By Carlos García Hernández
(Originally published in Spanish in El Común)
Is fiat socialism a communist proposal? This question was presented to me on 26th September in the form of a debate with British economist Michael Roberts. According to Roberts, fiat socialism cannot be considered a communist proposal, but mere reformism, and he supports this view with a quote from the article in which I first introduced the concept of fiat socialism. This quote states that ‘collective or state administration of the means of production and of the distribution of goods doesn’t have to imply the direct ownership of the means of production.‘ For Roberts, this statement is incompatible with any type of communist society, since the existence of a true communist society implies state ownership of the means of production. Furthermore, in his exposition, he said that my proposal was ‘impossible’ and a mere ‘trick’.
In the following, I will try to expose why I do consider my proposal of fiat socialism compatible with communism, although not with any kind of communism, but with communism as conceived by anthropologist David Graeber in chapter 5 of his great work, ‘Debt’. There, Graeber exposes what he calls ‘baseline communism’ and confronts this conception with what he calls ‘mythic communism or epic communism‘. In my opinion, Graeber thus makes the last great theoretical contribution to the concept of communism. Fiat socialism is based on Graeber’s baseline communism and positions such as those of Michael Roberts fall into what Graeber calls mythic communism, which as we shall see is nothing more than a fallacious recourse to an imaginary mythical past that never existed and never will exist.
Baseline communism
What is the main difference between the British economist’s position and mine? The definition of socialism. Thus, in another article dedicated to fiat socialism I wrote that ‘currently, the Spanish Royal Academy of Language defines socialism as: ‘Social and economic system based on collective or state ownership and administration of the means of production and of distribution of goods’ […] [I] propose that a new definition of socialism be: Social and economic system which, through modern monetary theory, provides guaranteed and permanent full employment, full and prudent use of natural resources, a guarantee of food, shelter, clothing, health services and education to every citizen, social security in the form of pensions and subsidies, and a guarantee of decent labour standards’. Michael Roberts defends the definition of socialism that appears in the Spanish dictionary. That is why he considers it fundamental that the ownership of the means of production should always be entirely public. In contrast, I argue that ‘Both the size of the private sector and the levels of surplus value must be decided by the citizenry democratically.’
This means that, first, I have nothing against all of the means of production being publicly owned, as long as the citizenry has decided it democratically, and second, as we shall see below, the existence of private enterprises does not imply the necessary self-destruction of the economic system. The economic principles expounded by modern monetary theory are valid regardless of whether all the means of production are public or whether private enterprises are allowed to exist, and in neither scenario can the inevitable collapse of the economic system be deduced.
Note that, from an economic and political point of view, the position held by Roberts is different from mine, but not incompatible, since fiat socialism accepts the viability of an entirely public productive system, as long as it is democratic. The real clash between Roberts’ position and mine is actually of a historical and anthropological nature, which are the fields that Graeber addresses.
According to this author, all human societies, including those that are not organized in the form of states and therefore not in the form of markets, base their economic interactions on three moral principles: communism, exchange and hierarchy. Humans alternate our behaviour among these three principles constantly, so that all three phenomena take place simultaneously, depending on with whom we interact.
Following Karl Marx’s ‘Critique of the Gotha Programme’, Graeber calls communism ‘any human relationship that operates on the principles of “from each according to their abilities, to each according to their needs.”’ Exchange occurs where human relations based on communism end, that is, where the accounting of transactions appears in order to settle debts and return to a situation of equilibrium. On the other hand, hierarchy is born with the acceptance of the existence of another person or institution capable of imposing a debt on us, either of a monetary or behavioural nature.
In my opinion, this scheme described by Graeber is correct. Thus, ‘communism is the foundation of all human sociability. It is what makes society possible. There is always an assumption that anyone who is not an enemy can be expected to act on the principle ‘from each according to their abilities’, and in this way, a ‘sociology of everyday communism’ can be constructed in which three characteristics are present:
- Non-existence of reciprocity: our communist relations start from a substantial equality of the individuals involved; consequently, there is no bookkeeping and no aim to convert our actions into debts.
- Tendency towards hospitality with strangers: if strangers are enemies, to lavish a stranger in order to add him to our circle of communist relations is also to convert the enemy stranger into a friend, and, therefore, an ally when it comes to covering our needs.
- The primacy of morality over property ownership, so that transactions (including commercial ones) are affected by the situation of the debtor, with whom we are bound by interpersonal and eternal ties whose basis is humanity itself.
