Abstract
ABSTRACT This paper has a twofold purpose. The first one is to present the core ideas of MMT. The second one is to explain its recent rise in Brazil after the publication of Andre Lara Resende’s articles in the press in 2019 and a book in 2020. In order to do that, the paper is organized as follows. After the introduction, the first session presents the core ideas of MMT: i) chartal money, or tax driven money; ii) functional finance; iii) Minskyan financial fragility; iv) sectoral balances approach; v) employer of last resort. The second session presents some critiques MMT has received both from the orthodox and the heterodox sides at the international level. The third section discusses the particular way in which MMT’s ideas have recently arrived in Brazil, considering peculiarities of the Brazilian economic debate and political scenario. The final session brings back the main ideas presented in the paper and raises critics to Lara Resende’s contributions from a political economy perspective.
Highlights
The economic debate in Brazil has been recently shaken by Modern Money Theory’s (MMT) ideas
In this set of articles, that later became part of his new book (Resende, 2020), Lara Resende presented the core ideas of MMT – money as a unit of account and money as debt issued by the State, which is accepted because it is needed in order to pay taxes – when the debt is redeemed
In the 1980s, when the country faced a period of extremely high inflation, he was part of a group of economists that developed the idea that inflation has a major inertia component – in what became known as the “inertial inflation theory”1, challenging mainstream’s approach and policies to deal with inflation at that time
Summary
The economic debate in Brazil has been recently shaken by Modern Money Theory’s (MMT) ideas. Theoretical issues which have always been crucial from a Keynesian-Minskyan perspective, and were not relevant to mainstream macroeconomics up to that moment – such as bank money and finance, endogenous financial fragility, as well as the key role of fiscal policy and financial regulation –were brought into the picture, but in a somewhat clumsy way It was in this environment of increasing dissatisfaction with mainstream economics that MMT crossed the borders of the academic debate and started to be discussed in important media outlets, including newspapers, all over the world. The final session brings back the main ideas presented in the paper and raises critics to Lara Resende’s contributions from a political economy perspective
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