What’s Wrong with the World

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American Affairs

A new quarterly called American Affairs earned some surprisingly good press when it first appeared. I would not have expected a magazine of scholarly Trumpism, unveiled a month after his nomination, to walk away with warm and whimsical write-ups in the The New York Times and the New Yorker; but then again a lot of things happen that I don’t expect.

The bad press came a bit later, when, driven by an entirely foreseeable trajectory of events, the journal’s Editor publicly repudiated his vote of a year ago for the aforementioned Trump. (But even then, the Times gave him prominent space for the mea culpa.)

However they voted, I’ll grant that the editors and writers of American Affairs have indeed produced some interesting and provocative copy.

[edited for some embarrassing typos]

Take, for instance, this essay by two men of plainly socialist disposition. “Make the Left Great Again,” an inspired headline, supplies in readable and mostly jargon-free prose, a kind of paleo-Leftist argument against (a) pigheaded identity politics, and for (b) the integrity of the nation-state. Eschewing a distorted overemphasis on American developments, the authors persuasively argue that international or globalized socialism is an illusion. The only possible route to socialism lies in an appeal to each nation with a political agenda that respects its integrity as a nation.

Even if we limit our analysis to core capitalist countries, it is apparent that virtually all the major social, economic, and political advancements of the past centuries were achieved through the institutions of the democratic nation-state, not through international, multilateral, or supranational institutions. Rather, global institutions have in many ways been used to roll back those very achievements, as we have seen in the context of the euro crisis, where supranational (and largely unaccountable) institutions such as the European Commission, Eurogroup, and European Central Bank used their power and authority to impose crippling austerity on struggling countries. The problem, in short, is not national sovereignty as such, but the fact that the concept in recent years has been largely abandoned to those who seek to push through a xenophobic and identitarian agenda.

There are strong Marxist strains in this essay: no doubt about it. Class-based analysis frames much of the argument, and hostility to free enterprise permeates its premises. But there is also some level-headed self-reflection:

Following its historical defeat, the Left’s traditional anticapitalist focus on class slowly gave way to a liberal-individualist understanding of emancipation. Waylaid by postmodernist and poststructuralist theories, Left intellectuals slowly abandoned Marxian class categories to focus instead on elements of political power and the use of language and narratives as a way of establishing meaning. This shift also defined new arenas of political struggle that were diametrically opposed to those defined by Marx. Over the past three decades, the Left’s focus on “capitalism” has given way to a focus on issues such as racism, gender, homophobia, multiculturalism, etc. Marginality is no longer described in terms of class but rather in terms of identity. The struggle against the illegitimate hegemony of the capitalist class has given way to the struggles of a variety of (more or less) oppressed and marginalized groups and minorities: women, blacks, LGBTQs, etc. As a result, class struggle has ceased to be seen as the path to liberation.

In this new postmodernist world, only categories that transcend class boundaries are considered meaningful. Moreover, the institutions that evolved to defend workers against capital—such as trade unions and social democratic political parties—have become subjugated to these non–class struggle foci. What has emerged in practically all Western countries as a result, as Nancy Fraser notes, is a perverse political alignment between “mainstream currents of new social movements (feminism, anti-racism, multiculturalism, and LGBTQ rights), on the one side, and high-end ‘symbolic’ and service-based business sectors (Wall Street, Silicon Valley, and Hollywood), on the other.” The result is a progressive neoliberalism “that mixe[s] together truncated ideals of emancipation and lethal forms of financialization,” with the former unwittingly lending their charisma to the latter.

It’s almost as if solidarity and fellow-feeling among neighbors and countrymen — call it, I don’t know, “patriotism” — works better at preventing pernicious accumulations of wealth and power, than massive continental structures of regulation and bureaucracy. And it’s almost as if an unending obsession with diversity, difference, peculiarity, accompanied by a relentless denigration of the culture men once held in common, undermines that fellow-feeling, thereby clearing the path for the most cynical capitalists to accumulate wealth and power.

I mean, wow: it’s almost as if the enterprising minds in Silicon Valley figured out that, by flattering American liberal preoccupations with diversity, they could gain for themselves a free hand to monopolize the technology sector. (Conveniently, many of those pliantly diverse non-Americans also sell their engineering labor at a cheaper rate than American citizens.)

My sarcasm aside, I count it as encouraging that at least some on the Left are starting to wake up to the malignancy and cynicism of the diversity project.