Obviously, we do not establish this type of bond with everyone, but with the people with whom we share common projects. With other people we relate to each other on the basis of exchange, that is, on the basis of reciprocity and accounting. When we exchange, we do not make the needs of the other person our own, but we assume that the other person wants something from us and that we will not give it to them unless we receive something in return. Therefore, the objective is to settle debts and recover the balance in the transaction as soon as possible. This is complicated. That is why exchange relationships are fertile ground for confrontation and violence, since exchange always starts from a conflict of interests. To solve this problem, humans resort to hierarchies. Through them, we recognize ‘by a web of habit or custom’ the capacity of certain people or establishments to regulate our exchanges. These people or establishments are placed above us and have the capacity to put us in debt. Thus, people are indebted to the laws we must abide by, to the taxes we must pay, etc., and it is with respect to this authority that we adapt our conduct towards others.
Mythic communism
Mythic communism can be found in the works of authors who, like Michael Roberts, contend that Marxism is a closed and perfect system capable of explaining the present and the future of humanity, with no contradictions. For them, Marxism is a substitute for religion. For these authors, socialism is a phase prior to communism. Socialism is the attempt to return humanity to an Adamic state which, once reached, receives the name of communism. Communism is the return to a state of equilibrium in which all humans lived in peace and perfect equality, without the State, without the market and above all without private ownership of the means of production and with exchanges based on barter. A state in which we were all free and lived in harmony among our equals and with nature. Marx’s work and especially that of Engels is full of this kind of primitivism. For example, Engels speaks in ‘The Origin of the Family, Private Property and the State’, of Native American societies as communist societies, and in the introduction to the third volume of ‘Capital’, he goes even further and says that human beings remained in this Adamic state from 5000 B.C. until the 15th century of our era, since profit and the rate of profit did not appear in Europe until the 16th century. Until that time, ‘the mark association, grown out of primitive communism’ prevailed in Europe. Then, ‘each peasant originally had an equal hide, with equal pieces of land of each quality, and a corresponding, equal share in the rights of the mark’. It is necessary to point out that Marx shared with Engels this erroneous vision of history, but he did not share with him the way to recover that primitive communism. Marx was not a statist, Engels was. Marx preferred different formulations such as the association of free individuals. It was Engels, in his book ‘Anti-Dühring’, who made a statist interpretation of Marx’s work and characterized socialism as a social organization in which ‘The proletariat seizes political power and turns the means of production in the first instance into state property.’ Lenin endorsed Engels’ interpretation and from then on, the communist parties adopted a statist view of socialism.
In his book, David Graeber breaks with this scheme, first in chapter 2, where he puts an end to the myth of barter, and then in chapter 5, where he says that mythic communism is nothing more than ‘a story we like to tell ourselves’. Neither the Mesopotamia of 7000 years ago nor the European Middle Ages based their economy on barter or the common mark, but on debt. ‘It is high time, I think, to brush the entire argument aside. In fact, ‘communism’ is not some magical utopia, and neither does it have anything to do with ownership of the means of production.’ In reality, communism based on the maxim ‘from each according to their abilities, to each according to their needs’, is based on ‘who has access to what sorts of things and under what conditions,’ which is precisely what my definition of fiat socialism tries to reflect. So, beyond ownership of the means of production, fiat socialism is universal access to:
- Guaranteed and permanent full employment
- Full and prudent use of natural resources
- A guarantee of food, shelter, clothing, health services and education to every citizen
- Social security in the form of pensions and subsidies
- A guarantee of decent labour standards.
These five points were first stated by Stuart Chase in his book ‘The Road We Are Traveling’ (1942) and I call them the goals of socialism. The recommended method of mobilizing the real resources to make it possible for every human being to have access to these five points with the best possible quality is modern monetary theory, for the reasons stated below.
From Marx’s Law of the Tendency of the Rate of Profit to Fall, to Mosler’s law
At most, only one of these two laws can be correct, since they are mutually exclusive. We can state them as follows:
- Marx’s Law of the Tendency of the Rate of Profit to Fall: every economic system based on private ownership of the means of production is inevitably destined to collapse (section three of the third volume of ‘Capital’).
- Mosler’s Law: 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.
