The Brooklyn Rail

FEB 2021

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FEB 2021 Issue
Field Notes

The Money Theory of the State

Reflections on Modern Monetary Theory

“No domination is so easily borne, even so gratefully felt, as the domination of high-minded and highly educated officials.” — Georg Friedrich Knapp1

Kafka’s unfinished final novel, The Castle, can be read as a parable about the misrecognition of power. In the course of trying to discover if he has, or has not, been appointed as a land surveyor by the local authorities, the protagonist K. becomes obsessed with the authorities themselves, the officials of the great castle whose shadow looms over the village below. Its bureaucrats cut nearly superhuman figures, working tirelessly day and night on countless cases while keeping track of innumerable files with an otherworldly zeal that overawes K. and the villagers, who respect and even revere them. Over the course of the narrative, though, it becomes evident that all this strenuous paper-pushing might be completely pointless, directed to tasks they may never complete, involving problems and questions that cannot be resolved or perhaps never existed in the first place—including, probably, K.’s appointment. The officials might very well have no idea what they are doing, or they might be useless drones, working themselves to death toiling away in busy work that never goes anywhere. But for K. this is unthinkable. For their prestige flows from the impersonal rule of the mechanism, the calcified, methodical, formal procedures that, as in a cage, enfold and dominate the officials and the villagers alike. K. deploys his own formidable powers of reasoning to penetrate their mysteries in his quest to gain permission to enter the castle. But the more he learns, the more he calmly reasons and deduces the state of affairs with impeccable logic, the more transfixed he is by the officials’ cabbalistic aura, the more entangled he becomes in their byzantine networks of influence, and the more he effectively dominates himself.

Kafka’s paradoxical presentation of modern power dramatizes the motif of alienation: something unintentionally created by people that takes on a life of its own and, in turn, dominates them. In Kafka, the governing authorities are not the source, but more like the confused custodians of this obscure power, which comes from elsewhere—perhaps only from the imagination of K. and the villagers. Yet K. cannot resist attributing quasi-divine qualities to the authorities themselves. He cannot help fetishizing them, investing them with the superordinate knowledge to decide his fate. The bureaucrats appear to be avatars of technical control, when in fact they, like K., are subordinated to the same system of rational irrationality.

The Castle was published in 1926, around the same time another ambivalent theorist of official authority, John Maynard Keynes, was developing the ideas that would eventually coalesce in a new language of capitalist governance. Like K., Keynes took it as an article of faith that state functionaries could govern in the serene name of reason, floating above the messy conflicts of the market economy in order to manage it for the good of the “national community.” Also like K., Keynes looked to rational authority for salvation, specifically to a scientifically-trained state bureaucracy equipped with a theory which, if competently practiced, would optimize economic growth and more equally distribute its fruits. If all went well, the villagers would be happy.

Appearing in 1936, Keynes’s most influential work, The General Theory of Employment, Interest and Money, was aimed at the most pressing ill afflicting the industrialized economies at the time: grinding, chronically high unemployment. The General Theory was widely taken to have overturned the dusty doctrine of laissez faire, the traditional notion that markets regulate themselves to optimum effect. Keynes considered this to be “a bit of metaphysical thinking,” and instead placed the national government in a leading economic role as the fiscal agent whose unique spending power and control over investment “will prove the only means of securing an approximation of full employment.”2 Now, in a similar time of global crisis almost a full century later, Keynesian remedies are popular again, as social democrats mine the past for something to replace the shattered hegemony of neoliberalism. This mostly takes the form of a search for new models of monetary and fiscal policy, and the ideological warfare around Modern Monetary Theory (MMT) is a case in point.

MMT has become a cause célèbre in recent years for insisting that government spending is not constrained by a budget, in the traditional sense. Cutting against mainstream economic thinking, which sees excessive government deficits and rising debt as an inflationary danger, MMT argues that a government issuing, borrowing, and collecting taxes in its own currency can spend as much money as it wants, so long as it is a fiat currency not tied to a commodity like gold, nor pegged to another foreign currency in a fixed exchange ratio. Governments fundamentally differ from individuals in this way. As a taxpayer, your spending is constrained by the amount of currency in your bank account; for the government that issues that currency, however, no such limit exists, because unlike you it can essentially create money out of thin air, and then get others—like you — to use it. Such a monetary sovereign can, and therefore should, create and spend as much as it needs to secure full employment and mobilize all available resources in its economy, regardless of deficits and limited only by the need to keep inflation under control. Or, in the words of the economist and MMT forefather Abba P. Lerner, finance should be “functional,” evaluated by its results on the economy, rather than "sound," shackled by arbitrary, self-imposed budget limits.3 “Countries with monetary sovereignty, then, don't have to manage their budgets as a household would," says Stephanie Kelton, one of MMT's leading economists. “They can use their currency-issuing capacity to pursue policies aimed at maintaining a full employment economy.”4 If the British aristocrat Keynes was writing at the twilight of the British Empire, now the MMT movement emerges in the darkening glow of another senescent, slowly dying superpower, offering similar remedies to stay the terminal decline of American capitalism.

Kelton herself was the chief economic advisor for the Bernie Sanders campaigns in both 2016 and 2020. For her, a greatly expanded role for government spending and a federal jobs guarantee would yield a “people’s economy,” in which “private enterprise and public investment all combine to raise living standards for everyone.”5 Some take it even further. In a book called Reclaiming the State, William Mitchell and Thomas Fazi enlist MMT as a central pillar in a campaign to rescue the nation state as part of a “progressive vision of sovereignty.” This entails nothing less than a “drastic expansion of the state’s role—and an equally drastic downsizing of the private sector’s role—in the investment, production, and distribution system,” even “a broad renationalisation of key sectors of the economy and a new and updated notion of planning.”6

These supposedly leftwing applications of MMT sit awkwardly next to the theory's enthusiastic reception by a fun assortment of libertarians, plutocrats, war criminals, and corporate-nationalist reactionaries. The hedge fund manager Warren Mosler, its principal founding figure, conceived his foundational text “Soft Currency Economics” “after spending an hour in the steam room with [Donald] Rumsfeld at the Racquet Club in Chicago.”7 Rumsfeld helpfully referred Mosler to the famous huckster of Reaganite trickle-down economics, Arthur Laffer, who then directed him to his future collaborator, the wealthy financier Mark McNary. Unsurprisingly, given this provenance, Mosler has also been received enthusiastically by Tea Party Republicans.8 John Carney, a Trumpist economics columnist at Breitbart, enthusiastically endorses MMT, even suggesting that “the idea for a job guarantee is ‘very close to what Make America Great is. We don’t want welfare, we don’t want handouts, we want good jobs for the American people.’”9 He predicts more support on the right for MMT once people begin to realize it justifies more tax cuts. The Republican Senator Marco Rubio approvingly cites the prominent MMT economist L. Randall Wray in his corporate nationalist manifesto, “American Investment in the 21st Century.”10 And Donald Trump himself is on record as having seen the light, telling a former chief economic advisor that we should “just run the presses—print money.”11

