Place-Based Narrative Labor with Sonia Ivancic

Money on the Left 
speaks with Dr. Sonia Ivancic about the importance of regionally sensitive and affirmative storytelling in provisioning processes. Assistant Professor in organizational communication at University of South Florida, Dr. Ivancic is a community-engaged researcher, whose work on “place-based narrative labor” offers essential new tools for displacing prevailing scarcity logics and rhetorics of austerity with more capacious ways of thinking, arguing, and narrating.

Through embedded fieldwork with non-profit, rural Appalachian food distributors, Professor Ivancic has developed astute critiques of the narrative frames used by some grant-making non-profits as they paradoxically seek to address privation and hunger in Appalachia by perpetually framing privation and hunger in Appalachia as the region’s most salient and seemingly default characteristicsIn place of this “deficit-driven” characterization–which, owing to the ways that such projects depend on the grant cycle, is nearly always the dominant kind of characterization–Dr. Ivancic identifies and promotes an “asset-driven”mode of place-based narrative labor. With this asset-based approach, the provisioning process affirmatively calls attention to and works to expand the capacities and potentials of a given community, honoring the dignity of particular communities, while opening political imaginaries to include new metrics for collective flourishing and renewal.

In our conversation, we extend Ivancic’s theorization of asset-driven place-based narrative labor to rethink the challenges and potentials of a Federal Job Guarantee under a future Green New Deal. We also draw rich parallels between her account of narrativity in local provisioning and conceptions of macro political economy in Modern Monetary Theory and other heterodox traditions in political economy.

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Music by Nahneen Kula:


The following was transcribed by Mercedes Ohlen and has been lightly edited for clarity.

Scott Ferguson: Sonia Ivancic, welcome to Money on the Left!

Sonia Ivancic: Thank you for having me. I’m excited to be here.

Scott Ferguson: We’re excited to have you. To begin, could you tell our audience a bit about your personal and professional background? How did you come to pursue your present research and pedagogical work in Communication Studies and in organizational communication in particular?

Sonia Ivancic: I’ve been thinking a lot about that question and just in the context of what we’re talking about today, and how many different ways you can story, your experience or my experience or my way of coming to this. So that’s just a side note that that’s been something I’ve been thinking about. But for me, personally, I grew up in Seattle, my parents are actually from Hamilton, Ohio. So it’s not Southeast Ohio, but not too far from where I did a lot of this research. My mom was raised by a single mother and was a first generation college student, she grew up pretty poor. She worked in early childhood education, she ran a child care center, at one point, taught special education, helped support high risk mothers. And then my dad is an architect. And so this is one of those jobs that is very affected by the economy. 

The reason we moved to Seattle was because all the architects in Albuquerque were getting laid off. And so we had to find a region that was having a boom, and was doing a lot of building. And I was four when we did that. And then he also was laid off for a relatively long time, during our most recent recession. So this is all to say that, because of this, I think conversations about work, and child care and poverty, were kind of routinely talked about in my house growing up. And then a lot of my research is around food, I would say food is a major love language for my mom. But so with all of this in mind, I went into my undergraduate degree at the University of Puget Sound, which is in Tacoma, Washington, and thinking I would get an MBA eventually. I was very entrepreneurial child and I really enjoyed finding various ways of selling things as a kid like ice cream, or like garage sales, or coffee cake. 

And so it was kind of this creative outlet for me. So I was like, oh, yeah, I’m gonna get an MBA, because I have this sort of history or thing I like to do. But I sort of accidentally happened into a class in organizational communication. I took a class called “Work Discourse” by a professor who later became my advisor, her name’s Dr. Renee Houston. And that really kind of changed things for me. I found I was really interested in wading into conversations about how a communication perspective can help us think about organizational issues like voice, power, control, dignity, and so forth. So I found I was less interested in finding ways to effectively manage employees and maybe more interested in why people talk and act in certain ways in organizations, and what does this do to people and to communities? And then how can we do it better? How can we create a world that’s more just? 

How can we create work, or an understanding of work that is more edifying for people? So broadly, my research is guided by a question: how do the ways we talk or the stories we tell perpetuate inequities, or open up spaces to promote equity and center marginalized voices? So I do both organizational and health communication research, I would say maybe the central themes running through my work are food and community organizing, as one, two would be discourses about the body or about work. And then three would be equitable and inequitable workplace practices.

William Saas: In answering the first question, you’ve signaled or anticipated where we’re going to go for the second, which is to your theory of “Place-Based Narrative Labor.” You started by talking about being from Seattle and family from Ohio. I’d be interested to hear other versions of that story, or the way that you negotiated that narrative, finally, for yourself with regard to the places that that you’ve been based. But before we get to that, could you tell us a little bit about what you mean by “place-based narrative labor” and why it’s so important to you? 

Sonia Ivancic: Yeah, so I’m gonna think I’m gonna start by talking about the context for the term, and then I’ll kind of get into what it means. But I think first one of the things communication scholars talk about is how nonprofit organizations specifically have to do,  rhetorical work to achieve legitimacy. They have to make arguments about what they’re doing, why they’re doing it, how successful it is, what the impact is. And they have to some, to some extent, tell and sell the story to people who will fund them. So this storytelling involves often telling stories to others, or telling stories about others. Like those they intend to help, oftentimes without input or decision from the people that are being depicted in the stories or images, right. So think of those commercials you often see of childhood hunger, that really depict others, and ways that we might be all familiar with, you know? 

So I’m building off of someone named Sarah Dempsey and her term “Communicative Labor”, where she talks about how nonprofits can often marginalize or misrepresent their typically vulnerable stakeholders, because they’re trying to cater their stories to the people who funded them. And this is usually an audience of privilege donors. And so the premise of a nonprofit is always that they’re making some positive contribution. But a critical Organizational Communication scholar might remind us or ask us to think about how they’re also always political actors as well. And so we might ask questions, like what stories are promoted by these organizations and whose interests are served through their work and through their storytelling? So it is sort of through both this context of the literature, but also through my ethnographic fieldwork, that I came up with this term of “Place- Based Narrative Labor.” 

So after kind of deep involvement and engagement with this organization in Southeast Ohio, called… or that I will call “Collaborative Food Strategies”– that’s a pseudonym– But this concept really evolved from seeing how the people there, talk and tell stories at the organization, how do they tell stories about the people and the place that, that they exist, and that they, they serve people in? And so it’s kind of my attempt to name something that I saw them doing and explain it’s significance, really. So what is “Place-Based Narrative Labor”? So I call what they do “Place-Based Narrative Labor”, which is the work of creating, maintaining and propagating narratives, or in this case, often counter narratives of place. And I call them counter narratives, because there’s sort of a typical dominant narrative of Appalachia, that is negative, deficit based about the problems in the region, and they sort of want to flip that and talk about what’s possible, beautiful, prosperous about the region. So they use these narratives about place to positively impact the region and the people there. 

And then when I say positively impact, I mean, both materially and symbolically so how can they change how people think of the place and the people there? And, also, how can they literally change that place, people’s food access, the type of food that people eat, the food knowledge and food skills that people have? So it kind of creates this space for the community to imagine what kind of future they want to create together. But it doesn’t mean downplaying or ignoring struggles or hardships and I think that’s sort of an important component. It means actively engaging and confronting these hardships and struggles and kind of dwelling in them, but never losing sight of what’s beautiful or possible or powerful about the place that they… that they are. So they draw on things like communal responsibility and collective strength. 

They reframe wealth, away from money to think about the natural resources that are there. The knowledge that people have the fact that people have been saving seeds there for hundreds of years, and things like that. So it’s it’s sort of this embodied emotional-lived interactional activity. It’s, it’s not just branding, or how they market themselves on their website, I think the value of ethnographic research is that you can be there to witness to see to hear the kind of in person interactions that go on at the organization. And so I saw them really, in their workshops at the farmers market, at the produce auction, sort of living this and taking this on as a daily practice.

So one of the important questions that brings up is what is placed mean? Who gets to decide? And I think engaging these questions is an important ongoing tension for the organization. Right? And that it may matters for all these reasons, right? So it matters in this specific case, because it’s trying to flip the way that they talk about Southeast Ohio is one of my participants specifically said, they’re trying to change other people’s ideas. But also, in general, and nonprofit organizations, whether they’re aware of it or not, are constantly telling stories that frame places in certain ways. Nonprofit organizations are already doing this work. I think the question is, how aware or mindful, are they about how they’re doing it? And that these stories impact how people see themselves, they impact how places understand what is possible, right? In that space. 

So they’re not just a reflection of what is, their constitutive and generative and their chosen, right? So it’s important to be mindful and consider: what are these stories doing? How are they acting to some degree? And then the other thing I think this brings attention to is that this storytelling is work, it’s labor. People were asking questions about how to tell these stories and wondering what the impacts of doing it in different ways was, they were taking it on as part of their jobs. And so I think a lot of times, the communicative work that we do in our jobs is incredibly important. We all do it to different degrees and in different ways. But we don’t necessarily name it or talk about it or value it, you know, kind of in the way when we talk about emotional labor, that you’re not necessarily paid for that. It’s just something you’re expected to do. And I think communicative work is a lot like that at times.

Scott Ferguson: Yeah. And the term that sometimes gets thrown around: “immaterial labor”– somehow doesn’t, doesn’t cut it. What you’re up to is much richer, and it affords us a lot more understanding about what’s going on.

Sonia Ivancic:  I appreciate that. Yeah, it doesn’t feel like it quite cuts it right? I think calling it immaterial, almost takes away some of the force of it or something, right? So I think creating food systems that are more just and equitable and cooperative and environmentally responsible requires creatively telling new stories and thinking critically about the role that these narratives play in accomplishing some sort of social change.

Maxximilian Seijo: And so then, as you already alluded to right, along alongside right, thinking about these sorts of narratives, right? You you have a particular concentration, geographically, and a lot of your research focuses on the Appalachian southeast region of Southeast Ohio. For our listeners, how would you characterize this region socially, historically, environmentally? And what drew you towards studying this region beyond what you’ve already mentioned with regards to your background?

Sonia Ivancic: Yeah, so I’ll talk about where I was with Southeast Ohio, which sits at the foothills of the Appalachian Mountains. People often talk about Appalachia or Appalachia… it can be pronounced different ways. Which is actually a very large, diverse region of I think over 13 states. So I’ll talk specifically about Southeast Ohio, which is this very lush, vibrant, beautiful place with hills and caves. Unlike other parts of Ohio, it has a relatively large number of farms that grow diverse crops. So oftentimes, like my visits to Ohio, when I was a child, visiting my extended family, we’d see a lot of these flat landscape and mono crop cornfield farms. And that’s not what you find in Southeast Ohio, I guess, actually, because the soil is not as rich. So interestingly, the less rich soil kind of creates this opportunity for farmers to grow these diverse farms with lots of diverse crops. 

And Southeast Ohio land that’s a lot cheaper than many other places. So I think because of all these things, it has this very vibrant regional food scene of local food growers and local food producers. And then a rich practice of home gardening, home canning, individuals who have saved seeds, like I said, in their community for hundreds of years and in their family for hundreds of years. And then kind of in contrast to that, or in conjunction with that, it also has what people call a history of extraction. And so it has this history of companies coming into the region– So coal mining, and brickmaking are really good examples– And then they come into the region and they create what is maybe the backbone of the economy. And they create these towns that maybe were once these thriving places. But when the resources ran out, or became no longer profitable for the companies, or whatever various different reasons, they left, kind of leaving this large environmental damage and their weak, leaving people who had once had good jobs with no opportunities for other jobs. 

Because they, you know, it was one of those sort of singular economies where it’s not, it wasn’t diverse in terms of what kinds of careers you could have. So and then, because of all of that, and Southeast Ohio also has a rich history of labor organizing and resistance against these corporations. So it’s kind of, you know, multifaceted, it’s many things. There’s currently a big anti-fracking movement that’s being organized in Southeast Ohio that I was really surprised to find out about when I moved there. So and then in the midst of this vibrant food system, and because of these lack of jobs that don’t earn people living wage, and due to how rural the region is, you have very high rates of poverty and food insecurity. 

The county that I was in routinely had the highest poverty rates in the state. And that can fluctuate year to year. So I don’t know if it’s necessarily currently true, but was something that often happened in the region. So I happen to live there while earning my PhD at Ohio University. And so partially, what drew me to the research was I, you know, I was there and around the place, and I got to sort of witness and see what was going on. But I think more than that, what I saw was this community, and this organization, responding in creative ways to some of these large societal problems that we have, like hunger, or a food system that damages our environment, and places a lot of the control of our food resources in these very few corporate actors. 

So I saw them sort of responding to these things differently. There’s a lot of critiques that can be made of our current food system, and also how we organize food assistance, in ways that tend to mark people or isolate them rather than create connection or community or inclusion. So food pantries are a good example. And a lot of our programs like food pantries, kind of presume that food insecurity is this natural inherent state of being. And so we build infrastructure for programs around emergency food assistance, kind of presuming this is normal, natural, and we’ll always have it, right. So we build this huge infrastructure of charity and emergency food, because we kind of presume that hunger is just a natural state of being.

But there’s a lot of research that says we actually have plenty of food. So the problem is not necessarily whether we have enough, it’s about things like allocation, access, profit margins, right? So I was kind of interested… there’s a lot of critiques that can be made. And those are really important to do. And that’s important work. But I was like, Can I find an organization that’s taking a different approach, you know, planning for long term solutions based on maybe the possibility of equity and justice rather than presuming that we’ll always have a community where people are hungry. Plus, I have this commitment to community engaged research and so both contributing to but also learning from the work that people are already doing in our communities is something that’s important to me as a scholar.

 So doing this project, where I lived also allowed me to have a really deep commitment, and involvement to that work. So with this stuff in mind, I was kind of just witnessing and noticing what was going on. I did some research with a fundraising event, you know, that ended up leading more to critique because I saw them labeling. The event is very communal and inclusive, and everyone’s doing it all together. But the ticket prices were very high, right? It was really exclusive and really hard to get a ticket. It was a very public event that happened in the public town square, like one long community table yet, you know, a lot of people weren’t included or invited. 

And then the whole thing was raising money for food insecurity, yet that was forgotten, I think, in the process of the event. So in doing all of this, I was kind of like, well, what else can I find and what else can I see? And that’s what led me to this collaborative food strategies.

William Saas: So continuing with discussion of Collaborative Food Strategies or CFS, much of your focus on them and other regional nonprofits is on their unconventional, quote unquote, “asset-based narrative approach” to community engagement and funding. And this is in contrast to what you identify as the dominant deficit narratives. And you mentioned before of course, we are interested in deficit narratives here at money on the left. And these deficit narratives are interesting or important in your work, especially as they’re promulgated by most of the contemporary nonprofits that you look at. So can you walk us through both the asset-based and deficit based narratives? The strategies, how they differ and why these differences matter?

Sonia Ivancic: Yeah, absolutely. So, um, let’s maybe start with the dominant deficit narrative. And I’m saying dominant because I think our story in our story about Appalachia, that’s what we tend to think of that what that’s what becomes dominant, right? So this narrative is circulated in media. It’s used by nonprofit organizations to earn grants. And it’s what most people outside the region think of when they hear the word Appalachia, so things like poor or lacking resources. People are described as hillbillies or lazy are that sort of a thing. And then there’s all the data to back it up. So I mentioned the poverty and food insecurity data in the state, which is often the case that nonprofits used in order to garner funding, right? 

Like, look how poor we are, look how high of food insecurity we have, we need this funding, right? So deficit narratives can, for nonprofits, produce funding, legitimacy, proof of need. So they can be very fruitful in that sense, people are moved by stories about how poor or desperate or in need a place or group of people are. And then there was this talk that I noticed when I was doing my ethnographic work of competing for most food insecurity, or poorest or, you know, they talked about this almost as a discussion of a race to the bottom, because that was a path to resources, grant money, and so forth. So one of the board members explained this as pride in the race for last place. And that showing you could do a lot with very little are showing that you had the biggest struggles kind of bolstered the case for nonprofits as they apply for funding or legitimacy. 

So one of the issues that can happen is that when the grants you’re applying for and the funding sources become attached to this negative depiction of the region, right, in order to get money, you have to then be the poorest. So how do you ever see your way out of that? This money becomes attached or dependent on this lack on the deficit. And that makes it really difficult for a community to become something otherwise. So that leads me to this asset-based perspective, which stems from questions about potential. They redefine wealth to include a myriad of assets outside of financial assets, which they don’t have a lot of, right. So they talk about strength, resilience, abundance, the wealth of the region, that is the, you know, the trees that allow them to tap for maple syrup, the mushrooms that they can forage for, the people who have, you know, long histories of knowledge about farming and gardening and canning food and things like that. So it’s different in what aspects of place it draws attention to.

 It’s not, as the executive director said, it’s not delusional. It’s a story rooted and lived experiences, it is real. But instead, it says it looks different than maybe what you’re expecting. And they leverage these communal resources, like bringing people together to highlight what the wealth is. So I think one of the interesting things about  place-based narrative labor is that it takes this asset-based approach, continuing to circulate these deficit narratives to garner short term funding, which might be good in the short term because you get a grant, but it ultimately undermines the organization’s goals, things like building community resilience, or creating a strong local equitable food system. So in order to create community resilience you need to understand what makes or can make the region abundant, durable, adaptable, right? And that means letting go or reimagining those deficits to some degree. So CFS recognized, I think, the temporality of this–you can’t depend on the deficit. 

And part of what they’re getting at is: Why would you want to, when you’re rooting your reason of being and your image of the future’s place to always having a region where people are really struggling to access food? Long term? Where does this take you? Right?

So I think one of the things I emphasize is that we’re all telling stories all the time. And that, to some degree, these stories are chosen ways of viewing the world. So neither one is necessarily right or wrong. They’re both accurate to some degree, but they do different things in the world. The deficit mirror narrative is very much over simplified. And it also struggles to create a story of where to go in the future, right? Whereas the asset-based narrative allows you to create a theory of social change. An image of who you want to be and where you want to go. It helps you see possible ways of getting there, right, because it calls for possibility and potential instead of lack deficit, what we don’t have, how poor we are, how hungry people are. So I think those are kind of the differences. And also the reasons why they choose that asset-based approach.

Scott Ferguson: Seems like there’s a connection to between, you know, your critique of the infrastructures around food scarcity, that sort of presume, a kind of endless, natural state of hunger and poverty, and this asset versus deficit approach, right? So not only does the deficit approach, kind of reify, lack and a lack of not just wealth, but dignity and validity. But then also, it seems like in the same breath, it’s in our imagination, putting these regions and these communities into this kind of state of nature that, you know, we can try to as long as there are some rich, you know, wealthy donors who might put, you know, help you out for a few months, you’re going to be okay, but then you’re going to just sink back down to this natural state that we all assume.

Sonia Ivancic: And you never want to use those resources to take yourself to a place where you’re no longer poor, because then how do you get future resources, you kind of get stuck in that. And yeah, I think that’s absolutely the case. And with a lot of these charity models, we kind of build an infrastructure around the charity, and this idea of a charity model, and it creates this very short sighted vision in which we can’t see our way out of that, you know, I think most people, if you ask them– and this has a lot to do with the ways that we talk about poverty and poor people– but if you ask most people, they don’t want aid or assistance, you know, that makes them feel ashamed. It makes them feel embarrassed. Again, like I said, it has a lot to do with the ways that we talk about aid and assistance. But so I think we we commit to these models, where we then are not envisioning a way out of them, or something more just and equitable, and something that a lot of people I think, would prefer.

Maxximilian Seijo: I think this is a nice moment to shift into perhaps more of a longer question that that I’m going to read, and that I think is trying to then make some connections between what we do on this podcast and our intersectional MMT framework and your work specifically. And so one of the reasons why we invited you two on Money on the Left to speak with us is that your theorization here of the asset and place-based narratives, right, as opposed to this deficit as in a sort of deficit of people, right? Or in the sense of people having food scarcity or a scarcity narrative for this particular region that you’re discussing is that these ways of looking at places complements and also complicates some of thinking in the MMT movement about public spending. 

So particularly with regards to urgent projects we support like the Federal Job Guarantee, and the Green New Deal. So MMT economist Pavlina Tcherneva, for example, advocates for a job guarantee that routes federal funds through nonprofits, which already have local knowledge about the needs and values of particular communities. In your writing, however, you newly sensitize us to the very different ways in which this process can be mediated. So we at Money on the Left share your conception of language and narrativity as generative rather than as neutral or descriptive. We regularly extend this assumption to the words, images, and sounds that give shape to money, understood, not as private zero sum exchange, but as constitutive and contestable public spending. Before discovering your work, we have not yet adequately considered how deficit storytelling within particular organizations and communities could undermine what are otherwise robust public spending projects. 

So granting that your case study involves organizations or communities largely abandoned by federal and state legislators, right, which is where this deficit narrative that you’re discussing, right, comes into being.This sense of scarcity and abandonment. We’d love to hear, though, alongside how your research might contribute to this then progressive fiscal program that thinks of deficits in a different way, right? public deficit spending, so an MMT, right? The public deficit is the private surplus. And so there’s, there’s this sort of balancing of deficits or where the deficit narrative exists, and we’re wondering if maybe you could just, you know, weigh in and and see what, how your research might contribute to this vision?

Sonia Ivancic: Yeah. So I think, a couple of things, one of the things I just thought of, as you were talking was this idea that, you know, we, we presume, or name or categorize something as deficit, when we could be asking maybe other different questions like, what is there? What do we have and what can we create? And then the other thing my research talks about is because of deficit storytelling we undervalue the things connected to that. So we undervalue for example, in my case, the people in places attached to Appalachia or Southeast Ohio, we undervalue urban neighborhoods that we labeled blighted, right? So in some ways, I think, we should reconsider that and think about how these places are actually full of potential, and have a lot to teach us. People love their communities. 

Oftentimes, I think I had a participant say something to the great degree of, people don’t look at your neighbor and say, “what a pathetic life you have,” you know? But the experience of living and being in a place as much different oftentimes then an outsider’s perspective of what that is or what it’s like. And so if we’re not from those places, we need to be careful coming in and telling people what to do or how to fix things, or presuming that fixing is even what needs to happen. So an asset approach might focus on harnessing highlighting, creating, or illuminating, instead, maybe. 

So I would say that these community members and nonprofit organizations and in Appalachia, and I’m sure in other places as well have a lot to teach, you know, everyone about how we navigate different symbolic and material resources. People love the region, they want to stay, but people tend to really struggle to find work that is engaging, or allows them to feel a sense of dignity or purpose or pays them a living wage. And so that was kind of a routine conversation that happened when I was there, you know, I had, and this was both for people at the organization, but also the people that they serve. So I had a participant tell me we’re not creating the right kinds of jobs. And so she talked about how you know, you could easily get a job at Dollar General or fast food, but that doesn’t pay you enough to live on. And a lot of these jobs are part time, so then you’re also don’t have really enough to live on and you don’t have benefits, right? 

So I guess ultimately, I think investing money, and jobs and resources into these different areas to kind of lift up what they’re already doing and allow them to do more, could not only benefit the people inside the region, but also the people outside of it, right, because they’re doing a lot of creative, engaging things that we have a lot to learn from. But one caveat, is just that these resources have to be permanent and reliable. And when creating these programs, I think a lot of work would have to be done to gain trust. And this has a lot to do with the context of extraction in the region that a lot of people have experienced. 

So booms and bust, promises without follow through, the government is storing fracking wastewater in a national forest there. So things like that create this distrust of like, you don’t know if you can trust people to say what they’re actually doing, or that they have good intentions, or that something will remain or be consistent there. So I’ve heard of people in a town saying no to a grant, because they weren’t sure that the source of the grant was going to give them local control over the decision making. So I think it’d be interesting to think about. You can take an asset-based approach and creating these programs and doing this, but really do it in ways that create trust and give local people voice and control over the resources.

William Saas: The tendency toward the deficit narrative is, you know, usually in service of making a compelling argument for additional resources. And I’m trying to–as we’re having these conversations, or we’re talking through these different elements of your work–I’m wondering how much of it maps on to macro, national, federal-level policy discourses. I’m thinking right now about the inverse of what we’re talking about–where a program is working well, and the deficit narrative sort of disappears, but also there’s no sort of alternate asset narrative that appears and affirms a situation. If there’s not a problem, if there’s not a deficit, if there’s not a lack, then there’s a tendency to forget about and then take for granted that that is now the equilibrium state of a community. 

And that seems to be why that perpetual deficit narrative is maybe assumed by these organizations, nonprofits and things. And I’m thinking about it in terms of national policy related to, for example, public health responses, where as long as there’s a deficit of care, we will intervene. But as soon as we feel like we’ve addressed that we will disintervene or disengage and then only intervene again, when the deficit becomes unavoidable in our daily lives and consciousnesses. So the question is, do you feel like what you’re observing on the community level is abstractable, or applicable, or if there’s an analogy with the broader national federal policies and programs?

Sonia Ivancic: Yeah, I think that’s a really good question. And I think you’re, you’re right, right, that the deficit narrative almost shines a spotlight on what we need to focus on what we need to look at or fix. And then, you know, we allocate resources and then kind of turn away and ignore, right? I think, you know, I mean, there’s a lot of ways I guess you could think about this question, but it makes me think about how a lot of our funding and our projects are very temporary, you know? You might get a grant for three years to start a local seed saving company. And then after those three years, you know, does the company go under? Do you frantically try to write more grants to see if you can sustain that? What do you do? So, it just makes me think about how, to some degree, these things need to be categorized as permanent.

Food. Is food something that you profit off of? Or is it something people have a right to, right? Is food a public good that we should all have access to? And so I don’t really have a solution to your question, but it makes me think about how we write grants and how we write policy and the things like the time limits and conditions and those sorts of things on them, instead of maybe looking at looking at something as permanently important, and really investing it in it in that sense. Because what we have is a lot of these nonprofit companies or organizations constantly putting so much work and effort into just like getting money. That’s important work. And that is a skill that people honed over many years. But to some degree, is that the best use of their time? 

You know, could they be doing a lot more if they didn’t have to worry about that as much? I think proving that what you’re doing is valuable, and that it is actually benefiting people is important. So accountability is important and good. But just think about how much time they’re putting into  just maintaining this very low base of funding, and how much more people could do if they didn’t have to be concerned with that as much.

William Saas: Could it be that we have better ways of measuring and demonstrating scarcity, and lack, and deficiency, and deficits, than we do have for accounting for and affirming abundance and plenty? 

Sonia Ivancic: Yeah, like, how do you measure possibility? You don’t have a measurement of possibility and imagination. So I think that’s a really good point. We’re very good at measuring lack. Do we have low or very low or marginal food insecurity? What are people’s incomes? And a lot of these numerical categories drive a lot of our policymaking. And I think if you were to go on the ground, and interview people and talk to them about their experiences and what they want, and what is possible, I think we could create something much more fruitful.

Scott Ferguson: So I think what I’m hearing is that there’s a temporal dimension to this deficit narrative mode that’s naturalizing, right? So we presume lack over the long term. And then try to do something about it by writing grants. But we could actually start with different narratives, not only, you know, in the communities themselves, but right in our macro political economic talk, right? We could talk about rights, we could talk about food rights. One kind of wonky term, but I think I think it works here is what we on this show, and in Heterodox Economics, we’ll talk about automatic stabilizers, right? So we have automatic stabilizers, we just don’t have enough.

We have unemployment benefits go up when there are less jobs and that happens automatically. Congress doesn’t have to have a big battle about it, unless there’s a pandemic or something like that. And it just happens, right? So we could have all kinds of ways of allocating credit that mobilizes resources to employ people or to invite people to participate in the ways they want to in their own food abundance and security. What’s neat here is you’re teaching us and opening up connections between a lot of what we think about at the level of macroeconomic talk and yeah, these local levels. 

I want to circle back to a question that we actually just skipped, but I actually like how this is unfolded. Anyway, I want to come back to this organization that you’ve given this pseudo name to: Collaborative Food Strategies. Can you talk a bit more about this organization? Who are the people who are involved? Beyond just this asset approach, what’s their background? What are their values? And then also, as you’ve mentioned, you did over a year’s worth of participant observer engaged community research as a scholar, and you know, as a PhD student, so you’re sort of of the community but also studying it. 

Sonia Ivancic: Yeah, I’m happy to talk about it. So CFS is a really small organization. And they’ve been around for over 30 years. They currently try to create community food security and resilience by investing in the food resources that people grow and produce there and by making fresh, high quality food available to people who lack access. So we can talk a little bit about the history if you’re interested in that, but they started doing different things and this is kind of where they’ve ended ended up and what they do now. So they try to foster communities where everyone has equitable access to healthy local food. I would describe their work as connecting people to food resources and networks, and to individuals with food skills to increase food knowledge and food access. 

They do all kinds of stuff, so I’ll just list some of it. They host seed giveaways, where they give seeds away for free. And you don’t have to meet some sort of metric, you just sign your name down and put your email down. And you can get free seeds, free potato seeds. They host seed swaps, where local seed savers can trade or sell their own seeds. They run a workshop series, where they ask people in the community and sometimes the executive director, or one of the people who works there, or a board member, but a lot of times it’s you know, just someone in the community will run a workshop on how to inoculate mushrooms. Or how to tap trees for sap. Or how do you plant a pollinator garden or canned food or various different kinds of things like that. They run community school gardens. 

One of their main programs is called donation station. And they have a tent at the farmers market. And then there’s a produce auction that is run by a different nonprofit in collaboration with farmers, and a lot of them are Amish farmers in the area where they auction off produce. So they set up a tent at the farmers market and the produce auction and they collect money. You can donate money, you can donate food that you’ve bought at the farmers market or auction. You can donate food or produce from your garden. So people will come and have a bunch of extra, you know, zucchinis was a thing people often have excess of have a ton of extra zucchinis. “Do you want them?” 

Then they use that money to buy food from the farmers at the market or at the auction. So how can we help people who need access, get access to fresh foods, but also how can we do that in a way that invests in the farmers and food growers and producers that are here? So then they hold a distribution once or twice a week, depending on the time of year. And we would haul out all the food. And people from local organizations, whether that be pantries, schools, people would take food back to the library sometimes. Would take it back into the county we’re in and also four or five surrounding counties. So it gets at this idea of when you’re doing food access stuff in a rural area, you really have to think about how are you bringing the food to the people who need it, rather than expecting them to travel to you. So yeah, they also ran a small seed company when I was there, which I think that project is on pause now. 

But they’re investing in the regional food system. They’re uplifting it and highlighting it and expanding on it through education and these shared resources. So their vision is to create a resilient region in which everyone in our community has access to an equitable, inclusive, and thriving food system. 

So then you asked who was involved. It’s a very small organization, there’s maybe five to eight employees depending on time of year and type of grants they have. Many of these workers are AmeriCorps volunteers, probably about half. And so AmeriCorps volunteers are federally funded and receive a very meager stipend. And I don’t know how much the executive director makes, but it’s not a lot of money. And so the woman who ran it when I did my research there, said, when she first got her offer, she was trying to negotiate her salary, and learned through the process of that negotiation that the organization barely had enough money to survive and was in dire financial circumstances. So from what I understand, she got them to a better place. But the point is that the people who are there are people who care a lot about about environmental justice, food justice, growing food and food production, community resilience. They have a lot of skills and passion, but they’re not paid very well and so they don’t tend to stay very long. Maybe a year or so after this data was collected or less, the entire organization turned over. And so I no longer personally know anyone who works there and that seems to be relatively common. And I think it’s because, you know, they’re not able to pay people to stay very long. The AmeriCorps workers are there for a year or so and then move on. The Executive Directors may be there for a few years and puts their heart and soul and all of their time into the organization, and then usually needs to move on to other things. I remember the executive director talking to me in our interview about how long she could stay viably, you know. And I think that’s a pretty kind of common and routine thing. 

So that’s who the people at the organization are what they do. You’ll have some people in the region who do these AmeriCorps jobs kind of over and over again, and maybe at different nonprofits, a lot of the people are either people who live in the region and are from there, or are students who recently graduated. So that tends to make up who works there. And then I can talk about my experience doing research, which I would say was a really amazing and special experience. I have a lot of gratitude to the individuals for welcoming me into their organization and community and just for the work that they do. 

I got into the field or into the site through a friend of mine, who knew the executive director, and we scheduled a meeting. And we kind of co-created what the relationship might look like in terms of my involvement with the organization. And I was very intent on not conducting what they call “helicopter research” where you, you know, land down and collect your data and sort of use people and then move on and don’t contribute anything back. And this is really common in the region, because there’s a university there. And then it mirrors what people have experienced with the industries and extraction. And so that’s something to be really mindful of when conducting research there. 

There was a different project I wanted to do where I wanted to interview women Appalachian artists, and once I mentioned IRB and research, the woman was not interested anymore and wouldn’t connects me to the participants. And so I think this idea of the people are vulnerable to being researched a lot, and maybe not always in respectful ways–this was something I really wanted to be thoughtful about. So we talked, I talked to the executive director, and I volunteered a lot–over 200 hours. I went to every event that I could attend, and I wrote blog posts for them about their workshops, and, you know, took photographs to go with the blog post. 

And so I ended up being able to really develop relationships with the participants. And by the time I interviewed them, one on one, I knew most of them really well. And that was hugely beneficial just for their comfort, their willingness to talk to me, you know, or willingness to share things with me or be honest, you know? And then I gave a final presentation with a few of my findings at the very end. So, you know, in the work involved, all kinds of things that we don’t typically think of as academic work, like packaging dirty potatoes and like rotten vegetables that smell really bad and beautiful vegetables like huge cabbages and going to produce auctions and farmers markets every week, giving seeds away watering gardens and things like that. So yeah, it was a fantastic experience. And I’m kind of in awe with with what they do there.

Maxximilian Seijo: I’m reflecting on where this conversation has led to, and I think there’s some interesting themes that come out for me. Particularly in the way you describe how, you know, the the employees and and who runs this nonprofit, how that structure is working. And in a temporal sense to bring it back to that. Because right, the AmeriCorps volunteers, of course, there’s your federal policy that’s been actively mediating these types of investment and this labor that’s going into addressing, even in the model, the deficit narrative, and its own terms. But shifting to the more asset-based approach, as you have said and, you know, Scott mentioned automatic stabilizers. It reminds me of this macro discourse around the business cycle, which is this idea that, there’s boom and bust, as you said, and the economy’s going well, and then it’s not. And then that’s when people need to come in and address things. And that’s when intervention needs to happen. And we keep circling back to that, but it’s interesting to think about in ways that are really austere still, but, you know, potentially, that these AmeriCorps volunteers are, you know, there’s the kernel of a model there potentially, to think about what a type of permanent investment in the assets of a community might look like. And I think this is where we highlight the Job Guarantee and the Green New Deal as policies that do install a rights based approach. That, you know, eschew the model of business cycles in favor of a sort of permanent infrastructure approach. Which I think is aligned with this asset-based approach. 

So framing where we’ve gone in this temporal sense, that feels like a really important, both, you know, critique, but also positive articulation of what could be done through what is already being done. 

Sonia Ivancic: I think that makes perfect sense as you said it, thank you.

Scott Ferguson: In your writing you mentioned it’s not all hunky dory, right? There’s the asset-based narrative approach, and then the organization that variously employs it, and tensions come up. And I’m wondering if you could tell us about some of those tensions.

Sonia Ivancic: Yeah, so I named two of these tensions, named them “food dissonance” and “concurrently contending with hardships.” So this idea of community based organizing tends to be really romanticized and glorified. And that’s really common, I think, especially with community garden type initiatives that, you know, we kind of glorify that it’s automatically good without thinking about some of the complications of it. So communication scholars talk about how organizing, especially nonprofit organizing is inherently filled with tension. Because you have to simultaneously achieve some sort of goal where you’re fulfilling a good or need, while at the same time writing for funding and arguing for funding and that sort of thing. And that one is profitable or gets you funding isn’t necessarily always in the name of achieving your mission.

So, with the food dissonance, I talked about how there’s moments of dissonance between what food the organization provided or emphasized, and the food that was kind of discursively connected to the region or of the region. So, for example, the region has a very long history of hunting and things like that. The organization used to have a mobile chicken butchery unit, which I learned about through one of my interviews. But a lot of people got the impression that the organization was encouraging vegetarianism. And basically, they were like, we feel like you’re coming in from the outside, and telling us how to eat, you know? And this happened for a number of reasons, there was a different nonprofit that didn’t do that, that sometimes people would confuse them with. 

But then other cooking demonstrations were all produce. And most of what they provide is  produce, and they don’t provide meat to people. They do do eggs and things like that, but but it just sort of raised these questions about “what does place mean, and who gets to decide?” So this concept of place itself is riddled with dilemma. Because there’s no singular meaning of place, there’s no one authentic meaning of place. On one hand, you had people saying, you know, “‘no, meat’ is in another region. And we need to, you know, that needs to be a part of our programming, because that’s something that people in this area care about.” And if we want to have a better sustainable food system, we need to think about hunting and things like that, because that’s a more sustainable way of accessing meat. And vegetarianism isn’t of the place. 

On the other hand, you had people who worked there who are from another region, and were vegetarians and vegans. And so it’s this sort of complicated thing about like, who gets to decide and who gets to make these choices about what place is, and then that’s sort of an ongoing conversation. It’s not a static finite thing, and not everyone is necessarily going to agree, but you need to grapple with those tensions. 

Another food dissonance tension was about what foods CFI or CFS offered. Because they made the choices when they were donating food about what people had access to. So questions about choice and, you know, did people feel familiar with that food or recognize it or know how to cook it and that sort of thing. They didn’t just respond to what people wanted. But the organization itself was actively participating in cultivating certain habits, or making certain things available and not others. 

And sometimes this had to do with funding sources. So it sounded really good on their grant applications, if they could say, for every $1 you donate, we buy a pound of food. And so when we were making our purchasing at the market, or the auction, thinking about weight was something we did you know, and so can we buy things that were heavier? And then can we do that to offset buying some of the other things that people really like or want to eat, that maybe aren’t as heavy or more expensive? Strawberries or peaches are expensive and not as heavy. Whereas potatoes or watermelon, or something like that was very helpful for that ratio. So there are these tensions of the organizations grappling with. And I think there is also something to be said for being able to provide more food, right, rather than if you buy all strawberries, you’re not going to be giving away very much food, nor can you subsist on strawberries. So that was one of the tensions. 

And then the other one, I called “concurrently contending with hardships.” And this just talks about that tension of you’re taking an asset-based approach while you’re simultaneously working to address local challenges. So as you notice, just in my story of the organization and of the place, there are deficits there, like that turnover. Maybe it brings in creativity but ultimately isn’t serving the organization all that much. They would be better served if the executive director and all the employees had a living wage and, and felt they could stay if they wanted to. So they have to work toward this vision of a better world while accounting for what is there, and the injustice is that are there. And so hearing stories about food insecurity, or the struggle of accessing food, or getting a job was very routine part of the work. 

It’s not that those stories weren’t there, or were silenced. But one of the things I talk about is place-based narrative labor means a willingness to dwell in these dilemmas, and to sit with them, and look for the resources to transform the circumstances. So can you celebrate while grappling. People talk talk a lot about toxic positivity right now, you know? Or tyrannies of cheerfulness, where in this case, positive place-based talk is the only thing acceptable and that basically, I just want to say that’s not what was happening. 

But they’re trying to expand what’s possible and complicate that deficit narrative. They’re trying not to define the people in the region by the bad things. So they have to be contextualized in the history of the region and how people are actually already they’re organizing to solve the problems. They’re not just sitting around going, “there’s not enough food, and there’s no jobs.” And so I guess that’s sort of the main main challenges I saw or tensions that I saw within doing this work.

William Saas: In some of your other work, you think critically about the Org Comm issues surrounding sexual harassment. Maybe by way of rounding out our interview, could you sketch out some of of these claims and that work? And then maybe tell us whether you see in your own work connections between the sort of place-based narrative labor and organizational communication and sexual harassment issues?

Sonia Ivancic: Yeah, absolutely. So I think I said at the beginning that a question that kind of guides my research is how do our actions and ways of communicating, hinder or open up possibilities for positive social change? So the sexual harassment project I conducted with a colleague was asking sort of what happens when someone talks about their sexual harassment? So they tell a co-worker, they report it formally. You know, what happens to their personal experience at work? And how do people respond to that? And so one of the things we found is that voicing your harassment to the organization tends to have a negative impact on the people who who were harassed. 

So a lot of times, you know, you need to just tell someone or report. Report it is a thing you often hear all the time. But reporting your harassment actually tended to make people feel less resilient at work, or able to be less resilient at work. And so their resilience decreases when they formally report their harassment. And this is more likely, as we might expect to occur in organizations that are perceived by them as tolerant of sexual harassment. So that’s some of the work that we’ve done around these questions of resilience, and, you know, does is the organizational culture tolerant or hostile to harassment occurring? And then we have a paper that’s currently under review. So it’s unpublished, and I won’t talk too much about it, but it’s about how organizations support or harm targets or witnesses of sexual harassment. So we focus on how discourses tend to form around the target that are negative and harmful for them. About who they are as a person. 

And that support for them, is very unreliable, and paradoxical. But that some people do get a little bit of support, and a few people are able to create these collective networks of support as resistance to the organization. So kind of what we’re arguing is that organizations tend to create the conditions for harassment to occur or thrive. And then perpetuate this with low accountability, low transparency, wanting to avoid the issue or brush it under the rug. I would say that targets of harassment tend to get the impression that the perpetrator is somehow impervious, or outside of accountability. For various reasons, you know? They’re well liked, they are the CEO, they’re their manager. And then the organization often kind of response to the situation in that way. That it’s impossible to hold the person accountable. 

So I guess collectively, these articles sort of advanced recommendations for how we can better support people who are harassed with the hope of creating cultures that are less tolerant to harassment occurring. They complicate narratives that speaking up or reporting your harassment will automatically lead to justice, because often that’s not what happens. The process tends to be pretty unpleasant for people. So speaking up is not necessarily or reporting… it’s not necessarily what’s best for people who are harassed. So I think I mentioned, this is a project I’ve been doing with my colleague, Dr. Jessica Ford, and we’re starting a second sort of project on this that kind of asks the question of, well, now what? Now, what do we want to do about this? Are there any examples where people have felt this has been done well or you know, and how do we sort of think about it in that way? So I guess this project sort of connects back to my central research program, about how organizational strategies perpetuate inequity, or disrupt it. And it centers the experience of people who have been targets of harassment or we also talk about witnesses, because that’s something that’s not discussed a lot. 

So when you’re asked about themes connecting themes between this and my other work. You know, I think how we talk matters, how we label a place or an action, or a person impacts how we respond to them. And whether it impacts whether we can create spaces that are safe, just, equitable, or whether we sort of continue to perpetuate current issues. And also how we mobilize material resources like food and money, harassment policies, that those matter. They have real impacts on people. These material objects and places are also always communicative and symbolic. So what messages are we sending, you know, not just with words, but through objects as well. So policies are a good example. I brought up the example at the very beginning about the long table, communicating community and inclusion when the event kind of did the opposite. So if you’re giving away free food, what’s the quality of the food and what does that communicate to people? So guess those are sort of some overarching connections.

Scott Ferguson: That’s great. Well, Sonia, thanks so much for joining us on Money on the Left. It’s been so wonderful to speak with you about your work. Thanks so much for coming.

Sonia Ivancic: Thanks for having me. I really enjoyed talking to you.

* Thanks to the Money on the Left production teamWilliam Saas (audio editor), Mercedes Ohlen (transcription), & Meghan Saas (graphic art)

Weimar Futurities with Engelbert Stockhammer

Engelbert Stockhammer joins Money on the Left to discuss the political and economic debates that shaped and ultimately devastated Weimar-era Germany. Professor Stockhammer is professor of political economy in the department of European and International Studies at King’s College London and has published widely on financial instability and Post-Keynesian economics. In this episode, we focus specifically on Stockhammer’s recent working paper, “Hilferding, Woytinsky, and the Fiscal Orthodoxy of Interwar Social Democracy,” published by the Post-Keynesian Economics Society in Fall 2021. 

In the essay, Stockhammer reconsiders the so-called “WTB Plan,” a union-backed public works program, which was tragically rejected by the Social Democratic Party (or “SPD”) on seemingly Marxist grounds. During our conversation, we explore the biographies and arguments of two key players in this historical drama: Vladmir Woytinksy, the Russian-born socialist economist responsible for drafting the WTB plan and Rudolf Hilferding, the Austrian-Marxist theorist and politician who turned the SPD against it. Along the way, we consider the stakes and fate of Weimar-era fiscal politics in light of a hegemonic gold standard that ruled across Europe and the United States, growing unemployment and suffering, and the German fascist movement that rose to answer such problems in violent and genocidal ways. Finally, we ponder how unrealized Weimar futurities in the past can help inform the struggle for public full employment today.

Read Stockhammer’s paper here:

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Music by Nahneen Kula:


The following was transcribed by Richard Farrell and has been lightly edited for clarity.

William Saas: Engelbert Stockhammer, welcome to Money on the Left.

Engelbert Stockhammer: Thanks for having me.

William Saas: It is a pleasure to have you. Could you start by telling our audience just a bit about your personal and professional background and how they inform your research and pedagogy? For example, you describe your approach as Post-Keynesian and your work as primarily interested in financialization and financial instability. Could you tell us about your background and how those terms come together for you in your work?

Engelbert Stockhammer: Yeah, I’ll tell you a story that hopefully leads to the Woytinsky paper that we’ll be discussing today. So when I say Post-Keynesianism, I mean critical heterodox macroeconomics and the tension between Keynes and Marxist ideas. It’s about, on the one hand, class struggle, on the other hand, effective demand and involuntary unemployment, but also financial dynamics, financial instability, and how you bring those together. So I’m originally from Linz, which is a medium, for Austrian standards, industrial but provincial town. The only historical significance of Linz is that, in 1934, the anti-Fascist workers uprising in Austria started in Linz. So it is a town with a certain leftist tradition. I should say the workers uprising was heroic. It was the only armed nationwide uprising in Europe against fascism other than in Spain. But different from Spain, our uprising lasted about three days until it was squashed. So while it was heroic, it was everything but successful. But it’s sort of an indication of the radicalism and the backbone of the Austrian labor movement in the interwar years. Indeed, it is in part fueled by Austro-Marxism, which we’ll talk a little bit about later.

So I’m coming from an intellectual family. My parents, essentially, were part of the 1968 generation. I grew up in a left environment, went to an antiauthoritarian kindergarten, and went to university in Vienna. By that time, I was already exposed to Marxist ideas, the Frankfurt School, and what leftist students in the 70s would read. And I would have regarded myself on the radical left. I studied philosophy and economics–economics on the encouragement of my parents that I should also study something useful. But I soon turned away from philosophy because I realized that when they say philosophy, they actually don’t mean Sartre and the Frankfurt School and Marx, but they want me to read Kant and Thomas Aquinas, and I have no patience for this. So I got into economics, but learned more about economics from the political science and history classes. At that time, universities were less commercialized. We were free to take classes from whatever the university offered. And politically, I was actually closer to the Greens, which were growing more radical in the 80s in Germany, Austria, and India. I was involved in student politics in the student unions and so on.

I went to the US to do my PhD. I went to the University of Massachusetts at Amherst, which is one of the strongholds of non-mainstream economics. In that way, they’re essentially for modern types of Marxism. In particular, that means that, at the time, we were excited about French regulation theory and social structures of accumulation, both of which don’t feature very prominently today, unjustly, I think. So when I got to UMass, it had this big internal divide between the postmodern Marxists or post-structuralist Marxists that were Reznick and Wolff, on the one hand, and on the other hand, there was Gintis and Bowles who you might think of either in the tradition of analytical Marxism or rational choice theories, game theory of social conflict, and all sorts of things, all of which was interesting, but it was not what I was coming for. It was not social structures of accumulation, that mixture of taking Marx’s ideas and embedding it in a historical institutional analysis, but using modern statistical and modeling techniques I didn’t quite find interesting because Bowles and Gintis were too much into micro for my taste.

So it’s under these circumstances that somewhat unwillingly I started to become a Post-Keynesian. At that time, I had this premise of what do I do for a dissertation. I was struggling with how to sort of reconcile my ambitions with feasible academic projects. At that time, I had a student subscription to The Economist. So you got the weekly propaganda organ of international capital. And they told me that the real problem of Europe are inflexible labor markets and eurosclerosis. That was the big issue. And the US was great because it has these flexible markets. And in case I didn’t get it, there was writing on the title page and in their headers that told me that the real problem of Europe was the inflexible labor markets.

Scott Ferguson: What year was this?

Engelbert Stockhammer: We’re talking mid to late 1990s. So at some point, I realized they are actually saying there’s a dissertation topic for you here. Let’s take the current mainstream theories of European unemployment. And that was the NAIRU theory, or the non-accelerating inflation rate of unemployment. It was sort of the theoretical underpinning of the whole discourse. And in my view, it was clear they were going after European welfare states in order to break them up. So to me that was part of a neoliberal agenda. And when I talked about these ideas, my Marxist friends told me, “Yeah, it’s a good idea to write about unemployment.” And you have to make clear that unemployment is a systemic feature. In capitalism, it’s unavoidable. And then, depending on how economically oriented they are, you need the industrial reserve army to maintain a certain profit rate for them. I thought that’s crazy. I mean, these guys are going after the welfare state and offering the analysis that unemployment is unavoidable. It’s not unavoidable. Sweden and Austria, which had relatively good welfare states at the time, had lower unemployment rates than the rest. So apparently, you can manipulate it.

In that sense, I became a Post-Keynesian, because the Keynesian framework with effective demand had a specific story about unemployment and testable predictions. I was interested in what Post-Keynesians call conflict theory of inflation, that inflation is the outcome of ultimately unresolved distributional struggles. Initially, it actually was partly developed by Marxists, in particular, by Rowthorn and also by later American structuralists. But it’s one of these heterodox economic theories that you can also use for empirical work. So that was my entry point into this. That is how I drifted towards the Post-Keynesians. And the second entry point also in that story is that effective demand essentially determines unemployment. It’s what the Marxists would call the rate of accumulation, but for the Keynesians it is capital investment. So if there is to be a substantial story that, no, it’s not about labor market institutions, but it’s about demand, then I need a story about demand. That is where financialization became important for me. To me, it was essentially around structural changes in the economy, the shareholder value revolution, or corporate governance changes, and the reassertion of shareholders on higher dividend payments.

But what I emphasize is that that’s not only an outside pressure on firms. The shareholders say, “Hey guys, we want higher returns, we want higher payouts.” But with the fact that firms are regularly reporting to the shareholders, there are organizational changes. So in other words, for me, it was also a way to bring in class struggle into the firm, but not in the Marxist industrial sociology, Braverman-type of analysis of the labor process, but in terms of corporate governance. How do you operationalize what the firm wants? With whom do managers talk to? Who do they report to on a regular basis? And as a side effect, non-financial firms start to become more active on financial markets. Now, part of that is hedging because the exchange rate becomes more volatile. But part of that is they start holding other financial assets or shares in other firms and theories that firms think of themselves as profit centers. And their own investment, whether they are producing shoes, wine, or cars only becomes one branch, and then you branch out, and if government bonds are a higher return, you hold government bonds. So it’s in that sense that I thought of financialization as a change in what firms are doing in terms of taking advantage. 

What I’m telling you, essentially, are chapters of my dissertation. The second one that came out in the Cambridge Journal of Economics on financialization is still one of my most cited papers. So that was my entry into financialization. I then went back to Austria and worked for 10 years at the university in Austria. We actually have a relatively broad heterodox economics program that was quite popular with students and a very lively atmosphere. And I continued to work on these Marx-Keynes tensions. At that time, what was important for me was what we now call the wage-led versus profit-led demand regimes. The Bhaduri-Marglin model, these are essentially synthesis models, where they say the Marxist argument emphasizes that investment is profit driven. The Keynesian-Kaleckian argument is emphasizing that higher wages mean higher consumption does higher demand. In the Marxist world, it’s an under-consumption crisis. These two are brought together in the Bhaduri-Marglin model. I was part of a literature that tried to empirically estimate these models and see how much mileage we got out of them. That literature then started out with those Marx-Keynes synthesis arguments, but eventually became more applied and asked, “Now that we’ve estimated whether the demand is wage or profit-led, how important is it?”

