Moral Economies of Money: Politics and the Monetary Constitution of Society

By Jakob Feinig

For much of American history, large numbers of people claimed that money was a public good and asserted the right to shape money creation practices. If popular knowledge about money creation was once widely shared, how and why did it disappear?

In this astute new work, Jakob Feinig shows how the relation between money users and money-issuing governments changed from British colonial North America to today's United States, discussing how popular movements reshaped money-creating institutions, and how their opponents attempted to silence them. He also reveals how monetary and political history unfolds in the tension between "moral economies of money" and "monetary silencing." Offering an introduction to money creation practices since the colonial era, the book enables readers to understand why most people are disconnected from knowledge about money creation today. At the same time, the book also allows readers to situate the recent prominence of Modern Monetary Theory (MMT) against a broader historical background. Historians of capitalism, economic and political sociologists, social theorists, anthropologists of money, and anyone seeking to understand monetary activism, will find this book helps to clarify present-day possibilities in light of historical processes.

• Language: English
• Publisher: Stanford University Press
• Release date: Oct 4, 2022
• ISBN: 9781503633452

Book preview

Moral Economies of Money

Politics and the Monetary Constitution of Society

JAKOB FEINIG

STANFORD UNIVERSITY PRESS

Stanford, California

STANFORD UNIVERSITY PRESS

Stanford, California

©2022 by Jakob Feinig. All rights reserved.

No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, or in any information storage or retrieval system without the prior written permission of Stanford University Press.

Printed in the United States of America on acid-free, archival-quality paper

ISBN 9781503629172 (cloth)

ISBN 9781503633445 (paper)

ISBN 9781503633452 (electronic)

Library of Congress Control Number: 2022003999

Library of Congress Cataloging-in-Publication Data available upon request.

Cover art: Six dollar bank note of the United Colonies, Philadelphia, 1776.

Wood engraving (facsimile), published in 1886. iStock

Typeset by Newgen North America in 10/15 Janson Text

New Thinking for Financial Times

STEFAN EICH AND MARTIJN KONINGS, EDITORS

To Ana and Irene, with love.

Table of Contents

Acknowledgments

INTRODUCTION: MORAL ECONOMIES OF MONEY AND MONETARY SILENCING

1. SETTLER DEMOCRACY AS A MONETARY SCHOOL: TOWARD MORAL ECONOMIES OF MONEY

2. MORAL ECONOMIES OF MONEY

3. MONETARY SILENCING AND THE ROMANCE OF UNMEDIATED EXCHANGES

4. GREENBACK MORAL ECONOMIES

5. WHAT KINDS OF PEOPLE SHOULD MONEY USERS BE?

6. MONETARY SILENCING AS A NEW DEAL LEGACY

CONCLUSION: FROM NEW DEAL SILENCING TO A MORAL ECONOMY OF MONEY

Notes

References

Index

Acknowledgments

This book is my answer to questions about money creation that I began to articulate at the University of Vienna, where I learned about global and European money politics, regulation theory, and political economy more generally from Johannes Jäger, Karin Fischer, Joachim Becker, and Andreas Novy. Philip Taucher was an important part of this process; he helped me think about political economy through a Freirian lens. When I started graduate school at Binghamton, I wanted to know why there were no broad and inclusive public controversies about money creation in the Eurozone. A Social Science Research Council grant enabled me to do preliminary interviews with key informants and learn from Sheila Jasanoff and Frédéric Lebaron.

I soon realized I had to find a historical case study to understand popular monetary knowledge and ignorance as an outcome, not a given. In one of his lectures, Andreas Novy had mentioned Greenbackers and bimetallists, and I began devouring the literature on nineteenth-century US Populism. In a frenzied process that took several years, I began making sense of eighteenth-century and nineteenth-century controversies but also expanded my research into the New Deal era. I then came across Modern Monetary Theory (MMT) and realized L. Randall Wray agreed with the eighteenth-century cleric Cotton Mather about what money is. I had found chartalism, a theoretical framework that highlights the relation between money issuer and money users. I had also found a historical case study I could use as a starting point: eighteenth-century Massachusetts.

I want to thank my graduate school friends, especially Albert Fu, Beniam Awash, and Sanem Güvenç, for listening to me at a time when I struggled to develop a framework. When he read one of my earliest attempts to write about this topic, Andrew Block helped me understand that popular disengagement has to be the effect of silencing (years later, he also helped me rethink the introduction to this book). I also want to thank my committee members for being a critical part of this process. Shelley Feldman introduced me to Institutional Ethnography and helped me develop my conceptual framework. Fred Deyo urged me to look at the New Deal, and Joshua Price read and commented on my text.

