Money as a Democratic Medium | Money, Democracy, and Morality


SCOTT FERGUSON: Well, I
think everybody is here. I’d like to welcome you all
to the Money, Democracy, and Morality breakout panel. Let me quickly do
something here on my phone. My name is Scott Ferguson. I am Associate Professor of
Humanities and Cultural Studies at the University
of South Florida. I have been charged with
moderating this panel and also serving as a kind
of commentator or discussant. I think what we will do is
start with introductions. I have decided to introduce
you all together at the top so we don’t have to
keep taking breaks, and then we’ll go in the order
of the conference schedule. Each presenter will present
for about 15 minutes. Some of the papers have
been pre-circulated. Some of you may or may not have
had a chance to look at them. You will certainly have a
chance to do so later on. Those papers are longer
than, of course, the remarks that can be offered here. And then after each presenter
presents for about 15 minutes, I’ll offer some brief thoughts
and questions to the panel, and then hopefully that will
just kind of open up a greater dialogue that we can
include you all in as we move toward the final,
let’s say, 15 minutes or so of this panel. So let me begin with
some introductions. Our first presenter
is Peter Dietsch. He is a philosopher
and economist and a professor in the
Department of Philosophy at the University of Montreal. His research focuses on
issues of economic ethics, notably on tax justice,
normative dimensions of monetary policy, and
on income inequalities. Dietsch is the author
of Catching Capital– The Ethics of Tax Competition,
Oxford University Press, 2015, co-author of Do Central Banks
Serve the People, Polity Press, 2018, and co-editor of
Global Tax Governance– What is Wrong with It and How
to Fix it, ECPR Press, 2016. In 2017, Dietsch was
nominated to the College of New Scholars,
Artists, and Scientists of the Royal Society of Canada. Our next presenter
will be Ann Davis. Ann is Associate Professor of
Economics at Marist College, author of The Evolution of the
Property Relation, Palgrave, 2015, and Money as a Social
Institution, Routledge, 2017. She was director of an
NEH Summer Institute on the Meanings of
Property in 2014, and she has served as chair of
the Department of Economics, Accounting, and Finance and
founding director of the Marist College Bureau of
Economic Research. Jonathan Crock will
be our third speaker. He is Lecturer of Government
and International Law at the College of William
and Mary in Virginia and PhD candidate in
international law at Leiden University in the Netherlands. Lastly, our fourth speaker
is Maximilian Seijo. He is a research fellow
for the Global Institute for Sustainable Prosperity. He received a BA in
economics from the University of South Florida
and is currently finishing his master’s thesis
in the Department of Humanities and Cultural Studies at the
University of South Florida. He is also a junior member
of the Modern Money Network’s Humanities Division
Executive Committee and co-host of the Money
on the Left podcast. His interests include critical
theory, aesthetic modernism, and the history of full
employment discourses. And with no further ado, I
will pass things on to Peter. PETER DIETSCH: Thank
you, Scott, and thanks for the organizers for putting
together this great event. So my goal in this
paper is to reflect on the distributive
dimensions of money creation. If you look at most
contemporary theories of justice and legal philosophy,
they pretty much all agree that money matters from a
distributive perspective, but they tend to
take money as given. They neglect the
fact that money is created by social institutions. And so my central
claim in this paper is that the very process
of creating this money is subject to a
variety of biases. The core of this bias
is relatively simple– when you go to the bank
and you have collateral, you have an easier time
getting credit than when you don’t have collateral. And one of the
things the paper does is to spell out this basic
phenomenon in a variety of ways in a modern economy. So the basic structure of
the paper is the following. I say something about the
process of money creation. With this audience, I’m going
to be very brief on that. I lay out the
normative foundations or the normative assumptions
from which I analyze the process of money creation. And then I will present four
types of bias in our economy today where, when
money is created, certain individuals and certain
groups get favored over others. Now, at that point, these
are mere inequalities. And then in the
last step, I point to institutional
alternatives– different ways in which we could create money. And once you put these
in place, then you can actually claim that the way
we’re doing it today is unjust. So very briefly, a quick
primer on money creation. So I distinguish
three kinds of money in the paper– currency,
which I will actually not talk about today, and then
deposits with commercial banks and deposits with the central
bank, central bank reserves. Now, how do these latter two
kinds of monies get created? Well it’s relatively simple. You go to the bank as an
individual and you say, can I have a mortgage or can
I have a consumption loan? And they will look at
your financial portfolio and financial background. And if they like it,
they press a button, and there is the money. Money has been created. In similar ways, central banks
create central bank reserves vis-a-vis commercial
banks, which those use a set of
transactions with one another or when more people
than predicted come and want to withdraw
their savings. Now, in normal times, the
creation of these central bank reserves might not have a
huge distributive impact, but as we’ve seen since
the financial crisis when central bank balance
sheets ballooned, now this central
bank money creation is actually significant. And therefore, as
I will argue, also has distributive consequences. One last aspect about money
that I want to highlight here is one that has been
underlined by Katharina Pistor in her work, and that
is the hierarchy of finance. So everyone but the
state in our economy has to settle debts
with higher-order IOUs. And if I owe someone
money, I have to– if I don’t have the cash to
pay it, I have to go to a bank and get out a credit
in order to settle it. The only entity that is above
this logic is the state. So what is the
normative benchmark against which I want to evaluate
the dynamics of money creation? In the paper, I
actually talk about some of the theories of distributive
justice that are out there and how you might use
or might not use those, but the one that
I end up choosing that’s the only one
I will set out here is an approach by G. A. Cohen. And he basically tells
us that money is freedom. Let’s quickly read this quote. “If A owns P and
B does not, then A may use P without interference
and B will, standardly, suffer interference if he
attempts to use P. But money serves, in a
variety of circumstances, and notably when A puts P
up for rent or for sale, to remove the latter
interference.” So in other words, the
argument I want to make is that the access to credit
amplifies the relative freedom that is conferred by wealth
because it gives people access to more money. And if some have better
access to this money, then we have a difference
in relative freedom, and Cohen says, the key truth
is that if you are poor, you are [? potentially ?] less
free than if you are rich. Now, what I’m saying
is that that phenomenon gets exacerbated if we have
unequal access to credit. This, I suggest, is a
relatively ecumenical way of thinking about it
because both people on the left and the right
of the political spectrum, liberal egalitarians
and libertarians, care about freedom. So they should all be
concerned about some people having less freedom than
others, from this perspective. So against this background
of what money creation is and the normative
assumptions from which I want to analyze it, here’s
an overview of the four sources of distributive bias. Now this might be
a little small, so down here, we have
consumers and firms, here we have commercial
banks, and at the top, we have the central bank. And I identify four
processes in which money creation, or money destruction,
as we’ll see in a minute, exhibits bias. So the first is the classic
lending from commercial banks to either consumers or firms. The second is lending on the
interbank lending market. The third is creation
of central bank reserves by the central
bank for commercial banks. And the fourth is
the reverse process after these forms of
money have been created. After a while, they
get destructed again. How do they get destructed? Well, in balance sheets, they
disappear again, either when you pay your money back– you pay your credit back– or when someone defaults. And that latter point is another
instance of a distributive bias I will argue in money creation. So I will go through at
least three of these. I think I’ll probably leave
out the central bank reserves case because it’s relatively
similar in structure to the interbank lending. Let’s start with the first one. So loans to non-banks. I’ve already said the