That led us to thinking about neoliberal demand regimes as either expert driven or finance-led. So in neoliberalism, you have financial deregulation, but also if you want anti-labor distributional changes, you have rising income inequality. Now, in a hippie-Marxist world, you would expect an investment boom to follow because you got lots of profits. If they get reinvested, you actually would have investment. That’s not what happened. So we’re saying that, actually, the economic structure, the demand regime, is still wage-led. But you have those distributional changes that, in a way, are integral, so you need other growth drivers. Then, the argument is, in some countries, finance, which initially was associated with stock market booms. But as we saw, there were more important housing booms, because they come with much larger wealth effects and much larger spillover on consumption expenditures and they also have powerful effects on investment. But there was only one group of countries. So in a way, you get a financialized form of neoliberal growth model. But in other groups of countries, say Germany, you get a much more industrial version of neoliberalism, where you also suppress wages, but you don’t have the same financial dynamics. In a way, you rely a lot more on export growth.

So the finance-led versus export-led distinction was an important one here. And that is an analytical framework that recently in comparative political economy, meaning outside economics, has gained a lot of interest. But you see again, it is that Keynes, Kalecki, Marx, and Woytinsky tension that’s often lurking in the background of this. In 2010, I moved to London. Unfortunately, the heterodox economics degree was shut down in Vienna, essentially because there was a university restructuring and the neoclassical wing of the department used that to clean the house. But anyways, for me, a big part of the reason was personal because we were looking for two academic jobs in one city. In Europe, it’s easier in London than elsewhere. As I moved to London, and essentially continued along the lines of work, following up on that, I’ve worked a lot on the Euro crisis. Again, there were neoliberal growth models interacting, but then the question arose as to how does the state react? And what’s the role of the state in particular in the Euro crisis? To what extent is that equation of different development of unit labor costs in different parts of Europe? To what extent are there real causes behind the Euro crisis? To what extent is it ultimately financial issues?

There was the real estate boom in southern Europe and the fact that the ECB does not support the member states. So with both on the left and right, you get debates about the real financial factors, the driving forces behind the Euro crisis. Finally, I became a professor at King’s College where now I am a Professor of International Political Economy. Funnily enough, I’m not an economist anymore. Again, there was a university restructuring at Kings. The program I was involved in got decimated. But it was also good for me to move out of economics, sort of half because conditions weren’t good, and half because I was actually happy to get out of economics and talk more to social scientists. So while the Woytinsky paper that we’ll be talking about is a side of my research, it actually ties back to what I’ve been thinking about for quite a while.

Scott Ferguson: That’s fantastic. Thank you for that elaborate introduction. So as you’ve begun to flag, we’ve invited you on the show specifically to discuss your fascinating 2021 paper that’s titled, “Woytinsky, Hilferding, and the Fiscal Orthodoxy of Interwar Social Democracy.” In the essay, you reconsider Wladimir Woytinsky’s WTB plan, and we’ll unpack what that is, which, just to quickly gloss over, is basically a union-backed and debt-financed public works program, which was tragically rejected by the Social Democratic Party in Germany in the Weimar period. And it was done so on seemingly Marxist grounds by some of the leaders of the SPD. So I think you’ve already begun to answer our kind of leading question, but I guess we want to know what initially piqued your interest in this particular episode in the history of Western Europe, social democracy, the struggle for socialism, etc? And then, what would you say your key claims are in that paper?

Engelbert Stockhammer: Yeah, I am delighted that someone finds the paper interesting. I’m totally fascinated by this episode and by Mr. Woytinsky, specifically. So first, what piqued my interest. Part of the interest is, actually, politically and not directly related to my research, and that’s the Austromarxist tradition. When I left Austria, I actually wasn’t particularly intrigued by the Austromarxists. As I became more social democratic while in the US and started to more appreciate what the Austrian social democrats had achieved, I, at some point, started to read what they did. And as I was working on finance, Hilferding’s Finance Capital, of course, is one of the big early Marxist works on finance. It’s a fascinating book. I presume we’ll have some chance to talk a little bit more about it. So Hilferding is trying to restate, in Finance Capital, Marxist theory and thinks about what it means for finance and banking. He will restate, in a way, a commodity theory of money, which I will argue leads to the gold standard. But the Austromarxist movement was much older. Hilferding was one of his most famous proponents, but the Austromarxists were, probably next to the Russians, at that time the most dynamic.

That time is very early 20th century, around the first World War, one of the most dynamic and innovative parts of Marxist thought. It sort of anticipated some of Gramsci’s ideas, in particular, on power, democratic ways to socialism, and notions of cultural hegemony. And Hilferding tried to conceptualize what he called organized capitalism, shifts in capitalism, and a changing role of the state in capitalism. They were also very deeply rooted in society and the working class movement. So let me give you a banal example of that. When I was 13 years old, I used to play quite a bit of chess. So for a nerdy young boy, the obvious thing is to play strategy games, and before computer games, one would play chess. So in Linz, some Austrian town, there would be the Linz chess club, which effectively turns out to be the bourgeois, upper-class, and cultivated one. There was a worker’s chess club, which essentially was the Social Democrats. And there was the chess club which was closer to the Communist Party. And despite the fact that at that time I had very little ideas about communism, I was part of it because my parents have connections to it. What I’m saying is even something as trivial as chess was organized along those big political lines. Imagine what that is like for football or for the things that take much larger constituents.

So they were deeply rooted. These were some of the best organized working class movements that the world has seen. And they were in a way quite down to earth. Vienna had those massive public housing projects, they did all sorts for schooling, and so on. But they also were intellectually leading. Hilferding comes out of that. And that movement gets essentially smashed by fascism. In the 1930s, you have this weird episode where Hilferding, who in some ways I admire, becomes the major economics spokesperson for the Social Democrats. He rejects a proto-Keynesian public employment program that Woytinsky has developed. And initially, it’s very odd. Why would you do that? Why would the forefront of the reformist, but still socialist movement, why wouldn’t they pick up on Keynesian ideas? On some level, that’s very odd.

And then, at some point, in reading about it, I came across this passage in Woytinsky’s autobiography, which is a fascinating thing. I think you’ll have a question afterwards about Woytinsky so I won’t go fully into that. But this guy is fascinating. He became the main author of that employment program for the unions. He’s one of the major economists for unions. But if you go back, he was a Russian socialist student in 1905 when the first Russian revolution took place. He was one of the student leaders of the Petrograd uprising. And I don’t kid you, he became the leader of the Petrograd Soviet of the unemployed, which of course, today no one knows about. And what did he try to do for them? He tried to implement a public employment program. So in other words, you have a socialist Keynesian, or proto-Keynesian, in 1906 in Petrograd at the height of the first Russian revolution. So once I had that, it was irresistible. You also asked me to briefly sketch out the main conclusion. So the WTB program that Woytinsky developed…

Scott Ferguson: Can you define why it is called the WTB program?

Engelbert Stockhammer: WTB stands for the three main authors: Woytinsky, Tarnow, and Baade. Tarnow and Baade were a union leader and a SPD member of Parliament. So essentially, Tarnow is the union support for that because the unions eventually supported the program, and Baade enabled the Social Democratic parliamentary faction such that it could get a hearing there. They essentially wanted to create a million jobs and have a magnitude of three percentage points of GDP. In other words, not completely off the scale, but something that we would recognize as substantial. So I’m investigating two things in the paper. One is how does Hilferding’s rejection of that program relate to his way of perceiving Marxist economics? Now, I purposefully don’t want to get into the debate on whether it’s proper Marxism. It’s his Marxism and he was an important Marxist at the time. And the conclusion will be, actually, his version of the labor theory of value ultimately endorses, or regards as completely normal, a version of the gold standard. Now, that’s a completely non-trivial statement.

Once you’ve read Polanyi or any contemporary economic history debates, the gold standard is interpreted as a mixture of an exchange rate regime, but also it comes with a policy package. The target is to meet the exchange rate to gold. You have to subordinate monetary and fiscal policy, ultimately, to the goal of maintaining that exchange rate. So the gold standard is a shorthand for orthodox economic policies. And Polanyi, of course, in The Great Transformation, is most outspoken on that. But it’s also clear in Barry Eichengreen, one of the most eminent economic historians. He was essentially saying the gold standard was inconsistent with parliamentary or modern democracies. The gold standard could run as long as you had an elite or census-weighted election system where the elite could make up their minds. But if you want to justify your policies with respect to the entire population who might be affected by unemployment, it becomes unsustainable. So for Eichengreen, there’s a fundamental tension between democracy and the gold standard. And for Hilferding, not realizing that will be, in my view, a devastating failure. So the argument here is that it is rooted in Hilferding’s Marxism.

But then, in a way replying to some other debates, I’m also asking, how much was German democracy an outlier? That is particularly replying to a very interesting book, I should say, by Sheri Berman, The Social Democratic Moment, where she contrasts Swedish and German Social Democracy. The Swedes are interesting precisely because they were the ones that endorsed Keynesianism. They were divided on Marx, but were quite leftist still on a lot of scales. And of course, they were then leading in establishing the most developed welfare states. But early on they endorsed versions of Keynesianism that got off the gold standard and did deficit spending. Berman is essentially arguing the German Social Democrats were too Marxist. They were too orthodox both in their theory of the state and in their theory of how the economy works. Now, the flip side of that, which she doesn’t fully draw out, of course, is that the less Marxist the Social Democratic Party is, the more you would expect them to be open to Keynesian policies.

So then, in the final part of the paper, I look at Britain, where you find the exact same problem that Hilferding and the Social Democrats have: what should you do in a recession? Should you do deficit spending? Should you stay orthodox? Britain is almost the opposite of Germany because they did not have a Marxist tradition. Ramsay MacDonald was all sorts of things, but he was not a Marxist. But you also had Keynes and you had the liberals who Keynes supported, who were campaigning explicitly on a public spending platform for the election. So why is the situation in Germany very politically difficult? In terms of implementing such a program, the Labour Party actually could have done it because that’s what the liberals had campaigned for. But they essentially did the same as Hilferding. So I’m saying it’s not just about Marxism. Marxism was distinctly unhelpful with the Hilferding version there. But the roots ran deeper. In part, it is the pressure group mentality of parts of the labour movement. In particular, the unions and the inability to develop an appropriate theory of socialist reform and transformation of the capitalist system, but also specifically the capitalist state and how we can use the state for our purposes.

William Saas: This is excellent. As you’re talking about Woytinsky and Hilferding, it’s hard for me not to see your story in Woytinsky’s story a bit, going back to your description of looking at the theories of unemployment in European countries, and encountering the Marxists who were like, “Well, unemployment is inevitable.” It’s almost a law of capitalism. And you go back and look at Woytinsky encountering him making what seems to be a very reasonable, sensible, and important suggestion and policy proposal, and encountering again, another kind of unexamined assumption that the commodity theory of money is an obstacle. So I don’t know if you see that reflection of your own experience in the experience of Woytinsky and maybe that’s a part of the draw of yourself to his work? But in addition to that, I wonder if you could help us better understand the context into which Woytinsky is making this proposal? What was the situation in Germany? How did they get there? What was economic life like after the Treaty of Versailles and following the German defeat in the first World War? What else was happening in Europe?

Engelbert Stockhammer: Yeah, I think it’s important to get some bit of historical context. Now, on the economic side, it’s important to realize that, for Europe, the interwar years, by and large, were an economic disaster. It is quite different from the US where you often speak of the roaring 20s, where you had a boom and rapid technological progress. You also had financial bubbles developing and so on, but you had very strong growth. In Europe, it was a mess. It was a mess, politically. It was a mess, economically. It was a mess, financially. I started with the finances and that of course brings us to Keynes and his economic consequences of the peace. The Versailles Treaty, essentially, signed culpability for the world to Germany, which isn’t entirely wrong, but probably a bit overstated. They also imposed reparations on Germany. And while reparations morally make sense, or may make sense, Keynes, of course, pointed out and resigned. He was one of the negotiators on the British side advising the finance ministry for the Versailles negotiations. Keynes was pointing out that, if Germany were to pay these reparations, it first of all would require massive export surpluses.

Now, these export surpluses would require other countries, such as Britain, the US, and France, because who else would Germany trade so much that it has massive foreign exchange from that? They would have to have massive current account deficits. In other words, employ less people because they’re producing less. So he says, that’s not gonna work and then there is the issue of scale. The European countries at that point are settled, overburdened with debt, and that debt is sovereign debt, but it’s essentially related to the war and it’s to the US. So we are in a situation where Britain, while still, in a way, the major empire, and London and the Bank of England is the financial center, actually, in terms of its balance sheet, is in no position to play the role of informal lender of last resort. And while we talk about the gold standard, of course, you can make a good argument that, actually, it was always a very managed gold standard. It was really a gold plus sterling standard, because the Bank of England, to some extent, was managing things already in the 19th century. But Britain, at that time, was not in a position anymore to do that. But all the countries tried to get pegged to gold because that was the normal. That was proper economic policies and structures, both in the Ricardian commodity money theory, but also implicit in the Marxists.

Although, they don’t usually like to point it out. Because money is also a produced commodity. I mean, if you get through the first 200 pages of Marx’s Capital, gold is taking the role of the general equivalent, i.e. money, precisely because it is a produced commodity, which embodies value and thus can represent value. For the Marxists, that is important because if that were not the case, if the money was just a piece of paper or accounting entry, you essentially have a massive case of unequal exchanges because you’re all the time exchanging goods against things that are intrinsically worthless, in which case, there’s no change of equivalent. Now, for the Ricardian, or the Liberal tradition, there’s other things, other reasons why that’s important. It’s essentially to simplify the barter economy. All the countries try to get pegged to gold, but that implies austerity policies when you have a crisis. So whether it’s Britain that enters gold with an overvalued exchange rate, which Keynes was critical about, or when Germany tries to get on gold, and at the same time, pay the debt, the debt creates permanent tension and permanent capital shortage. And by capital, we really mean US dollars shortage because they are indebted in dollars and that creates tension throughout the period.

So in Europe, we have high unemployment in most countries throughout the 20s, and thus social tensions remain high. You have a quite fragile–I am talking about Germany, here–you have a very fragile political system. You have a massive social democratic movement that’s deeply rooted in society, but only in certain segments in society. It’s essentially the industrial towns. They made very little inroads on the countryside. You have old elites still being important in Germany. That means the old landlords of the second serfdom in Eastern Europe, in Prussia, that are still dominating part of the state apparatus, in particular, the military, and they were the ones that initiated the first World War, or contributed to it, and they are still in power. You have a strange alliance of industrial capital and heavy industry with those reactionary landlords, the reactionary countryside, that this market had forged, but it maintains its way into the 20th century. And initially, you have quite marginal the rise of what would later become fascism. Now, the labor movement is this tragic divide with the Russian Revolution and it essentially cuts right through the Social Democrats.

In Germany, that takes particularly nasty forms, because it’s essentially under a German right-wing chancellor in the Ministry of Defense, Noske, that did the Freikorps, which are essentially proto-fascist military units that are not under military command when they act. They executed Rosa Luxemburg and Karl Liebknecht, who are the leaders of the young generation of the radical left. Now, that’s before we have communists. That’s the Spartacus League, which gave the name to my chess club in Linz. They were not at that point communists because the Communist Party only gets founded later. But they’re still Social Democrats, or the radical wing of the Social Democrats. Hilferding, as we’ll see, is part of the independent Social Democrats that split because of support of war credit from the majority Social Democrats. So you have an environment rich in social, political, economic, and financial tensions. It’s brewing up. You have these tensions maintained through the 1920s. Then, from 1929 to 1931, the global financial crisis hit. In Germany, you get bank failures from 29 to 31. In a matter of months, the third largest German bank goes bankrupt and unemployment is then rising sharply in a matter of over a year from two to six million people, if I remember the numbers correctly. I’m not sure that I fully addressed your question.

Scott Ferguson: Yeah, you did and it really puts into sharp relief what a massive union-backed public works proposal and program would mean in an intense situation like this. I think you made that really clear and vivid. I’m wondering if we can circle back and talk a little bit more about Wladimir Woytinsky and his fascinating autobiography. So you told us a little bit about his origins, but maybe you can go a little bit more deeply into his story and where he comes from and where he goes? It really is fascinating.

Engelbert Stockhammer: Yeah, I think he’s brilliant. I think someone has to make a movie about him. So Woytinsky is a Russian Jew. He comes from an intellectual background and became a student leader in the uprising, the first Russian revolution, in 1905 and 1906. He gets involved in that and he’s, at that point, actually working with the Bolsheviks. I have to say I was surprised that he didn’t mention the Bund at that point. Now, we of course nowadays think of the Russian Social Democrats in terms of Bolsheviks and Mensheviks, because that’s what matters in the Russian Revolution. The Bolsheviks in 1905 and 1906 were a non-category. Even Trotsky didn’t know that he was a Bolshevik or would be. But what you have is the Bund, which is a Jewish socialist organization that is much more along the lines of European social democracy, meaning that they are a mass organization. They are not clandestine, avant garde, or revolutionary organizations like the Bolsheviks would be later. Also, they, like the Austrians, would sort of have organizations throughout society and they play in the open. They’re not clandestine, conspiratorial organizations. And they’re a main driving force of the revolution.

But I actually don’t remember Woytinsky mentioning them. They are mostly Jewish. And they would become a wing of anti-Zionist Jewish international socialists. In Britain, the Jewish Voice for Labour, is still an echo of it, and that may not concern you, but it was important for us in Britain because the right wing went after Corbyn under the heading of he is an anti-Semite. And the Jewish Voice for Labour, of course, was up in arms against it, because for them being a Jewish socialist, never meant fully endorsing Israel, necessarily. So he is part of that radical tradition. He works with the Bolsheviks. He’s in some ways very pragmatic and wants to help and start building work around the Petrograd Soviet and unemployment, which I understand he helped to set up. To do a little bit of public employment, but mostly they provide public food kitchens and other things. So they’re doing actual work on the street. But of course, this whole thing doesn’t live long enough to make much of a difference, because that revolution gets squashed and it gets squashed brutally. Essentially, the tradition of the Bund gets almost wiped out because the mass organization and the internal democratic structures are just no match for the authoritarian Tsarist regime that we have afterwards. And that creates an environment where the Leninist organization actually becomes effective and it will then later become important in the Russian Revolution.

So Woytinsky was sent first to prison and then to Siberia for 10 years. And in Siberia, in spring 1917 with the bourgeois phase of the Russian Revolution, he and tens of thousands of other political prisoners get released from Siberia, and he goes back to Petrograd to work for the Petrograd Soviet again. Now, we are in spring 1917. So when I say Petrograd Soviet, we mean Mensheviks, we don’t mean Bolsheviks. The Bolsheviks become strong in autumn and their rise is rapid. And Woytinsky, in his autobiography he can be a little bit self congratulatory at times–he has a life that’s worth aggrandizing, I have to say. So it’s not always fully clear where his interpretation kicks in. But initially, he seemed quite indifferent to work with the Bolsheviks and Mensheviks because he’s not ideologically committed enough. Although, I don’t know whether that was true of his younger self at that point. He gets involved with the Soviet. He works with them in various administrative capacities. And when the Bolsheviks got to power, essentially, he and the Mensheviks had to flee because the Bolsheviks were not very forgiving. It’s clear that he’s coming out of social democracy, that he has a broader notion of democracy than the Bolsheviks.

So he flees to Georgia, which for two years or so is an independent socialist republic. It’s dominated by the Mensheviks. He joins, but wants to be in the diplomatic service of Georgia and is sent abroad to essentially advertise the existence of Georgia to other states, such that they will recognize it. So he is sent to Italy. There’s only two problems here. One is that the Bolsheviks take over Georgia and Mussolini takes over Italy. He has to leave Italy and eventually comes to Germany where he works as an applied economist. In economic history, he is cited because he has a very descriptive book, Die Welt in Zahlen, which is essentially a statistical compendium that economic historians cite quite a bit. So he’s a pragmatic applied economist. If you read his work around the WTB plan, it’s essentially driven by the urge to do something. You won’t stand by when you see the working class being unemployed. He has, on the one hand, human empathy, but also political aims. For him, as long as you have mass unemployment, you may get rebellion out of desperation, but you will not get it properly. You don’t get on the offensive as long as you have mass unemployment. You need to offer specific things to those people in it, as opposed to…

Scott Ferguson: So he’s not an accelerationist.

Engelbert Stockhammer: No, not at all. He’s the opposite. You need to give something tangible to them, as opposed to the promise of a socialist utopia. And his work, then, when you read it, it is quite empirically driven. I mean, there’s a lot of data in there. When he discusses the employment effect and the costs, what are the average costs of most of employment, not very surprising, it would be in construction, housing, roads, and bridges. If we are talking 2008, it is all in there. He looks for the sectoral hourly wages of workers, of bricklayers, of people in the construction sector. What is the state currently paying for unemployment insurance and benefits? He wants to get his data on that straight. What he’s doing there is very clearly proto-Keynesian. He makes a sustained case that you should do that even if it is deficit financed. Analytically, he is not quite Keynesian. There’s no well understood theory of the multiplier. I mean, he was aware of Keynes. He read him. He also had a letter exchange with Keynes. He was writing in 1929, well before The General Theory of Employment, Interest and Money, way before Keynes had the theory of the multiplier straight. So my ask here is high, but in that sense, theoretically, it wasn’t fully advanced. But in terms of economic policy, he was there and that’s also recognized in economic history literature.

The earlier version of the WTB plan was much more monetary financing. It was much more tweaking around the gold standard, the reserves that banks would hold, and thus were vulnerable politically in that you couldn’t quite do that without the consent of France and the US. So initially, he wanted an international program, not just a German one. As it became clear that that was not forthcoming, he more and more moved towards domestic financing where there would be, if temporary, financing by the German central bank. So in other words, it is to some extent a central bank financed public employment program. Woytinsky then tries to get it through with the Social Democrats. He manages to convince the German trade unions, which is non-trivial. It’s non-trivial in the sense that, in the division of labor between the party and the unions, and they were closely intertwined, the division of labor essentially was that the unions do the workplace organizing, they strike for higher wages, but legislation is by and large the business of the party, and thereby also macroeconomic policy. And certainly, whatever international currency arrangement is not traditionally the territory of the unions. But in a way, they got desperate because it was their members that got unemployed, and they were losing members when unemployment was spiking, both to the communists but also to the Nazis. So they felt the need for action, but they’re also, in some ways, more pragmatic and less ideological than the Social Democrats.

Now, in some ways, they were more to the right politically than the Social Democrats. But in this case, they were more Keynesian. Hilferding, he was the main spokesman. He was twice finance minister and, after Finance Capital, was sort of the Marxist authority, and then followed in the footsteps of Karl Kautsky as the main ideologue of the German Social Democrats. He essentially was blocking it. He was shooting it down both in the front but also behind the scenes in the Social Democrats parliamentary faction. I presume we’ll talk a bit more about Hilferding. So it doesn’t go anywhere. The Nazis will pick up on it, but mind you all this is happening in 1931 and 1932. So this is literally a year before the Nazis take power. And then, in 1933 Woytinsky of course has to leave the country. I mean, if you’re a Russian Jewish socialist, you couldn’t be much further up on the hit list of the Nazis. So he gets out just in time and goes to Switzerland, to Geneva, and works there for what would become the ILO, the International Labor Organization. And what he does for them is he develops public employment programs. He doesn’t get a permanent job there because the Soviet Union is blocking it. Because they don’t want a Menshevik counter-revolutionary in the ILO. So he doesn’t get a job and individually goes to the US. In the US, he starts working for the Roosevelt administration. He works for the Bureau of Labor Statistics, and labor statistics is exactly his home territory. On the BLS webpage, you’ll still find links to some of his work.

However, I have to say that the story that I’m telling you gets tarnished. I mean, he’s a Menshevik. A lot of his comrades get killed by the Bolsheviks. So understandably, he turns anti-communist. But he goes further. He endorses American liberalism, and at the end of his life, in the 1950s and 1960s, goes to Latin America and to East Asia to preach the advantages of liberal capitalism. So this guy ends up going to, I don’t know, Brazil and Vietnam to tell him how great it is. So it’s a bit painful if you read the biography, but it’s a fascinating story. But ultimately, the reason why I’m so fascinated by it is you glimpse the possibilities of a socialist Keynesianism there. We tend to associate Keynesianism, and my Marxist friends would say this, as an attempt to save capitalism, saving capitalism from itself. There’s no question that this is what you can use Keynesianism for. And this is effectively what has happened with the global financial crisis of 2008. I would argue, with the New Deal, it was more about transforming capitalism than about saving it, or at least as much. So in my view, you can use Keynesianism for all sorts of things.

But when Woytinsky was doing what he was doing, you didn’t have Keynes yet. I mean, he hadn’t written The General Theory of Employment, Interest and Money yet. It wasn’t necessary to associate Keynesianism with the Liberal Party in Britain. Unknown to everyone else because he was writing in Poland, you had at the same time, Michal Kalecki, developing big parts of Keynesian analysis, the multiplier effect, in particular, very keenly already in there with a much more Marxist background. You have Woytinsky, who, whatever he does after, is clearly a serious, social democratic reformist, as the Austromarxists at that time were. So at that time, history was a lot more open. If you could imagine, if Hilferding had fully endorsed it, and then said, actually, this is complementary to the state theory that he and Otto Bauer had been developing. If we wanted to endorse bourgeois parliamentary democracy and the Social Democrats, of which Germany was the only party who was unreservedly in favor of parliamentary democracy, and if you paired it with a Keynesian socialist agenda, then actually that could help us to do what we’re doing. So it’s that moment of openness that to me is so fascinating. Instead of having the firm association of Keynesianism as something pro-capitalist, it’s about having it as part of a socialist agenda.

Scott Ferguson: I’m curious, in his writings, did Woytinsky cite precedents? Did he cite Louis Blanc and the French workshops or anything like that?

Engelbert Stockhammer: I’m not aware of that at all. There’s, of course, big parts of his Russian writings that I can’t read. But that’s not his style. Woytinsky is not an ideologue, I think, both in his own mentality, but certainly in the way he wanted to come across. I mean, he is also a proto-Keynesian in terms of the technocratic attitude. He wants to say, guys, here are the numbers. There are 6 million people unemployed. It’s not going to lead to inflation if you do public employment, because there’s 4 million more unemployed people than you had two years ago. So you can employ up to 4 million without inflationary pressure. And these are the costs that you will get given the wages. So that’s his discourse. It’s much more technocratic. And it’s also the discourse, across the political spectrum, that a lot of the Keynesians would adopt in the coming years in the US and Britain.

William Saas: Why didn’t Rudolph Hilferding see Woytinsky’s work as complementary? What conclusions do you arrive at in your read on the biography of Hilferding?

Engelbert Stockhammer: That’s a very good and fascinating question. My short answer will be it’s deeply rooted in his Marxist theory. But let me give you the long answer, just because it’s so fascinating. So Hilferding is part of the Austromarxist movement. So he’s coming out of the Austrian social democracy and, in particular, a fascinating group of essentially young, radical students in Vienna. At that time, it’s Otto Bauer, Karl Renner, Max Adler, next to Hilferding, and they will have their own journals. And Vienna, at the time, is an intellectual hot house. I mean, you have the grand guys of the Austrian school there. You have Böhm-Bawerk there. You have von Mises there. You even have Hayek there. I’m not even getting started with the philosophers and artists. But so, Hilferding and those young Marxists, they sit in the seminars of the Austrians. And one of the first things that Hilferding writes is a reply to Böhm-Bawerk’s criticism of Marxist theory. And it’s still widely cited. I actually don’t think his writing there is particularly good. But it’s still impressive. It’s sort of good Marxism. While Böhm-Bawerk, of course, is very polemical and critical, he has some serious points, in particular, around the transformation problem.

The tension between what the Marxists call prices of production, where you have uniform profit rates, and the labor values, where you don’t have uniform profit rates, where it’s all about labor values. That is a real problem for Marxist economics. That would become a big issue in the 1970s and lead to all sorts of value theory wars. But Hilferding essentially says Böhm-Bawerk is too much concerned with explaining relative prices. But as Marx says, we’re really interested in exploitation. It doesn’t settle it. It’s correct, but it doesn’t settle the criticism that Böhm-Bawerk raises. But Hilferding, he studied medicine. He’s a doctor. This is intellectual enthusiasm and a political commitment that gets him and others into these debates. And it still is substantial and widely cited work. But then he writes Finance Capital, and that is really an impressive work. Again, it’s outside his own studies. It’s not that this is his PhD. He does it beyond learning about bones and muscles and the like. What he does there is a restatement of Marxist theory, but it takes finance very seriously. He takes finance seriously because, in the German experience, finance banks are much more important than in the Anglo Saxon countries, in particular, because Germany is late industrialized.

The banks are used to finance heavy industry and pharmaceuticals. They need lots of capital investment, so they need big things. So they become important. But because that’s important, he has to go back and ask, where does money come from? What is the role of money? What’s the role of things? And a lot of what he writes there is very, very sharp and innovative. You can read discussions of options and option pricing there, net present value calculations, it’s all in there. We all had to read up around the global financial crisis. He also has a theory of endogenous money in there. In his case, it’s around bills of exchange. And with bills of exchange, actually, more of them are issued in a boom, because then there’s more demand for them. And more of them are issued, because, and here comes the Keynesian element, because the business outlook is more positive and, therefore, the liquidity preferences decline. But for Hilferding, that is the action around the supply side fundamentals that are given by labor values. So there is a dynamics of the financial sector, and it’s procyclical, it intensifies the boom, and consequently, the crisis. But it is if you want a cycle around the labor values and the production side.

Ultimately, in his story, you need gold, because you need the real stuff that has changed in value to represent money. And where you see that is in international transactions. In other words, it’s the gold standard. So he explicitly says what we have here is the experimental proof of the labor theory of value, an objective value theory. It’s that, internationally, you need gold for transactions. So the Keynesians say this is a policy regime that has all sorts of complex implications. Hilferding says, no, that’s the true nature of things of the capitalist relations of productions. And his crisis theory, I have to say, is, unfortunately, quite disappointing to read. Because it’s essentially a restatement of Marx’s analysis of the contradictions of capitalism that essentially say there are unresolvable contradictions, and eventually, they will be so bad that there will be a socialist revolution. It’s not the crisis theory that gives you any entry points for economic policy. It’s not a crisis theory that would help you if you’re the finance minister in 1929. They won’t guide you to what you can do. It’s essentially a story of capitalist doom and self destruction, that you can watch and then afterwards do the revolution and take over the ruins. 

But then, he also has a fascinating analysis of international aspects, and that’s an implicit reply to Bernstein and to the revisionists, where he emphasizes that those finance capitalists, because they also get tied up with the state, will give rise to dangerous imperialist dynamics. Of course, Lenin would draw very heavily on that later. So in other words, this is, at a time, really cutting edge Marxism and really cool in terms of what it weaves together. Hilferding then goes to Germany. He leaves Austria and works closely with Kautsky. During the first World War, he keeps party discipline but he is highly critical of the Social Democrats support of the work, precisely, because of what he had written in Finance Capital. And he eventually, with two handfuls of other social democrats, gets kicked out of the Social Democratic Party because they are too critical of the SPD’s support of the war credits. So Hilferding, and ironically, also Bernstein, the main revisionists, are then part of the independent Social Democrats. They would exist until, I think, 1922. And in the last elections they ran, they were almost as strong as the Social Democrats. They were, essentially, the antiwar and more radical faction. They would then split over their position with respect to the Soviet Union and over communism. And they would split halfway through, in part joining the communists and part joining the Social Democrats. 

Hilferding also develops the concept of organized capitalism. So he keeps up with what’s going on, and notices that the state is becoming more and more important and involved. In particular, during the war, but he says it also goes on afterwards, precisely because you have to those big trusts and industrial groups organized by finance capital. They get so big that they start cooperating with the state. And that, for Hilferding, is an entry point. Because, at some point, he says, nowadays, essentially, if you nationalize the leading banks, you have nationalized half of the big industry. So for him, that’s an entry point for socialist policy. Economically, this is stabilizing. The concentration is stabilizing capitalism because it stabilizes prices and gives more if you want a rational planning aspect to prices. Hilferding, because he’s a reformist, is one of those that advocate for the Social Democrats to reach out beyond a blue collar working class. And that in interwar Germany, but all over Europe, means reaching out both to white collar working class but also to the countryside and to the peasants. Other than in Sweden, that remains a big unresolved issue for all social democratic parties, that they’re essentially not getting into the countryside, which, at that time, electorally is a big problem.

So in some ways, he’s very open and supports parliamentary democracy and argues for a parliamentary role to socialism. In a way, his state theory is advanced, or it goes beyond orthodox Marxism. But his economics doesn’t. And then, when he finds himself in these debates in 1929, 1930, and 1931, he essentially can’t understand how you want to get rid of all this without the gold standard, because that’s ultimately the natural thing. And you can’t solve the fundamental contradictions of capitalism with a bit of government spending. So in that sense, the Marxist theory here, rather than enabling sort of creative strategies, becomes a big stumbling block that essentially allows them to not see that possibility for Keynesian policies, or instrumentalizing Keynesian strategies for a socialist agenda. And when he comments in the main social democratic newspaper before that, on the breakdown of the gold standard in Britain, he uses that as an argument to say, “Well, you see, it only leads to disaster if you try to do funny things. You first of all need to get back to gold to do anything.”

I have to say two things about the gold standard. From an economic theory, but also from a sociological theory of money, it’s fascinating how the gold standard goes down in Britain. It’s a strike in a military base. It’s the naval fleet that goes on strike against their wage cuts. Now, these are not regular workers. These are soldiers. They are not allowed to strike. So what you have here is a mutiny. It’s not just a strike. It’s a mutiny. And with all the debates that happened, all the Keynesians that told you that the gold standard is actually a bad idea, it’s when the soldiers start a mutiny that the gold standard breaks down. So think about it. Doesn’t it tell you something that international money and exchange relations has something to do with class struggle? They’re striking about wages. But also, they have a deep relation to the state. It is once the military operators go on strike that the gold standard breaks down.

Admittedly, going off the gold standard in Sweden or the US is a different story, but it’s hard not to see that, once you’ve thought a little bit about what money is, that this is something very deep to do with the state. But there’s also a class conflict dimension to it. But Hilferding doesn’t see any of it. The gold standard is the natural order of things because money needs to be backed by value and gold is a produced commodity, thus it’s okay. That then blocks the WTB plan for the Social Democrats. The Nazis are not shy. They take it over, partly because they’re interested, partly, because they see that this can drive a wedge between the unions and the Social Democrats. At that moment, the Nazis tried to flirt with the unions. A few months later, they put them into the prisons and concentration camps, of course. But at that time, they used that. Essentially, the Social Democrats don’t go anywhere with it. And within a few months, they are also in the prisons. And, of course, Hilferding dies in a Gestapo prison in 1941.

Scott Ferguson: And the Hilferding argument, on behalf of the party, was that we cannot do anything. We must let the crisis play out. And that’s what happened. I mean, maybe this clearly wasn’t the only causal factor but it is tragic and haunting to think of what support for this program might have led to instead.

Engelbert Stockhammer: What you said is perfectly correct. There’s two complications that I would want to add there. I mean, it’s very clear in Hilferding and his close collaborator, Naphtali, there is an understanding that you have to let the crisis run its course and afterwards you can do something. Naphtali explicitly says it’s in the boom that you can try to do reforms. You don’t fix the capitalist crisis, you let the market forces work itself out. But there’s two complicating factors. The first is hyperinflation. Germany, of course, had experienced, as part of its monetary troubles, hyperinflation in the early 20s, which was devastating, I would argue, more for the middle classes than for the working class. But of course, it led to big scars. So that argument gets rehearsed. It gets rehearsed at a time when it becomes patently absurd. So Naphtali is literally warning in late 1931 against the danger of public employment because it would be inflationary. In 1931, I looked up the numbers for writing the paper, you already have minus 10% inflation. You have serious deflation. So the deflation is already fully biting. It’s clearly not the issue.

The other issue is foreign policy and the war reparations. The Social Democrats did accept the Versailles settlement. So in principle, meaning with the qualification it has to be bearable for Germany, they were committed to war reparations. And going off the gold standard, or giving up on austerity in that context could also be seen as an international affront against France, in particular. So it is more complicated, but at the core is this idea that capitalist crises will fix themselves. It’s very different from Woytinsky. Woytinsky is clear about the debt deflation theory that Irving Fisher would formulate. That is, in the current situation, when Germany is over indebted, you want more inflation, not less. It’s part of getting out. You also don’t want 1 to 5%, you actually need serious inflation to help firms deleverage.

William Saas: So previous historians, and people who’ve studied this moment and the WTB plan, have interpreted it differently than you have. Can you talk about those interpretations and where they might have gone off course? What are they missing?

Engelbert Stockhammer: I’m not sure there are a lot of substantive differences. Because I’m interested in the possibility of a socialist Keynesianism, I have a different angle and a different context. But the WTP plan is not widely known outside a few professional economic historians. I mean, once you’re sensitized to the term, you essentially see it in all discussions of the Great Depression in Europe. If you look at Kindleberger and Eichengreen, it’s there and they would essentially all agree, if there was any serious German Keynesian plan, it’s the WTB. It wasn’t quite the only one. There was also a somewhat less important one that was coming out that goes in a similar direction. So that’s there. If you read Harold James and others, they all essentially regarded it as, in principle, economically viable. There’s big debates on whether it politically was ever viable. But it was an economically plausible, proto-Keynesian strategy. It’s also clear with the authors, Eichengreen, for example. I mean, these are Keynesians. They’re coming out of the technocratic traditions. And for them, in a way, the puzzle is like, why didn’t the Germans do it?

Where I’m different is, I want to say that there would have been a specific socialist route to that, that comes as part of a grander, socialist strategy, and in particular, one that would have complimented the Austromarxists. The Austromarxists tried to formulate a radical socialist but democratic parliamentary strategy. And Otto Bauer, for quite a while, was heading what is often called the Internationale 2.5. They just didn’t want to accept the split between the communists and the Social Democrats, which in 1920 or 1921, is very honorable, and actually not completely absurd. Of course, a few years later, it is a futile attempt. But if you want to do such a socialist transformation, your problem is what do you do with the state? How do you instrumentalize it? That was a big problem for socialists at that time, and for good reason. I mean, their experience of the state has been a very nasty one. In the 1880s, with the late Bismarck, the Social Democrats were outlawed. They actually weren’t fully outlawed, because there were some states where the Social Democrats weren’t outlawed, except for the national elections. But the regional elections, they were allowed and so on.

So the details are complicated, but it was clear that there was repression. It was clear that the old aristocratic elite had not only no sympathy, but also no tolerance for socialists. And in that sense, of course, it’s difficult how you can think of the state as something positive that you can use. And initially, that’s, of course, a critique of a lot of the Marxists. A lot of the reformists of the Social Democrats were mostly ad hoc. I mean, it was collective bargaining and unemployment insurance and state pensions, but it wasn’t really part of a reformist strategy other than the Bernstein version, which essentially says the state is relatively neutral, which obviously doesn’t do justice to the complexity and nastiness of actually existing and capitalist states. If you are Charles Tilly and Michael Mann, states historically have been war making machines. And they essentially incorporate other social groups, because they need them for more effective war making, and in particular, for more effective financing of the wars. Initially, the British state needed the merchants and then, with conscription and mass armies, you needed the local population. The state makes concessions that then takes on a life of its own. That’s the problem our socialists have: how do they do that?

And ultimately, the Austromarxists were not successful in that because they were Marxist radicals in theory, but quite skillful reformists on weekdays. There was a big unresolved tension between them. Keynesianism would have offered a quite specific entry point there. It would also have allowed socialists to develop a more meaningful theory and narrative of finance and financial crisis. Because, as I said, for Hilferding, and essentially for a lot of the other Marxist literature, finance is something that comes on top of those class conflicts and exploitation, and then complicates things. But whatever you do, finance can’t fix the basic problems. Now, from a Keynesian perspective, it’s not clear why finance is less fundamental. I mean, that doesn’t take away that you can’t regard class conflict as being very important, but finance is very much built in there. And in Marx’s M-C-M’, the circulation of commodities, of course, money is also important. So, if you think of people like Jim Crotty, there are attempts to build Marx further in the direction where finance and money have a quite fundamental role, but it would have allowed the socialists to appreciate more how important that financial crisis is, and that once you have a full blown financial crisis, that’s not something that’s going to go away quickly.

Once you have a debt overhang, once you have a lot of bankrupt firms, that’s gonna leave long lasting scars on your economy. In that sense, you need entry points. Of course, analyzing and discussing finance, coming up with specific proposals for financial reforms, takes a lot of energy, because it comes with its own language. You have to understand things that are complicated. I mean, think of the only financial instruments that we discussed in 2008. Now, these are things that are quite remote from a lot of people’s lives. It requires some effort. But the effort, to some extent, also comes with new instruments and new areas of maneuver if you realize that there’s something you can do in that area. You can use the central bank to either finance governments or to finance development banks that then have a specific agenda, say, decarbonizing the economy. So, in other words, it requires quite a bit of effort, but it increases the state of your economic weaponry to some extent. So in that sense, I think it’s very important that the socialists engage with it.

Scott Ferguson: So you’ve walked yourself into our last question, which is, and I’m sure there’s not one simple, straightforward answer to this. We have to think about various contexts, whether we are talking about Europe, we are talking about the United States, or we are talking about the global south. But that said, what for you are some of the deep lessons of this story for a contemporary left moving forward?

Engelbert Stockhammer: I guess the short version is that socialists have to take finance seriously, because it’s not just a minor complication. It’s a big part of the capitalist system. So any systematic strategy of socialist transformation needs to think about what you do with corporations, how you structure the workplace, economic democracy, whatever you want to talk about there. But it also needs to think about the financial sector, because this is where a big part of the mess is coming from. Circumstances, of course, are quite different now. Not only is finance very different, but also Keynesianism has a very different state than in 1930. So let me start with Keynesianism. In 1930, initially, no one was doing Keynesianism. I mean, it was sort of a revolutionary mindset for all sorts of people. Even Keynes struggled to convince the Treasury, where he had a quite prominent role, to go in that direction. And when Roosevelt did it, it was trial and error. Until very late, Roosevelt talked about balancing the budget. Thankfully, he wasn’t doing it. His policy was different, but the theory–sounds quite horrible sometimes what he’s saying there. Roosevelt compensated for it by activism. He just wanted to do something in a way like Woytinsky. And because he was so much an activist, he didn’t care that much about the balance sheet ultimately. But it was quite late that the Roosevelt administration actually rhetorically endorsed budget deficits. So at that time that was all very new.

And in that sense, there were some Social Democrats. When you go to Sweden, Woytinsky, or to Kalecki, there were some socialists that were there. We’re talking about Keynesianism, and afterwards, it is deliberately fully incorporated. Nowadays, it’s very different. I mean, Keynesianism is much more regarded as a toolbox, and as we’ve seen, is sort of in a piecemeal way appropriated by all sorts of different political directions. And as much as we can have a socialist Keynesianism, you can have Keynesianism of the financial elite. To some extent, not the full extent, I should say, but to some extent, we’ve seen that after 2008. If you read Keynes, there is not a single road, I think, on bailing out banks. The focus is on fiscal policy to stabilize employment. Along the way, if it’s useful, you can do something with the banks. It’s probably not useful if they go under. But that’s not the focus. But in 2008, it was a very big part of the focus. Now, to be fair, there was also quite a bit of Keynesianism there. I mean, in the sense of employment, but not all the way and certainly there was not any sustained commitment to full employment.

Scott Ferguson: Full Employment of the banks.

Engelbert Stockhammer: Yeah, but in that sense, they don’t care about employment. They care about balance sheets…

Scott Ferguson: No, I know, I was making a joke. They wanted to make sure the bankers were fully employed.

Engelbert Stockhammer: In that sense, it’s clear that you can do lots of different things. It’s a lot less revolutionary. But there’s a certain legacy on the radical left to downgrade Keynesianism as reformism. My point is, yeah, sure, this would be reformism, but there’s all sorts of different types of reformism. Of course, the role of finance has also changed quite a bit. The gold standard doesn’t have the same role. It’s not a reference point. But I guess there’s two or three areas where it becomes immediately important. One is the whole role of the central bank now. And one of the things where we’ve seen it is in the Euro crisis. The Euro crisis was the echo of the global financial crisis. But different from the global financial crisis, it was mostly played out, not on private debt, but on public debt. So it was the Euro area member states, or the southern periphery, that got into trouble. And they got into trouble, to a large extent, because the ECB did not say, okay, you are member states of the Euro area, thus, in the case of need, I will support my governments, which is what the Federal Reserve has done in the US, what the Bank of England did in Britain, and what the Bank of Japan did in Japan. The Euro area, for a long time, did not say that. Quite on the contrary. They said to Greece in the run up and when things were escalating, you really have to balance your budget, which of course, is a signal to the financial market, they’re gonna let it drop the value of Greek sovereign debt further. Therefore, let’s speculate against it.

With Draghi, his famous words were that the ECB will do everything it takes to maintain the Euro. They had the Outright Monetary Transactions facility, which they actually never used because the words were enough. Because financial markets knew from the US and Britain that if the central bank wants it, it can have it. And then the government spreads declined and things were relatively stable. And then, during the COVID crisis, the ECB essentially preemptively set up these funds to make clear that they will not want a replay of the Euro crisis. And related to that is the question of should the central bank fund governments? Should they fund it directly? Should we use monetary expansion to finance public programs? And the answer to this is that it depends on circumstances. Of course you can, there’s nothing wrong with it. That’s how we fix whatever fixing we did with the global financial crisis. And that is, again, what happened during COVID. Once the government does substantial expansion because of their social needs, whether that’s because of the crisis or because of a pandemic, of course, you can do it and it does not cause inflation or any other horrible things.

Now, that said, there is a bit of a delicate thing if you open those floodgates, because then essentially, every politician could potentially take the central bank for whatever interests they have, which often would not be progressive. So it is clearly delicate. But economically, it depends on how big the social problems are, how big unemployment is, and whether that works or doesn’t work. So if you think of decarbonizing the economy, we need a massive investment program beyond the scale of what we’re currently making. If we want to meet climate targets, of course, you should use central bank funding. In a way, it’s a no brainer. I mean, if there are massive needs, you can do it unless you’re at full employment, which is very clearly a point where it would crowd out other activities. But if we are reaching full employment, and we are not on track of the decarbonisation of the economy, you have to shift employment. So even under these circumstances, I would support it. If inflation is the price of shifting away from fossil fuels, then so be it. Okay, that was the point about central banks and that is probably most important. I could also talk about changes in the financial sector, but I think in the interest of time, I will not do that. But trust that this was interesting enough,

William Saas: We would probably love to talk to you for a few more hours. This has been amazing. I wonder if you could close us out with maybe a word to our comrades, the Marxist folks who may remain resistant to the idea that these ideas and insights that Woytinsky and you talk about, in terms of the positive role of the state, potentially work. I think part of the ongoing skepticism, and you acknowledge this as part of the constraint at the time when Woytinsky and Hilferding were operative, was the political constraints. And to represent the Marxist position in a way that I think is as full and fair as it can be, it’s informed by a profound skepticism of the sort of ability or willingness of the political class elites and capitalists to go along with it. And then, in fact, that public employment programs along the lines that we’re talking about here, and that Woytinsky was advocating for, some people may have seen that clearly, or may see that clearly today, as something that could result in something more socialist and oppose it on those grounds, articulated or not. For our Marxist friends, a note of hope and, I don’t know, optimism. If you could leave us on that note, that would be excellent.

Engelbert Stockhammer: I guess the entry point there is Kalecki’s famous 1943 paper, “The Political Aspects of Full Employment,” where he’s essentially making the argument that if you want, you can create full employment. In that sense, he’s fully learned the Keynesian lesson. And he says, technically, it’s not a problem. We know how to do it. The constraints ultimately are political. Politically, the ruling classes will not want sustained full employment, essentially, because it shifts the bargaining power too much to workers. And there’s certainly some truth to that argument. And to some extent, you may argue that was hidden in the course of the long boom of Fordism where some sections of capitalists got increasingly skeptical. I would still even argue the other. Actually, it wasn’t so much industry. It was finance that wanted to move away from Fordism and Keynesianism. The big companies, in particular, the ones going from mass consumption, actually weren’t that hostile initially, but could also live with neoliberalism. That’s a digression. The important point is Kalecki infers from that, once you’ve reached full employment, you need further institutional change. And I think that’s the crucial point: what is the change that we need? For a lot of Marxist comrades, they come with the Kalecki paper as an end of the debate. They come and say, we already told you the capitalists aren’t gonna like it. That’s why it’s not gonna happen.

William Saas: 100%.

Scott Ferguson: So let’s give up.

Engelbert Stockhammer: If that’s what they say, then they have to own up to what Hilferding said. Then, you have to let the crisis play out. Otherwise, you need a rather, I’m tempted to say, almost naive picture of the revolution that you could clear the table from all the institutions that we have here. When we do a revolution–maybe I should say if–we will have to work with the institutions that we have to some extent. Some of them will be fully replaced, but a lot of them will not. Yeah, we have to. So in a way, in my view, the circumstances for revolution are based in a situation that you hit in the late 60s and early 70s, with relatively full employment and strong labor movements. It’s there where you need further institutional change embedded in society that will require changes in the workplace, economic democracy, and what have you. But it will also involve a lot of changes in the financial sector. It obviously will also require changes in state structures. But that is where we have to get. Because if you think that you can really change the power balance and take state power away from capitalists, you can also do that within these structures that will anyways not magically disappear. Even with neoliberalism after 30 years there are bigger states than before. With the revolution, that will not go away. We will be left with massive state structures. And socialists, a strategy on how to deal with it is not say, “Oh, it’s capitalist, we’re not going to deal with it.”

William Saas: Engelbert Stockhammer, thank you so much for joining us on Money on the Left.

Engelbert Stockhammer: Great, that was fun!

* Thanks to the Money on the Left production teamWilliam Saas (audio editor), Richard Farrell (transcription), & Meghan Saas (graphic art)

The ECASH Act with Rohan Grey (New Transcript!)

In this special episode, Rohan Grey (@rohangrey) joins Billy Saas  (@billysaas)  and Maxximilian Seijo  (@MaxSeijo) to discuss the “ECASH” or “Electronic Currency and Secure Hardware” Act. Introduced by Rep. Stephen Lynch (MA-08), Chair of the House Committee on Financial Services’ Task Force on Financial Technology, and based on Grey’s research on electronic currency, the ECASH Act directs the Secretary of the Treasury to develop and pilot digital dollar technologies that replicate the privacy-respecting features of physical cash. Recognizing the United States Treasury as an institution ideally suited to managing a digital U.S. dollar, the Act treats monetary inclusion and privacy as a political rights and public goods, while at the same time eschewing the exclusionary and ecologically destructive effects of crypto currencies that rely on blockchain technologies.

The ECASH Act is co-sponsored by Rep.’s Jesús G. “Chuy” García (IL-04), Rashida Tlaib (MI-13), Ayanna Pressley (MA-07), and Alma Adams (NC-12) of the Committee on Financial Services, and endorsed by Americans for Financial Reform, Demand Progress, the Action Center on Race and the Economy (ACRE), and Public Money Action.

Rohan Grey is Assistant Professor of Law in the College of Law at Willamette University.

Full text of the E-CASH Bill

E-CASH website

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Music by Nahneen Kula:


Maxximilian Seijo: Rohan Grey, it’s great to have you back on Money on the Left.

Rohan Grey: Thanks for having me.

William Saas: So last time we spoke in fall, a lot was going on, and particularly around the debt ceiling debates. We discussed the trillion dollar coin proposal, which you’ve done a lot of work and research on, and which entails the US president animating and channeling the money creating authority of the US Treasury to avert financial apocalypse. This time, we’re having you back to talk about an exciting new proposal. And that is the Electronic Currency and Secure Hardware (ECASH) Act (H.R. 7231), which was introduced today by Representative Stephen Lynch of Massachusetts, who also serves as chairman on the task force of financial technology. So I think in a way, like #MintTheCoin, Congressperson Lynch’s ECASH proposal entails recognizing and using the money creating authority of the Treasury, motivated this time toward less spectacular and very different, very urgent ends. So can you tell us a bit about your work on the bill and how you understand the nature of the US Treasuries claim on the digital dollar? And what does this proposal have to offer users of US dollars?

