Mary Mellor, Money

Mary Mellor, Money: Myths, truth and alternatives, Policy Press, 2019, ix + 177 pp, 1 4473 4627 2, pbk, £14.99

Money is a social institution: that is, it is a set of rule-based human behaviours, and it is up to us how it behaves. Mary Mellor doesn’t put it quite like that, but that is what the message of this clear and accessible book comes down to.

In her introductory chapter, in much the same way as J.K. Galbraith’s Money, Mellor explores the history and current characteristics of money, which is mostly now constituted by debt – that is, banks adding numbers to bank accounts – with the whole structure based on public trust that a nation state’s money will continue to be exchangeable for goods. She also declares her aim in writing the book: to expose ‘myths’ about money, and in particular the myth that money is in short supply.

Chapter 1 questions a history that suggests that the money economy emerged from a barter economy in the context of markets, because there is little evidence barter markets, and forms of money existed in societies without markets. Other myths demolished are that money has an intrinsic value, and that there was ever a fixed stock of money based on stocks of precious metals. There have always been credits and debts not so connected: and money with a value determined by the value of precious metal is in fact far less stable than fiat money, that is, government issued money, because precious metals are as subject to market valuation as is anything else. At the end of the chapter, Mellor offers her own understanding of money as a means of transfer, rather than as a means of exchange, because money can be transferred as gifts and taxes and not only in the market. Money is therefore best understood as social: as ‘a trust based on a common recognition of the money symbol’ (p. 35).

Chapter 2 contains a history of money that shows that money existed long before either states or markets, and that its uses have always been social and political, as they still are. Chapter 3 continues the history by showing the important role of the state in the early history of money, and by charting the shifting balance between basing the value of money on the value of precious metals (particularly in relation to coinage made of gold and silver), and basing its value on the state’s ability to tax a country’s population and institutions. As Mellor suggests, ‘rulers could authorise or issue only as much money as the economy could bear and the taxation system could reclaim’ (p. 73). Chapter 4 understands banks as loan-makers and account-keepers, and shows that, within limits, to expand the stock of money can expand the economy. Chapter 5 recounts the recent history of bank failures, hedge funds, banks too large to fail, sub-prime mortgages, and financial crisis, and of states stepping in to rescue the financial structure and then blaming the problem on the state rather than on financial institutions and instigating austerity measures. Chapter 6 explores the challenges faced by money not backed by states: the Euro, which had to be rescued by state and central bank action; cryptocurrencies, plagued by volatility; and local currencies such as babysitting circle tokens. The message is that all money is social and trust-based.

Chapter 7 summarises the case made in the book – that money is an active social institution resting on public authority, and that money is as much created by state spending as by bank lending. Mellor then offers a useful discussion of the history and advantages of Citizen’s Basic Income. Two challenges are discussed: that if means-tested benefits are rolled up into the Citizen’s Basic Income, then people with the most needs might be worse off; and that it might be difficult to decide who should receive the Citizen’s Basic Income. We might respond that there are perfectly feasible Citizen’s Basic Income schemes that would not leave low income households worse off; and that who should receive incomes from the state is not an issue unique to Citizen’s Basic Income. Two minor errors: the recent experiment in Canada was not a Citizen’s Basic Income experiment, even though it said it was; and it was never the state’s intention to extend the recent Finnish experiment: that was a hope expressed by academics.

Mellor closes chapter 7, and the book, by calling for the democratisation of money, by which she means that the state should take back control of money creation, and should deprive private banks of the ability to create money by issuing loans. She also makes the same point that Geoff Crocker has often made: that it is the ‘finite real capacity’ (p. 149) of the economy that should determine how much money the state should issue. The balance that is required is ‘between public expenditure and economic capacity’, with taxation as ‘an instrument of that balance’ (p. 150).

Whether the language of ‘myths’ and ‘magic’ is helpful or not will be a matter of opinion. The problem with it is that it entails clear distinctions between myth and truth, and between reality and magic, and that it leads Mellor into either/or statements when both/and ones might have been more useful. For instance, there is no need to minimise the role of markets in the history of money in order to emphasise the role of the state; and, as she recognises, there is some truth in understanding the origin of banking in individuals depositing precious metal coinage with bankers, as well as banks originating in the making of loans.

In one sense there is nothing here that could not be gleaned from a reading of Galbraith’s Money, Graeber’s Debt, and Jackson and Dyson’s Modernising Money, all recognised in the useful annotated bibliography at the end of the book: but we are in Mellor’s debt for putting together an accessible and coherent account of the nature of money and of how it might be better organised.