There is a profound confusion at the heart of modern economic debate. We often hear politicians compare the national economy to a household budget: a world of scarcity in which the government must balance budgets.
But this analogy is a failure. It’s time to stop looking at a ledger and start looking at an engineering schematic.
The economy is not a piggy bank; it is an Electric Motor..
When we view the government through this lens, taxation, spending, and inflation cease to be moral questions about “debt” and become engineering questions about capacity, torque, and heat management.
The Magnets: The True Function of Taxes
In a permanent magnet motor, the magnets are indispensable. They create the magnetic field that the motor generates torque against. Without it, the rotor won’t turn.
In a modern monetary system, taxation acts like these magnets.
Taxes are not a funding source for a sovereign government. The state creates the currency; it does not need to collect it to spend it.
However, a tax liability must be imposed in advance for a floating-rate currency to have value. It creates the obligation that gives government scrip purpose and acceptance.
Crucially, taxes also withdraw private spending power, thereby releasing real resources - labour, materials, productive capacity - for public use.
This is the central engineering point: the government can command goods and services only to the extent that it removes competing private claims on those same resources.
Where idle capacity exists, particularly unemployed labour, the state may be able to expand spending without immediate countervailing taxation. But once that slack is absorbed, further public expansion requires taxation to prevent overheating.
Critics often argue that using taxes to fight inflation is inefficient. They say that raising taxes on the wealthy won’t lower the price of milk or eggs, because rich people aren’t buying 300 eggs a week anyway.
Yet the electric-motor analogy helps clarify why this particular criticism has a grain of truth. The magnets are structural. You don’t swap out the magnets while driving down the motorway to adjust your speed.
The tax code defines the motor’s capacity, but it is a clumsy tool for day-to-day speed control. To manage speed and inflation in real time, we must look to current flows (spending) rather than just the magnets.
The Current: Spending and Inflation
If taxation provides the magnetic field, government spending is the electrical current.
Current drives the motor. It determines speed, acceleration, and delivered work. In macroeconomic terms, it represents the flow of government expenditure into wages, procurement, infrastructure, and services.
If you push more current through the motor than its physical limits allow, it overheats. The wiring degrades. Performance becomes unstable. In economic terms, this is inflation.
MMT is explicit on this point: the actual limit to government spending is not money availability - electrons are effectively infinite - but real resource availability.
The question is never “Can we afford it in pounds?” but “Do we have the people, materials, and productive capacity to do this without displacing essential private activity?”
Inflation is therefore not caused by money creation per se, but by attempting to command more goods and services than the economy can supply at current prices.
The Cruise Control: A Job Guarantee
If taxes are slow-to-change structural magnets and spending is the throttle, how do we maintain a stable speed over uneven terrain?
We install cruise control.
In the MMT framework, the Job Guarantee fulfils this stabilising function. It offers a publicly funded job at a fixed wage to anyone willing and able to work.
Climbing a Hill (Recession): Private demand weakens and unemployment rises. The Job Guarantee absorbs displaced workers, increasing government spending automatically and maintaining income flows.
Coasting Downhill (Boom): Private firms expand and hire workers out of the Job Guarantee pool. Government spending automatically falls as participants exit the programme, preventing excess demand from pushing the motor beyond safe limits.
The Job Guarantee, therefore, acts as a buffer stock of employed labour rather than unemployed labour, anchoring incomes and stabilising aggregate demand without requiring constant discretionary fiscal intervention.
The Political Question: What Size of Vehicle?
Much of the suspicion surrounding MMT stems from the belief that it is a Trojan Horse for “Big Government” socialism. This is a misunderstanding. MMT is the manual for the powertrain; it does not specify the vehicle’s size or purpose.
The debate between Left and Right is, at its core, a design choice about what kind of vehicle society wishes to build.
The Heavy Vehicle (The Left): Universal healthcare, extensive education, large-scale green infrastructure and comprehensive welfare systems. This vehicle is heavy because it makes a large claim on productive capacity: labour, steel, machinery, and expertise.
The Light Vehicle (The Right): Minimal state provision, lower taxes, reliance on private enterprise and market allocation. This vehicle is light because fewer goods and services are diverted to public use.
Here, the “physics” of MMT becomes unavoidable: the motor must match the vehicle’s weight.
If you want the Heavy Vehicle, you must install a motor with large magnets and pay high, appropriately structured taxes. These taxes reduce private-sector demand enough to free up the labour and materials required for the expanded public domain.
If you attempt to haul a heavy truck with a scooter motor - high spending without sufficient taxation - you will generate chronic overheating: persistent inflation.
If you want the Light Vehicle, you can operate with far smaller magnets - lower taxation - because the state is claiming fewer resources.
MMT does not take sides; physics has no political affiliation. It simply suggests that the drivetrain must match the chassis.
If you want the Heavy Vehicle of expansive public ambition, you are bound by engineering to install the heavy magnets (taxes) required to offset the use of productive capacity. The constraint is physical, not financial.
Conversely, a Light Vehicle of modest ambition is not a glider; it still requires a motor and a magnetic field to move, however compact. The difference is purely one of torque and tonnage, not of principle.
Conclusion
We need to upgrade our economic metaphors. We are trying to drive an electric car using the maintenance manual for a horse and cart.
Whether we prefer the heavy-duty capacity of a large state or the streamlined efficiency of a lean one, the engineering constraints remain equally binding.
A larger vehicle can deliver broader collective provision and resilience, but only if its motor is engineered to match the scale of its ambitions.
A smaller vehicle may offer agility and lower drag, but still requires sufficient structural power to perform even its limited functions coherently.
Once we finally switch to the correct operator’s manual, the physics of a monetary production economy rather than the folklore of loanable funds, we can stop arguing about imaginary financial constraints and start having the real debate: What kind of society do we actually want to power, and are we willing to engineer the motor equal to the task?
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