[발췌: M. Mellor's] The Future of Money: From Financial Crisis to Public Resource

출처: Mary Mellor, The Future of Money: From Financial Crisis to Public Resource (Pluto Press, 2010)

※ CONTENTS: 

Introduction (p. 1)

1. What is Money (p. 8)

2. The Privatisation of Money

3. 'People’s Capitalism': Financialisation and Debt

4. Credit and Capitalism

5. The Financial Crisis of 2007-8  (p. 109)

6. Lessons from the Crisis

7. Public Money and Sufficiency Provisioning

Appendix:Acronyms and Abbreviations (p. 176)

Bibliography (p. 177)

※ 발췌 / excerpts of which: 

INTRODUCTION

The financial crisis of 2007-08 has revealed both the instability of the global financial system and the importance of the state as lender, borrower and investor of last resort. The world of deregulated privatised finance proved not to be a source of wealth for all, but a drain on the public economy, as states poured money into the private financial sector. It has also been a destroyer of personal economic security as savings were threatened, jobs lost and homes repossessed. The crisis in the financial sector, most notably in Britain and the United States, but also in Europe and many other parts of the world, contrasts with the bombastic optimism of the latter part of the 20th century and the early part of the 21st century with its glory days of 'Big Bang' deregulation and the financial sector's dominance over national politics. Far from celebrating the 'rolling back' of the 'nanny' state, the implosion of deregulated finance has directly contradicted the neoliberal case that the market and its money system is a self-regulating process that will only be distorted by state intervention.

   The crisis raises many questions about the way the financial system operates under later capitalism, in particular the role of banks and other financial institutions. The financial system is about the flow of money in its many forms through human societies and this, in turn, raises the questions about the nature of money itself. Is money just a mechanism in its own right? Where does money come from, how does it operate? Who controls money, and how? In this book the case will be made that money is a complex phenomenon whose economic functioning relies on social trust and public authority. The role of states in attempting to rescue the financial sector challenges the idea that money is a purely economic phenomenon. The crisis reveals money's social and politicla base, but also its enormous power and lack of democratic control. It is therefore crucially important to understand how money operates within the capitalist market system and how the institutions that originate and direct its flow are owned and controlled. This book does not assume any prior knowledge of economics but will be of interest to those within the discipline who want to look beyond conventional economic analysis. For those seeking more radical approaches, it aims to broaden the debates about the crisis in the financial system in order to explore possible alternatives by looking at the wider social and political context of the financial crisis.

   Capitalist market theory sees money as the representation and product of a 'wealth-creating' economic system. As such, its operation should be left as far as possible to market logic. The case for the 'free' market and the privatisation of the money system is that markets are the most efficient way to organise and distribute economic goods, including finance. Given the assumption that all wealth is created by the private sector, the public/social sector is seen as parasitic upon this money/wealth creation process. Money circulation through the financial system is seen as the outcome of private economic acts, not as a function of social relationships and public authority. The notion that money issue and circulation should reflect the demands of the market means that public expenditure must always be contingent on the activities of private economic actors. Expenditure on social or public needs must be secondary to privatised economic forces. The private sector will authorise how much can, or cannot, be afforded since public expenditure is seen as a drain upon the public sector.

   The financial collapse has exposed the neoliberal ideology of market fundamentalism for the illusion it always was. In captialist economies, the state is a capitalist state and has always stood behind the capitalist financial system as guardian of the money system, financial properties and contracts. Although public sector spending is decried, the state is expected to produce unlimited sums of money to stabilise the financial system when it experiences its regular crises. The exposure of the reliance of the private financial sector on the state has brought the financial system into full view and opens it up for analysis. The opportunity must be taken to challenge the private control of finance and ask whether such an important aspect of human society should be owned by, and serve, the interests of capitalism. If the conventional view of money and its systems is not challenged, public intervention in the financial sector during the current crisis will only be a stepping stone back to hidden state support of a more carefully regulated capitalist financial sectorㅡuntil the next crisis.

   The core argument of this book is that the money system needs to be reclaimed from the profit-driven market economy and socially administered for the benefit of society as a whole as a public resource. In order to make this case it is important to look in detail at the nature, history and functioning of money and its institutions. There are dilemmas in opening up a debate about the nature of money and its role in economic life. The ideology of the market presents the economy as a natural process administered by inspired entrepreneurs in which exchange through money is conducted on rational principles. To say that money is as much a social and political phenomenon as an economic one is not an easy case to make. Confidence in money has largely been based on illusions about the origins of money and how it is issued and circulated. Will people be able to live within a financial system that operates without those illusions?

