Public Money for Public Purpose: Toward the End of Plutocracy and the Triumph of Democracy – Part V

By Dan Kervick, a PhD in Philosophy and an active independent scholar specializing in the philosophy of David Hume who also does research in decision theory and analytic metaphysics. Cross posted from New Economics Perspectives.

Where We Can Go from Here

I have asked the reader to follow me through a lengthy series of reflections and thought experiments on the nature and role of money in modern economies.   Some might ask why this issue is so important.  How can these ruminations on the nature of modern monetary systems help guide our thinking on the task of building a more fair and decent society of democratic equals?   How can they help us create a society in which democratic solidarity trumps self-regarding and avaricious greed, and in which broad and shared prosperity replaces the concentrated economic privilege and supremacy of the few?

It is important to keep the political problem of money in proper perspective.  No one needs to be reminded that money plays an incredibly significant role in modern societies.  But it is also important not to overrate the role of money.  The most important reason to reflect on the nature of money is that by doing so we better understand all those things that are not money, all of the sources of real and non-instrumental value in the world that are the ultimate ends we seek and the ultimate sources of our happiness.  And as we improve our understanding of the purposes served by money and monetary systems, our improved understanding can help liberate us from our dependency on monetary systems controlled by the powerful.

Clearly money is just an instrument:  a tool that helps us to organize our economic lives.  It is used for assigning quantitative values to the real goods and services we produce.  It assists in the production, distribution and exchange of those goods and services, and in the prudent storage of value and purchasing power over time.   A monetary system cannot be separated from the larger economic and social order of which it is a part.   A more democratic monetary system will therefore be part of a more democratic economic system and a more democratic society.

The cause of genuine democracy will, of course, require steps that go well beyond reform of the monetary system.  If we seek a more democratic society, one in which decision-making power over our everyday lives and common futures is more evenly distributed among all of our people, it will be necessary for all of us to embrace the demanding responsibilities of democratic governance.   This can be hard to do in the face of so many decades of governmental failure, where government itself has sometimes seemed to have become nothing but a tool of the plutocracy.  Some of the tendency in recent history among dissidents and reformers has been to pull away from one another other rather than pull together.  Some of us hope only to liberate ourselves from government and from one another in order to be left alone to pursue our individual happiness on our own terms.

This thoroughly individualistic approach cannot succeed. The cravings for ever more personal freedom, and for ever more liberation from the responsibilities of democratic government, will only lead to the eventual dissolution of democratic government and the triumph of authoritarianism.  Either we work together as equals to govern our lives and govern our societies, or ambitious and ruthless people commanding great stores of wealth will take advantage of the vacuum to seize control and govern our societies for us.   The urge for freedom is natural and praiseworthy, but the dream of a real and durable freedom that can exist outside the cooperative efforts of a democratic people practicing vigilant and industrious democratic governance is not the dream of a free people, but the twilight illusion of a defeated and alienated people who have given up on the kinds of freedom and well-being that can only be achieved through social solidarity and teamwork.

In the end, we are dependent and social creatures, built by nature for social and community life, and for relationships based on love, fellowship and friendship.

We have been living in recent decades through an anti-social era of greed, separation and inequality.   Those of us who have lived this way for a long time might have become accustomed to the norms and practices of this era, and might even have convinced ourselves that these norms and practices are appropriate and healthy.   But the rising generation of young people, whose natural and healthy sociality and friendliness has not yet been too damaged and disfigured by the ruthless demands of the system of greed know that something  is wrong.  They know that our present way of economic life is disordered and out of balance.

The anti-social era has been marked by a fatalistic passivity in the face of unregulated commerce and market behavior.    But the forlorn era of low social expectations is dying; we can feel it.   People are tired of being on their own.   The defeatist dogma about social change characterizing this dying era is that we can’t choose our society’s future, because people are too weak and stupid and selfish and limited for collective effort to succeed on a large scale.  The future can onlyemerge in an entirely unpredictable fashion from the crisscrossing patterns of individuals pursuing their own personal goals without any significant degree of social cooperation or coordination.   The result of this trend in thinking has been a withering of the social imagination and the enfeeblement of the democratic practices of our people.

In the neoliberal world of the past few decades, politics has become small, unambitious and managerial.   This dispirited managerial government presides over a society in which pathologies of social living are promoted as virtues: radical individualism, greed, ambitions of supremacy, cravings for isolation, hatred of community, and a debasement of healthy human relationships into commercial and exploitative transactions come to be seen as normal.   But the gloomy religions of self-seeking isolation are not just debilitating; they are dispiriting.  As David Graeber has written, “the last thirty years have seen the construction of a vast bureaucratic apparatus for the creation and maintenance of hopelessness, a giant machine designed, first and foremost, to destroy any sense of possible alternative futures.”

