No Depression in Heaven with Alison Collis Greene

In this episode of Money on the Left, we speak with historian Alison Collis Greene about her book No Depression in Heaven with an eye toward contemporary debates around the Green New Deal. Subtitled The Great Depression, the New Deal, and the Transformation of Religion in the Delta, Greene’s book critiques what she calls the “myth of the redemptive depression” which, particularly in the American south, eroded the legacy of the original New Deal by affirming regressive fantasies of self-help and individualism. 

Many on the left today see the “New Deal” framing of contemporary social and ecological politics as a concession to liberal nostalgia. However, No Depression in Heaven reminds us that right-wing and religious dismissals of the New Deal played a key part in rolling back government provisioning under neoliberalism. From our perspective, then, the original New Deal remains a crucial rhetorical battleground for the future of American political economy.  

Greene teaches United States religious history at Emory University, and researches American religions as they relate to politics, wealth and poverty, race and ethnicity, the environment, and the modern rural South. Check out her poetic mediation on scarcity, gender and history, “Pine Knot Woman,” which Greene reads for us at the beginning of the show.

Transcript

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

William Saas: Alison Collis Greene, welcome to the Money on the Left.

Alison Collis Greene: Glad to be here.

William Saas: Can you start by telling our listeners a little bit about your personal and scholarly background? How did you become a scholar of religious studies in particular?

Alison Collis Greene: Sure. The religious studies part came first. For a long time I was—well, that’s pretty self centered—my dad was a Southern Baptist minister. This goes way back. He left seminary to return to his home church when I was small. This was in a rural part of the North Carolina mountains where he and my mom had grown up. I was four and the church that we went to, like I said, was the church he’d grown up in. It’s kind of the center of our universe. I spent a lot of my childhood climbing the trees in the church yard, playing hide and seek in the pews, and wandering up the road to my grandparents’ house. I knew everyone there. I learned later that we were kicked out of our first rental house when the landlord saw that my dad had Greek and Hebrew texts on the shelves. You were just supposed to trust King James, not mess with all that other stuff. 

After another transition, which was when I was 12, I learned about this big split in the Southern Baptist Convention that had been ongoing. It rocked our world. We had to leave that church. “Too much learning and too little preaching, too much love and too little hell” was what people said. So my dad found odd jobs after he left the church. He drove a fuel truck for most of my childhood and figured out what he was doing to do. I knew from that moment that I was going to study religion. Christianity was this thing that had held us all together in this community, but it was also the thing that had torn us apart. So I wanted to understand it. And in a sort of childish way, I also wanted to know what was so dangerous in those foreign texts that got us kicked out of the house. When I went to college, I knew I was going to study religion and learn Hebrew Bible. I thought I wanted to learn Greek, but I fell in love with Hebrew. I took six semesters of biblical Hebrew, with some anthropology of religion and Scottish Calvinism courses on the side. That was my adolescent rebellion.

When I graduated, I joined Teach for America. I moved to the Arkansas Delta. Going in, with my background in Hebrew Bible and not knowing much about the world around me, I thought all rural places were the same. And so, my childhood in the Appalachians would be perfectly adequate preparation to teach in the rural deep South. You will be shocked to hear that it wasn’t. In my first week in the Delta, the local Churches of God in Christ led a boycott of the segregated public school system where I taught. The schools were segregated because the white kids went to an Academy. I faced new questions about race, class, and justice. For the two years I was there, I knew that what I really needed to know and learn was American history. If I wanted to answer any of the questions that I had, [history] was the route.

So I went to grad school to study religion and learn some history on the side. In our religion program, I took one semester of history classes and I was just hooked. The methodologies of history fit the way I think. I began to learn what was limited about the narratives of history that I had grown up with and started to piece together some of the answers to questions I had—and to ask better questions. So I switched programs and here I am. I’m a historian of religion now.

Scott Ferguson: Right. So I’d like to turn to your book, No Depression in Heaven. In that book, you focus on the Delta region nestled between Arkansas, Tennessee, and Mississippi in order to develop a critique of what you call the “myth of the redemptive depression.” Would you mind fleshing this out for our listeners? What is this myth? Where did it come from and what are its stakes for you, for history, and maybe even for contemporary American politics?

Alison Collis Greene: Yeah, let me start with some of the stakes and I’m gonna move on from personal narrative after this. I learned a story about my own family only after I’d written the book. It’s not a story about what motivated me, but one that helped me see the stakes of the argument that I was making. My great grandfather in the 1920s had three children and three school aged sisters left in his care. In the 20s, when things were supposed to be great, he had to send two of his sisters to an orphanage because he couldn’t afford to feed them. This orphanage was four hours away. He had a job in the feldspar mines and it wasn’t enough. My great grandfather thought he could bring his sisters home when things got better, but things did not get better. One day, when his wife, my great grandmother, was running an errand with one of her own children, the third child, who hadn’t been accepted by the orphanage because she was chronically ill, fell into the open fireplace in the kitchen and burned to death. I had written about abuses in orphanages and about things that happen to families who were crippled and crushed by the depression. But I didn’t know how much of that was part of my own story.

Those living sisters lived four hours away in that orphanage for the rest of their childhood, never again to live with members of their own family. I knew them distantly. They didn’t have much to do with the family for what are probably obvious reasons. So I knew about the sisters. I knew something about the orphanage story. But I knew nothing about the sister who had died until I finished my PhD in history, wrote this book about religion in the depression, and my grandfather died and the family started telling me stories. We had joked all through my childhood about all the moonshining preachers and married cousins in our family tree, but nobody told this story about poverty, suffering, hardship, loss, and humiliation. And so, I started to think about the way that the stories we have in our own histories, that are full of pain, sorrow, and shame, often die with the people who carry them instead of becoming part of our lived knowledge.

We learn cleaner, tidier versions of our histories. Those stories shape our ideas about the world and where we fit in it. If we don’t learn about the suffering in our own pasts, in our own worlds, then it can be really hard to see it in others. And even if we see it, we are likely to blame other people, or the suffering that befalls them.

So that’s a personal story about what I see as the stakes in this “myth of the redemptive depression.” I’m going to sum it up in a couple of ways. One of those ways is, when I finished the book, I had a friend on Facebook who posted a meme. It’s like a picture of a grandmother. She looks very Appalachian and she’s sitting in front of a farm. She’s all by herself, which is really important. And over it, it says “Grandma survived the Great Depression because her supply chain was local and she knew how to do stuff.” Now, this is a claim that you can make that seems so persuasive because it’s a version of history that all of us have heard, but it’s also a completely fabricated and inaccurate version of history. The local supply chain was a central problem in the Depression. Knowing how to do stuff doesn’t mean a hill of beans when there is no money, there’s a drought, and you can’t even grow a hill of beans. And if you can, you’re probably gonna be feeding them to hungry neighbors. In this meme, suffering of poverty becomes an individual problem—neither a political problem nor social problem.

So you have one of the richest countries in the history of the world with one of the highest wealth gaps, highest rates of child poverty, homelessness, and incarceration, and yet we blame the poor, the homeless, the incarcerated, and the work the government does to mitigate unnecessary suffering. In this country, we have a long history of blaming poor people for their problems, but that wasn’t always the way we thought. The Great Depression brought such quick and deep suffering that it made visible the costs of capitalism and systemic causes of poverty. Americans united around this idea that a federal response and a federal safety net wasn’t just a pipe dream or a path towards doom. It was a moral imperative—the best and maybe only way forward in this crisis. If you want to tear away that safety net, which was not completed but began during the Depression, or if you want to tear down the federal government, none of the things I’ve just told you is a convenient story.

So you have to make up a new story. And I would say that story goes like this. This is the standard narrative of the Depression that a lot of us inherit. The greatest generation suffered through the ravages of the Depression, but they came out of it stronger. Maybe Franklin Roosevelt helped them back on their feet with work programs or social security. But then, they pulled together and helped one another and themselves. If you think of it in religious terms, you could say the Great Depression redeemed them. They suffered just enough to turn to God to realize they could help themselves and their communities. Then, they fought another world war, they won, and they built cozy houses. They went to college, they raised families, and they went to church or synagogue every weekend. The greatest generation in this framing is independent, hardworking, and grateful.

Then, the social programs of the New Deal destroy their descendants. The rest of us are just a big disappointment. We’re coddled by the government. We’re lazier and greedier with each passing generation. Does that sound like a familiar narrative? That’s the narrative I call the “myth of the redemptive depression.” That’s the story that I’m talking about. It recasts the greatest economic crisis of the 20th century into this sort of morality tale. It’s like this purifying experience that brings people together and to God. Or it would have done that if Franklin Roosevelt and his big government hadn’t gotten in the way. And big government is a problematic term there, but I’ll come back to that. The thing about that story, though, is it’s a really handy story to erase the suffering and sorrow of the depression—all of the things that brought about the New Deal in the first place. It’s a story that erases the decades of bipartisan effort that protected Americans from another Great Depression for a long time. It’s a story that ignores the way the greatest generation actually rallied together to build a welfare state, which is what enabled them to prosper, but it didn’t enable them all to prosper equally.

And so, it’s also a story that emphasizes the experiences of the white middle class, but ignores the network of federal programs that enabled the white middle class to become what it was, such as home and farm loans, social security, and the GI bill. These programs were at the expense of people of color, especially black Americans, who have historically received far fewer federal benefits than white folks. I think one of the most toxic elements of this “myth of the redemptive depression,” is the argument, which began in the welfare reform debates of the 90s, but now we’ve just sort of accepted, that the New Deal destroyed the work of churches and voluntary associations. Even if you think the New Deal was okay, it destroyed this work. And in so doing, it undermined Americans’ inherent compassion in favor of an impersonal and permanent welfare state that rendered the poor helpless and dependent. This is a framing advanced by people like Marvin Olasky and others in the 90s. 

In 2012, Paul Ryan said, rather than being a basic entitlement of citizenship, which I would argue it is, the social safety net “dissolves the common good of society and dishonors the dignity of the human person.” So conservatives then frame this as a debate about who should do the helping. It’s not a debate about what we do, but who should do it? Why shouldn’t churches care for the poor and leave the state out of it? But that’s very disingenuous. No one really believes churches would do what the federal government does or did. And that’s actually the point. Even now, a lot of private charitable work relies on public dollars. Without our taxes, it would be gone. That’s where we might disagree, but that’s at least how it’s funded now.

Back in 2018, when the first disastrous Trump budget came under discussion, this anti-hunger organization called Bread for the World estimated that if you were gonna make up for individual church spending, what was taken out of the budget, it would cost $714,000 to maintain the existing social programming that budget would cut. So the moral case against the welfare state rests on basically two assumptions. One, that poverty and suffering are the result of individual failures and not flaws in political economic systems. And two, that there’s no need for a welfare state to assure a baseline standard of living for everybody. That, in fact, that’s bad somehow. The moral problem, then, is the poor and not the persistence of poverty. At the end, that is the message of the “myth of the redemptive depression.”

Maxximilian Seijo: To dig into the specifics of the counter narrative that you traced to that myth in your book, I’d like to perhaps talk about the history of aid in the Delta from the 19th century up until the Great Depression. What did aid look like in the Delta region leading up to the Depression, how is it structured, and what were its problems?

Alison Collis Greene: Yeah, the first thing you have to do to peel back this myth is look at things on the ground at this moment. To do that, you could start anywhere. I’m going to start with the sort of mythic golden age up to and through the 20s, when there was no federal safety net to speak of and when Americans were supposedly doing really great. Now, if you want to see that golden age of voluntary aid in its purest form, then you have to look at places where public aid didn’t exist. There were parts of the country where municipal and state level aid was fairly expansive. Memphis, Tennessee and the Mississippi and Arkansas Delta were a place that had very little of either. Memphis and the Delta, for a little context, were to some degree a single coherent economic region. Memphis was the economic and cultural capital of the Delta. It sits north of the Delta. It was where the cotton market was. It was the mule market for the Delta. 

Then, the Delta is the rich plains and soil area that extends for miles down both the Arkansas and Mississippi sides of the Mississippi river. The population of that region in the 1930s was more diverse than you’d probably imagine. There were wealthy planters and industrialists. There were poor factory workers and farmers. There were Protestants, Catholics, and Jews. There were African Americans, a pretty wide range of immigrants, and white folks. This makes it a pretty interesting case study of how aid operated across institutional lines, geographic lines, and racial and ethnic lines. Also, [how aid operated] from the rural outpost to the city center, because it’s going to look very different in the city from the countryside.

Before I go on to describe that aid—I do this with my students and when I talk about the book—I want to ask you to do something. Imagine this: let’s say it’s 1930. You have a little farm in the country or you have a little shop in the town or the city. You have a family constituted however you want to imagine it. You’ve always scraped by, but since the stock market crashed, prices have bottomed out. Nobody’s buying anything. You lost your savings in a bank crash. Your farm or business has gone under. The bank has repossessed your property. Your family’s hungry. Your partner has died of tuberculosis. You’re sick. Your kids have no food, you have no money, and there’s no work to be found.

I want you to actually answer this and I want listeners to think about this. Where do you go for help?

Scott Ferguson: Okay, let’s say I go to my church.

Alison Collis Greene: Okay, great. One of the first places you think to go to is your church. Depending on who you are, your church might be middle-class. Maybe you were once part of the middle class because churches are divided by class. You might be able to get a little help from your church. They might feed your family for a week. Now, say you went to a poor church. They’ve already helped everybody. Either way, your church has done what they can. Where do you go next?

William Saas: Neighbors?

Alison Collis Greene: Yeah, you go to your neighbors, but man, there’s a drought. There’s a crisis. Everybody’s hungry. You share what you have the best that you can. But I mean the drought doesn’t stop at your doorstep. So where do you go now?

William Saas: Well, I started thinking about stealing things.

Alison Collis Greene: Yeah, I mean one option is to just take, but you’ve got to travel pretty far to find people who even have much to take. Can you think of anywhere else you would go? You’re really desperate. Gone everywhere you can think.

Maxximilian Seijo: I might move. Relocate.

Alison Collis Greene: Yeah, right, this is a significant response to this crisis. Pick up whatever you have left and go. You look for a place where things are better. Maybe you find it, maybe you don’t. Everybody else is doing the same thing.

William Saas: And we can’t go back to the church at this point? They haven’t replenished their goods yet?

Alison Collis Greene: Right. You might try a different church. That is an option. Not all churches are equally resourced. So I’ll just go through the options. There are a few more options than you’ve already mentioned, but not a ton. Let’s say you look first at public options. Now, I asked you to think about if you lived in the Delta. If you lived in the Northeast, or in the Midwest, you’d have a few more options because there were municipal and state forms of aid. In either case, those resources were still pretty patchwork. Now, if you happen to be a veteran, you might have access to a state pension. This would only be the case in the South if you are a Confederate veteran, which was the South’s first form of welfare, and clearly a form of welfare for whites only.

If you were an abandoned or widowed mother—[this] wouldn’t apply to any of you—you might receive a few dollars of Mother’s Aid, which was a program that social workers advocated for around the turn of the century in the progressive era so that widowed or abandoned mothers could care for their children at home instead of turning them over to orphanages. Orphanages in this period weren’t just filled with kids without parents, but with kids whose parents simply couldn’t take care of them. The idea was that Mother’s Aid would keep kids out of orphanages for mothers who could prove that they had been widowed or abandoned and hadn’t just been irresponsible and gone and had a kid—cause those [mothers] did not deserve any help obviously. But if you’ve done everything right, and you probably had to be white in most places, then you could get a little bit of help. In the Northeast, it actually might be enough to help you take care of your kid. In the South, Mother’s Aid was mostly for whites. It was available only in a few cities and it was just a couple of dollars per month in most cases.

Now, if you were sick, and you were sick in this scenario, there were charity hospitals at both the state level and private charity hospitals. If, and this was a big if, you could get a bed, and there were hospital beds in Memphis for both black and white patients, but they were not equivalent and they were not adequate in either case. Now, if you were really destitute, you could also go to the poor house, where if you were deemed able and deserving—if you weren’t able or deserving, you’re out of luck—you could work the poorhouse farm in exchange for very basic accommodations and all of your worldly possessions. That’s sort of it from public aid in much of the United States before the New Deal. On the city level, some cities beyond Memphis offered more. By 1930, 76 percent of total aid in the nation’s largest 116 cities was public. That averaged a dollar and nine cents per person per year. In Memphis, that total aid averaged 55 cents per person per year, and those proportions are precisely reversed. 76 percent of total assistance in Memphis was private. In the Delta, it was all private. That was the only option.

I want to tell you a little bit about what that private aid would’ve looked like. That’s the aid that y’all thought of first—your family, your community, and your church. There was a little bit of institutional aid because between the civil war and the Great Depression, women societies and home missions organizations built schools, hospitals, orphanages, and settlement houses to reach needy white people in the city. They always prioritize their own members first. Catholic and Jewish charities were a lot more expansive. They served members of their own communities first, but they also helped a lot of others. By the 20s, a lot of those aid organizations, both in Memphis and around the country, united and consolidated community funds that produced all sorts of brochures explaining, as one in Memphis was titled, “Where to Send People for Help.” It had a long list of all the agencies that might help people who are aged, orphaned, or hungry. So you could look at these brochures and you could think, “Wow, anybody who needs help has somewhere to go.” They gave the impression that all you had to do is just ask. But if you look more deeply, you see that those agencies only focused on institutional aid.

So you could find a place. There was a real problem with poverty among older folks, but you could find a safe place to send an indigent older person if you didn’t really care about the conditions there. You could find an orphanage. Each of these agencies made it clear that nobody was entitled to adequate nutrition, a home, or to health. In fact, if you had too much of any of those things, it might spoil your will to work. And so, in 1927, the Methodist head of Goodwill Industries, which is like the Goodwill we have today, it was a sort of make work and charity organization, said “The first taste of charity is as dangerous as the first shot of dope.” And there’s a big dope scare at the same time too. This was the way that even the people who are providing charitable aid are thinking about it. It is a last resort and people have to show they deserve it because you really don’t want to mess with the workforce and their willingness to work at low wages.

For people in the South and mid-Memphis, this argument, of course, doesn’t apply equally to everyone. It applies most strenuously to African-Americans who represented 40 percent of the population in Memphis but received even less than they paid into the municipal and charitable coffers. Only 3 percent of the community fund budget in Memphis went to the blanket category of Negro aid. Black churches, women’s societies, and fraternal orders were the only source of support for most Black families in need. If your family was chronically poor or hungry, starving even, maybe losing their home, they really didn’t have anywhere to turn. In Memphis, only the Salvation Army offered a comprehensive soup kitchen. In the countryside, people relied entirely on informal aid—on their local churches, their families, and their communities. And there’s this sense that nobody really starved in the depression, but there are all sorts of state level nutrition studies that show that in fact people were very hungry and were suffering a really wide range of diseases—malnutrition, pellagra, rickets, and all sorts of horrific diseases of hunger. And that is while things are good. That’s before the disaster.

The stock market crash didn’t immediately affect Memphis in the Delta. But then, you have this record setting drought in the spring and summer of 1930. And so, the cotton, which is a drought resistant crop, is parched in the fields. Food crops shrivel up long before the cotton. Farmers now faced a long winter with no food to store and no income for basic staples. Even those who had managed to get a little bit of money saw their savings disappear in a wave of bank failures for the Delta region. It was a bank in Nashville that collapsed. Most of the banks in the region failed. So even if you’d done everything right, you still lost all your money. You still had nothing. That is the start in Memphis and the Delta of what would become known as the Great Depression.

William Saas: So how much of this is tied in explicitly with theological doctrine? How was it interpreted as personal and individual responsibility? And how much of it can we explain by broader political concerns about the spread of like Bolshevism, socialism, communism, and anarchism throughout the 20s?

Alison Collis Greene: That’s a really good question. I’m a historian, not a theologian, so I don’t have a formal doctrine of personal responsibility. I would say there is an American doctrine of personal responsibility. The fear of Bolshevism is part of this, but these attitudes long predate those fears. These attitudes are deeply embedded in American thinking in the 19th century. In part, they come out of American’s difficulty in managing the transition from a kind of community based society to a larger one. The big themes of industrialization and urbanization and trying to figure out how you live together in a world where you don’t know most of the people around you.

There’s also a theological component to this idea. It’s part of the messages folks would hear in churches on Sunday. And there’s a tension between the social gospel ideas that emerged in the late 19th century. If you take Heath Carter’s argument, it very much comes out of the ranks of labor, only later coming to the middle class. And if you take Janine Giordano Drake’s argument, it’s very much reduced to an ambition by the middle-class. You get this sense that people in the churches have some sort of social responsibility to each other, but that social responsibility, which has to look different in the city from how it looked before, entails a responsibility to manage the behavior of people who are not prospering. If you do things right in this American narrative, you should prosper. The 19th century Gospel of Wealth literally says that poor people deserve what happens to them and that everyone should be rich and could be rich if they just did things right. So yeah, it has a long history. It has deep precedent. What’s really striking about the depression is not that this legacy persisted, but that it actually faded for a little while. There was another way of thinking that gained traction, not just among Christian socialists, who were increasingly numerous in that period, or socialists more generally, but among a wide swath of Americans.

William Saas: Could you talk a little bit about that new way of thinking and how it evolved? You’ve done a nice job of giving us overview of the infrastructure and rhetorical scaffolding for the shoddy aid in the Delta region. What happened after the Great Depression and how did that infrastructure and justification evolve?

Alison Collis Greene: Yeah, sure. The Depression is a process. It’s a long period. In the initial response to the Depression, when the banks crash in 1929, nobody thinks this is going to be anything more than a little hiccup. So the initial response isn’t very promising. People at the start of the Depression did not know what they were looking ahead at was the Great Depression. They actually thought things were supposed to get better. And for the first couple of years, most people thought things would just turn around pretty quickly. With previous recessions, there was this boom and bust cycle. It was just part of American capitalism. And we had tried to manage it in the progressive era so that you could control the cycle. But this was really just a thing that was going to get better with time. A lot of religious leaders said that it was a good thing because it would purify the country. As a response to all the roaring twenties stuff, Girls would stop cutting their hair short and smoking cigarettes. We would get right with God and then we’d get better. But that didn’t happen. You had all this preaching about a spiritual depression and how we just needed a spiritual recovery for an economic recovery. But things kept getting worse.

The response among a lot of people wasn’t a moralizing call for evangelism, but a stunned agony and silence, a bewilderment about what was happening. There were also people who had the luxury of sticking their heads in the sand. There’s a Methodist Bishop in Memphis who wrote on Christmas day of 1930, an editorial in The Commercial Appeal called, “Nobody is Starving in America.” Essentially, the message of the editorial was: we don’t need soup kitchens, we need a moral awakening. Well, nine days after he wrote this editorial, black and white farmers outside the town of England, Arkansas banded together and marched into the center of town demanding food for their families. These farmers are starving. People all around the country are just stunned by this as it reaches the news. They were stunned by when a relief worker said, “People could hunger with the bountiful soil immediately underfoot.” They had assumed that farmers, as another relief worker said, “had only to decapitate another hen or pull up some produce from the garden.” But the hens were gone. The gardens were cold and bear. It’s winter.

By February, more than half a million people in Arkansas, a quarter of the state’s population, needed help getting food. The one other place you can get help is from the Red Cross if a disaster is declared. And so, that’s what happens. The Red Cross begins to provide a limited amount of food aid. What people were marching for was actually Red Cross food aid which had been denied. So these events changed the way people talked about suffering, charity, and individual responsibility. When you have bread lines and farmers marching for food, it’s really hard to make the same claims about deservingness and about the meaning of poverty that you might’ve made a couple years before. Private aid organizations had been really proud of all their success and caring for everyone who really needed help. Again, it was a very limited number, but they faced three crises all at once. First, the number of people who wanted help goes through the roof. Second, the donations to charities and churches plummet and their savings vanish in the same bank failures that crushed farmers in the middle class. Thus, more people need help and there’s less available. Finally, the defense that, people for whom this is happening deserve what they get, completely falls apart in the face of widespread economic and environmental crisis. Churches and charities tried to help. They didn’t just moralize—although they rarely gave up an opportunity to do that.

In December of 1929, the Salvation Army in Memphis had served 1,700 meals. The next winter it served in each month between five and 10 times as many meals before. Eventually, it drained the swimming pool to make room for homeless men and boys to sleep on pallets on the pool floor. So the Salvation Army is doing all this work and actually expanding its work, but most agencies are collapsing because they don’t have the kind of support that they need. And if voluntary agencies are doing poorly, churches are doing almost as badly or worse. They’re struggling just to stay open. And a lot closed. Between 1929 and 1932, this applies to both churches and voluntary agencies, national income dropped by more than 50 percent. So for another couple of years, church giving holds steady relative to national income, but that still means a 50 percent loss at the very moment that demands on the resources of voluntary agencies and churches are increasing. The churches immediately went into self preservation mode. They cut “benevolent spending,” as they called it first. The president of the Southern Baptist convention, which had had a series of crises in the 20s said in 1931, “We are putting off the Lords cause while we try to settle with our other creditors.” They were pretty direct about what was happening. When the money ran out, the churches turned their spending inward instead of outward. So denominations are scrambling to keep the programs they value, but they’re cutting corners.

We talked about orphanages before and so I’ll use orphanages again as an example. Like I said, orphanages housed non-orphans. In the depression, they’re housing a growing number of non-orphans—kids whose parents just couldn’t take care of them and feed them enough. Even before the depression, these orphanages were often really inadequate and dangerous places. There is a growing recognition that institutional care was not the appropriate setting for children. The institutions persisted nonetheless. In Memphis, there was an orphanage called the Industrial Settlement Home. It was a church supported African-American orphanage in the city of Memphis. In August of 1929, this orphanage burned to the ground. The matron ushered the responding fire men that everyone was out of the orphanage. She was wrong. Eight young boys from ages two to six died huddled together in a second floor bathroom of the orphanage. The report that followed showed that the boys hadn’t died of the fire or smoke inhalation, but essentially died in a room that became an oven in the heat of the fire. It also revealed that the home had been declared a fire hazard long before it was overcrowded. Children regularly slept in the closets and in bathrooms. The matron regularly beat children with shoes and hot fireplace pokers. The fire had, in fact, been set by a girl whom she had just beaten. This might seem particularly dramatic, but it wasn’t the only episode of abuse like this.

Similar episodes rocked the white Mississippi Baptist orphanage in Jackson in 1929 and 1930. This is right at the start of the depression. A grand jury actually indicted the superintendent for administering excessive corporal punishment. And let me tell you, to get indicted for administering excessive corporal punishment in Mississippi in 1930, it has to be pretty excessive. In one case, the superintendent beat a 14 year old girl with a board, stopping only when the board broke and discovered that this girl wasn’t an orphan. Her aunt visited and discovered that she was just a mass of bruises from her shoulders to her knees. So she shared this with the churches and with the orphanage. She makes a stink about it. And immediately, the denomination blamed the children. They were too unruly. They had brought this on themselves. Then, only later with the outcry of parents and others in the church, did it remove this administrator.

