Proposal for a Political Program around Monetary Reform

Introduction by the Editor

In the crucial and readable study Debt as Power the authors Tim Di Muzio and Richard Robbins not only give a historical overview of how debt in the modern capitalist society originated and became a tool of power, but also propose a political platform they argue is feasible to counter and even reform the current system. It is clear that they recognize that we operate under the credit creation mechanism of money and banking, i.e. private banks create our money as deposits when originating loans.

They embrace a version of the 1930s Chicago Plan which would transfer that privilege of money creation to a government agency. The now proverbial 1% is the main beneficiary of our debt-money regime. In response, the authors propose a platform for a hypothetical party, the Party of the 99%.

At the Alliance For Just Money, we prioritize full monetary reform in order to have stable prices, full employment and for the government to spend debt-free money into circulation on projects democratically decided by congress. Given that last prerogative we would do well to think about possibilities and debate the ones proposed by the Party of the 99%, not only for the USA but also on a global scale.

The following text is an excerpt from the chapter “Solutions: A Party of the 99% and the Power of Debt” from their book Debt as Power. 

The platform of the Party of the 99%

1. Monetary Reform

First, a Party of the 99% should be organized around the reform of its country’s monetary system. We have tried to show that the present state of affairs began with a single act: the act of bestowing on private individuals the right and the power to issue interest-bearing money. Consequently, addressing the results of that act requires taking that right away. The current system of creating money through debt only benefits the owners of the banks. The rest of us, with insufficient incomes for what the economy can produce, get mounting debt that pushes up prices (inflation) and an economy that is effectively controlled by whether bankers feel confident to lend at profit (Rowbotham 1998: 292). The over $27 trillion in total interest on debt paid out in the United States from 2006 to 2013 represents the price US debtors pay for receiving money as interest-bearing debt, and was greater than the total GDP of all but two other countries in the world—China and Japan.

The goals of public banks include: (1) investments that create jobs in the local community, (2) investments that encourage the production of the most durable goods, (3) investments in research and development to enhance the quality of life, (4) investments in renewable energy, (5) investments in sustainable public infrastructure, and (6) investments in local sustainable agriculture.

Public banks are already common throughout the world. Ellen Hodgson Brown (2013), in her book The Public Bank Solution: From Austerity to Prosperity, points out that publically owned banks account for 40 percent of all banks globally, particularly in the BRIC countries: 45 percent of all banks in Brazil, 60 percent in Russia, 75 percent in India, and 69 percent or more in China. As these countries rise in economic power, have better public debt to GDP ratios, and funnel wealth back to public projects, it may be necessary for wealthy countries to encourage the development of public banking or nationalize existing banks in order to keep up. These countries have even formed a BRICS Development Bank to challenge the IMF and the World Bank (Chen 2014).

2. Eliminate Third World Debt

Second, we must eliminate Third World debt. Developing countries receive about $136 billion in aid from donor countries, including debt cancellations. But they pay out to rich countries in debt service about $600 billion, much of it in the compound interest of loans granted to deposed rulers (Hickel 2014). Estimates are that from 2002 to 2007 the net flow of money from poor to rich countries was minus $2.8 trillion (Abugre 2010).

As we pointed out previously, most of that debt reflects absurd conditions, rank incompetence, or a cynical abuse of power by lending agencies. Since debt repayment must be taken from national budgets for education, health care and poverty alleviation it is also of questionable morality. And, as the recent Ebola epidemic illustrated, the costs in devastated health systems are no longer confined to these countries. To add to this debt burden, developing countries lose about $1 trillion a year in capital flight, largely tax avoidance by multinational corporations.

3. Universal and Free Education, Health Care and Childcare

Third, education, health care, and childcare should be universal and free. This will be easier to accomplish in some countries than in others, since many of the most civilized countries already provide nonprofit health care and education up to and including postsecondary education. This provision will mostly aid developing countries whose health and education budgets have been slashed through IMF structural adjustment programs. These services should be accessible to all and paid, debt-free, from the new public banking system and with funds saved through the canceling of odious debt. This will also contribute to bringing living standards of developing countries into line with that of the wealthy countries.

