Money as a Democratic Medium | The Public and its Money Problems

Money as a Democratic Medium | The Public and its Money Problems


MARTIJN KONINGS: Hi, everyone. Welcome to this panel on “The
Public and Its Money Problems.” Let me start off by
introducing the speakers. To my right here
is Perry Mehrling, teaching at Boston
University, then Eli Cook from the
University of Haifa, then Quinn Slobodian, who teaches
at Wellesley College, and Antara Haldar, who teaches
at Cambridge in England and is visiting here at Harvard. I am Martijn
Konings, and I teach at the University of Sydney. I’ll both be contributing to
the panel and chairing it. We’ll all speak for
about 15 minutes. And I’ll start off. PERRY MEHRLING: OK,
so can you hear? Can you all hear? Yeah, it’s good. AUDIENCE: A little closer. AUDIENCE: Be careful
of that water. MARTIJN KONINGS: OK,
sure, yeah, no worries. PERRY MEHRLING: Great. MARTIJN KONINGS: So
the title of the panel is a variation on
John Dewey’s 1927 book on The Public
and Its Problems, which he wrote in
response to the way Walter Lippmann had disparaged
the critical self-organizing capacities of the
American public through books like
The Phantom Public. So although Dewey’s book
did not deal with money, it was written against the
background of the growing financial volatility
that progressives viewed as one of
the key problems of modern economic organization. Today, we could say we face
somewhat similar circumstances, growing political
turmoil that is connected to the financial
logic of capitalism in ways that are both
unclear and undeniable. Intellectually, it
seems more and more difficult to maintain
the neutrality postulate as key a point of reference. Thinking about
money as something that is supposed to
facilitate market efficiency and that needs to be
managed by technocrats just doesn’t get us very far. So as it is less
and less tenable for progressive analyses
to evade questions of money and
finance, the question is increasingly,
what forms should such politicization can– should it take? And among the more
prominent perspectives to have emerged in recent
years is a neo-chartalism that emphasizes the
role of public authority in the production of money
and is interested in ways to institutionalize that role in
more democratic and progressive ways. And I think it’s
important to appreciate that this theoretical
position reflects a wider movement of thought
that includes currents of radical sentiment of the,
let’s say, the Bernie Sanders flank of the
Democratic Party, also the notion of a public
jobs guarantee, which is being debated right
now in a parallel session. So most of the
contributors on this panel are sympathetic to the
general idea of chartalism but remain at some distance
from its stronger implication. So the panel really
follows the chartalist lead in fore-grounding the
question of the relationship between money and the
public while exploring this connection through a
number of different lenses. The central idea
of chartalism is that money is
essentially a product of public
institutional processes and that to think of it as a
thing that can be privately owned is to fetishize it. Money consists of promises and
conventions made by people. And as such, it can
be repurposed to serve people rather than banks. If money has an anchor,
it’s political authority, the state’s power
to tax its citizens. Now, of course,
chartalists would readily concede that such fetishization
or reification involves more than an intellectual mistake. There are all kinds of
social and political and ideological reasons
for why we might be mistaking the nature of money. But the argument is nonetheless
that the most problematic policies of the
current neoliberal era are premised on the
misunderstanding of the basic ontological
structure of money. So for instance, the
obsession with deficits is seen to be bound
up with the inability to realize that money is
an accounting convention and with the mistaken
idea that there is a money anchor somewhere out
there, for instance, a metallic substance,
that would kind of tether the logic of credit and debt. I think it’s useful to see that
this chartalist case involves two quite separate claims– first, that money is a symbol
or a convention, and secondly, that it is a public institution. Of course, any
symbol or convention has some publicness in the
sense that an understanding of its meaning needs to
be shared among at least some different actors. But this is quite
different from saying that it was deliberately created
by a political community. So there is something
of a leap here. The first point
about conventionality does not entail the second point
about the public institution. And in fact, one of the
more prominent developments of the contemporary era involves
the globalization trends that mean precisely
a growing disconnect between those two dimensions. Then again, in some
important ways, has reinforced rather
than simply undermined the connection between
money and sovereignty. So the ability of the US state
to incur debts and deficits and fund deficits to
the extent that it has has, in critical ways, been
dependent on the global role of the dollar, which has
been built on globalization processes that at the
time of their occurrence were often seen as very highly
problematic from the standpoint of national sovereignty. It’s also worth noting
that a tension runs through the chartalist critique
of orthodox conceptions of money. On the one hand, it argues that
we should not think about money as purely a market phenomenon. On the other hand, it rejects
the idea of money as exogenous. So in terms of debates about
endogeneity and exogeneity, it’s not entirely
clear where it sits. It emphasizes the historical
origins of money in banking and also recognizes
that the formation of national currencies occurred
as part of a process whereby central banking
emerged or were created to manage the instabilities
that emanated from this process and also the way this
was linked to the growth of fiscal capacities. But then it also thinks of money
as purely a public commitment in a way that kind of
brackets all these processes. So it sees the
publicness of money as more or less transcending or
superseding the private logics through which it emerged. The key point that I think
isn’t sufficiently appreciated here is that money is
essentially hybrid, simultaneously
public and private, and that it is probably
more important to analyze the sometimes paradoxical
logics at work there than to try to decide the
issue in favor of either side, public or private. So one way of putting it
is that chartalism bypasses the processes whereby things
become public, whereby things become institutional facts. Money is a hierarchical
structure of promises. And what sometimes
appears as kind of arbitrary self-referential
power to issue money is actually built on a very
complex infrastructure that generates certain standards. And that is the truth
in Minsky’s point, which we’ve heard a few times
already during this conference, and Minsky’s point is that
it’s easy to issue a promise and that the hard part is to
get it to circulate and to be accepted, for it to
become used as a measure rather than something
that needs to be measured. And I think that taking
that issuing power back democratically
requires an engagement with the pragmatics of these
processes, the logistics of investment and payment. And I feel there’s a certain
politics of measurement and valuation here,
a politics that has to do with what
counts as what, that isn’t being
sufficiently explored. So for instance, when we
tried to conceptualize the way in which the value of
money as a measure is changing, why do we still not include
the costs of housing, which is becoming more
and more of an issue for an entire
generation, and I feel will become a real faultline
for political conflict over the next couple of decades? This is an issue of how
measures and conventions work that is really
ripe for contestation and politicization. So it’s not enough to save
that money is a convention. We need to refocus on
how conventions work, how investments and promises
interact and evolve over time. A key resource,
I feel, will have to be a rereading of the
legacy of Hyman Minsky. And that is something I
develop in my recent book Capital and Time, and it’s
indebted to Perry’s Mehrling’s reading of Minsky and
his place in the history of financial and
economic thought. And this version of
Minsky isn’t primarily a critic of overindebtedness
or of speculation. He’s an analyst of how
balance sheets interlock and the kind of financial
flows and dynamics that this gives rise to. A key here is the
role of liquidity, which Minsky realized
very well wasn’t some kind of pathological
fetish, which is how Keynes often saw it. It’s that it’s a
means of survival. It conditions one’s ability to
hold assets and one’s ability to stay in the game. In order to become an economic
unit with a flexible survival constraint, people need
to be willing to keep their funds invested in
you, to keep you liquid. Some states do have a uniquely
flexible survival constraint. And this is in part related to
their capacity for taxation, but it’s not a universal
feature and a fact that is at the heart of
several decades of IMF policy. So we might see chartalism as an
attempt at making money public. But it remains a somewhat
self-referential one, namely one that consists
primarily in declaring that money is political. Such reminders about money’s
conventional and constructed nature can only ever be a
starting point, I think. And this is something that John
Dewey understood very well. There is no ready-made public,
no ready-made publicness. The public only lives in
them through its issues. It constitutes
itself as a public through engaging specific
problems that bug it. And for that reason,
reengaging with early progressive
pragmatist ways of thinking seems particularly appropriate. Now, of course,
people are already doing that to some extent. But what seems to escape
these efforts time and again is that a key
weakness of early progressivism has always been its neglect of
questions of money and finance, which was reflected
in the way pragmatism and progressivism
in political thought became divorced from
economic institutionalism and economic theory
and the way this then resulted in the
version of Keynesianism that abstracted entirely from
the mechanisms through which money is produced. And the way in which
progressivism so often declined to engage the
mechanisms of credit and finance has no doubt been
one main reason why they’re so often given in
to managerialism and has been unable to actualize
the spirit of pragmatism as a living philosophy
for democracy, which Dewey thought it could be. So the politics-economics
disconnect prevented a more
sustained engagement with the conditions under which
a public or perhaps plural publics might be
able to flourish. So while Dewey’s
critique of Lippman was convincing in
philosophical terms, from a present
day point of view, it might be tempting
to think that Lippman’s managerial progressivism
was more in touch with the pulse and the
direction of history. And it is, of course, this
particular technocratic course that the progressive project
took that would eventually provide such fertile