As societies have become increasingly divided between well-educated, highly mobile, highly skilled, socially progressive cosmopolitan urbanites, and lower skilled and less educated peripherals who rarely work abroad and face competition from immigrants, the mainstream Left has tended to consistently side with the former. Indeed, the split between the working classes and the intellectual-cultural Left can be considered one of the main reasons behind the right-wing revolt currently engulfing the West. As Jonathan Haidt has argued, the way the globalist urban elites talk and act unwittingly activates authoritarian tendencies in a subset of nationalists. In a vicious feedback loop, however, the more the working classes turn to right-wing populism and nationalism, the more the intellectual-cultural Left doubles down on its liberal-cosmopolitan fantasies, further radicalizing the ethnonationalism of the proletariat.

That’s a pretty penetrating paragraph.

A final point that I’ll mention about this essay. In a series of asides, never fully formalized as an argument, the authors demonstrate a marked impatience with the prevailing assumptions of public finance. Specifically, in line with their defense of nations, they think sovereign states should have access to currency devaluation as a respectable policy tool; and they reject the “household budget analogy,” “which suggests that currency-issuing governments, like households, are financially constrained, and that fiscal deficits impose crippling debt burdens on future generations.”

Now the idea that currency-issuing governments are not, in any way, “financially constrained” is clearly absurd; but in my view it is not at all absurd to conjecture that maybe we’ve got the details of those constraints quite wrong. The massive monetary and considerable fiscal response to the financial crisis was greeted by a chorus of minatory predictions concerning runaway inflation, ruinous interest rates, and so forth, none of which materialized over the past decade. The idea of currency as an actual storehouse of value persists in the minds of millions; but the evidence is piling up to the contrary. Perhaps the time has come for both Right and Left to recognize that a currency is ultimately nothing more than a medium of exchange, which should be saved only for that purpose and not on the presumption that it has any intrinsic capacity to store value or preserve capital.

Comments (10)

Hmm, I have to admit that I'm having trouble warming to a bunch of class-warfare Marxists just because they oppose LGBT identity politics. And the idea of such people even temporarily supporting Mr. "I'm Very Rich" (presumably because of his campaign's anti-trade populism) tends to decrease the warm fuzzies even more. Certainly it's true that the Democrats long ago lost any credible claim to be the Party of the Little Guy, but I'd rather have a conservative point that out than someone who is going to support the proles in opposing sexual perversion, but only because it's classist. Or something. Collectivism doesn't become even remotely attractive just because some old-style collectivists decide to oppose the most recent insanity of the parochial American left.

"I count it as encouraging that at least some on the Left are starting to wake up to the malignancy and cynicism of the diversity project."

Yes, and some who were never with that program to begin with are speaking up -- both old-school liberals and the "traditional" Lefties who didn't buy into the whole New Left thing. Some of their concern is no doubt tactical, in that it reflects a fear of a further loss of white working class support. But there also seems to be a genuine concern among many that PC/diversity ideas have run amok.

An encouraging sign running parallel to this is an increasing interest in class issues on the Right, accompanied by the growing realization that Big Business is not the conservatives' friend. The cultural Left has largely forsaken class as a concern, and the mainstream Right really never had it. Wake-up calls by folks such as J.D. Vance, Yuval Levin, and Ross Douthat are starting to change that.

The idea of currency as an actual storehouse of value persists in the minds of millions; ...

That idea persists in my mind, at any rate.

... but the evidence is piling up to the contrary. Perhaps the time has come for both Right and Left to recognize that a currency is ultimately nothing more than a medium of exchange, which should be saved only for that purpose and not on the presumption that it has any intrinsic capacity to store value or preserve capital.

Once I have recognized it, what then serves to store value?

Or were you speaking only macroeconomically—such that fiat currency would meet my expectation privately but not for the whole country?

I have to say I'm all on board with the household model of national finance. As far as I'm concerned, we need way more of that rather than less. The argument that we need less of it and that countries *can* (contra the apocryphal Abe Lincoln) stay out of trouble even while spending more than they bring in is simply a recipe for governmental irresponsibility. Naturally socialists are all on-board with that, since they think the government is where all the goodies come from and (evidently) creates wealth by creating handout programs. Deficit? What's that? Santa is expected to take care of it. Or heck, just print or e-print more money. Something can come from nothing, right? But conservatives of all people should be urging fiscal responsibility on government, not the opposite.

