CURRENCY IN CRISIS

BY EMILY GILBERT

19 Scapegoat 20 Fabrica Mundi... Let me begin with two recent stories about currency. Th e fi rst involves the new design for the Canadian $100 bill that went into circulation in November 2011 [see fi g. 1]. Th e reverse of the bill features a woman scientist peering into a microscope. Controversy erupted when a report released through a Freedom of Information request revealed that the image had been altered in response to feedback from focus groups. Participants had reacted negatively to the original image of the woman because she appeared to be of Asian descent. Some had expressed con- cern that the image stereotyped Asians as excelling in the sciences, while others were opposed to repre- senting only one ethnic minority on the notes. As a result, the image was changed so that the woman on the currency now has Caucasian features—in the words of a Bank of Canada spokesman, she is of “neutral ethnicity.”1 Th is “whitewashing” of the currency was criticized from many fronts. Th e Gov- ernor of the Bank of Canada, Mark Carney, was compelled to apologize; in his remarks he sought to reassure that, “Our bank notes belong to all Can- adians, and the work that we do at the Bank is for all Canadians.”2

Th e second story comes out of the the richest 400 Americans have the same , where currency has net worth as the bottom 50 percent of been used as a tool for social protest. Americans (or 150,000,000 people) [see Th e Occupy George movement encour- fi gs. 2–6]. Another infographic shows ages protesters to circulate “dollar bills that the average ceo earns 185 times stamped with fact-based infographics” more than the average worker. Yet an- fi g. 1 that inform “the public about Ameri ca’s other uses a pie chart to illustrate that daunting economic disparity.”3 Th ere income growth disparity is wider today are fi ve stamps available that make visi- than it was during the Great Depression. ble an array of facts. One illustrates that The Occupy George website provides

21 Feature 22 Currency in Crisis data to support all of these assertions. two examples affirm that states and cur- ideas of the “imagined community” of not a run on the currency, which would Templates are also provided so that you rencies are intimately imbricated, even the nation.8 As states wrestled mono- lead to its collapse, and the failure of can overprint your own paper money in as this relationship is unravelling. poly over currency out of the hands of their own economic and political system. a photocopier; there is also information A detour through the historical rela- private banks, it was adorned with im- To assert that the circulation of na- as to how you can order custom-made tionship between Western states and cur- ages such as parliamentary buildings, tional currencies is rooted in public trust stamps with these designs. rencies provides some insight into the figureheads, flags, and coats of arms.9 is not to suggest that this relation ship is Both of these stories point to cracks contemporary challenges to currencies But these images were not just senti- unproblematic. Marieke de Goede has in the state currency. In the first ex- and the breakdown of confidence in men tal: they both appealed to and legi- documented the complexity of Western ample, the Bank of Canada strives to them. Currency did not originate with tima ted public trust in the currency. finance over the last several centuries, affirm its capacity to speak to and for the state, but by the twentieth century Confidence in the state was absolutely and the heated debates over currencies, “all Ca nadians.” Yet the Bank demon- it was axiomatic that currencies were essential for the smooth circulation of credit, debt, risk and speculation, which strates, through its mistakes, that it is within the domain of the state, and the money, especially with the rise of paper tend to be exacerbated in moments of unable to do so. It makes the double printing and issuing of money was an currencies. For what else, other than crisis.14 In the maelstrom of the early error of submitting to the concerns accepted marker of state sovereignty and trust, would make it possible for other- half of the twentieth century, this was raised by some individuals in their focus territorial power. Eric Helleiner, who has wise worthless pieces of paper to circulate? certainly the case, as new configurations groups, but then of presuming that the undertaken the most extensive research The rise of states, national currencies, of currency and the social contract em- solution to these concerns is whiteness— of national currency formation, indi- and liberal markets have thus gone hand