So the Depression leaves people so hungry now that parents have to choose between letting their children starve and leaving them in orphanages that are rife, in many cases, with abuse and violence. Not all were. But how could you know? Then, between 1929 and 1931, private aid collapsed completely. Overstuffed orphanages now turned kids away to starve. Religious leaders saw what they could ignore in the 1920s. Paul Ryan said that “poverty exacts a terrible price on families and communities.” There’s no dignity of the human person, as Ryan put it, when that person lies dying alone of hunger or the diseases of malnutrition and exposure. Or when that person can’t keep her children warm or safe. Or when that person has to abandon his own siblings so they don’t starve. So the churches had to reckon with this. [Religious leaders] had to look at this and figure out what to do with it.

Religious leaders could only turn their heads away for so long. Some had been looking for a moment when they could speak up. As they looked at the suffering before them, and their own inability to do anything about it, religious leaders across the nation actually stopped using the language of individual responsibility almost entirely. They also stopped using the language of charity to a large degree. Even Southern Baptists started to write about the failures of capitalism and Americans’ basic responsibilities to each other in Mississippi state Baptist papers. There’s this renewed sense of the public, of public responsibility, and of our common fate. They called for the federal government to step in to protect its citizens. Americans, inside the churches and outside the churches, started to conclude that a welfare state, as we would come to know it, would not destroy human dignity. It would recognize and preserve human dignity. Now, the actual response came much more slowly, but this was a pretty significant shift in language and understanding.

Scott Ferguson: Yeah, we’d like to know about the response, especially how federal action is being framed and interpreted locally through the lens of religious community.

Alison Collis Greene: That we can do. Like I said, federal response came slowly. The demands increase. Herbert Hoover is really committed to voluntary aid and he’s genuine about it. He thinks this is the way to address these problems. For him, if the power of the government bends itself to these problems, it’ll create a bigger disaster than the one he’s already in the middle of. I also don’t think he ever quite got his head around the scale of this disaster. He had worked for the Red Cross. He was deeply committed to this idea of voluntary aid. But in January of 1930, Hoover’s administration made a move to provide emergency loans to banks and corporations, and then later to States and municipalities for public works projects. But a lot of states and municipalities didn’t take these because they’re loans. They couldn’t pay them back.

It was all too little, too late. So Roosevelt trounced Hoover in the 1932 election on the promise that he would leverage the federal government to end the depression. The model would be some of the programs that he had first tested out as the governor of New York. And when I say he trounced Hoover, it’s almost unimaginable in 21st century terms. Now, you have to take into account the limited electorate and voter restrictions in the South. But Roosevelt won 57 percent of the popular vote and 88.9 percent of the electoral vote. He won handily. The barrage of legislation that he signed in 1933, what would become known as the “first hundred days,” included an agency that would be especially important to the church’s conceptualization of what they did. That’s the Federal Emergency Relief Administration, or FERA, which was the first program to put federal funds, not just towards employment relief, but also towards direct aid to people who are suffering with the caveat that this aid would be administered in whatever way administrators at the city and state level decided was appropriate. In practice that most often meant food aid and jobs aid. Now, FERA significantly prohibited explicit racial discrimination. Not surprisingly, local administrators figured out proxies for racial exclusion. So even though racial equity to some degree was written into it, it was also written out of it in practice.

Federal aid outpaced that of private agencies by a magnitude that is hard to even comprehend because it could leverage so many more resources. [This happened] throughout the nation, especially in places like Memphis and the Delta, which hadn’t offered much in aid to the poor. New Deal spending made everything else look like pocket change. At the peak of private giving in 1931, Memphians received 88 cents per person in aid. 75 percent of it was private. Three years later by 1934, with the New Deal in full swing, Memphians received 7 dollars and 21 cents per capita in aid for direct and work relief. Only 12 percent of that was private. That’s a really dramatic change in who is spending money, how it’s being used, and how much of it there is. In just five years, as federal dollars provided work and food that Memphians needed, private aid dropped from three quarters of relief spending in the city to less than 2 percent.

In the Delta, almost all aid was public. So you could look at this and say, “Well, I mean you can see here that the state swept in to take over the churches work. They did this and the churches were just crowded out.” But by 1933, the limited aid that churches had offered before the Depression was already long gone. This wasn’t the state replacing what churches were doing. This was the churches collapsing and the state then stepping in at the request, and demand in many cases, of the leaders of those churches and agencies. Even more significantly, New Deal programs shifted the emphasis from individual suffering to collective responsibility. It’s no longer about your particular suffering, it’s about our shared responsibility to each other. This is a shift from private charity to public welfare. The Depression justified [shared responsibility] and the New Deal reinforced it.

And so, what did religious leaders have to say about it? I’ll talk first about what they said in the region and then a little bit about what people said nationally. You probably won’t be surprised to hear that liberal Protestants applauded FERA, as well as the National Recovery Administration, which for the first time, acknowledged workers rights to organize labor unions. Liberal Protestants saw both programs as a realization of the social creed of the churches, a statement that the Federal Council of Churches published in 1908. Catholics linked New Deal programs to papal decrees regarding social justice and worker rights. Jews pointed to the connections between the New Deal and the teaching of ancient Israel prophets. So there was a pretty unanimous and vocal range of support for the New Deal across the country. Perhaps more surprisingly, conservative Protestants were just as enthusiastic. A lot of them said Roosevelt drew his inspiration straight from the Bible.

There was a Southern Methodist, who wrote “The blue eagle is now perched on my door.” This was the symbol of the National Recovery Administration. “I’ve signed up for the war against the Depression,” he said. The National Bible Press actually tracked the biblical allusions in Roosevelt sermons and published them. If you saw complaints about the New Deal from the clergy in the years after the first New Deal, most of those complaints were that the New Deal didn’t do enough. Christian socialists were particularly unhappy with it. So FERA and the other 1933 programs curbed the crisis, but they didn’t establish a permanent welfare state. That would come later. In fact, those came, in part, as a response to those demands when Roosevelt signed the Social Security Act in 1935, establishing what we now know as social security. There were also provisions for the orphaned and the disabled.

Then, the Works Progress Administration eventually created public works jobs for eight and a half million Americans. Upon the passage of those two programs—this is a remarkable resource—Roosevelt actually wrote a letter to clergy. It was supposed to go to every clergy person in the country, asking them to describe the conditions in their area and then also to say what they thought about the Social Security Act and the WPA in particular. And finally, the second New Deal in general. By the end, over 30,000 clergy responded. And the letters, I’ve read them, they’re astonishingly enthusiastic. Now, the New Deal liked to catalog everything, so with the first 12,000 replies that came in within the first couple of months, administrators actually tallied them by how positive they were towards the New Deal. 84 percent were either entirely or largely in approval of the New Deal and its programs. Clergy wrote over and over that the welfare state was, in their understanding, a religious achievement, not an encroachment on their work. It freed them to focus on supplementary care and to return to focus on evangelism. You really see this across the theological spectrum.

Of course, there were those who disagreed. There were Premillennialists who saw Roosevelt as one of many possible Antichrists. There were elite white southerners, although not exclusively elites, who worried that the New Deal would undermine Jim Crow capitalism, which was pretty remarkable because they had gained an iron grip on it to ensure that it wouldn’t do that. Then, there were Christian and Jewish socialists who wanted a president who would unmake American capitalism, not revive it. In the end, that’s what Roosevelt was trying to do. Their frustration was that the New Deal was shoring up the system that needed to fall. There was a range of concerns. It was pretty quiet to start. There was a slow simmer of concern that the federal government, in taking over the responsibility for caring for people, was in some way weakening church moral authority, or weakening the church’s hold on Americans’ secular institutions. But that was kind of it. The dissent in those early years wasn’t really happening in the churches. It was happening in the ranks of business.

Maxximilian Seijo: Thanks for that. Reading your book from the perspective of Modern Monetary Theory, especially in the spirit that we approach it on this podcast, I couldn’t help but notice a few meaningful threads sticking out that we’d like you to thematize and consider. One that struck us was how conservative fantasies of independence often affirm and even avowedly embrace this false sense of scarcity, which you thematize in the poem that you read for us. These fantasies often shore up Jim Crow racism and even in the sense that you were mentioning with this theory of crowding out between church and state. I think that is central to the way Modern Monetary Theory thematizes this false sense of scarcity. I was wondering if you could perhaps ponder those questions and those linkages for us? And perhaps ponder the ways in which these ongoing tensions between church and state inform the way we can think about our relationship to one another in America today.

Alison Collis Greene: Yeah, I really like this question. I haven’t thought about it in precisely that language before, but I think that works if you think about the grandma meme that I talked about earlier—that she knew how to do stuff and her supply chain was local. That’s a grandma who doesn’t need anybody. It’s an image where she’s on this big farm all by herself. Yet, one of the key realizations of the Great Depression was that people need one another. That we need one another not only as members of our particular communities, but as members of a broader public. When we rally together, when we look at ourselves as members of a broader public, then we ensure our collective health and wellbeing. We can build good, diverse, and inclusive communities and schools and ensure jobs with a living wage for those who want them.

I do have reservations about the emphasis on work because it has echoes of those ideas about deservingness. But still, you can accomplish these things. Americans did this. That’s how they thought. That’s what they did in the midst of this devastating economic crisis. And it’s something we could do again if we wanted to, if we had the shared initiative and sense of collective abundance that marked the response to the Depression. Unfortunately, we have this zero-sum language of scarcity. And I agree with you that it’s false. We are a mind bogglingly wealthy country. Our kids don’t have to starve. If we believe in the sense of the collective, then these are all our kids. Kids don’t have to be ripped from their parents. They don’t have to be thrown in cages to starve. They don’t have to be shot down in the street.

The language of abundance doesn’t create competition in the way the language of scarcity does. If there’s enough for everyone, then the very wealthy, the people who hold the levers of power, will have a much harder time pitting the poor against each other. And if you can’t pit the poor against each other, then the poor might band together. This fear that the poor will band together, it goes all the way back to reconstruction. It goes back further, but consider reconstruction. White elites saw these fragile and really fraught alliances, but alliances nonetheless, between poor black and white southerners, especially among farmers. They saw interracial labor unions, the Knights of Labor, and the Populists—all of them imperfect in lots of ways—as terrifying to the white elite power structure. 

So you get men, like Ben Tillman, who rose to the South Carolina governorship on the promise of doing lots of great things for poor white people by claiming black men were a threat and violent rapists. This was an intentional effort to fracture alliances across lines of race within lines of class. And it worked, people fell for it. White people fell for it. Poor whites chose race over class and it has happened over and over again. As long as that works, as long as your gain is my loss, then we’ll be exactly where we are. As long as we think in those terms, we preserve white supremacy, we preserve elite economic power, and we preserve the systems that separate us from each other. If we think in terms of abundance, if we think in terms of what we can all do together and who we all are together, then we’re starting from a very different frame. Then, those powers, the powers of white supremacy and elite economics, which are deeply bound together, they start to lose power. And the church and state is part of this same milieu. The idea that church and state are zero-sum is part of the same set of ideas. I think the implications are enormous for thinking in terms of abundance as opposed to scarcity.

Scott Ferguson: For a lot of people on the left, they’re excited about the Green New Deal, reviving the name and legacy of the New Deal project—especially since it’s really taking off. On the other hand, I think there are people who are not just left of center but really “left-left” that are wary of this framing for a number of reasons, many of which we’ve already outlined here. And so, it feels a little bit like a concessionary move to tap into a certain kind of white liberal nostalgia. But talking to you, and reading your work, it becomes so clear to me that the legacy and memory of the New Deal is actually key semiotic terrain for American political identity, both past and future. I think your project is so important for us to think about what this Green New Deal framing is doing. And not just more broadly in the larger American political landscape, but even more specifically in the South. Considering the South’s living memory of the New Deal, what does the Green New Deal potentially sound like in the South? What are your thoughts on that? What are the limits? What are the problems that need to be overcome? Are there certain problems that are not going to be overcome any time soon?

Alison Collis Greene: Yeah, that’s a good question. I think for me the best way to answer this question is to sort of step back and look at the ways in which the New Deal reinforced and codified white supremacy, but also the ways that it enabled new kinds of responses to it. So the New Deal consensus thrived for decades. Republicans and Democrats both expanded the welfare state well on into the 1960s. In response to civil rights activists, who protested the unequal benefits that the welfare state provided to whites, you got Lyndon Johnson’s Great Society programs, many of which didn’t exist in the New Deal, like Medicare and Medicaid.

Those are more recent innovations. Johnson’s administration, though imperfectly, responded with War on Poverty programs that were designed to expand provisions for health and child welfare this time across explicitly racial and ethnic lines. This was, to that point, the most equitable expansion of the welfare state. And so, when you’re talking about the New Deal, you also have to talk about the Great Society, which is a connected part of its legacy. It operated very differently. It operated very often through voluntary and private agencies as opposed to public agencies. It also operated in an era when you had a couple decades of backlash. You can’t separate that backlash from this idea of scarcity—the idea that as long as white people lose any sort of hold on economic power, then everything’s gonna fall apart and white people are no longer going to have anything.

Frankly, they’re thinking in terms of non-white people doing what white people had been doing. So the War on Poverty, with this rhetoric of scarcity, became what is often aptly called the “war on the poor”. There is, again, this idea to blame the poor for their own suffering. Then, there are all these efforts to shrink and privatize the welfare state and also simultaneously to expand its punitive powers so that there’s a lot more emphasis on policing and a lot less emphasis on aid. Elizabeth Hinton has written beautifully about this. The efforts of the state to close gaps between rich and poor, between black and white, between new immigrants and established citizens, between women and men—we now have this new period of vast income inequality that is unmatched, even by the 1920s.

And all of this work to dismantle the welfare state rests on this “myth of the redemptive depression.” It’s a myth that infuses contemporary faith in the voluntary and private sectors, and skepticism in the federal government. So this retelling does this sort of erasure that I talked about before. And because it’s a misrepresentation of our history, it also represents a misunderstanding of our present. I think that there are two pieces of things we should know and remember about the New Deal. Without setting aside all of the ways that it replicated existing Jim Crow and white supremacist structures, we should double down in focusing on those structures in order to not replicate them again, in order to do better.

There are a couple of lessons to take away from the New Deal. One of which is that there’s a long and storied history of religious support. So this isn’t just a story of the left. The story of the New Deal is a consensus across a wide range of Americans that we are in some way part of a collective, that we are responsible for each other, and that what you have doesn’t mean I don’t. And so, one lesson to take away is there are many ways that American religious and faith traditions have conceptualized their place in society. The one that we have right now is far different from the one that we had for most of the 20th century. And there’s no reason that it needs to persist.

And second, the real shortcoming of the New Deal was its work to bolster white supremacy. And so, the last lesson is that, in all this language about racial solidarity and class solidarity, white people cannot choose class solidarity over racial solidarity. It’s not a choice. If you want to see yourself as in solidarity with working people, then you can not only think of yourself as in solidarity with white working people. People of color, especially black Americans, have reason to be suspicious of the intentions of even well-meaning whites because, over and over, white supremacy has broken these interracial alliances. So the New Deal’s great flaw was its concession to embrace white supremacy. And so, I would say white activists, we have to step back. We have to listen to people of color. We have to carry through with our commitments and stop picking white people first.

William Saas: Well thank you so much, Alison Collis Greene for joining us on Money on the Left.

Alison Collis Greene: Yeah, it was great to be here. Thanks for hanging out for awhile.

* Thanks to the Money on the Left production teamAlex Williams (audio engineering), Richard Farrell (transcription) & Meghan Saas (graphic art).

Money Politics before the New Deal with Jakob Feinig

Jakob Feinig, assistant professor of human development at Binghamton University, joins Money on the Left to discuss the history of political organizing and activism around money in the United States, from the pre-Revolutionary period to the New Deal era. Characterized alternately by periods of widespread “silencing” and mass mobilization, the history of money politics that Feinig documents in his research has much to tell us about the present and future of the modern money movement. For more about the history of money politics, see Jakob’s research on money politics in Sociological Theory and the Journal of Historical Sociology.

Transcript

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

Maxximilian Seijo: Jakob Feinig, welcome to Money on the Left.

Jakob Feinig: Thanks so much for having me.

Maxximilian Seijo: We’re wondering if you could start by talking a little bit about your personal and scholarly background and how you came to the question of money politics?

Jakob Feinig: Sure. I grew up in Austria and did a degree that was very deeply connected to political economy. When I started learning about money creation and political economy, I had all those “aha!” moments that I’m sure many of your listeners have also had at some point–that [money creation] is connected to unemployment, central banking, commercial banking, et cetera. Also, at that time, there was the famous changeover to the Euro. I started trying to understand what this meant for countries like Austria, but also other countries, especially those in the European periphery. I couldn’t believe that everyone around me was completely uncritically celebrating it, so I started looking for ways of understanding the relation between institutions that create money and people who use it. I was struck that I couldn’t find a good way of thinking about that as an historically existing and changing relation. So even though the ECB never [directly] shows up in my writings, they are driven by trying to find a way of speaking about that relation.

Maxximilian Seijo: Later on, you came to America to explore those interests. Where did you do your PhD?

Jakob Feinig: I did my PhD at Binghamton University in a department that’s very much focused on historical sociology. It also has an important tradition of critical political economy. It’s a department of Immanuel Wallerstein and Giovanni Arrighi, so it’s very deeply rooted in historical thinking about economic life.

Scott Ferguson: Most of our efforts in the present neo-chartalist and constitutional money movement are dedicated to critiquing and posing theoretical alternatives to the orthodoxy–be it classical, neoclassical, liberal, or neoliberal. Yet, in your work, you’re doing something rather unique. You’re actually unearthing a repressed genealogy of popular left democratic monetary movements, which can provide a really rich and complicated, but nevertheless, positive resource for the contemporary left. Maybe to ease us into this discussion, you can tell us about how you are framing this intervention? I’m thinking about how you’re in the field of historical sociology. Where does money sit in your field and how are you responding to those who have either directly or indirectly taken on the question of money and monetary politics?

Jakob Feinig: Sure. There are two major ways of thinking about money historically that might resonate with what your listeners already know. One of them is the classical sociological approach. Here, money dissolves all bonds and social relations. It‘s the notion that all that is solid melts into air. It’s very grounded in Marx and Simmel. In this canonized tradition there are very broad claims about money being an individualizing force that breaks apart communities and traditions. The other claim about money is more recent. It’s most famous writer is Viviana Zelitzer. She writes about money as micro relations, challenging Simmel and Marx, saying “Money is actually more complicated. It doesn’t mean that everyone is individualized. It’s just a different way of relating to people.” She focuses on the micro rather than macro level–on what people do in households with money and how gender relations [are shaped].

I’m distancing myself from both of those traditions by asking this question: how do money users relate to the actual institutions that issue money? It’s not about how they relate to their bank accounts or organize money in households, but how people relate as political beings to the institutions that issue money. And how that changes over time and shapes possibilities for political action. It’s deep historical thinking about who we are in relation to these institutions. The goal is to emphasize how the way we relate to money is much more recent than we think, and therefore, much more easily changeable.

William Saas: Great. Now, where would the work of Geoffrey Ingham fit into those two camps and in relation to your own work? The sociologist who wrote the book, The Nature of Money.

Jakob Feinig: Geoffrey Ingham is complicated. I would say that he offers something that’s distinct from Simmel, Marx, and Zelizer. He offers a very large, institutional approach to money, focusing on patterns of money issuance. He does not look at how money users’ knowledge are shaped, how social movements understand monetary institutions, or how the very constitution of money changes over time by involving people in different ways.

Scott Ferguson: Maybe to further talk about your understanding of the relationship between canonical sociology and contemporary sociology, what I know of Ingham is that he seems to rely on Weber and his thinking about power. And I know you have a critique of the Weberian approach to money. How do you see that potentially influencing Ingham?

Jakob Feinig: I think Ingham is more complicated. He draws on Searle and this notion of collective intentionality. He also draws very much on the notion of legitimacy. Maybe we can just focus on the legitimacy aspect without claiming to do justice to the complexity of Searle. The idea of legitimacy–that people relate to public institutions through legitimacy–means that they’re somehow external. They relate to what they think is legitimate. They don’t relate as thinking beings who understand their relation. They relate to institutions on a superficial level by thinking they are either legitimate or not. From a participatory democratic perspective, it is a very problematic assumption to think that people simply cannot understand the institutions that govern them. And so, Weber is very skeptical of deep, social democracy. He openly states that he’s in favor of elite rule.

William Saas: Circling back to your own work, you contrast processes of what you call “monetary silencing” to moral economies that are rooted in shared knowledge about money’s institutional shaping. Can you tell us a little bit more about some of these terms? Where do they come from and what are their stakes for you?

Jakob Feinig: Absolutely. When I talk about moral economies, I talk about events and processes in which money users relate to the institutions that issue money, and also about monetary knowledge that informs direct action. It can also be electoral action or campaigning. [Moral economies] mobilize an idea of monetary justice that’s not limited to questions of money distribution or demand for welfare payments. They’re about what money is, about money’s public purpose, and about how monetary institutions should be arranged to conform to their specific ideas about justice. The idea of moral economy comes from the British historian, E.P. Thompson. He developed it to counter dismissals of non-elite economic thinking that were and are still common. They are still very present in the historiography about popular involvement in monetary institutions. [Moral economies] are about taking seriously non-elite economic thought. They’re also about how people nominate forms of economic thought and form action.

And so, I’m trying to understand this: who mobilizes moral economies and how are they developed? And, on the other hand, how are they silenced? I derive the term “monetary silencing” from the Brazilian thinker, Paulo Freire, who says that silence about political issues is a relation between those who have a voice, those who don’t, and those who have already been silenced. For him, such situations of silence are dehumanizing because they embody a denial of people’s right to participate in making their own history. So I am looking at processes of monetary silencing, which from his perspective, are also processes of dehumanization because they disconnect people from the institutions that condition their individual and collective lives. [Monetary silencing] is about excluding people from knowledge of monetary institutions and turning them into mere money users and consumers–people whose knowledge doesn’t go beyond using a credit card, depositing a check, or knowing where to get money from a pay-day lender. It’s about silencing anything that comes close to a structural vision.

William Saas: Maybe promoting our impoverished sense of financial literacy?

Jakob Feinig: Absolutely. I think even the concept of financial literacy can be a form of silencing if it promotes an individualistic way of thinking without any structural vision. Like, “Don’t worry about larger institutions, they’re all taken care of. Just focus on doing these few steps and learn how to survive as an individual.” Claiming [institutions] are not necessary can also be a way of depoliticizing money and negating moral economies. There are also many forms of silencing that can inform truncated moral economies. You can have moralistic thinking about money. You can have individualistic thinking about money. There are all kinds of ways of relating to monetary institutions that do not enable people to understand them as institutions. The very big one, which is like a moral economy of fools, is antisemitism. It is a way of creating scapegoats and distracting attention from the actual institutions for money users.

William Saas: There’s silencing and suppression in antisemitism, but also, from a gender standpoint, maybe thinking about notions of “sound money” and claims that our money should be physical and hard or limited and scarce?

Jakob Feinig: Totally. Those are also very truncated moral economies. They mobilize a certain sense of justice and injustice similar to commodity money festishism or even Bitcoin. There’s also technophilia–the idea that there is a technological fix to all our problems. With those, there is a sense of outrage and injustice, but they don’t allow people to connect to the institutions that already structure our lives and can ultimately be restructured. They don’t allow a true engagement.

Maxximilian Seijo: And so, your forthcoming book then concentrates through this lens on a fairly large swath of American history from 1637 to 1936. Why focus on America then in particular? And how does America’s evolving relations to money differ from other international histories of money politics?

Jakob Feinig: I think there are two conditions that establish the British North American colonies and later the U.S. in part. First, two things overlap that do not overlap in other North Atlantic national histories. In the Middle Ages, governmental monetary practices were more visible because it was more understandable [for people] that public authorities issue money to tax it back. Thus, MMT, or chartalist views of money, were much more common and easily intelligible. But at that time, popular action or non-elite action was limited to crowd action, so there was no legitimacy for significant parts of the population to participate in electoral processes. In the North American colonies, there were intelligible modes of money issue. Plus, a significant part of the population were propertied white men, so many of them could vote and participate. So you have this overlap of monetary intelligibility and significant electoral participation for a specific group. I think that explains why there is this recurring dynamic of a politicization of money in this geography.

Scott Ferguson: You tell a pretty long story about American monetary politics. And it’s a story that I think needs to be revised because there’s so much potential in it. In addition to pointing out there are limits and problems with this story, you begin with a rather cautionary tale of monetary production in service of settler colonial violence. I wonder if you can sketch that out for our listeners?

Jakob Feinig: Sure. In November 1637, the Massachusetts government declared wampum legal tender. A few months prior, one of the worst colonial massacres occurred at Mystic river, where the English, together with their native allies, killed 400 Pequots within a half hour. Now, there are different interpretations of that event and of the Pequot War in general. To give you a little context, at that time, wampum was first used by natives. The English would buy it first from natives and then export it back to Britain in payment of debts.

Scott Ferguson: For those who are less familiar with the term wampum, can you describe it? Like, what is it physically?

Jakob Feinig: It’s a form of shell beads manufactured by natives. They were used in trade and in payment of some local taxes by the colonists. It’s a very labor intensive process to produce wampum. It needs to be drilled. In some histories, wampum is seen as this nice currency that connects settlers with natives. It’s viewed as a symbol of coexistence and mutually beneficial exchange. When in fact, it was a way of organizing trade on a very large scale to the sole benefit of settlers. The English called the Pequots “mint masters” because they were the main group that produced wampum. They could make wampum scarce and expensive. And they were also potential competitors in the fur trade. Because, since they produced this currency, Pequots could buy fur from inland natives themselves.

After the colonial massacre, the Europeans levied a wampum tax on surviving eastern Pequot. They imposed all kinds of fines and forced them to deliver tribute. That meant, from now on, they had a free and plentiful money supply from the group that had formerly controlled the production of the currency. The English made it legal tender status, which meant they could organize local exchanges and pay down taxes in it. This was all based on one violent event, but also on the ongoing threat of violence in the case of not paying tribute. I begin the manuscript with this episode because I write mostly about white men’s moral economies–their understanding of monetary justice and political practices. Many histories of money in the U.S. and North America start with colonial paper money, overlooking the fact that the first legal tender was based on settler colonial violence. So it’s an attempt to not idealize American monetary history by talking about unspeakable settler colonialism.

William Saas: You begin with a story of monetary silencing as it’s been told in the history books–the white man, moral economy history of money in the United States. Could you trace out the rest of your project where you track this silencing and politicization over the rest of your time period?

Jakob Feinig: Absolutely. I’ll focus on two great waves of politicization. The first one that we started to talk about is the 18th century moral economy, where many propertied white men could vote. They had a moral economy that was based around the idea of white man’s independence, which meant that white men thought of themselves as the center of the household. They also thought of themselves as the center of political economy, to which everyone else was subordinate, including women, children, slaves, and the people they subjected to genocide. [White men] thought the position they claimed was constituted through money. They believed they had the right to reorganize money in ways that stabilized their position. If too many of them went bankrupt, lost their land or status as independent men, or even saw their status threatened, they believed it wasn’t their own individual fault. It was the fault of monetary organization. In other words, not enough money was reaching them as independent white men to stabilize their position. Since [white men] knew how to reorganize money, and money was a visible government practice, they claimed they needed to reorganize it to keep their status. That’s the basic assumption of 18th century moral economies, which progress into the 19th century.

