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Journal of Cultural Economy
ISSN: 1753-0350 (Print) 1753-0369 (Online) Journal homepage: http://www.tandfonline.com/loi/rjce20
Money and moneyness: thoughts on the nature
and distributional power of the ‘backbone’ of
capitalist political economy
Kai Koddenbrock
To cite this article: Kai Koddenbrock (2019): Money and moneyness: thoughts on the nature and
distributional power of the ‘backbone’ of capitalist political economy, Journal of Cultural Economy,
DOI: 10.1080/17530350.2018.1545684
To link to this article: https://doi.org/10.1080/17530350.2018.1545684
Published online: 09 Jan 2019.
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Money and moneyness: thoughts on the nature and distributional
power of the ‘backbone’of capitalist political economy
Kai Koddenbrock
Faculty of Economics, University of Witten-Herdecke, Witten, Germany
ABSTRACT
This paper contends that political economy may profit from an
understanding of money that is both able to account for its systemic
importance as well as money’s specific role for the contemporary
distribution of wealth. ‘Money-ness’is a strategic factor in profit-making
and capital accumulation. If we accord moneyness to all those
instruments that make the repackaging of credit and other financial
assets and liabilities and their capitalization possible, we arrive at an
understanding of money that underscores the Marxian analysis of the
structural importance of the money relation for capital accumulation
that is up to speed with current financial innovations. As a social
structure and process, moneymaking through capital permeates society.
As a public-private deal between the state, rentiers, banks, and
taxpayers that has existed since the foundation of the Bank of England
in 1694, it binds these actors together in shifting relations of
dependence. Under financial capitalism today, what counts as money
and how far moneyness stretches into the realms of financial innovation
has been a core object of struggle in the public-private deal of money
creation.
ARTICLE HISTORY
Received 20 September 2017
Accepted 27 October 2018
KEYWORDS
Capitalism; Bank of England;
derivatives; inequality;
accumulation; US dollar
Introduction
In times of crisis, people start looking for answers. In today’s world of rising inequality and precarity,
people have begun blaming immigrants and refugees, incompetent politicians, or greedy managers
for their tumultuous lives. Social changes are indeed substantial. The rise of China has ushered in a
new geopolitical constellation. The increasing financialization of our capitalist system has contribu-
ted to major shifts in corporate governance, the use of Eurodollar markets, tax planning, and the
rising concentration of wealth and decrease of the wage share. Reasons for these changes are plenti-
ful, and tackled across the social sciences. This paper is concerned with the role of money and its
contribution to these changes. It is about money as a force in the distribution of wealth in its
own right.
Thanks to the financial crisis, housing price inflation in times of ‘unconventional’monetary pol-
icy, and the lethal struggles between the EU and Greece, money as the capitalist means and structure
of Vergesellschaftung par excellence has moved back to the center of attention (Streeck 2015, Ingham
et al. 2016, Tooze 2018). Although still a highly complex issue, it is more visible now that money
institutionalizes and makes private property widely tradable, and –while also propelling broader
economic growth and democratic participation in the past –is susceptible to entrenching a social
organization that profits the rich more than the poor. As this kind of systemic and distributive
force, it is the ‘backbone’(Beckert 2016) of capitalist society and political economy.
© 2019 Informa UK Limited, trading as Taylor & Francis Group
CONTACT Kai Koddenbrock kai.koddenbrock@uni-wh.de Alfred-Herrhausen Straße 50, 58455 Witten, Germany
JOURNAL OF CULTURAL ECONOMY
https://doi.org/10.1080/17530350.2018.1545684
Given that various governments have been saving banks since 2007, the question of who calls the
shots –the state, or money and capital markets with their key actors such as banks –has been posed
with renewed rigor (Konings 2011, Knafo 2013, Braun 2018). This paper intervenes into this debate
by taking a step back to take a general conceptual and historical look at what money is and how it acts
on and structures capitalist society and political economy. Key to capitalist money is that it is a deal
between state and market actors and the people, that it distributes wealth between these groups and
between nations, and that it acts as one of the core systemic forces of capitalist competition, next to
private property and the international division of labor.
Throughout history, money has always assumed a structural role in market exchange, but even
more so once the intensity and competitiveness of economic interrelations picked up speed with
the historical development of capitalism. With the rise of capitalism came a particular configuration
of money creation, in which state-finance relations became a public-private deal. Three main actor
groups –governments, rentiers and their banks, and the people –have since been arguing and
fighting over money and its spoils. This struggle originates in the fact that this public-private deal
has distributive effects. In the realm of business, inventing and investing new money forms has
since provided the avant-garde of financial innovation with fantastic opportunities for profit. Push-
ing the boundaries of ‘moneyness’has been an essential pillar of these profit strategies.
The present article underscores the relevance of making sense of money today by linking it to
recent processes of financialization, rising inequality within nations, and ongoing inequality in a
world of international US dollar dependence. I contend that to gain a synthetic understanding of
money amid the current efflorescence of research on money, it is essential to bring into conversation
and cross-fertilization some of the core tenets of Marxist, (Neo-)Chartalist, and recent Minskian
approaches in financial economics and the emerging field of macrofinance. Marxist work on
money and finance capitalism is often too wedded to the old master and operates at an abstract
and structural level that loses sight of specific actors and institutions. Chartalists and Minskians,
by contrast, sometimes gloss over the fact that capitalist money and its distributive force is funda-
mentally capitalist, which comes with contradictions that lead to an inherent and systemic proclivity
to crisis. Because of this theoretical ambition, the article is written as a contribution to intellectual
history and debate.
It would be hubristic to survey the entire literature on money in the fields of sociology, anthro-
pology, economics, and political science. Instead, I aim to advance an understanding of money in
conversation with some of the key contributions to this literature, attempting to make sense of
the systemic and institutional logic of money as well as its potential force for redistribution of wealth
and power. I will maintain that only a broad understanding of money, which moves it quite close to a
Marxist understanding of capital, is able to account for the systematicity and underlying logics of the
processes of financialization and growing inequality. As I show, there is analytical value in seeing the
commonalities between various financial instruments such as securities and derivatives as money,
because it allows us to anchor them firmly in capitalist processes of accumulation.
