How Credit-Money Shapes the Economy: The United States in a Global System

By Robert Guttmann | Go to book overview

2
Economic Activities as
Monetary Circuits

We are in the midst of a transition period in which our economy is undergoing major restructuring. As the world community enters a new epoch, a geoeconomic era, it faces a much more integrated and multipolar system. Standard economic theory has little to say about this globalization process, and the reasons for this omission lie in the very methodology of its equilibrium model. We need to consider a different approach to economic analysis, drawing from various heterodox traditions. Such an alternative, besides providing a historic context for the structural changes under way, should enable us to analyze our capitalist system as a monetary production economy in forward motion. That exercise requires a more extensive understanding of money's role than is generally found in the neoclassical Quantity Theory of Money.


2.1. Defining Money as a Social Institution

Throughout history the operations and forms of money have changed, depending on the type of economic system and its stage of development. Money is a social institution subject to historic evolution. Its modus operandi varies according to period and place. This is true even today. Money has very different meanings and appearances for the aborigines of Papua-New Guinea than it has for brokers on Wall Street. More generally, money can only be properly analyzed in the broader societal context within which it operates. In Communist economies, for example, money functioned in ways that were quite different from its existence in advanced capitalist economies. Mikhail Gorbachev's successors there have become painfully aware of this difference, as they struggle with the thorny issue of currency convertibility.

If we investigate the role of money in capitalism, we have to begin by placing it in the context of the marketplace. The structural features of any market, includ-

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