From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Thu Jul 13 2006 - 12:51:26 EDT
"Money puzzles the mind because its power seems to have no visible support. Why
should pieces of metal and, much worse, pieces of paper, command real
resources way
beyond their physical weight or apparent worth? What gives money
value since it is pretty
useful for anything other than buying things? Why does paper acquire
value if it is printed with certain words but not others? Is gold
more valuable if it is minted into coin rather than in lump
form?" Desai, p. 46-47
Very well worded questions, should be very helpful for teaching.
I wrote to Professor Desai about this book, and I have had a very
interesting discussion with him (I do not include his important
responses)
Dear Professor Desai:
I just read your stimulating book on Pound. I am a bit skeptical
of the argument. If it took the war to turn Pound from humane
monetary reformer to raving anti-semite, then why did his
guru Major Douglas make the transition even
before the war? Wouldn't it be simpler to say that anti-semitism
was implicit in the ideas of monetary cranks from the start,
and as their ideas met resistance or their implementation failed,
the monetary cranks simply stopped being polite.
As I wrote on the OPE-L list serv in 2004: the attempt to reform
capitalism through the abolition of interest payments or the
euthansia of the rentier is rooted in the surface appearance of
capital itself. The interruption of commodity circulation appears as
a shortage of money, appears as unwillingness of banks to lower
interest rates such that there will be borrowing and hence creation
of the media with which to circulate commodities. The (apparently)
natural economy seems to come to a halt because of shortage of money.
Here is the basis for the wish of the natural, the concrete, use
values to do away with the fetish, the fetish and power of money. The
problem seems to be rooted in the money changers; they become the
demon personification of capital and Jews the face of that
personification in this demonology.
Free credit appears to be the solution--this tradition, developed
in the great depression by Major Douglas, has its roots in Proudhon
as Dudley Dillard perceptively recognized more than sixty years ago.
While reduction of interest rates and repression of rentier activity
can spur economic activity, i.e. accumulation through the
exploitation of wage labour, the Great Depression proved that it is
not a panacea for a crisis of general overproduction. Joan Robinson
went so far as to say Marx was proven not to have been incorrect to
have ignored the rate of interest altogether (though of course he did
not).
As William J Blake noted: "It is can be stated as an historic axiom
that any group that seeks to divert attention from the material power
of the capitalist class to that segment of their power dependent on
finance operations (abstracted from the interplay of these
monopolies) is almost invariably anti semitic and nationalistic. That
is it serves as a shield for the Fords, Rockefellers, Mellons and
even Morgans and other international 'Gentiles" by assuming the true
oppression of labor to rest in the counting houses of only Jewish
arbitraguers, exchange dealers, note brokers and private investment
banker...It is always needful to take the mind of the peasant from
the landowner, the worker from the boss, so as to divert the class
struggle from reality into a cryptic world. In the Middle Ages it was
religion, today it is 'the monetary mechanism.'" New Masses, vol 19
1936, p. 20
We see this at work in Keynesian obsessions over the secrets of the
temple (ie the ominpotent and autonomous Fed) and the putative
hegemony of the rentier through Wall Street.
Dear Professor Desai:
Well this is the point! After 1850, and by the time Pound inherits
the tradition of the monetary cranks,
it has been thoroughly infused with anti-Semitism.
In the Origins of Nazi Violence Enzo Traverso has recently elaborated
Moishe Postone's efforts to connect anti-Semitism to the demagogy
about the omnipotence of finance capital... as can be seen from this
instructive quote from an early leader Adolph Stoecker of the
socialist movement in Germany:
"We distinguish however between useful and harmful capital We seek to
promote the useful and restrain the harmful. Useful capital, in our
opinion, is that which is put to work in agriculture and in industry,
where it creates livelihoods for millions of workers. Useful capital
operates in honest trade the function of which is to collect the
world's goods and offer them for sale everywhere thus enabling the
whole of mankind to participate in the progress of civilization.
Useful capital, we think, is present in the form of savings which
represent the fruit of an industrious life. Useful capital increases
on modest scale only after real labor has been spent on increasing
it. But harmful capital grows beyond all limits without doing real
work, setting the stage for frauds and swindles that rob trusting
people. Such capital may be found at the stock exchanges, and it is
certainly no fault of ours that this capital is mostly in Jewish
hands."
I think you are making Major Douglas and Pound out to be more
innocent characters than they
really were. See the quote from Blake in my last note.
