According to the conventional wisdom, money is a scarce private commodity that needs to be rationed. Both households and businesses need enough income to cover their obligations, such as food, rent, payroll, and principal and interest payments on debt. Insufficient income can mean bankruptcy, insolvency, and, for an individual or family, homelessness. Monetary scarcity has pernicious political and social consequences. Historian Destin Jenkins’ incisive volume on San Francisco’s fiscal practices in the postwar era, The Bonds of Inequality: Debt and the Making of the American City, shows how scarce money in the United States has translated to racialized class conflict.
The sociologist Jakob Feinig challenges the dominant view of money as a scarce commodity. His masterful book Moral Economies of Money: Politics and the Monetary Constitution of Society demonstrates that money is an elastic public good. The United States government is a money issuer. It creates and allocates dollars and does not need to tax or borrow before spending. Feinig shows that, for much of U.S. history, money was commonly recognized as a public instrument. Populist political movements, in particular, recognized money as a tool for structuring economic life, not as a neutral means of exchange.
According to Feinig, President Franklin Delano Roosevelt played a central role in obscuring money’s real character. Even though he instituted many democratic and progressive changes in the United States through the New Deal, Roosevelt believed that dollar creation should be the responsibility of technocrats at the Treasury Department and Federal Reserve and that Congress should function as though dollars are scarce. The New Deal’s rural electrification program exemplifies this approach to money. Roosevelt and his allies rejected grant funding and offered only loans for electrification projects that aimed to bring light and power to the countryside. The New Deal’s rural electrification efforts were successful, helping set up hundreds of electric cooperatives to serve the countryside and making near-universal electric service a reality. The reliance on credit, however, saddled these democratic utilities with substantial debt that today impedes their decarbonization efforts and thwarts effective local control. Since the 1930s, the public and our elected officials have generally treated money as a limited commodity. But the Inflation Reduction Act of 2022 offers a glimpse of money as a public instrument. Is this law the breach in the dam of scarce money?