Keynes and Socialism

(Text of a talk I delivered at the Neubauer Institute in Chicago on April 5, 2024.)

My goal in this talk is to convince you that there is a Keynesian vision that is much more radical and far-reaching then our familiar idea of Keynesian economics.

I say “a” Keynesian vision. Keynes was an outstanding example of his rival Hayek’s dictum that no one can be a great economist who is only an economist. He was a great economist, and he was many other things as well. He was always engaged with the urgent problems of his day; his arguments were intended to address specific problems and persuade specific audiences, and they are not always easy to reconcile. So I can’t claim to speak for the authentic Keynes. But I think I speak for an authentic Keynes. In particular, the argument I want to make here is strongly influenced by the work of Jim Crotty, whose efforts to synthesize the visions of Keynes and of Marx were formative for me, as for many people who have passed through the economics department at the University of Massachusetts.

Where should we begin? Why not at the beginning of the Keynesian revolution? According to Luigi Passinetti, this has a very specific date: October 1932. That is when Keynes returned to King’s College in Cambridge for the Michaelmas term to deliver, not his old lectures on “The Pure Theory of Money,” but a new set of lectures on “The Monetary Theory of Production”. In an article of the same title written around the same time, he explained that the difference between the economic orthodoxy of the “the theory which I desiderate” was fundamentally the difference between a vision of the economy in terms of what he called “real exchange” and of monetary production. The lack of such a theory, he argued, was “the main reason why the problem of crises remains unsolved.”

The obvious distinction between these two visions is whether money can be regarded as neutral; and more particularly whether the interest rate can be thought of — as the textbook of economics of our times as well as his insist — as the price of goods today versus goods tomorrow, or whether we must think of it as, in some sense, the price of money.

But there is a deeper distinction between these two visions that I think Keynes also had in mind. On the ones side, we may think of economic life fundamentally in terms of objects — material things that can be owned and exchanged, which exist prior to their entry into economic life, and which have a value — reflecting the difficulty of acquiring them and their capacity to meet human needs. This value merely happens to be represented in terms of money. On the other side, we may think of economic life fundamentally in terms of collective human activity, an organized, open-ended process of transforming the world, a process in which the pursuit of money plays a central organizing role. 

Lionel Robbins, also writing in 1932, gave perhaps the most influential summary of the orthodox view when he wrote that economics is the study of the allocation of scarce means among alternative uses. For Keynes, by contrast, the central problem is not scarcity, but coordination. And what distinguishes the sphere of the economy from other areas of life is that coordination here happens largely through money payments and commitments.

From Robbins’ real-exchange perspective, the “means” available to us at any time are given, it is only a question of what is the best use for them. For Keynes, the starting point is coordinated human activity. In a world where coordination failures are ubiquitous, there is no reason to think — as there would be if the problem were scarcity — that satisfying some human need requires withdrawing resources from meeting some other equally urgent need. (In 1932, obviously, this question was of more than academic interest.) What kinds of productive activity are possible depends, in particular, on the terms on which money is available to finance it and the ease with which its results can be converted back into money. It is for this reason, as Keynes great American successor Hyman Minsky emphasized, that money can never be neutral.

If the monetary production view rejects the idea that what is scarce is material means, it also rejects the idea that economic life is organized around the meeting of human needs. The pursuit of money for its own sake is the organizing principle of private production. On this point, Keynes recognized his affinity with Karl Marx. Marx, he wrote, “pointed out that the nature of production in the actual world is not, as economists seem often to suppose, a case of C-M-C’, i. e., of exchanging commodity (or effort). That may be the standpoint of the private consumer. But it is not the attitude of business, which is the case of M-C-M’, i. e., of parting with money for commodity (or effort) in order to obtain more money.”

Ignoring or downplaying money, as economic theory has historically done, requires imagining the “real” world is money-like. Conversely, recognizing money as a distinct social institution requires a reconception of the social world outside of money. We must ask both how monetary claims and values evolve independently of the  real activity of production, and how money builds on, reinforces or undermines other forms of authority and coordination. And we must ask how the institutions of money and credit both enable and constrain our collective decision making. All these questions are unavoidably political.

For Keynes, modern capitalism is best understood through the tension between the distinct logics of money and of production.  For the orthodox economics both of Keynes’s day and our own, there is no such tension. The model is one of “real exchange” in which a given endowment of goods and a given set of preferences yielded a vector of relative prices. Money prices represent the value that goods already have, and money itself merely facilitates the process of exchange without altering it in any important way.

