Many thanks to Mary Mellor for such a provocative paper. Let me confine my own provoked (and maybe provocative) response to four points:
(1) I agree with Mellor that we need a public banking system. We do need to “reclaim money for the people.” Currently, the financial sector of our economy takes in more than 25% of all profits, only a miniscule amount coming from services that actually contribute to the general health and well-being our citizenry. We don’t need Wall Street anymore, certainly not one that has become so complex and opaque that meaningful regulation is impossible. We need a simple, transparent system, amenable to democratic control. Banking needs to be boring again—not a magnet for all the math and physics PhDs and other “quants,” who have flocked there during the last two decades.
(2) Mellor has been criticized for claiming that creating money through debt necessarily requires economic expansion. The criticisms are valid. We can have a sustainable economy that still permits interest-bearing loans, as the Barrington-Leigh model demonstrates. A more mundane example would be a steady state economy where people can buy homes before they have saved enough to pay full price, the mortgage-interest a service fee for this (enormous) convenience.
It is further claimed that we can have a capitalist economy that is steady-state. Models are invoked here too, but this conclusion is wrong. Yes, theoretically, a steady-state capitalism is possible—but not in the real world. The growth imperative of capitalism does not come from interest, but from the fact that capitalist stability requires, as Keynes noted, “investor confidence.” If private investors don’t see growth opportunities, they will save, rather than invest—or what amounts to the same thing, buy shares of stock in already-existing companies or other, more exotic financial “derivatives.” But if they don’t invest in the “real” economy, then “effective demand” for the goods and services produced in that “real” economy slumps, workers are laid off, demand drops further, the familiar downward recessionary spiral. To be sure, the government can step in at this point—so as to get the economy growing again.
Investors must be kept happy under capitalism, and that means making sure that they, as a general rule, get more back than they contribute—which can happen only if the pie keeps getting larger. (Simply getting an ever-larger slice won’t work, because—Keynes again—those with big slices will save far more of their share than those with smaller slices.) It is no accident that GDP growth gets so much attention in the business press—and by the Federal Reserve. They are not misguided.
(3) The fact of the matter is, we need a new system, one that takes us beyond capitalism. While local initiatives are extremely important, we need a system-change at the national level. (Not just here in the US, of course, but other countries too—though it’s wrong to think that nation-states themselves must be superseded. We will need international cooperation to address the global problems we now face.)
To say that such system change is impossible in the foreseeable future is to say that we, as a species (or at least most of us) are doomed—notwithstanding the fact that we now have the resources and technologies, not only to avoid global climate change catastrophe, but also to create a sustainable world in which virtually everyone on the planet has a real chance to lead a healthy, happy, meaningful life.
Sorry. I don’t buy that. The climate-clock is ticking—which is generating an increasing sense of urgency. I prefer to think of this as a miraculous moment.
To be sure, there is no guarantee that the bankers, traders, and assorted billionaires won’t be able to block the transition that needs to happen, but even if they do, they won’t “win”—unless living on Mars or in high-tech enclaves on a devastated planet counts as “winning.” We’ll all lose.
But not without a fight. The resistance is growing, and will only get larger. The game is far from over.
(4) My final point relates to some reservations about a basic income.
If people have more money, which they will if a basic income is introduced, they will consume more. But if there’s less need to work, less will be produced. Prices go up—and with them rising discontent, particularly among those who are still working, who see themselves (correctly) as producing what they themselves—and those who have chosen not to work—consume.
It is preferable, I think, to have the government serve as an employer of last resort, so that everyone has a genuine “right to work.” Work is more than just about money. It’s also a matter of self-respect, and of making a tangible contribution to the public good.
Since we do need to reduce overall consumption (which beyond a certain point doesn’t make people happier anyway), we need large-scale, targeted investment planning (possible with a public banking system)—and an overall reduction in the length of the working day, so that meaningless work can be phased out, and useful work spread around. More leisure for all, not just for those choosing to opt out the workforce.