The weird cast of characters coalescing around and in the background of MMT reflects how the theory rests on a basis of incontrovertible fact that anyone can see. Trump, for instance, has probably never heard of the theory, but he knows very well that the US Federal Reserve can simply buy bonds indefinitely as a way to directly juice the stock market—which it has indeed been doing almost continuously since 2008. Moreover, it can apparently do so without the slightest hint of inflation. This flies in the face of the budgetary dogmas of neoclassical economists and “deficit hawk” politicians, who axiomatically believe that deficit spending by governments will accelerate inflation by devaluing the currency and driving up prices.12 Yet for over a decade now the balance sheet of the Federal Reserve has steadily expanded, through all of its various monetary stimulus programs, by seven trillion dollars and counting.13 In response to the COVID-19 pandemic in early 2020, the Fed intervened in global credit markets with an unprecedented commitment, if necessary, to flood the markets with a deluge of dollars over three times as large, some $23.5 trillion.14 In the orthodox view, a monetary supernova of this scale should have vaporized the value of the currency, burning it away through hyperinflation, but in fact the dollar has actually appreciated. In effect, MMT provides a formal theory for the current, de facto state policy of unlimited monetary expansion, as the central banks continue to flood private banks and corporations with tidal waves of free money, like some gigantic iron lung pumping oxygen into the comatose body of a braindead patient.15

From Monetary Sovereignty to Neo-Chartalism

MMT may describe existing monetary policy, but it is not reducible to it. Claiming to be a general theory of money tout court, it reverses much of the received wisdom in economics. In one of economists’ most venerable folktales, money naturally emerged from the inconveniences of barter.16 As people trade with one another, they face the problem that they can only exchange with the particular goods they happen to have, so that if two people want to trade, each has to have something the other wants; if not, an exchange won't happen. As a general good for which all others can be exchanged, money simplifies the process by serving as something that everyone values and anyone will accept for payment.

This idyllic scene of private agents exchanging goods and services with one another to satisfy their wants is the real basis of economic life, according to the predominant, neoclassical school of economics. Here, money only greases the gears of exchange, which are what really matter—to use an old neoclassical canard, it is a "neutral veil" over the real relationships of the market.17 If left to itself, the market mechanism will lead to the mutual benefit of all parties involved, as trade continues until each individual's preferences are satisfied as much as they can be with existing resources.

MMT stands the neoclassical account of money and markets on its head. Instead of originating in private exchange, money comes from governments. Paraphrasing Keynes, Wray states that “for the past 4,000 years …our monetary system has been a ‘state money system.’ To simplify, that is one in which the state chooses the money of account, imposes obligations, (taxes, tributes, tithes, fines, and fees) denominated in that money unit, and issues a currency accepted in payment of those obligations.”18 Following Keynes's A Treatise on Money, Wray and other MMT economists see money not as a particular commodity, but first and foremost as an accounting device chosen by the public authority, which it then issues as its own liability.19 The currency is then accepted by buyers and sellers because, at the end of the day, they must use it to pay what they owe to the state. This sequence reverses the causal priority: it is not markets that make money, but state money that makes markets.20

With this redefinition of money, MMT then draws out further reversals of orthodoxy. Rather than taxing in order to spend, governments spend money into the economy first, and only tax or borrow later to adjust prices. They can do this because, unlike you and me, they issue currencies in high demand. For instance, the US government, as the sole issuer of one of the key global reserve currencies, the dollar, need only credit the bank accounts of federal contractors by instructing its central bank, the Federal Reserve, to do so. The government does not need to take money from a pre-existing stash of tax revenue, because it has the power to create the money in the first place that is then, later, collected as taxes. It is merely an accounting exercise. Likewise, when a central bank like the Fed buys bonds from banks and businesses, it does so by expanding its own balance sheet—effectively creating money on the spot through keystrokes, to use a favored MMT image. Commenting on this procedure, former Fed Chair Ben Bernanke captured the formidable technical aptitude of the neoliberal elite: "We just use the computer to mark up the size of the accounts."21

These macroeconomic ideas are not just a legacy of MMT's Keynesian assumptions. Giving the state analytical priority in the theory of money preceded Keynes's most influential arguments by some 30 years, appearing in Germany in the early 20th century under the heading of “chartalism.” Chartalism, from the Latin charta meaning a token or ticket, locates the origins of money in political order. The sovereign is always responsible for legally and institutionally designing money, for shaping how it works, whom it serves, and the rules that govern its circulation throughout the polity—money is always a “constitutional project,” in Christine Desan's formulation.22 MMT explicitly presents itself as a continuation of chartalism. "MMT rejects the ahistorical barter narrative," Kelton explains, "drawing instead on an extensive body of scholarship known as chartalism, which shows that taxes were the vehicle that allowed ancient rulers and early nation-states to introduce their own currencies, which only later circulated as a medium of exchange among private individuals.”23 It might seem strange that a theory with "modern" in its name would ground itself in a theory supposedly just as true for the ancient Sumerian kings of old as it is for today's United States. But while rulers may have indeed issued money in their chosen unit of account for millennia, the elaboration of this historical fact into an official philosophy of money is specifically modern.

State of Nature

The term “chartalism” was coined in 1905 by Georg Friedrich Knapp, an economist and statistician of Imperial Germany and one of the chief ancestors of MMT, when he published The State Theory of Money.24 Written in the twilight of the classical international gold standard, Knapp's theory took direct aim at metallic notions of money, or "metallism," which identified the essence of money with the supposedly unique, physical properties of the precious metals. He argues that the conventional definition of money as a medium of exchange is only a special case of the more general concept of the means of payment, the officially accepted unit for settling debts, which can take forms that may or may not involve a metal base.

With its analysis of the monetary system as a legally constructed “administrative phenomenon,” The State Theory was an intellectual expression of German dirigisme around the turn of the 20th century, the governmental project to actively organize the national economy into a more competitive shape by leveling industrial tariffs (mainly against Great Britain), forming cartels across its heavy industries and banking sector, and actively managing the exchange rate of the Deutschmark—again, primarily against the British pound.25 Chartalism is thus a felicitous philosophy for underwriting projects of economic statecraft.26 While Knapp declares in the first sentence of the book that “money is a creature of law,” he later clarifies that the state “is not, in fact, bound by its laws, which it only maintains for its subjects: from time to time it of itself creates new rights and obligations to meet the facts administratively, and perhaps afterward changes the law to make it correspond.”27 Laws do not determine what is to count as money, “for they are powerless against their creator, the State; the state in its payments decides what is … money and the Law Courts follow suit.”28 The state is as a demiurge, creating and destroying through the sheer act of its will.29 Neoclassicals assume the individual, bartering trader as their most basic unit; chartalism takes the state as the foundational concept of economic life. It effectively opposes the methodological individualism of the neoclassicals with methodological statism, swapping one transhistorical assumption with another.

In the State Theory money changes historically, but the state as its generative principle stands outside history, designating and modifying the currency as necessary to “meet the facts.” It is quite literally naturalized. Like many economists of the time, Knapp was heavily influenced by classical mechanics, but particularly the formative ideas of the French mathematician Jean-Louis Lagrange, who sought to model the movements of physical systems in a small set of elegant equations. In fact The State Theory has been described by one of Knapp’s foremost students as an explicit attempt to “apply the Lagrangian principle to the essence of money: the constitution of a complex system in a simple formulation.”30 One of its strangest features is its baroque terminology, a catalogue of Greek and Latin neologisms that, according to the author, are meant to give it the imprimatur of an empirical science, like chemistry or botany.31 These terms, which Knapp enthusiastically proclaims to be "founded upon Political Science," mimic the Latinate names of zoological and botanical species with words like valuta, hylodromy, and authylism. The text composes a natural history of the monetary system, a taxonomy that classifies the many appearances of money into their most basic elements.32 As the origin of monetary species, the state literally becomes a force of nature.

