Home > Uncategorized > Why isn’t Modern Monetary Theory common knowledge?

Why isn’t Modern Monetary Theory common knowledge?

from Blair Fix

I’ve always been baffled why ‘modern monetary theory’ is called a theory. I don’t mean this in a disparaging way. As far as theories of money go, I think modern monetary theory (MMT for short) is the correct one. But having a correct theory of money is a bit like having a correct theory of traffic lights.

Traffic lights (like money) are a social convention. We agree that red means stop and green means go. Why we’ve chosen these particular colors is an interesting question, as is why we choose to put traffic lights where we do. But the fact that red means stop and green means go just is. It’s something we’ve defined to be true. The workings of money are similar. True, money is more complex than a traffic light — but only in application. In conceptual terms, money is equally simple. It’s a social convention that we’ve defined into existence.

To frame our discussion of money, let’s begin with what it isn’t. Money isn’t a thing. True, money can have concrete forms like dollar bills and metal coins. But it needn’t. It can be as abstract as digits in a bank account, or tallies on a stick. Money is an idea. It’s an agreement to tie our social relations to a unit of account. To understand money creation, we need only look at the principles of double-entry bookkeeping. Debt goes on one side, credit goes on the other. The two sides carry opposite signs and so cancel out. This allows us to create money while simultaneously balancing our accounts.

Here’s a simple example. Suppose that a friend does a favor for me. I want to return the favor, but don’t have the time to do so immediately. So I give my friend a note that says “Blair owes you one favor”. This note is money. It is created from nothing using the principles of bookkeeping. On one side is a debt: I owe my friend a favor. On the other side is a credit: my friend is due a favor. And that’s all there is to it. My friend can now exchange my IOU with other people. It becomes money in circulation.

Understanding this act of money creation is trivial — much like understanding the creation of a traffic light. Just like we define the rules of traffic, we define the rules of double-entry bookkeeping. We then use these rules to regulate our behavior, creating money as we please.

What’s interesting, though, is that few people misunderstand traffic lights. We all know that traffic lights can be put anywhere we want them, and that they’re based on an arbitrary social convention. Yet when it comes to money, the same is not true. Many people fundamentally misunderstand money. To them, it’s not an arbitrary social convention that can be created/destroyed at will. Instead, they perceive money as a scarce commodity — something that, like water in a desert, must be guarded and conserved.

What we really need, then, is not so much a theory of money, but a theory of why people misunderstand money.

The quantified obligation

To think about why people misunderstand money, let’s keep the definition of money in our heads. The anthropologist David Graeber defines it best. Money, he argues, is a quantified obligation. The holder of money is entitled to receive things from other people. (See his book Debt: The First 5000 Years for a detailed exposition.)

We can see from this definition that money is a powerful tool. In fact, it’s a tool for power. If I have a lot of money, I can get other people to do my bidding. This fact is hardly controversial. We all know the adage that ‘money is power’. But somehow we forget this adage when we think about money creation. Money is nothing but a quantified obligation, so in principle anyone can create it. But in practice, few people have this power. The problem is that for money to circulate, people must trust that they can use it to receive an obligation. I could try to circulate a note that says ‘Blair owes you one hug’. But other than my wife and daughter, few people want that IOU. So it will never circulate as money.

In practice, money creation is done almost exclusively by the powerful. Textbooks on money will use the word ‘trust’. They’ll say that money can circulate as long as we trust the issuer. This is true, but neglects the flip side of trust. When you trust someone, you endow them with power. When soldiers trust their commanding officer, they’re likely to obey orders. That gives the commander power. Trust, in many ways, is the basis of power. You can’t have stable power relations without it.

So while I could try to create money, few people would be interested. I lack the trust of the public, which is another way of saying that I have little power. But if government wants to create money, many people are interested. Many people trust the government, which is why governments have power.

Legitimate violence

The sociologist Max Weber famously defined the ‘state’ (i.e. government) as having a ‘monopoly on the legitimate use of violence’. I think we could equally define the ‘state’ as having a monopoly on the legitimate creation of money.1 There are interesting parallels, in fact, between violence and money.

