Published by Lola Books, 2023

By John Clayden

Worker’s Money

I remember well over thirty years ago standing outside one of the biggest halls in Newcastle upon Tyne with a group of unemployed workers lead by a great unsung hero of the working class – Andy Robertson an oil rig worker who had organised his fellow North Sea oil rig workers into their own union, and had founded and led the organisation we were now in The Unemployed Action Group.
Inside the hall there were all the MPs and council leaders of the whole of the North Eastern area, they had been gathered to be lectured by Eddie George the governor of the Bank of England who was there to inform them of the future fate of the region.Every so often the leader of Ashington Council, John McCormack would come out to brief us as to what was going on inside. Steady Eddie, as he was known was there to tell them that the days of heavy industry, the shipyards and coal min es were over and the future was to be service industries and so it was to be.

Actually I think the excuse was that British industry was no longer competitive but with hindsight could we not have nationalised it under workers control and direction if this was the case and made it so. (This was long after the Bullock proposals had been swept under the carpet.) The idiots running the Labour Party then and still today had bought into a revival of a long discredited economic market theory reintroduced by Thatcher which played out in the economic crash in 2008. 

Whatever the excuses it always struck me as odd that we were being told our fate by the Governor of the Bank of England.

We tend to think of workers’ money as that which we receive as wages and if you are a socialist you know that it is your labour and that of your fellow workers which keep the country going and that your wage is less than the value of your work. So here was the governor of the Bank of England telling us our fate and whatever the reason it was clearly in the interests of the Bank of England and whatever it stood for and not of us. We were going to have our working lives disrupted and our skills thrown on the scrapheap. 

But why the Bank of England and from where comes its power? The bank, as recently one of its governors or was it a vice governor informed us is able to issue money out of thin air and this was for all to see in plain sight when the banks were subsequently bailed out in 2008 and more recently during the Pandemic when vast sums were found to pay for the furloughs and clearly there is no shortage of cash when it comes to military spending.

As Humpty Dumpty said it comes down to who has the power. At one time, the power was with the working class, who elected overwhelmingly the Labour Government in 1945 . Thanks to the understanding of Ernest Bevin after he had been tutored by J M Keynes,  money was made available to employ those returning from the war. Money was found to provide wages training and materials to build a NHS, a free education system, to nationalise the commanding heights of the economy and to build council housing. ( All this was outlined in the Beveridge Report the government published earlier in the  war.)

Money is not the problem, the question is who has the power to command the issuence of money. Clearly we the workers of the UK once we understand this truth can take measures to ensure its issuence is for our own ends. This is the simple essence of this book “Fiat Socialism” by Carlos Gacia Hernandez with a foreword by Chris Williamson.

Further thoughts on Workers’ Money

MMT forms the basis of the book;  in my opinion MMT is more of an observation on a state of affairs than a theory. Where you have a state or jurisdiction which has a monopoly of issuance of money or the means of accounting for and managing debt it can issue money or cancel debts at will. This is what happened in Sumer and Babylon for thousands of years ( see the writings of Michael Hudson) in fact it is a fallacy to believe we have to raise taxes before we can spend money to do what we deem important or borrow it from some private source, before  we can eliminate unemployment and build infrastructure and  ensure everyone has work is housed and clothed and fed.

The economic development of the Soviet Union did not require first taxing the population which was poor and impoverished . China has been able to vastly improve the standard of living of hundreds of millions of its population to an unprecedented degree through the control of its central bank and by controlling foreign finance capital. (Although it does have gross inequality of income and no universal welfare as far as I can make out.)
Measures will always have to be taken to control inflation but not at the expense of full employment. But as far as the internal economy is concerned, although it seems counterintuitive, there is no way a national autonomous state bank can go bankrupt as long as there is no dependence on foreign capital. However it is another matter when dealing with the rest of the world . This is because trading among states requires a confidence that the currency used can be used for trading. Ever since the Bretton Woods conference during the war the USA, much to its advantage, ensured that the dollar was the only world trading currency. This is backed by military force. This state of affairs is breaking down and alternative ways of managing balance of payments between nations are being pragmatically developed largely because the West has used its  financial power to control the rest of the world and the rest of the world has had enough.

