A communist manifesto for money?

I am reposting the article below by Wally Mooney (with permission) which was an indirect reply to Paul Mason’s recent article.

I thought it was a very lucid and well-argued piece on why Modern Monetary Theory (MMT)’s conclusions as to how money is created is factually correct and that is the case whether you are a Marxist or a Capitalist or somewhere in between. For me it also illuminated Marxist ideas (with which I have to imagine, Paul Mason presumably agrees).

Wally writes:

I’m a Marxist political activist based in Ireland and I’ve been studying MMT for the past few years. I believe MMT does provide the correct description of the monetary system as it exists now. And that a correct understanding of the capitalist monetary system exposes the inherent illogic of the capitalist mode of production and starkly poses the question of a post capitalist planned economy as the alternative. In this way I firmly believe that MMT largely complements Marxist theory.

 

On the surface, MMT appears to offer a solution to the crisis of capitalism based on counter cyclical state intervention. On a deeper level however I believe MMT’s understanding of the monetary system lays the basis for the elimination of capitalism and the transformation to a planned economy as does our own Marxist theory of course – but from a different perspective.

 

The bulk of MMT is just the correct operational description of the monetary system which is radically different to to the illusions we hear in the mainstream economic narrative. Social democrats and liberals will draw reformist conclusion from the reality that MMT describes in their efforts to preserve the capitalist model. This doesn’t invalidate MMT’s analysis of money which I believe is objectively correct. We as Marxists can in sharp contrast draw our own revolutionary conclusions to assist us in moving to the next higher stage of societal development beyond capitalism. MMT’s description of the nature of money helps to reveal that capitalism has laid the basis for its own destruction making possible and absolutely necessary the urgent transition to a planned economy. In that planned economy money will be simply a unit of measure of economic activity which the working class uses to democratically plan production and manage resources to provide for human need.

 

From Marx we know that capital owns the means of production (e.g. factories, power plants), distribution (e.g. ports, trucks) and exchange (e.g. banks, stock markets) and the working class owning little or none of these is required to sell its labour to capital. This enables capital to lay claim to the surplus produced by the labour of the working class as the workers always receive less in wages than the value of goods & services that they have produced. The difference is the capitalists’ profit. That profit is realized in monetary form and the money represents a claim on the surplus produced by the entire global labour class. So the capitalists accumulate monetary claims on the surplus resources and their money allows them to take ownership of those resources as and when they require them in order to generate yet more profit in a continuous cycle.

 

MMT explains that under our present fiat currency system this money which the capitalists seek to accumulate originates in the nation state. The currency is brought into existence by the simple act of governments (central banks) pressing computer keys (or licensing the commercial banks to do so when thy issue loans). So it’s a colossal absurdity to allow this relentless pursuit of computer digits to destroy the habitable planet on which we all depend.

 

A shortage of money is never a problem at a macro level. The UK government for example issues its own currency. This means that when it spends, the government records numbers into assorted bank accounts stored electronically on computers and those numbers represent sterling money. The UK government cannot run out of numbers. The actual limitation is the availability of real resources such as skilled labour, energy, land, raw material and the environment. Sovereign governments spend their own currency into existence at will and then tax it back out of circulation. Government spending creates the money and taxation destroys it in a continuous flow. At a macro level the money is simply an accounting tool for measuring and allocating real resources. If a real resource exists (e.g labour) and is for sale in a particular currency then the currency issuer can always afford to buy that resource.

 

In contrast to the instant availability of money, the real wealth of goods and services that we all depend on is created by the labour and skill of the working class applied to the raw material of the planet. Everything from the food in our bellies to the clothes on our backs right up to the most sophisticated technology is made by the workers. Money is a claim on those material resources produced by the working class and this is where money derives its power. The capitalist system peddles the illusion that there is a shortage of money (balance the books, reduce the deficit, live within your means etc.) in order to oppress and control the labour class who are the real creators of wealth.