erged. In many instances, the overprint- a “neutral” ethnicity—that is represent- cates that England is usually accredited in hand.10 States have a foundational ing of currency was both a cause and ative of “all Canadians.” As Minelle with establishing the first homogenous role in producing what Marx called “fic- consequence of spiralling economic pro- Mahtani suggests, in this colour-blind national currency in the early part of titious capital,” that is, tokens of value blems. The interwar period was especial- configuration, “white is non-racial,” and the nineteenth century.6 The spread of that are not backed by any metal re- ly fraught. European countries were it erases the contributions of all other national currencies followed relatively serve.11 It was common practice for plagued by different combinations of groups to Canadian society.4 In the sec- quickly in parts of Europe such as France is suing banks to circulate far more in hyper inflation, deflation, recession, un- ond example, the Occupy George move- and Germany. The United States and currency than the wealth held in their employment, and of course, in the US ment uses money as a form of social Japan had created territorial currencies reserves, e.g. gold ingots, which pro- there was the stock market crash, the media to discredit the pretense that cur - by 1914. In the interwar period, other vided them with an income-generating impact of which resonated much more rency is universally and equally avail- independent countries in Europe, Asia, loan. With the rise of nation-states, as broadly. A return to a modified gold able. It is precisely the inequalities of and the Americas followed, notably banks became centralized they gained standard after WWI was an attempt to currency distribution that the info graph- those countries, such as Canada, that a monopoly over the money supply, seek some stability. ics highlight, as they make starkly visi- had been part of the British Empire. and gradually took control over other In the 1940s, public debt exploded ble the uneven circulation of money and Another group of national currencies monetary levers, such as interest rates. to pay for the war and its aftermath. its concentration in the pockets of the emerged after WWII, in the newly de- When central banks printed money, Again, governments sought to offset (or wealthy. In this example, it is the fault- colonized countries of Latin America, they were financing government debt, hide) their economic woes by printing lines of class that have prompted a vis- the Middle East, Africa, and Asia. in that the amount in circulation far sur- extraordinary amounts of money, which ceral response. As this brief historical genealogy sug- passed state reserves.12 The creation of only exacerbated their problems. WWII While I do not want to overburden gests, the territorialization of currency national currencies effectively enabled a thus led to another search for currency these examples with meaning, I do think has often accompanied movements for loan to the state—just as the Bank of Eng- stability, which resulted in the imple- that they are indicative of two things. national independence. Indeed, while land was formed in 1694 to lend money mentation of the Bretton Woods sys- First, currency is not just a neutral eco- each national case is different, Hellei- to King William III for his war against tem that pegged Allied currencies to the nomic tool, as the economists would ner suggests that there have been four France. The trick that they play is thus to US dollar, which was in turn pegged to have it, but it embodies cultural, poli- main drivers: the desire to construct turn sovereign debt into public money. gold. The thrust to internationalism, tical, and economic values.5 Moreover, national markets, the promotion of both Or to put it differently, money is a form however, took place alongside the streng- while there has been a tendency for macroeconomic and fiscal goals, and of “socialized debt.”13 This makes pub- th ening of nation-states. As Timothy people to take for granted the money the strengthening of national identi- lic confidence doubly important, for not Mitchell has described, the post-WWII that passes through their hands, these ties.7 The monopoly over the issue of only must the population trust the paper period also marked the rise of the idea examples suggest that people are not so currency legitimized the role of the state. notes that pass through their hands, but of the “national economy.”15 The econ- quick to do so anymore. Second, these In turn, currencies were used to promote they must do so to ensure that there is omy became a geopolitically bounded,

