Thread by @deontologistics

Okay, here's a slightly different twitter thread from the usual. I want to say something concrete about the way in which capital works as an incentive structure that's supposed to co-ordinate human behaviour to solve resource allocation problems.

I think that the left has a fraught relationship with the concept of money. The two opposing poles that configure this relationship are something like: i) money is the root of all evil, and must be abolished; and ii) money is a neutral and homogeneous medium, and can be ignored.

Of course, there are a lot of intermediate positions here, but they tend to be arrayed along a line between the poles, rather than rejecting the presuppositions underpinning the polarity itself.

It's fairly easy to see where the latter comes from, as it's the default position under liberal capitalism, and is so precisely insofar as most people are oblivious to the different functions of money: as medium of exchange, as store of value, and as means of investment.

Most people understand that money is in some sense a fiction: it is socially instituted rather than naturally constituted. The exceptions are those who adopt extreme versions of the commodity theory of money, for whom it is any resource whose scarcity is relatively stable.

This takes different forms, from the more *global* libertarian obsession with gold backed currency to the more *local* market anarchist view that money spontaneously emerges in any economy with sufficiently complex distributed division of labour.

This is not to mention the cryptocurrency variants, that substitute computational asymmetry for resource scarcity, as either a local or global way of controlling the balance between scarcity and fungibility, and the properties this balance implies (e.g., liquidity and velocity).

Fiat currencies show that money needn't be a commodity in either sense, but that the relevant properties can be deliberately manipulated by governmental and financial actors to modulate the economy. Yet this shows that money is not a *fiction* but a piece of *infrastructure*.

As an aside, this is one of the fundamental fault lines in the actual ideology of neoliberalism: Hayek's arguments against state planning are notoriously abstract, and the monetarists made these concrete by explicitly restricting economic intervention to monetary intervention.

So, what are the functions of money as infrastructure, and how do the monetarists' restricted range of tools for intervening in the money supply enable you to modulate it? I have already mentioned exchange (supply/demand), storage (savings), and investment (credit).

These functions interact in ways that define the parameters of capitalism, such that it evolves as they evolve: goods (exchange/storage), variable capital = labour (exchange/investment), fixed capital = industrial machinery (storage/investment), and rent (all of the above).

The standard techniques of monetarism are exercised through central banks, which are sometimes *de jure* independent even when they are *de facto* dependent. This is important, because it gives us our first glimpse of how the exercise of power is bound up with economic control.

On this basis, the government can control *interest rates* by changing how the central bank reacts to requests for credit (interest negotiation), and *money supply* by changing how it offers credit (amount negotiation). Both have become more and more targeted over the years.

Crucially, these techniques are entirely dependent upon the co-operation of the hierarchy of financial institutions beneath the central bank, and the incentives for co-operating are largely based on the political equivalent of a handshake agreement between classes.

This is a principal agent problem if ever there was one, and the conjunction of the Bush regime's immediate capitulation to the demands of finance capital, combined with the Obama regime's unwillingness to leverage the residual power this granted, demonstrate its seriousness.

So, what's missing in monetarism? Well, it represents a compromise between Hayekian neoliberalism and earlier forms of liberalism in more than one way. It makes concessions to both classical liberalism and the post-WWII social democratic contract that followed.

On the former front, it de-emphasises other ways of making sure that market mechanisms function as advertised, namely, by acting to undermine rent-seeking behaviour, such as monopolies, cartels, and less obvious forms of power based solely on resource differentials and position.

The Reagan/Thatcher years saw a complete collapse of the whole conceptual edifice of anti-trust laws that had been introduced to reign in earlier excesses of capitalism. This was facilitated by brand new forms of guard labour that proliferated in the political ecosystem.

For those who don't know, guard labour is labour designed to protect the resource differentials and geographic/economic positions that enable one to extract rent without providing any of the improvements markets are *supposed* to produce: police, accountants, lawyers, lobbyists.

Guard labour pays for itself, otherwise it would not exist. It is often extraordinarily valuable. Consider how much a lobbyist is payed (both as personal salary and for 'greasing the wheels' in the zone on the edge of bribery), relative to how much value they realise.

This is even more obvious in the case of tax lawyers, who construct elaborate devices for funnelling capital flows in ways that respect neither territory nor jurisdiction. It is in the interests of both the political and financial classes to permit and enable such guard labour.

This brings us to the issue of taxation. Here we encounter the other traditional functions of money in the liberal state: redistribution and provision of social goods. The promise made to labour by hegemonic Keynesianism was that these could be used to balance the public books.

A state with a fiat currency and restrictions on labour and capital flows (borders) uses money to encode its monopoly on power within those borders (and sometimes without, as we see in the case of the imperial era US).

The promise of social democracy was that this power could be exercised by representatives of the people as a form of counter-power in the ongoing class war between labour and rentiers (be they industrial capitalists, financial capitalists, or aristocratic landlords).