Just like anyone can create money, anyone can do violence. You could walk onto the street right now and shoot someone. But most of us don’t. Why? First, because we think it’s wrong. Second, because the state punishes murderers. In other words, violence in modern societies is highly regulated. The same is true of money. Technically, anyone can create money. But few of us do. Your personal IOU will never circulate widely. And if you try to create state-backed money, the government will punish you. Like violence, the creation of money is tightly regulated. To see this fact, we need only look at language. We have a name for taboo violence (murder) and we have a name for taboo money creation (counterfeiting).

Those of us raised in stable societies take for granted both the regulation of violence and of money. This regulation begins to feel like a ‘natural order’. But if you were raised in a war-torn country, I suspect you’d feel differently. You’d understand that anyone can do violence — with devastating results. And if you lived through a period of hyper-inflation, you’d probably better understand that anyone can create money. (People tend to make their own money when government currency breaks down.)

Limits to government power

One of the main thrusts of modern monetary theory is to point out that government spending has no limits. If governments control their own currency, they can spend as much money as they want by creating money out of thin air. The interesting question is not whether this is true. It’s trivially true — much like it’s trivially true that a green traffic light means go. Any currency issuer (government or otherwise) can create as much money as they want. The interesting question is why governments don’t spend unlimited amounts of money.

Many economists will trumpet inflation as the boogeyman. Create too much money, they say, and you’ll have hyperinflation. Just look at what happened in the Weimar Republic. It’s true that money creation can lead to inflation. But MMT proponents point out that this has an easy solution. Government can destroy money just as easily as it can create it. Government spending creates money. Government taxation destroys it. Again, this is trivially true. And yet few (if any) governments accept this truism. In fact, most governments behave as if money, like water, is a scarce commodity. Why?

The answer, I believe, has to do with power. The creation of money is inseparable from the accumulation of power. Here’s an example. Suppose that I’m a king who claims the sole authority to create money. And suppose that everyone in my kingdom accepts this right. I create hordes of money and use it to buy all the land in my kingdom. I put the landed aristocracy out of business. And in so doing, I put all the citizens under my command. Everyone, in effect, becomes a state employee. It’s the totalitarian dream — an entire society unified under a single hierarchy.

This tale is, of course, a fantasy. The problem for a real king is that his subjects probably won’t accept his right to create unlimited amounts of money. There will be pushback, largely from other powerful people. The landed aristocracy, for instance, won’t want to give up their land. So they’ll oppose the king’s right to create money (and to tax it out of existence). History shows that rather than being sovereign money creators, feudal kings were in perpetual need of finance. This is just another way of saying that kings were relatively weak. They lacked the power to finance themselves.

What is true for the feudal king is true for modern governments. Like the king, governments can in principle create as much money as they want. But in practice they don’t, because there are limits to their power. When governments create money, they accumulate power, which implicitly means taking power away from other (powerful) people. The landed aristocracy didn’t want to cede control of their land to the king. And modern corporations don’t want to cede power to the government. And so these corporations act continuously to oppose government money creation.

The arbitrariness of power

I’m hardly the first to connect money creation with power. It’s been done countless times before. And yet many (most?) people still misunderstand money. Why? A good theory of money should explain this misunderstanding. Why — despite it being plainly true — do we recoil at the idea that anyone can create money, and as much of it as they want?

My suspicion is that accepting this fact is difficult because it means accepting that our existing social order is arbitrary. Those who create money do so not out of any natural right, but because of power that has been arbitrarily given to them. Nothing makes the human mind recoil like learning that the things we hold dear — the patterns and behaviors that dominate our lives — are arbitrary.

This points to a deep truth about human behavior. Our social conventions are, by definition, arbitrary. And yet the existence of these conventions is predicated on us believing that they are not arbitrary. One of the worst things you can say about a law is that it is ‘arbitrary’. Convince enough people of this fact and the law will soon change. Similarly, one of the worst things you can say about money creation is that it is ‘arbitrary’. Our social order depends on us forgetting (or refusing to see) this fact. The flip side is that changing the social order means remembering this arbitrariness.