The fading era of market fundamentalism and hyper-individualism was trumpeted as the “end of history.”   But history is starting up again.   In the shadow of the current recession, we are beginning to recapture the optimistic sense that the future is something we can envision and choose.  We can work to build a social consensus about the future we want, make large and ambitious choices about the shape of that future and then work with one another in the task of creating the future we have envisioned.   We need not sit back, wait, and just see what turns up.  The possibility of a mass democratic movement for profound social change begins with the recognition that the machine of despair is a lie, and that success is actually possible.

It is starting.   People all over the world, frustrated by the dismal and meaningless pursuit of individual achievement and material gain alone without larger social purpose, and fatigued by the insecurity, stresses and manic busyness that afflict the neoliberal individual, are reaching out to re-forge the social contract, establish a new sense of justice based on teamwork and equality, and articulate visions of the human future that are a match for the inherent human dignity we sense in ourselves and recognize in our fellows.   The world that we have passively allowed to be built around us by commercial frenzy devoid of higher purpose is an assault on that dignity.

It is notable and inspiring that as the Occupy Wall Street movement took shape around the United States and other parts of the world, the participants in the occupations organized themselves as communities of equals, in which every voice is equally prized and harmonious consensus is avidly sought.  The hunger for democratic community and self-determination is palpable.  This is not the laissez faire form of self-determination, in which each individual strives only to determine the course of one individual life, but a more encompassing phenomenon, in which people strive to build and sustain communities and then work together as equals in order to make well-founded, democratic decisions to determine the direction of the community.   It’s hard work.    But the work is inspiring and ennobling, and people are naturally drawn to it.

In both the United States and Europe, policy-making elites – whose allegiances are to the plutocrats who are responsible for funding and sustaining the political operations of these elites – are aggressively working to take advantage of the stress and confusion caused by the present global economic crisis to dismantle progressive social systems.  They are targeting systems of public ownership and organized social cooperation, and are working to undermine the capacity for democratic governance.   For the very wealthy, democratic governments represent nothing but competitors.   These governments have sometimes acted in the past to diminish some of the formidable power the wealthy would otherwise possess over entire societies, and they sometimes even strip them of some of the wealth that they have earned from the sweat of others.  Plutocrats would like nothing better than to put real democracy out of business, and to leave behind nothing but a toy facsimile of democracy – something like a high school student government that is allowed to engage in a little democratic role-playing inside an adult social institution that the students really don’t control.

So the plutocrats have put out a stark and coordinated message through the media channels they control, and through the opinion-leaders they own and influence.  It is a message designed to invoke fear and panic, and to achieve democratic surrender:   The message is that we are out of money, that our governments are bankrupt, that they must opt for austerity and downsizing and contraction, and that we must hand over even more decision-making to bankers, bond markets and technocrats – the functionaries of the plutocracy.
This message is preposterous.   Societies build their futures and common wealth out of the real resources they possess, not out of money.  Money is only a tool, and it is the simplest and most inexpensive tool we can make.   Modern democracies are very rich in human, material and technological resources.   We are not “out of” anything important of real and fundamental value.  The plutocrats might be out of ideas; and they are running out of time.   But the democratic peoples over whom the plutocrats are trying to reassert control are only out of patience with the plutocracy.

And this brings us back to the issue of monetary democracy.  The time has come to consider some specifics:  What role can money play in building a more democratic society?  How should we organize our monetary system so that the public’s money is ruled by the public and made to serve public purposes, and is not instead perverted into an instrument that primarily serves plutocrats in their drive to rule over the public?   In the final installment in this series I will propose six tasks for democratic economic reform, each of which has some dependence on the democratic reform of our monetary system.

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About Matt Stoller

From 2011-2012, Matt was a fellow at the Roosevelt Institute. He contributed to Politico, Alternet, Salon, The Nation and Reuters, focusing on the intersection of foreclosures, the financial system, and political corruption. In 2012, he starred in “Brand X with Russell Brand” on the FX network, and was a writer and consultant for the show. He has also produced for MSNBC’s The Dylan Ratigan Show. From 2009-2010, he worked as Senior Policy Advisor for Congressman Alan Grayson. You can follow him on Twitter at @matthewstoller.


  1. Peripheral Visionary

    I have been trying to follow this series, and while it has been interesting, I keep coming back to two key issues that I think have not been addressed: obligations to entities outside the monetary system; and future obligations that will need to be met with real resources. Changing the distribution of the accounting entries that fiat money represents addresses neither.

    It reminds me a little of the discovery of first-year accounting students, that changing the accounts seems to change everything – why, the accounts receivable can simply be incremented at the same that the profits are incremented, and it is profits from now until forever! Well, no, accounting is not the real world, it is only supposed to represent the real world, and changing the accounting does not change anything of substance. Likewise with money, it is only intended to represent the invisible system of expectations and obligations between individuals and organizations, to try and tinker with the system of book entries without addressing the underlying reality – distribution of goods and services – is a waste of time or worse.

