The following post is part two of an open-ended series exploring how modern money works and why it may change how social activists and revolutionaries organize the struggle for a better society. Part one, “Modern Money Systems: Understanding the Monetary Mechanics of Value,” looked at the historical evolution of money and introduced the basics of modern monetary theory (MMT), as well as some radical implications of the economic reality it describes. Part two aims to further explore these ideas, first by looking at how MMT might fit into the socialist framework of class-struggle described by Karl Marx and then by exploring the revolutionary potential of a federal job guarantee.
Here’s part one, for those who missed it:
“Modern Money Systems: The Monetary Mechanics of Value”
Practical Steps to Socialism:
What Is to Be Done?
Socialism is the notion that society can be run by the ordinary people who produce the goods, services, and knowledge that make up society and that this working class is fully able to decide how to best use its resources and the wealth they create with them. But this idea is rooted in a deeper movement of history. Just as people can only exist in the movement that develops from infancy to youth, maturity, and old-age, societies only exist in movements of social development through history. But this development isn’t automatic — just as a person must be nurtured to adulthood, a society’s historical development is driven by the force of social struggle between opposing classes. Capitalism cannot become socialism by wishful thinking — socialism must be built from existing conditions through class-struggle against the power of capital.
But what is the “power of capital”?
Basis of Power in Capitalist Society
Capitalism arises from relations of private-ownership that allow a wealthy minority to control all the resources, tools, and other things used by a working majority to create wealth. Creating the wealth of nations is a big ordeal and — since it takes the better part of nearly everyone’s days to do that — the relations people form to organize this endless group-project become a basis for social power. This structural power crystallizes into formal power through institutions, such as the political and legal systems, that turn back to reinforce and stabilize the pattern of social organization that created them in the first place.
These self-reproducing patterns of social relations determine the form a society takes (feudal, capitalist, socialist, etc.). Capitalist relations are relations of private-ownership that enable a dominant social class control over the means of production, i.e. the land, machines, networks, space, and resources used to produce all the wealth.
The Dictatorship of Capital
By default, private property denies access to everyone but the owner and others whom they permit. To make — i.e. to produce — a living, the non-owners of capital must enter contracts with the owners, often to sell their labor-time for wages or a salary. This is how power becomes concrete under capitalism. Owners control people’s wages and benefits, promotions, careers, how workplaces are organized, when and how long working-hours are, what good or service will be produced, and the product itself plus all the profit from sale. Less directly, the owners often decide stuff like what workers wear, who they spent time with, whether they can fly home for a parent’s funeral, what food or medicines they ingest, how much their kids see them, or whether a worker can honor her tribal heritage by wearing a traditional tattoo, etc.
This is the power capital has over people’s day-to-day lives and this actual power over the working majority is what has to be smashed through class-struggle, then reconstructed by social revolution. The wealthy few have power to rule the many directly because the working majority lacks the power to create wealth of its own without access to means. To fix this, the working class must seize the means of production and transform private control of production into public, social control. This would mean an equal right for all people to earn a living by accessing a means to produce the wealth of necessary and useful goods, services, and knowledge for themselves, their communities, and the greater society.
Or, more simply — everyone who wants a job, gets a job.
The Revolutionary Importance of Jobs:
Marxism & Armies of Labor
Among Marx’s thoughts on how the masses might kick-start a social revolution, is the idea to establish armies of labor to undertake large-scale development of farmland and other resources. Apart from ending unwanted joblessness, fully employing the workforce would add economic wealth to society through programs to restore public infrastructure, increase industrial and agricultural outputs, make technical improvements, and develop idle resources. The primary goal, however, was to create a framework for the transition from private to social control of wealth-production (aka socialism) by putting the ordinary people of the working masses directly behind the wheel of the economy.
Who Pays for the Revolution?
To fund the total employment of the workforce (as well as the large-scale programs for social transformation), Marx rightly judged that a future revolutionary state would need to get control of the money necessary to do it. To pay for it, Marx suggested replacing private rent-collection by landlords with a system that applied all rents to public purposes, levying a progressive income tax, and concentrating all credit in a publicly-run central bank.
In that era, people used commodity-money — government-issued notes backed by a gold standard — and this context shaped the ideas in the Communist Manifesto about how programs of social transformation might be funded. All of today’s most widely-used currencies, however, are not commodity-money backed by gold or silver but paper fiat-money and, as one might think, this changes things quite a bit (to say the least).
Toward a Marxist Modern Monetary Theory
& a Worker Self-Managed Job Guarantee
In an area where commodity-money still prevails, the usual Marxist ideas on funding a program for mass-employment might still be relevant but it would be absurd to apply the same logic in a monetarily sovereign, currency-issuing nation, such as the United States. Most leftists, however, have yet to understand the implications of the model developed by modern monetary theorists to describe how modern money — fiat-currency issued at a flexible exchange-rate — actually works.
By integrating the model of macroeconomic reality offered by modern monetary theory with a correct theory of social revolution, the strategies available for struggle against capital would expand considerably. Marx’s proposal to raise armies of labor, for example, could potentially be realized in the framework of a federal job guarantee program with worker self-management.