   Modern societies are heavily monetised so that nearly all human needs are met through monetary exchange, whether in direct purchases or through taxation and state expenditure. Many people also try to secure their future through money: in savings, pensions or other financial assets. It is therefore important that people feel that money is a tangible thing that has value and will hold that value. People must trust money and trust other people to hold to their money contracts if they are to feel secure. They must feel that their money is safe in the bank, that their pension will be paid or that the price of bread will be within their means. The case this book will make is that this economic security can only be achieved through public action and social solidarity, not through the market. In this context it is important to challenge the concept of the market itself. The capitalist market is not created to meet needs, it is created to make profit.

   ( ... ... ) One of the aims of this book is to explore whether it is possible to have a money system that could enable a comprehensive provisioning of human societies in an ecologically sustainable and socially just way. Understanding the present money system is central to achieving that end.

   The first chapter will explore the origin, nature and function of money. It will look at different ways that money has been construed: as private, related to the capitalist market; as public, related to the authority of the state or as social, a construct of social relationships and trust. Concepts will be explored such as 'sound' money and the relation of money to the 'real' economy. The chapter will look at the way that control of money has shifted over time from public authority to the privatised banking system. It will be argued that this shift is important because ownership and control of the issue and circulation of money gives to the issuer the benefit of initial expenditure of that money and, with that, direction of the economy as a whole.  (p. 4)

p. 5: 

   The privatisation of money issue and circulation will be explored further in the second chapter which will look at the ownership and control of the financial system institutions. It will show how money issue and circulation has moved between the private and public sector in an intricate relationship between the state, commerce and the banking sector. It will show how government reliance on debt to the private sector was central to the modern banking system. This has been amplified by the shift from state issue of debt free money, mainly as notes and coin, to private bank generated debt-based money, which is effectively 'fresh air money' or 'money from nowhere'. The radical implications of this will be explored. The chapter will go on to look at the changes that took place in banking in the late 20th century which saw an explosion of new financial instruments and financial institutions. These innovations in the financial system, together with the globalisation of finance and a political regime of light regulation, laid the basis for the 2007-08 financial crisis.

   The third chapter will argue that the privatisation of money issue and circulation has led to the emergence of a financialised society where money value predominates. This has underpinned public and collective approaches to social solidarity and security, particularly within Anglo-American economies. Concepts such as 'people's capitalism' and 'the property owning democracy' have encouraged people to think that they can individually safeguard their interests through money system. As a result, public and collective assets have been privatised or demutualised and people have been encouraged to become shareholders, rather than members and citizens. The chapte will explore how people were enticed into financial capitalism through pensions, stock market investments and, particularly, mortgages. Savings became confused with investment with little awareness of risk. In the short term the stock market and house prices boomed. Personal credit also exploded as a major engine of capitalist expansion. Easy access to credit masked stagnant levels of pay. The use of credit also became centrl to policy responses to social need, poverty and inequality. Strategies such as microcredit saw people, particularly women, encouraged to borrow and invest their way ( .... the end of p. 5) 

p. 8:

Chapter 1. What is Money?

This is not a straightforward question. Money in its long history has been represented by many different things from precious metals, shells and beads to heavy, largely unmovable stones. It has been made of substances that have value in themselves such as precious metals or represented by something that has no value in itself such as base metal coin or paper. Its operation has been represented in many ways from cuneiform tablets and tally sticks, to paper or electronic records. Conventional economics sees money as having a number of functions. It is a measure of value (a unit of account), a medium of exchange, a way of making deferred payments and a store of value. Money is seen as evolving with the market system. Barter is often assumed to be the original form of economic exchange with money emerging to solve the problem of finding suitable mutual exchanges. From thie perspective, money is the product of pre-existing economic exchange.

   The chose commodity needed to be valuable, durable, divisible and portable. Precious metals such as gold and silve were obvious choices. As a result, gold has been particularly resonant for modern conception of money. Gold is seen as havin an inherent or intrinsic value and was adopted as a basis for money value until comparatively recently. From this 'metallist' perspective, the value of money still relates back to gold or some commodity that has intrinsic value although, in practice, money can be represented in many forms, such as base metal coin, paper or electronic record. This view of money leads to the assumption that money can only function effectively if it is scarce and valuable. Douthwaite argues that this view, based on the historical scarcity of gold and silver has distorted economic theory ever since. It has led to the false idea that money can only be based on a scare, and therefore valued, resource (1999: 33).