Dear Professor Desai:
But this does not seem to be any way out of the confusion. It just
concentrates fury on the putatively
unproductive, yet necessary, system of speculation--currency trading
for example is unavoidable. Moreover, it makes a scapegoat of
speculative capital for all the woes and miseries of a turbulent
capitalist system. It is not the most important source of jobless
growth or absolute declines in employment levels in formal mfg. Yet
demagogues turn attention on the monetary mechanism.
And here I am reminded of Franz Neumann...
In his classic study of fascism Behemoth: The Structure and Practice
of National Socialism, Franz Neumann wrote:
National Socialist anti-capitalism has always exempted productive
capital, that is, industrial capital, from its denunciations and
solely concentrated on 'predatory' (that is, banking) capital...On 14
Oct 1930, the National
Socialist parliamentary group introduced into the democratic
parliament a draft bill demanding the confiscation without indemnity
of the 'entire property of the bank and stock exchange barons, of the
eastern Jews, and of other foreigners who had entered after 1 August
1914, and of all additional property acquired thorugh war,
revolution, inflations, or deflation after that date.' When the
Communists and Social Democrats declared their
intention of voting for the bill, the National Socialists quickly
withdrew their motion. Still the attack against 'predatory' as
opposed to 'productive' capital did not cease;; on the contrary, it
increased by leaps and bounds. The slogan was no doubt popular--a
bank is always a creditor
of the small and little businessman and therefore hated as a creditor
usually is. Interests on loans are no doubt not the outcome of
productive labor, though they are necessary within the capitalistic
system. Finance capital as identified with banking capital has
always beenthe target of all pseudo-socialist movements, movements
that never dared to touch the foundations of capitalist society but
rather sought a reform that would brake the poisonous teeth off the
the capitalist system and direct the deep resentment of the masses
against exploitation toward certain concrete symbols. Whether the
chosen symbol is John Pierpont Morgan or a Jewish banker is
immaterial.
"In singling out predatory capital, National Socialism treads in the
footsteps of Proudhon, who...demanded the liquidation of the Banque
de France and its transformation into a institution of 'public
utility' together with a lowering of interest to one-half or
one-fourth of 1
percent. The Communist Manifesto had already denounced that type of
socialism, the so-called 'True Socialism', as specifically Germanic.
Marx, in a letter to Engels on 8 August 1851, had, with supreme wit,
denounced Proudhon's fight against banking capital and interest as a
sham. He had already pointed out that the so-called 'social
liquidation' is 'merely the means of starting afresh the healthy
bourgeois society.' The theory expresses the longings of every
non-industrial capitalist to become an
industrial capitalist-- a quite understandable wish. The
anti-finance capitalistic propaganda may have had even a certain
amount of truth in it when banking capital was really decisve, when
banks could control, merge
and acquire industries, when money alone represented economic power.
But, as we shall see, that period is far behind us, and it is
important to realize that Natl Socialist anti-capitalism and its
fight against predatory
capital was raised to the rank of the supreme economic priniciple in
a period when banking capital has lost its significance, when the
investment banker has lost his power, when money alone cannot found
economic empires,
when, in short, industry has become financially almost
self-sufficient, when it not only finances its own expansion by its
own means but even penetrates into banks and insurance institutions
and subjugates them to the
needs of the industrial capitalists." p. 320-321
Dear Professor Desai:
Yes but can't Keynes own thought be understood to have evolved away
from a focus on money alone? Didn't Keynes himself understand the
limits of the monetary mechanism?
Nor should Keynes be forgiven for his unclarity especially regarding
his calls for the euthanasia of the rentier and socialisation.
Since the commercial banks are indispensible in a capitalist
system, Keynes would have to propose a complete socialisation of the
banks since if their services were to be offered gratis their costs
would have to be covered out of general taxes. but this is not what
Keynes meant by a
somewhat comprehensive socialisation of investment, yet that would be
the only way to abolish interest as a cost on firms. And if Keynes
meant to abolish the rentier class, he should have advocated 100% tax
on all income from property, or nationalisation and socialisation of
all income yielding property. But this he did not do either. So it
seems that no meaning can be derived from his famous call for
euthanasia of the rentier or a somewhat comprehensive socialisation.
To some extent, Keynes seems to have been a confused and confusing
man, perhaps a first rate intellect who became so mentally unsettled
and unstable by his catastrophic times that he descended into the
true underworld of demagogues
and cranks.
Yours truly, Rakesh
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