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Episode 246 – Fiat Socialism… the Convergence with Carlos García Hernández
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Carlos García Hernández is the author of Fiat Socialism: Achieving the Goals of Socialism through Modern Monetary Theory. He lays out the five goals of fiat socialism:
- Full employment
- Full and prudent use of material resources
- The guarantee of the five essentials to every citizen: food, housing, clothing, health services, and education
- Social security at all major exposed points in the social structure (eg, old age, sickness, accident, temporary unemployment, and childbearing)
- Labor standards, to be assured by labor unions
Carlos maintains that any society achieving these five goals at the same time and permanently should be called socialist, no matter the size of the private sector.
Steve and Carlos discuss the philosophical foundations of both fiat socialism and Marxism. They also look at the role of the IMF and the possibilities for monetary sovereignty in developing nations.
Carlos García Hernández is the founder and director of Lola Books, a publishing house that has introduced MMT to Spanish and German readers. He is the author of Fiat Socialism: Achieving the Goals of Socialism through Modern Monetary Theory.
@Carlos_G_H_ on Twitter. Or X
Macro N Cheese – Episode 246
Fiat Socialism… the Convergence with Carlos García Hernández
October 14, 2023
[00:00:00] Carlos García Hernández [Intro/Music]: China is opening swap lines with many developing countries, for example, Argentina, Nigeria, Egypt, South Africa, and there will be many more where you are using your own currency in order to buy products and goods from China, the biggest producer in the world.
I think that you either use your monetary sovereignty or you don’t, and that’s why I always propose a floating exchange rate and zero percent permanent interest rates.
[00:01:35] Geoff Ginter [Intro/Music]: Now, let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.
[00:01:43] Steven Grumbine: All right. This is Steve with Macro N Cheese. I have been on a mission to not only understand modern monetary theory, but to really develop a class consciousness and an understanding of what the working class needs, and a concept of class struggle. You’ve heard us talk to unions through class struggle unionism with Joe Burns and my friend Jeff Reisberg and Sarah Nelson.
You’ve also heard us talk to David Van Deusen, president of the Vermont AFL-CIO, and to many union leaders. And ultimately you’ve heard us trying to combine an understanding of the monetary system, with what Bill Mitchell calls the ‘value system.’ The values that we overlay within that monetary system. And socialism is a very important thing to understand.
Socialism has been written about and theorized and conceptualized over and over again by many scholars, going back to the days of Engels and Marx. And here we are today in a new time, in a new era with a fiat currency that fundamentally changes many of the preconceived notions that Marx had about money.
Yes, Marx did talk about fiat in volume three of Kapital. But that requires an awful lot of reading and it’s tough. And most people are never going to take that journey. So we’re trying to find fellow travelers that merge these concepts of modern monetary theory and socialism. A flexible socialism for the people that allows us to interpret the world through the times that we’re in, the material conditions that we’re in, and be able to allow enough space for us to make progress.
And this brought me to my guest today. His name is Carlos Garcia Hernandez. He is the author of the book, Fiat Socialism: Achieving the Goals of Socialism Through Modern Monetary Theory. A gentleman from Spain and he’s lived about half his life in Berlin, the city where he currently is. Studied philosophy and history at Humboldt University of Berlin and the founder of a publishing house called Lola Books, which not incoincidentally, is also the place that published this book, Fiat Socialism. Which is going to be the topic of today’s conversation.
So without further ado, let me bring on my guest. Carlos, welcome to the show sir.
[00:04:20] Carlos García Hernández: Thank you very, very much. For me, it’s an honor being here with you.
[00:04:24] Grumbine: The honor is all mine. We keep looking for people that are willing to go this route, to look at the world through this lens. We have so much trouble getting socialists to understand modern monetary theory. And by extension, we have even more trouble getting many of the people that are in the modern monetary theory world to understand socialism, and to consider its implications in modern society.
This is a welcome opportunity and I really appreciate you joining me today.
[00:04:53] García Hernández: Thank you very much.
[00:04:55] Grumbine: So with that introduction… you wrote this book and it’s fantastic. There’s a lot of detail in there. It goes for the conceptual and it’s got the math behind it. Some of the deeper levels of macroeconomic theory are in your book.
This is not just an easy read. There’s so much more depth to this book. And I wanted to talk about what was the motivation for you writing it? What brought you to this desire to dig into what you dubbed ‘Fiat Socialism?’
[00:05:27] García Hernández: Well, the origin of Fiat Socialism is kind of a hunch that I had by translating and publishing the main works of modern monetary theory in Spanish and in German. Once I got into it, I had the intuition, let’s say, that both Marxism and modern monetary theory were complementary. Meaning that the parts that one is not very strong in, are the aspects that in Marxism are not very clear, are solved through modern monetary theory. And the parts of modern monetary theory that are not that simple and clear, can be answered through Marxism.
So, I got this idea of merging both. And I think that also took me to different philosophical stances, not only economic. And I think that this fusion is what the book really is.
[00:06:35] Grumbine: It’s amazing. So you talk about five key things that you have to accomplish to achieve socialism. And this book attempts to lay that out. Can you tell us what that foundation is, what those five items are?
[00:06:52] García Hernández: Yes, this is the main way of looking at the question of socialism. It is a way of looking at the question that comes from David Graeber, the late anthropologist, who wrote a book called Debt. And there he explains that the main question of communism and socialism is not the ownership of the means of production, but who has access to what, and under what conditions.
So, it is not the typical, let’s say, Hegelian way of looking at it, where the ownership of the means of production is fundamental. And that is the main idea I took. And I just said that the size of the private sector should be decided democratically. The size of the private sector could be bigger, smaller, or non existent. Because the proposal of modern monetary theory is still valid whatever size of the private sector.
And then I learned about an author called Stuart Chase from the 1940s. He was a North American economist. I learned about him through the blog of Bill Mitchell. And I found a book called The Road We Are Traveling. And in that book, he explains the five things, or the five goals, of what he calls any rational government.
So, I took these five goals and I renamed them ‘the goals of socialism.’ And what I defend is that a society in which these five goals are achieved simultaneously and permanently, can be called, and should be called a socialist society.
And the size of the private sector should be decided democratically. These five goals are: Number one, full employment.
Full and prudent use of material resources, that is point number two.
Number three is guarantee of the five essentials to every citizen – food, housing, clothing, health services, and education.
Number four is social security at all major exposed points in the socialist structure. And this would include all age allowances, benefits for sickness, accident, temporary unemployment, and childbearing.
And number five, labor standards that should be assured by the labor unions.
So what I maintain in my book is that any society that attains these five goals, At the same time and permanently should be called socialist, no matter how big or how small the private sector is.
[00:09:51] Grumbine: Interesting. So when I think of socialism, I think of the division between public and private ownership in terms of, not necessarily personal property, but private property, and developing business and developing industry. And the necessary conditions that you find yourself in, in a capitalist environment,eventually leads to predation and oppression and other forces that I think Marx and Engels spoke pretty eloquently about.
So how would socialism work? Because we understand MMT to be describing public money, being the citizens money. And so how does one create a socialism where there is no such thing as public, I don’t understand that. Can you help me see that? Help me understand that.
[00:10:49] García Hernández: The public sector will always exist. But the question is, if we will allow private sector to exist, meaning the private ownership of the means of production.
[00:11:03] Grumbine: Ah, okay. So under what conditions might something like that exist? Because these are the questions that when we talk about MMT with socialists, these are the ones that really jump out, because they’re saying that labor should own its own labor. How do we marry those two together so that I can better explain this or better communicate this within those circles?
[00:11:31] García Hernández: Yes, but in that equation, we also have to include the costs. Who bears the costs of the production? And that is the question that you can solve with the existence of the private entrepreneurship. And the question… the way I understand it, has to do with Marx’s law of the tendency of the rate of profit to fall. That is the third volume of Capital. And basically what Marx says in that law is not a moral law or is not an ethical law saying, ‘well, I prefer this’, or ‘I think this is morally superior’, or ‘this is better from an ethical point of view.’
No, no, no, what he explains is, that if you allow the private sector to exist, if you allow the private property of the means of production, the system is doomed to collapse. It will collapse because it is not reformable. It will eat up the rest of the economy. The contradictions within the system will get bigger and bigger. The misery will only tend to grow. And at the end, the whole system collapses. And that is what he explains there. That is why his law is a historical law.
He says that sooner or later, the whole system is going to collapse. It’s not a moral reflection.
[00:13:09] Grumbine: Okay,
[00:13:10] García Hernández: Well, in that sense, then, like I said at the beginning, that is when modern monetary theory kicks in. In the chapter dedicated to conclusions, I oppose to Morseley’s Law of the Tendency of the Rate of Profit to Fall, which says that there is no financial crisis deep enough that it cannot be overcome by means of increased public spending and/or a decrease in the tax burden.
And I say that these two laws are mutually exclusive. Either both of them are wrong, or only one of them can be right. But both of them cannot be right at the same time. And Fiat Socialism maintains that the one that is right is Mosler’s Law. Because the mistake that Marx falls into, is that in his analysis he doesn’t include public spending.
Public spending, the way that Mosler explains it, makes the law of the tendency of the rate of profit to fall non valid. And we can see that in the case of Keynesianism, and in the case of the New Deal of Roosevelt, and in the case of the Western societies in Europe, after the second world war with the existence of welfare states.
[00:14:37] Grumbine: This is absolutely powerful. Steve Keen also wrote a long dissertation, basically knocking down the concept of capital flight and the labor theory of value in general, based on machines and automation. And this is why I wanted to dig into this with you, because there are things out there that were written at a time where other things didn’t exist.
And the thing about Marx, that I think most people that read his work undersstand, he is scientific. And so, if science dictates that there is something that has to change based on the conditions of the time or based on new information, then socialism would change with that. And so what you’re telling us is based on Mosler’s law and based on an understanding of how fiat systems work and state spending works, that the concepts that Marx was putting out there are no longer valid in that case.
Is that correct?
[00:15:42] García Hernández: They are not longer inevitable. That is the problem with Marx’s analysis. We saw the capitalist system collapsing in the Soviet Union and in China and in many places. But the problem with Marx’s law is that he says it is inevitable. And here we are with the capitalist societies still surviving.
So, that is what I think that Marx gets wrong. Marx has to make a decision. He either can go with Immanuel Kant or with Hegel. And he goes with Hegel. Unfortunately, he talks about historic laws. He talks about a priori laws that can’t be applied to history, like predicting what is going to happen in history. And that is not possible.
He has this, I would say, philosophical temptation of talking about history and how we can apply, like you say, a priori science to history, and then it’s when he makes his mistake.
All I say is that allowing private ownership of the means of production doesn’t mean the inevitable collapse of the system. It only happens if the government, like in the case of Russia in 1917, or in the case of the Kaiser before the Nazis got to power, is so incompetent that it allows it to collapse.
But, for example, the government of Roosevelt was not incompetent and it didn’t collapse. They got out of the gold standard, that’s true because you need fiat currencies in order to avoid that collapse, but Roosevelt did that and also did the Western countries in Europe. So, if you do that and you are not incompetent, the existence of private ownership of the means of production doesn’t mean the inevitable collapse of the economic system.
[00:17:44] Grumbine: Very well stated. I appreciate that. And some of these questions that I’m going to ask you, I know people will ask, and I want to have a good, clean answer. I really appreciate this. You broke this book down into multiple parts and I like that because it allows you to focus in on what’s really important. And you broke it down in the beginning under philosophers and you already spoke of Kant and Hegel.
Can you start with bringing us into some of the philosophical concepts and more importantly what led to this understanding of Fiat Socialism.
[00:18:21] García Hernández: Well, my background is in philosophy and I have always been very interested in this kind of contradiction that you always find between Hegel and Kant. I have always been a follower of Kant. Even though Kant can be considered, and I explain that in the book, as the father of neoliberalism. What the neoliberals did in the 20th century, I talk for example about Karl Popper, is taking the works of Kant and extrapolating that work into economy.
Kant didn’t write about economic systems. But what the neoliberal authors did was to take that amount of knowledge and try to apply it, not only to physics and chemistry and things like that, but also to economics. And the result is what we now call neoliberalism.
Well, that created for me a lot of unrest because I have been raised in the communist tradition. I have been a member of the communist party. And for me, it was It’s kind of heartbreaking to see that it was the conservatives that took the works of Kant. Not only the conservatives, neoliberalism has also been defended by the extreme right and the fascists like Pinochet. So it always created in me a very difficult contradiction.
Knowing quite well that the system explained by Hegel is by no means right. I think that we cannot talk about historical loss. We cannot talk about history, like something that is already written, and we are going towards an inexorable future that is already written. I definitely don’t believe that, so I have been more inclined to follow the work of Kant.
So, in that sense, what I propose in the book is that the main problem we have with the Kantian left, and I am a big defender of the movement called Austro Marxism. Austro Marxism was a Marxist tendency that existed at the beginning of the 20th century, especially in Austria. They were Kantians, and the movement tried to explain Marxism from Kantian points of view.
In my view, this is possible if we understand that microeconomics and macroeconomics are two different sciences. They are very much related, but they are different science, like physics and chemistry, they are intimately related, but they are different science. And if we establish the same with microeconomics and macroeconomics, I think that the problem is solved.
I think that the a priori schema of Kant can be used and applied in macroeconomics, but the schema that you have to use in macroeconomics is totally different. It’s not a priori, it is a posteriori, because the agent that you analyze, when you are talking about macroeconomics, is the state.
