May 25, 2018

Money Creation and Society

On Thursday 21st November 2014, the UK Parliament debated money for the first time in 170 years. Anna Zimmerman, GSM Economics Lecturer, attended this special debate and has kindly submitted this article for Law and Public Sector Week.

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Last year’s attendees at the University College London Council shared their table with the skeleton of Jeremy Bentham. The nineteenth century philosopher, economist, legal theorist and all-round genius – listed in the minutes as ‘present, but not voting’ – had been an early advocate of animal rights, feminism and the legalisation of homosexuality – all causes which, two hundred years ago, must have seemed as irreparably hopeless as, say, universal peace and free love.

I was reminded of Bentham’s sang froid in the face of entrenched idiocy when listening to the closing remarks given by a Treasury minister in the Parliamentary debate that some students and I attended today. The debate concerned ‘Money Creation and Society’, a topic that has not been discussed in the House since 1844. The question of who creates, and controls, the money supply has long been neglected by politicians and academics. It seems that politicians and meedya commentators who invariably justify any policy with reference to money are somewhat shy of discussing where the money actually comes from…

This topsy-turvy approach is partly explained by recent research by the campaigning group Positive Money, who found that only 1 in 10 MPs understood the mechanism of money creation. This is hardly surprising, given that it is perfectly possible to graduate with an Economics degree without an accurate idea of how money creation works in practice, a problem compounded by the misleading accounts of fractional reserve banking in standard textbooks (see link below to an article on this issue). The numerous implications of the privatisation of a vital social function are even less well understood.

The debate was attended by a surprising number of Big Political Names – by which I mean, I’m sad and aged enough to have been listening to some of them for years. Michael Meacher, Diane Abbott, Peter Lilley, Austin Mitchell, Steve Baker, Douglas Carswell and Zac Goldsmith were all present and vocal. There were more people in the public gallery than in the chamber, but given that monetary reform is still regarded as the preserve of cranks and romantics such as myself this is hardly surprising. Afterwards in the Central Lobby I thanked Michael Meacher for sponsoring the debate. With a grandeur worthy of a practised politico he said that as a lecturer I had the most important role of all in educating people. On the one hand, this was simple flattery – but on the other, it is a commonplace that reforms need the perseverance of ordinary people like me.

Let’s hope that, pace Jeremy Bentham, we don’t have to wait for 200 years to see some progress.

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