Published online 20 February 2008.
This is a review of Hutchinson, Mellor, and Olsen’s The Politics of Money, a critique of the money system that contains lots of good material, especially insofar as the authors’ discussion of the money system can be used to debunk the Republican dross about the sacredness of capitalism, but also insofar as the authors suggest a number of alternatives to the money system we currently have.
(crossposted at Docudharma)
Book review: Hutchinson, Frances, Mary Mellor and Wendy
Olsen. The Politics of Money. London: Pluto, 2002.
In American Presidential campaigns much is made of the role money plays in politics. We speculate, for instance, upon how the candidates get their campaign moneys, and about what each candidate has to promise the donors, many of them importantly wealthy, in order to get the money they get. But we rarely discuss the political ramifications of the money system itself; such a public conversation would be about how money is itself imbued with political meaning, and about what the omnipresence and omnipotence of money means for politics. Money limits which futures are possible; other imagined futures are possible only if we were to find some way of transcending the world of money, as was pictured (for instance) in the science-fiction universe of Star Trek.
More specifically, when we talk about money, we discuss it in other ways; we talk about how people have become the slaves to money, how politicians are dependent upon it for success, or about how the Bush administration spends so much of it. What we don’t talk about is what this thing we call “money” really is.
This gap in the discussion can be at least partially remedied by a reading of Hutchinson, Mellor and Olsen’s (2002) book The Politics of Money. This book, written by three British women, is exemplary because it confronts how ideals, ideals of economic democracy and of sustainability often shared by “progressives,” can only be attained if the matter of money, not just how to get it and spend it, but of the money system per se, is confronted. “New ways of theorizing and organizing economic systems are necessary if sustainable and equitable human societies are to be achieved,” the authors argue.
The first four chapters of this book enact a rather stunning critique of the money system. No doubt this is so, not for its originality, as what is said here has probably been said before, but for the elegance and simplicity of its presentation. The effect on the reader of reading the first four chapters is to clear the ground of all of the Republican dross about capitalism that typically dominates discussion about “the economy,” and so for that reason alone this book is an invaluable source for readers. The latter chapters involve the reader in a rather complex look at alternatives to the current system. The last chapter ties everything together.
The first chapter introduces us to “the money society,” in which “in capitalized market economies money means belonging.” (2) Money isn’t something just to have, though: it’s also something to borrow: “Consumption isn’t just about having money; it is access to credit as people and countries consume far beyond their current wealth.” (3) Credit, and financial speculation about credit, now of course rules the roost, with “a trillion or so dollars each day” changing hands.
The authors then proceed to a discussion of “the huge transfer of wealth from South to North through the loan shark system of North-South debt.” (6) The money economy, then, has concentrated wealth in the economies of the rich nations of the North, as wealth has been drained out of (at least) Africa and Latin America. This concentration of the money economy, however, is not held to say anything definitive about the quality of life in said regions of the world.
The authors regard the field of economics as existing in a sort of bubble created by its own circular assumptions. One of these assumptions is that “as long as it functions normally, money is considered to have no effect on the economic process, which is seen as operating on a barter principle, i.e. guns exchange for cabbages according to the operation of supply and demand in the market.” (13) However, since economists only measure money values, no economic point of comparison exists between monetary values and values which can’t be monetized – we saw how this limited the economic comprehension of environmentalism and environmental values in my review of Joan Martinez-Alier’s book last month.
But, in a money economy, the exchange of guns for cabbages has to transact through money. The cabbage sellers don’t necessarily want guns, and the gun-sellers don’t necessarily want cabbages, and so one sells cabbages for money in order to buy guns. Money, however, is controlled, and is indeed created, by those with monetary power: the governments, the banks, the rich, and those with access to credit. Economics, then, functions as the servant of this group of people:
Mainstream economic theory in effect operates as a system of rules, procedures and assumptions that justifies elite appropriation and manipulation of the material, social and intellectual resources of society through the institutions of the formal economy: property, finance, and markets. The internal logic of economic theory only possesses an elegance in so far as it is detached from the wider reality that it is seen as a distinct ‘economic’ system. For this, it is necessary to ignore the fact that the people who operate the formal economy and the materials they use originate outside the economic process… (14)
The money economy, then, exists within a larger universe, in which work is not always done for monetary reward, and in which human existence per se has an ecological basis. And, lest anyone be further confused about the intent of the authors, they tell us this: “this book is not a debate within economics; it is a debate with economics. (24)
Chapter 2 summarizes the “basic assumptions of orthodox economics” and the authors critique therein. Chapter 3 proceeds forward to a discussion of banking and economics. Here we receive the news:
Currency speculation is now beyond control. Writing in 2001 Lietaer calculated that $2 trillion were circulating per day whereas the total reserves of all the world’s banks was only $1.3 trillion of which $340 billion was in gold (2001:327). (54)
One should, perhaps, reflect upon these words when considering the monetarist doctrines of the Federal Reserve in its attempts to control the world economy.
At the end of Chapter 3 there is an excursus into the economic theories of John Law (1671-1729) to show that “money and therefore wealth is created (not through trade but) through the banking system.” “Most phenomena going under the heading of credit could be described as a form of money. Even government paper money can be viewed as government debt,” the authors explain. An elaboration follows, supplemented by a quote from Schumpeter:
Banks do not lend their deposits, or other people’s money. Banks create deposits and bank notes. Money is not a commodity, like any other commodity, because with no other commodity can a claim to the commodity serve the same purpose as the thing itself: “while I cannot ride on a claim to a horse, I can, under certain conditions, do exactly the same with claims to money as with money itself, namely buy”. (63)
So, since the world today is awash in credit and since creating credit is creating money, aren’t we all really quite wealthy? Isn’t the consumer in the driver’s seat of the economy? Well, no, since “this ignores the role of advertising and the problems of those burdened with consumer debts. Furthermore, creditworthiness becomes the basis of participation in the consumer economy.” (66)
Ultimately, within a capitalist system money is a claim upon wage labor, since “real goods and services are created by labour’s use of the natural resources of the planet.” Without wage labor, money would have no value. Credit, then, merely expands the system’s claim over the same pool of wage labor; the pool of labor does not expand merely because more credit has been issued.
