How to make money: Distributive justice, finance, and monetary constitutions

A capitalist society has two defining features. The first is well-known. A capitalist economy leaves coordination of exchange and production largely to private authority. The dissertation investigates a second feature. In a capitalist economy, individuals and firms coordinate exchange through contracts that involve obligations to pay money. Financial contracts allow individuals to defer payment and save money for expenditures at a later point in time. My dissertation assigns a crucial role to the structure of institutions and to the rules that create and define the authority over money. I refer to such a structure as a monetary constitution. In existing capitalist societies, money is not entirely under public control, as proponents of socialism or full reserve banking require. Nor is it entirely in private hands as libertarian free bankers would ideally have it. Instead, the supply of money to the economy takes place through a hierarchical order of money creation. Money issued by the central bank stands at the top of the hierarchy. Below it, private financial institutions issue different forms of credit money. In this sense, the monetary constitution is a hybrid of both public and private authority over money. Political philosophy has said virtually nothing about the authority over money. I aim to persuade the reader that this is a grave neglect. The three main claims of the dissertation are: 1. Money and finance are central to any account of distributive justice that is adequate for a capitalist society. 2. There are five objections to unregulated private money creation. 3. Existing monetary constitutions need fundamental reform. In support of the first claim, I argue that money is a crucial metric for any theory of distributive justice that is adequate for a capitalist society. I also put forward a new account of the crucial role of credit and saving in realising a fair intertemporal distribution. Finally, the second and third claims support the first claim where it concerns the authority over money. In support of the second claim, I argue that unregulated private money creation leads to (1) financial instability, (2) macroeconomic instability, (3) unsustainable use of natural resources, (4) an unfair distribution of economic means, and (5) an undemocratic concentration of political power. I also put forward a new account of why financial instability matters from the perspective of distributive justice. In support of the third claim, I argue for the incremental abolition of private money creation. Although the delegation of public money creation to an independent central bank is not objectionable in principle, I go on to argue that existing mandates are insufficiently democratic and need reform.

Name dc:type.qualificationname

Doctor of Philosophy (PhD)

Level dc:type.qualificationlevel

Doctoral

Grantor dc:publisher.institution

University of Cambridge

Year dc:date.issued

2018

Author dc:creator

• van 't Klooster, Johannes Maria

Advisor dc:contributor.advisor

• Oliver, Alex

• Distributive justice
• Finance
• Money
• Democracy

Licence

• https://apollo8-f-pro.lib.cam.ac.uk/bitstreams/8539a8f2-92b2-4df8-a33c-85ac70966b20/download
• https://www.rioxx.net/licenses/all-rights-reserved/

Language dc:language

en

DOI dc:identifier.doi

https://doi.org/10.17863/CAM.22062

OAI identifier oai:identifier

oai:www.repository.cam.ac.uk:1810/274911