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Working Paper No. 123 – October 2013
MONETARY SOVEREIGNTY, TRUST AND THE
POLITICAL. REFLECTIONS ON THE INSTITUTION OF MONEY AFTER THE EUROCRISIS
Matthias Lievens
MONETARY SOVEREIGNTY, TRUST AND THE POLITICAL. REFLECTIONS ON THE INSTITUTION OF MONEY
AFTER THE EUROCRISIS1
Matthias Lievens
ABSTRACT
Drawing on the work of Georg Simmel, the French regulation school and credit
theorists of money, this paper reconceptualises the institution of money from the point
of view of its complex relation to ‘the political’. The latter is understood as an order of
representations through which money is given meaning and is instituted, but which
can conceal its own political nature. The central argument is that the relation between
money and the political is characterised by a double bind: on the one hand, money
requires a political or sovereign moment through which the community of money users
is made visible, while on the other hand, this moment cannot be ‘politicised’, meaning
that it cannot become the object of open political debate or contestation. On this
basis, the paper aims to nuance credit theories of money and to grasp the stakes of
political interventions to support money, such as the euro.
KEY WORDS
Money, the political, sovereignty, credit theory of money, monetary representations,
Georg Simmel
AUTHORS
Matthias Lievens is a senior research fellow at the Leuven Centre for Global
Governance Studies.
ADDRESS FOR CORRESPONDENCE
© 2013 by Matthias Lievens. All rights reserved. No portion of this paper may be reproduced
without permission of the authors.
Working papers are research materials circulated by their authors for purposes of information
and critical discussion. They have not necessarily undergone formal peer review.
TABLE OF CONTENTS
Introduction ....................................................................................................... 1
1. Two philosophies of money ........................................................................ 3
2. Beyond metallism and chartalism ............................................................... 4
3. Instituting money ........................................................................................ 6
4. Money and representation: Georg Simmel ................................................. 6
5. Money as credit, money as command ........................................................ 7
6. Trust and public authority ........................................................................... 9
7. The ambivalence of money ........................................................................ 9
8. Expressing (dist)trust ............................................................................... 11
9. Money and the political: a double bind ..................................................... 12
10. Beyond the credit theory of money ........................................................... 14
11. Depoliticising money ................................................................................ 15
12. Conclusion ............................................................................................... 16
References ..................................................................................................... 17
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MONETARY SOVEREIGNTY, TRUST AND THE POLITICAL. REFLECTIONS ON THE
INSTITUTION OF MONEY AFTER THE EUROCRISIS1
Matthias Lievens
INTRODUCTION
Carl Schmitt (in)famously stated that the exception is more important than the rule (Schmitt 1988). Exceptional or crisis situations are moments of truth: they reveal something of the essence of politics. The recent financial crisis, and especially the crisis of the eurozone, is full of revelations in this sense. If there is something the eurocrisis has shown us, it is that money is not just a thing, a good that is traded on markets and exchanged for other goods. Money stands out between all economic affairs: it is both economic and political at the same time. On the one hand, the euro is sold and bought on financial markets as if it were a commodity like others. But on the other hand, however, the euro is a political project, a political symbol that is in dire need of political support by public institutions, especially in crisis situations (Lapavitsas 2012). This paper aims to investigate money’s ambiguous relation with ‘the political’. It will be argued that while money is a condition of possibility for individualist and contractualist forms of reasoning in our current society, it cannot itself be understood in purely individualist and contractualist terms, as there is a constitutive communitarian and political dimension to it (Cuillerai 2001). But what is this political dimension in money? It will be argued that one cannot think money without taking recourse to political notions such as sovereignty, representation or institution. But does that mean money is political in the same way that a constitutional order or a specific domain of policy-making is political? Drawing on Georg Simmel’s seminal book The Philosophy of Money and on heterodox literature on money and economics, the paper argues that money has a holistic dimension and should be understood as being politically instituted, even though this political moment of money’s institution can never fully become visible or be politicised, i.e. become the object of open political contention. This observation is of course of huge importance from a democratic point of view. Even though there is a dimension of sovereignty in money, as a number of scholars have argued (e.g. Ingham 2006), this is a sovereignty of a very peculiar kind. In a first instance, this paper aims to uncover that money cannot be thought without a reference to the political. This political dimension of money makes the latter an awkward object for economists. It is striking that money is absent from the famous model of general equilibrium developed by Leon Walras, for example (Orléan 2011; Walras 1952). More generally, the methodological individualism which is dominant amongst mainstream economists makes it difficult for them to think the entities which are absolutely crucial for thinking money: society, social relations, community, power, violence, sovereignty and their representations (e.g. Cuillerai 2001). The French regulationist economist André Orléan has stated that money is a scandal for neoliberalism, as ‘it makes society visible as a social totality that is politically instituted’ (Orléan 2005). The question, however, is how can we think this political institution of money? It is evident that monetary choices and policies are politically contentious, for example because they have distributive effects. The imposition of the gold standard, for instance, tends to privilege creditors over debtors and inflicts forms of suffering upon
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specific social groups (Orléan and Bourdarias 2002; Polanyi 2001). The determination of interest rates fundamentally impacts upon relations between creditors and debtors, relations between classes and between regions in the world (Duménil and Lévy 2004). If our aim is to investigate the dimension of ‘the political’ in money, however, we should go one step further than this. The claim is that in money, as an institution, the fundamental ethical and political principles of a society are at stake. The crucial question is to which extent this stake, through specific monetary representations, can become visible, debatable and contestable. What is behind this question is an understanding of ‘the political’ based on the work of the French philosopher Claude Lefort (Lefort 1986, 1988). Strongly simplifying his thought, it could be stated that society, for Lefort, only exists on the basis of a set of representations (a ‘symbolic order’) through which it acquires its meaning and unity. These representations are constitutive of society, and of how citizens understand themselves, their relation to each other and to society at large. They thus have a profoundly political thrust. Drawing the now well-known distinction between ‘politics’ (a social domain composed of institutions such as the government, parliament etcetera) and ‘the political’ (the symbolic order which is constitutive of a particular form of society and its self-understanding), Lefort draws attention to the possibility for the symbolic order of a society to be depoliticised. This happens in various ways in predemocratic or totalitarian societies (Lefort 1999; Flynn 2005): in the latter, the symbolic order was configured in such a way that it rendered its own political nature invisible, by suggesting for example that society is grounded in nature, the inevitable course of history or the homogeneity of the people. It is when society is represented as having an ultimate foundation that its democratic nature is undermined, according to Lefort (Marchart 2007). Characteristic for a democratic society is that it fully acknowledges its own political and therefore contingent or indeterminate nature. This is the result of its symbolic institution and of the way this symbolic order becomes manifest on the scene of politics proper. Concretely, for example, the distinction between majority and opposition in the parliament provides society with a very specific image of itself. It shows that society is divided and that contestation or conflict is legitimate. As a result of this, society remains an open question to itself, and this is in essence what defines democracy, according to Lefort. Interestingly, money can be approached from a Lefortian point of view to the extent that its institution relies on a symbolic order, or a set of representations with a deeply political significance such as community, public authority or certain fundamental ethical-political values. Moreover, as Georg Simmel has shown, money is in itself a crucially important symbol in our modern societies, which generates a particular kind of self-understanding of society and its members. Money is not a thing, but a way to look at things, to compare them, to represent them, as David Graeber has argued (Graeber 2011, 52). Looking at money (understood in a broad sense) gives one an image of what kind of society we live in. As Joseph Schumpeter stated: ‘The condition of the monetary being of a people is a symptom of all its conditions. Everything a people wants, does, suffers and is, is reflected in its monetary system.’ This paper therefore focuses on how a particular set of representations, a symbolic order, is constitutive of money, and how these representations generate a particular self-understanding of society by displaying its fundamental ethical and political guiding principles. Crucially, the question is to what extent this symbolic order surrounding money can be recognized as genuinely political: to what degree does it make its political character visible, and does it allow for money to become the object of contestation and conflict? These are crucial questions when we are interested in assessing the democratic nature of societies in which money has such an important role to play.