There were several episodes all over the colonies that led to clashes between different classes. There’s this very complex story of the land bank where class tensions within the colonies overlap with imperial relations. After the British prohibited paper money issue, a few merchants, together in alliance with the property holding class, set up what’s called a land bank without getting a charter. They started circulating those notes against the expressed opposition of the governor, a crown appointee who wanted to enforce British priorities. The money did not have legal tender status. It was not backed by commodities. It was backed by land. And it was not receivable in payment of taxes. So how did it start circulating? The settlers and individual townships decided that they would accept it in payment of local taxes. They were so used to what today is MMT, or the idea that taxes drive money, that they said, “If the governor and legislature won’t take this in payment of taxes, then we’ll do it ourselves.” That was seen as an outrageously rebellious move. The governor resorted to all possible means to stop the land bank. He dismissed judges. He dismissed militia officers. He withdrew tavern licenses. It was a real uprising where both sides fought with all means at their disposal short of violence.

William Saas: On one side, you have the townspeople who are accepting those land bank notes. Then, the crown says, “No, you cannot accept those.” Both sides seem to recognize what’s at stake: the question of sovereignty. Would you say that’s right?

Jakob Feinig: Yes, I would. At that time, there was already an emerging moral economy that was different from the North American moral economies E.P. Thompson writes about. There was an emerging sense that [this moral economy] was somehow connected to rights that were not just traditionally theirs as Englishmen. And money is part of the sphere open to that kind of intervention. Also, they didn’t think about themselves as rebels. They thought of themselves as embodying the just social order. This is found in a lot of movements from the pre-Revolutionary period through Shays’ Rebellion. They thought of themselves as regulators and as embodying a just authority distinct from and opposed to a government that had been led astray. There was a sense of white man’s justice not limited to obeying the government.

Scott Ferguson: Can you walk us through how a counter tendency, a tendency towards silencing, takes over as we move through the Revolutionary period to the Constitutional Convention, and eventually, into Jacksonian America?

Jakob Feinig: Sure. Even at the very beginning, there were writers who published pamphlets in an attempt to silence and ridicule moral economies. They were openly anti-democratic and elitist. They believed crowds cannot participate in [monetary governance]. There was a specific class of wealthy merchants who decided gold was the right commodity. And if everyone did not follow their lead, they claimed chaos would ensue. So there was always this idea that a monetary state of nature was right around the corner. And there was always a fear of the crowd and non-elite monetary thinkers participating in government.

One of the most famous pamphleteers is William Douglas, a Boston physician who posed, as Jeffrey Sklanksy shows in his book, moral economies of money cannot and should not be democratic. But also, the goal moral economists had, which was creating a just society of independent white men, was not something he agreed with either. Douglas wanted a few large landowners [to govern]. So there are silencing projects from the very beginning. There was never a moral economy without a silencing project at the same time.

Scott Ferguson: What happens with the Constitution and after, that seems to really change the tenor of your story?

Jakob Feinig: Yes, it does. I draw on the great work of Terry Bouton in a book called, Taming Democracy. There was a very clear elite project that put out documents to reorganize money less democratically by prohibiting state legislatures from emitting bills of credit. This is from Section 10, Article 1 of the Constitution. Instead, they put it in the hands of congress, which was deliberately constructed as an institution less open to non-elite pressure. After that reorganization, we start seeing a truncated moral economy. We started seeing the moral economy of Jacksonianism, where paper money is now popular because the banks issue it.

Banks are very different from colonial legislatures. [Banks] issue paper money supposedly backed by commodities. The legislature’s also issued paper money, but it was not backed by commodities, even though the notes that people held in their hands were made of the same material. Before, paper money was a symbol of popular sovereignty and popular democracy. Now, paper money is a symbol of corporate prerogative. It becomes very easy to deride paper money, to attack it, and to think that it is always bad. It’s always arbitrary. It’s always anti-democratic. People even started lumping together colonial practices with the corporate banks of the Antebellum era.

From there, once you’ve completely changed the function and meaning of paper money, it’s just one step to saying, “Well, because paper money is always arbitrary and anti-democratic, because there’s something inherently bad about it, we need to go back to the invented tradition of commodity money.” Previously, this idea was completely unthinkable. I think it is one of the most striking examples of an invented tradition–that commodity money is the popular, non-elite, and insurgent way of organizing money.

Maxximilian Seijo: A crucial part of the way you work through this history in your manuscript is by making an argument about periodization. In particular, you draw a line at the New Deal as a specific moment in which the politicization of money becomes silenced. I am wondering if we could work through this history and think about the ways the 19th century and early 20th century demonstrate a flourishing in the politicization of money? Were moral economies being created by actors throughout this American history? Like with the Civil War Greenbacks?

Jakob Feinig: Of course. To briefly remind listeners, as an unintended consequence of Civil War finance, there was a departure from the gold standard. The U.S. government issued paper money that was not convertible into anything else. It was receivable in the payment of almost all taxes. And, as another unintended consequence, different groups picked up on it because of an ideology of independence connecting the colonial era with the post-Civil War era. But the way that’s connected to money changes all the time. So one part of the ideology changes, while the other one does not. Enabled by that unintended politicization, you have all kinds of movements.

There were significant alliances between poor whites and blacks around the Greenback Party after the end of reconstruction. There were also very significant alliances between black and white populaces threatening redeemers who tried to silence democracy. In Virginia, there was a biracial alliance called the Readjusters. They issued state bonds that circulated as pay tokens to hire teachers and build schools. It was a really significant turn in terms of how groups relate to money. Typically, historians think that this moral economy of money ends in 1896 with the defeat of William Jennings Bryan. However, I’m arguing that it does not end until the New Deal. There were important generational links between the Populists of the 1880s and Neo-Populists of the 1930s. There were people who, with the help of farmers and veterans groups, kept those moral economies alive long enough for them to be activated in the context of the Great Depression. One way of thinking about the first wave of politicization is, when Shays’ Rebellion was crushed, popular money politics ends. And it was through state violence against veterans.

Scott Ferguson: Can you describe that?

Jakob Feinig: Sure. Going back to the 1780s, many of the people who had fought in the Revolutionary War faced very high debt and taxes. They found that their economic conditions had not really changed all that much from the colonial period and had even worsened in some cases. Many of them had participated in money politics before so they knew what was possible. A lot of them ended up in debtors’ prison, so they asked for more paper money issued. They shut down the courts and ended up arming themselves. Again, those events are typically described as Shays’ Rebellion. Yet, they did not see themselves as rebels. They saw the government as rebels. The government had huge problems financing itself. They put together an army by using privately raised funds. There was a battle and I think two members of Shays’ army were killed.

Moving forward, something comparable happens in the 1930s. World War I veterans walk on D.C. to set up camp in what’s called the Bonus March. They demanded advanced payment of a bonus owed by the government for their service. The government said they cannot afford it without threatening the viability of the gold standard. The veterans said, “Well, we’re more important than the gold standard. You’re using the Reconstruction Finance Corporation to give money to all kinds of shady actors. We also have the right to participate.” So many people and veterans, some with their families, camped in front of Congress demanding early payment. This connected them to the Greenbackers. After some time, Hoover sent the armed forces [on the camp] and two or three people were killed. Both waves of politicization end in violence.

Yet, it was not quite over. In 1932, when Roosevelt took office, he did not have a master plan in terms of how to deal with money politics and major groups demanding moral economies of money. In the first several months of his presidency, Roosevelt removed all issues connected to moral economies and replaced them with the notion of rights. When marches went to Washington again to demand payment, he did not send the military. Instead, he offered them jobs. That’s a much more preferable way of dealing with popular demands. Yet, at the same time, he consistently denied all ways of thinking about money as political. He used all kinds of talking points about the monetary and banking system. He used moralistic tropes by blaming greedy bankers. He talked about banks as an unchanging part of the political landscape. He did whatever he could to depoliticize money. But, at the same time, he made a crucial advance by legitimizing some people’s socioeconomic rights. Of course, those socioeconomic rights were severely limited to white men.

So there was a sense that rights were due, including stabilized access to money. But he granted those rights to the group that still had, by far, the loudest voice in national and local politics. This discouraged moral economies because they weren’t really necessary for white men anymore. By actively discouraging Neo-Populists and granting rights to a select group of people, the New Deal ended up being one of the most effective silencing mechanisms for moral economies of money. And I think we see that in the post-World War II period too, where money is constantly politicized. There are [money] movements, such as community reinvestment programs and women getting access to credit cards. So money’s never really depoliticized, but there’s also never the sense that money is inherently a public good. At the very least, [money politics] are marginalized in this context.

William Saas: I’d like to take a moment to pause. A lot of people listening might hear you claim the New Deal marking the end of money politics as counterintuitive. And so, I want to reflect on a couple of really interesting, innovative, and useful moves you make. First, to call it money politics is provocative. I think today, in public discourse, we figure money and politics as opposites. Like, people often say, “We want money out of politics.” But then, by also marking the New Deal as a time when money politics becomes marginalized and loses its voice over the next few decades, I think a lot of people would be surprised to hear that. I wonder what you make of that specifically? What can we make of the fact that a lot of folks look back at the New Deal as the beginning of something different, where money is politicized and put to more public ends? How do we account for that counterintuitive move that doesn’t seem to line up with what a lot of people think?

Jakob Feinig: Absolutely. I think there are two things. One is the way money is actually being organized institutionally. And the other one is how people talk about money. In the sense that policy makers were granted much more maneuvering space with money and there was a different way of thinking about money in policy making circles. There’s also this undeniable process where a privileged group gets very stable access to money that allows them to build wealth. For instance, in housing finance, which David Freund writes about, publicly organized credit enables white suburbs to flourish. So as a matter of institutional fact, there were very large scale public investments, public credit mechanisms, and public money creation [organized].

At the same time, it’s a discourse. It’s the way people relate to money. They were still relating to money as a creature of the market. FDR actively discouraged people from thinking about money as a public good, even though his administration did all of those major restructurings of money. This has really important effects later on. It kind of marks the boundaries for the anti-racist and anti-sexist movements, which tried to make the New Deal order more just. Ultimately, by not having a robust understanding of money as a public good, [these movements] could not put the same kind of pressure on public institutions that veterans and farmers did during the Great Depression. Once the welfare state and stabilized modes of access to money were chipped away, the situation became distinct from before the New Deal. In some ways it was worse because people no longer had the possibility to claim money as a public good and they were deprived of New Deal modes of access to it. It’s kind of the worst of both worlds.

William Saas: Welcome to neoliberalism, right?

Jakob Feinig: Yes. I think that’s what it is. That’s why I’m trying to push up against depoliticizing money. If we look very specifically at money, there is a commonality between the New Deal and neoliberalism, in the sense that both depoliticize money while at the same time engaging in all kinds of major projects to restructure it.

Maxximilian Seijo: It seems like the way you described the New Deal as a relation to the planning of neoliberalism suggests one of your main interventions is to say the New Deal isn’t necessarily what it rhetorically claimed to be. It wasn’t an intervention into the market. In other words, money and the politics of money are constitutive of all the planning that went on in the New Deal. And so, when it’s looked at in that way, it seems a bit more obvious and less counterintuitive as to how things seem to fall apart when it comes to monetary politics. Because, when we view money as a creature of the market, we see the ways in which government and politics are outside of it, which, as MMT and neo-chartalism would say, is not true. More importantly, it illustrates how people interact with money by decreasing their own agency. I see that as one of the fundamental takeaways of your work.

Jakob Feinig: Yeah, I think that really works. I think that’s correct.

William Saas: I just wanted to say too, going back and looking at FDRs rhetoric–in public speeches and also internal documents–it’s interesting to discover [he is] quite a fan of balanced budgets for much of his tenure as president. [He is] a bit of a gangster in terms of money politics.

Jakob Feinig: Absolutely. That was part of his first campaign. He was a balanced budget guy.

Scott Ferguson: How do you deal with the fact that your protagonists in this important story are predominantly property owning white men who sort of imagined themselves as independent? I mean, obviously you have a complicated rhetorical problem on your hands of wanting to affirm parts of these histories, but also critique and complicate them as well. Can you talk about that?

Jakob Feinig: Absolutely. I’m using Aziz Rana’s book, The Two Faces of American Freedom, where he does on a larger scale for many areas of political life what I’m trying to do with money. He looks at really robust democratic practices in North American past and how those were based on the exclusion of others. It’s about trying to see if those freedoms, liberties, and robust ways of thinking about democracy can be extended and generalized–he says universalized. And it’s a way of trying to inherit the institutions that we have inherited, while avoiding all of those exclusions. And to not purely reject [these institutions]. A pure rejection is not something that necessarily enables agency in the present. There needs to be a way of historically understanding the institutions that we have inherited in order to make them different [and more just].

Scott Ferguson: Pulling a few threads together, in the imagination about and struggle for a Green New Deal, an implication of this discussion is money cannot be external to that project. And to make it external to that project is misguided and we do so only at our own peril. Then, as many have pointed out, the original New Deal was tremendously biased toward white men. I wonder how much you’ve thought about the new context of the Green New Deal and how important that is for you?

Jakob Feinig: I think, on a discursive level, the proponents of the Green New Deal and the Jobs Guarantee are still inheriting a New Deal dichotomy. On the one hand, there are technical issues that ordinary people don’t need to worry about. On the other hand, there are those really robust human rights put forth, especially the right to a job. Since before the New Deal some non-elite groups could connect those two, I wonder if [proponents] are articulating their rights and money as a public good in this institutional context. That’s what is really distinctive about moral economies. You can connect institutions to your rights and not see those rights as something you claim without institutional grounding. So I hear the technical argument about the Jobs Guarantee as a macroeconomic stabilizer and I hear the right to a job as a human right–both of which I agree with.

At the same time, in order to develop a progressive and inclusive moral economy of money for today, it could be important to stress money as an arrangement that connects people and enables societies to coordinate what they do with the Jobs Guarantee. In other words, it’s more than just a right to a job. It’s a possibility intrinsic to this large scale institution that people are already part of. So I see potential for developing moral economies of money. I’m not in a position to say if that should be a priority when talking about the Green New Deal. There are so many other issues at stake. And there are some ways to go to develop a moral economy of money at the level of what the populists did.

Maxximilian Seijo: Throughout your study, you seem to be keenly focused on the question of media and mediation, be it the material substrate used as money or various forms of aesthetic practices about money, including the ways in which media are used to influence money politics. Would you mind ruminating about the importance of media in your work for our listeners?

Jakob Feinig: Absolutely. I think about how this apparatus of money talks to people. What does a bank or an ATM tell you when you withdraw money? How am I connected to this set of relations that either reaches me or does not? The way a bill of credit talks to you is very different from an ATM or credit card, especially as part of a larger discursive knowledge about what money is. And those knowledges are really everywhere. They’re not just in political debates. They’re in all forms of cultural production, which I’m trying to understand systematically. I’m trying to find out how people thought of themselves in relation to money, like with subject formation. What kinds of people do we think can be in relation to this institution? That’s where media is not just about representation. It’s actually constitutive of what money is today, how people talk about it, and also the languages we have or no longer have to talk about it.

William Saas: Riffing on that, in my own conversations with people about money–what it says to them and how they understand themselves in relation to it–I’m looking at money as a generically social constructionist project, where money is money because we believe it is money. However, you’re saying that it’s more than that. And I agree that we need to interrogate our relations with money and money’s relations with us. I know that your project is firmly situated in the present. This history is being done in order to better understand where we are now. Given the lay of the land and the way that a lot of people imagine the money relation today, what’s next for us? What are our next steps? What’s the future of money on the “Left”?

Jakob Feinig: Well, I wish I had a good answer to that.

William Saas: We’ll take anything.

Jakob Feinig: I don’t have any clear pathways to offer, but there are a couple of things that I want to mention. One of them is, given that money was politicized for such long periods, the current rise of politicization is much less surprising than it might appear at first sight. There’s a lot of history. This is not something that emerges out of nothing. It’s clear that in the decade since Occupy Wall Street, MMT has punctured monetary silence. And given what I’ve said about moral economies, many people are really electrified by this idea of being able to understand money. It’s so liberating to have all these mystifications about money and truncated moral economies, which are always erecting barriers between money users and institutions, being challenged. It has democratic potential for people.

At the same time–and Scott, you have done this in your book–I think there is a lot of leeway for developing a way of relating to money that can become common sense and not reductionist. That doesn’t mean that everyone will know all of the technical details, but at least develop a way that vaccinates people against ahistorical lies about money–one that enables people to develop a moral economy. What can a society look like if we rearrange money and use it in accordance with our vision of social justice? I see a lot of potential for using that electrifying process of understanding money through a chartalist lens and creating a deep sense of what a society is, what a society can do, and what a society can be.

Scott Ferguson: Yeah, thank you. I think this also puts into relief one of the problematic tropes that sometimes surrounds MMT and MMT culture. Often, there’s this framing that, “MMT is just merely describing and giving us a technical understanding.” When in fact, those people who are vociferously and sometimes angrily proclaiming this on social media are enacting and disavowing their own participation in moral economic processes.

Jakob Feinig: Yeah. I think the idea that there is a technical description of reality is misguided. Because, if you talk about capital and labor as a conflictive relationship, but then say, “That’s just a neutral description of reality and what you do with it is a different story,” there are politics in that description. It encourages you to think about politics in a specific way. Ultimately, I don’t think there’s any neutral description of monetary institutions. 

Maxximilian Seijo: Jakob, thank you so much for coming on Money on the Left.

Jakob Feinig: Thank you.

Inflation & the Politics of Pricing with Nathan Tankus

In this episode, we talk with Nathan Tankus, Research Director of the Modern Money Network, and Research Fellow at the Clarke Business Law Institute at Cornell Law School. Nathan recently co-authored an opinion piece in the Financial Times (“An MMT response on what causes inflation“) with Scott Fullwiler and former MoL guest Rohan Grey about MMT’s position on the causes of inflation.

In the conversation, we ask Nathan to expand upon and deepen his engagement with the inflation question in all its historical, political, and rhetorical complexity. More specifically we discuss the different historical approaches to inflation; how the Post Keynesian MMT perspective diverges from those approaches; the vital contributions of economist Fred Lee to the foundations of Modern Monetary Theory; as well as how we ought to be thinking about issues of inflation and growth as they pertain to the Green New Deal. The conversation is as compelling as it is challenging.


Transcript

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

Scott Ferguson: We’ve asked you to come talk to us about the question of inflation, and also some of the micro economic thinking surrounding MMT that isn’t always as well advertised as the macroeconomics in MMT. What occasions this discussion is not only some concern in the discourse about MMT regarding inflation, but specifically an article that you cowrote and published along with Scott Fullwiler and Rohan Grey for the Financial Times titled “An MMT response on what causes inflation.” To start, I’ll say that, in my own learning about MMT, I think the very last thing, the last obstacle for me to really get on board, and for MMT to really make sense to me was overcoming what is essentially a kind of sublime terror of the threat of inflation. 

I can tell you that very thoughtful reasonable people who I know, academics or leftists or both, they will sort of be onboard when I’m talking to them about MMT, but at the end of the day they won’t fully commit because they’re terrified by what happens when we start talking about using fiscal policy in supposed excess of what we “normally” use it for. Maybe to get us going, it could be helpful to paint a picture for our audience about what it is that the orthodox discourse assumes when they’re talking about this thing, this process that we call “inflation.” 

Nathan Tankus: I think for me, the key to understanding the orthodox position and really getting inside that mindset is actually to connect it right back up to their conversation and discussion of money. Because if you go back to the beginning, the beginning of those writings in the 19th century, the essential component that makes everything fit together is that there’s these other processes that are determining this aspect of prices called relative prices, which isn’t the actual monetary amount that you will pay for a good or service, but is that price in ratio with another price or even all other monetary prices. And it’s that the ratio is equivalent to the ratios that you would get in barter, in that natural relationship. And that there’s fundamental forces of supply and demand that are the same as bartering that determine these relative prices. So if money can’t determine relative prices, and we’ve “established that,” then there’s a question of what does money do? 

Well then where you get to very quickly is that there’s a price level and it’s not just produced by some government statistical agency. It’s really just this fundamental force in the world that agents inherently understand, and that money determines that price level. This is where money printing causes inflation, M rises and P rises. It has to be that way in this system, barring how frictions and imperfections might get some other mechanisms going. The fundamental basic framework must hold to keep underlying apparatus, the barter or non-monetary production economy framework, what Keynes and Marx, and all these people talk about. And so that is the essential way to understand that money printing has to inherently lead to inflation. 

Whether in the short run or the long run, inflation is just this price level that is asocial, apolitical, just what is out there in the world. When you ignore all that other human crap, this is what the fundamental forces of supply and demand are determining. That’s the key to the framework and why it’s so easy to bring up the inflation boogie man, because they have this whole framework that they’ve built up deductively that abstracts from all the other different processes that are going on and especially the processes that are going on in the modern monetary production economy. 

Scott Ferguson: To paraphrase and clarify, it’s starting with money as a natural barter exchange relationship that has little relationship to government that then essentially renders any government spending in excess of the supposedly natural forces a threat? Or at least a fundamental imbalance? 

Nathan Tankus: Well, it’s even more fundamental. It doesn’t even have to be government spending. [It can be] any sort of creation of money at all that starts flowing through the system. The only thing it can do is increase prices because there’s no other room for it to accomplish anything else that matters in the “perfect system.” Orthodox economists will be very quick to bring up all the auxiliary assumptions to this basic framework. Things like imperfect information and imperfect competition, sticky wages, sticky prices, etc. They may have all these other frictions that  put sand in the wheels and allow money to do something, the term of art is “allow money not to be neutral,” but fundamentally in the long run, all that money can do is create inflation. Maybe it can create other inefficiencies in the system, but it has no productive capacity outside of these edge cases. 

William Saas: Well, given your understanding and reading of the fundamental misconception of money at the center of this fundamental misunderstanding of inflation, could you take us up to NAIRU, the non accelerating inflation rate of unemployment, and say what heterodox economics and specifically MMT does to critique that?

Nathan Tankus: Okay, well, from this [orthodox] point of view, the NAIRU, the non-accelerating inflation rate of unemployment is kind of an index of the frictions in the system. Because, of course, you know, if the system was running perfectly, there would just be true “full employment.” But there are all these factors, whether it’s search frictions [or] if you’re Milton Friedman, whether there’s unions or minimum wage laws or any sort of protections for workers whatsoever, whatever it is there are all these reasons that the “price mechanism” isn’t perfectly allocating resources. And thus at any given time, you have a certain rate of unemployment among the population that is “consistent with inflation,” with inflation not accelerating. And then if you get down to a percentage of too low unemployment, say 4%, say 3.8%, 3.5%, or whatever unemployment rate it is next year, the inflation process is supposed to start taking off and accelerating into the stratosphere. 

Maxximilian Seijo: In the interest of fully sketching out this orthodox view, you mention that neoclassical economists view any sort of money creation in tandem with price level increases. Given that, could outline how they consider endogenous bank lending to tell our listeners how they conceive of the relationship between bank monetary creation and the economy?

Nathan Tankus: Well, one thing I would say is I think there’s always been two different views, broadly speaking here. There is one view that assumes that all of the fundamentally important things are determined without money, and sees money as an intrusion into capitalism, as weird as that is. And so this is where you get things like the Chicago plan, 100% reserve money. The idea that if you just require there to be a dollar of reserves for every dollar of bank liability outstanding, you can neutralize the powerful forces of money in the economy. But also because reserves determine the supply of money, the government is ultimately responsible for anything that goes awry in terms of the private agents in the financial system, but if you take a natural rate of interest point of view, they’re also responsible for everything going on with non-bank financial entities because of keeping interest rates too low. That’s one view. The money as intrusion on their “perfectly operating system” view. 

The second view is that money is this passive thing that’s necessary, but is not productive itself. And thus, as long as you don’t mess with the banking system, the banking system isn’t gonna mess with everything else. So you have this framework where either money is this passive accommodating thing that is merely not disrupting non-monetary forces, or it is money, especially particular actors and their money creation power, that are forcing themselves on the economy and causing disruptions to its perfect functioning. And obviously that reads as in line with a lot of Austrian views about the banking system. You have this struggle between these two poles that I don’t think is really a resolvable one because of the fundamentally non-monetary vision that they have, especially, “over the long run.”

Scott Ferguson: All right. And maybe just one more question about fleshing out the orthodoxy, turning toward critique. Let’s just spell it out, what are the consequences? What are the social, political, historical consequences of this orthodox viewpoint that most people adopt uncritically?

Nathan Tankus: It leads to a sort of fragmented worldview where when you’re talking about budgeting and fiscal policy, the banking system disappears from view. It’s not part of how you think about this whole system of “government money creation,” or how you think about deficit spending. We’re extracted from that, so we don’t need to think about that because we’re thinking about budgeting. And then on the flip side, when you bring up financial stability or the financial crisis or the banking system, the banking system is isolated from all these broader questions of fiscal policy. The big critique of the banking system is that they didn’t get out there and lend money after the financial crisis when they should have. That’s what they were “supposed to do” with the equity purchases that the government made into the too big to fail banks, but because we don’t connect these two conversations, it doesn’t dawn on anyone that the financial crisis and the collapse in lending in the banking system is actually a huge opportunity that essentially, “pays for” what could have been a huge program of government spending because you don’t have the output that is being appropriated by whoever the banking system lends to. You have that output being devoted to the ends sought by private finance, instead of devoting those resources to a public purpose. But this conversation about inflation and money, from the mainstream perspective, has managed to segment it and completely break these two conversations into an impoverished zero sum conversation.

If people could have a connected view where they saw money and finance throughout all of our economic policy discussions, then bankers could never threaten us with a collapse of lending by raising capital requirements. Because if people had a fuller fiscal policy view, they would just go, “oh, what you’re saying is we get to spend even more money without raising taxes or cutting spending elsewhere because banks won’t be lending as much” and the people they’re not lending to will be denied the ability to hire a bunch of people, buy up a bunch of machines, and use up a bunch of oil to go on whatever venture that they’re interested in. I think that one of the underestimated parts of MMT is the connection of these conversations back up with each other. That’s one of the motivations behind the Financial Times Op Ed, to really connect these conversations and make people realize that there are, even from their particular points of views, more positive sum games than are generally realized.

Maxximilian Seijo: I think this point is crucial because it actually informs the historical terrain that this conversation is taking place upon. Coming out of the financial crisis, we see a real paradigm crisis of what an economy is, and how it relates to a banking and governing structure. And so I don’t think it’s a surprise that we see the rise of MMT in popular consciousness and scholarly discourse during this period, which makes the FT article you cowrote and just cited more intensely applicable to this question of inflation, because it’s with the rise in the popularity of MMT that, as Scott mentioned, we see the rise of the inflation bogeyman again. Yet, as you suggest, the interconnectedness argument that you outline seems to fit perfectly as an answer for how to address this boogeyman historically, and for our paradigm crisis. And so, I was wondering if you could actually outline the arguments of what we’re calling the MMT view of inflation for our listeners?