23 Scapegoat 24 Currency in Crisis “knowable, calculable, and administra- huge cracks in the financial system are ble object” in the purview of the nation- being exposed: the economic advantages state.16 States planned their economies, of the ruling classes have spiralled up- through maximizing national outputs wards while the protective scaffolding and gross domestic product. This en- for the vulnerable has fallen. Confidence couraged a new way of understanding in currency, and in the economic sys- the population, and asking “Who is pro- tem more widely, has been shaken. Yet ductive?”17 The state began to show an at no time has the need for this con- interest in protecting its human capital fidence been as necessary to keep the by encouraging productivity. At the system afloat—if that is what is desired. same time, increasing labour struggles The “fictitious capital” that worried also meant that states became more in - Marx over 130 years ago has exploded, terested in reducing unemployment. Thus, especially over the last 40 years. In 1971, we find, after WWII, the rise of the con- Nixon suspended the convertibility of cept of social citizenship, as articulated dollars into gold and brought about the by T.H. Marshall, with the state provid- end of the Bretton Woods agreement ing “a modicum of economic welfare and The connection between currency and security” for its citizens.18 metal reserves was broken. In the words One could say that post-WWII West- of Philip Coggan, “From that point on, ern governments were offsetting their the final link with gold was removed sovereign debt by repaying a public debt and the ability of governments to run through social programs such as pen- deficits, on both the trade and budget sions, healthcare, and bonds.19 Indeed, accounts, was vastly increased. Money for , the monetization of and debt exploded.”22 Yet the problem the national debt, for all its problems, has was not so much that money was no nonetheless “opened the way to seeing longer rooted in gold or silver. Although government itself as a moral debtor, of their value appears to be “natural” or freedom as something literally owed to intrinsic, the value of metals is just as the nation.”20 Redistribution and invest- much of a social construct as paper. ment in the social and built infrastruc- What the metallic anchor had ensured, ture were used to enlist the support of however, was that there was a built-in the population.21 Yet, while there has limit to the system, determined by the been a tendency to romanticize state natural scarcity of gold. provisions in this era, it is important to With the end of Bretton Woods also emphasize that the system continued arose the creation of what Coggan calls to be based upon a precarious founda- “extra money.”23 Some of this was state tion of state debt that indebted the money. As has been common practice population to the interests of the rul- in history, and as has been alluded to ing classes. At the same time, there was above, states produce more money to certainly more scaffolding in place to ease the repayment of their debts; this prop up the system. As national debts— led to the high inflation of the 1970s. and public liability—started to climb, But the demise of Bretton Woods also monies were directed to public inter- reflected the rise of capital markets, and ests. Capitalism was thus made palatable the importance of new financial instru- by smoothing out, to a certain degree, ments such as Eurodollars, Eurobonds, its intrinsic unevenness. and derivatives.24 Susan Strange has In the present crisis we find that the called these new instruments “mad fig. 2–4 25 Currency 26 Currency in Crisis the dis ciplining of indebted economies tive worldview predominate within a through structural adjustment that in- changing geopolitics of world power, sisted upon more liberalization and mar- but the authority of states has dimin- ketization. Demands were also made that ished. They are much more clearly be- government spending be reduced to a holden to markets and private interests, bare minimum. and much less interested in social wel- Similarly, Western economies were fare. What is perhaps especially remark- embracing liberalization, marketization, able about the current storm, however, and reduced government spending. At- is that the responses to the crisis have tacks on labour were commonplace, as generated their own additional crises. another mechanism for disciplining the First, the US and UK have introduced economy. The result is a system that con- Quantitative Easing (QE) to bolster their spires to create more financial expos- economies. This is a form of money cre- ure and vulnerability for individuals, ation, whereby central banks buy assets— with no support structures. The profit- largely government bonds—from finan- seeking interests of capital markets cial firms in order to infuse the economy predominate, with no investment in with currency. These assets are not bought public gains. This is exacerbated by the with currency, but with electronic cre- concomitant rise in consumer debt, dits.32 The assumption is that all the through the role that capital markets extra money created will be destroyed plays in individual lives in the form of once the economy has kicked into gear. mortgages, credit card accounts, and Despite this “fictitious”—and dubious— instalment plans.29 It is not unimport- grounding, QE has appealed to Wall ant that the current crisis was triggered Street because it “props up the stock by predatory financial practices and sub- market and boosts their profits.”33 The prime loans made by private investment impact on individuals and general so- banks.30 The impact has been felt uneven- ciety is less clear, although it is hoped, ly. While the majority of those who have as the US enters its third round, or QE3, figs. 5–6 lost homes in the US have been white, that the stimulated economy will have there has been a disproportionate im- trickle-down effects on the consumer. money.”25 Designed to manage and mini- ation of the dollar led to “a massive net pact on African-American and Latino But as Benjamin Kunkel cogently re- mize risk by taking advantage of the transfer in wealth from poor countries, families, with other racialized groups marks, reading through Graeber: volatility of the market, these “mad which lacked gold reserves, to rich coun- also at high risk of foreclosure.31 monies” now discipline the behaviour tries, like the US and Great Britain, which It is almost unremarkable that the A far simpler and more effective of states. They no longer have the same retained them.”28 The rapid rise in the current crisis has unfolded, given the mo ne tary policy would have been capacity to regulate their own curren- price of gold benefitted those countries conditions for a perfect economic storm for the government to print a new cies, but it is a problem of their own that held gold reserves; in contrast, the that have just been laid out. As with the batch of money, distribute an equal making, and even in their own inter- plunging value of the US dollar drained interwar period described above, war- amount to everyone, then sit back ests and in the interests of their ruling the more impoverished countries, which time spending and debt has spurred eco- and watch as stagnant economies classes.26 As Nigel Dodd observes, the held the dollar in reserve. In turn, the nomic volatility, leading to widespread were stirred to life by the spending result is a huge disconnect that height- supra-national organizations that arose currency devaluation, recession, and and debts were paid down and ero- ens the precariousness of the system: alongside the Bretton Woods agreement— unemployment. Yet today, there is less ded by temporarily higher infla tion. as finance has become more and more the World Bank and the International of a sense of transnational or internation - The inconceivability of such a policy globalized, currency still tends to be Monetary Fund—reoriented their man - al cohesion regarding possible solutions, is a mark not of any impracticability, territorialized in the nation-state.27 date to provide loans to now impover- and there is no new Bretton Woods sys- but of the capture of governments by In the “developing” world, the end of ished “developing” countries. In the 90s, tem in the making. Not only does a a financial oligarchy.34 Bretton Woods and the resultant devalu- their mandate would change again, to much more individualist and competi-