    1. Dan Kervick

      I think I’m in complete agreement, Peripheral Vision, and said something similar in my second-to-last paragraph – and a few other places.

      I don’t think I’m just advocating changes to the bookkeeping, other than those which might obscure the way things stand with real resources rather than clarify them. The point is to see that the only things that limit us are our real resources. We should never allow ourselves to be fooled into thinking that, as a society, there are things we can’t do because we are “out of money”. Money in the modern world is simply a tool manufactured by governments, at negligible cost, to measure and store value and property claims, and to facilitate the exchange of real goods and services. If there are unemployed human and material resources that can and should be put to work to revive our stagnant economic lives, but if we are lacking for some reason in sufficient financial instruments to put these real goods and services into action, then we can just create the additional financial instruments we need and spend them into the economy.

      Money casts, for some reason, a kind of dazzling and illusory spell over people. They use and work with money every day, and basically know how to use it for everyday concerns, but sometimes don’t fully understand what it is they are working with. The money starts to function as an opaque wall obscuring the real world. the point of spending so much time looking at money and the monetary system, in order to understand them, is to make it easier to see through money and beyond it.

      1. Peripheral Visionary

        Thanks for the response Dan. I agree with your conclusion that we are not “out of money”; but the more serious problem, in my mind, is that we are short on resources, not just for what what we consume now, but also for what our trading partners expect from us, and for what we have committed to for the future (which is particularly dire given impending demographic pressures). If revising the monetary system helps us get at that reality, I would certainly support that effort.

  2. Susan the other

    Democratic economic reform is dependent on the democratic reform of our monetary system. It is so ironic that our system has grown into such a monster of complexity which was designed to exclude people from participation – except to be exploited or ignored by the “productive class,” which in turn controls the monetary system. Maybe we should seek a clear definition of the word “productive.” And recognize that any group of people making such a mess of things, on a global scale no less, has no control whatsoever. They only have the means to enforce their will, not the mandate.

    1. Dan Kervick

      There was a good recent discussion of the role of complexity over at Steve Randy Waldman’s blog interfluidity. Surely part of that role is to allow experts to exploit information asymmetry to bamboozle and exploit there customers – which explains why the financial sector brought out all of the big guns to fight off Elizabeth Warren and the Consumer Financial Protection Agency.

      Hyman Minsky argued that size and complexity played a role in the inherent instability of modern capitalist financial systems, and their evolution from robust systems based mainly on hedge positions to fragile systems with a higher and higher percentage of speculative and Ponzi positions.

    2. Joe Firestone (LetsGetitDone)

      I don’t think we can get a definition of productive that will do us any good without recourse to value theory. That is, economic definitions of productivity in terms of output per labor hour don’t work, because types of output have different value as everyone knows. Junk has no value. But what is junk, and how much it we produce, compared to things that are valuable is not known. Economic approaches to valuing things have been primarily based on the market or on “utility” approaches. But I think direct value theory approaches are necessary. I’ve got some ideas on that, but really can’t cover them in a comment.

  3. Whatidocy

    Oh for Pete’s sake, you “plutocracy” is really just the power of the Democrats Nomenklatura,/i>. It is the Soft Left, recently harding, that has been in power since the New Deal, not some “Plutocracy”. This is just rehashed agiprop straight out of the playbook of the 1930’s COMINTERN, which is just the scapegoat of Marxist propagandists and the hobgoblin of the fevered minds of those propagandists useful idiots.

    OWS is an organized Neo-Maoist, political front controlled uy professional Marxists. It in no way represents “the people”, or is it “spontaneous. Those people represent not even 1 percent of their populations of their respective nations. THis just just standard Communist theatrics.

    It is profoundly dishonest of you, both intellectually and morally, fro you to pretend otherwise.

    Likewise, you notion that stealing money from the productive will make the nation more “democratic” is pure sophistry. Democracy has absolutely nothing to do with equality of income. It is equality before the ballot box and the courts.
    This is just more communist slide of hand. The very last thing that you want is democracy and liberty, for there you must face you own limitations. Better the tyranny of socialism where you can steal from other and indulge your vileness.

    You must vilify those who you would pilfer, but it does nto change the fact that what you are advocating is totalitarian Socialism, and this absolutely never ends with “democracy”, but with an empowered elite who enslaves the masses. This is the “Plutocracy” to be feared,not so electioneering fiction sent out by the Marxist in the DNC.

    Stop pretending the OWS is not a wholly manufactured movement and represents “the will of the people”; it represents anything but that: The manipulation of fools by their moral weakness through propaganda. You would understand that if you were over the age of 50..

    You are either a liar or a useful idiot for liars. In either case, what you are advocating is absolute treason.

    The problem that face is collectiovism in all its various guises. Most Particualalry, we must chuck Liberalsim as propffered by the Democratinc Party.