And the state doesn’t only use the currency like in the case of macroeconomics, it also creates the currency. Which means that the principles that govern macroeconomics and microeconomics are totally different. And that is the problem with neoliberalism. Neoliberalism doesn’t understand the difference between macroeconomics and microeconomics. For them, macroeconomics is just an extension of microeconomics, but the principles are the same.
And there is where you have all the mistakes that the right makes. That’s why you have a capitalist system where massive unemployment and poverty is the rule. Because they don’t understand the difference between macroeconomics and microeconomics. In microeconomics, the private sector uses the money. But when you talk about macroeconomics, the government doesn’t only use the money, it also creates the money. So it means that the rules they use are totally different. They are two different sciences.
[00:22:41] Grumbine: I’m admitting right up front, philosophy is not my strong suit. And I’ve only done cursory reading on Kant and other philosophers of that time. What about his philosophy should people that are listening to us be cued in on. What is special about Kant’s interpretation of the world that we need to be aware of?
[00:23:03] García Hernández: It was published tonight, an article I just wrote called Dalit, in the Goldberg Initiative for Modern Money Studies. And I explain, more or less, the story behind Fiat Socialism in a very simple way. I say that Hegel, the one I reject, has a Shima or a Shim in three, the very famous thesis, antithesis and synthesis.
And that means that Hegel is number three. But I say that Kant is number four, because he always creates a Shima, a shim that is divided in four. First you have a reference, then you have a general principle, then you have a rule, and then you have a case, a practical case. And that is what I think, that is the right way to explain what science is, no matter what kind of science.
Why? Because in the shima of Kant, you have a reference which is the goals that you want to achieve. In the system of Hegel, we have a stage where history is developing, mankind is developing, and we are going towards our goals. Our goals are already defined. In the case of Hegel, he used to talk about Prussia and how Prussia was going to control the whole world.
Well, in the case of Marx, how it was inevitable that the private ownership of the means of production was going to destroy capitalism and we were gonna enter socialism and then communism, but Kant rejects all this, and he starts from the goals. He says that the reference we have to follow and the goals we want to achieve is our starting point.
So, history is not a stage where we make a play, and we are going through difficult time/easier times. And sooner or later, we will get to our destiny, which is a, I don’t know, a paradise. What he says is that what we want to achieve, has to be our starting points. That is the five points I have read before office to our chase.
And I say, no matter how big or how small the private sector is in the society we live in, we have to assure these five points to everybody. And everybody has to have access to these five points permanently and without being subjected to debt. Everybody has to have this permanently and for free. And then we can change the rest of society according to the achievement of these goals.
And that’s how we have a general principle. That, in the case of Fiat Socialism, is modern monetary theory. I explain modern monetary theory as a method to achieve full employment without inflation. So first you have the bones of socialism, the way to achieve it is mobilizing your real resources and without creating inflation.
That is how modern monetary theory fits into this system. And then we have a rule that in the case of Fiat Socialism is Kalecki’s profit equation, where you can see where the profits of the private sector come, and how can you regulate the private sector in order not to have a system that is collapsing. And at the same time providing the goals that we want to achieve.
And after that we have a case. In the case of the book, I analyzed the case of Spain, not because of any particular reason but because I come from Spain, and it is the country I know better. The rest of the world should do the analysis for the other countries. In the US, you can analyze the society through fiat socialism and build a case for the US and in Germany, etc. But in the case of fiat socialism, I had to choose a case, and I chose Spain. So that is how I fit the schema in four. Explained by Kant inside of Fiat Socialism.
[00:27:19] Grumbine: One of the other important points of Marxism and Marxist-Leninist thinking is historical and dialectical materialism. How does this either support or render irrelevant, within the construct of Kant and the framework you’ve built for Fiat socialism
[00:27:42] García Hernández: Well, dialectic materialism/historic materialism, is not part of Marx’s work. It was explained, I think it was by Plekhanov in the Soviet Union, and it was more or less the official economic system in the Soviet Union. And it is mainly Hegelian. So, I don’t follow it. I think… that it is not necessary. Marx himself didn’t use that terminology.
It was a terminology used by Hegelian commentators of Marx in the Soviet Union, and I don’t think that would take us very far.
[00:28:33] Intermission: You are listening to Macro N Cheese, a podcast brought to you by Real Progressives, a non profit organization dedicated to teaching the masses about MMT, or Modern Monetary Theory. Please help our efforts and become a monthly donor at PayPal or Patreon, like and follow our pages on Facebook and YouTube, and follow us on TikTok, Twitter, Twitch, Rokfin, and Instagram.
[00:29:25] Grumbine: From a perspective of antagonisms and contradictions, these are frequently brought up in leftist spaces. In particular Marxist Leninist circles, which. are the largest majority of those that would claim to be socialists today. I wonder, with Jason Hickel advancing eco-socialism to address the climate crisis as a value system, there is a natural relationship at some level there.
What I’m trying to understand is how we can bring those leftists and the socialists that are out there, under one umbrella, that can march towards a common goal. With such a large Marxist-Leninist contingent, and also the Trotskyists, these are groups that are beholden to their line of thinking. So there is no unity on the left. How do we bring those groups together? It’s hard to convince someone that everything they believe is completely wrong. We already know how hard it is to explain to people fiat currency and modern monetary theory. A lot of times people just reject it outright. What would be the argument to them, to help them understand what they get right and what they get wrong?
How would you approach that?
[00:30:48] García Hernández: Well, in the case of Trotsky, I don’t even consider it. I would recommend everybody read the analysis that Trotsky did about the New Deal of Roosevelt. There he literally says that the government is not going to be able to pay for it, that the government is going to run out of money. All these neoliberal fallacies that the right used to make about the New Deal of Roosevelt, are present in Trotsky.
So Trotsky really didn’t understand the monetary production societies. The case of Lenin, that I respect very much, is completely different. Lenin said that 90 percent of the communist project was the central bank. And he’s totally right, in my opinion. If you want to explain the development of the Soviet Union, and the development of communism, you have to analyze the policies of Lenin, and after that of Stalin, in respect to the central bank.
The central bank of the Soviet Union had a policy of full employment. And of course that full employment was not financed by the very little taxes that the Soviet population paid. They almost paid no taxes. It was actually fiat currency produced by the central bank of the Soviet Union, that follow a full employment policy.
That’s how a very poor country, a very miserable country of peasants and workers, was able to conquer the stars and to conquer the space and to have a society where there was welfare for everybody. So it is true, in my opinion, that 90 percent of the communist program should go through the central bank policy.
The question I analyzed in chapter four, when I talk about Kalecki profit equation, is that Lenin knew perfectly well that the full employment policies were not restricted to a system where there is only public ownership of the means of production. The problem is that he didn’t explain on it because what he really wanted was capitalism to collapse.
So, he really doesn’t explain why these full employment policies were not possible in capitalism. He knew quite well it was possible, but he doesn’t elaborate on that. What I do in the book when I analyze the equation of Kalecki, is that those policies can be and should be applied also in the countries where people decide that there has to be some kind of private ownership of the means of production.
[00:33:38] Grumbine: I’ve heard one of my old mentors, Ellis Winningham, refer to himself as a Kalecki socialist. And Bill Mitchell adheres closely to Kalecki as well. When you think about Bill Mitchell, who I happen to have tremendous admiration for and Ellis Winningham, who I think is a really brilliant guy, they’re coming at this with an understanding, not only of socialism, but modern monetary theory.
Something that you’re looking at as well and captured in this book. Help us better understand the thought and mindset of Kalecki on the profit equation and full employment.
[00:34:17] García Hernández: Well, Kalecki wrote a very famous essay called Political Aspect of Full Employment, where he talks about ‘target economy’. And he talks about the goals that you want to achieve as the starting point. So it fits very well in the system that we built in. And he used to call this a target economy.
You have to have targets. And then he builds an equation, which explains ‘where do the net profits of the private sector come from.’ And he says that net profits are equal to investment in fixed capital, plus capitalist consumption, plus public deficit, minus worker savings, plus position of trade balance.
And all these factors have been and had been analyzed by Marx, but public deficit. In the work of Marx, he doesn’t take into account the public deficit. And that’s how the origin of the money and capital behind the cost and capital is not explained in the second volume of Kapital by Marx. He cannot explain how the investment in cost and capital, machinery, technology, etc. can be ever growing in history and maintaining at the same time that the capitalists can only extract from the business cycle, what they have put in before.
That is a contradiction that he analyzes in the second volume of Kapital, and he cannot really explain. The only way you can explain that the capitalist investment in technology, cost and capital, machinery, et cetera, is ever growing, is because you have another sector called the public sector, that has the power to spend as much as it needs in national fiat currency in order to finance those investments. That is exactly public deficit. And if you incorporate that public deficit to the equation of Kalecki, you can understand that the equation doesn’t point to the inevitable collapse of a system where there is private ownership of the means of production.
Kalecki said that this was not possible in capitalism because the capitalists will always hijack the economic system in order to benefit from poverty, and from exploitation of the working class. But doesn’t have to be the case. In 1971, we got rid of the gold standard and the austerity measures were not inevitable anymore.
Now, when you have democratically elected governments by a majority of people that can vote, you can decide how much the government should spend in national currency without limits. And that can allow you to have a target economy, like Kalecki says, without destroying the whole private sector in the economy.
[00:37:34] Grumbine: That brings me to a really important point. Democracy is a spectrum, like monetary sovereignty is a spectrum in terms of African nations and their ability to produce real value added resources outside of the raw materials. In the United States, we have a very different power dynamic than in other countries. And our ability to make change through the electoral process is minimal at best.
In fact, some really great scholars at Harvard have shown we really don’t have a democracy right now. We have an oligarchy, we have a plutocracy. And so with that in mind, it seems like we not only have the task of merging modern monetary theory with the high values of socialism, but we also have the political angle, the ability to create change. The existing system has the power over media, the military and global interactions. And the media has been boiled down to a few conglomerates that control the flow of iinformation.
How do we overcome this Leviathan? How do we bring about the kind of change that we need to be able to take advantage of the concepts that we’re even talking. Because I think that is where the next level of stumbling block kicks in, with all these good ideas.
[00:39:09] García Hernández: Well, I would start saying that I don’t believe that monetary sovereignty is on a spectrum. I don’t believe so. I believe that sovereignty is either applied or not applied. That’s why I always talk in the book about floating exchange rates and 0 percent permanent interest rates. And that allows you to have full sovereignty.
I don’t believe in this kind of rhetoric that talks about the interest rates being managed or things like that. No, I think that you either use your monetary sovereignty or you don’t. And that’s why I always propose floating exchange rates and 0 percent permanent interest rates. Of course, there are little number of countries where that is not possible.
Why? Because you don’t have a functioning treasury. You don’t have a functioning central bank. You don’t have a functioning tax system. And then of course, the monetary sovereignty is impossible because these are real resources that not always are in place. But if we look at the number of countries where this happens it’s very low.
[00:40:23] Grumbine: I’m talking with Fadhel Kaboub, MMT scholar and Ndongo Sambasila, another MMT scholar in the Global South. They say you can spend money into existence, but you’ve got to have the real resources available for purchase. What’s been happening in the Global South is these foreign corporations steal your resources.
And then they apply value added production to it, and then they sell it back to you at profit. And monetary sovereignty, according to Fadhel has to be earned because without having food sovereignty, energy sovereignty, and value added production, you are required to get things from someone else who doesn’t trade in your currency.
This is why the IMF has been predating on the global South. And leveraging foreign debt to keep them in line and enforce structural adjustments. So while they could do things with their own currency locally, they don’t have enough of the production available. It’s really more about the availability of real goods and services, not just the raw materials, the ability to take those raw materials like crude and turn it into refined fuel.
Many countries don’t have that production available. So they may have monetary sovereignty, but they have nothing that they can purchase with it. It’s a little misleading because us has the ability to, for example, produce goods and services. It chooses to outsource that to strip labor of its power. But I agree with you on what you stated about monetary sovereignty.
The issue though, is not the money. The issue is what can you get with that money? Are you able to get real goods and services or are you just stuck with raw materials that you can’t really do anything with because you don’t have the infrastructure to build out?
[00:42:17] García Hernández: Well, the infrastructure is a problem, of course, but the real resources are precisely in those countries. So Fadhel, I have biggest respect for him and I think he’s a very important scholar. Same thing as some Basila. I think that in most of the countries, you can always index public spending in national currency to compensate any kind of price instability in the basic resources you need for your population, meaning with this, that if you have, for example, fully floating exchange rates, you can have fluctuations in prices of food, for example, but you can always compensate those fluctuations with spending in your own currency. You can always use your central bank in order to compensate those fluctuations.
I agree there are a very little number of countries where you cannot do this. You cannot do this because the central bank is not functional, the treasury is not functional, and the tax system is not functional either. So there are a little minority of countries where these real resources, meaning central bank and treasury, etc. Are not available.
But it is really the minority. The majority can do this and should do this only in national currency and work only in national currency. What is the problem with the IMF? The IMF is a tool of the colonialist and the colonial powers that they always follow the same rule. And that is never allow the developing countries get into the, in their own currency.
They always give you credit, but in a currency that you don’t issue meaning euros, meaning the CFA franc, meaning the dollar. And of course that creates enormous pressures. In the developing world, what is happening now is that this very unfair and absolutely inhumane and neo colonist strategies are coming to an end because now we have the new developing bank from China.
