Moralizing Money

Moral Economies of Money: Politics and the Monetary Constitution of Society
By Jakob Feinig
Stanford University Press, 2022

Since 2021, inflation has featured as among the most salient issues in American public discourse, with voters actively awaiting pronouncements from the Federal Reserve. Inflation mattered in the 2022 midterm elections, and it looms large over the 2024 presidential election. In historical terms, however, there is room for further politicization. While the much awaited soft landing promises to keep the show on the road, for the most part, it does little to alter the defining traits of the current economy. For critics, these problems are hardwired into the current system and are almost impossible to overcome as long as policy-making takes place within the parameters of the current monetary system—moving interest rates up or down. What is needed instead is a new monetary system: democratic choices about what serves as money, who can create it, and what its value is tied to. 

To politicize monetary policy is a controversial demand today; to politicize the design of the monetary system can sound positively outlandish. Jakob Feinig’s Moral Economies of Money gives us an excellent place to start. Feinig’s historical account demonstrates that monetary-system design was once “at the center of political life” in North America. He begins his narrative in the Colonial era, when voters and their representatives, from town halls to state legislatures, arrived at different answers to the fundamental question: what should serve as our money? They used wampum, or notes tied to land or tobacco, or created new money to pay for a specific public project. They dealt with the subsequent questions thrown up by the need to manage a dynamic economy, as when notes were increasingly backed by low-quality tobacco—a struggle that involved a warehouse being set ablaze. Where state legislatures created money to pay for public projects, they “made the functioning of paper money visible [because] under one roof, lawmakers performed the functions of today’s central bank, the Treasury, fiscal policy makers, and the Bureau of Engraving and Printing.”   

These were not, Feinig argues, missteps on the way to the present monetary system, but meaningful outcomes of a context-dependent struggle over equality and economic development. Regular voters understood that different forms of money empowered different parts of the population, making it easier to engage in some forms of economic activity than in others. Poets and traveling lecturers spread knowledge about the design of the monetary system far and wide. Such grassroots mobilization interacted with elite politics: proposals for forms of money that were more equitable had a better chance of success if an up-and-coming part of the commercial elite considered them beneficial for their bottom line. Feinig shows that contestation over money was a crucial element of some of the most important political questions. The climactic struggle between the settlers and the Crown, for example, might easily have taken place under the motto: no monetary-system design without representation. 

But in the early nineteenth century, a very different understanding of money gained prominence. Advocates of settler equality argued that any monetary system requiring ongoing governance was wont to become dominated by a privileged few who would “thrive at everyone else’s expense.” Feinig traces this sea change to a clause in the US Constitution that withdrew the states’ right to create money. State legislatures—previously the primary fora for democratic debate and decision-making about monetary design—lost an important function. Instead, they granted private citizens the right to set up commercial banks. Those banks issued money not to invest in projects that had been democratically deemed to advance equality and economic development, but that promised the highest return. 

In this setting, the Jacksonians managed to shift the conversation from how to govern money, to whether a society should even try to do so. What followed is one of the great ironies in Feinig’s account: Jacksonians kept federal deposits at so-called pet banks, which despite loyalty to the administration, proved unable to honor their promises during the panic of 1837. The episode encapsulates Feinig’s convictions: “monetary institutions there must be, institutions require decisions about their design, and decision-making is a political process”; a public discourse denying those facts only makes the many “manipulated [more] easily” by the few. 

Tracing a history extending from the early colonists up to the New Deal, Moral Economies of Money covers a lot of ground—in just 148 pages plus notes and a bibliography that includes much of the recent flourishing in the history of money. To synthesize this extensive material, Feinig develops two key concepts: “knowledges and practices that enabled people to shape money creation” are referred to as “moral economies of money,” and activities that stood in the way of such processes he calls “monetary silencing.”

The choice of the word “moral” puts Feinig in the position of having to protest against the impression that he embraces the values of the historical actors: “most moral economies of money sought to secure a white men’s ideal of living as ‘independent’ small producers, which they attempted to realize at other people’s expense and at other people’s peril.” The “us” in debates over what should serve as “our” money excluded women, slaves, and Native Americans. When white men decided what public projects to finance through money creation, they settled not only on bridges and lighthouses but also on military action against Native Americans. In one of the book’s strongest passages, Feinig explains the perverse dynamic at the heart of the wampum-based monetary system: “Disabling Native ways of sustaining life and imposing debts meant incorporating indigenous groups into the settler economy and monetary system even as Natives produced tokens that settler authorities had assigned legal tender status.” 

The distinction between “moral economies of money” and “monetary silencing” might create the impression that monetary silencers did not consider money a moral problem, but this was not the case. Even silencers often made normative claims. Not only the state legislators of the Colonial era (whom Feinig considers moral economists of money) but also the Jacksonians (moral silencers, in his terminology) fought for their respective ideas of just money. “Monetary silencers” were not silent about all things monetary, only about “the possibility of [its] democratic governance.” Indeed, Feinig approvingly cites a historian’s judgment that the Jacksonian politics of money was an early instance of mass politics. 

Future research building on Feinig’s important book might thus helpfully distinguish three dimensions of the politics of monetary-system design—silence, ethics, and democratic governance. Do actors talk about the monetary system? If they do, do they endow it with normative content? And lastly, do they see money as an ongoing governance project?