    Jealousyl and envy cannot be the basis of any meaningfully moral political plaform.

    It is not other people’s fault that you are unhappy with your life. You call to destroy all that has made us great in the name of “monetary deomocracy”, which, of course, is just gobbldygook masking the theivery that socialism is, will lead us inot the darkest of nights.

    Stop think that the worls owes you something. IT does not. If you want more money, go out and work for it and stop making up demons to blame your mediopcrity on.

    1. Travizm

      I would think democracy is about informed choices.

      Information asymmetry is thus a vulnerability to democracy as it can be gamed.

      And WTF with marx being bandied like an effin leper….like you represent some kind of unquantified puss if you agree with anything he ever said…..what ive read of marx is surprisingly robust thinking….the fact that its attacked…especially attacked emotionally….leaves me suspicious that it touches on a soft spot.

      Watching Les Miserables today and couldnt help but think of USA…

    2. James Hogan

      replying to whatidiocy–

      I don’t think you’ve ever had a difficult job in your entire life. I don’t think you’ve ever given any thought to how you have wound up in your own miserable circumstances. I don’t think you have ever studied the past in any meaningful way in your entire life.

      You are the perfect subject for the propaganda of the extreme right. How do I suspect that? Because here you are, having swallowed it whole, parroting it on a competing blog. Judging by your use of the language I can tell that you aren’t very smart, and have no qualifications whatsoever for making such pronouncements; nevertheless, here your are screaming at your supposed enemies.

      What you need to do is to look at the distribution of income in the US. There are charts galore showing how the bottom 90% have been systematically pushed down while the uppermost 1% have garnered most of the wealth of the nation. What is even more disgusting is that the uppermost 0.1% of the public have become fabulously wealthy while the bottom 50% of the public has suffered.

      Well, what’s wrong with that, I’m sure you’ll counter, What is wrong with that is that it is the US consumer that makes the economy go. If we take away the money from the consumer the economy grinds to a halt. The ultra-rich are very bad consumers–they have everything they want already and have no need for more.

      But people who live from paycheck-to-paycheck will spend what they have in their paychecks. And that spending makes it possible for others to have more money in their own paychecks. And the world goes around like that.

      So, take a deep breath, step back a bit and go to the library and try to learn something about what you are ranting about.

      The truth will astound you, I guarantee.

      1. James

        “replying to whatidiocy–”

        Looks like you were a bit too generous. whatidocy came up a bit short on the word idiocy. Go figure.

      2. jonboinAR

        What should the labeling of those who have all the $ “the productive” be called? Propaganda! As to the OWS being organized by a slightly shadowy group? Yes, most likely, as was Tea Party. That’s probably inevitably how these spontaneous looking things occur. The pot’s calling the kettle black in your post.

        The bottom line that we’re all around here railing about is that the 1%, and especially the .1$ have managed to reap ALL of the fruits of the gains in productivity over the past 30 years, all through the successfully disseminated propaganda of “free markets” and “get the government off of people’s backs.” Your ilk is right. We ARE promoting class warfare, but it’s to combat the class predation that’s occured since at least the 70’s. (When one side remains passive, as you wish most of us to continue to be, that’s class predation. Once we begin fighting back, that will be class warfare. Bring it on!)

    3. James

      “Likewise, you notion that stealing money from the productive will make the nation more “democratic” is pure sophistry.”

      Yes, and now that the money’s been stolen from the truly productive – the American WORKING class – we’d like it back. Surely you don’t think the 1% actually produces anything of value – other than financial terrorism – now do you?

  4. JTFaraday

    I respect your moral sentiments, Dan. But right now you are just hope-a-doping the crowd down a primrose path.

    1. Dan Kervick

      I really don’t think there is any point in thinking and talking about this stuff at all, JTFaraday, if you don’t keep alive the sense that there is actually something that can be done to change things. Modern neoliberal capitalism controls people by teaching them that they are socially powerless and hopeless as a group, and the only things they can (sometimes) control are a few things in their small individual sphere, like the number of shoes in their closet and the number of apps on their iPhone.

      I think the things I’m describing are possible. But they won’t happen just by investing some voting booth time in the latest politician-savior. They will require an organized mass democratic movement – and I think people realize that building and sustaining such a movement, and defeating the many enemies such a movement will have, is very hard work and doesn’t look like a walk down a primrose path.

      1. JamesW

        “But they won’t happen just by investing some voting booth time in the latest politician-savior.”

        Thank you. (They — the Vietnamese — did it many years back, to the Americans! And, many years later, I now fully agree with Hanoi Hannah’s comments on Wall Street’s running dog lackeys….”)

      2. JTFaraday

        You just wrote a 6 part article on MMT. That’s about engaging with closed-ended policy entrepreneurialism, not about furthering open democratic processes.

