Is what you learned about money wrong?
“Why can’t we live like the Smurfs?” my daughter asked one sunny Saturday morning.
“What do you mean?” Did she want to live in a colourful mushroom house?
“Without money,”she declared. “If you need a loaf of bread, you go to the baker and get one.” I laughed with surprise; when preparing my children’s literature course, I had read that the Smurf books have been criticized for being communist propaganda. Essentially, the Smurfs live in a cooperative community where each Smurf has a responsibility or job related to his or her skills (mostly “his” because female characters were an afterthought for Peyo). In Smurfland, the idea is to take only what you need and not stash away multiple loaves of bread for the future.
The Smurfs have a leader, chosen by wisdom and age, named Papa Smurf. He takes his responsibility seriously and has the Smurfs’ best interests in mind. Problems arise when he has to leave to collect a rare plant from a mountain meadow, and the Smurfs begin acting out the worst of their “human-like” natures by being lazy, greedy, or power-hungry..
The game of Monopoly is another of childhood’s influences on how we think about money. I read recently that the game wasn’t supposed to be fun; it was created to show the dark side of capitalism. It was meant as a lesson in economics. The game is dismal if you are on the losing side, with all your properties mortgaged, no income, and yet you are propelled forward towards the looming hotels of Boardwalk. And you want to land there, because you are thinking ‘please let this game be over.’ You know you cannot win. What kind of game continues on for another hour after the loser has been decided? I once played with an enthusiastic business student who was frustrated beyond belief because his dice rolls made him unable to get around the board once, so he could not buy any properties. He knew what that meant. He had already lost the game, but he was a business student and thought he wasn’t supposed to lose.
Kids today still play Monopoly and read books about Arcadian worlds; this exposes them to two extreme ways of looking at money. If they are lucky, their parents will give them an allowance, and when they run out of money, their parents will tell them they are out of luck (if they want to buy a Smurf figurine, for instance). They learn that money is something you can hold in your hand, until you’ve spent it. It appears thanks to the mythical tooth fairy or it falls out of a card from a grandparent. Money is strange, they learn, but if you hold onto it, you have a certain power.
As you grow older, you can get a bank account to earn interest on the money that you resist spending. One day, you realize you can lend money to your impulsive and desperate little sister at astronomical rates. Now you feel really grown up and start to listen when adults talk about money, the government, and one day, the shocking deficit. You are dismayed to learn that the country has been as irresponsible as your little sister! What I learned at school was that I would be paying off the government’s debt throughout my life. I was told that the government had a fixed amount of money, which they collected through taxes, and if there was not enough, then they had to cut back on spending or raise taxes. Based on my experience with my own private piggy bank, this made sense.
Happily, it’s far from the truth. Modern Monetary Theory (MMT) tells a money-creation story that leads to quite different conclusions. In “The World According to Modern Monetary Theory,” Rebecca Rojer explains how“The idea that we don’t have the “money” to supply essential public goods to everyone is a pernicious myth that can only be maintained so long as we remain ignorant of how money actually functions.”
Imagine, for a moment, that Papa Smurf has gone away and a different tribe of Smurfs have come to colonize our blue friends. Let’s call them the Usurps. They want the Smurfs to work for them, much harder than the Smurfs are used to working. How are they going to get the Smurfs, Lazy Smurf for example, to do this? The first way is to make the Smurfs work with the threat of violence. However, this will require a lot of the Usurps’ resources, as they will have to supervise constantly. The second way is through the creation of money.
The Usurps invent a currency, just pieces of paper with numbers on them, called Urps. But how will they convince the Smurfs to work for pieces of paper instead of loaves of bread? The Usurps tell the Smurfs that they each have to pay a tax using this new currency. If they don’t pay their taxes, they will be thrown into jail. Now the Smurfs have to find a way to get enough Urps each month. The only way is by working in the mines (or fulfilling another task the Usurps want done). This takes the pressure off the Usurps, who can keep the Smurfs working from a distance. Some of the Smurfs make enough money so that they have some left over. A number of services pop up, and now the Smurfs at the mine, who don’t have all day to bake bread, can buy a loaf on their way home (and maybe a lottery ticket).