When I received comments on what would become my first published article, an anonymous reviewer for the Journal of Historical Sociology suggested I use E. P. Thompson’s moral economy approach to structure my writing. Soon after, I attended the first Money on the Left Conference in Tampa. I had encountered a community of people who mine the possibilities of fiat money. I hope its public spirit is present on every page of the book. Later, MMT conferences provided a critical space to develop my thinking. The hosts of the Money on the Left podcast, Scott Ferguson, Bill Saas, and Maxximilian Seijo, deserve special mention. They are among the earliest readers of the manuscript and helped me deepen its argument and public purpose when they invited me on their podcast. Scott Ferguson’s book Declarations of Dependence, and his generous reading of my work, were especially critical. Nathan Tankus read and commented on several chapters; whatever nuance and originality the chapter on the antebellum United States has is thanks to his nudging. Rohan Grey read early versions of several chapters; his public-mindedness animates the book manuscript beyond the citations. David Freund read, and commented on, several chapters and helped me understand monetary governance in the postwar United States. Benjamin Wilson and Dirk Ehnts closely read the manuscript. I want to thank them for encouraging me, for helping me avoid critical mistakes, and for sharpening my argument.

Diren Valayden, my friend and colleague in the Human Development Department at Binghamton University (SUNY), read the entire manuscript several times and speeded up the process with his ability to direct my efforts in the right direction. It is customary to point out in an endnote when an author owes an argument to someone else. I can’t do that in his case because I would have to double the number of endnotes.

The book benefited from exchanges with specialized historians, especially Andrew David Edwards and Stephen Ortiz. They saved me from making some grave errors. I am sure many remain, but I am the only one to blame. I hope historians will focus on my broader sociological claims, not errors in detail. I also learned from Bruno Théret, Marjoleine Kars, Omar H. Ali, Richard Sutch, Leonard Richards, Julie Mell, Brent Tarter, and Loren Gatch. Simone Polillo invited me to present my manuscript as part of the University of Virginia’s Talks on Economic Sociology, Markets, Politics, and Organizations. I am indebted to Simone and the workshop participants whose comments helped me clarify my arguments.

I want to thank Erica Wetter, Caroline McKusick, and Emily Smith from Stanford University Press, as well as copyeditor Elisabeth Magnus. Their professionalism made this process smoother than I expected. Two anonymous reviewers helped me sharpen my thinking about money as a constitutional project and improve the final manuscript. Thanks to series editors Martijn Konings and Stefan Eich for their trust in this project.

In Binghamton, many people supported me throughout this process. I can’t mention them all, but the following people supported me in critical times. The Hadžiabdić family provided an exceptional space for my writing in the much-missed Crêpe Heaven café. Stephen McGruder, who passed shortly before I finished this manuscript, helped me deepen my thinking about this country—the historical case study that had become my home. I benefited from exchanges with and encouragement from Lubna Chaudhry, who passed in the year before the book’s completion, and Suzy Lee. After I began teaching a course on debt and money, my students helped me clarify my thinking. Finally, this project would have been unthinkable without Binghamton’s librarians, especially the Interlibrary Loan staff.

To my family and friends in Austria, thank you for putting up with someone twice removed from your lives: across the Atlantic, and lost in a book process. Sending this text to the press means we will be closer than before.

My daughter Irene has accompanied this book since her birth eight and a half years ago. She helped me advance the book in many ways. If you’re stressed, she would tell me, focus on what you want to say—the big picture, not the details. Once, she asked: What would Christine Nöstlinger say if she heard it will take you another year to finish? We had just learned that the Viennese author had published 150 children’s books.

And some debts are too big to acknowledge them in writing. Thank you Ana.

INTRODUCTION

Moral Economies of Money and Monetary Silencing

IT WOULD SURPRISE MOST PEOPLE IN TODAY’S United States to hear that in the past, political groups demanded that lawmakers create money and told them how they thought this new currency should reach the population. During the depression of the 1890s, for instance, hundreds of people who were looking for work, mostly white but some Black, marched on Washington, D.C. They demanded that Congress create currency and advance it to state and local governments. State and local authorities could then use this currency to pay workers who would improve neglected roads. Through their demands, these marchers highlighted the power of Congress to create money, employ people in situations of forced idleness, and improve public infrastructure. They also advanced an understanding of money as a public good. After they had entered the capital, police prevented their leaders from making a speech, arresting and beating several of them (Alexander 2015; Prout 2016). The first march on Washington—by what became known as Coxey’s Army—was not an isolated event but part of a larger pattern of popular involvement in money creation.

