**Every Tuesday night, we gather online to listen to the episode and discuss it among friends. Everyone is invited to this community building event. Bring your insights and questions. REGISTER HERE for Tuesday, March 25th, 8 pm ET/5 pm PT



Steve’s guest is Michael McCarthy, author of 'The Master's Tools: How Finance Wrecked Democracy and a Radical Plan to Rebuild It.' They explore McCarthy's analysis of financialization as a deliberate class project to dismantle working-class power and exacerbate inequality.

They look at the historical shift from a robust Social Security system to a privatized, financialized pension system as well as the rise of neoliberal policies post-1970s, facilitated by monetary policy changes (anybody remember the gold standard?)  The conversation goes into the failure of both traditional and direct democracies to serve the working class.

The episode also weaves through MMT perspectives and the impact of government policies. They touch on the potential of public banking and democratizing finance to empower the working class as well as the challenges of implementing these ideas.

Michael A. McCarthy is an Associate Professor of Sociology and Director of Community Studies at the University of California, Santa Cruz. His book Dismantling Solidarity: Capitalist Politics and American Pensions since the New Deal was awarded the Paul Sweezy Book Award as well as an honorable mention for the Labor and Labor Movements Book Award. His most recent book is The Master's Tools: How Finance Wrecked Democracy (And a Radical Plan to Rebuild It). Mike has written for the Boston Review, The Guardian, Jacobin, Noema, and the Washington Post.

@its_mccarthy on X 

: All right, folks, this is Steve with Macro N Cheese. Today's guest is a new guest. I have Michael A. McCarthy, who wrote this book, The Master's Tools, How Finance Wrecked Democracy and A Radical Plan to Rebuild It. And I got excited about this.I saw it out there on the interwebs, and I went ahead and bought it, and I reached out to him, and he was kind enough to take me on and be willing to do this interview. Mike is not an MMTer. But the thing I loved about our conversations is Mike said, "Hey, man, send me what you got.I'm interested in learning, you know." Not a full cup, right? How many people out there are not a full cup? This guy is not a full cup. And that just absolutely made me ecstatic.So let me go ahead and introduce him. Michael A. McCarthy is an associate professor of sociology and director of Community Studies at University of California, Santa Cruz.His book, Dismantling Solidarity: Capitalist Politics, and American Pensions since the New Deal, was awarded the Paul Sweezy Book Award as well as an honorable mention for the Labor and Labor Movements Book Award. He has written for the Boston Review, Jacobin, Noema, and the Washington Post. And here today to be on Macro N Cheese as my guest, Michael McCarthy.Welcome to the show, sir.

: Thank you so much for having me.

: Absolutely.So, you know, with all that said, you know, one of the most important things that we're doing here at Real Progressives, this podcast in particular, is an arm of us, Macro N Cheese, is to synthesize socialist tendencies and some of the theories that fit within today's conditions that we're experiencing and leverage Modern Monetary Theory (MMT). And you're talking about democratizing finance.And I found it fascinating because a lot of people have all the right, you know, names for the problems, and almost no one has the right names for the solutions. I believe the MMT comes to this understanding the plumbing of the system.But I believe that the class component is incredibly vital to weave into that, even though it kind of muddies the water once you get away from the base case of the plumbing and start adding political economy over top of it.But honest to goodness, anybody that's watching what's happening today can clearly see that not only is the economy not working for Main Street, but neither is the government. Nothing about society right now is working for the working class. And you took a crack at it. This is. This is really impressive work.You know, a lot of great write ups on the back. You got some good people tipping their hat to you. Can you just tell me a little bit about,before we get into the book, tell us a little bit about yourself and what your tendencies are and where your philosophies start with before we just jive into the book?

: Let me think about how to frame that. I guess I would say I'm somebody that did construction work after high school and kind of stumbled into academia in a way.I got into it because I was interested in labor politics. I was interested in anti war politics.And it was a space that kind of provided me the resources and tools to kind of think critically and to formulate my own opinions about those things.But, you know, going back to early adulthood, I've always had working class issues and issues of the working poor more broadly, kind of centering what I'm interested in and kind of driving what I've been interested in. And so I went to grad school with kind of that in mind. I wanted to do something about labor politics, so I wanted to do something about unions.I wanted to do something about forming unions and fighting back and winning.And you know, as people do in grad school, I kind of fumbled around different topics, read different things, and eventually I started doing some work on pensions.I started getting interested in the pension system and how we went from this moment in the 1930s, where the possibility for a robust, universal Social Security program was reversed in a way. And we ended up with what we have now, which is a like, heavily privatized, financialized pension system.And so basically in grad school, I started learning about pensions. And after six months of diving into the nitty gritty of how these things work, I felt like I had sunken costs. So I had to continue working on it.And I ended up basically writing this book, Dismantling Solidarity, which is really all about how that transformation happened and why we ended up with the system that we have today, which is HUGE pools of worker finance that's basically managed by other people, oftentimes against the interests of the working class itself. And that's kind of what got me interested in financialization and this kind of murky, shadowy world of Wall Street. That is my background.And so that book, Dismantling Solidarity, even though it's about pensions. And it's historical.And, you know, it kind of compares these three different big episodes, like one, right after World War II, why we adopted private pensions instead of expanding the pension system, then why those private pensions were financialized and invested in ways that mimicked Wall Street rather than invested in ways that were explicitly pro-worker.And then the last episode, how we went from a defined benefit private system to what we have today, which is principally what we call a defined contribution, or 401Ks. It's really connected to the, to the book that you read.And I really appreciate you, you know, picking it up and reading it, because the system that that history produced is the problem that the book tries to tackle.Now we have this system where not only do the elite own huge chunks of their wealth and financial assets, but actually the working class is tied to that system as well. And what are the implications for that? And how does that sort of throw up new possibilities? So I guess that would be my background.