Lydia, in my view the analogy of a family household to a nation is mediocre at best. It may obscure more than it illuminates. A nation may licitly stake its (say) second-best port revenues, in order to service a debt, in a way in which a family in debt may never stake their daughter's sexual organs. And what currency price, what household analogy, might we assign to the detail that American JSOC personnel, conveyed by V-22 Ospreys, could forcibly confiscate enough wealth in a weekend, from direct-action raids on subjects under surveillance etc., to fix any immediate national cash shortage?

Mr. Harrison: Let not the idea persist.

Once I have recognized [that currency is only a medium of exchange], what then serves to store value?

As a non-exhaustive list, I'll offer furniture, gemstones, preservable produce, musical instruments, baseball cards, books, beer, wine; alongside, of course, equity in companies, corporate debt, government debt, mutual funds, commercial paper, options, swaps, etc.

Also, please remember that deposits in the bank are actually debt instruments lent to the bank. If I take some currency and lend it to the bank, that's no longer currency as I speak of here.

Lest I be thought unclear, in my mind it is worth storing some currency; some percentage of your income you should keep as currency. But rationally this should not be thought a way to store wealth: only as a way to have enough medium of exchange around, should the necessity of selling wealth press upon you.

A nation may licitly stake its (say) second-best port revenues, in order to service a debt, in a way in which a family in debt may never stake their daughter's sexual organs.

What an utterly bizarre analogy. A better analogy would be a family's actually having something that it could, y'know, put up as collateral or sell to service a debt. The point is that of fiscal responsibility. The U.S. just happens to have more stuff than ordinary people do. That doesn't mean money comes out of thin air to pay for whatever deficit the U.S. wants to rack up in secula seculorum.

As for money as a store of value, saying that money isn't a store of value is a convenient way to blame the poor working stiff who puts hard-earned savings in the bank and whose savings loses value if inflation occurs, but it doesn't actually make it perfectly okay for a government to inflate its currency, it doesn't actually make the working stiff to blame, and it doesn't actually mean that he would have been more fiscally reasonable to have gone through the far more complex and arduous process of trying to save up for a car or even for the down payment on a house by buying gemstones instead. I could list you quite a few reasons (which you can probably think of for yourself, since you, unlike some others, are not fantastically wealthy and live in the real world) why telling a guy that he ought to save for what he needs to save up for over the next ten years by buying objets d'art or stock would be giving him bad advice.

I realize that you've said that you're not using "currency" to cover bank savings, but since nobody *does* save for a car or for the college tuition he'll need to pay in a few years by putting cash in his mattress, there's very little point in excoriating people who do so. Generally people who are bugged about losing value of their money to inflation are speaking (loosely, perhaps, but by an understood convention) of "their money" in the bank, inter alia. And presumably those who grump about not "treating money as a store of value" aren't too happy about their seeing their bank accounts as a "store of value," either. Because those folks should be saving up the $50 a month they can afford to save, in order hopefully to avoid a car payment or in order to get that needed trade school credential, by buying fine wine instead. Or something.

Since a huge number of people now use very little cash anyway and yet nonetheless think of money as in some sense a "storehouse of value," anyone arguing against it is going to find his argument very outdated if he is speaking only of physical currency. Many employers insist that their employees have a bank account and do not issue physical paychecks but rather electronic "checks." The working person then pays for his groceries with a debit card on the bank account or, sometimes, a credit card, which he then pays by direct electronic transfer from his bank account. On-line bill pay is making even physical checks obsolete, and of course almost nobody pays his electric bill with physical dollars anyway even if he pays with a physical check.

If all you want to say is that physical currency is not a storehouse of value while remaining neutral on whether e-dollars in a bank account *are* a storehouse of value, or even affirming that they are (!), your argument is losing relevance very fast. This is what leads me to think that the latter as a "storehouse of value" is a target as well. But of course if virtual dollars in the bank *are* a "storehouse of value," then we can't blame people for not wanting them devalued by government e-printing, or for not investing in something more concrete rather than saving in the bank, can we?

I will just add that it is intrinsically impossible for money to be a "medium of exchange" without it also being a storehouse of value. Being a medium of exchange JUST IS being a storehouse of value. When Bob sells his used but nice lawnmower for $150 to Bill, and then the next day he takes the $150 to the store and buys a tool to work on lawnmowers, the $150 stored value overnight. The whole point of it being a medium of exchange is that it stores value from the exchange where you GET the money to the exchange where you GIVE UP the money.