basic argument here is relatively simple. Imagine two people. One owns a house that is worth
$400,000 and the other one owns a house that
is worth $200,000. If the two go to the bank, then
A enjoys twice as much freedom to obtain credit
and do something with that credit than
B. Now, of course both have to pay their loan
back, but in the meantime, A can invest this money and
make twice the return compared to B. The same kind of argument
holds for loans against income streams. Now, one important
objection that I want to– I won’t discuss the
first one, but I’ll concentrate on that
important second one that I want to underline
here, is the following. Someone might say,
you’re right to point out that some people’s
freedom is enhanced more than other people’s freedom,
but you’re overlooking the fact that by giving out this
credit to some people, we’re actually enhancing
the freedom of everyone because there is this
trickle-down effect. When you have credit that
is given out to the rich, they will invest it, and from
this investment, not just A, but everyone will benefit. So my response to this
comes in two ways. The first is to say, well,
even if there is productive investment and there is
this trickle-down effect, there is what we call
the Cantillon Effect, those where the money was
injected in the first place– and we’ve talked about
this this morning already– benefit more than those
who it trickles down to. But the more
fundamental question is, is that actually
what happens when credit is created in our economy? Does it actually go to
productive investments? Again, we heard this morning,
since the financial crisis, a lot of it hasn’t. This is something that
has been underlined by [INAUDIBLE] in his book. And so when the
extra credit actually goes into existing
assets, not only is there no trickle-down
effect, but there is actually an additional bias
in favor of those who already hold those assets. So if, since the crisis, a
lot of the extra credit that’s been created has gone into
stock markets, housing markets, and art markets, one of the
beneficiaries of this process are the people who are
already in those markets. And so potential first-time
house buyers and so on get priced out of the market. So that’s an additional
form of bias. So we can sum up and identify
these three forms of bias in the basic case of
loans to non-banks. Now, on the interbank
lending market, there are some
additional facets that we can add to this process. So whereas individuals have
different objectives on what to do with the extra freedom
that they get through credit creation, banks tend to
have one single objective, and that is to make a profit. And over the last
decades, they’ve discovered that, on
their balance sheets, they have sitting all
this untapped collateral. And what have they done? Well, they’ve started to
tap into this collateral. So they’ve taken all these
things on their balance sheets and they’ve gone to other
banks and said, hey, I’m going to give you
this for two weeks if you give me some cash so
that I can do something with it. One example for this is the
repo market, which has, as many of you well know, taken
on incredible proportions. So LCH, one of the
clearinghouses in Europe, a few years ago cleared
11 trillion euros worth of repo
market transactions with only government
bonds per month. So it’s a huge market. It’s pro-cyclical,
and it’s just one example of interbank lending. Now, what are the
distributive consequences of this interbank lending? I think we can identify three. First is, again, the
Cantillon Effect. So the phenomenon that the
people where this money creation is injected
into the financial sector are the primary beneficiaries
of this new money creation. Second, we have
the same question as in the individual case– is there trickle-down or
is there not trickle-down? If there is no
trickle-down, then again, we have this additional bias
in favor of asset holders, as in the previous case. Now, even with trickle-down,
we have an additional problem here, and that is the
increased leverage which makes the financial system
more susceptible to crises. And we’ll come
back to this later. Now the third–
remember my overview here– the third kind
of money creation, I will actually have to skip
in the interest of time, and that is the creation
of central bank reserves. I’ll do some
self-promotion here. If you’re interested
in this, I also have a short new book with two
co-authors about central banks where we also talk
about inequality. The distributive effects of
this kind of money creation are actually relatively similar
to what we see on the interbank lending market, with the
one notable difference that I think we
have several reasons to think that trickle-down
is particularly unlikely when central banks are
created in this way. Let me switch instead to
the fourth kind of bias, and that is different
from the first three because it refers
not to money creation but to money destruction. So as I already
said, money can be destroyed, again, in two ways. Either people pay
back their credit, and then on the balance
sheets of the various parties in the economy, we see that
the balance sheet shrinks, or the counterparty defaults. Now, what does
economic theory tell us about who central banks
should let default? Well, the theory makes a
distinction between a liquidity crisis and a solvency crisis. If an economic entity is
merely illiquid– that means they just don’t have
enough assets short term but they would long term–
then we should bail them out. If they’re insolvent–
if they can’t meet their obligations even
in the long term– then we should let them fail. But what happens when you
have too-big-to-fail financial institutions? Well, central banks
don’t let them fail. They bail them out. And when they bail them out,
we see another two instances of distributive bias. First, we have a
selective protection of the freedom of
systematically important banks. So they already benefited in
the process of money creation, and now, because
they’re too big to fail, we’re advantaging them again
because we’re bailing them out. And the second aspect of
this distributive bias is that we’re socializing
private losses. How much time do I have left? SCOTT FERGUSON: Oh, you have
about three or four minutes. PETER DIETSCH: Three
or four minutes? OK. So, as I said, in order to
show that these biases are not merely inequalities but
they’re actually unjust, we need to go through
one last step, and that is showing
that there is alternative monetary
arrangements for our economy,
which would reduce or even eliminate these biases. And so here in the
paper, I propose one more ambitious program
and one more moderate program. The more ambitious
program would, I argue, be able to eliminate some of
the biases I’ve identified and mitigate one. And the more moderate program,
macro-prudential policies, would not eliminate any
but mitigate all of them a little bit. So let me say a few
more words on those. Today, central
banks basically need to pass through the
commercial banking sector to conduct their
monetary policy. Now, especially when there
is no trickle-down effect, this puts price stability and
financial stability at odds. If you want to have a
little bit more inflation but the money is being
spent on existing assets, then the liquidity
you have to pump in to get the monetary policy
you want is enormous. Now, if you separate money
creation from credit, you could get
around this problem. And one institutional
arrangement that does that is 100% banking. So here, commercial banks are
taken out of the money creation process altogether. They become mere intermediaries. And when you and
I go to the bank, we basically say, either
you keep this money like I would keep
it under my pillow or you invest it for me
under an equity contract rather than under
a debt contract. Now, this kind of
admittedly radical reform would get rid of
three of our biases that we’ve identified above. There would no longer
be any advantages to the commercial banking
sector because they wouldn’t have the right
to create money anymore. There would also no longer
be advantages to the holders of existing assets
because we wouldn’t have these speculative
bubbles anymore. And finally, because we have
fewer speculative bubbles, there would also be less
bias in the bailouts, because again, there would
be less need for those. The one single advantage
that we couldn’t get, or the one single distributive
bias that we can’t get rid of, is the fact that people
with more collateral would still be able to get
better access to loans. But that’s one of several
biases that I have identified. Again, the more
moderate strategy, and here you could
think of raising reserve requirements,
regulation of shadow banking, financial transaction tax– all kinds of things that we
have been and will be discussing over the next couple of days– you could use those to mitigate
the distributive biases that are inherent in money creation
processes in our economies today. So to conclude, the creation
of the very thing that makes us rich, money,
is biased in favor of some economic
agents in our society. So some people