Keynes of course was not the first to insist on a deeper role for money. Along with Marx, there is a long counter tradition that approaches economic problems as an open ended process of transformation rather than the allocation of existing goods, and that recognizes the critical role of money in organizing this process. These include the “Army of brave heretics and cranks” Keynes acknowledges as his predecessors.

One of the pioneers in this army was John Law. Law is remembered today mainly for the failure of his fiat currency proposals (and their contribution to the fiscal troubles of French monarchy), an object lesson for over-ambitious monetary reformers. But this is unfair. Unlike most other early monetary reformer, Law had a clearly articulated theory behind his proposals. Schumpeter goes so far as to put him “in the front rank of monetary theorists of all times.” 

Law’s great insight was that money is not simply a commodity whose value comes from its non-monetary uses. Facilitating exchange is itself a very important function, which makes whatever is used for that purpose valuable even if it has no other use. 

“Money,” he wrote, “is not the Value for which goods are exchanged, but the Value by which goods are exchanged.” The fact that money’s value comes from its use in facilitating exchange, and not merely from the labor and other real resources embodied in it, means that a scarcity of money need not reflect any physical scarcity. In fact, the scarcity of money itself may be what limits the availability of labor: “’tis with little success Laws are made, for Employing the Poor or Idle in Countries where Money is scarce.”

Law here is imagining money as a way of organizing and mobilizing production.

If the capacity to pay for things — and make commitments to future payments — is valuable, then the community could be made better off by providing more of it. Law’s schemes to set up credit-money issuing banks – in Scotland before the more famous efforts in France – were explicitly presented as programs for economic development.

Underlying this project is a recognition that is central to the monetary production view; the organization of production through exchange is not a timeless fact of human existence, but something that requires specific institutional underpinning — which someone has to provide. Like Alexander Hamilton’s similar but more successful  interventions a half century later, Law envisioned the provision of abundant liquidity as part of a broader project of promoting commerce and industry.

This vision was taken up a bit later by Thornton and the anti-bullionists during the debates over suspension of gold convertibility during and after the Napoleonic Wars. A subsequent version was put forward by the mid-19th century Banking School and its outstanding figure, Thomas Tooke — who was incidentally the only contemporary bourgeois economist who Karl Marx seems to have admired — and by thinkers like Walter Bagehot, who built their theory on first hand experience of business and finance.

A number of lines divide these proto-Keynesian writers from the real-exchange orthodoxy.

To begin with, there is a basic difference in how they think of money – rather than a commodity or token that exists in a definite quantity, they see it as a form of record-keeping, whose material form is irrelevant. In other words credit, the recording of promises, is fundamental; currency as just one particular form of it.

Second, is the question of whether there is some simple or “natural” rule that governs the behavior of monetary or credit, or whether they require active management. In the early debates, these rules were supposed to be gold convertibility or the real bills doctrine; a similar intellectual function was performed by Milton Friedman’s proposed money-supply growth rule in the 20th century or the Taylor Rule that is supposed to govern monetary policy today. On the other side, for these thinkers, “money cannot manage itself,” in Bagehot’s famous phrase.

Third, there is the basic question of whether money is a passive reflection of an already existing real economy, or whether production itself depends on and is organized by money and credit. In other words, the conception of money is inseparable from how the non-monetary economy is imagined. In the real-exchange vision, there is a definite quantity of commodities already existing or potentially producible, which money at best helps to allocate. In the monetary production view, goods only come into existence as they are financed and paid for, and the productive capacity of the economy comes into being through an open-ended process of active development.

It’s worth quoting Bagehot’s Lombard Street for an example:

The ready availability of credit for English businesses, he writes, 

gives us an enormous advantage in competition with less advanced countries — less advanced, that is, in this particular respect of credit. In a new trade English capital is instantly at the disposal of persons capable of understanding the new opportunities… In countries where there is little money to lend, … enterprising traders are long kept back, because they cannot borrow the capital without which skill and knowledge are useless. … The Suez Canal is a curious case of this … That London and Liverpool should be centres of East India commerce is a geographic anomaly … The main use of the Canal has been by the English not because England has rich people … but because she possesses an unequalled fund of floating money.

The capacity for reorganization is what matters, in other words. The economic problem is not a scarcity of material wealth, but of institutions that can rapidly redirect it to new opportunities. For Bagehot as for Keynes, the binding constraint is coordination.

It is worth highlighting that there is something quietly radical in Bagehot’s argument here. The textbooks tell us that international trade is basically a problem of the optimal allocation of labor, land and other material resources, according to countries’ inherent capacities for production. But here it’s being claimed is not any preexisting comparative advantage in production, but rather the development of productive capacities via money; financial power allows a country to reorganize the international division of labor to its own advantage.