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I will argue that (current) money is ambiguous from the point of view of the political. On the one hand, it cannot stably exist without the visible support from public institutions and a set of political representations. On the other hand, however, money seems to need to appear as neutral and non-political to a certain extent: without this apparent neutrality, its function as a means of exchange can be hampered. This ambiguity is constitutive of money: on the one hand, money is inevitably a relation of power, and yet, on the other hand, this power should be concealed for money to function properly. Crucially, while it must be made visible that society, through its political institutions, has the political will to support money (which became manifest during the eurozone crisis, epitomized by key speeches of ECB president Mario Draghi), money may not become an object of political contestation. In this paper, I will first reassess the debate on the nature of money from the specific vantage point of its relation to the political. Drawing especially on Georg Simmel and institutionalist scholars of the French Regulation School, who consider trust to be essential for money, a quasi-Lefortian analysis will be developed of the political institution of money. Subsequently, I will analyse the limits of the potential politicisation of money, especially focusing attention on the way trust and distrust are expressed. This will allow us not only to show the ambivalent nature of money with regard to the political, but also to reflect on politics of the euro and to critically reconsider so-called ‘credit’ theories of money.
1. TWO PHILOSOPHIES OF MONEY The debate on the nature of money has been famously structured around the opposition between realist, metallist or commodity theories of money on the one hand, and chartalist and institutionalist theories on the other. According to the first, dominant approach, money arose out of the deficiencies of barter. In order to facilitate exchange, it is argued, one commodity was selected to become the general equivalent, money. The value of money then derives from its value as a commodity. This is the standard view defended by many classical and neoclassical economists but also by marxist authors, admittedly with many variations (e.g. Moseley 2005; Mandel 1990; Samuelson 1970).1 The consequence of this view is often that money is not considered so important at all: money is a mere means to facilitate exchange, the latter being primordial from an economic perspective. It is no coincidence, therefore, that many orthodox economic theories often downplay the role of money, as they consider it to be ‘neutral’, or as a ‘veil’ behind which the real relations of exchange are hidden (Smithin 2000, 1). Money is then a mere expression of a more fundamental economic reality, namely value, which can exhaustively be understood in terms of relations of exchange. No reference to politics is needed to understand money in this framework. Chartalism, in contrast, takes a wholly different view of money. Charta being Latin for token, money consists merely in ‘symbolic “tokens” of abstract value’, according to this approach (Ingham 2005, 160). In other words, money is a social or political convention. The notion of chartalism was first coined by Georg Friedrich Knapp, who in his The State Theory of Money stated that ‘money is a creature of law’ (Knapp 1924, 1). Knapp, who was part of the German historical school in economics, argued that money arose because states imposed a uniform system of measure that was especially used for taxation: that which the state accepts as payment of taxes, is
1 While stressing that ‘the commodity form of money is certainly fundamental, not least because it is the
form in which money originally emerges in commodity exchange’, Lapavitsas argues for example, from a creative marxist point of view, that money should not ‘essentially’ be a commodity, but that it can take various forms (Lapavitsas 2005, 400).
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money. The notion of acceptation is crucial here: it underlines that it is the state which decides upon what constitutes money. This conception of money also understands money as being closely related to debt: ‘(t)he key concept is debt,’ Randall Wray writes, ‘the ability of the state to impose a tax debt on its subjects’ (Wray 2000). By imposing tax obligations to its citizens, the latter acquire a debt towards the state, which they have to pay in the unit of account recognized by the state. The use of money as a means of exchange is then only secondary to its use as a measure of account and a means to pay taxes. The consequence of this view is that public authority plays a crucial role in guaranteeing money. Stretching from Adam Smith, via Georg Friedrich Knapp to John Maynard Keynes, the chartalist approach has also been influential among many theorists who have tried to think money as a social relation or an institution, which is not strictly produced by the state, but which is certainly not a commodity either. Chartalist arguments have for example influenced the work of Max Weber and Georg Simmel, and are still being referred to by contemporary sociologists of money, heterodox economists or philosophers who try to think the institutional, social and political dimensions of money (e.g. Ingham 2005, 155; Mellor 2010; Hutchinson, Mellor, and Olsen 2002). What is interesting from the point of view of money’s relation to the political, is that these approaches reject the idea that money is neutral, in contrast to metallism. If money is not a commodity, political and institutional choices will have to be made concerning what will be accepted as money and how the money system will function. Money has effects, and can therefore not be considered as neutral (Keynes 1973, 408-409). Evidently, the ‘effectiveness’ of money can be studied from different angles: one can investigate it from the point of view of economics, to show how money and money markets actually function, but one can also focus on the political and institutional side of the phenomenon, and on the normative and political implications of monetary decisions. If money is an institution, and has its own effectiveness, it becomes possible to ask the question whether there are different ways to institute money, and what different effects this can have. As Bernard Lietaer states: ‘money is not neutral, i.e. different money systems are now possible’ (Lietaer 1999).