think that you have these entitlements to
the things that you produce with your labor. They should be upset
about this because there are some people who
benefit without having done anything for this benefit. If you accept the
normative premise– if you accept that
money confers freedom– then this inequality
[? in-access ?] to credit is potentially problematic. And given that we have
institutional alternatives that would allow us to reduce
these distributive biases, we can actually make a step
from diagnosing inequalities to diagnosing an injustice. Thank you very much. [APPLAUSE] ANN DAVIS: Thank you very
much to the organizers, to you, and to the panelists. So I have presented
this material in the goal of
providing a critique. So, rather than
assume what money is, I’m trying to say how
money evolved historically by looking at the institutions,
legal and financial. And so my basic goal
is critique, but, like, where did money come from? What does it do? How did it get there? But I’m using
institutional history. And so this, as you’ll
see in a minute, is a short kind of
preview of some material that I’ve written more about. But for this conference
in particular, I thought it would be useful
to quote Christine Desan. So she points out in
her book, Making Money, a very interesting switch. So money creation was
done by the sovereign, and the sovereign could
charge for that privilege. It was a service he did. But in the modern liberal
state, money creation is something that institutional
investors are paid to do. And she asked the question,
why is there that switch? And so it seems to me
that there’s a couple of different ways to read this. One is, there’s complementary
between the wealth holders and the state. So the modern liberal
state is forward-looking and depends on the wealth
holders to create wealth. Another interpretation, which
I’ll quote a little bit more later, is that there’s an
exploitative relationship between the state and the public
and that the wealth created is done by the public at large,
and the returns to that wealth is taken again by
the wealth holders, by their privilege
of charging interest. And so that’s a basic
question I want to ask. And so, in assuming
that money is social, there’s several resources
on which to draw, and I’ll just kind
of list these. And so, today, there’s
a lot of people who would say money is
social but there’s still not much agreement on what
functions, what role, money performs. And again, I go into more
detail on this in my book. OK. So I would start
with the structure of the modern liberal state. And here, the medieval state,
of course, would have tax farms or would borrow money
from private financiers, but the liberal
state internalizes the function of money. And so we have the formal
[? state ?] [INAUDIBLE] in the private sphere
and the public sphere. And so the private sphere is
the firm and the household, and the public sphere
is the official state, and in between that
is the civil society. So the liberal state
internalized the public finance function by taxing. And so, rather than borrow
money from the Rothschilds and the [INAUDIBLE],, the
[INAUDIBLE] and the Morgans, the liberal state
makes a contract– and we’ve heard some
about this today– I will tax you, and then
you are the beneficiary of the state functions that
are supported with that tax. But the functions that were
performed were military, and so the states at this
time were competitive– states competing
to expand markets for their own domestic
wealth holders. And so it seems to me that
that function has remained. That one important
function of taxes in a modern liberal
state, which I would argue we still have today,
is tax to support the military. And the military is to expand
the state and to create wealth. And even in economics,
mainstream economics, everyone assumes defense
is a public good, period, no questions. And so I would argue
that defense is still– the purpose– it’s still
competitive capitalist, and that the function of
the state, then, is to raise taxes to support that function. And we, the
taxpayers, would then say, oh, of course we
want secured borders. Oh, of course we want
to be the greatest state in the world economy. We want to be the empire,
sometimes explicitly, is a goal. And so this public finance
is rooted in the military. It’s rooted in the
bureaucratization of finances, and it’s also in the
professionalization of the military, which
used to be the citizen militia or the mercenaries. And so I see the modern
liberal state as formed by the internalization
of these functions, which have become invisible. So then another reason
I want to do the history is to make these original
founding contracts more visible. OK. So in reviewing this, I would
argue that the financial revolution can be
traced historically, and that after the Glorious
Revolution of 1688, where the Bank of England
was founded based on a deal, which is now well-known, we also
had what’s called kind of a big bang in the 1720s when– and this is again the UK state– internalized finance by
these major merchant monopoly corporations that then were
used to finance the state. So the state would
give the corporations a monopoly on certain
kinds of trade and then give those
corporations the ability to hold public debt as
a financial asset, which then they could
issue stocks and then have their colonial operation. In the meantime, especially
with the Bank of England, one of the privileges was
the issue of currency. But this was the privileges
of the merchant monopoly corporation, which
again seems to be, already in the beginning,
an expansionary goal of the liberal state. It wasn’t just freedom. It was power and
financial power. And so one of the things
that I would claim is really important, that we the
taxpayer fund the public debt, and the public debt is
still the foundation of the private financial system. So these safe assets,
we’ve heard about. The safest asset is
US Treasury bonds. It’s safe because US
taxpayers pay taxes. And the US state
that has been founded has been an expansionary
state which can then borrow money and pay it back
because of its world, military, and economic power. And so the story I
would tell is the state has been a way to consolidate
what started out as merchant monopoly corporations but then
merged into private business corporations. OK, so on this slide
and the next one, I want to contrast how different
people have interpreted– you could say spin. So in other words,
the Revolution of 1688 is famous, right? But what do [? North ?] and
[INAUDIBLE] say about it? Well, it was protection
of property rights. It’s a balance of power. And this is freedom because
the state has committed to protecting property rights. That’s on the left. On the right, Marx would
claim the whole country– the wealth of the
whole country– is backing the bank. And for the taxpayers,
the gold supply, the whole public debt
supports this bank. And so look on the bottom
right– public debt becomes the credo of
capital, and you dare not question the public debt. And again, can you read the
top quote without slipping? So, “Is there anything
more absurd, for instance, than the Bank of England, whose
notes have credit only thanks to the state, taking
payment from the state, from the public, in the form
of interest on government loans for the power granted to
it by the state to transform these same notes into
money and then lend it back to the state.” And so the ironic comment
from Marx is this is circular, and the bank is charging
the state for privilege that it has been
granted by the state. And Christine Desan,
one of our founders of this wonderful
conference, claims and argues that money no longer
appears as a public resource. It looks like an arrangement
between individuals. And here, she’s
interpreting Locke, that it wasn’t the state. It was just private individuals
who make a convenient deal that this is money. OK. So one point– let me
just summarize so far. One point is to look at the
history of the liberal state to understand what money is. The second point is to look at
the different interpretations that are possible
from this arrangement. A third point that
I would like to make is that what we consider
the importance of the public and the private spheres
really gets reversed. So in Aristotle and some of
the civic Republican tradition, it’s the public sphere
where we are most human. And we are political animals. We engage in rational debate. And this is freedom. Freedom is in the public sphere. But once you have a
state based on taxes, then the state is coercive
and forces you to pay taxes. And so the state
becomes the bad guy. And then you have freedom
in the private sphere where you have individual
consumer thrills, right? And so the freedom is an
individual freedom, isolated from all other
people, instead of, let’s say, what used
to be considered the fulfillment of
human nature, which is the political animal,
and the rational debate, and then coming together,
and the discussion of collaboration. And so I think the liberal
state presumes freedom, but in fact, we’ve split now. What used to be freedom in the
public sphere is now coercion. And in some thinkers like
