Fiat Money Socialism vs Lower Form Communism

The focus of recent posts has been on the possibility that fiat money, especially sovereign currency, offers a path to a better society. In considering what kind of path this might be, the thought occurs that it might actually be possible, by the completion of the fiat-money phase of societal development, to leap over Marx’s lower form of communism, as described in his Critique of the Gotha Program, straight into a rudimentary form of “from each according to ability, to each according to need”.

It has been suggested in recent posts that, in principle, sovereign currency makes any mix of public and private sector activity feasible and that this is true to a greater extent than under commodity backed or fixed exchange rate regimes. In particular, the capacity of a currency-issuing government to dictate the terms on which the currency is issued means that its spending is free of revenue constraints. If something is technically doable, meaning that it is within real resource constraints, it is affordable for the currency issuer. An implication is that capitalists cannot jeopardize activity that is run on principles other than the profit motive or logic of capital through investment strikes or bond vigilantism, although they can of course exert whatever other political pressure they can muster. The operative factor becomes the political pressure capitalists, on the one hand, and the general population, on the other, are able to exert on government.

In terms of the possibility of moving toward socialism, it therefore appears possible through democratic processes to push for an increasing role for public sector activity and other forms of not-for-profit activity at the expense of profit-making. With more activity undertaken in the public and not-for-profit sectors, there could be an attempt to democratize decisions over what is produced and how it is produced, and also to push for a wide range of goods and services to be provided free of charge (meaning free at the point of access).

In such a development, there would be a move toward “from each according to ability to each according to need”, except to the extent that some goods remained only available at positive prices. Even here, redistributive taxes and transfers could eliminate most inequalities of access to goods and services between people with similar needs (e.g. working parents with two kids, single person with no kids, etc.). However, there would still be money, so this would not be communism.

This raises the question of what would be necessary to get from this increasingly socialist economy to communism. If we take Marx’s descriptions of communism in his Critique of the Gotha Program, there are two phases, characterized as lower and higher forms of communism. In the lower phase, there is no money, but workers receive labor certificates, which verify that they have taken part in society’s aggregate labor time and entitle them to a corresponding amount of goods and services, produced with the equivalent amount of labor time. (Deductions are made to provide goods and services for those not in the workforce and to make allowances for administrative and insurance funds.) In this manner, in the lower phase of communism the labor time of workers of varying abilities and productivity is treated as equal, and they are all recompensed on the basis of their labor time. Inequality still remains, though, because the needs of workers can differ (e.g. one worker might have to support more dependents than another). (See pp.10-11 of Critique of the Gotha Program.)

According to Marx, the higher form of communism is only attained

… after the enslaving subordination of the individual to the division of labor, and therewith also the antithesis between mental and physical labor, has vanished; after labor has become not only a means of life but life’s prime want; after the productive forces have also increased with the all-around development of the individual, and all the springs of co-operative wealth flow more abundantly — only then can the narrow horizon of bourgeois right be crossed in its entirety and society inscribe on its banners: From each according to his ability, to each according to his needs!

Technological improvement and increased mechanization open up the possibility of freeing individuals to this degree, but presumably, even under communism, this would not be an end state, but a process of continual improvement in the conditions of life.

It is hard to conceive exactly what is necessary for society to qualify as operating under this higher form of communism, so no attempt will be made in this post. What can be pointed out, instead, is that if a socialist path were pursued through appropriate application of sovereign currency, then in principle there would be two basic differences between this fiat money socialism and lower form communism. In one respect, fiat money socialism would be inferior, because it would still involve money. However, in another respect, fiat money socialism would be superior, because it would have moved closer to “from each according to ability, to each according to need” than a lower form of communist society. In the latter society, a worker would be remunerated strictly on the basis of labor time with no account taken of the worker’s actual needs.

If society really progressed to this degree of socialism under a sovereign currency system (essentially access to goods and services according to need), it would seem to be a very manageable step subsequently to eliminate money altogether, simply by making access to all goods and services free. There would then be no need to pay wages (no need for wage labor) and no need for government spending and taxation. There would be a non-monetary economy in which access to all goods and services was free.

Further, it would be possible to do better than labor certificates, such as those used in the lower form of communism. Having attained fiat money socialism, it would be conceivable to jump straight to an arrangement in which equal access to goods and services was based on citizenship and any other relevant factors (e.g. family size).

This would not be a society yet at the highest form of communism, but it would already be beyond the lower form of communism.

Whatever Marx might have made of this line of reasoning, it does at least accord with a point he did emphasize; namely, the need to develop communism out of the system we are in now:

What we have to deal with here is a communist society, not as it has developed on its own foundations, but, on the contrary, just as it emerges from capitalist society; which is thus in every respect, economically, morally, and intellectually, still stamped with the birthmarks of the old society from whose womb it emerges.

Marx’s point applies irrespective of the society we want, and the society we are currently in. Whether it is a better capitalism, socialism, communism or something else, where we are now matters in trying to find our way forward. Like it or not, our current society is monetary. Fortunately for many of us, we already have sovereign currencies. It therefore makes sense to consider seriously the social possibilities of sovereign currency when thinking about how we might progress to a better society.