Nathan Tankus: Okay, where I would start with this is that there is this view in the mainstream, associated with new-Keynesian economics which, broadly speaking, attempts to show the efficacy of countercyclical fiscal policy, but within the constraints of these highly mathematized general equilibrium models, that without inserting a bunch of frictions, don’t have any room for countercyclical fiscal policy. It’s a little bit of a schizophrenic view, in the sense that you’re starting with a model that has no room for countercyclical fiscal policy and building in the frictions that give countercyclical fiscal policy some room to breathe. But because the model still must converge to equilibrium, you can’t have these forces go on in the “long run.” 

It’s a view that is… really serving more of a tractable mathematical purpose than a practical purpose. But, the key kernel in it is it starts bringing up the question of the price setting process itself. How do businesses set prices in the new-Keynesian view? They’re supposed to be these adjustments as there are in the perfect model. But because firms have some power, they are able to wait and slowly adjust to “demand shocks”, or “cost shocks” rather than having to respond immediately. But from a post-Keynesian, from a heterodox, but especially from an MMT point of view, there are concrete price setting processes that businesses have institutionalized over many decades and centuries based in accounting frameworks that are socially constructed. These frameworks are designed for reproducing those business enterprises. They’re designed to make sure those businesses exist in the future. When you think from that point of view, from the point of view of what is the best way to reproduce a business, this system, this concept of these constantly oscillating prices responding to supply/demand doesn’t just not fit the facts of how businesses set prices, but it doesn’t make sense for them. Businesses don’t want to be in a position where they are facing prices that don’t cover their costs, [where] they might be forced to—because of a competitor who has better access to finance or has lower costs—set a price that threatens their reproduction. They’re not gonna do it on their own. 

Where you very quickly get to from the MMT heterodox view of the pricing process is that the non-responsiveness of prices to shifts in demand, and the delay or structured process of changes in costs, and only to changes in costs that are persistent, isn’t some flaw in the business enterprise that we can “fix with better policy.” It is a strategy that makes sense for [‘businesses’] reproduction. Once we get to this point of view, what very quickly opens up is the idea that, if businesses are in general not responding to demand when they’re setting prices, and are responding to cost, but only persistent costs, then prices can’t do this job of allocating resources, of clearing markets. They can’t do the job that has been assigned to them by this barter role of establishing ratios between prices and making some hunter gatherer choose to produce one item over another. But instead, if it does this whole other role of reproduction, it means that fiscal policy has a higher capacity for resource creation, to fundamentally transform the system than it does in that other framework. Because now fiscal policy can increase resource utilization over the long run, can drive the creation of new resources over a number of years and can do all these things while accomplishing social goals, as long as we are organized, and can organize around making sure such processes of creation happen. That is a very different view, and view that now more than ever is vital in the context of climate change and in the context of a Green New Deal. Because, while you can make a case for the Green New Deal from an orthodox-with-frictions perspective, from the fundamental methodological and theoretical premises of an MMT heterodox view, the possibilities of a Green New Deal are much more obvious and natural.

Scott Ferguson: I want to get to the Green New Deal and the larger consequences, but a couple things before we get there. One is to have you reflect a little bit more explicitly on what I think you’re implying here. It’s the converse of what we were talking about with the orthodox point of view, which is that money has an active, productive mediating role in the economy and that changes everything. Maybe from there, you can walk us through some of the more detailed argents that you and your coauthors are making in the FT piece, in response to very specific kinds of critiques. 

Nathan Tankus: To draw out the money as having this creative mediating function. What I would say is that in the orthodox view, these prices, and they’re not really monetary prices, but really just ratios between goods and goods, are determining how the production system works. Once you break out of that worldview, money suddenly does have a role for allocating resources. Money decides what quantity of what goods and services are being produced, and now you can have shortages of particular goods and services, but that those shortages are, rather than being some big system failure, they are actually things that can drive the system forward. 

Obviously if there’s systemic shortages of everything, that can cause problems, but when you have a shortage of a particular good or service, the business enterprise figures out a way to make sure that a much more gets produced with the resources that they already have. If they don’t have the capacity to do that, they have the incentive to install more capacity to produce more. This doesn’t necessarily mean, it doesn’t even often mean that less resources go into other places, but that it’s actually pulling in resources. One obvious way is unemployment, but another thing is just literally what Joan Robinson called disguised unemployment. People who were in activities that weren’t very socially useful, but it was easy for some business to hire them to do that because they had no other opportunities. They were sort of just picked from literal idleness and put into what you might say is a figurative idleness, but still enforced idleness the whole time. 

There all of these ways, big and small, in terms of pulling people from different activities, to coming up with new technologies, in the sense that technology is just a different recipe for producing a similar kind of output to get more out of the system. When you look at the only times where we unleashed the productive, creative power of money, wars, you see this very clearly, that this power of production is unleashed, but that must be put in the box of war finance, and you must emphasize all the social disruptions that really come by the speed by which the economy has to adjust to for war, rather than high demand in and of itself. 

What MMT is essentially saying is that the socially productive, creative power of money is something that we can also have in a peacetime economy because it’s fundamental to the nature of our system, and social production itself. The last thing I would say is that another important thing to emphasize about money is it has the power to overcome capitalists’ desire to not engage in those kinds of socially transformative processes. The capitalist’s ideal position is to consistently make profit in the future, never implement a new technology, and if they implemented new technology, be out in front in implementing that new technology and have control over the process of its introduction. 

Whereas, a high pressure economy generated by a fiscal policy no longer puts businesses in the driver’s seat, and also pushes them to unleash the transformative, the creative power of our social labor because it is “in their interest,” but more generally, the incentives of a high pressure economy change, as well as the political ramifications of sabotage in the Veblenian sense of, of disrupting productive power simply because you have the property rights and the authority to do it becomes more challenging than it is in normal times. 

Scott Ferguson: All that’s really helpful. The framework of the article seems to be a response to critiques of MMT on inflation, which seemed to start from the presumption that what MMT is arguing is that ex post taxation, legislated by the federal government, will do all the work of “soaking up” excess in the economy. And it seems like the FT article is taking that on, and really problematizing and offering alternatives to that in terms of very specific kinds of approaches, institutions and mechanisms, agencies, etc. I was wondering if you can just kind of spell that out in a kind of bare bones way?

Nathan Tankus: I think it’s important to motivate what the thinking behind these kinds of claims about MMT, or the thought process behind this view of thinking about fiscal policy in terms of quantities. Because fiscal policy, like the Obama stimulus, is talked in terms of $900 billion, discrete amounts. Where this thinking comes from is this idea of taxing in quantities, meaning that if you have a sort of MMT view of money refluxing throughout the economy, money gets sent in, has all these processes in which it is sucked out or siphoned off, like with savings, and that basically any sort of attempt to have a sort of reflux using fiscal policy doesn’t really work because, as you said, you’re seeing that the economy is overheating and you’re trying to impose more taxes after the fact. 

There are a number of ways to approach that. One of the more basic ways is that we’re approaching this by challenging the current CBO process. The current CBO process already has a process for offsetting whatever spending initiative or tax cuts you want to do with a “pay for.” It’s just that the system isn’t very good. It’s thinking in dollar terms where $1 of taxes pays for $1 spending rather than in demand terms, where you might need a “pay for” that has a much larger dollar size if it’s tax cuts or no dollar size in terms of revenue if it’s some form of regulation, whether financial or otherwise. Fundamentally, this point of view, this quantities view of thinking about what MMT is trying to say, is missing that taxes in the modern era are always in all of these ways, big or small, based on these other forces growing and shrinking the economy. Most obviously, property taxes are based on the appraisal of the monetary value of the property. But also, our income and payroll taxes are based on the income that we are actually receiving in money terms, and to a certain extent corporate taxes as well, and sales taxes, based on the monetary value of the products themselves. When you look at the system from that perspective, we’ve transformed our fiscal apparatus to be able to reflux money based on the state of the economy. 

There is a literature on this in mainstream economics called automatic stabilizers, but automatic stabilizers, are sort of this technical topic. They are not part of the public’s fundamental thinking about fiscal policy. And you can tell, because when tax revenues dropped off and spending increased in 2009, people were talking about the deficit exploding rather than talking about the guard rails on our system that make sure the system functions. Therefore, we don’t necessarily need any discretionary policy at all to have a fiscal policy that adjusts to whatever our new spending programs are. But even on top of that, nonetheless, that is much less necessary than is that commonly conceived, certainly politically conceived because of an underemphasis on automatic stabilizers. We’re still suggesting to have this CBO process, but just to reform it so that you are ex ante, before the fact, deciding on what spending programs you have, estimating how many resources are under utilized, how many new resources can be generated over the next decade, and deciding on your pay fors, your tax increases, but also financial regulation and environmental regulation, and other regulations to reduce resource use and disemploy resources so that they can be reemployed. In no part of that, are we suggesting tax increases after the fact. This has been a narrative invented, “MMT is fundamentally talking about fiscal policy taking the driver’s seat, so it must mean tax increases that happen like interest rate increases.” That isn’t the case from our point of view. 

I’m not saying that it will never ever be necessary to have a tax increase after the fact, but we want to design a system that avoids that as much as possible, as much as everyone else does. It’s just that we see much more possibility in having a better budgeting process, a budgeting process that we also think is more attuned to the kind of economy and society people want. Also, [we want to consider] how to design and strengthen the automatic stabilizers we currently have so that we are in less need of that CBO process.

William Saas: To backtrack just a little bit in talking about firms and price mechanisms, could you talk a bit about the importance of the work of Fred Lee and the MMT micro perspective in those regards? 

Nathan Tankus: Yeah, I think Fred Lee really doesn’t get the attention he deserves. I would say especially from critics, because of course all the MMT economists know his work. There’s this big hiring period in the late nineties at UMKC where Mat Forstater, Stephanie Kelton and L. Randall Wray all get hired at the same time and transform the UMKC department overnight. Well, around the same time, Fred Lee was actually also hired and I don’t think it is saying anything about the others to say that Fred Lee was, in many ways, responsible for the most fundamental transformation of that department. Because if you think about an economics education, where there is macro and there is micro, where macro is treated as half the subject area, having a perspective that is MMT consistent and has something to say about microeconomics, but doesn’t rely on neoclassical microeconomics in any fashion, is first of all rare, but also crucial to having a holistic perspective. 

Many people who came for MMT got deeper into the project of MMT and heterodox economics as a whole through engagement with Fred Lee’s project. He taught at UMKC from that time for 15 years until his untimely death in 2014 from cancer. I think he’s a real critical part of this literature, which deserves more attention. Towards the last decade of his life, he worked hard to more and more integrate MMT into his framework formally, and certainly saw himself as contributing to the neochartalist project. And I think he does have something very foundational to contribute to it. The whole discussion I had around firms setting prices, around these prices being about their reproduction, and that firms have these administrative apparatuses that are designed to determine prices, precisely designed not to respond to short term variations, that is what I learned from Fred Lee. 

That’s what I learned from reading him, first his book Post-Keynesian Price Theory. That’s what I learned talking to him, reading his other papers, and in fact, I was fortunate to listen to his graduate lectures on heterodox microeconomics and then read his textbook Microeconomic Theory: a Heterodox Approach. The MMT economists are grounded in this too and, I’m sure, had many fiery conversations with Lee. For me, this is a fundamental piece of the MMT project and why writing that Op Ed with Scott Fullwiler and Rohan Grey came so naturally. Having that sort of understanding of the micro structure, the institutional structures that lead to individual price setting, which bubble up to these price indexes, and the price system as a whole, is fundamental for designing these kinds of policies and for taking a shot at reforming budgeting processes like the CBO. 

Fred Lee is absolutely fundamental, and when you start attacking the barter theory of money and make claims about a monetary production economy, what you quickly get to, is more fundamental than attacking the ignoring of money, but to attacking the price mechanism. The idea that there’s this law-like functional relationship between price and quantity, that there are these price ratios, these relative prices that determine how the production system works. If you don’t take a fundamental swing at attacking that, you might initially win some blows on the macroeconomics and the orthodox monetary theory that’s around, but it will ultimately survive you if you don’t attack the price mechanism. 

I think we see this very clearly in the inflation discussion. MMT makes these basic claims about how monetary sovereigns work, about government finances, and of course there are many orthodox economists who struggle against these claims, and try to deny them as much as possible. But once you break through all of that, what you get back to is this idea of deficit spending, of excess demand, and aggregate demand, driving prices, the price level and inflation. And it’s that last barrier, when once you reach a certain point, you’re back into the world that the monetarist pointed out so many years ago, and maybe the question of M, of what variables are M, is a little different, but you’re still fundamentally in that world. It still limits the possibility, imagination and capacity to see creation in our economy and in our society. So to me, Fred Lee is absolutely fundamental to the project of building an alternative economics, an alternative political economy to a mainstream liberal orthodoxy.

Maxximilian Seijo: It seems like what you’re calling into question through Lee’s work are really foundational categories of causality and agency in an economy. I was wondering if we could concretize these theoretical questions in the sphere of antitrust policy, and perhaps talk about the ways in which the relationship between governance, law and firms takes on a different orientation when we consider Fred Lee’s understanding of pricing, and how we can integrate those things to really get at an antitrust policy that isn’t a panacea for a whole economy, but a compliment to a broader suite of price management policies. 

Nathan Tankus: The first thing to say is that there is an orthodox conception that the problem with whatever imperfections that exist with large corporations such as they are is the disruption of that fundamental price mechanism. So in the same way that the money cranks look at the money system and see that as a disruption of this process. What I’ve termed in other places, the antitrust cranks see the same thing with corporations. That it’s just sort of this unnatural, interference of law into the functioning of the price mechanism and antitrust policy, through breaking up companies, can get us closer to that framework. Obviously Lee would reject that kind of perspective, but that doesn’t mean he would reject antitrust policy, or more generally, challenges to corporate power from a legal and analytical perspective.  

And I would mention people like Sanjukta Paul and Sandeep Vaheesan, who are carrying these projects forward in a tremendous way. Also, a fundamentally Lee perspective is that the question of corporate power is a question of the agency and the decision making processes of corporations. And it’s not that challenging restructuring corporations, democratizing them or granting price coordination rights to associations of people would get us closer to a price mechanism, but that it would change and challenge the the governing processes that lead to the reproduction of our current inequities and undemocratic structures. 

More concretely, one way is just go around breaking up companies and washing our hands, but still denying pricing power to loose associations, notably, Uber drivers who are classified as independent contractors. Another way is to strengthen those forms of democratic coordination, and restrict/regulate undemocratic coordination, like corporate consolidated decision making, which is hierarchal and makes decisions that are completely against any conception of the public purpose. This reaches its most extreme forms with insulin prices that go up a couple hundred percent. The [best antitrust] restructuring process is about creating a new governance order, and giving different actors, less pathological actors, more agency than the actors that currently have agency rather than trying to squeeze agency out of the system to get back to some imagined, ideal ideal type that makes “perfect or ideal” decisions, or even no decisions at all. 

Scott Ferguson: We’ve talked a lot about the MMT Leesian perspective on inflation, and how it breaks with the various breeds of orthodoxy. But now can we step back a little bit and compare this MMT Leesian approach to agency price coordination inflation with the way that Karl Marx and some Marxists have historically treated some of these same questions. Where are there places that MMT and Marxism converge on these questions, and perhaps where do we need to make distinctions? 

Nathan Tankus: This is a really good question. Where I would point to is, if you have a grounding in volume three of Capital, a big part of that is talking about these prices of production. They’re not very different from what would in earlier periods, say by Smith, be called natural prices. There’s this whole tradition of “classical Marxian economics” that carries forward the study of all these ideas and fundamentally talks the idea that prices gravitate towards these fundamental positions, and that there’s this gravitation process that leads prices to reach their natural prices, or the prices of production. 

Now in some ways, this framework is still a lot better than the neoclassical economics that follows it because those prices of production are fundamentally grounded in costs. Although sometimes it’s unclear whether they’re monetary costs, or some sort of other conception of price adjustment that existed at the time. Still, even though that they are “costs determine prices,” the fact that there isn’t really a description of the actual price setting processes involved, and also that there is no room in these arguments for agency in the markup, I.E, decision making by businessmen, by managers, by capitalists over the markup, makes it different from a Lee, or an emergent MMT heterodox framework. That’s one big place where there’s a divergence. 

The other place I would point to is the social construction of economic categories, which runs throughout many Marxists traditions, both in economics and outside of economics. However, because the discussion of cost accounting is so fundamental to their understanding of the labor theory of value or the socially necessary labor time theory of value, the idea that the only value machinery contributes to production is the value that is embodied in its purchase price, and thus its depreciation is exactly equivalent to its use value of production, which is exactly what Marx denies about labor. Building this system with these fundamental ideas in them makes the concept of the social construction of accounting, and specifically the managerial managerial accounting processes that firms use in their decision making of price setting, their evaluation of other economic opportunities, I.E., investment decision making, challenging to a lot of Marxists perspectives, although I wouldn’t necessarily say all. 

One way of putting this is that Lee really built a framework from the ground up that has social construction all the way down, and there are specific arguments that people are attracted to in Marx and Marxism that aren’t necessarily necessary for what I would say are the most fundamental points of Marx, but nonetheless, they’re attracted them because the process of theory creation you’d have to do to reject these certain aspects is uncomfortable, and is a step toward uncertainty that I think people struggle with, because they grasp onto Marx and Marxism as a way to understand a world that they otherwise feel like they don’t have a grounding to understand, especially, in the place of processes of capitalists decision making. 

Maxximilian Seijo: To elaborate on this point, I think how it’s so crucial to consider inflation, along with all the other pricing mechanisms that you talk about, as socially constructed. What’s really helpful about your answer to the question is that it really highlights the ways in which there is domination at the center of this socially constructed system, specifically the way we consider the relationship between inflation and the racialization of unemployment. I was wondering if you could take apart inflation as a category, perhaps even deconstruct it, in order to get at the question of how we as a society have constructed this racial domination at the heart of the way we consider pricing. 

Nathan Tankus: I think this is really fundamental. The question of prices and pricing in the price level is again a place where there’s a naturalization process that goes on with mainstream economics that you have to look really hard to see, because in their framework, price levels are a theoretical variable that is understood as distinct from the philanthropic or government measurement of prices, and construction of price indices. To the mainstream, price levels exists, and then we approximate them with our index construction processes, which are imperfect, but they get “close enough,” where basically we can treat these price indices as approximating just the prices “out there,” not having a socially constructed purpose themselves, and not being socially constructed themselves. Once you really get deep into a Fred Lee framework, I would say this is a place that Lee connects up with the legacy of chartalism, because someone like Georg Friedrich Knapp, who didn’t go as deeply as Lee, but looked at the price level literature with skepticism, and challenged the idea that price levels we’re basically just the inverse of the value of money, even [challenging] if they measured the value of money in any fundamental sense. 

Once you get to this socially constructed place, where it is a question of politics, of economics, of ideology, then you get to see processes in history that you weren’t able to see otherwise. One way to to tackle this problem is to look back at the 1970s. As much as there’s this talk of stagflation, of high inflation, the inflation that we see when we look at the current measures is lower than the inflation that they saw at the time, and the reason is because they had a different methodology. 

There are a number of places I can point to. For example, in the 1970s price indices, as contemporaries experienced, home prices were part of those indexes, interest rates were part of those indices, which is extraordinarily important because when Volker raised interest rates, it fed into the CPI, the price index that they experienced, that social security is adjusted for and that tax rates are adjusted for now. From their point of view, inflation was much higher [than we would consider it today], and that is a big part of what the discourse of inflation was at the time. It was this constructed process, which was more vulnerable to the fluctuations of what you might call idiosyncratic variables. 

There is one other thing I would point out about this social construction process. If it was a question of distribution, if it was question of, “the inflation rate is high and some people are really losing out,” it would be a political question, but it would not be a political question that was bigger than what was going on with our social safety net writ large. It wouldn’t be a bigger question than what was going on with the minimum wage. It wouldn’t be a bigger question than what was going on with working conditions. In other words, it wouldn’t be a bigger question than the actual social ailments that people are facing. It’s not merely that prices are changing and some people have greater access to the social provisioning process and some people have less. It’s the idea that prices are erratic, that they’re volatile, that they’re going everywhere at once. It’s the metaphor of losing control of a sort of prometheus’s fire. That is what captures people’s imagination and their terror, and what makes inflation such a highly political issue.

There are other ways of measuring prices which emphasize stability and emphasize how the system we have is stable and structured by administrative process, administrative processes that preserve their stability even in an adverse environment. If you look instead at it from the point of view of what is the average or the median frequency of price change, then prices are not changing often, about every three months or so, even in countries that we think of as these high inflation basket cases because we are, we’re so used to thinking about price indices. A country like Brazil, for many years, their median price change was about every two and a half months. That’s a more frequent level of median price change than in the US, which at a retail level, is four months, at a wholesale level, up to about eight months or a year. These sort of measures of price stability, what I’ve called Meansian price stability after Gardiner Means, who did a lot of the groundbreaking work in this area, create a whole different vision of the price system. It’s a whole different way of conceiving of what’s going on in the economy, one that emphasizes the corporate structure of the economy. When prices are fluctuating, it’s easy not to see the power that’s behind those fluctuating prices, meaning the price indices. But when you see endemic stability, you also see these periodic, sustained, even sometimes large price increases, that reveal the corporate power structuring process. 

This is where fundamental question of social construction comes in and shows how this becomes a racialized process. There are a few different elements here. One is simply that by constructing price indices rather than price stability indicators, we generate a “crisis in prices” that doesn’t necessarily exist organically, and are thus able to motivate this conception of uncontrolled money or uncontrolled government processes that disrupt the functioning of the economy. It’s a process  that always hurts the most marginalized, who are disproportionately hit by high unemployment, and less likely to attain raises when employers have the pick of the litter, I.E., the pick of white men. 

The other piece of course is that the narrative of losing control of the price system is connected to losing control of the society as a whole. A riot and inflation become these things that are metaphorically linked together because they are both these uncontrolled processes led by liberals gone amok. The idea that a conservative is a liberal who’s been mugged by reality, well the “mugged by reality” is being mugged by both inflation and a black man. It’s both at once. 

If you read the media of the time aesthetically, film, literature and elsewhere, you see that the uncontrolled process of inflation, of stagflation is tied up with the idea of uncontrolled crime and as an extension, this uncontrollable underclass. In Taxi Driver, when [Travis Bickle] goes to see a politician talk, the politician is talking about stagflation, and then stagflation becomes part of his warped mindset of the society out of control. It becomes another piece of evidence … [that] there’s these uncontrolled animals running amuck and there’s also stagflation that’s doing it, too. Stagflation in a real fundamental sense is this metaphorical mugging Black man wandering the streets of New York City.

The racialization process happens at all these levels, and of course, these narratives of crime and social collapse are connected with unemployment, and from another point of view, also the demand for full employment, a challenge to macroeconomic decision makers’ priorities, between inflation and unemployment and not a focus on how to accomplish full employment and accomplish whatever goals we have in terms of prices, in terms of oil, etc. 

It’s rooted together. For example, mass incarceration becomes a key piece of austerity, and not just about managing this unemployed underclass, but also integral to the process of regaining control over things that have fallen apart. In that way, the Volcker shock and the rise of mass mass incarceration, especially as it took off in the 80s under Reagan, but also among the Democrats who gave up any last vestiges of social democracy… Therefore, to fundamentally attack the mythical monster of race in America, of racialization, you also have to attack the mythical monster of inflation. 

Scott Ferguson: I really appreciate this discussion. Its interdisciplinarity is striking, we’re bringing together macroeconomics, microeconomics, legal studies, governance, but also alongside questions of identity, racialization, and art and cultural production. I think the project that we’re interested in on Money on the Left, and also in our individual scholarly pursuits is to think critically about the history of culture, and the history of aesthetics from this viewpoint, to really make the argument that [this viewpoint] can open up questions, both present and past, in new ways. As you were talking, I was reminded of the work of a historian named Michael O’Malley, who’s written about the greenbacks that the Lincoln administration produced in order to eventually fund the North in its military efforts against the South during the Civil War. It was during that moment when the relationship between pricing, inflation, money, its productivity and race was vividly on display. Let me just read from O’Malley’s Face Value, he says, “critics of Lincoln’s decision claimed that it raised colored soldiers to a level of equality with whites. They argued that blacks lacked the basic qualities of discipline, courage and intelligence necessary for battle. They saw the soldiers as inflated, valueless.” (96) I’m curious if you have any response to that quotation. 

Nathan Tankus: Yeah, I think that is fundamentally true, and something I definitely see in my own work. There’s a paper that I’ve carried with me that’s been part of teaching Rohan Grey and I have done by Shane White called “Freedom’s First Con” about changing bank notes in antebellum New York City. One of the really interesting ways to think about this [note changing] process is that there were all these different paper monies issued by individual banks from different regions, which made [note changing] a very personal, individuated process; giving banknotes value in any given transaction made [note changing] a fundamentally gendered and racialized process. Shane White talks about these vivid incidents of black owned businesses or black individuals dealing with this system and getting threatened by a white patron over not accepting their fraudulent bank note from a distant land. This made the negotiation process at a local store not just about the price of the goods, but also the exchange rate of their monies themselves. In that sense, the greenback was not just vital source of freedom because it was part of the process in which slave persons went on general strike, but also because it had the ability to break or at least loosen the constraints of these very personal forms of exploitation experienced through having what essentially was a non-fungible form of money. 

Abstraction was a source of freedom in the monetary sphere, and in other spheres as well. I think the fundamental ideological struggle carries itself forward in the idea of a constrained money being tied to psychological characteristics that are supposed to exist in white men, that also existed in their sexual behavior. This dichotomy between the “controlled,” the “constrained,” the “inhibited” and the “powerful” white man, compared to, especially black, but also other minorities, I would mention also Jewish in that earlier period at least, groups who were supposedly “uncontrolled,” “venal,” and liable to attack white women at random, and that would dirty the social relations through entering these fungible processes, most notably, “white slavery” or a relationship between black or Jewish or other types of “foreign” men with white women and sex work. There really is a very deep and long standing connection here, which has not been broken, and which needs a frontal assault by the left in order to reach a place of liberation. 

William Saas: Certainly. I think one of the ways I think we would all agree that the most exciting or promising paths to conduct that frontal assault, and to confront this history you’re talking about, and to reclaim, recognize and represent the social construction, the power dynamic, and the creative dynamic of money behind it is the Green New Deal. You just recently participated in an event at Harvard with some others where you were on a panel about managing inflation. Could you talk a little bit about the Green New Deal, your take on it, the inflation question, and then also a little bit about growth and de-growth, and the question of the limits and constraints that we might face moving forward?

Nathan Tankus: First of all, I would just say I’m excited about the Green New Deal. I think the Green New Deal opens up this conversation, this rhetorical space, that hasn’t existed widely in society. That must be the start, the idea of resource creation, of transformation, of the qualitative changes that we need to have a sustainable and just society to be out in the forefront of American politics is incredibly exciting. The measure of how exciting is how crazed the right is in talking about it because they have an innate sense of its power in a way that even most of the Democratic establishment doesn’t really seem to yet. 