Now we have the BRICS plus, and now we have a different situation. I point out in my book, how important the swap lines of China are. China is opening swap lines with many developing countries, for example, Argentina, for example, Nigeria, Egypt, South Africa, and there will be many more, where you are using your own currency in order to buy products and goods from China. The biggest producer in the world.
And China is also allowing you to buy resources from China in your own currency. And China is also purchasing your goods that it needs, in order to develop, because China needs a lot of, for example, energy sources. So for the first time, the neo-colonialist and terrible politics of the World Bank and the IMF is coming to an end, because the BRICS, especially China, and the swap lines of the Chinese Central Bank are bringing this to an end, through the development bank of China. Which is normally called the Bank of the BRICS.
I think that the number one objective of every single developing country, would be to get in touch with this new initiative and to take advantage of the possibilities that the BRICS Plus and China are opening. It is the first time that the developing world has the opportunity to develop itself in its own currency.
And that is being done by Xi Jinping, the Communist Party of China, and I have said this before, I think that if the Nobel Prize was not absolutely ridiculous, because it has been given to war criminals, like Obama… Xi Jinping should receive the Nobel Peace Prize because of this initiative.
[00:46:22] Grumbine: Amen. I really like that. Help us understand swap lines. I just want you to present it for people that maybe haven’t heard about this so they understand how that works.
[00:46:35] García Hernández: Well, swap lines actually allow the developing countries to stabilize their exchange quote. When you have, for example, fully floating exchange rates, your exchange quotes might fluctuate very abruptly, and then you have a lot of difficulties in order to stabilize. When you open a swap line this is stabilized, because what you are exchanging are basically in your own currency.
You receive credit in the central bank of the trading partner, and the trading partner receive credit in your currency in your central bank. Which means that at the end of the day, the currency is irrelevant. For example, we have now, in the case of Nicaragua, an agreement with China. So China gets raw materials from Nicaragua, and China has built housing projects in Managua for thousands of people.
So, you exchange one thing for the other. And the same thing you have, for example, in Argentina, in Argentina there is a very interesting swap line that allowed, I think the first time in history, to repay the payment of Argentina to the International Monetary Fund. Because they got into agreement with China, in order to exchange those reserves in dollars for natural resources in Argentina, especially gas and also crops.
So, that is what is going on now with the swap lines. You are stabilizing the exchange quotes of the currencies in the developing countries by opening credit lines in the central banks or the trading part. This allows you to exchange real resources for real resources, and always make a win-win situation.
Now it’s not a colonial power that gets advantage of the developing countries. Now the trading is made by equals. Both parts receive an equal benefit. In the case of the developing countries, they receive the infrastructure they need from China, and that is the infrastructure you mentioned before, and at the same time, China receives the natural resources it needs to keep on developing.
Now, for the first time, the currencies of the colonial powers are not in place. And both partners are benefiting.
[00:49:04] Grumbine: What a tremendous dichotomy. The US using neo-colonial strategies in 2023, subjugating the global South, while China is saying, let’s be cooperative. It’s only a thin veneer to block what we’re talking about, which is this very cooperative society, this ability to trade without predating upon one another.
What a novel concept. So how important are swap lines to building out the future of fiat socialism.
[00:49:38] García Hernández: I think that they are essential. I think that for me, it’s incredible when I see CNN or any other news network where they show demonstrations in the developing countries, and everybody has a Chinese flag or a Russian flag. And they say, well, how can this be possible? Aren’t these people in Africa crazy? Aren’t these people in the Global South crazy?
Why are they doing this? Because they are not stupid. They know who is helping them and they know who is not helping them. They know who is keeping them in misery and who is giving them a hand to get out of misery. So that’s why they are doing it, because they are not stupid.
[00:50:19] Grumbine: Something you’ve said that is triggering me that I think is important to suss out. I’ve been chastised by various individuals as I explained the role of the IMF, and even the Ukraine, NATO scenario with Russia. And while nobody wants to see Russia inside of Ukraine, the reality is US’s need for this neo-colonial approach to world dominatio, is leveraging the breadbasket of Europe and Ukraine through IMF loans.
Once again, predatory process that they’ve been doing with the rest of the world, and BRICS providing an alternative. This stops being so mysterious after you take the first swipe at it. But at the highest level, the reality is the U S has used the World Bank, the WTO, the IMF and NATO to once again, isolate and destroy another enemy by using sanctions, another weapon of war.
And they’ve used this to destabilize countries around the world, and China is providing a way out. We can’t have that. The US is going to step in and try to create a fuss, and the European powers that still play lapdog to the US are going along with it, to their own detriment. Can you talk about that?
Cause I feel like we’re on to something here.
[00:51:50] García Hernández: The problem that the US has is that the developing model that China and the BRICS are building is unstoppable. It’s unstoppable because they choice that the people in the developing countries have to do is, either stay in misery because of the IMF and the World Bank, or get out of misery. And it is a no brainer.
They are going to get out of misery. They are going to develop, and in order to do that, they have to use their own currency. And that is what China has allowed them to do. That is something that the United States and Europe and Canada has never allowed. Because of course, when they need infrastructures, the colonial powers say, you need so much and so much of dollars, here you are..
Don’t worry, take the money, but you have to repay it with interest, giving us your natural resources. So the developing countries are only allowed to produce the products that the North needs, and the money they get, they can only use to repay the loans in a currency that they don’t create. It is a vicious circleiewff you don’t use your own currency. And that is exactly what China and the BRICS are changing. And of course, the United States has no interest in allowing this. That is why they are provoking the third world war in Taiwan. And that is why they provoke the war in Ukraine. The first one who didn’t want to go to Ukraine was Russia.
The only one that tried to get into an agreement, the Minsk 1 and Minsk 2 agreement, was Putin. Putin didn’t want to go there, even though the Russians in the Donbas were being massacred since 2014. Eight years of crimes against humanity, against the Russians in Donbass because they didn’t want the neo Nazi government that came into power after the Maidan.
They said this is not the way we want to live. We want our democracy. We want our president. And that’s why they were being massacred. So the reason why now we have a war in Ukraine is the self-defense of people, which is recognized in the Carta of the United Nations. The same thing is happening now in Palestine.
It is self-defense. Everybody has the right to self defense, the Palestinians, the people in Donbass and the people in the developing countries, just the same. And if you see, for example, the declaration of independence of Ukraine in 91, it says very clearly that Ukraine has to stay neutral. It cannot be in NATO.
It cannot have weapons of mass destructionan and austerity in order to attack Russia. And they have not adhered to this agreement. Therefore, the agreement is no more in place. And we have to remember the Helsinki agreements, the Helsinki agreements say that the national security cannot come at the expense of the risk of other nations.
You cannot put another nation in risk in order to feel safe. We all have to comply with international law. And that is what the United States and NATO and the European Union don’t understand. And that’s why they are going to fail.
[00:54:59] Grumbine: Carlos, well said, thank you, sir. I appreciate it immensely. How do we get other MMTers to see this? And embrace this? Because I think this is a foreign concept, even within the MMT community. Help me understand messaging fiat socialism to other MMT ers.
[00:55:18] García Hernández: Well, I think that we can explain this in a very simple way. The bad guys win when they are more than the good guys. We see that in the movies all the time. And the problem is that we have not built a socialist majority yet. It is true that the system is weak, and the system is corrupted, and the system is not going to allow any profound change.
The truth is also that we are not the majority yet. And we need a profound change in the structure. We need an alternative. We need an alternative society that is viable, that is not related to any kind of drama. That is what people think when they think about socialism. No, socialism is making people live better.
That’s it. To improve the living conditions of everybody. That is, simply put, what socialism is. And in order to present a socialist alternative, we have to understand the fiat currencies that we have, we have to use modern monetary theory, because if not, we are always gonna end up with the same fallacies of neoliberalism.
We need to collect taxes in order to spend, and we need to go into debt in order to be able to have public spending, that is all a fallacy. For example, let’s take the proposal of Bernie Sanders. The reason why there is no universal healthcare in the United States right now is Bernie Sanders, because the only way you can have universal healthcare is by having Medicare for everybody from age zero.
Now you have it for everybody of age above 65. Well, the only trick is to load that age to zero. If you have Medicaid for everybody from age zero, that will do. But if you have enormous problems to say, no, no, no, we are going to pay this through taxes, we are going to pay this through debt, then is when people don’t follow you, people have to understand that the same way that the federal reserve creates the money to kill people all around the wall in Palestine and in Ukraine, they can also create the money to have everybody insured and everybody in a good living standard.
You don’t need taxes to develop it. And the socialist forces all over the world in the United States and in Europe have to unite to let everybody have a decent life because of their working power. And then we will decide democratically how big we want the private sector to be.
[00:57:55] Grumbine: Talking with Fadhel, we talked about a movement of movements needing to pull everyone togethern, and it sounds like you’re saying a similar thing. We need to build that collective power so that we can become a majority. So that we can, regardless of the rigging, overcome that with sheer numbers and tenacity. We have to have the smarts to know how to fight back. And right now there’s far too few that get it. And I think that what you’re proposing is at least a very good start to getting us on the way there. Carlos, thank you so much for being a guest with me today. And I really hope to have you back soon.
[00:58:28] García Hernández: Thank you very much. It was a huge pleasure for me and I will always be there when you call me.
[00:58:34] Grumbine: Thank you so much. My name is Steve Grumbine. This show is part of our nonprofit organization, Real Progressives. Please consider donating to us. Again, we only survive on your donations. We’re looking to try to get this information out there to you. If you find value in what we do, please consider becoming a monthly donor at our Patreon account, patreon.
com slash real progressives. Or you can go to our website, real progressives. org. And donate Carlos. Thank you. Once again, his book, which I strongly recommend is called Fiat socialism, achieving the goals of socialism through modern monetary theory by my guest, Carlos Garcia Hernandez. This is Steve. Macro N cheese.
We are out of here.
[00:59:29] End Credits: Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts and promotional artwork by Andy Kennedy. Macro N Cheese is publicly funded by our Real Progressives Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.
GUEST BIO
Carlos García Hernández is originally from Spain and currently resides in Berlin, Germany. He studied philosophy and history at the Humboldt University of Berlin and is the founder and director of Lola Books, a publishing house that has introduced MMT to Spanish and German readers. Among others, Carlos has translated the works of MMT scholars Bill Mitchell, Randall Wray and Pavlina Tcherneva for Spanish speaking readers. Carlos is the author of Fiat Socialism: Achieving the Goals of Socialism through Modern Monetary Theory
https://www.waterstones.com/book/fiat-socialism/carlos-garcia-hernandez/9783944203508
PEOPLE MENTIONED
Joe Burns
is a veteran union negotiator and labor lawyer and author with over 25 years’ experience negotiating labor agreements. He is currently the Director of Collective Bargaining for the Association of Flight Attendants, CWA. He graduated from the New York University School of Law. Prior to law school he worked in a public sector hospital and was president of his AFSCME Local.
https://www.haymarketbooks.org/authors/1116-joe-burns
https://againstthecurrent.org/atc220/joe-burns-class-struggle-unionism/
Sara Nelson
is an American union leader who serves as the international president of the Association of Flight Attendants–CWA, AFL–CIO. A United Airlines flight attendant since 1996, she previously served as AFA’s international vice president for a term beginning January 1, 2011. AFA-CWA represents nearly 50,000 flight attendants at 20 airlines.
https://en.m.wikipedia.org/wiki/Sara_Nelson_(union_leader)
https://realprogressives.org/?s=Sara+Nelson
Jeff Reisberg
is an American Airlines flight attendant.