27 Scapegoat 28 Currency in Crisis Indeed, the public interest is secondary the public, and of governments being Emily Gilbert and Eric Helleiner, Nation-States and Money: The Past, at best. responsible to and representative of the Present and Future of National Currencies (New York: Routledge, 1999). Second, banks and businesses have public, has been lost as the bankers and 7 Helleiner, The Making of National Money, 15. been frequently bailed out when they their interests take precedence. Fault- 8 Benedict Anderson, Imagined Communities: Reflections on the Origin and are poised to collapse. Effectively, “pub- lines of race and class are being exa- Spread of Nationalism (London: Verso, 1992). lic debt [has] replaced private debt.”35 cerbated with the increasing inequities 9 Emily Gilbert, “Forging a National Currency: Money, State-making and At the same time, there has been very between the bailed-out and the sold-out. Nation-building in Canada,” in Nation-States and Money: The Past, Present little rescue of individual debtors.36 But, while Graeber’s notion that gov- and Future of National Currencies, eds. Emily Gilbert and Eric Helleiner Homes are foreclosed on, and coercive ernments have a “moral debt” to pay (London: Routledge, 1999), 25–46. measures, including prison, are being the population is dissipating, the solu- 10 Karl Polanyi, The Great Transformation (Boston: Beacon Press, 1944). used to achieve debt repayment.37 Ra- tion is not a return to a more powerful 11 Karl Marx, Capital, vol. 3 (New York: International Publishers, 1959). cial ized communities have been dispro- state, with more control over the cur- 12 This relationship is actually much more complicated, particularly in the portionately affected.38 Moreover, gov- rency and a government that “owes” its present. The Federal Reserve, for example, mediates between the state and ernment programs continue to be cut. population social programs; it is rather private or commercial banks. The Fed makes a loan to the US government In the words of Kunkel, “West ern politi- to rethink this relationship from its by purchasing treasury bonds, but then lends money to US banks, which cians meanwhile excuse their policies foundations. Historicizing the connec- then monetize the debt. See David Graeber, Debt: The First 5000 Years by alluding to the national debt. Austerity tion between the state and currency both (New York: Melville House, 2011), 365. The Fed prints money, but the com- is required, they say, to placate the bond shows how intertwined this relation- mercial banks create “virtual money,” and, as we will see below, there are market—that is, the buyers of sovereign ship has been, but also suggests that many other forms of money creation today, such as derivatives, etc. debt.”39 The public interest is not even it is a historical accident, not an inevi- 13 Nigel Dodd, “‘Strange Money’: Risk, Finance and Socialized Debt,” The British secondary; it is off the table. Or to quote a tability.41 It has been sustained through Journal of Sociology 62, no. 1 (2011): 175–194; emphasis in the original. popular slogan, “The military strength and state violence, dir- 14 Marieke de Goede, Virtue, Fortune and Faith: A Genealogy of Finance banks got bailed out, we got sold out!”40 ected outward as well as inward. (Minneapolis: University of Minnesota Press, 2005). This brings us back, after a long de- It is time to embrace this lack of con- 15 Timothy Mitchell, “Fixing the Economy,” Cultural Studies 12, no. 1 (1998): tour, to the images with which I began fidence in currency and the state, and 82–101. this paper. Public confidence in curren cy to interrogate the currency that passes 16 Peter Miller and Nikolas Rose, “Governing Economic Life,” Economy is wavering. A (much-warranted) cur- through our hands. Only then will we and Society 19, no. 1 (1990): 5. ren cy crisis looms. Individual and na- be able to see what other alternatives 17 Ibid., 13. tional debt have exploded. All sense of there might be.  18 T. H. Marshall, Citizenship and Social Class and Other Essays (Cambridge: Cambridge University Press, 1950), 6. 19 Benjamin Kunkel, “Forgive Us Our Debts,” London Review of Books 34, endnotes no. 9 (2012): 23–29. 20 Graeber, Debt, 372. 1 Canadian Press, “Asian-looking Woman Scientist Image Rejected for 21 Emily Gilbert, “Money, Citizenship, Territoriality and the Proposals for $100 Bills” CBC News, August 17, 2012 http://www.cbc.ca/news/politics/ North American Monetary Union,” Political Geography 26 (2010): 141–158. story/2012/08/17/pol-cp-100-dollar-bills-asian-scientist-image.html. 22 Philip Coggan, Paper Promises: Money, Debt and the New World Order 2 Erica Alini, “Carney Apologizes for $100 Bank Note Redesign” Maclean’s, (Toronto: Penguin Books, 2011), 236. August 20, 2012, http://www2.macleans.ca/2012/08/20/carney-apologizes- 23 Ibid., 236. for-100-banknote-redesign. 24 Ibid., 109. 3 http://www.occupygeorge.com. 25 Susan Strange, “The Westfailure System,”The Review of International 4 Minelle Mahtani, “In Canada, ‘Non-ethnic’ Is Still the Norm,” The Globe Studies 25, no. 3 (1999): 345–354. and Mail, August 21, 2012, on-line edition, http://www.theglobeandmail. 26 Ibid. com/commentary/in-canada-non-ethnic-is-still-the-norm/article4490657. 27 The euro is clearly somewhat of an anomaly here. There is not enough room 5 Emily Gilbert, “Common Cents: Situating Money in Time and Place,” to delve in to the complexities of this example, but many of the same argu- Economy and Society 34, no. 3 (2005): 356–387. ments around the role of national currencies apply to the euro, but are 6 Eric Helleiner, The Making of National Money: Territorial Currencies in simply transposed to the transnational scale. Where there is a significant Historical Perspective (Ithaca: Cornell University Press, 2003). See also disconnect, however, is in the discrepancy between the currency and

