As you will see, most of the criticism of Monetary Sovereignty (MS) has to do with the fact that the focus is on a nation’s own finances.Rethinking Monetary Sovereignty: The Global Credit Money System and the State Published online by Cambridge University Press: 29 August 2022 Steffen Murau and Jens van ’t Klooster
Abstract We propose a new conception of monetary sovereignty that acknowledges the reality of today’s global credit money system.
In one sense, this criticism is warranted because every nation affects, and is affected by, the finances of other countries.
But while predicting the effects of our government spending can be daunting, including other nations in the mix adds many levels of complexity.
It can be akin to predicting next year’s traffic accidents at one city corner by including each car model’s auto sales last year, in each other city, everywhere.
It is faux attempt at precision when an economist does not even acknowledge that MS government taxes don’t fund MS government spending.
The words “predominantly” and “states” may indicate the writers Murau and van ’t Klooster aren’t aware that MS refers exclusively (not predominantly) to entities (not only “states”) that issue and regulate their own currencies. The term “Westphalian” refers to what happens in one’s own country without consideration of other countries.Today, the concept is predominantly used to denote states that issue and regulate their currency. We reject that Westphalian understanding of monetary sovereignty.
We agree that vast amounts of money are created and spent offshore of any nation. Even the mighty United States dollar is only a small part of the world’s economy. We also agree that vast amounts of money are created by non-federal entities within the U.S., as witnessed in the formula for Gross Domestic Product: GDP =Federal Spending + Nonfederal Spending + Net Exports. Finally, we agree that the world’s economy profoundly affects the U.S. economy. But today’s economists are ill-prepared to play 3-dimensional chess against multiple opponents. Until quantum computers are programmed to evaluate all the inter-nation effects of every monetary event worldwide, a good start would be to consider the intra-nation impact of a nation’s governmental spending. In short, MS tells quite a bit about how U.S. federal spending can provide benefits to the American public.Instead, we propose a conception of effective monetary sovereignty that focuses on what states can do in the era of financial globalization.
The conception fits the hybridity of the modern credit money system by acknowledging the crucial role of central bank money and money issued by regulated and unregulated shadow banks.
These institutions often operate “offshore,” outside a state’s legal jurisdiction, making monetary governance more difficult.
Monetary sovereignty consists of the state’s ability to effectively govern these different segments of the financial system and achieve its economic policy objectives.
How did MS supposedly die? Because of:Even though monetary sovereignty remains an important reference point in academic discourse and international politics, it has repeatedly been declared dead throughout the past decades.
This merely states the obvious. No nation is an island unto itself. The MS government does not have absolute control over GDP, inflation, deflation, poverty, unemployment, productivity, education, etc. Similarly, no person is an island unto himself. To deride MS for not providing absolute financial control is like criticizing someone for improving his financial position, though he can’t consider everyone else’s efforts. And here we arrive at the following evidence for ignorance about MS:“Creeping dollarization, globally active megabanks, asset managers, hedge funds global bond markets and the realpolitik of the IMF and the World Bank, cryptocurrencies, stablecoins, shadow banking instruments, and Basel’s Bank for International Settlements.”
Apparently, the authors, not understanding MS, do not realize that:Lacking the ability to control money within their borders, states have increasing difficulties raising taxes and funding critical expenditures.
In what sense, if any, can states still be described as monetary sovereigns?
- MS nations have no difficulty “raising taxes” should they so choose, and
- MS nations neither need nor use tax money to “fund critical spending.”
Sadly, the rest of the rather long-winded article is devoted to debunking a claim no one is making: That other currencies don’t exist, and that a MS government can control the financial effect of these other currencies. The article brushes past the fact that government spending moves a country in specific directions despite the effect of other currencies. So yes, an MS government can fight poverty by giving people money and by paying for things. An MS government can support industries, medical care, the infrastructure, the environment, the sciences, education, and a host of other benefits. Then, after all the sound and fury, comes the conclusion that MS really isn’t dead. No MS still lives; just the definition supposedly is wrong.Today, the concept of monetary sovereignty is typically used in a Westphalian sense to denote the ability of states to issue and regulate their own currency.
This understanding continues to be the default use of the term by central bankers and economists in fields ranging from modern monetary theory to international political economy and international economic law.
