Development, 2010, 53(3), (313–315) r 2010 Society for International Development 1011-6370/10 www.sidint.org/development/
Upfront
Rethinking Money in the Context of Crisis/Interview with Mary Mellor Wendy Harcourt, Editor of Development, interviews Mary Mellor who describes herself as a feminist green socialist and has recently published a book, The Future of Money (2010). WH: In your bookThe Future of Money by Pluto Press (2010) you discuss the many layers of the politics of money. To begin with, given the journal is on sustaining local economies, how do you see local money systems? MM: In the book I focus mainly on money at the national and global level, but I do see a role for local money organizations. They are great for stimulating change and helping people understand the wider money system. If communities set up their own money system they can understand much more clearly how the national and global money system works. Local money systems build trust and community relations, it’s very empowering. But local money systems have their limitations, they cannot really function as a full money system, they are more social than economic. This is because they do not generally cover the full range of goods and services people need. WH: So how do you see national and global money systems? MM: First of all, we need to understand how money systems work. Modern economies are to a large extent driven by money. The money system and both public and market economies have grown together. I would suggest therefore that the way to democratize the economy is through a democratization of the issue and circulation of money. Power resides in the authority to spend money into circulation and then take it back by taxation in the case of the state (historically the main form of money issue), or where money is issued through the banking system, through debt issue and repayment (in modern finance-based economies). Ever since we’ve had money being issued mainly through the banking system as debt we’ve had periodic debt crises where we arrive at the point where nobody can pay their debts or situations where depositors cannot access their money. An important stage was when banks stopped issuing their own money and instead issued state authorized money, that is, the national currency. This, together with the centrality of the banking system to the functioning of the economy, means that the state has increasing had to rescue crisis-ridden banks. In the current crisis we have seen the ludicrous position where the state is rescuing the banks (and the economy) by itself issuing money (quantitative easing) and handing it straight to the very banks that created the crisis in the first place. This seems to me sheer folly. That money could have been spent directly on public services thus reducing the need to borrow from the banking system. Development (2010) 53(3), 313–315. doi:10.1057/dev.2010.53
Development 53(3): Upfront The money could have been given to people to provide goods and services, instead it was given to the banking system in the vain hope that it would be lent to the ‘real economy’. Instead it was used to pump up bank balance sheets and feed more financial speculation. We have to end the situation where financial companies have been making money by borrowing huge amounts of money from the banking system and speculating with it, causing the current crisis. The way the current economy is run we have a terrible democratic deficit, we don’t trust the state, but I would argue we should trust the market and the profit-oriented banking system much less. We have nationalized money by having a national currency, but it is in the hands of the privately controlled financial system. This means the risk and liabilities rest on the whole community but the profits go to a very privileged minority. WH: How would you see a solution to the democratic deficit? MM: The first and most important thing is that ownership and control of money issue and circulation should rest with the people as a whole. What is important to understand is that money is essentially a public resource, which like natural resources should be the right of everyone to access. The economy we are living in at present is not a secure one. Simply put, western economies are beyond democratic control. We need to reorient them to a much more steady state economy, less consumption based and not run on debt. Money should be issued for public purposes through democratically controlled structures, that is a return from privatized finance to public control. Publically issued money would circulate through the economy with taxes used to control the amount of money in circulation and its uses. At present, independent central banks (theoretically) determine how much money can enter the economy via the banks by controlling interest rates. In a more socially responsive money system, such an independent authority could still determine how much money should be issued, but it would be up to national, regional or local commu314 nities to decide how that money would be spent.
Budgets could be decentralized and the local population would vote on economic priorities, for example, if they wanted more infrastructure or more environmental work. This practice already exists, for example, for local government expenditure in the Brazilian city of Porto Alegre. Money could still be allocated to the private sector if it was undertaking socially necessary work.While most money would be public, the private sector could be supported by private investment banks. These would not be able to issue new money and could only access or borrow money for activities relating to real goods and services, not financial speculation. Around a third of money issued as debt in recent years in the UK circulated within the financial sector itself and the majority of the rest went into private and commercial property. Investment for private profit would have to be based on real savings, that is money people have chosen to put at risk that is only returned when the investment is completed. Any banks issuing money as loans could only operate as not-for-profits such as independent regional, sectoral or local development banks or mutuals. No bank that takes returnable deposits would be allowed to lend to the for-profit investment sector. So all lending in the private investment sector would be based on previously issued money that could not be returned on demand and with no public guarantee against risk. WH: What does your analysis of money mean for development? MM: My understanding of the politics of money has important implications for development. At the international level, strong western economies can issue as much money as they want and use it to trade around the world. Less powerful nations are having to rely on trading in the dollar, euro or yen, which gives immense powers to the dominant economies. In a sense, they are getting the world economy for free while non-reserve, softer currencies are suffering. Instead of the dollar or euro or yen, countries should be able to make global payments in their own currency. This could be done by filtering trade through a separate global money with the exchange rate being based on something like average or median income to remove the ability to exploit cheaper currencies
Interview with Mary Mellor or cheap labour. Global money would also remove currency speculation. As at the national level, new global money could be issued with priority for social need. Global money could be issued free of debt to developing economies provided that it was used for social priorities. In this way, money issue would be the main tool for international development rather than a hard currency grant or loan. Allocation of global money could also be based on reducing environmental resource use or damage. Richer countries would get reducing allocations and have to restrict their overall demands on the global resource base. WH: How do you understand gender in this equation? MM: Our current money system gives value primarily to economic activities that are male dominated.What is seen as women’s work is either unpaid or low paid. Because the money system is gendered, it’s mainly (young) men in the financial system, though there is a scattering of women. Our current economy is not a gender friendly economy. If you look at the prices of houses in a country like Britain, historically prices were around 3 12 times average wage. Over time they have doubled to nearer to seven times. What this means is that women’s involvement in the workforce has been largely soaked up into higher mortgage payments rather than enabling a cut in working hours for everyone. Young families now can’t afford to have children as they struggle to buy a house (if they can afford one at all). That to me is a tragedy. Market economies where the priority is to make money for profit, are highly gendered, women unfriendly and very unfriendly to the whole lifecycle of people and nature. If the economy issued money based on social priorities, I’m sure that, for
example, health for all and care for children and the elderly would become the new priorities, not sport and consumption. Money would be issued much more for the sort of work women undertake, particularly care work. A sustainable, socially secure economy would be much more women friendly and oriented towards women’s work and lives.Women’s work would no longer be unpaid or low paid, and their needs marginal. WH: So what actions should we take in order to bring about this new type of economy and society? Are you involved in local or national political campaigns or networks? MM: Although what I call theoretical practice (working out new ideas) is important, practical action where people go out and set up alternative economic structures is also vital. I have been involved in co-operative development and community based finance. For several years I was chair of a research organization on sustainable cities, doing a lot of community-based activities. In all my research and activities I’ve tried to bring together, socialism, feminism, and environmentalism. My work to redesign the money system for a more socially just and ecologically sustainable economy is part of that process. One of the things that led me to see the money system as a focus for radical change was that whenever people asked for a new social service or social benefit, the response was ‘where is the money to come from’? So that is what triggered me in the early 1980s to start asking the question, where does money come from? In both my new book The Future of Money and the earlier book the Politics of Money written jointly with two other women Frances Hutchinson and Wendy Olsen, I have aimed to achieve change by helping people think differently about money systems.
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