I’m about 3 & ¾ chapters into Geoffrey Ingham’s The Nature of Money and I started having outside thoughts about it, so I took some time to glance at some other material and now I’m going to ramble about my thoughts for a bit. The issue I’m trying to get at right now is the implications of the monopoly of violence on the institution of money. To try and make sense of this, I looked at some writing about civilian control of the military; I don’t think I will take any direct insights, nor am I really ready to critique any of that literature, but it did get me thinking in a useful way.
If we take the phenomenon being studied here as being “value and its relation to the civilian control of the military”, then there are two questions we need to answer. First, what is the connection between value (as in money) and control of the military? Second, is there any value (as in moral weight) in civilian control of the military? Please don’t misunderstand; here I am specifically not equating money and moral weight, but I didn’t want to sit down and dig out better words for the two “values” here. What I will say is that I think understanding these two distinct concepts will provide some insight into how money operates as a social agent.
I am not an economist, so I cannot really speak to the current state of economic theory. Ingham’s book was published in 2004 which is (I must remind myself) 21 years ago, so even the details gleaned from his work are a little out of date. I say all this because I want to say that it is my belief that debt as the origin of money is a more-or-less settled issue, and I say all of that by way of not explaining the theory in any real depth than this right now.
Essentially, the contracting of debt, the promise to pay it back, and the enforcement measures constitute money together with the means of accounting for those things. This whole system relies upon trust that such a promise will be fulfilled; that the debt will be paid back. In most (if not all) states, the element which primarily constructs this trust is the state’s monopoly on legitimate violence.
Here, the terms of the three stage theory which I wrote will be useful. What people nowadays call a country, state, or nation-state is what I will call a state-society. The state is the collective group of constituents, while the society includes the state as well as the state’s subjects. To lead them, the state appoints one of the constituents as sovereign, and this sovereign has responsibility for operating the government. As the three stage theory lays out, the position and authority of the sovereign and constituents is related to their presumed fitness to manage the general crisis, which is to say, the problem of survival. This is the basic picture.
The constituents and the subjects make up the two classes of society. Government is another type of group; I’ve been calling it a “clade” so far but I don’t like that word, even though I haven’t thought of one that’s much better. A class is a group of people who share a similar relationship to the state: either being members of the state or not being members. A clade is a group of people who share a relationship of some closeness to a particular function of state governance. The government, as a distinct institution, can be understood as a clade whose purpose is to implement the will of the sovereign (and therefore, indirectly, the constituents). Another important clade is that of the enforcers, whose purpose is to remove obstacles to the sovereign’s will; in other words, they enforce the law.
The classic enforcers are military and police forces who together serve to make sure that everyone within the state’s purview abides by the laws established by the state. Often, the two groups are blurred; sometimes there are other groups providing niche functions. The sovereign’s control over their enforcers is what ultimately backs up any demand made by the sovereign. It’s what backs up money as well as law. This is the reason that a widely-accepted definition of a state (or government, in these terms) is the group which holds the monopoly on legitimate violence; it’s this violence which ultimately stands at the heart of every other action.
So I think it’s clear to see by this how the enforcers of a state have influence on the existence of money: if a debt is not being paid, the sovereign has to use their enforcers to get the person to pay or render them in a state where they can’t resist their property being seized (e.g. death). This is the basic proposition of what I call death-coercion. I specify this because, to me, the important thing about coercion is not force per se but both 1) the connection of a threat, promise, or implication to the well-being of a certain object, and 2) the perceived ability of the threat-maker to damage or destroy that object. So while death-coercion is what people usually mean by “coercion”, I specify death-coercion in hopes that people will open their minds up about how coercion works.
In any case, I’m sure that anyone with a historical bent has been asking themselves the question: why would the enforcers accept being ruled by a non-enforcer sovereign? What is it that prevents the military from staging coups repeatedly? This is, of course, the question of civilian control of the military. Despite the introductory reading that I’ve done, I haven’t yet gone through (or even pinpointed) a single text on this subject that can inform my ideas. What I’m going to say here has probably been anticipated to some extent by Peter Feaver, but I haven’t read his theory closely yet. I just want to make it clear that I’m speaking my mind here, not claiming to have truly solved this issue or even gotten it from an authoritative source.
I think the answer to the question of civilian control of the military is double-sided. I strongly disagree with what seems to be the orthodox position, which is that civilian control is its own good and that the military must simply accept it as an ethos that they should not intervene in politics. Not only is this a needlessly restrictive way to think, it is also falsifiable; at times, a military takeover has been the method which ended a period of instability (this often has terrible costs but the fact of it cannot be ignored). I do believe that civilian control is a virtue, but not in and of itself; that is to say, I don’t think the fact that we can recognize civilian control as good means that we have established a theoretical basis for it, and lacking this basis restricts our ability to change how things work.
One side of the control question is purely mechanical. The relationship between the state and the enforcers is reciprocal: the enforcers follow the state’s orders and the state guarantees the status and maintenance of the enforcers. While most enforcers in modern times are directly paid, this relationship should not be considered as a monetary contract; instead, it is a “personal” obligation, one open for frequent renegotiation. Because of this, the sovereign can never be considered part of the enforcer class unless we assume that the sovereign can really give to themselves. I do not. In fact, I think that the entire fact that the sovereign must act as the benefactor to the enforcers introduces an essential tension, because whatever the enforcers want will have to be provided for by the sovereign. So if a military chief came to power in a country, that chief would immediately become alienated from their soldiers. While such a chief likely did issue payment for those under their command before the rise, these earlier payments would be subsidized in large part by the state.