: No, I, I really appreciate the answer. I mean, that's fantastic. It gives me a basis from which to move forward. And, you know, your book is really targeting democratizing finance.I mean, not to boil it down to, like, just a statement, but that is, in essence, what it is. And we talked a little bit off-air about how we live in an oligarchy. We don't really live in a democracy that most people think we're saving constantly.And that mismatch of expectations and understandings of the world in which we live also fundamentally causes people to ask really silly questions that the answer's right in their face. And I think they're scared to see it for what it is. And I think, I mean, I know I am. I've got kids.The idea of staring this in the eye the way it is is terrifying. And you don't want to talk about it in polite society because now you're talking about what do we do with this? And you took a shot, man.You took a shot.I guess we'll start off and say, how do you think financialization has kind of shaped what little bit of democracy, this bourgeois democracy we have in this country? How do you think it's impacted that? And what do you think its relationship is between democracy and capitalism at this point?

: Yeah, that's a really important question and a really big one. I guess I would. you know, this is more or less echoing what you just said.I would just note a bit of reservation about the standing of democracy in American history at any point. Yeah, I don't think we've ever actually had a democracy. We've always in some way or another had an oligarchy.The large bulk of decisions that are made that affect the large bulk of the population in this country are made privately by people who have power because they own corporations, they own large amounts of assets and wealth. And that's baked into the system. It's baked into the Constitution, and it's baked into how our property relations are set up.But that said, there have been periods in the history of capitalist democracy, not just in the US but around the world, where working class people have been able to fight back through forming things like social democratic parties and labor parties and socialist parties and through building up unions, as you know, especially is the case here in the 1930s and 1940s and 1950s. And those moments, in a way, provided some important checks on capital's one directional rule of politics.I think financialization comes into the story because as labor in the United States and also around the world, you know, the story of financialization, its rise happens simultaneously with the decline of labor, both in the United States and elsewhere. But as labor goes into decline, the power of finance rises.And you can see the kind of pivotal moment around the Volcker Shocks in the 1970s and early 1980s, which really opened the door to what we have today. And you know, maybe one of the more less obvious things is that has actually been really fundamental for politics.Typically when we talk about finance and when people, you know, debate finance on the left or progressives, we talk about things like its impact on productive investment, whether finance is a source of profits or not, whether finance is the cause of different increased crises and things like that. But as finance has grown, and it's grown in a lot of different ways, it's a share of economic activity, it's grown.It's grown as a share of people's wealth, both the elite and working class. As that's happened, financial institutions and financial actors have become increasingly powerful within formal democratic politics.And they basically use a number of quite specific ways to influence politics. Spending in politics has increased tremendously by the financial sector.So lobbying, campaign finance, just flooding our system with money, which they have huge amounts of. The financial sector has become increasingly entangled with the state, and it's, you know, been entangled in central bank policy.It's entangled in the way in which the state basically functions, and also increasingly entangled with the private sector. So there's an interesting research out there by mainly political scientists.But what some, a couple researchers have found is that if you look at lobbying efforts. So let's say a regulatory bill gets put to Congress.What the researchers have done is they've looked at regulations for a number of different industries. So let's say a regulation for agriculture, a regulation for, you know, manufacturing or automakers, regulation for finance.What they find is that no sector generates as much support from other sectors in fighting against its own regulations than the financial sector. So when financial regulations get put to Congress, other sectors of capital come to fight back against them as well.And it kind of indicates in some ways, like this hegemonic position that finance has within the sectors of business more generally, that they kind of throw their support behind it when it's facing regulations. That's precisely because of the way that finance is entangled with the private sector.And so even the power of non-financial firms kind of enter into the story to defend finance. And there's a third way in which finance has kind of reshaped politics.It's that as wealth and assets in our society have become more mobile and more liquid, right? They're more easily moved around and they're more easily converted into cash.It has allowed the financial sector to more quickly respond to actually wield substantially more threats against the state to exit in facing crisis. And we can see this in a way, historically how this has worked.You know, in situations where capital is more fixed, capital doesn't have the capacity to simply flee when there are demands to regulate or expropriate.We can see this really starkly in the case of Chile in the 1970s, where [Salvador] Allende is elected and kind of pursues this, of socialization and nationalization.There was certainly a financial sector in Chile, but the financial sector were these kind of family firms that were also combined with the agricultural and mining sectors in key ways. So huge amounts of the capital were really fixed. And the result of that was those firms had to stay and fight. And that's precisely what they did.There was a number of capital strikes in the country, the trucking strike, which hurt the Allende government, and eventually there was the bloody coup which resulted in a dictatorship. In situations where capital is more mobile and more liquid, we see different reactions.So I think historical contrast is the Francois Mitterrand government in France in the 1980s, which, much like Allende, pursued a program of nationalization, trying to nationalize different financial institutions, different industries, substantial increase in welfare and a substantial increase in things like wages. The reaction there was different because the French economy was much more import based and it was much more internationalized.The way which capital shut it down was through systematic capital flight, disinvestment, primarily financial investment, such that the Franc went into a collapse, the government sort of ended up bankrupt, and the simple fleeing of capital was able to shut down the Mitterrand project. And as a result of that, the socialist government had to do a hard reversal towards neoliberalism.So what we see in contemporary capitalism is a combination of these levers of power, which are all kind of rooted in the character of the income producing assets that's at the heart of financialized capitalism, which are financial assets that are mobile and that are more liquid. And that sort of gives the financial sector a unique capacity to simply flee or to do massive sell offs when there is a threat.And so I think, you know, this combination of spending entanglements, the ability to move, all these things have really degraded our political system to the point that in some ways the financial sector is merged with the state itself. And the state is kind of...not to be too crude about this, but the state in some ways is at the behest of these asset managers and these financial actors, not just banks, but large hedge funds, the large asset managers like BlackRock and so on, that are really shaping politics. So that's where I see the kind of democracy story coming into view.Not only was democracy always impaired from the very beginning, but finance capitalism strips away even the little points of leverage that were generated before its rise.