The metaphor is not incidental to his argument. Knapp was part of an intellectual and political movement in fin-de-siècle Germany, a group of academic reformers who came together to form the Verein für Socialpolitik (the Association for Social Policy). The Verein was formed by a cadre of historians, statisticians, and economists seeking a scientific solution to the escalating intensity of class conflict in Germany around the turn of the century. They were liberal reformers alarmed by the rapid growth of an extraordinarily wealthy money class, at the top, and an increasingly assertive, openly-revolutionary working class at the bottom, leaving a squeezed, embattled middle stratum (Mittelstand) caught between them.33 Knapp and his colleagues, including the famous sociologist Max Weber and the influential economic historian, Gustav von Schmoller, sought to provide the basis for an empirical science of reform that could resolve the antagonisms emerging with Germany’s transformation into a rapidly urbanizing, industrializing society, enabling it to compete effectively with its Great Power rivals. At its core, this meant the development of a scientifically trained government capable of placing the “general interest” before the particular, narrow interests of any given class. This was a vision for the moral unity of the nation, to be achieved through reforms based on scientific research and carried out through the impartial, systematic administration of the state.34 In Knapp’s own formulation, this held out the possibility that the German Empire, as a meritocratic bureaucracy (ein Beamtenstaat), “could probably be the first to overcome the confusions and errors of the economic class struggle.”35

For Knapp and the Verein, it is the very discipline imposed on states by the working class and the world market that makes "objective" scientific administration necessary in the first place. In contrast to his neo-chartalist epigones who see monetary engineering as part of a supposedly democratic recipe for social democratic or even socialist politics, the founder of chartalism clearly recognized the class antagonisms and geopolitical pressures behind the need for the state to practice chartalist governance in the first place. In a historical period—much like our own—marked by creeping legitimacy crises, slow-motion economic collapse, and escalating struggles in the streets, governing elites had to manipulate money to raise national competitiveness and redirect internal antagonisms pushing toward domestic breakdown outward, into the external space of geopolitics. Thus, Knapp's abstraction of monetary governance into a realm above law and democracy ultimately reflects a fundamental contradiction of the nation state, riven between its existence as a national "community" of citizens, whose supposed common interest is the source of its political legitimacy, and its endemic structure as a class state, its organization by the supranational schism between the global power of a propertied, ultra-rich elite and the immiserated masses they rule. Scientific administration emerges as an intellectual and institutional form of class rule that must strive endlessly to reconcile this contradiction, one way or another. Law and money are not tools, neutral in themselves, that can be manipulated for different political interests; as forms of governance they are inevitably class weapons, precisely because they are wielded in the name of the “general interest.”

Assume a Banker

Keynes, as is well known, was enthusiastic about Knapp's argument, citing it approvingly in the first chapter of his Treatise on Money. This is unsurprising, as Knapp's social and economic thought brings together most of what Geoff Mann defines as the Keynesian critique.36 Here, "Keynesianism" is far more expansive than its conventional depiction as an economics of public works and full employment. It is an internal renovation of liberalism tout court, an immanent critique of liberal philosophy and governance that recurs historically, appearing and reappearing in periods of upheaval when the neoclassical, laissez-faire rulebook must be defenestrated to make room for urgent, practical action right now, not in the make-believe world of economics textbooks, but in the world in which we actually live. For this task, "Keynesian reason points to the centrality of centrality: to the political function of the state as the sole, if flawed, legitimate universal institution."37 Governments are capable of dissolving social conflicts through the scientific rule of a techno-philosophical elite, who see through the clash of competing interests to govern in the interest of all—the general interest. The management of money is, of course, critical to this project.

For Keynes, money is in essence a temporal phenomenon. As he puts it in the General Theory, “The importance of money essentially flows from its being a link between the present and the future.”38 Money is the locus of conflicting notions about what the future holds, which translates into different attitudes toward investment in the present; conversely, unforeseen events in the present shift and distort prevailing ideas about the future. Money and investment are psychologically driven, the object of fluctuating optimism and pessimism in the state of investors’ long-term expectations about an uncertain future. And so it falls to governments to step in and act when investors, out of excessive caution or uncertainty, will not invest enough to meet the needs of society. If scientific, responsible public authorities use fiscal and monetary policy to induce such investment, then money can operate in a way that benefits the whole society, rather than just a privileged group of wealthy rentiers. The Keynesian faith in money as a technical instrument reflects its belief in a class-neutral state ideally directed by experts who look out for the common good.

This faith is shared among contemporary Keynesians, including MMT, in the claim that money is essentially a unit of account—a promise to pay, or an IOU. Against monetarism, which simplistically fixates on the money supply (bank reserves) as the basis for new loans, the Keynesian argument runs the other way: bank credit creates new money. Banks issue loans, which they record as an asset on their balance sheet, by creating deposits, which they record as liabilities. The deposit is then a promise to pay cash, or "real" money, on demand at some future time. Of course, the question becomes what counts as real money when debts come due, and so Keynesian theory—mentally reproducing the current practice of central banks—recognizes a built-in hierarchy of money. Some forms of "money" are more acceptable than others to pay a debt. During a boom, for instance, many different forms of credit can circulate and function as means of payment, but when the bust hits, suddenly they can be devalued to the point of worthlessness, triggering a scramble for safety. And in the hierarchy that structures the world monetary system, US dollars or US state debt sit at the top as the safest assets available. Such is the actual historical basis for the MMT concept of monetary sovereignty.

This credit-based notion of money is a serviceable description of the monetary system. It accurately describes the "world in which we actually live," as Keynes would put it, since it adds up to an abstract model of the accounting and management techniques actually practiced by government officials and private bankers as they manage their funding needs through a turbulent, global money market.39 Like all economic theory, it is built out of the practical consciousness of market agents themselves. But precisely here are its limits. Although articulated from the standpoint of the modern nation state, Keynesian analysis is ultimately motivated by a theory of the psychology of market actors. Consequently, just like its neoclassical nemesis, the limits of its competence are in the end the real limits of the market itself.40

Money and Time

Keynes was right that money is a temporal phenomenon, but not in the way he thought, or at least not at its deepest level. Pick a typical product of contemporary globalization—say, a laptop computer. A laptop is sold for money by the company that owns it only as the end result of a transnational sequence of extraction, processing, manufacturing, assembly, transportation, and distribution, involving thousands of laborers doing different kinds of work for a range of contractors across dozens of countries. These contracting companies vie with one another to offer the most competitive terms by ramping up the productivity of their workers, producing more in less time than their competitors, and they, in turn, will engage their own contractors who will do the same. The tech firm selling the final product, e.g. Apple, pushes its own employees to the point of burnout.41 It will also issue bonds to raise cash and invest in financial products to insure against the risks associated with every part of this supply chain, including the political risks associated with worker unrest. In this way it acts much like a bank, arranging its balance sheet in a way that best allows it to profitably fund its investments.42 But the end goal for Apple, its contractors, and their competitors is always the same: when everything is tabulated, to have more dollars at the end of the day than at the beginning.