2. BEYOND METALLISM AND CHARTALISM Both metallism and chartalism have been subject to fundamental criticisms. First, the metallist or commodity theory of money seems to rely on a petitio principi. Indeed, stating that money is a commodity because it has value, and can therefore be exchanged for other commodities, already presupposes that there exists a (monetary) standard with which value can be measured (Mellor 2010, 10). Because of their focus on one of the functions of money, namely to act as means of exchange, metallists tend to downplay the function of money which is really fundamental, namely to act as a standard of measure (Keynes 1930, 3). Chartalism, on the other hand, also has its limits. According to authors such as Knapp or Innes, money has value because the government makes it legal tender (Wray 2004, 234). However, one thing is for the state to set the standard of price, another is it to determine money’s actual value (Lapavitsas 2005, 398; Orléan 2011). Moreover, the mere imposition of money as such can be problematic. An example given by André Orléan and Frédéric Lordon is illuminating in this regard. They point to the attempt by the revolutionary French state in December 1789 to emit so-called ‘assignats’, which were actually a kind of bonds based on the assets of the clergy that were about to be sold. Due to their over-emission, the French massively rejected this new type of money. Despite the threat to impose the death penalty on those who refused the assignats, the latter were massively rejected and depreciated with about
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97% (Lordon and Orléan 2008). Money thus partly escapes the mastery of the state, precisely because it needs the consent of the whole group of money users (Orléan and Bourdarias 2002). Finally, money is worthless if there are no goods to be exchanged (Cuillerai 2001, 151). Money, therefore, cannot be a mere instrument controlled by the state. In order to move beyond this opposition between metallism and chartalism in a way that makes it possible to address money’s relation to the political, Joseph Schumpeter’s interpretation of this debate provides a good starting point. Schumpeter makes a distinction between theoretical and practical versions of metallism and chartalism. ‘By Theoretical Metallism’, he states for example, ‘we denote the theory that it is logically essential for money to consist of, or to be “covered” by, some commodity so that the logical source of the exchange value or purchasing power of money is the exchange value or purchasing power of that commodity, considered independently of its monetary role’ (Schumpeter 2006, 274). Practical metallism, in contrast, means the ‘sponsorship of a principle of monetary policy, namely, the principle that the monetary unit “should” be kept firmly linked to, and freely interchangeable with, a given quantity of some commodity’ (Schumpeter 2006, 275). He makes a similar distinction between theoretical and practical chartalism. Schumpeter’s crucial point is that the theoretical and practical versions of both metallism and chartalism do not have to go together. One can perfectly be a theoretical chartalist and a practical metallist, for example. Of course, there is a tension in Schumpeter’s analysis. Being a practical metallist and a theoretical chartalist can be a coherent position: one can perfectly imagine that the state practically institutes money in such a way as to link it to a commodity or make it appear as a commodity. But if one recognises that certain (policy) practices (co-)determine the eventual shape of money, it becomes difficult to uphold theoretical metallism, for example. With his distinction between practical and theoretical versions of metallism and chartalism, Schumpeter actually subverts this very opposition between two philosophies of money. We can no longer understand money without paying attention to this underlying process through which money is constructed or instituted, a process which Schumpeter partly grasped by his acknowledgement that there is a ‘practical’ dimension behind money. We then have to look at how money is instituted, through specific practices, and more in particular, representations which govern these practices. If that is the case, the theories of metallism and chartalism lose their original meaning: they are no longer ontologies of money, but they become part of the very process through which money is instituted. In other words, they become part of the symbolic order which informs the practice of instituting money. Metallism then no longer means that money is neutral, but that money should be made neutral. Inevitably, metallism and chartalism thus acquire a normative and political dimension. The point we are arriving at, is an approach to money that has some similarities to how Claude Lefort approaches political affairs. For Lefort, one cannot understand politics merely as a set of things, mechanisms, processes which take place within the specific social domain which we are used to calling politics or the state. The really interesting question is how this domain came into being as such, in other words, how it was instituted, and what is the role in this of particular representations which he referred to as ‘the political’. From a Lefortian perspective, theories of politics, even if they are formulated in a very ‘scientific’ fashion, are never innocent or neutral: they partake of the processes through which political affairs are represented, given meaning and instituted. As will be elaborated below, something similar is at stake with regard to money, I contend: a purely objective account of money is not possible, precisely because money is not an objective thing, but is instituted. It only functions as
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money to the extent it is given meaning by a set of representations. The latter do not have to coincide with representations which refer to or take place within the domain of the state, even though political authority certainly plays a key role in the institution of money.
3. INSTITUTING MONEY From the perspective of how money can be instituted and how this process of institution can be recognized as political, we can conceive of the commodity and state theories of money as extreme positions. When money is represented in terms of the first theory, it tends to become completely neutralised and depoliticised. Money is then instituted without taking recourse to representations of community, society, nation, state etcetera, but merely in individualist and contractual terms (Orléan 1998; Pays 1991). It is constructed and treated as if it were a commodity next to others. If chartalist representations predominate, however, money seems to become very politicised. In its most radical version, money is instituted in such a way that it appears as an almost exclusive affair of public authorities. Mary Mellor, for example, advocates seeing “money as a socially constructed and publicly authorised resource that should be subject to democratic control” (Mellor 2010, 7). If we look at money from the point of view of how it is given meaning through representations, a range of possible modes of the institution of money becomes possible in-between these extremes. Crucially, the shift between different such modes entails political struggles. Significantly, for example, Keynes understood that the introduction of his monetary and financial visions amounted to the ‘euthanasia of the rentiers’ (Keynes 1951). This formula, which summarised Keynesian monetary and financial policy, was of course a deeply political slogan. On the other hand, during the last decades we have witnessed a return to depoliticised modes of instituting money under the influence of neoliberalism (cf. Orléan 1998). It is interesting to see how this shift, too, has been accompanied by a contestatory and political discourse, one which openly denounced the power of the state in the institution of money as a form of ‘financial repression’. Peter Gowan suggests advocates of the new neoliberal approach to monetary and financial affairs conceived of their struggle as a real ‘liberation struggle against financial repression’ (Gowan 1999, 14). Inevitably, even the struggle for a depoliticised representation and institution of money is ultimately a political struggle. In order to further develop this account of money as being politically instituted and given meaning (and potentially depoliticised) through a set of representations, I will make use, in the next sections, of crucial arguments developed by Georg Simmel and the French Regulation School. I will show the central importance of the concepts of institution, representation, symbolisation and trust for thinking money, and for better understanding the conditions of the politicisation and depoliticisation of money.