What I would say is that as good as it is to have this wide open rhetorical space, I am interested in getting to more specifics, and getting other stakeholders in this process committed to specifics, especially committed to the idea that the Green New Deal is about spending. To the extent that we rely on other tools, it’s more about discouraging resource use that is contrary to the broad goals of the Green New Deal, and not so much doing them through our traditional processes. There are scattered mentions of the Reconstruction Finance Corporation around in discussing the social transformations we need, and I don’t think that President Hoover created vehicle is a good way of running our public policy. Connected to that, is this other background discussion of the Green New Deal being America first policy, which I think, even just Money on the Left is evidence against that. 

But more specifically, I’d like to see a lot more discussion of what we’re going to do with the technologies and knowledge created by the Green New Deal and a green job guarantee. Our colleague Rohan Grey has been a visionary in this respect, of having a longstanding interest in copy left and patent left, meaning structuring whatever intellectual property that comes out of these public processes such that they’re given away at no monetary costs under the condition that any modified forms of intellectual property that come out of them are also given away at no monetary cost. This idea gets new urgency and importance in the context of the Green New Deal where climate change is a global process and the single most positive thing that the United States can do in the world in terms of contributing to the broader global process is giving away de-carbonization technologies for free, especially structured through our “free trade” structure as well, ensuring that other countries also have to let those technologies propagate for free. I’d also liked to see more discussion of how are we’re going to change our budgetary processes, and our administrative agency system to manage the ongoing transformations of the Green New Deal, to make it more of a dialogue between different stakeholders in the Green New Deal conversation rather than just sort of an important, but singular voice coming from MMT scholars, but I’m optimistic that in a lot of ways we’re still early in that conversation and we have a lot more to do. I look forward to those changes and evolutions in the conversation, but more than anything else, I’m just excited about resource creation being on the table.

In terms of questions of growth, obviously the Green New Deal brings these questions to the forefront. I think some people involved with the Green New Deal conversation may kind of believe in a green growth vision, and that there are people who are attacking that view. The question of growth is a little complicated by the lack of clarity of what people mean. I think for the laymen entering this space, growth is literally just about throughput. It’s about just literally the weight, the mass of output. And I think a lot of the people who are attracted to this conversation, who are attracted to rhetoric about the insanity of infinite growth on a finite planet, imagine that these fundamental constructions economists, GDP and pricing indices on top of that, are really about measuring some fundamental mass, and that if they’re conceived of as contributing to living standards, they must also be contributing to environmental devastation by definition, and thus we must attack growth to get to see sustainability. 

From a Fred Lee heterodox or MMT point of view, the fundamental idea that we have this socially constructed process that’s measured in dollars and has all these imputations, which don’t have even a referent in any underlying transactions at all in GDP. As well, we’re smashing on top of that a price index, choosing an unclear base year in which to ground our estimates means that there is no underlying biophysical referent for GDP to be measuring, and that without that, GDP doesn’t really tell us anything at all about what we need to do about living standards, and also doesn’t tell us anything at all about what we need to do in terms of our economy besides maybe some financial considerations where negative nominal GDP growth is associated with financial crisis. From the sense that we’re talking about these two social constructions on top of each other with fluctuating and complicated methodologies means that I’m unwilling to treat GDP as either a measure of “growth” or “de-growth” in that, in the GDP sense that makes me attracted to an a-growth position, being agnostic towards growth. That doesn’t mean that we don’t need to reduce the throughput of our economy, that we don’t need to literally shrink the massive stuff that we produce, and that we don’t need to move towards a care economy and an economy that’s not just caring in the individual sense, in the child care and elderly care sense, but an economy that uses reusable tools where you only or primarily need labor to produce the services that our society fundamentally needs. 

The transformative process that we need doesn’t necessarily have any relationship to any specific path of nominal GDP or real GDP, and thus that shouldn’t be the center of our decision making, but also that it doesn’t necessarily say anything about living standards at all. The processes that we have now that create ecological devastation haven’t brought happiness or good living to most people. Even people who live in suburbs, where they have many rooms and there’s a lot of resource consumption happening don’t necessarily have socially fulfilled lives and feel the pressure of these bills and economic insecurity bearing down on them such I am skeptical and unwilling to join narratives that paint our social questions as one of needing resource austerity to deal with climate change. It’s not necessarily that I don’t think certain processes of suburban sprawl are unsustainable, but it’s that I don’t think that densifying and moving to sustainable economic processes really is going to be some big burden on people in a living standard sense. Although, it might be psychologically disruptive, in terms of people having to rapidly and qualitatively change how they live. 

Scott Ferguson: Well, Nathan, this has hugely illuminating, thanks so much for joining us. 

Nathan Tankus: Thank you for having me. Pleasure to be on Money on the Left, contribute to my own listening, and give me something back to listen to because I’m always looking for more podcast audio to listen to. Money on the Left is one of the best, brightest stars on the horizon in the last year.

Colored Property & State Debt with David Freund

In this episode, we talk with David Freund, associate professor of history at the University of Maryland. David is the author of Colored Property: State Policy and White Racial Politics in Suburban America, an award-winning book that tracks how the language of racial exclusion was re-coded in terms of markets, property, and citizenship in the post-World War II era. Throughout the conversation, David speaks to his research on the history of public policy and economic ideology in the United States, and the role that heterodox economic thinking has played in shaping his research agenda. We talk at length about Colored Property, as well as his current book project, State Money, which offers a history of financial policy and free market ideology that unveils the repressed role of the state in the making of modern America.

David Freund recently published a chapter in the edited collection Shaped by the Statetitled “State Building for a Free Market: The Great Depression and the Rise of Monetary Orthodoxy.”

Freund also recently publish a piece, titled “Money Matters,” on the role of money in historical inquiry for The Metropole.


Transcript

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

William Saas: David Freund, welcome to “Money on the Left.”

David Freund: Thank you. Very nice to be here.

William Saas: Can you start us off by giving us a brief summary of your personal and professional background?

David Freund: Sure. I am a child of Los Angeles in the 1970s–the suburbs of Los Angeles–and attended college at U.C. Berkeley. After working in publishing, journalism, and food service, I started a PhD program in European history. Then I switched to study the United States and wound up writing a book about–go figure–the politics of white suburbanization, white flight, and racial segregation. One other thing that might be of interest is that I was technically trained as a cultural historian. I was studying in the 1990s, when the field of what’s now called “whiteness studies” was taking shape. But I also had a deep interest in political economy, which stemmed in part from my long term interest in the origins of capitalism. And this has clearly come to the fore in my work, both in my first book and in the new project, which is called State Money. Since writing the book on white suburbanization, I’ve been working on the history of financial policy, the history of money, and powerful myths about money and the state. That’s the anchor of what I’m doing right now.

Maxximilian Seijo: You sort of reference it there, but we’re wondering what questions or problems in historical research brought you to the study of money and to heterodox economics in particular?

David Freund: Right. My first book–Colored Property–is centered on a story about the federal government’s role in creating a racially segregated housing market in the United States after World War II. Many people might be familiar with the story of the Federal Housing Administration and redlining.  Both topics have in recent years become a focus of public discussion, which is pretty exciting for those of us who study it. 

Ultimately, it’s a story about mortgage lending and the creation of debt instruments. And while writing that book, I was really struck by conventional treatments of debt. Specifically, economists and most historians described debt, and still do, as distinct from money. And meanwhile they argued that neither money nor debt were essential to the productive process. In other words, they insisted that growth–economic growth–was solely a product of a bunch of “real sector” variables, like access to resources, technology, demand, and the like. Then they argued that money just helps people organize those variables by facilitating exchange. Money, in their narrative, is a commodity token, while debt helps people make contractual arrangements to exchange these tokens.

In this conventional story, the real action in the economy is coming from individuals’ choices about what they want to make, buy, and sell. Meanwhile the financial instruments, like mortgage contracts, are sort of like props. And it follows that if the supply of financial instruments is just right, it makes the real sector processes go smoothly. 

Now, I’m not trained as an economist, nor was I trained as an economic historian, yet, as I was encountering this story about money and debt, it seemed very odd to me. The documentary evidence showed me that government policy was creating debt instruments and that those debt instruments were creating conditions under which new homes were literally being built. Public policy was creating wealth. Meanwhile, I saw how those policies explicitly channeled that new wealth primarily to white people, especially to white men. People of color and single women were usually denied these new mortgages and this was by federal mandate. 

To me, that suggested that the government was creating wealth for some and not for others. Again, I’m just an historian. I’m not an economist, right? But economists, and plenty of historians, were disagreeing with me and they still do. They argue that by insuring loans, the federal government was merely helping to unleash the market forces that produced wealth in housing. And they argue this because they insist that money and debt are not intrinsically productive. 

That’s the origin story of my current project. Since completing Colored Property, I’ve  become a student of monetary theory, 20th century monetary policy, and the relationship between financial policy and popular ideas about money. In this new book, State Money, I’m arguing that our persistent myths about money are deeply intertwined with the politics and policy of finance. 

One more note on my first book. In Colored Property, I argue that myths about housing segregation, such as the myth that it’s not about “race” but rather about “economics,” have been created in large part by the very policies and politics that segregated housing in the first place. In this new book, I’m exploring, as a comparable dynamic, the larger topic of popular myths about money.

Scott Ferguson: Just to follow up and clarify, is it your sense that both historians who don’t necessarily foreground their politics and historians that are more critical, or even Marxist, all fall into this trap of seeing the histories that you’re tracing in this particular way?

David Freund: A qualified “most,” I would say. There are traditions of historical writing that are very attuned to money’s credit function, especially work on the “long” 16th century, most famously the writings of Fernand Braudel. There are economic historians, like Charles Kindleberger and John Kenneth Galbraith, who have written about this and have always been kind of held on the margin. And there’s also a newer generation of scholars. For example, Chris Desan’s Making Money is essential reading on this subject. Early Americanists and historical sociologists are doing very exciting work on debt markets, banking, and popular protest over currency reform. However, those are the exceptions to the rule. By and large, people writing about 20th century economic history and development in the U.S. are very much wedded to an orthodox or neoclassical model of money.

William Saas: It seems like you’re pretty convinced that historians of all stripes can learn from heterodox economics. Do you think they can especially learn from this field? And, if so, what do you think they can specifically take away from things like post-Keynesianism and Modern Monetary Theory?

David Freund: That is a big one and it is potentially boundless. It’s what I think about most of the time when I’m not thinking about other things–because historians generally work from orthodox or neoclassical assumptions about the economy all the time, even when they’re not citing the work of economists or invoking their findings. It’s sort of the pool that most people swim in intellectually. 

And this points to two big takeaways that may be useful to answer that question and to get historians to recognize why it’s important to consider these challenges. The first one is my standard appeal to historians. Namely, orthodox economic models are grounded in a story about finance that did not happen and [this fact] should really upset them. We cannot document historically an origins story about money and credit that continues to undergird basic textbook economics. Most economists insist that money has its origins in barter and that credit forms developed later to further facilitate this barter-like exchange. Yet we know that this is not true. 

Archeologists, sociologists, a core of European historians, and a bunch of historically minded economists have persuasively documented this for generations. As listeners of “Money on the Left” know, it turns out that money has its origin in debt instruments–basically in IOUs. Yet when orthodox economists are presented with this evidence, they say, in effect, “No, money must have its origins in barter because that’s what all the models are based on, so we are sticking with it.” Again, historians should not put their trust in an economic conceptual universe grounded in a fiction about money. That just does not make sense.

The second big takeaway hits home because it speaks to so many people’s research agendas. It is that economic heterodoxy–and we could talk about the range of debates within post-Keynesianism–but, in general, economic heterodoxy explores the very fluid boundary between the so called public and private sectors. It demonstrates–and this is important for scholars in so many subfields–that modern economic systems are inseparable from state structures. We can talk later about my current work on American financial policy, but the larger point is really inescapable. Never in the history of capitalism have there been purely free markets for anything. That is pretty profound and challenges a lot of conventional wisdom. State authority, and moreover state resources, have always been integral to capitalist growth and the allocation of its benefits. Heterodox traditions of economic thought have always reckoned with this and they provide the tools, I think, with which we can better understand that fluidity and expose it. 

That’s one way of answering your boundless question in terms of categories, rather than with specifics.

William Saas: Boundless and motivated. I have to say, the two points that you have described I have found relevant, especially considering my own writing and research on this stuff. In the field of rhetoric, and I’m sure this is also true in history, is how can we make a compelling case about what heterodox economists can learn from historians and rhetoricians and other humanists?

David Freund: Well, yeah, do you want me to speak to that?

William Saas: Please.

David Freund: Again, boundless. I’ll answer this one with an anecdote. For about ten years I have had extensive discussions with heterodox economists . . . And I’ve discovered a few places where they have blind spots, because they are more focused on the mechanics of contemporary financial markets. Sometimes they have overlooked what I think are key transitions or formative moments in the history of federal debt creation. In my case, it’s about the creation of federal debt during World War I and how this leads to a fundamental transformation in the Fed’s operations. It’s not that [heterodox scholars] don’t know about this. It’s just that they haven’t devoted that much time to it, in part, because they’re focused on a different set of questions. 

So, yes, it’s one of the countless places where heterodox economists can learn from us. Most notably, I think, there’s a huge debate among folks who work on the relationship between the public and the private and between public and private money. I’m still sorting through this, sometimes in real time, sometimes in my head, with MMTers. So I think there are a lot of places where we can learn from each other. Is that diplomatic? 

Scott Ferguson: It was.

William Saas: Well done.

Maxximilian Seijo: To dive in a little bit to your first book, which you’ve already glossed over nicely, Colored Property: State Policy and White Racial Politics in Suburban America, I was wondering if you could explain for us and for our listeners how your attention to money and debt instruments in the book complicate our understandings of mid-20th century American racism specifically?

David Freund: Right. Interesting. This is great. My answer to that question now is far more developed than it was when the book appeared in 2007. At the time, I presented it in sort of lay terms, arguing that federal programs, by insuring debt, created wealth for whites while simultaneously popularizing the narrative that government assistance was not creating wealth and that it was not segregating neighborhoods. And thus, that it was not impoverishing people of color. Basically, I argued that the programs masked the racial assumptions that structured a new market for housing. 

Since then I have taken a deep dive into the world of financial markets and the mechanics of money, so now I can put a lot more analytical meat on those bones. Here’s how I would describe it now. Federal credit policy–the operation of selective credit programs–most famously the Federal Housing Administration manufactured financial assets, namely home loans, that otherwise would not have been created. [These programs] enabled private lenders to create checking deposits, and that’s how money is created by private institutions. [The government] did that by promising to pay off those loans should the borrower default. So, the U.S. Treasury promised to cover bankers’ losses. Naturally, bankers said, “Okay, I’ll take that risk.”  

Obviously, it wasn’t much of a risk. And bankers made a lot of money, as did home builders and all the suppliers of materials that helped construct the modern suburb, from oil and plastics, through appliances and home furnishings. Finally, millions of Americans got access to home ownership for the first time, because the terms of these new mortgages were very generous.   [The loans] had low down payments. They were amortized. The federal government restructured the mortgage market as it insured it. We don’t need to go into the details, but that’s what made it viable and profitable. 

Again, this happened only because federal officials made a certain kind of home loan on very     specific terms into a very liquid investment. They asserted state power and they used state resources to secure those investments’ value and marketability. That is how money was fundamentally changing the way that resources were distributed by race.

Here’s the second part of that. Because, magically, by embracing orthodox economic ideas about money, [federal officials] also described what they were doing as purely market-driven. They insisted, and many historians still buy this line, that government mortgage programs did not create wealth but simply helped money circulate more efficiently. The story is that credit policy unleashed pent up demand and let the real sector of the economy do the heavy lifting. 

But that story only holds up if you imagine that money and credit are distinct and if you believe that credit is not economically productive. If you buy that story, then you erase the fact that the modern housing market in America is literally hardwired to be racially discriminatory. The housing economy, as I write in the book, was racially constructed. Re-thinking money and debt helps us to see how this was achieved. And it brings home the larger point that racism is not a sentiment or a misplaced belief system, but rather a structure that is embedded in modern life.

Scott Ferguson: Clearly, you’re not the first scholar or first historian to be telling the story of 20th century American racism in a systemic way.

David Freund: Oh, no, no, no, no. Long tradition.

Scott Ferguson: Indeed. So my question is: how does money and debt as a system potentially change or problematize other stories of 20th-century systemic racism that have been researched and told and taught?

David Freund: That’s another huge one. I’m interested in the relationship between federal policy (particularly federal debt creation) and its local implications. Much of the work on structures of racism focuses on case studies about local and state level politics. One of the things that I’m really curious about is how thinking about money as systemically created and distributed in racially discriminatory ways translates into the circulation of those monetary instruments in local economies. I don’t have anything profound to say about that, but there are people doing absolutely stunning new work on local real estate markets, the history of slumlords, and the politics of local bond financing. Ultimately, if we can integrate a heterodox understanding of money as a credit instrument, I think that’s going to raise some really important questions about the dynamic between the level of the monetary sovereign and the level of how people use money instruments locally. 

There’s also the important literature about discrimination within so-called welfare programs and in federal spending for the allocation and creation of whole industries in postwar America. For instance, the Sunbelt is, in large part, a creation of federal spending in the military industrial complex. There’s an extant literature on those structures of discrimination that needs to be revisited in light of the idea that money is not just a circulating medium, but a productive force.

Maxximilian Seijo: That’s so interesting. It seems like, specifically with the example of the local case study along the more urbanist model, that your framework in a broader heterodox monetary framework perhaps will open up the question of institutional and structural racism to more federal-democratic contestation. Is that your sense of where the integration of this sort of monetary lens is pointing towards?

David Freund: When you say federal-democratic contestation, what do you mean?

Maxximilian Seijo: In the sense that, for example, local bond holders and local real estate markets are always integrated into the federal structures of banking regulation and finance, in ways that are more influential and perhaps even more causal than some have suggested.

David Freund: No, I think that’s right. I think that’s spot on. You answered that question very well. Thank you. No, seriously. I think that is the place or one of the places that people can explore this. I mean, I will say, as someone who’s written a book about federal policy and local places–the second half of Colored Property is a local case study–it’s exhausting. And it takes forever. I’m hoping that we can create incentives for people to bring those two stories together. I think there’s a practical reason why people have often segregated these two subjects, in addition to the important interpretive angle that heterodoxy brings to that.

William Saas: I’m curious to know the extent to which you’re studying this history. In Colored Property, the very people who were being discriminated against, or who were most negatively affected, or even those most positively affected by the discriminatory policy, you got a sense that those people recognized and talked about and tried to do something about what was happening. I guess my question is: were there people speaking up against this at the time and clearly identifying it and were their voices suppressed? What happened?

David Freund: Yeah, that’s a huge story. It’s a subplot of my book, which focuses on the way that white people interpreted it. I have a very brief discussion of the amazing work that was done by activists and scholars, both black and white, to challenge these programs. And that’s a well developed story. There were a lot of people reacting to it and critiquing it. And there are some early critiques, like Robert Weaver’s work before he took over at HUD, and Charles Abrams, and a bunch of housing and civil rights activists, that were sort of developing a heterodox understanding of the role of state power. It is not the centerpiece of my work, but there are scholars doing amazing stuff re-creating those stories. 

What I did find–and this is partly because it was my focus–I really went in and tried to understand why white people didn’t understand the origins and dynamics of their own kind of structural privilege. That was the starting point for this project. And my big takeaway is that the vast majority of white people became convinced by and deeply invested in this mythology that was spread: that this was not about “race,” but rather about some kind of pure and choice-driven “market” dynamic.

One of the stories I track is about folks in the suburbs of Detroit. That was my local case study: how did these people respond to critiques of discrimination in the postwar era? Everytime [a critic] said, “Hey, look, we have segregation, this is unfair, and the government’s involved,” I was able to reconstruct [how residents] told a colorblind narrative about meritocracy and did so, in large part, by just grabbing onto the very tools, systems, and market mechanisms that had been created by the federal government. They literally turned to the FHA manual and said, “Look, no, no. Just like the FHA says. This isn’t about race.”

This is what FHA officials were arguing. [And] I believe that they convinced themselves of that. There were certainly some people who were saying, “Well, we really don’t want to live near those folks.” But this was the master narrative. I reconstructed this not just from public statements. I looked at the correspondence between civil rights activists and FHA officials. The FHA officials always responded with the same line: “Look, we don’t shape the market.”

In the end, I argue that a broad swath of people who consider themselves white in postwar America drank the Kool Aid. They bought it. It was in their interest to believe that they were not complicit. And it helped shut down a lot of activism and support for fair housing. I mean, we know that activism got a national platform during the Civil Rights movement, but there’s another story to be told about enforcement of civil rights and the Fair Housing Act of 1968. I would argue that pushback against enforcement, and eventually, the disassembly of those mechanisms, which is still underway, are fueled by this same kind of willful ignorance and the belief that there are these “market forces” that operate separately from people’s ideas about people, about place, and about who should live with who.

Scott Ferguson: I’d like to shift the discussion to your exciting book in progress, State Money, where you seem to be unearthing a more expansive story that encompasses the one you’ve already been working through in terms of a racialized property. In the book, as I understand it, you’re tracing a pretty fundamental broad shift in the way that American money is structured and the role of the state in that restructuration. To start, I just want to invite you to tell us a little bit about that story and then reflect upon how this puts pressure on the ways we’ve, whether it’s from orthodox perspectives or heterodox perspectives, thought about American money.

David Freund: Yeah. I should say, I promised myself after writing Colored Property that my next project would be more modest and contained. Ha ha, yeah. Joke was on me. Then I got this bug and took a deep dive into finance and the rest is what it is. 

The narrative of this book has two parts. One is trying to introduce historians to the long history of money and heterodoxy. The first chapters are a prefatory section. Then I turn to a case study to show how changing the lens through which we look at money and finance reshapes familiar stories. And I look at one of those familiar stories. It works on many scales, but the essential transformation is one that’s well documented by standard, conventional histories of finance and the state. It’s about the creation of the Fed and the transformation of its operations in its first 25 years, culminating in the New Deal legislation, which sort of rebooted the Fed and turned it into a different animal. 

The story that’s kind of the hook here is one that makes people’s eyes glaze over when you tell them that you’re working on it. It’s about the reinvention of Treasury debt. (The kids in class are like, “Oh, please tell me more!” No.) What I mean by that is the following: before World War I, investors did not go out of their way to purchase U.S. treasury bonds. Indeed, they were seen as risky investments. Experts counseled bond buyers–in manuals published at the time–to avoid buying U.S. government bonds. It was like the plague. Stay away from that. You gotta be crazy. Jump ahead to the 1930s and that’s ancient history. Treasury bonds by then are an essential component of the American financial system and they are deemed to be as liquid as commercial debts, which are commonly called “commercial paper.” These are the traditional debt instruments that banks collected in order to lend money. Now by the 30s, everyone’s like, “Oh, the Treasury bond. That’s just as liquid as a promise of an inventory or future production of goods.” 

What I’m asking is: how did this happen? It’s a complicated story. It takes me on this pretty deep dive into the weeds of finance and policy. But the short version is that the U.S. government went deep into debt to fight World War I. The Fed helped it market those debts. It’s something we know about, yet most historical accounts have magically erased this from the story.

Scott Ferguson: Which means what? When you say “market”?

David Freund: The Fed literally created the money that people and banks used to buy the debt. That’s why the money supply increased. It wasn’t that people had saved up and bought Treasury bonds. There’s this wonderful quote from [financial historian] James Grant: “the Fed was very generous with savers who happened to not have money.” Right. They literally created the “keystrokes” that allowed banks and individuals to buy billions of dollars of debt. I can’t remember the exact number. 

Anyways, the U.S. government goes into debt. The Fed helps make it possible. And in the 20s and 30s, a series of banking and policy interventions elevate those debts to new prominence. And they have maintained a version of that prominence ever since. The markets have changed considerably since World War II, . . . but [Treasury securities] continue to be a centerpiece of the American financial system. 

The other part of my narrative is how experts argued over the meaning of this transformation. I show how they reached a rough consensus by the 1930s. That, yeah, it was okay for the nation’s banking system to be heavily collateralized by federal debt. They just completely turned the conventional wisdom about the value of Treasury debt and the nature of money’s asset base on its head in 30 years. Why do they make that argument? Here’s the punchline. In their view, money is just a commodity token that helps the private sector operate at its full capacity. They basically embraced and refined this long intellectual tradition of viewing money this way. And by doing so, they could explain away the new state capacities and new state power over finance.

Now, there was a dissenting view–“real bills”–that challenged [this new consensus]. . . . . But [it] was basically shut down by a reassertion of monetary orthodoxy: again, the view that money isn’t essential to economic growth. [It claimed that] the federal state’s new role in backing the money supply was neither here nor there. It was just a management move that protects banks and the public. . . .

Now, once you look at this familiar story about the transformation of the Fed and the role of federal debt through a heterodox lens, it raises a bunch of questions about the way that we understand federal policy in the 20th century and its power to shape economic outcomes. It fundamentally challenges many of the conventional templates that scholars employ to discuss topics such as “big government,” federal spending, welfare programs, and partisan politics. Because, even before the federal government got “big” in a conventional sense during the New Deal, it had powers to shape markets that many economists are reluctant to acknowledge. That’s the first way that [this approach] challenges our conventional views of political economy. Then, once the Great Depression vastly expands state capacity, as we know it did, it means that federal financial and fiscal policy are at the heart of understanding both prosperity and precarity in the modern United States. It’s not a discussion about when the government should act or when it shouldn’t. The government is always there and it’s always acting on these two fronts. It’s, again, baked into the way that the modern American political economy functions.

Maxximilian Seijo: I was wondering if we could take a deeper dive into the Real Bills Doctrine of the 19th century and maybe you could reflect on the limits and possibilities of the Real Bills Doctrine versus the later paradigm centered on Treasury debt?

David Freund: Right. This gets at the most complicated part of the project. That is, if the project is a story about the [changing] mechanics of finance and about the intellectual and political negotiation of that change, then this is the most complicated part of that intellectual, political side of it. And, to be frank, I’m still sorting through it as I’m writing these chapters . . .

It basically goes something like this. “Real bills” was simultaneously regressive and progressive. “Real bills” was the conventional wisdom among bankers, and among a lot of monetary theorists, that a bank [should] only issue a loan when the borrower gave it a so-called “real bill,” which was a promise of a commercial good. It could be an inventory that they’re going to sell. It could be the promise to build something and sell it. The theory was that banks wouldn’t issue too much money [if] they were creating monetary instruments that would be used productively in the economy. That’s a short course in “real bills.” 

Still they believed, in a regressive way, in the commodity theory of money. In many ways [“real bills” advocates] are very much part of the neoclassical tradition. However, what was interesting and what makes them relevant to this story, is that the “real bills” model acknowledges the primacy of credit extension to the productive process. They do it on very different terms than heterodox and post-Keynesian folks do, but they were at least saying, “Look, this is central to how things are made and exchanged.” That’s why “real bills” advocates freaked out when the Federal Reserve assumed all these new powers over currency between World War I and the Great Depression. They saw that the federal state was assuming the power to basically stand behind monetary issue. In other words, a government promise was now standing in for a commercial promise to extend a loan. That’s why they’re on my map and I think they’re very interesting historically. But they mistakenly insisted–and this is where their orthodox impulses showed–that monetary sovereigns could not create productive capacity without distorting this mythical free market for goods.