Notes

  1. I can hear your objections. Private banks create money — so how can government have a monopoly on the legitimate creation of money? I think of banks as the equivalent of military subcontractors. The latter are private-sector institutions that have been given the right to do violence. The same is true with banks, only with money. Banks are private-sector institutions that have been given the right to create money. Just as easily as it was given, government could take this right away.

Further reading

Galbraith, J. (1975). Money: Whence it came, where it went. London: Deutsch.

Graeber, D. (2010). Debt: The first 5,000 years. New York: Melville House Pub.

Robbins, R. H., & Di Muzio, T. (2016). Debt as power. Manchester University Press.

Rowbotham, M. (1998). The grip of death: A study of modern money, debt slavery and destructive economics. Jon Carpenter Publishing.

  1. July 18, 2020 at 6:54 am

    Thanks Blair. Many discussions of money don’t get to that essence of it being an agreement. And an interesting discussion of how we treat it.

    At a recent conference in Adelaide (pre-virus) I asked Bill Mitchell why he called it MM Theory rather than MM Practice. His answer was about drawing out implications of the present system (I think), to which the word ‘theory’ is more appropriate. But it’s a trap when trying to explain present practice, as many of us have found – ‘radical new theory’ the commentators say.

  2. Craig
    July 18, 2020 at 8:01 am

    A very good post. And you’re right that money is about power and control. Power and control are the zeitgeist/ethics of the present age.

    The problem with money is its present paradigm, that is Debt Only. There isn’t anything inherently wrong with the idea or the nature of debt, but the monopolistic pattern of Debt Only keeps all of the economic problems heterodox economists want to change, in suspension. Integrate a new monetary and financial paradigm of Gifting into the economy and all manner of beneficial resolutions to those problems present themselves.

    • Ikonoclast
      July 20, 2020 at 5:21 am

      What is “Gifting” in your theory? You need to define it and explain it. As it is your “Gifting” is just a black box term to me. I have no idea what is in the black box nor how it connects and interacts with anything else.

      • Craig
        July 20, 2020 at 6:47 am

        Monetary Gifting in a monetary economy (it IS a monetary economy not a “veil over barter” as neo-liberal economists have re-defined and obfuscated it) is simply the strategic giving of additional purchasing power/money in the form of a universal dividend of say $1000 monthly, and via the twin policies of a 50% discount to the consumer at retail for virtually every consumer item and also at the point of note signing for big ticket items. The latter two policies work exquisitely because they are summing, ending and terminal factor expression points in the economic process and hence legitimate potential turning points. They are also universally beneficial. So much so that every retail enterprise would need to opt into them or rapidly go out of business because if you didn’t opt in they would have to get 100% of their price from the consumer while their competitors would only need to get 50% of same.

        These three basic policies (there ARE more policies, regulations and systemic changes) are a gigantic assist to all economic agents and resolve what heterodox economists say are the major problems with the present system, namely systemic monetary austerity, systemic financial instability and manipulation of the system by the dominant business model of Banking and Finance whose exclusionary and monopolistic paradigm of Debt Only as the sole form and vehicle for the creation and distribution of credit/money is the root cause that keeps all of these systemic problems in suspension.

        Do I say there will not be any borrowing? No. Do I say that resolving the major cause (the present monopolistic paradigm) of the current system will have major stabilizing and beneficial effects? Absolutely yes. Paradigm changes are always permanent beneficial and progressive phenomena, and mega paradigm changes imminently and continuously effect everyone and are trans-systemic and trans-body of knowledge beneficial and progressive. Do I say there will not be other
        problems? No. Systems, Life and the cosmos are emergent processes that will always evoke change and present problems, but again, historically, paradigm changes are permanently progressive.

        Be happy to address any other questions.

  3. John Hermann
    July 18, 2020 at 8:33 am

    In relation to the Notes at the end, it is true that banks create money but they do not create net financial assets. Only a monetary sovereign possesses the ability to create net financial assets.

