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Steve Clark Responds to “The Dollar as the World’s Reserve Currency”

| Steve Clark |

In this piece, Steve Clark responds to Dennis Torigoe’s recent article, “The Dollar as the World’s Reserve Currency.”

Thanks to Signe for raising a stimulating comment on Dennis’ piece in regard to Modern Monetary Theory (MMT). I appreciate what Tom had to say and wanted to comment further.

A bifurcated agenda (MMT at home and financial imperialism abroad) would be inconsistent and morally reprehensible for any progressive, and I don’t think anyone in or around MMT takes such a position. Rather, at worst — and like Dennis (and most of us) — MMT advocates don’t have a clearly articulated plan for remaking the international financial order. They know how it works, but they don’t know how to assert popular control at that scale (currently, their focus is on gaining effective influence in sovereign states and, someday, “going global” from such new-found power bases). Rather than criticize MMT for the same shortcoming that we all share, we need to put our MMT thinking caps on, figure out the necessary “next steps,” and advocate for consistent financial restructuring across our both domestic and global economies.  This might require a think tank and a legal corps, but that could set us in the right direction.

It seems to me that when our nation’s progressive wing overcomes dual power (defeats neoliberalism) in the US (that is, for now, in the Biden Administration and the Congress), all nations and people stand to benefit because the world does, in fact, have an integrated, global, financial system (and I think Dennis would agree) in which the US dollar and the US central bank (the Fed) dominate decision-making and financial power (at the IMF/BIS/SWIFT/IIF etc.). 

Given this institutional domination, if/when American progressives gain the power necessary to implement a true, worker-oriented, social investment agenda in the US, we also will gain (or will be on the verge of gaining) the power to pursue a similar agenda at global scale (via the IMF, where we progressives will have just acquired dominant power, or via some new authority that we and the world create to replace the IMF).

Further, given the scale and breadth of today’s crisis, when American progressives finally break the power of finance capital in the US (winning majority control of our government), the rest of the world’s progressives (in countries everywhere) will demand we immediately break that same financial power globally as well. Having gained control of the US votes at the IMF, we will have no choice but to comply (twist my arm!). 

Few American progressives have given much thought to how this “next system” of finance must operate to meet the needs of the whole world, including its impoverished nations. Obviously, “trickle down” from the US to the world doesn’t work, but, for sure, there’s no way some kind of global planned economy will be imposed. Rather, the next system — which has to carry civilization through the era of climate change impact and mitigation ahead — will be some kind of global mixed economy in which private entities and markets operate alongside public investment entities and non-market allocations, both within the world’s many nations and in transnational forms as well (corporations, global NGOs, UN-determined public investments(?), etc.).  

However this next system shapes up, the world is never going back to the gold standard. It will remain on fiat currencies because that is the actual and only way, now, that nation-states and their markets can operate (if anyone can see beyond the era of fiat currencies, please let us know what that might look like!). When US progressives quash dual power and take general control of our government (sometime over the next few election cycles), the dollar will become our currency (the public’s currency!), and we can directly and forthrightly engage China, Europe, Japan, Britain — the other four IMF-approved-for-trade currencies — the Global South, and all other sovereign nations on the matter of how best to reconstruct and democratize global finance for the challenging crisis-mitigation era ahead (including, possibly, setting a new Special Drawing Rights (SDR) currency to replace the dollar as the global reserve… MMT suggests how that might be done).  

I think that forging a new system of global finance is a necessary piece of this era’s struggle, an issue to be resolved sooner rather than later. MMT is empowering because it explains not only how the system works (and, as a corollary, how finance capital exploits the system for its own ends) but, also, how our nation’s democratic majority can impose its will on the system, reprioritize its investment agenda, move on to global financial reform, and, thereby, tackle all the vital problems of our time.

To me, a crucial task, now, is raising the financial consciousness of voters so elected politicians fight for popular oversight of finance in the public interest. That’s how we overcome dual power (defeat neoliberalism) and win progressive legislative majorities over the next few election cycles. Right now, the MMT folks are leading this project, but they need allies as well as broadened popular grounding and intersectional collaboration. I hope we Leftists will walk towards them, learn from them and help them see and link more effectively, beyond the financial realm.

Analysis Commentary Financial Justice

Tom Clark Responds to “The Dollar as the World’s Reserve Currency”

| Tom Clark |

In this piece, Tom Clark responds to Dennis Torigoe’s recent article, “The Dollar as the World’s Reserve Currency.”