[INAUDIBLE] and others would say, no, no, freedom is
really in the private sphere as isolated individuals. So I think that
whole structure– that whole interpretation of
the state as the bad guy– is unfortunate. And it also hides the idea
that the public really is the power behind the money. If it weren’t for we,
the taxpayer, public debt would have no liquidity. It would not be the safest
asset in the entire world. And if you ask the taxpayer
in the United States, where does wealth come
from, they would never say, we, the taxpayers. And so I think this whole
rhetoric of the private sector as the wealth
creators has really reversed what you might argue
is the institutional structure. So again, I have a few
brief slides on the fact that the public is the
back of the currency. And so the liability
for the public is the asset for the state,
and the asset for the public is a liability for the state. That is, you could say
that money is circular. And let me skip
quickly a little bit. This is the familiar
slide of the circular flow diagram, which is supposed
to be an equilibrium– supply and demand are equal. I would translate it back into
an accumulating relationship– cyclical. So starting at the top,
public debt is the safe asset. It still backs the
shadow banking sector. And from public debt,
you can issue notes– what we call the dollar
is Federal Reserve notes, which is the
liability of the Fed, based on really the
liability of the taxpayer. And then from those Fed
notes, the US dollars, that’s where the private
credit is created, loaned to the corporation, realized
after production and sale, paid back in taxes, and then
forms the public debt again. So essentially,
again, we the taxpayer are the backers of the
state and the wealth. So when I say money is social,
I would argue that it’s social in this particular way– that the national currency is
the symbol of the whole nation state. Yes, money represents
purchasing power. It represents freedom,
as we’ve just [? hold. ?] But it’s a collective
power, which is interpreted as individual. And without the
backing of the public, the financial system would
not be as resilient as it is. And so again, let me just say,
in terms of our contemporary period, if I’ve persuaded you
that the US Treasury bond is the safest asset
in the world– it depends on we the taxpayers– then it turns out that
because of people’s antipathy towards the state as the
coercive taxing authority, we may have less support. So these populist sectarian
secessionary types of movements are questioning
loyalty to the state, and yet, that’s where our
entire financial system resilience depends on, is
the US taxpayers’ willingness to pay into the power of the
US government, for example. So I think, without
recognizing the public, I think we undo the solidarity
and the recognition that ultimately may undo the
resilience of the debt. And so let me stop there, and
I look forward to comments. [APPLAUSE] JONATHAN CROCK: Hi, everybody. I’m Jonathan Crock, and
I teach at the College of William and Mary. And thank you all
for coming out today. My talk today is
about the human right to democratic control of money. And this conference is
an exciting discussion of reimagining money
as a democratic medium. At the same time that
we reimagine money, I’m going to argue we also need
to reimagine what democracy and to be democratic means. Money as a democratic medium
has three levels of meaning. The first level is
the understanding that money is a
public good, and we’ve heard a lot about that today. And you’re very much
well-aware of this. Money is a creation
of public law. It is a creation of the people. Banks are not truly
private entities but are franchises
licensed by the government to create money that is
backed by the government, that is the people. This is the first sense of
money at the democratic medium. The second level of money
as a democratic medium is that the public
good of money should be used for democratic purposes– for the benefit of
the people as a whole and not for oligarchic or
narrow, elite interests. Money should not be used
to increase inequality but should be used
democratically for the benefit of society as a whole. Under the second meaning of
money as a democratic medium, elected elites and
technocrats should seek to implement policies
such as public banking for all, a Green New Deal– and we’ve heard a lot
about a Green New Deal that would print
public money to provide a job guarantee for all– with a focus on
socially-beneficial green work. Other policies include
free higher education for all, eliminating the student
debt of all and making it free, and a host of other
kinds of policies. These all would
serve to have money be a truly democratic medium. Yet even this democratic
money at the second level, which would be a
tremendous success and is something
that’s urgently needed, is still controlled
by elected elites, whether at the national,
state, or municipal levels, wherever money is operating,
and also by technocrats. And such a system is
reversible by future elites, as the New Deal of
the past was undone. We also need to avoid
the structural racism and sexism of FDR’s New Deal. So how do we get past
these inherent problems at this level of
democratic money and how do we cement in
place democratic money so it can’t be undone? How can we make
the Green New Deal cemented in place so
it can’t be undone like the previous New Deal? So how do we accomplish this? We need a third level of
money as a democratic medium. The third level of money
as a democratic medium is having actual democratic
control of money, putting control of
money into the hands of the [INAUDIBLE] the people. All money is the people’s money,
as we’ve heard repeatedly, yet the people have never had
control over their own money. In discussing money as
a democratic medium, we need to rethink
not only what money is but what we mean by democracy. What would money as
a democratic medium look like in this third
sense of the phrase? I argue that it would be
giving control of money to a citizens’ assembly. A citizens’ assembly is
a randomly-selected body of citizens with power
over public policy that hears from and
is advised by experts, but where citizens themselves
have final binding power. The use of citizens’ assemblies
has been growing rapidly and some people have
heard about it already. Others are just starting
to hear about it now. But there’s all
kinds of examples of this growing globally. Today, I’m just going to
mention two brief examples. Iceland followed the
US in deregulating the financial industry,
helping to lead to systemic collapse
of Iceland’s economy in the global financial crisis. In the face of a
popular uprising, Iceland began a process to
draft a new constitution. So here’s an opportunity to
basically recreate society from scratch with a
brand new constitution. As one step in this
process, 950 Icelanders were randomly selected to help
draft this new constitution. This is a citizens’ assembly. When you randomly select
a citizens’ assembly, you automatically get 50%
women’s participation, and not just wealthy
women, but women drawn from a cross-section
of socioeconomic groups. You also get equitable
minority representation. And everyday citizens
have shown themselves fully capable of hearing
from technical experts, deliberating, and arriving
at policies that best benefit the community as a whole. In the Iceland experiment,
which was successful, the Iceland constitution
drafting process represented the first time
in modern human history that women had 50% of
decision-making seats in drafting that constitution. This was actually in one
stage of the drafting process. There were other
stages beyond that, but in this particular stage
is what I’m interested in. As a second example,
Ireland recently used a citizens’ assembly of
99 randomly-selected Irish citizens to address
the existence of a constitutional
ban on abortion. Existing elites and
the constitution had a ban on abortion. This did not match what
citizens as a whole wanted, and so this issue was kicked
to a citizens’ assembly. These randomly-selected
citizens heard from experts of all kinds. They heard from
religious experts, technical experts,
scientific experts, other kinds of ethics
experts, non-experts, NGOs. They deliberated over these
different recommendations and they came up with a
constitutional amendment that was adopted in
national referendum to legalize abortion in Ireland. And Ireland has gone on to
do this on issues of climate change and other issues. Control over the
money supply should be given to a citizens’ assembly. This statement likely
provokes fear among some. As Randall Wray
writes, regarding critics of modern
monetary theory, “There is a fear that
if you tell policymakers and the general public how
things work regarding money as a public good, democratic
processes will inevitably blow up the government’s
budget as everyone demands more from government.” End quote. There is a fear that
everyday citizens are too incompetent,
too irresponsible, too backward to have power
over what we’ve heard today is their own money. This fear is reminiscent
of colonial arguments of why certain populations