ground for the emergence of a neoliberal
politics of money. And neoliberalism
should really be seen as a specific politics
of finance that is not simply the result of a misunderstanding
of the nature of money. In my own work, I’ve written
about the ways monetarism was never just like an
obscure technical philosophy, but it really reflects
an imaginary of money that had a great deal
of popular traction. The idea of quantity targeting
had considerable support, which is precisely
why it was such a convenient avenue for
imposing restrictive policies. And I think this
speaks to the fact that the idea of a [INAUDIBLE]
or of an objective or even a natural metallic anchor
for the issue of currency tends to be seen as a key
way to prevent or counteract the corruption of
the market, a way to restore the
neutrality of the market. This means that the idea
of market neutrality has significant
mobilizing capacity. It’s not a simple intellectual
mistake or a naive idea. It speaks to a distinctly
republican, lower case r, distinctly republican
image of the markets. The market is a bulwark
against concentrations of power and wealth. And it is, of course, precisely
these republican credentials of capitalism and
liberalism that chartalism aims to recover. But I think we should be more
keenly aware that neoliberalism already operates on this
terrain, often to great effect. And we should be aware that
re-appropriating that sort of republican legacy
is not straightforward. When it comes to the
intellectual contribution to that kind of
project we can make, I think we could do a
lot worse than returning to the insights of early
progressivism and pragmatism but this time paying
very close attention to the nuts and bolts
of money and finance. Thank you. PERRY MEHRLING: So I’m next? MARTIJN KONINGS: Yeah. And we’re just
going down the line. [SIDE CONVERSATION] PERRY MEHRLING: Maybe I
should move this here. So thank you, Martijn,
for organizing this. I didn’t do anything
except write this. And you’ll see some parallels,
but they’re completely invisible hand parallels. We have not coordinated. So I have two mean analytical
points that I want to bring. But let me just, by way of
introduction, start with a few simpler points, which
is first to insist that as a matter of just
history that money has always been parallel, that there
have been state origins, and there have been
private origins. These are just three books
that have influenced me. And we could conceivably
think of the state’s getting its power to issue
money through coercion– this is taking from
Charles Tilly– and that the market and
merchants through their profit making, or if we want to
be more political about it, their exploitation. But in both cases, here’s
the economic point. The ability to issue
money comes from something about your action in society
that causes a regular cash flow in your
direction, which means that your IOUs come
back to you, which means that they are money-like. OK, so this is the point,
that there has always been multiple sources. And sometimes that’s
the fascinating thing about history. We heard yesterday in
this one on empire, multiple money circulating
at the same time and there’s an exchange
rate between them, and they’re distinct. What makes this hybridity
difficult to see today is that usually these
are not distinct, that they trade at
par, and you mistake what is private money,
what is public money, which one is fundamental,
which one is derivative. And so you have a
lot of arguments that actually can be
resolved by just saying, it is inherently hybrid. OK, and let’s understand
that hybridity. It has multiple sources and
multiple reinforcing sources of power. This is now another,
which may be more controversial
for this group, is to insist that
this hybridity, there is another nature of this
that’s very important today, which is the state
money is national money and that the private
money is global money. And that is what gives
the private money a lot more clout today than it
had in previous times. Here are just two
quotes that I pull out of the work I’m doing right
now from the last time the international
system collapsed. OK, here’s John H. Williams
in the failed 1933 London Conference, trying to
put the International Conference together,
in which he’s criticizing the British mainly. “Monetary nationalism is the
worst kind of nationalism.” And to some extent,
we can talk about it in discussion maybe
chartalism seems to be monetary nationalism. OK, and so that is one side. But there is a global
feature to this as well. And 10 years later, we have
Charlie Kindelberger suggesting an International New Deal. In order to get
capitalism going again, we need to develop
basically the Global South, and the private capital flows
are not going to do that. We need public capital
flows for that. And I think that
global imaginary is on the table today
in things like climate change and migration control. And so limiting ourselves to
the power of the nation state is problematic. Here’s why we’re here. The crisis of legitimacy
of the monetary system is a crisis of legitimacy
of the central bank. It was mentioned
earlier today this book by Paul Tucker, Unelected
Power, himself a central banker at the Bank of England. But I think that
the scene he’s just expressing in central
banker’s language the same thing that we
get from the MMT movement, from Positive Money,
from Vollgeld, that there’s a number of
manifestations of this crisis of central bank legitimacy. And here– I am not even
looking at my notes. Maybe I’ll just remind myself. OK, we will come back to this. Here is now the
analytical points. What’s the fuss about? OK, the fuss, I think, is
about the alchemical quality of banking. OK, and here, I would
just remind you. I thanked you, Bob,
this morning for talking about the nature of
the essential banking transaction, which
is a swap of values in which a
non-transferable IOU is swapped for a transferable IOU. And that’s what I’m showing
here, that the transferable IOU is the deposit of the bank. The non-transferable
one is the mortgage that is issued to the household. Each of us say to each other,
I owe you a million dollars. I’m sorry. I’m from Manhattan. And accept that
the bank’s promise lets me buy a house
with it, a very, very small house in Manhattan. Anyone can issue an IOU. This is what Minsky
was trying to say. If he had used
balance sheets, it could have been a
little more helpful. But this is what
he’s trying to say. The promise to get it accepted,
that’s what banking is doing. It’s accepting non-bank IOUs. And here’s a thing that I
think we should underline, because we keep beating this
dead horse of the barter thing. OK, there’s no barter here. OK, this is creation
of something from nothing, access
to social resources without providing
any social resources. That’s what it is. There’s no previous saving. There’s no previous earning. It is access. And that is alchemical, OK? And that is contested terrain. Everyone wants this. OK, in particular, the state
wants it and in times of war grabs it and takes it
entirely onto its own control. And that’s what I’m
showing you here, the state issuing a T-bill
to the private banking system and getting money
for using it to buy war goods to beat the war. This, in fact, is mainly how
the Civil War was financed. OK, the greenbacks
came in at the end when the banking
system said, you’ve screwed us in too many times. We’re not going to
do this anymore. OK, that’s when the state
issued the greenbacks. But most wars are financed
through issuing bonds. If you can’t issue
bonds, borrowing from banks in this
particular way where you’re expanding the
balance sheet on both sides and then maybe contracting
back at the end of the war. At the end of the war, the
private sector takes over. And then so I’m just showing. These are ideal types here
where the private sector is using the banking
system basically for economic development,
for capital development, for investment, and so forth. So the private
sector wants this. And the state sector wants this. This is a hybrid system. And so I’m showing you
two pieces of this hybrid. Of course, it’s also true
that within the state sector, all little bits of
the state sector want this, and all little
bits of the private sector. The households want this. The businesses want this. Everyone wants access to
this alchemical quality. And so how does this
all get resolved? And who gets access? It has consequences. This is the third bullet point,
that spending creates income, creates wealth, creates
development, or it doesn’t. So there are social
consequences of who gets it. It’s not just
about distribution. OK, it is about
distribution, but it’s also about macroeconomics. It’s about it’s about growth. So here’s the second
analytical point. Sometimes this talk
about the ability to just create
something from nothing makes it seem as if
this alchemy is actually turning lead into gold,
that it’s a free lunch, OK? And well, let’s unpack that. OK, in some ways, it
could be a free lunch but in some ways not. What is the issue here? The issue is whether
this new money that is issued in order to enable
me to buy my little apartment stays in circulation or not. OK, that is to say,
when I spend it, what does the person
who gets it do with it? And does it go out
of circulation, which is what I call credit funding? And I’m showing one
thing that could happen is that that deposit, he
uses that deposit to buy a mortgage-backed security. In which case, the bank that
expanded its balance sheet just contracts its balance
sheet back down again. And we’re right back where
we started with a greater amount of credit in
the system but no more money in the system. Or maybe society
wants this money. Maybe something
about this spending happened to create income,
and therefore, greater demand for money. And so there’s a
permanent increase in the amount of money. So there’s another
contestation here. Whose borrowing is
funded with money issue? And who has to
bid for the funds? Who has to pay an
interest in order to get– whose borrowing
is funded by issue of money which therefore might
conceivably be lower rate? And whose is not? Of course, in wartime, the
government controls all of this and controls all the interest
rates but in peacetime not so. It’s another place where
there’s contested terrain, where there’s politics. Just to be clear, when
I say contested terrain, that’s what I mean. This is about private versus
public, war versus peace. And so now we can understand
this crisis of legitimacy a little bit more. What I’m showing in the top
line in this balance sheet is the shadow banking system, a
structured investment vehicle. What is shadow banking? I define it as
money market funding of capital market lending. And you can see that in the
top of the balance sheet. The money market funding
is over in the right here. The deposits of the
money market mutual fund are funding, through
asset-backed commercial paper, the holding of a
mortgage-backed security. OK, this is how
shadow banking works. There are lots of varieties
of this, but this is the idea. All this stuff came to
an end when the sieves were unable to
roll their funding, this asset-backed
commercial paper. And eventually, what happened
is that all of this stuff wound up on the balance
