mary mellor: money as a commons
DESCRIPTION
Mary Mellor's presentation on money as a commons held in the University of Helsinki 16.4.2013.TRANSCRIPT
Money as a Commons
Professor Mary Mellor
Northumbria University UK
Helsinki University 16.05.13
Modern Money is not a Commons
• Modern money has been privatised
• The main source of money issue is through the banking system
• This money is only issued as debt through bank accounts
• However people think of this as ‘real’ i.e. public money (national currency)
Money Creation: Currency - Bank
QQ QE
Privatised Money Supply
• Most money is now issued as debt (97% in UK)
• States have lost control of money supply
• Enhanced by use of electronic money
• Enabled the growth of a ‘money market’ where both money (currencies) and debt (securitisation) are traded as commodities using debt funding (leverage)
BANK LENDING INCREASES
MONEY SUPPLY
Expansion of UK Money Supply
0
500
1000
1500
2000
2500
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
GDP index
Broad money (M4)
CREDIT CRUNCH DECREASES
MONEY SUPPLY
Bank money creation
• ‘the process by which banks create money is so simple that the mind is repelled’ (John
Kenneth Galbraith, 1975 Money: Whence it came and Where it went Penguin, London p. 29)
• ‘The essence of the contemporary monetary system is the creation of money, out of nothing, by private banks’ often foolish lending’ (Martin Wolf Financial Times 9.11.10)
Privatised Money
• Economic policy controlled by profit-driven private interests
• Financial sector controls money supply
• Instability of money supply (boom and crunch)
• State reliant on taxing private sector
• State has to rescue financial sector using ‘borrowed’ money
• State is then ‘punished’ through austerity
Marshall Plan
Louisiana Purchase
Moon race
S&L crisis
Korean War
New Deal
Iraq War
Vietnam War
NASA
World War II
Banking bailout
• Jim Bianco, of Bianco Research: http://www.ritholtz.com/blog/2008/11/big-bailouts-bigger-bucks/
Neoliberal Ideology – Handbag Economics
• All money and wealth is created in the private sector
• States must limit expenditure to avoid overtaxing the private sector
• States must not create their own money
• State as household dependent on borrowing from the ‘money market’ (Maastricht Rules 3% deficit 60% National Debt)
MONEY SYSTEM €€€€€€
What is Money?
• Where does it come from?
• Who owns and controls it?
• How is it issued and circulated?
• It doesn’t just appear in society –floating from the trees……
Economic Myths
• Money emerged through trade
• Money is only a medium of exchange
• Money originally had intrinsic value (gold/silver)
• Banks loans link savers to borrowers
• States cannot create money or wealth
THE ECONOMIST’S STORY
BARTER
1750 BCE Code of Hummurabi
600BCE
1300 AD Modern banking
MONEY CAN LOOK LIKE THIS
With permission: tab2space on flickr
MONEY CAN LOOK LIKE THIS
With permission joep de graaff flickr
Varieties of Money
• Money can take many forms: clay tablets, written records, sticks, stones, coins, paper
• Social : used for injury payments, tithes, dowries, local exchange
• Public: issued and used by rulers, states or monetary authorities
• Commercial: issued as debt by banks designated in national currency
PUBLIC MONEY IS DEBT FREE EXPENDITURE - TAX
BANK MONEY IS DEBT LOAN - REPAYMENT + INTEREST
The Problem with Debt Money
• More money is reclaimed than is issued
• Ponzi system – old debt is paid by new debt
• Drives constant growth and profit-seeking
• Crisis if unregulated (2007-8, Finland 1990’s)
• Private benefit - public responsibility
• Ignores the need for deficit/debt free money in money systems
The Necessity of Deficit
• Deficit: The allocation, spending or lending of more money than is reclaimed (taxation rates never 100% - banks demand 100%+)
• Handbag economics’ deficit hysteria is totally mistaken. More money must always be issued than is reclaimed – otherwise there will be no debt free money to circulate
• Bank deficit occurs as default on loans
Money systems need deficits not debts
• ‘I cannot find an example of a country that has come through a banking crisis and returned to economic growth without the creation of a state development bank… the whole point of a state development bank is that it loses money’ (a senior investment banker quoted in Sunday Times 05.08.12)
The Money Divide
Economic ‘Man’
Market value
Personal wealth
Able-bodied workers
Labour, intellect
Exploitable resources
Knowledge (IPR)
Women’s work
Subsistence
Social reciprocity
Sick, needy, old, young
Body
Ecosystems, wild nature
Feelings, emotions, wisdom
What to Do?
• Get rid of money – not very practical in urbanised societies, also money in various forms has a long history
• Spread current money access (debt) – problems of micro-finance/sub-prime
• Create Local Money – useful - but does not usually cover wider economic needs
Money as a Commons
• Money should be seen as a ‘commons’ social resource like air or water is a natural resource
• Its issue should not be privatised or its accumulation be a primary aim
• Currently no basis for ‘enough’ : bread/money price
• Money as a public resource would create the possibility of a sufficiency economy with enough for all not cornucopia for some
Money as a Commons
• Money access as democratic right (citizen income, right to meaningful work)
• Use of socially issued money to prioritise economic activities (social need, public services)
• Any residual market system would be regulated and serve the demands of a sufficiency and socially just economy
Debtfree Money for the People
Democratising Money
• Control of money supply needs to be taken back from the banks
• All new money should be issued free of debt on the basis of democratic priorities
• Monetary management through issue and taxation (linking fiscal and monetary strategy)
• Private investment should be based on a real transfer of money (as the text books say)
People’s Money for Sufficiency
• Democratic priorities
• Needs-led expenditure
• Public infrastructure
• Community/Specialist banks
• Not for profit services/production
• Basic income
• Income for ‘commons’ resources – land, water
Publications
• Mary Mellor (2010) The Future of Money: From financial crisis to public resource (Pluto)
• Mary Mellor (2010) Could the money system be the basis of a sufficiency economy? real- world economic review 54 www.paecon-net/PAEReview/issue54/Mellor54.pdf
• Frances Hutchinson, Mary Mellor, Wendy Olsen (2002) The Politics of Money (Pluto)
Web Lectures
• Bringing Economic Down To Earth http://www.youtube.com/watch?v=9F-DuD6T_i0
• Just Banking http://www.youtube.com/watch?v=uAhxDsm0eZE
Understanding Money: four lectures
• http://www.youtube.com/watch?v=5IZRWQn5jgk
• http://www.youtube.com/watch?v=8wpbnYZZaG4
• http://www.youtube.com/watch?v=PoIRCHq7Cr4
• http://www.youtube.com/watch?v=argEb1tWtt0