Money and the redistribution of wealth
The distributional effects of financialization and the liberalization of financial markets and financial
flows have been more widely discussed in recent years (e.g. Bonizzi 2013, Chesnais 2016, Lapavitsas
and Mendieta-Munoz 2016 , Sahr 2017). In her pioneering article on the rise of financial corpor-
ations’profit share relative to non-financials, Greta Krippner turned the term ‘financialization’
into common academic currency (see Christophers 2018 for a recent critique). Piketty’s and col-
leagues’work have provided data on how returns on capital (often predominantly on financial assets
next to housing, see e.g. Alvaredo et al. 2018, p. 224) have exceeded economic growth and thus dis-
proportionately enriched the financial assets holder or the ‘bondholding class’(Hager 2015). In a
more international view, postcolonial currencies like the Franc CFA in West and Central Africa
have been blamed for continuously extractive relations between colonizing nations and their former
2K. KODDENBROCK
colonies (Pigeaud and Sylla 2018, Pouémi 2000). Well established in International political economy,
the dominant position of the US Dollar as part of the existing currency hierarchy bestows the US
with ‘exorbitant privilege’(Eichengreen 2011). As a social relation, the relationship of money thus
distributes wealth and power between classes and nations in multiple ways.
Money distributes wealth between classes and wealth percentiles. Securities with varying degrees
of ‘moneyness,’as will be discussed below, are primarily held by the 1 percent or the top 10 percent of
household percentiles, and it is here that the privileges of money creation become directly relevant
for the recent growth of inequality, as much of the demand for the financial instruments and mon-
etary innovations comes from institutions like banks or funds, which are managing the stored wealth
of high-net-worth individuals and successful corporations. The majority of the population is content
with their good old bank notes or –if they have a bank account –their digital money in their bank
accounts.
In his work on who holds the public debt in the United States, Sandy Hager, shows that the com-
position of institutional investors have changed, and that the share of the top percentile has grown
substantially, especially since the 2007 crisis. Institutionally,
over the past three decades widely owned pension funds have seen their share of the public debt fall drastically,
while mutual funds, which are heavily concentrated in the hands of the top 1 percent of US households, have
seen their share increase. The findings therefore point towards the emergence of a new aristocracy of finance,
composed of giant money managers and wealthy households. (Hager 2015, p. 507)
In a similar vein, albeit more cautiously, the World Inequality Report proposes: ‘Another potentially
important global factor behind booming top wealth is the fact that financial deregulation and inno-
vation might have increased the inequality in rates of return that are accessible to different sizes of
financial portfolio’(Alvaredo et al. 2018, p. 204). This means, those who are able to invest more –
and thus assemble a bigger portfolio –enjoy a higher relative return on their investments.
The holding of particular kinds of financial assets is quite sharply distributed among household
percentiles. Mostly the rich profit from the innovations in money forms, as indicated in the graph
devised by Di Muzio and Robbins (2016), based on the work by economist Wolff(2013)(Table 1).
It is obvious that for 90 percent of the US population, the promises of financial markets and their
money forms matter little (see also the graph from the World Inequality Report below). A large part
of the elaborate edifice of contemporary financial markets and concomitant money forms exists to
allow for existing wealth to be stored and increased. Without these monetary conduits, the rich
would have to find other –possibly more productive –investments or would have to consume
more of their wealth (Figure 1).
In order to gauge the redistributive impact of the uneven distribution of money forms across
households, it also matters which interest surplus these various instruments generate for income per-
centiles. With reference to the scarce work on the uneven distribution of interest returns –mostly by
German Gesellians like Helmut Creutz and Margit Kennedy
1
–and Di Muzio and Robbins show
that, in sum, the bottom 80 percent transfer wealth somewhere else because of their share of inter-
est-generating assets, while only the top 10 percent have a clear positive balance of interest payments
(2016, p. 115).
Table 1. Total income-generating assets and debts by percentile of wealth in the US, 2010.
Asset type Top 1 percent Next 9 percent Bottom 90 percent
Stocks and mutual funds 48.8 42.5 8.6
Financial securities 64.4 29.5 6.1
Trusts 38.0 43.0 19.0
Business equity 61.4 30.5 8.1
Non-home real estate 35.5 43.6 20.9
Total assets for group 50.4 37.5 12.0
Total debt for group 5.9 21.6 72.5
Adapted from Di Muzio and Robbins (2016, p. 114), based on Wolff(2013).
JOURNALOFCULTURALECONOMY 3
That money is increasingly seen as a force of inequality has provoked even central bankers react.
Andrew Haldane, the Bank of England’s chief economist, for example, rejected the charge that recent
monetary policy, quantitative easing in particular, had increased inequality between wealth percen-
tiles. Its effect was, he said, ‘negligable’(2018, p. 10). Using counter-factual reasoning, Haldane
argued that the increase in wealth and income inequality would have been much bigger without
quantitative easing. Presented counter-factually, his argument is hard to refute. However, Haldane
did not hide, without giving analytical weight to these inconvenient facts, that there was evidence
that from the supposed average 5% rise in income across all income deciles, ‘the percentage gains
are slightly lower among lower income households and are slightly negative for the lowest income
decile’(2018, p. 9). In terms of wealth, Haldane further asserted that the rise in asset prices had
profited everybody. He failed to mention that not everybody owns assets. The share of low-income
families in housing and financial assets is low (see Figure 1)(2018, p. 10).
Not only do the current monetary order, monetary policy, and the privileges of money creation
re-distribute wealth between different wealth percentiles and classes, they also do so between nations.
Despite the attempts of IPE scholars to identify US American hegemony in decline (Keohane 1984),
the dominance of the USA over the global political economy has continued mostly unabated until
today (Panitch and Gindin 2013, Helleiner 2014, Fichtner 2016, Schwartz 2016). Capitalist money
as global money redistributes internationally because of the role of the US dollar as world money
and reserve currency.
As the only global monetary sovereign and largely unimpeded issuer of reserve currency, other
states, particularly from the Global South, are forced to run up debt with Western banks, Western
governments, or international organizations like the IMF and World Bank. While debt is not nefar-
ious per se –since it can kick-start productive investments –debt can become an unbearable burden
when interest payments increase at a pace higher than planned. A debt trap can build up fast. In
1982, after Paul Volcker raised interest rates that allows the dollar to appreciate, it took only a
few months for Mexico to announce bankruptcy (Schubert 1985, p. 139). Greece became unable
to refinance its debt at acceptable rates very suddenly in 2010. A debt crisis came into being
where few had expected it. The wealth of these societies is then drained by forced debt repayments.