are not fit to govern. Citizens and a
citizens’ assembly, as has been empirically
shown in numerous citizen assemblies connected worldwide,
are actually more responsible, more reliable, and better
at developing policies that benefit society as a whole
than either elected elites or technocrats. Citizens’ assemblies,
given power over money, combines democratic
control of money– that is, money as a democratic
medium at this third level of meaning– with you still have
technocrats and experts advising the citizens on
the best policies to pursue. So you have the
best of both worlds. You still have the expertise
of people like the experts you’ve heard from today,
and then you’re combining that with real citizen control. And as has been seen,
and when this is actually conducted around the
world, citizens actually do listen to experts and
come up with what is the best policy for society as a whole. Additionally, I argue
that citizens’ assembly control of money is not
only the best public policy but is a human
rights requirement. Human rights law requires gender
parity in decision making, meaning women have 50% of the
power over all decision making. It requires equitable
minority participation. It requires equitable
participation of all socioeconomic
classes and a host of other marginalized
groups that need to be brought into power. Let’s look at the composition
of the Federal Reserve Board just for comparison to
this kind of human rights legal requirement and
this human rights ideal. Looking at all new members
appointed to the Federal Reserve Board since
2000– so this is everyone in the 21st century– 71% have been male, and out
of all new members appointed since 2000, 100% have been
white, while, of course, people of color in
the United States make up approximately
40% of the US population. Additionally, all members
of the Federal Reserve Board come from upper-class
socioeconomic background. This is just one example of
a host of countless examples you could give across
society, and when we look at so-called
private banks, when we look at
Congress, when we look at other institutions
of power over money, they’re basically just as bad. Legislative, executive, central
bank, and private bank control of money needs to
be democratized, and the way to do this is
via a citizens’ assembly. There will still be
economists and other experts to advise citizens’
assembly on the best monetary and fiscal
policies, and citizens have proven themselves
fully capable of following good advice
when it’s in the best interest of society. The people should finally have
control over their own money. It is their human right. Thank you. [APPLAUSE] MAXIMILIAN SEIJO: All right. Thanks everyone for coming and
thanks to my fellow panelists. So in my paper, “The
Unnatural State, Money and Propaganda After
New Deal Liberalism,” I traced the
perceived opposition between money and democracy
to the discursive contexts of the American New Deal and
the World War II mobilization. As a figure whose
political theory I argue informed these
discourses, John Locke wrote in his two
treaties of government that “all men are naturally
in a state of perfect freedom to order their actions and
dispose of their possessions and persons as they think fit,
within the bounds of the laws of nature, without asking leave
or depending upon the will of any other man.” I write this paper in opposition
to this ontological conception and articulate the
deployment of these ideas in the mid-century
context as a precursor to neoliberalism’s deployment
of rhetorical tropes surrounding the invisible
hand of a neutral or free marketplace. Further, I draw
together two discourses which both are influenced
by Locke’s notion of individual will or
consent as the creative force behind governance. These discourses are economics
and social psychology. I do this to destabilize the
notion that activist governance represents a public
quote, unquote “intervention” into
supposedly private spheres. Instead, I insist that
legal mediation is perpetual and ongoing, and
what matters is not the preservation of Locke’s
notion of freedom in nature, but rather, a broader democratic
political subjectivity which centers around
monetary mediation. Of the supposedly
interventionist state policies of the 20th century, the
New Deal resonates today as perhaps the most important. It was created to curb the
most devastating effects of the Great Depression. It initiated an unprecedented
level of state intervention into American life,
so the story goes. Paradoxically,
however, Roosevelt framed this supposed
intervention as lacking any
intervening properties. He saw political risk in
calling for state control. In his May 7, 1933
radio address, titled, “Outlining the
New Deal Program,” he insisted that the
government was not taking control of
organized private industry but that the
policies were rather a partnership between industries
and central authorities. In insisting on
this partnership, Roosevelt demonstrated
to the public that he believes the market
to be a natural Lockean formation, which Friedrich
Hayek would later describe as the market’s
spontaneous order, even if, unlike
Hayek, he insisted the market required
substantial government regulation and support. As the historian Alan Brinkley
has chronicled, somewhat problematically, by the
later stages of the 1930s, Roosevelt’s
outward-facing insistence that the New Deal was a
public-private partnership could not be sustained. “By the later stages of the
New Deal,” quoting Brinkley, “virtually all the
New Dealers agreed that a solution of the
nation’s greatest problems required the federal
government to step into the marketplace to protect
the interests of the public.” In other words, Brinkley in
addition to the New Dealers, thought that the policies of
the New Deal quote, unquote “imposed order on a
disordered economic world,” as the economy of capitalism
could not stand on its own. Whether through denial or
affirmation of the state’s role in the New Deal economy,
this liberal frame obscures the state’s
role in perpetuating the basis of the
marketplace through money, with its insistence on man
and market’s state of nature. In its false affirmation,
however, it frames the New Deal as a never-before-seen
intercession of the state into the supposedly
free and private affairs of the American public. As a result of this
framing and in the context of the rise of militant
fascism in Europe, even some pro-New
Deal liberals began to question the state control
of the economy as reminiscent of rising European
totalitarianisms. Brinkley argues that
liberals who had once admired the collective character
of some European governments looked with horror at the
totalitarian state America was now fighting and
saw in them a warning about what an excessively
powerful state could become. He also went on to claim
that the war seemed to demonstrate that the
route to full employment was not state management
of capitalist institutions but fiscal policies that would
promote consumption and thus stimulate economic growth. This sort of anxiety
over state influence mirrors a concurrent
intellectual and aesthetic movement’s
consideration of government influence upon the public, but
instead of economic influence, they documented the effects
of mass media propaganda. Fred Turner names this movement
the Democratic Surround and argues that figures
involved with this movement, like Margaret Mead
and Gregory Bateson, had tremendous influence in
intellectual policy circles. By 1938, Turner
argues that virtually all agreed mass
communication could turn the individual
personality, and with it the structure of
society as a whole, in a totalitarian direction. Implicit in this example
of the Democratic Surround’s anti-fascism is a
psychological state of nature– a state in which the
mind of an American is chaotically free and
ready for the ordering force of fascist manipulation. Whereas I would
disagree and assert that the American mental
perspective is never formed in a vacuum but alongside
political, economic, and social experiences that are conditioned
by their respective points of view. In other words, it is formed
alongside the material and immaterial experiences
of government’s perpetual monetary influence. In 1941, the cadre of
academics and policymakers which informed the Democratic
Surround delivered a report to President Roosevelt as
members of the Committee on National Morale,
which I argue reflects and informs
policy on war information but also Roosevelt’s approach
to war-time production. This can be seen in the
cost-plus contracts of the war mobilization, which guaranteed
supposedly private corporation rates of profit
for war production. My contention here is that this
decision reflects a broader waning of the New Deal consensus
around the state’s role in the economy, reminiscent
of what historical sociologist Jakob Feinig, who’s
here with us today, calls the monetary
silencing of this era. It demonstrates the
paradoxical circumstance in which neo-chartalists or
constitutional understandings of money were mobilized as
public-private partnerships under the terms of
American liberalism’s Lockean assumptions about