Thinkers like Bagehot, Thornton or Hamilton certainly had some success on policy level. For the development of central banking, in particular, these early expressions of of monetary production view played an important role.  But it was Keynes who developed these insights into a systematic theory of monetary production. 

Let’s talk first about the monetary side of this dyad.

The nature and management of money were central to Keynes’ interventions, as a list of his major works suggests – from Indian Currency Questions to the General Theory of Employment, Interest and Money. The title of the latter expresses not just a list of topics but a logical  sequence: employment is determined by the interest rate, which is determined by the availability of money.

One important element Keynes adds to the earlier tradition is the framing of the services provided by money as liquidity. This reflects the ability to make payments and satisfy obligations of all kinds, not just the exchange of goods focused on by Law and his successors. It also foregrounds the need for flexibility in the face of an unknown future.

The flip side of liquidity —  less emphasized in his own writings but very much by post Keynesians like Hyman Minsky — is money’s capacity to facilitate trust and promises. Money as a social technology provides offers flexibility and commitment.

The fact that bank deposit — an IOU — will be accepted by anyone is very desirable for wealth owner who wants to keep their options open. But also makes bank very useful to people who want to make lasting commitments to each other, but who don’t have a direct relationship that would allow them to trust each other. Banks’ fundamental role is “acceptance,” as Minsky put it – standing in as a trusted third party to make all kinds of promises possible. 

Drawing on his experience as a practitioner, Keynes also developed the idea of self-confirming expectations in financial markets. Someone buying an asset to sell in the near term is not interested in its “fundamental” value – the long-run flow of income it will generate – but in what other market participants will think is its value tomorrow. Where such short-term speculation dominates, asset prices take on an arbitrary, self-referential character. This idea is important for our purposes not just because it underpins Keynes’ critique of the “insane gambling casinos” of modern financial markets, but because it helps explain the autonomy of financial values. Prices set in asset markets — including, importantly, the interest rate — are not guide to any real tradeoffs or long term possibilities. 

Both liquidity and self-confirming conventions are tied to a distinctive epistemology , which emphasizes the fundamental unknowability of the future. In Keynes’ famous statement in chapter 12 of the General Theory,

By ‘uncertain’ knowledge … I do not mean merely to distinguish what is known for certain from what is only probable.  The sense in which I am using the term is that in which the prospect of a European war is uncertain, … About these matters there is no scientific basis on which to form any calculable probability whatever. We simply do not know!

Turning to the production side, taking the he monetary-production view means that neither the routine operation of capitalist economies nor the choices facing us in response to challenges like climate change should be seen in terms of scarcity and allocation.

The real-exchange paradigm sees production as non-monetary process of transforming inputs into outputs through a physical process we can represent as a production function. We know if we add this much labor and this much “capital” at one end, we’ll get this many consumption goods at the other end; the job of market price is to tell us if it is worth it.  Thinking instead in terms of monetary production does not just mean adding money as another input. It means reconceiving the production process. The fundamental problem is now coordination — capacity for organized cooperation. 

I’ve said that before. Let me now spell out a little more what I mean by it. 

To say that production is an open ended collective activity  of transforming the world, means that its possibilities are not knowable in advance. We don’t know how much labor and machinery and raw materials it will take to produce something new — or something old on an increased scale — until we actually do it. Nor do we know how much labor is potentially available until there’s demand for it.

We see this clearly in a phenomenon that has gotten increasing attention in macroeconomic discussions lately — what economists call hysteresis. In textbook theories, how much the economy is capable of producing — potential output — does not depend on how much we actually do produce There are only so many resources available, whether we are using them or not. But in reality, it’s clear that both the labor force and measured productivity growth are highly sensitive to current demand. Rather than a fixed number of people available to work, so that employing more in one area requires fewer working somewhere else, there is an immense, in practice effectively unlimited fringe of people who can be drawn into the labor force when demand for labor is strong. Technology, similarly, is not given from outside the economy, but develops in response to demand and wage growth and via investment. 

All this is of course true when we are asking questions like, how much of our energy needs could in principle be met by renewable sources in 20 years? In that case, it is abundantly clear that the steep fall in the cost of wind and solar power we’ve already seen is the result of increased demand for them. It’s not something that would have happened on its own. But increasing returns and learning by doing are ubiquitous in real economies. In large buildings, for instance, the cost of constructing later floors is typically lower than the cost of constructing earlier ones. 

In a world where hysteresis and increasing returns are important, it makes no sense to think in terms of a fixed amount of capacity, where producing more of one thing requires producing correspondingly less of something else. What is scarce, is the capacity to rapidly redirect resources from one use to a different one.