Contrary to Keynes’idea of an Economic Clearing Union, which would have brought with it the
global currency ‘bancor’–a money of account only (Amato and Fantacci 2012, p. 37) that would not
have shifted in value unless collectively decided –the dollar’s value is managed by the US govern-
ment in concert with its private-sector partners (Winecoff2015, p. 90). The end of the US dollar’s
convertibility into gold in 1971 further increased the US public and private agents’marge de
Figure 1. From Alvaredo et al. 2018, p. 224.
4K. KODDENBROCK
manœuvre because nobody had to worry about re-conversion into gold any longer (Marazzi 1996,
Nitzan and Bichler 2009, Lapavitsas and Mendieta-Munoz 2016). The global consequences of US
monetary hegemony are not a primary concern for US monetary policy-makers –although,
occasionally, the interconnectedness of the global monetary order becomes threatening and leads
to US intervention and/or support abroad (Helleiner 2014, Tooze 2018).
Attempts at quantifying the ‘exorbitant privilege’enjoyed by the US have been inconclusive. Yet
the re-distributional power of global money in its current form is obvious (Eichengreen 2011).
Countries in the Global South have learned that hoarding dollar reserves can be an effective
buffer against the self-centered money decisions made by the US government and central bankers
(May 2013). These reserves, however, have to be earned and stored, which necessarily leads to mas-
sive amounts of reserves lying idle instead of being invested for productive purposes in those econ-
omies that would need them (Rodrik 2006). The redistribution of wealth between the US and other
countries worldwide, then, stems from the fact that these reserves are stored by investing in US gov-
ernment debt, which yields lower profits than the investments made by Americans abroad. Because
of the fact that trade and oil are denominated in US dollars, and because of the safe-haven status of
US government debt, countries are forced to invest in US dollar-denominated bonds. The US does
not face this compulsion. Its companies can invest freely where they see fit.
The dominance of the US, however, is in another sense systemically necessary. Although the US
played a decisive role in repelling the bancor and ending the convertibility of the US dollar into gold
(Marazzi 1996) it is too easy to demonize the US for its quest to maintain hegemony. Capitalism
needs a world money as general equivalent. Given the weak state of aggregate demand, worldwide
economic blocks like the EU and countries like China structurally depend on the willingness of
US consumers to run into household debt and to consume the products produced overseas
(Schwartz 2016). When Perry Mehrling argues that
the Fed is essentially hybrid, both government bank and banker’s bank, and also both US central bank and glo-
bal central bank. The great challenge of the present time is the politics of managing the hybrid reality of the
global dollar system, (Mehrling 2016)
he describes not only the central role of the US for global monetary relations, but also the inevitable
fact that all nations and societies worldwide have to face the challenge of capitalist money as a global
relation together.
While these distributional politics and economics are increasingly noted by scholars, they are
usually not linked to the question of money-ness and why it matters what money is. Discussions
about inequality and US dollar hegemony fail to take seriously two essential aspects of money:
first, the basic Marxian insight about how money matters as a systemic force of capitalist accumu-
lation, and second, how money and money creation are global/national public private deals, some-
times more akin to a struggle to get new forms of money accepted, to facilitate business and
ultimately allow for the accumulation of capital.
Why moneyness matters
Whether and how money matters in understanding how our societies are structured politically and
economically has been a matter of fierce debate for centuries. Already called the ‘blood of the body
politic’in fifteenth-century France (Desan 2014, pp. 422–423), money was at the center of reflections
on politics before the compartmentalization of the social sciences in the twentieth century fortified a
division of labor between sociology, economics, and political science that relegated the study of money
to economics. The legacy of Parson’s theory of separate social systems operating according to their
own logics has since loomed large (Streeck 2015, p. 6). The wave of publications on ‘financialization’
and finance capitalism have opened a large space to re-consider productively the relationships between
value, labor, money, and capital. Apart from the rising profit share of financial corporations, financia-
lization has meant that the expansion of finance as the constant and competitive valuation of assets and
JOURNALOFCULTURALECONOMY 5
income streams has reached more realms of social life and has created new markets in its wake (Kripp-
ner 2005, Bryan et al. 2009, Milios et al. 2013, van der Zwan 2014, Godechot 2015, Lapavitsas and Men-
dieta-Munoz 2016, Mader et al. 2019). For the money-focused perspective on inter- and intranational
inequality and its relationship to financialization investigated here, what interests us most is money-
ness, i.e. to what extent financial innovations are money and thus partake in its systemic role, its roots
in a public-private deal, and the possibilities to capitalize the future.
The problem with studying money is that delimiting what is money and what it does is notor-
iously difficult. My argument about the systemic role, distributional power, and public-private nature
of money builds on a three-pronged definition of money as first, the coeval structural and systemic
core of capitalism, next to private property and the separation between capital and labor; second, a
public-private deal of circulating credit–debt relations; and third, as all kinds of financial instruments
which express and make tradable the capitalization of future earnings and make it possible to gen-
erate profits from this capitalization. This definition of money moves it quite close to a Marxist
understanding of capital.
2
What are the stakes of this three-pronged definition of money? First, including money’s systemic
role in capitalist accumulation forces us to keep an eye on the systematicity of money’s role in capital
accumulation at all times. At the same time, most Marxist discussions of money refrain from tackling
money as a credit–debt relation, because this did not feature in Marx’s original, account and because
this credit–debt understanding of money has its roots in reformist economist thinking from Knapp
to Keynes. However, financial engineering and profit generation take place today with the help of
balance sheets, i.e. the registering of assets and liabilities, which is a close representation of credit
and debt. The relations of credit–debt are represented and managed through balance sheets.
Credit–debt and the balance sheets of assets and liabilities thus matter for the relationship between
money and inequality. Making profitable use of balance sheets or moving assets and liabilities off
balance sheets operates through financial instruments that have been continuously devised from
goldsmith notes to derivative contracts and expand the reach of money-making in order to accumu-
late. Including those instruments and contracts, which grease the machine of finance-led accumu-
lation, into our understanding of money thus constitutes the final but crucial component in this
both general and specific understanding of money.
Many approaches define money based on its three or four key functions, such as numéraire/
money of account, store of value, means of exchange, and money as money –i.e. as a highly desirable
commodity in itself (Altvater and Mahnkopf 1996, Amato and Fantacci 2012). While all of these
matter, these functions do not exhaust the specific facets of what capitalist money does today.