        All of this ceaseless MMT promotion–and the self-promotion of the MMT-ers– has become very stultifying in record time.

        Not because monetary policy is a complex issue requiring technical expertise, but because its acolytes are already exhibiting authoritarian tendencies and they haven’t even gotten out of the box yet.

        I also see no necessary connection between monetary policy and ANY PARTICULAR government employment policy. That they are so heavily promoting this ONE PARTICULAR employment policy–and that it rots so badly and places no obligation on the private sector whatsoever– strikes me as more than a little grotesquely obeisant to multinationals and entirely neoliberal in orientation.

        Well, sell me down the river.

        No doubt about it. Something so intimately involving of the lives of persons who are not neo-liberal policy entrepreneurs should be *wide open* to democratic deliberation about what kind of society WE want to see and what kind of work arrangements WE want to be in, not a one-way dictation from self-promoting technocrats in waiting.

        I also find the way they talk about the unemployed as if they were the dregs of humanity–even in the light of the crisis driven recession in which plenty of skilled people were put out of work–a tad repulsive.

        A big turn off all around. (Then we wonder why people decide they must really be libertarians).

        1. Dan Kervick

          JTFaraday, the connection is that some employment policies will require the expenditure of public funds. So it is relevant to discuss issues surrounding the federal budget – and whether or not we are “broke” or “out of money” – as part of the discussion about whether those spending proposals are feasible. It is also important to discuss the claims that additional money-financed spending will be inflationary – or even “hyperinflationary” as some critics charge.

          Obviously the private sector will play a huge role if we are ever to get anything close to full employment again. Right now, it is playing the almost the entire role. I do want to see an expanded public sector role. I don’t see how it is authoritarian to suggest that the public sector should employ maybe 10% of our people, with the private sector employing the other 90%. This is hardly some kind of government takeover of the economy. And nobody’s talking about ramming such a policy down people’s throats. We would just like people to support it, advocate for it, demonstrate for it, and then convey their support to their elected representatives so that it gets turned into a reality.

          You completely lost me on the neoliberalism charge. I think of myself as an opponent of neoliberalism. Neoliberalism is a tendency that took root under Reagan and Thatcher, and was expanded under Clinton, the Bushes, the IMF Washington Consensus and now for the most part under Obama – although it is cracking just a bit under the strain of the recession (or what I like to call the Great Income Crash). It is an approach that has abandoned activist fiscal policy, killed off unions, deregulated the financial sector, reduced marginal tax rates at the top of the income scale, abandoned any commitment to egalitarianism, and promoted the reduction of the public sector and the increasing reliance on the private sector and markets. Since I want to reverse these directions, I don’t see myself as neoliberal.

          Also I’m no technocrat. As you will see in Part 6, I favor the a reform of monetary policy that makes it the responsibility of elected political leaders and open democratic debate, and takes it out of the hands of technocratic central bankers working in private.

          Since I’m not one of the people responsible for developing the MMT school of thought, I’ll mainly let those folks defend themselves. But I think you are just absolutely wrong about MMT writers talking about the unemployed as though they are the dregs of society. The MMT writers have been vociferous in criticizing the government for its failure to treat unemployment as Job One, and for turning toward the pseudo-problem of debt hysteria and the promotion of austerity. While others argue that there is a tradeoff between full employment and price stability, and so the best we can hope for is to reduce the unemployment rate to the “natural rate of unemployment”, the MMT thinkers have zealously promoted the idea that we can have full employment and price stability. Their passionate concern for the problem of unemployment is what first drew me to them. Here is a recent post by MMT leading light Bill Mitchell making these points again:

        1. Joe Firestone (LetsGetitDone)

          JT, You’re just way offbase about MMT in every way. This:

          “I also see no necessary connection between monetary policy and ANY PARTICULAR government employment policy. That they are so heavily promoting this ONE PARTICULAR employment policy–and that it rots so badly and places no obligation on the private sector whatsoever– strikes me as more than a little grotesquely obeisant to multinationals and entirely neoliberal in orientation.”

          Immediately indicates you haven’t read any MMT to speak of. It’ not primarily about monetary policy. It’s about fiscal policy. Ir criticizes neo-liberal views on fiscal policy from the viewpoint of the realities of monetary operations. But most of the policy recommendations arising from MMT thinkers are fiscal policies. On April 28, 2010, some of us ran a Fiscal Sustainability Teach-In Counter-Conference at The George Washington University where many of the most well-known MMT Theorists and writers spoke, including Bill Mitchell, Warren Mosler, Randy Wray, Marshall Auerback, Stephanie Kea number of people who became MMT bloggers. The proceedings of the Conference are available here at selise’s site in various forms:

          Please take some time to go through them and really hear what the speakers have to say and how they respond to Q and A. If you do, you’ll never make the mistake of saying that MMT is primarily about monetary policy again. Nor when you hear and see them speak will you ever again say anything remotely like this:

          “No doubt about it. Something so intimately involving of the lives of persons who are not neo-liberal policy entrepreneurs should be *wide open* to democratic deliberation about what kind of society WE want to see and what kind of work arrangements WE want to be in, not a one-way dictation from self-promoting technocrats in waiting.