Bill Mitchell
is Professor of Economics and Director of the Centre of Full Employment and Equity (CofFEE), an organization dedicated to providing an evidence base to support full employment and equitable distribution of opportunity, income and wealth, at the University of Newcastle, NSW Australia. Along with Warren Mosler and Randy Wray, Dr. Mitchell is one of the founding developers of Modern Money Theory.
https://en.wikipedia.org/wiki/Bill_Mitchell_(economist)
Vladimir Lenin
or simply “Lenin”, was a Russian communist revolutionary and head of the Bolshevik Party who rose to prominence during the Russian Revolution of 1917. The bloody upheaval marked the end of the oppressive Romanov dynasty and centuries of imperial rule in Russia. The Bolsheviks would later become the Communist Party, making Lenin leader of the Soviet Union, the world’s first communist state.
https://www.history.com/topics/european-history/vladimir-lenin
Karl Marx
Karl Heinrich Marx was born in 1818 in the Rhine province of Prussia and was a revolutionary, sociologist, historian, philosopher, and economist whose works inspired the foundation of many communist regimes in the twentieth century. It is certainly hard to find many thinkers who can be said to have had comparable influence in the creation of the modern world. “Marx was before all else a revolutionist” eulogized his associate, and fellow traveler, Friedrich Engels, saying he was “the best-hated and most-calumniated man of his time,” yet he also died “beloved, revered and mourned by millions of revolutionary fellow-workers.”
https://www.britannica.com/biography/Karl-Marx
https://www.investopedia.com/terms/k/karl-marx.asp
https://plato.stanford.edu/Entries/marx/
Steve Keen
is an author and Associate Professor of Economics & Finance at the University of Western Sydney.
https://www.ineteconomics.org/research/experts/skeen
Immanuel Kant
was late 18th/19th century German philosopher and one of the central Enlightenment thinkers. His comprehensive and systematic works in epistemology, metaphysics, ethics, and aesthetics have made him one of the most influential and controversial figures in modern western philosophy.
https://en.m.wikipedia.org/wiki/Immanuel_Kant
Georg Wilhelm Friedrich Hegel
was a late 18th/19th century German philosopher and one of the most influential figures of German idealism and philosophy. His influence extends across the entire range of contemporary philosophical topics, from metaphysical issues in epistemology and ontology, to political philosophy, the philosophy of history, philosophy of art, philosophy of religion, and the history of philosophy.
https://en.m.wikipedia.org/wiki/Georg_Wilhelm_Friedrich_Hegel
Karl Popper
was a 20th century Austrian–British philosopher, academic and social commentator.
https://en.m.wikipedia.org/wiki/Karl_Popper
Jason Hickel
is an economic anthropologist, author, and a Fellow of the Royal Society of Arts. He is Professor at the Institute for Environmental Science and Technology at the Autonomous University of Barcelona, Visiting Senior Fellow at the International Inequalities Institute at the London School of Economics, and Chair Professor of Global Justice and the Environment at the University of Oslo. His research focuses on global political economy, inequality, and ecological economics.
https://bookshop.org/search?keywords=Jason+Hickel
Leon Trotsky
was a leading Marxist revolutionary of the first half of the 20th century. He is famous for playing leading roles in the Russian revolutions of 1905 and 1917, and for organizing the Red Army during the ensuing Russian Civil War. In the 1920–30s, Trotsky was an important figure in the Marxist opposition against Joseph Stalin. He critiqued what he saw as the degeneration of the Soviet regime and inspired many socialists who continued working for an international working-class revolution in opposition to the model of ‘socialism in one country’. He was expelled from the USSR in 1929 and killed in 1940.
https://www.bl.uk/people/leon-trotsky
Lawrence Lessig
is the Roy L. Furman Professor of Law and Leadership at Harvard Law School.
https://hls.harvard.edu/faculty/lawrence-lessig/
Ellis Winningham
is a macroeconomist, writer, lecturer focusing on the workings of our monetary systems.
https://bylines.scot/author/ellis-winningham/
https://realprogressives.org/author/elliswinningham/
David Graeber
was an American anthropologist and anarchist activist. His influential work in economic anthropology, particularly his books, and his leading role in the Occupy movement, earned him recognition as one of the foremost anthropologists and left-wing thinkers of his time.
https://en.wikipedia.org/wiki/David_Graeber
Fadhel Kaboub
is an Associate Professor of economics at Denison University, and President of the Global Institute for Sustainable Prosperity. He is currently working with Power Shift Africa.
Before settling at Denison in 2008, Dr. Kaboub taught at Simon’s Rock College of Bard and at Drew University where he also directed the Wall Street Semester Program. He has held research affiliations with the Levy Economics Institute, the Economic Research Forum in Egypt, the John F. Kennedy School of Government at Harvard University, and the Center for Full Employment and Price Stability at UMKC.
https://denison.edu/news-events/featured/148775
https://denison.edu/news-events/featured/148775
Ndongo Samba Sylla
is a Senegalese development economist. He has previously worked as a technical advisor at the Presidency of the Republic of Senegal and is Programme manager at the West Africa office of the Rosa Luxemburg Foundation. His interests include Fair Trade, labor markets, democratic theory and monetary sovereignty. He holds a PhD. from the University of Versailles (UVSQ).
https://bookshop.org/search?keywords=Ndongo+samba+sylla
Thomas Sankara
was a military officer and proponent of Pan-Africanism who was installed as president of Upper Volta (later Burkina Faso) in 1983 after a military coup. Sankara declared the objectives of the “democratic and popular revolution” to be primarily concerned with the tasks of eradicating corruption, fighting environmental degradation, empowering women, and increasing access to education and health care, with the larger goal of liquidating imperial domination. He held the presidency until 1987, when he was killed during another coup.
https://www.britannica.com/biography/Thomas-Sankara
Xi Jinping
is a Chinese politician who has been serving as the general secretary of the Chinese Communist Party (CCP) and chairman of the Central Military Commission (CMC), and thus as the paramount leader of China, since 2012.
https://en.wikipedia.org/wiki/Xi_Jinping
Clara Mattei
is an Assistant Professor in the Economics Department of The New School for Social Research and was a 2018-2019 member of the School of Social Sciences at the Institute for Advanced Studies. Dr. Mattei’s focus is primarily on post-WWI monetary and fiscal policies, and the history of economic thought and methodology.
https://www.newschool.edu/nssr/faculty/clara-mattei/
INSTITUTIONS / ORGANIZATIONS
BRICS
The acronym began as a somewhat optimistic term to describe what were the world’s fastest-growing economies at the time. But now the BRICS nations — Brazil, Russia, India, China, South Africa — are setting themselves up as an alternative to existing international financial and political forums.
https://www.dw.com/en/a-new-world-order-brics-nations-offer-alternative-to-west/a-65124269
https://www.silkroadbriefing.com/news/2023/03/27/the-brics-has-overtaken-the-g7-in-global-gdp/
World Bank
is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The world bank operates on a sectorial basis while the IMF concerns itself with macro goals.
https://en.wikipedia.org/wiki/World_Bank
International Monetary Fund (IMF)
is a major financial agency of the United Nations, and an international financial institution claiming it’s mission to be “working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.” The IMF concerns itself with macro goals, while the World Bank operates on a sectorial basis.
https://en.m.wikipedia.org/wiki/International_Monetary_Fund
The New Development Bank
formerly referred to as the BRICS Development Bank, is a multilateral development bank established by the BRICS states.
World Trade Organization (WTO)
is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to ensure that trade flows as smoothly, predictably and freely as possible.
https://www.wto.org/english/thewto_e/thewto_e.htm
North Atlantic Treaty Organization (NATO)
is a military alliance of, currently, 31 member countries established by the North Atlantic Treaty of April 4, 1949, which sought to create a counterweight to Soviet armies stationed in central and eastern Europe after World War II.
https://www.britannica.com/topic/North-Atlantic-Treaty-Organization
CONCEPTS
Modern Monetary Theory (MMT)
is a heterodox macroeconomic supposition that asserts that monetarily sovereign countries (such as the U.S., U.K., Japan, and Canada) which spend, tax, and borrow in a fiat currency that they fully control, are not operationally constrained by revenues when it comes to federal government spending.
Put simply, modern monetary theory decrees that such governments do not rely on taxes or borrowing for spending since they can issue as much money as they need and are the monopoly issuers of that currency. Since their budgets aren’t like a regular household’s, their policies should not be shaped by fears of a rising national debt, but rather by price inflation.
https://www.investopedia.com/modern-monetary-theory-mmt-4588060
https://gimms.org.uk/fact-sheets/macroeconomics/
Monetary Sovereignty Within Developing/Emerging Nations
Today, the concept of monetary sovereignty is typically used in a Westphalian sense to denote the ability of states to issue and regulate their own currency. This understanding continues to be the default use of the term by central bankers and economists and in fields ranging from modern monetary theory to international political economy and international monetary law. As argued in the linked article, the Westphalian conception of monetary sovereignty rests on an outdated understanding of the global monetary system and the position of states in it. This makes it unsuitable for the realities of financial globalization.
The Global South
refers broadly to regions of Latin America, Asia, Africa, and Oceania. It is one of a family of terms, including “Third World” and “Periphery,” that denote regions outside Europe and North America, mostly (though not all) low-income and often politically or culturally marginalized. The use of the phrase Global South marks a shift from a central focus on development or cultural difference toward an emphasis on geopolitical relations of power.
https://journals.sagepub.com/doi/pdf/10.1177/1536504212436479
Marx’s Theory of the Falling Rate of Profit
Considered among the most important conclusions of Marx’s theory of capitalism is that the rate of profit would tend to decline over time as a result of technological change. Marx called his law of the tendency of the rate of profit to fall “in every respect the most important law of modern political economy.”
https://link.springer.com/chapter/10.1007/978-1-349-12353-7_1
Keynesianism
Keynesian economics, the body of ideas set forth by John Maynard Keynes in his General Theory of Employment, Interest and Money, and other works, intended to provide a theoretical basis for government full-employment policies. It was the dominant school of macroeconomics and represented the prevailing approach to economic policy among most Western governments until the 1970s.
https://www.britannica.com/topic/Keynesian-economics
https://www.investopedia.com/terms/k/keynesianeconomics.asp
New Deal
was a series of domestic programs initiated and developed the administration of President Franklin D. Roosevelt (FDR) between 1933 and 1939, which took action to bring about immediate economic relief as well as reforms in industry, agriculture, finance, waterpower, labour, and housing, vastly increasing the scope of the federal government’s activities.
https://www.britannica.com/event/New-Deal
Capital Order
Clara Mattei, in her book The Capital Order, asserts the primacy of capital over labor in the hierarchy of social relations within the capitalist production process. That primacy was threatened after World War I in what she describes as the greatest crisis in the history of capitalism. Among the concepts the author discusses is a so called “Trinity of Austerity” through which the Capital Order asserts dominance over labor by the combination of Monetary (interest rate increase), Fiscal (reductions in spending for social need), and Industrial (layoff, wage/work hours reduction) Austerity with the desired, yet implicit, intention of increasing tension, and therefore pliability, among the working classes.
Class Struggle Unionism
Class struggle unionism is the belief that our union struggle exists within a larger struggle between an exploiting billionaire class and the working class which actually produces the goods and services in society. Class struggle unionism looks at the employment transaction as inherently exploitative. While workers create all wealth in society, the outcome of the wage employment transaction is to separate workers from that wealth and create the billionaire class. From that simple proposition flows a powerful and radical form of unionism.
https://www.haymarketbooks.org/books/1767-class-struggle-unionism (Book)
Class Consciousness
In Marxist thought, class consciousness is the set of beliefs that a person holds regarding their social class or economic rank in society, the structure of their class, and their class interests. According to Karl Marx, it is an awareness that is key to sparking a revolution that would “create a dictatorship of the proletariat, transforming it from a wage-earning, property-less mass into the ruling class.”
https://en.wikipedia.org/wiki/Class_consciousness
Class Warfare
Class conflict (also class struggle, capital-labour conflict) identifies the political tension and economic antagonism that exist among the social classes a society, because of socio-economic competition for resources among the social classes, between the rich and the poor.
https://en.wikipedia.org/wiki/Class_conflict
Class Theory
Marxian class theory asserts that an individual’s position within a class hierarchy is determined by their role in the production process and argues that political and ideological consciousness is determined by class position. A class is those who share common economic interests, are conscious of those interests, and engage in collective action which advances those interests. Within Marxian class theory, the structure of the production process forms the basis of class construction.
https://en.wikipedia.org/wiki/Marxian_class_theory
Labor Theory of Value
is a theory of value that argues that the economic value of a good or service is determined by the total amount of “socially necessary labor” required to produce it.
https://en.m.wikipedia.org/wiki/Labor_theory_of_value
https://www.marxist.com/marx-marxist-labour-theory-value.htm
Austromarxism
was a Marxist theoretical current led by members of the Social Democratic Workers’ Party of Austria and later supported by Austrian-born revolutionary Friedrich Adler. It is known for its theory of nationality and nationalism, and its attempt to conciliate it with socialism in the imperial context. More generally, the Austromarxists strove to achieve a synthesis between social democracy and revolutionary socialism.
https://en.wikipedia.org/wiki/Austromarxism
Dialectical Materialism
is a philosophical approach to reality derived from the writings of Karl Marx and Friedrich Engels. For Marx and Engels, materialism meant that the material world, perceptible to the senses, has objective reality independent of mind or spirit.
https://www.britannica.com/topic/dialectical-materialism
Historical Materialism
is Karl Marx’s theory of history. Marx locates historical change in the rise of class societies and the way humans labor together to make their livelihoods. For Marx and his lifetime collaborator, Friedrich Engels, historical materialism is the “view of the course of history which seeks the ultimate cause and the great moving power of all important historic events in the economic development of society, in the changes in the modes of production and exchange, in the consequent division of society into distinct classes, and in the struggles of these classes against one another.”
https://en.m.wikipedia.org/wiki/Historical_materialism
Kalecki Profit Equation
“Capitalists earn what they spend, and workers spend what they earn”.
PUBLICATIONS
Fiat Socialism: Achieving the Goals of Socialism through Modern Monetary Theory by Carlos García Hernández
https://www.waterstones.com/book/fiat-socialism/carlos-garcia-hernandez/9783944203508
Fiat Socialism (Blog Post) by Carlos Garciá Hernández
https://gimms.org.uk/2019/03/01/fiat-socialism/
The story behind Fiat Socialism (Blog Post) by Carlos García Hernández
https://gimms.org.uk/2023/10/09/dalet/
Debt: The First 5,000 Years, Updated and Expanded by David Graeber
Macroeconomics by William Mitchell, L. Randall Wray and Martin Watts
https://bookshop.org/p/books/macroeconomics-william-mitchell/167901?ean=9781137610669
Das Kapital by Karl Marx
https://bookshop.org/p/books/das-kapital-karl-marx/7012904?ean=9781453886328
The Road We Are Traveling by Stuart Chase
https://www.barnesandnoble.com/w/the-road-we-are-traveling-stuart-chase/1124594495
The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism by Clara Mattei
Political Aspects of Full Employment (Essay) by Michał Kalecki
https://jacobin.com/2018/05/political-aspects-of-full-employment-kalecki-job-guarantee
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Carlos García Hernández is the author of Fiat Socialism: Achieving the Goals of Socialism through Modern Monetary Theory. He lays out the five goals of fiat socialism:
- Full employment
- Full and prudent use of material resources
- The guarantee of the five essentials to every citizen: food, housing, clothing, health services, and education
- Social security at all major exposed points in the social structure (eg, old age, sickness, accident, temporary unemployment, and childbearing)
- Labor standards, to be assured by labor unions
Carlos maintains that any society achieving these five goals at the same time and permanently should be called socialist, no matter the size of the private sector.