As we argue in this article, the Westphalian conception of monetary sovereignty makes it unsuitable for the realities of financial globalization.
Using “tools for monetary governance” is what all nations do, whether or not they are Monetarily Sovereign. The entire article boils down to an incorrect, inappropriate, meaningless definition of MS. The article does clarify that a nation pegging its currency to another currency is not MS, which seemingly has not been understood by someone, somewhere. Also (OMG!), euro nations are not MS! And that is it. I have given you the link (twice) to their article. Nothing in it changes the sad fact that:We propose considering monetary sovereignty as states’ ability to use financial governance tools to achieve economic policy objectives.
Monetary governance involves controlling pure public money, regulating private-public money, and managing private money within the state’s monetary jurisdiction.
- Most economists don’t teach Monetary Sovereignty
- Most economists don’t even understand Monetary Sovereignty.
- Monetary Sovereignty is the foundation of economics, and if understood, taught, and applies, it could make for a better world.
- Economics is where astronomy was during the popularity of the geocentric model, 2,500 years ago.
- A comprehensive, no-deductible, no-cost form of Medicare, regardless of health
- Long-term care
- Social Security, regardless of age
- College and post-grad for everyone who wants it
- Reduced federal taxes, with support for state and local governments
……………………………………………………………………..
The Sole Purpose of Government Is to Improve and Protect the Lives of the People.
MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
Well-said overall.
Loosely related to this, what would be the best response to the idea that the USA creating money for the benefit of it’s own people (including, but not limited to, UBI) is unethical because such dollars are “tokens of empire” that are used by us to take labor and resources from the Global South (including modern slavery) without giving back any of our own labor and resources in return? I have actually had a debate with someone who made such an argument, and I was unable to convince that person. She believes in anti-imperialism, “small-scale sovereignty” (autarky), and community reciprocity. And she has implied that the only way it could possibly be ethical is if such UBI was given to everyone in the world in equal amounts (exactly why it should be given by only one country to the entire world is unclear).
Thanks in advance!
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Although your friend seemingly favors UBI for everyone — the morality of giving UBI to the world’s poor is commendable — I suspect it really is a disguised argument against UBI.
The U.S. government has the ability to create that many dollars. It can create infinite dollars. The real problem is not with creating the dollars but arranging the gifts with foreign governments.
Let’s say every person in Mexico were given $10,000. What would that do to the Mexican peso? Would dollars replace pesos? Would the Mexican government lose control over spending in its economy? What would that do to the US economy, as Americans compete for resources with Mexican people? Would foreign taxes be paid in dollars? What about the exchange rates.
There are many questions your friend probably has not considered.
The U.S. currently gives the world about $44 billion. (See https://fee.org/articles/us-foreign-aid-the-gift-that-keeps-on-giving/#:~:text=In%20fiscal%20year%202022%2C%20the%20total%20amount%20of,dollars%E2%80%94a%20%249%20billion%20increase%20from%20the%20previous%20year.)
We easily could give double or a hundred times that amount. But many questions would need to be answered lest our “gift” be pyretic.
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Indeed, you are correct that it was a cleverly disguised argument against UBI. It is an argument from purism at best, and most likely a clever (and disingenuous) triangulating request and trick question.
My response was that we should not make the perfect the enemy of the good, and that a global UBI is best funded globally by a Tobin Tax on foreign currency exchanges, not by just one country. Indeed, her argument leaves one with far more questions than answers.
The person in question is an obscure Substack blogger who I have debated with on occasion, who cherry-picks ideas from David Graeber, Ellen Brown, Margrit Kennedy, and even Buckminster Fuller, while discarding anything inconvenient that each of them have to say. Many of her ideas are good, if contrarian, but others are highly problematic. She is quite the enigma IMHO.
Thanks again 🙂
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‘Princes of the Yen’ a glowing review: https://www.amazon.com/gp/customer-reviews/R2G4EAWSZDAJHE/ref=cm_cr_dp_d_rvw_ttl?ie=UTF8&ASIN=0765610493
Without Monetary Sovereignty Japan would not have bounced back so fast from the utter devastation of the 1944/45 strategic bombing campaign.