In chapter 4, the authors probe the capitalist system as a whole. They argue:
Capitalism is a system based on commodity production for profitable exchange in which the majority of people are obliged to take part as waged labour if they want to survive. Capitalism is not concerned with supplying the necessities of life. Rather, it is based on institutions engaged in denial of access to the means of sustenance for the majority class, so that the minority class can pursue power and status through predatory competition. (72)
This is of course at radical variance with the propaganda version of capitalism, which exists to please the “sovereign consumer” that von Mises praised in his attack on the likes of Hutchinson, Mellor, and Olsen, titled The Anti-Capitalistic Mentality. Our authors continue:
Capitalism can be defined as the private ownership of the resources for sustenance. It is lack of access to the means of sustenance that results in the phenomenon of ‘employment.’ To gain employment, ‘free’ labour offer themselves to those who command the ‘means of production.’ (72)
“Free” labor doesn’t look all that free here, does it? “So what do you want to be when you grow up?” One answer not permitted is, “I want to live off of the land.” Of course, people actually get resources for sustenance through employment. However, this doesn’t mean that capitalism’s main business is the production of sustenance. The authors continue:
However it is important not to confuse the means of production with the means of sustenance. The means of production under capitalism do not necessarily make any contribution to human sustenance. That is why calls for the ownership and control of the means of production as defined by capital misses the point. For economic democracy what is important is that people have control over the resources necessary for their subsistence and the capacity to decide what form of productive activity will take place to meet social needs and desires. (72-73)
Capitalism operates in ignorance of human sustenance, of course, because “the logic of market capitalism is not satisfaction of human needs, but meeting of ‘effective demand,’ that is, demand backed by money.” (96) The “sovereign consumer” must have money to participate, and so production must cater to money, and not to the needs of those without. Moreover, the socialist tradition that calls for control of the means of production without questioning how the means of production has been defined by capital fails to question the real disconnection between capitalist production and production for human sustenance. Such a tradition, then (like the Soviet tradition), does not present the world with a real alternative to capitalism.
To create a social system based on effective demand, the authors argue, that “laissez-faire,” the so-called “free market” system, is centrally planned, and to buttress this argument they list the organizational structures which must precede the “free market.” The world of the “free market” must have previously been coded as “private property,” and enclosed. Indeed it is true that “publicity, transport, clerical work, and storage are required to be in place before trading can begin” (91). Beyond this, though, are a series of structures meant to ensure an ever-growing, global, elite domination:
The capitalist ‘free market’ economy has been centrally planned and controlled from its origins in the interests of the ruling elite. In a mixed economy democratic procedures may secure some concessions for the working class, but only in so far as they continue to serve the interests of the elite class. (91)
In support of this argument, the authors grant us summary histories of capitalism, the trusts, and the present-day institutions of transnational capital.
After Chapter 4 the going gets more complex, and I am tempted to discuss the material included therein in another diary. The typical reader should be forgiven for leaving Chapter 4 of this book with the impression that “the empire is so big and I am so small; what can I do?” Indeed, the authors point out that the whole world has not entirely been enclosed, and there still exist common properties and resistance movements. But the descriptions given must seem very far away to those who live in the capitalist heartlands. The Zapatistas? Papua New Guinea? The authors give us a favorable summary of the argument of Mies and Bennholdt-Thomsen’s The Subsistence Perspective, but we must still figure out on our own how to subsist in a universe dominated by capitalism.
Chapter 5 is a rather complex discussion of Karl Marx and Thorstein Veblen, both 19th c. critics of the capitalist system; Chapter 6 introduces “social credit,” a proposed system of money conceived in opposition to the capitalist financial system. This chapter, although short, puts the rest of the book on a practical basis. We are treated to a short synopsis of the “social credit” theory of Clifford Hugh Douglas (1879-1952) as it was developed in the early 20th century. In Douglas’ ideal system, money would be issued by the workers’ communities themselves, and there would be two forms of money-creation: consumer’s credits, intended to provide everyone with basic sustenance rights, and producer’s credits, intended to stabilize the economic situations of individual producers. The authors explain:
Instead of attempting to recoup the full costs of past production of the product, producers would sell at the “just price” (free of the profit and interest payments of debt-finance) of their present costs. They would be compensated for certain additional… costs through a central clearing house. (130)
The idea of such a system would be to allow for trade while at the same time allowing communities, and not a global debt-finance system, to manage their own economic affairs. Such a system would, of course, have to exist outside of the capitalist system as a whole.
The rest of The Politics of Money, outside of the concluding tenth chapter, is a survey of different critiques of capitalism, including feminist, institutional, and environmentalist critiques, many of them regarded as curiosities because they aren’t “orthodox” capitalist or Marxist, and of different proposed alternatives to the existing money system. The general line of advocacy throughout this book is that of localism; we should, they argue, be empowered to decide as local communities how we are to “make a living.”
This book, then, is valuable in that it opens up a conversation about how alternatives to the capitalist system can deal with the problem of money, of how to create a system of exchange without falling into the trap of the global money-system in which we are currently caught. The analyses therein would be useful both before and after any proposed alternatives would come into being.