Our times of financialized, global capitalism have brought a proliferation of financial instruments
whose ‘moneyness’–i.e. the degree to which they are accepted and actively promoted by both public
and private institutions, how liquid they are, and to what extent they trade at par or play an integral
role in capital accumulation –is fiercely debated.
3
These instruments have allowed for particular
wealth accumulation strategies both among individuals and households and between nation-states
in recent decades.
The investigation of what capitalist money does to capitalist societies can build on a long lineage
of Marxist social inquiry. Since Marx’s dictum that ‘the power which each individual exercises over
the activity of others or over social wealth exists in him as the owner […] of money. The individual
carries his social power, as well as his bond with society, in his pocket’(1867, p. 156f.), money and its
power or even ‘terrorism’(Marazzi 1996, Alami 2018) have been investigated in Marxist discussions
under the banner of ‘finance capital’(Hilferding 1920) and ‘monopoly finance capital’(Baran and
Sweezy 1966, Foster and Magdoff2009), or in the historical sociology of Arrighi (2010). Value-theor-
etical discussions have been less concerned with power and politics but have continued the concep-
tual discussions on money and value (Marazzi 1996, Heinrich 1999, Elbe 2012, Milios et al. 2013,
Stützle 2015).
But not only Marxists stress the relevance of money to understanding the world of today. Econ-
omists of the twentieth century like Keynes and Schumpeter investigated capitalism as a money-
6K. KODDENBROCK
based system, and money has since been an important component of the (margins of the) discipline
of economics, despite its turn to mathematical modeling (Bell 2001, Friedman and Schwartz 1971,
Minsky 2008, Wray 2012, Werner 2014). Longstanding debates between ‘metallists’and ‘nominal-
ists,’for example, have negotiated whether the value and price of money is intrinsic or based on con-
vention and perception. Sociology has also had its share of productive research on money, tending to
stress the cultural and symbolic over the material (Simmel 1900, Zelizer 1997, Dodd 2014; for an
exception, see Ingham below). International relations, traditionally interested in inter-state behavior
with the in-built aim of overcoming war and contributing to a less war-prone world society
(Carr [1939] 1964), has paid very little attention to the role of money in the pursuit of global politics.
4
With its longstanding focus on interstate war, global governance as the study of international
institutions, and more recently, the role of norms, political economy in general and money or
capital in particular have had little place in the discipline of IR in recent decades (Koddenbrock
2017; for an exception, see ten Brink 2014) unless one considers international political economy a
part of IR. International political economy, the academic discipline that sprung from that particular
neglect (Strange 1970), has been the natural home of analyses of the global political economy and
the global monetary system (Cohen 2016). IPE has produced numerous innovative works on ‘the
international organization of credit’(Germain 1997), the ‘power of money’(Kirshner 2003,
Cohen 2016), and the important role of the state –and the US American state in particular –as
part of their core disciplinary research interest in understanding the logics and hierarchies of the
global political economy (Germain 1997, Seabrooke 2001, Helleiner 2003,2014, Konings 2011,
Desai 2013, Knafo 2013, Panitch and Gindin 2013, Norloff2014, Fichtner 2016, Norfield 2016,
Schwartz 2016, Braun 2018).
Money as dynamic social structure and relation
Marx begins his chef d’oeuvre Capital with the world of commodities and money. The capitalist
mode of production is, for him, about the production of commodities and their exchange for and
through money. Money is first and foremost the general equivalent emerging from commodity
exchange and propelling this exchange to new heights (1877). But money is also the prerequisite
of capital –capital being money invested or spent to arrive at more money. Capital, in this view,
is a form of money (de Brunhoff1976). With money-based capitalism comes the necessity to out-
compete your competitors and the departure from more static forms of social organization.
Based on and further entrenching the legal institution of private property and the separation
between capitalists (as those who own money) and workers (those who need to earn money to
live), money as means of exchange, store of value, unit of account, and desired commodity in itself
allows for the systematic expansion of capitalist life. As the universal equivalent of all commodities, it
is the prime means of linking the production of surplus value through labor and its trade and
accumulation in circulation. Without capitalist money, owners such as feudal lords would have
had to continue to coerce people into working for them through direct force –slavery –or by paying
them a subsistence wage. Thanks to money –invested with hope for profit as capital –capitalism has
come about as a system which forces everybody who does not own enough assets or means of sub-
sistence to sell his or her labor and time in order to live.
Money becomes a social structure because, as circulating capital, it allows for a process of auton-
omization of value and thus a de-linking from what Marx considers to be the source of all value:
labor. In the interpretation provided by Ingo Elbe and Michael Heinrich, there are several consecu-
tive steps of autonomization that entrench money further and render it more impactful (Elbe 2012):
first, value turns from the means to the end of exchange. With the store of value function that money
can provide, value no longer aims for exchange but for its own increase. As ‘treasure’or ‘world
money,’however, it is not really autonomous yet. Only as capital, as continuously invested money
to make more money (sometimes traveling via the world of commodities, other times not), does
it assume the stability and ubiquity that turns money into a dynamic structure. It is structural,
JOURNALOFCULTURALECONOMY 7
because it permeates all societies and nation-states. It is dynamic, because it is continuously in flux.
There is nothing static about money as a quintessential global relation.
Marx convincingly underscores the crucial importance of money for contemporary capitalism but
provided comparatively little empirical detail (1867,1877,1894) on the institutional specifics –in
contrast to his analysis of the work day or original accumulation, for example. His scattered notes
on banks, credit, and world money have often been interpreted and given a coherent allure (de
Brunhoff1976, Milios et al. 2013,p.65ff.), but it is obvious from these attempts that Marxists are
in substantial parts on their own when they want to deal with contemporary money (Marazzi
1996). Marx’s case for the systemic and structural role of money and for money as the basis of capital
remains, but a fuller understanding of today’s money requires complementary contemporary scho-
larship. Moving beyond the fundamental argument on money as a dynamic structure and global
relation, the next section will focus on more recent attempts to make sense of what money is and
does in (neo-)chartalist debates and financial economics.