Though it will involve different arrangements from case to case, the same is true for every corporation in the world. Corporate balance sheets do not just record the movement of market prices; they indirectly trace the accumulated, concentrated time of innumerable human efforts transmuted into the common form of money. Money, accordingly, becomes their universal equivalent, a shared standard by which their value is measured. This role is currently played by the US dollar.

In this system, what individual businesses experience as the competitive pressure for profit is a result of a system-wide drive to always increase productivity, regardless of the bounds of the market—the key dynamic of capitalist production. From the standpoint of the owners of capital, this effectively reduces all the diverse forms of labor to the same measure: comparable, compressible expenditures of time. Yet by imposing this reduction on labor and constantly pushing to produce more in less time, capital sears coercion, violence, stupefaction, and hostility, the raw materials of class conflict, into the core of money itself. The blind pursuit of money by banks and businesses is only the flip side of this systemic, relentless drive for higher productivity and the social antagonisms it engenders.43

As a universal equivalent, then, money becomes an abstract, normative measure of time, the way the system evaluates, regulates, and disciplines everything from the different kinds of work people do, to the time society allots to different productive activities, to the temporal pressures of everyday life. As such, "money" names an alienated form of power: something created through relationships between human beings that takes on an impersonal, independent existence from its creators and in turn dominates them.44 To everyday perception, as well as in the theoretical elaborations of everyday perception that make up economics, money appears to represent different things, like market relationships, material goods and services, or state authority. Actually the reverse is the case: these things now represent money as an autonomous power, which invests them all with its holy aura.

Through this reversal, or fetish, which perceives money to be valuable for its own sake, material resources are produced and distributed only as incidental byproducts of the universal, limitless drive for money. Accordingly, money does not conveniently exist to help circulate material goods and services, but is rather the reason goods and services exist in the first place. It functions as a means that becomes its own end, which is still only a means—a contradiction rooted in the class relations of commodity production itself.

The point is that money regulates the social organization of time. It coordinates the productive life of society, but from behind the backs of the producers, the workers of the world who form an interconnected, interdependent association of thickening density—the planetary laborer. Debt-enserfed American university students compete for a shrinking number of jobs on laptops assembled by Chinese manufacturing workers in Shenzhen, whose computer chips are manufactured by factory workers in Taipei, the metal and minerals for which are extracted under brutal conditions by cobalt and lithium miners in the Democratic Republic of Congo and Chile, perhaps with the completed product transported on container ships piloted by Danish sailors supplied with wheat harvested by Russian farmers. The more extraordinarily productive and efficient this planetary assemblage becomes, the more surplus time it generates in the form of the surplus product—interest, rent, capital gains, in general the astronomical financial profits that define our era. These are the excess time of human association extracted and captured by the transnational capitalist class, the top one percent who owns nearly half the world's wealth.45

Money did not, and does not, enable this planet-spanning productive formation. Rather, it is itself the result of a process of reconfiguration that occurred outside of any state actor's conscious intent. As the global division of labor has become transnationally integrated over planet-spanning supply chains and logistics channels; as work itself has become increasingly molded by its dependence upon the whims of the stock exchange and the broader financial markets, themselves dependent on the continued largess of the central banks; as the very reproduction of the basic social relations through which material goods are provided becomes the mere residue of this gargantuan monetary edifice; and as the experience of labor, paradoxically, grows more fragmented, precarious, and uncertain the more a fully interconnected world market for labor comes into existence—in short, the more transnational social labor becomes, the more abstract money becomes as its adequately transnational representation. The abstraction of labor and money are two sides of a single historical dynamic through which the productive association of human beings appears as its opposite: an independent power with a life of its own. As a socially necessary form of misrecognition, the money fetish is constitutive. It is how capitalist money works.

A Dialectic of Centralizing Disintegration

Governmental practices of money, and the way these are ideologically imagined, theoretically rationalized, and legally institutionalized, are how bureaucratic elites attempt to reconcile the contradiction at the heart of the money form. State actors, above all central bankers, respond to economic events—particularly crises—as if they were forces of nature, exogenous, natural disasters that must be fought with the alacrity of emergency first responders. To do this, and successfully prevent the entire system from collapsing, they must as a matter of practical necessity believe that money is essentially a unit of account chosen by the state, tout court, for at this point they have no other option. In other words, they must fetishize it.46 MMT, as well as its more radical, neo-chartalist variations, make a virtue of this necessity, hallucinating an entire transhistorical ontology of credit money on the basis of how contemporary states are pulverized and remade by a single, global crisis cycle broader and deeper than any one of them.

Since the watershed of 2008, the Federal Reserve has become a kind of dealer for the entire dollar zone of the global economy, swelling its balance sheet to over seven trillion dollars from just under one trillion dollars in 2007. The Fed's staggering expansion of its balance sheet in 2020 has fed a binge of corporate borrowing that has led to a full 20 percent of the 3,000 largest American companies no longer earning enough to pay their interest expenses, mutating into “zombie companies,” de facto wards of the state.47 However, 2020 only solidified an already existing trend, which was well in place prior to the COVID-19 pandemic. The other major central banks of the G10 countries have to varying degrees followed a similar pattern, with the tab of total commitments to monetary stimulus currently standing at $15 trillion.48 This amounted to nearly a fifth of the entire global economy in 2019.49 Some forecasts believe the balance sheets of the Fed and the ECB could top 50 percent of GDP or more in the US and Eurozone by the end of 2021.50 This is separate from the US federal debt, which currently stands at over 27 trillion dollars. US state debt has been steadily rising since the early 1980s, but since 2008 it has been rising exponentially, with some estimates expecting it to reach 130 percent of US GDP by the end of 2021.51

The flood of US debt marks a worldwide trend. Japan's state debt is currently at 230 percent of GDP, while China's domestic (non-foreign) debt is over 300 percent of GDP.52 Taking the 37 countries of the the Organisation for Economic Co-operation and Development (OECD) area, by the end of 2019 sovereign debt had expanded to 72 percent of total GDP, feeding a huge buildup in non-financial corporate debt, the heart of the so-called "real economy" of production and investment, which reached a record high of 13.5 trillion dollars in the same year.53 Overall global debt-to-GDP was already over 300 percent before the onset of the coronavirus pandemic in the first quarter of 2020.54

The most striking development, however, is not the absolute debt levels themselves, but the sclerotic productive apparatus this supernova of debt is built upon. Across the capitalist world, pre-pandemic 2019 was already one of the most dismal years for productivity growth in recent memory, again dashing hopes that, finally, the world economy would bounce back from the nadir of the Great Recession.55 In fact business profits were back at recession levels, trending downward to the low point of a decade before.56 Contemporary investment, when it does provide jobs, seems mostly able only to provide low-wage, low-productivity work, which, in the OECD area, indeed makes up the vast majority of what new work has been created over the last decade. The anemic level and inferior quality of investment underlies the well-documented, decades-long trend of flat or falling wages for workers, whose share of income has continued to decline over the last 15 years.57 The great mass of that income has flowed into capital gains, basically rents, for the owners of financial assets—made possible, of course, by a delirious, never-ending rally in asset prices stoked by unlimited central bank stimulus. This trifecta of decaying growth, widening inequality, and exploding state debt is transnational, affecting virtually every country producing for the world market.58 But beneath the indicators as their common source is stagnating systemic productivity, appearing in a steady supply of graphs and charts like an electroencephalogram showing at once the fading vital signs of a terminal social order and the flatlining mental abilities of the rulers responsible for it.