sheet of the Fed, which I’m showing you there,
the central bank, which is doing money market funding
of capital market lending. It’s issuing reserves
to finance its holding of mortgage-backed securities. OK, there are three
dimensions of this dealer of last resort aspect. One is, in the process,
it’s solving the liquidity problem of the money
market mutual fund, which there may be run on it. And there were runs
on some of these. It’s solving the liquidity
problem of the sieve. It’s solving the problem of
the funding of these things. It’s ultimately buying these. So there’s three levels
in the market system at which the central
bank is intervening. And in doing so, it
sort of saved the bacon of the financial system, OK? It put a floor on the
financial equilibrium. But it created a big
political disequilibrium. As I say, this is
contested terrain. And this little
piece of action here is the most contested
terrain that there is. And this action was taken
without asking anybody. OK, not exactly
right, the Fed was extremely reluctant to do this. I think this is
important to say. They knew there was
hell to pay here. And they said, we are able
to do anything we want under exigent circumstances. So they waited until they
could say, you know what? Exigent circumstance, OK, we
will pull out our trump card, and then we will do it. As a consequence, they
had to do more than if they had acted earlier. OK, so this is another political
problem, that we’re in this fix partly because we don’t
trust the central banks. And so we say, you
can’t act until there’s exigent circumstances. As a consequence, they don’t
act until it’s too late. And now we don’t
trust them at all. So here, this is the
second to last slide. The political economy of
hybridity– the central banks are at the heart of all of this. We’ve heard a couple of
calls for democratizing the central bank. I think it’s right to view
the central bank as the very central locus of this problem. OK, but that requires
understanding exactly what is the central bank. I say the monetary
system is hybrid. I want to insist here that
the central bank is hybrid. Central banks are government
banks, certainly in wartime. OK, and they’re bankers’
banks, certainly in peacetime. But in general, they’re both. They’re hybrid institutions. They are the issuer of the
ultimate means of payment, at least domestically. And as such, they are
the ultimate arbiter of this key contested terrain. Who gets access to the
alchemy of banking? Ordinary banks do the
alchemy of banking. Let’s be clear. This isn’t something
only central banks do. But the central bank alchemy
is that of another order entirely above that. They can legitimize. They can bless all the alchemy
that the banks below them do. That’s what it means to
be a bankers’ bank or not. They can bless these
alchemy of a government that’s trying to do– or not. OK, or not– that is
enormous political decision and which is why
central banks want to hide behind technical rules. We don’t do this. We control interest rates. We do inflation targeting. OK, and that’s the veil
that allows this process to work without shooting. In a crisis, this veil
gets ripped apart. That’s what we just saw. They’re not hiding behind it. You put that on your
own balance sheet. This isn’t about–
we’re removed. We’re just controlling
the interest rate. Everyone is paying
the same interest, or there’s a credit
spread or whatever. You chose these assets. You bought these assets. You put them on
your balance sheet. It became very, very visible. So here’s my lesson. The central problem in
a hybrid monetary system is managing that hybridity. It is that it is a
hybrid system, But. It’s inconstant that it’s
not as if there’s agreement, like this is my side,
and this is your side. Everyone is saying,
here’s what I want– elasticity of credit for me,
discipline of money for you, OK? And everyone is saying that. Everyone is saying that. Private sector is saying
that to the government. Everyone is saying that. How does that thing
get arbitrated? What are the mechanisms of this? That’s a lot of what the
financial system is about is about arbitrating that. And the ultimate arbiter
is the central bank. And that’s why it’s
such a fraught problem. Today, though– and this is
the last point I’ll make– we need to appreciate that
this is a global system. That same hybridity,
that same arbitration, that same elasticity
and discipline, that same contested
terrain is global. OK, and the public problems
we face are global. That global system
is what needs to be harnessed for the public
problems of today. What is the demos? Democratic medium, it’s an
international demos, not a national demos. And that makes our
problem a lot harder. Thank you. [APPLAUSE] [SIDE CONVERSATION] ELI COOK: So it’s truly an honor
to be here amongst colleagues and also many of my teachers. And I’m going to begin
in the most shameless way possible with a slide of my
own book, but I have a reason. Oh, boy, two computers
here is tricky. There we go. So after my book
came out last year, I was interviewed
by TheMarker, which is the Israeli equivalent of
the Financial Times or the Wall Street Journal. Tracing the origins
of our GDP-run world, my book examines
how Americans came to measure human welfare
and social success in units of money. In the book, I argue that
this pricing of progress emerged out of the
rise of capitalism, and more specifically,
the imagining of everyday life as a series
of capitalized investments. It was this capitalizing
investmentality, I contended, which eventually led
Americans to calculate the overall value of their
society in accordance to how much annual
income it could generate. During the interview,
I tried to explain to the kind yet
bewildered journalist the possible downside
of such a world view. One of the basic problems
in a capitalist society, I noted at one point,
was that resources are allocated in order to
maximize monetary gains, even though such allocation
decisions often do not reflect the best
investments for maximizing the actual well-being
and welfare of people. The day after the
interview was published, I received a
surprise phone call. It was from Israel Eliahu,
CEO of Migdal Capital Markets. Eliahu was one of those
powerful people in Israel. Migdal is the largest insurance
and financial conglomerate in the country, and Eliahu
oversees the allocation of $8 billion, mostly from
middle class Israeli pensions including my own. [LAUGHTER] Yeah, I had to play nice. Eliahu had read the
interview and wanted to meet. He asked me to
come to his office. So a few days later, I took the
elevator up to the top floor of– you guessed it– Eliahu Tower, where I met
a 40-something year old man with white teeth and
a strong handshake. I had no idea what
I was doing there. But then Eliahu began to
talk, quite frankly, in fact. You’re right, he said. A lot of our capital is
in Warsaw shopping malls and other Eastern European
real estate assets. While they earn the best
return, such investments do very little to
improve Israeli lives. I’d like to bring some
of that money home to put it to work creating,
quote– this is his words– “real value.” But I can’t. The returns would be lower. I’d be reneging on
my fiduciary duty. And my investors would
leave for competitors. Yes, I nodded. This is how capitalism
usually works. But then Eliahu smiled. He went on to tell me
a very elaborate plan he had begun to put into
motion with the help of some rich and
powerful friends in the public and
private sector. The Israeli government would
set certain quantifiable social goals such as
cutting traffic jams, decreasing Arab unemployment,
or reducing stress levels. They would then link
these benchmarks to monetary payments. For every tenth of a percentage
point a for-profit company reduced Arab unemployment
or Tel Aviv traffic, the government would pay said
company a hefty sum of money. Eliahu ended by noting that
if the government did this, he could shift a
good deal of capital to these local for-profit
companies, thus not only earning a healthy
return for investors but also making Israel
a better place to live. When I asked him how the
government would determine these social benchmarks,
he mumbled something about professional economists,
and quote, “people like you.” [LAUGHTER] I don’t think he knew who I was. [LAUGHTER] Nothing ever came
of this meeting. In my eyes, behind Eliahu’s
seemingly benevolent concerns lay convenient, and
as Quinn can tell us, almost textbook
neoliberal strategy in which a technocratic
government would foster a profit-friendly environment
for capital investors, thus essentially
funneling public spending into private pockets. But as I prepared for this
panel and I was challenged– and thank you, Martijn,
for organizing this– to think critically
about Modern Monetary Theory and the
democratizing of money, I kept recalling this meeting. It kept coming back to me. For despite his clear financial
interest and utter disregard for democratic processes,
Eliahu was doing something that I do not think has received
enough attention from the MMT crowd. He was questioning the very
link between value and money and then imagining a
state apparatus that could better align the two. Eliahu, of course,
is not alone today in distinguishing money values
from, quote, “real values.” Many of us humans
of late capitalism have a nagging sensation
that market prices do not do a very good job reflecting
value or our values. Health care is too expensive. Coal is too cheap. Nurses are too poor. Hedge fund managers
are too rich. And to be clear, this is not
just a private sector problem. Here is a map of
the highest paid public officials in every
state in the United States. It’s football and
basketball coaches. I am an historian of
American capitalism. I am not an expert
on money or MMT. Yet from my novice
viewpoint, it appears to me that until now, mainstream
MMT has had relatively little to say about how we
could democratize not only the
creation of currency but the very valuation
mechanisms through which this made money, once
injected into society, is allocated, divided,
spent, and distributed. This is a shame, because
I think MMT supplies us with exciting new
opportunities to rethink the very essence of value and
its relationship to money. Through a very brief
history of economic theories of value these past
150 years or so, I’ll try and quickly develop
a historical perspective to frame MMT as a potential
path down a new more egalitarian and democratic
form of economic valuation, one in which prices
are determined not only by objective labor or
subjective desire but rather the one person, one
vote will of the people. For most of human
history, people did not think that prices were
a particularly useful measure of social value. William Petty, father
of political arithmetic, was echoing what
much of mankind had assumed for millennia when he
noted in the mid-17th century that market prices were,
quote, “often accidental, casual, extrinsic,”
and quote, “according to the bargains which a few
men make one with another through ignorance, haste,
false suggestion, or else in their passion or drink.” Yet it was the same
Petty who would then go on to initiate an
intellectual shift that would challenge humanity’s
skeptical approach to money’s evaluative powers. Desperate to employ his