: Thank you. That was wonderfully stated.I want to add a little bit of historical context from the monetary side here, because you've picked out a perfect time frame right there. Before the Volcker Shock was the decoupling of the US dollar from the Bretton Woods Accord.And we went from kind of like that global dollar standard, which was sort of a gold standard, but not really a gold standard. We eliminated that peg.And that peg has a lot of negative externalities, by the way, but we eliminated that peg and we implemented what we call a free-floating fiat regime. And that free-floating fiat regime started in '71 when Nixon took us off the gold standard.And so with that in mind, you can look at the hockey stick of income inequality that started about four or five years later. It really started under Carter. Carter was our first neoliberal austerity kind of president.You know, that was kind of getting us all prepared to tighten our buckles and really start diminishing our expectations of having a life better than our grandparents or our parents. And so even though Jimmy is celebrated for his time building houses, Jimmy was the first one to start the austerity narrative.And it really took off obviously in '80 and beyond with the Reagan revolution.But what it did, the most important thing that, and I'm hoping this is adding value to what you just said, not just being redundant, but what I'm hoping is, is that people can understand that there was something that happened. It wasn't just a random thing. The unpegging of the currency had a huge amount of potential for what it could do.It could either a) serve the people or b) it could serve finance and capital. They knew what was going on, the regular people? Think about how many people actually thought about the monetary system in the 70s.Think about how many people even had a clue what was going on. So all this is going on and capital is saying, "Hahaha, we got access to all this capital."And the government started pointing its direction towards business really heavily.And you have Mont Pelerin [Society] a few years prior and now you've got the rise of the Libertarian/Chicago school, Milton Friedman and all that good stuff bringing their monetarism in.So there was a huge kind of ideological change shift that was going on in the early 70s and propelled through the 80s and we haven't looked back since. But I think the key there is, is that the government, the federal government is by law the currency issuer.Even though it works hand in glove with this kind of pseudo-public, pseudo-private entity in the Federal Reserve, the nation's bank, it's got parts private, parts public. It's kind of the demarcation between public and private. And we just never kept up with it. It just sort of went beyond the working class.The working class didn't really understand what was going on, but business did. And here we are now. It's like I think the MMT angle would be to say that the government could do all these great things.The problem as we've already established, is that the government doesn't serve the people. So these things, what it could do, what we could make it do, they're not happening. And they're not happening because it's not in the interests.You always have to ask whose interest are they serving?And unfortunately there's a lot of people out there with a lot of Pollyanna, "save democracy" and don't really understand fundamentally that government is captured. What is it? The unification of corporation and state is, I believe what we're seeing happening right now. It's called fascism.So anyway, I just wanted to add that in there that the state itself has made a choice because it is the currency issuer. It could choose differently, but it didn't. It chose to go in the way that it went.And if it chooses to go that way, it should tell you who it's serving. It isn't serving we the people. Anyway, I just want to throw that in there.

: No, that's super useful. Oh, go ahead. I'm sorry.

: No, no, no. I just wanted to. You know, it's hard for me.I try so hard to bridge these two things together, and I'm doing it by the seat of my pants to some degree here. But it's an important tie in.I think that that period of time, when you look at what Pinochet did to Allende and that whole Chile experiment, I mean, that was a beautiful thing. You look back and you think to yourself, we could have done great things. But alas, the Milton Friedman school crushed it, killed it.Libertarianism, this Austrian mentality, It's an ideological proclivity to "reward the makers and destroy the takers." You know, as Ayn Rand would have said, it's building off of that same libertarian logic.And I think finance capital is kind of like the highest stage, as Lenin would say. The highest stage of capitalism is this imperialism.And we're seeing that now through the IMF and all the other extensions of the financial system giving these loans with massive structural adjustments and literally forcing countries that are dirt poor to give away their most precious resources in the name of paying off US dollar denominated debt. In any event, I want to bring us back to your book. How do you think that obviously financialization contributes to the inequality?I just laid out what my thoughts were based on the understanding of removing us from the peg and allowing us to spend without concern. Because now we're being backed by, we were always backed by the tax. The currency is never really backed by gold.It was sort of like an exchange of sorts. It was kind of like, you get this for that.But in reality, it's always been the government's proclivity to make the dollar worth what it wants to make it worth. It uses interest rates to dominate and manipulate how the value works, and who's the winners and who's the losers.How do you see financialization in particular in the way you wrote it in the book, contributing to inequality?