a private economic sphere, which almost
predestines the breakup of institutional liberalism
later in the 20th century. Aside from the generally
flawed framework surrounding state intervention,
there are specific hints of this ontological failing
in the throes of New Deal public intervention. In 1935, Congress approved the
passage of the Patman Greenback Bonus Bill, which would
have awarded bonuses to veterans as early
payments for their benefits. However, Roosevelt
vetoed the bill, emphasizing the threat
of inflationary chaos if a particular group
successfully pressured Congress into creating money. Roosevelt saw the
public pressure surrounding the bill as
a threat to his control of money creation. His position demonstrates
a central paradox of Lockean-informed governance. Absolute authority
is tenuous because it is seen as an arbitrary
projection of individual will or consent and not ongoing
collective legal mediation. Feinig describes
Roosevelt’s veto calculus in these nightmarish terms. He writes, “FDR evoked the
threat of a monetary state of nature, a nightmare in
which group after group pushes for money creation
on its own behalf, and the monetary
order disintegrates as cash becomes worthless,
just like in Weimar, Germany.” I suggest here that
this anti-democratic, anti-inflationary
argument will be inverted into a bad faith,
anti-authoritarian opposition to fiscal aspects of
state intervention in the neoliberal era,
but only because it was based on a false assumption
that the market and further the minds of the American
people were a blank slate right for the states interceding
anti-democratic presence in mass media forms
like money or even the government press release. From this perspective,
conceptions of information dissemination
during the war changed shape. In 1942, only months after the
Committee on National Morale presented its findings to
the president, Roosevelt reorganized the
disparate war information agencies under a single office,
known as the Office of War Information, or OWI. Instead of the neutral
dissemination of quote, unquote “facts and figures,” which was
the old policy under the Office of Facts and Figures,
OWI was tasked with achieving an approach
to information issuance that attempted to walk the
line between neutrality and effectiveness. In other words, OWI
was given a little bit more space to lie about
government activities. This received some pushback
from within the military. General Dwight D. Eisenhower
voiced his opposition in a letter to the
director of OWI. Elmer Davis wrote,
“We must maintain our policy of objectivity. Our job is to promote an
understanding of policy, not to make policy.” This approach, which
somehow imagined that monopolistic public
issuance of information about the war could be
neutral, is not only mistaken but a sentiment
which would arise later in free market discourses, which
insisted on the government’s role in not making policy but
mere objective adjudication of the supposedly free
affairs of the marketplace. As well, this insistence on
propagandistic neutrality is useful for understanding
the perpetual influence of legal media on the public. Just as money perpetually
organizes all production, a fact which is obvious in
the context of World War II, legal mediation of information,
whether through the networks of distribution or the
information itself, is always influencing
public discourse. From here, we can begin to
break through the Lockean teetering between freedom
and authoritarianism and imagine the
democratic potential of perpetual monetary mediation. But before I get to that,
I want to drive home a historical point
about OWI’s propaganda and monetary issuance. John Morton Blum, a cultural
historian of this era, affirms Eisenhower’s
insistence on OWI’s neutrality by pointing out that,
and I quote, “OWI itself, as Eisenhower understood it,
had no mandate from Congress or the president to undertake
to define the purpose of the war or to try and sell
its definition. Indeed, its mandate as
an issuing mechanism was far from clear.” Blum’s framing of the necessity
of congressional mandate for issuance draws together
these two seemingly distinct registers of governing
mediation under the auspices of the general category
of government influence and communication. When we envisage money
and press releases together as media
for such influence, we can begin to see how
Locke’s philosophical influence during the war enabled
the persistence of a void between governance
and social subjectivity that would lead to abandonment
and neoliberalism, leaving monetary issuance to
quote, unquote “private banks” and information
issuance to quote, unquote “private media actors.” In the anxiety about issuance
displayed by Eisenhower, we can see how
collective provisioning waned in importance
to assertions of Lockean neutrality
and freedom. Drawing together
these registers also shows how the Roosevelt
Administration’s earlier rejection of populist
monetary creation through congressional
issuance was inverted from a concern over
democratic influence to a concern over
anti-democratic propagandistic influence in OWI, all while
monetary issuance was itself totally organizing American
affairs, as it always does. Most importantly, these
paradoxical inversions are premised on
Lockean assumptions of the possibility of free
neutrality in the first place. This leads to the
post-war era, where the banishing of
productive responsibility to the supposedly
private sector enables the disruption of the
economy in the 1970s, when the faux neutrality of the
tax cuts and fiscal lubrication supposedly stops working. The result of this
is, of course, neoliberalism,
which doubles down on the Lockean assumptions that
condition this chaotic outcome. Of course, in the real
world, doubling down on this Lockean freedom
mandates the heavy hand of the totalitarian
government, which neoliberal thinkers such as
Hayek conceited and avowed. This totalitarianism
took the form of the racist anti-democratic
disenfranchisement of millions during the War on
Drugs and Crime, often while utilizing the
public-private partnerships that Roosevelt insisted
define the New Deal. To extend what has been noted
by David Stein and others, neoliberalism marginalizes
full employment and justice movements through its obsession
with austerity and budget surpluses by solving the
problem of unemployment with a deployment
of Lockean freedom that mandated
authoritarian imprisonment at the level of policy. This brutal reorganization
of social life represents the conclusion
of liberal divestment from policies of
economic governance out of the fear of fascist
totalitarianism– a fear which
ultimately manifests in a propagandistic
totalitarianism of its own. Taking this all into
account, we can now consider that money can be
conceived of as democratic only after we divest from
the Lockean assumption of the state of nature. We can do this by framing
money’s origin and function as predicated upon the abstract
legal connections that mediate all commerce,
production, employment, and information dissemination. No longer must we
conceive state mediation as teetering into and out
of the free private sphere, sometimes leaving
authoritarian scars that abridge our supposed freedoms. With neo-chartalism and
constitutional money at hand, we can now see that
money is always governing social
interaction, and as a result of this reconstitution of
money’s origin and function, we are now tasked with asking
not if money can be democratic but rather how should
we mobilize money to maximize its perpetual
democratic potential. [APPLAUSE] SCOTT FERGUSON:
Well, I want to thank our panelists for such rich
and interesting papers. I’m seeing a lot
of convergences, a lot of overlaps,
potentially some tensions around questions of
freedom, the relationship between public and private. There were a lot of, I think,
interesting meditations on the role of historical
and changing historical role and relationship
between war and money. And I’m kind of
curious to see where a dialogue about
these different issues might take us in the
next 20 or so minutes. But I want to say a few things
about the topic that sort of is supposed to be
orienting this panel but I would say has been
pushed into the background maybe in an implicit way. So the title of the
panel, if we all remember, is Money, Democracy,
and Morality. And I think that a lot of
powerful moral arguments and claims have
been put forth here but maybe not thematized as
such and using moral language. And by way of maybe
getting us going in our Q&A and conversation, I want
to suggest that maybe it’s worthwhile to start
thinking about developing a moral language around money. And one of the major
reasons we need to do this is because it is sorely
lacking, especially in the contemporary context. And I would say that there are
two primary reasons for this, and I would say that the
right, center, and left are all variously guilty. So the two reasons I
would say is, first, is our liberal
and now neoliberal hyper-reduction of
the monetary relation to a private instrument
and a private relationship. The public disappears, even– leftists who want to sort of