 

Money can be seen as the scoreboard of capitalism. The big capitalist class have just accumulated a large money score in their bank accounts. But ultimately in a sovereign floating currency issuing state like Britain, the government is the scorekeeper. It can change the scoreboard at any time to give itself or anyone else access to the real resources that society has produced collectively. This knowledge is toxic to the capitalist class whose power and privilege rests on having a lot of accumulated keystrokes while the majority have little.
In contrast to the parasitic capitalist class, the productive working class has produced more than enough real resources to provide everyone on the planet with proper nutrition, a decent home, healthcare, education, recreation and a job. It’s a political and ideological choice to deny people these basics.

 

So following the logic, society as a whole has no requirement for and can no longer sustain a system of productive activity with the sole purpose of accumulating money. The money that the capitalists seek to accumulate is instantly available at a government/central bank level and is merely a unit of measure to allocate the real resources that society has produced collectively. So society already has the all of the necessary components for a rationally planned economy while the capitalists still insist on pursuing these money numbers to the point of destruction of our species and much of life on the planet. Instead of this suicidal socioeconomic madness we urgently need a radically different model which democratically plans its use of resources and production in order to meet human and environmental & ecological requirements. This is the sustainable future for humanity and it’s called socialism. Or we can continue down the current path towards escalating barbarism and destruction of the global environment.

 

Our dialectic materialist method looks at things in their connections as well as how they change. Marx of course analyzed the connection between Capital, Labour and money in his Labour theory of value.

 

What MMT has done is to analyze the connection between money and the state. Money has no intrinsic value. It’s just computer entries and pieces of paper. Money exists and is accepted because the state names a unit of account (currency) and then imposes, by force if necessary, a tax liability payable only in that currency.

 

Capitalism is at its core simply the pursuit of this money through exploitation of labour, the environment and everything else it can. So the money itself which is the cornerstone of capitalism is a product and an instrument of the state. Therefore capitalism depends utterly on the authority of the state for its existence both to establish the monetary system and to enforce the capitalists’ property rights which are denominated in the state’s unit of account.

 

There can be no capitalist system without the state first establishing the monetary system. The surplus value is misappropriated by the capitalists primarily in the form of money. And the money is a claim on the real wealth produced by the working class through its labour and also on the labour itself. The money allows the capitalist to lay claim to labour, goods and services as and when he needs them. But he doesn’t need to permanently own and so bear the cost of maintaining the labour force as was the case in slave society. Nor does he need to hold all of his wealth in real assets like land, houses etc. as the aristocracy of old did. The modern capitalist buys what he wants and needs at his own convenience with his accumulated money.

 

Before capitalism developed the productive forces the state money was limited by the availability of real goods and services. The king cannot buy what does not exist. But now the productive forces are at such a peak that there is an abundance of real wealth. And the money is a claim on all of this real wealth.

 

The point of analyzing and understanding human society is to change it is as Marx explained. I think MMT gives us an insight into a great Achilles heel of capitalism and so the potential to undermine its entire foundation. The capitalists have just managed to collect a lot of keystrokes on the scoreboard of capitalism. And that scoreboard can be changed at will by those in charge of the scoreboard. The money is created at will by those entities that issue the currency. So a central bank under the democratic control of the working class will never face a shortage of its own money. The actual limitation is the availability of real resources. And the money can simply be an accounting tool, a unit of measure to allocate and manage those resources under a democratically planned economy to provide for the wellbeing of all of humanity.

 

I was rather surprised that there was so much to agree with here – yes there are a few controversial and, for me, dubious ideas such as “there can be no capitalist system without money” which I’d suggest should be: no proper economy without money, and “from Marx we know that capital owns the means of production, distribution and exchange” whereas the system of exchange in the form of banks owns pretty much everything now and I think Marxists seem preoccupied with the so called class struggle as well as materialsm (dialectical or otherwise) whilst overlooking finance’s parasitical role which has transformed what we still seem to call capitalism (now ‘new bankism’ perhaps?) so significantly.