: Yeah, that's a really good question. I guess, I guess first I would say that the origins and the flourishing of financialization's lie in essentially a class project of the elite to destroy the working class, or at least to destroy the capacity of the working class to influence politics.This lies in the period of World War II, where there was a real effort of unions coming out of the CIO to mobilize politically not just in the creation of the New Deal programs, but to expand those programs through the creation of things like a universal healthcare system and a more robust universal Social Security system.And those efforts were essentially crushed by incorporating unions workers into a system of collective bargaining over privately employer based run pensions and healthcare plans. And that to me was kind of the moment in which finance starts to kind of re-emerge on a more widespread level.Because the funds that are created in that period end up becoming massive, massive pools of financial assets in the U.S. I mean, just to really put a point on this, by the mid-1970s, pension funds in the U.S. you know, worker funds control 25% of all corporate U.S. equity.They become massive pools of wealth such that the management guru Peter Drucker writing in the early 1970s said that "America is in fact the first socialist country of the advanced capitalist democracies because the workers own capital." Right? But you know, of course there's a huge difference between ownership and control.But we see the next episode being the Volcker Shocks, where this is an explicit anti-working class program essentially to break the wage-setting abilities of unions.You know, at the time, policymakers and folks in the central bank really were working from this cost-push theory of inflation where they believed that, and you know, there's an OECD report kind of laying this out. This wasn't just an American phenomena, it was just as true in other places where neoliberalism took hold.They saw unions as being sort of the drivers of inflation and unions wage-setting capacity as being the drivers of inflation.And so the regime that sort of broke that ability, which in a way, this is what's so fascinating about this story is the Volcker Shocks worked in some ways in spite of capitalist demands. I mean, there were large sectors of American business that hated the Volcker shocks that were significantly hurt by them.They caused recessions and that wasn't good for business. Right? But this essentially created a regime in which finance could get access to markets and money in ways in which their profits could really soar.And so the inequality story underlying this large shift is really one in which as workers themselves, as the things that they're organizing around: their pension funds, their healthcare plans, the homes that they want to buy with their, you know, modest middle-class incomes that they're winning in the post-war period, all these things end up becoming sucked into a logic of finance that actually undermines ordinary people's power and politics, undermines their ability to live flourishing lives in an economic sense. So those pension funds I talked about, they're increasingly invested in ways that chase risk for return. So there's some wild examples.So like the UAW at one time was trying to organize Texas Instruments and it was doing a failed job.And at the time its own pension fund was like heavily invested in Texas Instruments or other times where pension funds are basically investing explicitly into non union areas because they're providing a greater return on the financial assets and so they kind of contribute to a race to the bottom.And the kind of, the best way to put this, the absurd aspect of this all, is that as workers pensions become increasingly intertwined with finance, as more and more money is sloshing around in this fast capital chasing risk for return arena, there's actually an increase in macroeconomic instability in financial crises, there's an increase in kind of business cycle swings up and down. So it contributes in a way to increase precarity and not just a national level, but a global level.And underlying all this, again, it's not only that the elite hold a large chunk of their wealth in financial assets. Workers wealth itself is in financial assets. I mean, most people's wealth is if they own a home, it's in their home.But many people have retirement funds, they have mutual funds that they contribute to that over time become kind of embedded in this system.And why this is also important for inequality is that so much of this wealth is sloshing around in this system that doesn't actually produce any tangible goods for anybody and that draws wealth away from projects that would be good for ordinary people. So projects like affordable housing where I live in Santa Cruz, it's just insane. The housing market here.There's literally nothing affordable unless you're a Silicon Valley billionaire. I don't understand how anybody owns a home here.Things like green infrastructure and green retrofits, things like community wealth, which could be a whole range of things like funding co ops and so on. None of these things are funded because they're not profitable.And the way that finance works, the way that these assets are managed, is explicitly to extract as much profit and as much gains out of their investment as possible. And that to me is what runs against establishing things that create more flourishing lives for ordinary working class people.

: You are listening to Macro N Cheese, a podcast by Real Progressives. We are a 501c3 nonprofit organization. All donations are tax deductible. Please consider becoming a monthly donor on Patreon, Substack, or our website, realprogressives.org. Now back to the podcast.