4. MONEY AND REPRESENTATION: GEORG SIMMEL Why do we accept money? That is a central question for Georg Simmel (Simmel 2005). Fundamentally, money is based on trust, because in the last instance, all money is a form of credit, based on a promise (Simmel 2005, 177). Credit etymologically comes from the Latin verb credere, to believe. For money to function, it is important to be persuaded that it has value, and beliefs and representations play a crucial role in this regard.2 Today, we often tend to reduce the notion of credit to
2 Geoffrey Ingham uses the term “working fictions” when speaking about such representations. He points
to representations which naturalize money by relating it for example to the gold standard (as a result of
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‘debt’, but giving someone credit actually has a broader meaning than to indebt someone. It is this broader meaning which is important for a theory of money based on trust. Which beliefs or representations are relevant for producing the necessary trust in money? The functioning of money does not so much rely on trust in the individual economic actor with whom one is involved in acts of exchange. What makes it reasonable to trust and thus to accept money as a means of payment is the question whether all other members of society will accept money, and this regardless of whether money is gold or a piece of paper. The general acceptance of money is not the result of its acceptance by individual economic actors, but renders the latter possible in the first place. It only makes sense to accept money if all others do the same (see also Cuillerai 2001, 331; Ingham 2005, 156). In other words, money cannot be merely understood in terms of the exchange relations between individual economic actors: there is always a third agent present in each interaction, namely society as a whole. This ‘holistic’ dimension, which is crucial in Simmel’s analysis of money, sets the latter apart from approaches based on methodological individualism. The important question, of course, is what is this third agent exactly? How does it makes its presence felt, or how is it represented? And how does this generate the necessary trust?
5. MONEY AS CREDIT, MONEY AS COMMAND Within Simmel’s framework, the representations which generate the necessary trust in money are representations of the community of money users as a whole. Importantly, the third agent required for money to operate is not necessarily the state, but the community or society as such (which of course needs to be represented, and the state obviously plays a central role in this regard3) (Simmel 2005, 176). Money is not reducible to state policies, Simmel argues. In an often quoted passage in The Philosophy of Money, he states: ‘When barter is replaced by money transactions a third factor is introduced between the two parties: the community as a whole, which provides a real value corresponding to money. (…) money is only a claim upon society’ (Simmel 2005, 176). For the project of this paper, the idea that money is ‘a claim upon society’ is of crucial importance. This enigmatic formula brings us to the core of our problematic: the ambiguous place of the political (understood as the symbolic order in terms of which society is given meaning) in the institution of money. There seem to be two layers in this formula. The first is even better expressed in another passage of The Philosophy of Money, where Simmel makes a similar argument, stating that ‘money is a transfer to the achievements of others’ (Simmel 2005, 344). The German term translated here as ‘transfer’ is ‘Hinweisung’, meaning ‘allusion’. Money can only function when accompanied by a reference to the presence of others, of a community of money users. In order to function as money, it somehow requires the presence of society as a whole, and its capacity or readiness to accept money. Of course, society is never literally present as such in any economic transaction. Instead, trust in money is a product of certain representations of society.
which money appears as a commodity), to the rethorics of economic theory, the central bank and its rituals, and to credit ratings (Ingham 2005, 170). 3 The representations instituting money can in principle lack any relation with the state or the sphere of
politics proper. On the basis of Lefort, it could be argued that this separation between instituting representations (the political) and the sphere of politics is a crucial cause of depoliticisation (the process through which the political nature of instituting representations becomes invisible).
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Second, however, there seems to be more at stake than a mere ‘reference’ (Hinweisung) to others or to society. The notion of a claim upon society suggests that there is also a power relation implied in money. The ‘claim upon society’ is a translation of the original German term ‘Anweisung’, meaning ‘instruction’, ‘command’, or ‘direction’. In other words, she who holds money, makes a power claim, obtains a commanding power over society, for example a command over resources (cf. Mellor 2010, 14). Credit theorists of money have used this and other passages in Simmel to underline the similarities between money and debt (e.g. Ingham 2004). Indeed, both can be conceived as being at the same time relations of trust and of power. Yet, as I will argue below, the basis of trust and the political operation of power is profoundly different in money and in debt. Simmel’s use of the analogy of debt to analyse money can become confusing in this sense. What is relevant at this point, however, is that this analogy helped him to point to the dimension of power and obligation involved in money. Just as the indebted person has an obligation towards the creditor, the guarantee of money by society also involves ‘an obligation for the community. The liquidation of every private obligation by money means that the community now assumes this obligation towards the creditor’ (Simmel 2005, 176-177). In other words, for money to function effectively, society should somehow answer the claim made by each individual agent when the latter wants to use her money as means of payment. Or, better, individual agents assume that this will happen. As Gianfranco Poggi states in his book on Simmel: ‘Each member of the collectivity who receives or spends money implicitly assumes that the whole collectivity takes cognizance of and stands ready to sanction his or her transactions’ (Poggi 1993, 139). Crucially, the power that money is thus supposed to yield over society is not (merely) factual power, but it is considered legitimate within the money system, just as the power of a creditor over a debtor is more than brute, factual power. This legitimacy is constructed through (monetary) representations. When we look at the conditions under which the political dimension of the institution of money can become visible, the formula of money as a ‘claim upon society’ leads to ambiguous conclusions. As will be further developed below, the two dimensions of the formula have a different relation to the political. On the one hand, in order to create the necessary trust in money, society and its willingness to uphold its ‘obligations’ with regard to money should somehow become visible through specific representations. Public institutions play a central role on this level: they (should) express or represent the political will of society to maintain and reproduce the basic social and economic institutions which allow money to operate and garner the necessary trust. On the other hand, money, as a claim upon society, involves the exercise of a power over society. This has important social and political consequences for the institutional set-up, the policies or representations governing society. The point, however, is that this claim almost never appears as political in itself. The political aspect of the claim almost never manifests itself as such, as the claim merely appears as the offer of money in exchange for a commodity. The claim, in other words, becomes visible merely as a private act of buying or selling, and not as an act of power. It is only through a complex effort of decipherment or unmasking that forms of power underpinning prices might become visible. When looked at from the point of view of the political, the notion that money is a claim upon society thus entails a fundamental asymmetry. While the ‘obligation’ of society (which is the counterpart to the claim money makes upon society) principally become visible through political acts by the state (or public institutions in the international arena), this is always an obligation towards claims which appear as private and never manifest themselves in political terms, even though they have social and political
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implications. In order to generate trust, in other words, society must be made politically visible through political institutions, while the claim upon society must not. The latter can and perhaps even should remain private, and does not have to justify itself in political terms.
