Reintegrating the dismal science
There are a number of ways to explain what money is, and what it allows us to do. Sadly, the "origin story" that we were all taught in school is a very misleading morality tale, in which exchange of goods is presented as a wholly separate sphere of life. Supposedly, humans were stuck with a so-called "barter economy" until they invented money. This is a complete fairy tale, and this matters a great deal.
Throughout history, most people spent most of their lives living near basically the same group of people. Under those circumstances, the notion that you'd only give someone something they need when you both have something that the other wants right then and there is both silly and callous. Yet that is what is presupposed by the problem of "double coincidence of wants" -- which is presented as foundational by just about every mainstream economics textbook out there. This even though any child could tell you that humans are motivated by much more than a desire for procedural fairness [in the form of 'direct exchange of material goods of roughly equal value']. Most of us, in fact, enjoy contributing to other people's well-being. But thanks to everyone being forced to take introductory economics classes in high school (when we're at an impressionable age, and in the 'safe' and 'neutral' learning environment of the school system), hardly anyone asks why we are telling ourselves things that are so obviously misleading, let alone why we should even want to impose a categorical distinction between mutual gift exchange and our other behavior (starting with one-sided gift-giving, but also including performance of non-material services, gifts with promises or expectations attached, and so on).
Given that this story makes no sense, there must be a reason why we are nevertheless taught to treat it and this problem with such reverence. I would suggest that the main reason is because it serves as support for what in the 19th century was called the "New Spirit of the Age: Gain Wealth, forgetting all but Self". It's only because we have internalized this distinction between our economic and other behavior, and that we don't question it, that it seems logical to treat our (and others') market behavior as being beyond morality (and to deflect criticism of our behavior). And it's mainly because we frame our own actions this way, that we don't (bother) ask questions like whether the work we are asked to do in exchange for money and a stable source of income is in line with our values or not. (Which is great for corporations.)
As it is, we simply accept that (slightly) icky feel as unavoidable given that we're talking about the dismal science. And it wasn't until I encountered David Graeber's account of how money relates to promise-making and human interactions more generally, that I started thinking about this, and that I realized how strange and misleading everything we're taught to think about "economic behavior" really is. With this post, I hope that I can pay this insight forward, by explaining how the stuff I mention in the title relates, and by giving you a sense of how we can organize ourselves and our societies differently, once we remove the shackles imposed by this way of thinking.
So what is money?*
Let's start by noting that money allows us to quantify how much we owe someone in return for something they did for, or gave us. Such a value can be either be completely subjective, or established through group discussion. Once we've attached a money value to a promise or expectation, the IOU becomes transferable. This allows us to, say, cross out debts three people owe to each other, without everyone needing to do something back for everyone else. And for this to work, all that's needed is trust, and basic accounting skills; although once you scale this up, money or coins may come in handy.
Of course, the more people participate in such a system, the more useful it becomes, as this allows people to specialize, etc. But if we want this to scale much beyond a circle of acquaintances, we will need either a public institution that produces, records and validates tokens and transactions, or a process that allows everyone to do so (such as the much-hyped block chain). And if we want participants to be able to make requests before they've earned credit, we either need to work with a system of bar tabs or tallies (which are periodically evened out), or an option to take out loans, or to overdraft. Finally, we might want to impose a few constraints, such as capping the size of the tabs and loans, to keep individuals from running up too high a surplus or deficit, to prevent destabilization of the system, or monopolization of resources by one or a few people. Because while money of account need never be scarce, resources and people who can perform services and produce goods will be, which is one reason why constraints might be desirable.
At this point you might ask how we can ensure that people keep their promises and respect their debts, so that the owe in IOU means something. One potential solution would be to threaten or use violence against people who don't keep their promises. Alternatively, a state could impose something like a poll tax (see Ex.2 at the top of this article for a historical illustration), which would force people to participate, or risk prosecution. Alternatively -- in line with Marshall Rosenberg's nonviolent communication, and rather less likely to create resentment and resistance -- we might ask people who are unwilling to do so why they are now (or currently) unwilling to do so, explaining why we'd like them to participate (and to help us), while offering to help them to get back to a place where they're once again willing and able to contribute. For such a system to work, a majority of participants would need to be on board, to actively approach people who refuse to participate would need to similarly be approached. (Needless to say, we're pretty far from such a system today, and getting there would take a bit of effort. But it's at least conceivable that it might work.)