A second important dimension of the Keynesian perspective on production is that it is not simply a matter of combining material inputs, but happens within discrete social organisms. We have to take the firm seriously as ongoing community embodying  multiple social logics. Firms combine the structured cooperation needed for production; a nexus of payments and incomes; an internal hierarchy of command and obedience; and a polis or imagined community for those employed by or otherwise associated with it.

While firms do engage in market transactions and exist — in principle at least — in order to generate profits, this is not how they operate internally. Within the firm, the organization of production is consciously planned and hierarchical. Wealth owners, meanwhile,  do not normally own capital goods as such, but rather financial claims against these social organisms.

When we combine this understanding of production with Keynesian insights into money and finance , we are likely to conclude, as Keynes himself did, that an economy that depends on long-lived capital goods (and long-lived business enterprises, and scientific knowledge) cannot be effectively organized through the pursuit of private profit. 

First, because the profits from these kinds of activities depend on developments well off in the future that cannot cannot be known with any confidence. 

Second, because these choices are irreversible — capital goods specialized and embedded in particular production processes and enterprises. (Another aspect of this, not emphasized by Keynes, but one which wealth owners are very conscious of, is that wealth embodied in long-lived means of production can lose its character as wealth. It may effectively belong to the managers of the firm, or even the workers, rather than to its notional owners.) Finally, uncertainty about the future amplifies and exacerbates the problems of coordination. 

The reason that many potentially valuable  activities are not undertaken is not that they would require real resources that people would prefer to use otherwise. It is that people don’t feel they can risk the irreversible commitment those activities would entail. Many long-lived projects that would easily pay for themselves in both private and social terms are not carried out, because an insufficient capacity for trustworthy promises means that large-scale cooperation appears too risky to those in control of the required resources, who prefer to keep their their options open. 

Or as Keynes put it: “That the world after several millennia of steady individual saving, is so poor as it is in accumulated capital-assets, is to be explained neither by the improvident propensities of mankind, nor even by the destruction of war, but by the high liquidity- premiums formerly attaching to the ownership of land and now attaching to money.”

The problem, Keynes is saying, is that wealth owners prefer land and money to claims on concrete productive processes. Monetary production means production organized by money and in pursuit of money. But also identifies conflict between production and money.

We see this clearly in a development context, where — as Joe Studwell has recently emphasized — the essential first step is to break the power of landlords and close off the option of capital flight so that private wealth owners have no option but to hold their wealth as claims on society in the form of productive enterprises. 

The whole history of the corporation is filled with conflicts between the enterprise’s commitment to its own ongoing production process, and the desire of shareholders and other financial claimants to hold their wealth in more liquid, monetary form. The expansion or even continued existence of the corporation as an enterprise requires constantly fending off the demands of the rentiers to get “their” money back, now. The “complaining participants” of the Dutch East India Company in the 1620s, sound, in this respect, strikingly similar to shareholder activists of the 1980s. 

Where privately-owned capital has worked tolerably well — as Keynes thought it had in the period before WWI, at least in the UK — it was because private owners were not exclusively or even mainly focused on monetary profit.

“Enterprise,” he writes, “only pretends to itself to be mainly actuated by the statements in its own prospectus, however candid and sincere. Only a little more than an expedition to the South Pole, is it based on an exact calculation of benefits to come. Thus if the animal spirits are dimmed and the spontaneous optimism falters, leaving us to depend on nothing but a mathematical expectation, enterprise will fade and die.” 

(It’s a curious thing that this iconic Keynesian term is almost always used today to describe financial markets, even though it occurs in a discussion of real investment. This is perhaps symptomatic of the loss of the production term of the monetary production theory from most later interpretations of Keynes.)

The idea that investment in prewar capitalism had depended as much on historically specific social and cultural factors rather than simply opportunities for profit was one that Keynes often returned to. “If the steam locomotive were to be discovered today,” he wrote elsewhere, “I much doubt if unaided private enterprise would build railways in England.”

We can find examples of the same thing in the US. The Boston Associates who pioneered textile factories in New England seem to have been more preserving the dominant social position of their interlinked families as in maximizing monetary returns. Schumpeter suggested that the possibility of establishing such “industrial dynasties” was essential to the growth of capitalism. Historians like Jonathan Levy give us vivid portraits of early American industrialists Carnegie and Ford as outstanding examples of animal spirits — both sought to increase the scale and efficiency of production as a goal in itself, as opposed to profit maximization.