          I also find the way they talk about the unemployed as if they were the dregs of humanity–even in the light of the crisis driven recession in which plenty of skilled people were put out of work–a tad repulsive.”

          The original MMT thinkers believe that unemployment is a crime of society against people. There is no way they think that any of the unemployed are “the dregs of humanity.”

          Also, if you really care about the unemployed and are not simply debating in bad faith, then after you go through these proceedings you proceed here and read every post Billy’s done on unemployment and neo-liberalism, and then try to show me or anyone else through quotations that Billy Mitchell thinks that any of the unemployed recent, skilled, unskilled, or long-term are the dregs of humanity.

      3. Joe Firestone (LetsGetitDone)

        I’m with you, Dan. Repeating the comment I made at NEP:

        Good preparation for Part Six and nice writing, framing things in terms of the central concern of our time.

        I have a series of my own in process called the Emerging Oligarchy series. Here’s Part Five which has links to the other four. At least two more parts still in process. Here are links to other relevant posts.

        I’m looking forward to Part Six

  5. Paul Tioxon

    These things go in cycles.

    We lived before science, before money, before the development of language. All of these great tools were used by humanity to get where we are today. Our tools, our invented instruments, including ideas and concepts, did not build the social order, people did and will continue to do so. We run more on hope, than money. Rugged individuals should have no need for language or money which are both inherently social enterprises used in conjunction with others. But they really need the rest of us to survive. Without out the larger community our words and stories would have no meaning, only when we direct them outward to others do they take shape. Likewise money. Without people in a larger society, why would we ever develop it?

    The first people were mute, without language. Before we even farmed in settled communities, we developed a tool of communication in order to work, to hunt together. Look at human communication today, how rich and complex it is expanding so far beyond speech to writing, film and transmitted by the internet worldwide. We have come from nothing and we did so without a dollar or a pocket to carry it in. Think of how much more we can accomplish today!

    There is a recognition of how great the Chinese economy is today. How far and fast it is growing. Compared with India, which is no slouch either, it seems to have taken a lead role as the factory of the world. Why not India, or Brazil? They all have the cheap labor that everyone wants. Why aren’t the factories of Brazil the equal of China, why isn’t India on a par with China as well?
    One answer is the development of the rural population by the Communist Party under Mao. Decades of investment in health care and investment in education, in the human capital, not so much the physical infrastructure, is what prepared China to grab the opportunity to populate so many factories with the young from the rural areas by the hundreds of millions. Without the people ready to work in a productive capacity, all of the money in the world invested in China would just produce ghost cities and empty office parks.

    The US has one world class advantage that no one has yet to match: our education system, in particular our research universities and community colleges all across the country. The people have been heavily invested in with this system of higher education that is distributed through out the nation. And the best of the best cull the population for talent by the high school SAT tests, looking for intelligence, even the kind that is not reflected in grades, over achiever activity dossiers of school paper editor, president of the class or debate team captain. For a very long time, America has mined its greatest wealth from its citizenry and circulated people from the bottom of Appalachian hollows, urban ghettos and mid West corn fields to the halls of power, wealth and decision making. We have all we need to build a Great Community, upon the material prosperity of the present.

  6. craazyman

    Dan you’re a smart guy, maybe you can figure this out.

    I’ve been straining my brain to understand how many people it takes to go from a household (which is a currency user) to a society that can sponsor and maintain a currency. This is a fundamental question of the highest theoretical interest (no pun intended).

    Money is a form of cultural imagination and it takes its power by virtue of the culture’s agreement to cooperate with each other using it as a trust medium.

    In fact, in this regard it is not especially different — pyschoanalytically speaking — from the totems and taboos that regulate interaction in what are somewhat pejoritavely called “primitive” cultures.

    However, what the primitive culture maintains as a overall ensemble of organizing principles that do not lend themselves to easy deconstruction and manipulation, and that require either full cooperation or open revolt, money atomizes the trust ensemble into discrete units that can be disaggregated and traded. Clearly we see here the impact of western rationalism, whereas in the primitive culture we see the impact of non-rational mythopoeticism.

    The division line is not so black and white, perhaps, but what is interesting about money is the fact that it represents the atomization of the creative and industrious live preserving spirit of a community or tribe, if you wil. It also acts as an abstract form of force and protection, which is evident simply by observation, but which aligns the idea of money with the idea of the life force itself. And so those without money are seen as “invalid” or invalids because they do not possess the life force in a nourishing quantity. They become scapegoats who deflect from the society it’s inward directed death-fear-neuroses.