“Real bills” was wrong to be sure, but it was also a canary in the coal mine, at least for students of heterodoxy, because it sounded the alarm about consolidating federal power over finance. 

The paradigm that won the battle over Fed policy, by contrast, is even more complicated. Of course, it helped to validate our current system, in which the Fed operates as a true central bank with lender of last resort powers and, critically, with the authority to finance U.S. government expenditures. [The Fed] literally injects federal spending into the economy and it manages the Treasury’s account. And it couldn’t do that, at least as seamlessly as it does, if it had not reinvented itself between World War I and the 1930s. And so, in the most practical sense, the existing paradigm explains how the federal government can manage, and at its best, sustain the domestic economy. 

The big problem with this new paradigm–the orthodox treatment–is that it masks the federal state’s generative powers. This will sound a little bit like a broken record, but economic orthodoxy insists that the modern Fed helps insulate a market for private financial instruments. And that this private market alone drives economic outcomes. In that model, money’s primary task is to circulate private wealth, which is then represented by money tokens. And to support this reading, orthodoxy insists upon two overarching myths. One, money isn’t productive. Thus money issuance by a sovereign is not wealth creating. Which, I’m sorry, that’s just plain goofy. And two, that the existence of all this Treasury debt and the active trade in that debt, which becomes so central to American finance and policy, are just conveniences. [Government debt] is a convenient instrument that enables monetary authorities to make these necessary adjustments to the supply of currency. In this orthodox view, [the Fed’s use of Treasury debt] in no way distorts private market activity. 

What the heterodox challenge does–and MMT has been especially effective at this–is help people recognize, first, that finance is essential and economically productive. Money literally makes production and trade possible. And second, it highlights the central role of monetary sovereigns in sustaining modern monetary systems. If you put those two together, you get a result that’s really important for understanding contemporary politics: that both federal monetary management and federal spending are essential to making our marketplaces function.

Scott Ferguson: Can you now connect the dots between your central thesis in your first book and what seems to be a key thesis in this book in progress? It seems like they are homologous and that the second book is kind of zooming out. I’m just kinda curious if you have thoughts about that.

David Freund: I do. I thought that the second book was going to cast the net wider and show the range of ways in which federal financial and credit policies have fundamentally restructured the American economy, especially since the New Deal. That was the original plan.  . . . .

[But it] turned into something that’s both narrower and broader. It’s narrower in that it’s literally just about this transformation of the Fed and what it did to American money. It drills down much deeper. . . . But, where it’s gotten broader is that I’m trying to highlight how any case study [of federal intervention] operates. If you look at any of these case studies in the context of this fundamental heterodox challenge and in the context of the fact that money is actually debt, it kind of changes everything. . . . 

Scott Ferguson: Yeah, and it seems to me that both of the books are about an obfuscation and a naturalization of money’s designs. And that, the law behind American processes of unjust racialization, is behind so many other problems and possibilities. And, I guess in that way, I see this as one larger evolving project.

David Freund: Right. That’s really nicely put. I appreciate that. And what you’ve done is articulated a connection that is there in the work, but one that I couldn’t yet articulate on those terms. When I was writing Colored Property, I knew that there was an obfuscation going on. I knew it was broadly about the federal role and credit markets. But what you’ve identified is the link, which is that the mechanisms of monetary creation and debt creation are at the center of both projects. And yes, I agree.  . . . I think they will help us understand a lot about systemic inequality in the modern world. Thank you for that. I appreciate it.

William Saas: What has working at the intersections of American history and heterodox economics changed how you think about the relationships between empirical research, on the one hand, and theory and speculation, on the other?

David Freund: That is very interesting. I think the lesson I take away from it applies to all interdisciplinary work. Again, I came up at a moment of the “cultural turn” in the humanities and learned a lot from it.  But I also grew critical of what I saw as some of its excesses, which was often when scholars ignored political economy and ignored the social. 

The lesson I took away was that good theory is always grounded in evidence. Theory is only speculative in that it suggests fresh or maybe hidden interpretive frameworks for understanding social reality. I think it helps people take interpretive leaps of faith and helps us to break out of what you could call hegemonic intellectual constructs. The best theoretical work on gender, on sexuality, on race, is grounded in lived experience and the documentary record. I used to write about theories of racial difference and I think the best work on that was informed by scholars and by activists who demonstrated historically that there is no real thing called race, but rather that there’s this constellation of power structures and practices that have invented and reinvented racial categories. They came up with the supportable theory, because the theory was fashioned out of a documentable past and present. 

And it’s the same with economic theory. Heterodox traditions are, for lack of a better term, fact-based and inherently inductive. In a lot of ways, they’re a throwback to the days before the marginal revolution in economics, when so-called political economists or institutional economists drew upon real world evidence to draw conclusions about economic processes. Not surprisingly, they are much more attentive to the power of institutions. By contrast, neoclassical economics is, for the most part, a deductive science. It imagines a world of individual consumers who have “perfect information.” It posits that this world, if it existed at all, would operate efficiently and produce resources fairly. And then, it explains why we don’t have it and how we can use policy to hopefully get closer to it. 

Let me put that another way, very briefly. I think we all have theories of how the world works. I don’t think there are objective or theory-free explanations of social phenomena. The task is to use history to determine if your theory is supportable. I’m sticking with that.

William Saas: Speaking of theory just a bit longer, are there any other historians working with other heterodox economic traditions and recognizing the critique of neoclassicism, but coming to different conclusions by different paths than you are with your work?

David Freund: Oh, yes. That is a really, really hard question to answer.

William Saas: I’m asking, in part, because it’s also true in other fields as well. Like there are Marxists, autonomous Marxists, and different strands of that. All seem to contain a critique of neoclassicism.

David Freund: Yes, absolutely. I see heterodoxy all over the place. There are long traditions of both activism and scholarship that are basically making the equivalent of heterodox economic analyses. There are so many smart interpretive traditions. Some are based in Marxist political economy. Some are built from work by institutionalists, especially institutional economists of the early 20th century who reconstructed some of these stories. Did they have a laser focus on monetary instruments? No. But I think they’re speaking to the way that things are baked in structurally and that institutions are basically shaping the allocation of resources. It’s a very interesting question. I appreciate it. . . . 

Maxximilian Seijo: So if listeners haven’t already recognized, you’ve been in dialogue with these largely obscure schools of heterodox economics for quite a long time now. I was wondering what it’s like to see MMT in particular become increasingly relevant and debated in the midst of what now seems to be a paradigm breakdown, specifically for the neoliberal consensus.

David Freund: Yeah. This has been a pretty head-spinning time for a lot of us. I began reading post-Keynesian economists while I was writing Colored Property. I stumbled upon a book by Robert Guttman. I went to his footnotes and I took it from there. I’ve been doing it ever since. And I quickly learned that this was part of a generations-old minority report, basically among economists, sociologists, and scholars in several other disciplines. I learned about their forerunners. There’s some really interesting threads of what could be called heterodox and credit money theory, for example, in classical economics writings. And, finally, I became a student of the post-Keynesian scholarship that sort of consolidated in the decades after World War II. 

I have enormous respect for the scholars who stuck with it. And it goes without saying, I literally could not do this work, both without their published work and the fact that they are helping me understand this stuff in real time. I know, both from reading the debates over heterodoxy and from discussions with some of its prominent practitioners, that they are held in contempt by the mainstream economics profession. That is not an understatement. And so basically, they’ve been keeping alive a tradition of inquiry and also making stunning contributions to a tradition which has the potential to transform the conventional wisdom about the relationship between the public and private sectors. 

So, in some respects, given that long history of push back [against] these ideas, it’s been a surprise to see these debates crash into the public sphere in the last year or so. It is fun to be able to tell people who I’ve bored to tears with discussions of monetary theory, “Hey, look, why don’t you just open up Bloomberg and see this exchange that’s going on in there? This is some of the stuff I’ve been talking about.”

At the same time, it makes sense that it’s happened, for two reasons. First, and this is a big, sweeping point: we know that moments of political and economic crisis have always created openings for dissenting perspectives. That’s central to understanding progressive victories in U.S. history. Think about labor movements, racial justice movements, LGBTQ movements, and others. Dissenting voices are always there and they’re usually organizing. Then moments of crisis help those voices gain some leverage. It gives their protest efforts some traction, it creates an opening for more people to rethink common assumptions, and it creates that space that I mentioned before when an analytical framework can be challenged and maybe even transformed. 

And, needless to say, we have been in an economic crisis for a long time and now a crisis of political legitimacy. I think that those things combined have made it possible for a new conversation about economic and policy alternatives to emerge. 

The second reason that it’s not that much of a surprise is related to that broader story of how activists and heterodox economists have long been working hard to make these issues a topic of public concern. I’m thinking about your previous question, regarding traditions. Non-economists have been exploring what might be called heterodox economic theory forever. It’s been central to civil rights organizing. Just take a look at Ture and Hamilton’s 1967 Black Power, or more recently, the mission statements of groups like the Black Youth Project (BYP100). It has always been central to black organizing. 

Meanwhile, heterodox economists, especially those associated with MMT, have very effectively leveraged the internet and increasingly electoral politics to get people talking about the importance of these supposedly arcane subjects and to understanding our contemporary political struggles. They’ve been very involved in recent congressional campaigns. Stephanie Kelton has been an advisor to Bernie’s presidential campaign. 

So, if you put all these ingredients together, crisis and all the hard work of dissent, it makes sense that Stephanie Kelton and Paul Krugman are duking it out in the pages of Bloomberg and The New York Times, or that Randy Ray is being interviewed by major press outlets, which gives me so much joy. But, sure, it is still very disorienting. And for those people who’ve been doing it their entire lives, I’m sure that they are thinking, “Pinch me.” But I think there’s a historical logic to it nonetheless.

Scott Ferguson: Well, David Freund, thank you so much for coming on our show.

David Freund: Thank you so much for having me. It’s really been a pleasure. I’m a big fan of your program.

Imagining the Green New Deal with Robert Hockett

In this episode, we speak with Robert Hockett, Edward Cornell professor of Law at Cornell Law School. At Cornell, Hockett teaches and writes about organizational, financial, and monetary law and economics. He’s also worked as a fellow for the Century Foundation and as a consultant to a number of international financial institutions and state legislatures.

We talk with Hockett about his role in crafting the Green New Deal Resolution, his conception of finance as a franchise, and his experience as an advisor to Congresswoman Alexandria Ocasio-Cortez as well to Senators Sanders and Warren.

Professor Hockett’s notable publications include his essays, “The Finance Franchise,” co-authored with Saule T. Omarova and “The Green New Deal: Mobilizing for a Just, Prosperous, and Sustainable Economy,” co-authored with Rhiana Gunn-Wright.

Confronting Monetary Imperialism in Francophone Africa with Ndongo Samba Sylla

Ndongo Samba Sylla (@nssylla) is a Senegalese development economist and Research and Programme manager at the West Africa office of the Rosa Luxemburg Foundation. Sylla is also the author of many articles and three books, including the recently published L’Arme Invisible de la Francafrique, or “The Invisible Weapon of Franco-African Imperialism.” In that book, Sylla and coauthor Fanny Pigeaud lay out a comprehensive case against the CFA Franc, a neocolonial currency union that presently constrains the social, political, and economic prospects of each of its member states.

In this episode, Scott Ferguson and Maxximilian Seijo talk with Sylla about the history of political economy in pre-and post-colonial Africa; the theoretical bases and political stakes of the anti-CFA Franc movement; and how Modern Monetary Theory ought to inform current and future efforts to restore political and economic sovereignty to West African nations.

Transcript

The following has been lightly edited for clarity. 

Seijo: Ndongo Samba Sylla, welcome to Money on the Left.

Sylla: Thank you, thank you for your invitation.

Seijo: So I was wondering … if you could tell us a bit about your personal, educational, and political background.

Sylla: Yeah, I am a Senegalese citizen. I currently live in Dakar, where I grew up (Dakar is the capital of Senegal). I did my early studies in Senegal, until the Baccalaureate, in 1996. From there, I went to Paris for my university studies, and I obtained a master’s degree in sociology at the Institute of Political Studies in Paris, and also a master’s degree in development economics at the University of Paris I Panthéon-Sorbonne. And then I did a Ph.D. in economics at the University of Versailles Saint-Quentin-en-Yvelines, and my dissertation was about employment relationships in Senegal.

Professionally, I started my first job as a researcher in 2001, in a public research center in Paris specialized in employment issues. I worked there under the supervision of one of my professors, and I had to participate in the writing of evaluation reports about The European Employment Strategy, which was an initiative launched in 1997 by the European Union.

From there, I worked for the government. I was, between 2006 and 2009, technical advisor at the Presidency of the Republic of Senegal, and I left this job in 2009. After that, I worked as a consultant for the Fair Trade worldwide umbrella organization. Since then, in 2012, I worked in Dakar as a program research manager at the West Africa office of the Rosa Luxemburg Foundation, which is a leftist German political foundation. And regarding my writings, I have authored a book on Fair Trade, named ‘The Fair Trade Scandal’. I have also authored one book on the story of democracy, and recently I co-authored a book with a French journalist, Fanny Pigeaud, on the story of the CFA Franc.

Ferguson: So your recent work, and your recent co-authored book, focuses primarily, as you said, on the present history of the neo-colonial monetary system that is the CFA Franc, in Francophone Africa. And really, in this conversation, I want us to dive into that. But before we start, I was wondering if you could sketch out for us how you approach this question through political economy, and how do you understand money. I’m also curious, given your background and training, thinking about employment and unemployment, how you see the relationship between money and employment.

Sylla: It’s difficult to give a definition of money of my own. I do not have a definition of my own. But I somewhat subscribe to some existing views about money. Namely, the view that money is an important social institution, which helps, lets say, settle debts and credit relationships in given polities. And this function is more or less possible because if money has to work, first you need a unit of account allowing to count the debts and the credits, and also you have to establish rules for exchange, payment, and accumulation of social values. But the view of money which doesn’t convince me is the neoclassical view of money as commodity, which helps overcome the shortcomings of barter. I am really not convinced by this view, and the neoclassical view, too, that money is a neutral economic instrument.

Generally, I often like to quote Aristotle in his book, Nichomachean Ethics (in French it’s Ethique à Nicomaque), where he says the word that designates law in Greek [nomos], shares the same etymology, the same root, with the word referring to money/currency [nomisma]. So that means that you could not find a more political topic than money. Sometimes people told us that money is a complicated subject, only for experts, but with the observation made by Aristotle, we could be sure that money is, let’s say, a political topic, which needs a really democratic framework for debate. So I think, as progressives, it’s important to open the money ‘black box’, and make it understandable for ordinary people. And that’s why I also appreciate very much the efforts made by the Modern Monetary Theory movement.

Regarding now the link between money and employment, I think there is a clear link between them, because in the capitalist economies, money is at the beginning of production. It’s at the beginning, and it’s at the end. And you have to create money to start production. And by the act of creating money, you create production, and at the same time you create jobs. So in capitalist economies, you need money to create jobs. You have to provide money. And when you say ‘money’, it’s not just existing savings, or means of payment, but newer means of payment – monetary creation. That’s why there is a strong link between money and employment.

Seijo: So I was wondering, if we can take those ideas – money is inherently political, and that in the production context it’s present in the first and last instance – and I was wondering if we could apply it to the pre-colonial northern and western African societies. And I was wondering if you had any insights into the credit and debt relations that perhaps preceded European invasion and colonization.

Sylla: Yes, in fact, the role of money in … capitalist economies is obviously different to its role in pre-colonial, pre-capitalist societies. Because if you remember the formula of Marx, M-C-M’ [Money-Commodity-Money plus], that means you have money at the beginning, and also money as the object of production. In pre-colonial societies, pre-capitalist societies, money has a different  function, and this is eloquently shown in the book of David Graeber, his best-selling book Debt, and he was saying in his book that pre-capitalist societies, the function of money is not only to facilitate economic exchanges, but first to rearrange, to repair existing social relationships. For example, in the case of West Africa, the currencies were used, for example, to pay dowries, to pay fines, but also blood price. If you take the national languages, you could see this importance of money in the language. For example, in my own mother tongue, which is Wolof, the word ‘nephew’ literally means ‘blood price’, while the word ‘uncle’ means ‘let him sell’. In fact, in the Wolof societies, the family structure was matriarchal, so the uncles who were … captured, could be exchanged with their nephews, and their nephews could also be used to play the blood price. So it was … one view about money.

The Quest for Economic and Monetary Sovereignty in 21st Century Africa: Lessons to be learnt and ways forward. November 7-9, 2019, Tunis.

But Africans before colonization knew also that money is not a commodity, but a social relationship, because you would see that there was many types of currencies, which had classical functions – unit of account, means of payment, store of value. They were commodity currencies for the most time – rubber bars, iron and copper bars, shells, cotton, things like that–and they knew, of course, that through those objects they were trying to shape social relationships. And there was the cowries, which were the … most successful currency, probably, in West Africa. And they were used throughout the region at the point that the people were talking about the cowries-Zone. And even the cowries were used, in fact, were listed, in France, so they could be exchanged with French currency. So money in the pre-capitalist societies was not … used primarily for economic objectives, but … for political and cultural, and sometimes religious, uses. But only, as in capitalism, to create, to accumulate value, to extract value, et cetera.

Ferguson: Thanks. So this leads to our next question: what changes under colonial rule? …. Do you see colonization, and changing money relations, as a purely top-down process, or do we see instances where local political, legal, customs, play a large role also in shaping colonial relations?

Sylla: Yeah. I would say that colonialism has transformed deeply the monetary experience of African people. First we have to remind that colonialism was first associated with … violence. And you could see that with the example of the conquest of Algeria. Because it happened in the 1830’s, and it was … the beginning … of the military colonization of the continent. What happened there was … looting, and the French troops, for example, looted the stock of gold, the stock of silver, of Algeria, and this was shared by the looters, by the French Treasury, and by King Louis-Philippe himself. And this was important because just after the conquest of Algeria, in 1848, there was the abolition of slavery in France. And this was something really important from a monetary point of view, because the slave owners, French slave owners, had to be compensated. …  Part of the compensation was used to set up colonial banks under the supervision of the Bank of France.

This is, for example, the case for the Bank of Senegal, which was created in 1853, and which had its headquarters in a town named Saint Louis in the north of Senegal. And this Bank of Senegal is the ancestor of the current Central Bank of West African States. So you could see through this telling example the relationship between debt, credit, money, and … the setting up of the banking system. I [remind] this story because the creation of this Bank of Senegal was illustrative of the objectives of the … colonial project and also the place of money in the colonial project. Because the colonizers used money for extractive purposes–that means to bring the colonies to produce the resources and products demanded by the metropolis, and also to drain economic surpluses to the metropolis.

At that time, there was something called the “Colonial Pact.” … The Colonial Pact is not really a pact, … [a] convention between partners. It was a way of designing … the operating principles of the colonial economy. And those operating principles were, for example, the fact that the colonies were legally prohibited to industrialize–they had just to supply raw materials to the metropolis, which would transform them into finished products, and then sell them back. The metropolis had also the monopoly on exports and imports from the colonies. It also had a monopoly on the transportation of the products of French trade of the colonies. And in this colonial economic system, the role of money was to allow this extraction of value. That’s why, when banking credit was created for production, it was limited just to the production of cash crops and raw materials demanded by the metropolis. And when credit for consumption was created, it was just to create a demand for the goods imported from the metropolis.

[W]hat is sad is this colonial function of money is still in full force in countries using the CFA Franc. So the first impact of … the introduction of colonial currencies has been to kill the monetary pluralism that was a characteristic of African polities. Because you could see, in the same town, different currencies. But when the European powers came, they wanted to lower transaction costs. That’s why they created currency blocs. But those currency blocs were not what we would call now ‘Optimal Currency Areas’; … they were created just for colonial purposes. And by doing that, the colonial powers have disrupted African economic structures, and they have made them dependent on external economic diktats. That means they are no longer sufficient, … economically speaking.

Ferguson: So, to follow up on that, you were discussing the ways in which you’re very critical of the commodity theory of money, which we sort of associate with the classical political economy of Locke and Smith, and it transforms, and takes on new forms, in the marginalist revolution, and the turn to what we call neoclassical economics. Where does that intellectual history link up with the story of European invasion, colonization, and violence?

Sylla: I think that neoclassical economics does not talk in a satisfactory way about the origins of money, and how money was created, for example, by … countries or regions which have been colonized by Europe. They will just say that money was created because it is more efficient than barter. And European powers, of course, knew that money does not work like that. That’s why what they did first [was] imposed their own currency. In our book, we have quoted Hyman Minsky, who used to say ‘everyone can create money; the problem is to get it accepted’. And for me, this is really interesting when we think about the story of the imposition of colonial currencies.

If we take the case of the cowries, for example. When France conquered West Africa, and created the Federation of West Africa, the first thing they did is to stop the imports of cowries, because the cowries came from the Indian Ocean. And so they stopped that, and sometimes they went to markets with military people, just to impose traders to use the French currency. And they have put legal sanctions for people not accepting French currency. But we also see the importance of … the fiscal instrument, to generate a demand for money. Because through the obligation that indigenous people have to pay taxes, they created a demand for the colonial currencies, because people had to work in sectors where they would receive the cash, so they would be able to pay their taxes. And this is something which, let’s say, this process, this way of ‘money-to-work’, you could not see that in neoclassical economics, but you could see that, clearly, for example, in Modern Monetary Theory. That is, the issuer of the currency has to spend, first, before … the people who have to pay taxes pay their taxes. This is something you could see in the history of the colonial currencies, but this kind of story, you will never find that explained in neoclassical economics.

Ferguson: So, I know this is a sweeping generalization, but would it be fair to say in terms of the conscious intentions and actions of the French in the 19th century, that they were commodity theorists at home, and chartalists abroad when they needed to be?

Sylla: Yeah, I would agree with that. They clearly acted in the chartalist way. And yeah, they knew that if they wanted to substitute the French currency, and abolish the indigenous currencies, they had to impose taxes. … Through that, they were able to create a demand for the French currency. Because African people had resisted … five decades before they came to really accept the French currency. And this had been possible through the fact of saying if you do not pay taxes, you will face legal sanctions, and yeah you have to pay taxes. And when you have to pay taxes, you have to earn money, and you could earn money only by producing what is demanded by the metropolis. And that’s how they manage to impose their currency.

Ferguson: Thank you.

Seijo: So I wanted to bring this back to some of your more recent work, specifically on the CFA Franc. And I was wondering if, for our listeners, you could define what the CFA Franc is, and then, perhaps, narrate how it shaped the post-colonial political economies of Francophone Africa in the early years of decolonization.

Sylla: Yeah. The CFA Franc is … a currency born during the colonial period. Now it is the acronym for two different currencies. The first is the Franc of the African Financial Community, this is the currency of eight countries, members of the West African Economic and Monetary Union. And there is another CFA Franc, it’s the Franc of the Financial Corporation of Central Africa, for the six countries belonging to the Central African Economic and Monetary Community. So we have two CFA Francs, but at the beginning there was just one CFA Franc. And the beginning was in 1945, that is just after the Second World War. And at that time, the acronym meant ‘Franc of the French Colonies in Africa’. So it was clear that this was a colonial currency, which was circulating in sub-Saharan colonies of France. The currency was created, officially, on December 26, 1945, by the General de Gaulle and his Finance Minister.

30 Minute Mark

Sylla: [It was clear that this was a colonial currency] which was circulating in the sub-Saharan colonies of France. The currency was created officially on December 26, 1945, by General de Gaulle and his finance minister. And the currency was created the same day that France ratified the Bretton Woods agreement; the same day also that the new parity of the French franc was declared to the IMF (which was just born).

The CFA Franc was created in a context where the French economy had been destroyed during the war, and there was not enough foreign exchange reserves. There was high inflation, many shortages, et cetera. And so, the decision at that time was whether we should have a devaluation of the French franc, which would be homogenous throughout the empire. Because at that time, there was just one currency circulating in more or less the whole empire, except, for example, in India and Indochina. It was the French franc which was circulating in the empire, and of course the bank notes were more or less differentiated from one place to another. But it was basically the French franc. And as the French economy was in a more precarious state, the technicians of the ministry of finance in France said “it would be better that we devalue the French franc.” And that decision implied that the new currencies be created. And the CFA franc was created in that context.

That means it has been created with a devaluation of the French franc. And the devaluation of the French franc has abolished what was called “monetary unity”—that is, one currency circulating in the whole empire. So, the CFA Franc is … a devalued French franc. But what is interesting is that when the CFA Franc was created, it had an external value higher than the French franc, because one CFA Franc was exchanged with 1.70 French franc. And in 1984, there was a devaluation of the French franc, which was not followed in the colonies. And as a result of that, one CFA Franc was worth 2 French francs. That means that the CFA Franc was born overvalued, because in the British colonies, their currencies had parity, which was obviously weaker than the British pound. But France decided to keep the CFA Franc at an exaggerated external value, because it was in interest for France to break up the ties that the African colonies had nurtured during the war with the other parts of the world—for example, Latin America and Asia.

During the war, the trade between France and its colonies had decreased a lot, and France wanted to regain control of that trade. And so, it was interesting for France to have colonies with overvalued currencies. As a result of this overvaluation, the colonies could no longer sell competitive products in Asia and Latin America, so they were obliged to sell it to France. And at the same time as their currency was overvalued, they could buy, cheaply, goods from France. So it was very profitable for France to have colonies with overvalued exchange rates. What was also profitable for France is that the French franc was, at that time, a very weak currency. And the Bretton Woods regime was a regime with U.S. dollar hegemony. And goods had to be bought in U.S. dollars. But with the CFA Franc, France could buy all the raw materials, all the products, in its colonies without using U.S. dollars, because France could just credit the amount of exports of the colonies in the French franc. And that’s what France did. This was really important for France, as it contributed to strengthen, a little bit, the French franc exchange rate. Because if France had to earn dollars to buy its imports in Africa, it could have been very disruptive for the French economy, which was really in a mess just after the second World War. The creation of the CFA Franc was also a means for France to have total control on its colonies, because all the decisions—economic, financial, and political—were taken from France.

Seijo: So you’ve just explained the historical creation of the CFA Franc, and how it shaped African political economics. Could you talk about what the current status of the CFA Franc is, and how it’s related to the Euro currency zone?

Sylla: Before answering that question, I’ll give some context about why the CFA Franc still exists. Because after the creation of the CFA Franc, there was some political concessions from France, which allowed the colonies more autonomy and which recognized some rights—labor rights, etc. This process has led to decolonization. But what is particular in the case of France is that other monetary blocks—because in Africa you had many monetary blocks: you had the sterling area; you had the peseta zone; you had the Belgian monetary zone; the dollar zone —and all those monetary blocks were dismantled after formal decolonization.