Given the world organization of labor and the types of capital investment it allows, the global economy in its current form has basically exhausted its potential for productivity growth. The result is a gradual process of diremption. As money evolves into a centralized, governmental instrument of global monetary management, it is accompanied by a parallel return of the fragmenting politics of space and place: nostalgia for a lost, better past, the basic fantasy that fuels every form of communitarian nationalism. The ever tighter fusion between state institutions and private financial markets, and the political fission of nationalist reaction it feeds, propels a dialectic of centralizing disintegration: the contradiction between the state as the general custodian of capital and the general interest of its citizens, intensified and set into historical motion by the earthquake of the general crisis.

Consider the US dollar, the currency at the top of the world hierarchy of monetary sovereignty. The dollar makes up 60 percent of global currency reserves. It is involved in fully 90 percent of foreign exchange trading.59 It is the unit of account for invoicing most of world trade, for pricing key commodities, like oil, and for nearly half of a 544 trillion dollars global derivatives market. Its central position makes it the most desired currency in the world, a universally-accepted store of value, unit of account, and means of payment for international transactions, credit creation, securitization, and flows of funds. But what lies behind the dollar? When the US government “prints money,” it buys bonds and other assets from multinational corporations and a small class of rich asset owners, replacing their securities with cash; likewise, when it “borrows,” it issues Treasury debt to the private market, where it then circulates as the standard, international safe asset for investors. This, in turn, fuels further credit creation by banks and, crucially, other non-bank financial institutions in the shadow banking system. As “the financial mirror image of larger underlying trends of economic inequality,” this unregulated, unmonitored agglomeration of private equity funds, mutual funds, insurance companies, pension funds, bank-spawned legal entities (“special purpose vehicles”) and a host of other shady outfits are the cauldron of world money creation.60 Its total size has grown exponentially over the last two decades, now holding some 183 trillion dollars or 49 percent of the world's financial assets. At 212 percent of global GDP, this dwarfs the balance sheets of even the biggest banks.61 Little wonder it is the shadow banking sector that is financing the bulk of the recent, record-breaking rise of corporate debt, which reached an all-time high in 2019.62

Shadow banking revolves around the intrinsic link between sovereign debt, issued by national treasuries, and liquidity, or the option easily to convert a security into its cash equivalent with no change in price. Liquidity is the circulating blood in the veins of the global financial system. Without it markets cannot be made, prices cannot be formed, no one can sell what they need without huge losses, sending the entire system into a sort of heart attack—a liquidity crisis. To prevent this from happening, states are compelled to manufacture liquidity by issuing bonds to be used as premium collateral for borrowing and lending in the enormous and expanding shadow-banking sector, mainly through a deceptively simple legal instrument called the repurchase agreement, or "repo."63 Repo is the legal form that most funding, and thus liquidity, takes in the shadow banking complex. Standing repo trades finance more than $12 trillion, 75 percent of which is based on government collateral, thus playing an instrumental role in making the $16 trillion global market for US Treasury bonds.64 This is where law and money meet at the apex of the global monetary hierarchy. The convolution of sovereign debt, shadow banking, and repo makes up the dark architecture of contemporary world money.

The shadow banking network is the molten core of the global financial system, and the sovereign debt-repo relation is in turn the center of that network. As Daniela Gabor observes, “sovereign debt has become the cornerstone of modern financial systems, used as a benchmark for pricing assets, to hedge positions in fixed income markets and as collateral for credit creation via shadow banking.”65 Government debt is required as repo collateral in two thirds of both the US and European debt markets, which are the largest in the world. Consequently, “the state has become a collateral factory for shadow banking, and for big banks’ activities in the shadows.”66 In other words, for currencies like the dollar or the Euro to serve as reserve money for the global economy, to function as a means of exchange and payment, the dominant unit of account, a measure and store of value—in short, to serve as a universal equivalent—states must subordinate their national economic policies to the needs of a distended, dysfunctional, transnational money nexus whose full scope and depth is unknown, perhaps unknowable.

Money, Class, Geopolitics

When the US Fed and Treasury act to shore up world money through the shadow banking complex, they effectively act as the general interest of capital, as the custodian for the interests of the transnational capitalist class as a whole, whose struggle for profit between its individual members constantly works to destabilize and destroy the very system that enriches them. Yet the state is also, supposedly, the general representation of its citizens, of their collective interests as a national community. This contradiction paralyzes the “monetary sovereign,” which cannot simply pick one side or the other but must remain suspended between both, subjugated from above by the anonymous, abstract sovereignty of world money and threatened from below by the new nationalists, whose objective function—regardless of ideological hue—is to advance domestic corporate interests pushing for more protectionism from the state, and less competition from globalization.67

The paradox of monetary sovereignty is that its condition of possibility as an idea lies in the profound weakness of the broader political economy that spawned it, a symptom of the long-term decalescence of the capitalist mode of production. The neo-chartalist proposal to redirect the monetary largess of the state toward the reinvigoration of national growth, or even some ambitious socialist program, completely ignores the systemic basis for current, actually existing chartalist practices. The objective function of these practices is to prop up the asset values of the transnational ownership class, an increasingly complacent mob of lumpen billionaires whose private competitive dynamic is no longer enough to accumulate capital at a level that would smoothly reproduce global society. This class is a global formation whose social power stems from their control over the laboring lives of billions of people, a form of control mediated by money. This is the actual material basis for sound money ideology and the politics of debt hysteria, which, however much MMT economists vociferously denounce it, will easily retain its firm grip over popular thinking and political common sense unless the power of this class is confronted and broken.68

Nevertheless, assume the entire problem of class power away, in the usual MMT fashion. Can a monetary sovereign like the US switch from monetary policy to a fiscal footing, and just print all the money it needs for a full, social-democratic renovation of the country, perhaps including a federal jobs guarantee, regulating away whatever problems might arise?

The same problem returns in the form of geopolitics. In the increasingly brittle, crumbling edifice of financial globalization, the class question and the geopolitical question are closely linked, just as they were in Knapp's time. All the partisan rancor that supposedly afflicts the US political establishment miraculously evaporates as it marches in lockstep to confront the supposed Chinese threat. The untimely return of great power conflict is happening amid a synchronized international shift away from support for free market globalization and toward revanchist nationalism—the same trend that has thrusted MMT and other chartalist ideas into the spotlight. This political and ideological transformation reflects the slow death of the global regime of social reproduction once known as neoliberalism, turning politics into a morbid contest about who will bear the cost for a dying society. While the US government can technocratically massage many financial and monetary problems into a manageable form, it cannot by itself resolve the productive exhaustion of the system as a whole, which is the underlying, objective tendency ripping the US apart from the inside and driving it into a posture of open conflict with China. In the political climate formed by this antagonism, the ideology of unlimited spending will be channeled into the need to strengthen strategic industries to prepare for confrontation with the national enemy. Without shifting a balance of class forces and political terrain that inherently favors the right, it will only serve corporate power.

