3. De-territorialized Currency
This state-centrist model, also called "Chartalism" exercises a strong influence over the way we think about money and monetary relations. Cohen believes that we normally think of money in terms of geographical state-units much like children's building blocks - playthings easily manipulated by national governments. However, Cohen would submit that currencies have largely been de-territorialized due to the globalization of productions and finance. Governments are no longer seen as the primary determinants of their currency's value, but must now submit to 'market discipline' by private players. Liu has argued, in addition to Cohen's causes for de-territorialization, that we must consider the mobility of capital uncountered by an equal mobility of labour. 29 Cohen believes that currencies have largely been deterritorialized, and they can be categorised as outlined in Appendix B.Cohen argues that nations closer to the bottom of his currency pyramid are able to extract less seigniorage than those higher up (p.123). With seigniorage, comes power, according to Cohen: "in relations between states, deterritorialization clearly implies a redistribution of power that favours those with the most widely circulated moneys"(p.129). This does not mean, however that states higher up the currency pyramid receive a corresponding increase in power. Cohen believes that power does increase the further up the pyramid a currency is, but this power is accorded to groups within a state - largely to private actors - specifically to "those in the market with the capacity and opportunity to choose among alternative transactional networks" (p.128). Finally, Cohen argues, "politically, these societal actors achieve a measure of leverage over governments that would be unimaginable in the strictly state-centric Westphalian model" (p.129). Interestingly, certain historical figures could at least imagine this type of power, and they warned against it:
"If the American people ever allow the banks to control the issuance of their currency, first by inflation and then by deflation, the banks and the corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied . . . I sincerely believe the banking institutions having the issuing power of money are more dangerous to liberty than standing armies".
The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in iniquity and born in sin. Bankers own the earth; take it away from them, but leave them with the power to create credit, and with the stroke of a pen they will create enough money to buy it back again. . . If you want to be slaves of the bankers, and pay the costs of your own slavery, then let the banks create money"
Are these the ravings of paranoid schizophrenics, monetary cranks, gold-bugs and conspiracy theorists? Quite the contrary - they were warnings by witnesses to an historical process of monetary development; they are the words of Thomas Jefferson30 and the former director of the Bank of England, Lord Josiah Stamp31.
One possible conclusion to draw from this is that the power of seigniorage no longer accrues to the state because money creation is in the hands of private issuers. Analysts who subscribe to the Chartalist theory of money believe that power lies with the US state, when in actuality, private banks issue money and the government performs the institutional service of 'backing' it. We have, in effect, privately created currency masquerading as a public exchange medium.32 Money is brought into existence as a debt, and the economy must grow by an amount greater than the growth in debt, which can explain the growth bias and competitive aspects of neoliberal economic policies. Furthermore, Cohen argues that much governing power is accrued to 'the market' and that governments and the marketplace are engaged in a dialectical relationship whereby they act as 'checks' upon each other.33 Cohen concludes that producers and users of money co-govern its power structure. Neoliberals of a libertarian nature, however, will tend to side with the marketplace, and will argue that it is democratic because it reflects, at any instant in time, the attitudes, desires and decisions of millions of actors, much like a perpetual polling system for evaluating policy prescriptions (Cohen, p.148). Cohen does not side with this argument when he states, "Those with the most money have the most votes. Such a skewed franchise is greatly inconsistent with contemporary views of political legitimacy" (p.148). Who then, governs?
Be Sure to Continue to Page 8 of "E Pluribus Unum: Dollar Hegemony and Money Creation in IPE".