In the face of these two laws, fiat socialism chooses Mosler’s law. Moreover, the validity of Mosler’s law is the reason why the Law of the Tendency of the Rate of Profit to Fall is not fulfilled. I have already published a refutation of Marx’s law in my article ‘The Paradox of the Two Knights’, so I invite readers to read that article. There, it is explained how Marx thought that capitalism was unreformable and that the discussion was not whether the private sector should be larger or smaller, but that Marx thought that, if private initiative was allowed to exist, the fate of the economy in question was inevitable collapse. In contrast to Marx’s law, Mosler incorporates into his analysis the ability of the state to extend credit to the consumption of citizens through its exclusive ability to issue currency. Mosler’s analysis and David Graeber’s analysis in his book fully coincide. From ancient Mesopotamia to the present day the same scheme is reproduced. The citizens of a state accept the ability of a central power to impose a debt on them (in the form of taxes, tariffs, fines, etc.). This debt is issued in the currency of the State, which in itself has no intrinsic value (in the case of Mesopotamia it was clay tablets). It is the need of the citizens to settle their debts with the State by means of the State’s own currency that gives value to the currency. Therefore, first, the central power puts its currency into circulation and then collects taxes in that currency in order to alleviate inflationary pressures. In other words, taxes do not finance public spending, since the State has to spend before it can collect taxes. The currency that the State does not collect in taxes takes the form of credit. With such credit, citizens have the ability to stock up on the market created on the basis of the State’s currency. Therefore, the State (the hierarchy capable of imposing debts on us of which Graeber speaks) is prior to the market and is what gives rise to its existence. The market is the place to which producers and consumers go with the currency of the State to supply themselves. As the issuer of the currency, the State is able to acquire on the market everything it needs, since it cannot run out of its own money. Citizens depend on government spending being greater than tax revenue in order to be able to increase their savings and investment capacity.
Through such an analysis, consistent with the historical sources available to us, Graeber dismantles the myth of barter as the origin of money before the existence of states. Barter only occurred in very exceptional conditions and of extreme necessity after great catastrophes; in no case is it the origin of civilization and economics. Graeber also explains that the system based on credit and debt is at the basis of the class struggle. Without it, the birth of the wage-earning class and the bourgeoisie cannot be explained. Moreover, this scheme explains how debt became a weapon of domination over the citizens and how a coup-attempting and rentier elite has, since Mesopotamian times, aimed at taking away from the State its capacity to issue money in order to be the one to benefit from the debts imposed on the rest of the citizens. For this very reason, the great rulers of ancient and modern times have before them a great responsibility: the cancellation of debts that cannot be paid. This is what Mosler’s law represents: the ability to wipe the slate clean when debts (which are nothing more than accounting entries) arising from a financial crisis, place an unpayable burden on citizens. The forgiveness of this debt, mostly in the hands of rentier elites, is what makes it possible to overcome any financial crisis, no matter how deep it may be. It is what enables consumption, savings and investment by citizens, who, once freed from debt, can devote their labour to the creation of new goods and services to satisfy general needs.
The saddest part of Michael Roberts’ attacks on modern monetary theory was the one he devoted to Warren Mosler. According to Roberts, modern monetary theory (another name for what was originally called Mosler economics) cannot be valid because Mosler is an investment fund manager and is not a socialist. In the face of such weak ad hominem arguments little can be said, especially when Michael Roberts himself worked for 40 years as an economist in the City of London. Unfortunately, I never met David Graeber, but of Warren Mosler, I have to say that he is one of the most intelligent and lucid people I know. Certainly, Warren Mosler is not a socialist, but the Spanish economist Eduardo Garzón is. It was precisely he who, in his article ‘Reply to Michael Roberts on macro modelling MMT’ and from the perspective of modern monetary theory, dismantled one by one all Roberts’ misrepresentations, whose only objective is to save his conception of mythic communism. I invite everyone to read Garzón’s article. In that article, he exposes two aspects that Roberts, like neoliberal economists, is unable to explain: ‘the causal relationship established between profits and investment’ and ‘how to finance the public deficit’. In my debate with Roberts, I argued against his positions by means of the arguments put forward by Garzón in his article. Unfortunately, Roberts’ response was to dismiss these arguments as mere ‘technicalities’, and to defend his mythic communism he did not hesitate to resort to arguments accepted by neoliberalism, such as the conception of money as a commodity instead of debt, the erroneous idea that the State cannot issue currency if consumer goods have not been produced beforehand, the contradiction with the historical record that contends that the market is prior to the State, the absurdity of defending that sovereign States have to finance their deficits through public debt, and above all the neoliberal idea par excellence that it is supply that creates demand and not the other way around. This is how Roberts’s approaches show clearly that the theoretical assumptions of mythic communism and neoliberalism are actually more similar than it might seem.