  4. July 18, 2020 at 12:50 pm

    I agree with Geoff: thanks, Blair, for an illuminating discussion. I disagree with John: as I see it a monetary sovereign only possesses the ability to BUY or SELL ON net financial assets.

    Blair, I agree on traffic light colours and money being conventions, but I suggest that the first is logical and the second currently understood as quantitative. By ‘logical’ I mean that the red stops me but the green allows right of access to all the vehicles on the road crossing mine, i.e. it is a one-many relationship. This incidentally is internationally recognised, not just decided by national governments.

    Likewise barter trade is one-many, my borrowing what I am short of my neighbour has in surplus being expected to be repaid not in kind but in whatever (of many things) my neighbour may happen to be short of. Money transactions are however many-many, identification requiring logically that each side be indexed in the credit and debit columns of a book-keeper. That doesn’t have to be a government or bank: we can keep our own books to deny third parties the possibility of defrauding us, and contain the risk of that by localising government and by banks recording credit exchanges rather than wealth. At the moment we are allowing monetary conventions to be dictated to governments by international banks. In outline I argue that, like traffic light colours, government and banking should as far as possible be local (key word ‘subsidiarity’) and, by international agreement at UNESCO, maintained openly via credits and left primarily advisory.

    • John Hermann
      July 19, 2020 at 3:37 am

      Dave, a monetary sovereign government is responsible (in cooperation with the government’s central bank) for creating state fiat money (currency), which is always injected into the banking system when that government spends into the economy at large. Moreover, when such a government deficit spends, new bank deposits are created in a bank account of the payee without the creation of any matching liability. This becomes very clear when one surveys the assets and liabilities held by the payee and the payee’s bank in the wake of such a process — a net financial asset has been acquired by a non-bank. By contrast, commercial banks cannot create net financial assets on their own. I would also make the point that the creator of a nation’s currency has no need to borrow, buy or sell that currency.

  5. July 18, 2020 at 12:57 pm

    So I agree basically with Craig too, though I find his language as confusing as his money. Didn’t he say before that the ‘gifting’ had to be mutual? On a one-one or one-many basis?

    • Craig
      July 18, 2020 at 4:27 pm

      Dave,

      What is confusing about crediting a 50% discount to the consumer at the points of retail sale and at note signing, and the monetary authority debiting every cent of that retail discount back to the enterprise giving it to the individual? And the true national bank simply reducing the already 50% reduced note by another 50% at note signing, which because it is not a profit making concern and the credit is created ex nihilo like all fiat money is, can simply apply the debit credit convention at that point as well?)

      That way commerce is facilitated not inhibited by austerity/individual monetary scarcity, both the individual and commercial agents benefit and the natural philosophical concept of grace as in Gifting is self actualized in the economy and in the minds of everyone participating…continuously?

      It’s just double entry bookkeeping and wisdom applied to the economy and the money system.

  6. July 19, 2020 at 10:01 am

    John and Craig, it is not that I cannot follow the actions you are describing/imagining, my confusion arises when I try to imagine what follows from those actions. I find much the same in the discussion of MMT. It is an entirely logical (not factual) inference that the creator of money doesn’t need to borrow it. The arguments given, however, haven’t entirely disposed of the fact that banks and credit card companies, not governments, actually create the representations of value [of what, unstated: in their book the price of a commodity which sold, in mine the credit-worthiness of the buyer] which are colloquially referred to as money.

    I think the problems in economics stem from this ambiguity: unrecognised perhaps apart from Keynes in the famous quote about the need for a non-Euclidian geometry. I’m going to discuss this by reacting to Yoshinori’s significant comment on “More Complexity”.

    • John Hermann
      July 20, 2020 at 10:59 am

      Could I suggest investigating Knapp’s state theory of money, which is one of the foundation stones of MMT.

  7. Ikonoclast
    July 20, 2020 at 12:31 pm

    Blair Fix has posted a thought-provoking article here. He means, I think, that since we as a society define and prescribe modern money for certain operations then our prescription for modern money should be our ready-made description of modern money. Why should we need a theory for mere description?