I’m a big Dennis Torigoe fan.  As I told him at the 40th Anniversary event, having never met him before, I miss his writings from the Worker’s Viewpoint days and am very glad to see him still at it after all these years.  His response about Walden Bello last winter was very useful and enlightening.  And, as I commented on the Voices for New Democracy site, I do appreciate Dennis’ timely information about SWIFT, one of the ways the US exercises its hegemony, and INTREX, a potential remedy. He is still an authority in my view.  I’ve thought that we should invite him to present to our Finance Group on how he thinks about financial and economic issues and what his suggestions are for how we should think about them.

So it is with all due respect that I say that I found Dennis’ explanation of Modern Monetary Theory (MMT) to be vague and unsubstantial, and his conclusion about reserve currencies misplaced.  

In his article, he mentions the name Wynne Godley. What he didn’t mention, and might have, is the substance of what that economist’s work is about.  As laid out in Chapter 2 of The Deficit Myth, Godley demonstrated the principle of ‘sectoral balances.’  Simply put, as author Kelton does, the government’s red ink (the deficit) is the non-government’s black ink (a surplus).  Or, more precisely, there is a ‘penny-to-penny’ relationship between the amount of the government’s ‘debt,’ as we so misleadingly call it, and the amount of the surplus held by the non-government sector (what you, me, the business community, the Chinese etc., hold onto in our wallets, bank accounts, 401(k)s etc.) as assets, and didn’t pay in taxes.  As Godley showed, this accounting is a fact, not a theory, and decisively exposes the myth that the national debt is somehow a burden to our descendants, any more than the massive deficits from WWII were a burden to us.

In fact, there was a recent Twitter exchange where someone asked about exactly what [Signe Waller Foxworth] wrote here and what was in Dennis’ article:  Doesn’t MMT get used to maintain US hegemony over the world financial system?  The answer is that framing it that way is backwards:  The dollar acts as the world’s reserve currency because the US is an imperialist power and has the military and political clout to enforce its culture onto other players.  In other words, the dollar’s status as reserve currency is a result, not a cause, of US imperialism.  Of course they use monetary operations (the accurate description of which is the basis for MMT) to further their domination; it’s what we used to call ‘cultural hegemony,’ and part of the ‘code of capital,’ as we have called it more recently.  But the work of Fahdel KaboubLua Kamal YuilleNdongo Samba Sylla and many others demonstrate how the MMT lens and the concept of monetary sovereignty can be used by progressive/revolutionary movements to improve the lives of their constituents as well as further expose the aggressive, oppressive roles played by the US and their neoliberal allies. 

To say one more thing, since you mention military spending.  As we all know the US military budget is nearly 3 quarters of a trillion dollars per year.  But notice that the Dems infrastructure and rescue proposals are for $6T total over 10 years, in other words about $.6T/year, comparable to the military expense.  What the MMT folk say is that we have enough room to do both, at least for a while. The MMT proposition is that there is no need to ‘pay for’ the Green New Deal, Medicare for All, education, childcare, reparations etc. by cutting the military budget or anything else.  Of course doing both seems wasteful and leaves in place an aggressive, damaging institution that we all hate.  (I say we can work on that problem as we go.)  But isn’t it worth it to get the good stuff that we really have to have and to highlight that possibility to those we work with?  I think so.

The point is that believing that we must first cut things like military spending to ‘pay for’ the social programs we know are so acutely necessary, is to swallow the ‘Deficit Myth,’ to accept that the US government has to ‘find’ the money it spends just like households, businesses and local governments must.  It’s just not so.
So the question is larger than, ‘how do we stop so much military spending?’  It’s ‘how do we get people the things they need?’ The MMT lens says we do that by writing and passing budgets that fund the programs we want, at least initially no matter what happens with the military budget.  Let’s do that and then the democratic will of the people we have established by working with everyone who will — what I think Steve means by ‘dual power’ — can decide later what best to fund for the long term, guns or butter, to use the old phrase.  The issue is getting our (small-d) democratic foot further in the door of this appropriations/spending process, using what ‘dual-power’ we can muster, not slaying old dragons no matter how righteous and right we are about how monstrous they are.   

Agree or disagree, I hope this is useful. Again, thanks for your response to my vids about the ongoing mainstreaming of MMT.

Analysis Commentary Financial Justice

Signe Waller Foxworth Responds to “The Dollar as the World’s Reserve Currency”

| Signe Waller Foxworth, PhD |

In this piece, Signe Waller Foxworth responds to Dennis Torigoe’s recent article, “The Dollar as the World’s Reserve Currency.”

Thanks to Dennis Torigoe for a very informative piece in Voices for New Democracy about the privileged position the U.S. has in global finance due to the acceptance of the dollar as the world’s reserve currency. I am wondering about the relationship between Modern Monetary Theory (MMT), that has captured the enthusiasm of many of us, and the sovereign role of the dollar in global finance. 