    And we see these ideas also in the descension of money from religious functionarial rituals and why we also see the rebellion against a hypocritical religous functionarianism in Jesus’ removal of the money changers from the temple.

    And so, without wandering around too much like a drunk, the elemental question is this: How many people and what sort of population does it take to create and support a functional currency. By possession of their own currency, they possess in metaphor (and in actuality) their own spiritual group consciousness and control their own methods of social cooperation.

    I figure it’s about 20,000 souls. With that kind of number, we can easily imagine local currencies that complement and supplement a broader-based national currency. The local currencies would take their power from local taxation and would enable impoverished communities operating well below their cooperation potential to energize their latent cooperation in the form of economic activity.

    However, there would need to exist group consciousness structures that could be activated by the creation of a monetary medium that they control. And this is always a potential problem. Not all communities have these self-organizing conscisouness structures. It’s why some populations do not thrive even when they are showered with money, because it goes into a few corrupt pockets and is not broadly distributed and used.

    1. Dan Kervick

      Wow. This is hard. And it’s really far outside my competence.

      One thing I would suggest is that we shouldn’t overestimate the element of trust. People are willing to accept a particular form of money in exchange for goods and services because they are confident that other people around them will continue to accept money in exchange for goods and services. What is the source of that confidence? Well one “Humean” answer would be that there is no source for the confidence other than the existing pattern of acceptance, and the natural tendency of human beings to assume that the future will be like the past. So there is some “trust” here – but it’s similar to the trust you have that the sun will rise. You don’t have to trust your neighbor – in the social or interpersonal sense of that word – in order to be confident that he will take your many in exchange for the squash he is selling.

      But my gut instinct is that pure habit-based monetary stability would tend to be much shorter-lasting than our current monetary system has proven to be, and subject to much wilder swings of panic, confusion, rumors, and rapid spontaneous replacement by other monetary systems. But we have governments. Governments can do various things to stabilize and preserve a monetary system over time, and ground our confidence in something more durable than mere habitual pattern. They pass and enforce laws surrounding the use of money, establishing firm legal obligations regarding money, and those regulatory structures help cement the monetary order in place and give it stability over many years and decades.

      Also, money is a kind of technology – an extremely useful one. And it is a technology with which most currently living human beings are very familiar and on which most of us rely. So it is much easier for a government to establish and preserve a monetary system over time these day, because people want there to be a monetary system. If for whatever reason an existing monetary system collapsed, people would immediately demand that the government step up to provide a new one, just as they would demand the government rebuild essential roads and bridges if they were destroyed by a natural disaster. They would say, “C’mon. Cut out some pieces of paper, stamp some pictures on them, distribute them around the country, and let’s get going.”

    2. Travizm


      Im lost for words…

      Amazing post!

      I NOW UNDERSTAND MONEY!!!!!!!!!!!!!!

      Thanks Craazyman…brilliant brilliant mind…

    3. beowulf

      Size is irrelevant since there are monetarily sovereign countries with smaller populations than individual US counties. For example, New Zealand has half the population of Los Angeles County.
      The three elements of sovereignty are a monopolies on violence, taxation and the creation of money.

      In our country, State and local govts share sovereignty over the first two with Uncle Sam. The last one is solely in Congress’s wheelhouse (which they’ve mostly outsourced to private banks).

    4. GrandCamel

      I think you posted something similarly brilliant on Huffington post that I just read yesterday.

      Our minds are on very similar paths. My thought experiment is that everyone is born and dies with their own personal currency (currencies and/or virtual-wealth needs to obey the laws of impermanence). The reasoning is that the currency needs to carry informational content about value that can only be judged through a lens of personal value learning algorithms we train to help us discover exploitive behavior in our cooperative relational economic networks. The physics problem of an undying universal scalar value (money) is it loses usable information quickly through dispersion. Ungodly concentrations of wealth act as entropy accelerators in the process of dissolution of the system that sustains it (similar to “black holes”).

      If we invert the center of value to be on our actual lives we create vectors (e.g. to represent relationships) that can create complex living systems out of our relationships (which the vector allows us to see as it really is). I expect we would see complex positive feedback loops evolve and adapt as our circumstances change. This existing scalar system of “wealth” creates a duality of money (positive) & debt (negative) with interest bearing debt acting as a hostile binding agent that forces unnatural & exploitive relationships between people focused on the delusional fantasy of infinite growth in a finite realm (Earth).

      Anyways, I probably could better describe in long form from a physics perspective (tl;dr style).

      Craazyman, you have a real gift at seeing into cultural spirit of economics. Thank you for sharing your insights!