claim a place for the public, they tend to other
the money relationship as sort of belonging
to capital, belonging to private money
claims that might be backed by a public state. But that’s about it. And so the kind of
center of causality, as we heard in an
earlier panel, it is the private actor as the
prime mover of the world. So what ends up happening there? Then we take various
kind of moral responses to this reduction. Maybe we’re sort
of good liberals and we say, you know, it’s OK. There’s some excesses. Maybe we have a few
regulations in here, and everything will be fine. The further left we go, we
decry what’s going on here with monetary relationships. And really, the whole
money relation as such is pitted against
the moral sphere. And you see this tension
beginning in John Locke, and actually earlier as
well, where John Locke has to be thinking about drawing
on the tradition in which he was working, British
sentimentalism, moral philosophy, moral
theory, where he has to start theorizing these natural
sentiments– that fellow feeling toward
other humans, for him, men, and that that was somehow
going to kind of temper the self-seeking,
self-interested bourgeois individual in his private
monetary goings-on. Then you have
19th-century socialists and of course Karl
Marx suggesting that money is really–
you know, it’s not just kind of not moral,
it’s the essence of immorality. It is the evacuation. It is the universal force
of alienation in modernity. So I think drawing
on I think a lot of the impulses in these papers,
the constitutional theory of money, the neo-chartalist
theory of money that puts money as a ontologically
and topologically as a public good at the front
and center of our analysis and our politics, I
think it’s imperative that we develop a language,
a set of metaphors, a grammar of morality that is
irreducible to private commerce and how it might be controlled
or made nice or destroyed. You know, you see examples
of this all the time. Just looking through
my social media feed in the last couple of
days while thinking about this, I saw, yet again, an
advertisement for Paul Krugman’s new master
class in which he says, you know, economics is
really just about people. It’s not about money. And what he’s doing? He’s making a moral claim. He wants to say– this is very Adam
Smith– you know, well, at the end of the day, you know,
we’re just people getting along and we can have a kind of
mutual, nice relationship to one another, and money is
this sort of incidental thing and don’t take it too seriously. So I think that the
chartalist approach and the constitutional
approach says, no, money is a public social
relationship which mediates our interrelationships, our
production, our distribution, our sense of participation and
exclusion at a macro scale. And we need a language for
that and we don’t have it. Another example I’ve
come across several times recently is a book by a Harvard
professor named Michael Sandel whose very title bespeaks
these kinds of logics, What Money Can’t Buy, colon,
The Moral Limits of Markets. So morality begins where
markets stop and markets equal money, full stop. So I want to say, and
I think a lot of us are at this conference,
money is public. And when we erase that, we let
ourselves off the hook morally and in terms of our
collective imagination, and I think it’s
urgent to develop a positive, plural, rich
moral language around money and social provisioning. So that’s where I’ll stop, and
I’ll open it up for questions. AUDIENCE: So I have
three things beginning with morality and money. I think that a lot
of the conversation here has been about John
Locke, the way that you did. I would like to
draw your attention to John Maynard Keynes. And I think that the ambiguity
about these questions of morality really
begin with Keynes. Keynes has been adopted by
people of all kinds of stripes as proposing a technocratic
approach to full employment. But sometimes
pretty awful people have adopted Keynes,
including Hjalmar Schacht, who was one of Hitler’s
main economic policy person. So I think the problem
in Keynes is the fact that it was a very
technocratic way of bringing about full employment. And I think we need
to be extremely careful in using Keynes, because
there was no power in that. I understand that question
is central to our issue. So I have three– on the basis that I want
to say three things. One on Ann, I mean, I taught
and read Marx for a long time since grad school. I think that there
is a contradiction in Volume 1 between what he
writes at the end where he’s talking about the legal
and political foundations of the economy, and
his theory of money at the beginning,
which is virtually the Austrian theory of money. Now, I got my PhD at the New
School, so that’s a pretty– we can talk more about this, but
I’ve become very disillusioned with that. I don’t think [? Chris’s ?]
approach would be consistent with that [? commodity ?]
theory of money that Marx has. On Jonathan, I agree with the
kind of proposals you’ve made, but I think there’s
one issue that I have been troubled with all along– not with regard to you, but
these economic experts that we see in this world around us– these are all
neoclassical economists. And unfortunately, they
dominate the conversation, which means that there’s no way– unless a new kind
of left politics really breaks through
that, that we’re going to bring in these
kinds of questions of power and morality. Yeah, that’s it. SCOTT FERGUSON: So I’m thinking,
can we answer a little bit and then go back
to the questions? I kind of prefer that format,
if everybody is OK with that. Ann, did you want
to speak to that? ANN DAVIS: Well, sure. So interpreting Marx– how easy. [LAUGHTER] Just really quickly, I don’t
see the first part in Volume 1 as Austrian. I see the first part of Volume
1 as leading to an analysis of exploitation of labor. And that is the true– AUDIENCE: I mean,
just the money part. Just the money part. ANN DAVIS: Yeah. Yeah. But the money part,
I would argue, is connected to the analysis
of the exploitation of labor. So that may be why we’re
interpreting it differently. And so the first part of
Volume 1 discussing money, I see as labor is underlying
the exchange equivalence. And then later on, the
public is supporting the institutional
foundations that enable the state to be both
a dominant colonial power and a domestic control of labor. So that’s why I
think we disagree. SCOTT FERGUSON: OK. Next question. AUDIENCE: Hello. I was just on a question of
liberty [? in general. ?] I was wondering, in the recent–
well, not very recent, but– in the rise of neofascist
movements in Europe– I think some of you
mentioned that– I was wondering, how
much does that correlate the failure of neoliberalism– liberalism in
general– to realize the freedom of everyone,
particularly the working class? MAXIMILIAN SEIJO: Yeah. So I think I can also
address [INAUDIBLE] question about Keynes as
well in this question. So I mean, I think
there is a direct line between the neoliberal
divestment– or further divestment–
from the question of social and ongoing
mediation, and dealing with, morally, what it means that
the public is constantly mediating all aspects of life. And so yeah. I mean, the solution
in my mind– and it’s something that I’m
continually thinking about, and it’s part of an
ongoing project– is to sort of attempt to
redefine and rethink about how we define freedom in a
way that is not always a process of getting away from– a mediation which you
can’t get away from– but rather, a way of
flourishing and being taken care of by that mediation. And so what I would say to
[INAUDIBLE] question about Keynesianism or Keynes broadly–
the technocratic nature of Keynes– the same thing that
powered the Third Reich was what defeated
the Third Reich. It was full employment. And so in the sense that the
United States, and the Soviet Union, and Great
Britain all mobilized every aspect of the economy– I mean, and in a way– I think Jonathan referred to the
New Deal as being not enough, which I completely agree with– in a way that
actually was inclusive and was the double victory
for African Americans and for Rosie the Riveter,
and women in America. So it certainly is a tool. And it’s a description of
what governance can do. And I think when
there’s the void that I spoke of that
liberalism ascribes, what can fill that void can look
like inclusive, leftist, full employment movements, or it can
look like exclusive neofascist movements. SCOTT FERGUSON: In the back. AUDIENCE: So this is for Peter. So in yours, you talked
a lot about freedom. And I want to move
away from Locke and move more toward Nietzsche,
and [INAUDIBLE] existentialism, and how they define morality
in more individual terms. It’s more about the
choices of the individual, and how they align, and
how they view their world– and why money is also
still a public good, and we understand
the power relations that are run by postmodernism. So how do you balance those
things out in your eyes when it comes to money? How do you balance out the fact
that money is a public good, but it’s also used for choice? So use it to show our choices–
that’s how we [? do ?] [? preferences ?]