Money as public-private ‘deal’
Since the influential work of Knapp (1905) and its selective adoption by John Maynard Keynes
(1930), chartalist theories of money have highlighted the role of the state in determining what
money is and what is allowed to function as money. As L. Randall Wray, one of the prime propo-
nents of Modern Money Theory, put it early on: ‘Money is, and always has been, a creature of the
state’(Wray 2000, p. 12, quoting Abba Lerner (1946)).
5
Neo-chartalists refute the metallist and
Marxist conviction that money emerged from exchange. For them, money existed for much longer
as a money of account in which credits and debts were recorded. Because of this reading of history,
money is treated primarily as a credit–debt relation, while also being the quintessential means of
exchange, as Marx had highlighted. Curiously, there is very little interaction between Chartalists
and Marxists, although their premises are by no means incompatible. Money can both be a general
equivalent and basis of capital and a credit–debt relation shaped by the interaction between the state
and banks (and the people). As the Marxist money analyst Lucas Zeise puts it, ‘whether money was
first a general equivalent or a credit–debt relation cannot be decided’(2010, p. 63, own translation;
Milios et al. 2013, pp. 223–228). Obviously, the Keynesian and post-Keynesian tradition is an openly
reformist and non-revolutionary tradition, which might go a long way in explaining this mutual
neglect.
One recent and influential state theory of money was provided by Geoffrey Ingham (2004). The
benefit of Ingham’s theory of money is that it makes sense of money from the vantage point of
today’s times of central banks and private bank-created fiat money and traces the substantial com-
monalities of capitalist money forms spanning several centuries. Ingham’s analysis allows us to grasp
money as a systemic global relation that is fought over by specific actor-groups. He analyzes money
as a fluctuating three-way partnership –which I prefer to call a ‘deal’as discussed below –between
the state, rentiers (and their banks), and taxpayers (2004, p. 131). The character of money and the
reach of moneyness are constantly negotiated among these three actor groups. What counts as
money at all, the amount of money in circulation, the interest rates at which it can be borrowed,
the inflation rates at which it is devalued, and the amount of taxation that redistributes money
between these groups are tenuous and the result of conflict.
For Ingham, the ‘transformation of privately contracted debts into money’(Ingham 2004, p. 135)
has been at the heart of recent monetary history. In this view, money is a state-sanctioned means of
final settlement. Money is money once it has been accepted by the state either as a means of market
interaction or, crucially, as a means to pay taxes. In his work and that of many others in this tradition,
the narrative revolves around the ways merchants, banks, and funds have continuously found ways
of issuing new credit–debt instruments, such as notes on goldsmith vaults or derivatives –and their
survival depended on the ways the state allowed and even rendered official their use. For the pur-
poses of our argument, the core value of Ingham’s conflict theory of money is that it highlights to
8K. KODDENBROCK
what extent money is a ‘deal’between these actor groups, building on the creation of mutual depen-
dence. The state depends on financiers and taxpayers, so it develops bureaucracies to maximize tax
returns and govern efficiently. Financiers, in turn, depend on the probability that their credits will be
repaid, and taxpayers depend on both the state and the rich for their well-being. In the past, rulers
could be erratic and throw creditors into turmoil.
6
This happens occasionally even in our time, as
seen in the surprising acquiescence to Lehmann Brothers’demise. But more often than not, the
deal has held, but rising inequality might threaten it.
Following Keynes, for Ingham, money is a credit–debt relation linking the present and the future
(2004, p. 72). Money existed in past civilizations and in all kinds of places across all of human history
(Ingham 2004, Graeber 2011). What is unique to capitalist money since the ‘financial revolution’
(Dickson 1967, Wennerlind 2011) at the end of the seventeenth century in Britain is its tradability
and ease of expansion, resulting from the close public-private partnership that the government and
the landed and moneyed classes entered into for mutual gain on the back of taxpayers. Thanks to this
partnership, money slowly gained the level of tradability and ubiquity needed for capitalist expansion
(Carruthers 1996,p.9ff., Ingham 2004, pp. 126–131, McNally 2014). The struggle over money, how-
ever, is not simply about who gets how much money and at what price or discounted at which
inflation rate, but also about what counts as money at all. As David Graeber perceptively argues,
‘[M]oney has no essence. It’s not ‘really’anything; Therefore, its nature has always been and presum-
ably always will be a matter of political contention’(2011, p. 372, see also Bjerg 2014, p. 88). This is
evident in the key institutional innovation of central banking in the later seventeenth century, and it
has been evident in recent decades in the struggle about what counts as money and what doesn’t.
The ‘deal’from the Bank of England until today
The main problem with money in early capitalism was its scarcity. In order for the production of
commodities and the accumulation of wealth –in money –to take place, money cannot be scarce
at any time. Before our age of bank money and an exploding plethora of money instruments serving
to provide liquidity and leverage for money-makers’profits, scarcity of money was a frequent
phenomenon. In fact, quantitative easing, the massive expansion of central bank balance sheets
by giving out cheap reserves for treasuries or other bonds, was also a reaction to scarcity. Banks
were not lending enough and ‘safe assets’as collateral were desperately needed. Historically, how-
ever, scarcity was particularly acute until various forms of paper money and credit based on the pub-
lic-private deal inherent in modern central banks were installed. Before the deal, conquest and war
were animated by the desire to steal gold and precious metals serving to increase the money supply.
The late seventeenth century in England brought a decisive breakthrough in the development of
flexible and expansionary money needed to take capitalism to new heights through colonialism
and industrialization.
One of the important launching pads for this expansionary partnership was the founding of the
Bank of England in 1694. Its founding followed times of civil war and the Glorious Revolution and
resulted from the aristocracy’s need to invest their riches with a profit, from the desire of influential
London merchants to expand the money supply by bringing into circulation new forms of money-
like banknotes, and from the need of the king to raise funds for warfare against Louis XIV of France.
The objective of merchants and the aristocracy ‘was to create a liquid and reliable monetary asset in
environments where such assets were rare or unavailable’(Roberds and Velde 2014, p. 1). The king
needed cash to fight the French. England had been at war with Louis XIV for quite some time and ran
into problems generating enough tax revenue. The idea hatched by a group of London merchants
was to set up a private bank –not much more than an ‘investment trust’initially –and to loan
1.2 million pounds to the crown at 8 percent interest (McNally 2014, pp. 12–13). This setup of
the Bank of England allowed for a mutually beneficial deal: the king promised to tax enough in
the future to pay interest every year, which was in the interest of the creditors. The promise to
tax was further backed up by installing well-connected ‘receiver generals’in the royal tax office
JOURNALOFCULTURALECONOMY 9
(Knafo 2013, p. 96). The government, in turn, received a handsome sum for war financing on the
spot and only had to pay back a fraction because the loan came as a ‘permanent loan,’an innovation
of the day (Davies 2002, p. 259).