Arguing about whether it stores value very well, or whether it does so over a longer versus shorter time period are just quibbles on the basic point. Money would cease to be any sort of thing at all if its ability to store value between exchanges became completely unpredictable: If the $150 that Bill got were to fluctuate in value (against every other item of value) according to a random number generator factor, so that it was worth 1 piece of gum, or 20,000 bananas, or 5 minutes of labor from my mechanic; and then CHANGE AGAIN in value against all of those items of value at short but completely random intervals, it COULD NOT BE A MEDIUM OF EXCHANGE. The only reason it succeeds in being a medium of exchange is that it does NOT fluctuate in these ways, instead it has some degree of stability and some predictability about how its value changes. But that stability JUST IS its being a storehouse of value.

Of course money does not retain a completely fixed and definite relationship to other goods over long periods of time without alteration - neither does anything ELSE do so. Everything of (economic) value is in relationship to all the other things of value, and these relationships constantly vary as things become inherently more desirable or less due to changes in usefulness, need, etc. Money will, also, undergo some variation. But saying that it is not a storehouse of value because it undergoes variation is just like saying your house, boat, car, stock, and gun are not storehouses of value because their values change. Non sequitur.

It may be true that money in our current monetary arrangement tends not to be a VERY GOOD storehouse of value over a long period of time. This would be an idiosyncratic feature of our particular arrangement, since there were lots of times in the past where a certain gold or silver coin held its value against other goods really quite well. It then must become a policy question, whether we WANT to manage our monetary system so that the money is a better or worse storehouse of value, and over what kind of time horizon. As a policy question, this cannot be dismissed by merely noting the fact THAT currently it is fairly limited as a storehouse of value. Such an empirical state of affairs is capable of being changed.

Excellent points, Tony!

Nor is there any moral requirement to try to make our political policies discourage people from thinking of things as "storehouses of value" except insofar as those things have some particular use or insofar as their value reflects some deeper metaphysical reality. Milk is very useful while drinkable but is de facto a poor storehouse of value because it spoils. Antique baseball trading cards pretty much define "practically useless" and have their market value entirely by human convention but might be a perfectly ethical investment nonetheless. There is no imperative for government to try to force people to *admit* the intrinsic valuelessness of baseball trading cards or to "value milk more." By the same token there is nothing particularly virtuous about a governmental policy that "forces people to recognize" that currency or e-currency is not intrinsically useful, that you can't eat it or use it to make something, that it doesn't (now) represent a claim on gold, or whatever, and to try to pressure people to invest in some kind of more tangible property instead. It is not as though investing in gems or real estate is *intrinsically* smarter or more in touch with deep metaphysical reality than putting money in the bank, so that the former should be encouraged by policy and the latter represents a bad or "usurious mindset."

Tony's correction is well taken. Sorry I've been confusing.

Lydia, I'm certainly not recommending some kind of government policy to "force" people to think of currency in a different way. Nor am I "blaming" or "excoriating" working stiffs or anyone who takes a different view. I'm suggesting a framework for better understanding of how things work. Tony's point that everything in economics fluctuates in value is another way of making the point. But folks operate on the (in my view faulty) assumption that currency is the only thing that doesn't fluctuate, or least least shouldn't. Assets of all kinds are adjusting values in relation to each other constantly. The primary source of value in currency arises from its use as a medium of exchange (secondarily because the government requires payment of taxes in it). Thus (to repeat) it is only useful to store it for that purpose. It is unwise to store it expecting it to retain value.

I'd also say the fact that we're rapidly moving away from physical cash strengthens my point, not weakens it. And yes, most people regard their deposits as cash. One reason is that the banks have government backing: a promise to print money to make depository lenders whole in the event of the banks' failure. Take that away, and folks would quickly see that deposits are a financial instrument quite different from cash on hand.

The only policy I'd recommend is that sovereign nation-states retain authority over their sovereign currency. They should increase or decrease the money supply as circumstances require. Currency devaluation is a legitimate tool of statecraft, often misused but not made illegitimate by examples of misuse.

On the "household model": as long as we recognize its limitations, I'm fine with it. The key thing to understand is that nations have assets and resources which have no analogy to a human household.

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