6. TRUST AND PUBLIC AUTHORITY In order to generate the necessary trust to make sure money can function properly, there must be a ‘diffuse mental and moral atmosphere’, Gianfranco Poggi argues in his study of Simmel (Poggi 1993, 149). With this, he refers both to a ‘society’s political arrangements’, and to money’s ‘moral standing in the eyes of the people’. Both aspects relate to how society, its ethical and political principles and the place of money in it are made visible and represented. It can be argued that it is especially in modern money societies that this visualisation happens through political institutions. In many premodern societies, specific forms of money were used which were instituted in a very particular way: they figured within an overarching, ‘cosmological’ worldview which gave meaning to all social facts, including money. In modern societies, in contrast, which are characterised by contingency and fluidity, the institution of money requires the visualisation of the community or society through political means, as the latter are no longer considered natural entities. This usually happens through the state: as a result, it becomes possible for money to acquire a visibly political dimension.4 Unsurprisingly, a large part of the literature on money and trust retains a strong focus on public institutions, and therefore maintains strong links with the chartalist approach. Mary Mellor, for example, states: ‘Effectively when we say people trust in money we mean they are trusting in the organisations, society and authority that create and circulate it, other people, traders, the banks and the state’ (Mellor 2010, 11). Money acquires a public nature because its use relies on assumptions concerning the behaviour of others, and a basic function of public authorities is to guarantee and make visible that these assumptions are warranted. Crucial for money is therefore ‘a public authority which effectively backs up and sanctions money with its own distinctive resources’ (Poggi 1993, 156). As Simmel states himself: ‘(i)t seems clear to me that the basis and the sociological representative of the relation between objects and money is the relationship between economically active individuals and the central power which issues and guarantees the currency’ (Simmel 2005, 176). In most money systems (except systems such as LETS for example), trust is impersonal: that is why it needs instances such as legitimate political institutions who can help produce trust. The market cannot do that, as Ingham argues: ‘the market is not in the business of trust building and the history of successful money is the history of successful states’ (Ingham 2005, 170). At the same time, however, there is more to trust than what public authorities can realise. As we have seen, even Simmel, who acknowledges the important role of the state, stresses that money is not merely the creation of the state.
7. THE AMBIVALENCE OF MONEY ‘Nor commodity, nor state, nor contract, but trust’, thus Orléan and Aglietta summarise their position, which is inspired by Simmel, but especially draws on René Girard, French anthropology and their own economic research (Aglietta and Orléan 2002, 1). In their attempt to move beyond metallism, chartalism and contractualism, they argue
4 For a similar, Lefortian analysis of the difference between the political in premodern and moderns
societies, see (Flynn 2005).
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that money is profoundly ‘ambivalent’. Interestingly, they develop a theory of the necessary political institution of money, while acknowledging that this institution can also conceal its political nature and manifest itself in a depoliticised way. Similar to Simmel, Aglietta and Orléan and other French regulationists argue that in order to garner the necessary trust, society or the community of money users as a whole should somehow be visualised or imagined. This ideally happens through a set of representations that cannot be reduced to forms of instrumental rationality or to utility maximizing individuals (Cuillerai 2002, 48; Orléan 1992). The basis of trust in money resides in ‘the capacity of money to represent the values to which a community of exchangers adhere’ (Orléan 2001). Therefore, the crucial question is that of ‘the nature of the representations through which individuals think the presence of the institutions and arrange their relation to them’ (Orléan 1992, 93). For Orléan and Aglietta, money is a symbol, in which ‘the whole of the group (…) founds its expression’ (Orléan 2005, 5). This entails a moment of visualisation of the community as a totality which is structurally equivalent to the place of sovereignty. As Aglietta and Orléan state, ‘(w)e call monetary legitimacy the whole of complex processes through which money is fully accepted within a community. (…) It supposes the constitution of an exteriority where the community is expressed as a totality, as a hierarchised whole of values. It is in the relation to this exteriority that money grounds its legitimacy’ (Aglietta and Orléan 1998, 11; 1995). What this exteriority is, remains vague, but it seems to be a symbolic place where certain things can become visible through specific representations. In this sense, their analysis comes close to the Lefortian framework, whereby it is also essential that society is provided with an image of itself through a set of representations on the scene of politics. According to the French regulationists, (monetary) representations do not merely institute money, but at the same time express society as a totality (Cuillerai 2001, 65). As a ‘total social fact’ (Orléan 1992, 90), the institution of money is not merely an economic affair, but it has moral, political, anthropological and cultural ramifications. In a way, the symbolisation of money shows us the kind of society we live in. Following this idea, Orléan and Aglietta also engage in comparative historical and anthropological research on different money systems (e.g. Aglietta and Orléan 1998). ‘In the monetary rules’, they argue, ‘a global social project is made visible where the place of each is specified and the goals to be attained are determined’ (Aglietta and Orléan 2002, 116). They show for example how the individualistic representations of money undergirding a modern market society profoundly differ from monetary representations instituting a gift logic in so-called ‘traditional’ societies. Even though Aglietta and Orléan pay a lot of attention to the notion of sovereignty in monetary affairs, the role they attribute to political institutions in the institution of money remains ambiguous, which is the consequence of the ambivalence of money itself. On the one hand, these institutions visualise the project and values which buttress money, while at the same time, Aglietta and Orléan stress that if money fundamentally relies on trust, the state or public authorities cannot have the last word. The institution of money entails more than a sovereign act by the state. Aglietta and Orléan distinguish three levels of trust in money (Aglietta and Orléan 2002, 104). The first level is methodical trust, which is based on the repetition and regularity of everyday practices of exchange. In normal circumstances, methodical trust suffices: we know that our fellow citizens accepted our money yesterday, so we assume they will tomorrow. It is especially in times of crisis that the other two levels of trust become important. The second level is hierarchical trust, which relies on the public authorities that buttress the money system. The third level, however, goes beyond the state or public authorities: the authors call it ethical trust, but do not define it very precisely. Fundamentally, it is trust in the doctrine that underlies monetary policies, and that is