Anyway, I sensed common purpose in the idea that because we are so deluded about the origins of money we have lost our collective power and, however you think it should change, that goes to the heart of democracy.

 

Comments

  1. Wally Mooney -

    Hi Peter,
    Hi Peter,
    Thanks for publishing the piece. On your point in relation to the parasitic finance sector I would agree and explain that this represents capital’s indirect exploitation of labour rather than the direct exploitation which occurs at the point of production. Capitalism is a highly adaptable and innovative system in finding new ways to exploit labour and in this regard finance capital has been a highly rewarding advance for the bourgeois and so by definition very costly for the working class.

    I used the money as a scoreboard metaphor above and this concept also helps to explain the trend towards finance capital over the past 5 decades. Traditional productive capital accumulates money through the exploitation of labour but creates necessary goods & services as a side effect of its quest for profit. Finance capital in contrast seeks to accumulate money without undertaking any useful activity. It just speculates on and manipulates the money scoreboard to accumulate profit for itself. Banks, stock market and currency speculation, hedge funds, derivatives etc. produce nothing of real value and are entirely parasitic on the productive working class. They just reallocate a greater portion of the money units to themselves by assorted and increasingly complex financial trickery and fraud. While the capitalist states enable, endorse and underwrite this colossal theft from labour

    So for example not one grain of rice was lost in the global banking system meltdown a decade ago. What was lost was capital’s claim on the real wealth of goods & services produced by the working class as they saw the digits tumble in their bank accounts. The capitalist states then waded in and bailed out the capitalist class to the tune of many trillions (across multiple currencies) with their unlimited monetary capacity. The “crisis” was then used as pretext to drive the working class back even further under the decade long austerity (planned poverty) program which is based on the fallacy of the currency issuer being fiscally constrained. The wealth transfer occurs is the vicious cutbacks to public services. In the privatization of public utilities. In the failure to build social and affordable housing. In the race to the bottom in wages and conditions capitals uses unemployment as a stick to beat workers into submission . Big capital always gains massively in the periodic busts that it causes and those advances are always made at the expense of the working class as borne out clearly in the economic data. It’s a vicious neoliberal Catch 22 for ordinary people justified using bogus economic propaganda.
    Cheers
    Wally

    1. Peter May -

      I basically agree though I do still think most small capitalists are not usually taking an exploitative share. After all most employment is created by SME’s yet these small capitalists are usually exploited by finance. I’d suggest I suppose that capitalists, who are often, at root, excited by new opportunities and ideas, are good for innovation whereas the exploiters are really the financiers who, as you say undertake, “no useful activity”. But they ride on the income of all others.

      1. Wally Mooney -

        The logic of the capitalism requires all capitalists whether large or small to exploit labour. Private capital has only ever had one real objective and that is the accumulation of maximum profit. It can’t be otherwise as a capitalist entity which doesn’t pursue this goal will soon cease to exist.

        Capitalist enterprise will not create a single job or produce a single product or service without the expectation of profit. Therefore capital only ever employs labour in order to exploit it to a greater or lesser degree. The sole objective of capitalist enterprise is the accumulation of profit and that profit is generated in the first instance by the workers in the excess value they create over and above their wages. That is the essence of capitalism and it’s inherently exploitative. That profit is maximized by paying labour as little as possible and working people as hard as possible. So the objective of each capitalist entity is in fact to make its workers poorer to increase profits. This is the class divide and why the interests of the classes are always opposing.

        It’s often the case that small businesses are even more ruthless with their workers than big capital as the petit bourgeois are not far removed from the working class and dread becoming part of that class. They are acutely aware that failure of their business will often condemn them to be pulled into the ranks of the exploited proletariat. In Ireland this is reflected in for example the small employers body ISME who are eternally bitterly opposed to any increase in the minimum wage. Much more so than the big capitalist representative body IBEC who can afford to take a somewhat more holistic view of the macro economy.