    5. Foppe

      Very nice post craazyman.. I would venture a few suggestions: first, try to make this notion of ‘group consciousness structures’ much more concrete.. My own suggestion for that would be knowledge of/familiarity with specific types of organizational structures that can be employed by such groups, in combination with built infrastructure, but it is pretty hard to say what this should mean for the psychological makeup, skill sets and preferences (and cultural diversity, education level differences, etc.) of such a population. There is a large literature on the topic of anarchist modes of organization (as well as alternatives to money, such as time-sharing or time-banking systems) out there already that might be worth reading — e.g. Colin Ward’s “Anarchism as a Theory of Organization”. Two additional books that might be useful here are Graeber’s Possibilities, and Harvey’s Cosmopolitanism and the Geographies of Freedom (the latter for reasons that might not be obvious directly, but I suspect you will find it interesting nonetheless).

      As to trust: it is certainly important, but as it is a consequence of ‘right’ interaction, it strikes me as a kind of secondary worry — certainly important in western society, where everyone is taught to abuse confidences and punish people for being trusting, but not so much otherwise.

    6. psychohistorian

      An interesting rabbit hole to go down but I don’t agree that money is or should be looked at as the center of group organization. Medium of exchange is good but what if you are the Native Americans about property rights? Nice theory and practice that bit the dust when it came up against Manifest Destiny, private ownership of property, inherited wealth and guns.

      If might does not always make right, how do we move from where we are to somewhere else that seems less imbalanced?

      I often feel like this Woody Allen character watching society crater as a species as we madly enter our textual white noise screaming EVOLVE DAMMIT, EVOLVE!!!

      Maybe next time when it comes around on the guitar we will get it right.

    7. Joe Firestone (LetsGetitDone)

      Federal taxes couldn’t be paid in the local currency, because it’s the Federal monopoly over its own currency that makes US fiat currency valuable. So, since people would need Federal currency to pay Federal taxes, convenience considerations would then soon see to it that people used only the Federal currency for commerce.

      On the origin of money see:


      I think their views on the origin of money are closer to the truth than yours.

      1. F. Beard

        So, since people would need Federal currency to pay Federal taxes, convenience considerations would then soon see to it that people used only the Federal currency for commerce. Joe Firestone (LetsGetitDone)

        Probably so, if Federal currency was managed properly and not used to, say, bailout private businesses such as the banks and thereby cause or threaten a “stealth inflation tax”.

        So what is to be lost by allowing private currencies?

  7. nah

    the law has a glaring lack of accountability for ‘lots and lots and lots’ of money in bank accounts
    its an unusual victimless crime of epiphany

  8. joebhed

    To me, there’s a certain irony in attempting to broach the subject of THE ROLE OF MONEY in a modern monetary system (small m’s) via course after course of rather disconnected social anecdotes. It’s the Money SYSTEM.

    The only way to come to understand the proper role of money in a modern monetary system framework is to FORGET everything taught in economics about money, and to rebuild from the present social constructs of a sovereign people with human needs that are legally organized with limited resource availability.
    For a historical reconstruct, please visit the American Colonies: almost unlimited resources, a naturally hardworking and free-thinking spirited people, and the NEED for a system of economic exchange.

    What form would their currency take, and what role would it play in achieving the broadest prosperity for all?
    Look at its mechanics and its success – so great that the Brits (with all due respect) passed a law against the Colonies’ use of their own currencies.
    Leading to ?
    Yes, the War for Independence – in money.

    The most rational discussion to promote the concepts of real wealth and its distribution was laid out by non-economist and Nobelist Frederick Soddy.

    His book on The Role of Money best lays out how a scientific mind sees the NEED for a money system to function in order to achieve the broadest distribution of the wealth created by labor and energy.

    And, his book on Wealth, Virtual Wealth and Debt should lay out the real SCORECARD for visiting the nouveau financial casino and casting OFF those parts without real social merit.

    We will not arrive at MMT.
    We will select therefrom that which is really critical to our social well-being, especially including Lerner’s debt-free money, and we will once and for all solve for Minsky.

    It will take us to the solution available through H.R. 2990.
    Complete monetary sovereignty.
    Economic democracy.
    Bankers doing banking.
    And government managing the national monetary system.
    Just like, for the most part, the Colonies.

    For the Money System Common.

  9. Ray Phenicie

    The author makes an interesting point: Money is merely a tool-the building of the tool, the implementation of the tool, how the tool is used, who uses it, where it is used, to what ends it will be used, who benefits from its uses . . . can the impatient reader please meditate for a couple of days on these thoughts and then comment?

    No automobile can run without oil. No person can live on just air and water alone. No living thing lives in isolation. We live in a social universe. I thought the author made those points clear but I guess some people are unable to follow through on a thought.

    So lets breathe in on the count of eight
    1 , 2 ,3, 4, 5, 6,7, 8
    Now release the air out slowly on the count of eight
    1 , 2 ,3, 4, 5, 6,7, 8
    Again, this time to the count of 9.

    Chill out folks and meditate for the new year on the hopes and fears that we all face. We can build a better world.
    We can build our dreams into reality.
    We are the controllers of our own fates.

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