political arithmetic in order to empirically measure the
economy through, quote, “number, weight, and
measure,” Petty tried to invent other units of value. But it was too cumbersome. Prices, on the other hand, were
popping up nearly everywhere by this early modern era. If only Petty could use money as
his measure of objective value, he could really begin
to advance his Baconian agenda into the economic realm. At last, the temptation
got the best of him. In a groundbreaking
article in 1662, Petty told one of the
first modern stories– today, it would probably
be called a model– linking money to value. In describing how
bushels of English wheat could be equated to coins
of South American silver through the labor time and cost
it took to respectively grow and mine each, Petty
created the labor theory of value, which would
remain at the cornerstone of Western economic thought
until the late-19th century. The labor theory of value
has had its benefits. Ironically, because
it was invented in an era when laborers
were not democratic citizens or seen as a major
political threat, most classical economists
from Petty to Smith to Ricardo were refreshingly
honest about the belief that labor created value. Yet not all of that value flowed
to the laborers themselves, but rather much of it
ended up in the hands of those who owned the
means of production, be they capitalists,
entrepreneurs, or [INAUDIBLE].. By claiming that
the value of goods was based on the objective
labor that went into them and that profits and rents
flowed from this labor fund in accordance to
institutional arrangements and property rights, the
labor theory of value could, by the mid-19th
century, be easily co-opted by the rising mass of
proletariat workers and reframed in
poignant class terms as damning evidence of
capitalist exploitation. But while the labor theory was
useful in politicizing value, it usually did not lead to
a democratizing of value. At its core, it was
not the principle that value should be
collectively determined by egalitarian institutions
and democratic processes but rather that
it was objectively set by the physical
or mental labor activities of individuals. This individualization
of value– and we must remember that
the labor theory of value was born as a liberal
invention, not a socialist one– was often used to
legitimize private property, European colonialism, and
the general status quo. Even today, at the very core of
neoclassical labor economics, lies essentially a labor theory
of value reframed as the law of marginal productivity. According to this law,
each worker’s wages is determined by
their productivity. As such, everybody
earns what they deserve. Everybody’s net worth is
also their self-worth. Socialists, of course,
tried to get over the individualized nature
of this labor theory. They recognized that commodities
were social creations, and it was almost impossible to
segregate one’s congealed labor efforts from another. But while Marx and
his followers would attempt to solve these
liberal contradictions with complex, abstract notions
of average socially necessary labor time, my sense is that
the labor theory of value often works best as
a political tool, and hence its long
lasting popularity in non-socialist
America, by telling workers that economic justice
meant that they would receive, a full return of their
own individual efforts. Finally, as the rise of Soviet
Russia and Chinese communism makes all too plain,
the objective, intrinsic, and positivist nature
of the labor theory of value made it most compatible
with top-down forms of high modernist, bureaucratic
control, and totalitarian governance, which
did not believe that valuation processes should
be determined democratically. For an assortment
of reasons, which include everything
from the Paris Commune to the rise of consumer culture,
by the late-19th century, most liberal economists
abandoned the objective labor theory of value for a subjective
theory of marginal utility. These neoclassical
economists began to tell a new story in order
to link value and price. Here is Stanley
Jevons, one of the– oh, I forgot to show
you William Petty. Here is William Petty. Here is Stanley Jevons, one
of the fathers of the 1870s marginal revolution and
quite a wonderful storyteller in his own right. Quote, “we can no more
know nor measure gravity in its own nature than
we can measure a feeling. But just as we measure
gravity by its effects in the motion of
a pendulum, so we may estimate the equality
or inequality of feelings by the decisions
of the human mind. The will is our pendulum,
and its oscillations are minutely registered in the
price lists of the markets.” I would argue that Jevons’ story
remains the dominant narrative of our times. Inherent in this story
is the powerful notion that prices, thanks to
the wonders of the market, simply reflect all the wants
and desires of humanity. As Gregory Mankiw
argued– the second time he’s mentioned today. As Gregory Mankiw argued
only a few years ago in his article, quote,
“Defending the 1%,” “if some people are
rich, it is mostly because they provided
others with the things that they desired.” Mankiw and others can make such
arguments because economists since Jevons usually refuse to
unpack, let alone even measure, the very unit of
utility they created. Subjective desire in their hands
remains an exogenous black box, and the historical conditions,
coercive practices, power asymmetries, or
cultural institutions which shape consumer choice
are marginalized completely. All one needs to
do, as Jevons taught us, is glean human will
from, quote, “the price lists of the market.” Unlike the labor
theory of value, which at least politicized
the distribution of money, the utility theory depoliticized
valuation almost completely by shifting the realm
of free will and choice away from political
democracy and voting and towards market
consumption and exchange. Nowhere is this shift more
telling than in the emergence of the term dollar votes,
which, while less popular now than it was, was often used
by 20th century economists– Samuelson uses it a
lot in his textbook. He actually critiques
it, following the rise of neoclassical economics. According to this worldview,
since the market reflects the voluntary wants and
desires of everyone, there really is no need for
a robust one person, one vote democracy, as it
would probably only get in the way of the far
more efficient valuation abilities of the free market. There are, of course, many, many
problems with such a worldview. But perhaps the most
galling is the fact that, quote, “voting
with your wallet” assumes an egalitarian system,
when in fact, the market is anything but. Warren Buffett would
get 84.8 billion votes. The median African-American
family in Boston would get eight. So what was the point
of this World War tour of 350 years of value theory? It was to take a step back and
offer a bird’s eye perspective that shows how we human beings
have never really come up with a monetary approach
which places egalitarian one person, one vote democracy and
not objective labor or market selectivity at the center of
our evaluation techniques. By reminding us the money
is always political, legal, and social, MMT can serve
as a jumping off point towards a democratic
theory of value. But to do this, we must
not limit our analysis to the making of money or
controlling its supply. A democracy theory
of value, of course, is entirely unprecedented. Every time Congress votes
for another corn subsidy or regressive tax cut or
Big Pharma monopoly power, it’s altering market
valuation mechanisms through political, if not
ideally democratic, means. The goal of this talk has
been to use the longue durée to reframe our very conception
of value so it does not merely passively reflect the sweat
of our individual brow or the dollar votes in our
wallet but rather serve as a living, breathing, and
ever-changing political animal that we must invent,
debate, and eventually vote over again and again and again. Since supply and demand that
set prices is always political, let’s also make it democratic. In our current digital world
where nearly every citizen has a smartphone in his pocket,
I don’t think local, state, or even federal apps for
ranking preferences or answering monthly referendums
is necessarily a bureaucratic impossibility
as it once often was. And finally, I’ll
end by just saying that the other goal
of this talk has been to suggest that we
need to go further than just money as a democratic medium. In a capitalist society, as
Israel Eliahu understood all too well, money does not only
serve as a medium, a means to an end. It often is transformed
into capital, at which point money and its
accumulation become the ultimate goal of capitalist
society, an end in itself. By democratizing not
only the making of money but its relationship to our
human needs, collective goals, and social values, perhaps we
can democratize not only money but capital and capitalism. Thank you. [APPLAUSE] [SIDE CONVERSATION] QUINN SLOBODIAN:
Thanks, everybody, for coming and to
Martijn for organizing this very interesting
panel and to Christine for this extraordinary
conference. I’m going to be talking today
about a particularly acute case of central bank illegitimacy
in the eyes of what Stefan Eich sort of gestured
to today in the opening panel, which is the emergence
of these sort of parties of the crisis, parties that
have capitalized on the way that the 2008 financial
crisis was resolved. In this case, it’s
the Alternative for Germany Party, or the AfD. Being neither a sociologist
nor a theorist of money, I’ll respond to the
theme of our panel as a contemporary historian,
introducing some material from my current research
on the exit fantasies and capitalist futures of
the trans-Atlantic far right. While the proposal of the
conference and the chartalism and neo-chartalism
discussed in it concentrates on the idea of money
as a state creation, I’ll be looking at
the staunch opponents of this idea in
adherence to metallism, people who see
themselves quite self consciously in the
tradition of Carl Menger and Ludwig von Mises against
Georg Friedrich Knapp. Christine Desan has
written that making money is a governance project. And I want to ask. What does it look like when
unmaking money is a governance project? And what effect does
it have on democracy? The case I’ll introduce today
as the Alternative for Germany Party, better known as the
AfD, which currently holds just under 13% of the seats
in the German Bundestag is currently polling
at around 15%, dead even with the
Social Democratic Party, or the SPD, which
until recently was one of the two mass
parties of Volksparteien alongside the
Christian Democrats. Given the response of the
party to recent episodes of vigilante violence
against people of color, the media focus on the AfD’s
Islamophobic and anti-migrant rhetoric is understandable. Yet it is worth remembering
that the original alternative to which they were referring
was not an alternative to non-white migration,
as it effectively has become come to function
now, but an alternative to the euro as the
German national currency. As many will know,
the AfD was founded in 2013, led by economics
professors in protest against what they