Steve and Carlos discuss the philosophical foundations of both fiat socialism and Marxism. They also look at the role of the IMF and the possibilities for monetary sovereignty in developing nations.
Carlos García Hernández is the founder and director of Lola Books, a publishing house that has introduced MMT to Spanish and German readers. He is the author of Fiat Socialism: Achieving the Goals of Socialism through Modern Monetary Theory.
@Carlos_G_H_ on Twitter. Or X
Macro N Cheese – Episode 246
Fiat Socialism… the Convergence with Carlos García Hernández
October 14, 2023
[00:00:00] Carlos García Hernández [Intro/Music]: China is opening swap lines with many developing countries, for example, Argentina, Nigeria, Egypt, South Africa, and there will be many more where you are using your own currency in order to buy products and goods from China, the biggest producer in the world.
I think that you either use your monetary sovereignty or you don’t, and that’s why I always propose a floating exchange rate and zero percent permanent interest rates.
[00:01:35] Geoff Ginter [Intro/Music]: Now, let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.
[00:01:43] Steven Grumbine: All right. This is Steve with Macro N Cheese. I have been on a mission to not only understand modern monetary theory, but to really develop a class consciousness and an understanding of what the working class needs, and a concept of class struggle. You’ve heard us talk to unions through class struggle unionism with Joe Burns and my friend Jeff Reisberg and Sarah Nelson.
You’ve also heard us talk to David Van Deusen, president of the Vermont AFL-CIO, and to many union leaders. And ultimately you’ve heard us trying to combine an understanding of the monetary system, with what Bill Mitchell calls the ‘value system.’ The values that we overlay within that monetary system. And socialism is a very important thing to understand.
Socialism has been written about and theorized and conceptualized over and over again by many scholars, going back to the days of Engels and Marx. And here we are today in a new time, in a new era with a fiat currency that fundamentally changes many of the preconceived notions that Marx had about money.
Yes, Marx did talk about fiat in volume three of Kapital. But that requires an awful lot of reading and it’s tough. And most people are never going to take that journey. So we’re trying to find fellow travelers that merge these concepts of modern monetary theory and socialism. A flexible socialism for the people that allows us to interpret the world through the times that we’re in, the material conditions that we’re in, and be able to allow enough space for us to make progress.
And this brought me to my guest today. His name is Carlos Garcia Hernandez. He is the author of the book, Fiat Socialism: Achieving the Goals of Socialism Through Modern Monetary Theory. A gentleman from Spain and he’s lived about half his life in Berlin, the city where he currently is. Studied philosophy and history at Humboldt University of Berlin and the founder of a publishing house called Lola Books, which not incoincidentally, is also the place that published this book, Fiat Socialism. Which is going to be the topic of today’s conversation.
So without further ado, let me bring on my guest. Carlos, welcome to the show sir.
[00:04:20] Carlos García Hernández: Thank you very, very much. For me, it’s an honor being here with you.
[00:04:24] Grumbine: The honor is all mine. We keep looking for people that are willing to go this route, to look at the world through this lens. We have so much trouble getting socialists to understand modern monetary theory. And by extension, we have even more trouble getting many of the people that are in the modern monetary theory world to understand socialism, and to consider its implications in modern society.
This is a welcome opportunity and I really appreciate you joining me today.
[00:04:53] García Hernández: Thank you very much.
[00:04:55] Grumbine: So with that introduction… you wrote this book and it’s fantastic. There’s a lot of detail in there. It goes for the conceptual and it’s got the math behind it. Some of the deeper levels of macroeconomic theory are in your book.
This is not just an easy read. There’s so much more depth to this book. And I wanted to talk about what was the motivation for you writing it? What brought you to this desire to dig into what you dubbed ‘Fiat Socialism?’
[00:05:27] García Hernández: Well, the origin of Fiat Socialism is kind of a hunch that I had by translating and publishing the main works of modern monetary theory in Spanish and in German. Once I got into it, I had the intuition, let’s say, that both Marxism and modern monetary theory were complementary. Meaning that the parts that one is not very strong in, are the aspects that in Marxism are not very clear, are solved through modern monetary theory. And the parts of modern monetary theory that are not that simple and clear, can be answered through Marxism.
So, I got this idea of merging both. And I think that also took me to different philosophical stances, not only economic. And I think that this fusion is what the book really is.
[00:06:35] Grumbine: It’s amazing. So you talk about five key things that you have to accomplish to achieve socialism. And this book attempts to lay that out. Can you tell us what that foundation is, what those five items are?
[00:06:52] García Hernández: Yes, this is the main way of looking at the question of socialism. It is a way of looking at the question that comes from David Graeber, the late anthropologist, who wrote a book called Debt. And there he explains that the main question of communism and socialism is not the ownership of the means of production, but who has access to what, and under what conditions.
So, it is not the typical, let’s say, Hegelian way of looking at it, where the ownership of the means of production is fundamental. And that is the main idea I took. And I just said that the size of the private sector should be decided democratically. The size of the private sector could be bigger, smaller, or non existent. Because the proposal of modern monetary theory is still valid whatever size of the private sector.
And then I learned about an author called Stuart Chase from the 1940s. He was a North American economist. I learned about him through the blog of Bill Mitchell. And I found a book called The Road We Are Traveling. And in that book, he explains the five things, or the five goals, of what he calls any rational government.
So, I took these five goals and I renamed them ‘the goals of socialism.’ And what I defend is that a society in which these five goals are achieved simultaneously and permanently, can be called, and should be called a socialist society.
And the size of the private sector should be decided democratically. These five goals are: Number one, full employment.
Full and prudent use of material resources, that is point number two.
Number three is guarantee of the five essentials to every citizen – food, housing, clothing, health services, and education.
Number four is social security at all major exposed points in the socialist structure. And this would include all age allowances, benefits for sickness, accident, temporary unemployment, and childbearing.
And number five, labor standards that should be assured by the labor unions.
So what I maintain in my book is that any society that attains these five goals, At the same time and permanently should be called socialist, no matter how big or how small the private sector is.
[00:09:51] Grumbine: Interesting. So when I think of socialism, I think of the division between public and private ownership in terms of, not necessarily personal property, but private property, and developing business and developing industry. And the necessary conditions that you find yourself in, in a capitalist environment,eventually leads to predation and oppression and other forces that I think Marx and Engels spoke pretty eloquently about.
So how would socialism work? Because we understand MMT to be describing public money, being the citizens money. And so how does one create a socialism where there is no such thing as public, I don’t understand that. Can you help me see that? Help me understand that.
[00:10:49] García Hernández: The public sector will always exist. But the question is, if we will allow private sector to exist, meaning the private ownership of the means of production.
[00:11:03] Grumbine: Ah, okay. So under what conditions might something like that exist? Because these are the questions that when we talk about MMT with socialists, these are the ones that really jump out, because they’re saying that labor should own its own labor. How do we marry those two together so that I can better explain this or better communicate this within those circles?
[00:11:31] García Hernández: Yes, but in that equation, we also have to include the costs. Who bears the costs of the production? And that is the question that you can solve with the existence of the private entrepreneurship. And the question… the way I understand it, has to do with Marx’s law of the tendency of the rate of profit to fall. That is the third volume of Capital. And basically what Marx says in that law is not a moral law or is not an ethical law saying, ‘well, I prefer this’, or ‘I think this is morally superior’, or ‘this is better from an ethical point of view.’
No, no, no, what he explains is, that if you allow the private sector to exist, if you allow the private property of the means of production, the system is doomed to collapse. It will collapse because it is not reformable. It will eat up the rest of the economy. The contradictions within the system will get bigger and bigger. The misery will only tend to grow. And at the end, the whole system collapses. And that is what he explains there. That is why his law is a historical law.
He says that sooner or later, the whole system is going to collapse. It’s not a moral reflection.
[00:13:09] Grumbine: Okay,
[00:13:10] García Hernández: Well, in that sense, then, like I said at the beginning, that is when modern monetary theory kicks in. In the chapter dedicated to conclusions, I oppose to Morseley’s Law of the Tendency of the Rate of Profit to Fall, which says that there is no financial crisis deep enough that it cannot be overcome by means of increased public spending and/or a decrease in the tax burden.
And I say that these two laws are mutually exclusive. Either both of them are wrong, or only one of them can be right. But both of them cannot be right at the same time. And Fiat Socialism maintains that the one that is right is Mosler’s Law. Because the mistake that Marx falls into, is that in his analysis he doesn’t include public spending.
Public spending, the way that Mosler explains it, makes the law of the tendency of the rate of profit to fall non valid. And we can see that in the case of Keynesianism, and in the case of the New Deal of Roosevelt, and in the case of the Western societies in Europe, after the second world war with the existence of welfare states.
[00:14:37] Grumbine: This is absolutely powerful. Steve Keen also wrote a long dissertation, basically knocking down the concept of capital flight and the labor theory of value in general, based on machines and automation. And this is why I wanted to dig into this with you, because there are things out there that were written at a time where other things didn’t exist.
And the thing about Marx, that I think most people that read his work undersstand, he is scientific. And so, if science dictates that there is something that has to change based on the conditions of the time or based on new information, then socialism would change with that. And so what you’re telling us is based on Mosler’s law and based on an understanding of how fiat systems work and state spending works, that the concepts that Marx was putting out there are no longer valid in that case.
Is that correct?
[00:15:42] García Hernández: They are not longer inevitable. That is the problem with Marx’s analysis. We saw the capitalist system collapsing in the Soviet Union and in China and in many places. But the problem with Marx’s law is that he says it is inevitable. And here we are with the capitalist societies still surviving.
So, that is what I think that Marx gets wrong. Marx has to make a decision. He either can go with Immanuel Kant or with Hegel. And he goes with Hegel. Unfortunately, he talks about historic laws. He talks about a priori laws that can’t be applied to history, like predicting what is going to happen in history. And that is not possible.
He has this, I would say, philosophical temptation of talking about history and how we can apply, like you say, a priori science to history, and then it’s when he makes his mistake.
All I say is that allowing private ownership of the means of production doesn’t mean the inevitable collapse of the system. It only happens if the government, like in the case of Russia in 1917, or in the case of the Kaiser before the Nazis got to power, is so incompetent that it allows it to collapse.
But, for example, the government of Roosevelt was not incompetent and it didn’t collapse. They got out of the gold standard, that’s true because you need fiat currencies in order to avoid that collapse, but Roosevelt did that and also did the Western countries in Europe. So, if you do that and you are not incompetent, the existence of private ownership of the means of production doesn’t mean the inevitable collapse of the economic system.
[00:17:44] Grumbine: Very well stated. I appreciate that. And some of these questions that I’m going to ask you, I know people will ask, and I want to have a good, clean answer. I really appreciate this. You broke this book down into multiple parts and I like that because it allows you to focus in on what’s really important. And you broke it down in the beginning under philosophers and you already spoke of Kant and Hegel.
Can you start with bringing us into some of the philosophical concepts and more importantly what led to this understanding of Fiat Socialism.
[00:18:21] García Hernández: Well, my background is in philosophy and I have always been very interested in this kind of contradiction that you always find between Hegel and Kant. I have always been a follower of Kant. Even though Kant can be considered, and I explain that in the book, as the father of neoliberalism. What the neoliberals did in the 20th century, I talk for example about Karl Popper, is taking the works of Kant and extrapolating that work into economy.
Kant didn’t write about economic systems. But what the neoliberal authors did was to take that amount of knowledge and try to apply it, not only to physics and chemistry and things like that, but also to economics. And the result is what we now call neoliberalism.
Well, that created for me a lot of unrest because I have been raised in the communist tradition. I have been a member of the communist party. And for me, it was It’s kind of heartbreaking to see that it was the conservatives that took the works of Kant. Not only the conservatives, neoliberalism has also been defended by the extreme right and the fascists like Pinochet. So it always created in me a very difficult contradiction.
Knowing quite well that the system explained by Hegel is by no means right. I think that we cannot talk about historical loss. We cannot talk about history, like something that is already written, and we are going towards an inexorable future that is already written. I definitely don’t believe that, so I have been more inclined to follow the work of Kant.
So, in that sense, what I propose in the book is that the main problem we have with the Kantian left, and I am a big defender of the movement called Austro Marxism. Austro Marxism was a Marxist tendency that existed at the beginning of the 20th century, especially in Austria. They were Kantians, and the movement tried to explain Marxism from Kantian points of view.
In my view, this is possible if we understand that microeconomics and macroeconomics are two different sciences. They are very much related, but they are different science, like physics and chemistry, they are intimately related, but they are different science. And if we establish the same with microeconomics and macroeconomics, I think that the problem is solved.
I think that the a priori schema of Kant can be used and applied in macroeconomics, but the schema that you have to use in macroeconomics is totally different. It’s not a priori, it is a posteriori, because the agent that you analyze, when you are talking about macroeconomics, is the state.