Rohan Grey: Yeah, I mean, there’s actually an interesting additional connection to the #MintTheCoin story, which is that one of the probably first very vocal advocates for a treasury issued cash-like version of a digital dollar was the former director of the US Mint, Philip Diehl. And he made that proposal not in the last five years, but back all the way in 1997 in a congressional hearing on the future of money, where he was essentially arguing that we need to look to the future of money. We’ve just done big internet regulation bills, like the Telecommunications Act of 1996. And now we need to look at what the future of money is going to look like. And he made the argument at that point and in that committee that the Mint is the agency that has historically made hardware-based forms of a privacy respecting dollar. The coin is the most privacy respecting form of money we’ve ever created. You can hold it in your pocket, it doesn’t have a barcode, there’s no identifying features, and you can carry it wherever you go. 

The idea at that point was that we could use prepaid debit cards, magnetic chip-and-pin card technology, to hold balances of currency directly, like we do with coins in our wallet. Today, that’s the similar kind of logic that we’re bringing back to the conversation. Right now, around the world, the debate over how to create a government digital currency has been almost exclusively defined in terms of a central bank digital currency, or a CBDC. That term sounds very technical, it sounds very wonky, but it says nothing other than the central bank is going to issue it. It doesn’t tell you how it’s going to be designed. It doesn’t tell you who it’s going to be for. It doesn’t tell you why it’s being issued. All it says is: we’re in charge. But it creates this very perverse dynamic because the central bank says, “We don’t know what it’s going to look like, but we’re going to issue it.” And then, in the next breath, they say, “Well, when it comes to the design, we don’t have any experience doing retail services. We don’t work with the public so we probably shouldn’t design it that way. And, of course, Congress gets to make the decision on how it should be designed, but we think it shouldn’t have these features, XYZ, like anonymity.”

So suddenly, by the simple act of calling it a CBDC, even though that term has no content whatsoever, you’ve already narrowed the ideological, imaginative space around what we’re trying to do with a digital dollar. So what this proposal is doing that is different from the conversation we’ve had up until now is to say, let central bankers continue their conversation and we’re going to have a separate parallel conversation. We’re going to have a conversation around a form of digital dollar that is like physical currency, it’s like coins and notes, and it works differently to the kind that central bankers are really interested in. Not in competition, not in some sort of zero-sum fight to the death, there can only be one, like Highlander, but in the sense that we’ve always had multiple forms of money. They’ve always existed in parallel. You open your wallet right now, you might have some cash, debit cards, credit cards, and maybe a prepaid gift card or a Starbucks card. We’ve always had different options.

This is simply preserving that kind of pluralism and institutional, ecumenical approach to government currency design as we go into this digital dollar debate. But the Treasury, historically, has the capacity to do hardware security technologies. Coins and paper currency have existed for a long time before the Federal Reserve was ever established. The Federal Reserve manages accounts, but the Treasury is responsible for anything that is designed to go directly to the public held in your hand and in your pocket. That’s true of both coins, which the mint was established very shortly after the Constitution was ratified. Then, the Bureau of Engraving and Printing was established in the 1860s, 50 years before the Fed. More recently, the Treasury does prepaid cards. It sends out snap cards, EBT cards, and all that kind of stuff. So if you were being objective, and you hadn’t already had your ideological blinkers narrowed by the CBDC discourse, you would say, “Hey, we want to issue a form of digital cash. Who’s best positioned to do that?” I think, objectively, you would end up at the Treasury. So the question of why the Treasury, I think, is always kind of backwards. Why shouldn’t we be doing it with the Treasury? It’s the obvious place to start. The only answer to why not would be central bank ideological dominance, frankly.

Maxximilian Seijo: Perhaps we can dig into a little bit of these details of what the Treasury would be doing under this proposal. We have in our notes here that only one of the three pilot programs in the proposal uses anything like a distributed ledger. So I guess, maybe as a way of getting into that, why so little love for the blockchain in this ECASH Act?

Rohan Grey: See, I would have said, we’ve actually given a lot of love to the blockchain, because we’re even giving one option to be blockchain-based, when in fact, this technology, and the use cases that we’re trying to establish, shouldn’t be using any ledger at all. If you think about cash, there are a lot of different reasons why people like to use cash. They like the simplicity of it, the resilience, you can use it offline, you don’t need an internet connection, it’s not going to run out of battery, you don’t need permission, and it’s not keeping a record. But I think one of the things that defines cash is that there is no third party involved. There’s no permission you need to ask once the cash gets issued. We’re not talking about a private cryptocurrency, where the issuance itself is based on some pseudo gold standard, mining logic. We’re talking about a publicly issued dollar, where the amount and who it gets issued to is still a matter of collective governance. But once the money is out there, once it’s issued, it has its own locus of gravity.

You can’t have the government back door shut it down afterwards. Once it’s out of your mouth, it takes on its own life, so to speak. And in this situation, in order for that to exist, you need to think about how to not simply distribute a ledger, but have no ledger whatsoever. I forget who it was, but one of the poets said, “Silence is the most beautiful language.” Because everyone else has to compete against the most perfect language where you can say things without any words at all. And this idea of a centralized ledger versus a distributed ledger is a question of, well, we need someone to keep the records. Who do we trust? Do we trust Big Daddy’s central government? Or do we trust the wisdom of the crowd or something? And the reality is that that’s an interesting conversation. But there’s a whole separate conversation, which is, what if we don’t want a record at all? What if we want to go dark? What if we want to actually just have this transaction to exist ephemerally in the moment, and then it’s done. And the only record is that the ownership of these instruments has changed on the other side.

Maxximilian Seijo: I think what’s so interesting about what you’re saying, too, and something to highlight, because I can imagine a lot of people getting really mad at this for a lot of different reasons, that maybe they don’t even really fully know why they’re mad at it, but the thing that stands out to me when you describe it is the pluralist approach. This necessity for having multiple forms of money that have multiple structures, that have a ledger attached, or even not attached to them. And how with certain aspects of society, there’s something necessary about providing space in different forms of money, and different ways of securing the hardware of the currency. I was wondering if maybe you could talk a little bit more about why that’s necessary?

Rohan Grey: Yeah, and we designed this initially to be a pilot, because this is still very early days. We need to actually have a conversation as a public about this. And one of the things is that, because central banks have dominated the conversation up until now, they’ve sent a pretty clear message to the industry about what they’re looking for. So when you’re looking at people out there who are proposing technologies to sell to central banks, to provide services to central banks issuing digital currency, interested in digital currency, right now, most central banks have said we want something that’s likely to be account based. It’s likely to involve intermediaries, it’s likely to be a two tier system where we’re not going to manage the last mile service, that’s going to be someone else. And the technology companies have heard that, and they’ve responded and marketed accordingly. But one of the things about this pilot program is essentially to say, look, there’s a whole separate segment of the market that we’re interested in supporting. There’s a whole separate segment of production. Take markets out of it. We want this kind of technology. If you’re interested in building it, then we’re interested in buying it, essentially.

And to open up this space for technologists to know that there’s interest in it for them to pursue. But we did keep it relatively agnostic at this stage, because there are different models. For example, prepaid cards have a different threat model than cell phones. They have a different set of use cases with a prepaid card. It’s a single-use piece of hardware. With your phone, you may be using the trusting environment on the phone or the SIM card, whatever it may be, but you’ve also got all these other applications and other ways that your phone can have your hardware security compromised. So we’re being ecumenical at this point by saying, let’s let the tech companies and let’s let people who’ve got interesting ventures on this front. I hope nonprofits and open source collectives will be a huge part of that. Let’s let them come up with things. Let’s fund it. Let’s see what the variety is. And this is why, even though I think at a kind of technical specs level, it’s almost antithetical to have a blockchain or ledger. We’ve even kept the option that if somebody can demonstrate a use case or a model where that could work, we’ll keep an open mind about it here.

But the goal is to be very clear that this is supposed to have the features of cash. There are account based technologies that are important. They should be pursued in other contexts, and certainly in the CBDC conversation. But here, we’re specifically looking for something that can have the functional specifications as close to cash. The other thing is that all technologies are vulnerable. There’s no perfectly secure system. So we’re not trying to propose here that hardware security is perfect or flawless. There are well known risks. But one of the elements here is that, if you design it with quantitative limits on each device, like we have with denominations of physical currency–we don’t have $100,000 Bill anymore–even though I might want a trillion dollar coin, I’m not suggesting that we’d be using them at the vending machines. So there will be some baked in limits to how bad counterfeiting could get at scale.

You would still need 10,000 cards shipped in big boxes and crates, or prepaid cell phones by the dozen, to benefit from counterfeiting at scale. But I think the other thing is that, when we’re talking about the scale of the political risks and political stakes at play here, that is to say, privacy, civil liberties, respect for tolerance, respect for dissent, those are such important values that, if we have to deal with a little bit of risk of counterfeiting, that’s fine. We’ve been doing that for centuries. The Secret Service protects the currency first and the president second. So I think the idea that we need to have a perfectly secure currency to be worthwhile is that technical model is not true. And that as long as we can keep the risk profile from being absolutely catastrophic, then the privacy benefits are worth pursuing this as one option.

William Saas: So the proposal is motivated by two moves that are, I think, going to strike a lot of people as immediately counterintuitive. One is that it should be the Treasury rather than the central bank. And then, two,  there would not be a preference for, or prioritization of, or even special consideration of, the blockchain or distributed ledger over something else to make counterfeiting impossible and to guarantee security, which is illusory, right? So I love that we’ve gotten quickly into the weeds. And we’re going to have a link to as much information about this proposal as we can in the show notes. But I think it would be really useful for us and for listeners to have a bird’s eye view of what this proposal will look like if it is enacted, and from the pilot stages to that final moment of secure hardware. You talk about cards and then prepaid cell phones. Maybe take us from the legislation to the hands of consumers.

Rohan Grey: Yeah, sure, thanks. So the first thing is, due to your original observation, I think when we look at policy constraints that are also political or technical, we often take one particular constraint as the starting point for our inquiry, and then everything else is assumed to be less important than that constraint. So to give an example from a world we’re all familiar with, politicians will say it’s really hard to sell deficit and budget politics, so I don’t want to do it. And then, you end up having all these incredibly complicated conversations about how we’re going to get pay-fors, how we’re going to get the taxes, etc. And it may be that half of those political challenges are even more complicated than simply teaching people about deficit politics. But because you started from the idea that that was too hard, you end up doing things that are much, much harder to compensate. So in this debate, we often have a situation where people say, well, anonymous cash is impossible, politically. We can’t sell it. And then, we end up having these extremely convoluted conversations about how to balance privacy and national security and all these different interests that are often much more complicated than if we had just started from the outset and said, “Look, it is going to be hard to fight for this, but it’s actually really important.” 

So all of that is just to give a precursor of the reason why this bill feels so different to everything else. It is because we aren’t making that initial political compromise that then makes all the other decisions really bad or really difficult. They say hard cases make bad law. Well hard compromises make bad further down the road policy decisions. But to go in the bill itself, first of all, the bill would be funded directly through money issuance. There’s no taxes funding it and there’s no national debt. The Treasury would spend the money, the funds would come out of a special account established at the Fed that would basically be like a permanent overdraft account. Any overdrafts incurred by the Treasury would not count towards a national debt. It would be at the Treasury’s discretion how much to spend, and the Federal Reserve would book any losses on that account and any overdrafts that it maintains for the Treasury, separate from the rest of its budget. So it wouldn’t affect any remittances back to the Treasury and it wouldn’t affect the net operating surplus that it returns. So that money would then go towards funding pilot programs. 

Those pilot programs would be overseen by a new position, which is a director of what’s called the Economic Currency Innovation program. That director would have relatively wide authority under the Treasury Secretary. They would coordinate with a larger digital currency group that consisted of other agency heads and other important government officials across the government, including chief technology officers and things like that. There would also be, in addition to the Economic Currency Innovation program director, a monetary privacy board. And essentially, independent privacy experts would oversee the process and periodically conduct audits and reviews and release their findings to the public. Their job would be to essentially keep the system honest and oversee it from a privacy and stakeholder-oriented perspective. The bill itself, in addition to establishing pilots, defines what a digital currency would be. So it says what ECASH would be as a specific form of digital currency. So it’d be legal tender.

It would be a bearer instrument, which means whoever holds it, is the owner of it considered legally. It would be not based on a ledger so that the value would be stored on the physical instrument, on the physical device. And it would be capable of being held by the public without any fees, fines, and things like that. And merchants would be required to accept it to the same degree as they’re required to accept physical currency. So they couldn’t unfairly penalize people who were trying to pay with this instrument. The pilot program is set up in two phases. There is an initial phase, which is a proof of concept phase, where the Treasury would select three pilots of which two, at the very minimum, would involve some sort of debit card or prepaid chip card capacity. And then, at least one would require phone based capacity. So we left the option open for someone to come up with a ledger based system if they really can show how it can meet the broader specification needs of cash, i.e. offline capacity.

And then, after that initial set of pilots that would take place, I think, within about a year, there would be a write up, a report, a review of what went right and wrong, and then there would be a larger scale rollout pilot, presumably in collaboration with another government agency, or a state or local government, something like an EBT card program or an economic cash program. For example, you could imagine, not that I support it as a policy, but Gavin Newsom’s gas tax rebate card could be a good example of how you might pilot something like this. And that’s the sort of second phase pilot. And the idea is to keep a relatively tight timeframe on this. Obviously, if things need to be stretched out, because of technical considerations, that’s fine. But the goal is to not have this due in 2035 or something, but to be relatively soon, because in the world of technology, five years is infinity.

Maxximilian Seijo: So now that listeners maybe have a sense of not only what’s in the bill, but also like the certain considerations that went into drafting it, I think, a question that comes up is, who are the political coalition’s involved? And how is this gonna play out? Maybe you can talk a little bit about the stakeholders and where the political will for passing this might come from?

William Saas: Anyone can create an ECASH Act, the problem is getting accepted.

Rohan Grey: Yeah, from your mouth to God’s ears. I think this is a really interesting part of this bill. In addition to this institutional move, where we took it outside of the CBDC conversation to start a whole separate conversation to say, “Look, you’ve done a really great job as central bankers around the world defining this term CBDC to be exactly what you want it to be while still giving the appearance you haven’t made any decisions yet. We’re still considering every option as long as they’re black. And you’re in charge of creating an instrument that we’ve defined the parameters of.” This kind of debate. But in addition to that institutional move, there is also a political move, which is that if you look at the broader crypto conversation right now, a lot of it is taking place on this vector that I find to be very problematic, which is that a lot of the kind of industry people–the liberal crypto advocates–have positioned themselves as the only ones doing anything. They’re the only ones doing something new. We’re the ones trying to fix problems. Have you tried to use the payment system? It’s slow, it leaves people out. It’s exploitative, blah, blah, blah, blah, blah. Look how much better the things that we’re trying to create are going to be.

And then, the progressive response is, you’re lying. You’re a fraud. You’re a charlatan. You’re making it up. But it comes across as a combination of sour grapes and being the party of “No!” William Buckley talks about standing on top of history shouting, “No!” or shouting, “Stop!” There’s almost that vibe. It’s a bit reactionary in its opposition. And I think part of that is because you’re trying to fight something with nothing. Unless you actually have a progressive vision of the future that’s stronger, unless you want to own the future of technology, of where we’re going, then you sound like somebody that thinks the status quo is okay. Even if you don’t, that’s the dynamic. So I think it’s been really problematic that the only vision that people have at a mass level for the future of money in an exciting way is this crypto vision. And one of the big ways that that gets justified is that the government alternatives are pro-surveillance. They’re not your friends. You’re putting a dangerous device in your pocket, just like we had now come to realize with Facebook and Google and things. What we thought were more benign turned out to be malicious.

So this coalition, I think, is a combination of people that recognize that the ability to use cash or cash, like transactional freedom, is really important for marginalized populations. So sex workers, marijuana businesses, people in the gray economy, undocumented people, people working in the informal economy, all of those kinds of people, but also political dissidents. Palestinian activists who don’t want Venmo to shut down their donations. People who are trying to engage in political dissent, who don’t want the racist governor of Alabama getting the list of all of their political donors to the NAACP in the 1950s, which was a real Supreme Court case. So those kinds of things, where we don’t want the money to be a tool of oppression, I think brings or should bring progressives to the table. Then, you’ve got privacy advocates. You’ve got people that care about tech privacy in general. The ACLU and civil liberties groups who should have been on this for a long time, but have not been because money has been scary as a topic–it’s hard enough to get your head around technology to get your head around money as well.

But then, interestingly enough, and God forbid I would ever say I want to have a bipartisan coalition, you have the kind of libertarians who are true believers. Now, I think they are a vanishingly small subset of the community, but those for whom they definitely prefer private sector solutions, they definitely prefer crypto. But if they were going to have to have a government digital currency, they  would probably prefer one like this. So they understand that from a pro-privacy point of view, that cash is very important. And even if they don’t like the government, they like having more privacy in their money than not. So I think you’re going to get some people on that front. Then, the last group of the people are those who’ve been opportunistically opposing other government options, who have been using the surveillance talking point as a stalking horse, as a way to bash CBDCs, which I think is a valid criticism. Now, whether they’re actually serious in saying they would prefer a privacy respecting alternative, I’m not very confident about, but this will at least give them an opportunity to show that they were something other than cynical, duplicitous liars. So we’ll see. But I think there could be a relatively wide coalition here of people who oppose government domination, or corporate domination, who believe in privacy and the ability of using money in ways that authorities might not approve of as being an important form of political freedom.

William Saas: So in terms of actual members of Congress who might be in support of this, we have Stephen Lynch. We also have Chuy Garcia?

Rohan Grey: Yeah, notably, Stephen Lynch is a moderate. He represents a relatively blue collar district, but he intuitively understands the benefit of opening up a conversation around the Treasury, rather than the Fed. He intuitively understands the value of preserving cash. He knows that this isn’t radical in the sense of a departure from the status quo. This is protecting freedoms that we’ve had for thousands of years so that they don’t get crushed in a sociological transformation towards a more digital society. So we’ve got moderates there. The original ECASH proposal that was in a much shorter form was actually the ABC ACT that I worked on as well with Congresswomen Rashida Tlaib and Pramila Jayapal. And about 19 other progressives signed on board, including Chuy Garcia and others. So Congresswoman Tlaib is a co-sponsor of this bill. Congresswoman Presley is a co-sponsor. I think other progressives are going to get on board. There have been other people in the Senate side who are supportive as well, who care about privacy and care about a public option.

In my experience, when we talk to progressives, they often haven’t considered this issue. But when we explain it to them, they go, “Oh, that makes sense, we should definitely have that.” Now, the way you’re going to lose people in this coalition are going to be those who care a lot about surveillance, who care a lot about anti-money laundering and KYC, and who see this as a step backwards. Because for them the War on Cash is a positive development. It’s a good thing that we have more surveillance, that we have the ability to create backdoors, to freeze accounts, and all those kinds of things. So they see the current inertia, which is towards the inevitable death by attrition of cash, as a good inertia. And anything that arrests that inertia is bad. So the opposition is going to come from people who are quite comfortable with the fact that cash is dying and don’t really want to resuscitate it.

William Saas: Because it’s dirty and can be used for dirty things.

Rohan Grey: Yeah, bad people use bad money. If you’re a good upstanding citizen, you’ve got nothing to hide,

William Saas: There’s nothing wrong with that logic.

Rohan Grey: No, famously, societies where every political leader is expected to have no vices at all never have their own political vulnerabilities.

William Saas: So I’m trying to imagine the scene of the dissident using this digital dollar, or ECASH electronic currency. What is the hardware that they might be using? I know there’s going to be lots of experimentation.

Rohan Grey: They could be using a prepaid card that might have an E-Ink display. It might have a few really basic buttons on it like something that looks like the remote that you might program your air conditioner with or something.

William Saas: Hopefully, a little more sturdy.

Rohan Grey: But yeah, there are already versions of those kinds of chip cards in China, and elsewhere, all the way back to the 1990s were the earliest forms of government pre-stored value cards. We also see similar kinds of stored value card technology with transit cards, things like that, currently in operation. But you could imagine something where you essentially tap that card using some sort of near field communication. You could maybe put some numbers into the card to say I want to send $25. The card then produces a unique 10 digit code. You can then type that code into someone else’s card and it will receive the funds. That’s one option. You could also have essentially an app on your phone that integrates an ECASH wallet on the phone with accounts that are managed remotely and in a ledger-based system somewhere else in a server. So that you pull up the app on your phone. It’s called your money app, and it has a checking account, credit card account, and a cash account. And if you want to transfer balances to your ECASH account, in a cash wallet, you simply go withdraw $100 from my checking account, your bank debits your account, and it’s the equivalent of if you walked into the bank and asked for a $100 note. They take it from their E cash balance. If they need more ECASH from the government, they buy it, the government debits their reserve account, gives them the equivalent of pallets of cash, and the armored truck comes and delivers them to the safe. This is all just happening remotely with software now.

William Saas: Can they animate a Brink’s truck on your card, maybe?

Rohan Grey: Yeah, that’s right. You see a little armored truck go from your bank app horizontal bar down to your cash app horizontal bar, and then the value appears there. And then, if you want to make a transaction to someone else’s phone, you can either send them a text message with the code, or you can tap the phone next to each other or whatever else. Merchant point of sale terminals, we demanded that the bill require the technology to be interoperable. So in the future, it would be simply you have a terminal and it says, would you like to pay with checking, credit, or ECASH? You press ECASH and it taps your balance, etc. And that can happen offline. It can happen with something that has no battery other than kinetically powered. There are wearable tech now things where the low powered chips get powered by movement and by you touching it, those kinds of things. So you can imagine all sorts of ways that that low powered hardware can continue to function without a battery or something like that.

William Saas: Speaking of low powered hardware, how many Nvidia graphics cards are going to be needed for the Treasury to roll out this program?

Rohan Grey: Yeah, I mean, this is one of the funny things. If you go back to that 90s moment, when I was saying before with Philip Diehl was testifying in Congress in the mid 90s, you had initiatives like Mondex, which was a bank initiative to create a stored value card. You had initiatives like Avant card at the Central Bank of Finland. But I think it was one of those moments where it’s wrong to be right too soon. So the conversation around money hadn’t caught up to the conversation around the internet, essentially. So when people were experimenting then with stored value cards, there just wasn’t that much government interest in them. And eventually, the technologists said, this isn’t going to work for us, we went a different direction. And the way that they went, because a lot of them were kind of libertarian, oriented in the Cypherpunk movement, unfortunately, they went into we’ll create our own money. Up until that point, it was we’re going to use the public money, but we’re going to create privacy respecting payments technology. And now it was, well, the government’s not going to meet us halfway. So we’re just going to create our own private money. And then, that way, we’ve closed the loop where private money and private tech can do the whole thing.

Now, of course, the problem is that you then need a theory of decentralized issuance. You need a kind of theory of fiscal and monetary policy to go with your payments theory. And that’s where you end up in these incoherent libertarian, we can do it in the private sector, there is no collective governance, bullshit. And it creates a technical problem, because you now need to solve not only decentralized payments, but decentralized issuance, and that’s where you get to mining and all of that kind of stuff. But if you have a public hardware based system, then you can have trusted issuance, and then the hardware is only doing the payments processing. It’s actually a much smaller technical problem to solve when you’re not simultaneously trying to solve the money problem as well as the payments problem.

Maxximilian Seijo: And from a technical perspective, too, I think, as you’re saying, this is interesting as a way of connecting up these ideological presuppositions about money and opening up a conversation to the design of money and the creation of money around a public and democratic ideals-based paradigm. And opening up what it means to have political freedom, as you said. And it’s interesting to see that in line, historically, with the moment of politicizing money, generally speaking. It feels like an important theoretical step in connecting up some of these problems.

Rohan Grey: Yeah, I mean, you all have done a great job of talking about queering money and the way that money can be a site of people to provide alternative modes of being, to demonstrate, and to experiment. In order for that to happen, the money itself needs to have some degree of tolerance for pluralism. We created the public money to serve these collective and social goals. But separately, it can also serve these goals that no one expected, no one planned for, but we’re improvising because we’ve got a few minutes in between rehearsals and that kind of stuff. As long as the studio isn’t shut down and we haven’t been kicked outside, then we’ve still got access to the materials. We can still play the instruments together while we’re in the room waiting. So this kind of technology is a way of saying, look, it’s still public, but it’s public with a little bit of space for you to define that around the edges. You, as an individual, all the way down to the individual node in the social organism, you can have the freedom and autonomy to offer a contribution to how you think this thing should look like, even if it’s different to how we have collectively decided up until now. It’s that balancing of the consensus versus the individual editor on the Wikipedia page.

And in that respect, I think, not to sound like this is super nuanced, but up until now, we’ve been having this conversation where the dichotomy is public money and private money. And we have confused the word private money there with privacy money. We think they’re the same. But really, at the very least, we should be thinking of a four box, two dimensional kind of thing, where you’ve got public money and private money, and then privacy respecting money and non-privacy respecting money. And as long as the public, the cultural imagination, is stuck between a public surveillance coin, and a privacy libertarian coin, I think we’re fucked. I think we’re in a bad place. I think we’re gonna continue to go in a bad direction for the future of money. But if we can get the conversation up between a privacy respecting public money and the other two, then we can see how privacy respecting public money is better than a government surveillance coin. And privacy respecting public money is better than pseudo-privacy respecting private money, and in fact, may actually be better at serving that privacy function, because of the features of public money, not despite them.

Maxximilian Seijo: That point about the construction of the antagonism between public and private in a vacuum without these other complex variables for thinking about the way we participate with money is so key. So yeah, thanks for the work that you put into opening up this conversation, both theoretically, and then, obviously, also technologically.

Rohan Grey: I think, obviously, none of us are so naive as to think that writing a piece of legislation is the same as making social change, but this is a form of intervention. And I think it’s a show don’t tell kind of model, because we’ve been trying to explain this idea to people for years, but sometimes you just need to really articulate the future. I mean, my wife loves The Dispossessed: An Ambiguous Utopia by Ursula Le Guin. And one of the reasons she loves it so much is just because she’s so good at explaining a whole world and making it actually seem viable, that something so fundamentally different could work. It’s not just once upon a time, there was a wood cutter and you’re like, well, wait a second, does he have healthcare? Does he see his relatives in other places? Is there a train line to the Sleeping Beauty story? But if you tell a story with enough detail, suddenly, that imagination can become real. So something like this bill is a way of saying get over that imaginative hump. This can happen. It’s a viable future. We just have to choose it.

Maxximilian Seijo: Not to go too far down a digression about The Dispossessed, but I read it again recently. And for fans, I was taken by Anarres, one of the more utopian planets. In the book, there’s so much, I guess you could call it, money in that utopian space in a way that I think is counterintuitive to people. But it’s because it’s money in a different way than we understand money operating in our world. So yeah, I like that you brought that up. It’s a great example.

William Saas: For sure. So I’m looking at the fact sheet that folks can also look at, I presume. And I’m seeing some great stuff here. We’re talking about the possibilities of something like this for achieving something maybe not utopia, but a more just order. So we have on this list of the features of ECASH, legal tender, which we’ve talked about, financial inclusion, and an emphasis on prioritizing technologies that promote universal access and usability, especially for folks with disabilities, low income individuals, and communities with limited access to internet or telecom networks. Privacy, we’ve talked a lot about that. Consumer protection, some regulatory details, and then some transparency and oversight functions. I don’t see anything here about fighting inflation or winning the war with Ukraine. So I’m joking, but at the same time, this is the context that we’re entering into.

Rohan Grey: Yeah, I think the first thing is that, in terms of the actual spending on the bill, we’re going to be talking about, maybe in the wildest dreams, a few 100 million dollars for these pilots and things. I mean, it’s a rounding error when it comes to actual real resource costs. What we’re going to be having and subsidizing like 15 computer programmers and a couple of computer manufacturers. But on the Ukraine question, I think it’s a really interesting moment, because there is this duality or tension with how people are understanding the role of things like crypto and financial sanctions right now. Because, on one hand, it’s nice to know that we don’t have to start nuking Russia to impose some warfare on them. If we have to go to war with someone, God forbid, the idea that we’re doing that with these soft financial means, rather than literally destroying the planet, seems like at some level a kind of relief. But on the other hand, what are economic sanctions? Every progressive has known for years, they’re painful, they hurt the most vulnerable, they don’t necessarily work, etc.

So, on one hand, it’s like, well, thank God, we’re not sending in shock troops. On the other hand, it’s financial warfare forever. That’s a terrible, bleak future as well. And then, conversely, people are saying, isn’t it amazing that people are supporting the people of Ukraine with cryptocurrency. So suddenly, the ability to subvert financial sanctions is also a good thing right now. We like financial sanctions against Russia, but we don’t really. And then, we like evading financial constraints with crypto, but we also don’t really like crypto. So it’s a very weird moment where I think the public is having to deal with a lot of ambiguous conflicting feelings. And that’s a productive space to be in because it problematizes a lot of these very morally clean binaries between criminals and average people, or the cops and the robbers and this kind of stuff. The reality is that there are bad uses of cash and there are good uses of cash. And there are downsides to having political freedom and there are good sides.

But if you think about it like a pen and paper, pen and paper in the wrong hands can be extremely dangerous. And in the right hands, it can be extremely liberatory. I think the question is, do we want to start from a world where we assume that access to a pen and paper can be controlled by somebody else? Maybe that’s not actually a question we want to ask ourselves, because how do we want to control people’s access to pen and paper gets us in a very dangerous headspace. So I think the Ukraine moment is at least going to be a more interesting context for having this conversation than the traditional four horsemen of the apocalypse, of the internet, that everybody loves to talk about, which is money laundering, terrorism, child pornography, and drugs. So if people think of censorship resistant money, and they immediately go to political dissidents, that’s probably a better starting point than what would have happened before all of this.

William Saas: Did I just hear you say that the ECASH Act might help to highlight and resolve the contradictions of late, imperial capitalism?

Rohan Grey: Well, yeah, maybe heighten. I’m not sure about resolving, but it certainly brings them into relief. And I think, just like with climate, it takes a climate apocalypse being literally on the doorstep for people to start thinking what a better world might look like at scale. I think the idea that we’re standing on the doorstep of a totalitarian surveillance dystopia with our digital money gives us a bit of space to imagine just what we really need and what’s really important for a future monetary system. And it’s this idea that we’ve actually been losing the war on cash for a while, I’d say since the 70s. It’s been a slow drip, drip, drip, war of attrition, that they’ve been winning. And I’m not happy that we seem to be on the precipice of building a surveillance panopticon that’s going to be the future of everything. But it’s also at least not drip, drip, dripping all the way to extinction.

And I don’t think I consider myself an accelerationist in general, but I think it’s one of these moments where, I didn’t choose accelerationism, it’s been chosen for us. And this is the kind of moment we get to deal with that. But after the last decade of watching how people’s thoughts changed after the global financial crisis, how the debate around crypto changed the debate around FinTech, how the debate around stable coins got changed by Libra, and now how the debate around privacy may be changed by this, I think there is a sense in which these antagonistic trends can open up space for new vectors for political organizing, consciousness building, and things like that. I think whatever else is gonna come out of this, a lot of journalists, a lot of commentators, and a lot of people thinking about digital currency, are now going to know that there’s another battlefront to fight here.

Maxximilian Seijo: Well, Rohan, thanks again for coming on Money on the Left. And I’m sure we’ll have you back on sometime for some other thing that you’re working on. Because you’re certainly working on a lot of things.

William Saas: Well, hopefully, we’ll talk about this, right? It’s a live thing.

Rohan Grey: Yeah, we’ll talk about the pilots and how they’re running, etc.

Maximilian Seijo: But yeah, thanks so much. And for listeners, we’ll have links to everything that we’ve discussed in the description.

William Saas: And listen to Rohan on the upcoming Odd Lots episode.

Rohan Grey: Thanks a lot, guys. It’s always a pleasure. Take it easy.

Adorno, Lazarsfeld and the Birth of Public Broadcasting with Josh Shepperd

Josh Shepperd joins Money on the Left to discuss the research and activism that hastened the rise of public media in the United States. Assistant Professor of media studies at the University of Colorado-Boulder, Shepperd shows how public-interest broadcasting platforms like NPR and PBS exist in the U.S. today in large part as a consequence of hard-fought battles by committed scholars and advocates throughout the inter- and post-war periods. In particular, Shepperd traces the untold aftermath of the Communications Act of 1934 which, in addition to creating the Federal Communications Commission, gave overwhelming legal support to private for-profit networks, while stripping radio licenses from public and educational broadcasters committed to serving the common good. 

Deepening this narrative, Shepperd draws special attention to the Princeton Radio Research Project, spearheaded by noted sociologist and communication studies scholar Paul Lazarsfeld. Through the Project, Lazarsfeld developed influential quantitative research methods that fundamentally shaped the discipline of communication studies. Fascinatingly, however, Lazarsfeld hired then-immigré critical theorist Theodor Adorno to assist in the research program. As Shepperd tells it, Lazardfeld welcomed and even incorporated the critical theorist’s incisive contributions into the Project. Yet, Adorno ultimately repudiated the Project’s efforts to build a robust U.S. public radio system, unfortunately divorcing the developing tradition of Critical Theory from the domain of public media research and advocacy. 

Fast-forwarding to the present, we ask Shepperd about his argument that contemporary humanities research ought to be politically constructive. We then conclude by exploring his important archival work for the Radio Preservation Task Force at the Library of Congress.

See here for Shepperd’s article, “Theodor Adorno, Paul Lazarsfeld, and the Public Interest Mandate of Early Communications Research, 1935–1941,” published by the journal Communication Theory in August 2021.Visit our Patreon page here:

Music by Nahneen Kula:


The following was transcribed by Richard Farrell and has been lightly edited for clarity.

William Saas: Josh Shepperd, welcome to Money on the Left.

Josh Shepperd: Thank you for having me.

William Saas: So to kick things off, we would like to invite you to tell our listeners and us a little bit about your personal and professional background, especially as it relates to your current work on public media.

Josh Shepperd: So I’ve got a background in continental philosophy. And I never was able to shake the ideas and the different kinds of idealisms that philosophers carry into their assessments of ethics, aesthetics, and other approaches. So when it comes to research in media studies, or film and media studies, I really tend to focus on how people frame the why of what they’re doing, not just the case example that’s at hand. I tend to listen more to the precursory investment of why the phenomenon is being studied. So when it comes to public media and studying a topic like that, there are two factors. The first is that public media is a mission statement based industry. It doesn’t follow from logics of accumulation like the private and commercial industries do. It pulls from certain concepts of social amelioration about equal access to education and cultural uplift, and sometimes that’s very paternalistic or patriarchal along the way. But there’s an ideal there that they’re trying to realize through media as opposed to creating a kind of mechanism that is both profitable and can predict what content audiences won’t respond to so that they can continue to produce content, which is the basics of commercial industries.

So the second factor is, with those investments in mind, I ended up at the University of Wisconsin for grad school, and they had the National Association of Educational Broadcasters archives there, or NAEB. And NAEB built NPR and PBS. But no one had ever actually written the history, going back to the onset of educational media, that traced where non-commercial logics came from in media production, and how it went through a series of concessions and shifts and evolving concepts to reach public media between the 1920s and late 1960s. So I really just sat in the archive for a very long time in grad school, and even went back after grad school, to look at the personal letters. And the beauty of that was that educators are bureaucrats. They saved every single piece of paper. So as a historian, I had kind of the opposite problem of what other historians have where they have to travel intrepidly around the world to find that one smoking gun document. I instead had literally millions and millions of pages to work through over about 10 years leading to the book that I have coming out, hopefully next year. So yeah, there’s just been a huge amount of trying to trace the concept of why we have a non-commercial system, why people really believed in it and gave their careers to it over multiple generations, and then what the actual machinations were of building that system from scratch without advertising income, or to do it from a nonprofit perspective.

Maxximilian Seijo: So jumping into what you’ve already sort of described as the stakes and scope of your project, you’ve communicated to us and argue that political economic research should be applied in ways that not only clarify, but change institutional practices, and that for you, humanities scholarship has important roles to play in such efforts. Could you situate this claim and perhaps flesh out this argument for our audience with maybe some reference to some of the broader scope and stakes of your project that you’ve already started wading into?

Josh Shepperd: So one thing I’d like to say about political economy in particular is that the tradition of political economy of media turns out to have been a policy strategy of non-commercial media in the 1930s and 40s. It’s a methodology that was developed to solve a problem. So I’ll sketch that out a little bit and then say a couple more words about it. So essentially what happened was, and this is part of the paper I recently published on Adorno, is that the FCC and the Office of Education began to work together for the first time after the Communications Act of 1934, which as Robert McChesney has very famously written–and other colleagues, Victor Pickard, Nelson Perlman, and other scholars have addressed it–it privatized the American system, but to such an extent that it was impossible to build any non-commercial, sustainable entities within the post-1934 Communications Act environment. Okay, so usually the history ends there.

What I have found in the archives is, from 1934 to roughly at least the late 1950s, the media reform movement, as it’s been called in our field, began to organize in a decentralized, parallel way by which multiple sectors were working for the same goal, but perhaps in the ways that they deemed suitable to their specific sector. In other words, philanthropic groups started to fund research around these topics. The government began to create clearinghouses and mandate different kinds of research projects in concert with the government. Our intrepid grassroots, local broadcasters began to develop best practices that would differentiate commercial broadcasting from educational broadcasting at the time, while at the same time taking the best practices cues from commercial broadcasting for what audiences seem to like. Then, out of that, they had to make a case, the non-commercial broadcasting side, for why there should be special frequency allocations for non-commercial media when it was not profitable, when it was not well supported by universities at that point, and when it was not even clear what the effects were of education on classroom audiences, on students in classrooms listening to the radio for education.

So what happens is they end up bringing over the director of talks of the BBC, a guy named Charles Siepmann, who becomes a kind of a mentor to a generation of NAEB broadcasters. And one of those people in the process was Dallas Smythe. With a guy named Dallas Smythe, they wrote something called the “Blue Book” for the FCC in the mid 1940s. This has been published about by Victor Pickard. He has a very excellent piece. In that “Blue Book,” there’s a suggestion for the relationship between public good, even public defense, and non-commercial broadcasting that’s not in the hands of private interests. Dallas Smythe is Canadian. He went back to Canada eventually, but he helped build the very first communications program ever, which is the Illinois School with Wilbur Schramm and others. He also did a huge amount of work for the FCC and NAEB to make an argument for why media serves as a kind of a public good that requires attention to path dependencies, sociological path dependencies, and institutional and policy decision making. This is the foundation of political economic research in media studies.

So Dallas Smythe is often credited, then the Illinois School researchers that followed him, who were super excellent for many decades, and were conducting essentially a moral, sociological assessment of the effects of commercial media on broader democratic discourses, and in the process, pulling from traditions like Marxism. Political economy is usually a Marxist term, but in this case, I would say this is more of a post-Deweyian, American, and pro-capitalist, but anti-monopoly viewpoint. So we should be clear about where political economy came from, which I would say is a liberal, mildly left tradition when it began. Then, it actually moved further left and then began to disappear in our field at the same time. But the key point here is that political economic research began as an empirical solution to a policy problem to address non-commercial media allocations within the government. This engendered a series of types of reports that became a mechanism of communications research itself over time.

So in terms of the practice of political economy, when I learned this through the archives and just through the personal letters of the founders of the tradition, one thing that really struck me is that political economic research can’t merely be critical. Political economic research is not merely a critical piece that we’ve written for a metrics-based evaluative journal. It’s actually a mode of practice that attempts to adjust how institutions and policies work. One of the things that I love about non-commercial media history is that it’s one of the histories in the 20th century that did change policy. It actually changed the Communications Act and the commercial broadcasting structure into something that at least designated a role for non-commercial media. And there’s a lot to say about that. But when I enter into a political economic approach to research, I think about my public role with different policy and institutional structures beyond my assessment of what the archives tell me or something like that.

So I was very fortunate to be placed in DC for my first job at Catholic University of America back in 2013 or so. And I was invited right away, as many people in DC are who move there, to join a research project with the Library of Congress. And we realized that radio was basically not preserved whatsoever. So the Radio Preservation Task Force is the name of the project at the Library of Congress. We realized, “Okay, we have an opportunity here to actually work with the path dependency of a specific institution, and one with a huge amount of international weight.” We’ve been studying these principles, my friends and I, for all this time on the project. What could we do with this that would be a public facing political economic project with some influence of Gramsci and cultural studies–we could talk about that later–but within the logic of the institution so that it sustains itself? What we realized was that there was already a film preservation plan.

There was a recording preservation plan that was new, but that radio was probably the most untapped primary source archive maybe in the world. It had not been preserved. There was over a million hours of material. And it was a non-theatrical modality. People think of like Jack Benny for the radio. They think of the great theater of radio. I love these things, of course. But most of radio is community organizing, talk shows, sports talk, and so what you actually end up having are these primary sources of people who may not be in the paper trail describing their perspectives about events as they’re happening in real time. So we realized pretty quickly, within the first year, that what we had was a potential political economic project from memory studies, which is to diversify the archive through sound history where paper trails ended with alterity experience. But of course, to do that, you have to go through all these steps. You can’t just say, here’s an archive, let’s preserve it. There turns out to be dozens of steps, huge numbers of personalities, policies, state claims, copyright, there needs to be applications, grant writing, and then we need implementation in the classroom.

So we just started building this political economic project. We ended up with about 300 professors after the second year on the project to just account for this and it still wasn’t enough. It still has been a very difficult project to facilitate. But so, in other words, the political economic research in the archive for all those years influenced my willingness to really dive into, with an opportunity at hand, the institutional decision making processes, and see how we could interject specific kinds of moral, ethical, or structural changes to the machinations of how the institutions work. And we’re still going. I think we’re the longest lasting–I don’t want to be too bombastic about it–media research project in Library of Congress history. I can’t find an equivalent at the US National Archives. So it’s all built around the precedent that we are working together in a horizontalized way to diversify the archive through sound. So the project is really more of a media studies and political economic project that learns the institution to get something else done, which is to make our curriculum better and more diverse when it comes to studying media history. So that’s part of the political economic story here.

I have this conviction that the work that we’re doing in media studies comes from two places. The first is a mission statement that we should be invested in non-commercial media. And I’m mostly alone in the belief that that is a crucial mission statement for media studies. But the second, I think, is super fascinating, and I hope will resonate over time, which is that media studies was founded as a system building approach. We used to build things in our discipline. Our discipline came from people who built an entire alternate media system. And, at some point, we just sort of turned to critique and we stopped building things. So that’s super fascinating to me. I’d say, what we’re doing at the task force, is one tiny fraction of the division of what was accomplished in the Cold War era. But at the same time, I do think there’s something there that could be recaptured.

Scott Ferguson: That’s beautiful. It’s such a really helpful and comprehensive summary and situating of your work. I was wondering, for our next question, if we can focus a little bit and pick up something that you mentioned in your response, which is that Communications Act of 1934. You and your work show this really looms large in both the history of public media activism and in the rise of communication studies. And in your published writing so far, you’ve begun to lay out the significance of the 1934 Act in an article titled, “The Political Economic Structure of Early Media Reform Before and After the Communications Act of 1934.” Maybe you can walk us through some of the details of that Act and what it did? I mean, you’ve already kind of addressed this. But I wonder if you can say, in more particularity, why this Act is so important and what did it end up doing?

Josh Shepperd: So, I mentioned him already. There’s a really important book that I admire by Robert McChesney about the foundation of, essentially, the media system in the US. And again, it has a huge amount of attention in the early 90s for its comprehensive archival research, but also its political economic framing of where essentially we went wrong, or where the paradise was lost in the American system, and why we don’t have a BBC like system, or at least why our public system isn’t as robust as it should or could be. So this is kind of the word for the field. Like people look to this work and a few other foundational works from like Susan Douglas and Michele Hilmes, who was my mentor at Wisconsin. And these are really excellent books that are the foundation of my work. But his book ends with 1934 with the loss for educators, which is completely accurate. And politically, I agree with what he takes away from this history. But if you go one year later, the same people that are in his book begin building public broadcasting right away.

So what happens is this 1934 Act is, from what I can tell, the watershed moment, good or bad, for American media. What you have is this moment in which some of the rhetoric of Coolidge and Hoover about public interest, convenience, and necessity as the grounds for station allocation rules–so who gets to have a station and broadcast–becomes ossified into policy in 1934. That’s essentially what McChesney’s book looks at. And I agree with him completely that this notion that station ownership should be dictated on the question of interest instead of service, this is a big distinction he makes, is like this break, it’s almost like this epistemic break in what was possible during the New Deal. So all the consequent decisions that are made during the New Deal by the FCC follow from the senatorial rules that were passed that essentially equate to technical mastery and technocratic understanding of measurement of audiences and the broadcast range and all that stuff are the single grounds by which American systems can be created. This gave a huge advantage to advertising based media who could have just constant income coming in with vaudeville and Tin Pan Alley performers. And I love that stuff by the way. I love the performances on early radio.

But at the same time, it’s like, why don’t we have that other system? So what happens is the Communications Act becomes the grounds by which, I argue, future advocacy is also shaped. And one way that I do that in the article is, and I’ll just give a little spiel about it, McChesney covers two groups in his book and shows how there were two fundamental responses to an inevitable retraction of opportunity for educational media. There’s the National Committee on Education by Radio, the NCER, that was funded by something called the Payne Fund out of Ohio and was connected to the National Education Association. Then, there was the NACRE, or National Advisory Council on Radio in Education, which was really just a single person. It was a guy named Levering Tyson. And he was appointed by the Carnegie Corporation and the Office of Education commissioner pre-New Deal to investigate opportunities for different modalities of broadcasting practice to work together for a common goal of education.

So what happens is, and I love this in McChesney’s book, he points to the NCER as kind of like the Bolsheviks pushing against the system, and then the NACRE as the Mensheviks passive with the system. He creates this like super lefty dynamic between the different institutions and how that kind of complacence led to the Act itself. So the fact that there was not unified resistance to the oncoming changes in policy. But if you look at the same exact people, and they all left all their papers, like thousands and thousands of pages, personal letters, not just reports, but letters about these things. I had to go work on research in Cleveland, Ohio, which is its own problem. I spent all this time in the Payne Fund papers, and the same people after the Communications Act completely changed their methodologies and their strategies for how they approach the question.

So the NCER says, “Okay, we tried to, during the hearings for the Communications Act, state a reason that there should be a certain amount of frequency set aside.” This is usually referred to as the Wagner-Hatfield Act. It’s 15% of the reallocation, and argued sometimes as much as 25%. That was denied completely; it was just rejected outright. Then, by 1935, they’re saying, “Well, why don’t we just build a non-commercial media system.” So the same people who were built as these lobbyists and resisters to the system actually become practitioners within like two years, and they built something called the Rocky Mountain Radio Counsel out, not where I am now in the Denver area, but up in Wyoming. And they call it public broadcasting. So they actually invented the term. And this had never been discovered. I discovered this by accident in these papers. This is where the term came from originally.

It’s from this guy named A.G. Crane, who became president of the University of Wyoming and who was chair of the NCER after the Communications Act. He says we can’t just allow and wait for other people to do this work for us. We have to build a decentralized system based around philanthropic funds–the Rockefeller Foundation in this case. And from there, we will do shortwave or program transcription, which is a recorded program distribution of non-commercial media to classrooms. And, you know, dang it if they didn’t get it done, at least until about 1940. Then, one of the guys they have running the project named, Robert Hudson, goes on to help build the Illinois School with Dallas Smythe and Wilbur Schramm, the first communications school, about seven years after that. So there’s a few takeaways from these pieces.

When we are faced with failure on the Left, where do strategic changes get implemented that do change path dependencies of policy and institutional decision making? It’s a highly problematic case study. We’re talking about a bunch of white guys here. And we’re talking about people at universities. There is a huge amount of privilege with these things. But it reveals something about the policy itself without assuming that it’s like the same thing as a kind of rights advocacy. It’s still like a lefty political economic advocacy to increase equal access to education, which is a pretty important thing, I think, at that time, especially. So I’m really interested in these moments in which there’s a pivot within a strategic advocacy by which the rules change internally to the discursivity of the group itself. And what different decisions are made about the practices and then what worked and what didn’t. So I go very tediously and procedurally through how that worked within that piece.

Then, the NACRE guy, Levering Tyson, ends up being placed on something called the Federal Radio Education Committee, FREC, which was founded by the FCC and Office of Education in 1936. Because, it turns out, we should be clear that the FCC was formed by the Act. It didn’t precede the Act to make these decisions. So the new FCC members were like, “Why aren’t universities and school districts able to broadcast?” So right away the FCC is like trying to help build during the New Deal some kind of educational system. So they built this committee. And the committee becomes the funding line and becomes the precedent for all of the model of non-commercial media’s underwriting. We call it underwriting instead of sponsorship. And that’s the Rockefeller Foundation and Carnegie Commission. So yeah, the NACRE guy ends up on FREC. He becomes the chair of a committee that just wants to research what works with audiences or not in terms of broadcasts. It wasn’t actually successfully educational when it was broadcasting. Anyway, that becomes the Princeton Radio Research Project. And that is the foundation of all communication studies in the world. It’s Paul Lazarsfeld, it’s Frank Stanton from CBS, it’s Herta Herzog, who helped build survey group research and was Lazarsfeld’s wife, it’s Hadley Cantril who was a social psychologist who did propaganda for the government later. 

But what happens is, in this process, the same people that are in McChesney’s book end up building communications studies, research, or at least underwriting its origins, and building the first model for non-commercial media that’s networked, that’s not one of the commercial station forms of networking. So that’s what that piece is kind of about. It’s like we have got to keep working on these things. Where is the institutional change or development by which something becomes sustainable? This is what I think we’re missing on the Left a lot. It’s like, where is the durability of the belief? It’s always going to be in something outside of oneself. Like when we’re gone, we leave our projects, we pass away, or something like that. What is that thing that we did that survives in the practices of others? I think that that’s where institutions become both the problem and, not the solution, but at least the strategy.

William Saas: It’s such an amazing and essential history. And I think we’re all nodding our heads just going, “Yeah,” to everything that you just said about institutions and institution building and the promises and perils of doing that. And the need to look to history for some guidance. I think one of the things that, and this is not a question so much as it is a comment and a riff, but the discovery of the first use of public broadcasting and the development of a public broadcasting network, it seems to me like, “Okay, that’s great.” And we like that that institution was built, but it was because it was philanthropically funded. It was precarious from the jump, or private in a sense, from the jump. I guess what I’m trying to say is, you listen to public radio today, and it is lousy with like Kaiser Family Foundation and all these sorts of sponsorships. And you start to start to wonder, is this public broadcasting? How does it work? I don’t know, maybe this is just a throwaway, your research is cool and thought provoking comment. I don’t know if you have any thoughts on the sort of inherent problems with public broadcasting being grounded in philanthropic endeavors from the beginning?

Josh Shepperd: Yeah, I think this is one of those great Raymond Williams points about what are the limits and pressures that are exerted like hegemonically over institutional decision making and the determinants that have to be followed within like the homological structure of how discursivity works, or something like that, within cultural studies. I think this is something that’s been thought through really importantly, critically, and appropriately. So yeah, I think public media has always been a series of concessions to maintain a vision of the mission statement. So I think what you see over time is that, within our system, in a US capitalist system without a huge amount of earmarked money, there’s very sparse money compared to other public systems, you end up with the Koch brothers like underwriting NOVA. You end up with, in my experience working with public media and history stuff, a huge amount of worry about, if we do the right thing, what kind of damage will come back at us? So why don’t we occupy some kind of soft middle that sort of winks at political economic questions, but is actually more of a middle of the road centrist service.