saw as Merkel’s mishandling of the euro crisis. The conventional way of
understanding the party nowadays, understanding the
superficially curious hybrid of monetary and cultural
issues that defines the AfD is to talk of a, quote, “right,”
and a, quote, “liberal wing” of the AfD. It is mocked in this
float at Cologne Carnival earlier this year. Many critics argued that
liberal wing has withered away to be dwarfed by the
brown neo-fascist wing, especially as some of the
founding economic-minded members of the party have left
and started a splinter party. What I’ll argue today, though,
is that this bifurcation is a false one. There is, in fact, a
coherent philosophy within the AfD that unites
moral and monetary issues. It revolves around an appeal not
to the deutschmark but to gold. In the writings of
key AfD thinkers, gold offers not just a more
reliable store of value but the very filament of
cultural and social order. As longtime member of
the AfD’s federal board and professional opera
singer, Dirk Driesang, put it in 2014, quote, “the
fatal effects of fundamentally fake money, falschgeld–”
which is an important category for them, “on our
society and politics, our family and our
values, are destructive, and they undermine
the fundamentals of our civilization as well
as our Western culture,” end quote. The AfD, I contend, has cannily
tapped into not only rising anti-immigrant sentiment but
the decline in German confidence in paper assets in an era
of financial crisis and zero interest rates. The German response
in a flight to gold is best expressed in
the extraordinary fact that, since 2008, private German
gold holdings went from quote, “barely registering
on anyone’s radar,” in the words of one
Forbes reporter to being the largest in the
world, surpassing the longtime champion of India. Riding this golden wave
has allowed the AfD to mainstream a right-wing
libertarian philosophy cultivated in the fringy world
of LewRockwell.com, the Ludwig von Mises Institute,
and gold bug online forums, a
world, as we’ll see, that at least two
key AfD members emerged directly out of. By focusing on gold as an
anti-democratic medium, we can understand how
the AfD is carrying out a project more subtle and
actually perhaps more radical than a simple entrenchment
of national borders coupled with a defiant
nativist pro-natalism. The destination at least
of some of their thinkers is not a return to the
pre-Maastricht deutschmark patriotism but to go
through the deutschmark back to a foundation
in gold itself. To hazard a neologism from
the Greek prefix for gold, we could call what some AfD
promote an oro-patriotism a national feeling
whose referent is not this or that territory,
ethnos, or language, but whichever monetary
system backs its currency with the precious
metal that they perceive to be the natural
currency of modern humanity. It’s a peripatetic patriotism,
alighting where it is safe and fleeing when
it is in danger. The central act
of oro-patriotism is the sale of paper
assets for gold, an act that Bundestag delegate
for the AfD and current chair of its budget committee, Peter
Boehringer, calls, quote, “the sit-down strike and
Gandhian hunger strike of our generation.” It is only through
such acts, Boehringer argues, that the AfD
and its followers can defend what he
calls the, quote, “paper money totalitarians
of modern central banks.” In other words,
the true opponents of the AfD’s most imaginative,
and in a way, their most vanguard ideologues is
not the itinerant migrant or the refugee who they see
as only a symptom of a larger problem, in fact, a
manufactured crisis by big finance and George
Soros and people like that. These are the things
they argue themselves. Rather their enemy is
captured best in this image that Peter Boehringer–
again, AfD Bundestag member, chair of the Bundestag
Budget Committee– posted to his own blog
showing Karl Marx superimposed over the city of Frankfurt–
of course, the seat of the European Central Bank. To the AfD oro-patriots,
fractional reserve banking and fiat money is a
structure built on sand, designed to accelerate the
purchase of political goodwill and thus political power. Falschgeld, or fake
money, is cloaked in a fake morality of social
justice, multiculturalism, diversity, and gender ideology. This is all part
of a regime of what they call monetary socialism,
or geldsozialismus, that began with the
breakdown of Bretton Woods– Nixon is actually the real
villain here in 1971– and rose ascendant
in the European Union after the fall of
the Soviet bloc. The belief in metal
morality is also a belief in the metal view of history. Among the followers
of Mises, the idea that, quote, “the
purchasing power of money can be traced back through time
to its origins and the value attached to the commodity
and its premonetary uses is known as his regression
theorem,” quote, unquote. For right wing gold
bugs like Boehringer, it becomes a regression
program, a mandate to walk back institutions
to a pre-state stage. In other words, there
is an acceptance that fiat money is
a democratic medium, and it is for that very
reason that it must be undone. The first act of this
story comes in late 2014 after the AfD won seven
of Germany’s 96 seats in the European Parliament. To collect party financing
from the German state, the law required that the AfD
first earn its own revenue in matching funds. This was traditionally
done through party member contributions, but the
AfD discovered a loophole. The revenue did not have to come
from donations or party dues. It could also just
come through sales. So they opened an
online gold shop. AUDIENCE: Wow. QUINN SLOBODIAN: Under
the slogan roughly translating as “the AfD is
worth its weight in gold,” the shops sold bars
and coins including the Deutschemark, which was
reportedly the best seller. But also four of eight
of their offerings was the South
African Krugerrand. The gold was sold at a slightly
inflated price, meaning that the party
profited from that, but also, more
importantly, the revenue allowed them to collect
matching funds and financing from the federal state. Demand for gold was
actually much greater than they expected. And party leaders
reported having to suspend political activity
altogether for some time just to operate the gold shop. [LAUGHTER] The speaker for the AfD
probably told a reporter, quote, “we are the only
party headquarters which is also a profit center.” The material effect
of the sales was also significant for a party
with a small donor base. They ended up making 2
million euros in 2014 and 2015 before the law was changed. Yet even more interesting, I
would say, is the symbolism. Libertarians selling
gold is an old grift that I can talk
about more and Q&A. But suffice to say
that it thrives by selling suspicion
of the state and of the stability of the
democratic state in particular. The AfD openly use the rhetoric
of suspicion in their pitch, even as their leaders
predicted the imminent collapse of the euro on the
campaign trail. After noting the
zero interest rates, the AfD gold shop’s own
website noted that, quote, “gold is fundamentally a product
that many citizens perceive as a form of investment
that is crisis-proof and future-oriented.” They were quite direct. Quote, “participation
in the gold trade offers us the opportunity to
provide a service to citizens, to point out the undesirable
developments of the euro, to attract media attention,
and to increase our revenue through a very
specific AfD service rather than
attracting stakeholder funds like other parties.” Amazingly, the
party financing law designed to encourage buy in
to the competition of parties within the democratic process
was now enabling citizens to purchase exit from the
democratic state-managed monetary system itself. Party sympathy was
not being expressed through the donation of
value but the promise of a future value. Party identification was
transmitted quite literally into a speculation
in precious metals. Gold bars autographed
by the party’s leaders were sold at the party
congress in 2015. The AfD gold shop
suggested somewhat obliquely that the
purchase of gold could work to
discipline the state, but this was much more
open in the writings of Boehringer, the AfD delegate
I mentioned a moment ago. Born in Munich in
1969, Boehringer holds degrees in both
business and communications. I have some more details
about his life, which I won’t have time to share. But suffice to say, he’s a
classic gold bug, invades against the US Fed, a.k.a. “the
creature from Jekyll Island,” and warns that, quote,
“the unbacked paper money system is, in a literal sense,
the tinder that will set the world on fire,” end quote. Where he showed the flair
for public relations and I would say a set for the
zeitgeist was in a campaign he launched in April 2015 called
Repatriate Our Gold, [GERMAN].. For reasons I don’t have
time to explain here, most of Germany’s– which
probably many of you know, most of Germany’s gold
reserves since 1945 were held in the Fed’s vaults
on Wall Street. And there was actually
no sign of this changing until Boehringer’s
campaign, which ended up putting a lot of pressure on
the Bundesbank, which indeed brought back a good portion of
the gold in the last few years. Copycat gold
repatriation campaigns have kicked off since in
Switzerland, Austria, Holland, and in France, where it has led,
quite tellingly, by Marine Le Pen. So there was an attempt
to sort of create a public display of
the gold about which I had some words
here, but it looks like I don’t have enough time. What I wanted to
say was that what Boehringer’s oro-patriotism
presents to us is that, although
the AfD rejects the slogan of open
borders, they offer, by definition, an ideology
of open borders for gold. The nation as they see it
nests within a golden globe where precious
metals flow freely. Far from rejecting
globalization, their vision deepens
it, subjecting the actions of the state
to the continual audit of asset holders with
the ability to move. The so-called populism, in
other words, of the German far right is also a
monetary extremism reliant on exits from the
democratic control of money and appealing to a
neo-naturalism that places culture, morality, and
currency within a single frame. When asked in 2013 how he
envisioned Germany in 10 years, Boehringer said,
quote, “a country economically and
culturally degraded by euro debts and decades of
brainwashing and a fake money system but which will
still have a chance after systemic change.” In other articles, he
encourages physical fitness and the storing of fresh
water and non-perishable goods as a way to prepare for the
coming collapse, all the while acting as a precious
metals consultant, which he continues to do as a
member of the Bundestag. So the costs and casualties
of this systemic change, should they manage to
tap into deep reservoirs and currents of economic anxiety
in Germany, remain to be seen. I’ll leave it with that. Thanks. [APPLAUSE] [SIDE CONVERSATION] ANTARA HALDAR: OK,
good afternoon. I’d like to begin by thanking
Martijn for putting this very imaginative panel together
and thanking Christine for this incredible conference. It’s really been
an embarrassment of intellectual riches. I don’t actually specialize
in either the study of money or chartalism. But I do look very closely