Alas, the class and geopolitical questions cannot be wished away, but must be confronted. As the organic ideology of the post-neoliberal crisis state, MMT will not go away anytime soon. But the loose affiliation of organizations and tendencies that currently make up the left cannot afford, in the manner of K., to hope for salvation from a benevolent group of elites who are just as confused as they are. As the five-year wave of social democratic energy recedes, defeated—for the moment—by a centrist restoration, now is the time for a sober evaluation of the shortcomings of the strategies that got us here. As always, the work of building power from the bottom up, without illusions, remains.

  1. Die Landarbeiter in Knechtschaft und Freiheit: Vier Vorträge (Duncker & Humblot: Leipzig, 1891) 86.
  2. TheGeneral Theory of Employment, Interest, and Money (Harbinger: New York) 378.
  3. Abba Lerner, "Functional Finance and the Federal Debt." Social Research 10, no. 1 (1943): 38-51. Accessed January 10, 2021.
  4. The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy. (PublicAffairs: New York, 2020) chap. 1, Kobo.
  5. The Deficit Myth, chap. 8, Kobo.
  6. Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto: London) 252.
  7. "MMT history and overview." The Center of the Universe (blog), August 4, 2011.
  8. Zach Helfand, "The Economist Who Believes the Government Should Just Print More Money." The New Yorker, August 20, 2019.
  9. Ibid.
  10. Ben Holland, "Marco Rubio Puts Out a Paper Citing Obscure Left-Wing Economists." Bloomberg, May 16, 2019.
    Sen. Marco Rubio, "American Investment in the Twenty-First Century: Project for Strong Labor Markets and National Development." May 15, 2019.
  11. Michael Tanner, "Congress Finds a New Excuse to Avoid Balancing America's Books." September 19, 2018.
  12. "What causes inflation? In almost all cases of large or persistent inflation, the culprit turns out to be the same — growth in the quantity of money. When a government creates large quantities of the nation's money, the value of the money falls." Gregory Mankiw, Principles of Economics (San Diego, CA: 2001) 2nd ed., 14.
  13. "Recent Balance Sheet Trends." Board of Governors of the Federal Reserve System. Last Accessed January 11, 2021.
  14. "Banks lose out to capital markets when it comes to credit provision." The Economist, July 25, 2020.
  15. Chris Giles, "Global Economy Enters Period of 'Synchronized Stagnation.'" Financial Times, October 13, 2019,; Lisa Lee and Tom Contillano, "America’s Zombie Companies Rack Up $2 Trillion of Debt," Bloomberg, Dec. 16, 2020.
  16. This twice-told tale is ubiquitous in economics textbooks, defining money as something useful to help meet people's needs through exchange. As far as the tradition of positive economics is concerned the origin of this account is in Adam Smith's The Wealth of Nations, but its roots can arguably be traced all the way back to Aristotle's Politics: “When the inhabitants of one country became more dependent on those of another, and they imported what they needed, and exported what they had too much of, money necessarily came into use. For the various necessaries of life are not easily carried about, and hence men agreed to employ in their dealing with each other something which was intrinsically useful and easily applicable to the purposes of life, for example, iron, silver, and the like.” The Politics and the Constitution of Athens, tr. Steven Everson (Cambridge, UK: Cambridge University Press, 1996) 22–23.
  17. There is a widespread, mistaken tendency to attribute the barter theory of money to Marx, even by some self-identified Marxists who really should know better. This mainly results from reading the first few chapters of the book Capital as if they were introducing a historical sequence, in which one first has basic commodity trade, then labor values, then money is introduced to measure labor values, leading to the analysis of C-M-C as if it were describing a simple market for exchange, and so on. This tendency is baffling, since the very first sentence of the book Capital tells you what Marx is dealing with: "The wealth of societies in which the capitalist mode of production prevails …'" Capital, vol. I (London: Penguin, 1990 [1976]) 125. In other words, the object is a fully developed, modern capitalist society in which barter is irrelevant or nonexistent. The presentation of the categories of commodity, labor, and money in the opening chapters of the book are steps in an immanent critique of bourgeois political economy, revealing how the terms of that science systematically misapprehend, or fetishize, economic phenomena by analyzing them solely as they appear, rather than as parts of the whole that is their historical essence. Money becomes mediated by its place within the larger theory as it emerges across the entire work, including, crucially, the analysis of the process of production, accumulation, and class struggle. This will become evident later in the argument.