And the state doesn’t only use the currency like in the case of macroeconomics, it also creates the currency. Which means that the principles that govern macroeconomics and microeconomics are totally different. And that is the problem with neoliberalism. Neoliberalism doesn’t understand the difference between macroeconomics and microeconomics. For them, macroeconomics is just an extension of microeconomics, but the principles are the same.
And there is where you have all the mistakes that the right makes. That’s why you have a capitalist system where massive unemployment and poverty is the rule. Because they don’t understand the difference between macroeconomics and microeconomics. In microeconomics, the private sector uses the money. But when you talk about macroeconomics, the government doesn’t only use the money, it also creates the money. So it means that the rules they use are totally different. They are two different sciences.
[00:22:41] Grumbine: I’m admitting right up front, philosophy is not my strong suit. And I’ve only done cursory reading on Kant and other philosophers of that time. What about his philosophy should people that are listening to us be cued in on. What is special about Kant’s interpretation of the world that we need to be aware of?
[00:23:03] García Hernández: It was published tonight, an article I just wrote called Dalit, in the Goldberg Initiative for Modern Money Studies. And I explain, more or less, the story behind Fiat Socialism in a very simple way. I say that Hegel, the one I reject, has a Shima or a Shim in three, the very famous thesis, antithesis and synthesis.
And that means that Hegel is number three. But I say that Kant is number four, because he always creates a Shima, a shim that is divided in four. First you have a reference, then you have a general principle, then you have a rule, and then you have a case, a practical case. And that is what I think, that is the right way to explain what science is, no matter what kind of science.
Why? Because in the shima of Kant, you have a reference which is the goals that you want to achieve. In the system of Hegel, we have a stage where history is developing, mankind is developing, and we are going towards our goals. Our goals are already defined. In the case of Hegel, he used to talk about Prussia and how Prussia was going to control the whole world.
Well, in the case of Marx, how it was inevitable that the private ownership of the means of production was going to destroy capitalism and we were gonna enter socialism and then communism, but Kant rejects all this, and he starts from the goals. He says that the reference we have to follow and the goals we want to achieve is our starting point.
So, history is not a stage where we make a play, and we are going through difficult time/easier times. And sooner or later, we will get to our destiny, which is a, I don’t know, a paradise. What he says is that what we want to achieve, has to be our starting points. That is the five points I have read before office to our chase.
And I say, no matter how big or how small the private sector is in the society we live in, we have to assure these five points to everybody. And everybody has to have access to these five points permanently and without being subjected to debt. Everybody has to have this permanently and for free. And then we can change the rest of society according to the achievement of these goals.
And that’s how we have a general principle. That, in the case of Fiat Socialism, is modern monetary theory. I explain modern monetary theory as a method to achieve full employment without inflation. So first you have the bones of socialism, the way to achieve it is mobilizing your real resources and without creating inflation.
That is how modern monetary theory fits into this system. And then we have a rule that in the case of Fiat Socialism is Kalecki’s profit equation, where you can see where the profits of the private sector come, and how can you regulate the private sector in order not to have a system that is collapsing. And at the same time providing the goals that we want to achieve.
And after that we have a case. In the case of the book, I analyzed the case of Spain, not because of any particular reason but because I come from Spain, and it is the country I know better. The rest of the world should do the analysis for the other countries. In the US, you can analyze the society through fiat socialism and build a case for the US and in Germany, etc. But in the case of fiat socialism, I had to choose a case, and I chose Spain. So that is how I fit the schema in four. Explained by Kant inside of Fiat Socialism.
[00:27:19] Grumbine: One of the other important points of Marxism and Marxist-Leninist thinking is historical and dialectical materialism. How does this either support or render irrelevant, within the construct of Kant and the framework you’ve built for Fiat socialism
[00:27:42] García Hernández: Well, dialectic materialism/historic materialism, is not part of Marx’s work. It was explained, I think it was by Plekhanov in the Soviet Union, and it was more or less the official economic system in the Soviet Union. And it is mainly Hegelian. So, I don’t follow it. I think… that it is not necessary. Marx himself didn’t use that terminology.
It was a terminology used by Hegelian commentators of Marx in the Soviet Union, and I don’t think that would take us very far.
[00:28:33] Intermission: You are listening to Macro N Cheese, a podcast brought to you by Real Progressives, a non profit organization dedicated to teaching the masses about MMT, or Modern Monetary Theory. Please help our efforts and become a monthly donor at PayPal or Patreon, like and follow our pages on Facebook and YouTube, and follow us on TikTok, Twitter, Twitch, Rokfin, and Instagram.
[00:29:25] Grumbine: From a perspective of antagonisms and contradictions, these are frequently brought up in leftist spaces. In particular Marxist Leninist circles, which. are the largest majority of those that would claim to be socialists today. I wonder, with Jason Hickel advancing eco-socialism to address the climate crisis as a value system, there is a natural relationship at some level there.
What I’m trying to understand is how we can bring those leftists and the socialists that are out there, under one umbrella, that can march towards a common goal. With such a large Marxist-Leninist contingent, and also the Trotskyists, these are groups that are beholden to their line of thinking. So there is no unity on the left. How do we bring those groups together? It’s hard to convince someone that everything they believe is completely wrong. We already know how hard it is to explain to people fiat currency and modern monetary theory. A lot of times people just reject it outright. What would be the argument to them, to help them understand what they get right and what they get wrong?
How would you approach that?
[00:30:48] García Hernández: Well, in the case of Trotsky, I don’t even consider it. I would recommend everybody read the analysis that Trotsky did about the New Deal of Roosevelt. There he literally says that the government is not going to be able to pay for it, that the government is going to run out of money. All these neoliberal fallacies that the right used to make about the New Deal of Roosevelt, are present in Trotsky.
So Trotsky really didn’t understand the monetary production societies. The case of Lenin, that I respect very much, is completely different. Lenin said that 90 percent of the communist project was the central bank. And he’s totally right, in my opinion. If you want to explain the development of the Soviet Union, and the development of communism, you have to analyze the policies of Lenin, and after that of Stalin, in respect to the central bank.
The central bank of the Soviet Union had a policy of full employment. And of course that full employment was not financed by the very little taxes that the Soviet population paid. They almost paid no taxes. It was actually fiat currency produced by the central bank of the Soviet Union, that follow a full employment policy.
That’s how a very poor country, a very miserable country of peasants and workers, was able to conquer the stars and to conquer the space and to have a society where there was welfare for everybody. So it is true, in my opinion, that 90 percent of the communist program should go through the central bank policy.
The question I analyzed in chapter four, when I talk about Kalecki profit equation, is that Lenin knew perfectly well that the full employment policies were not restricted to a system where there is only public ownership of the means of production. The problem is that he didn’t explain on it because what he really wanted was capitalism to collapse.
So, he really doesn’t explain why these full employment policies were not possible in capitalism. He knew quite well it was possible, but he doesn’t elaborate on that. What I do in the book when I analyze the equation of Kalecki, is that those policies can be and should be applied also in the countries where people decide that there has to be some kind of private ownership of the means of production.
[00:33:38] Grumbine: I’ve heard one of my old mentors, Ellis Winningham, refer to himself as a Kalecki socialist. And Bill Mitchell adheres closely to Kalecki as well. When you think about Bill Mitchell, who I happen to have tremendous admiration for and Ellis Winningham, who I think is a really brilliant guy, they’re coming at this with an understanding, not only of socialism, but modern monetary theory.
Something that you’re looking at as well and captured in this book. Help us better understand the thought and mindset of Kalecki on the profit equation and full employment.
[00:34:17] García Hernández: Well, Kalecki wrote a very famous essay called Political Aspect of Full Employment, where he talks about ‘target economy’. And he talks about the goals that you want to achieve as the starting point. So it fits very well in the system that we built in. And he used to call this a target economy.
You have to have targets. And then he builds an equation, which explains ‘where do the net profits of the private sector come from.’ And he says that net profits are equal to investment in fixed capital, plus capitalist consumption, plus public deficit, minus worker savings, plus position of trade balance.
And all these factors have been and had been analyzed by Marx, but public deficit. In the work of Marx, he doesn’t take into account the public deficit. And that’s how the origin of the money and capital behind the cost and capital is not explained in the second volume of Kapital by Marx. He cannot explain how the investment in cost and capital, machinery, technology, etc. can be ever growing in history and maintaining at the same time that the capitalists can only extract from the business cycle, what they have put in before.
That is a contradiction that he analyzes in the second volume of Kapital, and he cannot really explain. The only way you can explain that the capitalist investment in technology, cost and capital, machinery, et cetera, is ever growing, is because you have another sector called the public sector, that has the power to spend as much as it needs in national fiat currency in order to finance those investments. That is exactly public deficit. And if you incorporate that public deficit to the equation of Kalecki, you can understand that the equation doesn’t point to the inevitable collapse of a system where there is private ownership of the means of production.
Kalecki said that this was not possible in capitalism because the capitalists will always hijack the economic system in order to benefit from poverty, and from exploitation of the working class. But doesn’t have to be the case. In 1971, we got rid of the gold standard and the austerity measures were not inevitable anymore.
Now, when you have democratically elected governments by a majority of people that can vote, you can decide how much the government should spend in national currency without limits. And that can allow you to have a target economy, like Kalecki says, without destroying the whole private sector in the economy.
[00:37:34] Grumbine: That brings me to a really important point. Democracy is a spectrum, like monetary sovereignty is a spectrum in terms of African nations and their ability to produce real value added resources outside of the raw materials. In the United States, we have a very different power dynamic than in other countries. And our ability to make change through the electoral process is minimal at best.
In fact, some really great scholars at Harvard have shown we really don’t have a democracy right now. We have an oligarchy, we have a plutocracy. And so with that in mind, it seems like we not only have the task of merging modern monetary theory with the high values of socialism, but we also have the political angle, the ability to create change. The existing system has the power over media, the military and global interactions. And the media has been boiled down to a few conglomerates that control the flow of iinformation.
How do we overcome this Leviathan? How do we bring about the kind of change that we need to be able to take advantage of the concepts that we’re even talking. Because I think that is where the next level of stumbling block kicks in, with all these good ideas.
[00:39:09] García Hernández: Well, I would start saying that I don’t believe that monetary sovereignty is on a spectrum. I don’t believe so. I believe that sovereignty is either applied or not applied. That’s why I always talk in the book about floating exchange rates and 0 percent permanent interest rates. And that allows you to have full sovereignty.
I don’t believe in this kind of rhetoric that talks about the interest rates being managed or things like that. No, I think that you either use your monetary sovereignty or you don’t. And that’s why I always propose floating exchange rates and 0 percent permanent interest rates. Of course, there are little number of countries where that is not possible.
Why? Because you don’t have a functioning treasury. You don’t have a functioning central bank. You don’t have a functioning tax system. And then of course, the monetary sovereignty is impossible because these are real resources that not always are in place. But if we look at the number of countries where this happens it’s very low.
[00:40:23] Grumbine: I’m talking with Fadhel Kaboub, MMT scholar and Ndongo Sambasila, another MMT scholar in the Global South. They say you can spend money into existence, but you’ve got to have the real resources available for purchase. What’s been happening in the Global South is these foreign corporations steal your resources.
And then they apply value added production to it, and then they sell it back to you at profit. And monetary sovereignty, according to Fadhel has to be earned because without having food sovereignty, energy sovereignty, and value added production, you are required to get things from someone else who doesn’t trade in your currency.
This is why the IMF has been predating on the global South. And leveraging foreign debt to keep them in line and enforce structural adjustments. So while they could do things with their own currency locally, they don’t have enough of the production available. It’s really more about the availability of real goods and services, not just the raw materials, the ability to take those raw materials like crude and turn it into refined fuel.
Many countries don’t have that production available. So they may have monetary sovereignty, but they have nothing that they can purchase with it. It’s a little misleading because us has the ability to, for example, produce goods and services. It chooses to outsource that to strip labor of its power. But I agree with you on what you stated about monetary sovereignty.
The issue though, is not the money. The issue is what can you get with that money? Are you able to get real goods and services or are you just stuck with raw materials that you can’t really do anything with because you don’t have the infrastructure to build out?
[00:42:17] García Hernández: Well, the infrastructure is a problem, of course, but the real resources are precisely in those countries. So Fadhel, I have biggest respect for him and I think he’s a very important scholar. Same thing as some Basila. I think that in most of the countries, you can always index public spending in national currency to compensate any kind of price instability in the basic resources you need for your population, meaning with this, that if you have, for example, fully floating exchange rates, you can have fluctuations in prices of food, for example, but you can always compensate those fluctuations with spending in your own currency. You can always use your central bank in order to compensate those fluctuations.
I agree there are a very little number of countries where you cannot do this. You cannot do this because the central bank is not functional, the treasury is not functional, and the tax system is not functional either. So there are a little minority of countries where these real resources, meaning central bank and treasury, etc. Are not available.
But it is really the minority. The majority can do this and should do this only in national currency and work only in national currency. What is the problem with the IMF? The IMF is a tool of the colonialist and the colonial powers that they always follow the same rule. And that is never allow the developing countries get into the, in their own currency.
They always give you credit, but in a currency that you don’t issue meaning euros, meaning the CFA franc, meaning the dollar. And of course that creates enormous pressures. In the developing world, what is happening now is that this very unfair and absolutely inhumane and neo colonist strategies are coming to an end because now we have the new developing bank from China.
