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Analyzing the Constitutional Theory of Money: Governance, Power, and Instability

Published online by Cambridge University Press:  01 March 2018

JAMEE K. MOUDUD Open the ORCID record for JAMEE K. MOUDUD [Opens in a new window]
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Abstract

At the heart of the constitutional theory of money is the argument that money is central to governance. This article explores the ways in which the core mechanism of the publicly undergirded monetary system, involving the incentivization and disciplining of private investors in the money creation process, creates its ‘fiscal value’ and generates both power struggles and possible instability in the unit of account. This twin dynamic of power and instability is intrinsic to a longue durée analysis of money. It is argued that since the current jural relations allocate money and power in particular ways, the basis is created for potential future political challenges to the status quo ante, thereby creating instability. Further, the article emphasizes the centrality of the indeterminacy criterion which is at the core of the critical legal studies (CLS) framework, and its intimate connection to Keynes's notion of uncertainty. The indeterminacy/uncertainty nexus is used to explore how currency stability is determined or undermined by expectations, power struggles, tax contestations, and broader policy frameworks. Finally, the article relates this monetary theory to the literature on state-led industrialization and shows how such a constitutional money theory of industrialization is an alternative to the New Institutionalist perspective which emphasizes the centrality of ‘clear and well-defined’ property and contracts in order to create an ‘efficient’ economy.

Keywords

critical legal studiesgovernancelaw and economicsmoneytaxation
Type
INTERNATIONAL LEGAL THEORY: Symposium on International Law and Political Economy
Information
Leiden Journal of International Law , Volume 31 , Issue 2 , June 2018 , pp. 289 - 313
Copyright
Copyright © Foundation of the Leiden Journal of International Law 2018 

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References

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51 For example, do strong tort laws prevent firms from flooding the market with a large number of low-quality and potentially harmful products? How do labour laws affect distributional struggles and thus unit labour costs? Are there import tariffs in place that expand the domestic market by restraining the sales of foreign firms? Do industrial policies promote export markets? Is the country embedded in a free trade zone, which subjects domestic firms to more efficient foreign firms and thus shrinks the former's market shares?

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53 This was exactly the experience of the Mitterrand government in the early 1980s. See J. Birch, ‘The Many Lives of François Mitterrand’, Jacobin, 19 August 2015, available at www.jacobinmag.com/2015/08/francois-mitterrand-socialist-party-common-program-communist-pcf-1981-elections-austerity/ (accessed 19 January 2018).

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56 Export promotion and protectionist policies would raise the foreign demand for domestically produced goods relative to the domestic demand for foreign goods. Other things being equal, this situation would appreciate the value of the domestic currency. Finally, note that capital inflows would also tend to appreciate the currency.

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73 See Chang, supra note 57.

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77 See Desan (2014), supra note 21, at 153 and 165.

78 Ibid., at 218 and 219.

79 Ibid., at 243.

80 Ibid., at 255

81 Ibid., at 261.

82 Ibid., at 264.

83 Ibid., at 281 and Ch. 7 more generally.

See G. Alexander, Commodity and Propriety: Competing Visions of Property in American Legal Thought 1776-1970 (1997) for parallel ideological processes occurring in the US with the growing commercialization of society.

84 See Desan (2014), supra note 21, at 281.

85 Ibid., at 269 and 270.

86 Ibid., Ch. 8.

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88 See Desan (2014), supra note 21, at 387.

89 ‘Money, when paid into a bank, ceases altogether to be the money of the principal; it is then the money of the banker, who is bound to return an equivalent by paying a similar sum to that deposited with him when he is asked for it. The money paid into the banker's, is money known by the principal to be placed there for the purpose of being under the control of the banker; it is then the banker's money; he is known to deal with it as his own; he makes what profit he can, which profit he retains to himself.’ (Foley v. Hill (1848) 2 HL 28, 38–9; 9 ER 1002, 1006–1007). Cited from Desan (2014), supra note 21, at 393 and 394.

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93 Ibid., at 369.

94 Ibid., at 329

95 Ibid., at 370.

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99 Ibid., at xiv.

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108 See Desan (2014), supra note 21, ‘Conclusion’.

109 Ibid., at 418.

110 See supra notes 57 and 58.

111 See supra note 60.

112 C. Schonhardt-Bailey, From the Corn Laws to Free Trade: Interests, Ideas, and Institutions in Historical Perspective (2006); P.S. Ho, Rethinking Trade and Commercial Policy Theories: Development Perspectives (2010).

113 See Desan (2014), supra note 21, at 328.

114 Ibid., at 418.

115 See supra notes 57 and 58.

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118 See Desan (2014), supra note 21.

119 See Chang, supra note 57.

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123 Ibid., Ch. 7.

124 E.E. Baptist, The Half Has Never Been Told: Slavery and the Making of American Capitalism (2014); S. Beckert, Empire of Cotton: A Global History (2015).

125 In each case the correlation coefficients linking the two variables exceed 0.8 and are highly statistically significant.

126 ‘Slavery is a legal relationship: It is precisely the slave's bundle of jural rights (or rather lack of them) and duties vis-à-vis others (he can't leave, he can't inherit, he has restricted rights of ownership, he can't insist on his family being together as a unit, etc.) that makes him a slave’. From Gordon, supra note 5, at 103 (emphasis in original).

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129 Ibid., at 109.

130 See, e.g., D.A. Kysar, Regulating From Nowhere: Environmental Law and the Search for Objectivity (2010), and references cited therein.

131 E.P. Thompson, The Poverty of Theory and Other Essays (1978), 96 (emphasis in original).

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