at the informal economy. So I will be reacting to
the premise of this panel, coming at it from a completely
different perspective. And with a wildly beating heart
given the keynote that we just heard, I am going
to try and make a defense for the local and
re-injecting micro-foundations into the paradigm of modern
monetary theory and chartalism. OK, so I’m going to
start with a provocation. On the 9th of November 2016, I
know that this nation woke up to a major political event. But all the way over
on the other side of the world in India, Indians
woke up to the realization that their 500 and 1,000 rupee
notes were now no longer legal tender. This was over 90% of the cash
in circulation in the country. And interestingly, the move
was led by the executive with the central bank
following suit rather than the normal sequence of events
that one would imagine. Now, this interesting case for
all of us at this conference and at this panel in
particular, because it posits a kind of relationship
between this triangulation that we’re interested
in, which is the state, the market, and
the public, right? And I could talk more about how
democratization was actually a version of the
Modi government’s amplification of
the Gujarat model, which was deeply
anti-democratic. And it was really a
reallocation, in one sense, in favor of market at
the cost of the public. There were actually
100 casualties as a result of the
move, to say nothing of the weeks and
months of suffering that were inflicted
on normal people. But I want to emphasize
something else, which is that one of the key
motivations of this move was to try and snuff out or
extinguish or at least reduce as much as possible the quantum
of the informal economy. So the argument
here is that it’s a sort of parking
place for black money and encourages corruption. But this intuition that the
informal economy is the enemy is widely shared. And this is the intuition that
I would like to interrogate. So several panels yesterday,
particularly the one on financialization
and inequality, talked about how one of the
problems with the paradigm of financialization was that
in America, for instance, it accounted for 25% of profits
but employed only 4% of labor. And the informal sector is the
exact counterpoint to this. Half of the world’s
population is employed in the informal sector. And in the aggregate
globally, the informal sector accounts– it is estimated
to be worth something in the range of $10 trillion. This places it third
to the US and China and significantly
ahead of the net GDP of countries like India. So why is it that despite
vast amounts of research on the resourcefulness
and the enterprise and the innovation of what
is referred to as the Jugaad economy, or
extensive chronicling by the Peruvian economist
Hernando de Soto, who ends up pivoting on informality
that the informal economy, is actually a living,
breathing testament to the resilience of the human
spirit in an economic context? Why is it that we vilify it? All the way from
Max Weber to sort of doing business indicators,
the mysticism and magic– it’s like a series of montages
from Scorsese and Tarantino films, this seedy,
murky area where– and there is a lot of
seedy and murky things that go on in that
realm, but a lot of it is just robust
counterfeiting of software and pirating of DVDs
and so on and so forth. But the intuition that I
really wanted to unpack here is that what makes it? What throws this bright line
around the formal and informal? It’s actually my core
discipline, which is law. There is nothing natural
or organic about it. The same thing that fed
and fed the monster that is the financial sector
and fattened it up to its obese
proportions is exactly the thing that is keeping
the informal sector marginal. And this brings
me to chartalism. So I’m going to
mix metaphors here. And I think almost everyone
who’s referred to Chris’ work has talked about her
incredibly evocative use of the imagery of money as the
blood in the economic system. My understanding of
chartalism or a new chartalism on modern monetary
theory is that it’s saying that if you
need to inject a blood transfusion into the system
to prevent it from dying, then that is entirely justified. My point is that if that
blood transfusion goes only to some organs, if it goes
entirely to the brain, you might be able to
keep the organism alive. But it’s not going to be as
robust and holistic a kind of thriving as it might be. I particularly welcomed
the premise of this panel and the foregrounding
of the public, because there’s so
little discourse on the public in these
sort of highfalutin conversations of the monetary. But for me, when
I’m in the field, the public is alive and kicking. It’s inhabiting. The informal sector bears
testimony again to the living, breathing civic participation
and the resilience of the public. And I think that
they deserve to be sort of re-injected
into the conversation. Again, with tremendous
trepidation, I would confess
to the fact that I have spent a significant part
of my academic career studying microfinance. And despite its
many, many ills, I would argue that in one sense,
institutionally speaking, it has been a kind of
template for democratizing finance of a kind and of an
order of magnitude that we don’t have very many other
templates or prototypes for. So I assume everyone
in the room, from the very emphatic
responses to the keynote about the evils of
microfinance, know the basics. But just to sort of recap
in a very cursory fashion, it involves giving very small
loans to women, originally in rural Bangladesh and then
across the developing world and even in the developed
world, that they then are organized into these groups
and these centers to repay. And microfinance boasts that
repayment rates were higher than 90%, 95%. And at the peak
of the experiment, it boasted a borrower base
of a billion globally. OK, so what is my point here? My point here is
that I am not saying that the informal economy
is a justification for the state stepping back. The point that
I’m trying to make is that the informal economy
should be legitimated as a source of
epistemic knowledge that we can fold into
our conversations about formal finance
that can actually help us think through how we
might democratize finance. To disregard large tracts
of the global economy that are existent and
that we render invisible with our [INAUDIBLE] friends,
as the critical legal theories Boaventura de Sousa Santos
has very convincingly argued, is a kind
of epistemic racism. So the point here is
that if chartalism argues that law is actually an
amalgam of conventions, what follows from this is that these
conventions need to be embedded in local networks of trust. Which, in an institutional
way, microfinance was very effective in creating. But I think microfinance
is only the first step. There was an
extremely interesting and I think insufficiently
attended panel yesterday on complementary currencies. And we’ve been hearing
throughout the duration of this conference about
how, in historical vein, a plurality of currencies
was actually the norm. And I think microfinance
could point the way to creating a federalized
institutional structure that could be a segue to creating
a kind of financial federalism that can actually
provide for a resilience to the local economies that
currently doesn’t exist. So initiatives like
complementary currencies– and we have Susan Witt here,
who founded BerkShares. And the notes
actually have images of local heroes like Herman
Melville and Norman Rockwell. This was imitated by the
Brixton pound which has pictures of David Bowie on it actually. And what this does is that
it’s not only financially salient, but speaking
to Quinn’s point and what was fueling
these very heretical kind of populist moves that
he’s been describing, it provides a narrative
of cohesion as well to these local communities. And this is not just a
phenomenon of the dual economy and tracts of the
developing world. It speaks equally to rural parts
of Midwestern America, the Rust Belt, and to the nations
that, in a remarkable display of self-esteem, started to label
themselves the PIGS nations, in the European context. And equally, as books like
Jeremiah [INAUDIBLE] Vanishing New York attests
to, this is not even just a rural-urban phenomenon. Even within urban contexts, as
with Amazon arriving in Queens, we need to develop
institutional mechanisms that will legitimate the
broader systems and that interface in interesting
ways with the global system but are embedded and
have roots and legs in the sort of micro-economy. So to end, I share
the preoccupation of the chartalists and
the neo-chartalists of this grotesque phenomenon
of the kind of economy that we live in when
Monopoly money is real, and human beings have been
reduced to pawns or chess men in that game. And I laud the contributions
of my co-panelists who have stressed
how complex, tiered, and hybrid the
nature of money is. Perry’s talked very
eloquently about how it’s both public and private. I would argue that
it needs to be both local and global as well. So Dewey’s concern
with putting the public at the center of the discourse
I think is absolutely right. But I think a
plurality of publics can be our friend rather
than our enemy going forward, if we’re truly committed to the
idea of democratizing money. Thank you. [APPLAUSE] MARTIJN KONINGS: OK,
questions, comments? So you first. AUDIENCE: Thanks. So thanks, folks,
[INAUDIBLE] very diverse observations on
[INAUDIBLE] very. So I liked the way
that you formulated the poor political economy
questions [INAUDIBLE].. And then it’s who gets
access to the [INAUDIBLE].. So while I agree that money
is always public and private, we have a choice to make
with respect to the bounds of this access [INAUDIBLE]. In other words, who do
you give the backstop to for accepting one
bank [INAUDIBLE]?? Because accepting
one bank [INAUDIBLE] is a risky business. So if we don’t give
the backstop to anyone, there aren’t that many
[INAUDIBLE] to do it. But the more people we give
the backstop to, or [INAUDIBLE] appears, to the [INAUDIBLE] both
the more growth we might get. That’s the positive
that we hope for, but also the more
bubbles we might get. [INAUDIBLE] So I wonder whether
there is anything in principle that we can say about where
to find the optimum about how broadly we cast the
net [INAUDIBLE] access to this backstop. MARTIJN KONINGS: OK, let’s
just take a few questions at the same time. AUDIENCE: Well, thanks
so much– great panel. Yeah, I wanted to just
build on the last question and reflecting on the fact that
[INAUDIBLE].. in the space right now, as in where we’re
drawing that line. And indeed, credit
systems are hybrid. But the degree of hybridity
or the nature of hybridity is, in a sense, up for grabs. And that changes the whole
world of space and time. In India, we have 70% of
the banks are nationalized. And even though
30% is [INAUDIBLE],, there’s balance between
elements of hybrid shifts. And it’s embedded
in a kind of broader political sentiment [INAUDIBLE] One way in which it
shifts, during war time, that’s obviously, in a
sense, a limiting case. What’s more often the
case is a class war. And there has been a class war,
especially in this country. And there has been a