This fictional Smurf tale explains chartalism, one of the tenements of Modern Monetary Theory. Rojer explains that “Forcing people to pay their taxes in a money that is otherwise worthless creates demand for money and gives it its value.” The Smurfs need the money to avoid going to prison, and their cooperative economy has been transformed for the profit of the Usurps.
Thus, the origins of money are violent in nature. Only a sovereign nation with the strength to physically enforce tax collection can create their own currency.
So, the Usurps have made a new currency, which is valued by the Smurfs. One Urp, an arbitrary unit, has value because of the consequences if the Smurfs don’t pay their taxes using Urps. The Usurps are happy because the Smurfs are working hard and mining a lot of gold. However, what will the Usurps do with the Urps they collect from the Smurfs? Do they need them? Are they any more valuable to them than Monopoly game money is to us? When you consider that the Usurps created Urps and can print them on demand, the Urps returned through taxes can go into a festive bonfire for all the Usurps care.
This story sounds dismal and would not sell very many comic books, but it does prove that nations with their own currencies do not have piggy banks because they don’t need them. Rojer explains that “Sovereigns create money as a tool to obtain the labor and other resources they need to fulfill their political goals.” How often we hear leaders talk about budget limitations and the need to collect tax money so that they can spend. Rojer points out that “as money issuers, sovereigns have no need for their own tokens and thus no need to close their deficits.“ The Usurps do not need the money from taxes to be able to pay the workers.
To add cheer to this particular comic, consider, as Rojer says, that “the logic of modern money can also be put in the service of the collective, as opposed to exploitative, political aims.” Perhaps when Papa Smurf comes home and inevitably saves the Smurfs and declares Smurfland a free state again, he will choose to make a new currency. Then when he needs the Smurfs to work on a collective project such as fixing the dam or rebuilding the part of town trampled on by Gargamel, he will be freed from the task of supervising every Smurf closely (including debating with Brainy Smurf and finding out where Lazy Smurf is napping). He can ask every Smurf to pay him a number of Smurf dollars every year and this will provide him with resources and labour.
I assume Papa Smurf would follow the Smurf tradition of the job guarantee. After all, can you imagine him leaving some Smurfs unemployed just to ensure wages stay low? No, each Smurf would have, as Rojer describes, “a job that serves the public good, provides ample leisure time, and supports a low-consumption lifestyle.” The Smurfs would return to a better quality of life and the work they do would benefit their own community, not the Usurps, who coerced the Smurfs into the “work hard, consume hard” lifestyle.
You might wonder what will happen if Papa Smurf does not have enough money to pay all the Smurfs a living wage. Will he be running a deficit? Yes, but that is not a bad thing at all.
A deficit means simply that Papa Smurf has spent money (by paying the other Smurfs) and he hasn’t taxed that money back yet. This is a good thing because the Smurfs have extra money and can exchange goods and services amongst themselves. Perhaps Beer Smurf would like to save up to take time off work and travel. As Rojer reminds us, “Money scarcity is basically a political decision.” As fellow Medium author Maxime Levesque writes, “Taxes don’t fund spending.”
Money is an indirect appropriation of goods and labour by the state. What really matters is not money, but resources.. Papa Smurf cannot run out of money; he can only run out of Smurf-power or natural resources. What the Smurfs can accomplish under Papa Smurf’s leadership is limited only by two things: the number of Smurfs (and how much work they can do) and the material resources available.
Hence, in the coming election, when you hear a politician or an austerity theorist (likely remunerated) tell you that we’ve run out of dollars (points, really), and that we need to liquidate real resources in order to obtain the virtual points that we lack, tell them that the austerity we need is not the virtual points we call dollars. It’s the one that concerns real resources, especially non-renewable ones.
We can create dollars by flipping zeros and ones on computers; we can’t as easily create food, wood, minerals, oil, and biodiversity. The ecosystemic debt that we will leave to our children is the one that matters.