Free Money by Felix Martin Page B

supervision of money and finance by government—surely not a very socialist objective? The monetary system, as currently configured, is flawed: it is intrinsically unstable. The alternative view of money admits this problem, and implies that the best way to deal with it is to take the frightening step of undertaking radical surgery rather than continuing to prescribe piecemeal treatments. And reforming the banking system is also the only practical way of addressing the even older question of what money’s proper place in organising our lives is.”
    “What? Narrow banking will tell the Skidelskys
How Much Is Enough
, and Professor Sandel
What Money Can’t Buy
? That sounds like a bit of a stretch!”
    “I don’t know whether it will do exactly that. But the biggest difference of all between the conventional and the alternative views of money is that the alternative view acknowledges the genuine dilemma in which people find themselves—today as they did two and a half thousand years ago—over the extent to which money should co-ordinate social life. The sceptical tradition is useful because it warns us what are the wrong answers to the question of what should and should not be weighed in money’s scales: the Spartan solution of abolishing money in order to return to traditional society, for example; or the Soviet solution of attempting to impose administrative restrictions on what can and cannot be bought and sold for money. But it is most useful because it also points to the right answer. It is the lesson of the myth of Midas. The root of money’sirrepressible imperialising tendency, it warns, is neither morals, man, nor markets: it is money itself. As currently constituted, money’s promise looks irresistible—but only because, as Midas discovered, it is actually impossible. Confine that promise to sovereign money alone via the structural fix of narrow banking, and the incentive to mediate everything via money would be radically reduced. Shorn of its specious promise, monetary society would perhaps find natural limits—because Midas would grasp that human relations are just as valuable as financial ones from the outset.”
    “So: you’re going to bin fixed inflation targets and license money-printing in order to escape the debt hangover. You’re going to arm the central bankers to the hilt and tell them to keep firing until politicians tell them to stop. You’re going to make banking a branch of the civil service, and tell savers that if they want to earn a half-decent return on their nest eggs, they’d better be ready to take some losses as well. And if anyone complains about this marvellous new policy mix, you’re going to tell them not to worry because as well as preventing financial crises, it’s the only way of avoiding the fate of a deranged despot from story-time. It sounds like a cross between Karl Marx, Ayn Rand, and the Brothers Grimm. I rest my case.”
    “I’m just getting going: that’s only the practical agenda. Given that all these problems originate with the wrong understanding of money, there’s not much point fixing the policies if we don’t fix the ideas behind them too. So there’s an intellectual agenda as well.
    “The key, I’ve argued, is economics. Modern, orthodox economics is a uniquely powerful set of ideas which pervades not only the world’s central banks and finance ministries but popular culture and personal ethics as well—and the conventional view of money is ingrained in its core. More important for the long term than any of the practical policies we just discussed is the reform of economics. As with the practical policies, piecemeal reforms won’t do. We need finally to bring about the Reformation that never happened. We need to reformulate economics so that it starts from a realistic understanding of money. On the alternative view of money, understanding the economy properly also means understanding politics, history,psychology—and ethics. The practical