: I want to throw this at you because it kind of goes hand in hand with the Volcker Shocks, and it also goes with the current inflationary period that we went through where you saw the Fed revert to Volckerism, where they tried to do the whole, let's jack up interest rates again to fix inflation. But here's the problem. You just said, and rightfully so, that most wealth is caught up in financial systems.These people invest in bonds, the safest investment in the world. And if you jack interest rates up, what is that? That's a basic income from the already rich.It's a basic income for wealth that is set to earn an interest. Interest rates. When we raise interest rates, that's somebody's income. And that income is not Main Street.That income is going to those who are super wealthy. Yes. It does, to your point, cross over that line, because pensions have now been heavily invested in Wall Street, and they probably have bonds that they've invested in to hedge against ups and downs in the Wall Street market. But this is all a function of policy, right? Like, somebody made the choice. These aren't things that happen out of nowhere. They're choices.And I don't know if I'm right or wrong on this, but I jokingly say that raising interest rates was payola to the rich to bring prices down. And that was like, all right, you got your hand grabbed. Now get the heck out of the kitchen.But I don't think that's really it either, because I don't think they want them to get their hands out. I think that's kind of the goal, right, is to get rich.And we see it more nakedly transparent here with the Trump administration saying the quiet part out loud.I guess the next question I have for you, which is kind of piggybacking off of what you said, you know, I think about the idea of people really believing that they have a chance, you know? And so what do they do? They become crypto investors. And what does crypto do? Crypto is a true Ponzi scheme, unlike Social Security.People think that Social Security, they're putting their money into a real trust fund, that their physical dollars go into a physical trust fund that stacks them up. They got 1919 hay pennies from granny still in the Social Security system, blah, blah, blah.But in reality, if you've ever seen those kind of road trackers that they put the rubber hose across the road and it goes click, click, click, click when a car runs over it, that's all the trust fund is. Every single penny in Social Security comes from the federal government. When you see it's brand new money, FICA taxes destroy money.They don't save those dollars to destroy, just like every other federal tax, in a fiat system, the taxes are literally destroyed. It's all new money. And so when you think about that, you know they're trying to end even that little ruse.I mean, Roosevelt made a deal with the devil, basically. He knew that creating a trust fund, even though it isn't real, it's not something that can be raided.Sorry, folks, that got those narratives out there. The actual Social Security law is just about the trust fund has the authority to make payments.Change the wording in there and you don't have to lift the cap. You can eliminate FICA and jack up however much money you want to give the people. It's that simple.But because people have been so snowed about how the financial system works, in particular the monetary system. Forget the financial system, the monetary system, how a fiat currency works within Article 1, Section 8 of your and my Constitution.And if you think about that, that fundamental disconnect between people and their government should be all you need to know.They have let us believe that there is nothing in there for us, that it's all austerity, that we gotta tighten our belts, that if we do anything for the people, it'll be inflationary. They've literally got us snowed to the point of doing nothing.And when I think back to this and I think about Bitcoin and crypto, that is a true Ponzi scheme.What happens is the people that have all the stuff, they sit there and hold and then it drops after people sell out and they buy low again and then they wait till it fills back up and then they do it again. And there are big time winners and there's a lot of losers. That is the most true Ponzi scheme of them all.But that seems to be what people think is democratizing finance today. I'm sure there's probably a way of doing things uniquely different, but you know, to me it seems like once again the rich are getting richer.Help me understand what you mean by democratizing. It's not crypto, is it? Or is it?

: No, absolutely not.  Crypto is such a bizarre world and it's just so indicative of the wackiness that has become our modern world.It reminds me in some ways, and Robert Hockett was the one who pointed this out first and I thought it was a really. [I know Bob! Yeah] Yeah.He has this paper where he compares crypto a bit to the banknotes that existed before there was a single dollar in the US in the kind of the wild west of the 1800s, when you had like the Wyatt Earp banknote, you know, all these different notes that.

: Kind of Billy Bucks and Joey Bucks and.

: Yeah, exactly [Jose Bucks] exactly. And the result was just insanity, you know, like they were constantly fluctuating in their value. It was an unmanageable system.And, you know, it was part and parcel why we need to create what eventually became the dollar. But this is just so, I think in just a descriptive level, I think that's kind of how crypto works.It's all these little schemes that are trying to kind of figure out ways to make money all the time at somebody else's loss.I guess I would just say something broader about that because people in the crypto world, and I think this is also true of people in the progressive world and also on the Left who might not even think, you know, probably don't want anything to do with crypto. They frame this as a centralization versus decentralization story. And there's kind of a strand. There's not just a strand.There is a deep current of libertarianism in the crypto world that sees democratizing finance as decentralizing finance, in particular away from the state, but also away from large financial institutions like banks and things like that.And this has, in some ways, decentralization idea has, I would use the word infected, the entire discourse about not just democratizing finance, but democracy in the US and you see it by leading economist.There's this book called Finance and the Good Society by Robert Shiller, which basically makes the argument that democratizing finance is about giving more and more people access to financial markets. Right. So it's like his argument is that the elite are the ones that have access to these markets.The elite are the ones that are benefiting from the S&P 500 going up. The elites are the ones whose wealth is creating. To democratize it, we need to open access. And that's essentially what crypto is trying to do.They're saying, look, the people with access are the banks, are these small groups. Let's create a system that's de tethered from these large institutions where anybody can have access.Of course, it's ridiculous, and it's not in any way a description of how crypto works. The ownership of crypto is even more concentrated than the ownership of just regular financial assets. It's a hugely monopolized system.And as we can see from our own president issuing his own cryptocurrency on the eve of his inauguration. It's typically a way of small groups of people to make massive amounts of money over short amounts of time.And those are precisely the small groups of people who have the capital to set these projects up and to hoodwink other people into sort of participating in them. So I don't think that has anything to do with democracy, in my view.

: Zero.