The other side has to do with legitimacy. While it is true that part of the money system relies on the use of sanctioned force to settle debts, this is only part of the money system, and that is only part of the state-society as a whole. All of the social networks of the country have their part in contributing to the continual generation of money. The trust which allows such exchanges to take place is a result of the actions of the sovereign. Further adding to this legitimacy is the method of the sovereign’s confirmation; a highly legitimate method, such as mass elections, greatly increases the trust felt by the public for their sovereign and government. Military coups rarely have such legitimacy; not only do they often involve upheaval for the common people, they also frequently break apart important alliances with abandon, leading to the deterioration of the cities they worked on. Without the ability to manage the economy and the political space, the military has often deferred to civilians on those matters.
While Ingham rightly points out that money is largely based on coercion rather than trust-as-such, I disagree that we should replace the concept of trust in money with the concept of coercion. Instead, I think we should view coercion as a kind of pseudo-trust, or as a mechanism which supports trust, rather than an absolute stand-in for trust. It allows the system to proceed as if there was something approaching perfect trust in its institutions. The reason I separate them is that I am not convinced that the “violence”, or what Weber calls the “battle of man with man”, has to be one that ruins or ends all “losing” parties. I’m not totally sure about how this works out but this is where my intuition goes; I’ll need to read more to support and develop my thoughts here.
I’m going to end with something of a loose thought that I can’t quite connect to the previous points but that I do find relevant. One of the major issues with the acceptance of credit theories of money, including the state theory, is that it means lenders can create instruments that can act effectively as money, and this can cause the actual supply of money to grow out of a desired range. Ingham tends to specify “banks” as the ones who can create this money and he excludes forms of private credit. Instead of this, I would suggest that the difference between private credit and bank-issued credit on these terms is primarily about degree of moneyness and not an issue of difference in kind; the reason bank credit is more trustworthy is that they are both regulated and integrated with the commercial system (which means that they must uphold their trustworthiness in order to continue doing business). That is to say, private lending still does create something which is on the same scale of moneyness that includes cash, bank notes, certificates of deposit, and other debt instruments; if bank credit money can be called “near money”, private lending would create “distant money” or “restricted money”.
I raise this mainly to expand the issue I want to talk about to the broadest possible boundaries. I want to posit the use of banking techniques concerning bad loans in managing state debts. In brief, if a bank has issued a loan that they don’t feel they will be able to recover, they can write the loan off; they effectively take money from their general store and use it to pay themselves back. This is a matter of bookkeeping and clearly does not change the amount of actual currency that the bank has, though it does nullify debt instruments to the extent that they are based on that issued loan. If proper accounting practices are used, such money cannot be infinitely reused in this way.
How I would describe it is something like this. Say Rupert asks his friend Steve to borrow $10, promising to pay him back by Friday. Steve has to pay for a hot dog on Friday and it’s going to cost $10; he was going to use that money to pay for the hot dog, but instead he lets Rupert borrow it. Friday comes by and Rupert hasn’t paid Steve back. However, it happens that Steve started out with $30 and not just $10. To pay for the hot dog, he could (theoretically) present the IOU that Rupert gave him and say that Rupert will agree to pay the hot dog man the $10; this is roughly how loans start to travel as money. However, since Steve still has $20 of his initial $30, he can instead choose to simply pay the $10 out of his store. Therefore the hot dog has been paid for even though the money that was “supposed to” be used for that purpose is still out. If Steve had paid with an IOU, the hot dog man would eventually have to go after Rupert for the money. If Steve simply “writes it off” by paying the hot dog man out of his pocket, no one has to go after anyone anymore; the debt is still between Steve and Rupert, and we’ll assume that Steve has decided not to pursue the issue.
Of course, when we’re talking about write-offs, we’re talking about paying ourselves to convince ourselves to not go after the debt anymore, which does seem like a tautology, but the point of the exercise is that this is how the exchange works to reflect the decision not to pursue the debt in a manner that can be read through accounting records.
Given this, it should be possible for a state to write off debts to itself. That is to say, there seems to be no reason that a state would be forced to punish its subjects (or constituents, though practically they are never punished) for non-payment of taxes, or even to hold an accumulated tax. The state could write off such unpaid debts. Now, this is probably not a new suggestion, though I haven’t yet seen it suggested in these terms. I believe that this is very close to the conceptual problem of full employment leading to inflation; in other words, it seems to be within the state’s power to unilaterally change this situation (write off tax debt, create full employment), but for some reason doing this appears to be impossible or impractical (or simply undesirable to those in power, but we will leave that speculation aside for now).
The argument in this case, as I see it, would be that since money is created through the act of employing violence to ensure the settlement of debts, it follows that the state cannot simply refuse to use violence by ignoring debts or trust that debts would be repaid would be lost. As Ingham says, “In capitalism, taxation is also a part of the settlement with the state’s creditors – the rentiers, whose dividends are believed to be secured by taxes.” [emphasis original] By this, what I understand is that rentiers believe that their money is dependent on the actual collection of tax money by the state; that is, the believe that their money is dependent on the state’s quantity of money.
I believe instead that money is largely dependent on the general faith in the state’s viability; whether the state will pay back its debts. This is, however, not connected directly to the actual collection of tax; it is instead more strongly connected with the ability to produce stable high-powered money (i.e. cash). Further, though taxation is the most straightforward way to institute the use of money, neither the actual collection nor the process of collection is what creates the value of money; it only creates the basic debt relationships required for money to come into existence. These three processes – state viability, the ability to create money, and taxation – is what allows for the existence of a stable money economy.
These are just conjectures, like I’ve been saying. I am just beginning my study into this stuff. The blog grind, though, right? I’ll keep you all updated on the other things I learn as I can digest them.