Though Cowards Flinch

Two quite different posts have caught my eye this week.  First, there’s Najlaa’s homage to Margaret Thatcher as feminist, and her depiction of the Iron Lady’s handbag as potent symbol of her empowered femininity.  

To handbag, I will return.

Then there’s Giles on how stupid some economists/financial journalists can be about fiscal stimulus and debt.

At a recent evening event hosted by a fine new economics outfit, I heard one right wing speaker dismiss government spending as “just taking a bucket of water out of one side of the pool and pouring it into the other side”.  The image of finite resources being artificially diverted (into presumeably corrupt and inefficient channels) is what all these right wing theses aim at.

This all reminds me of the massive fuss raised by Eugene Fama about a year ago, when criticising the very idea of stimulus working, with this home spun logic:

“The problem is simple: bailouts and stimulus plans are funded by issuing more government debt…. The added debt absorbs savings that would otherwise go to private investment…. [G]overnment infrastructure investments must be financed — more government debt. The new government debt absorbs private and corporate savings, which means private investment goes down by the same amount.”

This is so seductive, and so ‘micro’economically sound, that its failure to be TRUE is often beside the point: by then, the polemic is written, and the voter persuaded. 

This puts me in mind of a radio interview a while ago between John McFall MP, who does understand some economics, and John Pienaar, who doesn’t. 

I wrote the important bit down for posterity, as I thought I might need it again:

John Pienaar:  ‘There’s no such thing as free money.  In the end taxes are going to have to go up, aren’t they?’

John McFall: ‘Well actually in terms of borrowing, I think this is a leftover from Baroness Thatcher’s time, in which she compared the government’s borrowing to a household’s borrowing.  The conventional thinking assumes a fixed pot of money.  That isn’t true.  It wasn’t even true under the gold standard and we now have what we call a paper currency…area…where government prints money and the amount of liquidity….money…is a joint outcome of official policy and the private sector’s behaviour.  So it’s wrong to compare it to a household’s income.’

John Pienaar: Mmm. 

As this handy American article (by Giles’ fave Brad De Long) on the history of the money supply sets out, the idea of a fixed money supply hasn’t actually been based on reality for quite some time. 

In 1844 the Bank of England broke the law by printing money it didn’t have backed by gold in its vaults in order to keep afloat banks who’d lent too much too quickly to new capitalists industrialists and would have gone bankrupt if the Bank of England hadn’t stepped in. The law was changed to cope with a de facto change to the modus operandi by banks in support of early capitalism.

Pretty well from the start of capitalism, it would seem, the state worked with capitalists to provide them with the wherewithal to ride out the boom and bust crises inherent to it, and to start them on their trajectory towards extractions of every greater levels of surplus value from the labour of an ever larger proletariat.

Yet, by and large (and excluding John McFall’s crystal clarity), this fundamental change to what money is – no longer something that is a symbolic indication of the existence of something more substantive, whether that be gold or amount of time worked, but a substance in its own right – has gone unnoticed.

It’s not just Eugene Fama, John Redwood and John Pienaar.  Niall Ferguson’s just as bad. As Phil at A Very Public Sociologist said of Ferguson’s televisual recounting of the story of money:

The problem is Ferguson’s treatment of capitalism. Or rather, his non-treatment of it. By focusing entirely on the history of finance he abstracts it from their contexts. For example, we are led to believe there is no real difference between the capitalism of today and the mercantile activities of 13th century Northern Italy. Taken at face value, it results in a naturalisation of capitalism, a presumption that the mode of production in which we live now is as old as humankind itself.

Why doesn’t Ferguson get the distinction between the then-use of money to trade, and the now-use of money to exploit labour, backed by the power of the state when need be to do so?  Why does it take a well-informed socialist like John McFall to nail it?

Essentially, it because we (the working classes) have been conned by capitalism into conceiving of money in the way capitalists would have us conceive of it.  The really, really clever bit is that 21st century capitalism has even created two kinds of money – one kind for the forces of capital operating according to one set of rules, and another one for the rest of us to scrabble about in the dirt for.

This is where Margaret Thatcher and her now iconic handbag come in. 

Nearly thirty years ago Stuart Hall showed us brilliantly that the popular success of Thatcherism – popular despite the fact that it wreaked havoc on Britain and provided a legacy of poverty that lives on today – was created through a discursive articulation of New Right economic ideology, coming out of the United States, and an older authoritarian Tory tradition of ‘family values’ and of a mythologized sense of what an Englishman’s castle was all about – a place of security set apart from the evils of sociologists and other leftie beardy-weirdies, who’d all been carefully constructing demonic forces of society, when they weren’t being red under your bed, or leading secondary pickets. 

