a friendly critique- [Klein’s Hard-Money Ideas, Typical of the Left Climate action needs to happen very soon and as we live in a largely monetary economy, it will be via some form of payment that many types of projects to reduce emissions will take place. There will be non-monetary behaviors and transactions based on ethical commitments and other motivations but these will still take place in the midst of a society that runs on the balanced reciprocity of exchanges of goods and services for money. Therefore how climate action integrates economics and money is a critical element to its actual realization. One of the more policy-oriented parts of TCE but highly problematic is Klein’s theory of money and how the climate and energy transition will be financed. A section of TCE [110] and in a supporting article in the Guardian titled “Climate change: How to make the big polluters really pay”, Klein outlines what I would term a “hard-money” view of financing climate action that is pretty explicitly also an imagined retribution against the fossil fuel industries for their multiple wrongdoings. Klein states that governments have exhausted their supply of money in bailing out banks, while the fossil fuel industries have accumulated money from their profitable businesses. Via fines or taxes on fossil-fuel company profits, as major polluters, Klein sketches out via her “polluter pays” program that governments can then finance the climate mobilization and large-scale investments that she recommends. In a seemingly self-contradictory manner, Klein recognizes that governments have the capacity to create money and acknowledges that it would theoretically be possible for governments to institute “quantitative easing for the people” but she explicitly states her preference for extracting money from fossil fuel companies as if to finance government expenditure[110]. Of course, this is well-meaning economic freestyling on a number of different levels made to serve Klein’s, all-too-typical Left and liberal, preference to reduce economics to a simple morality play of victimizers and victims. For one, even within the terms of Klein’s stated policy preferences, Klein skims over that what she is proposing is akin to a complicated carbon tax, though Klein seems to think that this will be simply a matter of “taking” the fossil fuel industries’ ill-gotten gains as punishment. Klein seems to believe that fossil fuel companies will still continue to exist and function to a degree, generating profit and revenues, to in turn supply the money for climate action. In reality, not only would there be legal complexities in terms of corporate accounting and governance associated with such government actions but also the economic behavior of these companies and the fossil fuel sector overall after such fining or taxing is not explained in TCE. More importantly, Klein’s scenario for financing climate action ignores that currency-issuing governments (unfortunately not the Euro-Zone countries) continually create money by spending (and destroy it by taxing), so Klein’s dismissal of fiat currency as second-best to “polluter pays” is a spurious distinction, at least on the national level. If it were possible to follow Klein’s format for climate finance, a tax would be imposed on fossil fuel company profits and then government spending for climate action would occur via fiat as a separate action. Local or regional governments that must use taxes to finance themselves could in part use some version of Klein’s mechanism but this might also expose these more vulnerable jurisdictions to the flight of the industry to more favorable tax regimes in other jurisdictions or a “race to the bottom” by local governments or “tax arbitrage”. The amount of government spending for currency-issuers like the US and Canadian federal governments is, in reality, not dependent in amount upon the amount of taxation. Finally, the profits of fossil fuel companies, though very large in terms of corporate profits ($271 billion in the US and Canada in 2013) constitute not a particularly large slice of total energy industry revenues (somewhere between 5-10% for established oil giants and it appears many fracking operations operate entirely in the red) and are by no means enough to fund large-scale spending in the manner of a war mobilization to fight climate change. Such a mobilization in the US might easily require in the range of a trillion dollars or more of additional government spending in some peak years. The price-tag in the trillions is no problem for currency-issuing governments given the risks and incalculable real and subsequently monetary costs of insufficient or no action. Klein is well-aware of many of the government actions required, and I agree with many of the ideas for spending she puts forward but has chosen an unfortunate and problematic way to “finance” them. I agree with Klein that one aspect of government climate policy should make the fossil fuel business become a less profitable and therefore a less financially attractive business on the way to its downsizing and orderly liquidation. There are many ways to achieve this, including the removal of subsidies, divestment and thereby raising the cost of capital, as well as reducing demand for oil, via a variety of government and other programs and measures including taxation, all of which Klein does or, I imagine, would support. However, utilizing the idea that governments, especially national governments “need” or should prefer to “use” the money in fossil fuel company bank accounts does not ultimately serve these goals. Klein’s aesthetic preference for the “Robin Hood” style tax/fine-then-spend scenario for public spending is familiar to readers of New Economic Perspectives as well as observers of the contemporary neoliberal-era “Left”. Almost the entire, supposedly progressive, public sphere, inclusive of the Democratic Party, labors under the illusion that taxation must precede spending and the amount of the latter