The system based on this compact collapsed for a variety of reasons, but it is clear that one aspect of this failure was the increasing alignment between the class interests of professional political representatives and the ramifying strata of guard labourers.

There's an important story to be told here about the way that the adoption of general purpose management broke the fordist alliance between labour and industrial capital and reasserted that between industry and finance, and the consequences thereof. It is a story for another day.

The key point here is that the 'financialisation' associated with the neoliberal era was the result of a double compromise, the need to use the tools of monetarism to preserve standards of living while turning a blind eye to auto-catalysing rent-seeking dynamics.

As is fairly obvious, when this double compromise began to fail in a variety of ways (e.g., the coupling of incentives for private homeownership and asset speculation from the 90's to present), it was almost always resolved in favour of the compromise with capital.

Before I turn to the consequences of this gradual unravelling of the neoliberal compact between capital and 'the people' (within the workforce and without), I need to return to the topic of how the the left thinks about money, and discuss the pole left alone thus far.

What I have said thus far is that the right tends to deny that money is a fictional commodity, preferring to treat it as a natural one, and even when it concedes this, to reduce its engagement with money qua infrastructure to those dimensions present in the naturalist analysis.

What I have said thus far is that the right tends to deny that money is a fictional commodity, preferring to treat it as a natural one, and even when it concedes this, to reduce its engagement with money qua infrastructure to those dimensions covered by the naturalist analysis.

It's worth noting that monetary naturalism comes in many forms. Those that preceded Smith, Ricardo, and Marx tended to focus on the function of exchange and storage. However, the classical view did not so much supplant naturalism as reconfigure it: it discovered investment.

However, this discovery was interpreted in terms of the *interface* between man and nature, i.e., labour. Instead of understanding money in terms of resource scarcity, the classical economists interpreted it in terms of labour scarcity.

This is the central claim of the labour theory of value: the limit governing how little you (as a capitalist) can pay for labour (in wages) are determined by the cost of reproducing that labour, rather than by how many resources one can extract from nature.

There's an obvious sense in which this is true, and an obvious sense in which it is false. It's clear that one cannot count on a worker who does not make enough to feed themselves, but it's equally clear that one cannot feed workers with their own labour if the resources run out.

There's a more detailed story to be told about the problems of LTV, but for now it suffices to note that it has been abandoned by everyone but the far left, where it exercises an influence proportional to the waxing and waning of Marxian/Marxist/Marxisht thought.

There are a bunch of interesting pressures here, but to explore them I need to say something about Marx, and thereby invite my mentions to be thoroughly waxed by Marx philologists.

Here's my claim: Marx provided an immanent critique of classical economics and its normative consequences that was nonetheless to some extent dependent on its descriptive assumptions, and that this tension is responsible for the poor signal/noise ratio in Marxist circles.

So, there's a sense in which the perennial preference for macroeconomics over microeconomics on the left is tied to its proximity to Marx and his inheritors. For example, it's clear that Keynes is under pressure to defend capitalism from challenges coming from the far left.

Or rather, from further left. So he drew up the blueprint for the post-war compact, though he is far from the only one responsible for the confluence of ideas and policies that congealed in response to the twin failures of classical liberalism: the great depression and fascism.

Marx provides a descriptive analysis of capitalism and an explanation of its failures that is quintessentially holistic, and it is this methodological orientation that many of his most perspicuous critics inherit: Veblen, Keynes, Sraffa, etc.

But by contrast, the normative dimension of Marx's analysis - the account of exploitation in terms of surplus value - is all too easily read in a microeconomic fashion, i.e., in terms of relations of exchange (and employment) between individuals.

As @rechelon has pointed out quite concisely, one can be compensated for one's labour by a capitalist even if one's labour has net zero productivity, net zero profit, or is consumed by a process that produces nothing that can be valorised through exchange.

@rechelon Even if LTV is correct, which I sincerely doubt, it most certainly only makes any sense as a macroeconomic theory of the global dynamics of the capitalist mode of production and the systemic oppressions it produces.

@rechelon But this does not stop its microeconomic interpretation from distorting the social imaginary of the political left. I think it is genetically responsible for much of the prelapsarian nonsense talked about 'authentic community' by many communists and fellow travellers.

@rechelon "If we can only erase the taint of capitalism from the human animal, then we might live in true community, where people will have the sort of sociality that's just right for me. Have you read my Paris commune alt-history fanfic?" - I wish this was more of a caricature than it is.

@rechelon If classical economics discovered the dynamics of investment, then Marx most clearly saw what these dynamics implied: that the reconfiguration of the productive process had become endogeneous to that process itself.

@rechelon But the microeconomic version of LTV stipulates that there can be no exploitation in a post-capitalist world, and this leaves one with only a few options for how to conceive of the economics of such a world. The easy option is to pretend there is no need for investment.