29 Currency 30 Currency in Crisis financial markets—the currency is transnationalized, but bond markets still operate at a national scale. See Dodd, “Strange Money.” bio Emily Gilbert is an Associate Professor in the Program in Canadian Stu- 28 Graeber, Debt, 362. dies and the Department of Geography and Planning at the University of 29 Paul Langley, The Everyday Life of Global Finance: Saving and Borrowing Toronto. Her two current research projects deal with questions relating to in Anglo-America (Oxford: Oxford University Press, 2008), vii. citizenship, security, war, borders, and money. The first is a critical exami- 30 Dodd, “Strange Money,” 182. nation of the ways lives are being valued (or not) in the “war on terror,” 31 Debbie Gruenstein Bocian, Wei Li, and Keith S. Ernst, Foreclosures by from military payments on the battlefield to terrorism compensation to Race and Ethnicity: The Demographics of a Crisis, Report by the Centre for veteran benefits. The second is on the changing politics of the Canada-US Responsible Lending, 2010, http://www.responsiblelending.org/mortgage- border and the ways that border risks are being used to discipline behav- lending/research-analysis/foreclosures-by-race-and-ethnicity.pdf. iour and promote new forms of citizenship practice. 32 Coggan, Paper Promises, 37. 33 Ibid., 5. 34 Kunkel, “Forgive Us Our Debts.” 35 Coggan, Paper Promises, 4. 36 Individual debt for “assets” such as homes and education has soared since WWII. In fact, indebtedness for homeownership was encouraged by the state as a counter to communism. This was a highly racialized script, how- ever, as redlining policies made it almost impossible for non-whites to access loans. See Andrew Ross, “Democracy and Debt,” in Is This What Democracy Looks Like? eds. Cristina Beltrán, A.J. Bauer, Rana Jaleel, and Andrew Ross (2013), http://what-democracy-looks-like.com/democracy-and-debt. 37 Debtors are being jailed in more than a third of US states, often because of legal loopholes whereby they are in contempt of court if they fail to follow up on court summons. See Alain Sherter, “Jailed for $280: The Return of Debtors’ Prisons,” cbs Money Watch, Monday, 23 April, 2012, http:// finance.yahoo.com/news/jailed-for--280--the-return-of-debtors--prisons. html. The American Civil Liberties Association has documented the rise of debtors’ prisons in the US in its 2010 report In for a Penny: The Rise of America’s New Debtors’ Prisons, http://www.aclu.org/files/assets/ InForAPenny_web.pdf#page=82. 38 Bocian, Li, and Ernst, Foreclosures by Race and Ethnicity. 39 Kunkel, “Forgive Us Our Debts.” 40 Notably, the Occupy movement has put forth several initiatives special ly targeted at debt reduction or elimination, such as the Strike Debt movement (www.strikedebt.org) with its Rolling Jubilee project, and the Occupy Student Debt Campaign. See Ross, “Democracy and Debt.” 41 Gilbert and Helleiner, Nation-States and Money; Gilbert, “Common Cents.” figures

1 Bank of Canada $100 bill (http://www.thestar.com/business/ article/1243067--image-of-asian-looking-woman-banned-from- new-100-bills-after-complaints). 2–6 Overprinted $1 US by Occupy George (http://www.occupygeorge.com).

31 Scapegoat 32 Currency in Crisis