Modern Monetary Thievery

Good Intentions, Harmful Means

It is often purported that the road to hell is paved with good intentions. My online debate with South African Modern Monetary Theory (MMT) advocate, Buddy Wells, made me think about this wise saying.

Mr. Wells, of whom I have grown fond since our first interaction on X and who has been nothing but cordial in our debates, argued that following the policy prescriptions of MMT, the SA government can issue more currency to build more schools and employ more teachers. According to him, spending newly issued currency isn’t inflationary when directed towards “unemployed labour and resources.”

Mr. Wells’ desire to see more productivity and more educated South Africans is undoubtedly noble. However, I must insist against the employment of ignoble means to achieve them.

How economies should work

To understand my claim of the ignominy of MMT as a means of achieving Mr. Wells’ goals, one first needs to understand what goes on during all trade transactions in an economy.
The functioning of an economy can accurately be described as people serving each other. Ismaila serves Zainab; Zainab serves Ifeoma; Ifeoma serves Damilola’ and so on. One would expect that Ismaila serves Damilola, and Damilola serves Ismaila in return (i.e. trade by barter). But money makes it so that you need not serve the one who served you. You can serve absolutely anyone, and it would be as though you served the one who served you.

Therefore, when Mayowa buys a loaf of bread from Dubem, he’s not merely exchanging a piece of paper for the loaf. He’s presenting a receipt of service to Dubem. He’s showing Dubem the evidence that he offered a service to Martin, who may have served Dubem, Debbie, or even Mayowa himself in the past or will serve them in future. Nothing goes for nothing. Everyone must serve someone in order to be served. This is how an economy should function.

As is evident in this description, money is a receipt of service. Whenever we go to purchase commodities and the sellers ask us for money, what they are really asking is to show our proof that we served some other person. If one does not have money to pay for goods, it means that he has not served anyone, that he has not created any value. In this case, the only way he can get the goods – if the seller does not gift it to him – is to steal them.

The stealth of counterfeiting

Most theft occurs under the threat of force. But a more subtle way to steal from people is to counterfeit. If someone wants to steal but does not wish to do so overtly, he can simply print the currency. If he does a good enough job, he can literally steal from people without them knowing it.

Counterfeiting money enables those who do it to take from producers without offering anything in exchange.

Counterfeiting is more heinous than regular theft for two reasons:
• With regular theft, people can put measures in place to stop the thief. With counterfeiting, if the counterfeiter is good enough, his theft can go undetected indefinitely.
• If he persists in his counterfeiting, he makes everyone who uses his counterfeit naira complicit in his theft.

If everyone in society decided to counterfeit, civilization would break down very quickly. Prices would start to rise. Eventually, societal collapse would occur when productivity grinds to a halt and all commodities are consumed.

Appearances can deceive

Consider a counterfeiter who prints out naira notes perfectly indistinguishable from the original. Imagine that this man takes his counterfeit notes and uses them to build brand new schools and employ previously unemployed teachers.

To the layman, this counterfeiter is a hero. He has employed previously unemployed people, educated underprivileged youth and increased productivity. However, to the trained economist, this man has done a greater disservice to his fellow Nigerians than he has helped.

As described earlier, this counterfeiter has stealthily stolen the productivity of others. He has stolen from the landowner from whom he deceptively acquired the land to build the school by using his counterfeit bills. He hoodwinked hardworking businessmen into giving him chairs, tables, boards, computers, chalk, fabric for uniforms, etc.

He has also stolen from everyone from whom the previously unemployed staff members purchase goods and services with their counterfeit salary. He has made these innocent staff members complicit in his theft. He did not serve other people to earn money. He only printed fake receipts of service to deceive his fellow Nigerians and steal their productivity.

Though the counterfeiter employed previously “unemployed labour,” he still requires the employment of previously produced resources. These are resources he stole from the owners. Therefore, he still does great damage to those from whom he stole, which is the entire Nigerian economy.

MMT is legal counterfeiting

Let me state emphatically that Mr. Wells’ MMT proposal differs only from the afore-described counterfeiting in two ways:

Legality

The proposal of Mr. Wells and his ideological ilk is legal, and counterfeiting isn’t. Issuing currency has literally the same effect as counterfeiting. The legality, however, doesn’t keep it from being unethical and destructive.

Scale

Mr. Wells’ proposal is much worse when the government does it. No counterfeiter or group of counterfeiters – for fear of being found out and severely penalized by the government – can counterfeit as much currency as the government can print. The Nigerian government can issue billions and even trillions of naira. This is a feat unimaginable for all the counterfeiters in Nigeria combined.

There is nary a sane individual who will defend the actions of a counterfeiter, even if he spends all the counterfeit currency doing good. But when Mr. Wells calls for the issuance of new currency to spend on building schools, fighting unemployment, or whatever else, he does just that. According to him and other MMTheorists, it’s acceptable when the government does it.

Economic implications of counterfeiting

Were it only a matter of the ignobility of the MMT proposal, I might’ve stilled my tongue. I might have done so lest I be accused of virtue signalling at the expense of poor people who can’t afford education and healthcare. However, this isn’t just an ethical matter.

It’s also an economic one. As earlier stated, issuing currency (i.e. legal counterfeiting) is always inflationary. According to many economists within the Austrian tradition, it can set off recessions.

To offset this, some MMTers will advocate for tax cuts to draw back the money in circulation, but this is also contractionary in nature. Mr. Wells’ policy is harmful to the economy. And his cure to the problems it causes is also another problem. I recommend that the all governments ignore his proposal altogether.