At the beginning there you heard our guest this week, author and digital rights advocate, Cory Doctorow and we’re going to be talking to Cory in a moment about, among other things: his new book, Attack Surface, and about where his work intersects with economics, and also about the importance of the late, great, anthropologist David Graeber who, with his book Debt: The First 5000 Years, got many of us thinking about money in a different way.
The typical mainstream economics textbook story is that money is a system of tokens that evolved spontaneously through humans needing to solve the problem of barter, the inconvenience of having to wait for someone to come along who not only had what you wanted, but also wanted what you had - the so-called double-coincidence of wants - and to solve the problem, humans started using tokens to represent value, starting with feathers and stones and beads and shells, and eventually settling on precious metals, because you can make them into coins and they’re hard to counterfeit - and, because these are precious metals, at some point, people preferred not to carry them around, but instead to lock them in vaults and issue paper IOUs for their precious metals, and then eventually people worked out that the system would work fine without the precious metals to back up the IOUs, so then we moved to pure fiat currencies, and then we worked out that we didn’t even need to carry around the paper money, so now we just keep most of our currency tokens as ledger entries on a spreadsheet at an institution called a bank, and when we want to pay someone we tell our bank to move some of our tokens from our name at our bank into another person’s name at their bank by writing a cheque, or swiping a card, and our respective banks change our ledger entries according to our instructions. All of which is a long story that comes to the conclusion that our present-day economies are still just barter economies, but with money - albeit getting more and more sophisticated - just serving as a device to remove frictions. So the those big shiny buildings in your capital city’s finance district are just full of people just wanting to help us to barter our sheep and our chickens and our credit default swaps in better ways.
But David Graeber’s book introduced us to what I understand to be a consensus among anthropologists, which is that not only is there no evidence anywhere on earth that money evolved from barter, but also that the way we “do” money today, as a ledger system, is the thing that came first, from as far back as thousands of years ago, and since then, we’ve alternated between ages of virtual and physical money, but with that money always issued and controlled by an authority of one kind or another, and never arrived at spontaneously by private sector actors.
You may disagree with these findings, but if we put that to one side and bring things up to today, I think it’s indisputable that when it comes to currency, there is always an issuer and a user - and if you find yourself subject to counterfeiting laws, you’re probably in the latter category. Yes, private sector actors can always leverage a national currency by writing IOUs denominated in that nation’s unit of account - but as I understand it, the only thing that can make those IOUs as liquid (or as accepted) as the national sovereign currency is when the currency issuer, the government, extends a legal franchise to that private sector entity to create those IOUs - and so in that respect, that entity is then acting as an agent of government.
And so what many of us have found more useful, in terms of explanatory power, is the MMT money story, which starts with an authority like a nation state needing to get something done, whether it’s to have an army, or a national health service, so it needs to provision itself and so it picks a unit of account, a token that it alone is allowed to create, and then this authority puts all the people under it in debt in that token. That could be done by issuing bills for fees or fines, but you and I are probably more used to this indebtedness showing up in the form of a tax bill. And by issuing tax liabilities payable in its own unit of account, a national government creates people looking to do things to earn its tokens, so that that government can then spend its otherwise worthless pieces of paper or ledger entries into existence to hire people to build its army or its healthcare system.
So what does the government want when it issues us with tax liabilities? Well, it’s a bit like that quote from marketing professor Theodore Levitt “people don’t want a quarter inch drill bit, they want a quarter inch hole.”
The MMT analysis flips the script in a similar way. The government doesn’t want your money, it wants what results from you needing *its* money - which is the ability to spend its currency into existence to provision itself.
It wants the materials and the labour necessary to deliver the outcomes it was put in charge of delivering - like infrastructure, or transport, or security, maybe a public education system or a public health system if you’re lucky enough to live in a society that values those things.
But because resources are finite, and fiat currency isn’t, governments always stop short of supplying enough money to the economy to give everyone a job, for three reasons: 1) they’re scared of inflation, 2) it’s very easy to get the unemployed to blame themselves for their predicament and 3) The volatility that arises from deepening social and economic inequality often benefits politicians running on a law-and-order platform.
The MMT solution to some of these things is to have the government guarantee a job to anyone willing and able to work, which pays at a fixed, (and crucially) socially inclusive wage, and this stabilises prices by having the government only spend automatically where spending is definitely needed, ie on people looking for a way to earn the government’s currency, who can’t yet find one. Remember: the unemployment itself is a result of the government having a money system in the first place but not running it optimally - so it’s on them to fix it, and it’s on us as voters to get that on the ballot. Also, consider that we already have a system where the government spends automatically via unemployment benefits when people become unemployed. And the government do this, not out of altruism, but to stabilise the economy - so it seems to me adding an extra employment option to this stabilisation mechanism doesn’t take anything away, and it has to be better, on a point of logic, to what we have now.
