The story about voting giving the people democratic power is an example of the cover-up that passes for education at every level in our societies. Politicians need money and money men need political cover. Central banking was invented to institutionalize their partnership. The Bank of England, Banque de France and Federal Reserve are all private institutions which were given the appearance of public authority in return for absorbing the “national debt”, that is of the King, Napoleon and Congress respectively. I am not sure about the ECB’s constitution, since one problem with the euro is that monetary union preceded political or fiscal union. Of course, the educators, including the vast bulk of academic social scientists, insist that our societies are built on the separation of public and private interests, when it hasn’t been so for over 300 years.
Perhaps the main thing that is new about neo-liberalism is not the privatization of public interests, which has long been normal, but rather its ideological promotion as an ideal, where before it was clandestine. As Umair Haque noted recently, this makes the Gilded Age look Leninist in comparison. In both cases any social contract between rulers and masses was torn up and revolution seemed inevitable. It is chastening to contemplate what happened after three decades of financial imperialism last stopped — in 1913/14.
Yet there is something special about the plutocracy that has built up in recent decades, especially but not only in the USA. This has to do with the rise of modern corporations which were granted the rights of individual citizens in 1884 and now combine those rights with their longheld special privileges in ways that make the rest of us hardly citizens at all. Even the Romans, not noted as champions of democracy, limited the spending of the rich in political campaigns. The US Supreme Court not long ago refused to accept any restriction on corporate political spending since it would infringe their “human rights”.
These same corporations once built their wealth by producing industrial commodities for profit at prices cheaper than their competitors. Now they rely on extracting rents (transfers sanctioned by political power) rather than on producing for profit. The best way to rob a bank these days is to own one. Yet these rent-seekers, far from being punished for stealing from the public, are bailed out by our taxes and held up as shining examples of super-rich consumption to be adulated by a public that has exchanged equal citizenship for bread and circuses (or looted plasma TVs). This is decadence, a repudiation of the values of modern civilization, and the result is an impasse where there are no longer any political solutions to our economic problems. Some new form of political economy may emerge, perhaps ushered by war or civic unrest on a massive scale. But don’t hold your breath.
It’s time to revisit The Wonderful Wizard of Oz.
The American Civil War provided the opportunity for introducing a national monopoly currency. In 1879, having won the war and built up its gold reserves, the federal government finally felt able to back its dollars with gold. Immediately voices arose seeking to make money plural again. The People’s Party (better known as the Populists) found their support mainly in the South and West, among poor farmers. They flourished during the first age of financial capitalism, when New York was beginning to rival London as the world’s main money center. They wanted the government to address the chronic cash shortage in some parts of the country by issuing more paper money and unlimited silver coins. The rising price of gold and a corresponding fall in agricultural prices squeezed America’s farming communities; but the main cities enjoyed a boom in international trade, splitting the country on class and regional lines. Blaming Eastern bankers and politicians, the Populists settled on a monetary policy of bimetallism (silver coins in addition to the gold-backed currency). Their champion was William Jennings Bryan, twice defeated as Democratic candidate for president in 1896 and 1900. Bryan famously told the East Coast establishment, “You shall not crucify mankind on a cross of gold”.
Also in 1900, a journalist called Frank Baum published an allegory, The Wonderful Wizard of Oz. A tornado lifts Dorothy and her dog out of their Kansas home and deposits them in the East. Dorothy and her companions set out on the “yellow brick” road to Oz (referring to gold, as ingots and ounces), evoking an 1894 march by the unemployed demanding more money and work for the common people. On the way she picks up a scarecrow (farm worker), a tin man (factory worker) and a cowardly lion (William Jennings Bryan). The Emerald City (New York) is controlled by the Wizard of Oz (a contemporary plutocrat), who fools the Munchkins (the people of the city) into not seeing how he and the bankers manipulate the levers of power. After the Wizard is exposed for what he is, the tin man gets a bimetallic tool and Dorothy’s magical silver slippers take her back to Kansas.
Congress passed the Gold Standard Act in 1900, committing the US to even more reliance on gold. But discoveries in South Africa, Alaska and elsewhere increased the supply of gold and commodity prices rose. So Americans had their cake and ate it, at least until the Wall Street Crash of 1929 drove everyone else off the gold standard and into a new regime of national paper currencies. Richard Nixon completed this process in 1971. The anniversary of this event was last Sunday. It took forty years, but the capture of money by “the markets” then has finally reached its denouement now. The rest is up to us and school civic lessons won’t help.
Originally published as comment on Eugene Mendonsa’s blogpost at the Open Anthropology Cooperative, The ECB, The Fed and Poleconomics — the Wizards of Oz.