A Cosmopolitan Reading of Modern Monetary Theory

The increasingly influential neochartalist Modern Monetary Theory (MMT) comes with a nation-state-centric framing of politics. The neochartalists argue that many alleged globalisation-related constraints on national economic policy are illusory or seriously overstated. In their view, monetarily sovereign states enjoy substantial autonomy over their fiscal and monetary policy decisions. The neochartalist diagnosis thus seems to undermine cosmopolitan calls for supranational forms of macroeconomic governance. However, this paper argues that if we pay serious attention to a range of subtler obstacles and strategic incentives that apply especially to small currency-issuing states, cosmopolitan aspirations remain well-motivated. Accordingly, the political implications of MMT are reexamined and a case for supranational exercise of monetary sovereignty is made. The paper goes on to demonstrate how the standard state-centric approach to currency privileges can prove counterproductive from the perspective of democratic governance. It is concluded that neochartalism and cosmopolitanism can fruitfully both correct and enrich each other.