You can listen to our episodes 4 and 47 with Fadhel Kaboub and Pavlina Tcherneva on how the Job Guarantee works as a superior macroeconomic stabiliser.
It’s likely that there will be challenges in the design and implementation of a Job Guarantee, and as Cory explores in his next book, The Lost Cause, what happens if, for instance, the people who wanted to Make America Great Again But Not In A Way That Works For Everybody start lashing out in creative ways or trying to sabotage the system?
And this question made me have a dig around and take a look at the early years of the NHS. And it turns out that when the NHS was at its planning stage, there were people who were worried about the government guaranteeing healthcare to everybody. People who didn’t want the upper limit of their earnings to be decided by the state. And those people were doctors and members of the British Medical Association, and they published letters in the British Medical Journal describing Nye Bevan, the architect of the NHS, as "a complete and uncontrolled dictator" and the doctors who were co-operating with the NHS were called “Quislings”. One leading member of the British Medical Association said the NHS was “the first step…towards national socialism", and that it would be controlled by a "medical Führer”.
And this demonisation of the NHS was also fun sport for the rich and prominent. Sir Bernard Docker, a CEO with an appetite for conspicuous consumption, who drove around in gold-plated cars, and used his company to expense items such as a 14 grand mink coat for his wife (that’s 130 grand in today’s money) and also a Welsh castle, yes - I really just said “castle”. On expenses. Anyway this Jeff Bezos of his day was so worried about everybody getting healthcare that he described the National Health Service as a 'mechanism in which the patient will get caught and mangled' and that it would result in the 'mass murder of…hospitals’. Baron Thomas Horder, a physician to Queen Elizabeth II and the president of the British Eugenics Society warned in a speech to the Society of Individualists that "If medicine were taken over by the state… it would be as disastrous as the domination by the Church in the Middle Ages” and in fact “a greater disaster, because the Church was cultured."
This was not popular push back, this was just a tiny sliver of privileged people leveraging their positions but as a result, compromises were made and General Practitioner surgeries were kept as private businesses and senior doctors in hospitals were allowed to continue private treatment, which preserved the private healthcare system. So right up to the present day, even in the NHS-loving UK, we have a two-tier healthcare system where if you have more money, you get better healthcare - so we’re still distributing healthcare by income rather than need.
But just because that was - and still is - massively unjust (as I see it), I still think we needed to institute the NHS, and carry on instituting it today. If you’d’ve asked the advocates and architects of the NHS to guarantee that it’d be constructed perfectly as a qualification for its inception, it would never have gotten off the ground, but maybe that’s the whole point of asking for proof of something that’s impossible to prove. So when it comes to the Job Guarantee, I think we have to proceed on the basis that it might not be implemented perfectly, but perfect shouldn’t be the enemy of the good.
And this brings us back to the importance of understanding how modern money systems work in macro terms. When you have a floating exchange-rate fiat currency system, there are only two choices for price stability: an unemployed buffer stock or an employed buffer stock. And as I said before, I choose the second one because it seems to me better on a point of logic than the first one.
In the interview Cory raises a point made by Law Professor James Boyle, that until the concept of “ecology” came along, a lot of people were split between different fights, people who cared about animal rights, people who cared about habitat, people who cared about pollution… but with the advent of ecology, this became one movement with a thousand ways to get involved. And I see a similar thing with the fight for a true full employment, socially-inclusive, Job Guarantee. At the moment, we’ve got many movements spread over many workplaces fighting for, a minimum wage, or better workplace safety, or for provision of childcare to help working families, or for green jobs, or for localism, and on and on, and I think all of these fights can be brought together by the fight for a Job Guarantee. I think might be at the stage in the Job Guarantee’s history that the NHS was at in the 1930s. We need to keep making the case for it until it becomes not just the moral thing to do, but also the common sense thing to do.
Anyway, I’ve linked to a ton of great stuff in the show notes including more detail on the Job Guarantee from its principal architects and also where you can contribute to Cory’s kickstarter for his audiobook, and also Cory’s podcast, where there’s always great stuff - at the moment there’s a three-hour excerpt from his new Audiobook and also he’s been reading one of his earlier novels as a series, so definitely check that out!
And as ever, I’ve linked to where you can support this podcast via Patreon dot com slash MMT podcast, your support really helps keep the show going and puts food on the table and is so appreciated. Support starts at a dollar a month (which is 79 British pence at the time of recording) and no matter what level of support you give, you get early access to all our shows and patron-only episodes. As ever, thanks for the time you put into understanding and spreading the word about MMT. Let’s dive in!