And yeah, when you go back to the origins, and you look at the philanthropic funding as a solution, the goal was, of course, some kind of earmarked money, which has never happened, honestly, to this day in the way that it should have or could have. And then, the philanthropic system ends up exerting certain limits and pressures on the way that broadcasts would unfold. I can give you like one or two quick anecdotes. So first, with empirical research of audiences, the Rockefeller Foundation wanted proof that educational broadcasting was, in fact, educational. And this leads to decisions on the part of early experimenters about how to frame what they’re doing for income. So a certain kind of logical positivist intervention begins to occur in the framing of the institutional logics.

Now, this is true in commercial media, too, because they like to break down audiences into sub-demographics, and do predicative work about who they think will watch and when. This doesn’t seem to have been necessarily part of where non-commercial media went, because it’s supposed to serve every audience, including small audiences. So it’s a legitimate question to see like, well, where is the audience going with this? Are they listening? Are they paying attention? Do they understand? Are they actually learning? Can it be tested? And then there’s another side, which is, does everything have to be substantiated in terms of a content production within previous tropes that have worked in commercial media and could be quantified as opposed to qualified. So I think that’s one point. I agree with you, in the early parts of it, immediately, there were effects upon the approaches.

Now, I’m a very qualitative, humanistic researcher, but I’m not against my mass communications peers at all. Like there’s sometimes some strife there. There’s a lot of questions that get answered with good quantitative research. I learn a lot by reading it and stuff, too. But is that the normative investment of how to understand an audience, which is the quantification of the subject as listener? So I think that’s one thing to consider. I have never written about that. But I think about it sometimes. And yeah, is it a mode of privatization? Another comment that I think is a very good comment. Does it become a mode of privatization to have an alternative funding model that is philanthropic? One thing about a third party that is itself a nonprofit institution is that the kinds of pressures that it exerts tend to be in remittance of funds, and then future reporting, less than day to day operations. Whereas in commercial media, there’s a huge amount of influence over what can even be on screen. So it’s a softer form of power, but it does exert some power.

William Saas: Well, just as a quick follow up on that, I’m still thinking through and really energized by your provocation that the Left needs to think about taking up these building projects again and how your work has, in a fell swoop, challenged the foundational narrative in McChesney’s work, or at least extended it, and says, “Hey that’s not the end of the story.” And then, the next year you discover public broadcasting was a phrase or a term coined as a sort of compromise in response to the limits and pressures, but baked into that, it’s not what you think it is, and it never has been. So let’s think about it and what it could be, which I really appreciate.

Josh Shepperd: Yeah my investments are in the concepts more than like just following and supporting what every practice has been. And then, just also on the McChesney note, I would call it like a mild or supportive revisionism of his work, because I do agree in principle with his politics on these questions.

Maxximilian Seijo: Perhaps shifting gears a little bit and, especially, as someone who’s done some work on Siegfried Kracauer, I found your recently published article in the journal Communication Theory really interesting, particularly where you sort of hone in on a understudied chapter of the story, which is the relationship between Paul Lazarsfeld and Theodore Adorno. So for those who don’t know, for his work with the Federal Radio Education Committee, Lazarsfeld of the Princeton Radio Research Project did hire Adorno “not only to develop techniques to inform educational music study,” as you explain, “but to strategically formulate advocacy language for the media reform movement to help non-commercial media obtain frequency licenses.” What circumstances occasion this historic convergence between these two, we could say, maybe, intellectual titans of communication studies and critical theory? What have we overlooked about Lazarsfeld and Adorno’s relationship, and perhaps could you also say what lessons we can draw by reflecting critically on this moment today?

Josh Shepperd: Yeah, thank you for that. So I have a few things going on with that article, I think. One is the revisionist history. Where did communication studies come from and what are its commitments? And why does it have certain commitments? My answer to that is that it’s not just a matter of answering a question, which it does really well. It originally came from this public ameliorative mission statement. So communication studies, I would argue, is at least in part a consequence of media reform advocacy, which I think has not really been written about in the field. I think that to understand communication studies, it wasn’t just that they were able to create a more efficient model of understanding audiences, which became public policy research, which is all true. It is a functional approach to social science research. And in that functionality, it answers questions designated to it by either an institution or a social process.

Communication research is fundamentally different from the humanities in that way. Humanities tends to begin with concepts, existential experiences, storytelling, myth, there’s all kinds of ways that the humanities pull from a source if it’s problematic or not. Communication studies is a 20th century American phenomenon that attempted to answer technocratic questions within the constraints set for it by the institutions that underwrote early research. So that’s kind of what that piece is about. But what I found, of course, along the way, is that we have this discipline that doesn’t know where it came from. We’re probably the only discipline that has not traced its own history fully. And there’s really good work being done by Jeff Pooley, David Park, Peter Simonsson, who’s here at Colorado and the history of communication division at ICA, the International Communication Association. So my work stands on their shoulders. I think that because they were doing this work, I was able to begin this kind of work. So what I would say about the origins of communication studies and Adorno’s role is that Adorno is always taken for granted as someone who was brought to the United States as some kind of brilliant thinker. Of course, they wanted to bring him, but in fact, he was trying to escape Germany at the time.

He was brought here for a reason, which was that, mired within their attempts to develop reproducible models of audience analysis at the Princeton Radio Research Project in 1936 and 1937, they discovered that they had no way to translate the consequent assumed neutrality of quantitative results back into the policy language that the FCC was looking for to allocate the frequency assignments. So they said, “Well, we should bring somebody who has a different methodology,” Lazarsfeld says this in one of his letters, “that is a parallel analysis to this quantitative functional approach that we are implementing.” So Adorno gets brought to the US by really the founder of communication studies, Paul Lazarsfeld, to work on this problem of persuading the FCC to create 15%, 10%, or whatever allocations for non-commercial media. It hedged under his expertise, which is musical analysis, or analysis of musical syllabi, and these kinds of things. This has made it to Martin Jay’s work and David Jenemann’s books–these are really good books. But what everyone had seemed to have missed was the backdrop of the invitation and what that meant or what that revealed.

So what that article does, at Communication Theory, is it goes back to the start of where the mandate for the project even came from, it works into the questions they were assigned to research within it, which points to the functionalism of communications research itself. They weren’t trying to answer some major, Weberian question about how different social structures work. They were trying to answer how to get around the Communications Act and the limitations of that. Then, they begin to conduct research specifically to address the problem of educational audiences to report back to the Office of Education and the FCC. In the process, they bring on Frank Stanton. Frank Stanton becomes president of CBS not too long afterwards. He’s very young and just graduated from Ohio State in educational psychology. He and Lazarsfeld have this moment, and it’s just a remarkable, historically important moment in which they figure out how to triangulate audience responses across expanded models of demography.

So one thing they did before those two is they would get all this data and they would say, “Here are five categories. Where do you fit in these categories?” And Stanton, Lazarsfeld, along with Herta Herzog, were able to figure out that you could ask people what categories they would associate themselves with, and then create broader and broader demographic categories. And from there, they were able to triangulate that with people who would answer in similar ways across geographic spaces of separation. So in other words, that person who believes the same thing in New Jersey as they believe in Nebraska, or something like that. What they realize is that it’s not geographically defined in terms of how one understands oneself. There are actually these modalities of discursivity that people associate with culturally, which parallels critical theory in this understanding at that moment, as they’re both developing, that actually define embodiment. So, in other words, Lazarsfeld and Stanton are able to successfully triangulate responses across geographic spaces for the first time in ways that are reproducible by different researchers. If different researchers all conduct the same kind of work, they can get the same answers.

So this was the gold. This is the foundation of modern sociology in some ways, too. And they’re super excited about this. It kind of blows their mind a little bit that they discovered it themselves. So that’s where Adorno comes in, like, “Well, how do we get this back to keeping this along the social ameliorative questions?” That’s where Adorno comes in. But their work is so profoundly impactful within its first year that they basically abandon the educational question, first of all, and they go all in. Rockefeller loves it, the government loves it, the advertisers love it, the network’s love it, and the commercial networks love it. Immediately, it becomes research and development for all media and public policy. By the early 1940s, it becomes propaganda research for the OWI. It literally changes how all institutions work, like almost immediately. Adorno is brought in, he says, “You’re quantifying audiences. You’re separating the questions from the context in which they’re asked. You’re turning agents into subjects. It’s a form of subjection. And this work cannot stand in support of media reform.” So they’re like, “What are you talking about? This is like the biggest discovery of social sciences of this decade. Everyone loves it.” And he puts his foot down on this so they fire him.

So within like a year or year and a half, Adorno was famously kicked off of this project. But what I love about what he’s kicked off about, is that it’s a fundamental disagreement over what embodiment means. It’s an ethical distinction that they’re making between each other about what counts in terms of recognition. Can you be quantified into a category? Or do you need to be described thoroughly. But then, of course, the twist of that is that Adorno abandons media reform altogether. And the quantitative guys stick with it. So the irony is that the equal access to education question mobilizes the creation of an entire academic discipline in the 1930s, and then the critical theorist abandons that completely and just continues to write brilliant, critical work, in my opinion. But you have this paradox that happens at the end of that moment that I try to account for in the article, by which part of what we have is the Left’s abdication of its role within the development of an alternative model of media.

So I just can’t believe that part of the history. And I have a lot of respect for Lazarsfeld and the mass communications guys in their ability to get right to the point in research. I kind of wish that we had that additional moment in which critical theory became the early foundational form of communications research. We almost had critical theory as the founding qualitative approach of communications and media studies. But we didn’t. And who did they bring in? I mentioned him earlier: Charles Siepmann. Political economy, in its empirical approach to analysis of audiences, but from a production standpoint and an ethical standpoint, actually better matches what they’re doing with that project. So with the invention of political economy in media studies, there was actually a reaction against critical theory in the late 1930s. And in my opinion, it has done a really good job for the field of political economy. It’s not like we should have had critical theory, but we almost had critical theory. We ended up with an empirical form of critical analysis that was not quite as far left, I think, as Adorno was on these questions.

Scott Ferguson: This is just such a fascinating story that feels really revelatory. And I’m particularly preoccupied with this split. You’ve suggested that your sympathies go both ways. But there’s also kind of a tragedy at the heart of it, that the kind of really nuanced, sophisticated approach of Adorno and critical theory is cleaved from the institution building, commitment to public reform and public world building, which as you suggest, Adorno would be right on this, was quickly sold out and became an arm of propaganda in all these complicated ways.

Josh Shepperd: Like immediately.

Scott Ferguson: I guess our conceptual and political commitment in our project and on our podcast and beyond is to bring these two impulses together. That we can be really smart and nuanced critics of the system and its history as it has developed, at the same time as we can keep our commitment to imagining new positive futures that basically don’t capitulate the future to mere critique, essentially. I don’t know if you share that way of framing it or if you have your own way of framing it. Do you care to comment on that?

Josh Shepperd: One thing I like about Lazarsfeld, personally, is when you go through his letters, he was, besides being encyclopedic and really just intellectually cutting and able to fulfill the mandate that he was given by the government and Rockefeller Foundation, he really was trying to play with empirical methodology and Adorno’s ideas. Like there’s all these letters about how he was trying to implement what Adorno was telling him in spite of them arguing. And one point that I make in that piece is that, I would give it like a 5% influence on what becomes the two step flow model in understanding the context of audiences, not just response or demographic quantification of audiences. And of course, Lazarsfeld then goes on and works with Elihu Katz, who recently passed and was just a giant of our field, and Merton and others. And they do kind of begin to streamline the capacity for this method to understand context. And what this becomes is, and Dallas Smythe writes about this very famously, the prediction model within research and development. Almost the entire commercial industry is predicated on predicting behaviors that haven’t happened yet. And they do that now through micro analytics. Before that, it was niche broadcasts, and before that, it was lowest common denominator, least objectionable programming, and mass produced programming like westerns.

But they’ve always been trying to create content based upon this formulation of data that comes from Lazarsfeld to be psychic about what people’s behavior will be. It’s a behaviorist approach. And I think that’s super fascinating. To think that a little piece of it actually might come from Adorno, in that they started to pay attention to context as much as mere affiliation along the way, that’s how Lazarsfeld interpreted it. There was really no stopping that tsunami once it began because it was so effective for every media and education institution along the way. It was to be able to understand the audiences, minimize chance, and minimize gambling for the amount of money that they put into a program development. So it maximizes profit, it reaches audiences as something that they already would like and know in advance. So I’m just super fascinated by that part of this too. The ability for mass communication to do research that predicts audiences comes at least a little bit from Adorno and his forcing their hand to pay attention to context as a determining factor in decision making.

Scott Ferguson: He’s rolling in his grave.

Maxximilian Seijo: One aspect of this that fascinates me, and it relates to someone who you brought up earlier in this discussion, Victor Pickard, who we’ve interviewed on this podcast, so for listeners, you can check back to get some of this genealogy, is the question–especially as we hover within this Adorno-Lazarsfeld complicated split, but also, as you’re suggesting, influence–is the question of the public funding of media. And I think, in a more general sense, Pickard is offering a new model through his history for thinking about the way we publicly fund media structures and media infrastructures in the US and beyond. To me, what I find interesting about a part of this split, and you framed it in a lot of ways as a methodological point. And I think that’s really crucial. But I guess, because we’re Money on the Left, I wanted to just raise the question of the money that sits at the heart of these structures and how maybe Adorno would think about the determinisms of money as what we would call capital in his critical and theoretical structure versus a more public funding, we could bring up MMT here, model for thinking about building futures and institutions. To me, there seems to be a tension that perhaps rhymes with this methodological split that you’re describing on that point as well, whether it’s explicitly articulated or not. I figured I’d raise it to see if you had any thoughts about it.

Josh Shepperd: Yeah, so I like Victor’s new book. I’m not a journalism historian. I’m not a journalist. So I want to be clear that I can’t give a sufficient answer for how it shall be funded. However, at the same time, I think that this notion, and Victor calls from these similar histories in his work, that there are alternative models that we not only have imagined, but have been implemented over time, and that it does not have to be a logic of accumulation when other logics are already present and successful within modes of production and divisions labor. And that not trying them is a decision to not try them. This is actually resembling an issue of political will. It’s an ideological problem, not an institutional problem, because we have the means and we have the history. We know how it works and what doesn’t work. So when he talks about alternative modes of funding that are government-based or public sector-based and these types of things, once you end up with something like the Sam Zell model of maximizing profit and limiting journalist freedom to do investigative reporting or something, it incentivizes different things like clickbait forms of journalism, glibber forms of reproduction of the AP story over and over again. There’s all kinds of problems with the relationship between how a funding model creates or engenders consequent content.

So in that way, I completely agree with him that if we have a funding model that doesn’t interject itself into media ethics within a journalism process, then this would probably be one model that’s worth pursuing to see how it might be better or not. At the same time, I’ve worked with a lot of people in the public sector since 2015. And I want to be gentle about this, but we can’t over idealize who the people actually are in that sector. There’s a lot of parallels between the private sector and public sector in the same ways that the academy talks about itself in a meritocratic way, but in fact, is a pretty toxic and exploitative environment for a lot of people. So we have to also be careful that the concept doesn’t automatically translate into the best practices. But I say this without any knowledge of how journalism works. I’m not an employee of journalism or some kind of expert. So I want to be very careful here to not overstep in that way. But in terms of what Victor’s talking about, with having these alternatives at hand, and then choosing to not follow them, I think that’s a great contribution.

Scott Ferguson: Yeah, I think there’s another part of this that Maxx is trying to get at that I don’t know if you have any comments on. There’s a commitment that is coming through Marxism and is being arguably amplified in Adorno’s work and related contributions to critical theory that numbers, that quantified abstraction, is seemingly intrinsically alienating, and violent to particularity and to material reality in its history unfolding over time. It seems like the methodological split between the communication quantifiers versus Adorno’s qualitative approach–it’s so funny, I never use this language, because I’m fully qualitative. I never say the expression “qualitative research.” But anyway, I am a qualitative researcher, who, in our theoretical commitments, while we learn so much from Adorno and critical theory, we feel strongly that the reduction of quantification or the reduction of counting or accounting to a kind of flat alienation is part of the blind spot of critical theory. And again, not to say that we endorse certain kinds of narrow and positivistic social scientific methods of quantification either. But when we’re trying to politicize money as a public good, part of that is politicizing public accounting and accountability. So I think that’s another part of this kind of methodological question that Maxx is trying to get at that maybe you can get into.

Josh Shepperd: So where are the commitments in the applications? I think one issue with public sphere theory is that it assumes a certain kind of instrumentalized behavior that didn’t take into account the actual life worlds, as Habermas says, that were at hand. So you get these correctives from Nancy Fraser and Michael Warner, and we also could reframe the public not as a mode of deliberation but as a site of violence or humiliation. This is also true for different types of publics historically. But at the same time, if we go too far away from publics, I usually think of that as concessionary politics, by which we just leave it for the Right to make all the decisions. So it’s almost like a way of saying, “Well, I don’t believe in publics, and I’m going to let the Right make all the decisions for everyone else.” The way I kind of track it with the work, and you could probably extrapolate this from what I’ve been saying, is, “Okay, we don’t need a capital P public. But we do need public services.” So instead of a capital P public, it’s a capital PS or something.

So like we should be all in on underwriting journalism, public media, public parks, public education, and public health. These are crucial instrumentalizing forces within how people understand the relations to others. And they achieve certain kinds of, honestly, just moral visions for how interaction can go, that call from everything from liberation theology to Marxism. I mean, there’s even religious dimensions to these kinds of responsibilities that we imagine. I say that as someone who’s very secular, but I’ve been around people who have quite eloquently articulated even better models of brotherhood, sisterhood, or personhood, and all these kinds of relationships when I was at Catholic University in DC. And I’m not even Catholic. But I really enjoyed listening to liberation theologists talk about what a better society would look like. Not just like, we should have it, but here’s what it takes. This kind of stuff. So yeah, I think that these are great questions, and that if we can get away from a concept of a public that frames people within the model as opposed to examining the bottom up relations of people and what they need, and then building systems around those needs, I think that that’s one good way to approach a concept of publics.

William Saas: I’m trying to think of the best way to articulate this question. I wanted to kind of return to your work with the Radio Preservation Task Force. We’re talking now on a podcast that’s being distributed through a private hosting service and people are downloading it through private infrastructures of the internet. And we’re hoping to, I think, serve a broader public educational purpose, but ultimately, we are funding this through various forms of crowdfunding and our own jobs. It’s part of my job now and I think it’s part of Scott’s, but it hasn’t always been. So thinking about podcasting as a public, a broad platform, and trying to imagine where it fits, podcasting as a medium, form, or technology, how do you understand it fitting or not within the ambit of the Radio Preservation Task Force? And also along those lines, if you are aware of any promising trajectories for public funding for things like podcasting, because it seems to me that there’s so many Left projects in podcasting, but there is a correspondingly vanishingly small, maybe non-existent exploration of how to do this other than through things like Patreon, crowdfunding, and the familiar technologies. I don’t know how to put it other than crowdfunding platforms like Patreon. So what’s the place of podcasting in the history of radio preservation and are you concerned with that? I actually read with some students last week some work from your mentor, Michele Hilmes, in the Savings New Sounds anthology about podcast preservation. But yeah, podcasting in the history of the medium, and is there any concern in the task force for that? And then, if you have any ideas or are aware of any proposals for a more public form for podcasting?

Josh Shepperd: Yeah, so podcasting in the task force. I do see podcasting as a kind of natural progression out of radio. It does have its own preservation head at the Library of Congress already just for podcasting. And as you mentioned, there’s been some work around the task force that actually came out of the task force for podcasting preservation out of University of Wisconsin, which are by Jeremy Morris and Eric Hoyt  and that came out of our first conference, which was in 2016. I feel like the thing about podcasting is that it is not appointment listening. I think that that’s really crucial these days. You can just listen whenever. You don’t have to tune in at a certain time. You can create a podcast for the smallest possible audience, which actually meets the public media mandates that goes back to the 1930s. This imagination that it doesn’t matter, you don’t need the biggest audience because you don’t have to get advertising dollars. The reason we want bigger and bigger audiences isn’t just to get bigger audiences. It’s because that’s what pays. That’s part of that model for commercial media.

Podcasting also provides an artistic space to do variations of radio flows. Radio flows are predicated on the model of interruptions. There’s a commercial in between and the entire content is built around those interruptions. Raymond Williams, who I mentioned earlier, has written about this with TV that comes out of radio. So it’s really positive in that way. And the relationship between the task force and podcasting is very positive. A lot of our colleagues kind of work on both. I have a very good friend Andrew Bottomley at SUNY Oneonta who wrote a book about podcasting that’s fabulous. The task force is mentioned in the book I just mentioned by Morris and Hoyt. And what we’re all trying to do is say, and this isn’t exactly something I work on directly, but my colleagues are working on it, “Well, what about stuff that’s happening now that hits the ephemera of the ether?” So we’re worried about where radio history went, we’re worried about what materials are available, are degrading or decaying, and what we’ll lose of historical memory. But what about stuff that’s happening now? Can we preserve it now so it doesn’t happen to that, to the podcasts. So I really love that project. It’s a NEH funded project called PodcastRE. I wrote a letter for that, for the grant when it went up.

And what they’re doing is two things. They’re creating the metadata that explains what’s on the content, which is something we don’t have for radio. And people don’t even understand how crucial that is for searchability and for funding for later. And second, they are cataloging it when they can, just the materials. And these guys are brilliant at Wisconsin, because they’re also doing preservation of journals with the Media History Digital Library there too. So they have all these different preservation of media history initiatives happening simultaneously. It’s a great service to the field. But fundamentally, podcasting is the contemporary, non-appointment remediation of radio structures. So it still carries a radio structure of interview, performance, breaks, music, and segues. It is still aesthetically radio in most ways. But it is something new at the same time. And there’s a certain amount of creativity to it that I don’t think we’ve seen since like Musique Concrète out of France with Pierre Schaeffer and Pierre Henry. You get these artists and Stockhausen who played with radio. But podcasting does it almost more pragmatically, and innovates at the same time, so there’s these aesthetic shifts and engagements while it’s still resembling something that is more accessible and fills time with listening. So yeah, I love the work that my colleagues are doing. I’m more of an early media historian, obviously, an early media preservationist, but yeah, there’s absolutely correlation.

Maxximilian Seijo: One thing I wanted to make sure we covered before we closed was your article co-authored with Shawn VanCour, “Radio Preservation and the Orphan Agenda,” where you historicize and theorize your own work with the Radio Preservation Task Force that you’ve brought up quite a bit in this interview. You make this point, and I would like you to explain this for our audience, why, essentially, on your reading, sound preservation is politically meaningful, in a sense that goes beyond mere antiquarian interest. So this interest just in the antiquity of these media forms. And could you explain what you mean by that?

Josh Shepperd: Yeah, thank you for that question. This actually gets to the heart of what it means to put humanists who are trained in philosophy, because Shawn had a philosophy background too, on a logistical project. So one thing that we think about all the time is we really should attend to the memory studies components of the task force. Our goal is to expand and diversify the historical record through sound that takes a certain number of political economic steps to get there, that humanists don’t typically understand, but we had to learn along the way. And then, what is the outcome? Okay, it’s new syllabi, a new curriculum. But then something else kind of happens there. And I pull from people like Stuart Hall on these things, or even like Alain Badiou I like a lot on these kinds of questions about how fidelity to truth procedures unfold. And by that, I mean that when new information about historical events is introduced into some kind of circulation of discursive reception, there’s a selectivity process that takes place by which a discourse will say why I like that part of the information and not that part, or I’ve been waiting for this part to consolidate this conceptual belief in why I’m affiliated with this discursivity.

And in the process, if the right kind of information is introduced in the right discursivity at the right moment, there’s a retroactive actuation of the concept of continuity about how we got to a certain place. Which is to say, when you introduce new historical events into the historical record, sometimes, and you can’t predict with who or when, it changes how memory understands what already happened, which is part of the mobilization of the Left in my opinion. Part of the mobilization of the Left isn’t just changing how things work or decrying it after it already happened, which is what happens too often, in my opinion. We’re always a step behind. It’s changing the concept of where we came from and how we got to where we are so that it meets the criteria of the ethos of the movement. So one thing that history does, when it’s done really well, and I’ll point to something that I think is excellent like the 1619 project or something, when you redefine the contours of a continuity, it is actually fodder for mobilization and for grassroots organization. So that’s why we’re really deeply invested in civil rights histories.

I’m working right now with a radio program called This Way Out. It is the longest running LGBTQ community organizing program ever. It’s been around for 30 years. They have 1800 hours of recordings, and we’re going to get that canonized at the Library of Congress. That’s one of our projects for this year with the task force, getting This Way Out into the recorded sound reading room for research as something that’s accessible there. So yeah, these kinds of histories are important because the omissions that we have in the record are also erasers of possibilities. So it is our responsibility, I think, as humanists to saturate the circulatory apparatuses of media with as much new information that overturns biases that we can. And that doesn’t just mean saying something is a bias or resisting something. It means giving voice to the different experiences that have not previously been recognized within those circulating apparatuses. So that’s kind of what we’re getting at in that article there. You might be one of the few people that pick up on that element in the article. But there is a humanistic investment in the project for us that also has to do with our political commitments.

William Saas: That’s an excellent place to leave it, I think. Josh Shepperd, thank you so much for joining us on Money on the Left.

Josh Shepperd: Thank you for having me.

* Thanks to the Money on the Left production teamWilliam Saas (audio editor), Richard Farrell (transcription), & Meghan Saas (graphic art)

Ballerinas on the Dole with Colleen Hooper

In this episode, we talk with Colleen Hooper (@hoopercolleen), assistant professor of dance at Point Park University. Colleen researches the history of public funding for arts programs in the United States from the New Deal through the post War era. Her 2017 article in the Dance Research Journal, titled “Ballerinas on the Dole: Dance and the Comprehensive Employment Training Act (CETA), 1974-1982,” is the subject of most of our conversation.

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Conversation originally published on October 8th, 2018.


The following was transcribed by Mike Lewis and has been lightly edited for clarity.

Colleen Hooper (@hoopercolleen): Yes, like, there is money to employ artists and to do all these things. But there’s also this pull towards just completely zeroing out this type of thinking. So, I guess I’m just, you know, mentioning that to say I think in this moment of political turmoil it’s important for those of us who care about arts funding to think about how to frame that when so much of our social programming is being threatened.

Billy Saas: You are listening to Money On The Left, the official podcast of the Modern Money Network Humanities Division, or MMN HD. In this episode, we talk with Colleen Hooper, Assistant Professor of Dance at Point Park University. In addition to her choreography and performance work, Colleen researches the history of public funding for arts programs in the United States across both the New Deal and Post-World War II eras. Her 2017 article in the Dance research journal titled “Ballerinas on the Dole: Dance and the Comprehensive Employment Training Act (CETA), 1974-1982,” is a particularly riveting read, and the subject of most of our conversation today. In “Ballerinas on the Dole”, Colleen tracks the development and demise of CETA as a vital funding resource for US dance companies, several of which make a compelling case for understanding dance as a public service. Colleen clarifies in her article, and throughout our conversation, just how vital it is to consider systems and democratic oversight alongside proposals for public employment programs. But slightly differently, the CETA case is emblematic of a somewhat deeper truth. Democratic experimentation is messy, and vital work. Thank you to Colleen for joining us, and thank you to Alex Williams for producing this episode, and to Hillbilly Motobike. Thanks for the theme tune. Colleen Hooper, thank you so much for joining us on Money on the Left.

Colleen Hooper (@hoopercolleen): Thank you so much for having me, I’m excited to be here.

Billy Saas: Well, let’s just start off with asking you to give us a sketch of your background experience as a scholar, performer and teacher.

Colleen Hooper (@hoopercolleen): Sure. So I studied dance and English in undergraduate, and I went to George Washington University and really became interested in dance and politics around that time being in Washington, DC. Then I lived in New York for seven years, and I pursued choreography, performance, teaching, arts administration: I really went at Dance from a lot of different perspectives. And I became interested in dance and community settings at that time as well, because I had the opportunity to perform in site-specific performances and to see a lot of really innovative work that was happening in the city at that time. And then I went to Philadelphia in 2008, and I got my MFA and PhD in Dance at Temple University. And that was another whole experience in terms of thinking about how my aesthetic ideas and my performances and my choreography could intersect with my scholarship. And government. Public funding has always been a big interest of mine. And so studying CETA, the CETA Dance program, was a way to bring together questions that I had about the way funding is structured in this country for the arts, and also to zoom in on this place in time that was really hard for me to imagine that it had existed. So that’s kind of how I got to this point, and now I teach at Point Park University in Pittsburgh. And I teach a combination of Dance History classes, Dance improvisation, and choreography.

Scott Ferguson: So if we could go back a little bit, you talked about how in your experience you found yourself interested not just in dance performance and dance form and research but also public administration and policy and public funding. Could you talk a little bit more about what exactly brought you to that topic? Because it seems to me, and correct me if I’m wrong, that that isn’t the go to topic for, I don’t know, Dance scholarship. That we often think of the arts as belonging to the private sphere.

Colleen Hooper (@hoopercolleen): Right. Well, I think being in Washington DC as a college student influenced me a lot, because I was able to see and understand aspects of government from being in that situation. And it made me curious about how that tied to the broader dance field. And then in New York, I worked at a nonprofit organization called Brooklyn Arts Exchange,  and I did press in marketing for them. And it helped me understand how a mix of both public and private funding came together to support an organization with a specific mission. And I think that I’ve just always been curious about how things work. Like, how does one become a choreographer and maintain a company? Or how does one create an organization with a specific mission focused on the arts? And how does one sustain that? And so I would always be asking those types of questions. And I’d always be curious about tracing the money, basically. And thinking about, you know, where does the money come from? And how does this sustain itself? And what role, if any, does the government have in it? And how much of it is a private endeavor? So I guess, yeah, I’ve always been fascinated by what undergirds these artistic and cultural projects and question the idea of how does that relate to ideas of the public and public service, and what our government can provide and what our government does provide. Or what our government chooses not to be involved in.

Maxx Seijo: So kind of, to those ends, could you trace for our listeners, a kind of brief history of public art provisioning in the United States and highlight where the government has been involved and really taking responsibility for the field of artistic endeavor?

Colleen Hooper (@hoopercolleen): Sure. So during the Great Depression, in 1933, was the first time that the government created something that would aid US citizens. So the unemployment rate at that time was about 25%. And the government created the Federal Emergency Relief Administration during that year. And it was the first nationwide welfare and government work program. It was part of FDR’s New Deal legislation, and Congress passed a broader welfare program in 1935. And this 1935 program included aid for theater workers, artists, musicians and writers. And the whole aim of it was to hire unemployed professionals in their given fields, but artists were specifically categorized as workers for the first time in 1935. And I think something that’s important to mention is that it was this idea of including the arts as part of a democratic culture, and that the arts could be integral to democracy. And that artists were cultural workers who actually contributed to society at large. Despite many accomplishments, the Federal Theater Project and the Federal Dance Theater were shut down due to controversies about the productions, its professional quality, and also some of the political affiliations of its performers, because a lot of them were involved in leftist causes. And that became very controversial kind of near the end of the WPA programs. And basically, Martin dies and J. Parnell Thomas began hearings in August of 1938, for the House Un-American Activities Committee to determine if members of the Federal Theater Project engaged in communist activities. And while the Director of the Federal Theater Project thoroughly defended her program, it was shut down in 1939. So that was the beginning of the funding for the arts from the government. And then a lot of it does continue kind of in this vein connected to communism. There were a lot of US diplomacy initiatives surrounding communism in the late 1940s and early 1950s, which were led by President Dwight Eisenhower, and he established the President’s Emergency Fund for International Affairs in 1954. The purpose of this fund was to increase international appreciation of US culture by exporting it abroad. So in terms of dance, which is my field, the Soviet Union was really known for its dance culture at this time. The Moiseyev of Dance Company had a popular tour of the US in 1958, and the Bolshoi Ballet toward the US in 1959, followed by the Kirov Ballet in 1961. And so this kind of created a sense that the US needed to put some of its own culture forward in order to show what we had to offer. So after a lot of debate about what dance companies should represent the US, the American Ballet Theatre, toured the Soviet Union in 1960. And the New York City Ballet followed in 1962. So this idea that the artist from the United States could show that they were offering a counterpoint to the Soviet Union culture. And it was a way for the United States to show that we had more to offer than consumerism and capitalism that we also had an important culture. And then the next thing that happened with arts funding was the founding of the National Endowment for the Arts in 1965. And this organization sought to support artists financially, so they would be able to pursue aesthetic goals outside of the capitalist marketplace. And for dance, this was a really prolific period, because from 1965 to 1975, the number of dance companies in the United States more than quadrupled. So this was kind of considered a dance boom during this time period. So that brings us up to the 70s. And the National Endowment for the Arts was still being funded at very high levels during that time.

Maxx Seijo: So I’d like to kind of latch on to something you talked about, in the ways in which public funding kind of during the Roosevelt era was predominantly democratic enterprise. And you seem to imply perhaps, that this had to do with kind of the American anti-fascist project of the late 30s and 40s, and I was wondering if you could expand on that, and perhaps illuminate the ways in which we did fund art in the name of American anti-fascism?

Colleen Hooper (@hoopercolleen): Hmm, I think that’s a great question. One thing that’s interesting about the 1930s, and the Works Progress Administration, funding of the arts, is that it revealed some really inherent tensions, which I think continue to be present in government arts funding. And that is the tension between artistic freedom of expression, and being part of any type of pro-government project. And those things are just continually at odds within any government funded artistic project. And we found that in the 1930s, because they put forth this idea that there was a populist intention for the WPA arts programs, and that it wasn’t about artists being solitary geniuses, but about a general movement. And this is a historian, Francis O’Connor. He says, it’s a “sound general movement, which maintains art as a vital functioning part of any cultural scheme,” and I think that that’s really interesting, because it’s a great possibility for art, but then at the same time, it’s very limiting. So basically, if you’re not part of this sound general movement that is supporting a specific idea of democracy and is anti-fascist by nature, then we don’t really have space for you within this movement. But at the same time, the government was very cautious to get into overtly censoring the content of these arts projects. So it’s a very challenging equation, because the government did have certain expectations about what the content of the artwork would be, and how it would support certain democratic principles, but at the same time, they knew that by being overt about those intentions, that that would basically stifle any sense have creativity from the people they were employing. So it just creates a very interesting tension. And I think one of the ways I summed it up best is with the reception of government funds comes the assumption of public benefit. So there’s this idea that the public should benefit when any person is receiving government funding for the arts. But then how you decide whether or not the public is benefiting, I think, becomes a really interesting question.

Scott Ferguson: So can you clarify, perhaps in contrast to a private patronage system that we associate with the arts before this period that you’re outlining, and happening at the same time, how does private patronage for the arts and in private commercial art, perhaps, articulate these tensions in other ways?

Colleen Hooper (@hoopercolleen): I would say that private patronage of the arts allows for private citizens to pursue aesthetic directions that they find to be valuable in some way.

Scott Ferguson: As long as somebody is paying for it, though.

Colleen Hooper (@hoopercolleen): As long as somebody is paying for it, right? Or as long as there’s some money coming in from somewhere to provide, you know, the basic necessities. So it isn’t tied to a larger project of government, necessarily, but it’s tied to a foundation that has certain goals or a philanthropist who has a certain set of interests. It’s not tied to a government project, which I think is the major difference. And yeah, I mean, I think the assumption of public benefit that you see connected to government funded arts projects, is one of the most interesting questions because it’s something that’s challenging to define, like, who decides if it’s benefiting the public and what public is it benefiting?

Billy Saas: So we’ve talked a bit about the Works Progress program. Another government program that develops later in your timeline is the Comprehensive Employment Training Act, or CETA. And you’ve written and researched a lot about this, could you tell us a little bit about what CETA is, where it came from, and how it’s organized?

Colleen Hooper (@hoopercolleen): Sure. So CETA was an Employment Training Act that was passed in 1973. And it was during President Richard Nixon’s administration. And during this time, the unemployment rate had increased from 5% to 9%. From 1974 to 1975, both Democrats and Republicans agreed that there had to be some type of federal action to ease unemployment because that jump was so great. And Gerald Ford significantly expanded CETA and then Jimmy Carter actually encouraged states to employ artists and other cultural workers through CETA from 1977 to 1980. So it was really, by the time it got going, it was like a six year period that provided a tremendous amount of employment in the United States. The cultural workers that I focus on, were approximately 22,000 of the workers. And it’s not necessarily the largest portion, it’s like 3% of the large number of people who were actually employed through CETA, but it made a really large difference in terms of those fields, in terms of the cultural fields.

Scott Ferguson: So at the same time as CETA is being created, funded, implemented, debated, you have a larger conversation going on. And a larger fight going on about the politics of full employment that get concentrated around the Humphrey-Hawkins bill in the 1970s. And I was curious if you could talk about the relationship between CETA and Humphrey-Hawkins, and Humphrey-Hawkins, of course, didn’t stabilize it. It was, you know, constantly being re-articulated and frankly gutted again and again. But what were some of the bigger goals that were being pushed for in terms of public employment, versus CETA, which, to me, reads as a tremendous compromise? 

Colleen Hooper (@hoopercolleen): Mm hmm. Well, I can’t say too much like I would need to look a little more in depth in terms of the exact relationship between CETA and Humphrey-Hawkins. So that’s something I would love to come back to more in depth. But I can tell you a lot about the way CETA was constructed, and how it was structured and how that bared on the way that it was actually enacted, and how it came to its demise. So Nixon designed CETA as a decentralized program with limited federal oversight. And it was something that actually replaced over a dozen programs that were previously part of the Manpower Development and Training Act, and also the Office of Economic Opportunity. So Nixon cut back on all of these Labor Department programs, and the federal government did not oversee the CETA mandates. Initially, CETA was supposed to have extensive federal oversight, but basically that federal budget allocation was eliminated when it became enacted. It became a very open program: local officials were really able to do what they wanted with the CETA funding that they received. And it had very lenient standards for employment. Local officials liked this because they were able to do what they wanted with the money. But there were some real structural issues in terms of accountability and being able to speak to how the program was becoming effective because there wasn’t any oversight. So the Department of Labor really only had basic information about the CETA projects after their completion. Like they knew what category they went into, but they weren’t able to really evaluate what they were doing. The federal government offered technical assistance, but no meaningful supervision. So with CETA, we had a combination of decentralization: so the money went out to prime sponsors all over the country, over 450 of them, there was a lack of accountability. And because of the leniency of the program, there was a lot of political favoritism. And it led to CETA spending controversies. So the way in which it was constructed, I would say, was basically constructed to fail. And there’s just a quotation I’d like to share, which is historian Bruce Schulman, explained that Nixon, “did not attack liberal programs or agencies and the political networks that undergirded them. Rather, he subtly, cunningly undermined them. Nixon wanted to destroy the liberal establishment by stripping it of his bases of support, and its sources of funds.” So I just think that’s an important way to look at it, because I think that’s exactly what he did with CETA. He set up the structure in such a way that it couldn’t become a sustainable, successful program for full employment.

Billy Saas: Seems like a really good opportunity to kind of, you know, learn from how a public program rolls out, but then also a good reminder to be, you know, mindful of who’s proposing it, and to what ends, was there any indication at the time? I mean, I know that the historian, looking back, says this is what was happening, but was there resistance at the time and people looking at what Nixon was doing and saying “look, we see what you’re doing here?”

Colleen Hooper (@hoopercolleen): Yes, there definitely was. In terms of the entrance standards for CETA, Democrats wanted strict standards to make sure that people who were poor benefited the most. But Republicans fought for more lenient standards. And in the end, that was part of the compromise is that the standards were quite lenient, and the money could be made available to people who had in some cases only been unemployed for a matter of weeks. So that was part of the compromise. But you definitely saw the Democrats wanting to be stricter in terms of who received the funding and Republicans wanting it to be a more open process where each of the prime sponsors would have the maximum amount of flexibility in terms of how they allocated the money.

Maxx Seijo: Given this sort of compromise between Democrats and the Republicans, it’s worth asking explicitly, I think what perhaps is implied here is, so what was the role in CETA for arts, if there was any?

Colleen Hooper (@hoopercolleen): There was not any intended role for the arts in CETA. That was not part of the program. So that’s a big difference between the CETA program and the 1930s WPA arts programs, wherein the arts were part of it, and it was, you know, from the beginning, there was an infrastructure to support the 1930s programs. So art was not intended to be part of CETA at all. And basically, the way that it happened is that local administrators were able to categorize artists and performers among workers, and to say that they should also be receiving benefits because they were also people who are contributing to our country. And they did this by framing the arts as public service. The person who created the first proposal for the arts in CETA was John Kreidler, and he did this in San Francisco. And he had a really unusual background because he had worked at the Office of Management and Budget in the United States Capitol. So he had knowledge about CETA prior to it becoming law from his time there. But he had also studied the WPA during graduate school. So he knew a lot about the arts programs during the 1930s. So he took his technical knowledge, his ability to work with census figures and understand the Office of Management and Budgets reports, and he combined it with his knowledge of the WPA. And he was the one that really brought this idea of artists in CETA, and had it pass in San Francisco. That was the first program. And then it kind of spread all across the country. From his first proposal in 1974 through 1980, it went from a proposal for 24 artists, to employing 10s of 1000s of artists.

Scott Ferguson: Can you give us an idea about the range of different arts that were practiced under CETA, and then maybe we can use this as a transition to focusing on dance, which is your specific area of expertise and an interest?

Colleen Hooper (@hoopercolleen): Sure, well, the range of artists that were supported during CETA is quite broad, and honestly, it’s difficult to even grasp. There are some reports that talk about the different types of arts that took place in all the different states. But there is no one archive that really shows the full breadth of the CETA program because of its decentralized structure. That being said, My research has focused primarily on the New York City CETA arts project, because there is an archive for that, and I was able to survey the entire archive, and it was also the largest arts program in the country. I’ve also written about CETA arts programs in Philadelphia, and I’ve interviewed people from CETA arts programs across the country. But the way in which these programs were not organized makes it impossible to actually understand the breadth of what took place. That being said, there were visual artists, theater artists, dance artists, puppetry, oral history. And among the generation who was employed in the CETA arts projects, it’s literally a continually unfolding story about different institutions that exist to this day that were given a start or given some type of monetary or administrative support from CETA. So it’s something that it’s quite exciting, but it’s also something that’s quite overwhelming in the sense that it just branches out in all these different directions, and it’s actually impossible to know everything that took place during that time.

Maxx Seijo: So throughout your work, you focus on the history of Dance during these programs. And I was wondering if you could kind of give an overview for our listeners, what Dance looked like under CETA, and specifically, how Dance was shaped by CETA, and how the dance aesthetics were shaped by public funding?

Colleen Hooper (@hoopercolleen): Right? That’s a great question. Two of the most important trends at that time, in both the Dance field and also in the arts, in general, were culturally diverse arts programming, and also expanding regional arts centers. So it was a time that many arts organizations that are well established today were founded during the 60s and 70s. And it was creating a much broader sense of what art could be. And I think that’s also the case in terms of Dance. Like beginning in the 1960s, African Americans, Latinas, and women were gaining more mainstream attention for their cultural contributions. And so this was also part of the Black Arts Movement, which is mostly defined as the decade from 1964 to 1974. And, basically, this time period was a time for art really broadening and reaching into areas that had not been necessarily considered a place for art in the past. Prior to this time period, it was more about taking art that was created in major metropolitan centers, and exporting it in some ways to regional places. But with Dance, and with the visual arts, this was a time of kind of broad democratization of the arts. In terms of Dance, I mean, I would say, I could speak best on the New York City CETA arts program. And it was very much tied to what was going on and experimental dance during that time in New York City and people who are receiving funding. So they were people who were considered to be important in terms of their aesthetic contribution, but the dancers were also evaluated in terms of what type of public service contribution they could give. And people were assigned, depending on what their skills were like, they may be assigned to do a performance outdoors at Union Square, or they might be assigned to do a performance with children in a school, or they might be assigned to teach dance to children at a school, working with people who are handicapped. So there was really a broad range of what the dancers did. But the thing that the New York City dance program had in common is that these dancers were considered to have very aesthetically innovative approaches to Dance. And they also had the skills to perform Dance as public service in some capacity.

Maxx Seijo: So interesting, because that, you know, reminds me of what we were talking about earlier with the tension that you say is at the heart of public funding of arts programs. And it seems like in this case, the public funding actually kind of made dance aesthetics and arts generally kind of more capacious than perhaps it was before. And I’m wondering if you think that runs, in contrast to perhaps the quote that you mentioned from the historian before, who argued that public funding was perhaps binding of creativity?

Colleen Hooper (@hoopercolleen): Hmm. Yeah, I mean, I think that CETA definitely did help people reimagine what the arts could be. I also think that, as I argue in the article that we referenced, that the program tended to benefit the artists more so than the public, and that it’s really tricky to figure out what type of arts benefit the people who are receiving it without asking them. You know, like it was really set up in a way where it says: okay, well, this panel of experts has decided that these artists are meritorious in some way. So we’ve selected to support them. And now we’re going to have them go out and perform and give service to the public to places that don’t necessarily have access to the arts. Right away, we have an issue, because people do have artistic practices in their own communities. So it’s becoming this sense of cultural export that was not necessarily valuing the artistic expressions that were already taking place in communities. And I think that’s one of the aspects of CETA that failed in terms of public service. But I do agree with your statement that it did broaden the definition of what Dance could be. And as I stated in my article, Martha Bowers talked about how performing a dance in a men’s prison made her realize, oh, this type of dance, I don’t think this type of dance belongs in this setting. And there are reasons for it. And it made her really question what type of dance she was doing, and why she was doing it and for whom she was doing it. So I think that by placing artists in places that they would not have normally performed outside of the proscenium stage, CETA did really create a lot of growth for the artists themselves. And I guess I just keep coming back to this question of, it’s hard to say, what benefits the public because there is no one monolithic public. And we can’t necessarily ask the people who were on the other end of these programs, you know, that’s not necessarily an option at this point in history. So I guess I’ll say I do think that CETA expanded the notion of what Dance can be, and it also exposed some of the limitations of exporting a cultural form to different places in the assumption that it offers public benefit.

Scott Ferguson: There’s also the question of what counts as success and what counts as public benefit?

Colleen Hooper (@hoopercolleen): Right. 

Scott Ferguson: Because even failure, or contradiction or tension, or bringing the arts, whether they were comfortably in a kind of New York, hip experimental scene, and then brought into a public prison context. And the sort of problems and tensions that unfolded, one could make the argument, as I think you in a certain way do in your article, that there’s something at least minimally, socially and politically and aesthetically interesting about that, if not beneficial, from what it teaches us. 

Colleen Hooper (@hoopercolleen): Hmm, I definitely agree. And I think that there’s a lot to be learned from that process. But it always makes me want to go back to those initial questions we discussed at the beginning of the podcast, where we think about, where’s the money coming from? Who’s receiving the money? And what is the money supporting? What is the money valuing? And so I guess my question with it is, what types of art are receiving money and being valued as contributions to society? And what types of art are being seen as amateur or folk art or less important in some way? And that’s something that I keep returning to because I also talked about an article that Janice Ross wrote where she discussed how now there still is a good amount of dance in prisons, but it’s often the prisoners themselves who are participating in the process. It’s not about them, necessarily being audience members who are receiving cultural edification, but they’re actual participants within the process. And that’s the trend that’s been more prevalent currently in that type of situation. But I do think that there is value to what happened during CETA, and I just think it’s important to think about who is receiving the support from the government and who is viewed as needing edification.

Scott Ferguson: Absolutely.

Billy Saas: This is bringing to mind something at a talk that was given at the Money on the Left conference in April, a conversation between performance artists, Harriet Gillies and Rohan Grey, and I recall correctly, Harriet was suggesting that one of the advantages of like a public arts program would be to help educate and develop aesthetic sensibilities in audiences in terms of, you know, educating folks on how to receive and appreciate and engage with art. I wonder if there were any kind of conversations or ideas around that circling CETA?

Colleen Hooper (@hoopercolleen): Definitely, there definitely were. And it was this idea that the arts were usually reserved for certain class of people, and that now we’re bringing the arts to everyone. And there were some aspects of that that were really quite moving, like looking through the archives and seeing pictures drawn by children who enjoyed the dance performances that took place at their schools or reading letters from seniors who had the opportunity to take a pottery class and really enjoyed it. So there were these really interesting glimpses of the type of impact that this program made. And it also provided a seed for many organizations that continued after CETA ended. So you know, local arts organizations really got their start with that CETA of money, and then they were able to find support and other places after the program ended. So there are definitely a lot of things that happened during CETA that have continued to contribute a lot to communities all over the country. And this idea of art appreciation, aesthetic appreciation, it also, I think, sometimes can lean into bringing dominant Western ideals about aesthetics, to people who have other ideals and other aesthetics. And I think that that’s something that I want to always be careful about, and also be very inquisitive about because I think that from our 2018 point of view, we understand that bringing dominant Western artistic esthetics into communities that don’t currently value them is really problematic.

Scott Ferguson: Absolutely. And I was wondering if you could take a more detailed and deeper dive, as you do in your article into an example of this kind of imposition, right? And the limits of public arts funding that you had referenced earlier, maybe perhaps in relationship to prison performances?

Colleen Hooper (@hoopercolleen): Yeah, so in my article, I talked about a number of performers who performed at the Arthur Kill Correctional Institution on Staten Island. And basically, that certain performances seemed really well received and exciting, according to both the dancers, and according to the prison newsletter, which I was able to view in the archives, and they talked about how wonderful the Rachel Lampard and dancers company was and how much they related to it. And then they brought another dance group in a few months later, and the reaction was more mixed. And it was just such an interesting practice, because I was able to speak to a number of people who performed in the prison and get their perspectives, I was not able to speak to any of the audience members who watched, but I was able to piece together a sense of what could be known and what could be unknown, in terms of a public performance in that type of setting. And the thing that was fascinating to me is that, you know, 40 years after this performance took place, several of the dancers I spoke to brought it up as something that really impacted them because it was so different than what they were accustomed to in a Western theatrical stage presentation. They received so much feedback from the audience, and a tap dancing group, which was comprised of Jane Goldberg, and Charles “Cookie” Cook was really well received. Whereas, a dance that was performed by Mitchell Rose and Martha Bowers had a more mixed reception, we’ll say, and that was like a moment for Martha because they were performing something that was kind of dry, tongue in cheek humor relationship between a man and a woman. And, at one point, she does a somersault in the dance and her underwear was exposed. It was like, you know, dance underwear. So it was supposed to happen, it wasn’t a mistake, but the audience just reacted so much. And she just thought, what am I doing? Like, this is not a dance to be doing in a men’s prison. Like, they’re just seeing me as a woman who just exposed my underwear, and she just realized there was a huge disconnect between something that on a New York City stage in the theater district would be seen as cheeky and tongue in cheek, you know, humor, and being in a men’s prison, and that there was really a huge gap between those two spaces. And then that was something that she really considered and it influenced the direction in which she took her career. And she’s been involved in many different programs in Red Hook Brooklyn, over the past decades, first with Dance Theater, etc. And now she works with youth in the community in a lot of other ways. And it really was a career changing moment for her because I think she realized that a dance does not have any meaning that is not tied to this broader sense of place and audience.

Maxx Seijo: So fascinating. I can’t help but thinking as we’re discussing this, what’s so interesting about the way you’re posing questions, and we’re pondering the question of public funding and public value, is that the question is never, right, “Can we afford to employ artists?”, it’s just, it’s about what we want to get done with the employment that we can always already afford. And I think the way that you’re framing that and that we’re discussing is just so useful to actually get to the core of the question of public arts and how we should be appropriating money to public betterment.

Colleen Hooper (@hoopercolleen): Right, I think that’s a great point, because we’re also sitting here in a moment where the past two budget years, our current President Donald Trump, proposed to completely eliminate the National Endowment for the Arts and the National Endowment for the Humanities. And these budgets that he’s issued are, as we know, they’re mostly political documents. But it also gives us a sense of his vision for the arts in our current moment, and his administration’s vision. And I mean, thankfully, in the 2018 budget, bipartisan support led to both the NEA and the National Endowment for the Humanities receiving very modest increases in funding, and they did stay open for this past year. Those increases did not keep pace with inflation. But they, you know, were small increases nonetheless. But then again, the same thing happened for the 2019 budget. He also proposed that we completely eliminate these organizations. And right now, we’re just awaiting appropriations. So I don’t think that these organizations are necessarily going to be eliminated this year. But it is two years in a row that that has been what is proposed, and that different members of Congress have stepped forward and talked about things like the veterans who are being assisted through the National Endowment for the Arts and how every single state in the Union receives benefit from these programs because they do enact a lot on the local level. They’re not just secluded in metropolitan centers, as was once the way in terms of funding. So I guess I’m just saying all that to say that, that’s the historical moment we’re living in.