But this did not happen with France. Because when France knew that the decolonization was something inevitable, France said to African leaders—because most of the Francophone leaders were trained in France; sometimes they even had seats in the French parliament; and those elites would afterwards rule the newly independent African countries. And France told those leaders: I will grant you independence, provided you sign what was called “cooperation agreements”—that means agreements giving France monopoly rights in many areas, for example: raw materials, currency diplomacy, armed forces, higher education, civil aviation. In all those domains, there were cooperation agreements. And this was something very clear: the prime minister of France at that time wrote to the Prime minister of Gabon at that time, telling him that we will grant you independence but you have to sign those agreements. Without the signing of those agreements, no independence. And it was clearly written. As a matter of fact, all those countries would more or less stay in the safer zone. You could see even in the case of a country like Gabon the cooperation agreements were signed the day of its official independence. So that means that in Francophone Africa, there was not really a full decolonization, but only a partial decolonization. So this is the context which explains why the CFA Franc survived the wave of formal independences in Africa.

Ferguson: This history, it seems to me, is illuminating in a way that we often don’t hear when we hear about the story of decolonization. We hear narratives about various formerly colonized peoples winning or receiving or agreeing to take up their own political autonomy or their political capacity, but they remain economically dependent. And usually, my sense of the way that that conventional narrative is told, even if it’s on the side of decolonialization, it takes money for granted—sort of treats money as a commodity, and doesn’t really open up a question of how money is really the central question and problem when it comes to the process of decolonialization. Is that your sense? Do you have a sense that putting money at the center of the story brings new light to this history?

Sylla: Yeah, and I must say that I have learned a lot, and [began] seeing things differently, when I started to work on the CFA Franc. I had the more or less conventional view about the process of decolonization, but when you factor in the money aspect, you see why you could not really talk of real decolonization without taking into account whether the money management was decolonized or not. And clearly, in the case of the CFA Franc, one of the most important aspects for France was to have the CFA Franc zone maintained. And you could see many statements from ministers, from MPs, saying that it’s important that African countries remain in the CFA zone. Because if they remain in the CFA zone, it is as if those African countries were an administrative department of France. Because as France could buy all African products, just by credit—so it is a very critical thing for them, very critical, because they could buy everything just by crediting it in their own currency in the operations account. And that means that what is called the exorbitant privilege for the U.S. dollar is somehow what France enjoys in its former colonies through the maintaining of the CFA Franc. Because France has an exorbitant privilege. But now this has declined with the arrival of the Euro. But nonetheless, it has been a very important exorbitant privilege. And I think that, without this arrangement, it would have been really tough for France to rebuild its economy and also be a major economic power.

Seijo: So can you talk a little bit about how the CFA Franc is operating in the Euro context?

Sylla: In fact, the CFA Franc mechanisms have not changed since colonial times. They are really simple; they are based on four principles. The first principle is the fixed parity against the French currency. Which was the French franc before, and now the Euro. That means the peg is always there, it’s the same peg and it normally should not be devalued. The second principle is the freedom to transfer capital and incomes within the Franc zone. The Franc zone gathers the 14 countries using the CFA Franc, and also the Comoros and France. The Comoros have a so-called national currency, but it functions in the same way as the CFA Franc. It’s just the parity that is different; otherwise it’s more or less the same working principles. The third principle

45 Minute Mark

Sylla: The third principle is that the French Treasury promises to guarantee the convertibility of the CFA Franc into French currency. And this convertibility guarantee means that the French Treasury promises to lend foreign reserves, Euros, to the two central banks–the one in West Africa, the other in Central Africa–if  they no longer have any foreign exchange reserves. That is the promise of lending money. It is as if the French Treasury was acting like a private IMF for the African Central Banks. [A] private IMF to say that if they have … [a] shortage in foreign reserves, [the] French will be there to lend them money so that the fixed peg is maintained, so that the free transfer of capital in incomes will not be impeded. What has to be said is that France has seldom performed that role of lending money in times of crisis.

The fourth principle is that, as a result of this convertibility guarantee by the French Treasury, the central banks, the central banks are required to deposit in a special account of the French Treasury fifty percent of their foreign exchange reserves. After independence, this was one hundred percent. This has been lowered to sixty five percent in 1973. And since 2005, it’s fifty percent. So, those foreign exchange reserves are deposited at the French Treasury as a counterpart to the guarantee of convertibility. And this is something you would never see anywhere else than the CFA Franc. All of these mechanisms date back to the colonial period. And they are still functioning like they functioned in the colonial period. The French authorities are represented in the bodies of both … central banks and they have veto power. That means that no monetary policy decisions, including the decision to devalue the CFA Franc, can be taken without the approval of the French government.

People don’t know also that the CFA Franc is a currency unknown in international markets. Every time a CFA Franc is exchanged against the Euro this has to pass through the French Treasury. That means that the French Treasury is de facto the foreign exchange office of African countries because the CFA Franc is unknown in international markets. Everytime there is a conversion it is through the French Treasury. I have to add that the bank notes, the coins are still produced in France without any international call for  tenders. And the stock of gold of the central bank of West African states is at 90% held by the Bank of France.

All these elements show that the CFA is a colonial monetary arrangement. It’s workings have not changed with formal decolonization. It is interesting to say that [in] the first report about the Franc Zone published in 1953, it was clearly indicated that the CFA Franc is technically similar to the French franc. In fact, the CFA Franc is a sub-multiple of the French franc because there is a total integration between the monetary space in the franc zone countries and the monetary space of France. So, it’s the same money. The sole difference is that, for the CFA Franc countries, you have different bank notes; but it’s more or less the same.

Now with the era of the Euro, you could say that the CFA Franc is the sub-multiple of the Euro. What has really changed with the arrival of the Euro is that the governance of the CFA Franc now includes the European Union authorities [Council of the EU, European Central Bank, Economic and Financial Committee]. Because when the French knew that the French franc would disappear and [cede] it’s place to the Euro, they negotiated with their European Union … partners and they [said] they want to peg the CFA Franc with the Euro. They had to negotiate that with their partners because there were some critical voices, for example Germany and Austria, which [said] that, normally, if France want[s] to peg the currency of its former colonies, it’s the European Union who will be sovereign. There will be no place for France to [have a] say. What happened is that France was efficient enough to convince the European Union authorities [of] the fact that guaranteeing the convertibility of the CFA Franc is not a danger to [the] French public budget and so to European Union stability. They made a compromise on that basis.

The compromise was that now France [had] to have the consent of European Union authorities if the membership of the CFA Zone is to be enlarged. Also, exchanges have to be brought to the French convertibility guarantee. In the same way, France should give the European Union authorities prior information in the case that the CFA Franc parity is planned to be modified. For example, if a devaluation is planned France has to inform first the European Union authorities. These dynamics mean that now the CFA Franc is under the tutelage of both France and the European Union authorities. So, this is a change brought by the arrival of the Euro.

The second change …. has, let’s say, an economic nature. By pegging the CFA Franc to the Euro, now the African countries and their central banks are more or less submitted to the same restrictive rules in terms of inflation, public debt and public deficit[s]. The mandate of our central banks is to have price stability and they target a rate of inflation below three percent. This kind of setting tends to lead to deflationary outcomes, which are bad for the long-term growth of African countries. The other thing is that African countries receive their export income in dollars, whereas their currency is pegged to the Euro, which has often appreciated a lot vis-a-vis the dollar. For example, between 2002 and 2008, the Euro has appreciated a lot vis-a-vis the dollar–more than ninety percent cumulatively. At that time, many agricultural producers were bankrupted because of just one factor: the Euro was so strong. So, the arrival of the Euro means less export competitiveness for African countries. This is a serious handicap for structural transformation and also the capacity to record trade surpluses.

Ferguson: In the way that you tell the story of the rise and evolution of what is essentially a colonial project, the CFA Franc, it seem that it begins with a clear, somewhat clear, chartalist intention and consciousness. But by the time we get to the later twentieth century and the Eurozone, it seems like the chartalist insights, as evil as they were put to use, are really lost. And my sense is that this happens in the way that both the Eurozone and, of course, the CFA Franc really provide little place for fiscal capacity in any of the European economies or the Francophone African economies. Is that fair to say?

Sylla: Yes, that’s true. Because we are no longer in the same type of international mindset. From 1945 to 1980 more or less, there was the idea that economic development should be encouraged using heterodox policies. And so there was an active role for central banks and an active role for states. But since then the mindset has changed. Now, monetary policies are too orthodox, at least for developing countries like those of the CFA zone. The budgetary policy, fiscal policies are too orthodox. African countries are trying to follow the dictates of France, the IMF, and also the European Union. You don’t have to have budget deficits. You don’t have to borrow money passed some given level, etc. And so, it has become difficult for many countries. At that time, as you say, there was this chartalist perspective by France on African countries. But with the integration of France in the European Union this chartalist perspective has disappeared. Because now France had no longer the same margins to create money to, let’s say, buy African products. France is no longer sovereign monetarily and you could see that with the relationships with the African countries, which are blindly following the crazy Eurozone model.

Ferguson: We’ve been talking at a theoretical level for a while and I was wondering if you could give our listeners a real contemporary example of the disaster that the CFA Franc for people in communities, whether it’s in Senegal or elsewhere.

60 Minute Mark

Sylla: You just take a look at the long term growth rates. For example, if you take the real GDP per capita of the most important economies in the Franc zone, you’ll see that today it is lower than 40 years ago. Take the case Côte d’Ivoire. In 2016, its real GDP per capita was 1/3 lower than it was in 1978, which was its best year. The annual growth rate of real GDP per capita for Côte d’Ivoire, between 1960 and 2016, is more or less 0.5%. In my own country, Senegal, during the same period, annual rate of growth for real GDP per capita is 0.02%. That means there has been no long term growth at all.

Nowadays, you will hear people say that the CFA Franc countries today have a high rate of economic growth. And that’s true; since 2012 there has been a 6% rate of economic growth. But this is a kind of economic growth which is catching up with the past best levels of economic performance. Out of the whole 14 CFA Franc countries, 9 of them are ranked as less developed countries, and four of the remaining five have a real GDP per capita lower than they had in the 1970s and 1980s.

What’s also interesting is that you could not explain why this CFA zone still exists. Because you’ll see that trade between African countries and the Franc zone is very limited. In Central Africa, it’s less than 5%. After 70 years of so-called monetary integration, they have just much less than 5% of original trade. If you take the case of West Africa, it’s better but nonetheless not very important. Between 10-15%. If you take also the level of competitiveness of African countries of the Franc zone they fare the worst in the world. In w Africa, except Côte d’Ivoire all the remaining countries and chronically in a state of trade deficit. Countries like Benin, Niger, Mali, Burkina Faso, they never recorded one year of trade surplus. They are structurally in a situation where they have to be indebted in foreign currencies. They will never be able to develop because the mechanism of the CFA Franc will never allow them to be developed. On the one hand, as I said earlier if you want to produce you have to create money, but in the CFA Franc Zone the central banks are more or less forbidden to facilitate money creation. The reasoning of the French authorities for this is very simple. They say that more bank credits means more imports. More imports mean less exchanged reserves. And less exchanged reserves imply more pressure to defend the fixed peg to the euro. So at a macroeconomic level there is this rationing of credit. And there are some crazy indicators that show that the CFA Franc exchange rate is more or less functioning like a currency board. That means that the monetary base of CBs is covered nearly at 100% by foreign reserves. In this context there is not enough credit to stimulate production. And those who happen to produce in order to sell abroad cannot be competitive because the currency is too strong because it is pegged to the Euro.

So on the one hand, there is no credit for production. And when you are able to produce you cannot sell abroad because you have a strong currency. Because you have no monetary sovereignty. So this is the case of the CFA Franc zone and that’s why there is no economic dynamism at all. Economic growth in the CFA Franc zone is never triggered by internal dynamics, but just by external dynamics. For example, good terms of trade and cheaper interest rates, … on international financial markets. So this is the sad story of the CFA Franc. Somehow owing to these mechanisms when there are economic crises it’s much more difficult for CFA Franc countries than others because the exchange rate cannot be used as a policy variable. As they follow the neoliberal rules, so public deficits are not really encouraged and the central banks generally in those circumstances follow an orthodox monetary policy, and that means that whenever there are economic crises, the main way of adjusting economically is what is called internal devaluation. That means lowering internal prices and limiting public deficits and letting the private sector enterprises go bankrupt. That is the main mechanism of adjustment in the CFA Franc.

Siejo: So, given those harms, how has the CFA Franc been challenged by African people and governments, in the past and now?

Sylla: There have been many attempts to challenge the CFA Franc, at least there have been four periods. The first took place just after the independences. Guinea was the first [Sub Saharan African] country to challenge the CFA Franc. Guinea took their independence in 1958. Two years after, they had their own national currency and left the CFA Franc. But France did not accept that, and in retaliation the French secret services flooded the Guinean economy with counterfeit bank notes. Through a large scale military operation called Operation Persil. This operation is described in books and especially by the people who performed it. And obviously those counterfeit banknotes disrupted the Guinean economy, and this was a warning from France saying that if you want to get rid of the CFA Franc reflect twice because we will sabotage your economy.

Another example is Togo in the early 60s. They had a political leader named Sylvanus Olympio, who had been trained at the London School of Economics. He wanted a national currency and to diversify Togo’s international relationships, namely with American, German, etc. But he had never been able to create his national currency because he was killed days before its launch, in front of the American embassy in 1963. Togo and Guinea were the first two countries to challenge France, but more or less they have failed. Togo has failed and Guinea has exited, but its economy never recovered.

There were also attempts to challenge France in the mid 1970s. In that period, there was some turmoil following the suspension of the Dollar-gold convertibility. Africans were angry to see that France had devalued its currency without warning them. This devaluation of the French Franc was followed as a result of the fixed peg by the African countries using the CFA Franc. This has increased inflation, the debt burden, and also had reduced the value of their foreign exchange reserves. Because at that time, all the foreign exchange reserves were held at 100% in French Franc, so Africans were not happy about that. France responded with some minor concessions. Since then, France allowed African countries to reduce their monetary deposit rate to 65% and accepted that the CBs now be managed by African staff. Until the mid 70s, the CBs managers were in Paris. But as I said earlier, France is still represented and has a veto power.

There was a third wave of challenges in 1994, when the CFA Franc was devalued for the first time in its history. This was a shock for many African leaders who opposed the devaluation, but it was nevertheless enforced by France and the IMF. When France decided that there would be a devaluation, this produced inflation, impoverished urban dwellers and led to riots in which many people were killed in the days that followed. Those protests were not against the CFA Franc in particular, but were an immediate response to the devaluation.

And now there is this current wave of protest that started in 2015/2016, and what’s interesting about this wave is it’s more popular and more Pan Africanist. For the first time, everyone is talking about the CFA Franc. Recently, Italian government officials accused France of behaving like a colonial power in Africa, and this of course brought more visibility to the CFA Franc.

There is an episode which is not really known, but which is interesting as it illustrates how France dominates this system…

75 Minute Mark

Sylla: Now the issue of the CFA Franc is gaining more visibility and recent declarations of Italian government officials accusing the French of behaving like a colonial power in Africa have also given more visibility to the CFA Franc.

There is an episode which is not really known, but which is also really interesting as it illustrates how France dominates this system. In 2011, there was a presidential election in Côte d’Ivoire. There was some tension between Laurent Gbagbo, who was the incumbent President and Alassane Ouattara, who was a former IMF staff and also a protege of France. There was an electoral dispute and France [took] sides with Ouattara. To put pressure on the Gbagbo government, the French government asked the BCEAO, the central bank of West African states, to stop supplying the Ivorian economy with bank notes, and to stop dealing with the Gbagbo regime, which could no longer access its accounts at the central bank. The French government also asked the French banks’ in Côte d’Ivoire to cease all external operations, and finally, the French government blocked the operations account. The operations account is the account where all operations to convert the CFA Franc into Euros, and vice versa, pass.

As a result, there was a financial embargo against Côte d’Ivoire and against the Gbagbo regime. The Gbagbo regime [then] chose to create a new national currency and were [having] discussions with some countries [about helping] them manage their foreign exchange reserves. But they didn’t have time to create this new currency, as France bombed Gbagbo’s palace to install Ouattara. This was one intervention among more than forty-some done by France since the independencies in Africa.

So, there have been many attempts to challenge the CFA Franc, but each time France has been very strong and sent very clear messages that France will never allow African countries to exit the CFA Franc. But I think now with the current wave [of dissent], it will be much more difficult for France to have that stance.

Ferguson: From what I’ve read, there seem to be two resistance strategies right now to the CFA Franc, and ways of exiting it and potentially breaking it up. Could you quickly outline those two strategies and discuss what you believe their strengths and weaknesses are?

Sylla: Yeah. In fact, we could exit the CFA Franc on a national basis. That means Senegal would say, “I want my own national currency,” and so I’m exiting the CFA Franc. This is the path followed by Guinea, Mauritania, Madagascar, etc. And legally speaking, it [would be] very easy. The Senegalese government would just have to notify the West African monetary union of this decision, and in six months they could have their own national currency. But it’s difficult because  if you go alone, you don’t know what consequences you could face from France. This is what I call the nationalist exit, but there is another type of exit, what I call the Pan-African exit. That means, instead of African countries trying to initially have their own currency, they say, “we no longer need France.” France could [then leave] the CFA Franc system.

This option is made plausible by the fact that the so called guarantee of convertibility by France doesn’t exist because this guarantee of convertibility, as I said, is a promise to lend money in Euros when the central banks are devoid of any foreign exchange reserves, and this generally doesn’t happen. It [only] happened in the 80s because it was a very difficult period marked by the international debt crisis, and even in that time the amounts lent by France were really ridiculous. Since African countries [were] independent in the 1960s, the French convertibility has been used for about a decade. That means that African countries don’t need France, and they could tell France that they don’t need its “convertibility guarantee”. That is possible, but the Pan-Africanist and the nationalist exit are just formal ways of exiting the system. The important questions are, “what are you going to do? How could we achieve monetary sovereignty?” In this regard, there have been many proposals.

Seijo: What do you see as the path forward for African nations looking to exit the CFA Franc?

Sylla: With regard to the issue of how to get out of the monetary status quo, there are in my opinion, four different points of view. First, there is the perspective I call symbolic reformism, which consists [of] touching only the visible systems of monetary coloniality without touching the fundamentals of the CFA Franc system. This includes proposals such as changing the name of the CFA Franc, having banknotes and coins manufactured outside of France, and even further reducing the deposit rate of foreign exchange reserves at the French treasury. Emmanuel Macron, for example, made this type of proposal, and he even suggested that he was open to expanding the CFA Franc zone to a country like Ghana.

There is the second perspective that I call adaptive reformism. These are reforms that aim to adapt the CFA zone to the current context, marked by the economic and geopolitical decline of France and the Euro, but with the ultimate objective of maintaining it. This is the case, for example, of those who want the parity of the CFA Franc to be more flexible because the peg to the Euro is too rigid and undermines the price competitiveness of African exports, and because the CFA zone is increasingly trading with China and other countries [using] the US dollar.

For many economists of different sides, there is this proposal of [basing] the exchange rate of the CFA zone on a basket of currencies, but the problem with this perspective is that it is simply unrealistic because it ignores the functioning of the CFA zone. Exchange rate flexibility is not an option in the CFA system because the convertibility guarantee is offered at a fixed exchange rate and in the currency of the guaranteeing authority. Many people who claim to be experts and moderate [still don’t] understand that the demand for flexibility is incompatible with the maintenance of French guardianship; it is one or the other.

Thirdly, there is the perspective I call neoliberal abolitionism that is an exit from the CFA Franc that follows the neoliberal monetary integration model. By that, I am referring to the Eurozone model. I have in mind those countries in West Africa who want to be part of the single currency project of the ECOWAS (Economic Community of West African States). This single currency project for West Africa normally should be launched next year, but I don’t this this will be done, owing to technical and political problems. Technically, no country yet fulfills the convergence criteria copied from the Maastricht Treaty and defined as prerequisites for entry into the new monetary zone to be created. Politically, the current Nigerian President, who has just been re-elected, Muhammadu Buhari, has been demanding, since 2017, a divorce plan from the French treasury of the eight West African countries that use the CFA Franc, but [since] then, the countries of the West African monetary union that use the CFA Franc have remained silent, for fear of angering France. It is very unlikely that there will be an ECOWAS single currency by next year.

Even if it were possible, for me it would be a very bad idea, for the simple reason that sharing the same currency is not justified among ECOWAS countries, owing to a number of factors, like for example Nigeria’s disproportionate weight. Nigeria accounts for at least 70% of West African GDP. [As well], there are differences in economic specialization. Nigeria is an oil producer and exporter, whereas, you will find in West Africa at least nine countries which are net oil importers. There is also the fact that economic cycles are not synchronous in West Africa and the level of inter-ECOWAS trade is very low. All of these elements point to the fact that a single currency is premature and not justified economically in West Africa. We have to also say that there is no planned federal fiscal mechanism, but rather, limitations on public debt and deficits, following the Maastricht criteria. That means, in case of economic crisis, countries in this currency union would only have the option of so called internal devaluation [via] the lowering of internal prices, which often comes to austerity policies and the growth of unemployment.

Lastly, there is my extremely minority perspective which I call sovereign abolitionism that is an exit from the CFA Franc that breaks with the neoliberal model of economic integration and that strengthens the sovereignty of individual countries and also the sovereignty of [countries] collectively. If we put aside the political criticism of the CFA Franc, the real economic criticism is that the CFA zone must not exist because it has no economic justification. It is not a so called “optimal monetary zone.” Each country must have its own national currency because economic fundamentals, levels of development and productive dynamisms are not the same. But saying that does not mean that we cannot have systems of solidarity between African countries. For me, this is possible.

That’s why my preferred option is that of solidary national currencies. Concretely, that means that each country has its own national currency with its national central bank. The exchange rate parity is determined according to the fundamentals of each country, and countries have a common payment system. Their currencies are linked by a fixed but adjustable parity to a common unit of account, and also there is solidarity in the management of foreign currency reserves. Finally, there are common policies to ensure energy and food self-sufficiency, because in the ECOWAS zone energy and food products represent between 25-60% of the value of imports, depending on the country.

The advantage of this option for me is that it makes it possible to reconcile macroeconomic flexibility at the national level, that means the possibility to use the exchange rate as an instrument of adjustment, and at the same time to have solidarity [between] African countries. This option also helps break the Anglophone, Francophone, and Lusophone divide, [which] is a legacy of colonialism. What is unfortunate is that this option is unlikely to emerge. Generally, people talk about national currencies in the CFA zone, and many Pan-Africanists are convinced that Pan-Africanism means having a single currency for the largest possible number of African countries. I see this position as not really solid on economic grounds. Unfortunately, those who defend the CFA Franc are not interested by national currencies and those Pan-Africanists that want to get rid of the CFA conceive of the alternative as just the single currency, but not national currencies. That is a little bit unfortunate, but obviously, I will try to push this argument about the necessity to have national currencies organized in a solidary way.

Seijo: Before we conclude, we wanted to give you the opportunity to talk to our listeners, and tell them what they can do to help overturn this unjust monetary order.

Sylla: To finish, I would like to make a call to the MMT community to join us, to support our fight for the abolition of the CFA Franc and also for an international monetary system better suited to the needs of developing countries, the so called global south. In this perspective, if the basics of MMT were made more available in French, and other languages besides English, it would also help.

Seijo: Well, Ndongo, it was a real pleasure having you on Money on the Left.

Myth of the Medieval Jewish Moneylender with Julie Mell

In this episode, we talk to Julie Mell, an associate professor of history at North Carolina State University and author of the two volume book, The Myth of the Medieval Jewish Moneylender.

In The Myth of the Medieval Jewish Moneylender, Mell marshals previously untapped primary sources to upend the common historical narrative regarding the role of Jewish moneylenders in the development of the modern economy. On Mell’s reading, the prevailing understanding of the medieval Jewish moneylender–common to both antisemitic and philosemetic discourses in the 19th and 20th centuries– has no more basis in history than does the related myth of barter.

At North Carolina State University, Mell teaches courses in medieval history, Jewish history, and economic thought; she also recently served as a fellow at the Center for the History of Political Economy and as a visiting scholar at the Centre for Hebrew and Judaic Studies at the University of Oxford.

Transcript

The following was transcribed by Megan Reilly and has been lightly edited for clarity. See here for a French translation of the transcript.

Scott Ferguson: Julie Mell, welcome to Money on the Left.

Julie Mell: Thank you. I’m delighted to be here.

Scott Ferguson: I was wondering if we could start by having you tell us a little bit about your scholarly background, your intellectual training, and what brought you to your current book project.

Julie Mell: Sure. I was a major in the history of religions. I started out interested in East Asian Studies and then gravitated back to Abrahamic religions by the end of college. When I was thinking about going on to graduate school, I was really struck by two fields. One was Rabbinic Judaism and the other was medieval history. As things turned out, I entered a master’s program in medieval history and worked with a very well-recognized women’s historian at the time. Meanwhile, I was not only working on Latin in my medieval studies program, but I had also been learning modern Hebrew. I had just come back from a summer in an ulpan in Tel Aviv, so I asked her if I could continue with modern Hebrew.

Fortuitously, at other universities that collaborated with ours and in the research area where I was a graduate student, there had just been hired a professor of Hebrew literature and a chaired professor in Jewish history who happened to be a medievalist. Through the confluence of those things, I ended up working on the Jewish community and medieval England. With my professor who was a women’s historian at the time–it was at a point where women’s history was transitioning into gender studies–there was a lot of discussion and debate around issues of difference and recognizing differences among women. She asked me to work on Jews in order to bring a major minority group in medieval Europe into conversations about gender and women’s history.

Actually, the first paper I wrote in graduate school was on medieval Jewish women money lenders. But even then, I had a sense when I finished that first research paper that there was something profoundly wrong about it, or there was something off. Women’s history at the time, and still today, very often has a heroic mode to it–you’re recovering voices, you’re recovering women’s economic activities where we’ve assumed there weren’t any–so the female moneylenders became the heroes, the heroines, of this piece of research. At the same time, I was aware in the background of all the stereotypes about Jews and money lending, which sat very uneasily with me. I actually abandoned that work and moved into a very different area. I ended up moving after the masters to religious studies to do a lot more training with the one Rabbinic scholar that ultimately oversaw my dissertation.

My plan when I started out with the dissertation that would eventually become the book was that I would work on a type of Hebrew text known in English as Responsa and in Hebrew as She’elot u-Teshuvot, or questions and answers. These are actually legal texts that are sent from one rabbi or one Rabbinic court to another, which they recognize as superior, asking for advice on a particular case or asking theoretical questions which they’ll frame as if it were a case. And we have many of these from medieval Europe. They have not been used very much at all for historical work. So I wanted to work on a gender issue in relation to economics through this kind of source. I actually had a dissertation project that was inspired by a Marxist-feminist work that was looking at the household as a form of work.

This was at a point in the nineties when a major turn to notions of identity, of performativity, were really at the forefront. I felt that there was something that had been lost in terms of the materialist base in a Marxist or socialist critique. What I wanted to do was examine this issue of separation between market and household. I was going to do it in this type of source known as Responsa using the Jewish community as an example for all of Europe. And the more that I got into the project, the more I kept thinking to myself, you know, the problem is nobody’s going to take the Jewish communities of Western Europe as a representative case study for Europe as a whole because they’re going to say Jews were different economically. And so, what initially started as an introduction–as an “I’ll set the story straight” over time–became the dissertation that turned into the book: The Myth of the Medieval Jewish Moneylender.

