Money as public software, rather than private hardware

There is a wonderful article that I’ve encountered on this European Election Day that – for me at least – envigorates the ideas contained within the concepts of Modern Money (MMT).

This is excellent ammunition in political arguments because it is both so concise and also itself incisive:

As elites literally claim human survival is “too expensive”, it’s crucial for movements to absorb this..chief insight. Money itself, although not always starkly a creature of the “state”, is a creature of law, just like the institutions through which it flows.

Of course the law is upheld by the state and the state is the law…

When we analyze money as public software, rather than private hardware,….

This needs emphasising and drawing attention to – this is a great aphorism. It also sounds good enough to challenge the financial world.

….we see political economy differently. For example, as Harris argues, any movement for economic justice must overcome the toxic trope of the “undeserving benefit recipient” …. In my view, MMT helps us challenge this divide-and-conquer strategy, by undermining the technical premises of “taxpayer citizenship”  …. that rights should correspond to one’s nominal contributions to government coffers.

The National Insurance System was largely based on this contribution system, but at the time we were partly on the (nominal) gold system. So the Atlee government had little choice but to follow the scenario. Whether they knew how radical they actually were, without declaring it, I’m really not sure.

But we certainly now know that National Insurance is not a ‘contribtion’, but Tax – pure and simple…

Then the article says:

There is no ‘natural’ interest rate: the Federal Reserve sets the price, rather than the quantity of…money.

That’s just it! The quantity of money is set by governments and the idea that Central Banks should set its price is really not basically, in the least credible…..

Lastly, an aphoristic conclusion:

A democracy of consumers dependent upon an aristocracy of financiers is no democracy at all.

Which is, I fear, where we are today.

Comments

  1. Andrew Dickie -

    Ages ago I gave a presentation to my CLP, in which I characterised Major’s Government as one replacing “the democracy of the ballot with the democracy of the wallet” (I like to think I coined the phrase, but almost certainly heard it elsewhere, and simply dredged it up from my memory)

    Now, however, I’d be more than happy if John Major were still PM (better still, Gordon Brown), as either of them would have long ago put this BREXIT nonsense to bed – that’s too kind; in the dustbin for preference.

    Alas, however, both if them would still be meeting stiff opposition from the following, quoted in your post:

    “A democracy of consumers dependent upon an aristocracy of
    financiers is no
    democracy at all.”

    Gordon Brown DID save the sum of things in 2008/9, and then dropped the ball (he played rugby, which is where he nearly lost the sight in one eye) by

    a) not FULLY nationalising HSBC, and making its Branches be local investment banks dependent on HSBC as a National Investment Bank and
    b) not imposing constraints, fines, and even imprisonment (a la Iceland) on the irresponsible Banks and
    bankers, who created the mess, and then profited from the bail out.

    That, alas, reinforced the “democracy of consumers dependent upon an aristocracy of financiers”

    PS: I love the idea of “money as public software, rather than private hardware” – that really clarifies the relationship between money, the State and the economy, while simultaneously attacking the claims of the wealthy to ownership of their wealth, which derives mainly from Government software of Marina Mazzucato’s “The Entrepreneurial State”, and the Nick Hanauer TED talk I referred to in another post, where he talked of the organic nature of the economy)

    1. Andrew Dickie -

      Should be a bracket at “of Marina” to read:

      (cf Marina…)

      I can’t scroll back on my mobile to edit out mistakes.

  2. Peter May -

    Many thanks, Andrew. Watched the Nick Hanauer TED talk, which was really good to hear coming from a million/billionaire.
    Mariana Mazzucato is always good to hear
    I think we have to try and spread this marvellous scheme of ‘money as public software, rather than private hardware’.
    It’s short and sweet and very much to the point!

  3. Michael Green -

    I think this makes a point that I tried to put forward in a post I recently submitted. Both sovereign governments and banks create money out of thin air, and recoup it, either as tax or loan repayment. However, some of the money falls out of the system. The difference is that banks recoup the lost money from those with least money to start with (predatory lending). Governments can set progressive tax policies so that the lost money is recouped from that part of the system where money is plentiful.

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