   The claim that money originated in barter has also been challenged (Innes 1913/2004, Ingham 2004, Smithin 2009). Rather than tying the origin of money directly to the emergence of a market economy, a variety of early uses have been identified such as tribute, ^wergild^ (injury payment) or temple money(offerings). Money has also appeared in many different types of society and in many different forms. The emphasis on street level portable money in western economic thinking may reflect the fact that in Europe coin emerged a thousand years before banking. However, in historical terms the banking function is thousands of years older still. It emerged in Ancient Egypt and Babylon which both had extensive banking functions based upon grain storage. The invention of money as coin is creditd to the Lydians of Greek Asia Minor in the 7th century BCE who made coin out of electrum, a naturally occurring gold/silver alloy. Alexander the Great (356-323 BCE) minted coins to fund his military campaigns and expand his empire. The Romans also used coins widely and their value was set on the authority of Rome. After the fall of Rome the use of coin became more chaotic in Europe and was even abandoned in Britain. However by the 7th and 8th centuries coins were circulating through much of Asia, the Middle East and Europe. Some of these coins travelled long distances, particularly the ^denier^, a silver coin (Spufford 1988: 40). Even so, as Buchan notes, until the 12th centiry gold and silver were as likely to be used for decoration as money. However, from the 12th century onwards the balance between decorative uses and money shifted in the direction of money and religious artefacts were being melted down and minted into coin to fund the crusades (Buchan 1997: 53).

   Although coins have historically been associated with precious metal such as silver and gold, as Mitchell Innes pointed out as early as 1913, the amount of precious metal in coin has varies widely over time. Rarely has the value of the actual coin been the same as the value of the metal of which it is made (Innes 1913/2004). Given the varying amount of precioius metal in coins, the only guarantee of the worth of the coin became the face or signature of the issuer, basically the authority behind the minting. Far from being a precious commodity that had become readily accepted through trade as the barter theorists thought, money as coin has generally been issued by fiat, that is, issued and guaranteed by an authority, such as powerful leader, and office-holder or a religious organisation. In fact, as Davies has argued, when coins were too closely associted with scarce precious metal, economic activities became restricted. Economies flourished where coins were plentiful, such that 'long run trends in depression and prosperity correlate extremely well with the precious metal famine and surplus of the Middle Ages' (Davies 2002: 646). Even debasing the coinage by reducing the precious metal content was not in itself a problem as the countries which experienced the greatest economic growth were those whose leaders had 'indulged in the most severe debasement' of their coinage (Davies 2002: 647).

   Making coin out of a precious metal confuses the role of money as a measure of value with the value of the coin itself. Since gold and silver have value as commodities, it would seem reasonable to imagine that their value is intrinsic to the coins themselves. However to say that silver and gold have intrinsic value is not the same as saying a gold coin has a particular value, certainly not one that is constant over time. Gold can change vwlue both as a commodity and as a coin in terms of purchasing power. Therefore gold/silver as a commodity does not 'have' a value. It is valued, but at any point in time the exact value will vary and will need to be designated in some other form of commodity or money, such as silver or dollars. As Rossi argues, money cannot be a commodity because its vaue would need to be established using another standard of value such that 'infinite recursivity makes this measurement logically impossible' (2007: 13). Money value is therefore much less certain than even an arbitrary measure such as an inch. Once an inch is chosen as a unit of measuremtn it stays constant, whereas money as a unit of measurement can never be assumed to be constant no matter what it is made of. Money does not in itself embody a value, it measures relative values.

   The historical popularity of scarce metal has obscured the fact that to say that something is worth a few shavings of silver, an electronic money sum, a number of gold coins, wampum beads or a Yap stone is all the same thing, that is, different ways of measuring value. The Yap stones of Yap in Micronesia are particulary interesting as they are large stones that can only be moved with great difficulty, if at all. Value does not imply anything about the material from which money is made. Gold and silver are therefore valued for themselves, but cannot act as a fixed measure of value, nor can they secure the value of a currency. Despite some contemporary arguments that money should be returned to a connection with precious metal (Lewis 2007: 409), money is more helpfully seen not as a 'thing' but as a social form (Ingham 2004: 80). Ingham sees the idea that there is some 'invariant monetary standard' as a 'working fiction' (2004: 1444). 'Sound money' is a product of society, not of nature. Money is something that people trust to maintain its value or be honoured in trade, while its actual value can vary. Effectively when we say people trust in money we mean they are trusting in the organisations, society and authorities that create and circulate it, other people, traders, the banks and the state. Money, whatever its form, is a social construction, not a natural form. It has no inherent value but it has vast social and political power (Hutchinson et al. 2002: 211).