A 2003 hardcover edition is available online for registered users of the Internet Archive: https://archive.org/details/princesofyenjapa0000wern An updated 2nd edition came out in 2015 but I’ve never looked at it other than some pages from an added chapter I came across online once.
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While we are on the topic of the “case against” MS or X, Y, or Z aspects of it, what would be your response to this other quasi-objection from the otherwise ever-insightful Riane Eisler?
From the article with her:
“The combination of overpopulation (due to denying women reproductive freedom) and resources depletion makes a shift from the present market consumer-driven economics essential. This shift is also essential because we are entering an era of structural unemployment and underemployment due to a massive technological shift. A guaranteed annual income or negative income tax where people are given monetary stipends is one response to the replacement of human workers by automation and robotics – trends that will exponentially increase with the advent of artificial intelligence.”
So far so good. I agree 100% thus far with Eisler. Brava! But the very next couple of sentences she says is:
“The response I propose in The Real Wealth of Nations is linking this monetary support to the work that only humans can perform: caring, caregiving, creating. People need meaningful work to be fulfilled, and just handing out money does not encourage positive contributions.”
And that just nerfs it right there, especially that last sentence. (Cringe) Quite patronizing and paternalistic IMHO, even if she did not intend it, similar to the argument for JG only in broader form (and logistically even more difficult as well). It’s one thing to propose such a thing in *addition* to UBI, but *instead* of kinda rubs me the wrong way. I mean, I dig what her overarching sentiment is, but does literally *everything* have to have more strings than a spider’s web attached in her view or something? SMH.
https://thenextsystem.org/riane-eisler-on-changing-the-whole-system
What would your response be? Thanks in advance.
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“People need meaningful work to be fulfilled” — except for the very rich who are quite satisfied doing little meaningful work.
Of course, Ms. Eisler considers digging ditches, driving taxis, buses, and Uber, house cleaning, picking in the fields, waiting on, and bussing tables, dishwashing, working on a repetitive production line, working in an Amazon warehouse, etc. “meaningful” and “fulfilling” work.
Then, there are all those old people living on pensions and Social Security — including people like me who have been retired for, uh, 15 years, and all I can do is write, paint, play tennis, and live my “unfulfilled” life in a posh gated community. So sad.
I can hear her superiority sneering from here. How can I put this gently. What about, “She’s full of shit.” Is that gentle enough?
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Rodger that! Correct and to the point indeed. Well-said.
One can just hear the sneering in that last sentence of hers, whether that was her intention or not. (Usually she does not come across as elitist, as she is usually more down to earth, so that seemed a bit out of character for her.)
Granted, the sort of work that she has in mind here is apparently more the sort of unpaid (or underpaid) care work that is undervalued in our society and often excluded from the GDP. But scratch the surface of her argument and you indeed find the very same old Puritan Work Ethic (TM) underneath, simply broadened, warmed-over, and repackaged for a new audience. And in doing so she short-circuits her previous argument as well. ZAP!
Thanks again.
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Golly I used to love digging ditches with my family. Really looking forward to doing it with my grandkids someday on the job guarantee: https://en.wikipedia.org/wiki/Corv%C3%A9e Statute labor in lieu of tithes was how the Suez Canal was dug in 1860’s Egypt.
Farmers in Wisconsin did so many days of road grading and ditch clearing every spring instead of paying cash for taxes until 1911 or 1912 I think it was
“The word corvée has its origins in Rome, and reached English via French. In the later Roman Empire the citizens performed opera publica in lieu of paying taxes; often it consisted of road and bridge work. Roman landlords could also demand a certain number of days’ labour from their tenants, and from freedmen; in the latter case the work was called opera officialis. In medieval Europe, the tasks that serfs or villeins were required to perform on a yearly basis for their lords were called opera riga. Plowing and harvesting were principal activities to which this applied. In times of need, the lord could demand additional work called opera corrogata (Latin: corrogare, lit. ’to requisition’). This term evolved into coroatae, then corveiae, and finally corvée, and the meaning broadened to encompass both the regular and exceptional tasks. The word survives in modern usage, meaning any kind of inevitable or disagreeable chore.”
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But it was meaningful and fulfilling. Ask the Job Guarantee MMTers.
