Review of a book by Mary Mellor, Pluto, 2015, ISBN: ISBN: 978-0-7453-3554-4
“For a little while Pooh and The Floating Bear were uncertain as to which one of them was meant to be on the top, but after trying one or two different positions, they settled down with The Floating Bear underneath and Pooh triumphantly astride it, paddling vigorously with his feet.”
A.A. Milne’s charming sketches illustrate metaphorically what happens when the tool seeks to become master. In similar vein, as Mary Mellor skillfully demonstrates, the money system is currently dictating the rules to humanity. Why can public money be made available for banks, she asks, when there is none for the people? Her latest book, Debt or Democracy is an explanation of the nature of money in the 21st century. She explores the way in which governments create new money (“public money”) arguing that, since money is a public and a social tool, its creation should therefore be democratically accountable. Hence public services could be funded by public money. Given the political will, central banks could reclaim money creation for the people rather than acting as banker to banks. The book is a competent, comprehensible and readable analysis of local, national and international banking, whilst introducing the ways in which such a democratising of money could give birth to an entirely new post capitalist economy.
The private, commercial banking system that currently dominates the economy, does not, and cannot stand alone. The banking system of the global market rests entirely upon public trust and public authority. It is necessarily backed by the public capacity to create public currency free of debt. The fact raises the fundamental question of the political will. Why do citizens and taxpayers allow the private finance system to control the public sector? As taxpayer bailouts and subsidies to private banks indicate, the logical progression is to bring money creation under democratic control so that it can be used to serve public purposes. This conclusion flows from the fact that, as Mellor concisely explains, money creation originally lay in the hands of the sovereign rulers of city or nation states. It has shifted from the ruling classes to the commercial sector, but remains necessarily a public resource. The central bank must now return the sovereign right of money creation, free of debt, to the democratic control of the people.
In casting a searchlight on the choice between debt or democracy, Mellor quietly raises questions which go well beyond the scope of this fascinating book. What could be done if the money system was under democratic control? What socially just and ecologically sustainable policies might cease to be blighted by the myth of market freedom backed by the heavy hand of austerity? The answers are all there, sparkling inside the unappetising cover. All you have to do is open it.
Frances Hutchinson
Our Comment
The chief importance of Mellor’s book is expressed in its title. It states bluntly exactly where we’re at!
We’re living through an exciting age of transformation that, over the past four decades has been dragged off course by those who would thwart change and instead, fortify the status quo. To that end, they have monopolized the sovereign power to create money and used that power to ensure policies that they see as serving their best interests.
Mellor states that the basic question addressed in her book is, “Why was there public money for the banks but none for the people?” This question, she shows, “is central to the choice between debt and democracy.” She argues adroitly that money is social and public – that “the public currency in all its forms relies on social and public trust,” and that, “because money systems and their currencies are of necessity public and social, they should be democratically accountable.”
She shreds the myth that it is “private wealth and private money that drives prosperity,” and contends that it is “public money and public wealth that creates the framework for private profit,” and maintains that public money must be used to support the environment and social justice, “in the same way it has been used to save the financial system.”
She makes clear and compelling the case that we must choose between debt and democracy and provides the information essential to the task.
While “it is no utopian dream,” she does not underestimate the challenge. “What is needed,” she realizes, “is the political will to recognize the potential power of public money creation.”
Two outstanding, pertinent resources are Michael Rowbotham’s The Grip of Death: A Study of Modern Money, Debt Slavery and Destructive Economics, and Kate Hawarth’s Doughnut Economics.
The former is a highly readable background that ought to do much to generate that political will.
The latter is equally accessible. Hawarth quotes Buckminster Fuller who said, “You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.”
Taking up that challenge, Hawarth “[sets] out seven mind-shifting ways in which we can all learn to think like twentyfirst- century economists.”
Élan
General Comment
The greatest feature of a central bank – however vigorously it may be denied – has been strongly expressed by Joseph Stiglitz in The Price of Inequality. He said, “say what you like, all central banks are public.” He went on to argue that they should, therefore, be working for the common good.
Élan