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connected to the ethical-political project of society, its conception of the common good.5 In the last instance, trust in money is dependent on the capacity of money to represent the values to which a community of exchangers adheres (Orléan 2001, 26). In an individualist society, Aglietta and Orléan argue for example, the ethical source of trust in money resides in the fact that the money systems facilitates the maximalisation of individual well-being (Aglietta and Orléan 2002, 212). The problem is that this notion of ethical trust leads to ambiguous standards to evaluate, question or contest monetary policies. The paradox is the following: on the one hand, ethical trust is trust in the fundamental ethical-political project of society, and it therefore has an irretrievable collective and political dimension. On the other hand, however, when the substance of this doctrine consists of individualistic values, as is the case in modern money societies, economic actors will not evaluate their trust in money on the basis of an assessment of the legitimacy of the political project underpinning current society as such, but in terms of their own individual interests. Shared or collective ethical-political representations are required for money to garner sufficient trust, but the evaluation of their effects happens in terms of self-interest. The question which Aglietta and Orléan do not ask, but which is crucial for the topic addressed in this paper, is the mode in which distrust is expressed. Precisely because hierarchical trust is not the end of the story, but requires a further ethical context, which in modern societies has a strongly individualistic orientation, the expression of (dis)trust primarily happens in a non-political mode.
8. EXPRESSING (DIST)TRUST According to Aglietta and Orléan, money is profoundly ambivalent. They describe this ambivalence as ‘the hierarchised coexistence of an individualist point of view, namely money as a financial asset, and a holistic point of view, money as an institution’ (Aglietta and Orléan 1998, 371). Evidently, the individualist point of view is rendered possible by the way money is instituted in modern society, namely as a means for exchange between individual market actors who are supposed to pursue their self-interest. Paradoxically, this institution is inevitably political in Lefortian terms (as it entails a symbolic order instituting social relations in a particular way), while the very mode in which this institution takes place, namely through individualistic representations, makes this political dimension invisible. It is unsurprising that the expression of distrust on behalf of economic actors will then also adopt individualistic and non-political forms. According to Geoffrey Ingham, the judgment of the credibility of monetary representations first and foremost takes place through the very acts of buying and selling: ‘through the buying and selling of currencies the global money markets deliver their verdicts on the credibility of the “working fictions”’ (Ingham 2005, 170). In other words, the expression of trust or distrust takes place in a way which makes it unrecognizable or invisible as being political. When financial markets stop buying European bonds or flee away from the euro, they somehow express distrust in the euro, but one can hardly compare the financial markets with ‘public opinion’, as is sometimes done in the financial press, which often presents the financial market as if it were voicing an opinion, or as if investing is an equivalent of voting. The range of possible manifestations of distrust in a currency such as the euro remains extremely limited: it is to invest or not to invest, to buy or not to buy.
5 Reframed in Lefortian language, in this difference between hierarchical and ethical trust resides the
separation of ‘the political’ (the symbolic order which expresses fundamental ethical-political values) from politics (e.g. the state), which is the ground for depoliticisation. To the extent that this difference is necessary, depoliticisation is unavoidable.
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Concretely, (dis)trust becomes visible in the price, which goes up or down. A decreasing value of the euro, however, conveys only limited information about economic actors’ motives for distrusting and exiting the euro. There is only one price, which is the resultant of many private decisions. The unicity of this price is at odds with the plurality which characterises public opinion formation. Political division can never appear under these conditions, and that is also why the ‘claim’ money lays upon society cannot easily be expressed in a political way. Another expression of (dis)trust is provided by credit-rating agencies. Again, this happens through thoroughly depoliticised and technocratic representations, even though fundamentally, rating the creditworthiness of a country entails far-reaching forms of political judgment. Whether Greece will be able to pay back its debts crucially depends on the ability of its government to keep down or repress social unrest, and on the ability of ‘eurozone governance’ to overcome political divisions and provide effective solutions. Traders similarly make political judgments when investing: a fund manager who buys Greek credit default swaps probably bets that strikes and protests will be strong enough to hinder austerity policies, thus bringing debt default closer. Each time, an underlying political judgment is expressed or becomes visible in a non-political mode. Furthermore, the expression of distrust does not take place within political institutions, on the visible scene of politics. It rather happens through a multiplicity of private decisions on the market. In order to react to this, public institutions then have to decipher the meaning of what is happening (e.g. price fluctuations), and often this is presented as a technical affair. Nevertheless, such depoliticised expressions of (dis)trust convey a deeper political meaning. Fundamentally, the loss of trust in money means one loses trust in the commanding capacity of money and in the capacity of society, through its social and political institutions, to meet its obligation towards the claim money makes upon her. Framed in more general terms, there is a difference between how in a democracy, political sovereignty in the narrow sense of the term is put into question by citizens, and how monetary sovereignty is ‘contested’ by market actors. Political sovereignty entails imposing certain decisions, while raising one’s voice is the best way to contest these decisions. Monetary sovereignty, in contrast, is usually not contested through voice, but through exit, to follow Albert Hirschman’s famous distinction (Hirschman 1970). An example given by Orléan illuminates this difference (Orléan 1998, 371-372). At the end of the 1980s, the Israeli government advocated the dollarisation of the economy as a response to rampant inflation. The threat of this loss of sovereignty sparked a wave of public protests. At the same time however, the dollarisation of the Israeli economy took place in actual facts, as a result of private decisions by economic actors who wanted to safeguard the value of their assets: the real expression of distrust thus happened through non-political, invisible means.