    I can imagine that we might need a theory for our description of the emergent outcomes of our invention of modern money but that is not what MMT intends or tends to be. I think perhaps MMT should be called MMD (Modern Money Description) in the plain sense that one can describe what others, who have come before one, have invented. An MMD is certainly needed. The prescriptions for modern money and its operations are extensive and arcane, especially to the average person.

    Blair Fix calls money “a social convention that we’ve defined into existence”. This is true and correct as far as it goes. I contend that money, especially and precisely the numéraire, operates in a “social-fictive dimension”. In calling “value”, meaning “use value” or “exchange value”, a social-fictive dimension, I am harking back to ideas suggested to me by Blair’s earlier and excellent paper, “The Aggregation Problem: Implications for Ecological and Biophysical Economics”. In that paper, Blair talks about the aggregation problem and measurement attempts made with a fluctuating measuring stick (the numéraire). This entails, essentially, measuring in a fluctuating dimension (the social-fictive dimension of “use value or “exchange value”) by using a fluctuating base quantity (the numéraire). The dimension is social-fictive in the social-exchange-value-and-market-practice sense and the base quantity is social-fictive in the formal legal prescriptive sense. Each is socially-fictively constructed in different ways which makes their interaction even more problematic.

    In taking the discussion back to “dimension” and “base quantity” I am using the terminology of the hard sciences. By this method we must seek to find out if we can, or can ever, call economics a science. I will not keep the reader in suspense. My conclusion is that we cannot and can never call economics a science. “Dimension” in science means one of seven basic scientific dimensions which are objectively measurable precisely because the base quantity for the dimension can be objectively and reliably defined empirically.

    The SI (International System of Units) identifies seven scientific dimensions namely: time, length, mass, electric current, thermodynamic temperature, amount of substance and luminous intensity. The SI also defines their objective and reliable base units of measure. The respective base units listed in the same order are: second, meter, kilogram, ampere, kelvin, mole and candela. These are the base units.

    In economics, the base quantity is not empirically derived. It is prescribed not described. It does not bear the same relation to the dimension as does a scientific base quantity to its scientific or real dimension. In economics, the behavior of the dimension (value) is itself emergently conditioned, to some extent, by the quantities and qualities of the base quantity. In science, we can define a base quantity (say the meter) for consistent measurement in the dimension (length) but we do not and cannot affect the dimension by issuing a quantity of the base quantity. This would be an impossible absurdity in science; both the issuing of a quantity of the base quantity and its affecting the dimension.

    In economics, where the issuing of a quantity of the base quantity which affects the dimension is possible (meaning issuing money can affect agents’ assessment of various use values, which is to say money is not neutral) then fundamental laws cannot be derived for the system. This follows logically and scientifically.

    I am still trying to figure out this theory so bear with me. I do not claim my ideas are finished or even finish-able. But I am intrigued by the strange puzzle that is “economics”.

  8. Gerald Holtham
    July 21, 2020 at 4:28 pm

    The bit missing from the discussion on MMT is that no-one is obliged to take anyone else’s money. Money is a claim on resources but it is not a legal claim on anyone in particular. That means its utility depends entirely on a general confidence that other people will accept it in return for the things I want to buy. Inflation is no more than an erosion of that confidence so that money exchanges on worse and worse terms. In a Zimbabwe style hyperinflation the confidence fails completely and money becomes worthless. Governments can issue as much money as they like but if the amount of money they issue far exceeds the value of the goods and services it can buy, confidence begins to erode. That might sound theoretical but it acts as a limit on the issuance that governments can make.
    The practical difficulty is that governments do not know how much money is too much. They have only a vague idea of the supply potential of the economy at any time and an even vaguer notion of whether private people and companies will want to spend stocks of money they may be holding. Moreover while they control their own direct issuance via expenditure they have only weak control of secondary money creation by commercial banks.
    MMT is not wrong but it doesn’t get us much further because it does not address the practical difficulties. Note that monetary gifting is subject to similar uncertainties; the central authority would always be unsure how much it could safely gift..