4. Ban all Private Money from Politics

Fourth, a Party of the 99% should ban all private money from politics and those running for public office must be given a reasonable set of public funds to run their campaigns. A new political party should be eligible for reasonable start-up money as long as it meets certain criteria, such as a certain number of supporters. This will help eliminate fringe or less serious parties. Campaigns should be short in duration so money can be used for other priorities.

5. Abolish the Patent System

Fifth, a Party of the 99% should aim to abolish the wasteful and innovation-killing patent system. Patents were the original way in which a monarch granted a monopoly to private interests—typically for an invention. Some believe that patents are the only way to encourage innovation: they reason that “inventors” invent only if they can profit from their discovery. But this is ridiculous. Neoliberal economists like to argue that contributions from entrepreneurs such as Steve Jobs or Bill Gates or literary accomplishments, such as J.K. Rowling’s Harry Potter series, would not have been possible without existing patent protection (Mankiw 2013). But the idea that Rowling would have written the Harry Potter books only if she knew that they would make her a billionaire and that Bill Gates expected to earn $80 billion from his efforts is absurd. The irony of such claims, of course, is that it is only by government regulation that such protections are forthcoming. And as Dean Baker (2013) points out, government could have easily cut the length of such monopolies in half, or return to the 14-year limit of the past instead of the present ninety-five-year limit in the United States.

And government-granted drug monopolies add hundreds of millions of dollars to health care costs, particularly in the United States and, worse, yet, push such drugs out of the reach of the poor who, given the forced reduction of public health budgets in the developing world, most need them (e.g., Baker 2005).

Hence the best solution is to abolish patents entirely through strong constitutional measures and to find other legislative instruments, less open to lobbying and rentseeking, to foster innovation whenever there is clear evidence that laissez-faire undersupplies it (Boldrin and Levine 2012).

6. Public Non-Profit Insurance

Sixth, a Party of, by, and for the 99% should make insurance public and not for profit. Insurance works on the principle of the law of large numbers: the larger the number of people involved in the insurance scheme, the less likely it is that everyone will experience the same calamity. People who do suffer an injury or accidental death are paid out of the contributions provided by those who do not experience an accident or injury. There is no reason whatsoever why insurance provision should be owned by private individuals making money out of the misfortune of others. The absurdity of the present insurance system is evidenced by the practice of employers taking out life insurance policies on their employees, with the employercompanies as beneficiaries (Gelles 2014). Because company-owned life insurance confers generous tax benefits on employers, hundreds of corporations have taken out such policies on thousands of employees, while banks, such as JP Morgan and Chase, count billions of dollars on their books as evidence of their ability to withstand economic shocks.

Once again, the publicly run banking system can provide for this debt-free, with no premiums required. In other words, everyone is covered by virtue of being a member of the political community.

7. Fully Fund Retirement

Seventh, a Party of the 99% should at a democratically agreed-upon age. Presently, because of the economic insecurity wrought by the 2008 financial crisis and the defunding of pension plans by governments and municipalities bankrupted by debt, retirement is out of reach for many. Consequently, the elderly are forced to continue working longer (see Table 5.1).

Table 5.1 Percentage employed of US men and women working full time by age group, 1995 and 2005 (See Gendell, 2006).

 

Men

Women

Age

1995

2005

% Change

1995

2005

% Change

55–61

91.8

91.8

0

74.6

78.7

6

62–64

77.9

81.2

4

58.9

65.8

12

65

65.4

73.7

13

45.9

56.8

24

66–69

52.3

65.7

26

34.8

49.5

42

70

44.2

51.7

17

29.6

39.2

32

While many may be working longer by choice, most continue working because savings, pensions, and social security are not enough. Moreover, the number of elderly working population is expected to increase further in the United States as baby boomers retire. A recent survey found that 62 percent of people aged 45–60 plan to delay retirement, up from 42 percent in 2010 (Brandon 2013).

In addition, by delaying retirement, jobs become less available for young people wishing to enter the workforce. Arguably one of the biggest problems in the developing world is the high unemployment rate among the young. Over 70 million young people are out of work—12.6 percent—an increase of 3.5 million between 2007 and 2013 (ILO 2013).