9. MONEY AND THE POLITICAL: A DOUBLE BIND Of course, the capacity of actors to express their distrust in a non-political way crucially depends on whether the rules and institutions of markets allow them to do so. In other words, the more markets are free and capital controls are lacking, the easier it becomes for money owners to ‘vote with their feet’. Yet, the example of the assignats in revolutionary France shows that there is also something more fundamental at stake: even when a monetary system would be tightly controlled and regulated, a mere sovereign decision cannot simply impose money upon society. On the contrary, exactly because money relies on trust, the sovereign can never have the last word, for the simple reason that one cannot impose trust. Trust can be supported by a set of (political) representations, as I have argued, but in the end, trust has no ultimate foundation. Trust is self-founding: it is by having trust in money that the conditions for
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trust as such come into being (Cuillerai 2002, 45).6 Even if political authorities can play an important role in creating the preconditions for trust in money, in the end trust relies on a kind of performance of consensus, a logic of co-producing trust which cannot be grasped merely in terms of market contractualism nor in terms of state sovereignty. As Victoria Chick states, ‘(t)here is a mutuality of state and social support of money in the modern Western economy” (Chick 1992, 142). The exact role and extent of sovereignty in monetary matters is thus a complicated issue, with which the French regulationists also struggle. Orléan and Bourdarias state for example that ‘(t)hrough the play of money, the merchant group constitutes itself into sovereign’ (Orléan and Bourdarias 2002). They thus suggest that sovereignty does not reside in the state itself, but in the group of money users. Similarly, Marie Cuillerai argues that monetary and political sovereignty tend to become separated (Cuillerai 2001), while Geoffrey Ingham states that ‘(i)n capitalism (…) monetary sovereignty is shared between the state and the private banking system’ (Ingham 2005, 166). Evidently, if this can still be called sovereignty at all, the sovereignty involved in the process through which public and private actors co-produce money will tend to be an invisible and depoliticised kind of sovereignty. Of course, a crucial question is what kind of consensus is required for money to garner trust, and who is a relevant actor for expressing trust. As Victoria Chick states, ‘(th)here are major acceptors who influence the course of monetary evolution’ (Chick 1992, 142). While normal citizens can of course also withdraw their money from banks, or exchange their money for gold, it is especially bigger (systemically important) actors whose expression of distrust is relevant. Crisis situations, situations of distrust, display a strange kind of asymmetric conflict between public authorities that try to restore trust through political acts, and (powerful) private actors who express distrust in a non-political mode. Fundamentally, this asymmetry forces public institutions not to allow much space for the politicisation of their own interventions: they have to show the political will to support the currency, without allowing for a genuinely political space for debate and conflict concerning money. The actions of the European Central Bank (ECB) during the eurozone crisis illustrate this rather well. A turning point in the crisis, it is generally admitted, was Mario Draghi’s speech on 26 July 2012, when he stated the ECB would do anything necessary to support the euro. This expression of political will did not allow for a real politicisation of monetary decisions, however, in the sense of opening a space for political debate and open disagreement within the institutions involved in monetary governance. The ECB especially manifested its intention to support the euro, and thus to take on the obligation that society has towards the claim which money lays upon it. The ECB is often portrayed in technocratic terms, as uniquely oriented to fighting inflation, is formally independent from political institutions, and is characterised by secret voting. Therefore, it is part and parcell of a far-reaching attempt to depoliticse money (Orléan and Cuillerai 2003). Yet, the partial depoliticisation of money is not merely a contingent result of neoliberal policies: as suggested above, a certain depoliticisation might be intrinsic to the ambivalence of the very institution of money itself. Typically, important monetary decisions (such as devaluations) happen overnight, come unexpected and are represented in technical or technocratic terms. To a certain extent, it could not be different, if one does not want to risk capital flight, for example. While such occurrences are often described in economic terms, they can also be represented in political terms: the non-political expression of money’s ‘claim upon
6 Trust thus has to be thought in post-foundational (Marchart 2007) terms: trust does not have an ultimate
foundation, but yet it must appear as if it is founded, e.g. on the state.
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society’ (the decision to buy or not to buy, to invest or not to invest) forces a certain depoliticisation upon monetary decisions of public institutions. In a way, it tends to ‘crowd out’ the political appearance and representation of money society as such. We end up with the following paradox: on the one hand, money requires a political or sovereign moment through which the (political) will of a society to support money is rendered visible, while on the other hand, this political moment can never be politicised in the sense that open debate or conflict become the modus operandi of monetary governance as such. Money requires the political affirmation of the totality of society, without allowing this totality to be put into question in a political or democratic way. It might be objected that in the context of the eurocrisis, money has become politicised to a certain extent. In Germany, for example, a huge debate has arisen on how to conduct monetary policies, and new actors have started to contest European monetary policies. Significantly, however, this debate was especially situated within civil society, amongst what Nancy Fraser calls ‘weak publics’, who only engage in opinion formation and not in decision making (Fraser 1996, 132). Amongst ‘strong publics’, who also effectively (co-)decide, this debate and the political divisions it implies have to remain subtle and invisible. The ritualistic and consensual discourse of central banks testifies to this: few central bankers would consider it a good idea for a central bank to act as if it were divided between a majority and an opposition.
10. BEYOND THE CREDIT THEORY OF MONEY
If we look back, from this vantage point, to credit theories of money, we observe that the latter should be nuanced or amended. Geoffrey Ingham has forcefully argued that “(m)oney is a social relation of credit and debt denominated in a money of account” (Ingham 2004, 12). He describes money as a relation of debt and credit between individual economic actors: ‘A coin (transferable credit) is handed over to cancel the debt incurred in the contract to buy a newspaper and is accepted because it is a credit for the next purchase in the same sovereign monetary space. The distinction between “money” and “credit” is false, as Simmel explains’ (Ingham 2006, 266). In The Philosophy of Money, Simmel indeed speaks about money in terms of credit. However, there is a significant difference between money and debt properly speaking, as a result of which we cannot uphold a strong understanding of money as credit. Perhaps the relation of money to credit should be understood as one of the typical analogies Simmel elaborated in this work, but which cannot be understood too literally. Crucially, Simmel does not speak about relations between individual economic actors when pointing to the credit-like nature of money, but to the relation between economic actors and society as a whole. With regard to money, the object of trust is not the exchange partner, as it is in the debt relation, but society as a whole. The point of the matter is that ‘the political’ is inscribed entirely differently in both types of relations. Trust in money relies on a political moment through which the community of money users is rendered visible as the ultimate support of money, while this political or sovereign moment cannot be ‘politicised’ in the sense that it becomes an object of conflict and open debate. The creditor/debt relation, in contrast, is of a completely different nature. The object of trust is primarily the other partner in the debt/credit relation, and this relation can become the site of politicisation (of conflict, discussion, negotiation) par excellence, which is not the case with money proper. As Carl Schmitt has argued, debt can become a typical terrain for the formation of friend/enemy groupings: the distinction between creditor and debtor has to a large
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extent undergirded twentieth century international politics (Schmitt 1994). The same cannot be said of money as such.