Billy Saas: So one of the really great things about your research is that it helps us get a sense for how it came to be in the first place that we had just the NEA and NEH as the primary outlets for public funding of arts and humanities work in scholarship, could you tell us how it came to be that this CETA program was shut down and why it was shut down?

Colleen Hooper (@hoopercolleen): So the CETA program was the last labor program that created public service employment jobs for US citizens. And I think that’s really important to note, because even though we’ve had other types of interventions like this was full time employment, full benefits provided by the government, to citizens, because there was an acknowledgement that the economy was not creating the jobs that were needed, due to various factors. And when CETA was coming to a close, there’s a New York representative named Ted Weiss, who proposed a new program called the Federal Artist Program bill. And he basically wanted to create a public-private partnership where different types of companies either for-profit or non-profit companies would employ an artist. And at first, the government would pay the majority of the artist’s salary. And then as the years went by, the government would pay less, and the for-profit or non-profit would pay more, until it got to the point that the artist was just employed by this outside organization. Now, this bill did not come to vote. So it never came to fruition. It didn’t see the floor. But these ideas about how the arts could be leveraged in different ways became part of the National Endowment for the Arts Challenge Grant program in the 1980s. And so this was a way of the National Endowment for the Arts putting some money forward for the arts, and then whatever organization received that money would have to find matching funds elsewhere. So it was this idea of leveraging government funding to get additional funding for different programs. So I mean, the reason why CETA ended is that it was really structurally impossible to evaluate CETA’s success or failure. And Carter, actually, President Carter increased CETA’s funding in 1977. But because the administrative structure was so decentralized, they could not effectively manage this expansion. They just had so much more money to employ so many more people, but without the actual structure to do that effectively. And so by the time the federal government re-centralized the jurisdiction over CETA in 1978, the program had largely lost political support. And yeah, I think that just goes back to the structure. Like I think the way that it was structured, it was really set up to fail. And it was federally funded, but everything about it was locally conceived. So it really led to a huge variation from programs that were exemplary in every sense of the word to programs that were totally corrupt, and not making use of the money received from the government to do anything worthwhile. So there was really such a large variation.

Billy Saas: Was it the fact that it was locally conceived that was the issue? Or was it more about not developing standards, metrics, oversight ahead of time, for those localized purposes, because it strikes me as entirely possible that local communities would have a pretty good idea of what they ought to be doing. But the problem of oversight not being addressed seems to kind of be a critical ingredient and setting it up to fail. 

Colleen Hooper (@hoopercolleen): I agree. I think the oversight really was the central issue, because I think you’re right in that local communities definitely know what they need. But it depended on whomever that administrator was, and what their intentions were. Were they really going to work with the community to create a project that was valuable? Or were they going to use the money to basically employ people that would have been employed anyway to employ friends or relatives? And because of the way everything was organized, it’s really hard to know the degree to which that type of corruption took place because of the lack of oversight, but once you know some of that got into the news, it really started to create a lot of problems for CETA and people did not politically want to be attached to it anymore, because there wasn’t a way to ensure that that type of thing wasn’t happening due to the lack of oversight.

Scott Ferguson: So your research deals with the history and memory of CETA. Or maybe it’s better to put it as the lack of memory or the amnesia about CETA and the arts. You know, and I can say that as somebody who’s interested in the possibilities and complications for public employment across sectors, including the arts, I think that most Americans have this idea that the last time the federal government hired anybody to paint or perform anything was during the New Deal, and maybe during World War II. So I’m wondering, you know, what is the memory of CETA? You cite a fairly conservative economist Tyler Cowen, in your article, what does Tyler Cowen have to say about this? And why is reviving the memory of CETA Arts and Dance important for you?

Colleen Hooper (@hoopercolleen): I think it’s important because I think it was misremembered. I think that through talking to people who participated in it, I just got a totally different sense than from anything that I’ve read, which had been written previously. So there was also a book written by Steven Dubin called Bureaucratizing the Muse, which was about the Chicago CETA arts program, and he was actually a participant observer in that program. And to him, it seemed like the artists were being used as boosters for the city, and really, their talents weren’t being fully used. And that’s the only monograph that had been written about CETA arts, and it had come out during the 80s. So that was one point of view. And another was just this idea of corruption, which was documented in popular news sources like the Reader’s Digest where Bennett, Ralph Kinney Bennett talked about, you know, just anyone could say they were an artist, and this was such a misuse of federal funds. And it was a joke on the truly disadvantaged, the poor. And he does bring up an important point, because I think there were problems in terms of using CETA funding to support people who were very highly educated and were also maybe had access to capital in other ways that weren’t able to be documented on a typical income employment sheet. So those types of conversations really dominated what was going on with CETA in terms of how it was remembered. And then Cowen was very dismissive. In his book, Good and Plenty, talking about the successes of US art funding, he was very dismissive of CETA. And he said, you know, by the time CETA came around, there were better methods for identifying talented artists than there were during the 1930s. And it really didn’t make a big difference in the field. And it was basically a, you know, a total waste of money. Because by then, people were able to identify talented artists and it wasn’t as dire of a situation economically as the Great Depression. So I just felt that CETA was really written off in a lot of regards, but then my lived experience of talking to dancers and artists, from different fields just told a totally different story. And, you know, I think that that’s why I wanted to bring this to the forefront because as you gestured towards having this sense of full employment, we’re having the possibility of the government employing artists and other types of workers. has been kind of dealt with in a dismissive way in some senses, and I just feel that that’s inaccurate. I feel that the impact of CETA goes well beyond the types of scholarship written by Cowen and others. Because it was really hard to track what CETA did. And that’s kind of part of what I’m trying to recover is figuring out how CETA impacts these people? And how can we tell the story so that we can start to recast the conversation and acknowledge that this important thing happened, and see where it fits into where we’re sitting today.

Billy Saas: We’ve talked a bit throughout our conversation today about you’re talking with people who actually experienced and worked in the CETA program or audiences for CETA programs. Could you talk a little bit more about your methods in this article that you circulated “Ballerinas on the Dole”? That’s the Ralph Kinney Bennett’s kind of dismissive remark about CETA programs. But could you talk a little bit more about your methods?

Colleen Hooper (@hoopercolleen): So in terms of my methods for researching CETA, I did in depth, semi-structured interviews with a number of people, and I cast my net quite broadly in the beginning, and then obviously, I realized I had to at some point finish a project. So I had to focus then a little bit more in terms of geography and specific programs. But in terms of the interviews, I really, you know, would just talk to anyone who was artistically involved in CETA during that time period. So that meant that I talked to a lot of dancers. But I also talked to people who ran the visual arts programs in Philadelphia, I talked to a lot of administrators, which I think is not necessarily normal in terms of a Dance Studies project. But it definitely fits with my interest, because I think it’s important to understand how this program was conceived and how it was implemented, and how it fit within both the localized scene and then also this national conversation about CETA and the CETA arts programs. So I did a lot of interviewing of different artists and administrators. And then I went through the full archives at the New York City Municipal Archives, and it was like a 54 box collection that nobody had gone through prior to my dissertation research. So it was unprocessed. For those of you who may have an appreciation, what that means is basically, the papers just were, as they were donated to the municipal archives. So there’s a lot of information. But it was really a conversation between these interviews and the archives, and then obviously, a lot of secondary literature to help me try to contextualize the importance of both of those things. But yeah, those were primarily my methods. So I would say it’s like the qualitative interviewing process of the semi-structured, in depth time speaking with people in person as much as possible, but sometimes it was done over the phone. And then really, you know, diving into the archives, and using that as a way of gaining more knowledge and building upon interviews, which were talking about something that happened 40 years ago. So it was kind of a balance between those two methods.

Maxx Seijo: So before we wrap up, we wanted to ask what projects you’re currently working on whether they be scholarly or aesthetic in nature?

Colleen Hooper (@hoopercolleen): Well, I’m currently working on a book project. And I’m looking at this project of CETA, as we’ve been discussing, and I’ve expanded to also examine the WPA Works Progress Administration Federal Dance Theater, during the 1930s. So my working title is Dance From Labor to Service from 1935 to 1982. And it’s comparing dance as work in the 1930s to dance as service in the 1970s. And thinking about how dance redefines the concept of work. So I had the opportunity this summer to do research in the New York Public Library for the Performing Arts at Lincoln Center. So I was there for about a month in the archives and just really going into the administrative files of the Federal Dance Theater and the Federal Theater Project and also the different specific choreographers, papers, and really diving into what’s there and kind of looking at it from this other perspective. So that’s what I’m up to. So I’m doing a comparative study, and I’m kind of right in the midst of it right now. So I’m trying to make sense of all of this archival material, and looking for different ways to theoretically frame what is important about these two periods. I’m focusing on making connections between labor policy, federal arts funding and the Dance field. And aesthetically, I continue to choreograph. And I’m really focusing on the book project right now, but I’ve choreographed different pieces in the past couple of years. Focusing on ideas of outer space on ideas of humanity, kind of a little broader themes, but that’s what I’ve been working on right now.

Scott Ferguson: Well, Colleen, we wish you the best of luck. Thank you so much for joining us and definitely keep us posted on the progress of your research.Colleen Hooper (@hoopercolleen): Thank you. Thank you very much for having me.

Historicizing Inflation & Price Controls with Andrew Elrod

Andrew Elrod joins Money on the Left to discuss the political economy of inflation and price controls, past and present. Elrod holds a Ph.D. in History from the University of California, Santa Barbara and is presently Research Specialist at United Teachers Los Angeles, a 36,000-member labor union. In our conversation, Elrod overturns one of the most common understandings of a central plot point in our collective memory of the 1970s, and which continues to shape dramatic engagement with the problem of “inflation” today: the notion that stagflation was both a consequence of factors exogenous to politics and the catalyst for austerity in the United States and across the world. In doing so, Elrod locates human agency—not autonomous “price signals” or exogenous shocks—as the most formidable instrument for dealing with post-Covid inflation.

Link to Elrod’s recent essay for the Washington Center for Equitable Growth titled ‘Austerity policies in the United States caused ‘stagflation’ in the 1970s and would do so again today’:

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Music by Nahneen Kula:


The following was transcribed by Richard Farrell and has been lightly edited for clarity.

Maxximilian Seijo: Andrew Elrod, welcome to Money on the Left.

Andrew Elrod: Hi, great to be here.

Maxximilian Seijo: So for our listeners who probably don’t know that much about you yet, could you spare a moment to talk a little bit about your personal and professional background?

Andrew Elrod: For sure. I was a teaching assistant and graduate student in the Department of History at UC Santa Barbara for six years. I just finished this summer and filed a dissertation on the history of wage and price controls in the United States from World War II to The Volcker Shock, so sort of in the middle half of the 20th century. I do some public writing related to that, but I’ve also recently taken up a position in the research department of a labor union in Los Angeles–the city where I live–so I’m kind of in a moment of transition. But I like to think there’s a thread keeping my interests between the two jobs together.

Maxximilian Seijo: Cool. For listeners who might know where I am institutionally, you’ll notice that Andrew and I did or are doing our PhDs at the same institution. So there are some heterodox spaces around, perhaps, where you don’t expect them to be. Part of the reason why we wanted to bring you on the show, and why we wanted to have this conversation via Money on the Left, is that inflation and prices are all themes and buzzwords that are really present for us today. We live in an era of 7% CPI measured inflation. We can problematize that measure if we want to, but in relation to this, you recently published a piece with Equitable Growth titled, “Austerity policies in the United States caused ‘stagflation’ in the 1970s and would do so again today.” To begin unpacking this piece, why don’t you start by discussing what the conventional wisdom for dealing with inflation, or this so-called economic problem, is today. Mainly, maybe you can touch on some themes of excess demand, or the demand driven story about inflation. What is it? Who is espousing this story and why? Why do most mainstream economists believe that to be the narrative?

Andrew Elrod: Sure. Well, just to begin with, you opened by saying we’re in an era of 7% inflation–it’s only been a year. Between 1968 and 1979 or so, the annual inflation rate was up between 5 and 12%. That’s twelve years. And that’s remembered as a bad time in history, but we’ve yet to see exactly what’s going to happen today. We are about a year into a new inflationary environment, but whether it’s going to be an era, I think, is kind of open at the moment. But, of course, that’s why it’s in the news. Everybody’s afraid of that. So to answer your question about the conventional wisdom, so to speak, around macroeconomic management, the historical answer is that, since the Depression, but especially since World War II, global economic thought has centered around the ideas that came to be associated with John Maynard Keynes–that there is such a thing as a full employment level of spending, or a full employment level of demand, and that that demand can be manipulated by national governments. This is the set of underlying assumptions that the whole macroeconomics discipline was founded on.

Before the 30s and 40s, there was no such thing as macroeconomics. There was classical political economy. There was a neoclassical school at the end of the 19th century, but macroeconomics is really a 20th century development. And it’s related to a variety of things, including the Depression itself. The intellectual problem of how societies could pull themselves out of the Great Depression was certainly one impetus. Then, there are also developments in statistics. I think Adam Tooze is probably one of the best examples of a historian who’s shown that the concepts themselves, such as the level of demand, depend on governments setting up accounting systems to measure things ‘out there,’ like expenditures by households and firms, and integrating them into a comprehensive system of accounts that you can use as an instrument for doing things that we now call macroeconomic analysis. So the conventional wisdom is a simplified Keynesianism, or what some people might have once called, ‘bastard Keynesianism,’ which holds that raising or lowering the level of demand in a national economy depends on fiscal and monetary policy.

The division between those two things is itself, I argue, a historically specific development, particularly in the United States during the time of McCarthy. But the idea is that the level of spending, the amount of money people have to realize their wants, is something that the government can control through taxes and its own budget, or taxing and spending, which is fiscal policy. The credit system, or central bank policies–often, for much of the 20th century, regulations over how much the private member banks under the government’s central bank, or who have to borrow from the government’s central bank, regulations about what they can do, what they can lend, how much they can lend, for what purposes they can lend, that credit realm is the other traditional instrument–is monetary policy.

So today, a lot of the debate departs from the point of view that there’s too much demand, or people have too much money in their pockets and businesses are investing too much. This is a problem because prices are rising. Demand is above supply causing prices to rise. And the solution to this problem of wanting prices to stop rising is to take money out of people’s pockets to reduce demand, either through reducing spending, and you see this very heavily in an opportunistic and kind of right wing ideological way around the expanded Coronavirus emergency relief measures, like the enhanced unemployment benefits. Joe Manchin, for example, as a Democrat does this and gets in front of the Senate and says social spending is causing inflation, or giving low income, working class people money is causing them to spend more than the American economy is capable of supplying them. That’s causing prices to go up so we can’t have any more of that. And that would be a fiscal contraction.

Interestingly enough, no one is talking today about raising taxes, although that would also be a kind of orthodox fiscal contraction, or anti-inflationary, tool. But then, the other thing that’s really in the news, and in part because it doesn’t rely on Congress, is contractionary monetary policy with the intention of restricting demand. The idea there is that, if you can raise interest rates, then investors are going to, well, first of all, borrow less to make real investments. There’s going to be fewer apartment buildings going up, fewer new warehouses going up, and the cost of credit, which is a crucial component of running a business, is going to go up. So you can slow investment down that way. And the understated, or sometimes unstated, but universally acknowledged, effect of that is to increase unemployment. So part of the reason that I think that writers say there’s such a controversy right now over the idea of the Federal Reserve raising interest rates, is because the effect is going to be to throw people out of work. And there’s still a lot of people who don’t have jobs. So that’s kind of a survey of the inflation dilemma right now as I’m sure you and your listeners know.

Maxximilian Seijo: In what you’re describing, perhaps we could boil it down into a phrase of the economy ‘overheating,’ right, in that conceptual sense. I think you do a great job of looking backward towards the intellectual and conceptual dynamics that produce the composite environment for coming to that conclusion. As you say in your piece that I referenced with the last question, this conventional narrative is itself preoccupied with a subset of an era, of the time in which you describe macroeconomic economics as coming into fruition or to the fore, which is the 1970s. So as we investigate this conventional wisdom, can you tell us a little bit about what the policy debates of the 1970s were, and particularly, as they related to things like inflation or pricing? On the way, the listeners, I think, would enjoy hearing a little bit about the Marilyn Monroe lyric that references JFK’s particular pricing management schemes?

Andrew Elrod: Yeah, the 1970s are a very interesting time, and really, I think, the time when what we think of today as the popular handbook for how to handle inflation was written, because there was a big twelve year debate about what to do. Before 1979, there was a much more sophisticated understanding of what caused prices to rise, or more generally, price determination. It had grown out of the 1920s, sort of the pre-macro era, when price theory itself was not monopolized by ideologues, but instead was an open subfield where growth of the large vertically integrated manufacturing corporation, branded products, and a world in which price competition appeared increasingly to be vanishing from consumer life had to be reckoned with. So there’s this intellectual tradition that dates back to before the war, but it survives after the war. In the mainstream of economic thought, and certainly applied economic thought, where the administrators and politicians’ staff who make the laws that govern the economy and enforce them within that mainstream occupy, there was an understanding that prices in particular markets rose for particular reasons.

There was the very recent memory of World War II, and again during the Korean War, of economy-wide wage and price controls and periods of emergency when Congress granted the president the powers to impose ceilings, dollars and cents ceilings, on particular commodities. Also, surviving after the Korean War, was a knowledge of the government itself as an actor in the marketplace, a large procurer, a huge customer, and a customer whose own purchasing decisions could have an effect in shaping markets. So this is the world in which John F. Kennedy is elected, assassinated, LBJ takes over, and then the Vietnam war happens. This is the world that we think of as the 1970s beginning. So by the time you get to the middle of the 1960s, the beginning of the escalation of the US occupation of South Vietnam, and the bombings of the Vietnam War, there is a fairly elaborate and sophisticated understanding of how to manage the economy. It’s very different from today where salaried pundits will write about the importance of reducing demand and the worries of an ‘overheating’ economy. That phrase itself ‘overheating’ became popularized during the Vietnam War.

Now, just to answer your specific question about Marilyn Monroe, John F. Kennedy, and everything else, the Kennedy administration enters office during a recession. There is a long recessionary period. Technically, it’s two business cycles, from 1957 to 1961, in which the major employment centers have hundreds of thousands of unemployed workers. The auto industry in Detroit in the late 1950s was a hard place, because if you’re an auto worker, you can’t get enough work for the whole year. There was a sustained stagnation in American manufacturing at the end of the 1950s. So this is the environment in which John F. Kennedy runs his notable campaign slogan, “Get America Moving Again.” So he runs on this program of growth. We’re gonna grow the American economy, we’re going to put people to work, we’re going to build factories, we’re going to build houses, and we’re gonna build missiles–it’s a high Cold War period. But the problem with that is that, during both the World War II mobilization, the great thing that finally pulled the country out of the Depression, and during the Korean War, which was itself also a massive expansion of industrial capacity, there had been inflation.

So Kennedy comes into office with this problem of promising growth, but not wanting to cause inflation to happen. The solution that his advisors come to is what are called wage and price guidelines, which is a loose set of non-binding, voluntary guidelines for companies and workers, particularly labor unions, to use in negotiating wages and prices. For the biggest companies, they don’t have to negotiate with anyone; they just set their prices. But it was a set of guidelines for corporate managers and union leaders to consult in making the decisions that govern economic life. So the administration finds itself in a strange, hostile environment with big business, because voluntary price guidelines, as much as the administration had bent over backwards to warn everyone that they’re not going to assuage fears, that they’re not going to impose price controls–they have voluntary guidelines–as much as they do that, the organized businesses in America and the business press says this is de facto price controls. Kennedy is a crypto-communist. Only loony people would say that back then, but the reaction was very hostile.

In fact, by 1962, US steel, which had been the biggest corporation in America, made a point of publicly violating the price guidelines. The company had been meeting with the White House regularly. There had been big labor negotiations in 1961. Labor negotiations are traditionally a time for large employers to raise prices so they can have precautionary funds to pay any wage increase they’re forced to pay. Throughout this period, Roger Blough, the chairman of US Steel, had never indicated that he was going to violate the price guidelines. But in the spring of 1962, after labor negotiations were done, he came to the White House with a memo that said, “These are our new price schedules.” And it’s immediately clear what’s going on for the JFK administration. The President explodes and then there’s an emergency weekend, a three-four day emergency where the Department of Defense and the President’s advisors hold these press conferences saying this is un-American and unpatriotic.

There is a famous anecdote, which if you read any history of the Kennedy administration, this is when the President says, “My father always told me that all businessmen are sons of bitches.” That’s actually printed in Fortune or one of the business magazines. The result is that US Steel rescinds the price increase. They enforce the guidelines. It’s very difficult because they can’t just go to the court. It’s not a law. But what they do is they say they’ll issue a preferred contract, a procurement contract, for steel products at a lower price. I think Kaiser steel, the West Coast steel company, takes it and now business is going on at the lower price. And US Steel, if they don’t want to lose market share, then they’re going to have to meet that. So they rescind the price increase and that becomes a legendary moment of the early Kennedy administration. And it sets up the later 1960s in a really interesting way, where you can see why businessmen, especially anti-communist businessmen, themselves come to oppose Johnson and see the Democratic Party, which had been their instrument, as somehow betraying them. It sets up the greater rightward shift in American political culture.

But, because that was such a high profile scandal, at Kennedy’s birthday in May, they have, famously, Marilyn Monroe come out on stage and do a number in a sequined dress. And it’s very glamorous, but the lyrics to the song she sings are…

Marilyn Monroe:

Happy birthday to you,

Happy birthday to you,

Happy birthday, Mr. President,

Happy birthday to you.

Thank you, Mr. President,

For all the things you’ve done,

The battles that you’ve won,

The way you deal with US Steel,

And our problems by the ton.

We thank you so much.

Andrew Elrod: “Happy Birthday, Mr. President, for all the things you’ve done, the battles that you’ve won, the way you deal with US Steel, and our problems by the ton. We thank you so much.” What is that about? It’s about the fact that the President was willing to call one of the biggest businessmen in the country to the White House and denounce him for profiteering. And that was celebrated. Everybody remembers Marilyn Monroe’s “Happy Birthday, Mr. President,” but nobody remembers what it’s about. So that’s that anecdote.

Maxximilian Seijo: Yeah, that’s such a fascinating story. It makes me think of so many different things and how it reverberates into what we can think about as politically possible relation to pricing in general. Maybe we can come back to that, but I want to start to dig in a little bit. Coming out of that particular moment, there’s a shift in the way that pricing is dealt with. So in your piece, you argue that, throughout this history, the shift to austerity as opposed to these wage price guidelines, perhaps as a microcosm of a larger shift with more complex variables, was not only right wing or reactionary, but was actually not helpful for combating price increases. You even say that this austerity exacerbated the inflationary pressures in a complicated way with this change in price management policy. So could you explain how those dynamics work themselves out?

Andrew Elrod: Yeah, I mean, one fact that we all have to acknowledge is that there are centers of concentrated power in many markets. Not every market, but there are companies, and many writers argue all companies do this, who set their prices after making certain decisions about the preferred rate of return they want, the target profits, the expected volume of sales, all things that that may or may not happen, and that prices are then administered after the fact. So you end up selling and making as much as the market will take at whatever price you set, but you’re setting the price. That analytic distinction in business management is something that many models of price determination do not take into account. They assume that everyone is always receiving a price, that businesses will always be adjusting their prices in real time, but many large companies post their prices at the beginning of the year, and then they post them again when they change them next year. So that’s the starting point for thinking about it.

Now, what’s going on in the 1960s is an intense battle between organized labor and the core industries, including construction. Construction is a little different in that each city will have its big construction firms. One big trend in the business history of the 1970s is the growth of these national construction companies. There is a battle between organized labor, which these unions had been built up maybe a generation before in the Depression, during World War II, and had gone through maybe four or five contract cycles during the 1950s. By now they have a seasoned leadership who know what collective bargaining is and they understand what the real purchasing power of the wages they win are. You have this union leadership now confronting a corporate sector that can raise prices on its own, because of the growth financed by the Vietnam War. So you have an inflationary environment in which companies are raising prices because they can and because unions are then raising wages and forcing up costs.

This is what had been known as a wage-price spiral. In the 1940s, there was a lot of writing about how we arrest the wage-price spiral and how we interrupt the wage-price spiral. And people still use that language, but by the end of the 1960s, that’s what the guidelines were intended to do. If you say the guideline is a 3% increase, then you can’t bargain for a 7% wage increase, because that’s outside of the guidelines. Between 1960 and 1966, the biggest unions of organized labor all adhered to the guidelines out of a sort of political loyalty to the reform project of the Kennedy administration and the Great Society. There had been a sort of political coalition. But by the end of the 1960s, once you do get 3-4% inflation, the guidelines don’t work on labor, for one, and they had never really worked effectively on business, beginning in 1966-67.

So Nixon gets into office in 1969 having campaigned on repealing the guidelines. And that’s a situation where things really decisively change, because during 1969 and 1970, you take the guidelines off and the inflation that had been around 4% in 1968 goes up to 5-6% by 1970. So what we think of today as stagflation is really something that comes into consciousness, or sort of crystallizes, for journalists in 1969-1970. Now, there’s two other parts to this that you should understand, which relate to conventional macroeconomics, or fiscal monetary expansion and contraction. In 1966, once the guidelines broke down, the Johnson administration moves towards fiscal contraction. Historians don’t write about this. The characterization most people get of the Johnson administration, the Vietnam War, certainly something you would hear in an undergraduate lecture, is that, well, the problem with the inflation of the 1960s is that the Johnson administration didn’t raise taxes. That is like an historiographic truth at this point. And it’s wrong. It’s completely wrong.

In November of 1966, Congress repeals a 10% investment credit that was a de facto corporation tax increase. In 1967, things slowed down. Inflation slows down. There is a mini recession. Arthur Okun, one of the members of the President’s Council of Economic Advisers, wrote a book about the Johnson period of political economy and prosperity in which he says 1967 was a “mini recession.” So in that situation, with the guidelines, maybe not everyone is following them, but you have a sort of general contraction, and then the guidelines are an instrument for the government to try to slow things down. And it was viciously fought. That’s the other thing you have to understand. 1967 is the year of the Detroit riot. 1967 is the year of the Newark riot. All of the cities which had been perpetually underfunded are now facing even tighter purse strings from Washington. So you get a precursor of what Nixon actually does in 1967 in the mini recession. But the difference is that, between 1967 and 1969, Nixon lets off the guidelines.

There was a huge explosion in 1969 of wage and price increases because businesses are confronting smaller markets. From a businessman’s perspective, well, you can recoup lost sales volume with higher prices. That makes sense. And from a union’s perspective, it’s survival, because now you’re living in inflation. So the real consumption power of organized workers is being eroded by inflation. So you have to keep money wages going up. That 1969 moment, I think, is really under-appreciated in the economic history of the period, which is usually narrated as, well, the Vietnam War spending kicked off, Johnson didn’t raise taxes, inflation began, and then it lasted until 1979. When, in fact, the story is a lot more nuanced than that. Nixon campaigns, not only on repealing the guidelines, because businessmen hate the guidelines, businessmen see it as a hidden project of price control, which, maybe it was. Nixon campaigns on repealing them as well as on shrinking government spending, or on the excesses of the welfare state, and famously, public universities, but in all sorts of other ways as well. There’s an interesting moment where you see the Republican Party business consensus actually consider expansions to a welfare state.

But anyway, Nixon’s response when he gets into office in 1969 was to cut government spending. His advisors are Herbert Stein, whose book, The Fiscal Revolution, had just come out. He was celebrated as the preeminent expert on fiscal policy and whose own career kind of helped to crystallize the idea of such a thing as fiscal policy as a distinct area of expertise. They advise to cut government spending. So Nixon arrives in 1969. There is the tax increase leftover from the Johnson administration, which they extend. They don’t continue the kind of ambitious social policy expansions of the Johnson administration, and understandably, because that’s what we think of as modern Republican Party ideas, which are being formed at this moment. In addition to fiscal contraction, they get rid of the guidelines. Then, the result is that inflation intensifies. And inflation intensifies as unemployment starts growing. So by the summer of 1970, the unemployment rate is way up and the Republicans lose big time in the midterm elections. And that sort of sets up the avalanching spiral of corruption that is revealed in Watergate.

But it all stems from this summer and fall of 1970 moment, where the administration realizes, “Oh, if we pursue the Orthodox anti-inflation policy here of reducing government spending, raising interest rates, and maybe even raising taxes,” and often it’s like consumption taxes, like raising a sales tax on refrigerators or something, “but if we do all of that, we’re gonna lose the election. Not only are we going to lose the election, but we’re going to intensify the social conflict that has been erupting since the end of the Johnson administration.” 1970 is the sort of height of the anti-Vietnam movement. There’s the National Guard killings at Kent State and the student uprising in Santa Barbara, so there’s a real national chaos in 1970, which austerity only exacerbates. Then, the rest of the next four years you can kind of see emerge out of this problem, which the ruling class solutions are incapable of solving. So Nixon has to sort of improvise.

Maximilian Seijo: I want to hold up here because I think this is really, really important. There are a few theoretical insights that maybe can be pulled from this tale that you’ve told here, the story of this history, as it relates to economic causality. Then, I want to push slightly into The Volcker Shocks and talk about the oil supply shocks as well, because that’s a central part of the narrative. But I think for our listeners, it’s important to say here, that the wage-price spiral, which for any listeners who’ve done an undergrad in economics, such as me, you hear all about this all the time. This is the problem of the last 50 years of macro policy. And it is the problem because of the things that you laid out, Andrew. What’s interesting about your history here is that it inserts price management through guidelines and through price controls, in maybe a larger sense, causally, in a way that almost comes before the chaos of the wage-price spiral.

So the foreclosure of price management, as a policy tool, is what sets the stage for the evacuation of the essential politics, that is, the politics of this situation. So it becomes a purely economic dynamic in the wake, or in the vacuum of, that political evacuation. I wanted to say that because I think that’s a fundamentally crucial thing for us to carry to today in this conversation for talking about the inflation of our moment. And in doing so, I want to push you back into the history. People talk about The Volcker Shock all the time. And, of course, the oil supply and the OPEC embargoes are rich in our consciousness when we’re thinking about this era. What effects did these things have on this wage-price environment?

Andrew Elrod: I think the sort of philosophical distinction between economics and politics that you’re drawing our attention to here is indispensable for understanding what happens during the Nixon administration. And maybe one way of putting it is that the politics of price control had been very clear before Nixon. The federal government had imposed price controls in moments of emergency to protect working class incomes. It was the condition for the successful mobilization of World War II to keep people working in those war factories. You had to have affordable food and you had to have affordable rent. There was a dramatic expansion of rent control during World War II, and similarly, during the Korean War. It was that legacy that motivated the Kennedy experiments in voluntary price control.

But, at the same time, the Washington, Cambridge, Massachusetts, and New York axis came to accept certain perspectives of, frankly, corporate managers. So you end up with a voluntary system. The politics of intervening in price decisions, what otherwise would be private price decisions out of a question of political and civil rights, were protecting working class incomes. There’s a real class politics to it. You make a good point in saying, once price controls were abandoned, politics were evacuated from economic management. But there’s a moment in the history, I would say, that we’re not acknowledging, which is the politics of the Nixon price controls, which when imposed, the Democratic Congress sort of goads Nixon into authorizing this two years in a row. 

Then, finally, Nixon does it when he sets up the Cost of Living Council, which is the supervising body under the Secretary of the Treasury for administering the wage and price controls and the mandatory legal price ceilings. He does it in a way that is much more permissive to profit increases than to wage increases. So the politics of the Nixon price controls reverse the class dynamic in the price control apparatus. It becomes an instrument of the ruling class. If you read the radical economists writing about the Nixon price controls, they’re all very explicit about this point. This is a program designed to further immiserate the working class, to pad corporate profits, and to reestablish the commanding position of American corporations in the global economy. They have a real conspiratorial critique and it’s not wrong.

But that’s the view and it’s bolstered by the record of, famously, Arnold Weber, who had been one of the members of the Pay Board. I think he was the commissioner of the Pay Board, which is the wage setting body of the price control program. He told the newspapers, “The goal here is to zap labor. That’s what we’re doing here. We have to get these organized labor unions that are fighting back against inflation across the economy. We have to zap labor.” So that’s where the politics of price control are reversed. And I truly do think that that experience for boomers taught boomers a lesson. It’s dressed up today in all of these formal economic arguments about why price controls don’t work. But I do think there’s a deeper cultural and political memory of the fact that the last time we used price controls it was to hurt the working class. It was an instrument in the class war from above.

So people don’t trust the federal government. And, of course, this is all exacerbated by the fact that during the price control regime, the community to reelect the President is taking all these illegal campaign bribes from the Fortune 500 companies and using them to break into the Democratic Party offices in Watergate and steal Daniel Ellsberg’s psychiatric files, and the plethora of underhanded campaign strategies that became known as “rat fucking.” That’s happening under the price control regime. So this is setting up the popular perceptions, or whatever you want to call it, the American public’s understanding of what goes on under federal power. Your question was about the oil price shocks and The Volcker Shock later in the decade, but I think to understand what’s going on after October 1973 when the Yom Kippur War begins in Palestine and OPEC decides to quadruple the price of oil as a protest, you have to understand what happens from there forward. You have to begin to unpack all of the baggage that had been built up to that moment.

Maximilian Seijo: So this context, I think, is really important. And one of the things I took away from your piece was that the oil shocks, while, as you said, quadrupled the price of oil overnight, these underlying dynamics are often obscured in the memory by that shock of the price at the pump–that you can look up and see going up so rapidly. And not necessarily to get too lost in the weeds, but I wanted to hear you talk about that dynamic, because that’s certainly what I took away from your piece.

Andrew Elrod: This is another important point, I think, that needs to be made in economic history, or in places in economic history where real revision needs to happen. Like the 1967 mini recession that is never taught. The inflation of the Nixon administration begins before the controls. And the pressure on food prices and oil prices begins before the oil shock. This is crucial, because the history is really mistold when it’s explained as, “Oh, the American people knew how to run the American economy.” The experts were in charge, and then there was this unforeseeable, external event that really threw a wrench in the machine. But it’s not true. There had been all sorts of problems in the two years before the oil shock, which, in some ways, allowed us to better weather the oil shock. And one example of this is energy. The price of petroleum, raw crude petroleum out of the ground, and then the refinery price, the price of gasoline, those are all controlled. And that system of controls is the customer of the oil price increase that comes later. As bad as it was, the domestic price of oil didn’t quadruple in 1974. Now, there’s a lot to say about all of that.

Maxximilian Seijo: Yeah, I think we can leave the listeners a bit wanting on some of that. I think that’s a really fascinating point, and actually very much reverses the conventional wisdom that we always hear, which is, of course, like you said, that an external effect threw a wrench in our well functioning–maybe there was some pressure building up–machine.

Andrew Elrod: Before you ask again, there are two points about the pre-OPEC controlled period, I think, to flesh out the story. Raw agricultural commodities, like bushels of corn and wheat, were left outside of the Nixon controls. Since the Great Depression, one of the big things the New Deal does is it brings agriculture completely under federal management. So every year the US Department of Agriculture–really twice a year, because you have multiple planting periods–through the 50s and 60s, determined the preferred planned acreage in the allotment that each farm company–or farmer, there are still some family farms–would plant. The annual supply of raw agricultural commodities was the policy variable they were manipulating. It was a completely planned system.

And in 1972, the high period of Nixon control, even though it’s an instrument against the unions, it did stabilize the economy. Nixon wins reelection in a huge landslide in 1972. During that period, the State Department under Henry Kissinger pivots to détente with China and USSR. Part of the global strategy for people like Henry Kissinger is to restore diplomatic ties with the Soviets and China. And part of that is the grain deal. So we have these huge shipments of like 10-20% of the US agricultural output being sent abroad. As this was becoming known to the price commission, the Cost of Living Council, they became very concerned about the supply of wheat and corn in 1972.

And if you read the record, they publish books with retrospectives with the Brookings Institution, but also just in the newspaper record. They go to the White House and say, “You have to expand plantings, you have to expand supply, if you’re going to ship all of this food to other countries. You have to expand supply at home, otherwise, food prices are going to go up.” So the price of food at the processor and the retail level is controlled, but the price of raw agricultural commodities is not. And, as you know, the simplest economic model would show you the price goes up, or demand exceeds the planned supply. So I think that’s a planning error that should be acknowledged. Now, the second point is about oil.

The record of the oil industry during the Nixon administration is often used as an example of the failure of controls, because prices were controlled in August 1971. There was a freeze, and then they moved into a controls program at the end 1971 into 1972. That’s when the shortages begin. You have gas lines before OPEC. For both the economist and the businessman, his argument is that companies won’t produce at a loss if you control their prices. That it’s too close to cost. There’s no incentive to produce. Nobody’s gonna produce at a loss. That is something that happened in the petroleum industry. But today, there’s a second lesson we can learn from this, because it was seen as a huge failure to have gasoline and petroleum production decline in the 1970s. But today, that wouldn’t be seen as such a terrible thing. In fact, today, the problem of how to reduce petroleum extraction is like a huge problem. There are whole institutes devoted to this, but we have an example of when we actually did it.

Maxximilian Seijo: Credit history really can be cruel sometimes. As we’re sort of coming more to the end of this, there’s something I wanted to ask you about, which is something perhaps more present in my discipline, which is critical humanities. From the more art side and a theoretical approach, there is this narrative around the Marxist analytic of labor and capital as this historical antagonism. Normally, how the story of this era that you’re describing gets told is that this two sided antagonism is tempered through the New Deal, through the war, and then there’s the mid-century period, you could call it some sort of new social contract, where this antagonism is set aside, and we have this prosperity that’s dependent upon external accumulation. But this can’t last, right? There’s a falling rate of return on this social contract. Ultimately, steam builds up, and forgive the mixed metaphors, and the top pops off, and this antagonism comes into its natural state again as a purely economic antagonism.

What I’ve learned from you is that, there are aspects of this story that rhyme with the truth, and certainly the stakeholders, whether they’re regional or corporate, are fighting other stakeholders in what we might call the working class or the unions. This is certainly happening. There are certainly conflicts there. But to me, what your story does is it really nuances and brings this ambivalence around the politics of conflict and antagonism to the fore and perhaps shows these levers of mediation that structure these dynamics. So it’s not that, as you say, the 1970s happens, then there is a pop, and then we’re in this natural state of conflict and it spirals out of control. Those dynamics are in some sense constitutive of things that happen in the world. But there are also political decisions and intellectual debates that really structure the way these conflicts play themselves out. I guess that’s less a question and more of a statement, but I would be curious to hear what you have to say about those not absolutely distinct, but still different stories for narrating this era.

Andrew Elrod: Well, I think the notion of the era of consensus is something that has to be understood in the context of an intensely pressurized organized conflict. There’s a very important article on the 1959 steel strike. In the steel industry, the White House gets involved every time. So three historians, Gabriel Winant, Kristoffer Smemo, and Samir Sonti wrote this great article, critical historical study, about the 1959 steel strike in which they make the larger historiographic intervention that the era of consensus can only be understood as a moment of stalemate and deadlock in a highly organized conflict that had been bequeathed by the experience of the Depression and the organization of the working class that accompanied it. So, as someone who’s influenced by their work, I think the larger roadmap you laid out about interpreting the history of capitalism in the 20th century is useful, but it can be even more useful if we understand the conditions that created the so-called stability, and the political divisions that existed then, which would grow to lead to what is everywhere described as the unraveling, the shattering, or the end of the consensus. You can see it all in embryo, to mix my own metaphors, in the 1950s. You can see it there already.

As a final example of this, with the fiscal contraction that the LBJ administration pursues in 1967, the Vietnam war is going on so it’s not that total government spending is falling, but they want to take spending out of the civilian economy. This is coming at the height of the Civil Rights Movement. So the whole question of what are we going to do about the Black ghetto in the cities, that’s a situation in which you have the left wing of the Democratic Party saying openly, if you want to take money out of the economy, you have to raise taxes on wealthy people. You have to raise corporation taxes. Part of the reason that the tax increase that takes so long to come is this political division about the composition of government spending and who it’s going to go to. You have many high wage white union workers who, in this period, do turn to the right, frankly, out of the racist perception that there’s something unfair going on with the government budget. That’s a really good example of where the detailed institutional history lens helps with the broader conceptual distinction between conflict and consensus, where the organized conflict that produces so-called consensus is beginning to disorganize, and opportunities open for both the ruling class and workers, or the left and the right, or however you want to frame it, but opportunities do open in those periods as well.

Maxximilian Seijo: I think, then, for the last question I want to ask, to this consensus and to these actors who today are arguing in favor of austerity as a solution to the inflation that we’ve seen over the last year, or since the dynamics of the COVID pandemic have started playing out, what would you say to them, in short? And I can even make it a particular person. What would you say to Jason Furman who is arguing that we need a certain type of reduction of demand and that’s the solution?

Andrew Elrod: What are you doing? I can’t imagine ever having an opportunity to talk to that person, but I would say what are you doing? Why is it so important to use your professional expertise and the weight of all of your credentials in this way? Is it more about your profession? Are you truly acting as a good faith historical actor? That’s probably too provocative, I wouldn’t say that. But I think that the class politics of the government budget need to be understood as something more than an abstract full employment level of demand, and that the private sector has really failed to give Americans, people living in the United States, an adequate, basic standard. There are growing tent cities in every city. There’s a generation of people burdened with student debt. People fear the healthcare system–the place that’s supposed to keep you alive. So questions about the government budget should also be considered with this in mind. And if you’re being guided by macroeconomics, that’s a handy instrument to avoid these real questions.

Maxximilian Seijo: I appreciate both the psychoanalytically tinged answer and the straightforward, historically-minded answer. I think they’re both important and two aspects of what we’re contesting today, and where we definitely share a lot of political grounds. So I just wanted to say, Andrew, thanks so much for coming on the show. I really enjoyed this conversation and hope to talk more again soon.

Andrew Elrod: My pleasure. Let’s be in touch.

* Thanks to the Money on the Left production teamWilliam Saas (audio editor), Maxximilian Seijo (transcription), & Meghan Saas (graphic art)

Vulnerability Theory with Martha Fineman

Money on the Left discusses “vulnerability theory” with Martha Fineman, Robert W. Woodruff Professor of Law at Emory University. Going beyond the politics of non-discrimination and formal equality that animate liberal politics and policies, Fineman underscores the human being’s embodied vulnerability throughout the life cycle in order to politicize, rather than pathologize prevailing structures of social dependence. Working primarily in the context of constitutional jurisprudence in The United States, Fineman argues for forms of government, economic institutions, and social organizations that variously take responsibility for the vulnerable subject’s ongoing resilience in a contingent world. In doing so, she controversially re-conceives universality through, rather than against difference, expanding the language of feminist and intersectional politics in capacious ways. In our conversation with Fineman, we plumb the depths of vulnerability theory and ponder its significance for left politics oriented toward public money and provisioning.

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Music by Nahneen Kula:


The following was transcribed by Aditya Sudhakaran and has been lightly edited for clarity.

Scott Ferguson: Martha Fineman, welcome to Money on the Left, it’s such a pleasure to have you speaking with us today.

Martha Fineman: Well, it’s a pleasure to be here.

Scott Ferguson: So maybe to kick things off, you can tell our audience a little bit about yourself, maybe if you feel comfortable, some of your personal background, but certainly your professional and academic background.

Martha Fineman:  Well, I think my personal background really profoundly affects my professional status, in my professional position. For example, I am the first person in my family to graduate from high school, not college, but high school. I had my first child when I was 18. My second one, when I was 20, my first divorce at 21. I didn’t go to school until after that with two children, two small children. As a single mom, I continued my education largely through the help of government programs. 

I started an underground newspaper when I was a college student, which helped to support me through college, daycare center to help with taking care of my children and other people’s children. When I went to law school, I had not only my two original children, but my twins were five months old. So I had four children. This is not the typical background that you would have for a professor(!) A law professor, professor of anything, actually. And I really think it profoundly shaped the way that I view the world, and the way that I understand our dependence as individuals, on social institutions and supports. 

I didn’t take anything for granted and I think that that’s really reflected in the work that I do, which is very focused on institutional structures, and institutional relationships. I did my legal education at the University of Chicago on a full scholarship. They were wonderful, and began my teaching career at the University of Wisconsin. I was there for about 12 years, and then got a chaired position at Columbia University, went from there to Cornell, where I held the first chair in the country in feminist jurisprudence. And then from Cornell to Emory, where I’m Woodard professor, which is a kind of university professorship, focusing on legal theory.

William Saas: I wonder if you might say a little bit more about that, that biographical journey. At what point it became clear that you wanted to get into this sort of institutional jurisprudence. I mean, was law school the goal and then along the way, it formulated more clearly that institutional jurisprudence was with the direction you wanted it to go?

Martha Fineman: Well, I always had ambitions to change the world, right!? Which wasn’t very hospitable to the way that I was, into which I was born. I tried various things. As I mentioned, I started an underground newspaper called The Populace, interestingly enough. I started Baker Center, and was involved in all sorts of political things (this was) in Philadelphia. I went to Temple University as an undergraduate and I took a little stint working with skid row alcoholics as kind of a counselor. Did a variety of different things and I really, naively thought that lawyers had a whole lot of power. So I thought the way that lawyers operated like the social workers would come in, but it was the lawyers who actually could control the system, control the courts, and so forth. So that was one of the reasons I went to law school. 

When I went to law school, I always had in mind that I was more interested in the academic side of law than I was in the actual practice. Or at least, that became apparent the further I got into law and the more I saw that it really explained the structures of society and power in society in a way that I hadn’t envisioned outside of the legal context. So I always wanted to teach and I was really very fortunate that I had that opportunity. I clerked for a federal judge, but I really didn’t ever practice law. Instead, I went right into teaching. 

Scott Ferguson: We invited you to speak with us today about your legal theory, which addresses vulnerability as a key foundation of the human condition and the social manifestation of such vulnerability as dependents, which you primarily think through in the context of the United States. But before we move into some of your positive claims, I think It could be helpful to work through some of your critiques, your pretty profound critiques of mainstream, dominant, liberal, legal jurisprudence and discourse, to get a sense of the world into which you’re intervening.

Martha Fineman: Right, one of the things about the legal subject, what I call, “the legal subject,” but I want to point out that it is not only the legal subject, it is the theoretical subject. It’s the way that we imagine the everyday, ordinary being or person who’s at the center of our theory, be it legal theory, political theory, economic theory, anthropological theory, historiography. Whatever it is, we imagine a certain kind of human being at the center of our endeavors, our theoretical endeavors. So in thinking about this, for me, the typical way that we think about it is in terms of ‘autonomous,’ and here we’re talking about people having agency, autonomous, independent, self-sufficient individuals. Liberty seeking individuals, they want their freedom and their liberty. We see this very much today in the context of what’s going on with COVID, and people, you know, “this is my right!” 

So all these people or this subject is taken out of context. It stands outside of society, it stands outside of the institutions that inform our day to day lives. It is a radically individualized subject. And in addition to being radically individualized, what this means, ultimately, is that the state in which that individual is placed in the theory, is of necessity restrained. Is prohibited from interfering with the independence, interfering with the liberty of this idealized, (and I might add) totally incomprehensible and inappropriate legal subject to this autonomous, independent legal subject. So it’s that tradition, the theoretical tradition, not only in law, but particularly in disciplines – it’s the “rational man” of economics. 

Even in the context of critical theory, it’s the oppressed or victimized subject of, you know, it individualizes. It focuses on the individual and not on the social structures surrounding the individual. So that’s what vulnerability theory challenges, again, it’s this radical, individualized notion of the theoretical subject, and was to place that subject in the context that actually defines who that subject is and what that subject becomes. 

William Saas:  So before we leap into your claims about vulnerability and dependence, would you mind briefly sketching out how you came to these claims over the course of your career?

Martha Fineman: Well, I started out, and I still consider myself to be a feminist theorist. I was very concerned with gender, and with the exclusion of women from a lot of significant public and political areas of life. And I do want to say, it’s extremely important that we developed a discrimination model that argued against discrimination and exclusion and for inclusion. That was an essential, and necessary step in the evolution of a just society. So you can’t have people assigned to different kinds of areas and excluded from the main important political areas. 

What happened during the 20th century was, of course, that those formal exclusions, not only gender, but race, religion, all sorts of them were battered down, and the notion became anti discrimination and inclusion. So that if you look at law today, what we have actually is a formally equal system. I mean, everyone is supposed to be included, improper discrimination along these identity categories is impermissible. So that’s where I was, initially. And that was an important part of the early work that we all did. 

But it occurred to me in realizing this, and this happened in the context of the family, that the problems that we saw in the family were quite often not problems associated with gender or sex or women, but rather problems of the way that we looked at the family in the context of the larger social system. So the problem was not that caretakers or women as caretakers, were discriminated against (although that was one way to look at it.) But the larger problem was that caretaking itself was devalued by the governing system. It didn’t matter who did the caretaking. It was the practice, the notion of caretaking that was devalued. It wasn’t accommodated, there wasn’t a room made for it. We defined caretaking as a task of the family alone, the workplace was not asked to adjust to accommodate caretaking.

Rather than having institutional arrangements across the board to accommodate this vital and important social task, raising the next generation, what we did was confine it within the private institution of the family. And it seemed to me that it was saying, “Okay, well, hey, boys, you got to share the load equally and do the caretaking too.” Was not and did not solve the problem. The problem was not the individual relationship between husband and wife, mother and father. The problem was the relationship between the family as a social institution and other social institutions, particularly the state and the workplace.

Scott Ferguson: Yeah and it seems like that extends outward, right? From the family. So such that, for example, we can talk about a privatized health care industry. That model of privatized care is equally culpable of not addressing vulnerability in a systemic way.

Martha Fineman: It’s not only healthcare and it’s not only care, and this was another evolution in my thinking, moving from what I initially did was to articulate a theory of dependence or dependency that really focused on family and caretaking. And of course, there were a number of feminist theorists who looked at care work and care as the way to organize that. But the family is embliotic of larger social arrangements. 

In other words, the dependence that we see, not naturally recognized in the family, but for caretaking. We are all dependent on social institutions and relationships, and we move from this family into other areas of dependence, like the educational system, the employment system, the finance system, the healthcare system; We’re all dependent on the social arrangements and social organizations that define these systems for us. So this dependence is something that travels, what varies is the particular set of institutional arrangements. We are less dependent on the family as an institution as we age, but we are nonetheless dependent, equally dependent on other social institutions as they come into play. 

I just wanted to mention that one of the big realizations for me, also in terms of why I find discrimination analysis, not only inadequate, but in fact, problematic is the question of what do we gain if with a discrimination model? Where essentially the complaint is you’re excluding me, the remedy is to include me. So what do we gain from inclusion in an existing system that is unjust or corrupt? I mean, what has actually been gained from that? What we really need is not a personnel change or a personnel expansion, but rather a fundamental restructuring of the values and the purposes of the social institutions. That’s really what’s necessary. 

Also, one of the more recent realizations with vulnerability theory is that focusing on equality as the paramount consideration can also be very problematic. And again, back to the institution of the family. There are social relationships that are inherently and desirably, unequal relationships, the parent child relationship is one. So a discrimination model and equality based model doesn’t help us think about how we can justly organize these relationships of fundamental inequality. I also now think about other relationships that way, employers and employees in the context of work, we don’t ask and we don’t want employers and employees to perform the same functions. They are not equals, although we pretend they are, because we construct this fiction of the employment contract. Also, you have bargaining between equals which is all nonsense, most of the time. But rather, this isn’t again, it’s a reciprocal relationship of inequality and there should be unequal notions of responsibility. Doctor/patient is another one. Teacher/student, there’s all sorts of inherent inequality and unequal relationships that are just totally passed over in the dominant ways that we think about social justice currently. 

