Author: Sandeep Vaheesan, Open Markets Institute
Popular and elite wisdom today treats money as a private commodity that is scarce and needs to be rationed. This is true of households and businesses. Both need to generate enough income to cover their obligations, such as food, rent, payroll, and principal and interest payments on debt. Too little income or too many obligations can mean bankruptcy, insolvency, and, for an individual or family, homelessness. Monetary scarcity has real and harmful consequences. Historian Destin Jenkins’ incisive volume on San Francisco’s fiscal practices in the postwar era, The Bonds of Inequality: Debt and the Making of the American City, shows how scarce money in the United States has translated to racialized class conflict.
The sociologist Jakob Feinig challenges the dominant view of money as a scarce commodity. His masterful book Moral Economies of Money: Politics and the Monetary Constitution of Society demonstrates that money is an elastic public good. The United States government is a money issuer, not a money user like households, businesses, and state and local governments. Feinig shows that, for much of U.S. history, money was commonly recognized as a public instrument. Populist political movements, in particular, recognized money as a tool for structuring economic life, not as a neutral means of exchange.
Ironically, according to Feinig, the obscuring of money’s real character happened during a period of progressive change—the New Deal and Franklin Delano Roosevelt’s presidency. Roosevelt believed that dollar creation should be the responsibility of technocrats at the Treasury Department and Federal Reserve and that Congress should operate as though dollars are scarce. The New Deal’s rural electrification program exemplifies this approach to money. Roosevelt and his allies rejected grant funding and offered only debt financing for electrification projects that aimed to bring light and power to the countryside. The New Deal’s rural electrification efforts were successful and helped set up hundreds of electric cooperatives to serve rural residents. The insistence on credit in lieu of grants, however, saddled these nominally democratic utilities with substantial debt that today impedes their decarbonization efforts and thwarts effective local control. For nearly a century, the private view of money has prevailed. But the Inflation Reduction Act of 2022 offers a glimpse of money as a public instrument. Is this law the breach in the dam of scarce, private money?
Sandeep Vaheesan, “Money as an Instrument for Justice,” UCLA Law Review Discourse, Forthcoming (April 12, 2023): 1-17, https://ssrn.com/abstract=4417321.