The Money Hierarchy and the False Duality of the State and Market
The Money Hierarchy and the False Duality of the State and Market
Learning Objectives
By the end of this section, you will be able to:
- Apply the vocabulary and conceptions framework developed in the previous section to the Hierarchy of Money
- Explain where money comes from in a monetary production economy
Hyman Minsky once argued that anyone can make money; the real trick is getting people to accept it.[1] For the Metallists, gold or a precious metal’s intrinsic value insured money’s acceptance as a facilitator of exchange. While simplicity is often a strong characteristic, when it comes to money, a more thorough understanding of money’s source of value transforms the relationship between the market and the state. We often think of these two concepts as opposing forces struggling to direct economic activity. From this perspective, one might imagine the market as the strong lead character in pursuit of efficient solutions, and the state as a pesky nemesis taking resources from the market to achieve its own objectives. This plot, however, takes an unexpected twist in Modern Money Theory, as these two characters are revealed to be the same person. The real analysis claims of duality between the state and the market are the product of methodology. The “trick” is not that we accept dollars, but that the true source of their value continues to be largely ignored by economists, policymakers, and the general public.
In 2011, renowned London School of Economics anthropologist David Graeber published a comprehensive examination of the historical origins and development of money, titled Debt: The First 5000 Years. While all 5000 years are interesting, and students are encouraged to explore this exemplary work of scholarship, our focus is limited to the current economic system. This narrow focus will allow us to build upon the above ideas of Marx and Keynes and to develop an understanding of key concepts from MMT. The first of these concepts is the hierarchy of money. From this conceptual framework, we will explore the technostructure of money (see Chapter 16 The Megacorp). The collection of institutions that regulate money’s issuance or production is similar to market governance (see The Megacorp) of business enterprises in that stability is a primary objective. Given the central role of money in economic activity and its origins with the state, the clear delineation between where the market begins and state ends is all but erased.
We begin our analysis with MMT’s hierarchy of money. As a social relation, not all money is created equal. For example, by definition as a social relation, you borrowing a shirt from your roommate is a money transaction, as long as you promise to give it back. We call this an IOU. I had a friend in high school that literally carried around a notebook listing all of the people that owed him money (he now works in finance). These records represented promises to pay. For some of those entries, repayment was completed and their na