A Political Theory of Money
Excerpts from Joscha Wullweber's "Central Bank Capitalism"
A Political Theory of Money, pp. 53-84.
Socioeconomic and political form of money: form of money as a special political-economic relation, in itself possessing no value as long as no social meaning is ascribed to it by a political act (according to Knapp, 1905; Keynes, 1955 [1930]; Ingham, 2004 contrary to Mises, 1924; Ganssmann, 2012 and the majority of conceptualisations in economics)
Assumption: commodities have no natural or intrinsic value, but commodity value is socially constituted
Money expresses the value relation of commodities to each other and in this way functions as a general equivalent for all assets (money = master signifier: Money as the unit of measure of a value resulting from a social process of negotiation) // Money is commodity (foreign exchange markets) and expression of the value relation (unit of account) of all other commodities at the same time // Money as a hybrid of particularity and universality // Money, as a measure of value, not only defines the relation of commodity values to each other, but determines what counts as a commodity and what does not:
“If it is not possible to express something in money, it cannot take the commodity form in a market economy” (p. 55)
=> of importance is the political process, in which is determined, which object shall take over this function and which institution may multiply it in which way.
basic distinction of 3 functions of money: 1) means of exchange or payment; 2) store of value = abstract purchasing power; 3) unit of account and measure of value by means of which all (other) goods can be compared with each other enabling the calculation of prices, costs, services, of debts and credits, profit and losses (Ingham, 2011, p. 67)
Two opposing conceptualizations of money:
1) money = commodity and medium of exchange (in the tradition of Adam Smith, 1776; Carl Menger, 1892 and Ludwig von Mises, 1924);
2) money as a unit of account (money of account) and abstract form of value in the tradition of the Chartalists such as Knapp, 1905:
“Money is a creature of the legal order” (Knapp, 1905, p. 1)
The validity of state money is based on the fact that the state accepts a certain form of money as legal tender (e.g. for the payment of taxes) and executes state expenditures with this money (Wray, 2004).
Criticism of chartalism: reduction to state proclamation not sufficient to justify and establish legal tender, e.g. convention or patked compulsion to accept for the concept of tender (Weber, 1922) or society by means of monetary contracts determines "what must be handed over in order for a contract denominated in the unit of account to be concluded" (Keynes, 1955 [1930])
Central banks as the most important players in this trust game (Konings, 2015), as they provide security not only for solvent commercial banks but for the entire financial system, thus creating confidence in its stability
Differentiation between an authority that creates and legally establishes money and the process by which money is created (Beggs, 2017)
Constructivist approaches:
1) problematizing the focus on the state;
2) analyzing social construction (Konings, 2015; Beggs, 2017; Searle, 1997);
3) inscribing money in people's everyday actions: "doing money" (Ganßmann, 2004)
<- hiding domination, social power relations, and political dimensions
Money = more than the exchange of promises to pay: Money as a general and thus socially recognized promise to pay and politically enforced by coercive means if necessary; the promise to pay must be generalized, socially recognized, and politically enforced //
“The transition from a specific promise to pay to a general form of money requires a political act and for this reason is potentially conflictual” (p. 63)
<=> Credit relations ≠ subset of money relations (as Ganßmann, 2012 claims), but: Money = a special subset of credit relations:
“Money represents a generally recognized credit that can be passed on. Only when an object is socially recognized as a general equivalent (or in the respective area of validity) can it take on the functions of money.” (p. 63)
socio-theoretical approach to the money form: conceptualization of the money form as the genesis of social negotiation processes incl. legal and (financial) market-internal processes involving hegemony (after Laclau, 2005):
“The establishment of the promise of payment presupposes an 'authority' that is ultimately based on coercion. [...] The monopolistic enforcement of the standard of value [...] goes hand in hand with the monopolization of physical violence” (Ingham, 2004, p. 76)
Focus on the social struggle for acceptance of the money form through consensual processes:
“[Hegemony] is characterized by the combination of coercion and consensus” (Gramsci, 1991, p. 1610)
Definition of the money form, of an object "that is to become the general equivalent, to determine the assets that can be traded at face value with money as needed," and definition of the institutions with license to create money as conflictual processes: "An object becomes money as soon as, as a result of a political process, it is enforced, recognized, and institutionally secured as the general equivalent for the assets that are traded in this community" (p. 65) //
Theorem of the master signifier: Struggle for the establishment of certain value ascription in a conflictual process by different actors to generalize their interests (Laclau, 2004, p. 283f.) = expression of a particular interest that could be universalized in social processes:
