[P2P-F] Fwd: Money for the People (GTN Discussion)

[Michel Bauwens]

---------- Forwarded message ----------
From: Great Transition Network <gtnetwork at greattransition.org>
Date: Tue, Sep 19, 2017 at 9:55 PM
Subject: Money for the People (GTN Discussion)
To: michelsub2004 at gmail.com



>From Mary  Mellor <m.mellor at northumbria.ac.uk>

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[NOTE: In July, we had a lively discussion on Mary Mellor’s essay “Money
for the People.” Please find Mary’s response, delayed due to illness,
below. You can review all comments on her piece at
www.greattransition.org/forum/gti-discussions/191-money-for-the-people. Now
back to the discussion of Luis Cabrera’s “Global Government Revisited.” ---
Paul Raskin]

Response to Reponses – Mary Mellor

First, I would like to thank everyone for their responses. I found them
both helpful and challenging. It was particularly encouraging that the
topic of money was seen as important, even if the perspectives varied. In
my response, I want to focus on a few key themes.

Large-Scale Public versus Human-Scale Social

This dichotomy was picked up by a number of people. I agree with Gwen
Hallsmith’s point that “public, private, global, local, large and small—all
of these demand definition and rethinking.” This is as true of assumptions
about the local and social as it is of the large and public. Is small
always good? What will be the ownership patterns of local economies? Is the
core assumption that they are market systems? The fact that British
“building societies,” akin to credit unions but focused on home mortgages,
are social banks did not save them from privatisation or the German public
banks from dabbling in securitisation.

I think the pessimism about political parties, the state, and public
structures generally plays into the hands of market fundamentalists. This
is not to ignore the limits and failures of the public sector. What we need
to do is socialise public money and ensure that social money has a public
focus. Who will care for the elderly in the decentralised economies? Who
will train the medics? I focus on public, national currencies because that
is where we are now. It is the point from which the transition must begin.
An alternative scenario would be to abandon national money systems in
favour of a plethora of local monies, but I don’t think that would be wise.
If we are to see local initiatives as parallel or complementary, then this
must assume they are parallel to a continuing public currency. In that
case, we need to have a perspective on how the public currency would
operate both in the transition and in the future.

Although my essay focuses on money, my underlying proposition is about the
nature of the economic system. The circulation of social money leaves open
the fundamental nature of the economy. Is it a self-organising market based
on individualised choices, or is it a social/public provisioning system
involving collective decision-making? If it is a market, then the social
money is purely a medium of exchange. This fits well with the emergence of
cryptocurrencies. I agree with Michel Bauwens that these are
anarcho-capitalist in orientation. Is it possible to have more socially
responsive markets as several people suggest? Can the blockchain model or
innovative commons-based systems such as crowd funding, peer-to-peer
networking, or open platform cooperatives provide a decentralised
alternative to the private market? Do they still depend on individualised
spontaneity, or can they produce coordinated provisioning systems?

The process that dares not speak its name in this neoliberal world is
planning. The core assumption of my perspective is that there is a need for
a democratically planned public economy that would be organised through the
allocation of publicly created debt free money. This is not the same as
wholesale nationalisation of the economy. A major area of debate would be
what is appropriate to be delivered though some version of the market
(hopefully transformed by all the innovative ideas above) and what should
be provisioned through the public sector. For me, the important potential
of public money is that it allows for democratic planning in decisions
about how money is to be allocated or spent.

I hope it proves possible to build from the ground up as many of the
suggested approaches envisaged. I see my focus on democratising and
decentralising from the top down as supportive of these initiatives not in
competition with them. I agree with Howard Richards that a vibrant social
economy can empower the state. The British Labour Party has benefitted from
a strong historical relationship with the consumer cooperative movement.
The social economy also can (re)emerge when states and markets fail.