In this book, I show how users of the monetary systems from seventeenth-century British colonial North America to the New Deal took part in shaping monetary institutions. I call knowledges and practices that enabled people to shape money creation moral economies of money, and processes that disabled such patterns monetary silencing.

Because most of the moral economies of money I discuss in this book were part of settler colonial projects, it would be a mistake to idealize them. Moral economies of money helped constitute colonizer-colonized relations by monetary means (chapters 1 and 2), excluded Black people, and replaced an institutional understanding of money with anti-Semitism (chapter 6). Most moral economies of money sought to secure a white men’s ideal of living as independent small producers, which they attempted to realize at other people’s expense and at other people’s peril.¹ In this book, I address aspects of the racial history of moral economies, but this dimension requires further investigation,² as does their gendered character.³ Despite its limits, this book provides elements for a historically grounded understanding of one condition of present-day political life: the disconnect between money creation and public knowledge about it.

This book allows readers to understand this disconnect as a historical outcome. In the eighteenth century, large groups of people understood money creation as a political process in a context in which monetary institutions were intelligible. In the antebellum era, people lost sight of money’s character as a malleable governance institution when they focused their critique exclusively on corporate banks and demanded money made of gold and silver but forgot about the possibility of democratizing money creation. The Civil War’s public currency (greenbacks) made money’s political character visible again, inaugurating a period of moral economies that lasted until the 1930s. Finally, New Dealers developed monetary institutions and rhetoric that obscured the stakes of public money creation and began a period of monetary silence that lasts to this day.

Because money users’ disconnect from knowledge about money creation limits people’s potential to stabilize their lives and avoid mass impoverishment, bankruptcy, and unemployment, the stakes are high. Money users’ response to Covid-19 illustrates its cost. In the pandemic’s first weeks, Neel Kashkari, the president of the Minneapolis Federal Reserve Bank, appeared on national television (Pelley 2020). The interviewer asked the central banker: Can you characterize everything that the Fed has done this past week as essentially flooding the system with money?

Kashkari: Yes, exactly.

Interviewer: And there’s no end to your ability to do that?

Kashkari: There is no end to our ability to do that.

Kashkari emphasized his institution’s capacity to create money, and in the weeks after the interview the federal government illustrated its power over money creation through unprecedented levels of spending. At the same time, the government left many victims of the pandemic out in the cold. For instance, a Covid-19 patient on an inhalator wondered who was going to pay for his medical care before he called his family for the last time (Elassar 2020). On a larger scale, state and local governments faced budget shortfalls.

But when the Federal Reserve offered advances to state and local governments, it found few takers. The central bank’s Municipal Liquidity Facility (MLF) could have helped public institutions such as municipalities or school districts, prevented more unemployment and business closures, and stabilized many people’s lives.⁴ But no major social movement urged state and local governments to access these funds. Before it ran out at the end of 2020, only the State of Illinois and New York City’s Metropolitan Transport Association had accessed the MLF. During a crisis that was existential for many money users, no shared knowledge enabled people to pressure municipal and state-level politicians to access these funds. Today, most people do not think of themselves as money users who stand in a relation with the institutions authorized to create money.

Money Users and Money Issuers

Neochartalist monetary theorists distinguish between governance bodies that can issue money and money users who cannot.⁵ Money issuers, such as the US government, are not revenue constrained. Only the resources that actors offer for sale in the issuer’s currency limit what it can purchase and hence the character and scope of projects it can undertake. Money users, in contrast, cannot issue a generally accepted pecuniary medium. Money users, including households, firms, and municipal and state governments, are revenue constrained and face severe sanctions if they cannot balance income and outgo. Therefore, their capacity to mobilize resources is more limited than the money issuers’. The distinction between money issuers and money users expands possibilities for democratic governance because it enables debates about which resources a money issuer should mobilize for public purposes, and to what end, while undermining the idea that money-issuing governments are revenue constrained.⁶

But why should money users accept the issuer’s cash? Neochartalists argue that the issuer makes its money current when it imposes taxes and fines. To discharge the debts the issuer has established, people need to get the currency that the issuer has created—the only one it promises to accept. Because of the pressure to acquire this currency, a population begins to use it in everyday payments. In sum, the issuer forces its pay tokens on money users through taxation and the threat of penalty for failure to comply.⁷ In such a situation, people need to sell their labor power, their products, or assets they own. Unable to issue money, they have to act as economic individuals: they work for a wage, attempt to buy low and sell dear, and so on.