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Another common objection is the comparison of UBI to the ancient Roman Cura Annonae (dole), namely the implication that it caused cumulative laziness and decadence (the “slow poison” over the generations and thus caused Rome to fall. I have responded to such objections that the decline and fall of the Roman Empire was multifactorial with no one single cause, took many centuries to occur, and Rome was likely rotten from the start long before the Cura Annonae was instituted. All empires eventually fall, and Rome would have fallen regardless either way, dole or no dole. And for whatever reason, whatever wicked problems plagued the western half of the empire seemed to mysteriously spare the eastern half for another thousand years for whatever reason (as the “Byzantine Empire” was really simply the continuation of the same Roman Empire, who still called themselves such).
And their argument is also very patronizing and paternalistic as well.
How would you respond to such assertions? Thanks again in advance.
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The hardest-working people with the most onerous jobs are the poor. The people who work least in the most pleasant circumstances are the rich.
Therefore, it is the rich who exhibit laziness and decadence (the slow poison . . . ).
Logically then, the rich should have their wealth taken from them so they will cease being lazy and decadent. Take that, GOP, the party of the rich.
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Very well-said and witty as usual, Rodger. That should leave them utterly speechless! Certainly worthy of a (Mic drop) at the end. Thanks again 🙂
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Another very silly argument against UBI is as follows:
“3) Effects on Economic Growth – Even a modest slowdown of economic growth can have dramatic effects when compounded over a period of decades. And so even if whatever marginal disincentives a Basic Income Guarantee would produce wouldn’t do much to hurt currently existing people, it might do a lot to hurt people who will be born at some point in the future. Here’s a thought experiment for the mathematically inclined among you: imagine that Americans in 1800 decided to institute a social welfare policy that reduced annual economic growth by 1%, and that the policy was maintained intact to the present day. How much poorer a country would America be? How much poorer would the poorest Americans be? Even if the only thing you cared about was improving the lot of the poor, would whatever benefits the policy produced have been worth it?”
https://www.libertarianism.org/columns/libertarian-case-basic-income
While I appreciate their (feigned most likely) concern for distantly future generations, their largely abstract theoretical argument is way off the mark. It is just a thinly veiled and repackaged “trickle down” argument at best, and also highly anachronistic as well. Growth for the sake of growth, the ideology of the cancer cell, has long since jumped the shark. And as Robert Reich famously said, the economy exists to make our lives better. We don’t exist to make the economy better. And we certainly don’t exist to make the rich richer!
And to quote John Maynard Keynes, “in the long run, we are all dead”.
QED
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What about the argument that there is a lack of “reciprocity” between those who receive UBI and those who produce and provide the goods and services that the recipients purchase with that free money? And the corollary that Social Security for seniors is somehow different, as it is from the younger generation to give back to the older generation? Yes, people some people like that aforementioned “small-scale sovereignty” lady actually make that argument. But that argument is ultimately begging the question, since saying something is wrong because it is not always perfectly reciprocal (as few things are in the real world) is basically saying it is wrong because it is wrong. And it implies that everything must have strings attached. Truth is, everyone ultimately ends up subsidizing one another over the life cycle to one degree or another, where it is locally, nationally, or even globally. Everyone but the oligarchs, of course.
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I agree that every benefit coming from the government helps some people more than others. UBI benefits the poor more than the rich. For the rich, the UBI disappears into the noise, while for the poor, it can be a lifesaver.
When the government helps California, ravished by wildfires, or Florida, crushed by hurricanes, it doesn’t do much (directly) for people in Texas and Oklahoma.
Of course, there are indirect benefits for everyone. The poor spend their UBI into the economy, which spreads the benefit to all. Similarly, the people devastated by wildfires and hurricanes spend their rebuilding money into the economy.
Finally, there is the compassionate aspect. We give to charity out of our own pockets because we care about other human beings. So, it’s a no-brainer to be able to give to charity at no personal cost at all (via federal spending).
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Very well-said, Rodger. That is an excellent rebuttal to the opponents’ concern (trolling most likely) for “reciprocity”.
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By the way, the lady I was referring to above is the author of “How to Dismantle an Empire”. A lot of good gems, but overall a mixed bag:
https://thirdparadigm.substack.com/p/what-if-money-was-no-object?utm_source=substack&utm_medium=email
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