@rechelon If we stipulate that all needs are met, and that all needs are fixed (because 'authentic', 'natural', etc.), this allows us to imagine an idyllic crystalline social order in which none of the problems that the *infrastructure* of capitalism has evolved deal with need be solved.

@rechelon Post-capitalism, become the perfect imaginary commune, thus has no need of money, because it has no need of exchange, storage, or investment. It equally has no need of taxation or distribution, because the social relations which mediate means and ends are fashioned without flaw.

@rechelon To provide a more vivid image: "If you want a vision of the future, imagine a washing up rota stamping on a human face for all eternity."

@rechelon I think it is entirely conceivable that money will outlive capitalism, because the relations between them might be reconfigured in ways that are no longer distinctly capitalist: there might be exchange without wages, storage without interest, and investment without profit.

@rechelon Of course, this is by no means necessary. Yet, once one acknowledges that money is a fictional commodity, and that treating it as a real commodity can undermine its infrastructural role, there is no reason to tie the conceptual connection between money and capital so tightly.

@rechelon So, what I am saying here is that the characteristic failure of the left in thinking about money is not so much naturalism as fantasism. Money is not merely treated as a *fiction* of sorts able to function as infrastructure, but a *fantasy* getting in the way of some purer thing.

@rechelon But this purer thing is the real fantasy, and it stops us from giving honest answers to people who, when confronted with the idea of a post-capitalist society, wonder how they will get income support, or whether they will have to make do with vouchers that limit their choices.

@rechelon It is fantasies like these that stop us from seeing the things actually in front of us. The concrete needs and the difficult strategic choices. The polymorphous perversion catalysed by production and the fragile solidarity required to unbind it from the whims of commerce.

@rechelon So, after this marathon digression, here's something that's in front of us: the biggest single obstacle to tackling climate change is double entry book keeping.

@rechelon Now, just in case your initial reaction to this is that I'm proposing the elimination of accounting, that's not what I mean, though I'm less opposed to the elimination of accountancy as guard labour.

@rechelon It is patently obvious to everyone who is not a free market fanatic of some stripe that the energy market as it exists is completely irrational when looked at from anything resembling an objective point of view.

@rechelon It is completely incapable of handling the co-ordination problems posed by regular investment and provision of infrastructure (look at privatised energy companies in the UK) let alone the properly existential threat of fossil fuel externalities.

@rechelon Even now that renewables are becoming cheaper than legacy fuels, we simply will not switch to them in anything resembling an optimal manner. If we'd put all the money captured by fossil fuel subsidies into R&D and infrastructure investment, we would be decades ahead in this.

@rechelon This is a categorical failure of capital as a mode of investment, combined with a complete failure of liberal democracy as a means to modulate it: investment analysts have long had an accurate picture of the problem, but all incentives have been stacked against solving it.

@rechelon There is, in fact, no greater sign that whatever it is, the current way in which we solve co-ordination problems does not scale, and is riddled with organisational pathologies that have accreted in layers since the end of the post-war period.

@rechelon But putting all that aside, here's the single biggest choke point right now: fossil fuel companies need to pretend that their infrastructure is an asset not a liability, and every bit of accumulated power they have is directed to ensuring that everyone plays pretend with them.

@rechelon It doesn't matter whether we think they should have this power, or whether they should be tried for crimes against humanity, they have power and are using it to distort the investment incentives for the global techno-industrial substrate. This is a transfer of power problem.

@rechelon Transfer of power is the thorniest of political problems, and building systems to handle it reliably is incredibly difficult, but there are also one-off transfer of power strategies that can work, and we should at least *try* to apply them to this looming existential threat.

@rechelon Here's what I'm calling for: a fossil fuel infrastructure armistice. We buy it all back at the pretend value, no questions asked. We make people who do not deserve to be made whole whole, because that's the easiest route around this obstacle.

@rechelon There's probably room to negotiate a bulk price, given that they know it's overpriced, and also that they're risking the lives of their descendants, but less than we might expect from anyone with a functioning conscience. If we want to do truth and reconciliation later, so be it.

@rechelon To summarise, we've got to be serious about money as infrastructure, infrastructure as capital, and capital as accumulated power; and if we recognise that we should be willing to pay for the power transition we all really need, even if it deviates from our political fantasies.

@rechelon One final point, before I go. The great underappreciated tragedy of the era of financialisation is the way management culture incentivised leveraging every enterprise to the hilt. This has created more systemic fragility than can be handled by derivatives.

@rechelon Again, the near banking collapse of 2008 is the obvious example, but it's important to see the case of fossil fuel infrastructure as belonging to the same genus. Too much fragility means too much incentive to feign ignorance to unanticipated problems, and even to generate it.

@rechelon Right, that's probably the longest thread I've done. Expect an edited version tomorrow.