7
It is obvious from this process of granting a monopoly based on mutually beneficial public-private
deal that the Bank of England was not initially devised for the people but for the crown and for inves-
tors’monopoly rents.
8
It was also a prerequisite for the colonial subjugation of many parts of the
world by the British starting in the eighteenth century (McNally 2014), and it came with a substantial
degree of internal violence because sanctions on forging money were draconian (Wennerlind 2011,
pp. 123–160). Most relevant for today’s time of exploding state debt, the public-private deal
expressed in the Bank of England also installed for the first time a bond of ‘national’debt. No longer
was the debt ‘personal’and only tied to the king and his potentially erratic decisions (Knafo 2013,p.
33, Davies 2002, p. 265, McNally 2014, p. 14). This national debt was designed to be permanent.
Marx quipped about this national debt: ‘The only part of the so-called national wealth that actually
enters into the collective possession of a modern nation is –their national debt’(1877, 919). Today,
there are only four countries in the world without a national debt: ‘Brunei, Lichtenstein, Palau, and
Niue’(Di Muzio and Robbins 2016, p. 59). As Richard Dienst put it: ‘The collective that has become
indebted to itself has become unbounded’(2011, p. 31).
9
What counts as money is as relevant today as it was when the Bank of England was created,
because new money forms always bolster the profits of their inventors and traders. Oliver Godechot’s
argument that ‘financialization is marketization’is helpful here (2015). New markets with a trade in
new products, mostly unregulated or lightly regulated, and the resulting opacities and lack of pricing
transparency allow for fees, commissions, tricks, and speculation. In the early days of new forms of
money, business deals are possible for the avant-garde that are not yet available to others.
What counts as money and what does not matters for these practices of profit generation, because
the transferability of all kinds of financial instruments into state money (reserves), bank or credit
money (deposits), or other forms of money (liquid securities and derivatives) is an important stra-
tegic component of profit-making. If a varied portfolio of different financial instruments, a.k.a.
money forms, were not essential to profit generation in times of asset and liability management,
moneymakers could simply rely on old-fashioned cash or bank-created deposits tout court. But
they don’t, because new money forms allow them to hedge risks, to speculate on the future, and
to repackage and sell existing assets; they make expected earnings monetizable and capitalizable,
and thus allow for further trade and exchange profits that cash would not offer. Moneyness is
thus a strategic factor in profit-making and capital accumulation. If we accord moneyness to all
those instruments that make the repackaging of credit and other financial assets and liabilities
and their capitalization possible, we arrive at an understanding of money that underscores the Marx-
ian analysis of the structural importance of the money relation for capital accumulation that is up to
speed with current financial innovations.
The quest for acceptability and thus for moneyness is at the heart of the discussion on ‘shadow’
money and the hierarchy of money in financial economics. The debate revolves around the possi-
bility and usefulness of making distinctions between various forms of money and credit and the pro-
cesses of getting forms of money accepted (Bell 2001, Mehrling 2012, Pozsar 2014, Braun 2016a, pp.
12–14, Sgambati 2016). As Hyman Minsky quipped: ‘Everybody can create money. The problem is to
get it accepted’(Minsky 2008, Sgambati 2016). Paper money was an IOU (I owe you) first, and was
accepted and monopolized by states and central banks step by step. We are witnessing the same pro-
cess today. All kinds of new financial instruments flourish –designed to make money with money –
and their acceptability and profitability is a matter of fierce competition.
Like Ingham, who argues that money is a credit–debt relation, and contrary to others who attempt
to draw a neat distinction between credit and money (de Brunhoff1976,Stützle 2015, Beckert 2016),
leading financial economist Perry Mehrling argues that in a modern central bank system, ‘what
counts as money and what counts as credit depends on your point of view, which is to say that it
depends on where in the hierarchy you are standing’(2012, p. 3). Reserves are money everywhere,
10 K. KODDENBROCK
bank deposits are money for their customers, private IOUs only function as money among private
individuals. In Mehrling’s view, lower-rank forms of money –such as bank deposits –are accepted
for settlement at one level of the monetary hierarchy (say, individuals) but merely represent credit at
the level above, where banks must settle in reserves (2012, p. 1).
The public-private deal at the heart of capitalist money allows for various strategies among the three
broad actor groups involved today. Governments rely on banks and other money actors to create credit
and stimulate growth. Governments also profit from low interest rates when their government bonds
are among the attractive ones. Commercial banks –the quintessential moneymakers since the end of
Bretton Woods –and other money dealers engage in asset and liability management, which is part of
a type of finance commonly known as debt finance. The latter consists in a regime of fluid property relations
whereby debts are routinely monetised and, consequently, can be readily traded as commodities and accumu-
lated as capital. (Sgambati 2016,p.6)
Households –the people –play their role in the triangle of money creation as the main receivers of
credit, especially mortgage credit –for better or worse. Without bank money creation through mort-
gage credit, there would be a lot less growth in the money supply and there would be less money to
leverage, securitize, and transform into derivatives (Turner 2013, p. 11, Michell 2016, p. 7).
While the public-private deal has proved resilient since the founding of the Bank of England,
banks as operators of the payments system have accumulated privileges of money creation that
have passed well under the radar of academic and political scrutiny (see also Sahr 2017). Since
the advent of fiat money with the end of US dollar convertibility into gold in 1971 (Marazzi
1996), commercial banks have moved ever more toward the center of current powers of making
money. More than 90 percent of circulating money is bank (broad) money, created endogenously
by commercial banks (Solte 2007). In terms of quantitative importance, banks clearly have to be
in focus (see also Seabrooke 2001, Hardie et al. 2013, Schwartz 2016). Thanks to reigning accounting
rules and bank regulations, commercial banks are able to write deposits into customers’accounts and
onto their balance sheets more or less as they wish. Banks indeed create (bank) money by fiat and
‘out of nothing’(Werner 2014, Schwartz 2016), but this ‘nothing’consists of a very specific insti-
tutional architecture. Putting this particular autonomy into the limelight is no longer an obscure
statement, but is increasingly entering the mainstream of economic reporting (Wolf 2013) and cen-
tral bank transparency (McLeay et al. 2014, Braun 2016b, Bundesbank 2017).