: It has everything to do with perpetuating the already screwed up system that we're living in. To me, democracy is fundamentally.I'm really trying to break from this centralization, decentralization way of thinking about it, which is oftentimes framed as a public versus private thing. Right. Like centralization is the state, decentralization is private markets, people making free choices.I think that that distinction has actually created some real barriers for us to see that in fact, the market and the state have become deeply intertwined and are almost one and the same thing. Now, of course, we should separate these things out analytically. Yeah, the formal state institutions are different than the market.You know, a bank is different than the Federal Reserve.But there's so many ways in which these things are intertwined that I just don't think it makes very much sense to talk about these as distinct realms with their own distinct logics.The thing that I think is fundamentally missing in both projects to build up power in private markets and power in the state are members of the working class itself, which in the book I call the demos, and I'm using that word because I'm trying to get away from the view of the working class as like this one dimensional group of people that all have kind of similar jobs, or look the same, or have a similar set of interests. The working class is this hugely varied and differentiated massive group of people.It's the large majority of people and they work all sorts of different jobs and live all sorts of different lifestyles and vote for all sorts of different people and walk all sorts of different walks of life. And it's the massive group of people that work to survive that are disempowered in our system.And so for me, I think what is fundamental about the idea of democratizing finance is trying to figure out ways to empower this group of people to actually make decisions about how our investment, both the investment of their own actual financial resources, whether they be pension funds or whatnot, but also the investment of larger pools of finance, how those are actually invested in our society, and to be able to create mandates for public and social investment of finance. And so that's kind of how I think about democracy.It's sort of the ability to deliberate over, to discuss, to formulate your own preferences about, and to make binding decisions and mandates about how finance is actually invested. Because today the way in which finance is invested is deeply detrimental to not just human flourishing, but like our entire social fabric.And so that's kind of how I'm coming at it. And so I think there are real glimmers of hope here, not just in the US but around the world.In the Netherlands, for instance, one of the big public sector retail pension funds, which is, I think it might be the fifth or sixth largest in the Netherlands. Don't quote me on that, because I'm completely going off the top of my head.

: Sure.

: But they've set up basically a deliberative body. And this is new. It's kind of experimental.It's something that's happened over the past year or so where ordinary people who are beneficiaries of that fund are brought together and they're asked to deliberate over and kind of make recommendations about how that fund is investing.And in these processes, these ordinary people have consistently said, you know, we want to invest our funds in ways that don't solely prioritize return over everything else. We want to invest in ways that are more ecologically friendly, invest in ways that are more pro worker and so on and so forth.In the United States, in a somewhat different vein, but we have a number of robust movements to create public banks.So in California, where I'm located, but this is also true in New York and other places, there's the California Public Banking coalition, which since 2019, basically there was a law that was passed to create a pilot program for the creation of public banks in California. And a number of different movements, typically they're coalitions of labor and community organizations have come together to establish public banks.The needle, to the greatest degree, are in places like San Francisco and also Los Angeles, where in both places they're moving through the city council process to do feasibility studies and all that to see whether it's possible. And so in these contexts, the governance of these banks is a real open discussion.The LA Public bank has in their proposals the idea of basically governing this finance through a random selection of ordinary citizens of LA who would come together to talk about financing needs in the city. And so there's real glimmers of possibility. And we see this also at the national level.At the end of 2023, Rashida Tlaib, Congresswoman, introduced the Public Banking Act, which creates a framework for the creation of public banks. And in the act, this was a revision of her 2020 Public Banking Act.In the new version, there's a large area about governance of public banks which explicitly recommends that actually makes determinant that for banks above a certain amount of capitalization, they need to incorporate public deliberation and discussion into how their portfolio is managed. So this is kind of what I mean by democratizing finance.The bringing together of people who are part of the working class, who work in different occupations, who live in different places, who may think of themselves as having different interests, bringing them together to discuss and debate and deliberate over the things that are important to them and the issues in their lives that matter to them, such that they can come to sort of identify common interest and common projects that they can mobilize actual money for. That's what I think is so exciting about the idea of democratizing finance has nothing to do, not one iota with getting rich off crypto.

: Good deal. Raul Carrillo worked heavily with those groups, as did Rohan Grey. Both of these gentlemen are from the Modern Money Network.One of the challenges that I have with the public banking right now, because it's a great concept, okay, a lot of them don't fundamentally understand the United States government as the currency issuer or they think we're drowning in debt. They think we're drowning in national debt. And they play on some of those figments of imagination.You know, the thing that the state has is two things. Number one, it's got the power to tax only in its own unit of account. You notice that it doesn't tax you in Bitcoin.It doesn't tax you in chicken necks, doesn't tax you in, you know, frog legs or, you know, sexual favors even. It taxes you only in US Dollars because what it's doing is it's deliberately creating an obligation payable only in it's Sbarro 50 cent off coupon.You can only pay your taxes in US dollars, and you can only buy Treasuries in US dollars. This is all about maintaining the hegemonic nature. And. And the government has two things that are going that no one else does.And so this makes that public space always different. It has the power to tax and it has the power of legalized force.You can call it legalized violence, it's probably a more appropriate way of saying it. But they both have the power to do negative things to you if you don't do certain things, and those things carry with them real consequences, you know, like jail and losing your home and other such things. And so the state is a key component in maintaining capital's stranglehold on a lot of us.But just imagine, every bank in the United States right now is technically a public bank. It exists by one virtue, and that is a bank charter from the federal government. Without that bank charter, it would be counterfeiting.So in many levels, we could literally create every bank we have into a public bank if we had a government that was actually serving the people instead of capital. And it's the distinction of where money starts that makes public banking the challenge.Because ultimately, where do you get your funds to start a public bank? Do you get it from the federal government? Do you get it from private investors? Do you. Does everybody pool their money?Where does the initial pool come from? Because, you know, when banks lend, they have no real capital requirements anymore. A lot of that's been lifted.They can just keystroke a loan into your account and then you pay interest on it. And that keystroking ability is based on a charter by the federal government. So it wouldn't even be able to do that if not.So you can clearly see the delineation between what is public and what is private. Once you look at who the authorized currency issuer is, it's Article 1,  Section 8 [of the US Constitution] exclusively gives it to the federal government.In fact, the states are prohibited by Article 1, Section 10 to create their own currency. So you've got a currency issuer, currency user paradigm here.Because we don't have the chutzpah, we don't have the power to tackle nationalizing the existing banks. We have to do an end around, it looks like, to do public banks. So there's where I'm in agreement on this approach.I am curious, what is the stumbling blocks you've seen so far in terms of making moves in this direction? Because obviously only the most ardent people really understand public or private banks.You know, only the most willing people are willing to understand a lot of the stuff. You know what I mean? These are complicated concepts. Selling it to a public that is fatigued from work, from the news cycle, et cetera.It's a real challenge. I mean, you get that core group of people that's really excited.How do you make this stick with a public that is literally, by design, been dumbed down?

