Reading Against Money

Some people seem to be!

Pilsen Community Books. If I lived in Chicago, I think I’d spend a lot of time here.

The other day, Laura and I were standing on the subway platform, on our way to see Boots Riley’s I Love Boosters (which was excellent), when a young man walked up to us. Well, up to me. “Are you the author of this book,” he asked; he had a copy of Against Money. I said that I was, and asked him if he’d read much of it. Two chapters in so far, he said; he used to follow me on Twitter; he had a pen if I could sign it.

I feel like this is an experience authors of academic books don’t get to have very often. Though I suppose it’s more likely than most places in Park Slope.

I had another nice experience at a reading at Pilsen Community Books in Chicago, a lovely little collectively-owned bookstore I had never been to before. Not a lot of people showed up, but Gabe Winant and I had a good discussion with those who were there. One person in the audience introduced himself as an organizer for UNITE HERE. We had a good conversation about what motivates workers to join unions, which, today, is practically a matter of defying a totalitarian surveillance state. It’s not mainly about pay, we agreed, it’s about self-respect; or as an organizer I worked with years ago put it, it’s the one’s chance in someone’s life to say “Fuck you” to their boss.

Anyway the discussion went on and toward the end of it a young man in the back asked the question people always ask: ok, but what can I do? What is there to do? I had some answers; Gabe had some better ones, but still not fully satisfactory. Afterwards the young man came up to talk to us. So did the union organizer: What do you do for a living, he asked him. “Oh, well, I just quit my old job” the young guy said. “So, how would you like to work in a hotel?” Afterward they were adjourning to a coffee shop nearby. If the event results in that guy becoming a salt for the hotel workers union, then I would say it was an evening well spent.

There are some other responses to Against Money that I am also eager to share.

Our first two reviews are out. One, in Jacobin, is by Mona Ali, whose scholarship on international finance and power I’ve long admired. The second is in Reuters, by Jon Sindreu. Jon is someone I’ve interacted with online for a number of years. He’s a journalist professionally; despite (or because of) that, I feel like he is more in tune with Arjun’s and my particular Keynesian vision than almost any economist I know.

Both reviews are insightful and generous and thoughtful – exactly the kinds of reactions to the book I would have hoped for. One thing I particularly appreciated about both of them is that they don’t just respond to what is in the book, but take its core idea — the difference between money -world with its own internal logic, and the world of productive activity that it interacts with but is distinct from — and carry it in new directions. I think it reflects well on the usefulness of this perspective that they are both able to apply it to other questions that we might have discussed in the book but did not.

Both of them highlight global imbalances as an area where the conflation of money payments with material things is especially pervasive. At the aggregate level, “saving” is just an accounting residual, the difference between total incomes generated from production and consumption spending. As Keynes long ago pointed out, saving is never a constraint at the macro level; any change in investment spending (or the government fiscal balance or the trade balance) mechanically generates an equal change in aggregate saving. Mistaking this accounting category for a quasi-physical substance that can move from place to place — a misapprehension that is ubiquitous in discussion of international trade and finance — leads to all sorts of wrong conclusions, like the idea that financial conditions in the United States are a function of our trade balance with China.

Another area Mona’s review points toward is the idea of degrowth. There is a longstanding desire among economists to regard measures like GDP as reflecting in some sense human wellbeing or happiness, an impulse we criticize at length in the book. But there is a somewhat analogous tendency on the part of some environmentalists to see GDP as a measure of physical throughput or real resource use, so that decarbonization and other sustainability goals necessarily imply a lower path for GDP. The original outline for the book had a chapter called “Planet Money and Planet Earth,” which did not make it in. But we would have argued, as Mona suggests, that to think clearly about the economy and the environment, we need to give up on the idea of a single scalar and turn toward more granular, physical measures, like say, to use her example, the area of tree coverage.

Among other things recognizing money as autonomous and self-referential change the way we think about the productive side of the economy. (This is something Arjun and I have written about elsewhere, but also didn’t get into this book; maybe the next one.)

The view that you get from an economics textbook is that output is effectively a homogeneous substance merging from a production function — a certain quantity of labor and capital goes in one side, and a certain amount of stuff comes out the other. This is an example of seeing concrete reality in the image of money, which really is homogenous — the equivalence of one unit of money to any other unit of money is one of its defining characteristics.

But in reality, production consists of all kinds of complicated forms of specialized cooperation between people; changing what people are making or the conditions under which they make it involves frictions which grow more severe the faster the changes must be made. We may be able to ignore this in the case of gradual, incremental changes in production, and just say that the next unit of spending results in the next most valuable thing that can be produced. In that case, we can describe the system in terms of a level of spending and a corresponding level of aggregate output. But as soon as the changes get larger or faster, the frictions imposed by the real-world heterogeneity and embeddedness of production become impossible to ignore.

As Sindreu highlights in his review, the conflict between the money-like vision of production and its concrete social reality has come more sharply into view in recent years.

Take the Covid 19 pandemic. Governments had no trouble conjuring $11 trillion for fiscal stimulus. Yet most of the money went to keeping the economy humming, with only about a tenth overall going to the health sector. No amount of paper wealth could procure nurses, masks, hospital beds and vaccines in time to make a difference to the virus’ early spread. Consider also the energy shocks of 2022 and this year, U.S. President Donald Trump’s trade spats, the AI revolution and the war in Ukraine. The relevant metrics in these cases have been barrels of oil, critical minerals, computing power and stockpiles ​of ammunition. A larger GDP helps fund such purchases, but doesn’t necessarily translate into a greater capacity to build or procure them when they’re actually needed.