Such an explanatory framework is urgently needed to make sense of our current predicament: an unprecedented period of almost a century in which money creation has not been a topic of sustained democratic debate. That is a marked departure from the earlier pattern that organizes Feinig’s book, in which such democratic debate occurred and disappeared with much more regularity. Future research on the exceptional period in which we find ourselves will fruitfully engage with Feinig’s hypothesis that its foundations were laid between 1913 and 1935. The first cause is what we might call the “fudgibility” of the monetary system: elites’ ability to change the monetary system in ad-hoc ways that are not fully grasped by the public despite their tremendous consequences. In this respect, World War I was a watershed moment. Feinig writes: “Since the colonial era, wartime currencies had forced money users to grapple with tax receivability and legal tender laws and taught them that legislatures and treasuries make money.” World War I was “the first major conflict during which money users did not encounter a new currency.” The monetary system changed, but that change was difficult to parse. 

Since then, the institutional set-up that allows for monetary fudging has only become more entrenched. It revolves around the Fed, a large supply of sovereign debt, and a small number of banks that can move money around at scale, either indirectly through their influence on smaller banks or directly through their giant balance sheets. In the financial crisis of 1974, the Fed repurposed old crisis-fighting tools to backstop new forms of money. Lev Menand and Josh Younger have shown that the Fed interpreted its statutory authority creatively to turn government bond dealers into money issuers. We know from a new paper by Will Bateman that in moments when even this was not enough, the Fed engaged in direct monetary financing of the Treasury. Daniela Gabor has described similar changes in recent years as a monetary “revolution without revolutionaries.” 

As the second cause of the unusually long democratic silence around money, Feinig identifies the rhetoric used by Franklin D. Roosevelt (FDR), which later became taken for granted. Feinig is a close reader of FDR’s speeches, which “grafted moral rhetoric and banking regulation onto an institution [i.e., money] that remained unspecified and seemed to be always and already there.” At the same time, FDR did engage in monetary redesign. He “pressure[d] central bankers […] to buy more government bonds than they otherwise would have by threatening to issue greenbacks.” But “there was never a moment of truth about fiat money, and FDR presented each step in a way that distanced his policy choices from moral economies of money.” Similarly, Roosevelt made gold policies that gave him room to maneuver while he spoke in a way that reinforced the link between gold and money. His “denial of the federal government’s unique monetary agency” while exercising it is indeed, as Feinig puts it, “paradoxical”—and it had a long-lasting effect, the book suggests, in that it effectively helped block democratic debate around money creation for decades. 

This is not only because FDR avoided the discussion of moral economies of money. What was just as important, Feinig suggests, is that he created moral economies around financial institutions that are adjacent to but now were understood by the public as categorically different from money—particularly fiscal policy and social insurance. Most importantly, FDR designed social security in such a way that citizens perceived themselves to be building up a capital stock that they would later be drawing down. 

Feinig’s narrative ends with the New Deal, but invites future research in archives like the papers of Henry Reuss, chairman of the House Banking Committee from 1975 to 1981. In the fall of 1979, Reuss received a letter from a citizen living in Chokoloskee, Florida, that encapsulated the understanding, so carefully nurtured by FDR, of pensions as separate from money creation: 

Sir:

You ought to be ashamed of yourself!

Your criticism of the Federal Reserve in raising the discount rate to bring inflation under control […] means that you don’t know that a […] 13% increase in the money supply vs. about a 2% production increase results in double digit inflation […]

P.S. If you do answer, please advise how you expect to take care of those of us on a fixed income in a rapidly inflating economy. I trust it isn’t welfare. We did work and we foolishly saved so people like you could tax it away by inflation.¹

To this day, such an understanding of the economy—moralizing social security and the budget while obfuscating money creation—has served to block more egalitarian policies. What will happen if deficits in the Social Security trust funds and the federal budget continue to grow? Some proponents of a new democratic politics of monetary-system design hope that the growing internal contradictions can be used as a lever to pry the orthodox understanding of money open. Modern-day politicians, Feinig suggests, could do what FDR did not: 

[he] could have […] pointed out that what counted were the real resources available to those who would use Social Security payments to purchase goods and services in the future. He could have connected the new institution with existing moral economies of money, turning people into participants in a monetary governance project, not individual contributors who seemed to depend on hoarding cash in a government account. 

This new democratic politics of monetary-system design could take a relatively traditional institutional form, with the American Association of Retired Persons the modern-day equivalent of the nineteenth-century Farmers’ Alliance.

But it is just as conceivable that a new democratic politics of monetary-system design will take a different institutional form, and one that does not follow pre-existing social cleavages. Feinig’s history suggests that assembling the monetary alliances of the past involved creativity and uncertainty: Jacksonians achieved “the conscious creation of a heterogeneous alliance,” and Colonial legislators had invited proposals on money creation “from any persons whomsoever.” Over the past fifteen years, the most publicly visible proposal for a new monetary design has been Bitcoin with its combination of moral stance, high salience, and denial of democratic governance. But over the same period, an increasing number of activists have sought to advance environmental protection, local value creation, and racial justice through a democratic governance of money. In an echo of the monetary poems of the eighteenth and nineteenth century, there are now manga spreading heterodox thinking about monetary governance.² These grassroots efforts coincide with attempts to shift elite politics. Since 2020, three experts who seek to redesign the monetary system have been nominated or seriously considered for important positions in Washington, DC: Mehrsa Baradaran and Saule Omarova as Comptroller of the Currency, and Sarah Bloom Raskin as Federal Reserve Vice Chair for Supervision. In the financial crisis of spring 2023, such voices were heard in mainstream publications. Monetary governance, considered outlandish not long ago, may be moving toward the center of democratic debate.