11. DEPOLITICISING MONEY Money is never neutral, even if it is instituted as a commodity. Even when money is thus ‘neutralised’, it still requires a set of representations which are constitutive for how society conceives of itself (e.g. as a set of individual economic actors engaged in exchange in pursuit of self-interest), and these representations have a political meaning. They are always collective representations which have a wider social and political significance. As the French institutionalists of the Regulation School have argued, behind each type of money, there is a social and political project: money always presupposes ‘a common adhesion to a project’ and it is always ‘based on a doctrine which asserts a certain conception of the common good’ (Orléan and Bourdarias 2002). Money has a fundamentally political dimension, even though this dimension can, and to a certain extent must, become invisible and therefore uncontestable.7 At the same time, money can be more, or less, depoliticised, as Aglietta and Orléan suggest. According to them, the euro is an example par excellence of what they call ‘autoreferential money’, namely money which is a pure instrument for exchange. Still, the creation of autoreferential money remains a political endeavour: ‘(a)utoreferential money should be understood as the expression of a specific project of social organisation which attemps to isolate the economic sphere from each external disturbance’ (Aglietta and Orléan 1998, 380). There remains a collective moment, a set of representations instituting a particular self-understanding of the community of money users, but this self-understanding is no longer political. The collective moment is separated from the representation of political sovereignty proper. The institutional manifestation of this depoliticisation with regard to the euro is of course the formal independence of the central bank, its secret voting, and the strict task which the latter is attributed, namely to fight inflation, as if this were a merely technical issue which does not require political and value-laden decisions. A symptomatic corrolary of this depoliticisation of the euro is its lack of symbols: euro notes do not depict politically significant symbols, but mere architecture. Yet, as already suggested, even depoliticised money relies on a political project, even though it does not completely become visible and subject to political debate and constestation. This project crucially implies the establishment of the euro as a ‘world money’ (Painceira 2012; Lapavitsas 2012; Marx 1982, 240), which requires the increase of Europe’s competitiveness and attractiveness on the world market, and the creation of strong companies and banks which can equal their American counterparts. Although it is difficult to pinpoint the extent to which, in the end, it is possible to completely depoliticise money, the recent eurozone crisis at least provided empirical proof of the importance of political institutions for supporting money. At once, it became clear that money cannot exist without solid backing from public institutions. It turned out that the ECB could not but ‘do politics’: it went far beyond its formal task in order to fight the fire. It made political choices, and it has actually always done so: even if monetary decisions can be represented as being technical and neutral, there is always a political dimension to them (Orléan and Cuillerai 2003).
7 Several authors have pointed to the inevitability of forgetting the political dimension of money in order
for the latter to operate properly in a market economy. According to Frédéric Lordon, for example, money only functions when one forgets the struggle between different money’s that underlies or precedes the choice for the actually existing money (Lordon 2008, 18).
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Although monetary ‘politics’ has been reduced to a minimum, and the private control of the money system was greatly expanded over the last decades, in the end money still appears to be “publicly underpinned by social trust and political authority” (Mellor 2010, 104). The crisis thus unveiled to a certain extent the contradictions of the project for a depoliticised money. The latter is inevitably very weak and vulnerable: on the one hand, the construction of depoliticised money under conditions of market globalisation has severely undermined the fiscal capacity of public institutions, while on the other, it is these institutions which in the end have to buttress the money system, and their only resource is taxation. The vulnerability of the euro is the weakness of its political institutions, its very limited tax basis and its weak social solidarity. Yet, the crisis urged the state to come back in, in several ways. As Elmar Altvater states, ‘(i)n transferring the credit risk from the private to the public sector, the state as the government functions as the ‘borrower of last resort’ whereas the state as the central bank functions as the “lender of last resort”’ (Altvater 2012, 273). Public authorities thus had to support the credit relation on both sides.
12. CONCLUSION Money and how it is instituted ought to be a central concern not only for citizens and politicians, but also for social and political theorists. Money has a crucial relation with how political community and sovereignty manifest themselves. The way money is instituted has profound implications for questions of social justice, as the deepening social cleavages between the core and the periphery of the eurozone currently show. It crucially impacts upon the capacity of societies to take their destiny into their hands and make democratic choices. Therefore, investigating the process through which money is instituted is of crucial importance. The argument made in this paper is complex but nuanced: it is that there is a political dimension in the institution of money, which has tended to be downplayed or rendered invisible during the last decades, although in the recent crisis it inevitably has to come to the fore again. Yet, money can never be fully politicised and become the object of open democratic debate or contestation. The reason is that trust is crucially important for money, and doubts about the trustworthiness of money are normally expressed in a non-political way. It is impossible for political authorities to start a debate or a conflict with these non-political expressions of distrust. Non-political expressions of distrust thus reduce the scope for a genuine politicisation of money and lead to technocratic and/or ritualistic interventions aimed at restoring trust, even though trust can never be sovereignly imposed. At the same time, however, it should be stressed that different modes of the institution of money entail different capacities for states to take and impose monetary decisions: the difference between a strongly regulated Keynesian state and today’s liberated market systems is evident in this regard. Each institution of money entails a different articulation of the logic of political sovereignty and the logic of the commodity. The question for the future is whether this articulation can be significantly altered so as to increase the potential for democratic decision-making on money or to decrease the scope for non-political expressions of distrust. A long tradition of democratic theory, going back to Rousseau who famously stated that ‘finance is a slave word’ (Rousseau 1966), has been sceptical on this issue. However, even though in the last instance, money cannot be fully politicised and democratised, there must be scope for doing better than what is currently the case.
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