: Yeah, that's a really important question. And I guess just also going back to your point about issuing currency, that's a great question for financing these things.There's been a ton of debate and discussion about how you actually finance a public bank, how it has to organize its own portfolio in terms of what is invested into things that are profitable versus what is invested to things that are taking a loss. But that's okay because they serve a certain social function.And I think there's a real opening here for a real contribution from folks around MMT to how we actually think about long term term finance. But this is just a note of interest in your point there.But to go directly to your question, how do you actually interest and excite people around these things? Yeah, I would say that banking is kind of an intrinsically uninteresting thing, as is pensions.You know, the first thing I studied, you know, as our asset managers, I guess I have this really bad proclivity of getting interested in uninteresting things.But I guess this is what I would say about that, is that the possibility of bringing people together to discuss and deliberate something is a really exciting one for me.And so when I talk about democratizing finance, I try to contrast the version of democracy that I have in my brain with two more common versions that I think most people think about when they hear that word. So I think when people think about here democracy, they typically think about just like electing representatives.You go to the ballot box, it's the time of year again, or you don't, and you choose the person that you think is going to best represent you. And then you kind of, you don't really have a say in anything for the next four years.I think that idea of representative democracy, we can see this laid out in some really important historical work about the founding of America, was always intended from the outset, I would say, and I want to emphasize the word intended. It was intended by the American founders to create an oligarchy and an aristocracy, not to create genuine public power.And so I'm an extremely skeptical of representative democracy in general. I think representative democracy, in fact, by design, it produces elite rule.So the way the left and progressives have responded to this is, you know, think back to Occupy Wall Street in 2010.Think back to the participatory budgeting experiments which are still going on in places like Brazil and in other parts of the world where you have large, open, direct democracy, right? Where you have these large groups of people who come together and who try to make decisions on the basis of things like consensus.I remember when I was at Occupy Wall Street back in 2010 and somebody was talking, and then the group was so large that people had to echo the thing that was talking across the crowd. So Somebody would be like, "we think the banks shouldn't have been bailed out".And then the next line of people will say, "we think the banks shouldn't have been bailed out. We think the banks..." you know, and the message goes across the crowd.And I think there was like some hope around some kind of anarchistic consensus based model of democracy around that time, which I think was a bit Pollyanna-ish. I'll say it like that, that I think that form of democracy has real limitations. One, is that you're dependent on people who want to show up.So lots of people don't go to those meetings because turns out you don't actually have a lot of power. There's too many people and it's hard to like get a point across. You can't really hear anything.The other is that these large deliberative, direct democracy, open democracy experiments tend to be dominated by a small number of people, right?Like over time, the people who are showing up the most, who have the strongest will, who are kind of having a natural proclivity to politics and power games, they end up being the ones that are kind of calling the shots behind the scene in the name of consensus. So the Left's best option, this kind of direct democracy thing, I don't think is so great either. So what's left for democracy?Well, I think that actually there are some very, very hopeful things that we can see going all the way back to ancient Greece, where if you look at ancient Greece during its period, which is called the radical democracy period, almost everything in places like Athens in particular, were governed by these randomly selected groups of people.And they had these devices called the claritarians where you would go and put marbles into these large stone devices which could produce a random selection outcome, right?They randomly selected people to do everything from maintaining the roads to setting up temples and cleaning them after their festivals, maintaining the prices in the market, making sure that the rentals for harp players didn't get too high or you know, like everything was managed through these randomly selected bodies. Similarly, juries and the criminal court system was also run that way. And that's the one thing that we keep from that period.I think that kind of getting directly to your point about how do you excite people about this? That to me is how you excite people about it.Randomly drawing people together to discuss and deliberate specific issues that are related to financial allocation in their particular place.

: Can I jump in here?This is really exciting because one of the things that from an MMT perspective that we talk about, and I want to apply what you're saying right here and let you get back to what we've been saying. There's something called a Federal Job Guarantee that MMTers advocate for heavily. Because people want work, they want to be useful in their community.It's not just like so they can do something for the capitalists. They don't want to be alienated from their work. They want to do something that is fulfilling.And the idea of creating a local job for them within the community, that serves the community is something that the MMT community talks about regularly. It's a core element to solve unemployment, to eliminate unemployment forever by federally funding it and locally administering it.But what you're talking about with that randomness and things like that, I have always said that if you get your local, local, communities together and your local townships or however your area is broken out, you allow the financing to come from the federal government, which means, yes, it is still centralized, but it is being given to the state or to the municipality to really hire people to do whatever the people vote to do. And so you could technically have local random things to choose. What do we want in this community? What do we need in this community?What are our needs right here, right now? And you have the funding to fund any one of those jobs.And so rather than having to drive three hours away to some job that you're completely alienated from, you're building some widget and a big thing that you could never buy to begin with, blah, blah, blah, all the other alienation stories, you're now serving your next door neighbor, you're getting to know the people in your community and you care about them again. There is something about touching grass, you know what I mean? There's something about being a community.And by allowing that, I think that, by allowing that, I think that it could play off of kind of the randomness that you're talking about to bring people together at the local level anyway, just something exciting.Because if you have a job guarantee tied into this public finance and this approach that you're talking about with, if you expanded that to include things like work, employment, then people who have disabilities, or people who are artists and they're always looking for a UBI, [Universal Basic Income] what does the UBI do?It enables the capitalist class to suck more of your income away through price gouging and other tools of the trade that they use to suck whatever loose changes out of the poor. So the opportunity to eliminate them from subsidizing bad wages is a job guarantee.And I think something like this could be done in a very similar fashion to what you're calling for within this finance model. It just. I wanted to add that in because I think there's so many cool synergies.