   This insight has not always been clear in radical thought. Marx, for example, was close to the ideas of the commodity theorists on the origins of money. At the same time, he saw the money relation as a social relation. This makes confusing reading. Marx seems at times to say that money is based on valuable metal and at other times that money has no value (Mellor 2005: 50). He adopts a commodity theory of money as 'a single commodity set aside for that purpose' (Marx 1867/1954: 36). However that commodity must be socially identified: 'a particular commodity cannot become the universal equivalent except by a social act ... thus it becomesㅡmoney' (Marx 1954: 58); 'money itself has no price' (Marx 1954: 67), and the even more confusing, 'although gold and silver are not by nature money, money is by nature gold and silver' (Marx 1954: 61). This is mainly because Marx's focus isn't money itself, but the exploited labour embodied in the exchange process that is obscured by the money system: 'When arose the illusions of the monetary system? To it gold and silver when serving as money did not represent a social relation between producers, but were natural objects with strange properties' (Marx 1954: 54). One result of Marx's confusing statements and the focus on the labour theory of value is that the analysis of money has not been central to radical economic thought. In this sense, much radical and conventional economic theorising shares a common idea that money is only the representation of a 'real economy' of economic exchange and is therefore of no special interest within economic theorising.

   As we have seen, coins confuse the analysis of money if they are made of something that has a separate value as a commodity. This is not the case with paper money. Paper itself cannot have any inherent value as a substance. Whatever it represents must be the bases of a social agreement. Like coin, paper money has a long history. It was first used in 9th-century China during Hein Tsung period 806-821 and the paper money of the empire of Kubla Kahn (1260-1294) was recognised from China to the Baltic. Withing Europe paper-based exchange was vital to the growth of commercial markets. Trade was enabled through promissory notes (based on the personal trustworthiness of the issuer) and bills of exchange (linked to the sale of goods) issued by traders and goldsmiths. Paper money also avoided more risky forms of payment such as carrying gold or coin. The exchange of paper was supported by the development of double entry book-keeping that was widely used in trading cities such as Genoa by the mid-14th century. The use of paper money and book-keeping systems enabled an expansion of trade that was free of the limitation of precious metal.

   However this does not necessarily undermine the commodity theory of money. Paper money can be seen as merely representing, and being backed by, the original precious metal. The notion that there was a precious metal reserve 'backing' currencies was retained until the early 1970s through the attachment of currencies to a dollar value of gold. This did not claim that there was an inherent value in gold, but that currency values should be based on the nominal value of gold priced in dollars. However, any real backing of currencies by gold would be impossible in modern economies (or even many traditional economies) given its scarcity: 'the very notion of a commodity money is an illusion' (Parguez and Seccareccia 2000: 106). The dollar maintained this fiction the longest and it was the strain on American gold reserves that led to the final abolition of any attachment to gold in the early 1970s. On coming to power in 1997 the UK Chancellor of the Exchequer, Gordon Brown, acknowledged the impracticality of gold as a currency reserve by selling half the country's reserves and buying instead a range of currencies: dollars, yen and euros. The alternative to the 'metallist' or commodity theory of money is a theory that sees money as resting on a social and political base, a combination of social convention, banking systems and state theories.

Money as a Social Phenomenon  (p. 13)

The theory of barter economy saw money as emerging organically out of the market. Ingham argues that this is logically impossible as the market could not exist without money and therefore 'money is logically anterior and historically prior to market exchange' (2004: 25). Ingham makes this argument because he focuses on a different aspect  of money from the barter theorists. The latter stress[es] the importance of money as a medium of exchange, with the chosen valuable commodity taking the place of bartered goods. For Ingham, the most important aspect of money is its use as a notional or abstract measure of value which he sees as preceding coin by 2000-3000 years (Ingham 2004: 12). Even barter would need to have a notional scale of values with which to measure a carrot against a cabbage. For Ingham, measuring value in economic exchange is much more important than the actual medium used to transfer value. This is why the large and immovable Yap stone can act as money if people calculate value in relation to it. The British guinea 21 ( ... p. 13)