We are excited about MMT because it exposes the myth of deficit spending and describes the actual working of the economy. MMT shows the deceitfulness of rationalizing the government’s failure to provide for the basic needs of the people with excuses like we don’t have the money for this or we would have to raise taxes to pay for that. These rationalizations are false because the U.S. Government is the sole currency issuer and creates fiat money by spending it into existence, a feat none of us can accomplish, at least legally. It is no more difficult to find the money for universal health care, housing, living wages, education, immigration reform and addressing environmental destruction and climate catastrophe than it is to find the money for bombs, drones, guns, corporate bailouts and aid to foreign countries that are human rights abusers. The failure to provide a decent living standard for its population is exposed as due to a failure of political will and moral values, not a shortage of money. MMT opens the door to a more democratic process of managing the U.S. economy.

What I find challenging is what is precisely the relationship between MMT and the international financial arrangements that lead to U.S. dominance over other nations. The sovereign dollar plays a major, if not decisive, role in promoting U.S. imperialism. Could we, or would we even want to, create a paradise in the U.S. by trampling the rest of the world to death with imperialistic and financial action afforded by our privileged position in the global financial system? The relationship between MMT, with its potential benefits toward democratizing our national life, and the global financial system that fosters U.S. imperialism challenges our thinking in the fields of Economics and Ethics.  Could we (is it even economically feasible) or would we want to (is it even ethically justifiable to) utilize the tools of MMT domestically to fund education, housing, living wages, immigration reform, universal health care and avoiding the worst climate catastrophes if the US sovereign position in global finance continues to allow us the latitude to address Americans’ needs by immiserating other peoples?

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Forum on Labor’s Future: International Solidarity

As part of our recent Forum on Labor’s Future, panelist Carolyn Kazdin delivered a presentation on her experiences in the international solidarity movement and the links between the American labor movement and the international context. The following is a summary of the key points she presented, and the full presentation is available to watch below.

To understand the possibilities for international labor solidarity, it is first essential to understand that the American labor movement has traditionally been a reactionary one on the international stage. The U.S. trade union movement has been known for engaging in “trade union tourism” in visits to other countries, rather than building relationships and forging solidarity. While progressive unions around the world have already been working together, U.S. unions have largely been left out of the picture.

Fortunately, this is beginning to change. And as the American labor movement begins to explore international possibilities, it is worth taking a look at the trends already unfolding across the world.

The Brazilian labor movement is an important place to start, as they elected one of their own as President of the country with the election of Lula da Silva of the Workers Party (PT). In his 8 year tenure, Lula and his movement lifted 40 million people out of extreme poverty, and created 20 million jobs. While the movement has since faced significant setbacks under the Bolsonaro administration and the corrupt trials that jailed Lula and his associates, their successes are an important reminder of what a robust trade union movement can achieve when it wins power.

International solidarity work also offers an important illustration of the ways that global capital works. During NAFTA struggles, for example, amid all the anti-immigrant rhetoric a number of U.S. workers were sent on delegations to Mexico to see where their jobs went. Those American workers saw firsthand what had happened to their jobs with heightened exploitation, which is why these jobs were offshore to begin with: to exploit workers in the Global South, where their governments would allow it. And when they came back, those workers were able to speak to other workers across the U.S. to explain what was really happening with NAFTA, why Mexican workers are allies not enemies, and why global capital is at the root of the issues they face.

When these international bonds are forged, they pay dividends. When Brazilian companies bought steel mills in the U.S. and mines in Canada, workers across these countries resisted the union-busting efforts and launched campaigns forcing those companies to respect unions and right to bargain. When the UAW attempted to unionize Nissan workers in Canton, MS, they recognized that the U.S. is the only country where Nissan workers are not unionized, and brought in unionized Nissan workers from other countries to show why their unions are so important to them. And when the tire maker Firestone opened new sites in Liberia, the Steelworkers union sent delegates to the Liberian workers to help them in collective bargaining.

International solidarity work also casts an important light on the intersection of class and race. As the U.S. and Brazilian labor movements have built relationships, they’ve also been able to explore how racial struggles fit into the labor struggles both domestically and internationally. Brazil’s is over 50% Black, home to the largest Black population outside of Africa, and Black Brazilians face many of the same struggles as Black Americans. In particular, Black Brazilians suffer from an epidemic of police murders and a growing prison-industrial complex. With that in mind, Black Brazilian workers have been inspired by the recent resurgence of racial justice movements in the U.S., and have been eager to learn more about how the Black Lives Matter movement was launched so that they could develop their own.

All told, international solidarity work offers an important reminder that the labor movement is a global struggle. And in building relationships between labor movements across countries, we can both strengthen our own campaigns at home and gain new insight into how we can advance our shared struggles.

Hear the full presentation from the Forum on Labor’s Future below.