As part of this discursive articulation, though, there was something that I now realise was even more insidious – the creation of money as the driver of all things social and moral. 

I don’t mean this in the narrower sense of monetarist economic policy, but at a wider cultural level.   

When John McFall refers to Thatcher’s notion of household income as erroneous, the image that comes forth in my mind is of Thatcher herself, standing in front of a door – a door that may be in Downing Street or may be that of a 1950 grocery store – arm folded half defensively across her wait, and a handbag dangling from it. 

It is an image that takes us backwards to a time when money was easy to understand, when you couldn’t spend more than you earned because you simply didn’t have access to the cash, when household budgeting meant stocking up judiciously on tins of beans if you could afford it one week.  It is a pictorial representation of Hall’s articulation of the new monetarism to an older tradition, ultimately a pre-capitalist tradition in which money still represents goods and labour. 

Thatcher with her handbag is one iconic image of the UK in the 1980s. Yet there is also another image of the 1980s – the banker in pinstriped suit and red braces, the Gordon Gecko figure who needs eat no lunch to sustain in his powers, the original prototype for the Masters of the Universe of the 2000s.

It is these two images of the 1980s which mark a divergence of the conception of what money is into two different conceptions – one for us and one for the Masters of the Universe.   

For us, money was in limited supply, whatever the 1844 Banking Act had to say about it.  This was the new virtuous common sense and discipline that Margaret Thatcher had introduced, and which John Major was to later seek to reinforce with a bit of back to basics. 

Yes, we could have credit to buy things, but only when the banks told us we could by sending us a brochure or advertising on the telly, and even then it wasn’t really our money – it was still attached to real stuff like a new pair of shoes, or a bike, or even a house. 

For the Masters of the Universe, though, money had a fundamentally different quality which transcended the mere mortal connection with real stuff. 

The Masters were no longer the ‘merchant bankers’ they’d been called in the 1970s, because that still implied grubby, earthly dealings with ships and lorries and bags; now they were called financiers, or simply referred to as ‘in the city’.  Their money was not actual cash – that was the stuff you had a bit of fun throwing about in wine bars at the end of a busy bull market day – it was green flashing numbers of a screen. 

And quickly they developed their own set of logics, in which it seemed quite reasonable that the derivatives market should be measured globally in quadrillions of dollars, even though another earlier, seemingly outdated, logic suggested this was about 10 times greater than the value of  some ‘real economy’ or other. 

Ultimately, in the early 21^stcentury, there came to be virtual reality in the very sense that Baudrillard meant it – unattainable and incomprehensible to the masses, but utterly controlling of the masses. 

In more Marxist terms than Baudrillard chose to use, there came to be a virtual world which had stepped beyond the alienation of the masses through the direct exploitation of their labour, and created a form of ‘meta-alienation’.  In this brave new world, the masses can be required to behave – to spend when required, to go without vital public services when required – in accordance with a ‘common sense’ that Redwood and Co. would have us believe has always been with us, even as Giles and Co. know it hasn’t.

So how should the half-conscious left react to the latest crisis of capitalism that the masses are expected to behave their way out of, rather than get busy living the lives they might otherwise choose? 

Well first, a bit of applause IS due to a Labour government which, in the shape of its Quantitaive Easing, has at least acknowledged that a finite money supply is actually only a cunning trick that’s been played on us for the last 30 years, and that the money supply can actually be used in the interests of people’s lives, rather than the other way round. 

It is for this reason that the Left should work for the re-election of a Labour government (though I’d happily take Vince as chancellor).  The alternative is Redwood and Co., and they have lied.

But beyond that, we need to keep on getting the message out that, in going through this spend, spend-it-now process we are really only offering what Bob Jessop (following Nikos Poulantzas) would call the next ‘spatio-temporal fix’ for capitalism, and that in so doing we’re not really emancipating ourselves from those Master of the Universe, who  took cover behind their respective state apparatuses for a while, but are back again in all their glory. 

In doing so, we need to go beyond the late Baudrillardian attempts to accommodate a permanent state of virtual reality, by constructing a tense but workable ‘lucidity pact’ with the intelligence of capitalist evil.   

Instead, we need, in Habermasian terms, to be striving for a state of ‘ideal speech’, in which all people actually know what they mean by the term money, and in which we are emancipated from the control of those who currently control what it means and how we behave in respect to it.

We need, again in Habermasian terms, to reclaim modernity on our own terms, and to codify it in the interests of the masses.

As I’m sure the boy Habermas would appreciate, there would be a delicious irony in the use of the law to remake a society which was initially splintered from its Enlightenment progress back in 1844, when those first agents of capitalism realised they needed to resolve their first crisis, and simply got on and broke the law, and then got on with re-casting the whole of the legal system in their favour.