8. Guaranteed Basic Income

Eighth, a Party of the 99% should provide each adult individual with a guaranteed income through the public bank. The income should be set at a level that secures a basic standard of living. A guaranteed standard of living produces important social goals by taking the power of the sack away from employers. First, it establishes a rule of greater freedom than is currently enjoyed by the majority of workers. The idea is premised on the fact that we are creative, productive beings and work is a large part of our subjectivity or identity. Most people want to work but they want to work in employments that are meaningful to them. With a secure income, we can be sure that those who work for added income will be doing so because they want to contribute to society in some way. Second, a guaranteed income solves the problem of unemployment and does not create any new debt. Third, with a guaranteed income, people will likely choose to work less, increasing their leisure time and potentially leading to a drop in the consumption of goods and services. This is a worthwhile goal not only because leisure time is valued by all but also because people will probably consume less. Without doubt, some will be up in arms about this proposal in such a materialistic economy, where social status is connected to possessions and shaped by advertising and marketing. But, from a sane point of view, we know from studies that after a certain threshold of wealth, individuals are no happier having more and more stuff. It seems that acquiring more and more possessions is not about happiness but about power and the demonstration of it. If we displace the logic of differential accumulation and stop creating debt money, no one will make enough money to acquire an inordinate amount of goods in the first place.

9. Transition away from Fossil Fuels

Ninth, a Party of the 99% should seek every way possible to transition away from fossil fuels and stem the growing threat of climate change. There are no quick fixes here, but time is of the essence if we want the transition to be relatively painless and peaceful. Three important studies have convincingly demonstrated that there is no way to socially reproduce current patterns of high energy consumption in rich countries with alternative energy (Trainer 2007; Heinberg 2009; Zehner 2012). Of course, a Party of the 99% should invest in renewable energy and implement renewable energy schemes wherever possible, but the Party should also have a program to reduce material consumption and promote low-energy leisure activities. As suggested, a guaranteed income should help in this pursuit.

10. Demilitarize the World

Tenth, all parties of the 99% should work together to demilitarize the world. The military industry is also capitalized by dominant owners and they profit from conflict or the threat of conflict. Most of the bill is paid for by taxpayers and future generations, not to mention with the lives of soldiers and innocents. This is wasteful expenditure and we should not have our scientists working on solutions for how to kill people more effectively. In a social order where everyone is guaranteed a decent standard of living and there is no chance of gaining excessive power over others, there will be no need for a military. Some may recoil at this suggestion and believe it unrealistic, but the idea has deep roots in the liberal tradition. Concerned with the potential for a military dictatorship, people always feared standing armies. It was only with the rise of the capitalist mode of power that professional militaries became a cornerstone of Western states. As the capitalist mode of power withers, so too will the need for wasteful expenditure on an apparatus of violence, surveillance, and death.

11. Income only from Work and Guaranteed Income

Eleventh, a Party of the 99% should ensure that the only income stream available other than the guaranteed income from the public bank comes from a person’s direct labor. What this means is that no one will be able to capitalize the labor power of another or take undeserved rewards. Individuals will be free to form producing associations, and, if they require investment, they can issue a proposal to the public bank. Provided that it meets the objectives of the public bank, the money can be created for the project. All projects funded by the bank should be transparent: this means that the entire entrepreneurial plan is made public. All businesses must be run on a not-for-profit basis and the 99% should design a salary schedule for each employment, with strict caps at the top. Should some jobs that are necessary for the reproduction of society fall into abeyance because no one wants to do them, the government can offer special inducements where these jobs are necessary to support a decent quality of life for all. It could very well be that those working in sanitation and health end up making the most money—but, of course, always within democratically decided reason.