When the Bank of England, and the Bundesbank recently acknowledged the willful dependence
on commercial banks for money creation, they were quick to reassure readers that there are a num-
ber of important limits to the autonomy of banks’money creation, the most important of these being
‘monetary policy’–i.e. the interest rates the BoE charges and the effects it has on economic perform-
ance more broadly (McLeay et al. 2014, p. 4). While the near limitless creation of reserves has indeed
subsided in the US, possibilities to extend moneyness if the state allows abound. While central bank
reserves matter for transactions on the interbank market for which reserves are needed, the ability to
create bank money, trade in bank money, and extend moneyness into the realm of securities and
derivatives has allowed banks and other financial actors to occupy the avant-garde of new money
forms and to generate profits from this liberty.
Money theorists agree that money is more than cash. Yet how far into the realm of securities or
derivatives moneyness reaches remains a matter of fierce debate (Bryan and Rafferty 2007, Zeise
2010, Ricks 2011, Milios et al. 2013, Gabor and Vestergaard 2016, Michell 2016, Judge 2017,
Murau 2017). Is money that which allows for the ‘final’settlement of contracts (Michell 2016), is
it simply liquidity (Ricks 2011, Amato and Fantacci 2012, Sgambati 2016), or is it those financial
instruments that ‘trade at par on demand’(Pozsar 2014, p. 9, Gabor and Vestergaard 2016)?
From the vantage point of money as a public-private deal, this matter cannot be settled easily.
Treating derivatives as money illustrates the stakes of a three-pronged understanding. Derivatives
are contracts generating fee income for the seller and more potential income when the contractual
event like the rising of interest rates or a decrease of exchange rate or other value-related events
JOURNALOFCULTURALECONOMY 11
materializes. The underlying assets from which the derivative was supposed to be ‘derived’neither
have to be owned nor do they have to exist. These contracts or bets can be traded on their own. How-
ever, since they allow for hedging risk and making profits,
derivatives allow different financial obligations to be traded and […] shift these obligations within and across
commodity and financial asset boundaries. (Bryan and Rafferty 2006, p. 65)
Dick Bryan andMichael Rafferty thus argue that derivatives are‘behind the scenes’money because they
ensur(e) that different forms of assets (and money) are commensurated not by state decree (e.g. fixed exchange
rates) but by competitive force. In this sense, the effect of derivatives is to merge the categories of capital and
money: to bring liquidity to the market for financial assets, making all assets more like money, and to bring
capital-like attributes to money –at the extreme, presenting money as itself capital. (2007, p. 153)
This means for Bryan and Rafferty that just like in securitization (indeed, more so because of the
leverage implied), derivatives give a liquidity to capital as a social relation of value in movement
(Bryan et al. 2009, p. 467; for a critique). How so?
With the help of securities and derivatives, moneymakers tackle liquidity and interest rate risk.
They manage their balance sheets by dealing and holding assets and liabilities in a way that makes
them accrue profit, while keeping a sufficient part of them liquid enough. Given that cash and central
bank reserves are (mostly) in short supply, more complicated contracts of credit–debt capitalizing
future earnings or hedging profit risks assume the role of greasing the machine of capital accumulation
as money. Securities are equities and bonds. They are claims of future income towards the corporation,
which the holder now partly owns through equities, or towards the debtor, who has promised to pay
annual interest and principal at a later stage, as in the case of government bonds, for example. Secur-
itization refers to the re-packaging of assets such as mortgages or student loans sold on as securities.
Since they are based on existing assets, they are generally called ‘asset-backed securities.’
Without going into all the difficult details of these financial products, their strategic and systemic
importance for profit-making warrants calling them forms of money. While clearly not cash or cash-
equivalent, they have a decisive place in contemporary strategies of capital accumulation –the expro-
priation and hoarding of value through money –without being final means of settlement. From this
vantage point, money is a liquid and relatively safe means of storing and exchanging value but, more
broadly, money is also that which allows us to make profits in the financial realm. All financial
instruments that play an integral role in moneymakers’profit strategies as part of asset and liability
management should thus be considered to assume this role and to possess moneyness.
The process has remained the same for centuries: moneymakers and dealers seek new ways to make
more money by devising new financial instruments, which they can sell at a profit or use to manage
their balance sheets in ways conducive to annual profits. For credibility and trustworthiness, an endor-
sement by the state is helpful but not essential.
10
Because of its arsenal of executive powers –including
the ability to impose and forcibly collect taxes –it can act as a material guarantor of a money instru-
ment’s future value. The public-private deal at the heart of capitalist money creation entails a constant
back and forth between rentiers and investors eager to profit and the state’s willingness to promote
them or slow them down. This, in turn, has implications for inequality between classes and wealth per-
centiles, because access to financial instruments and the ability to deal with them productively is highly
unevenly distributed between the upper and lower classes. Internationally, money and its translation
into currency hierarchies distribute wealth, unevenly because the US as the only monetary sovereign
has managed to make the rest of the world dependent on the currency it can manage according to its
needs –while being forced to do so because of the systemic requirements of capitalist money.
Conclusion
Money impacts our societies and nation-states in multiple ways, and it distributes and re-distributes
wealth. At its most encompassing, it structures all capitalist societies, because it allows for and
12 K. KODDENBROCK
nurtures the quest for ever-increasing profit and accumulation. Capitalist money has also been a very
specific public-private deal since the seventeenth century. This deal has been profitable to both the
state and the moneyed classes, and to a certain degree to the majority of taxpayers, but the balance of
power in this three-way struggle has always been susceptible to imbalances. In recent decades, the
increasing privileges of the banks and the ability of the capitalist class to fend offtaxation have con-
tributed to levels of inequality not seen since the interwar years. At the same time, the dependence on
the US dollar creates substantial economic and political costs for the rest of the world and continues
to re-distribute wealth from the rest of the world to the US.