Now we have the BRICS plus, and now we have a different situation. I point out in my book, how important the swap lines of China are. China is opening swap lines with many developing countries, for example, Argentina, for example, Nigeria, Egypt, South Africa, and there will be many more, where you are using your own currency in order to buy products and goods from China. The biggest producer in the world.
And China is also allowing you to buy resources from China in your own currency. And China is also purchasing your goods that it needs, in order to develop, because China needs a lot of, for example, energy sources. So for the first time, the neo-colonialist and terrible politics of the World Bank and the IMF is coming to an end, because the BRICS, especially China, and the swap lines of the Chinese Central Bank are bringing this to an end, through the development bank of China. Which is normally called the Bank of the BRICS.
I think that the number one objective of every single developing country, would be to get in touch with this new initiative and to take advantage of the possibilities that the BRICS Plus and China are opening. It is the first time that the developing world has the opportunity to develop itself in its own currency.
And that is being done by Xi Jinping, the Communist Party of China, and I have said this before, I think that if the Nobel Prize was not absolutely ridiculous, because it has been given to war criminals, like Obama… Xi Jinping should receive the Nobel Peace Prize because of this initiative.
[00:46:22] Grumbine: Amen. I really like that. Help us understand swap lines. I just want you to present it for people that maybe haven’t heard about this so they understand how that works.
[00:46:35] García Hernández: Well, swap lines actually allow the developing countries to stabilize their exchange quote. When you have, for example, fully floating exchange rates, your exchange quotes might fluctuate very abruptly, and then you have a lot of difficulties in order to stabilize. When you open a swap line this is stabilized, because what you are exchanging are basically in your own currency.
You receive credit in the central bank of the trading partner, and the trading partner receive credit in your currency in your central bank. Which means that at the end of the day, the currency is irrelevant. For example, we have now, in the case of Nicaragua, an agreement with China. So China gets raw materials from Nicaragua, and China has built housing projects in Managua for thousands of people.
So, you exchange one thing for the other. And the same thing you have, for example, in Argentina, in Argentina there is a very interesting swap line that allowed, I think the first time in history, to repay the payment of Argentina to the International Monetary Fund. Because they got into agreement with China, in order to exchange those reserves in dollars for natural resources in Argentina, especially gas and also crops.
So, that is what is going on now with the swap lines. You are stabilizing the exchange quotes of the currencies in the developing countries by opening credit lines in the central banks or the trading part. This allows you to exchange real resources for real resources, and always make a win-win situation.
Now it’s not a colonial power that gets advantage of the developing countries. Now the trading is made by equals. Both parts receive an equal benefit. In the case of the developing countries, they receive the infrastructure they need from China, and that is the infrastructure you mentioned before, and at the same time, China receives the natural resources it needs to keep on developing.
Now, for the first time, the currencies of the colonial powers are not in place. And both partners are benefiting.
[00:49:04] Grumbine: What a tremendous dichotomy. The US using neo-colonial strategies in 2023, subjugating the global South, while China is saying, let’s be cooperative. It’s only a thin veneer to block what we’re talking about, which is this very cooperative society, this ability to trade without predating upon one another.
What a novel concept. So how important are swap lines to building out the future of fiat socialism.
[00:49:38] García Hernández: I think that they are essential. I think that for me, it’s incredible when I see CNN or any other news network where they show demonstrations in the developing countries, and everybody has a Chinese flag or a Russian flag. And they say, well, how can this be possible? Aren’t these people in Africa crazy? Aren’t these people in the Global South crazy?
Why are they doing this? Because they are not stupid. They know who is helping them and they know who is not helping them. They know who is keeping them in misery and who is giving them a hand to get out of misery. So that’s why they are doing it, because they are not stupid.
[00:50:19] Grumbine: Something you’ve said that is triggering me that I think is important to suss out. I’ve been chastised by various individuals as I explained the role of the IMF, and even the Ukraine, NATO scenario with Russia. And while nobody wants to see Russia inside of Ukraine, the reality is US’s need for this neo-colonial approach to world dominatio, is leveraging the breadbasket of Europe and Ukraine through IMF loans.
Once again, predatory process that they’ve been doing with the rest of the world, and BRICS providing an alternative. This stops being so mysterious after you take the first swipe at it. But at the highest level, the reality is the U S has used the World Bank, the WTO, the IMF and NATO to once again, isolate and destroy another enemy by using sanctions, another weapon of war.
And they’ve used this to destabilize countries around the world, and China is providing a way out. We can’t have that. The US is going to step in and try to create a fuss, and the European powers that still play lapdog to the US are going along with it, to their own detriment. Can you talk about that?
Cause I feel like we’re on to something here.
[00:51:50] García Hernández: The problem that the US has is that the developing model that China and the BRICS are building is unstoppable. It’s unstoppable because they choice that the people in the developing countries have to do is, either stay in misery because of the IMF and the World Bank, or get out of misery. And it is a no brainer.
They are going to get out of misery. They are going to develop, and in order to do that, they have to use their own currency. And that is what China has allowed them to do. That is something that the United States and Europe and Canada has never allowed. Because of course, when they need infrastructures, the colonial powers say, you need so much and so much of dollars, here you are..
Don’t worry, take the money, but you have to repay it with interest, giving us your natural resources. So the developing countries are only allowed to produce the products that the North needs, and the money they get, they can only use to repay the loans in a currency that they don’t create. It is a vicious circleiewff you don’t use your own currency. And that is exactly what China and the BRICS are changing. And of course, the United States has no interest in allowing this. That is why they are provoking the third world war in Taiwan. And that is why they provoke the war in Ukraine. The first one who didn’t want to go to Ukraine was Russia.
The only one that tried to get into an agreement, the Minsk 1 and Minsk 2 agreement, was Putin. Putin didn’t want to go there, even though the Russians in the Donbas were being massacred since 2014. Eight years of crimes against humanity, against the Russians in Donbass because they didn’t want the neo Nazi government that came into power after the Maidan.
They said this is not the way we want to live. We want our democracy. We want our president. And that’s why they were being massacred. So the reason why now we have a war in Ukraine is the self-defense of people, which is recognized in the Carta of the United Nations. The same thing is happening now in Palestine.
It is self-defense. Everybody has the right to self defense, the Palestinians, the people in Donbass and the people in the developing countries, just the same. And if you see, for example, the declaration of independence of Ukraine in 91, it says very clearly that Ukraine has to stay neutral. It cannot be in NATO.
It cannot have weapons of mass destructionan and austerity in order to attack Russia. And they have not adhered to this agreement. Therefore, the agreement is no more in place. And we have to remember the Helsinki agreements, the Helsinki agreements say that the national security cannot come at the expense of the risk of other nations.
You cannot put another nation in risk in order to feel safe. We all have to comply with international law. And that is what the United States and NATO and the European Union don’t understand. And that’s why they are going to fail.
[00:54:59] Grumbine: Carlos, well said, thank you, sir. I appreciate it immensely. How do we get other MMTers to see this? And embrace this? Because I think this is a foreign concept, even within the MMT community. Help me understand messaging fiat socialism to other MMT ers.
[00:55:18] García Hernández: Well, I think that we can explain this in a very simple way. The bad guys win when they are more than the good guys. We see that in the movies all the time. And the problem is that we have not built a socialist majority yet. It is true that the system is weak, and the system is corrupted, and the system is not going to allow any profound change.
The truth is also that we are not the majority yet. And we need a profound change in the structure. We need an alternative. We need an alternative society that is viable, that is not related to any kind of drama. That is what people think when they think about socialism. No, socialism is making people live better.
That’s it. To improve the living conditions of everybody. That is, simply put, what socialism is. And in order to present a socialist alternative, we have to understand the fiat currencies that we have, we have to use modern monetary theory, because if not, we are always gonna end up with the same fallacies of neoliberalism.
We need to collect taxes in order to spend, and we need to go into debt in order to be able to have public spending, that is all a fallacy. For example, let’s take the proposal of Bernie Sanders. The reason why there is no universal healthcare in the United States right now is Bernie Sanders, because the only way you can have universal healthcare is by having Medicare for everybody from age zero.
Now you have it for everybody of age above 65. Well, the only trick is to load that age to zero. If you have Medicaid for everybody from age zero, that will do. But if you have enormous problems to say, no, no, no, we are going to pay this through taxes, we are going to pay this through debt, then is when people don’t follow you, people have to understand that the same way that the federal reserve creates the money to kill people all around the wall in Palestine and in Ukraine, they can also create the money to have everybody insured and everybody in a good living standard.
You don’t need taxes to develop it. And the socialist forces all over the world in the United States and in Europe have to unite to let everybody have a decent life because of their working power. And then we will decide democratically how big we want the private sector to be.
[00:57:55] Grumbine: Talking with Fadhel, we talked about a movement of movements needing to pull everyone togethern, and it sounds like you’re saying a similar thing. We need to build that collective power so that we can become a majority. So that we can, regardless of the rigging, overcome that with sheer numbers and tenacity. We have to have the smarts to know how to fight back. And right now there’s far too few that get it. And I think that what you’re proposing is at least a very good start to getting us on the way there. Carlos, thank you so much for being a guest with me today. And I really hope to have you back soon.
[00:58:28] García Hernández: Thank you very much. It was a huge pleasure for me and I will always be there when you call me.
[00:58:34] Grumbine: Thank you so much. My name is Steve Grumbine. This show is part of our nonprofit organization, Real Progressives. Please consider donating to us. Again, we only survive on your donations. We’re looking to try to get this information out there to you. If you find value in what we do, please consider becoming a monthly donor at our Patreon account, patreon.
com slash real progressives. Or you can go to our website, real progressives. org. And donate Carlos. Thank you. Once again, his book, which I strongly recommend is called Fiat socialism, achieving the goals of socialism through modern monetary theory by my guest, Carlos Garcia Hernandez. This is Steve. Macro N cheese.
We are out of here.
[00:59:29] End Credits: Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts and promotional artwork by Andy Kennedy. Macro N Cheese is publicly funded by our Real Progressives Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.
GUEST BIO
Carlos García Hernández is originally from Spain and currently resides in Berlin, Germany. He studied philosophy and history at the Humboldt University of Berlin and is the founder and director of Lola Books, a publishing house that has introduced MMT to Spanish and German readers. Among others, Carlos has translated the works of MMT scholars Bill Mitchell, Randall Wray and Pavlina Tcherneva for Spanish speaking readers. Carlos is the author of Fiat Socialism: Achieving the Goals of Socialism through Modern Monetary Theory
https://www.waterstones.com/book/fiat-socialism/carlos-garcia-hernandez/9783944203508
PEOPLE MENTIONED
Joe Burns
is a veteran union negotiator and labor lawyer and author with over 25 years’ experience negotiating labor agreements. He is currently the Director of Collective Bargaining for the Association of Flight Attendants, CWA. He graduated from the New York University School of Law. Prior to law school he worked in a public sector hospital and was president of his AFSCME Local.
https://www.haymarketbooks.org/authors/1116-joe-burns
https://againstthecurrent.org/atc220/joe-burns-class-struggle-unionism/
Sara Nelson
is an American union leader who serves as the international president of the Association of Flight Attendants–CWA, AFL–CIO. A United Airlines flight attendant since 1996, she previously served as AFA’s international vice president for a term beginning January 1, 2011. AFA-CWA represents nearly 50,000 flight attendants at 20 airlines.
https://en.m.wikipedia.org/wiki/Sara_Nelson_(union_leader)
https://realprogressives.org/?s=Sara+Nelson
Jeff Reisberg
is an American Airlines flight attendant.