To me, an interesting aspect of this is the way it challenges the sort of Keynesian macroeconomics that I teach as well as the standard production-function view. The high ground on which retreating Keynesians made their last stand a generation ago was that short-term fluctuations in activity are the result of shifts in the volume of spending, not the productive capacity of the economy. When output falls in a recession or depression, it’s because something has reduced the capacity to make money payments, not the capacity for real production. The alternative, advancing from the freshwater redoubts of Chicago and Minnesota and Rochester, was the “real business cycle” view — that scarcity and allocation are the only economic problems at the macro as well as the micro level, in the short run as well as the long. For people like me, rejecting this view was the starting point for our engagement with macroeconomic theory.

And yet … wasn’t the pandemic downturn a kind of real business cycle? Thanks to the fiscal response (in the US at least), the flow of money payments was not interrupted. The loss of employment and output was precisely due to a sudden loss of capacity for real productive activity.

As Sindreu stresses, the possibility of disruption on either side — in the web of money payments or in the concrete activity of production — reinforces the need to maintain the conceptual distinction between them. The two cases are very different! What is harder to say is whether the pandemic and subsequent disruptions were a one-off; or whether they were a harbinger of future and especially climate related disruptions to the supply side, as Isabella Weber has suggested; or if they should lead us to rethink historical fluctuations as well. It’s not an easy question! For my part, what I still say in the classroom is: “business cycles are always the result of changes in demand … except for the pandemic.”

One more example: the importance of distinguishing between real and financial provision for the future. At an individual level, they are equivalent: If I want to eat in retirement, the way I provide for that is by amassing claims against society in some financial form. But this does not carry over to aggregate level. Many economists, notes Sindreu, think that funded pension schemes, which back promises to retirees with a pot of financial assets, are more sustainable than pay-as-you-go scheme.

but they’re wrong. … If higher measured wealth doesn’t map onto more physical production in the future…, the ageing problem remains unsolved: while an individual retiree may be able to run down assets to boost consumption, society as a whole will still ⁠need enough workers ​to produce the goods and services demanded.

Here as elsewhere, the problem is that from the point of view of the individual participant in the system, the mapping of money payments on real things is an objective fact: If I pay for so much more of this, I will have to accept less of that. But at the level of the system as a whole, it is not.

Of course you don’t need to read Against Money to observe that GDP is as fetishized by degrowth as by growth for its own sake, or to note that employing people to plant trees boosts measured output and employment just as much as employing people to cut them down. You don’t need to read Against Money to understand that a disruption to production like the pandemic is quite different from the financially-mediated falls in demand of other recessions, or to see that the meals eaten by tomorrow’s retirees must be cooked by tomorrow’s workers, regardless of what is in the Social Security trust fund.

What I hope the book contributes, is to show how these points are connected — that there is a larger worldview implicated in them. Our goal was to bring into light the ideas about money-world and its relationship to concrete production and other social domains, that are implicit in various debates but seldom foregrounded.

So, for example, rejecting a hard tradeoff between decarbonization and meeting people’s immediate material needs should change the way you think about global imbalances. Or — to take another example offered by Sindreu — if you see the strong element of conscious planning driving investment data centers in the US and green energy in China, this awareness of finance as planning should put you on guard against attempts to disguise the actions of the Bank of England as the objective judgement of decentralized bond markets.

Based on the range of fascinating questions that both Mona Ali and Jon Sindreu were able to connect to the arguments of the book, I think we had some success with this. The kinds of issues they brought up point in exactly the directions that we hoped conversations around the book might go. Along with the young people and union activists, these are the readers we were hoping for.

A few other bits of Against Money content.

Arjun was on the “This Is Hell” podcast, with Chuck Mertz, which also airs on WNUR 89.3FM Chicago and Lumpen Radio. I’m especially tickled by the latter, since I was friends with Lumpen co-founder Ed Marszewski and that crowd back in the 1990s, and used to hang out sometimes at the Marszewski family bar in Bridgeport.

I was on UpFront on KPFA for a generous 45-minute interview. (The interview itself starts about 12 minutes in.) Brian Edwards-Tiekert of UpFront is a dream interviewer — he had read the book deeply, summarized its key arguments better than I could, and asked thoughtful questions that connected these more abstract debates to the real world debates that are why we care about them.

Finally, I feel compelled to share this review from Amazon. Not just because it’s our first five-star review (though one might pause to consider how the motivating power of prestige and recognition points to the limits of money as a coordination device). But mainly because verified purchaser MudHen so clearly gets what we were trying to do:

Since everything is priced in money, it is all too easy to think, for example, that an object priced at $50,000 has $50,000 of “value” in it somewhere. The equation of price and value simultaneously reifies money (making it a commodity) and casts a veil over the entire material world. This causes us to confuse money and things. That confusion is the bedrock foundation of modern (marginal utility) economics.

Money-is-credit-is-debt points to an end to capitalism. Eventually the entire world is commodified and money is left just valorizing itself in an M-M1 loop which becomes increasingly divorced from use value. At some point, this becomes so ridiculous that everyone can see the problem: uses values are no longer increasing, while nominal (money) wealth is skyrocketing. The Americans are bonkers for their stock market, which is increasingly just a debt (M-M1) financial loop. As the country falls apart, it will become astonishing “wealthy” — and tens of millions of people will slide into functional poverty.

The penalty for confusing money and things is severe, but this book is hopeful. It may not be a matter of envisioning an alternative to capitalism (the hard problem of Jameson/Fisher), so much as the simple realization that most of our growth today is merely financial (number go up). To improve life for everyone, we will have to look beyond money.

Yes, that’s it. The road to a freer, more democratic and egalitarian society doesn’t involve redistributing money claims, but recognizing and building on the ways in which those claims are already and increasingly irrelevant to the activity through which we meet our collective needs.