Understandably most people are not aware or care  how the world of finance works except in how it affects them and this is primarily in their dealing with the private sector, credit and thus debt  e.g. to get a car to go to work, to pay for a mortgage or for education and credit cards or even just to get by. And it seems logical and ethical even, that it is only through our taxes that money is spent by the government.

  
Our argument is that our taxes should not be spent on providing bombs to destroy the people of Gaza or support the corrupt regime in Ukraine but should be spent on infrastructure and the health system. This moral socialist argument is not weakened if we are aware that the economy doesn’t work quite like that. It is also crucial to alleviate anxiety that a prospective socialist government would have to show the measures it would take to control the private banking and credit system. See below in the measures Michael Hudson advocates to address this problem.

What is most important is that those people who are curious and are opinion-formers start to think about these things because the key question will be who will have the necessary understanding and will, when the time comes,  implement these decisions.

Our opponents will also say that someone who has worked hard should not have their money taken away by the state which is understandably often perceived as a malevolent force. Any socialist government would be accused of wanting to do this. Only when it is understood that the state plays a crucial role will people understand how it will have to be employed in the interest of our class.

Socialists will have to understand and explain these issues that  I have only sketched out here. This seems a tall order but what is the alternative? It may become more possible though, as we enter a period where the credibility gap expands between us ordinary people and the political class due to our increasing awareness that our politicians back genocide and war at our expense  and are lacking in any moral integrity.

There are many counter arguments we can employ to the household budget analogy and we will have to make a strong case  that shortage of cash is not what is stopping us from realising our socialist aims.
It will take time to build up this understanding among our constituency but I cannot see any alternative.

It is important that we know what we are up against and what measures would have to be taken if we are to succeed

Michael Hudson (please see p225 “The Destiny  of Civilization”.) 
has outlined the following measures which he suggests will be necessary (he puts it in the context of a counter-rentier program.)

1 Public ownership of natural monopolies, especially money and credit creation privileges to prevent their monopolization in private hands and resulting rent seeking.

2 Keep basic infrastructure (in addition to banking) in public hands to provide essential services such as transportation at subsidised prices or free to minimise QA the cost of living.  Providing high-quality education and health care as basic human rights will prevent them from being turned into vehicles for rent-seeking and financialization under private ownership and management.

3 National self-sufficiency in money and credit creation to protect against  other nations’  ability to create credit at will and the political strings that accompany borrowing from the IMF and US centred international banking systems.

4 Consumer and Labour protection against rent-seeking behaviour and exploitative employment conditions.

5  Capital controls to prevent borrowing currencies or denominating debts in foreign currency. Borrowing foreign currency to spend at home requires the central bank to create domestic credit for use in the local economy in any event. In such cases, foreign currency is not needed, but is simply a liability.  When governments need foreign credit to stabilise their exchange rates, a principle of international law is needed to ensure that no government should be obliged to pay foreign debts at the cost of having to impose austerity and economic shrinkage..

6 Taxes should fall mainly on unearned income (economic rent) which is not a necessary cost of production. Taxing economic rent prevents it from becoming an overhead cost.

7 Progressive Taxation of income and wealth to prevent economic polarization and the resulting instability, and to avoid taxing labour costs.

8 A land tax to collect the site value that results from public infrastructure spending general prosperity, not the landlords own investment.  This tax will prevent land’s rising rental value from being pledged to banks for credit to bid up real estate prices, and will prevent the emergence  of a symbiotic Finance, Insurance and Real Estate sector.

9 Use the economic surplus for tangible capital investment to raise productivity and improve living standards, and to achieve economic and environmental resilience, not to create financial wealth in the form of claims on the economy.

10 National self-sufficiency in food and other basic needs so as to protect the economy from foreign coercive Trade and related economic sanctions as well as well as from adverse movements in world prices for food and other essentials.

11 Fiscal and capital controls to prevent speculative attacks on the domestic currency,  and to prevent capital flight and tax avoidance via offshore banking centres.

I would add – self-sufficient national steel production and weapons manufacture.
 
Also it is necessary for workers to have the right to decide not only how their industries are managed and what forms that would take, private shared schemes, cooperatives, or workers’ owned companies . But also not just how but what they produce and what consumers want, except in matters of national security. The mechanisms to do this would have to be worked out but it would avoid alienation.

This is by no means an exhaustive list of course.