Keystroke Capitalism

How Banks Create Money for the Few

Aaron Sahr, Sharon Howe

• Publisher: Verso
• Year: 2022
• Print ISBN:
  9781839761195
• eBook ISBN:
  9781839761201
• Topic: Economics
• Subtopic: Economic Policy
• Index: Economics

Contemporary capitalism produces more and more money, debt, and inequality. These three trends have a common cause: the privilege of private banks to create money by means of accounting - by the stroke of a key. Why was this privilege not addressed politically for so long - and who benefited from it? At the heart of the answer lies the realization that the power to create money has been hidden by the way we commonly think and talk about capitalism. The book traces the omission of money creation from theories of capitalism and maps its consequences. By expanding the manoeuvring space for the banks to use their privilege, the capitalist countries have financed a transformation of the economy known as financialization. As a result, the real economy and private households became a debt supplier to a monetary system whose returns accumulate at the top. It is not simply "the markets" but money itself that transfers economic benefits from the masses to a minority. Increasing inequality of income and wealth can therefore only be combated if one does not only correct distributive results of markets-redistribution-, but addresses predistribution: the modalities of money creation.

Notes

Introduction

1 Anthony Shorrocks, James Davies and Rodrigo Lluberas, Credit Suisse Global Wealth Report 2021, Zurich 2021.

2 Facundo Alvaredo, Lucas Chancel, Thomas Piketty, et al., ‘Global Inequality Dynamics: New Findings From WID.world’, NBER Working Paper 23119, 2017.

3 See the International Monetary Fund’s Global Debt Database, available at IMF.org.

4 See Credit Suisse, Global Wealth Databook 2016.

5 Wolfgang Streeck, Buying Time, trans. Patrick Camiller and David Fernbach, London, 2017; Colin Crouch, ‘Privatised Keynesianism: An Unacknowledged Policy Regime’, The British Journal of Politics and International Relations 11(3), 2009, 382–99; Steve Keen, Debunking Economics: The Naked Emperor Dethroned, London, 2011; Ann Pettifor, The Production of Money: How to Break the Powers of Bankers, London, 2017; Susan Lund, Toos Daruvala, Richard Dobbs, et al., ‘Financial Globalization: Retreat or Reset?’, McKinsey Global Institute, 1 March 2013, available at mckinsey.com.

6 Branko Milanovic, Global Inequality: A New Approach for the Age of Globalization, Cambridge, MA/London, 2016.

7 This expectation of progress arose, not least, from the relevant studies by Simon Kuznets (see, for example, ‘Economic Growth and Income Inequality’, The American Economic Review 45(1), 1955, 1–28). More recent research on inequality makes many references to this disappointed hope: Thomas Piketty, Capital in the Twenty-First Century, trans. Arthur Goldhammer, Cambridge, MA, 2014, 11ff.; Anthony B. Atkinson, Inequality: What Can Be Done?, Cambridge, MA, 2015, 65ff.; Milanovic, Global Inequality, 46ff.; François Bourguignon, The Globalization of Inequality, trans. Thomas Scott-Railton, Princeton, 2015. James K. Galbraith, Inequality: What Everyone Needs to Know^®, New York, 2016, 29f. To quote Piketty, people believed that ‘the balancing forces of growth, competition and technological progress [would] lead in later stages of [economic] development to reduced inequality and greater harmony among the classes’ (Capital in the Twenty-First Century, 13).

8 Alvaredo et al., ‘Global Inequality Dynamics’.

9 Ibid., 4.

10 OECD, Divided We Stand: Why Inequality Keeps Rising, Paris, 2011.

11 World Inequality Database, available at WID.world; OECD.Stat, available at stats.oecd.org.

12 Michael Förster, Ana Llena-Nozal and Vahé Nafilyan, ‘Trends in Top Incomes and Their Taxation in OECD Countries’, OECD Social, Employment and Migration Working Papers 159, 2014; OECD, In It Together: Why Less Inequality Benefits All, Paris, 2015.

13 Pierre Rosanvallon, The Society of Equals, trans. Arthur Goldhammer, Cambridge, MA, 2013.

14 Ibid., 4.

15 For a discussion of this point of view, see Atkinson, Inequality, 23ff.

16 Ibid., 25.

17 World Bank, Poverty and Shared Prosperity 2016: Taking on Inequality, Washington, DC, 2016.

18 Kathrin Brandmeir, Michaela Grimm and Arne Holzhausen, Allianz Global Wealth Report 2015, Munich, 2015, 19. See Anthony Shorrocks, James Davies and Rodrigo Lluberas, Credit Suisse Global Wealth Report 2021, Zurich 2021 for recent figures.