trench warfare played out in the terms of [INAUDIBLE]
of kind of a [INAUDIBLE] credit systems. And that’s shifted this
line in the kind of sector in rejection of the private. And we need to– part of the
question as economists I think is precisely where we
want to draw that line. And I think [INAUDIBLE] a
very fine accomplishment is precisely in that space. Where do you draw the
line between the money interest and the public
interest again, right? And this comes back to
something that [INAUDIBLE].. How does something
become [INAUDIBLE]?? What is that process by which
that draw of that line happens? And of course, its
acceptance as far as [INAUDIBLE] and
[INAUDIBLE] the Fed accepted certain
[INAUDIBLE] liabilities. But acceptance isn’t
[INAUDIBLE],, not just economic. And in a sense, is
it the case that, if central banking– and
I think that’s a nice way of framing it. And here’s my question. If central banking is about
managing the contradiction [INAUDIBLE],, if we change
the nature of that hybridity, does it make those
contradictions easier to manage? Do we draw down some
of the sharpness of those contradictions
to make it very concrete? If the system is more
private, acceptance of those private [INAUDIBLE]
by the public [INAUDIBLE] becomes more contested. And that is, in a sense,
what is constraining the Fed to act
late, and therefore, act more costly [INAUDIBLE]. So if the line is drawn
in a different place, the Fed can act earlier,
and therefore, I think, in a less costly [INAUDIBLE]. MARTIJN KONINGS: OK, let’s take
two more questions– one at the back there. AUDIENCE: [INAUDIBLE]
the emphasis on hybridities [INAUDIBLE]
the essential nature of money. But then I would ask. Why do we even need a line? So if money is
essentially public, why is there so much division
between public and private? And is that really where
the problem starts? MARTIJN KONINGS: [INAUDIBLE] AUDIENCE: So I just wanted
to do some ground clearing and see if we have
common space here. Three points to make– the
first is that since Seneca and Aristotle, many individuals
have recognized that public authority, most effectively,
has the most power to define the
[INAUDIBLE] in which private credit is generally– AUDIENCE: Christine, I’m sorry. Could you stand up please? AUDIENCE: Yeah. So I’m just trying to find
common space or a clearing ground. So what I said was basically
since Seneca and Aristotle, many commentators have
said the most effective– the agent most capable to
create [INAUDIBLE] accounts is public authority. And private credit is
written in that [INAUDIBLE].. So this does not reduce to MMT. That is, attacking the position
that public authority creates money by attacking
MMT strikes me as a kind of
rhetorical [INAUDIBLE],, so just to clear the ground. And MMT is a particular
post-Keynesian project. I respect it very highly. It’s not my project. But it’s a very
respectable project. And they want to
use the fiscal base, our recognition of
the fiscal base, as a way to open
up policy space. That seems fine [INAUDIBLE]. So I’m wondering
if we can basically hear the vocabulary,
not [INAUDIBLE] everything in particular
post-Keynesian. The second point is really
a question about hybridity. And this is to
Martijn and Perry. When you speak about hybridity
as a base banked logic, that makes sense to me. That’s what I wrote a
book about, which really saying that one way
to define capitalism, the way that I
define capitalism, is a move towards a central
banking commercial bank hybridity. Other worlds haven’t had
that kind of hybridity. So it seems to me that
what we want to do is look at different money
designs and different aspects. They’re not all reduce
to the same one. I happen to think that
transformation is huge– world-changing [INAUDIBLE]. But England, minting
and free minting, was not our system in
18th century America, no banks, no private banks. So my third point, and
so this is really– do we agree on
these three points? I suspect that we do, but
we should get it clear. Third point is, in these other
worlds, in the English world that I studied– and
18th century America I’ve also studied. And possibly in every political
community that’s monetized, there is a large private
demand for money. That’s not the same
thing as private money. But there’s a large
private demand for money so that in each of
these worlds, you see ways that base money
often, as far as I know, produced for public
activity, whether it’s war or building roads, it
doesn’t disappear in peacetime. It’s 3% of GDP, as someone said. This kind of activity that
[INAUDIBLE] base money doesn’t generate enough
[INAUDIBLE] monetary payments– let’s put it that way– literally to irrigate
the private exchange that could occur in this thing
that we [INAUDIBLE].. That private demand,
if that’s the hybridity that we’re talking
about, we can [INAUDIBLE] place that I’ve
looked at [INAUDIBLE].. It’s not that the banking system
is particular is necessary. It’s that we see
societies create something that aligns
for private activity time and again. And they do so in
many different ways. So the question is, do
we agree on these things? And can we move
forward respecting people’s different
political positions but agreeing on
some common terms. MARTIJN KONINGS: Let’s
start from that end and then work this way. ANTARA HALDAR: It might make
more sense to start with Perry, given the research
questions were directed. QUINN SLOBODIAN: Well, I
did mention MMT in mine so obviously I’m off the hook. [INTERPOSING VOICES] PERRY MEHRLING: Well, I
don’t know that I was– I’m not sure. I didn’t particularly
mean to be attacking MMT. I see MMT as Tucker. These are symptoms of
the moment we’re in, that we’re anxious about
our monetary system, about who’s running it. And what I observed in that
slide where MMT was mentioned– I think the only slide in
which MMT was mentioned– is that a lot of these
anxieties are showing up as a demand
for a repossessing the sovereign right of money
or something like that. Let’s get rid of private money. That’s the answer is
no more hybridity, only sovereign money. And I think that’s a mistake. And it’s a political
mistake I think also, as well as just
a category error. Let me take– I’m better at these
specific questions, I guess. I think the first question
and the second one, how exactly what– that’s fair. If this is contested
terrain and we have to manage
hybridity, first of all, I want to say it
is being managed. OK, when you look
at the collateral rules of the central
bank, this is about which of the existing financial
assets out there have privileged access to the
discount window, for example. So that is a way of managing it. And there’s a lot of pushing
and pulling about that. I want my debts
to be there, or I want to have a facility
in the private sector where I can swap my debt for
something that I can pledge. And so there’s a
lot of activity that is about creating
collateral that is acceptable at the central
bank when you look behind. And some of that is legal
work and creating businesses. And it’s very
interesting in the crisis to see in the different
countries what happened to their central banks. OK, look at what happened to– what are the assets that
showed up on the central bank’s balance sheet? They’re mortgage-backed
securities in the United States. What about Europe? OK, sovereign
bonds, in Europe, we justified the QE Project as
part of the European project. It was OK to take all
these sovereign bonds, because that was a way of
keeping Europe together. OK, so the politics of it played
out in a very different way. It’s OK to put
mortgage-backed securities in the balance sheet in the US. Why? Because we believe
in homeownership. This is American apple pie. I don’t know that you
could have gotten away with that in Europe,
and I don’t think you could have gotten
away in the United States with putting a bunch
of municipal bonds on the balance sheet
of the central bank. So it’s going to be different. It’s going to
reflect the politics of the particular location. I’m just drawing attention to
it and saying QE is not QE. It looks precisely at
what exactly is happening and why that is legitimate,
or at least more legitimate than something else, that
it has to be legitimated in order for this to happen. And so it’s particular assets. And there’s asset swaps that
are happening behind the scenes to make sure that the ones
that are in the balance sheet of the central
banks are the ones that are politically acceptable. Now, it still remains
the question of– so I’m saying it is being done. But the first question
takes my point that it is just not
logically possible to give everyone access
to the alchemy of banking, that there are debts,
but the debts are repaid. And if they’re not all repaid,
the whole thing just collapses. So there is a management. There’s elasticity, and
there’s discipline both. And the question is,
who gets elasticity, and who gets discipline? Or when are we leaning
towards elasticity, and when are we leaning
toward discipline? That’s what I mean
by managing as well. And that involves allocation
of credit quantities but also of who gets it. I would draw attention
here to something that I didn’t– it’s on the slides, but
I didn’t really talk about it, which is one of the ways
that asset pricing, prices, the way that it gets
decided who gets there– portfolio equilibrium
is achieved after you have this
disequilibrium of the expansion of balance sheets– is
by changing asset prices so that certain assets
become attractive to buy and other ones are not. And so that is not only an
early warning system, watching the movement of asset
prices, but It’s also the place where
the central bank can intervene as a manager. OK, and so there’s a whole
other talk here about that. I showed you the slide that
showed that in the crisis, the central bank intervened in
the payment system, the funding system, and also capital markets
as a dealer of last resort, putting its own balance
sheet on the line. OK, in normal times, it’s the
dealer of last resort too, but it’s not putting
it on its balance sheet because these are options. And they’re outside options. And most of this is
done by private banks and private dealers. So in my other work,
I’m really emphasizing. We have to think of
the market-making role of the central
bank as backstopping the market-making role of
other agents and watch those. Those are the ones who are
doing this allocation, who are deciding. And by tightening the bounds
or moving them around, you can manipulate
what’s happening, even if you’re doing no
trading if people know that– it’s a more general
version of what I said about collateral
acceptability, that you’re creating
potential trading options in the future which
move things around today without actually
doing any trading. These are allocative decisions. But as I say, the allocative
decisions are being made now. There are mortgages
on the balance sheet of the central bank
of the United States. And there are sovereign bonds
on the balance sheet of the ECB. I should stop there. MARTIJN KONINGS:
OK, [INAUDIBLE]?? QUINN SLOBODIAN: Do you want to
just [INAUDIBLE] for a second? MARTIJN KONINGS: Yeah,
I just have a few– ELI COOK: I’m sorry. Use the microphone. MARTIJN KONINGS: Oh, sorry. So two of those questions,
