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The fantasy of money and the market as outside the state


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At the New Inquiry, Julianne Werlin provides a very interesting history of money as told from the “chartalist” perspective, i.e., from the perspective of the state as being central to the market. Here’s an excerpt:

In the wake of the financial crisis, an old school of monetary history, sometimes called chartalism, gained new momentum. Introduced by the German historian G.F. Knapp in 1905, chartalism suggests that received wisdom had the relationship between the market and the state backward: It is not that money, generated by the market, is appropriated by the state in order to finance public spending, but rather that the state, by accepting the money it mints as payment for taxes, gives it a guaranteed value that makes it useful for other kinds of transactions. The story of circulation always begins with the state.

The lesson chartalists draw from this reversal, explored in detail by a heterodox school of economics called Modern Monetary Theory, is that governments have far more scope for controlling the use and value of money than most economists—or more to the point, most politicians—realize. Challenging the politics of austerity, Modern Monetary Theorists argue that the state can run high deficits safely, since it creates the means of repaying them through its ability to print currency and to generate demand for it by taxation. Governments may not be able to create gold, but like the historical Midas, they can mint currency…

Desan’s attempt to reveal the political character of money is important and timely. Now more than ever, it is impossible to regard money as a neutral medium devoid of political implications. But its politics must be conceived more broadly and deeply than chartalist theories allow. As the denouement to the Greek debt crisis showed, the politics of money can never be reduced to the decisions of a single state; it is conditioned and constrained by competing interests both nationally and internationally. The long history of English currency suggests that it always was.

Image via New Inquiry