    • Craig
      July 21, 2020 at 6:36 pm

      “Moreover while they control their own direct issuance via expenditure they have only weak control of secondary money creation by commercial banks.”

      Not if we create a truly national non-profit banking, financial and monetary system based on and fully aligned with Monetary Gifting which private banking cannot compete against seeings how they require profit, interest and clients willing to pay far more than what they would need to pay from the new national system.

      “Note that monetary gifting is subject to similar uncertainties; the central authority would always be unsure how much it could safely gift.”

      In the consumer economy it would be 50% of whatever was purchased by the consumer. That’s a nice empirical figure. Fiscally, if it ought to be whatever makes the economy more internally integrated, self sufficient and thus robust and independent from any coercion from import platforms like China. In the mean time I doubt China would refuse our currency as it is still the largest consumer economy on the planet and thus their major importer, and if they try anti-social inflation of their prices you just slap a 100% tariff on the increase. Meanwhile, as the cost decreasing effect of Monetary Gifting’s policies are implemented we become competitive with them. And as we wouldn’t have to worry about unemployment, individual monetary scarcity or inflation, re-industrializing in the most efficient and ecologically sane way possible would be the obvious thing to do…no matter whether China or anyone else liked it or not.

      MMT, Keen’s Minsky Financial Instability Hypothesis and Hudson’s Financial Parasitism are all good research. They just need the policies of Monetary Gifting to complete the paradigm change.

    • July 22, 2020 at 2:44 am

      “no-one is obliged to take anyone else’s money”
      You are obliged to take the State’s money because the State insists that you pay your taxes in its money. That is a basic part of MMT, so you need to understand it better.

      How much money is too much? Well if unemployment is high there is not enough. If inflation starts, that’s a sign of too much. You know, we used to have bouts of inflation that did not automatically turn into hyperinflation. These ‘practical difficulties’ are no reason not to do it.

      Try J.D. Alt’s ‘Millennial’s Money’, the clearest explanation I’ve seen.

    • Yoshinori Shiozawa
      July 22, 2020 at 9:59 pm

      An additional note to Gerald Holtham‘s post on July 21, 2020 at 4:28 pm

      Gerald > MMT is not wrong but it doesn’t get us much further because it does not address the practical difficulties.

      I agree with Gerald. MMT is right as a theory of normal state of the economy in which we live. But, very little explanations are given when and at what conditions the economy works as a normal state.

      For example, everybody accepts money as they normally believe that they can buy anything they want at the price near to the present one. In this belief there is an assumption that the economy runs normally. If the average demand change slowly through time, producers can produces as much as demand comes at the price set by the producer. This is not a question often asked, perhaps because people are still believing neoclassical price theory (demand and supply equality by price adjustment) or because simply they have never considered that this is a question worthy to pose. However, if we are living in a modern economy, where prices are set by producers (or sellers) and people buy goods and services at the price set by producers, this is in fact an important question. (Imagine what happened in centrally planned economy. Economy of shortage was chronic.) If this condition is not satisfied, you cannot buy what you want at the time you want and as much as you want.

      Almost of all arguments of MMT is implicitly based on the assumption that the economy is in the normal state. If it runs out of this normal state, people may run to buy what they believe necessary for near future and similar phenomena like bank run will emerge for products like toylet paper and others (Toylet paper run was observed in Japan in 1973 when people were afraid of shortage of toylet paper.) In such a case, inflation may come suddenly and the central bank cannot stop it.

      Then, we should know what are the conditions that assure normal running of the economy. My two colleagues, Kazuhisa Taniguchi, first by computer simualtion, and Masahi Morioka, by estimating the maximal absolute value of eignen values of a large matrix, succeeded to explain how this normal state of economy is possible (Chapter 4 and 6 of our book: Microfoundations of Evolutionary Economics. See for a short overview Marc Lavoie’s book review). As I have explained in Section 2.7 in Chapter 2 in the same book, the economy can follow average demand change as long as the change is sufficiently slow. For the exact meaning of “sufficiently slow”, see p.128 of the book above cited.