Now, let's continue where Mosler's thought experiment, presented in the embedded video, leaves off. Imagine people have freely organized, and decided that they want to publicly fund certain institutions (let's say education, healthcare, waste removal, public infrastructure, transportation, utilities, and a justice system). How could they motivate people to work for the public? And how could they get others to supply those people with the goods and services needed to do their jobs, and to be able to take care of themselves? In sum, how could they marshal the personnel and resources, and get people to participate, in a way that gives everyone maximal freedom to decide how to contribute? Historically speaking, states have largely done this through fines or taxes. These can be levied either on its citizens, or on its colonial subjects, the former usually paying in goods and services, the latter mostly using the money created and distributed by paying its suppliers and its employees (mainly soldiers). The imposition of taxes forced people in border areas to earn money, either by providing goods and services directly to the state and its representatives, or by trading with people who had already earned some, and so on. And thus, markets were born.
How money is being used and distributed in the contemporary world
One of the more interesting insights that follows from Mosler's thought experiment, is that unemployment is a consequence of taxation (plus violence). Nowadays, of course, there are many other, and more positive reasons for wanting to have or earn money, than evading punishment for not paying one's dues. In contemporary society, access to more and more of the infrastructure, goods and services that we used to view as basic rights that everyone should be able to use, is allocated using market principles. This includes housing, food distribution, utilities, transportation, telephony, education (especially beyond the primary level), healthcare, etc.. As a result, everyone who wants to be "part of society" is pretty much required to take on a number of long-term financial obligations, such as a mortgage or rental contracts, costs associated with child rearing, and student loans. This forces us to either earn a steady flow of income, or to already own quite a lot of money; while much of the money we earn goes to interest payments, which furthers wealth concentration, given that it's the already wealthy, and banks, who are most able to lend. Consequently, most of us must in fact join this system, and allow ourselves to be disciplined by it, and discipline ourselves to function inside it, with a substantial part of the value we produce being claimed by others, either in the form of surplus value (our employers), or interest or rent extraction (our lenders).
This creates a diffuse web of dependence, in which those with institutional power and capital, who have their own ideas about who should get how much, and what they should do to get it, while most of us must turn to them for the money we need. And they, and others who think the same way -- who embrace the same meritocratic logic -- get to write the rules, and decide to whom they are applied. Consequently, social status, affluence and power are becoming ever more tightly coupled, while those who perform most of the labor intensive productive and service work (i.e., the people most closely involved in the day to day aspects of the reproduction of daily life) tend to earn from around the median income level down to less than a living wage in every country. After a few decades of society being reorganized by people who think this way, public institutions are now run in the way shown in a film like I, Daniel Blake, which illustrates how UK citizens are treated by their own government.
And what's happening in the UK and US is happening across the western world: Schröder's (German labor party) government came up with the 'mini-job', and in the Netherlands, the government decided to create additional unemployment by coming up with a (Calvinist) mandatory "quid pro quo" rule, that people have to perform unpaid labor in exchange for receiving social security.** This was very quickly turned into a requirement to perform unpaid menial labor for state-favored companies. Within a few years, this turned into forcing people to inhale poisonous chemicals (chromium 6), as the (state-owned) employer refused to take their health and safety seriously, and the local government also refused to act. One of many illustrations of how quickly institutional violence can escalate, once you accept the notion that less socially successful human beings "merit" less consideration of their equal needs. Of course, a far more serious example of the same logic at work still is formed by indentured servitude allowed via the US 13th amendment. And so it goes -- the implicit message being that our claim to existence and freedom from exploitation is directly proportional to our social status and economic success.
Social control through debt
Let's return to debt. When we think about the state of being indebted, we in an important way invert the story I've been presenting up to now. Because as Graeber notes, the focus now is exclusively on our state of being indebted, with no reference to how the debt was incurred. And this matters, because of the dual meaning of the word, namely guilty, which is more obvious in different languages (like German, or Dutch), in which guilt and debt are the same word ("Schuld"). But in English, too, until you repay your debt, you are at fault, or someone's inferior.
