The story behind Fiat Socialism
By Carlos García Hernández
“It’s not three, it’s four” – I remember distinctly when I had that thought. Intuition hit me. I was writing A Chinese Socialist Consensus. It was August, 2021. I was reflecting on Deng Xiaoping’s visit to Washington on January 1st, 1979, and I wrote:
“To approach China’s relations with the US from a vantage point from which to advocate the imminent collapse of capitalism would have made no sense.
Deng knew that such a collapse was not going to happen. This allowed him to go beyond the Trinity Formula enunciated by Marx in chapter 48 of the third volume of Capital, according to which there are only three sources of income: capital-profit, land rent and labour-wages. Deng knew that there were not three sources but four, since to Marx’s list public expenditure must be added as a source of profit realization.”
This is the way that number four entered Fiat Socialism. Up to that point, Fiat Socialism was little more than a nascent project. A cluster of articles without structure. But now things had changed. The presence of number four gave at least a glimpse of a structure.
Number four, represented by dalet (ד), the fourth letter in Hebrew, the letter of poverty. Only one leg to sustain itself. In that sense, dalet can also be understood as necessity, as the things without which we are always poor, our basic necessities for everyday life. This resonated with me on so many levels.
Now a first name came to mind, Bill Mitchell. In 2017 he had published an entry in his blog under the title Stuart Chase – a visionary ahead of his time. As the obedient self-declared disciple of Bill Mitchell I was, I always read Bill Mitchell’s blog as part of my breakfast. That’s how I discovered Stuart Chase’s book The Road We Are Traveling, written in 1942. There he wrote about the goals of economic policy as the starting point of any reasonable government. The goals as the starting point. What were those goals? Precisely our basic necessities for everyday life: 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. Should we call a society in which these five goals are achieved simultaneously and permanently a socialist society? In my opinion, the answer to this question is yes. As a matter of fact, only socialist societies were close to achieving these goals, from permanent full employment by law to all the other issues pointed out by Chase.
This didn’t only resonate with me, it became an outcry.
More names came to mind: Rudolph Hilferding, Friedrich Adler, Otto Bauer. The main authors of Austromarxism. This was what they had in mind. Later other names came up (Chris Williamson, David Graeber) but first was the problem of the structure. I had to build a structure with this material. That’s when the figure of Immanuel Kant popped up. He was the unifying foundation of all the above. Many years before, I had read an old book I bought at the second hand book store in my street. It was a book about Schelling and there the author, Steffen Dietzsch, wrote: “Kant is not the solution, but there is no solution without Kant”. Now I knew he was right.
I dove into Kant and what I found was dalet. Kant’s schema is represented by the number four. Dr. Arthur Holmes used to refer to it in his lectures. A reference, a general principle, a rule and a case. That is Kant’s schema in four. Next to it, Hegel’s schema in three (thesis, antithesis and synthesis) paled into nonsense. Kant’s schema, the landmark of Austromarxism, was superior in all respects. Fiat Socialism was going to adopt this schema in four as its structure.
As a reference, I took the five goals of Stuart Chase and I renamed them as the goals of socialism, the starting point. As a general principle, I took Bill Mitchell’s modern monetary theory in the role of method to achieve full employment of resources without creating inflation and a subtitle was added to the name of the book, Fiat Socialism. Achieving the goals of socialism through modern monetary theory. As a rule, I took Kalecki’s profit equation and as a case I took Spain.
I decided to analyze Spain because it is my country, it’s the land I know best and I care about the most. The reason why I chose Kalecki’s profit equation was also Bill Mitchell.
Bill Mitchell declares himself a Kaleckian Marxist. This made me discover Kalecki’s masterpiece Political Aspects of Full Employment and later the profit equation. In Political Aspects of Full Employment, Kalecki writes about a “target economy” orientated from the onset to the desired targets. This was in perfect alignment with Kant’s schema and the goals of socialism as reference. The profit equation is this one:
Net profits = Investment in fixed capital + capitalists’ consumption + public deficit – workers’ savings
+ position of trade balance
I mark public deficit in red because it’s the decisive factor for Fiat Socialism. Let’s remember that there is no solution without Kant, but Kant himself is not the solution. This took me to a preliminary question of gnoseological character. The schema in four that I had constructed following Kant’s steps was inductive and Kant’s schema was deductive. Therefore, Kant takes us from the universal to the particular and he extracts particular truths from general principles independently from experience. Fiat Socialism does the opposite, it is the particular experiences from which general principles are extracted. This is to be seen from the beginning, when Fiat Socialism states practical results as the goals of macroeconomic activities. Public deficits are at the center of it. Fiat Socialism proposes that, beyond the existence or not of private entrepreneurship and beyond the economic decisions of the private sector, the government must always guarantee the five goals of socialism by means of sufficient public spending. This a posteriori decision by the government is possible because of the fiat character of the national currencies studied by modern monetary theory. This question became the introduction to the book.
One last chapter draws the conclusions of the work. A name stands out, David Graeber. Fiat Socialism reclaims the concept of baseline communism reflected in David Graeber’s book Debt by which the fundamental question of communism is not the ownership of the means of production but “who has access to what sorts of things and under what conditions”. This is the right way to interpret the maxim “from each according to their abilities, to each according to their needs” expounded by Marx.
The book has two more essential parts, a foreword by Chris Williamson and a collection of articles. For me is a huge honour that such a relevant figure like Chris Williamson, author of Ten Years Hard Labour, was generous enough to write the foreword. This not only improves the quality of the whole book, but it also allows my name to be reckoned with the legacy of Chris Williamson and I am deeply grateful to him.
The collection of articles is called euro delendus est. The project of Fiat Socialism was gestated in the form of press articles that I normally end with the sentence euro delendus est, the euro must be destroyed. In the articles, the necessity of monetary sovereignty in order to propose any kind of socialist transformation of society is explained through current affairs. A Chinese Socialist Consensus is one of those articles. Therefore, euro delendus est is also a cornerstone of Fiat Socialism. Many of the articles have been curated and published by Claire Jackson-Prior at the web portal of The Gower Initiative for Modern Money Studies. Claire Jackson-Prior also corrected my English translation of Fiat Socialism from the original in Spanish. Working together with Claire Jackson-Prior was a wonderful experience and I thank her for her kindness, her dedication and the extraordinary quality of her work.
This is the story behind Fiat Socialism, now available to the general public. It is a story about dalet, the representation of number four, poverty and necessities, but also a word that means door. In that sense, Fiat Socialism tries to be a door for humanity to abandon poverty and enter a socialist society where the basic needs of everybody and the care of nature are permanently guaranteed.
Euro delendus est