  18. “Real analysis proceeds from the principle that all the essential phenomena of economic life are capable of being described in terms of goods and services, of decisions about them, and of relations between them. Money enters the picture only in the modest role of a technical device that has been adopted in order to facilitate transactions … so long as it functions normally, it does not affect the economic process, which behaves in the same way as it would in a barter economy; this is essentially what the concept of Neutral Money implies. Thus, money has been called a ‘garb’ or ‘veil’ of the things that really matter … Not only can it be discarded whenever we are analyzing the fundamental features of the economic process but it must be discarded just as a veil must be drawn aside if we are to see the face behind it.” Joseph Schumpeter, History of Economic Analysis (Abingdon, UK: Routledge, 2006) e-Book, 277.
  19. L. Randall Wray, Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems (New York: Palgrave Macmillan, 2015) 2nd. ed., 1–2.
  20. One can also find elements of the chartalist notion of money in Aristotle. “All goods must therefore be measured by some one thing, as we said before. Now this unit is in truth need, which holds all things together (for if men did not need one another’s goods at all, or did not need them equally, there would be either no exchange or not the same exchange); but money has become by convention a sort of representative of need; and this is why it has the name ‘money’ (nomisma)—because it exists not by nature but by law (nomos) and it is in our power to change it and make it useless.” Nicomachean Ethics, tr. David Ross (Oxford: Oxford University Press, 2009) 89. Aristotle recognizes the public dimension of money, its role as a political construction that can be re-coded to better fit human needs. The idea that money ultimately serves human need is the shared illusion of both chartalism and barter theory, serving as the mythological foundation of both ideologies.
  21. Placing state spending before taxation and borrowing also overturns the standard neoclassical dogma on government budgets. Following Keynes, MMT rejects the antiquated fixation on the supposed need for a “balanced budget.” In laissez-faire thinking, maintaining a balanced budget is necessary to ensure excessive government spending will not drive up interest rates, set off inflation, and melt away business profits—what economists call “crowding out” the private sector. Following the traditional Keynesian formula, MMT holds this notion to be obsolete, but with a new twist. Instead of seeing the private sector as the source of savings, which is then appropriated by taxation or government borrowing, MMT takes the private and government sectors of the national economy as two accounts that must balance each other out, with net credits and debts on both sides adding up to zero. If this basic accounting identity is true, with other conditions remaining the same, then government deficits are required for the private sector to save, since deficits on one side equal savings on the other; conversely, running a budget surplus would contract the private sector. Like all such identities, national accounts can be useful for certain purposes of analysis, but tell you nothing in and of themselves.
  22. Kelton, Deficit Myth, ch.1
  23. Christine Desan, Making Money: Coin, Currency, and the Coming of Capitalism (Oxford: Oxford University Press, 2014) ch.1.
  24. Kelton, Ibid. The hypothesis that government is the prime economic mover, which then sets everything else in motion by issuing debt in its own units of account, was loudly advanced in David Graeber”s widely read Debt: The First 5,000 Years, duly cited by Kelton in this passage. One finds the same story in Desan’s Making Money in the notion that money is originally created by a “stakeholder,” a sovereign who steps forward to construct the legal and technical basis for a unit of account that can serve a given political territory. Besides over-simplifying an ancient economy in which official money and credit were almost always enmeshed in trans-regional patterns of trade to which the ruling policies were forced to adjust, the argument also amounts to one giant genetic fallacy, suggesting that because money may have worked a particular way 5,000 years ago it works the same way today. More generally, the contemporary projection of dubious, neo-chartalist assumptions across all time and space reflects the tendency for the ruling class to look into the past and see its own image as the meaning of history.
  25. Friedrich Knapp, The State Theory of Money [Staatliche Theorie des Geldes], trs. H.M. Lucas and J. Bonar (London: Macmillan, 1924 [1905]). Knapp is widely seen as a foundational figure in the MMT literature, and is cited frequently as such. However, even if he is not cited explicitly, his central argument that state acceptation establishes monetary value is at the cornerstone of all MMT discourse in its insistence that “taxes drive money.” He also plays an important role in the sociologist Geoffrey Ingham’s political theory of credit money, inspired by Weber, in The Nature of Money (Cambridge, UK: Polity, 2004). In positing state authority and its capacity for violence as the ultimate backstop of any credit/debt-based monetary network, Ingham directly politicizes money, pushing back against its standard economic definition as a neutral medium of exchange.
    Ingham’s work is emblematic of a distinct trend in social theory before the global meltdown of 2008. Money, it turned out, was not natural, but “socially constructed.” For decades a main task of "theory" in the humanities was to unmask supposedly natural features of the world as human-made constructions in which the interests of power could be exposed, and so “resisted.” Thus, after all, money was not some innocent medium of exchange; behind it stood the menacing edifice of the modern state, with its monopoly on violence and its totalizing, modernist drive for rational order. Neoliberal critical theory as a paradigm was organized around the critique of totalizing, homogenizing "power," which was usually most vividly embodied by bureaucratic power of the state. These critical theorists found themselves in awkward company when, around 2010, fascism began to resurface as an international mass movement for the first time since the middle of the twentieth century, emerging out of civil society as an act of collective resistance against supposedly totalizing governmental power.
  26. On German economic development and monetary policy at the turn of the century see Eric Hobsbawm, Age of Empire (New York: Pantheon, 1987) ch. 2; Joyce Appleby, The Relentless Revolution (New York: Norton, 2010) ch.6. For a more contemporary account, Max Weber's observations and analysis remain an excellent source. See his critique of Knapp, “Excursus: a Critical Note on the ‘State Theory of Money,’” in Economy and Society: An Outline of Interpretive Sociology, eds. Guenther Roth and Claus Wittich (Berkeley: University of California Press, 1978) 184–193, and passim.
  27. As Max Weber observes with dismay in his commentary on The State Theory, “the work immediately was utilized in support of value judgements.” Economy and Society, 184.
  28. Knapp, State Theory, 106–107.
  29. Knapp, Ibid., 111. See also L. Randall Wray, “From the State Theory of Money to Modern Monetary Theory: an Alternative to Economic Orthodoxy.” Levy Economics Institute, Working Paper No. 792, 6.
  30. Knapp, Ibid.,53.
  31. Gerald Braunberger, “Was ist neu an der Modern Monetary Theory? Eine erinnerung an Knapps Staatliche Theorie des Geldes.” Frankfurter Allgemeine Zeitung, 18 January, 2012.
  32. Knapp, State Theory, viii-ix.
  33. Compare Foucault’s description of the role of observation in the episteme of the 17th and 18th centuries, as practiced by the great naturalist, Carl Linnaeus: “To observe, then, is to be content with seeing—with seeing a few things systematically. With seeing what, in the rather confused wealth of representation, can be analysed, recognized by all, and thus given a name that everyone will be able to understand … a description acceptable to everyone: confronted with the same individual entity, everyone will be able to give the same description; and, inversely, given such a description everyone will be able to recognize the individual entities that correspond to it.” The Order of Things (New York: Vintage, 1994) 134.
  34. Erik Grimmer-Solem, The Rise of Historical Economics and Social Reform in Germany 1864–1894, (Oxford: Oxford University Press) ch. 3.
  35. Knapp and his colleagues saw their project as “at once super-partisan and apolitical, and yet also deeply moral,” as the historian Erik Grimmer-Solem describes it. “Central to that morality is the old liberal ideal of a classless, civil society,” Grimmer-Solem 104.
  36. Knapp, Die Landarbeiter in Knechtschaft und Freiheit, p.86
  37. Geoff Mann, In the Long Run We Are All Dead (New York: Verso, 2017).
  38. Ibid. 53.
  39. Keynes, General Theory, 293.
  40. “Keynesian theory rests upon a speculative-financial paradigm—the image is of a banker making his deals on a Wall Street.” Hyman Minsky, John Maynard Keynes (New York: McGraw Hill, 2008 [1975]) 55.
  41. I owe this formulation of the critique to Simon Clarke, Keynesianism, Monetarism, and the Crisis of the State (Hants: Edward Elgar, 1988).
  42. “Close to 60 Percent of Surveyed Tech Workers Are Burnt Out—Credit Karma Tops the List for Most Employees Suffering From Burnout.” Blind Blog—Workplace Insights, May 29, 2018.
  43. Tony Norfield, “Apple's Core: Moribund Capitalism,” Economics of Imperialism (blog), May 24, 2017.