: In the book I make the case a little bit. The last chapter is called Democracy on Fridays.And the basic argument is that taking what you're saying a step further, what if we make the work of democracy paid work, right? Federally paid work. Let's create a four day work week. Fridays are the days for democracy.This is the day in which you go participate in your randomly selected deliberation pool that's paid. You're getting fair wage for it. And why not? Like, this is the lifeblood of our civic society.Understanding how we kind of connect with one another and understand our shared interests and our shared enemies.And in some ways the context that we're living in now is so atomized and so isolated that this is precisely how you get people interested in these issues, right? This is how you get people interested in banking, for instance, or in their pension funds or in co ops and interested in monetary theory.I think there's real hope there for creating a real public interest in these public issues. I should say that there's been some interesting experimental studies.These are often called things like people's assemblies, or if you look in the literature, the more technical stuff refers to them as mini publics, these randomly selected groups of people who make deliberations over and then judgments about things. And there's been a lot of really interesting research about them about whether they're effective and whether they generate good decisions.And so lots of really, really interesting stuff is coming out of the literature, mainly in political science, but also in economics.And one of the things that some researchers have found, which I think is quite interesting, is that if you look at, and this is done through like experimental research, but if you look at messaging that is sent to the public from randomly selected citizens or randomly selected people, just like you and me, versus messaging that's sent to the public from politicians or business leaders, or people who are leaders of social movements, or people that are leaders at unions, or people that are in some sort of institutional role, people in general see the messaging from ordinary people as much more legitimate.So we have some experiments essentially where like a group of people just like you were brought together to discuss the issue of environmental change.This was the conclusion that they came to to versus that same conclusion being like your local business, your local chamber of commerce representative thinks this about this. People see the deliberations and conclusions of other people when brought together randomly as more legitimate.And I think that speaks in a way to, 1) both how you get people excited about this stuff, but  2) to people's complete disillusionment with anybody that they see as occupying a position of power or a position of political leverage. We're in a moment where we need to figure out ways to engage and activate ordinary working class people in politics.And I think there's a lot of potential with this one.

: I think that's fantastic. This is all making me think very, very hard. We're about at time.Is there anything that we didn't capture about your book or the essence of it that you feel would be worth capturing to take us out here? 

: Hmm, it's a good question. Yeah, I think we covered most of it. I guess I would just say that this is really a book that is a combination of things.It's trying to give us the tools to understand our current moment. What I call in the book our current conjuncture. What are the main problems?What are the kind of main social forces in politics that are making it so we're entrapped by these different crises of investment? And then it tries to offer a plan and it comes with significant risks. It's hard to say what the future should look like like. Right?But the plan that I try to lay out, I hope it's useful in some way and I hope if not replicated on some one to one basis, I hope it at least gives people kind of interesting ideas to work off or things to engage with and to debate about.

: No, absolutely. A gentleman that we are going to be interviewing next week, Randall Wray.He is wonderful, one of the OGs of MMT and he was taught by an economist named Hyman Minsky. And they talk about instability and all that stuff and the Minsky moments, if you ever want to just dig in. He wrote a book called Why Minsky Matters.And I would just highly recommend taking a look at that at another time. And it might be an entryway into the stuff I'm talking about and love to work with you in the future.Real Progressives is actually a nonprofit and we do, unfortunately, not nearly as much as I would like it to do.But one of the things we do have the opportunity to do is to put this podcast out and work with great authors and other practitioners and thought leaders to bring these ideas to fruition. We'd love to make some practice out of this and do something with it. The ideas in this book are great.Love to be able to build some bridges and find some real opportunity to make an impact. So I really appreciate your time here, man.

: I really appreciate being on the show.You know, MMT is not the world I really occupy in a direct way, but I'm always excited about learning from different people about the things that make them excited and the things that they think that we need for a more just and flourishing life.

: Absolutely. All right, man. Well, listen, thank you very much for being on the show. My name is Steve Grumbine. I am the host of Macro N Cheese.We are, as I've stated, part of Real Progressives, which is a 501(c)3, not for profit. That means your donations to us, which we live and die on, are tax deductible. So please consider becoming a donor.You can go to our website, realprogressives.org to donate right there. You can go to patreon.com real progressives to donate.Or you can go to our Substack, which is real progressives.substack.com so on behalf of my guest, Mike McCarthy, myself, Steve Grumbine, on behalf of Macro N Cheese, we are out of here.00:57:17 Production, transcripts, graphics, sound engineering, extras, and show notes for Macro N Cheese are done by our volunteer team at Real Progressives, serving in solidarity with the working class since 2015. To become a donor please go to patreon.com/realprogressives, realprogressives.substack.com, or realprogressives.org.