12. Promote Alternative Local Currencies

Finally, promote other alternative financial systems, most notably those based on alternative or local currencies, that are designed to avoid interest, keep money circulating, and keep it in local communities (see, e.g., Kennedy 1995; Hallsmith and Lietaer 2011). One of the most successful of the thousands of local currencies existent today is Ithaca Hours, the alternative currency created by Paul Glover (1995) in Ithaca, New York, in the 1980s (see Papavasiliou 2008, 2010). Such local currencies are monetary alternatives to microcredit, which uses the mechanism of debt to affect social and economic change. Instead of microcredit, we need to promote the development of alternative currency systems that promote trade and exchange, rather than locking local economies into currency systems that promote debt and inhibit exchange. By promoting local trade, Papavasiliou (2010: 210–211) suggests, we create direct relationships between producers and consumers that protect local economies from “free trade” commodities and services that don’t reflect the social and environmental costs of production and don’t pit the benefit of cheaper prices against the long-term costs of deteriorating local economic and social conditions.

Conclusion

These twelve points are not a magical panacea for a perfect world free of all social ills and of the vast ecological problems we face. Nor, of course, are they the only steps necessary. For example, we also need to adopt a means of measuring societal well-being that replaces the GDP, such as the Genuine Progress Indicator (Costanza et al. 2009). We also need to address problems specific to some countries, such as student debt in the United States. But the suggested twelve points are close to a minimum of things that need to be done to repair the environment, reduce inequality, and inject greater accountability into global political systems.

Of course the immediate response to such proposals would be that these goals, while perhaps worthwhile, are completely unrealistic. As we noted earlier when Thomas Piketty proposed the simple expedient of a global wealth tax to stem the growing inequality of income and wealth, something as easy to implement theoretically as any land or income tax, he noted that even this, seemingly small measure, was unrealistic and “utopian.” What hope then for the twelve points above?

We want to suggest that the above measures are at least worth debating and that a Party of the 99% has the means to promote change provided, first, that we correct the ideological imbalance that exists in the creditor–debtor relationship and that we implement a strategy based on the existence of debt as a technology of power.

Source

Di Muzio, Tim & Robbins, Richard. 2016. Debt as Power: Theory for a Global Age. Manchester, UK: Manchester U.P. Pages 126-134. For references see the pdf.

Dr. Richard Robbins is Distinguished Teaching Professor in Anthropology at Plattsburg State University of New York, USA.

Dr. Tim Di Muzio is an Associate Professor of International Relations and Political Economy at the University of Wollongong, Australia.

The excerpt is posted with the kind permission of the authors.

Book: Di Muzio, Tim & Robbins, Richard. 2016. Debt as Power: Theory for a Global Age. Manchester, UK: Manchester U.P.

Book: Di Muzio, Tim & Robbins, Richard. 2017. An Anthropology of Money: A Critical Introduction. London: Routledge.

Paper: Robbins, Richard H. 2018. “An Anthropological Contribution to Rethinking the Relationship between Money, Debt, and Economic Growth”. Focaal, 81: 99-120.

Robbins, Richard H. 2019. “The Tyranny of the Rate of Return“. The Money Question, 9 Sept 2019.

Blog: Di Muzio, Tim. 2019. “The Major Problems with Bank Money Creation“. Blogs – Alliance for Just Money, 4 June 2019.

Excerpt: Di Muzio, Tim. 2019. “Brief Discussion of Money“. Article – Alliance for Just Money, 21 Mar 2019. (Excerpt from The Tragedy of Human Development).

Chapter: Di Muzio Tim. 2016b. “Energy, Capital as Power and World Order”. In Cafruny A., Talani L. & Pozo Martin G. (Eds), The Palgrave Handbook of Critical International Political Economy. London: Palgrave Macmillan.

Article: Di Muzio, Tim & Noble, Leonie. 2017. “The Coming Revolution in Political Economy: Money Creation, Mankiw and Misguided Macroeconomics. Real-World Economics Review, 80 (26 June 2017): 85-108.

Book: Di Muzio, Tim. 2018. The Tragedy of Human Development: A Genealogy of Capital as Power. London & New York: Rowman & Littlefield International. (An excerpt from this book, “Brief Discussion of Money“, is posted on our web site)

Book: Robbins, Richard H. & Dowty, Rachel. 2008 (1999). Global Problems and the Culture of Capitalism. 7th Edition. New York: Pearson/Allyn & Bacon. [Review]

Manifesto: Robbins, Richard H. 2013. A Debtor’s Bill of Rights.

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