In Keynes’ view, this was the only basis on which sustained private investment could work. A systematic application of financial criteria to private enterprise resulted in level of investment that was dangerously unstable and almost always too low. On the other hand — as emphasized by Kalecki but recognized by Keynes as well — a dependence on wealth owners pursuit of investment for its own sake required a particular social and political climate — one that might be quite inimical to other important social goals, if it could be maintained at all.

The solution therefore was to separate investment decisions from the pursuit of private wealth.  The call for the “more or less comprehensive socialization of investment” at the end of The General Theory, is not the throwaway line that it appears as in that book, but reflects a program that Keynes had struggled with and developed since the 1920s. The Keynesian political program was not one of countercyclical fiscal policy, which he was always skeptical of.  Rather it envisioned a number of more or less autonomous quasi-public bodies – housing authorities, hospitals, universities and so on – providing for the production of their own specific social goods, in an institutional environment that allowed them to ignore considerations of profitability.

The idea that large scale investment must be taken out of private hands was at the heart of Keynes’ positive program.

At this point, some of you may be thinking that that I have said two contradictory things. First,  I said that a central insight of the Keynesian vision is that money and credit are essential tools for the organization of production. And then, I said that there is irreconcilable conflict between the logic of money and the needs of production. If you are thinking that, you are right. I am saying both of these things.

The way to reconcile this contradiction is to see these as two distinct moments in a single historical process. 

We can think of money as a social solvent. It breaks up earlier forms of coordination, erases any connection between people.As the Bank of International Settlements economist Claudio Borio puts it: “a well functioning monetary system …is a highly efficient means of ‘erasing’ any relationship between transacting parties.” A lawyers’ term for this feature of money is privity, which “cuts off adverse claims, and abolishes the .. history of the account. If my bank balance is $100 … there is nothing else to know about the balance.”

In his book Debt, David Graeber illustrates this same social-solvent quality of money with the striking story of naturalist Ernest Thompson Seton, who was sent a bill by his father for all the costs of raising him. He paid the bill — and never spoke to his father again. Or as Marx and Engels famously put it, the extension of markets and money into new domains of social life has “pitilessly torn asunder the motley feudal ties that bound man to his “natural superiors”, and has left remaining no other nexus between man and man than naked self-interest, than callous “cash payment”.

But what they neglected to add is that social ties don’t stay torn asunder forever. The older social relations that organized production may be replaced by the cash nexus, but that is not the last step, even under capitalism. In the Keynesian vision, at least, this is a temporary step toward the re-embedding of productive activity in new social relationships. I described money a moment ago as a social solvent. But one could also call it a social catalyst.  By breaking up the social ties that formerly organized productive activity, it allows them to be reorganized in new and more complex forms.

Money, in the Keynesian vision, is a tool that allows promises between strangers. But people who work together do not remain strangers. Early corporations were sometimes organized internally as markets, with “inside contractors” negotiating with each other. But reliance on the callous cash payment seldom lasted for long.  Large-scale production today depends on coordination through formal authority. Property rights become a kind of badge or regalia of the person who has coordination rights, rather than the organizing principle in its own right.

Money and credit are critical for re-allocating resources and activity, when big changes are needed. But big changes are inherently a transition from one state to another. Money is necessary to establish new production communities but not to maintain them once they exist. Money as a social solvent frees up the raw material — organized human activity —  from which larger structures, more extensive divisions of labor, are built. But once larger-scale coordination established, the continued presence of this social solvent eating away at it, becomes destructive.

This brings us to the political vision. Keynes, as Jim Crotty emphasizes, consistently described himself as a socialist. Unlike some of his American followers, he saw the transformation of productive activity via money and private investment as being a distinct historical process with a definite endpoint.

There is, I think, a deep affinity between the Keynes vision of the economy as a system of monetary production, and the idea that this system can be transcended. 

If money is merely a veil, as orthodox economics imagines, that implies that social reality must resemble money. It is composed of measurable quantities with well-defined ownership rights, which can be swapped and combined to yield discrete increments of human wellbeing. That’s just the way the world is.  But if we see money as a distinct institution, that frees us to imagine the rest of life in terms of concrete human activities, with their own logics and structures. It opens space for a vision of the good life as something quite different from an endless accumulation of commodities – a central strand of Keynes’ thinking since his early study of the philosopher G. E. Moore.

 In contemporary debates – over climate change in particular – a “Keynesian” position is often opposed to a degrowth one. But as Victoria Chick observes in a perceptive essay, there are important affinities between Keynes and anti-growth writers like E. F. Schumacher. He looked forward to a world in which accumulation and economic growth had come to an end, daily life was organized around “friendship and the contemplation of beautiful objects,” and the pursuit of wealth would be regarded as “one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease.”