  44. “Money is not just an object of the passion for enrichment; it is the object of it. This urge is essentially auri sacra fames … the accumulation of money for the sake of money is in fact the barbaric form of production for the sake of production, i.e. the development of the productive powers of social labor beyond the limits of customary requirements.” Karl Marx, A Contribution to the Critique of Political Economy, ed. Maurice Dobb (New York: International, 1970), 132.
  45. Weber clearly understood this dynamic of alienation and its implications for modern institutions, though in the end he saw them as ineluctable features of modernity, rather than something that can be understood and changed. “Looked at from a social-scientific point of view, the modern state is an ‘organisation’ (Betrieb) in exactly the same way as a factory; indeed this is its specific historical characteristic. In both cases the relations of rule within the organisation are subject to the same conditions … Whether an organisation is a modern state apparatus engaging in power politics or cultural politics (Kulturpolitik) or pursuing military aims, or a private capitalist business, the same, decisive economic basis is common to both, namely the ‘separation’ of the worker from the material means of conducting the activity of the organisation—the means of production in the economy, the means of war in the army, or the means of research in a university institution or laboratory, and the financial means in all of them.” Max Weber, “Parliament and Government in Germany under a New Political Order.” Political Writings, eds. Peter Lassman and Ronald Speirs (Cambridge, UK: Cambridge University Press, 1994) 146–147.
  46. “Why wealth matters: 10 years of change.” Credit Suisse, October 21, 2019.
  47. “It is not enough to confine ourselves to pointing out that it is advantageous to the ruling class to erect an ideological smoke-screen, and to conceal its hegemony beneath the umbrella of the state. For although such an elucidation is undoubtedly correct, it still does not explain how such an ideology could arise, nor, therefore, does it explain why the ruling class has access to it. For the conscious exploitation of ideological forms is of course something separate from their emergence, which usually occurs independently of people's will.” Evgeny Pashukanis, Law & Marxism: A General Theory, ed. Chris Arthur, tr. Barbara Einhorn (London: Pluto, 1989) 140.
  48. Lee and Contillano, "America’s Zombie Companies."
  49. Tommy Wilkes, Ritvik Carvalho, “$15 trillion and counting: global stimulus so far.” Reuters, May 11, 2020.
  50. Ibid.
  51. Ibid.
  52. Eric Platt and Colby Smith, “Fitch cuts US outlook as federal deficit climbs.” Financial Times, July 31, 2020.
  53. Amanda Lee, “China debt: how big is it and who owns it?” South China Morning Post, May 19, 2020.
  54. “Corporate Bond Market Trends, Emerging Risks and Monetary Policy.”
    At the end of 2019, total OECD GDP stood at just over $63 trillion, while total marketed government debt was expected to reach $50 trillion in 2020: "Sovereign Borrowing Outlook for OECD Countries: February 2020." OECD.;
  55. Andrea Shalal, “Global debt hits record high of 331% of GDP in first quarter: IIF.” Reuters, July 16, 2020.
  56. It is worth noting that for some 30 years the world has been expecting a “digital revolution” in productivity and economic performance that has yet to materialize. At this point, it is probably safe to conclude it never will. Chris Giles, “Digitisation failing to lift global productivity, study shows.” Financial Times, April 14, 2019.
  57. Patti Domm, “Falling profit margins raise some alarm: ‘It can be a precursor to layoffs and a recession’.” CNBC, Oct. 21, 2019.
  58. “Low productivity jobs continue to drive employment growth.” OECD, April 24, 2019.
  59. Chris Giles, “Global economy enters period of ‘synchronised stagnation’.” Financial Times, October 13, 2019.;
    Mike Allen, Dion Rabouin, “The synchronized global slump.” Axios, August 15, 2019.
  60. Kimberley Amadeo, “Why the US Dollar Is the Global Currency.” The Balance, July 23, 2020.
  61. Oddny Helgadóttir, “Banking Upside Down: The Implicit Politics of Shadow Banking Expertise.” Review of International Political Economy, 2016.; See also Daniela Gabor and Jakob Vestergaard, “Toward a theory of shadow money.” Institute for New Economic Thinking, working paper, April, 2016.
  62. “Banks lose out to capital markets when it comes to credit provision.” The Economist, July 25, 2020.
  63. While traditionally the control of the dollar has been looked upon as a case of “exorbitant privilege,” bestowing enormous economic and political benefits on the US state from its status as the world reserve currency, more recent analysis has begun to re-evaluate the relationship. From a Keynesian perspective, the economists Michael Pettis, Yakov Feygin, and Dominik Leusder argue that the dollar's impact on the US is much more ambiguous than traditionally thought. Pettis has pointed out how the dollar is at the center of the enormous payment imbalances between countries that run up US debt and destabilize the global economy. Feygin and Leusder center attention on the “class politics of the dollar,” the way the dollar-based international monetary system works to enrich a transnational rentier class who reaps its benefits at the expense of rapidly rising debt, unemployment, and stagnating wages for labor the world over, including in the US. Both arguments certainly help to diagnose the current malaise as a crisis of the global economy as a whole, specifically its monetary order. Yet because they remain within the Keynesian paradigm, their analysis glides over the underlying causes of the general crisis in the permanent, ongoing overproduction of capital and the resulting decline in global productivity growth. It is this deeper dynamic that shows up, on the surface, as a “global savings glut,” or the imbalance of international payments. Michael Pettis, “Are We Starting to See Why It’s Really the Exorbitant ‘Burden?’” China Financial Markets (blog), October 5, 2014.;
    Yakov Feygin and Dominik Leusder, “The Class Politics of the Dollar System.” Phenomenal World, May 1, 2020.
  64. To elaborate a bit more: repo is a type of short-term contract in which, for a fee, a lender provides funds to a borrower on the basis of acceptable collateral, usually sovereign debt, which the borrower agrees to buy back later—often the next day, but sometimes up to several months after the initial deal. They allow institutional investors with large cash pools to earn a profit by lending to firms that hold a large amount of securities, such as banks, corporations, or hedge funds, but need cash to fuel further investment. Often mediated through a dealer seeking profit on the trade, repo allows them to swap collateral for cash; the firm taking the collateral can then, in turn, re-sell it forward to raise additional cash, fueling further credit creation throughout the financial system.
  65. “Repo market functioning.” Bank for International Settlements, Committee on the Global FInancial System, April, 2017.;
    “US Repo Market Fact Sheet: Description and Purpose of Repo Markets.” SIFMA Research, April, 2020.;
    Liz McCormick and Alex Harris, “The Repo Market's a Mess (What's the Repo Market?).” Bloomberg, September 19, 2019.
  66. Daniela Gabor, “The (impossible) repo trinity: the political economy of repo markets.” Review of International Political Economy 2016, See also Daniela Gabor and Cornel Ban, “Banking on Bonds: The New Links Between States and Markets.” Journal of Common Market Studies 2015, pp. 1-19,
  67. Ibid., 3.
  68. This is the upshot of supposedly leftwing applications of MMT. In an essay appearing in American Affairs entitled “Make the Left Great Again,” Thomas Fazi and Bill Mitchell argue that MMT ideas can be used to “reclaim” sovereignty as part of a radical program to nationalize private industries and democratically empower ordinary citizens. The essay’s title is a propos, since the proposal evinces about as sophisticated an understanding of capitalism as your average MAGA voter. In the case of a global cornerstone like the US, unilaterally seceding from the present international economic and monetary order would simply destroy it. This will not restore some sovereign demos to power, in any case a delusion based on a fictive “general interest” that dissolves transnational classes into an organic, national community. Rather, it would replace the abstract rule of world money with a more directly geopolitical and geoeconomic struggle for domination, as states are forced to compete more aggressively for access to resources and markets. Under these pressures, labor would remain just as alienated, mind-numbing, and exploited as before, if not more so, despite the symbolic compensation of laboring for the fatherland instead of private interests.
  69. In the US, the one and only “monetary sovereign,” the gospel of endless money is not likely to resonate with voters who in the 2020 Democratic primary rejected the politician who supports the policies they actually want (M4A, jobs guarantee, higher minimum wage etc.) and elected the one who rejected all of these. The plausibility and power of political ideas has to be rooted in everyday experience, it cannot simply be grafted onto it from above. This has to be taken as a key lesson of the five-year social democratic wave now receding in the US. Gabriel Winant sums up most of the critical lessons for materialist politics in his recent retrospective, “We Live in a Society,” n+1, December 12, 2020.


Jamie Merchant

Jamie Merchant lives in Chicago. His book, Endgame: Economic Nationalism and Global Decline will be published in 2024 by Reaktion, in the Field Notes series.


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