When we talk about debts, we assume they are freely agreed to between moral equals, with one borrowing from the other; at which point the parties become morally unequal until the debt is made whole, or they deliver on their promise. It's important to note, however, that this isn't the only kind of indebtedness. There is also a hierarchical [or meritocratic] form, in which the inferior and/or indebted party is considered to be so different (or so indebted) that they cannot (easily) restore their equality. To start with a (mostly) harmless example, (confused) parents may tell themselves that their children owe them for bringing them into existence and/or raising them. The most extreme cases of this, however, involve people owing 'their life', for instance when someone saved them -- or didn't kill them. Historically, this has served to justify slavery: namely, by enslaving those you otherwise would've killed, after declaring "war" so you have "permission" to kill others). In this vein, we also find debts that are imposed by western countries after a "colony" liberates itself, such as Haiti, or Madagascar. In those cases (and many others), France imposed a heavy fines, which other western states treated as legitimate (with still-ongoing consequences for the people who live there). And in all of these cases, the superior party sees any request they make of their inferior as reasonable, because they see themselves as entitled to whatever it is they request.
That said, when the initial gift was between rough equals, and didn't take the form of a withheld (lethal) violence, or a loan -- so that you don't owe your life, or a specific quantity of goods or money -- we will generally only take umbrage at the return gift when its value differs wildly either from what's reasonable, or from what we were promised, at which point we may take it as an insult (because it's taken as a -- lacking -- token of appreciation). That said, most of the time, we'll leave it at calling someone a cheapskate, and deciding to keep our distance from then on. Actual violence will generally only occur either when there is a hierarchical difference between the parties (i.e., when the perpetrator views the other as their inferior, or less than fully human), so that the superior party feels their being irked or short-changed is as weighty to them as they consider loss of life or limbs to be for the other. Or when the involved parties are seen as (rough) equals, but the gift was conceived of as a loan, so that not repaying it triggers someone's need for justice, besides appreciation/respect. At that point, the use of (institutional) violence to get someone to keep their promises is basically the norm, and considered morally legitimate. (And it gets worse when these two intersect -- say, borrowing from people with higher social status, or from people inured to violence, who've lost touch with their respect for life's inherent value.)
Yet it's important to keep reminding ourselves that a debt is just a kind of promise, and that it's not particularly just to give so much weight to your own disappointment that you're unwilling to take into account the reasons the other party has for no longer being able or willing to make good on their promises. But because we don't usually consider the issue this way, and forget to connect debts with that which precipitated them, challenging debt claims can be very difficult, particularly because of how money is intertwined with social status (just ask yourself how we view people who are guilty of not repaying their debts, and what we allow lenders and the state to do to borrowers who don't repay their debts). Now of course, if a debtor gets to speak, and if they can convince others that the loan terms were unreasonable/exploitative, or agreed to under duress, or that their circumstances have changed through no fault of their own, a debt may be annulled or declared odious. But this is very much the exception, not least because debtors generally have less social status and access to the justice system than debtors do, given the overlap between social status, power and wealth.
That notion that one must always pay one's debts -- make good on one's promises --, or experience shame or guilt over not keeping a promise, in a society that allows us to use violence when people don't, serves as a powerful disciplining apparatus. As David Harvey likes to point out, the elites who made home ownership part of the "American Dream" did so because they knew 'debt-encumbered homeowners don't go on strike' (for fear of being dispossessed). Similarly, the need to take on student debt if you want to gain credentials (or educate yourself) serves largely to silence and discipline, besides discouraging people from engaging in (badly paid) idealistic pursuits. Now of course, building and maintaining houses takes resources, as does education.
But given that the state can create money at will, and that money exists to allow us to organize ourselves and our societies, I would venture that attaching any -- let alone punitive -- interest rates is exploitative, as well as rent-seeking behavior. Moreover, given that we all have equal inherent value, why should we accept this status quo, in which most people are treated largely as subjects that are to be policed and kept busy and silent via debt peonage? Because as it is, the people who do jobs with enormous direct impact on other people's lives (e.g. nursing, sewage treatment, education, cleaning) largely are paid terribly, and receive very little freedom to do their jobs. And the people who have the most social and economic power, also have the most material comfort. Similarly, given how concentrated wealth allows people to exert enormous influence on the political process, why should we allow such wealth concentration, and why should we give some the power to decide how much the many have? I don't see good reasons for any of this, and I think we very much need to get away from this mode of organization, in which "the best" get to decide how much everyone gets.
* Note that I'll be freely drawing on insights gained from Graeber's and Rosenberg's work, as well as on my understanding of MMT, throughout.
** Parenthetically, note that even the Dutch socialists find it difficult to argue against the Dutch law, because they too believe in the social benefits of what the politicians so cleverly termed 'participation', so that they only object to unfair competition from more or less free labor, and workplace safety violations, but not against the notion that your claim on a humane existence is contingent on contributing the public or corporate projects.