19 Förster et al., ‘Trends in Top Incomes’.

20 Credit Suisse, Global Wealth Databook 2016.

21 Michael Kumhof and Romain Rancière, ‘Leveraging Inequality’, Finance & Development, December 2010, 28–31; Thomas Goda and Photis Lysandrou, ‘The Contribution of Wealth Concentration to the Subprime Crisis: A Quantitative Estimation’, Cambridge Journal of Economics 38(2), 301–27.

22 Obviously, the inequality crisis cannot be explained by any single factor. The economists Anthony B. Atkinson and Branko Milanovic point to the restructuring of labour markets in the second half of the twentieth century as partially responsible for increasing concentrations of income and wealth (Milanovic, Global Inequality, 18; Atkinson, Inequality, 115ff). The globalization of labour markets – reinforced by the growing technological dependency of production chains – favours highly skilled employees in so-called knowledge-intensive fields, and disadvantages ordinary industrial workers. These views are shared by many institutional economic observers (ILO, World of Work Report 2011: Making Markets Work for Jobs, Geneva, 2011; OECD, Employment Outlook 2007, Paris, 2007; OECD, Growing Unequal? Income Distribution and Poverty in OECD Countries, Paris, 2008; European Commission, Employment in Europe 2007, Brussels, 2007; IMF, World Economic Outlook 2007: Globalization and Inequality, Washington, DC, 2007). Piketty (Capital in the Twenty-First Century), Joseph Stiglitz (The Great Divide, New York, 2015) and many sociologists have explored other causes of the inequality crisis; for an overview, see Steffen Mau and Nadine M. Schöneck, eds, (Un-)Gerechte (Un-)Gleichheiten, Berlin, 2015, and Heinz Bude and Philipp Staab, eds, Kapitalismus und Ungleichheit. Die neuen Verwerfungen, Frankfurt/New York, 2016.

23 Jeremy Rifkin, The Zero Marginal Cost Society, New York, 2014; Paul Mason, PostCapitalism: A Guide to Our Future, London, 2015; on the notion of the digital economy as a non-capitalist form of value creation, see Dave Elder-Vass, Profit and Gift in the Digital Economy, Cambridge, UK, 2016.

24 See, for example, Silke Helfrich and Heinrich-Böll-Stiftung, eds, Commons. Für eine neue Politik jenseits von Markt und Staat, Bielefeld, 2012.

25 Toby Baxendale, ‘Public Attitudes to Banking’, The Cobden Centre, 15 June 2010, available at cobdencentre.org.

26 L. Randall Wray, Modern Money Theory: A Primer on Macroeconomics for Sovereign Money Systems, New York, 2012, 81.

27 On this concept, see Aaron Sahr, ‘Reichtum aus Feenstaub: Das Free-Lunch-Privileg des Keystroke-Kapitalismus’, in Bude and Staab, eds, Kapitalismus und Ungleichheit, 25–44; Sahr, Das Versprechen des Geldes. Eine Praxistheorie des Kredits, Hamburg, 2017.

I. Debt

1 One troy ounce of gold was worth 615 dollars in 1980 and 445 dollars in 2005; gold price data per Statista.de.

2 OPEC-crude oil price data per Statista.de.

3 A comprehensive review of existing research on this subject can be found in the special issue of the 2015 Socio-Economic Review (13[3]) and in Gerald F. Davis and Suntae Kim, ‘Financialization of the Economy’, Annual Review of Sociology 41, 2015, 203–21.

4 Greta Krippner, ‘The Financialization of the American Economy’, Socio-Economic Review 3(2), 2005, 173–208.

5 Susanne Lütz, ‘Finanzmärkte’, in Andrea Maurer, ed., Handbuch der Wirtschaftssoziologie, Wiesbaden, 2008, 341–60.

6 Kathrin Brandmeir, Michaela Grimm and Arne Holzhausen, Allianz Global Wealth Report 2015, Munich, 2015; Susan Lund, Toos Daruvala...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Dedication
• Contents
• Introduction
• I. Debt
• II. Ownership
• III. Capacity
• IV. Appropriation
• V. Change
• Notes
• Index