William Saas: The latter is especially relevant now as it’s the end of the semester and grades are coming to their relative equality or inequality of student and teacher comes into stark relief. I wanted to say that one of the things that I think we appreciate about your work, particularly is that emphasis on sort of, not stopping really at a step in critique. Continuing to move forward past the discriminatory discrimination model. To a more robust and encompassing critique of the system, and thinking through, developing, cultivating values that are more ethical and better, right, but that project is sort of ongoing. What we know I think, from our perspective, as humanities scholars who are interested in political economic theories and heterodox economics, and specifically modern monetary theory is that that’s a tremendous amount of work. That it doesn’t stop. 

On your reading, is it a matter of well– is it defensible to say that pragmatically, we have the discrimination model in place right now and we’re working with it, right? And we’re improving it incrementally. We don’t have time or resources to sort of pause and have this sort of conversation and the mass pedagogical moment that you’re calling for. Another way to rephrase it would be: How do we get to those questions? And then I think that one of the things I appreciate about watching your lectures and reading your work is that you are not afraid to teach and to pause and say, “This is how we’re thinking now, this is how we need to think.” So a lot of thoughts there. But how do we do it?, I guess, is the takeaway.

Martha Fineman: There’s a lot of things I want to put your question in the context of a lot of other things. So for example, I recently read and it struck me as absolutely true. If you change the way people think about things then you will also change their actions, although it’s hard to change actions if you don’t change how people think. And I think that this is a lesson that feminists should have learned and necessarily did not learn. When they took an idea, again, an abstract concept like equality, and sought to impose it on empirical circumstances where equality was not the model, in fact, the imposition of equality resulted in greater inequalities

And I think that with a discrimination approach where we are now, again, since we have won many of the battles, at least in a formal sense, discrimination is illegal. Discrimination is condemned, those are significant battles. We should recognize that that’s the case and welcome that. But where do we go from there? Again, what good is inclusion, if the institutions that we’re including ourselves in are in fact unjust, operate on jostling? So we have to think about how it is, I think the continuation of the discrimination model actually fractures the theoretical subject, the subject of concern in radical politics, progressive politics, whatever you want to call it. 

It fractures that subject in ways that allow those who are interested in maintaining the status quo, to turn us against each other, or to view the fragmented theoretical subject. Address their concerns, but not the concerns of all of the people, “the others.” “The others” who share that set of concerns but are excluded by the particular identity category. Whether it’s race, gender, religion, whatever, sexuality. Again, we fracture the possibilities, the solidarity that is possible; The bringing together as a collective, talking about social justice, justice for everyone, even though there’s a disparate impact. People are differently affected. We are all affected, in one way or another. I think that it’s maintaining that, what the discrimination model, in fact minimizes the past ability of real state action. The state becomes a standby to ensure, kind of an umpire making sure that all these disparate groups get to play fairly rather than taking an active role in ensuring a more just society for everyone

William Saas: Sort of like the neoliberal nightwatchman of equality!

Scott Ferguson: Yeah, yeah. Listening to you speak, I just keep coming back to Hillary Clinton’s last campaign for the presidency. One of her tropes that I hated so much, and I shouldn’t even pick on her because it’s just a standard trope. It’s not Hillary’s trope, but she was the candidate. She kept saying, “Everyone should have a chance to succeed. Right? I kept thinking, “No!! Everyone should be taken care of!” That’s different. That is such a different premise. We don’t want to give everyone a chance to succeed, but maybe they won’t. And, you know, we did what we could.We need institutions that do active ongoing caretaking and mediating along the way. 

I think we’ve teed up the background and the stakes pretty well. What I’d like to give you a chance to do is to get us into some of the weeds of how you’re thinking about vulnerability as constitutive of the subject. How this is related to what you call “dependency?” You also differentiate dependency in important and complex ways in your work and I just want to give you a chance to do some theorizing with us along these lines with these terms.

Martha Fineman: Well, first, vulnerability is a term that’s in common use. Usually, when people think about vulnerability, or the vulnerable, they’re thinking about people or individuals or groups who have been subjected to discrimination and exclusion or disadvantage, in some ways. So it has this negative kind of connotation. When I use the term vulnerability, I’m using it as a term of art. And I chose vulnerability carefully, because to me, there is no position.

I think we know this both empirically and intuitively, there is no position of invulnerability. None of us are totally invulnerable from outside forces or internal forces, that will change our position. 

So vulnerability, to me, is the susceptibility to change. 

Now, a vulnerability analysis is based on or it begins, and I talked about it this way, reasoning from the body. So that where we begin in our theoretical inquiry is not with some abstract concept, like autonomy, or equality, or dignity, on these abstract concepts, but rather with the reality, the empirical reality of our physical material body. And what does that mean? That is, in fact, the human condition, that body is vulnerable to change. By change, I mean, both positive and negative change, our bodies develop As infants we are totally helpless. But we develop, these are positive developments. There are also negative developments, developments that are caused by accidents and injury and environment, and so forth and so on. Negative changes within our bodies, illness etc. But both positive and negative changes. 

One of the things that we have to realize, and again, that factors into the concept of vulnerability, is that many of those changes, many of those forces that change are totally beyond both individual and collective control. That we, in fact, cannot control everything and that’s a really hard lesson for someone in the 21st century in an advanced democratic society to actually accept. But it’s true. Many of these are beyond – many of them can be anticipated and planned for, we can have, again, social policies. People age and guess what, we should have social policies that plan for that! People get sick, things like that we can actually do but we don’t. Because we tend to think of ourselves as invulnerable and the vulnerable individual is that “other,” who’s not us. Who we shouldn’t worry about because somehow they’re inferior or whatever. 

Vulnerability analysis begins by reasoning from the body, the realities of the body, it is an empirically based theory initially. Now there is a normative side to a vulnerability theory and this is extremely important. We have the physical, empirical realities of the body. The normative part is what does our realization about the body mean for the way that we should think about constituting a just society? How should we design our institutions? How should we proceed, given that we are vulnerable individuals? And again, here’s where the concept of dependence comes in. Because of the limitations of our body and the susceptibility to change. We are throughout our lives, always, constantly dependent on social institutions and relationships, the family, the workplace, the financial system, the healthcare system, the social welfare, you just go on and on. We are dependent on those institutions throughout our lives. How should those institutions, in fact, ‘designed’ given our vulnerability; How should they be structured so that they are in fact, just?

William Saas: What role do ecologies play before or alongside these institutions?

Martha Fineman: Yeah, I’ve had a couple of graduate students doing their Ph.D. dissertations on vulnerability theory and the environment or, vulnerability theory and animals. Again, one of the significant things about vulnerability theory, in contrast to both liberal theory and much of critical theory, is that the individual is really put in a social context, which includes the environment. It’s not only man made, excuse the term! A man made environment, but it’s also the natural environment. We are part, we are dependent upon all of these things. So we need the animals, the air, the ocean, everything. Angela Harris actually wrote an interesting piece using vulnerability theory, talking about the environment within and how these bacteria in our guts that totally our health is reliant on. So that, it displaces the individual, as the primary focus of our concern in our policy to look at the individual, again, within these contexts, and the context certainly would include the environment.

Scott Ferguson: Yeah, and I keep hearing you grammatically, it’s interesting, you shift when you’re talking about liberal theory, you’re talking about the self of the subject, but then you often shift to our. That’s something that I think is worth noting and tracking as we’re trying to rethink our own use of language and grammar. 

So one of the aspects of your work, which you’ve already hinted at, but I want to highlight in a more focused way, is that you’re making a pretty radical claim to universality. Which I don’t know if we’re in the age of, postmodernism or anything like that anymore. But I would say that, throughout my lifetime, and my intellectual academic development, that was naughty, you know? One doesn’t appeal to universality, because that’s discriminatory, right? That’sa highly problematic move. Butyou take this on in a very different way. And you’ve had some critics of this move and I want to just give you an opportunity to spell it out and, how you’re responding to critics and, why this rethinking of universality so important?

Martha Fineman: Well, again, the universality is the body. And we all have physical bodies. Now there are differences, and in fact, those differences– Well, there’s two kinds of differences that we can think about. So the body is the fundamental reality, the body is the human condition, we are all born into bodies. And when we escape them, we die. Right?! There’s two kinds of differences that people are thinking about here and I think that a lot of the postmodern critique is concerned with the demographic differences, the differences that are at the center of a discrimination analysis Differences like age and sex and race and so forth, ability. 

Those are the demographic if you take a slice of society at any one time, you can look and categorize people according to all these demographic differences. Again, a vulnerability analysis says, “Fine, there is nothing wrong with attacking discrimination when it exists.” That’s a positive thing to do. It is not sufficient however, if we’re concerned about defining the appropriate relationship between the governing system and the individual. Then we have to look at the differences that arise in the body over time. So one of the strengths of a vulnerability analysis is that it takes a life course perspective, looking at the developmental, not the demographic, but the developmental differences that occur within every human body. (Actually, they occur in animals, but skip that one for now!) 

But the developmental differences, and again, the way that we move through social institutions and relationships, because of our developmental phases, and increased abilities, capabilities, or decreased abilities and capabilities over time. So that places it outside of the characteristics of the individual, to the functioning and structures of society. it’s a different kind of “different,” it’s a different kind of difference. I think that when the postmodernists would talk about ‘deconstruction’ and ‘non essentialism,’ what they were talking about was those demographic differences, but I don’t believe even they could deny the realities of the physical material developmental body.

Scott Ferguson: Do you appeal to specific theories of ontgenices, or developmental models? Are you working with more of an intuitive level with that analysis?

Martha Fineman: One of the things I love is when sociobiologists and people like that get a hold of me! Evolutionary anthropologie. I’m working through all these concepts trying to build this theory, and it’s always of interest to me when people of other disciplines and other areas come to me and say that it relates to the work that they are doing. I mean, I actually just did this piece criticizing human rights because vulnerability analysis is an alternative to both human rights and a social contract paradigm, both thinking about state responsibility. In thinking of human rights, there is a way in which rights, which are a highly individual concept, are argued as necessary for reproduction of society, which is a socio-biological…You have to have an altruistic approach or else society will die out if you don’t care about the collective. I listen to that and I find that of interest but what I want to do is to have a comprehensive integral theory that actually takes into account the factors that I think are important. I’m not interested in justfying murder, or rape. 

Wiliam Saas: I wonder if, does it seem like there might be something at play broadly in terms of this block to a discussion of universality or an acceptance of universality and indeed, an acceptance of vulnerability theory and all of its implications? Well we don’t like our bodies and we don’t like to think about them and we don’t want to contemplate the fact that we’re going to die. And I wonder what level you might have thought about that kind of discomfort with embodiment informing and shaping the difficulties you have encountered? 

Martha Fineman: That’s really true and you know, I’m not a psychologist but I do think there’s a lot to that. The notion of control also, that we like to feel that we’re in control. “I did everything I could.” “I did everything right.” “I don’t deserve this.” What happens to us in fact, is random, largely.  You can call it luck, whatever.  I do think that that’s very difficult for many people to think about. Which worries me actually, when I first started vulnerability theory I thought about 9/11 and Katrina. The things that expose to the average everyday person are inherent vulnerability. Things are external, that they can’t control. Not only they can’t control but their government can’t control, or doesn’t control, doesn’t respond appropriately. You can see how easily the failure to understand vulnerability and its universality, to be manipulated for nefarious political reasons. This same thing is true with dependence. I mean dependence, what is the right wing’s cry for any welfare proposals? “This dependency. This generation of dependency.” As though that is some sort of evil admiration when if in fact it’s totally normal and we all experience it. Again, I don’t think theory and academics do anyone any service by pretending that those things don’t exist and by not confronting them and trying to educate people! You know Education starts with one person at a time, one group at a time. And again, unless you change how people think about things, you’re not really going to change their actions or responses. 

Scott Ferguson: One podcast at a time!

Martha Fineman: I agree!

Scott Ferguson: So I want to shift our conversation a little bit. We’ve been talking about the state and the responsibility of the state, but I’d like to shine a sharper light on that. You make some quite radical claims about not just the state, what it is? What it isn’t? What it’s responsibilities are. But also about the constitution and the question of constitutional jurisprudence. Could you take us to a little tour of what is the State according to Martha Fineman? And how should we rethink, or maybe be rewriting, the Constitution.     

Martha Fineman: Well, the state is one mechanism of governance. What we call the State is a mechanism of governance. I think one of the other things that distinguishes vulnerability theory is that it recognizes not only the inevitability of governance systems, but the desirability of governance systems and to go further and say, the desirability of the State. We all live in, again back to society, and are living in a society, and are living in institutions and relationships. We all live with sets of rules that define our day to day existence. They define who’s in a family, who’s not. What the consequences of a family are. They define our employment relationship, what the relationship is between employer and employee. They define our banking system, our healthcare system, our insurance, whatever it is, there are sets of rules.  That defines our interaction, our day to day interaction with each other. So that’s one set of rules. 

There’s another set of rules that define the governing systems relationship to those who are governed. So that’s another kind of hierarchical relationship. So sets of relationships. Vulnerability theory deals with both of those sets of governing relationships, although it’s more concerned with the day to day relationships than the governing system, although it does address that. But it’s more concerned with the day to day relationships. So I think, for me I that there is more positive, radical, transformative potential in a governing system that we call the state, which is the democratic state, susceptible to challenge, susceptible to democratic process, which puts Incidentally, the responsibility on us as citizens, than there is for other governing systems. Because if it’s not the state, the Democratic state that’s acting, to define those rules, to define those relationships, to tell us what our day to day existence is going to constitute, it’s going to be something else. Multinational corporations, insurance companies, religion, there’s one. Or the proud boys, and they’re ak 57, or whatever the guns are. 

Someone is going to tell us the rules or someone who’s going to impose that. Society cannot function without those rules. Whether that’s a radical or a realistic way of actually thinking about governing systems, I’m not sure. I mean, it seems to me that, you know, again, it’s hard to think of the human being, an individual living outside of society, and society is constituted by sets of rules.

Scott Ferguson: That answers some of it. But I’m wondering if you can speak a little bit more about your understandings of let’s say, the responsibilities of the state, and maybe something about your thinking around this concept of resilience?

Martha Fineman: I say the resilience comes from the institutions in relationships. Resilience is nothing more than the resources that we get and by this I do not mean only economic or material resources. I also mean things like security, comfort, love, or the resilience of the resources that we have as human beings, to confront and ameliorate our vulnerability. To survive and thrive in the face of these unending changes. Some expected, others not, some within control, others not. It’s the resilience that gives us the ability to withstand and thrive in those contexts.

 Now, no one is born resilient. Resilience rather, is gained through our experiences within social institutions and relationships, so that our family instills in us a certain set or not, security ability, love, material resources, health care. These institutions provided, relying on other institutions like the family needs the healthcare system. The family needs the state. The family needs that employment system, so forth, and so on. So we have the symbiotically arranged set of social institutions, where resilience is built through these individual interactions in social institutions and relationships. 

So vulnerability theory and thinking about inequality really looks at the inequality in resilience, rather than the inequality in other forms of inequality. It’s really how can we transform our institutions, so as to provide greater resilience. I mean, resilience should be the end and the responsibility of and since those institutions again, institutions and relationships are controlled by the governing system by the state. It’s their responsibility, then to see that they in fact, operate in a just manner. Vulnerability theory would say that, in fact, our vulnerability is the reason that we constitute the state. It is the reason we constitute social relationships and institutions. This family arises because of our vulnerability. The community, the state, the international community arise because of our vulnerability and that is the justification for those institutions. We should always judge those institutions by how well they then respond to the vulnerability. That’s the basic fundamental reason for their existence. So how are they in fact responding to it?  

And the state, of course, as we know, refers responsibility to other institutions. This is what privatization is all about. But again, we should judge those institutions, by what function, what public function they’re supposed to be serving. So how well does the corporation in fact, generate a vital economy, prepare workers for the you know, for the future?  How well do these institutions function? Not for the purpose of their shareholders, for example, but for their social purpose in allowing them the privilege of all of these legal advantages that the corporate form has given their social role in reproducing society, in generating and distributing wealth in society, and resources in society. And we don’t judge them that way, we judge them by a totally different set of – and this would be a big vulnerability project. It’s again, dismantling these institutions in terms of the function they’re supposed to serve in reproducing society, and the functions that they’re actually serving? And how should law be reformed to reflect the former rather than the latter?

William Saas: This is a point of overlap that I think excites me, Scott and others in our community. Which is our sort of shared interest in perhaps not dismantling, but reconstructing, deconstructing, recovering institutions, and remaking them and channelizing their energies and sort of possibilities in specific ways that serve the public good, and the public purpose. So for us, and this is a long, might be a little bit of a long winded way to set up the question, we want to get your take on modern monetary theory. So for you, it seems like in a sense, the state can go 100 different ways. The best one is probably to be organized and through democracy and democratically and in a way that democracy is kind of an institutionalization of a vulnerability to change. Right? An immutability and a shiftability. Money, I think, for us, and what MMT is sort of made clear for us and coming at this from the humanities, critical theories perspective, seems to be remarkably similar. And is, I think, an institution that is frequently associated with the state, but also for us associated with political agency. 

Could you talk a little bit about how you do or do not see the kind of central observations of MMT, which are that money is not a scarce private resource, and that we can afford most of the nice social programs that we can imagine, right? It’s a matter of resources, not of scarce money, with the kind of claims and things that you’d be interested in accomplishing through your ideal state or a governance system that operates in accordance with vulnerability theory?

Martha Fineman:  Well, just a couple of things. One is that I don’t need to  state it out here as something that’s different and distinct.

Scott Ferguson:  Neither do we.

Martha Fineman: The state may have made the decision to privatize, or refer certain kinds of state functions to other organizations, like the financial system or whatever. But there’s no standing outside the state. The state is, in fact, inevitable. 

As far as money, I think it’s important to think of vulnerability theory, again, focusing on reasoning from the body. The body is pre-political, it’s pre-economic. The body is the body. The body is the body with its limitations, is a dependent, vulnerable independent entity. And it is the reason and the justification and the rationale and the occasion for the construction of all of these other social institutions including monetary policy. But nothing is inevitable in that regard. Money or financial arrangements are in a vulnerability analysis, only a small part of what constitutes resilience. Again, money is part of an institutional cluster of things. It’s one measure or mechanism for fulfilling state responsibility, but it can’t be considered alone. 

I think this is the problem that I have with things like political economy is that they focus on politics, and they focus on the economy, and they forget the rest of the world. And in fact, they forget the world that for most people on a day to day basis, are really relevant to their lives. Security, right? Valuation, accommodation, you know, the structural arrangements that they want, I suppose you could put a monetary value on them. But I think that it would lessen their significance actually, just like you can’t reduce everything, you can’t quantify everything.

And well, I know there are people that would disagree with that, but there are things that you can’t quantify that are qualitatively measurable things that we have to deal with. So money is a mechanism. And I think you’re absolutely right, that, you know, it’s a construct. All right, and it’s all you can play around with in all sorts of ways. But I would urge you not to focus only on the monetary aspects. But on rather, I mean, if you have universal daycare, and universal health care your monetary needs are lessened. I mean, there are things that are provided structurally, that actually have an impact on the way that you might think about the allocation of financial resources. I don’t know if that makes sense. But it’s something I’ve been thinking about because I’m doing a piece for law and political economy. And I’ve been thinking again, about the way that political economy narrows the focus on state responsibility. I mean now, to an important aspect of state responsibility, but it is only an aspect, it’s not the totality.

Scott Ferguson: This makes a lot of sense to us and actually as critical humanities scholars and podcasters and many other things, we are emphatic about theorizing, making sense of money from a nonreductivist point of view. So for us, money is always imbricated as an institution, in multiple institutions. And just as you’ve said, and I guess, for us, we have a similar critique, we share a critique, I think of a political economy and political economies predication of analysis on the individual. And for us, one of the ways that we articulate this through MMT, through modern monetary theory, is a critique of the so-called, “barter story,” that is supposed to originate money. 

The barter story as most of us know, starts with individuals, really an individual, which in a Lockean model has mix their labor with nature, so much that they have a surplus and in order for it to not to spoil, they decide to have some social relations from an autonomous point of view. And then though, it creates barter relationships, and from those barter relationships, there are various kinds of opportunity costs and problems that come along. Then we get a more formalized money system. Then, you know, years later a state comes along, puts its stamp on the coin and vows to protect private property, etc, etc. We all know that story. 

But what that story does is it makes money a question of individuality, right? And in such a reductive way, that pushes institutions, society and government to the outside. Even if they recognize that those institutions and government have a role to play, it’s always a kind of intervention. Right? And so for us, what we would say is, we want to theorize, thematize and critically explore and fight for a much more capacious understanding of money. One that is necessary for universal, free daycare. So if money is not being quantified and tallied up at the individual, private level for daycare, that’s great. But that also for us means that money is being spent, it’s being spent at the federal level. Right? So money’s gonna be somewhere. But the question is where in the vast, heterogeneous array of interdependent institutions, is it playing its role? So I don’t know if that makes some sense as a response to your comments. 

Martha Fineman: Yeah, it does. And I mean, I think it’s reflected in the current discussion now about the budget for the Defense Department, the defense budget versus “Build Back Better.” I mean it’s an allocation question, isn’t it? I mean, but investment in institutions, which is made with money, is more important, I think, in many ways than just tallying up the bank accounts of individuals at the end, which is how we tend to value individuals. I mean, it really is, it’s very perverse.

You might be interested in one of the projects we have, which is actually rethinking professional ethical relationships in the context of vulnerability theory. And I have this project, which is looking at law, business and medicine. And of course, law and medicine have become nothing more than businesses. Just thinking about how you could take away from a transactional analysis, the way that we think about ethics now is on a transactional basis, you know, what happens when “x does y?” And you know, all that, to actually thinking about an ethical responsibility in terms of the professions responsibility to the just reproduction of society to making sure that social justice is done with these transactions, realizing these transactions are not individual transactions, but transactions that actually express fundamental values that society has. So anyway, it sounds like we have a lot of things to work together on. And I’d love to see, I’d love it. If you send me some things you’ve written, that would be great.

Scott Ferguson: Yeah, that’d be wonderful. Billy, do you have any closing thoughts?

William Saas:  I just wanted to say that it’s, of course, really great to talk with you and think through these things, and would love to move forward talking more, as Scott was recounting the, the Lockean story of the origins of money into an Aristotelian story to it goes on, always back, right? That it’s not the traders, or the producers that are vulnerable in that situation. It’s the commodities and things that they’re making that are vulnerable to decay and rot. It’s out of a reaction to the vulnerability of the commodities rather than themselves that they find it necessary to make coins, which are more permanent, right, and can withstand circulation and things like that. And so just vulnerabilities just completely.

Scott Ferguson: “Other.”

William Saas:  “Other,” yes. And where does it go?

Martha Fineman: There’s a great article that actually uses vulnerability theory to look at the vulnerability of corporate attorneys. Not a group that we normally think of, but they are! They’re totally vulnerable to, and again, this is related to the professionalism project. The demands of their clients, you know, the demand. I mean,they’re in a position where their options and their ethics are structured by these external forces. Anyway, yeah. So, it sounds like a lot of really exciting possibilities.

Scott Ferguson: Absolutely. Well, I think that’s a pretty great place to stop. Martha Fineman, thank you so much for coming on Money on the Left.

Martha Fineman:  Well, thank you for having me. I enjoyed this interview immensely. Thank you.

* Thanks to the Money on the Left production teamWilliam Saas (audio editor), Aditya Sudhakaran (transcription), & Meghan Saas (graphic art)

The Metaphysics of Accounting with Paolo Quattrone

Paolo Quattrone (@PaoloQuattrone) joins Money on the Left to discuss the metaphysics of accounting and the significance of accounting’s repressed history for political economy today. Professor of Accounting, Governance & Society at The University of Manchester, Quattrone insists that, while often seen as a positivist and merely technical skill for recording extant data, accounting in truth represents a rhetorical and quite generative engagement with the “mystery of value.” This mystery, Quattrone reminds us, informs nearly all aspects of collective life. Genealogy is central to Quattrone’s work and, in our conversation, we explore how numbers, figures, and visual arrangements used in contemporary accounting trace complex and often surprising lineages that have a lot to teach us about accounting’s still untapped possibilities. Along the way, we touch upon two of Quattrone’s most important case studies. First, we delve into the Jesuit order’s rich contributions to early-modern accounting, including its development of double-entry bookkeeping. Then, we turn to the more recent history of “I.R.I.,” the Italian “Institute for Industrial Construction” which, even as it served as administrative arm of the Marshall Plan, underwrote the midcentury period of prosperity known as la dolce vita by precisely rejecting the ideology of “profit maximization” promulgated by The United States. We conclude, finally, by rethinking money’s futurity through Quattrone’s approach to accounting. If spending tomorrow is never flatly predicated upon yesterday’s inert data in the form of receipts or revenue, we suggest, then it instead derives from mobilizing accounting practices in the present to create new credit and debt relations “endogenously” in response to shifting circumstances.

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Music by Nahneen Kula:

Scott Ferguson: Paolo Quattrone, welcome to Money on the Left. 

Paolo Quatrone: Thank you, Scott. Thank you, Maxx. 

Scott Ferguson: Thanks so much for joining us. I was hoping that we could begin by asking you just to tell our audience a little bit about yourself, your background, your training, and how you came to this question of accounting.

Paolo Quattrone: Maybe we can start from how I came to become an accountant. I’m actually a qualified accountant. Of course, the answer is by mistake. Because until the age of 17, I wanted to become a medical doctor. And then, because my father was an accountant and he had a small practice, I said, “Why do we have to waste all of these clients that you have?” And so, I wanted to become an accountant too. He discouraged me with all of his power, but because of course kids never do what their dad tells them to do, I started to study economics and management. 

Then, when I was in my last year of my degree, my father was not very well. I started to help in his business. I took a year off from university. And I understood that that was not what I wanted to do. Then, I decided to do a PhD and I was very lucky to have a great supervisor, Professor Claudio Lipari, who’s still alive and well. He viewed accounting as a theory of knowledge, not as a stupid technique. I started to study accounting with him, he became my PhD supervisor, and then also by chance, we started to get interested in the Society of Jesus, the Jesuits. Also, because the first college of the Jesuits was opened in Messina in 1548. I’m Sicilian from Sicily. I’m from Palermo, and the first college was opened in Sicily. So we started to discover this huge, new world of relationships between religion and accounting, rhetoric and accounting, pedagogy and accounting, and various other things.

Maxximilian Seijo: Accounting in the dominant reading is often seen as a positivist and merely technical skill for recording extant data. However, in your work you make a passionate case for accounting’s generativity and uncertainty which, you remind us, inform nearly all aspects of collective life. I suppose for starters, what is accounting in your view? Why is it so important? And why is accounting, as you would say, “rhetorical” and not simply boring?

Paolo Quattrone: First of all, accounting is important because it deals with the production and distribution of value. It is very meticulous about how value is produced and distributed. There are a couple of things that come to my mind. In the production and distribution of money, one important thing is the way in which you do that. Not many people know the word “rationality” has an interesting genealogy. It comes from Latin ratio. When I teach my students, I always tell them, “Look, at the end of this, you may not learn anything new about accounting or program management,” which I teach a lot, “but you will learn a lot about Greek and Latin.” This is my first Latin etymology class. The word rationality comes from ratio. Ratio, in Latin, means two things. One is ratio, so proportion. In order to be rational, you have to be balanced, you have to be proportioned. Two is account, because account gives the idea of symmetry and balance. So if you want to be wise, you have to be balanced. 

Accounting is interesting because it emerges and was designed as an instrument to seek for this wisdom and for this balance. It did that thanks to a lot of rhetorical techniques, and we can talk about them if you want. One thing that is interesting is also that in the first accounting treatises–let’s say early, modern times, late medieval times–to explain to those who are reading these treatises what accounting was about, an example that was used is the metaphor of the mirror. When it is asked: “Why do you use the accounts?” It is because you will see the state of your affairs, you will see yourself, you will reflect on your morality as if you are looking at yourself in a mirror. 

This brings us to the second important Latin etymology behind contemporary accounting discourse: speculation. Mirroring in Latin is speculatus. Sorry, my Latin is a bit rusty. My father would be ashamed of me. The idea is you create a distance between you and yourself and you reflect on your behavior by looking at yourself in this mirror which, in accounting terms, is the financial reports that are produced at the end of the year, or when you close the books and you open them again. Interestingly, this speculation was a moment of reflection, a moment of reflecting on your morality. In modern times, this has devolved into a degraded sense of speculation, however. “I don’t even care about who I am and why I’m here, I just want to make money.” Then, you’re in the world of high frequency trading and algorithms where no one stops and reflects. 

One other thing: at the moment we teach a lot from home. When I’m at home in my study, I have all my books around me, including one on my left on the history of balance. But next to that, I have a few books on labyrinths and mazes. It’s the same idea. I’m interested in labyrinths and mazes, because the maze is made up of moments where you have to stop and think. So do I go right or do I go left? Then, you make the decision, you deal with the uncertainty and the mystery of life, you decide to go right. Then, you stop and you face another wall. Again, you have to make a decision. If you make all of these decisions right, you are amazed, you are out to the maze and you see the light.

So accounting is all about speculating about what you do not know. It’s about creating

spaces in between opposites. In that sense, it’s rhetorical, to make sure that you interrogate the unknown. There is a link between Latin rhetoric and accounting as well. I mean, if you think of a couple of words like data, or fact, fact is possibly the most interesting, but data as well. Fact comes from factum, which means made. Data comes from datum, which means given, but also attributed. So the meaning of data is never given, it’s always attributed. The truth needs to be in the middle, in that middle space between the two opposites. Accounting is about creating two opposites in order to speculate on the mystery of value, in order to speculate on what is in between these dichotomies, expenses and revenues, assets and liabilities. You create figuratively in order to deal with the mystery of value, with uncertainty, with the unknown, so forth and so on.

Scott Ferguson: What it seems like you’re starting to explain here, and what so much of your work is criticizing, is a certain modern and even more contemporary reduction of accounting to a series of terms. I wonder, if you had to spell out a critique of the key terms in contemporary accounting, or maybe even just popular conceptions of accounting, what would they be? What bugs you about our approach to contemporary accounting that your genealogical method seems to work in the opposite direction of in a movement of opening up, of expanding meanings, which are maybe hiding in our contemporary language, but that we only treat in a reductive way?

Paolo Quattrone: I had a meeting yesterday or the day before yesterday with some people who were working on an initiative on the future of environmental accounting, and there are various, different initiatives. At one point, one of the people said, “I know you want to measure nature. I know you want to count how many bees are being killed or how many bees have been saved, the stock of natural capital that we have and how much we are consuming.” And I said, “Look, I think you’re completely wrong in the sense that it’s the idea of measure which is wrong. You cannot really understand the stock of nature that we have available. But we can reflect on what we do when we consume natural resources and what trade offs we have.” Another example is this idea of believing that you can define targets and measures in these targets. So you’ve got this target and that target becomes the “truth,” or it’s affirmative in a sense. It defines what is the right objective of a corporation, maximizing profit or whatever. In doing that, you lose sight of what, in economics, would be the opportunity costs. But in other terms, it would be the trade offs. In order to pursue profit, what is it that you are killing? In order to make sure that you deliver your target sales this year, what is it that you are losing?

I think accounting has, until very recently, always been about reflecting about these trade offs. So it’s about making sure that you use what you can count–money–in order to reflect about what you cannot count, which is the purpose of the organization, your morality, what you need to do next year, and so forth, and so on. While we tend to, nowadays, reduce everything to numbers in the false belief that numbers will produce objectivity and generate rational choices, that was just the first movement that accounting did. Accounts indeed reduce the complexity of the world that is around you which cannot be reduced to numbers in order to augment your understanding of this complexity. However, numbers were excuses, they were not final objectives. They were means to explore the ambiguity of life. They were means to explore the mystery of value. They were means to explore how we always deal with uncertain situations. They were never instruments to eliminate the mystery, eliminate the uncertainty and eliminate the ambiguity. That would have been a stupid way of using numbers. Yet this is exactly what we’re doing in contemporary time. We are using accounting as if accounting can provide more certainty through answers, while instead, the only thing accounting can do is to point us towards the right questions. 

I always make this point to my students. I mentioned Professor Lipari, my supervisor. He was also my professor in accounting 101, the first accounting course that I ever took in my life. I did Classics in my high school, so very little math, very little anything that was merely practical. At that time we had oral exams. So you do the written part, and then you sit in front of 30 people who ask you questions all the time. And if I told him, “Accounting is about truth,” he would have taken me from the ear and kicked me out of the group saying, “You have not understood what accounting is about!” This is 1980. So it’s actually quite recent. It’s only with the financialization of the world and the belief in the power of markets as a mechanism to substitute accounting in the valuation of basically understanding how value is produced, distributed, and allocated that we lost sight of the power of accounting. In a sense, it’s the victory of finance versus or against accounting. 

This reduces everything to cash, as if cash is the ultimate goal in life. Of course, it isn’t the ultimate goal in life, it’s a means to pursue an end.  This is why the Jesuit cash box had two keys. One was kept by the accountant, the appropriator of the college. He was the spokesperson for financial matters. He needed to take care of the money. But the other one was kept by the Rector of the college, who was the spokesperson for anything else that was not financial. So yeah, the means, the key of the appropriator to interrogate the end, which is the key of the Rector. You can count the money, but you use the money to speculate about what the Jesuit Order was about without pre-defining what is right, without fixing targets. Because that would have been too stupid to deal with managing a complex and large organization like the Jesuits.

Scott Ferguson: What is so fascinating, and I think it’s such a nuanced point that you’re making, which is that this kind of reduction of accounting to non-accounting becomes a function of what we call “neoliberal financialization” or “marketization,” on the one hand. But on the other hand, even those who are thinking about the environment or thinking about ecology get stuck, too, in this reductive epistemology and the ontological assumptions involved, right?

Paolo Quattrone: I would say they’re trapped into this idea of measurement. We can measure finances now. We have to measure what happens in society and we have to measure what happens in the environment. Yet, we forget that, as much as measures are wrong for understanding how value is produced and distributed, they will be wrong in terms of how we understand societal matters and environmental matters. But those who designed double entry bookkeeping knew this very well. There is another interesting issue here. I would say, since the 16th century, from a technical point of view, in relation to double entry bookkeeping, there has not been any groundbreaking innovation. I mean, with the accruals, you basically, from a double entry point of view, you have more or less everything that you need to keep the accounts. 

So it’s the same double entry that can be used in different ways depending on what kind of epistemology orientates you. So are you driven by positivism? Then, you screw with the beauty of accounting. Are you driven by a very, I would say not even relativist, I would say, very pragmatist approach? Then, you start to see that things are much more complex than what measure can tell you. In that book that was mentioned, it’s one of the first accounting treatises where the rules were described. It was published in my hometown in Palermo in 1636, by Lodovico Flori, a Jesuit. 

In the preface, it says accounting is a scientia prattica, it’s a pragmatic science. It’s not about truth. I’m not a theologian. So it’s about solving problems. In order to solve problems, you know, truth is almost irrelevant. You want to reflect on what may be true in Rome is false in China. What is true in Rome at one point in time will become false in a different point in time. What is right in a certain network of relationships in Rome will be false in another network of relationships. Accounting helps you with that ambiguity. It helps you to manage that ambiguity, helps you to manage that continuous malleability of what counts as right.

Maxximilian Seijo: You’ve mentioned the Jesuits a few times now, and they are an animating feature of your work, specifically with regards to their particular accounting forms. One term we would ask you to explicate from this lineage is the meaning of “inventory. Your genealogical approach really does a lot of work to defamiliarize how accountants, and perhaps lay people, might understand what inventory means and how they fit into accounting practices, and particularly, the alternative practices that you locate in this 16th century Jesuit context. But before you do that, could you say for our listeners, who are the Jesuits and a little bit about how they came to transform accounting?

Paolo Quattrone: Yeah, the Society of Jesus is still a Catholic order. It was founded in 1540 by Ignatius of Loyola. The first college was opened in Messina in Sicily, because Messina was the port. It was the kind of door, along with Venice, towards the east. The Jesuits were interesting because they mainly did three things. They did many things, but let’s say three main missions. One was, of course, evangelization. So they had missions. Another was they had colleges and schools. So if we teach in classrooms these days, it is because of the Jesuits and their Ratio Studiorum, the first treatise of pedagogy. It was a Jesuit treatise. And they were crazy about double entry bookkeeping. They were using double entry bookkeeping, or they loved double entry bookkeeping, as much as we love artificial intelligence these days. So for them, it was a fantastic innovation. What is interesting in the Jesuits is that, in every single activity, even in the arts, think about the Baroque and the Fall, and the work that Deleuze has done on the Jesuits to explain how it was impossible to find a true representation of the world in a sense, and it was open to difference, but anyway, in every activity that they did, they dealt with the unknown. So in pedagogy, it was the mystery of knowledge, in the missions, it was the mystery of the unknown. You go to lands where you don’t have the maps, you would not know what animals would kill you, you would not know what kind of people you would find, what culture they had, and still, you needed to establish a connection with them. 

They were pioneers in accounting, because they understood the mystery of value. For them, value was not something that is easy to represent but it was something that it’s quite difficult to represent. It’s contingent and it varies depending on where you are and what you do. So my interest in the Jesuits emerges from their interest in the mystery, and also, spiritual exercises and the mystery of God. They never define what God is, but they give you instruments to make sure that you search for it. 

This is why I was interested in them, because in contemporary terms, I would say they were at ease with the idea of dealing with “unknown unknowns,” the infamous word, or collection of words, that Rumsfeld discussed. It’s their daily business. It would have been very stupid for them to define what is right, because as I said before, what is right in Rome, will not be right in China, will not be right in Latin America, will not be right in India, will not be right in Rome in different times. It’s interesting also how I use this stuff when I teach major program management, or when I teach people who run very large projects. This could be large infrastructures like airports, defense, or nuclear plants. And these projects are so complex that you cannot really say what they are about. There’s a famous phrase that I use from the program director of HMS Queen Elizabeth II, one the new aircraft carriers of the Royal Navy. He has a very nice line where there’s a picture of the warship and then the heading is, “This Is Not a Warship.” 

So if you think that this is a warship, you have not understood what my job is about. So if you fit the target to believe that I have to deliver a warship, you are adrift in the very first moment in which you do that. And you are adrift because the warship is many different things at once. It’s an airport, a small village. If it were a nuclear submarine, it would also be a nuclear power station. It would be many different things. But also, most importantly, it’s a very dynamic object. It has the tendency to become what it was not, I would say. So he said, “No one told me when I took this job that this program would have been used to keep Scotland in the United Kingdom because the shipyards are in Edinburgh in five.” During the Scottish referendum, the UK Government said, “Okay, you can leave the United Kingdom, but be careful that you will lose 12,000 jobs because this shipyard will be moved down to England.” Forget the warship because this thing will never go to war. Forget the other things. At one point in time, in a certain network or relationship, this thing was about jobs and votes in order to keep the United Kingdom together. That creates a quite serious challenge to modern management, which is based on positivity. “This is a warship, this is not a warship.” So a negative attitude towards the warship is actually much more useful than a positive attitude towards the warship. The Jesuits understood that in the 16th century.

Scott Ferguson: Just to circle back to Maxx’s question, the term “inventory” seems to be the place where accounting practices are supposed to begin, but you point out in your genealogy, that an inventory, as we’ve been saying so far, is not just in a positivist recording of inert items. It’s something more. So maybe you can tell us where that word comes from? 

Paolo Quattrone: When people think of the word “inventory,” they think of accounting, of course. They do not know that the term originates from the first canon of rhetoric, which is inventio. And inventio is about classifying things in spaces, in Greek, it would be topos. They would become topics of conversation, for instance. Then, the first canon of rhetoric is about doing this classification, or doing this de-finition. So an asset becomes certain things and expense becomes other things. But again, because of the richness, I would say, of the Latin word, Romans understood very well that every classification, every de-finition–and we can think of the word definition as well–it’s always contingent. 

That classification valuementary was functional to actually be reclassified, that is the second canon of rhetoric, ordinatio e dispositio. And, not by chance, that book that I mentioned before by Flori was organized in three parts. The first part, “Dell’inventario,” is about the inventory. How do you do the classification, how do you do your chart of accounts? But the second part was about the ordinatio e disposizioni dei conti, or the ordination and disposition of the accounts. Once you have the classification, you start to mix them around in order to invent solutions to problems and issues that you have not thought about. So the inventory was not there to measure things or to represent them. It was there to prompt imagination, to prompt creativity, and to prompt the possibility of finding new solutions. 

So the inventory, which is a definition with the emphasis on the word finis, or boundary, opens up the possibility of taking those boundaries away, knowing that the moment in which you make a definition, some people will agree and some other people will disagree. So you always get, as a good rhetorician, to be open to the possibility that you are wrong. Never fixate on things in a way that you believe you’re right. That would be the greatest sin that you can commit. And in that sense, accounting is rhetorical and pragmatic. Because the ultimate end is not to deal with and understand what is right, what is true. But actually, to deal with the unexpected circumstances in which you can find yourself, and that the belief that you have is actually put in question by something that you had not thought about. 

This is why I talk about the procedural rationality of the Jesuits. That example of the two keys that I made earlier exemplifies the fact that they never defined what is right, but they defined procedures through which you understand, in every single circumstance, what is right and what is wrong. You do that by establishing a tension between two opposites in order to explore the ambiguity of them, which is symbolized by the space in the middle.

Maxximilian Seijo: Moving from this attention to genealogy and language, your work deals quite a bit with accounting’s visuality. This might be counterintuitive so I’m looking forward to you explaining this, but instead of treating visual arrays, like the double entry grid, as transparent mechanisms for conveying the underlying facticity of the data–this measuring process and reduction that we’ve talked about–you compare accounting’s visual representations to paintings, and explore them rhetorically, if not in almost a metaphysical sense. So with that, can you explain how accounting can be like a painting and what attending to accounting’s visual aesthetics might mean for the future of accounting?

Paolo Quattrone: Yeah, there is a need for a step back first, and maybe an example helps. I always make the same example so some of the people who will listen to this, if they are my students, they will have listened to this already. Think about a classroom, also talking about the Jesuits who invented the classroom in the first place. Depending on how you lay out the desks in that classroom, you would have a different kind of social interaction. So in a conventional way, you’d have the teacher sitting and then a series of rows opposite to the teacher. And the idea is that the teacher conveys knowledge to a passive audience. Organize that classroom as a Harvard style lecture theatre, so you have an amphitheater, you have a space in the middle which is empty, and then you have the lecturer who orchestrates the debate amongst the participants in that classroom.

Typically, that architecture symbolizes the fact that a good Harvard case study does not have a solution. It’s a rhetorical device to investigate the ambiguity of management and the empty space in the middle signifies the fact that the case study does not have a solution. So knowledge emerging from the debate will not be conveyed by the lecturer. Or think about an executive session classroom. The layout is organized in Cabaret style and the knowledge emerges from the tables, because people are really experienced. 

So I’ll translate that into an account, and an account is also space. Physically, it is a space. Depending on how you design that space, depending on how we design that data visualization, you would have different kinds of social interactions. Depending on how you design the income statement, you will have different kinds of social interactions. So when I was a student, I was taught I think 6 or 7 different formats of income statements. Now, we teach students only one, which is the one that everyone knows that starts with revenues, cost of goods sold, gross profits, then operating expenses, operating profit, financial income or expenses, profit before tax, and tax and dividends. That is not, I would say, an income statement. That is a political statement. It tells us that the most important thing on earth is the shareholder, and the dividends that need to be distributed to them.

But you can organize the income statement in different ways where there is no one single perspective then there is taking into account. Think about value added accounting, for instance, where you have reduction augmentation, you have the production of value, and then the distribution of value amongst peers. Interestingly, you would distribute this value between workers, labor, shareholders, capital, banks, the state through taxes and the firm where the mediation amongst these different stakeholders would happen. That is a statement where there is no perspective. So this is the link with his theory of art. Because in most modern forms of visualization, there is a clear perspective. So we tend to represent things from a clear perspective, normally the perspective of the owner. Instead, you can design dashboards, for instance, which do not have perspectives. In another paper, I analyzed one of the dashboards utilized for a program managed delivery for one of the London Heathrow terminals, one of the few that actually had been delivered on time and on budget. I used medieval aesthetics to explore how that artifact works because the artifact by design does not want to privilege one target versus the others. 

Because if it did, you would think that visually that that target would be building the warship, or building the airport, as if that program is about building the airport only. Well, that problem is much more complex. So you need to create spaces where you debate what is important at one point in time or another point in time. That dashboard does not have one single focus and does not have one simple perspective. It does have multiple foci and multiple perspectives exactly like medieval art where the technique of perspective was not invented. And therefore the viewer, and the eye of the viewer, was asked, and even forced, to go around the painting and not focus on the vanishing point, which is instead what happens with modernity. 

So there are lots of links between accounting, its spatial nature, but also it’s, I would say, artistic nature, in the sense that it embeds intrinsically in ways that are very pervasive and work without being seen, notions of perspective. Which become ways to make certain forms of capitalism work, for instance. Without those, without accounting and the income statement done in a certain way, you will not be able to think about the maximization of profit. You will not be able to do certain things. Of course, Keith Hoskin who reminded me how double entry cannot be an Italian invention, because the Italians did not have zero in their numbers. So it needs to be an Indian, Persian, or an Arab invention. These things had an agency. The structure of the data visualization, the structure of the income statement is not a neutral, banal technique. It embeds certain forms of seeing societies, certain forms of seeing the world, certain forms of seeing the economy, and who counts in that economy and what counts in that economy.

Scott Ferguson: That’s so fascinating. It also really defamiliarizes Excel spreadsheets, which is what mediates so much money in our world today. Whenever I hear you talking about and affirming dashboards or accounting visual matrices that walk our eyes around, it makes me think of certain cinema theories, actually. André Bazin, the French film critic and writer from the 30s, 40s, and 50s, he famously argued for the value of a certain kind of cinematic aesthetic that he deemed “realist.” But he didn’t mean it in any kind of positivist sense, he had a kind of a mystical articulation of this aesthetic. And it precisely, for him, asks our eyes to wander about the frame. And even though cinema is based on photography, and photography on the camera obscura, and these kinds of optics that go back to Renaissance perspective and before that have a tendency to focus us in a very monocular way, even using, to go back to your example, what we account for, what we say it is, isn’t necessarily all that it is. What Bazin is doing is he’s telling us that this monocular, single perspectival technology actually can be non-identical to itself and can produce a different relationship to the world, to visuality, etc. It just strikes me that there’s probably a lot more work to be done interdisciplinarily thinking about the history of art, the history of different media, how they’re used, and what that might mean for accounting and vice versa.

Paolo Quattrone: Absolutely. Also, a couple of things come to mind about what you just said, Scott. One is that in pre-modern times, let’s say in early modern times, you would use numbers to reduce the complexity and interrogate what cannot be actually seen by and through the numbers. While with modernity, we stopped at the moment of reduction. So we believe that what the numbers tell us is actually the truth. We forget that by focusing on certain targets rather than others, I see only certain things and not others. So it misses the second point of that rhetorical technique, which is reduction argumentation. 

Historically, and also, in genealogical terms, if we look at all the business visualizations, or most of the business visualizations, that are used nowadays, you mentioned Excel, Excel is a rhetorical grid. It was a rhetorical machine, una machina rhetorica, because in the Latin machina means “crane.” So that is the way in which you build and rebuild knowledge. The basketwork is a rhetorical wheel. This is why I guess in English you say, “reinventing the wheel.” Because all of these things were not there to represent things; they were there to make you invent new things. They were not there to focus on what you can see, but to make you focus on what you cannot see, what you have to speculate about. 

If you’ve got time, it is up to you, we can pick this up later if you want. The example of the grid is fantastic. Because if you’re a good orator and you’re paid well because you speak well in public, you may accept to speak in public even for things that you do not know very well. So the good rhetoricians, they had a series of techniques to organize their speeches. And there were all these visualizations that we use nowadays. So the grid, the modern version would be Excel, rhetorical wheel, balanced scorecard, Instagram, and things like that. But the grid is very interesting, because the idea was, let’s assume that I have to give a talk about something that I do not know. Okay, whatever, so the unknown. I have to deal with the unknown, with the mystery of the object. Let’s assume it’s this iPhone, and I know very little about this iPhone. So what was the rule? The first one is to take a piece of paper and write a certain line vertically, and horizontally, and then assign to each of these lines a grammatical value. So who, what, when, why, whether, how, and so forth and so on. 

Then, take the object, the topic of your conversation, okay. Make it float above the grid, and then you start to interrogate the unknown. You say, “Who built this? Apple.” Okay, then you take note, and write Apple. “When is it used? In how many different ways?” Then, “Why is it used?” God knows, for many different reasons. “How is it used?” In many different ways, and you take notes, you start to interrogate the unknown and start to build your speech, 

Then, the third rule was be careful, never let the object fall into one of the cells, into one of the places, or into one of the topics there. Because otherwise, this becomes a commonplace. You believe that this is actually a phone, you lose the opportunity to understand that this is actually not just the phone. To understand this technology, which everyone has got in his or her pocket, it’s much better to think in negative terms. Again, this is not a phone, this is a bank, this is a cinema, this is a camera, this is a church, this a square, this is a matching agency. It’s whatever you want this to be, to become, but never let it fall into the grid because otherwise this becomes a commonplace. 

What do we do nowadays? We concentrate on the numbers which are on the grid rather than using those numbers to interrogate what cannot be representing the grid. This goes back to this idea on means and ends. The Jesuits said very clearly that accounting has always said very clearly that you use numbers, the means, to interrogate the ends. It’s when means and ends become the same thing that it’s the end of the world. In a sense, it is when the means becomes an end in itself, when speculation becomes speculation. “I want to make money,” that is my end. So means and ends began isomorphic, and that is the end of the world. And I say that is the end of the world because you mentioned that film director and I mentioned another film director, which is Paolo Sorrentino and his film on Giulio Andreotti. At the end, there is a wonderful monologue in that film. If you’re not familiar with Sorrentino’s films, he won the Oscar a few years ago. 

But in many of his films, he interrogates the mystery, the mystery of power, beauty, love, and the mystery of life. And at the end of Il divo, there’s this wonderful monologue. Andreotti is the most important Italian politician of the 20th century. He has been charged with all kinds of crimes including being a partner with the mafia and having asked people to kill some of his friends as well, like Aldo Moro. At the end of this monologue, he calls all these people that he asked to be killed, and he says, “Aldo, Carloberto…” All of these people who are in love with truth, they don’t understand that truth is not the end of the world. If you believe in truth, if you believe that that target is truth, that it is the end of the world, then there is no room for mediation, there is no space for discussion. This is why I teach my students to forget about alignment. Alignment is epistemologically, politically, and practically impossible. What you need is tension. What you need is to use rhetoric to create opposites and explore the ambiguity of what is in the in-between. That brings wisdom. The rest brings, I would say, atrocity. 

Maxximilian Seijo: It’s really remarkable how you draw out this rhetorical, logical and analytical schema with means-ends. And it reminds me, to sort of make the connection that I think is already hovering there and make it explicit for our listeners, of the way throughout the history of economics people study money. There’s the sense in which the vast majority of it is the study of the commodity that represents money. And it’s the way that it behaves within a system. We could look to Marx and Smith and a lot of others, especially in the classical tradition, who do this. But in some sense, in studying the object of money, even if you know it goes beyond gold, as such an object without letting it hover over the grid, as you said, by “submerging it into the fixity of that systemic process,” you perform that means-ends analytical structure. But not just at the level of diagnosing the fact that money becomes the means and the ends at the same time. But in the sense of, in how to fix the problem of money becoming means and ends at the same time, you submerge money analytically into that status. So that doesn’t allow for an alternative reprocessing of the accounting medium of money in that particular logical schema. And I think it’s just so fascinating how you, in such a lucid way, put that together as a matter of rhetorical argumentation.

Scott Ferguson: I’ll just piggyback here and say that, I think, for us on this show, and the work we do as scholars and public intellectuals, I think we have a different understanding of what Marxism calls “reification.” We see money as being reified and we make criticisms of how Marxist analyses often don’t interrogate their own reifications of monetary mediation and as accounting. And your work helps, I think, flesh out a language that is new to us and really helpful and illuminating.