        In any event small businesses are becoming increasingly peripheral to the global economy now. Marx understood that capitalism always tends to monopolies and cartel as that is the most efficient model of profit extraction which is the overriding imperative of all capitalist entities.
        The free market doesn’t care about competition despite the ubiquitous claims to the contrary. Its overriding object is to maximize profit and that is often achieved by eliminating the competition. They don’t call it that of course. It’s usually referred to as “consolidation” and “mergers & acquisitions” in the mainstream but it’s essentially about the removal of competition. The trend is for more and more of global industry to be concentrated into a handful of vast corporations who snap up smaller competitors on a daily basis or merge with fellow giants to allow more efficient exploitation of a sector. The bulk of humanity’s productive capacity now rests in the hands of a few dozen colossal multinational corporations which cover the globe in a deadly parasitic embrace.

        Nor does late stage capital drive much innovation now. Most of the difficult, risky and expensive innovation and entrepreneurial effort is now undertaken by the nation states (using the collective resources of society ) which then pass on the hard won knowledge and expertise over to the private sector for profit. The present communications age is a good example. All of the component technologies which make the laptop, smartphone etc possible such as GPS, the lithium ion battery, LCDs, touch screens, voice recognition software etc were developed through state funded research. Indeed the foundation technology of the Internet itself (TCP/IP) was not developed by private enterprise. It was created by the U.S Dept. of defense and assorted other U.S government agencies and universities. After decades of research and development in the public sector, the powerful new communications technology was following market dogma handed over to the private sector to be exploited for profit.
        Here the founder of Microsoft and one the richest capitalists on the planet Bill Gates acknowledges this:

        “Since World War II, U.S.-government R&D has defined the state of the art in almost every area,” Gates said. “The private sector is in general inept.”

        https://www.indy100.com/article/bill-gates-says-that-capitalism-cannot-save-us-from-climate-change–b1xNpbL8O_x

  2. Ivan Horrocks -

    This (Wally’s retort) is certainly a fine response to Paul Mason’s argument, Peter. And all the more effective as it comes from a fellow Marxist. To me, therefore, the key passage, both in terms of accurately describing what MMT is and its potential usage – whether from a social democratic, liberal and Marxist perspective, is this:

    ‘The bulk of MMT is just the correct operational description of the monetary system which is radically different to to the illusions we hear in the mainstream economic narrative. Social democrats and liberals will draw reformist conclusion from the reality that MMT describes in their efforts to preserve the capitalist model. This doesn’t invalidate MMT’s analysis of money which I believe is objectively correct. We as Marxists can in sharp contrast draw our own revolutionary conclusions to assist us in moving to the next higher stage of societal development beyond capitalism.’

    And that just about nails where Mason gets it wrong, I’m afraid. Additionally, it exposes once again how deeply ingrained in the minds of many – including people who we might assume know better – the “myth of money” that’s been manufactured by those in power and is now central to protecting neoliberalism and all that flows from it.

  3. TonyB -

    As you are aware Ivan, if Paul Mason and the like didn’t self censor – “you wouldn’t be sitting where you are”. Quote from Noam Chomsky to Andrew Marr.

  4. Peter May -

    Wally, I do get the theory and a lot, it seems to me, depends on what you mean by ‘exploit labour’. Under practical capitalism not everyone always operates in a capitalist way. It may not make them rich but perhaps they improve their mental health, or get to work in a pleasant part of the world.
    As we’ve seen our societies taken over by corporations and financiers, the corporations are capitalists but in a different league to SME’s and financiers are usually to be found feeding off both of them or just making money by paper shuffling in ‘shadow banking’. These are actually the people who as you might say have ‘the most efficient model of profit extraction’.
    Which is why we spend so much time talking about money on this blog, I suppose.
    And the ‘free market’ is never of course free, which is why there is so much lobbying to influence governments, who make the rules for the ‘free market’. And as you say the state has a lot of input (is that state capitalism?) as “The Entrepreneurial State” by Mariana Mazzucato shows.And of course it is often acquired for free by those who use it for their own business purposes…

Write a reply or comment Comments Policy

Your email address will not be published. Required fields are marked *

Name *