The broad understanding of money advanced in this article serves to highlight both the systemic
and agential role of money in capitalist social relations and underlines the fact that thanks to money
and with money, particular accumulation and profit strategies can be devised. Today’s derivatives
and securities assume the role that paper money played in the past. It extends the reach of moneyness
to make further profits possible. The avant-garde of capitalist profit-making is allowed to accumulate
and profit through these novel forms of money. Gold and cash were never enough to satisfy the
liquidity, predictability, and exchangeability needs of fluid private property relations. Our money-
based capitalist political economy will always generate new money forms, greasing the machine of
capital accumulation. The importance these forms of money are allowed to gain and how complex
they become depends on the willingness of the state to accommodate them, as money and money-
ness continue to be public-private deals, driven by private profit desires and the carriers of state
power.
Capitalist money has entrenched a social distribution of power that is heavily skewed towards
those classes and nations able to create, mobilize, and control large swathes and chunks of
money. Money creation through credit and debt is largely in the hands of private actors such as
banks and their depositors and investors, asset managers, and other funds. Interest rates have
been uncapped and perpetuate this inequality. In times of low interest rates, in turn, the easy avail-
ability of credit–debt serves to increase liquidity and push financialization ever further. Internation-
ally, US dollar hegemony and dependence will be a central pillar of US global hegemony until the role
of the dollar as world money subsides.
Struggles over the wage share were the hallmark of reformist struggles since the beginning of
industrialization. Practices of ‘financial expropriation’(Lapavitsas and Mendieta-Munoz 2016) are
a more difficult opponent than the industrialist, because the financial industry based on the global
relation of capitalist money is dispersed and interlocking. What is more, the people are enmeshed
in it themselves as part of the public-private deal of money creation and through their own indebt-
edness. In order to start shifting the balance of power inherent in the longstanding public-private
deal of money creation, nation-states and individuals would have to engage in collective and encom-
passing defaults and debt strikes, deal with the economic turmoil resulting from this, and start afresh
with more public control over the money supply and less permissive approaches to high or low inter-
est rates (Di Muzio and Robbins 2016). However, at its most fundamental level, capitalist money has
entailed a relation of indebtedness to the moneyed classes and nations since its inception, so the
impact of these reforms would be rather slim. After all, the capitalist class’influence is rooted in
the system of private property: without tackling that system, no version of monetary reform will
make wealth inequality history.
Money has passed well under the radar of progressive politics and social science for a long time.
The evidence on who profits from the way money currently works is plentiful. To counteract the
strategies employed by moneymakers in the last 350 years, this evidence should be applied to policy-
making and nurture the scant mobilizations around monetary affairs that we have witnessed so far.
The discussions about the promises and pitfalls of a coercive currency like the Euro are a useful start.
Who profits from capitalist money, and by how much, is a matter of social and political struggle, and
there is no reason to believe that the ease with which the upper classes have made money work for
them in the last decades should continue unabated.
JOURNALOFCULTURALECONOMY 13
Notes
1. Next to ‘positive’money and ‘Vollgeld’proponents, there exists a small constituency of scholars and activists
working with the thoughts of the German economist Silvio Gesell on ‘free land’and ‘free money.’Gesell’s main
argument was that the interest system must be reformed and replaced by a negative interest rate system in order
to make capitalism human again by increasing the amounts of money used for consumption and making
money hoarding unprofitable (Gesell 1916). See Altvater (2000) and Zeise (2010) for a Marxist critique of
this position.
2. The distinctions between money, money capital, credit and fictitious capital are notoriously hard to draw.
The ‘solution’I propose here is a broad definition of money that allows for its general role to remain at the
forefront not to be lost in terms like ‘near’money, financial instruments, etc. Capital, then, is excluded
from explicit treatment, because it is even more polysemous. Capital denotes the capitalists collectively,
a social relation fusing together everything that moves under capitalism and an accounting entry from
fixedtovariablecapital.
3. Moneyness is a term used for options pricing and has been debated between the Marxist political economists
Bryan et al. (2009) and Milios et al. (2013), among others. Most recently Daniela Gabor and Ann Pettifor have
joined the conversation see: https://soundcloud.com/iippe/moneyness-the-essence-of-money-and-its-recent-
developments
4. Marxist IR, broadly speaking, has tended to mention money and capital in its historical materialist accounts
without placing emphasis on it as a relevant explanatory relation for their interest in the rise of the state
system or the uneven and combined development of world order (Anievas 2015, Anievas and Nisancıoglu
2015,Burnham1991,Cox1987,Gill1993, Koddenbrock 2015,Tansel2015,Teschke2003,Rosenberg,
2013).
5. http://www.cfeps.org/pubs/wp/wp10.html.
6. See Arrighi (1990, p. 103) on Edward II’s default on Florentine debt in 1339, which was worth the annual Flor-
entine production of cloth at the time.
7. A permanent loan means that the principal never has to be repaid but that creditors make a profit from the sum
of annual interest paid on the loan.
8. See Gorton (2016, pp. 21–23) for an interesting treatment of the role of state charters for banking in the UK and
the US.
9. The government also tried to raise more war financing through the selling of government securities, which were
mainly bought by large joint-stock companies like the colonial East India Company, which effectively became
an important owner of the ‘national debt.’
10. Cryptocurrencies and the pioneer Bitcoin have been an attempt at a private form of money that can perma-
nently stay clear of the state sanction. As Mike Beggs puts it ‘The technical problem that Bitcoin solves is to
simulate a physical coin electronically, without relying on centralized administration’(Beggs 2018). However,
just as most other money forms, at some point or the other, the state joins the fray and becomes and integral
part of the infrastructure needed to maintain the trustworthiness of a previously private currency. Now, Bit-
coin’s value also depends on its prospects for state sanction and regulation and permissions to be used widely.
In this sense, cryptocurrencies are just another new form of money that must eventually become a part of the
public-private deal.
Acknowledgements
I am grateful to Benjamin Braun, Samuel Knafo, Ingo Stützle, Timo Walter and the anonymous reviewers for their
constructive engagement with earlier versions of this paper. Much of the research for the article was done at the
Max Planck Institute for the Study of Societies. I thank the chief librarian Susanne Hilbring and her team for running
this amazing library at the heart of Cologne.
Disclosure statement
No potential conflict of interest was reported by the author.
Notes on contributor
Kai Koddenbrock is acting Professor of International Political Studies at the University of Witten-Herdecke, Germany.
He is currently working on money theory, dependency and humanitarianism at the intersection of international pol-
itical economy and international relations. He leads the international research network politicsofmoney.org.
14 K. KODDENBROCK
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