This vision of productive activity as devoted to its own particular ends, and of the good life as something distinct from the rewards offered by the purchase and use of commodities, suggests a deeper  affinity with Marx and the socialist tradition. 

Keynes was quite critical of what he called “doctrinaire State Socialism.” But his objections, he insisted, had nothing to do with its aims, which he shared. Rather, he said, “I criticize it because it misses the significance of what is actually happening.” In his view, “The battle of Socialism against unlimited private profit is being won in detail hour by hour … We must take full advantage of the natural tendencies of the day.” 

From Keynes’ point of view, the tension between the logic of money and the needs of production was already being resolved in favor of the latter.  In his 1926 essay “The End of Laissez Faire,” he observed that “one of the most interesting and unnoticed developments of recent decades has been the tendency of big enterprise to socialize itself.” As shareholders’ role in the enterprise diminishes, “the general stability and reputation of the institution are more considered by the management than the maximum of pro

A shift from production for profit to production for use — to borrow Marx’s language — did not necessarily require a change in formal ownership. The question is not ownership as such, but the source of authority of those managing the production process, and the ends to which they are oriented. Market competition creates pressure to organize production so as to maximize monetary profits over some, often quite short, time horizon. But this pressure is not constant or absolute, and it is offset by other pressures. Keynes pointed to the example of the Bank of England, still in his day a private corporation owned by its shareholders, but in practice a fully public institution.

Marx himself had imagined something similar:

As he writes in Volume III of Capital, 

Stock companies in general — developed with the credit system — have an increasing tendency to separate … management as a function from the ownership of capital… the mere manager who has no title whatever to the capital, … performs all the real functions pertaining to the functioning capitalist as such, … and the capitalist disappears as superfluous from the production process. 

The separation of ownership from direction or oversight of production in the corporation is, Marx argues, an important step away from ownership as the organizing principle of production.  “The stock company,” he continues, “is a transition toward the conversion of all functions… which still remain linked with capitalist property, into mere functions of associated producers.” 

In short, he writes, the joint stock company represents as much as the worker-owned cooperative “the abolition of the capitalist mode of production within the capitalist mode of production itself.” 

It might seem strange to imagine the tendency toward self-socialization of the corporation when examples of its subordination to finance are all around us. Sears, Toys R Us, the ice-cream-and-diner chain Friendly’s – there’s a seemingly endless list of functioning businesses purchased by private equity funds and then hollowed out or liquidated while generating big payouts for capital owners. Surely this is as far as one could get from Keynes’ vision of an inexorable victory of corporate socialism over private profit? 

But I think this is a one-sided view. I think it’s a mistake — a big mistake — to identify the world around us as one straightforwardly organized by markets, the pursuit of profit and the logic of money.

As David Graeber emphasized, there is no such thing as a capitalist economy, or even a capitalist enterprise.  In any real human activity, we find distinct social logics, sometimes reinforcing each other, sometimes in contradiction. 

We should never imagine world around us — even in the most thoroughly “capitalist” moments — is simply the working out of a logic pdf property, prices and profit. Contradictory logics at work in every firm — even the most rapacious profit hungry enterprise depends for its operations on norms, rules, relationships of trust between the people who constitute it. The genuine material progress we have enjoyed under capitalism is not just due to the profit motive but perhaps even more so in spite of it. 

One benefit of this perspective is it helps us see broader possibilities for opposition to the rule of money. The fundamental political conflict under capitalism is not just between workers and owners, but between logic of production process and of private ownership and markets. Thorstein Veblen provocatively imagined this latter conflict taking the form of a “soviet of engineers” rebelling against “sabotage” by financial claimants. A Soviet of engineers may sound fanciful today, but conflicts between the interests of finance and the needs of productive enterprise — and those who identify with them — are ongoing. 

Teaching and nursing, for example, are the two largest occupations that require professional credentials.But teachers and nurses are also certainly workers, who organize as workers — teachers have one of the highest unionization rates of any occupation. In recent years, this organizing can be quite adversarial, even militant. We all recall waves of teacher strikes in recent years — not only in California but in states with deeply anti-union politics like West Virginia, Oklahoma, Arizona and Kentucky. The demands in these strikes have been  workers’ demands for better pay and working conditions. But they have also been professionals’ demands for autonomy and respect and the integrity of their particular production process. From what I can tell, these two kinds of demands are intertwined and reinforcing.

This struggle for the right to do one’s job properly is sometimes described as “militant professionalism.” Veblen may have talked about engineers rather than teachers, but this kind of politics is, I think, precisely what he had in mind. 