Paolo Quattrone: I hope it does. But that means and ends separation and tension, for me, it’s a really important thing to wisdom. Because what it does is to ensure that you never reify things. So that reduction is what we have talked about during the whole of this chat. In order to avoid that reduction, you need to make sure that means and ends are always separated. I have another TEDx talk where I talk about my college at Oxford. I didn’t study at Oxford, I was employed by them. So it was a lecture in accounting at Saïd Business School and Christchurch. And it’s interesting how the layout of the room where the governing body in Christchurch, it’s telling, of how that basically still medieval institution defines good governance. You have the seat of the Dean. There are some signposts so the Dean always sits in the same seats. The Dean is appointed by the Monarch who was chosen by God. That is the idea. So the Dean is the spokesperson for celestial matters and wisdom, and who sits opposite to the Dean in a clear opposition is the Treasurer.

The Treasurer, the person who deals with dirty stuff, money. Because the Treasury is the means. And the Dean is the spokesperson for the purpose and the end of that institution. It is in that space between the two that they have to find that compromise–compromise, another wonderful word. And the college collapses in a sense, either when there is no dialogue between the two or when the two collude. The college would go bankrupt if you pursue your ends without thinking about your means. You would be corrupt if you pursue your means, so if you pursue money, but not the celestial matters that bring us close to institutions. This is why, for instance, universities are losing their power, because it’s all about money. So it’s not about education. It’s not about the role of the university in keeping democracies together, or in keeping the nation-state together. It’s all about making money. The moment in which money is no longer a means to pursue a bigger and greater end, then institutions collapse. When you have states where the Treasury is much more powerful than the other departments, then the state and democracy is at risk.

Maxximilian Seijo: I think moving now to perhaps a case study, which you sort of already gestured at a little bit there, in your work, you talk about how accounting is vital for governance in the sense that you just explicated. Specifically, in one instance, you study the history of the IRI, or the Italian Institute for Industrial Reconstruction, which served as an administrative arm of the Marshall Plan. And as you suggest, it underwrote the mid century period of prosperity known as “La Dolce Vita.” So for our listeners, could you perhaps say what is the IRI’s history? How did it approach planning and budgeting? And how did IRI’s approach to “rationality” conflict with the ideology of profit maximization promulgated by the United States?

Paolo Quattrone: So IRI first of all was established by Mussolini during the fascist regime in 1933. But then, before the war, he changed its mission. It was set up for saving the banking system, or restructuring the banking system, after the crisis of 1929. But then he changed its nature and it became an instrument of industrial policy for the fascist regime. Already in 1940, the Vatican understood that Mussolini entering the war was a big mistake. And they started to understand what they had to do in order to build what came after the fall of Mussolini. And IRI was particularly important in this strategy also, because quite a few leaders of IRI in the 40s were very strong Catholics, and in particular a couple of guys, Pasquale Saraceno was a professor of Industrial Economics in Bocconi University in Milan. Also, Sergio Paronetto was an adviser to the Vatican, to Einaudi, and a very close friend of Giovanni Battista who then became Pope Paul the Sixth.

So when Italy gets out of the Civil War, which followed the end of the Second World War, the Americans come to Europe and come to Italy and tell the Italians, “Okay, we will give you money. But we will also help you to turn the companies that you have, and then sell them on the market. And in order to do that, we will also give you accounting and business techniques and knowledge.” The idea was to add efficiency as the main criteria for the allocation of resources. So this is the Marshall plan. Now, if they followed efficiency as a criterion for the allocation of the resources of the Marshall Plan, all of the resources in Italy would have been invested in Lombardy, which was the very industrialized region of the North. But the people of the country at that time were Catholics. The Vatican understood in 1940 that things would have not played well for the fascist regime. They started to organize a series of meetings where the Catholic intelligentsia met to define the contours of what would have been a modern social democracy. People like Aldo Moro, Giulio Andreotti, Paronetto, Saraceno, Ezio Vanoni, and some others started to meet in Paronetto’s house, Via Reno.

Then, after a few years, they issued that code to a what’s called the “Camaldoli code.”  In the Camaldoli code, they defined what a good Catholic would have done. They were the principles to drive the good Catholic. The core principle of that code, of the Camaldoli code, was the idea of “common good.” So in everything that you do, if you’re an accountant, if you’re a lawyer, if you’re a politician, if you’re an administrator, you have to pursue the common good. But they define the common good in a very interesting way. Because it was defined in this very ambiguous way where the common good was the series of conditions that allow individuals to pursue their personal interests. So in pursuit of the common good, inevitably, you have to compromise and you have to mediate with others. You have to allow the others to pursue their individual interests, which means that you have to constrain yours, but the others had to constrain there’s for you to pursue yours. That was the basis for the typical Catholic mediation and compromising attitude. 

Now, they managed to translate that into accounting terms, because as I said before, the Americans came and said, “Okay, we give you the money with the Marshall Plan, but we also give you instruments and techniques through which you can make this money work.” Not lastly, principles like efficiency, but also accounting techniques to measure this efficiency and to pursue this efficiency. The Italians of that time were a bit smarter than the Italians that we have recently, I would say. And they said, “Hmm, that is not what we like.” Because an income statement where you have profits and dividends at the bottom line, it’s indeed a political statement that tells you that the most important institution in the economy and society is the corporation and the shareholder. For us, the most important issue is the family and possibly what drives our activity is not profit or efficiency, but common good. 

So after a few years of negotiation, they managed to tame the Americans. And towards the end of the 50s, they started to define planning and budgeting not based on the idea of profit, but based on the idea of value added. So how value is produced is by selling goods and services and then acquiring raw material and basic production factors that creates a bunch of, or a basket if you like, of value. And that value then is distributed amongst the equals, including the workers. Interestingly, you see how we got back to the idea of the account being a space for social interaction. The worker in this new format of the income statement is no longer a resource to be utilized, but is actually a resource to be remunerated in the same way in which capital is. It’s an interesting story because the people who came out with this form of budgeting, not only for IRI, but also for the state, were Pasquale Saraceno, a professor of Bocconi, Paronetto and Ezio Vanoni. Three people from the same village in the north of Italy, Morbegno, all relatives. 

So Saraceno was married to Vanoni’s sister, and Vanoni and Paronetto were relatives. Vanoni became Minister of Finance and he organized planning and budgeting based on value added at the national level. Saraceno had various roles within IRI and he was called the architect of the planning era within IRI. That planning was organized according to the idea of value added so that value added could work all the way up and down, from the state down to the subsidiary where it was owned by one of their holdings that IRI was made of. IRI was also an interesting solution, an interesting model that was apparently copied in many other countries, because the holding was a public holding, so full in the end of this of the state, but the subsidiaries operate in the market. 

Again, you have that need to balance a trade off between the need for pursuing profit and efficiency but also the need for pursuing social equality and welfare. The two things add to balance. That is the key to wisdom. So being Catholic, these people understood it very well and they reached a compromise. And it is since the very beginning of this chat that I wanted to tell you the etymology of the word compromise. It is compromisum, or “with the promise.” The com means “with” and “promisum” means “promise.” So with the promise that eventually we will agree, but we know that we can never be aligned, that is impossible, and it’s actually counterproductive. It’s much better to be misaligned and have an instrument of mediation. The key instrument of mediation in contemporary times, or in financial times as the newspaper would say, is indeed accounting.

Scott Ferguson: You have this lovely way of painting the picture of “La Dolce Vita,” this mid century prosperity moment. Maybe you can, for our listeners who know nothing about the history of Italy and what was happening, what was it like? What was it like to really benefit from this?

Paolo Quattrone: In relation to this, there’s a five or six volume of the history of IRI that we have a chapter in. There is also a chapter that begins in this way to give you an idea of how important IRI was, and then I’ll give you some anecdotes on what the 50s, 60s and possibly the early 70s allowed. So the story of that chapter begins in this way. If in the 60s you were a tourist and wanted to go to Italy or you wanted to travel to Italy, you would fly there or you would take a boat. If you fly, you would possibly go with Alitalia, which by the way now has disappeared. With Alitalia, my friend told me, “Paolo, do you know what Alitalia stands for? It stands for ‘Always late in taking off, always late in approaching.’” 

So you would fly with Alitalia or you would take one of the wonderful transatlantic boats, the Michelangelo. Alitalia was owned by IRI. Michelangelo was built by Fincantieri, and it was owned by IRI. Then, you’d get to the airport or the port. You’d rent an Alfa Romeo Duetto, which was then owned by IRI. Then, you’d take the first and longest motorway in Europe that was built by Autostrada. Autostrada was owned by IRI. Then, you get to Milan. And after having survived Italian traffic, you’d get to your hotel, you’d make a phone call with SIP. SIP was owned by IRI. And things started to become a bit complicated in terms of striking a good compromise when you’d go downstairs to buy a Panettone, the typical Christmas cake in Milan and Malta. The manufacturer was also owned by IRI. So IRI exporting became too big to be managed. The history, I don’t know, I was not there. I can tell you that Italy during the 50s and 60s must have been an interesting country. First of all, it allowed a lot of social mobility. My grandmother was born in 1900. She only did the first three classes of the elementary school. I began in the faculty at Oxford in the span of two generations. My mother didn’t have a high school qualification. She stopped after the second cycle of school. I made it into Oxford. 

The sisters, no, her brothers all became doctors, lawyers, very successful entrepreneurs in the span of one generation. We had a wonderful system of state schools in Italy. And for me, that is “La Dolce Vita,” the fact that you can actually aspire to a better life while enjoying yourself rather than putting effort into what you do. I think that is gone somehow in Italy. Okay, I would say that the state schools are still good, but you have this emergence of private English speaking schools. Because the idea is that your kids will not find a job in Italy and that they will have to be ready for the international market. That is a bit sad, it is no longer dolce. It’s actually quite bitter, I would say. Dolce means sweet in Italian.

Maxximilian Seijo: So before we wrap up, we wanted to perhaps speculate a little, to use your refrain there, about Modern Monetary Theory, which as listeners will know is what is the sort of guiding framework for this podcast. While recognizing you’re no MMT expert, I do want to go through some of the assumptions and then see perhaps if we can reflect on them. So for MMT, money is not private, or a finite chit of circulating value which governments can tax or borrow away from the private sector. It’s a political and thus public system of accounting, credit and debt, in which private firms variously participate. So on MMTs analysis, money’s “futurity” is not flatly predicated upon inert past data in the form of receipts or revenue. Money’s “futurity” then derives from mobilizing accounting practices, as we’ve discussed, to create new credit and debt relations endogenously in response to shifting circumstances, perhaps different ends that we might want to pursue. So for us, this is where MMT as an economic discourse stops, and your work precisely begins. What we’ve said is how much we appreciate that your work gives us this rich and non-positivist language for reimagining money as endogenous accounting. We’re wondering if you could reflect on that and perhaps talk about how you see accounting and going forward as a discipline but also a practice for pursuing just ends?

Paolo Quattrone:  First of all, let me say I’m not an expert in MMT, although I do know where you’re coming from. I would say, yeah, definitely money is not a finite resource. The beauty of double entry bookkeeping since the Middle Ages is that you can create money with a stroke of a pen. I’m actually quite surprised that there is all of this enthusiasm about blockchain to create new money. Creating money was so simple with double entry that you did not need all of this fancy technology, costly and environmentally unfriendly, to create. You can create it in a much, much easier way if you have strong institutions that make sure that relationships are managed wisely. 

Then, it goes back to the point that we’ve been discussing for this entire chat: it’s means and ends. I guess that if you treat money as a scarce resource, it becomes an end in itself. If instead it is a means that you can create as, in fact, it happens in banks–banks create money with a stroke of a pen, with the financial multiplier–if you instead think of money as a means to pursue different ends, then the issue is to make sure that you balance the two things and you do not create too much money and too little money. And it depends on what you want to do. 

But of course, that requires a strong governance around this relationship between the creation of money and the use of money. At the moment, I don’t see that happening. I don’t see that happening at the state level. I don’t see that happening at the company level. I don’t see that happening anywhere. I don’t see that happening in any kind of modern institution, which led to a century of prosperity, at least in the Western world. So I think there is a lot of work to be done. Maybe we can have another chat on the reform of the auditing profession and the need to rethink the relationship between auditors and auditing, because that is also part of the lack of proper institutional arrangements to make sure that this relationship between means and ends is governed properly.

Scott Ferguson: Absolutely. One final thought that I am curious if you would want to reflect on with us is you draw on this word and this notion of balance a lot. And this is the promise of ratio in its deepest, genealogical sense. But in the predominant discourse around governance, we hear a lot about balance, we hear a lot about balancing budgets and balancing state budgets. And this becomes the foundation, the unquestioned foundation, for bad governance, for austerity, for destitution, for systemic abandonment and exclusion. So I was wondering, if you have thoughts about these two different understandings of balance. Because I don’t think that that’s what you mean when you talk about the rhetorical machine of the grid allowing for a kind of balance.

Paolo Quattrone: Now, as I said before, it is the same word, speculation, it is the same technique, double entry, but it is for completely different reasons. So the balance does not have to be done in the interest of money. The balance has to be done in the interest of the various interests that rotate around the idea of money. If you reduce everything to money, then that is not balanced. It’s a reduction. I don’t know whether that helps, Scott. Money and finances are one of the different interests that need to be balanced. It’s not the thing in which the balance has to be achieved or pursued. So that is, I believe, what makes the difference between the contemporary forms of governance that are based on that equilibrium and the medieval forms of governance that were based on balance. Balance was a much more poly-focal, poly-vocal issue than to be made or be pursued in the interest of one thing only, which is financial capital.

Scott Ferguson: I think with that, we’re going to close out this beautiful discussion. Thank you, Professor Quattrone for joining us on Money on the Left

Paolo Qauttrone: Thank you Scott, thank you Maxx. Thanks also for the wonderful pronunciation of my surname.

Scott Ferguson: We try, we try. 
Paolo Qauttrone: Okay thank you guys. Perfect.

* Thanks to the Money on the Left production teamWilliam Saas (audio editor), Aditya Sudhakaran (transcription), & Meghan Saas (graphic art)

Radical Heterodoxies & Parallel Institutions w/ Mat Forstater

Mat Forstater joins Money on the Left to discuss the origins of Modern Monetary Theory (MMT), the vicissitudes of heterodox economics, and the challenges of building alternative institutions in and beyond the academy. As one of the principal architects of MMT, as well as teacher and advisor to many of the more recognized MMT scholars and advocates today, Forstater is perhaps the best equipped heterodox economist to give us the details on the innovative assumptions and arguments that created the firmament for what we now know as Modern Monetary Theory. More importantly, how Forstater came to shape the project greatly defamiliarizes popular assumptions about MMT, which tend to reduce what is in truth a rich intellectual and political movement to a narrow and technocratic set of truisms and just-so stories. From experimental poetry and Black political economy to the problems of futurity and invention, Forstater’s circuitous path reveals MMT’s origins to be far more interdisciplinary and heterogeneous than it is often understood to be by opponents and advocates alike.

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Music by Nahneen Kula:

William Saas: Matt Forstater, welcome to Money on the Left.

Mathew Forstater: Thank you. It’s great to be here.

William Saas: It’s so wonderful to have you finally with us. To get us started, we’d like to ask a bit about your professional and personal backgrounds and how they kind of end up leading our guests to what they became. Can you do that for us and tell us how you came to be involved with heterodox economics, maybe what brought you down that path, and what maybe influenced you the most along the way?

Mathew Forstater: So I guess, at some distance, I can say that I was something of an unusual kid. I was a big reader growing up, and I was very interested in Black history in elementary schools, finding books about Martin Luther King, Harriet Tubman, whatever you could find, and all that kind of thing. Actually, all the way up until I went to college, people thought that I would go into the humanities. I won an English award in junior high school. I wrote, I was not a math and science person. I certainly wasn’t taking any personal finance courses or anything like that. A big moment in my development was when I had gone to public school from kindergarten to the end of 10th grade, and I had been not doing well in school in 10th grade–I always did well in school. So anyway, long story short, I went to an alternative high school for my last two years. And I’m sort of the generation that was alive during the 1960s, but not old enough to participate in it, but old enough to be aware of what was going on. I have older brothers and I watched the Watergate hearings with them.

So I went to an alternative school. It was run by very progressive minded people, you call the teachers by their first names, and there’s no rules practically or whatever. I looked at the classes that I was going to pick from my first semester, and there was communism, eastern religions, and transpersonal psychology. I was just in heaven. This was just like the greatest thing. A course that I ended up taking for two semesters that maybe had the biggest influence on me was conceptual art. It just opened up a whole world for me of art, theater, poetry, the borders between fantasy and reality, audience and performer, and all these kinds of different issues. I was always motivated by social justice issues. I was very concerned about the world, especially after Reagan was elected and was talking about the Soviet Union as an evil empire. It seemed very scary. It really was for me. So I decided, instead of going to college, I moved to a farm. It was actually like a Homestead School.

So there was a group of us on this property. We were growing organic food and learning about solar energy. Our goal was to try to be as self-sufficient as possible. Then, the Three Mile Island nuclear accident occurred. It was just 11 miles away from the farm. It was a big deal, because the radiation doesn’t stop at the gate of the utopian commune. The message that I realized was that you can’t separate yourself, or at least I didn’t feel that you can just go and find some place to make your imaginary utopia. There are still these problems in the world, and you’re not going to be able to fix them here. So after that, I left the farm. Then, I lived on the west coast for a couple years and pursued poetry. Finally, I made my way back to the east coast and registered for my first college course. It was “Introduction to the Black Aesthetic,” taught by Sonia Sanchez, who was a well known poet, certainly in the Philadelphia area. She’s like an institution, but she’s someone who was not as well known as Nikki Giovanni or some other young poets that were part of the Black Arts Movement. But now she’s pretty recognized. In any case, it was just fantastic.

I was able to develop a nice relationship with the professor and we all did some type of performance at the end. This course, at that time, was being offered in the department of Pan African Studies. The department at that time was a very interesting department because one of my professors was Vietnamese. There was a very global, third-worldist view and a lot of emphasis on the connections between Africans in the diaspora and on the continent. So I just started taking different courses in Pan African Studies. In the meantime, I was taking introduction to this, that, and the other thing because I really didn’t know what I wanted to major in or what I wanted to do. Finally, I settled on Pan African Studies. The name changed in the middle of my time there to African American Studies, and some of the faculty changed. Temple University became a center for Afro-centric thinking and an African-centered worldview, laying out the methodology and philosophical foundations, and, of course, the critique of Eurocentrism was a big part of the curriculum and what my focus really became. I started to look at issues both in the US and the anti-apartheid movement, which was also going on at that time. 

So the relationship of race and class is what I was grappling with. How much of what we see is due to class and how much is due to racism, and what’s the relationship between capitalism and racism? Then, I also tried to bring gender into the analysis and the picture as well. So I was introduced to political economy by an anthropologist, actually. I only had two economics classes as an undergrad. There were one or two heterodox professors at Temple, but not anymore, one left. I only saw a little bit of mainstream economics in my introductory class. The teaching assistant had to take me aside, I think, after the second day and say, “You’re right about everything you’re saying, but I have to get through this material. Here’s a bunch of professors, you might like their classes.” I’ll tell you, I took a lot of his recommendations and they were all just fantastic. I was very fortunate to have some fantastic professors even just in these introductory courses. They have a required course for all undergrads called “Intellectual Heritage” at Temple, and it’s taught by dozens and dozens of different people. But somehow, just picking a section because of my schedule, I ended up having some wonderful teachers as an undergrad. I was getting into studying, the library, and researching things just on my own.

So I felt like I wanted to systematically study political economy. Somehow I heard about The New School and saw their course descriptions and said, “Okay, I can go there. I can try to catch up on the technical stuff that I don’t have a background in–the stats, maps, and all that. But I can also take these courses in economic history, the history of ideas, and political economy.” In those days, you had three courses that were all Marxian economics, two introductory, one advanced, and then there was another advanced one that was not required. But we really delved deeply into it. This was the time when the mode of production controversies were going on. I got really interested in that because I was interested in economic development, and I was interested in Africa, but sometimes things affect the trajectory of your career where it can seem somewhat arbitrary. At The New School, the faculty is very small. There’s only really one faculty member for each field area. So there’s one person in international trade, one person in labor economics, and maybe one person in money and banking. If we were lucky, we had all these covered, but if a faculty member would leave–which is what happened, the development economists left–then it took them two years till we had a replacement. And by that time, you had to keep moving on.

I was very fortunate because even though development wasn’t available, race and class was being taught by Rhonda M. Williams. And it turns out that she was only at The New School for two years. I used to say I’m the last person who did a field in race and class with Rhonda Williams. It might have been the first and last. There were maybe three people who actually were able to do it. But in any case, she was doing a lot of really exciting work. One of the things about heterodox economics is that there’s different ways of being heterodox and there’s different ways of being orthodox. So we had some heterodox economists who methodologically were extremely conventional, like almost the crudest type of positivism in terms of just their view of science. It wasn’t really any different from mainstream economists saying economics is a science. People who are heterodox in content, but not method, maybe we could say have a very similar idea of–and we see this in some brands of Marxism–the idea of science and so on.

So there was Rhonda Williams, and also another newer professor, Will Milberg, who is now the dean of graduate faculty, but he was a new faculty member then. Both of them were very early explorers of kind of postmodernism in economics. This was the aftermath of Deirdre McCloskey’s book, The Rhetoric of Economics, which raised a lot of methodological issues and kind of reinvigorated a reflection on methodological issues. So that resulted in all of these different cottage industries opening up in different aspects of methodology. That was very important for me. And the professors, despite the remarks I’m making about methodology and so on, were brilliant. I learned a ton. Before, when I heard things from out of economics, I had a gut feeling that something was wrong with these arguments, but because I didn’t know the language, the models, the terminology, and all these things, I really couldn’t engage with it in a very strong way. So this is what I was doing there. I was learning the language.

At the same time, African American Studies is, by its very nature, interdisciplinary. It is very historical in its approach. The critique of Eurocentrism, I would say, is another part. So anything that would come up, if I would see reference to sociological economics or economic anthropology or whatever it was, and then out of this sort of postmodern turn, finally, reaching economics, that also opened up. With Marx and political economy, there were a lot of ways to engage in cross disciplinary thinking, collaboration, and so on. In the end, I had taken a job for one thing, without even having my dissertation topic approved yet. I was at Gettysburg College in Pennsylvania, and there was a fellow from Malawi, Derrick Gandwe, who was in that department. He had got his PhD at Manitoba which still does kind of have a heterodox PhD program way up north in Canada. So he kind of became like a mentor of mine. But you’re working full time and you’re trying to finish your dissertation. So a lot of my motivation for starting the institutes was to provide students with PhD funding so that they didn’t have to work and do the dissertation at the same time if possible, because it’s important for students to have  at least one year to devote to their dissertation.

What I’ve always wanted for students was for them to have the same opportunity that they do in the mainstream departments. I would say it’s pretty unheard of for people to pay their own way through a PhD program. Most of the time, if you’re getting to that point, there’s a good chance you’re going to be offered some type of support. So heterodox economics has never really had that, except on a very, very tiny basis. I really began to see how it was going to be necessary to talk about institution building in heterodoxy. This was also a time when there was a debate about “big tent” heterodoxy versus all these different subfields or paradigms. You have Marxists over here of one type, and Marxists there of another type, and post-Keynesians of one type here, and post-Keynesians of another type there. And some really felt strongly that you couldn’t mix schools of thought. Heaven forbid, we should do something like that. I mean, it really was kind of incredible thinking about it now, because how else do we move forward unless we are grappling with, improving, and modifying? That means learning from other insights and so on.

William Saas: What years are we talking about right now?

Mathew Forstater: In the 80s. I was at The New School physically from 87 to 92. The word heterodox, you never even heard that in the beginning part of that time period. Maybe just toward the end of that time you started to hear it because Fred Lee was over in England, and he was starting the Association for Heterodox Economics and other things. Before that, post-Keynesianism kind of served a similar purpose in that it was, with some exceptions, less dogmatic and more open. People have made these arguments, and there was a big period where critical realism was all the rage in post-Keynesian economics. It’s this idea of open ontology. In any case, it was more open, and therefore, of a certain humility, because I never saw any one of these schools as having all of the answers. Feminist economics and ecological economics started to emerge. You already had Black political economy back from the 60s and so on. You had these different heterodox professional associations, like social economics, evolutionary economics, and the others.

Post-Keynesians never had a professional organization, which did have some repercussions, because, for example, at the big meetings, in order to sponsor sessions, you had to have an organization. So the social economists, the evolutionary economists, the feminist economists, and historians had their sessions, but post-Keynesians, because they didn’t have a professional organization, they would have their own conference. Those became very important for MMT, because UMKC started sponsoring these conferences. And they were very international and very well attended. Very early on, before the term MMT even came out, a lot of these ideas were being debated at these summer schools. There weren’t just conferences. We would have graduate students and young professors, or people early in their careers, who would come, and do three to five days of hearing from all different speakers. Then, at the end, there would be a full two or three day conference. So these are great experiences, and the Institutionalists started doing one as well, which we also sponsored, and some of these were explicitly interdisciplinary.

William Saas: How did you get from Gettysburg to UMKC?

Mathew Forstater: Yeah, so I wrote my dissertation with Robert Heilbroner. Then, I had my third year review. These days, forget it. If you’re getting one year to finish, that is it. I haven’t heard of people getting more than that these days. So for me to go three years, I mean, really… Anyway, I got done in time for my third year review, but I spent all my research time writing my dissertation. So I felt like I needed to focus on some research and publications, and I applied for a research scholarship or whatever with the Levy Institute. It turns out now, Pavlina Tcherneva, who had been an undergraduate student at Gettysburg, obtained a prestigious fellowship with the Jerome Levy Forecasting Center, which is no longer associated with the Levy Institute, but in those days it still was. So she came to Levy and then Randy Ray had a long time association with the Levy Institute, because Minsky had been his teacher and Minsky was the chief kind of face of the early years of the Levy Institute. His former student, Stephanie Kelton, then Stephanie Bell, had been doing an MPhil at Cambridge, and the Levy Institute and Cambridge had an exchange program. So she came as a Cambridge scholar to Levy. So we all converged on the Levy Institute.

Wynne Godley was there as well. His name isn’t brought up so much these days, but sectoral balances was really kind of elaborated by Wynne Godley, and he was a big supporter of ours in terms of all the stuff on money and everything. He was not as enthusiastic about the job guarantee, but he was on the money and budgeting side. So Randy was on leave from the University of Denver, I was on leave from Gettysburg College, one year turned into two years, and all during this time, we were organizing sessions at conferences and had visitors. Bill Mitchell came from Australia and some others. Basically, we were talking to everybody we could possibly talk with. We were submitting papers to the heterodox journals, of which there are many. And we were going to various meetings. We were sponsoring our own workshops and conferences. We used to call them workshops, but if you look at the lineups of our conferences, it’s unbelievable what we brought together. What we had was funding. So we could say we will bring you here, we can fly you from Europe or Australia, we can put you up, and all that kind of thing, and even for US-based people.

Each conference would have a different theme. We had one on Social Security. Several of the people from the National Jobs for All Coalition we invited participated in that–Trudy Goldberg, Helen Ginsburg, and Sumner Rosen. I hate to say it, but unfortunately, and now I can say for myself as well, heterodox people are not getting big invites all around the world to present their work, share their ideas, and so on. I soon figured out that heterodoxy has created a kind of parallel institutional structure. You won’t let us into your journals? We’ll have our own journals. At one time, there was concern that people’s careers could be affected, because if you only published in these heterodox journals, they weren’t ranked as high. Well, I’ll tell you this, it’s not like I’ve been at Ivy League schools or whatever, but I have never seen a non-economist, Dean, provost or anybody question the journals. They’re refereed journals. A lot of them have been in existence for decades. They have editorial boards, people with prestigious records, and so on. But that’s not a completely satisfactory solution. 

Scott Ferguson: It’s a strategy. So you’re talking a lot about this institutional coalescing around the Levy Institute and everyone sort of on leave, and it’s an extended summer camp, maybe. Then, you’re talking about the way you start inviting people and staging these events, and it’s all very exciting. Is this all “big tent” heterodox? Where is so-called MMT emerging? How is that coalescing? Are there certain topics, problems, and shared social values that are coalescing here as well? Or is it just, “Well, we’re all in the same place and we’ve all got different ideas?” What was that kind of primordial soup like?

Mathew Forstater: So that’s a great question. In some ways, there was a certain kind of iterative process to it. But I used to jokingly say, in the early years, I should be writing a book or an article on the socialization of professions, or the sociology of knowledge, like introducing a new paradigm, what that entails, all the different things that happen, and what are the tipping points or whatever. So we did not all just go to the Levy Institute and say, “Oh, we’re all kind of post-Keynesian,” and then next thing you know, MMT happens. It was an organized thing that we would all converge on the Levy Institute. Pavlina had done an internship with Warren Mosler between her junior and senior year. And as a result of that, she did a crash course in post-Keynesian monetary theory. Her assignment was to write a critical review of Mosler’s “Soft Currency Economics.” She did that, and then she also worked on another paper, which was like a math model type paper.

She was able to participate in the 50th anniversary of the Bretton Woods Conference. There were only three economists at that conference, Randy Ray, Charles Goodhart, and Basil Moore. Everybody else was from the world of finance, hedge funds, or something, but Goodhart was working on the paper that became the two concepts of money. He introduced chartalism and metallism and that whole thing. He was working on that paper, and he even incorporated some of the African Studies references about the colonial tax and that stuff into at least some versions of that paper. Then, Randy had started to work on the book that became Understanding Modern Money. That was published at the very end of 1998, I believe. He and I both had working papers starting in 1997. He had one on the government as the employer of last resort, one “Money and Taxes: The Chartalist Approach,” and then one on functional finance.

I forget what it was called, but basically, he covered what at that time we saw as the three main areas: the history of money and the nature of money, different contending theories of money, the government budget, deficits, national debt, and all of that, and then full employment and the job guarantee, which then was referred to as the employer of last resort, or public service employment, you’ll see that as well. So some of these things had different names for a while. With chartalism, some people really didn’t like that name. I never really saw what the big deal was, but in any case, the bottom line is, we were introduced to “Soft Currency Economics” in the summer of 1996. Then, when Pavlina came back from her internship when she was a senior, she took my seminar in macro and monetary theory, and she did an honors undergrad thesis on these ideas.

There was this post-Keynesian email listserv. Instead of blogs or podcasts or whatever, in those days, it was listservs. And a lot went on on those listservs. There were incredible discussions and debates and dramas. Warren Mosler found his way there. That’s where I first saw his name. That’s where he saw my note that I had a student who was looking for an internship. Randy, and then Bill Mitchell, that’s where I first saw his name as well. These ideas, like tax driven money, that the deficit is just accounting information, and these basic sort of cornerstones or whatever of modern money, I mean, each one had to be completely unpacked and thoroughly examined. And what we started to find out is that these were not completely unique ideas. There was a long tradition in each of these areas. Now, maybe finding them all together in quite that way was new.

But one of the things that I did was look for evidence in the history of economics, and beyond economics, to find evidence of people who had recognized that money could be tax driven, because at the beginning, one of the things that people always assumed is that we were arguing that all money that there ever has been, or ever could be, was tax driven. Or our critics would exaggerate our claims. Instead of saying that in a certain institutional context, then, the monetary system or the budgetary system can be managed in this way. But not saying that under any possible imaginable institutional arrangements this is how it is. That gets into a lot of things about what is money and there were plenty of discussions about this.

Maxximilian Seijo: I was thinking, before we perhaps open up that rabbit hole, I wanted to hover on what you briefly mentioned there, which are your contributions. Because, I think, if listeners haven’t already heard, your background in Black studies and poetry and then coming to economics later offers perhaps a bit of a unique intellectual background that led you to this point on these listservs, and then, importantly, as you mentioned in the institutional context of post-Keynesianism and heterodoxy more broadly. So with reference, perhaps, to this sort of lingering background, what do you feel like your primary contributions to this moment and to this coming to be of MMT were, and how did your background inform the shape that they took?

Mathew Forstater: Right, that is great. So I came to the Levy Institute. My stated proposal was to conduct a historical and interdisciplinary analysis of employment and budgetary policy. In fact, I’m still a research scholar on the website of the Levy Institute. And if you click on me, it still says that that’s what I’m doing, which is fine. My colleagues were taking a super macro look at the economy, and you could state all of the main things about money and so on in these kinds of sectoral balances levels. There are three sectors: domestic, government, and the International sector. But I came out of a tradition within post-Keynesian economics that is sometimes called structural post-Keynesianism, institutionalist post-Keynesianism or post-Keynesian institutionalist. Basically, instead of only looking at things in the super aggregated way, the economy is looked at as a set of linkages among industries. Let’s take labor. Movements of workers between different firms and industries, and the different amounts of activity in different industries and so on, was part of both unemployment, and also that understanding, or that level of analysis, had to be part of full employment policy.

So I did a paper on how full employment policies must consider both effective demand and structural and technological change. And this was actually a little bit controversial among my colleagues, but where one of the interesting parts of this comes in is that what was behind me going into this work was the constant bringing up of the Kalecki article about full employment and why full employment could never be in capitalism. I thought that what was kind of missing in a way from the post-Keynesian tradition, or Keynesian tradition, that you had with Kalecki and Marx was recognizing the functionality of unemployment and excess capacity. So this is the ironic thing, the job guarantee actually addresses those issues, whereas, if you just try to have generic government spending, deficit spending, to pump the private sector up to something close to full employment, if you could even get there, then it would create all kinds of problems because of the loss of the functionality of unemployment and excess capacity. So I did publish a couple papers in this area, but my main interest has always been what we could do with this.

And for myself, like you were saying in your question Max, what are the implications for the goal of environmental sustainability? What are the implications of this knowledge that we have now, of how money works, how the budget can work, how a job guarantee program, looking at all the different programs, what their obstacles are? What if all these jobs were helping the environment? What I came to was the first point is that public sector activities should not be judged on the same criteria as private sector efficiency criteria. People, politicians, or the media are always saying how inefficient the public sector is, and that we should have the private sector do it because it’d be better. Private companies seek to maximize profits and minimize their internal costs, but sometimes, we have other goals that are broader social and macro goals. So the public sector activities are not for profit, and therefore, minimizing internal costs is not the goal. The goal is to perhaps find a cost effective way of achieving independently given goals, or goals that are the outcome of a political process.

That means that we don’t do a cost benefit analysis and say, “Oh, well, guess what, slavery is really efficient,” or these kinds of things. Sometimes something is done because it is the right thing to do. And that is independent of cost in just purely dollars and cents. Open things up. Public sector activities should be geared towards other things. That led to green jobs stuff, functional finance, ecological tax reform, and the idea that people have all these different definitions of green jobs. A green job is a job that is not harming the environment. It doesn’t have to be explicitly performing an environmental service. Of course, some jobs will perform an explicit environmental service, but some like caregiving and the library or whatever it is, practically pure services that use very little natural resources and don’t pollute, they’re not producing carbon. So there’s that piece.

Then, with race and class, on the one hand, I got into the colonial tax and colonial money topic using the example of Africa under colonialism and the way that the colonial monetary system, and how the government used the monetary system to promote the growth of market activity to the wage labor, and all those kinds of things. And on the other hand, I did some stuff on African American issues, rediscovering Martin Luther King’s writings on the job guarantee, Bayard Rustin, the A. Philip Randolph Institute, the freedom budget, and so on. I was like, wow, this is great. In the last few years, one would think that MMT was all about social justice and the environment. But it really wasn’t always that way. So I feel like I was able to, first of all, show how we could be thinking about the use of these policies and this knowledge, and opening up some different lines of research.

The one other part was going back and finding all of these statements that are clearly about tax-driven money in writings by like Adam Smith and all the neoclassicals. It’s unbelievable. And, of course, in Marx I found that stuff in there as well. The thing that became clear was that they all were emphasizing how it’s in a specific institutional setting rather than how a government money can be managed. That part started to come through. Of course, there’s a million more discoveries. All the time, people were sending me things like, “Tolstoy was a chartalist!” But the crazy thing is that there’s a lot more awareness, both within and outside of economics, of tax-driven money than previously thought. And there was a lot more support for a job guarantee type program in history than we knew about. The interesting thing about working with a small group of people on something that seems like new is that you’re talking all the time, discussing and debating, somebody says something and somebody else picks up on it or whatever. It’s really difficult to exactly pinpoint the origin of a certain notion. People like Randy often say at the beginning of their books that this is the result of a group, the research of many people, and the work of many people. It really is true.

So our first real target was to thoroughly introduce these ideas, present them, get them discussed and debated among all the different heterodox groups, and to publish our work, for it to go through the standard refereeing process and all that. Then, the opportunity at UMKC opened up toward the end of our second year at the Levy Institute. And basically, we all went to UMKC. They had a PhD program–an interdisciplinary PhD program. It was very successful. We had to show that our students were going to be able to get jobs. So many wonderful colleagues that we have had came out of UMKC’s program. I’ve said this quite a bit, but when I was younger, I always thought education was one of the greatest sources for peaceful social change, but it takes so long. But now that I’m older, I realize that you can have a tremendous impact over a 20-30-40 year career of supervising students. We’ve got dozens of students around the country who are teaching, publishing, organizing, and leading. We’ve got Pavlina, Fadhel, and Stephanie. They’ve gone beyond, but they started out as our students.

William Saas: So the capsule version of your contribution early on was the question: “what can you do with this?” Underscore under the “do.” That’s something that, I think, a lot of us in the editorial collective have connected with MMT over the years. What are the possibilities that are presented by it? I love hearing every time you talk about the history of MMT and tell this story. But I think that I’ve also encountered other versions or angles on it, thinking specifically about Fred Lee’s History of Heterodox Economics posthumously published in 2009 with Routledge. That “what can we do with this?” as a question is interesting, then you run into “how do we do it?” as a supplement or a second order question, and that’s where you seem to run up against institutions and the limits of one’s own capacities at that moment. Returning to Lee’s book, one of the things that I’ve found interesting and also a bit confounding, is where he ends up–and of course, this is 2009, published posthumously–which is we need to basically win out in the academy and that will be our most direct path to potentially affecting policy in a way we heterodox economists have not been able to get to at this point. And we do that by making sure that our journals count equally with mainstream journal publications and things like that. And we build PhD departments.

And really, a lot of it is institution building within the confines of conventional institution building. So it’s almost as if the theory is that we need to match and overcome what orthodoxy has accomplished, but through the very sort of means that they have accomplished what they’ve accomplished. The part of what continues to be compelling about MMT, and you’ve alluded to this by referring to the students, the second generation, is that it seems to me that transcending, operating, or building institutions outside of conventional institutions has become maybe a bit more part of the story, and especially in the recent decade and a half. I don’t know if you could say a little bit about how you understand after we’ve got the heterodox conferences, we’ve got the heterodox journals, we’ve got Levy, and we now have a PhD department, and then, in the last 15 years, how do you sort of see the institutions of MMT having taken shape and evolved, and maybe in a way that people wouldn’t have expected back in 2000?

Mathew Forstater: Right, I think one thing that has to be brought into it is that, as we were focusing on getting the ideas out there and publishing and establishing the department and those things, the real economy continued to make people’s lives miserable. So the global financial crisis and Occupy Wallstreet, I mean, that was huge for MMT. That’s how this patchwork of chartalism, the job guarantee, functional finance, and sectoral balances became MMT. It is really because of the global financial crisis, the most recent pandemic crisis, and so on. And especially, think about the impetus to MMT just as a result of people seeing the amounts of money that were spent during the bailout in 2008, and then with the pandemic, and the impact that even giving people a couple thousand bucks has on their lives and all the other issues. It connected the academic work with the activism. I really feel like social media was important.

We had the proliferation, at the same time, of Facebook and Twitter groups emerging in this way. I would say the Modern Money Network was a total surprise. We’ve got some law students who are interested and started to hold some events at Columbia. Because the thing about the law schools is that Harvard and Cornell have heterodox people in their law schools. So they have a platform. They’ve got the prestige behind their messages. That was a very important piece as well. Then, you had the activism. You had Alexandria Ocasio-Cortez and the Sunrise Movement with “Green Jobs for All” shirts on in front of Pelosi’s office. It’s crazy, I couldn’t believe it. And Stephanie was working with Bernie Sanders and all that brings–lots of media coverage. Things start to have a life and a momentum of their own that propels things. Of course, you get in all different directions and things as well. I feel like it’s great. I have the opposite feeling of anyone who wants to keep…

William Saas: Keep their cards close to their chest?

Mathew Forstater: Yeah, keep a secret to myself or something. If I insist that I’m going to converse with people who agree with me 100% of the time, I would be sitting alone in a room. Are we going to try to find places where we can build alliances and bridges? There were always some people who had sympathy with part of our project, but not necessarily all of it. And I never viewed this as a problem. That’s just the way things are. We’ll continue to have conversations and so on. You should want to have a pretty broad MMT tent. That is what is healthiest for moving things forward. With the doctoral dissertations, I feel it’s great when students do something different with the material. Zdravka Todorova took feminist approaches on household debt with sectoral balances, chartalism, and post-Keynesian and came up with a very great piece of work. There are dozens of examples like this, such as applications to certain time periods. The amount of work that remains to be done is just so much. We just scratched the surface. And you see now you have got to get to work. That’s why it takes resources. This is where funding students is so important. Of course, we’re not like a department of MMT. We do a variety of things, but they’re mutually supportive of one another.

Scott Ferguson: One of the many reasons why we wanted to bring you on the show is this idea you’re very much playing out, which is, in the name of getting certain MMT lessons out there, there’s been an effort to streamline them and to make them into idioms or easily repeatable sayings. And that’s fine, that work needs to be done. Then, there’s the inevitable misconstruing of all of them and things like this. When I see certain resistances to MMT on the left, and in a certain kind of intellectual left that is in some ways in and out of the academy, or working in like literary magazines or whatever, is they don’t have any sense of this kind of rich interdisciplinary history, which includes the present. There are PhD students, Sunrise organizers, and all these people taking up what I often like to call a shared problem space in different ways, going to work on it, and being like, “Yeah, but we haven’t thought about this deeply important feminist problem of the organization of domestic labor under patriarchy.” I really appreciate the way you’re bringing that sense of richness and heterogeneity that often gets lost in certain more dominant discursive spaces to the table.

Now, I have a question to maybe help wrap us up. So you gave a talk that we invited you to give, a keynote, at our first Money on the Left conference. This was a few years ago back at the University of South Florida where I teach, and you did a lot in that talk. It was kind of performative. It was multimedia. You played a lot of hip hop music clips and you yourself engaged in some poetic practice. I don’t want to put you on the spot, but I’m curious if you could revive some of the ideas and impulses of that talk. Ultimately, at least conceptually, could you talk about what you were doing with what I would call futurity, or a kind of practice, research, a method, a modality, a social dynamic that is oriented toward the future in a particular way?

Mathew Forstater: Yeah, first of all, I appreciated coming down to your university and meeting your students and colleagues. It was a fantastic conference. Your colleagues’ presentations and students’ presentations were incredible. You’ve got a fantastic program going on down there. I’m a big fan and supporter of everything that you’re doing with the podcast and the movement. So the methodology for public policy that I worked on in my doctoral dissertation, and that I’ve published some stuff about, approaches policymaking from this idea that we have to begin with a vision of the sustainable and just society that we want to create. And that, analytically, we work backwards from the vision of where we want to go to find a path that connects that future with where we are now. So the idea is that this kind of working backwards invites the imagination to discover policies that would move us in the direction that we seek. That has always been an important part of how I view things. Adolph Lowe, who was Heilbroner’s teacher, and whose work I was examining in my dissertation, he promoted this idea he called instrumentalism, instrumental inference, this working backwards idea. One of its most appropriate applications is when it comes to the environment, because if we know that the assimilative capacity of the environment has the ability to deal with, say, X tonnes of a certain emission per year, then that gives us the strain, in a sense, that we cannot go beyond. Our goal, then, is given to us by that scientifically informed political process. If we would have just worked forward, then there’s no telling if the amount of emissions would be consistent with the sustainability,

Scott Ferguson: We might work through cost benefit analysis instead of this, right?

Mathew Forstater: Yeah, cost benefit gives the goals. That’s how the goals are determined–if there are even any goals determined and we’re not just wandering aimlessly or whatever. That opens up the whole envisioning aspect of things. And because I draw from outside of economics there’s so much rich material that we can engage with. It turned out that Abba Lerner, because he was also at The New School and a colleague of Adolf Lowe, he participated in this conference that was evaluating Lowe’s argument. Basically, Lerner stated that functional finance was perfectly consistent with Lowe’s idea. It also works very well with what I was talking about earlier with a slightly disaggregated analysis from the super macro level stuff. So part of what the methodology work that I did and that I’ve used, it examines things like following a hunch or guessing things that don’t appear in scientific papers. They sit uncomfortably somehow in a scientific paper, but if you go to scientist’s diaries, letters, autobiographies, and journals, then they’re talking all about this kind of stuff.

So the role of the imagination–C. Wright Mills’ sociological imagination–that fits very well with this kind of thing. The economic imagination, the ecological imagination, however you want to describe it. That took me to all these literatures which are about discovery. And even in the presentation down at University of South Florida, I brought up a Sherlock Holmes quote or whatever, because he’s talking about working backwards. Then, I discovered a few other little interesting things. In the appendix to The Sociological Imagination, C Wright Mills talks about the researchers file. It’s not just a file cabinet full of articles, or now files on the computer, but it’s snippets of conversation that you heard, something you read in the newspaper, a dream you had, etc. All of these things can be part of the discovery process. So the whole process of discovery, of diagnosis, of detection, the main kind of issue that came out of it is that a lot of times we feel things are presented as though it’s just by chance.

Like the eureka moment comes because you poured the wrong liquid into the thing. Those things can and do happen, and we can look out for those happy coincidences or whatever, but the part that I was focusing on was there are things that we can do to enhance our powers of discovery. I got really interested in that and sought to apply it, because, in a lot of ways, there is more than a certain content of heterodox economics, or even interdisciplinary heterodox economics. More than a certain content, for me, it was how do I go about investigating a problem or identifying a problem worth solving, to be able to consciously and intentionally make everything a potential source of reflection or consideration? With all these literatures about entrepreneurs and their powers of discovery in finding profit opportunities or whatever, I see no reason why policymakers shouldn’t be able to use the same powers of discovery to come up with innovative ways of dealing with the most vexing problems that we’re facing. It’s hard to get up every day, it’s so overwhelming. It is part of my lifelong grappling with certain core questions, the relationship between materialism and idealism, and some type of rapprochement or whatever in terms of recognizing material and ideological aspects of society, or what the Germans called the problem of freedom and order.

We can have a sustainable world. We can have eco-fascist people on every corner making sure you recycle or whatever. Well, that’s not satisfactory. And now, with the word freedom, people think it is a violation of their freedom to be told to wear a mask during the pandemic or something like that. But inspiration is so important to me. I find the arts and the humanities very inspiring, especially music and performance. So I’ve had some fun over the years. We kind of had a tradition where I would do poems at the end of the summer school. When you get tenure and promotion, then you can go up to the lectern with your guitar or whatever.

Maxximilian Seijo: I’m sure the expansive grappling will continue. But I can’t think of a better place to sort of conclude this conversation. Matt Forstater, thank you so much for coming on Money on the Left.

Mathew Forstater: Thanks so much for having me.

* Thanks to the Money on the Left production teamWilliam Saas (audio editor), Richard Farrell (transcription), & Meghan Saas (graphic art)

Mint After Reading: Philip Diehl Talks with Rohan Grey

In this bonus episode, Rohan Grey speaks with Philip Diehl about #MintTheCoin in the wake of this season’s debt limit showdown. Director of the United States Mint under President Bill Clinton from 1994 to 2000, Diehl is best known today as the person most responsible for 31 U.S. Code 5112(k). The law permits the Treasury Secretary to “mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.” This clause charts a completely constitutional path to avert recurrent debt crises and furnishes a ready framework for a new kind of radical financial literacy. No wonder why much ink has been spilled and many hands have been wrung trying to explain away or dismiss its radical implications. Grey’s conversation with Diehl explores the history of the platinum coin, offering a fascinating and unprecedented behind-the-scenes glimpse of life in the U.S. Mint.

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Music by Nahneen Kula:


The following was transcribed by Rohan Grey and has been lightly edited for clarity.

Transcript of #MintTheCoin! – Interview with Former Mint Director Philip N. Diehl by Rohan Grey[1]

[1] Assistant Professor of Law, Willamette University & Director, Public Money Action.

Grey: Well thank you so much for joining me. My name is Rohan Grey, and I’m an Assistant Professor of Law at Willamette University in Oregon. I’m also a Director of Public Money Action, a 501(c)(4) that promotes public education and tries to improve our public policymaking process around money and financial issues.

And I’m joined today for this very special one-on-one interview with Philip Diehl, the former Director of the United States Mint, appointed by President Clinton, and currently President of U.S. Money Reserve, to talk about this idea that’s been taking the world by storm, and getting into the press, about how we could potentially resolve the ongoing and recurring debt ceiling crises that we’ve been experiencing through a provision of the Coinage Act, that authorizes the minting and issuing of platinum proof and bullion coins of whatever denomination the Treasury Secretary determines to be appropriate.

So we’re going to go into some detail about the history of that law, and some of the sort-of edges and boundaries of it. But before I get into that, I’d like to let everybody get to know you a bit more, because you’re the sort-of architect behind this in many respects, and have had a pretty incredible and unusual career. So would you mind telling us a little about what got you to be the Director of the U.S. Mint, where you were beforehand, and what that journey was like?

Diehl: Well, I went to Washington D.C. when I was thirty-nine years old, so I had a long career before that in government, some in politics, but mostly in government and the private sector. I went to Washington to be Legislative Director to Senator Lloyd Bentsen (D) of Texas. And I served in that role for almost two years, until he appointed me to be Majority Staff Director of the Senate Finance Committee. And I was probably the shortest-lived Director of Senate Finance, because within three months Bill Clinton was elected, and a few weeks later Bentsen was chosen as Secretary of the Treasury, and then I went in as his Chief of Staff at the Treasury Department on the first day of the Clinton Administration.

I was in that job – a thankless job, my kids never saw me, I had young kids at home – and after about six to nine months, I felt like I had helped the Senator, and now Secretary, transition into the job. And so I decided that I was ready to go home back to Austin, Texas. And he said, well, why don’t you go look at the United States Mint, that’s a turnaround situation, I know you want to run a company.

And I was never a collector. I knew hardly anything about the U.S. Mint. But you don’t tell the Secretary of the Treasury, “No.” So I went over there, and I was very fortunate because a fellow by the name of David Rider was Director at the time, and he was a Bush Administration – H.W. Bush Administration – holdover. And he and I really made a connection. He gave me a great orientation to the U.S. Mint.

So I went back to the Secretary after three weeks and told him, “Yeah, I am interested. This looks like a real good opportunity.” And that’s a very unusual move for someone who came to Washington because of his policy interests. And this really isn’t a policy foundation, it’s a manufacturing and marketing operation. But I saw it as a diamond in the rough, and I thought, “I could do something with it.” And one of the things that really animated me, and animated the team around me at the U.S. Mint, is we had, and have, a very strong commitment to demonstrating what government – well-led government agencies – can do for the American people. That there’s a real role for an active government.

And I really liked this particular audience that I was playing to – the U.S. Mint customers on the bullion and numismatic side of the business – who are, I used to say, white, male, and over fifty, conservative, Republican. And I said the white male over fifty thing was something I aspired to – now I’m well into that demographic – and I think we really had an impact on them, surprising them in what we were able to accomplish in a whole lot of areas.

Grey: Yeah, it’s incredible, you would think that sometimes people come up through the ranks of the Mint, or they come in thinking that their job is just to keep the lights on, and not make waves. But as you said, you came in thinking of it as almost a turnaround, and you had had experience both on the hill, and in the heart of the Treasury, and seen a sort-of bird’s eye view, and saw what this agency could do and what it could become. And not only a vision for active government, but a vision for how to take an agency and to make it bigger than what it might have been. And history is full of people who’ve really kind of had a vision for making something bigger than what it was when they came into government, and to be creative about that.