Fiat socialism and communism
To conclude, and based on the above, we can ask ourselves, Is fiat socialism a proposal alien to the communist tradition? Not at all. The defence of universal access to the five points on which fiat socialism is based has been part of the backbone of the communist movement since its origins. Moreover, it was the demand for such access by the working class that turned communism into a mass movement. Only under communism was the power to decide on the level of unemployment in the economy taken away from private initiative and placed in public hands. Fiat socialism does exactly the same thing. The difference between fiat socialism and the communist regimes that have existed to date (with the exception of China) is that the former focuses on access to social rights rather than ownership of the means of production. In doing so, fiat socialism attempts to strip communism of its mythical characteristics. However, this is no stranger to communism either. Marx devotes a large part of chapter XXIII of the first volume of Capital, specifically from section 5b ‘The Badly Paid Strata of the British Industrial Class’ to the end of the chapter, to the lack of access of the proletariat to the five points on which fiat socialism is based. Likewise, the right of workers to a decent job and the need to carry out policies of permanent full employment appear in the ‘Critique of the Gotha Programme’. In short: it was the defence of universal access to the five points on which fiat socialism is based that made communism triumph in more than half of the planet and that allowed the left not to disappear after the collapse of the Soviet Union.
The introduction of modern monetary theory as a method of fiat socialism occurs precisely because in my opinion, it is the method that allows access to the five ends of fiat socialism most easily.
Fürsorgediktatur, assistance dictatorship, is the term used in the extinct German Democratic Republic to characterize the method of access to the goals of socialism in the former Eastern European bloc. In other words, the communist regimes were never strangers to universal access to the five goals of socialism. The problem was that the method used (the implementation of an assistance dictatorship) proved to be very inefficient and in many cases access to the goals of socialism was better guaranteed in Western Europe. In my opinion, the origin of inefficiency in the Eastern bloc is the mythic communism described by Graeber.
In the case of China, things are very different. The Chinese Communist Party does not fall into the error of mythic communism, but uses as a method of access to the five goals of socialism what the Chinese economist Xu Chenggang calls a ‘regionally decentralized authoritarian system’, which I analyzed in the article ‘A Chinese socialist consensus’. This method has proved to be enormously efficient and has turned China into a world power, despite the fact that it started from a much worse situation than the Eastern European countries. However, the Chinese system lacks the assistance aspect that characterized the Eastern European regimes and many of its citizens have no access to the five goals of socialism.
In my opinion, baseline communism and modern monetary theory on which fiat socialism is based represent a better alternative to the Chinese model and the model of the former Eastern European bloc in guaranteeing what is fundamental to communism: universal access to the five goals of socialism. The existence of private for-profit companies should not scare us. The important issue is that this profit is not produced through the misery of workers. Money is not a commodity, but bookkeeping entries in bank accounts. Money earned by one person is not money that is not earned by another. The State has the capacity to control the accumulation of capital through fiscal policy without the need to have direct ownership of the means of production. The fundamental idea: the working majority must have the ability to control the size of the private sector in its hands. When, as in the case of the Spanish energy sector, the private sector does not guarantee universal access to basic goods and services, this sector should be nationalized. The best possible access to the goals of socialism is what the working class must take into account when democratically deciding the size of the private sector. For the rest, history shows that one cannot pretend that the totality of social relations can be based on communism. Ignoring that humans also act according to the terms of exchange and hierarchy has produced great inefficiencies within socialist countries. That is why the sociology of everyday communism did not play a more important role in Eastern Europe than in Western Europe (we emigrants living in former communist countries know this well). As Graeber writes, ‘most capitalist firms, internally, operate communistically’ because baseline communism is most effective to ‘allocate tasks by ability and give people whatever they need to do them.’
Given the above, I think it would be perfectly consistent for communist parties to adopt a program based on fiat socialism. With this, the socialist transformations of society would cease to be associated with traumatic experiences. Socialism is to make everyone live better. What is traumatic is to continue with the capitalism of the euro and the European Union that condemns millions of people to poverty. Fiat socialism could end the irrelevance in which, except in China, communist parties are mired. The most important matter is that communist parties free themselves from the chains of mythic communism and fight efficiently to eliminate the human suffering caused by poverty by providing all citizens with the tools that allow them to be as productive as possible through the full development of their capabilities. The perfect economic system does not exist because the perfect human being does not exist, but what does exist is the human goodwill and intelligence on which baseline communism is based. Let us use them to make real the words of the great Spanish communist Marcos Ana when he said that ‘communism is affection for all’.