Reforming Money

Among the comments, there were many suggestions for issuing new currencies
or providing basic incomes. Some combined both. Alf Hornborg suggests that
a basic income should be issued by the state in a currency that can only be
circulated locally. He sees this as overcoming the problem of having public
currencies as general purpose money that can be used in destructive ways.
David Schweickart, by contrast, outlines his reservations about a basic
income, and although supportive of a basic income, I share such concerns.
The danger is that it dissipates without producing either an individual
good or public good. What matters are the provisioning structures that
exist, and these cannot be created by the mere distribution of money. With
multiple currencies, I also worry how they will be coordinated at the
boundary between them. My approach is to keep the general purpose money and
deal with destructive uses through regulatory and fiscal measures. As
Hornborg himself argues, what is
important is the value system that underpins the currency.

What and How

Several commenters emphasized the need to clarify the “what” and the “how”.
The “what” for me is the public money system and the public economy—in
short, funding public welfare and public provisioning (services and
infrastructure). I don’t see this as the only focus for change and
transition, or even a determining one. There are plenty of others as many
people pointed out. However, I think it is an important one and a major
area of challenge to neoliberalism. Public welfare has been undermined by a
shift to a blame culture rather than an entitlement culture (i.e., the
widespread belief that people are in need through their own inadequacies).
It is claimed that welfare cannot be afforded and public services are
inefficient. Taxes are increasingly framed as voluntary.

Although I imagine the respondents will have little sympathy with
neoliberalism, many expressed reservations about public money,
representative democracy, and large-scale structures generally. I think
what matters is wellth—how can the goods and services people need for
wellbeing and flourishing be provided. What structures will best serve the
most needy/troubled members of society? What happens to those who are sick
or have disabilities, those who are old with no family, those who are poor,
or those off the net with no computer literacy? Until I am convinced that
the techno-optimists of the blockchain and open-source era have a strategy
for those “others,” I will defend the principle of a comprehensive welfare
state. And funding that state is a key issue.

The “how” is twofold. The first is campaigning for social justice and the
right to livelihood for all (including other species)—promoting sufficiency
provisioning for all and reversing the emphasis on individualism and
bootstraps (shared by conservatives and progressives in their different
ways). This cannot be done on a purely ad hoc basis: there needs to be
policy and planning, responsibility for the well-being of others, etc. I
think some respondents may be very uncomfortable with this. None of this is
new; there have been welfare campaigners for centuries.

The second “how” is overturning neoliberal ideology and neoclassical
economics. I am often described as a monetary reformer, but I consider
myself more a monetary re-thinker. While there is certainly need for a new
approach to monetary policy, I see this as being based on how money really
works rather than prevailing economic myths. What I have tried to show in
my books is that public money does exist, states do print money, money is
not in short supply, public expenditure does not rest on taxation, the
public sector is not funded by the private sector, banks do not link savers
and borrowers, a debt-based money supply is not viable, public sector
deficits (surplus expenditure) are usually a good thing—among many other
points. Re-thinking alone cannot achieve change—this will come from the
exposed failures of current thinking and practice, if we are ready with an
alternative analysis and framework for action. I think most respondents
agreed broadly with my analysis;
differences came in what should be done.

As Susan Butler says, the “how” is preparing our own minds for deep change.

The Interest Problem

The question of the relationship between debt, interest, and destructive
economic growth caused major disagreement. I asserted several times in the
paper that there is a link between the three. I was referring to what seems
to be a commonsense notion that if all the money supply is created as
interest-bearing debt in total, then the banks must always want back more
money than they create. Further, as people have to find the money to repay
debt, this is likely to include destructive forms of growth. Evidence and
modelling seems to disprove both ideas. Clearly, debt-based money expansion
can occur without triggering more resource damage—as in the example of the
growth in finance. Peter Victor and Tim Jackson have shown that debt-based
money creation does not trigger growth. I don’t think these reservations
undermine my other two critiques of a debt-based money supply. It is
socially unjust as only the “credit-worthy” (according to the banks) can
access new money, creating
“left behind” people and communities. And it is economically unsustainable
because it is crisis-ridden. A credit crunch threatens the money supply
requiring the state to step in, thus revealing the myths of market adequacy
and state dependence. I don’t think a capitalist steady state economy is
possible for the reasons David Schweickart says: investor confidence and
constant demand are key drivers.