“The more the respective particular interest has become universalized - hegemonic - the less its former particularism is evident. [...] The moment a master signifier has become hegemonic, various general interests are equated with it. The master signifier is not a passive expression of these general interests, but, through the naming process, has a constituting effect on the interests and meanings associated with them” (Wullweber, 2012, 2015, 2021)
Refutation of the substance theory: non-existence of a natural value of an asset (Mirowski, 1986, 1991; Konings, 2018). // // On the contrary to the sensual gross concreteness of the commodity bodies, no atom of natural matter enters into their concreteness of value. Therefore, one may twist and turn a single commodity as one likes, it remains incomprehensible as a thing of value. [Commodities possess] value-representation [...] only insofar as they are expressions of the same social unity, human labor; that their value-representation is therefore purely social, it also goes without saying that it can appear only in the social relation of commodity to commodity" (Marx, 1973 [1867], p. 62)
=> If the value of a commodity is socially negotiated, there are no fundamental values: congruence of price and market value at a specific moment, (if these prices are paid):
“Price represents the social value of a thing in relation to the values of other commodities. [...] Prices like values are socially negotiated.” (p. 68)
<= Relationality of commodities among themselves does not yet necessarily lead to the use of money: commodities must refer to a third instance = mediation of the equivalence of commodities by money as a general equivalent = general standard of value makes commodity exchange possible and at the same time excludes from the monetary exchange of commodities everything that cannot be expressed by means of this standard of value (Keynes, 1955 [1930]) // Money as a union of particularity and universality in the form of a general standard of value = expression of historically specific social developments: "Via historical socialization processes these developments are potentially naturalized and dehistoricized (Husserl, 1978; Carruthers/Babb, 1996)" (p. 71) //
Distinction between the form of value of money and its substance:
“The form of money (its function as a general equivalent) is politically conditioned and to be distinguished from its mere substance (the concrete carrier object)”
-> Money is solely the symbol, the numerical sign, which expresses the standard of value +++ Significance of the attribution of the preferential social meaning of (material) carriers to secure value: "for numerical value requires a carrier which stores and transports abstract value. [...] Money without a carrier substance is meaningless and valueless." (p. 73) // Attribution of an object as carrier of the general, therefore socially accepted and enforced, commodity value resulting in political-social (negotiation) process: "commodity values [...] are relations of commodities to each other, and this [...] depends on the respective political, social, and economic context" (p. 75)
Concept of master signifier = money = hybrid of particularity (a specific commodity value; a commodity) and universality (general role as representative of the general standard of value) => "money generates a system that would not exist without it"
+++ "this monetary system [is] not self-stabilizing" (p. 79)
<= necessity of central banks and ministries of finance to maintain the myth of monetary stability, because "the universal is incompatible with any particularity and at the same time cannot exist without it." (Laclau, 1996, p. 35)
Money as a promise of a future payment of a purchase = promise to pay; promise to pay = deferred payment, i.e. a credit // Money as a symbol of general value = money as a social (credit) relation at once a concrete expression of a promise to pay (= promise of the state:
“The owner of a ten-pound note is promised that it is not a specific credit but a legal tender that can be exchanged at any time with central bank money.” (p. 81)
Money as a special form of credit in the respective scope at the same time a generally accepted credit (McLeay/Radia/Ryland, 2014) = generally accepted promise of payment in the sense of a general debt claim: "Money is consequently a generally accepted promissory bill vis-à-vis other credits with specific and only restricted promises of payment" // "Money issuers, such as commercial banks and sovereigns or their central banks, promise to accept the money issued by them as payment for all debts in which they act as creditors. Money creation thus involves credit creation, which at the same time means that in money creation the newly created amount of money is matched by an equal amount of debt." (p. 82) <-> repayment of a loan = money destruction: "Through this relationship, however, money can be created nowadays only for the reason that an institutionalized and state-legitimized structure exists which recognizes these privately issued promissory bills as the general equivalent of all assets and thus as money." (S. 83) // = Security structure, i.e., political process to legitimize/equip certain actors with the license to create money: "The current market-based monetary system developed through the integration of commercial trade-credit-debt systems into state-issued monetary systems by linking privately issued promissory bills and state-issued money through state-guaranteed convertibility." (Ingham, 2004, p. 89ff.)
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Sources:
[1] Wullweber, J. (2021) Zentralbankkapitalismus, Berlin: Suhrkamp.