Maxximilian Seijo: So in the book, as you’ve just said, you critique what you call the “mythic meta-narrative” of the medieval Jewish moneylender. I was wondering if you can explain for our audience what this mythic meta-narrative is, and why it’s so deleterious for understanding the roles that Jews have played in political and economic life both past and present? Perhaps you could also talk about how the narrative has changed over time?

Julie Mell: That narrative is one that tells a story of European economic development as something which is spurred by the Jewish population as modernizers. The way this simple narrative goes is that in the early medieval period the Jews were the traders for Western Europe until European peoples–this is a very 19th century version right now–developed enough to take on trade for themselves. Once they had done so, they pushed Jews out of trade and Jews turned to the new economic niche of credit which was opening up. And so, they became the moneylenders for Europe. Moneylending, as we know from our wise modern perspective, is necessary, or credit is necessary for economic development. The Jewish moneylenders were actually benefiting Europe. Yet, at the same time, they suffered an antisemitic backlash for providing credit, or tagged as “usury” at the time.

They suffered a backlash precisely for doing the thing that was in Europe’s best interest–it is a tragic tale. This is the standard narrative that you’ve had from the late 19th century through today. We can talk a bit later about how it’s grounded in older layers of history, but as a mainstream academic narrative, it emerges in late 19th century Germany as a philosemitic story. In other words, it is one that’s sympathetic to the Jews, sympathetic to the plight that they suffered. Though it’s presented by members of the German historical school of political economy, it’s grounded in the work of Jewish historians and in the interwar period, and particularly during World War II as the Holocaust is happening. In the latter part of the war, there are a number of Jewish émigrés who take up the narrative and really refashion it in relation to the Holocaust.

That narrative has become the one that we find in history textbooks and in Jewish museums. It’s a common piece of history that a lot of people know. But one thing to point out about this narrative is that it’s dropped down in different places at different times. As a historian who looks for uniqueness and contingency in historical events, when I see the same narrative being used in three different places and periods of time, I become very suspicious. Medieval England and northern France in the 13th century is one locus for this narrative. Another is 15th-16th century Italy, and the third one is early modern Germany and the court Jews. It can be tweaked in different ways, but that’s essentially the narrative. I should point out that I call it a meta-narrative in the sense that the postmodern philosopher Lyotard uses it–as a grand narrative, or a master narrative. For me, that signals the fact that it’s a kind of framework. It’s the box within which we’ve been asking questions, but we’ve never questioned that box itself, or that framework. Once we do, I think that new avenues of exploration will open up.

Scott Ferguson: Can you tell us why you see this box, this meta-narrative, as so problematic and so damaging?

Julie Mell: It shares a lot of assumptions with antisemitic stereotypes. In fact, it’s really just an inversion of those stereotypes based on a liberal economic point of view; that the development of markets, commerce, et cetera, is positive, and therefore Jewish moneylending was positive. My own research has attempted to show that most Jews were not moneylenders, even in the very places and periods where we thought that most Jews were. Most of the Jewish population were quite poor. My target audience are really Jewish studies scholars, the Jewish public, Jewish museum curators, and so on, who are not antisemitic at all. Attempting to start there and change the stereotypes that are still very strong and still circulate really widely today is the best place to begin to revise this narrative. Hopefully once textbooks are rewritten and so on, then it will gain more purchase.

Scott Ferguson: You’re saying that both the positive and the negative version of this story, just to clarify, end up being equally problematic because they don’t challenge the meta-narrative. Is that correct?

Julie Mell: They both assume that Jews are in a way non-European, that they’re different, they’re other. It is the idea that Jews perform this modernizing role in the economy and that there’s some inherent connection–and this is framed differently by different thinkers–between Jews, Judaism, and money. 

Scott Ferguson: This actually leads us nicely into the next question we had for you. We’re certainly interested in your project for pushing back against a problematic history of the Jewish people and this problematic figure of the Jew. But it also speaks to our interests in heterodox economics and Modern Monetary Theory, also known as neochartalism, which understands that money is a medium that arises–as another great myth of modernity goes–not from private barter relations between individual people, but from a centralized governance project, whether that project is the Catholic Church in the High Middle Ages or the emerging modern nation state. It struck us that your critique of the Jewish moneylender as an origin of modern European political economy really speaks to and helps flesh out the Modern Monetary Theory critique that barter is somehow this asocial, external, interpersonal activity that begins on the fringes of society and comes into the middle rather than actually starting as a governance project. And so, how much did you think about this barter myth while you were researching and writing your book? Has your thinking changed as you’ve come into contact with folks like us embracing your work and beginning a dialogue?

Julie Mell: That’s a great question. There are two different ways I would go with that. In attempting to figure out where this narrative came from, and what was inaccurate about it, I was led back into 19th century political economy and then to the school specifically known as the German historical school of political economy. The way in which they describe the historical development of the economy is in discrete stages. You generally go from barter to money to credit, that would be the most simple kind of schema, but you can get more complex ones up to seven or eight stages depending on which thinker you’re looking at. I became aware of the fact that the very same intellectuals that were thinking through the historical development of the economy were also those that were thinking about Jews as modernizers, or Jews as having an instinctive capitalist instinct.

Some of the names would be Wilhelm Roscher, Werner Sombart, and Max Weber, who carry the historical school forward and are bringing forward Marxism into academic discussion. For all these thinkers, the two really worked hand-in-hand; that is, the stages theory of economy or what you refer to as the barter myth is closely linked to this narrative about Jews as moneylenders. With the stages theory, you need an agent that’s going to propel movement from one stage to the next. And in this construct, Jews are defined as a non-European people–they’re on the outside, they’re already civilized. There’s an organic folk model for how nations evolve and develop that follows a pattern of the human life cycle. 

The Jewish population is seen as older, more advanced, and mature. They then teach the Europeans, tutoring them in trade and economy and so on. If you have this stages theory, you also have to have an outside agent that’s going to propel that change forward. That’s how I saw the two linked, and they became disjoined in the 20th century with critiques. There are people who have critiqued the Jewish narrative. And there are a whole bunch of medieval historians who created the field of medieval economic history, who critiqued the stages theory. I’m going to pause there because you asked me to connect this to MMT.

Scott Ferguson: I think the connection to MMT is that MMT insists that there is no outside. Money doesn’t begin outside, it’s always internal to a centralized governance project. It seems to us that there’s a kind of homology here in critiquing the Jew as outsider who’s not, and money itself as outsider that’s not. And it seems to me that the Jew then becomes–we’ve long thought about the Jew as scapegoat–the Jew becomes here a scapegoat for an emerging modern Europe’s incapacity to deal with its own monetary technology as internal to itself.

Julie Mell: Yes, absolutely. The second part of my intellectual journey is that, in my initial interest in this relationship between the household and market, I lean on the Hungarian economist Karl Polanyi. Not only in The Great Transformation but particularly the work that he did later with the group of ancient historians, sociologists, and anthropologists at Columbia University in the 1950s was really an inspiration for the way in which I have approached the economy. If David Graeber is the one who coined barter myth–I’m not sure if that’s the case–he is also influenced by Karl Polanyi, because there’s a whole anthropological tradition influenced by him. What he says is that the economy is an instituted process. There’s no such thing as a separate market, rather it’s created and constructed by governments. And The Great Transformation that he wrote during the last years of the war has a brilliant study that argues that even the free market per se, is only possible when it’s constructed by governments and when it’s closely regulated by governments. What emerges out of this tradition of work around Polanyi is what’s known as substantive economics. And that is redefining economics not as money markets and trade, but rather as the substance that we require as human beings for continuing our lives, for improving our lives and so on.

In that way, it’s quite in line with MMT. What I was seeking in the dissertation–and it remains an open question for me, I haven’t solved this problem yet–was to find a way to narrate a European economic history from this Polyani-esque model, or economy as an instituted process, which gets rid of the barter myth. Maybe not surprisingly, a lot of medieval historians have contributed to that rethinking of money and coinage, people like Marc Bloch and others.

Maxximilian Seijo: In your book, you spend quite a bit of time on the medieval period and you suggest that the Jewish moneylender myth originates in the medieval period. I wanted to ask what the main social, legal, and cultural features that you find in medieval society are and how we’ve repeated those structures and perhaps the meta-narrative of those structures in a way which is wrong? To those ends, you started to mention some historians who’ve dealt with the medieval question of money and antisemitism. In your book, you draw on Giacomo Todeschini’s critical analysis of these medieval Franciscans and find the roots of modern market-based society in their thought. I was wondering how your story about medieval times and the Jewish medieval moneylender myth develop or even complicate his narrative?

Julie Mell: Let me respond to Todeschini first then maybe I’ll go back to those social-legal  features of medieval society that do initiate this association between Jews and usury. I see Todeschini’s work and my own as a pair that fits together beautifully, although I did most of my work before I encountered his work and I have not yet really integrated his thinking into mine. He goes at it from the angle of intellectual history looking particularly at those new kinds of Christian movements like the Franciscans in particular that are defining the best kind of Christian life around the ideal of voluntary poverty. It’s those individuals who not only are the radical preachers and movers of medieval western Christianity at the time, but they also become the great intellectuals in the universities, so they’re the thinkers that are initiating new kinds of ideas about the economy: what are the limits, what’s permissible, and what’s impermissible? 

My own work goes at it from the angle of, on the one hand, Jewish history and traditional economic history, and at the same time from 20th century historiographic tradition and how it’s been constructed. I think our work really sits well together. What he really brings out is that one of the things that has emerged by the 15th century is the notion of the good merchant over and against the bad usurer. This is depicted brilliantly of course in Shakespeare’s The Merchant of Venice where you have those two ideals pitted against each other. 

What is it that makes one different from the other? It’s not actually the economic activity that they’re doing, but it’s the valuation or the assessment of the value of their activity for the community as a whole. So a merchant is seen as a good merchant because whatever he’s doing economically benefits the Christian society as a whole. And the usurer, whether Jewish or not Jewish, is seen as bad because their economic activity is harmful to the good of the community as a whole. These labels of merchant and usurer are also deeply rooted in religious notions so that only a true Christian can be a good merchant. Jews in a way are already set up to be usurers by virtue of being non-Christians and the major non-Christian religious minority in Europe at the time.

We can still see these kinds of associations in the use of words like trust which can have an economic meaning, but also has a moral meaning as well. This intellectual history piece of it is really important. What strikes me most about Todeschini’s work is the way in which he’s uncovering the medieval Christian and theological roots of many of our basic economic concepts. 

If I may, I’ll go in a little bit more about usury here. One of the misconceptions is that in the medieval period–and here you’ll hear it again, a stages theory–this is a narrative I do not agree with. In the earlier medieval period, there was a church dominated society, an agrarian society, and the economy was static. In the 12th and 13th century, we see what medievalists would refer to as a commercial revolution happening spurred by our cultural revolution and demographic growth and so on. The church now is put in a position where they can no longer hold the line against usury, but they have to give in to the market. So we have a model where market and religion are in conflict and tension with each other. Religion has to give way to the progress of a market society. 

In fact, what’s happening is really different. There isn’t a prohibition on usury except for clergy until we hit this high medieval commercial revolution. It’s the very same Franciscan Dominican thinkers who hold up poverty as the ideal Christian life who are thinking out both what is permissible economically and what is not permissible. So they are the ones that really flesh out and create a concept of usury at the very same time that they’re creating all kinds of ways to loan and make a profit on that loan that’s perfectly legitimate. So they actually invent the term interest, and that has no negative moral implications to it. They are actually two things that go hand-in-hand. I know that other medievalists that work on this would agree with me here. Usury is really just a label that marks out someone as undesirable. Usury should not be understood as lending money on profit. It goes back to the first part of your question about social, legal, and cultural features that lead to the development of this inception of Jews as usurers.

I’ve told some of the story in terms of the Franciscans and the intellectual thought that’s going into economy. It’s not a surprise that the outsider, not one of the faithful who’s not a believer, would be tagged as a usurer. There is at the same time a development of anti-Judaism or some might even call it antisemitism in this high medieval period that I think runs together and crosses over with this economic discourse. So Jews are seen as an internal enemy during the period of early rampant crusading, who is dangerous and who wishes to harm Christian society out of sheer malice. One of the ways in which they could do that potentially is through their economic activity. 

Having said that, one of the things I try to emphasize to other medievalists is that actually, there’s a whole church campaign against usury and that campaign is actually not focused on Jews. It’s focused on Christians and only later is it applied to Jews. Even in this notion of the Jewish usurer, we can see that stereotype developing in the 12th and 13th centuries. You have great intellectuals like Benard of Clairvaux who says, you Christian merchants are Judaizing because of your usury. Even in that context, the principle campaign against usury is not directed towards the Jews. I think actually our perception of Jewish usury is really shaped much more by a modern context of political antisemitism from the late 19th century on.

Maxximilian Seijo: And to heighten the point that you’re making there, money is central to the construction–and there are a lot of inversions along the way–of the way in which modernity thinks about Jews and how antisemitism has developed. I think what you’ve suggested and what Todeschini has suggested as well, is that the drawing of the line of what the community represents and who’s allowed in it, a lot of that work gets done in this period and money is central to that question. And politicizing that is, from a historical perspective, really important. I wanted to ask you, given that, how did the myth about the Jewish medieval moneylender change shape under modern fascisms and totalitarianisms? Specifically, how did the Nazis mobilize and reshape it?

Julie Mell: There’s a really good example if I can go from the macro down to a micro example in the thinking about court Jews during the 1920s, 30s and 40s. There’s a rather famous novel by Feuchtwanger written about one of the most famous court Jews known as Jud Süß. It spurs a lot of other accounts. There’s a first archival study done by Selma Stern. There’s a play version and there’s a film made in England in the late thirties which is a very sympathetic portrait of Jud Süß as a man. It’s the same narrative then that is taken and appropriated by the Nazis and made into one of the most viciously antisemitic of films known as Jud Süß. I don’t know if it still is today, but for many, many years it was banned in postwar Germany–something that was thought to have been seen by millions of people, to have been shown at Hitler Youth Evenings and so on. If you look at those two films, you could see in the second one that Jud Süß is demonized actually as a rapist, who is after the beautiful German blonde. So there’s a demonization and other kinds of accusations that are brought together there. To me, it’s a really striking example of how this kind of narrative can shift. 

Another example would be the fact that Jews in Nazi Germany were demonized both as hyper-capitalists and as rabid Marxists. How can you be both at once? The figure of the court Jew is interesting because in the 30s, it really became a locus for these struggles between antisemites and German Jews over the question of Jewish emancipation and Jewish inclusion in the nation. The reason they become a touchstone is that they are seen as the precursors of emancipation in the sense that they were allowed to dress without a distinctive Jewish garb to participate in court society. These individuals became quite wealthy and a number of them, but not all of them, would shed their religious practices and certainly their religious dress and become art patrons and collectors and so on. They figure in a period when integration wasn’t yet allowed as an integrated precursor for Jews as a whole. But that very same kind of image of them then becomes for Nazi thinkers a great example of how Jews can present one face to the world and yet are something else.

So that falseness and fakeness makes them become a negative locus for that mover, for that modernizer that’s lying outside. And I haven’t done this work, but I would speculate that perhaps the Nazi ideas might be grounded in that notion of a stages theory of economic development in which all studies go through these stages in the same sequence arriving at a fully developed economy at the end of that role. The Nazi thinkers are drawing from that German historical school, which itself was quite philosemitic. They’re drawing the notion of the Jew as that outside agent that is affecting the modernization.

One of the underlying elements–whether it’s philosemitic or antisemitic–is that the notion that court Jews, Jewish bankers, and in the medieval period, Jewish moneylenders represent the Jewish community as a whole. They stand in for all other Jews and therefore one can say “the Jews” had a powerful economic role in Europe. So that’s one piece of it. And then we have to pay attention also to the fact that there’s a process of racialization that’s going on where Jewishness is being redefined not as a religion but really as a racial national essence which is alien from European peoples and alienated from European political and class structures.

Scott Ferguson: I want to give you a chance to potentially put something into relief that feels to me at the level of the larger stakes of your project and your claims. We’ve long known that the Jew as a figure has played the role of a scapegoat. And that figure, that phantom, if you will, played a central role in various moments in the rise of modern antisemitism, and maybe we could say culminating with World War II. But how does your rethinking of the myth of the Jewish moneylender and taking us outside of that meta-narrative frame rethink the critique of Jew as a scapegoat? How would you speak back to the Jewish community, Jewish studies scholars, and maybe Marxists who will also use the trope of the Jew as scapegoat? I’m curious if you have any thoughts about that.

Julie Mell: I would start there with Hannah Arendt’s The Origins of Totalitarianism. I’m not sure I can pull a quote out of my head about this, but she starts off with a critique of both the notion of a Jewish scapegoat and the notion of the Jews as all powerful, and she’s seeking for some way in between those two. An article that I’ve been working on goes on to unpack the way in which she appropriates and transforms the other narrative as the Jewish moneylender in order to answer that question. My reading of her is quite critical at that point, but I think her initial starting point, which is to firmly reject both the scapegoat and the notion of Jewish power, is right on. 

My own work, I think does both, and it leaves us in a kind of uncharted terrain in terms of thinking through how we describe the variety and the diversity of Jewish economic life. How do we narrate Jewish history from the medieval period through the early modern ghettoisation expulsions to the emancipation, opening up of European life, and the integration that happens later? I think that’s really an open question. My lovely life companion likes to joke that my book writes Jews out of history. My argument does argue that Jews are not central in terms of economic development and that the scapegoating function is not, at least, a real part of the narrative.

There are points where it can be a kind of imaginary accusation, but it’s not real because most Jews weren’t in fact moneylenders. It leaves us at a point that’s more ambiguous, ambivalent, and therefore also to immediately integrate with political action. I was at the Association of Jewish Studies Conference in December, and one of the things that we discussed in the panel that I was on called Jews for Racial and Economic Justice was a pamphlet that they had put out that uses that narrative in order to explain antisemitism, explain Jews to non-Jews. It’s used for good purposes and yet I think it’s dangerous because it’s easy to flip it back on its head.

I wish I had a good answer for what we could substitute as a new narrative in order to answer that. It does’’t have the kind of defensive force that the concept of scapegoating does have behind it. This is part of my argument too: why this narrative became so important in the 20th century and something that people hold on to so strongly is that it really provided the best support against antisemitic rhetoric. My own feeling is that, where we are in terms of a post-Holocaust moment and the absorption of the Holocaust in North America and in Europe, has put us in a different place. Since the moment I was at the end of the book to today, the whole world has changed. There are ways in which the antisemitic rhetoric with new kinds of fascisms is rearing its head. With my more nuanced, careful, and ambiguous history, maybe the post-Holocaust setting that we’re in isn’t going to be strong enough to allow that to be sufficient.

Scott Ferguson: I would say in defense of your project to what your companion says is that you’ve made Jews no longer the center of history. To me, the great achievement here is that you’ve actually integrated Jews into history. It’s not simply that you leave us with ambiguity; you leave us with an important critical ambiguity. Also, you’re telling us that there is no outside and there are no figures that are outside. Political economy and social life and culture [are] complicated and contested. If we want to avoid fascistic tendencies or the rise of fascistic forms of governance, we have to fully reckon with our mutual inter-relatedness and our social interiority.

Julie Mell: That’s beautifully put. I have said on an intellectual level that the revision of our understanding of Jewish history has really important implications for our understanding of economic history more broadly, which I think you all responded to in recognizing that my book speaks to common interests with the MMT movement.

Maxximilian Seijo: I’m currently working on a project on the Jewish 20th century critical theorist Siegfried Krakauer. And he has this figure for what he calls himself–the so-called “wandering Jew.” He calls himself extra-territorial. Intellectual theorists have thematized this in talking about critical theory and his ideas, but it seems to me what your work shows, and you bring it together with heterodox economics, is that there’s really this reassertion of intra-territoriality and the ways in which they don’t eliminate or annihilate difference, but the different experience of being a Jew in the 20th century or throughout modernity and earlier. And I think, as Scott was saying, and as your work has shown, it really isn’t a difference that is categorical in a sense that changes the way in which we need to think about what our community is and what it represents and who deserves power and a voice in that community. Obviously, we would say everyone because everyone is already inside it. I think your work really puts into sharp relief the way forward that you were alluding to. In integrating Jews back into history, I think having that in mind is such an important idea. 

Julie Mell: Thank you for that comment. That’s a wonderful way to see my own thinking expanding far beyond borders that I had imagined.

Scott Ferguson: I want to shift gears a little bit and go back to some of the origins of Modern Monetary Theory and chartalism which has a long history that takes us all around the world, to the medieval period and before. But in its high modern form, it was originated or re-originated by this figure, Georg Friedrich Knapp who happened to not only be a late 19th, early 20th century German, but he also belonged to the German historical school that is so responsible for philosemitic myth of the Jewish moneylender. And you may or may not have encountered or thought all that much about Knapp, but his claim was that money is a creature of the state. Implicit in what he was saying was that there is no outside, or there is no external private barter relationship that then is somehow absorbed by the center of the community. I was wondering if you’ve encountered Knapp in your work and if you’ve given much thought about that?

Julie Mell: I have encountered Knapp in my work as one of the representatives, as you said, of the German historical school, one of the younger ones of the German historical school, in particular, in terms of his model of the stages of economic development. After I was at the recent MMT conference, I returned home and I was reading up on neochartalism and discovered the surprising fact that Knapp is actually a basis for chartalism, someone that’s spoken about and referenced in chartalism. I was really struck by that because it seemed to me quite contradictory. I don’t have an answer for you today, but I have a hunch. It’s an issue that would be a great piece of research for an article. My hunch is that he is both. The way in which chartalism fits into his model–I’m speaking off the cuff here, I haven’t gone back to look at his stuff–it fits at the end of that sequence of economic stages. It’s a manifestation of the modern form of economy that’s at the end of the teleological trajectory. That’s my guess. If I’m right about that, then I think this tension between the barter myth and chartalism raises some critical issues for neochartalism and for MMT more generally. Those are really around the issue of whether the critiques of MMT scholars are applicable only to nation state models or whether they can be extended beyond the nation state. I think that’s a really important question to take up, not only because the EU still exists but because we’re at a moment in history where we still have strong nation states, but intellectually the thinking is moving to transnational models. That’s where, in terms of our political structures, where we’re headed. What do you think?

Scott Ferguson: I think those are all important and interesting tensions to think about. I will say that in my own experience, the history of chartalist thinking sometimes gives up when it comes to history. They’ll put chartalism in the present and then it gets lost at the origin. Not in MMT 101 soundbites for the public, but in a lot of the actual scholarship, there is a less positivistic and much more elastic understanding of what is meant by a state. We don’t mean a modern nation state. You might have noticed that I kept using the expression centralized governance. That can be overlapping, it can be nested, it can be called different things, and it can be organized in a number of ways. This is to get away from the disembedded barter, the disembedded market, and those sorts of imaginaries.

Maxximilian Seijo: I had done a little bit of reading a while back of Sombart talking about Knapp. Maybe this will illuminate something about Knapp that’s maybe only implicit, but it seems like Sombart seems to draw a distinction between commerce money and state money. There seems to be this sense that, as your intuitions suggested, there’s a contradiction happening and it’s happening simultaneously. There is both commerce or commodity money and state money and they both come from private actors who implicitly are often Jews and the state, and they’re trying to straddle this on both sides in order to not allow for the incoherence to actually change the way that they’re thinking–at least Sombart in this case–about the question of where the money comes from.

Julie Mell: That’s a wonderfully illuminating comment. It brings to my mind a distinction that I find troubling that runs alongside that one, which is the distinction between credit for consumption and credit for production. If the second is highly valued and the first is not, which ignores–to get back to Karl Polanyi–the basic definition of economy, which really hinges on consumption. We’re not economic actors in order to make profits, but in order to live.

Maxximilian Seijo: Right. And that consumption is inextricable from the production and the allocation of credit for such production. 

Julie Mell: Exactly.

Scott Ferguson: For a final question, if we could come back to the present moment, I don’t think anybody here is an expert political scientist or political theorist who has mapped all of what’s going on right now across the globe. But as you noted, we’re at a moment where we’re seeing the rise of various kinds of neo-fascisms. And you mentioned that those neo-fascisms, some of them include and are turning upon the negative figure of the Jew. I’m curious if we could just zoom in a bit. Do you have any examples of that? Are there other examples of rising neo-fascisms that don’t call upon the figure of the Jew? And if they don’t, are they maybe working in the same kind of meta-narrative and frame, but without naming the Jew specifically? I’m just curious if you’ve been thinking about the present geopolitical context.

Julie Mell: I have. I would say that a number of events in Hungary are particularly disturbing.  The neo-fascism there has gone much further than we’ve seen in other areas. I’m having trouble thinking of a specific instance right now that would be a good example of the antisemitism there.  I’ll turn to the other side of that question. Do I see it appearing in other ways in other places? Yes. I think the figure of the Muslim and the Muslim immigrant is a much greater target than Jews in these new movements. It’s a really interesting question for me, whether there are patterns, tropes, or meta-narratives that have moved from antisemitism to this anti-immigrant language or anti-Islamic language. Yes, in certain ways, but I don’t think it’s the economic ones there. I would say the immigrant is posed as an internal danger to society in the same way that the medieval Jew was. The immigrant is seen as one that’s taking something that belongs to the citizens of that nation, that’s somehow a threat, one that’s heightened through the association that’s made unjustly between Islam and terrorism. There are similarities structurally that I see there. I see very much immigrant populations, not only the Muslim population, but immigrant populations in the US and Europe in a very similar situation to the Jewish population previously in history that is marked out as the unwanted outsider and so on.

Maxximilian Seijo: Well, Julie Mell, thank you so much for coming on Money on the Left.

Julie Mell: Thank you all so much. I enjoyed the conversation.

* Thanks to the Money on the Left production teamAlex Williams (audio engineering), Megan Reilly (transcription) & Meghan Saas (graphic art).

Direct Job Creation in America with Steven Attewell

In this episode, we’re joined by Steven Attewell, adjunct professor of Public Policy at the City University of New York’s School of Labor and Urban Studies. His recent book, People Must Live By Work (University of Pennsylvania Press), examines the history of direct job creation programs from the depths of the Great Depression and debates over the Employment Act of 1946 to the War on Poverty and the Humphrey-Hawkins Act of 1978.

Money & Power with Jamee Moudud

In this episode, we’re joined by Jamee Moudud, a professor of economics at Sarah Lawrence College. Jamee draws on the tradition of critical legal studies to extend the constitutional theory of money to new historical and international contexts. He currently serves on the board of the Association for the Promotion of Political Economy and the Law. He is also associate editor for the Review of Keynesian Economics.

You can check out some of his recent work, “Free Trade Free for All: Market Romanticism Versus Reality,” in the journal of Law and Political Economy’s website.

Digital Money Beyond Blockchain with Rohan Grey

In this episode, we’re joined by Rohan Grey (@rohangrey), President of the Modern Money Network, Director of the National Jobs for All Coalition, Research Fellow at the Global Institute for Sustainable Prosperity, and JSD student at Cornell Law school.

Our conversation is dedicated to Rohan’s current work on the political, economic, and cultural implications of money’s digital future.

Rohan’s report on digital fiat money: “The Case for Digital Legal Tender: The Macroeconomic Policy Implications of Digital Fiat Currency.”