especially– so going back to Seneca and Aristotle
said that public authority institutes a certain
measure, and that’s kind of where private
commerce takes off. I think that’s a
reasonable model of how– it’s a reasonable model. I just don’t think it applies
very well in the world that we have. I just think that– Yeah, more so, I
think hybridity is not some sort of universal
feature up all kinds of monies that have ever existed. I think it is a
feature of the money that we have in our current era. So in the past, it
might still have been possible to think of
different forms of money as either primarily
arising out of commerce or as having been
authorized by a sovereign or an authority external
to that process. In this era, that
is not really– those options have sort
of folded into each other. And any significant currency
is hybrid in that sense. So that brings me to like,
OK, if we agree on that, which I think we do, then my concern
is with MMT’s or chartalism’s willingness to then take a
big jump and say that money is a public commitment, because
it’s not as if all of these processes whereby, all
these hybrid processes whereby money was made,
it’s not like debt history. This is constantly still there. It needs to be
continuously activated, which is also why
these are points of intervention for
doing more interesting and progressive things. So that is my main concern. I’m not sure if that
clarifies that in any way. But I do completely
agree, for instance, that yeah, like
the fiscal base, I do agree that that
is something that needs to be put to way more
imaginative and creative use. I just don’t think we
can sustain the idea that just because the
state has a formal ability to tax its citizens
that that automatically translates into substantial
validity of the currency it issues. ELI COOK: I’ll just say
one thing very quickly. I think what came up in
now what Perry was saying and what came up
in Antara’s and was pretty much the
core of my talk is these questions of allocation. We’ve been talking a lot
about how money is created. But the next question is,
OK, now who gets what? And especially if there’s this
magic alchemy that’s limited, the question of allocation
becomes even more crucial. And I think we
know how capitalism solves problems of allocation. That’s kind of what I was
gesturing to in my talk. We know what private
banks do to allocate. They bring someone in, and they
look for the maximizing return. And I think what
I was trying to do and I think what you mentioned
in your talk about the blood in the body is I think we have
real questions to ask ourselves about providing alternative ways
of deciding about allocating. [APPLAUSE] [SIDE CONVERSATION] MARTIJN KONINGS: OK, then
we could take some more questions, if that’s OK. Yeah, right there. AUDIENCE: Just a
quick observation that might bring
something that Perry was talking about
together with something that Antara was talking about. So [INAUDIBLE] maybe
one way [INAUDIBLE] just a level of
sovereignty of encouraging a more local monetary autonomy
or local credit autonomy or [INAUDIBLE] it
might be to have the central line [INAUDIBLE]
in question simply given expression to a
preferential option to the purchase of
bond instruments that are perhaps issued
by local authorities? My understanding is this part
of what the European Investment Bank [INAUDIBLE]. And I think there are some
models for public investment banks. [INAUDIBLE] in effect
with shared local risk with [INAUDIBLE] by having a
public authority at the highest level of generality
standing ready to purchase the instruments that are
issued by [INAUDIBLE] balance. MARTIJN KONINGS:
Another question? AUDIENCE: My question is, is
it premature or extraneous to this discussion to
bring in taxation and debt? Because it seems
like it’s really hard to have a discussion
about this money creation and allocation without
bringing in– it’s sort of a three-legged
stool or a triangle. The debt and the
taxation and the money are all three sides
of the same thing, which is what the AfD is trying
to pull out of that contract. But I just wondered whether
it’s kind of a handicap not to be able to talk
about those things or if it requires
too much more time or whether that’s
not really in here. I’m not sure. MARTIJN KONINGS: OK, yeah? AUDIENCE: I have a
mini comment for Eli and a question for Quinn. So my mini comment
is just about what you said about hedge
fund banker, hedge fund people, making too much and
nurses making too little. So if you think about salary
as a way to incentivize someone to do something and reputation
as another incentive, wouldn’t you expect an
inverse relationship between how much we
respect a profession and how much somebody
makes, all else being equal? And my question for
Quinn is, do you notice any similarities and/or
differences between what you’re talking about in Germany and the
alternative crypto-currencies amid Bitcoin happening in the
United States and other places? Are they rooted in a
similar kind of distrust? MARTIJN KONINGS: OK,
last question, yeah? AUDIENCE: Sure. It feels like we’re
sort of skating around in this conversation following
[INAUDIBLE] comments is a question about
legitimacy [INAUDIBLE].. So what is legitimacy
doing in all these stories? Why should anyone
as an individual accept whatever end
of the hybridity you’re getting other
than instruction of a political legitimacy? Why should I pay my
taxes other than either I believe that the money
I gave in is somehow politically legitimate or
someone has a gun to my head? And if that’s not
how it works, then I can place that at the
center of money creation. Then the question
might be, why are we talking about legitimacy of
money, when we could just talk about the legitimacy
of [INAUDIBLE] government or fiscal policy or state
planning for investment? What does money [INAUDIBLE]. Is money just a vector, a holder
of legitimacy, and that’s it? And that’s [INAUDIBLE]. MARTIJN KONINGS: OK,
who wants to start? PERRY MEHRLING: I
think maybe I’ll just make one final
general comment, because otherwise it goes on too
long, something to take home. I think we’re living
in a Bagehot moment. Bagehot, in 1873, rose to
consciousness for everyone that the central bank was acting
as a lender of last resort, that it did this every
time there was a crisis, even though it always
said it wasn’t doing this. But it was. That was the beginning
of management, explicit management. But it was only
crisis management. But once you had a
central bank that was committed to
crisis management, it then became committed to
preventing crises or something and then ultimately to some
kind of monetary stabilization. And so we were walking
that path since 1873. I think that this
crisis showed us that our understanding of
how to manage the system is a lot more primitive
than we thought. So we know how to
put a floor under it. That’s what we did. OK, what is next? Preventing crises. What is next? Monetary stabilization. I don’t think we know
how to do these things. We heard some talk about
monetary transmission mechanism today. Well, we don’t really know. We’re finding it out. That’s where we’re at. I think it’s important
to appreciate that in terms of our
level of knowledge and technical expertise,
we’re working it out. And that’s not going to
happen in six months. It’s a 100 year project. QUINN SLOBODIAN: So yeah, on the
crypto question, good question. I mean, it’s certainly true
that in the online world, the kind of gold bugs
and the crypto people intermingle and have their
internecine disputes. Where I got into this question
was having just finished a book that [INAUDIBLE]
mentioned just now about the history of
neoliberal globalism. It ends with the WTO. The question was,
what disputes really split the neoliberal
intellectual movement after the ’90s? And I found out that
the management of money was one of them. And so you basically
have– the crypto ended up not playing such a role. On the one side,
you had the kind of hard metal, the gold
people, and then you had the kind of monetary
constitutionalists who really sincerely believe
that if the central banks worked according to
the rule and discretion was as minimal as possible
that it could work. And the ECB, they didn’t
like from the beginning because they felt
like it actually wasn’t rule-bound enough. So the crypto thing ends up,
for even the gold bug people, it ends up being kind
of a red herring. Because for the same reason that
the AfD did an active campaign against the removal
of the 500 euro bill, they worry that this
technology will just be sort of taken over by the
paper money totalitarians in a new way. The movement entirely
into a digital space doesn’t solve the problem
that as Perry pointed is as the fetish of the
real on which they’d like to imagine that
the monetary order can be sort of re-founded. ANTARA HALDAR: Yes, so just a
few quick concluding comments, I think there are many strains
to this conversation where it was struggling to pull
the strands together. But using Eli’s comments
about the allocation issue, I think that is the theme
that binds it together. And it speaks to the
legitimacy issue as well. So quick [INAUDIBLE],, going
back to my positing of the state market in public, I
think given the logic of capitalism, unless explicit
means are created of achieving the allocative and distributive
outcomes that we’re interested in and effective
institutions are put in place to do that,
it’s always going to go to the top of the pyramid. As a lawyer who studied
development reform and legal reform
in the developing world for the last
70 or 100 years, the track record tells me
that aggregating to the law is a very dangerous thing to do. So the public, in that sense,
is really where we need to look, which is why I welcomed the
premise of this panel so much. But we need to make
the political decision to give the public some
sort of power directly. The very act– this is
a very reductive take for this audience–
but the very act of having national currencies
is in and of itself a political act. Within the paradigm of
neo-classical logic, the radius of trust
and ease of exchange would be facilitated maximally
by a global currency. The fact that that has been
institutionally impossible points to certain limits in
terms of the traction and trust that these institutions
need to have to be workable. And that brings me to
my final comment, which is a link with Perry’s work. So I think we have
this intermediate state or stage of the nation
state and the central bank and monetary policy in
that case where we have some idea of what’s going on. But at the aggregate
level of the global or the kinds of
issues that Perry was pointing to
about climate change and needing to create monetary
and institutional arrangements around that, we’re a bit lost. And then again at the
level of the local, it kind of boomerangs back into
these national institutional structures not having
the kind of foundations that they need to have
sufficient resilience. And it always strikes
me as interesting how there is this similarity
between the global and the local at a
structural level. MARTIJN KONINGS: OK, we’re 20
minutes over, so [INAUDIBLE].. [LAUGHTER] Thank you very much. PERRY MEHRLING: I
think we’re done. [APPLAUSE]

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