Political Theory

Communist Money

“…the instability of the capitalist economy and the growth of government are wholly due to governments denying free enterprise the right to supply the good money it needs…”

– F.A. Hayek


Money is the lifeblood of the “free market”, but it is not free. The government monopolisation of money is one of the prime factors that has driven the Western world to its greatest levels of inequality since the Gilded Age. An inequality that is unsustainable and unjust.

In the Soviet Union, a central committee set the rules and times for all the harvesting of crops, of wheat, and the price of bread. This repeatedly led to massive shortages of basic foods through the existence of the Soviet empire. Not wholly the fault of the system, the harsh Russian climate takes part blame, and a free market system is also inefficient regarding crop cultivation (the cobweb theory offers a reasonable explanation why, beyond the scope here).

But a large reason for the difficulties was due to the misallocation of resources created by a centralised committee decreeing how the farming should be done, and how much reward the farmers and merchants deserved: Meaning they weren’t motivated to do anything beyond the bare minimum. And in all that time, with all that starvation around them, the Communist Party officials and their friends never suffered a lack. Only the average citizen suffered.

Most central bankers (including Federal Reserve officials (technically a private corporation, but a de facto central bank)) believe in some form of free market. Ask them why they’re capitalists, and they’ll probably tell you something about allocation of resources, or perhaps the history of the free market lifting people out of poverty. Ask them why the same rules of resource allocation don’t apply to money creation, and they’ll have a lot of smart sounding defences: we need a “lender of last resort” or “public utility” or something along those lines.

The truth is that the same rules apply. And just like in the times of the Soviet Union, the people close to the Party (the donor class and top government officials) never suffer from lack. The average citizen struggling for the bare minimum though: tough luck.

To be clear, I do not think central bankers are evil or part of a global conspiracy. Perhaps I’m naïve, but I do believe that if they could do something that benefited both the average citizen and the top of society, they would prefer to do so and would choose to do so. Just as the Soviet central planners would have loved to have been able to provide plentiful bread and meat at low cost for the average citizen (loyal ones at least).

But if forced to choose, they’re going to provide for the oligarchy first, those are their friends and family and they’ll suffer if they don’t prioritise the needs of the ruling class.

We see the results today, massive wealth inequality, with a big chunk of it at the very top being largely unearned.

Sadly, the only people who ever talk about this tend to be gold standard zealots and hardcore conspiracy theorists. If the gold standard worked so brilliantly, they never would have got rid of it in the first place, and reintroducing it now would likely lead to all sorts of mayhem, as it did when Churchill tried in Britain a century ago.

I must note that there is also private money in the form of debt and credit issued between private parties. “How the Economic Machine Works” by Ray Dalio is a good introduction to that side of money. But these private credits and debts are still issued in the currency created by government monopolies.

I’m unsure how to end this essay, so I’ll just state that I believe I have a reasonable and just solution and I shall explain this in the future, and provide a link here when that article is ready.

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