How Should Money Be Created?

Brent Ranalli asked how I envisage the creation of money post-transition.
He lists the possible alternatives as (a) the state’s fixing the whole
money supply (100% reserve), (b) money creation by nationalised banks, (c)
banks as independent utilities with windfall profits, and (d) banks as
agents of the central bank or treasury. My position is at a slight angle to
these choices. My focus is on public expenditure, which I see as
essentially a process of money creation. In the same way that banks create
money when they lend, states create money when they spend. The idea that
banks create money through loans is becoming generally accepted; that
states create money when they spend has yet to be widely recognised. States
do “print money” as they spend, but this only becomes obvious if public
expenditure is not matched by a retrieval of that money through taxation
(balancing the books). The fact that surplus expenditure (deficit) is
recognised and allowed even by the neoliberal EU
Maastricht Rules shows that money creation through public expenditure takes
place. Public borrowing to cover any deficit is post hoc and is a monetary
rather than a fiscal exercise.

It is therefore the democratic demand for public expenditure that will
drive money creation. The level of tax retrieval will be a major
determinant of the size of the private sector. Any public expenditure not
retrieved will either be held as savings/investment or spent in the market
sector. This would have repercussions for the balance of payments if there
were no controls. As Schmaltz points out, Bernard Lietaer’s solution is to
have a separate global currency, particularly as most current global
monetary transactions are purely speculative. In my recent book, I make a
similar suggestion.

Schmaltz also favours alternative forms of exchange to avoid the
monetization of care and other altruistic activities. As with my earlier
comments about alternative internal currencies, I am not sure if this will
solve problems or prove a bureaucratic nightmare as different types of
currency butt up against each other. My hunch is that it may be simpler to
minimize the number of currencies but make their use more democratic. This
would include making the rules and regulations under which the market
operates a matter for public debate. This could include social, public, or
commercial banks. Whether these operate on the basis of revolving loan
funds or money creation would, again, be a matter for democratic debate. I
think the difference between my approach and that of most monetary
theorists is that they see the market as the predominant economic form
whereas I see the public economy as more important (including within the
present system). For example, modern monetary theory (MMT)
sees public money creation as supportive of the market sector in its role
as employer of last resort. I would see money creation as enabling social
and public provisioning as employment of first resort.

******************************************

>From Paul Raskin <praskin at tellus.org>

-----
Dear GTN,

The old proverb—money is the root of all evil—may overstate the case, but
money is, indeed, implicated in the iniquitous debt/growth spiral now
degrading Earthland.

Mary Mellor explains in her new GTI essay, “Money for the People,” that it
needn’t be so. The modern money system is a social construct that evolved
to spur capital accumulation, but lingers on in an era needing, instead, to
throttle consumerism, debt, and the economic growth machine. Rather than
creating money privately through bank lending, as the current system does,
an alternative approach—public money—can undergird an economy oriented
toward people and use value, not profit and exchange value.

I think you’ll find Mary’s vision of a critical institutional pillar of a
Great Transition economy illuminating, intriguing, and inspiring. Please
read it at www.greattransition.org/publication/money-for-the-people, and
let the comments and questions begin! How would public money work in
practice? How would it interface with the market? How might its pursuit
contribute to strategies for system change?

Comments are welcome through JULY 31.

Looking forward,
Paul Raskin
GTI Director

HOW WE WORK
Odd-numbered months are for internal GT Network discussions; even-numbered
months are for public dissemination. You will receive all comments via
email, and can review the entire thread online at
www.greattransition.org/forum/gti-forum. The essay will be published
alongside a “Roundtable,” comprised of selected comments from the GTN
discussion and a response from the author.

PS: Apologies for any difficulties getting to the website over the past
couple days. It’s back up and running!

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Hit reply to post a message
Or see thread and reply online at
http://www.greattransition.org/forum/gti-discussions/191-
money-for-the-people/2442

Need help? Email jcohn at tellus.org





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