      MMT must be supplemented by this kind of theories on the workings of real economy (here, real means “not financial”). This is what is lacking in MMT.

      • July 23, 2020 at 3:15 am

        I agree with Yoshinori that MMT is not a complete theory. Some MMT enthusiasts imply that everything will be fixed if only we adopt MMT. Here are a few other problems that must be dealt with.

        The private banks still create far too much money, and for non-productive activities like bidding up the price of assets. They feed the boom and bust cycle of debt.

        The neoclassical equilibrium theory is still nonsense. Markets need to be managed. (This probably overlaps with Yoshinori’s comment above.)

        We need ownership structures that ensure wealth flows more fairly – coops, local shared ownership, etc.

        We need to use proper measures of wellbeing, which GDP is not.

        The financial sector trades about 50 times faster than we need, because most of its trading is parasitic. A transaction tax could remove most of that profit and bring it back to serving us.

        We need to count the ’emergent wealth’ in urban areas due to development of neighbouring properties. It belongs to the community but is captured by individuals.

        Dean Baker also has a list of structures that feed wealth to the rich, such as patent law.

  9. Ken Zimmerman
    August 4, 2020 at 3:35 pm

    Blair, I agree that money is a social convention. But just recognizing that money is a social convention tells us little about the kind of social convention it is, or about who and what it benefits and who and what it harms. A few words on those questions seem in order. The answers are, of course complex. Benefit and harm depend on which version of money is in play. Money to facilitate exchange to improve the welfare of society and each of its members is clearly beneficial. Money as a tool to gather political and economic power to a person or organization with the intent of controlling society and diminishing the welfare (including freedom) of its members is clearly not good for our species. Almost since the creation of the first bank in the 17th century, banks have supplanted governments as the creator and rule setter for money. The consequences of that arrangement have been one money crisis after another. With the debtors (the poor) and generally only the debtors being hurt. This “money revolution” hammered once-independent townsfolk and villagers into the ground and opened the way for most of them to ultimately be reduced to wage laborers, working for those who had access to the higher forms of credit created by the banks (government debt bonds), Before the 17th century the laws of money were useful if not always beneficial for artisans, merchants, and guilds. Once banks too over defining the laws of money, these folks were slowly and inexorably reduced to peonage. With but a few periods of loss of control by banks, the trend continues today.

    Since the end of the Second World War several game-changing ideas have been widely propagated and accepted in the western world – about how economies should be run, how societies should function, and how the relationship between the individual and the state should be handled. Doctrines have been victorious that, until quite recently, were dismissed as the preserve of a small and extreme minority on the fringes of politics, economics. and philosophy. In terms of longer-term history, aberrant doctrines. The interlinked ideas that came to dominate both intellectually and in terms of economic power stifled almost all opposition. Taking center stage in the entire world. For much of the 20th century, and long before that, it was recognized that societies were more than collections of atomized individuals, that their strength and cohesion were the result of a collective effort, and that it was that effort which allowed individuals, enjoying the support provided by many others, to flourish. This does not mean societies are without conflict or disagreement. They are not Pollyannaish. But so long as the members support and trust one another in their shared culture both the society and each member will in most instances blossom. The new, but really old idea that came to dominate spilled from such as Friedrich Hayek, Robert Nozick, Ayn Rand, and many others who insisted the individual was the only entity that mattered, and that any attempt to constrain individual freedom of action was anathema to any proper concept of liberty and free expression. This single change led to new rules for economies, for markets, and for economics. For example, if economic success rested almost entirely on the achievements of a few successful individuals, no reward was too great if they were to be properly recognized and encouraged to achieve even more. In the era of the huge salaries, bonuses and share issues for business leaders that preceded the global financial crisis in 2008, influential journals (such as The Economist) argued that, provided they were sanctioned by the market, there was literally no limit to the riches that could and should be paid to the most highly rewarded individuals. We are now involved in a great upheaval to determine if this social convention will continue to devastate American, indeed world society.

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