is dependent upon the amount of the former. The debate on the sustainability of government spending on Social Security as well as other social programs is almost entirely contained within the paradigm that the federal government can run out of money, and is dependent on the amount of taxation collected. Left-leaning Democrats are particularly focused, at least in rhetoric, on the taxation of the wealthy and corporations as the gateway to subsequent social spending, and display ignorance of or dismiss the relevance of the actual fiat monetary operations. Modern Money Theory shows that for currency-issuers this imaginary “conservation of currency” via tax-then-spend violates stock-flow consistent macroeconomic accounting in a growing economy with private sector savings/profits. For some reason, the neoliberal-era Left concedes to the political Right the entitlement to relatively unrestricted use of fiat spending for their favored purposes. Spending without regard for tax revenue is “allowed” to bailout the private financial elite and military spending, while “good” liberals blindly play the game of overzealous adherence to “covering” spending by taxation for the more socially- and economically-useful government spending they tend to advocate. They are, alone, trying to win a virtue competition that their right-wing colleagues ignore, in this case with good reason. Bill Clinton is praised for running budget surpluses, one of the more economically damaging aspects of his Presidency, while George W. Bush is pilloried for one of the few bright spots of his awful Presidency, i.e. that he once again ran deficits. I have encountered from other intellectuals of the Left similarly convoluted and homegrown hard-money beliefs that seem to be premised on the wealthy or corporations controlling and virtually owning the money system. In response to a blog post by a prominent left-wing academic and long-time political commentator in which he/she claimed that the US government was suffering from a dollar shortage and therefore diminished foreign influence, I sent him/her an explanatory email, including links demonstrating the fiat nature of US government spending, indicating that waning US international influence may have had other causes. The response I received did not engage with the content I had sent him but was simply a blithe reiteration of his own personal theory of money, tailored to the historical moment of his interest, that at the same time is a similar type of moralized monetary theory to that of Klein. One of the problematic areas in terms of recognizing monetary realities for the Marxist, post-Marxist or liberal Left’s ideas about money is that economic and monetary theory is subordinated entirely to a moral vision, based on condemnation of existing inequalities. The wealthy are to feel guilty in the liberal version or in the Marxist are to be outright condemned, punished, and forcibly or legally transformed into the non-wealthy. An unfortunate side-effect of this vision that has some roots in Judeo-Christian ethics and the age of money based on coinage and precious metals, is that money is reified and its fiat dimension ignored or misunderstood. Money continues to be misunderstood as a finite collection of “money-things”, like gold coins, of which the wealthy, of course, possess more. Moral redemption in the liberal vision is then either the giving of charity or the payment of fines and higher taxes and in the Marxist or radical vision, the full-scale levelling of wealth differences and therefore the punishment of those who have become wealthy by exploiting or oppressing others. Klein and the aforementioned academic are holding fast to their view of money (and in case of the latter against proffered evidence) because they apparently have an attachment to a drama where the evil-doers will be punished monetarily with simultaneous rewards for the poor and working people, very much like the Robin Hood story. Of course, this theory is in part rooted in ideas from Marx, that politics and the State are part of a “superstructure” that rests upon the more fundamental economic class relations between the working classes and the ruling/ownership classes, the “base”. Some non-Marxist Left, Marxist and neo-Marxist writers often tailor their theories of money to fit the notion that the capitalist class is pulling all the strings within government so they then elide that into a homespun “hard money” theory in which virtually “all the money” is owned by various corporations/members of the capitalist elite. This rather a-historical view, despite pretensions to historicism, ignores the roles of states in co-creating capitalism or at least many of it institutions, including fiat money. Furthermore, one can better describe the operations of even a highly unequal plutocracy-corporatocracy like our current one, i.e. during the financial meltdown of 2008, if one also accepts that politics and government institutions are also economic institutions but formally independent of and different from capitalist enterprises and financial institutions. [Of course, Marxists will point out that Marx was sensitive to the problem of reification and commodity fetishism and in fact “wrote the book” about it 150 years ago. That Marx invented this terminology however does not mean that its role has been fully integrated into either off-the-cuff or more doctrinaire economic and political analyses of the Left. Furthermore, it might be argued that Marx’s inadequate theory of money and his even more inadequate theory of politics and the State have prevented those who follow in his footsteps from fully understanding the abstractions involved in monetary systems. Reification and commodity fetishism remain the basis of much Marxist and non-Marxist left cultural criticism but are not understood as dangers or phenomena in Marxist or Marxian political-economic analysis.]]
Posted on: Sat, 15 Nov 2014 17:40:23 +0000
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