Bill Mitchell
is Professor of Economics and Director of the Centre of Full Employment and Equity (CofFEE), an organization dedicated to providing an evidence base to support full employment and equitable distribution of opportunity, income and wealth, at the University of Newcastle, NSW Australia. Along with Warren Mosler and Randy Wray, Dr. Mitchell is one of the founding developers of Modern Money Theory.
https://en.wikipedia.org/wiki/Bill_Mitchell_(economist)
Vladimir Lenin
or simply “Lenin”, was a Russian communist revolutionary and head of the Bolshevik Party who rose to prominence during the Russian Revolution of 1917. The bloody upheaval marked the end of the oppressive Romanov dynasty and centuries of imperial rule in Russia. The Bolsheviks would later become the Communist Party, making Lenin leader of the Soviet Union, the world’s first communist state.
https://www.history.com/topics/european-history/vladimir-lenin
Karl Marx
Karl Heinrich Marx was born in 1818 in the Rhine province of Prussia and was a revolutionary, sociologist, historian, philosopher, and economist whose works inspired the foundation of many communist regimes in the twentieth century. It is certainly hard to find many thinkers who can be said to have had comparable influence in the creation of the modern world. “Marx was before all else a revolutionist” eulogized his associate, and fellow traveler, Friedrich Engels, saying he was “the best-hated and most-calumniated man of his time,” yet he also died “beloved, revered and mourned by millions of revolutionary fellow-workers.”
https://www.britannica.com/biography/Karl-Marx
https://www.investopedia.com/terms/k/karl-marx.asp
https://plato.stanford.edu/Entries/marx/
Steve Keen
is an author and Associate Professor of Economics & Finance at the University of Western Sydney.
https://www.ineteconomics.org/research/experts/skeen
Immanuel Kant
was late 18th/19th century German philosopher and one of the central Enlightenment thinkers. His comprehensive and systematic works in epistemology, metaphysics, ethics, and aesthetics have made him one of the most influential and controversial figures in modern western philosophy.
https://en.m.wikipedia.org/wiki/Immanuel_Kant
Georg Wilhelm Friedrich Hegel
was a late 18th/19th century German philosopher and one of the most influential figures of German idealism and philosophy. His influence extends across the entire range of contemporary philosophical topics, from metaphysical issues in epistemology and ontology, to political philosophy, the philosophy of history, philosophy of art, philosophy of religion, and the history of philosophy.
https://en.m.wikipedia.org/wiki/Georg_Wilhelm_Friedrich_Hegel
Karl Popper
was a 20th century Austrian–British philosopher, academic and social commentator.
https://en.m.wikipedia.org/wiki/Karl_Popper
Jason Hickel
is an economic anthropologist, author, and a Fellow of the Royal Society of Arts. He is Professor at the Institute for Environmental Science and Technology at the Autonomous University of Barcelona, Visiting Senior Fellow at the International Inequalities Institute at the London School of Economics, and Chair Professor of Global Justice and the Environment at the University of Oslo. His research focuses on global political economy, inequality, and ecological economics.
https://bookshop.org/search?keywords=Jason+Hickel
Leon Trotsky
was a leading Marxist revolutionary of the first half of the 20th century. He is famous for playing leading roles in the Russian revolutions of 1905 and 1917, and for organizing the Red Army during the ensuing Russian Civil War. In the 1920–30s, Trotsky was an important figure in the Marxist opposition against Joseph Stalin. He critiqued what he saw as the degeneration of the Soviet regime and inspired many socialists who continued working for an international working-class revolution in opposition to the model of ‘socialism in one country’. He was expelled from the USSR in 1929 and killed in 1940.
https://www.bl.uk/people/leon-trotsky
Lawrence Lessig
is the Roy L. Furman Professor of Law and Leadership at Harvard Law School.
https://hls.harvard.edu/faculty/lawrence-lessig/
Ellis Winningham
is a macroeconomist, writer, lecturer focusing on the workings of our monetary systems.
https://bylines.scot/author/ellis-winningham/
https://realprogressives.org/author/elliswinningham/
David Graeber
was an American anthropologist and anarchist activist. His influential work in economic anthropology, particularly his books, and his leading role in the Occupy movement, earned him recognition as one of the foremost anthropologists and left-wing thinkers of his time.
https://en.wikipedia.org/wiki/David_Graeber
Fadhel Kaboub
is an Associate Professor of economics at Denison University, and President of the Global Institute for Sustainable Prosperity. He is currently working with Power Shift Africa.
Before settling at Denison in 2008, Dr. Kaboub taught at Simon’s Rock College of Bard and at Drew University where he also directed the Wall Street Semester Program. He has held research affiliations with the Levy Economics Institute, the Economic Research Forum in Egypt, the John F. Kennedy School of Government at Harvard University, and the Center for Full Employment and Price Stability at UMKC.
https://denison.edu/news-events/featured/148775
https://denison.edu/news-events/featured/148775
Ndongo Samba Sylla
is a Senegalese development economist. He has previously worked as a technical advisor at the Presidency of the Republic of Senegal and is Programme manager at the West Africa office of the Rosa Luxemburg Foundation. His interests include Fair Trade, labor markets, democratic theory and monetary sovereignty. He holds a PhD. from the University of Versailles (UVSQ).
https://bookshop.org/search?keywords=Ndongo+samba+sylla
Thomas Sankara
was a military officer and proponent of Pan-Africanism who was installed as president of Upper Volta (later Burkina Faso) in 1983 after a military coup. Sankara declared the objectives of the “democratic and popular revolution” to be primarily concerned with the tasks of eradicating corruption, fighting environmental degradation, empowering women, and increasing access to education and health care, with the larger goal of liquidating imperial domination. He held the presidency until 1987, when he was killed during another coup.
https://www.britannica.com/biography/Thomas-Sankara
Xi Jinping
is a Chinese politician who has been serving as the general secretary of the Chinese Communist Party (CCP) and chairman of the Central Military Commission (CMC), and thus as the paramount leader of China, since 2012.
https://en.wikipedia.org/wiki/Xi_Jinping
Clara Mattei
is an Assistant Professor in the Economics Department of The New School for Social Research and was a 2018-2019 member of the School of Social Sciences at the Institute for Advanced Studies. Dr. Mattei’s focus is primarily on post-WWI monetary and fiscal policies, and the history of economic thought and methodology.
https://www.newschool.edu/nssr/faculty/clara-mattei/
INSTITUTIONS / ORGANIZATIONS
BRICS
The acronym began as a somewhat optimistic term to describe what were the world’s fastest-growing economies at the time. But now the BRICS nations — Brazil, Russia, India, China, South Africa — are setting themselves up as an alternative to existing international financial and political forums.
https://www.dw.com/en/a-new-world-order-brics-nations-offer-alternative-to-west/a-65124269
https://www.silkroadbriefing.com/news/2023/03/27/the-brics-has-overtaken-the-g7-in-global-gdp/
World Bank
is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The world bank operates on a sectorial basis while the IMF concerns itself with macro goals.
https://en.wikipedia.org/wiki/World_Bank
International Monetary Fund (IMF)
is a major financial agency of the United Nations, and an international financial institution claiming it’s mission to be “working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.” The IMF concerns itself with macro goals, while the World Bank operates on a sectorial basis.
https://en.m.wikipedia.org/wiki/International_Monetary_Fund
The New Development Bank
formerly referred to as the BRICS Development Bank, is a multilateral development bank established by the BRICS states.
World Trade Organization (WTO)
is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to ensure that trade flows as smoothly, predictably and freely as possible.
https://www.wto.org/english/thewto_e/thewto_e.htm
North Atlantic Treaty Organization (NATO)
is a military alliance of, currently, 31 member countries established by the North Atlantic Treaty of April 4, 1949, which sought to create a counterweight to Soviet armies stationed in central and eastern Europe after World War II.
https://www.britannica.com/topic/North-Atlantic-Treaty-Organization
CONCEPTS
Modern Monetary Theory (MMT)
is a heterodox macroeconomic supposition that asserts that monetarily sovereign countries (such as the U.S., U.K., Japan, and Canada) which spend, tax, and borrow in a fiat currency that they fully control, are not operationally constrained by revenues when it comes to federal government spending.
Put simply, modern monetary theory decrees that such governments do not rely on taxes or borrowing for spending since they can issue as much money as they need and are the monopoly issuers of that currency. Since their budgets aren’t like a regular household’s, their policies should not be shaped by fears of a rising national debt, but rather by price inflation.
https://www.investopedia.com/modern-monetary-theory-mmt-4588060
https://gimms.org.uk/fact-sheets/macroeconomics/
Monetary Sovereignty Within Developing/Emerging Nations
Today, the concept of monetary sovereignty is typically used in a Westphalian sense to denote the ability of states to issue and regulate their own currency. This understanding continues to be the default use of the term by central bankers and economists and in fields ranging from modern monetary theory to international political economy and international monetary law. As argued in the linked article, the Westphalian conception of monetary sovereignty rests on an outdated understanding of the global monetary system and the position of states in it. This makes it unsuitable for the realities of financial globalization.
The Global South
refers broadly to regions of Latin America, Asia, Africa, and Oceania. It is one of a family of terms, including “Third World” and “Periphery,” that denote regions outside Europe and North America, mostly (though not all) low-income and often politically or culturally marginalized. The use of the phrase Global South marks a shift from a central focus on development or cultural difference toward an emphasis on geopolitical relations of power.
https://journals.sagepub.com/doi/pdf/10.1177/1536504212436479
Marx’s Theory of the Falling Rate of Profit
Considered among the most important conclusions of Marx’s theory of capitalism is that the rate of profit would tend to decline over time as a result of technological change. Marx called his law of the tendency of the rate of profit to fall “in every respect the most important law of modern political economy.”
https://link.springer.com/chapter/10.1007/978-1-349-12353-7_1
Keynesianism
Keynesian economics, the body of ideas set forth by John Maynard Keynes in his General Theory of Employment, Interest and Money, and other works, intended to provide a theoretical basis for government full-employment policies. It was the dominant school of macroeconomics and represented the prevailing approach to economic policy among most Western governments until the 1970s.
https://www.britannica.com/topic/Keynesian-economics
https://www.investopedia.com/terms/k/keynesianeconomics.asp
New Deal
was a series of domestic programs initiated and developed the administration of President Franklin D. Roosevelt (FDR) between 1933 and 1939, which took action to bring about immediate economic relief as well as reforms in industry, agriculture, finance, waterpower, labour, and housing, vastly increasing the scope of the federal government’s activities.
https://www.britannica.com/event/New-Deal
Capital Order
Clara Mattei, in her book The Capital Order, asserts the primacy of capital over labor in the hierarchy of social relations within the capitalist production process. That primacy was threatened after World War I in what she describes as the greatest crisis in the history of capitalism. Among the concepts the author discusses is a so called “Trinity of Austerity” through which the Capital Order asserts dominance over labor by the combination of Monetary (interest rate increase), Fiscal (reductions in spending for social need), and Industrial (layoff, wage/work hours reduction) Austerity with the desired, yet implicit, intention of increasing tension, and therefore pliability, among the working classes.
Class Struggle Unionism
Class struggle unionism is the belief that our union struggle exists within a larger struggle between an exploiting billionaire class and the working class which actually produces the goods and services in society. Class struggle unionism looks at the employment transaction as inherently exploitative. While workers create all wealth in society, the outcome of the wage employment transaction is to separate workers from that wealth and create the billionaire class. From that simple proposition flows a powerful and radical form of unionism.
https://www.haymarketbooks.org/books/1767-class-struggle-unionism (Book)
Class Consciousness
In Marxist thought, class consciousness is the set of beliefs that a person holds regarding their social class or economic rank in society, the structure of their class, and their class interests. According to Karl Marx, it is an awareness that is key to sparking a revolution that would “create a dictatorship of the proletariat, transforming it from a wage-earning, property-less mass into the ruling class.”
https://en.wikipedia.org/wiki/Class_consciousness
Class Warfare
Class conflict (also class struggle, capital-labour conflict) identifies the political tension and economic antagonism that exist among the social classes a society, because of socio-economic competition for resources among the social classes, between the rich and the poor.
https://en.wikipedia.org/wiki/Class_conflict
Class Theory
Marxian class theory asserts that an individual’s position within a class hierarchy is determined by their role in the production process and argues that political and ideological consciousness is determined by class position. A class is those who share common economic interests, are conscious of those interests, and engage in collective action which advances those interests. Within Marxian class theory, the structure of the production process forms the basis of class construction.
https://en.wikipedia.org/wiki/Marxian_class_theory
Labor Theory of Value
is a theory of value that argues that the economic value of a good or service is determined by the total amount of “socially necessary labor” required to produce it.
https://en.m.wikipedia.org/wiki/Labor_theory_of_value
https://www.marxist.com/marx-marxist-labour-theory-value.htm
Austromarxism
was a Marxist theoretical current led by members of the Social Democratic Workers’ Party of Austria and later supported by Austrian-born revolutionary Friedrich Adler. It is known for its theory of nationality and nationalism, and its attempt to conciliate it with socialism in the imperial context. More generally, the Austromarxists strove to achieve a synthesis between social democracy and revolutionary socialism.
https://en.wikipedia.org/wiki/Austromarxism
Dialectical Materialism
is a philosophical approach to reality derived from the writings of Karl Marx and Friedrich Engels. For Marx and Engels, materialism meant that the material world, perceptible to the senses, has objective reality independent of mind or spirit.
https://www.britannica.com/topic/dialectical-materialism
Historical Materialism
is Karl Marx’s theory of history. Marx locates historical change in the rise of class societies and the way humans labor together to make their livelihoods. For Marx and his lifetime collaborator, Friedrich Engels, historical materialism is the “view of the course of history which seeks the ultimate cause and the great moving power of all important historic events in the economic development of society, in the changes in the modes of production and exchange, in the consequent division of society into distinct classes, and in the struggles of these classes against one another.”
https://en.m.wikipedia.org/wiki/Historical_materialism
Kalecki Profit Equation
“Capitalists earn what they spend, and workers spend what they earn”.
PUBLICATIONS
Fiat Socialism: Achieving the Goals of Socialism through Modern Monetary Theory by Carlos García Hernández
https://www.waterstones.com/book/fiat-socialism/carlos-garcia-hernandez/9783944203508
Fiat Socialism (Blog Post) by Carlos Garciá Hernández
https://gimms.org.uk/2019/03/01/fiat-socialism/
The story behind Fiat Socialism (Blog Post) by Carlos García Hernández
https://gimms.org.uk/2023/10/09/dalet/
Debt: The First 5,000 Years, Updated and Expanded by David Graeber
Macroeconomics by William Mitchell, L. Randall Wray and Martin Watts
https://bookshop.org/p/books/macroeconomics-william-mitchell/167901?ean=9781137610669
Das Kapital by Karl Marx
https://bookshop.org/p/books/das-kapital-karl-marx/7012904?ean=9781453886328
The Road We Are Traveling by Stuart Chase
https://www.barnesandnoble.com/w/the-road-we-are-traveling-stuart-chase/1124594495
The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism by Clara Mattei
Political Aspects of Full Employment (Essay) by Michał Kalecki
https://jacobin.com/2018/05/political-aspects-of-full-employment-kalecki-job-guarantee