More broadly, we know that public sector unions are only effective when they present themselves as advocates for the public and for the users of the service they provide, and not only for their members as workers. Radical social service workers have fought for the rights of welfare recipients. Powerful health care workers unions, like SEIU 1199 in New York, are successful because they present themselves as advocates for the health care system as a whole. 

On the other side, I think most of us would agree that the decline or disappearance of local news outlets is a real loss for society. Of course, the replacement of newspapers with social media and search engines isn’t commodification in the straightforward sense. This is a question of one set of for-profit businesses being displaced by another. But on the other hand, newspapers are not only for-profit businesses. There is a distinct professional ethos of journalism, that developed alongside journalism as a business. Obviously the “professional conscience” (the phrase is Michelet’s) of journalists was compatible with the interests of media businesses. But it was not reducible to them. And often enough, it was in tension with them. 

I am very much in favor of new models of employee-owned, public and non-profit journalism. Certainly there is an important role for government ownership, and for models like Wikipedia. But I also think — and this is the distinct contribution of the Keynesian socialist — that we should not be thinking only in terms of payments and ownership. The development of a distinct professional norms for today’s information sector is independently valuable and necessary, regardless of who owns new media companies. It may be that creating space for those norms is the most important contribution that alternative ownership models can make 

For a final example of this political possibilities of the monetary-production view, we can look closer by, to higher education, where most of us in this room make our institutional home. We have all heard warnings about how universities are under attack, they’re being politicized or corporatized, they’re coming to be run more like businesses. Probably some of us have given such warnings. 

I don’t want to dismiss the real concerns behind them. But what’s striking to me is how much less often one hears about the positive values that are being threatened. Think about how often you hear people talk about how the university is under attack, is in decline, is being undermined. Now think about how often you hear people talk about the positive values of intellectual inquiry for its own sake that the university embodies. How often do you hear people talk about the positive value of academic freedom and self-government, either as specific values of the university or as models for the broader society? If your social media feed is like mine, you may have a hard time finding examples of that second category at all.

Obviously, one can’t defend something from attack without at some point making the positive case that there is something there worth defending. But the point is broader than that. The self-governing university dedicated to education and scholarship and as ends in themselves, is not, despite its patina of medieval ritual, a holdover from the distant past. It’s an institution that has grown up alongside modern capitalism. It’s an institution that, in the US especially, has greatly expanded within our own lifetimes. 

If we want to think seriously about the political economy of the university, we can’t just talk about how it is under attack. We must also be able to talk about how it has grown, how it has displaced social organization on the basis of profit. (We should note here the failure of the for-profit model in higher education.) We should of course acknowledge the ways in which higher education serves the needs of capital, how it contributes to the reproduction of labor power. But we also should acknowledge all the ways that is more than this.

When we talk about the value of higher education, we often talk about the products — scholarship, education. But we don’t often talk about the process, the degree to which academics, unlike most other workers, manage our own classrooms according to our own judgements about what should be taught and how to effectively teach it. We don’t talk about how, almost uniquely in modern workplaces, we the faculty employees make decisions about hiring and promotion collectively and more or less democratically. People from all over the world come to study in American universities. It’s remarkable — and remarkably little discussed — how this successful export industry is, in effect, run by worker co-ops.

 At this moment in particular, it is vitally important that we make the case for academic freedom as a positive principle. 

Let me spell out, since it may not be obvious, how this political vision connects to the monetary production vision of the economy that I was discussing earlier. 

The dominant paradigm in economics — which shapes all of our thinking, whether we have ever studied economics in the classroom — is what Keynes called, I distinction to his own approach, the real exchange vision. From the real-exchange perspective, money prices  and payments are a superficial express of pre-existing qualities of things — that they are owned by someone, that they take a certain amount of labor to produce and have a definite capacity to satisfy human needs. From this point of view, production is just a special case of exchange. 

It’s only once we see money as an institution in itself, a particular way of organizing human life, that we can see production as something distinct and separate from it. That’s what allows us to see the production process itself, and the relationships and norms that constitute it, as a site of social power and a market on a path toward a better world. The use values we socialists oppose to exchange value exist in the sphere of production as well as consumption. The political demands that teachers make as teachers are not legible unless we see the activity they’re engaged in in terms other than equivalents of money paid and received.

I want to end by sketching out a second political application of this vision, in the domain of climate policy. 

First, decarbonization will be experienced as an economic boom. Money payments, I’ve emphasized, are an essential tool for rearranging productive activity, and decarbonizing will require a great deal of our activity to be rearranged. There will be major changes in our patterns of production and consumption, which in turn will require substantial changes to our means of production and built environment. These changes are brought about by flows money. 

