What Money Is For: Ann Pettifor

Poca gente conoce cómo funciona realmente el sistema financiero. En su último libro, la economista Ann Pettifor argumenta que las democracias deben recuperar el control sobre la producción de dinero y restringir a un sector financiero fuera de control para que sirva a los intereses de la sociedad.

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Sarah Davison

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During a visit to the London School of Economics in November 2008, Queen Elizabeth was briefed by academics and economists on the global crisis that had recently erupted: “It’s awful”, she exclaimed, “Why did nobody see it coming?”. Queen Elizabeth has an estimated net worth of about $340 million and needn’t worry too much about making ends meet. Yet many of her subjects, as well as the vast majority of the citizens of the world, unfortunately, do. 

understanding moneY 

And the truth was that someone did see it coming. In autumn 2006, a year before the subprime crisis blew up, Ann Pettifor, a South African economist and research fellow at City, University of London, published the book The Coming First World Debt Crisis. Widely ignored at the time, her book proved to be wholly prescient. According to her analysis, at the root of the problem lies a lack of understanding of how money is created and how the financial system operates. 

the casino economy

As she explains in the brief but comprehensiveThe Production of Money (Verso Books), contrary to what most people believe, money is not a scarce commodity like gold or silver. In fact, money and the rate of interest — a figure based on a relationship of trust between lender and borrower — are social technologies. If the supply of money is well managed, there should be no shortage of it, and consequently no need for big capitalists as the only source of investment for the whole of society. However, during the last four decades, big finance has taken advantage of the ignorance of the wider public. In collusion with governments and the ruling class, big banks and financiers have effectively run amok and treated the international markets like a huge casino.

Ann Pettifor (mild South African accent): Absolutely we should have seen it coming. Karl Polanyi wrote this book in 1944, The Great Transformation, and explained the rise of fascism. And [he] said that what happens if the governments try to detach markets from regulatory democracy, i.e. from the oversight of society, and allows them just to do as they please. And of course they then fool around and make a load of money and crash the system every so often, and destroy the lives of thousands if not millions of people. And governments sit on their hands, essentially. 

THE purpose of banking

According to Pettifor, the consequences of financial markets operating outside the real economy without proper oversight or regulation is that their original goal has been subverted.

Ann Pettifor: Now for me, and this is a key issue about why globalization is wrong, which is that you cannot have markets that are detached from society. We’ve had markets for five thousand years, but they’ve been embedded in societies. They’ve worked for us. We’ve done this because we manage this wonderful thing called a ‘market’ in the interest of society and we’ve always regulated markets. Now, under globalization, markets are self-regulating. They look after themselves. It’s a really awful ideology, in my view, and it goes back to laissez-faire, and to the idea that you shouldn’t interfere in markets because markets know best and all that nonsense. Now we’re allowing markets to fight to the death on their own there, except when they get into trouble, then of course taxpayers have to bail them out. And they are fighting to the death and they’re destroying the economies.


Perhaps the main point of Pettifor’s books is the little known fact that it is private banks who create 95 per cent of the money supply, basically by lending money to borrowers. Of course, they do not mint coins or print notes — only central banks can do that. But banks have the capacity to bolster the economy deciding to whom they lend money and under what conditions. But instead of fostering the productive real economy, the financial sector chooses to abuse this faculty to amass wealth through dubious if not illicit maneuvers.

Ann Pettifor: If you engage in speculation in international capital markets, you don’t make profits, you make capital gains. And capital gains rise exponentially. Who the hell wants to engage with the land and who the hell wants to engage with labour when you can not even dirty your hands and make loads of bucks effortlessly? That’s what’s so wrong about what the finance do. It doesn’t do anything. We invented banks for the purpose of lending into the real economy. That’s all what banks are for, right? The banks bankrupted themselves through their own speculation because the Glass Steagall allowed them to go crazy and go gambling. And we just sat back and allowed that to happen. 


In a context like the current recession, Pettifor urges the public sector to increase its investment, rather than cutting back on it. This would help create jobs, which will in turn generate income in the form of tax revenues and consumption by the public in a virtuous circle. But, Pettifor complains, the financial sector lobbies the governments not to invest in the real economy for fear of inflation. Why? Because inflation diminishes the real volume of people’s debts, which is in fact the main asset of the big capitalists.

Ann Pettifor: The City of London hates inflation with a hatred that you would not believe, OK?. So they want deflationary policies because it increases the price of their asset, which is debt. It’s the debt they want to be expensive. And if there’s a touch of inflation, they go berserk and policymakers go berserk. 

Ignorance is doom

And if the causes of the crisis are so evident and the misdoings so outrageous, why aren’t we doing something to fix the system? Pettifor has her own suspicions.

Ann Pettifor: Economists don’t include money, banks or debt in their models. And they don’t teach money, banks or debt in their curricula. So if you have a complete blind spot for what the finance sector is doing, then you don’t see it when it crashes. And you have no answer to what to do when they fall down. So my book is fundamentally a massive attack on the economics profession. Now I have this — and it is a conspiracy theory, I have to admit to one although I don’t believe in conspiracy theories — I have this idea, the economics professions have done a deal with the finance sector. You do as you please, we promise to ignore you, right? We’re not gonna teach money, banks and debt and you go out into the world and screw up the world and then we’ll stand aside when the Queen approaches us and asks why didn’t you see this coming? And we’ll say, “Oh nothing to do with me, guv.”

446 Oct ESP Cover

Este artículo pertenece al número de Octubre 2022 de la revista Speak Up.

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