and things like that. So we need it to express what
we want in the poor man’s world. But we also need it to
deal with the issues that are in the system. PETER DIETSCH: So I would
say two things in response. The first is, I don’t think
there is anything in what I’ve said that is incompatible
with also understanding money as a public good. So that’s one element
of the response. The other element would
be to maybe give you a little bit more of a
precise interpretation of what I mean by freedom. So one of the
objections I actually omitted in the presentation,
because there’s only so much time, is
that someone might say, are you kidding me? Money means freedom–
or especially money created through credit. And that means people who have
debt are freer than others. And there is, of course, lots of
counterexamples in our economy. And I would immediately
concede that for some, money created through debt
is the opposite of freedom. It binds them to
paying the debt back. And so there I make a
distinction between– well, it depends on what
you get the credit for. If you are forced by your
socioeconomic situation to get credit for
basic health care, education, and so on, then money
is not freedom in the sense that I’ve understood it here. Money as freedom in
the sense that I’ve understood it here
is when you can use the collateral that you have– as opposed to not have– to enhance the choices that
you can make as an individual. And so even the cases of where
money creation favors or biases the system in favor
of banks, ultimately, can be reduced to some
individuals rather than others having more choices open
to them in the economy. So that’s the aspect of
freedom I’m focusing on. But again, I don’t
see anything that is incompatible here with
also understanding money as a public good. AUDIENCE: Chris
[INAUDIBLE] for Maximilian. In your paper, you may want to
look at the gold cases with FDR when he was threatening
to pack the Supreme Court. This is dealing with
the gold standard. And the final case dealt with
a gentleman who loaned gold– a certain amount of
gold– to the government. And he wanted gold plus x
number of ounces of gold back. You may want to look
at the dissent of that. So they ruled that the
government could just take away that gold, and
give you dollar bills, and say that that’s
the equivalent. And the dissent
basically said, if you do this, that’s the end of
private property in America. [LAUGHTER] So actually, if everybody
here– it actually informs what is money. And can it ever be democratic? Is it the end of
private property? And the argument in the
dissent goes into that. And Peter, I think
you heard my question at the beginning of
the session today, as far as the first
receivers of money get to buy goods at a discount. I was very happy someone had
mentioned Cantillon Effect. I was wondering if I
was ever going to hear those words at this conference. But still, in your system,
you have 100% banking. And you do have the past
where the banks would actually pay equity. And this is where commercial
banking comes from– is that they would pay the
depositors a percentage of that, and pay them
interest, and give them a cut on the investments
that they made. So you didn’t have
that in the US– I don’t know if
you’re aware of that– but even in your system
that you advocate, the government has to decide
who gets that money first. So if you’re the
government and you’re going to decide a contract
between the three of us, it’s you– the government,
bureaucrats, the experts, the deciders– who get
to decide which one of us gets to buy that. And I don’t think that
your paper, or at least your presentation,
didn’t cover that. And I’m curious as to
how you cover that now. PETER DIETSCH: OK. First thing I want
to say is, when you say, your system that you
advocate, so it’s not even me. AUDIENCE: Right. PETER DIETSCH: So maybe
I presented it that way, but in the paper, I
want to really put the emphasis on the diagnosis. Look, there is these
distributive biases. And here’s a menu of
things of what we can do. I’m careful not to
endorse one of them. I’m not saying we should
go for 100% banking. I’m saying, look, we can
point to these things as possible solutions
for this problem. But the problem
is the main thing. AUDIENCE: Right. You get to that, and
I think you eliminate a lot of distributive bias. But there’s one that you
don’t mention, and that’s– PETER DIETSCH: And that’s the– yeah. So where I completely
agree with you– that even if we take commercial
banks out of the equation, there will still
be money creation. There will just be
one money creator. And that’s the central bank. And so the money
supply will grow. And then the
question, especially if you have the Cantillon
Effect at the back of your mind, the question is still, well, who
are the primary beneficiaries of the money that is being
created by the central bank? So for instance, if we
had a Green New Deal– and we could even do that in the
current system under [? QE– ?] we could buy green bonds
rather than a neutral sample of the market, which
is not neutral anyway. So I agree. These are political decisions. But I mean, that’s where
I agree with Scott. We should treat them
as political decisions. Today, we give to the central
banks and say, I don’t know. This is technocratic expertise. But there’s all kinds of
hidden political choices that are in there. So we need to bring
these out in the open. SCOTT FERGUSON: Does somebody
have a question for Jonathan? Not right now? AUDIENCE: In terms of your
citizens’ assembly example, you mentioned
Iceland and Ireland. Has there been sort of
smaller scale, maybe municipality-level
type examples that have involved either
municipal budgeting or some sort of control
of money between them? JONATHAN CROCK: Yeah. It’s been done around the world. One particular example I
find purely fascinating, because you don’t think of this
as where it would be occurring, is in China. James Fishkin, who
is a professor here, who specializes in
this kind of activity, actually does
municipal budgeting at the municipal
level within China. And so they randomly pick
people from the municipality– they actually first poll the
existing party elite as to how they intend to spend the money. Then they randomly pick people
in municipalities in China. They deliberate. They hear different proposals
of how the money could be spent. Then they come up with how they
want the budget to be spent. And it’s always different
than what was initially set. And then that’s
then implemented. And this has been done
in pilot-type projects. And there’s potential
for expanding. But this has been done there. And it’s been done other
places around the world. So I think this is something
that could be replicated in other municipalities. Jackson, Mississippi
has something that I’ve only
recently heard about, but it’s not a full– citizens’
assemblies aren’t randomly selected. But it’s a mayor doing
public policy and budget setting through popular,
town hall-type inputs. But I think this
kind of thing can be done across municipalities. SCOTT FERGUSON: I think we
have time for maybe one more. AUDIENCE: Thank you. Yes. Scott mentioned earlier that
the problem that we really have is overcoming ignorance. It’s the fact that
money is not taught. How about the fact
that Larry Summers was the president
of this university, and there was never a
course here on money. And when I say money, I
mean the monetary system. That’s what we’re talking
about, is the monetary system. We’re not talking about
money in banking and capital, or anything like that. We’re talking about money. We’re talking
about public money. So overcoming that
ignorance requires some kind of massive steps. You mentioned reserve banking,
[? what is ?] reserve banking? If you create the money,
there were no reserves when we created the greenbacks. There was no reserves. So read Dr. Joseph Huber’s
book on Sovereign Money– Beyond Reserve Banking. Because there’s no need to have
a discussion about reserves. As far as the morality
of capitalism– what’s going on with
capitalism today– I’m just going to suggest
a little bit of homework, which is Hyman Minsky’s– one
of the papers that we never talk about– never, ever talk about
Hyman Minsky’s paper number 127 which is titled, Financial
Instability and the Decline of Banking, public policy
implications in which he identifies the
problems of capitalism. And we’ve talked
about it a little bit. We’ve touched on it
a little bit, which is, they create their money, and
then they determine the capital development of the economy. That’s the superpower
of capitalism. And if we don’t
recognize that that’s the superpower of
capitalism, there’s no way we’ll be able to deal
with the immorality that comes out of it. He did suggest
that the way to get to solving it is for a
national monetary commission. So that’s one of the
things that I would say. What do you people
think about moving towards a national
monetary commission? That we overcome
the ignorance first, and then we start to put
the solutions in place. SCOTT FERGUSON: Anybody
want to take this on? ANN DAVIS: So on the ignorance– there are so many
interpretations. And so even if I
take it on myself to educate the
public about money, what I would say that I
believe might really not be what other people believe. So I think somehow we are
in the process of developing a critique and getting to
what democratic money might look like. I’m pessimistic,
personally, because I think capitalism is
in the way, but others seem to be more optimistic. But I think that’s the problem. PETER DIETSCH: If you
want to have that debate, we need to have it in the
education of economists. I mean, Jamie
mentioned it earlier. In the education of
neoclassical economists– I studied economics. I never heard about money. For four years, I never
heard about money. [LAUGHTER] So in order to get
over our disagreements, we economists need to learn. I have economics colleagues who
I told about these projects, and they say, I
don’t know how money is created in a modern economy. ANN DAVIS: There’s a reason for
that, though There’s a reason– because neoclassical
economics think it’s a veil and everything. PETER DIETSCH: Of course. AUDIENCE: [INAUDIBLE]
neoclassical economics. It’s all part of [INAUDIBLE]. SCOTT FERGUSON: Well,
we’re out of time. If you have more questions,
you can come and speak to our panelists. Help me thank them with a– [APPLAUSE]

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