While such activities are common across time and space, in this book I show that money users can develop other forms of agency.⁸ In the British North American colonies and the United States, money users reshaped money creation mechanisms, revising the neochartalist script and enriching the role of economic individuals in which it casts them.⁹ They participated in what the historian Christine Desan (2014) calls monetary design:¹⁰ making decisions about the principles that govern money creation.

Monetary design varies over time and across space, shaping possibilities for different groups and constituting society. For instance, if a government establishes loan offices that issue currency against real estate, it empowers landowners relative to their creditors. Landowners might support such a monetary design, while their creditors might be skeptical (see chapters 1 and 2). If a government issues cash against agricultural staples, it empowers farmers who control their production relative to those who market them. The former might be in favor, and the latter might be opposed (see chapter 4). If a government issues money against gold or silver, it empowers those who have access to specie relative to everyone else (see chapters 2 and 5). And if a government issues money against labor power when it hires people, it stabilizes workers’ lives and strengthens their position vis-à-vis private employers (Tcherneva 2020). In sum, when societies design money creation mechanisms, they constitute themselves.

Banking is a form of monetary design in which legislatures place profitoriented institutions at the center of the money creation process (see chapter 3). When today’s commercial banks extend loans, they create deposits: that is, the bank marks up a debtor’s account to the amount it advances.¹¹ Banks decide who should, and who should not, get credit to mobilize resources. For instance, a bank can decide to extend credit for luxury housing, enabling a developer to purchase labor power and building materials. In this example, banks shape the built environment and help choose the kinds of people who inhabit a space. Those who receive credit spend money into circulation and pass it on to other money users. But those who receive money first (Desan 2014) can decide where it flows, shaping social spaces as they do so.

The practice of delegating money creation to banks is a little over three centuries old and represents a world-changing break with medieval patterns. The currencies of British colonial North America, the starting point for this book, emerged in the period in which medieval money was replaced by bank money, a distinct form of money creation with democratic potential.

Settler Democratic Currencies

Seventeenth-century English policy makers considered that the inflexible medieval currency supply (coined alloys of silver and gold) was insufficient for financing wars, and they sought to create a currency that could expand when needed. In response, Parliament established the Bank of England, which could create tax-receivable paper currency and operate for the profit of its owners. Thereby, Parliament made the profit motive a legitimate driver of money creation (Desan 2014). The controversies that led to the Bank of England Act involved Parliament, pamphleteers, and financiers (Desan 2014; Carruthers 1996), but at a time when only a fraction of the population could vote, most money users did not take part in them. England thus developed a routinized way of producing elastic money insulated from nonelite pressure long before the franchise became generalized.

Like English policy makers, colonists in British North America sought to create a currency that could expand, but political conditions were distinct because generalized voting for European men began earlier. In the very decades in which corporate banking spread in England, the colonies printed public currency, and electorates learned about monetary matters through political practice. They asked and answered central questions of monetary design: How should public money enter circulation? Which groups should have access to currency, and under what conditions? How much of it should they create? Whom could they force to accept a currency in payment of a debt? (chapters 1 and 2).

Monetary controversies occurred across the early modern world, but the British North American colonies and, later, the United States stand apart as the clearest examples of large groups’ recurring involvement in creating those currencies that are generally accepted within a jurisdiction.¹² In Europe, monetary policy, in addition to economic policy writ large, was insulated from popular pressure until much later. Bordo and Eichengreen (2004:58) note that in many countries the right to vote was limited until after World War I, restricting the ability of those subject to unemployment to object when monetary policy was targeted at other variables. In France and Germany, for instance, there was no popular involvement comparable to that in the United States during either the crises of the nineteenth century or the interwar period.¹³ In the colonized part of the world, overwhelming European violence made democratic money politics impossible. European money issuers forced colonized societies to become users of their currencies while destroying Native ones, a process that also occurred in the lands the United States claims today (see chapter 1; Forstater 2005; Braudel 1981; Pigeaud and Samba Sylla 2018).

In sum, the United States and its predecessor polities are the clearest example of a recurring pattern of broad but exclusivist involvement in governmental money creation. Therefore, they constitute a privileged terrain for studying the changing character of money users’ agency over time and are a productive starting point for comparative inquiry into what I call moral economies of money.

Moral Economies of Money

When money users understood the stakes of monetary design, moral economies of money flourished.¹⁴ Money users’ capacity and willingness to take part in the politics of monetary design characterize such moral economies. From a moral economic perspective, money is not a neutral quantity of things but an integral part of democratic processes. For instance,