Mary Mellor, Debt or Democracy

Mary Mellor, Debt or Democracy: Public money for sustainability and social justice,  Pluto Press, 2016, vii + 215 pp, pbk, 0 7453 3554 4, £17.

Mary Mellor’s new book sets out from a question that is frequently asked: ‘Why were private financial institutions being supported by public money while public institutions were being starved of funds or privatised?’ (p. 1). Quantitative easing is central banks creating money that buys government debt and enriches bondholders. Why can’t governments create money and spend it on public services? And how come private institutions can create money, and central banks can as well, but governments apparently cannot? The way that we do things means that governments have to borrow: hence Mellor’s ‘debt or democracy’ – significantly without a question mark. It is a political choice as to whether governments create money or borrow it from private institutions that governments allow to create it. As Mellor points out, governments therefore choose to create public debt, and government deficits would not result in debt if they were financed by new government-created money. And as Mellor also shows, the way in which money is borrowed by governments is an important driver of inequality, and the justifiable perception that governments have lost control of money is driving a loss of faith in democracy.

This wide-ranging book explores the nature of money; studies the way in which governments create new money (‘public money’); understands money as public and social – and that its creation should therefore be democratically accountable; shows that public services could be funded by public money; suggests that central banks should reclaim money creation for the people rather than acting as banker to banks; asks about international and global currencies; and theorises about the ways in which such a democratising of money could give birth to an entirely new postcapitalist economy. Whilst this last suggestion might be valid, it diffuses the book’s message. Most of the book can be regarded as a doable contemporary project with clear aims and outcomes. The more speculative future-oriented material belongs elsewhere.

Along the way the book demolishes a variety of myths – for instance, that money originated in precious metal, and that banks mediate between savers and borrowers ( – they don’t: they create the money that’s borrowed): and the accounts of experiments in local currency are interesting and relevant. Material about non-money sustainable ‘economies’ is also interesting, but that too might belong in another book, because it detracts attention from the main subject of the book, which is money, and from the point of the book: that the choice between debt and democracy is a political one. What Mellor does show to be relevant is that public money and privately created money have different relationships with debt-based ecologically damaging capitalist production, and suggests that public money would facilitate a more ecologically sustainable economy than privately-created money. Further exploration of these relationships would be useful, as it is not clear that public money would not contribute to an ecologically unsustainable economy. Mellor’s rightly complains that ‘while states spent huge amounts of money to meet the financial crisis, there is no indication that they are willing to put such a level of funds into the ecological crisis’ (p. 50), and we look forward to more work on this.

As Mellor correctly points out, the kind of ‘democratic provisioning by public money’ that she envisages could well be achieved via a Citizen’s Income (pp. 81-3): although her statement that a Citizen’s Income could ‘only be “afforded” if money creation and circulation was through the public money circuit’ is inaccurate.

There is plenty in this book that its readers might wish to argue about, but it is a thought-provoking read. Its main argument, that there is a political choice to be made between democracy and debt, is surely right. What we now need is a road-map from privately created money to public money: a realistic map that takes into account the obstacles that will be encountered, and that takes fully into account that we live in a globalized world and that no one country’s monetary reform can be insulated from a global economy hard-wired into privately created money.

The book has a good index. A pity about the boring cover.