So do you mind going into a bit more detail about what your sort of vision was for the Mint, what your agenda was? I know you were there for quite a while, but sort of looking back, what would you say your kind of priorities were, or how do you feel your legacy of what you left the Mint, what shape you left it in versus where it started?

Diehl: I started well, what I thought was small, and ended up being pretty big, and with three priorities that I, in my confirmation hearing, I called those out. And one of them was the financial situation at the Mint – both performance and in terms of the whole financial structure – was a terrible mess. And we were one of the first agencies – because we had private sector-like functions – we were one of the first agencies subject to a new federal law that subject government agencies to outside audits. And eventually that spread to every agency. And our first audit, the U.S. Mint failed. And for any number of reasons. So I said we need to fix that.

The second thing was we had a real problem with customer service to our numismatic customers.

Really all three of our customers: bullion, numismatic, and then circulating coins, where the Federal Reserve is the U.S. Mint’s customer. And I said we needed to fix that, that was a big problem with just performance, morale at the agency, the tremendous criticism from outside the organization because of that failure of performance.

And then the third thing was there was – there is – this commemorative coin program, in which the U.S. Mint produces, upon a mandate of Congress, a series of commemorative coins. And Congress mandates every one of those programs. And this is a way of raising funds for organizations that have access to very powerful members of Congress, and it’s a way of circumventing the appropriations process. So there grew to be a feeding frenzy for these programs, and as a result, by the time I became Director, the market for these coins had collapsed because of abuse, really, by Congress. And so getting that program under control was my third priority. And I could only do that with the help of Members of Congress, especially a couple of committee chairs, to reign in that program.

So that’s really where I started. But as we built our capabilities and our confidence in our capabilities, and there’s a psychological element to that, there’s a personnel element to it, there’s a structural element to it, there’s a financial element to it—

Grey: There’s a precedential element, yeah.

Diehl: Yes, yeah. So we grew in confidence and capability in what we could do. Which ultimately led to a series of highly innovative, entrepreneurial programs, that we had Congress enact, and that we built on to build our credibility and our capabilities. And the first one of those programs was the Platinum Eagle program. And I wanted to—first of all, I’d begun to build a relationship with the new Republican Chairman of our Banking Committee, Financial Services Committee, Oversight SubCommittee, Michael Castle from Delaware. And so I went to him and said we have this idea for a brand new platinum coin, that allows us to – will allow us, if we structure it correctly – to compete in international markets. And we had never competed in international bullion markets before.

And so I asked for a blank slate. Completely unprecedented in U.S. Mint and U.S. coinage – two hundred years of U.S. coinage – history. Where in the past, Congress mandated every little detail, and the Mint could not deviate from those details, had no discretion. And I asked for virtually total discretion to design a coin, based on market research and building a relationship with the person, the company, and the patriarch of the company in Japan – which along with North America are the two big international platinum bullion markets. And so that included everything from design to denomination.

And that’s what we were granted. I drafted that bill, he got behind it and carried it to fruition. It got embedded in a much larger Coinage Act that was designed to fulfill one of my promises, and that was to get the commemorative coin program under control. To limit it. So that’s relevant to the issue of the platinum coin, because it has been described as our intent, and Congress’s intent, to create another collectible. And that was not the intent. The intent was to authorize a bullion coin. And as I sidelight of that, it also allowed us to produce a proof coin, which is a collectible coin. It was never intended to be a commemorative coin of any kind.

So that’s sort of how we got started. And that program was immensely successful. Within six months of launching the bullion version of this coin, we had taken sixty, sixty-five percent of the Japanese market away from another competitor. And we’d also, of course, taken the American market away. And that success laid the groundwork for Congress to pass the Fifty State Quarters Program. We demonstrated our ability to perform on an entrepreneurial project.

Grey: So I want to just take a step back – I want to get into the platinum coin provision in particular, but two things that you mentioned were interesting to me. One is you were talking about the idea that Congress had previously micromanaged all of these different coin programs, and you wanted more discretion. One of the things that I traced out in my research on this issue was that if you look at the debt ceiling – before the debt ceiling existed, Congress would micro-manage the issuance of Treasury debt. You have to issue this amount of this kind of duration for this spending program, and this amount for this program, et cetera.

And in the earlier twentieth century that became increasingly unwieldy as the government got bigger. And one of the goals of the original debt ceiling, if not the primary goal, was to give more discretion to the Treasury to choose how to finance, right? You tell us how much to spend, and we will work out how to do it. In fact, I think it was Secretary Mellon in the thirties that said we [the Treasury] should have complete discretion – using similar words to you – in what kinds of securities we issue, in what denominations, to meet our needs. Get Congress out of it entirely.

And it seems like there’s that trend in general, as the government gets bigger and more complicated, to put more discretion on the executive branch. Not to make the important political decisions, but to execute on the sort-of priorities and commitments. And it seems to me that’s kind of consistent with – that there’s a sort of parallel there – with you getting more of that discretion within the Mint’s sort of authority, the way that the Bureau of Debt Management, or Office of Debt Management would have done with Treasury securities.

Diehl: Yes. Yeah, that’s exactly right. And there’s another element to this, and that is that Congress has delegated more authority to the executive branch as it has become more politicized over decades. And a great example of that is the Base Closure Commissions, in which – because it is so politicized, in terms of who are the winners and losers – that Congress in the past was paralyzed in its ability to make the Defense Department more efficient by closing down bases that had outlived their usefulness. And so what did it do? It turned over to the executive branch a process by which it presented a package of bases to be closed and consolidated, and then that package went to Congress, and they could vote it up or down. They could not amend that package whatsoever. So basically what Congress did was said “put these handcuffs on us, and then, you know, just give us a simple option.”

That’s also what they did with that whole Commemorative Coin Program. I basically put together a Base Closure Commission for these coins, so that there was a committee that was formed that would make recommendations to Congress. And Congressmen would make recommendations to us, but they didn’t have to say no. They could say, “Oh, the executive branch committee over here, they said no.


Grey: Mhm. And you can see a clear parallel with the debt ceiling today, where everybody knows it needs to be increased or abolished, but nobody wants to take political responsibility.

Diehl: Yes.

Grey: And so, for the executive branch to step into the breach and say: look, we’re going to do what everybody knows needs to be done–

Diehl: Yes.

Grey: …but may be politically unpalatable, and that might be to use authority that you’ve clearly given us, you know–

Diehl: Yes.

Grey: …in ways that maybe you want to be able to say, hey, you didn’t want this–

Diehl: Yes.

Grey: …and that’s useful political theater, because you can distance yourself a little bit, but it allows us to keep doing what needs to be done.

Diehl: And that is part of the magic of the trillion dollar coin, is it takes – it depoliticizes the whole issue. After you bite the bullet – or bite the coin – and do it, it takes that issue out of the hands of Congress. Everybody is off the hook, except the Secretary of Treasury and the President. And actually, I think what happens – right now what’s happening – is the trillion dollar coin, and also the Fourteenth Amendment, serve as a failsafe–

Grey: Yes.

Diehl: …on the coin. So everybody can play games with the politics of this, knowing that in the end that there are outs to this. And to sort of settle markets down as they pretend to approach this disaster of the economic collapse of default. And I, you know, I think that’s part of what’s happened this week, when all of a sudden, you know, Senator McConnell decides that, well, let’s put this off. Because there were escape hatches.

There were other things that were going on too, like, you know, the Department of Defense intervened, and said–

Grey: We need to keep the lights on, this is a national security issue.

Diehl: Yeah, we need to pay our people. And so there were other things at play too. But the timing of the article that was written by Felix Salmon, that said, you know, that quoted me, saying, Oh, the Treasury Department could–

Grey: could be done in hours.

Diehl: Yeah, can produce this coin overnight, virtually, if they set up a couple of ducks in order. And that’s the first time, I don’t think that had ever been said.

Grey: No, it hadn’t.

Diehl: And so – and it got tremendous play. As you know, Drudge put it at the top of their page, and then gave a spin to the title that suggested it was already–

Grey: They’re going to do it, yeah.

Diehl: …They’re doing it right now. So–

Grey:  The hyperbole helped bring it further into reality.

Diehl: Yes, yeah, yeah. It certainly blew up the whole story.

Grey: Yeah, and I want to just go and take a step back also. Because you were just talking about taking this out of – about depoliticizing this. But of course, this isn’t about depoliticizing the budget itself.

This isn’t about depoliticizing spending itself.

Diehl: Exactly, yeah.

Grey: That’s still an incredibly political process. In fact, maybe the most central political process for Congress. This is just about honoring that spending once it’s already been committed, and not saying we’re going to ignore Congress, or go back on our debts and things. And I just to sort of connect that, because one of the things that you haven’t mentioned about your legacy – and correct me if I’m wrong about when this, the timing of this – but my understanding is that you were also the Mint Director when the Mint really sort of separated its own budget from the rest of Treasury, and became a nonappropriated fund instrumentality, which means essentially that it funds itself through its own operations. You know, the CFPB [Consumer Finance Protection Bureau] does this with fines, other agencies do this with fines, the Fed does it with its own money creation powers.

But you essentially sort of elevated the Mint back up to an equal status with the Fed in terms of being, kind of, off balance sheet from the rest of the government. Which, when you combine that with the Mint’s sort of, internal powers, makes it a very very, you know, powerful institution. As you said, the Mint has been around for two hundred years, it’s the oldest monetary institution in the U.S. government. But that seems to have been a pretty key moment in making the modern Mint what it is today. Do you have any thoughts?

Diehl: Yes, it absolutely was. And when I proposed this to Treasury I got laughed at. They said, how are you going to get Congress to let go of the purse strings on your agency. And I said, I’m going to do it through the Appropriations Committee. Which made them laugh harder, because of course the Appropriations Committee is where that power is exercised. But I already know at the time that the Chairman of my Appropriations Sub-Committee was going to back it, because he and I had talked about it, and he really–

Grey: You worked on the hill, you know how this works.

Diehl: Well, yes, exactly. But also I was very fortunate, because the new Republican Chairman of the Committee – this was in ‘95, so right after the Gingrich revolution – the new Republican Chairman of the Appropriations Sub-Committee was a conservative – very conservative – Republican. But he and I hit it off on a personal level. And he really liked the idea of what I was doing at the United States Mint, of turning it into an entrepreneurial, you know, business-like agency.

Grey: Believing the government can do something, ironically.

Diehl: Yes, yes. This was before there was this commitment in the party – his party – that the best way of showing the government could not perform was to sabotage it. And so he was not like this at all, a guy by the name of Jim Lightfoot from Iowa. And so he said yes, you know, and I explained that all these things that we need to do, I need to have this flexibility. And so I need to operate off my own profits. The U.S. Mint is a profit-making enterprise for the U.S. government. Our profits go directly into the general fund of the Treasury. And I told him, you give me this flexibility, and I’m going to send a lot more money into the General Fund.

Grey: Which means less government debt, right? Less borrowing.

Diehl: Exactly. I mean, that’s exactly right. The money from the United States Mint, part of it, is exactly the same as tax revenue. And the other part of it, which gets to the trillion dollar coin, is very much like the issuance of interest-free loans, uh, bonds. So the combination of that, you know, really was compelling to him. He carried the legislation. Not only did we get completely off the appropriations process, but we also got the FAR, the federal procurement regulations, were lifted from us. So we took a document that was like *this* thick, and turned it into a pamphlet, to describe to outsiders what our acquisition process was.

Grey: So once again, it’s the story of more flexibility, more discretion.

Diehl: Yes. And I will say this: later on, we went to OMB [Office of Management and Budget] and asked for flexibility around the personnel rules. And I had such a good relationship with our unions that I actually had the endorsement of our unions to lift the personnel rules from us. And when my Deputy Director and I went in, we explained what we wanted to do, and pointed to our success on the procurement and on funding. He said, “you don’t understand. It’s not failure we fear, it’s success.” So we realized, okay, we’re at that point of hitting the Catch-22.

And the concern was, and he said – we said, what’s that mean? – and he said well, if you achieve this kind of flexibility, every other government agency is going to want it. And we said, our response was, “well, if they earned it, why wouldn’t you give it to them?”, knowing that is a very high bar to reach, and not very many government agencies are going to do that. One of the reasons they wont do it is because the professional risk – and therefore the financial risk – that leadership in Washington D.C. takes if it wants to make a significant change in how things work in Washington, and in the performance of an agency.

So there were a lot of things that, sort of came – and we got really lucky. We had friendly Republicans in key positions. But it is, yeah, it is hard to get that kind of flexibility.

Grey: It’s just incredible to hear this story in detail like this, I mean I feel like it needs to be a book or a movie, or something. I’ve spent a fair bit of time studying the origins of the Federal Reserve, and it’s incredible to hear this story – that you sort of almost did single-handedly – when you think about the Federal Reserve’s origins as this sort of confluence of massive banking interests in the heart of a crisis. And you’re just behind the scenes, sort of quietly doing something that ends up creating a level of budgetary and legal autonomy that’s sort of comparable within its own space.

But a couple of things were sticking out to me. One is the Federal Reserve also has budgetary independence, but doesn’t have the same kind of independence with its employees, for maybe a similar reason. So there are court cases and things where they say, look, in one sense the Federal Reserve System is clearly a government agency, but it’s got its own separate budget process, but in certain circumstances employees will be considered government employees.

But your point about the seigniorage revenue being a source of income similar to interest-free loans: at the Fed, of course, they create Federal Reserve Notes; they create reserves, which banks use as money. And the profits that the Fed returns from the assets that it buys by creating those dollars, when it returns it to the Fed, at least very recently, it was booked in accounting terms as Interest on Federal Reserve Notes. So the whole thing was, we can create this one kind of currency, and anything we do within our agency will be sent back as the sort of seigniorage profit, or the charge that we pay on what we earn on creating these instruments.

And so it’s sort of interesting to me that we have this moment where, you know, when the Federal Reserve returns eighty billion dollars a year in this revenue, we say this is great, you know, this reduces the need to borrow, thank you so much. This isn’t against Federal Reserve independence, this is good for, you know, statutory agency independence. But nobody kind of notices that the Mint’s also been doing that, often because the numbers are maybe an order of magnitude smaller. But as you noted, in your tenure they went up. And they could have kept going up. And there’s never been a limit historically on the upper limit. It’s only been, sort of, how visionary the Mint Director has been, it seems like.

Diehl: Yes, yeah, those are good points. And it gets to one of the points I like to make, [which] is: the trillion dollar coin is nothing novel. I mean, it has been made out to be this gimmick. And as you say, you know, it’s [an] everyday occurrence at the Fed, and at the United States Mint. Creating seigniorage – seigniorage being the difference between the face value of a coin, in this case, and the cost of production. And that represents sort of a profit, but really it represents more of a loan in this case, because the U.S. Mint sends a coin – a quarter, let’s say – to the Federal Reserve. The Federal Reserve purchases it for the face value – twenty-five cents. Let’s say the Mint produces it at a cost of eight cents. So that’s seventeen cents, margin, that the Mint makes on that coin. Well, you add up all of that in the course of the year, and that acts as – the U.S. Mint moves it over to the Treasury Department – and that seigniorage acts as a means of funding the government, just like a bond does.

And so the only difference a trillion dollar coin represents, is it has more zeroes on the end of it. And, yeah, that’s a huge thing. But it’s not a different process. It’s not a different concept. In fact, this is a concept – seigniorage goes back, you know, I don’t know–

Grey: Yeah, Founding Fathers.

Diehl: …two hundred years.

Grey: Pointy hats–

Diehl: Yeah.

Grey: …and tin whistles, and, you know, the HBO mini-series.

Diehl: Yeah.

Grey: It’s as American as apple pie.

Diehl: [Chuckling] Yes. Yeah, yeah. And it’s because governments have used seigniorage to fund their operations – the King’s operations – for hundreds and hundreds of years. And Mint Directors in the past, if they shaved too much – if they shorted the amount of metal that was in a coin beyond what the Crown had authorized – they were hung, you know. 

Grey: It was a big deal.

Diehl: It was a really big deal, yeah.

Grey: Isaac Newton was the Mint Director in the U.K, took his job very seriously. Yeah, I mean, two things on that. One is, you know, you say it’s sort of like issuing government debt. But it’s important, and this is where, again, being very clear about statutory language – as a law professor I love this whole moment because it’s forcing people to learn how statutes work – but the public debt limit is quite narrow. It’s for things that have interest and principle, and it includes only a certain group of instruments. So for example, Federal Reserve Notes and coins have never been counted in the national debt. If they did, then we’d have probably accidentally violated the debt ceiling a number of times already.

Diehl: Yes.

Grey:  But not only that, there’s actually been instruments that the Federal Reserve issues – interestearning term deposits, which they started issuing in 2009 – that pay interest, are a legal obligation of the government, but are not included in the debt ceiling. And so there’s a lot of instruments out there – including the Greenbacks that Lincoln authorized, that are still legal on the books at the Bureau of Engraving and Printing – that are not included in the debt ceiling. We could call them debt, we could call them a means of financing, but they are no “Debt Subject to Limit” in the same way. And this coin would be very clearly in that category, not in the category of debt subject to the debt ceiling, because that’s a very narrow category. And that’s sort of one of the other confusions. People say, “oh well this is basically violating the spirit of the debt ceiling law.” Well, no more than issuing a quarter is, right?

Diehl: Yes, that’s exactly right.

Grey: And you mentioned, you know, that this was a sort of bullion coin program initially. And I think this is one other confusion – we were just talking about this earlier – people often think, well, bullion coins have to represent the underlying metal value and nothing more. And the reality – correct me if I’m wrong – is that a lot of bullion coins are sold, you know, over their face value because the metal is more expensive.

But there’s nothing that says the face value couldn’t be more than the metal, and we certainly aren’t on a gold standard, or a metal standard in general. And it’s the face value of the coin that matters. In fact, I pulled up a couple of statutes – 31 U.S.C. § 5112(q)(4), which concerns the sale of $50 denominated gold bullion coins, says that the bullion coins shall be sold for an amount the Secretary determines to be appropriate, but not less than the sum of the market value of the bullion, and the cost of designing the coins, including labor, materials, machinery, et cetera.

So even with regular bullion coins – and there’s another one for § 5112(o)(4)(A), which governs the sale of $10 denominated commemorative gold coins, that says that bullion coins shall be sold at a price that is equal to or greater than the sum of the face value and the cost of designing the coins. So even when we think of bullion coins, we’re not thinking of something that can only ever be the value of the metal. That might be a floor, but it’s not necessarily a ceiling. Does that sound correct to you?

Diehl: Yes, that’s exactly right. And it’s only by practice, and sort of practicality, that the U.S. Mint sells bullion coins at a small premium over the spot price of gold, that represents those costs of production, of marketing, sales, and all that. And that’s because the purpose of the coin is to compete in marketplace with other bullion coins. And so those sorts of price constraints apply because of the intent, and the intent of the product, and the circumstances in which the product enters the marketplace. None of that applies to a trillion dollar coin. Its purpose is very different. And so it wouldn’t make sense for it to follow that model, because it is so different.

The other thing that’s important is there is no language in that provision of law that authorizes the platinum coin that says anything about pricing.

Grey: That’s right – other than that the Treasury Secretary has absolute discretion, right?

Diehl: Yes, yes. So the restraints that are in the statute, that apply to gold and silver bullion coins, aren’t there for platinum.

Grey: And I believe it was Harvard Law Professor Lawrence Tribe that talked about this. He said, you know, if you look at all the other statutes, and they have constraints. And then you look at one that doesn’t. And it was intentionally written to not have the same constraints as the others. Then you have to take that seriously as a matter of statutory interpretation. You can’t say, “oh, they meant it to have similar constraints, they just forgot.” You wrote it! You didn’t forget. You made it.

Diehl: [Chuckling] Yeah, no, it’s a feature not a bug.

Grey: That’s right, that’s right. That’s exactly right. And you mentioned also, you know, there was also this other language for “proof” coins in the statute as well. And there’s been some sort of debate around this. People say well, proof coins means they have to only be entered into as collectibles. And obviously, most proof coins are collectibles. But my understanding – correct me if I’m wrong – is that the word “proof” there refers to the method of production. Can you describe that for people that aren’t that very familiar with the minting process, what proofing is?

Diehl: Yeah, so proof coins are produced in a very different way from circulating coins and bullion coins. And they are produced to much higher standard. Also, they look different. They have a frosted image, typically, and a marred background. They are sort of a fine art of coin production. And so those coins are typically sold to collectors. But there’s no restriction. They could be sold as bullion coins. They could be produced and put into the Fed as circulating coins.

Grey: You wouldn’t do it because it would be a waste of money and high production grade, but you could if you wanted to, right?

Diehl: Exactly. I mean, you could do it – and we actually talked about doing something like this – to put a very small portion of, like, a State Quarter,into circulation through these huge ballistic bags that we send to the Federal Reserve, and they put into rolls and they ship to banks. And we decided that there was enough interest in the 50 State Quarters when we launched it without doing something like that, there was–

Grey: Sort of like Charlie and the Chocolate Factory and the golden tickets.

Diehl: [Chuckling] Yes, yeah exactly, yes. And so, yes, we completely had the authority to do it. The economics of it does not work if you’re doing all the coins like that. If you took a very small, you know, percentage and did it like that, then the accelerant would easily pay for itself, because all these other coins would be collected hoping to get those. And you get all the seigniorage profit on that.

Grey: In fact, I believe it was Andrew Jackson who issued a Gobrecht Dollar that was a proof circulating coin. And you might know the history better than me, but my understanding was that it was the sort of reintroduction of a dollar coin. And so it was a sort of, as you say, an attempt to drum up interest, and to make a big show of it. And so the reason that you used this higher production grade quality was precisely to get the marketing and the attention, more than you might for a regular coin. And that was a proof coin that happened to circulate. So there’s no kind of inconsistency there.

Diehl: Yes. There’s a similar situation that as far as I know was an accident. I was not aware it was happening, I don’t at all know it was intentional. But when the Sacagawea coin was launched, there were some of them that were produced on a more highly refined blank, and those coins became especially valuable collector items once they were discovered, and–

Grey: Semi-proof, huh? Quasi-proof?

Diehl: Yeah, but it had a better strike to it. And as a result we had a similar kind of effect that you’re describing.

Grey: And the idea of, kind of, having a high – you know, you call it the [high] art of of coins – seems to be pretty appropriate for a trillion dollar coin. You know, I’ve always said, people say “what happens if it gets stolen?” or something, and its sort of a funny joke. And yeah, we all get to laugh about it. Of course, if you steal a trillion dollar coin and then try to use it, there’s going to be a pretty strong legal presumption you didn’t get it legally, right? But I’ve always thought it would be great to have some ritual and symbolism around this, especially if it was to save the government from itself and this insanity of the debt ceiling.

When you think about the Federal Reserve and its announcements – you know, the ritual of these Federal Reserve pronouncements – when you think of courts and them wearing robes, when you think of military service and the, you know, the music they play, and the folding of the flag, ritual is very important to our government. And if we were to going to mint a trillion dollar coin, having it to be beautiful quality, and then, you know, having a child walk it from the Mint to the Fed–

Diehl: Yep.

Grey: …and say, you know, here we are, I’d like to hand this over, and then “I accept this on behalf of the American people,” you know.

Diehl: Yes.

Grey: And then maybe on the other side it ends up at the Smithsonian, and everyone can tour it in schools as part of their, you know, American history education. It seems like proof coin, there, is sort of the appropriate one. Even if the law had said “bullion, proof, or circulating coins,” if you were going to create a trillion dollar coin, you’d probably want it to be proof.

Diehl: Yes, yes. Well, not only would you stand out if you carried a trillion dollar coin and tried to use it in commerce, but hard to make change for it to. But yes, sitting at the Smithsonian, obviously you’d have to have it well guarded, but the–

Grey: Alongside the Declaration of Independence, or something.

Diehl: Exactly, yes. But the key to this – and to address another knock that we hear that is fallacious on the coin – the key is that the coin does not, and of course, can not go into circulation. It has no impact on the money supply. And that is the wrap, is that all of a sudden, it’s going to be like Venezuela. All of a sudden, you’re increasing the money supply by a trillion dollars, and you’re going to have all of these disasters and consequences. You know, it never goes into commerce. It’s not like other coins, or currency, or QE [Quantitative Easing] for that matter, in which money is being inserted into the economy. This coin is produced at the United States Mint, goes to the Federal Reserve, stays in a vault. There will be, when sanity prevails and the debt limit is increased, that trillion dollar coin can come back to the U.S. Mint, just like any other coin. That seigniorage is taken off the books, and the coin is destroyed.

Grey: Right. The only spending that would happen is the spending that Congress has already said needs to happen, that should be happening anyway, and in fact is constitutionally required under the Fourteenth Amendment.

Diehl: That’s exactly right.

Grey: The money going out of the Treasury’s account into people’s pockets should have kept going anyway, but for the insanity in Congress, and these misunderstandings that the debt ceiling is supposed to stop us from being able to continue honoring those obligations.

Diehl: Yes, yeah, exactly.

Grey: So, one question – you mentioned there, you said the coin doesn’t need to go into circulation. Usually, my understanding – and correct me if I’m wrong – is that coins are sold to the Fed, and that the Fed sells them on to banks, who then, you know, get it out into the public. But the Fed isn’t the only actor that has bought coins directly from the Mint, apart from collectors and bullion investors, right? There are other ways that coins do get into circulation. Do you want to tell us a little bit about some of that history?

Diehl: [Chuckling] Okay, yes. It’s sort of notorious. So we were given a mandate by Congress to produce a new dollar coin to replace the Susan B. Anthony, which was an utter failure for a number of reasons. And this is something that Congressman Castle and I worked together on as well. And we were given discretion in this case too, but only over the design of the coin. And it was through a design competition that the United States Mint executed, that the image of Sacagawea and her infant Jean Baptiste on her back, during the Lewis and Clark expedition, was chosen for that coin.

And so we did a lot of market research – part of the entrepreneurial basis. The United States Mint hadn’t done that before to any significant degree; certainly hadn’t with the Susan B. Anthony. And part of the market research was to go the banks and the Fed, and say, you know, to make a pitch: you should get this coin, it’s going to be much more popular than the Susan B. Anthony, and they won’t be in the vaults forever. Here’s the market research of consumers that shows there will be this demand. And the response from the banks and the Federal Reserve was, “well, you have to demonstrate to us – actually demonstrate to us – that there will be demand for this cause.”

Well [it was] the ultimate Catch-22, because if we can’t get through the Federal Reserve into the banks, how do you demonstrate the public is going to want it.

Grey: It’s almost like they just didn’t want it.

Diehl: They didn’t want it, yeah. The coins and the Federal Reserve – I mean, the banks and the Federal Reserve, they don’t like coins. And for–

Grey: It’s an unpleasant reminder that there’s other monetary traditions other than theirs, right?

Diehl: Yes. And coins are more expensive for the Federal Reserve: they’re heavier, they’re–

Grey: They have to pay face value, not the paper cost if they buy paper notes.

Diehl: Exactly, yes. And a dollar coin that was highly popular, the banks in particular didn’t like. Because what happens if you have a really popular coin? Customers come into the bank, they ask for it, they come to the drive-through. That imposes a cost on the banks they don’t want to incur. So no way, they weren’t going to do it, we couldn’t persuade them. It wasn’t a big enough issue for the Secretary of the Treasury or certainly the Chairman of the Fed to get involved in–

Grey: Small change for them.

Diehl: Yeah, exactly. Doesn’t matter. Penny-ante. And, so–

Grey: In fact, I believe I’ve read some Government Accountability Office reports saying, you know, it would be much better for costs and things to have less dollar paper notes and more dollar coins, but it’s very hard to get people to use it, and it would certainly be hard if the banks are not actually on board with helping people use it, and actively resist.

Diehl: Yes, yes. So, being entrepreneurial, we decided we’d go around the Fed and the banks. And I had a lunch with the brand new lobbyist for Walmart, who’d never done any lobbying before. He didn’t know this kind of entrepreneurial stuff wasn’t smart in Washington, D.C. So I said, what I want to do is I want to launch this coin on the same date in three thousand locations, Walmart locations across the country. And we will direct ship, you know – and it was, my recollection was it was two hundred million coins over the period of those two months – to all those locations. A huge number. They wanted as much as we could produce, well we couldn’t produce more than that. And so none of the banks ordered it, Walmart ordered it, and we did a marketing campaign, and at the end of January 2000, that coin was launched.

People lined up. People think the Sacagawea coin was a failure. And it ended up being a failure for a couple of reasons – one is hostility in the banks and the Federal Reserve. But when we launched it, people lined up at the stores. They were out of the coins by the end of the first day. They wanted to order more, we were on a production schedule. But when people couldn’t get the coin that they wanted at Walmart, they went to their banks, and the banks didn’t have them. And so they were embarrassed.

And so what did they do? They don’t say, “oh, you know, we made a mistake.” They call their contact at the Federal Reserve. And the complaints all come in to Greenspan, Greenspan calls the Secretary of the Treasury, I get a telephone call, and I explained why we had done it this way, and it faded the heat. But what we ended up doing was, we went back to Walmart and said, “we’re not going to be able to provide the second one hundred million coins.” It’s a government contract, and also they had achieved their objective.

So we took that hundred million coins, and direct shipped them to the banks based on orders they made online.

Grey: On the day.

Diehl: Huh?

Grey: On the day.

Diehl: Yes, yeah. And we direct shipped it because the process of getting coins from the Mint through the Federal Reserve to the banks was so slow that we, you know, it frustrated the demand. So we bit the bullet and direct shipped it to them, and so it kind of ended the controversy.

Grey: It’s an interesting story on two levels, because on one level it’s showing that – you know, people often say well the Fed wouldn’t accept the coin – well, maybe there are other people that would accept, maybe not a trillion, you know, not everyone’s looking for a trillion in cash, but there are certain investors and things that are looking for, you know, a billion dollars in liquid cash and things. And if you could say, “hey, you know, we can’t sell any more T-Bills this month, but we can sell some coins that you can store, and they’re legal tender, and they will satisfy your fiduciary responsibilities to invest in safe assets, you know, I think there could be people that’d be interested.

But the other part of that story is that, you know, we often think that, “oh the Fed said it can’t be done, so it can’t be done.” But the reality is that’s just one opinion of one agency within the government, and there’s other agencies with other opinions, and who ends up winning that battle when there’s a difference is often about who’s more creative in putting pressure in the right way. And the story you just told is about precisely putting the pressure. And you mentioned a similar story in the past about the 50 State Quarters, where the antagonist was the Treasury in that situation, if you want to share a little about that story.

Diehl: Well, opinions are a dime a dozen. And so of course, you have to look behind the opinions at the facts. And on all of these monetary issues, they’re very complex. So it’s hard to sort through, and usually you have to rely on somebody whose judgment and independence you trust. But the other thing is it’s crucial to look at what is the motive behind – the economic motive, the emotional motive, whatever–

Grey: The partisan, the political motive.

Diehl: …the power motive behind an opinion. And also, what is the strategic situation. For example, we are hearing from the Treasury Department and the White House that “no, no, we won’t do the dollar coin, I mean the trillion dollar coin. It’s a gimmick.” Well, okay, that may be a sincere expression of their intent, or their adamant commitment not to do it. But also it’s very clear that the White House and the Treasury Department wanted a particular outcome, which they got by standing firm. And to say, “yeah, you know, the trillion dollar coin is an option” releases the pressure, the negotiating pressure, to get the outcome they really wanted. And–

Grey: It was Margaret Thatcher that famously popularized “There Is No Alternative” as a justification–

Diehl: Yes.

Grey: …for doing anything. And often there was. But–

Diehl: Yup.

Grey: …it was a useful line. In fact, I remember speaking to some senior Treasury officials back – about the situation in 2011, and they said that. They said, “we didn’t want there to be another option,” because–

Diehl: Yes.

Grey: …we wanted to force the Republicans to come to the table.

Diehl: Yep.

Grey: And so anything that showed that this could be resolved on our side–

Diehl: Yeah.

Grey: …was inconvenient for us.

Diehl: And it’s easy to frame that in partisan terms. That, okay, the Democrats were smarter, tougher, stood hard this time, as opposed to last time; they prevailed. But it’s crucial to rise above that partisan – you know, it’s really a partisan dismissal of what’s really at stake.

Grey: That’s right.

Diehl: What’s at stake here is using the debt limit as a cudgel by threatening the country with default. And now it’s happened three times. The first two times, the Democrats compromised. They were the responsible party. And what did that do?

Grey: Yep.

Diehl: That just laid the foundation for the next time that–

Grey: Yep.

Diehl: …you know, that their opponents would push them to the wall. And this time, they took a stand and the prevailed.

Grey: And, you know, Mitch McConnell managed to get, what? Ten Senators, or something, on board with this, or to vote to change the rules to extend it for another two months? But–

Diehl: Very difficult.

Grey: …all you need–

Diehl: Very hard.

Grey: …all you need is a slightly more radical, you know, opposition party, or maybe not three branches, where there’s enough, you know, members on one side or the other. And yeah, I’ve described it as putting a gun to the head of the American economy–

Diehl: Yes.

Grey: …and saying, “we’ll pull the trigger if they don’t come to the table.” And, you know, even if they’re being unreasonable by not coming to the table, the fact that you’re putting a gun to the head of the American economy is its own form of, kind of, degradation of the process, and what the public understands, because you’re telling them something that isn’t true–

Diehl: Yes.

Grey: …to achieve an outcome–

Diehl: Yes.

Grey: …and in doing so eroding that trust in government, and in the fact that you can, that your politicians are actually telling you what is going on. And they’re doing so in a way that is playing with fire. And if it gets burned will affect everybody. And–

Diehl: Yes.

Grey: …we’ll go, “I can’t believe this happened,” you know?

Diehl: Yes, yeah. And in – I think in the past, when it came up in 2011, 2013, this became increasingly difficult to believe. But, there are some who believed – and some very smart people, savvy people, who believed – that this was only traditional politics: using leverage to – in a negotiating situation – to get an advantage over your opponents. I think we’ve increasingly come to realize – not just because of previous debt limit fights, but from other political situations – that there are people in the country who believe that they benefit, in terms of power and–

Grey: Disruption.

Diehl: …political organization by damaging the economy of the country when the opposing party will be held accountable for it. And it’s a form of economic sabotage. And there is still a group of people who would benefit from that. Or who could sustain their position for a period of time in those circumstances. But the vast majority of us would be losers.

Grey: And we saw that, almost, with some of the – some of the people motivated behind Brexit, for example.

Diehl: That’s right.

Grey: Now they might have been quite aware of how damaging it could be to their economy, but they didn’t care.

Diehl: Yeah.

Grey: So I don’t know if you don’t want to talk about the 50 State Quarter Program and the Treasury experience there, if you – we can move on on that one. But the other thing was, you know, people have been saying, “well, the Fed could just refuse to accept the coin, and it wouldn’t be booked as legal tender until it was sold. And so it’d have to be sold to someone first, and if the Fed refused to accept it then that would be that.” And you were telling me earlier about, sort of, the difference in the legal rules around when something gets counted as, you know, legal tender – when it leaves the Mint, versus when it gets to the Fed.

Diehl: Yes.

Grey: And it reminded me a little bit of when I teach in Contracts. You know, people talk about the Mailbox Rule, you know, when you accept a contract. You send it in the mail versus when the other person receives it; it’s a question of, kind of, when was it accepted. But can you tell us a little bit about that rule, and how it’s changed, and, sort of, what you think about it?

Diehl: You bet. First of all, I think this is a highly unlikely–

Grey: Right.

Diehl: …  theoretical scenario, where–

Grey: …the Federal Reserve would have to be refusing to go along with the Treasury, and saying, “we prefer default in this eleventh-hour moment”–

Diehl: Yes.

Grey: …we will be the ones putting our hand up, saying–

Diehl: Yes.

Grey: …‘we’re willing to cause this default–

Diehl: [Chuckling] yes.

Grey: …in the name of Federal Reserve independence, which, by the way, we hope will still be around tomorrow–

Diehl: That’s right.

Grey: …if we do this.”

Diehl: [Chuckling] Yes, yes. That’s one half of the equation that makes it virtually impossible to happen. The other half of it is just politically, the President, and the Secretary of Treasury, and the Chairman of the Federal Reserve are going to have to agree on doing this beforehand. It’s just, it’s inconceivable that the White House would try to jam this into the Fed. But, I mean, there are scenarios you can conjure up where something like that may happen. So–

Grey: I had a colleague remind me that it’s still on the books that the Treasury Secretary can remove the Fed Chairman for cause, and–

Diehl: Yes.

Grey: …maybe this would be moment–

Diehl: Yes, yes.

Grey: …that unthinkable moment where you might actually be able to remove the Fed Chairman for cause, because they’re standing in the way of preventing unconstitutional default.

Diehl: [Laughing] Yes. I definitely think that would be cause.

Grey: As far as stakes go, you would hope–

Diehl: Yeah, that would be cause.

Grey: …that would be high enough. If the President said, “it’s my sincere belief that–

Diehl: Yeah.

Grey: …this Fed Chair is standing in the way of us, you know, preventing default, I can’t imagine the Supreme Court getting in the way and reversing it. So, you know [shrugs].

Diehl: Yes, yes. And I can think of at least three members of the Senate who you could move into the Chairmanship of the Federal Reserve [clicks fingers] that would accept a trillion dollar coin that fast.

Grey: I won’t ask you to name their names right now.

Diehl: Yes, I’m not gonna name them. But they – and not just because it avoids default, but because there are a whole set of other policy issues that come together in the trillion dollar coin that people don’t talk about because they’re complex. Very complex. And they are downstream from what we are talking about here today.

So this caveat here, to answer your question – this is my recollection of what happened twenty-plus years ago at the United States Mint, and why it happened. And I do not know whether it has changed since then or not. I’d be very surprised if it changed because of the reason why it changed.

So during my term and before my term – during most of my term – seigniorage was booked when coins left the Mint loading dock, on its way to the Fed. So in the case of the trillion dollar coin, we, you know – the U.S. Mint strikes it, they send it to the loading dock, a truck takes it over to a helicopter, which flies it over to the Federal Reserve in New York City in an hour. So under that scenario, boom. The seigniorage would be booked immediately.

There was a point late in my term, when it was the OMB (the Office of Management and Budget), I believe – it could have been Treasury, but I think it was OMB – that changed that booking procedure. And changed it so that the seigniorage wasn’t booked until the Fed had accepted the coin. And – a quarter, whatever coin. And the reason – and it might have happened during the Fifty State Quarters Program (that would make sense) which was launched in 1999 – [was] because we were shipping so many coins to the Federal Reserve, that OMB looked at that and said, “oh, we need to change the incentives for the shipment of coins to the Federal Reserve.”

Grey: You’re too successful. You’re getting to many out the door.

Diehl: Well, it was just the concern that some time in the future the U.S. Mint would produce a whole bunch of coins, send them over to the Federal Reserve – or the Administration would order it to happen – and then inappropriately book – “inappropriately” [inverted fingers] book – all the seigniorage.

So – and this is ironic, because – when I got to the [Mint], there was this boom and bust cycle of the production of coins. And as you can imagine, the demand for coinage depends on the economic activity in the economy. More coins are needed when there’s more economic activity.

Grey: We had a coin shortage last year. I think it’s still enduring, because–

Diehl: Exactly.

Grey: …of the pandemic.

Diehl: Yes. And so – and this was magnified by the Fed’s terrible model for projecting coin demand. And so I had a very smart young economist, who I brought in and said, “uh, we gotta fix this.” Because what happens is we fall way behind in production when all of the sudden all of this demand comes in. And then so we’re so slow in cutting off production, the Federal Reserve vaults fill up with coins. Then those back up into – we had them not in vaults, but in hallways back in those days.

And then when demand comes back up, all that flows out; we have to crank up production. And so the irony of this is that we [the Mint] were responsible for changing the model that the Fed used in cutting down this shipment of excess coins and seigniorage and everything.

But – so, that change occurred. And that would obviously affect the trillion dollar coin, because if the Fed refused to accept it, then the seigniorage wouldn’t be booked. But as we were saying, that’s a highly unlikely situation for all kinds of reasons. It, you know, it would only be done as a failsafe measure. And –

Grey: And the rule that the OMB set could just be changed, right?

Diehl: Well that’s the other thing. Yeah.

Grey: It’s not legislative, it’s not statutory. It wasn’t Congressional intent. This is all within the executive branch, this is all internal baseball between different agencies and internal politics, right?

Diehl: [Nodding] It wasn’t even a regulatory rule change–

Grey: Right, so it wouldn’t need to go through the–

Diehl: …that required public notice and all that stuff. It was just [snaps fingers] you know, they’re just done.

Grey: So if Biden needed to change that rule five minutes before that coin got struck, he could, potentially.

Diehl: Yeah. Absolutely, yeah.

Grey: So I know we’ve been going – we’re [at] the end of time, but I’ve got one last question, sort of. You mentioned all of these downstream, second-order implications of the coin. One of the things that I was writing – and found this, you know, whole issue so fascinating – is because, you know, I was an elementary school teacher. I like social myths and public narratives – about how our government works, that provide the basis for us to understand the world we live in – that are accessible to people.

A colleague of mine – a sociologist named Jakob Feinig – talks about this term “monetary silencing:” where average people are taught to, you know, “you don’t need to know about this stuff. It’s very complicated. There’s people in the room – you know, who wear suits, who have finance backgrounds – they understand all of this stuff. You shouldn’t try to understand it at all, you know?

Diehl: Yes.

Grey: We need economic literacy and monetary/financial literacy in schools, but what we really mean is you,you know, you should balance your checkbook. You shouldn’t learn how the government actually works, and how this sort of ‘veil of money’ works.

And even, you know, very respected scholars who I otherwise respect, you know – there was an op-ed in the New York Times by Peter Coy, just recently, about this – they would say, “look, yes, it’s a Noble Lie that we can’t make money out of thin air, and things like that. But, you know, even if Noble Lies aren’t great in some situations, we shouldn’t probably be drawing attention to this too much right now.” And at least to me, if you look at the alternative, it’s this catastrophic debt ceiling that we keep coming back at. It’s politicians saying we can’t afford to deal with climate change, we can’t afford to deal with poverty, because we don’t have enough money.

And as you said before, it’s a useful political kind of rhetoric, to say, “oh, there’s no alternative to austerity. There’s no alternative.” But if there is an alternative, then these myths are not just things that keep the lights on – they are things that actively harm us. And maybe we could be looking to a new set of myths. Something that meets our new moment and our new needs.

And if we’re in a world now where – you know, bitcoin, and dog[e]coin, and all these things – people have embraced the idea that you can coin an asset out of thin air. It could literally be made of zeros and ones on a computer.

Diehl: [Chuckles] Yes.

Grey: And the value is: how people accept it, how people use it, what’s backing it, has it got the force of law behind it, et cetera. That, if we think about coins, there’s actually maybe a time for a renaissance of coins as a sort of symbol of the money power–

Diehl: [Nodding] Yeah.

Grey: …and going back to that two hundred year history. And one last little point on that before I get your thoughts is: I know that we’re in now this world of government digital currencies – we’ve been talking about, you know, they say a “central bank” digital currency.

Diehl: Yes.

Grey: And I’ve testified to Congress, saying “why don’t we talk about coinage? Why don’t we talk about digital coinage?” Because if you think about a bank account, there’s a third party in the middle. There’s not as much privacy. In fact, there’s a whole third-party legal doctrine that says you don’t have privacy if you put your money with the bank. But even paper currency has a barcode. Coins are the original, anonymous money. If it’s in your pocket, it’s yours.

And one of the earliest forms of digital currency that was tested by a government was Canada, and it was the Royal Mint. They created the “Mint Chip” program–

Diehl: Yes.

Grey: …and it was an attempt to create a digital coin. So maybe, you know, I’d be curious to your thoughts – as we’re entering a digital world, as we’re discussing how to create a whole new form of currency, that maybe the Mint should be in the room. Maybe we should be thinking about this beyond just the Federal Reserve. Beyond just a better bank account. And what lessons we can learn from the history of coinage – and from the design of coinage – even if it will be, you know, a digital equivalent.

Diehl: Well Mike Castle – Representative Mike Castle – back in, probably, ‘96, ‘97, had a Congressional hearing on the future of money. And I testified at that. And all these issues sort of came up in a primitive form.

Grey: You were talking about stored value cards at the time, if I remember that correctly.

Diehl: Yes, yeah, that’s exactly right. Stored value coins. And this is one of the things that I was – you raised one of the issues I was really intent on at the time – was that coinage is the ultimate private exchange. Cannot be traced.

And that – in those days, people weren’t concerned about privacy. I mean, it was amazing to me how nonchalant people were about privacy. And then we saw all that take off with social media. Where people told their life stories, and said things online that inevitably would come back to haunt them. And people just sort of didn’t care about it.

Well now, especially after 9/11 and the surveillance act–

Grey: The Patriot Act.

Diehl: Yeah, Patriot Act. People woke up to what that meant. And so, you know, it’s begun to sink into the culture. And I think you’re absolutely right.

You know, coinage is the physical embodiment of that set of privacy values, which are being expressed in what I believe is a highly-dangerous-to-individuals-form in crypt[o]currency. And also, you know, has the potential of destabilizing the larger economic system. So–

Grey: If the only kind of privacy we get is these volatile crypto private-currencies–

Diehl: Yes.

Grey: …then it will be a very bad day for privacy, because–

Diehl: Well, if we–

Grey: …it doesn’t have the full faith and credit of the United States. It doesn’t have that whole infrastructure. You can’t use it at a store, necessarily. All those kinds of things. 

Diehl: Well we’ve lived through that before too. Leading into the Civil War, when before there was the American Greenback.

Grey: Greenback, yeah.  

Diehl: And so you had all these banks issuing their own currency. And yeah, you know, if you were using it locally you knew something about the stability and reputation of that bank. But the further you got away from that bank, that note would still be used, and people didn’t know, you know, what was the providence behind this note. And–

Grey: I remember someone saying it used to be better to get a counterfeit note on a good bank–

Diehl: [Chuckling] Yes.

Grey: …than a good note on a bad bank.

Diehl: Exactly right, yes. And the U.S. could put up with that, economically. And there wasn’t the political will to do anything about it until the Civil War. And then the U.S. federal government – number one – had the ability to do it because half the nation who opposed doing anything about that left Congress. And the other was: we need to finance, you know, the war.

So necessity bred a change. And unfortunately that’s how the government works; our government works. It reacts. So there will have to be some disaster that occurs around cryptocurrency that will drive Congress, the Federal Reserve, the regulators, to do something about it. Hopefully that occurs somewhere else, not in the U.S., and we learn the lesson from somebody else.

But let me address the assumption that underlies this question. And that is that people don’t really understand fiat currency. I think that may have been true in the past. Probably was true in the past. But people have driven into their minds, over and over again – certainly since 2009, with the QE, and the, you know, and the opening, basically, of the flood of the money supply into the economy to save the economy (not just the U.S. economy, but the world economy) – people came to understand that what fiat currency means.

And they don’t necessarily understand what it means: the “full faith and credit of the United States Government.” What that means. But – especially when you’re threatening to default on your, you know–

Grey: Especially when it doesn’t mean as much as it used to, maybe.

Diehl: Yes, yes. So I think people are getting that. The other thing, why people are being educated on that, is that a conservative mantra has been against fiat currency [and] for the gold standard. And, you know, that’s been the case since, you know, ‘33? Since FDR got us off the gold standard. And – well, informally–

Grey: They’ve been predicting the–

Diehl: …and then Nixon took us off. But – so I think the predicate has been laid for the trillion dollar coin. People just don’t – it looks like a gimmick. And when you think about it, this is a branding problem.

Grey: Yep.

Diehl: Because “QE” (Quantitative Easing), it hides what it does. Those words, it sounds really complex. Beyond our comprehension. Whereas a trillion dollar coin sounds ludicrous, you know? Grey: Yep. What we’re doing is we’re easing, quantitatively–

Diehl: Yeah.

Grey: …with a trillion dollar coin. Let’s just, Mint Quantitative Easing. Yeah. And you’re absolutely right. You know, there were newspaper headlines: “oh trillions of dollars have been created.” If that was going to cause a panic in the streets, where was it? Where was it the last ten years? When the last debt ceiling crisis happened, even Standard & Poors downgraded the U.S. credit rating. And what happened? People flooded into Treasuries, not out of them.

And I remember Neel Kashkari, last year – the President of the Minneapolis Fed – said, “we have an infinite amount of dollars that we can use to save us from this crisis.” I’d never heard a Federal Reserve person use the word –

Diehl: [Chuckling] No, that is pretty good.

Grey: …“infinite” in public before. Maybe in private, but not in public. And the New York Times had an op-ed headline saying, “the Coronavirus money is being pulled out of thin air.” And if that’s not going to cause a crisis, you know, I think you’re right. The idea that the public can’t handle this truth that it’s too big, it’s too scary – even if that had some credibility in 2006, it doesn’t have the same credibility in 2021.

But maybe you’re right. Maybe it does take necessity to breed government action. And maybe we do need to get even closer to that debt ceiling cliff, you know, before we will entertain the unthinkable.

Diehl: If I could–

Grey: Sorry.

Diehl: If I could make one other point, that has really been impressing on me under these current circumstances. There will come a day when it’s inevitable: what comes down must also go up. And I’m talking about the inflation rate. And all know this in the back of our minds, that once the inflation rate goes up, and the federal government is no longer paying what is essentially zero-interest on an inflation-adjusted basis for, you know, on its bonds. When inflation goes up and we have to pay more, and we have thirty trillion dollars in debt, then we are going to see interest payments – the financing of that debt – devouring larger and larger sections of the federal budget.

Grey: Yeah.

Diehl: And coinage – and seigniorage – is one of the ways to think conceptually about how to deal with that. And this is particularly relevant in terms of the whole starve the beast strategy, [which] is that we will build all these deficits, at some point the government will have to face reality, and will have to start cutting social security, and killing all the old New Deal and Great Society programs. And Obamacare, now. All that will have to die, and there won’t be any choice.

Well, there are choices. And we just need to be aware that that day is gonna come.

Grey: And we need to be preparing pre-emptively to do that marketing work, and do that public education, and building the institutions. And I know I speak to people, and they say well, you know, even if the Treasury issued zero-interest financing, the Fed would pay interest on reserves if it wanted to raise the interest rate. So it doesn’t matter, which way.

And I say to them, “but you know it’s very different in the public mindset if this is the cost of ‘borrowing’ or the cost of government spending on one hand, or if it’s the Federal Reserve choosing to pay money – for free – to people because it wants a higher interest rate. If the Fed wants to do that – if it wants to take responsibility for paying, you know, hundreds of billions of dollars of interest as part of its monetary policy – it can take responsibility for doing that, and see whether or not that’s the best way to actually limit inflation.

There were debates in the ‘70’s, in the ‘50’s, about using other forms of qualitative and quantitative credit regulation, and other ways to limit, you know, investment in the economy – to cool the economy down – that didn’t require raising interest rates through the roof like Paul Volcker did. And my guess is when it’s easy to blame the Treasury for those interest payments, then it’s a lot easier for the Fed to raise rates. If the Fed had to own the politics of raising rates like that – and giving free money to interest-earning, you know, people who hold interest-earning reserves, or other assets issued by the Fed – and had to take responsibility for that on their balance sheet, my guess is they would be a little more creative about finding other ways to manage inflation.

Diehl: Yes, yeah. Yes.

Grey: Well thank you so much. It’s been an absolute pleasure, Director Diehl. I honestly feel like this is the kind of conversation that will hopefully go into the history books. Because I’ve never heard these kinds of stories from within the government before. So thank you so much for taking the time with me, and for your voice and for your courage in speaking out. And I hope I don’t have to see you again because we don’t have this problem recurring, but–

Diehl: [Chuckles] Yes.

Grey: …maybe we will, and I look forward to connecting again in the future. Thank you very much.

Diehl: My pleasure. Thank you.

End of Transcript

* Thanks to the Money on the Left production teamWilliam Saas (audio editor), Rohan Grey (transcription), & Meghan Saas (graphic art)