MMT fuels populist leaders.

In the language of textbook macroeconomics, these are policies where the government shifts simultaneously, and significantly, the IS and the LM curves. In every Latin American experience with populist policies the government granted wage increases — both public‐​sector and minimum wages — that exceeded significantly what was justified by improvements in productivity. Just as MMTers, populist politicians present heterodoxy as the solution to the nation’s ills, and in particular to the suffering of the middle and lower classes.∂ For populists, one of the features of capitalist economies is the existence of substantial idle capacity. Thus, in their view, large and persistent fiscal deficits financed through money creation do not result in serious imbalances, high inflation, and, eventually, crises. For populists the contrary is true: large fiscal deficits expand demand and encourage output, allowing firms to exploit economies of scale and to use resources fully. For them the combination of large deficits with redistributive policies results in a decline in inflation. Populists tend to dismiss possible collapses in the demand for domestic money, and increases in the velocity of circulation; in this, their perspective is, again, very similar to that of MMT supporters.∂ These views are clearly captured by the following quote from Daniel Carbonetto (: 82), the economist behind Alan García’s populist policies in Peru in the second half of the 1980s: “If it were necessary to summarize the strategy adopted by the government since August 1985 with two words, they are control (meaning control of prices and costs) and spend, transferring resources to the poor so that they increase consumption.” Carbonetto (: 83) then added that budget constraints had to be ignored: “It is necessary to spend, even at the cost of a large fiscal deficit, because, when this deficit transfers public resources to increase consumption of the poorest, they demand more goods and this will bring about a reduction in unit costs. Thus the deficit is not inflationary.”