Concretely: creating new means of production, new tools and machinery and knowledge, requires spending money. Abandoning old ones does not. Replacing existing structures and tools and techniques faster than they would be in the normal course of capitalist development, implies an increase in aggregate money expenditure. Similarly, when a new or expanding business wants to bid workers away from other employment, they have to offer a higher wage than an established business needs to in order to retain its current workers. So a rapid reallocation of workers implies a faster rise in money wages.

So although decarbonization will substantively involve a mix of expansions of activity in some areas and reduction of activity in others, it will increase the aggregate volume of money flows. A boom in this sense is not just a period of faster measured growth, but a period in which demand is persistently high relative to the economy’s productive potential and tight labor markets strengthen the bargaining position of workers relative to employers – what is sometimes called a “high-pressure economy.” 

Second. There is no tradeoff between decarbonization and current living standards. Decarbonization is not mainly a matter of diverting productive activity away from other needs, but mobilizing new production, with positive spillovers toward production for other purposes.

Here again, there is a critical difference between the monetary-production and the real-exchange views of the economy. In the real-exchange paradigm, we possess a certain quantity of “means.” If we choose to use some of them to reduce our carbon emissions, there will be less available for everything else. But when we think in terms of social coordination organized in large part through money flows, there is no reason to think this. There is no reason to believe that everyone who is willing and able to work is actually working, or people’s labor is being used in anything like its best possible way for the satisfaction of real human needs. Nor are relative prices today a good guide to long-run social tradeoffs. 

Third.  If we face a political conflict involving climate and growth, this will come not because decarbonization requires accepting a lower level of growth, but because it will entail faster economic growth than existing institutions can handle. Today’s neoliberal macroeconomic model depends on limiting economic growth as a way of managing distributional conflicts. Rapid growth under decarbonization will be accompanied by disproportionate rise in wages and the power of workers. Most of us in this room will probably see that as a desirable outcome. But it will inevitably create sharp conflicts and resistance from wealth owners, which need to be planned for and managed. Complaints about current “labor shortages” should be a warning call on this front.

Fourth. There is no international coordination problem — the countries that move fastest on climate will reap direct benefits.

An influential view of the international dimension of climate policy is that “free riding … lies at the heart of the failure to deal with climate change.” (That is William Nordhaus, who won the Nobel for his work on the economics of climate change.) Individual countries, in this view, bear the full cost of decarbonization measures but only get a fraction of the global benefits, and countries that do not engage in decarbonization can free-ride on the efforts of those that do.

A glance at the news should be enough to show you how backward this view is. Do Europeans look at US support for the wind, solar and battery industries, or the US at China’s support for them, and say, “oh, what wonderfully public-spirited shouldering of the costs of the climate crisis”? Obviously not.  Rather, they are seen as strategic investments which other countries, in their own national interest, must seek to match.

Fifth. Price based measures cannot be the main tools for decarbonization.

There is a widely held view that the central tool for addressing climate should be an increase in the relative price of carbon-intensive commodities, through a carbon tax or equivalent. I was at a meeting a few years ago where a senior member of the Obama economics team was also present. “The only question I have about climate policy,” he said, “is whether a carbon tax is 80 percent of the solution, or 100 percent of the solution.” If you’ve received a proper economics education, this is a very reasonable viewpoint. You’ve been trained to see the economy as essentially an allocation problem where existing resources need to be directed to their highest-value use, and prices are the preferred tool for that.

From a Keynesian perspective the problem looks different. The challenge is coordination — bottlenecks and the need for simultaneous advances in multiple areas. Markets can, in the long run, be very powerful tools for this, but they can’t do it quickly. For rapid, large-scale reorganization of activity, they have to be combined with conscious planning — and that is the problem. The fundamental constraint on decarbonization should not be viewed as the potential output of the economy, but of planning capacity for large-scale non-market coordination. 

If there is a fundamental conflict between capitalism and sustainability, I suggest, it is not because the drive for endless accumulation in money terms implies or requires an endless increase in material throughputs. Nor is it the need for production to generate a profit. There’s no reason why a decarbonized production process cannot be profitable. It’s true that renewable energy, with its high proportion of fixed costs, is not viable in a fully competitive market — but that’s a characteristic it shares with many other existing industries. 

The fundamental problem, rather, is that capitalism treats the collective processes of social production as the private property of individuals. It is because the fiction of a market economy prevents us from developing the forms of non-market coordination that actually organize production, and that we will need on a much larger scale. Rapid decarbonization will require considerably more centralized coordination than is usual in today’s advanced economies. Treatment of our collective activity to transform the world as if it belonged exclusively to whoever holds the relevant property rights, is a fundamental obstacle to redirecting that activity in a rational way.