Under MMT, the primary tool for managing inflation isn’t interest rates—which often inflict pain through rising mortgage or credit costs—but taxation. This shifts economic power away from central banks and back to the elected government, restoring democratic control over fiscal policy.
A Shift in Economic Focus
MMT also shifts what we focus on in economic policy. Instead of obsessing over inflation—a problem that often corrects itself—MMT argues that we should prioritize:
Full employment
Public investment
Reducing inequality
Tackling the climate crisis
These aren't just economic goals—they are moral imperatives. MMT makes them achievable by removing artificial constraints based on outdated myths of “tax first, spend later.”
Changing the Power Game
At its core, MMT is political economy—it’s about power. It returns power to the public sector and democratic decision-making, empowering governments to act in the interests of their people. It challenges the dominance of financial elites and reframes our economic debates to focus on human well-being over monetary balance sheets.
MMT matters because it tells a different story—one where money is a tool, not a master, and where people come before profit. It changes everything because it shifts the very foundation of who holds power, how decisions are made, and what is truly possible in our economy.