How a Federal Job Guarantee Works
A federal job guarantee is one of those rare ideas that is exactly what it sounds like. Differing proposals have been made, each with its own take on implementing the details, but the core concept is that the government guarantees a job to anyone who wants one. As professor of economics Matthew Forstater explains:
“[a job guarantee] offers a public service job to anyone ready and willing to work, no means tests or time limits. The federal government pays the basic JG wage-benefits package, but community groups, NGOs, nonprofit enterprises, and local governments administer and manage the program.”
The unconditional and open-ended nature of a job guarantee sets it apart from the garden-variety reforms peddled by pidgeonhearted liberals. By guaranteeing a public-sector job to all who want to work, the federal wage-benefit package would become the de facto standard for compensation. Since it would be offered to workers in the private sector also, a job guarantee gives working people considerable leverage against private capital and acts as a basis for wresting further concessions from their grip.
Radical Potential of A Worker Self-Managed Job Guarantee
If a provision for worker self-management were included, a job guarantee program could also act as a forum for workers to freely associate, a means to democratize workplaces, and organize an array of counter-institutions. Allowing local governments, community-service organizations, and even neighborhood committees to manage the program would minimize bureaucracy and empower communities to identify and address their unmet needs. The possibilities for how such a program might be applied are only limited by material resource and labor constraints and the social imagination — as Forstater describes:
“Musicians and artists might be free to follow their calling. Oral histories can be documented and preserved through interviews with the elderly. Community gardens can thrive, with JG chefs preparing meals. Addressing the historical legacy of patriarchy and gender exploitation, care for one’s own children and one’s own home can be considered valid JG work. Even education and training may be considered public services.”
Macroeconomic Reality Check
Since nobody worth listening to is against good well-paying jobs, most objections to a job guarantee are some variation of the idea that the government is unable to afford such a costly program. Luckily, this notion is totally divorced from the operational reality of modern money. Politicians on both sides of the aisle in congress decry any big increase in government spending because [insert something about inflation or how scary the deficit is]. Naturally, this logic quietly vanishes each time they raise their own pay, increase military spending, or cut taxes for their wealthy pals. The fact, however, is that it never applied in the first place.
If congress passed a spending bill for a job guarantee program today, then tomorrow the government could pay to create as many jobs as it likes the same way it pays for as many tanks, hellfire missiles, soldiers, and drones as it likes — by altering numbers in a spreadsheet.
The State Theory of Money, From a Marxist Perspective
One of the key points where MMT diverges from the liberal notions of the Keynesian economists, is its basis in the state theory of money (also known as chartalism). Rejecting metalism and quantity theory (as Marx did), MMT argues that money’s value arises from the state’s power to impose taxes in its currency, which makes it a use-value (regardless of what the money is made of) since no other commodity can be used to settle a tax-debt. This explains fiat paper’s acceptance in exchange and, since it takes definite amounts of labor equal to a minimum- or subsistence-wage to “produce” units of fiat, modern money has value for the same reason gold has value (in Marx’s sense of the word).
Marxists understand the state as the constellation of institutions used by the ruling-class to organize and direct power. It is a concrete expression of class-struggle and, whether it calls itself a republic or monarchy, the state is always, at the end, the dictatorship of one class over another. Its characteristics reflect the class-characteristics of the ruling-class and it serves as an organizing committee to protect their interests. The state is both an expression of the outcome of class-war and a weapon used by the ruling class to wage it — thus, the state, almost by definition, is one of the primary arenas for the conflict of social classes.
Re-Thinking What It Looks Like
To Seize the Means of Production
The traditional prescriptions for socialism all hinge on the idea that the masses should seize the means of production and use the state’s power to abolish the ownership-relations of capitalism. This simple outline is well-grounded in revolutionary theory but too many on the Left have a tendency to take this formula as an invitation to replay the romanticized tactics of a preferred mid-1900s historical revolution. The Bolsheviks did their thing in 1917, followed by revolutionary experiments in Cuba, China, and elsewhere that are still unfolding — but all that has little to do with the real conditions and issues faced by revolutionaries all over the world in 2018.
Knowing how class-struggle drives social change is great but, to paraphrase Marx, simply understanding the world misses the point, which is to change it. Capitalism’s inability to address issues like climate-change and increasing inequality is growing more obvious to more people everyday and, while socialism as an idea appeals to many, the left needs to come up with viable ways to get there. And quick. In sovereign currency-issuing nations — like the US — the radical spending-framework offered by MMT’ers might offer a practical road to an updated version of the revolutionary policy of full-employment envisioned by Marx nearly 200 years ago. The individual and social benefits of a worker self-managed federal job guarantee are immense and wide-reaching, making it an ideal rallying point not only for workers but for the precariat, the unemployed, and the houseless, too.
Modern money is a mechanism of state-power and MMT provides us with the user-manual. Whether the Left cares to use it or not, the spending-power of sovereign currency-issuers as described by MMT is already being used to advance the causes of capital and imperialism. But if the people wrested control of this power away from the bastards, it might just as easily be used to build a better world…