Money Is Politics.

Kirshner, Jonathan (2003) “Money Is Politics.” Review of International Political Economy 10 (4): 645–60.
Shaun Balderson

In ‘Money Is Politics' Jonathan Kirshner argues that contrary to efforts aimed at ‘de-politicizing' the management of money (Which for example, might be seen within the independence of the Bank of England), monetary phenomena are always and everywhere either shaped by or shaping politics. This politicisation is something, he argues, that has grown greater, rather than diminished in the era of globalisation.

He starts off by employing an explanation his eye-catching and initially paradoxical opening statement; ‘Money is everything. Money is nothing. Money is what you think it is. Money is power. Money is politics'.

Here, money is everything because of the ‘revolutionary expansion' in the size and scale of international financial transactions' that has occurred since the 1970s. This expansion meant that money became everything to governments and economies.

At the same time as being everything, Kirshner explains, money is also nothing. This is because money has no inherent value. Money is simply a technical tool, a unit of account, a medium of exchange and a store of value. In this way, money solely represents an anticipated demand of goods and services in the future. As Keynes put it, money is ‘above all, a subtle device for linking the present to the future' (1936: 294).

This point, that money is nothing, relates to his next; ‘That Money is What You Think it is'. In this, Kirshner clarifies that another aspect of money is that it has value solely because other people think it is valuable. In other words, money is based on people's expectations, guesses and confidence about the future value of money.

Kirshner further claims, that Money, like almost everything else has power. This power is embedded in the fact that, those who influence it use that power to advance their interest. In this way, those who hold, lend and control the movement of money do so, typically, for a self-interested purpose. In a way, as Kirshner explains, the interest of financial institutions in the setting of monetary policy is no different than the interest of car manufacturers in the setting of environmental legislation.

Finally, money is politics. According to Kirshner, this is because every choice about money is the outcome of a political contest. For every policy choice regarding money, there will be some that agree and some that disagree along with identifiable winners and losers. This final point, Kirshner notes, has been significantly sanded down by the perception that in the global financial system market forces impose best practice on states. This perception is one whereby the hand of the market chooses who will be the winners and losers, rather than an outcome of politics or political manipulation.  In this way, policy makers, abide by the ‘rule of money'. As going against it would leave economies as ‘roadkill on the financial superhighway'.

This, however, as Kirshner notes, is, in fact, an illusion. While economic logic (in a world where money is everything) may limit the range of policy choices to a ‘plausible set',  the choices from that set is determined by the politics of money. There are various ways to witness this politics of money. Below I demonstrate the three examples I found most compelling within the text.

1. Kirshner observes that there is something special about the role of embedded political ideas or beliefs in money. For example, when discussing exchange rates,  as  Kindleberger's  observes  (1970:  198) ‘A country's exchange rate is more than a number. It is an emblem of its importance to the world, a sort of international status symbol'. Such concerns for political prestige shape choices and policy decisions surrounding money divorced from economic logic
2. Kirshner also argues, that the political support for CBI by the financial sector is another illustration of how a focus on the differential effects of money demonstrates ‘sharp politics' driving macroeconomic policy - as opposed to scientific, calculated and objective economics.
3. Kirshner furthermore gives the example, that even in the ‘esoteric realm of money', international relations still reflect the interests of powerful states. Here, Kirshner provides countless examples of how states, primarily the US, shapes the international system (through the Bretton Woods institutions such as the IMF) in an effort to ‘enhance their  relative autonomy,  address concerns for national security, pursue unrelated political goals, or to advance the interests of the financial sector within their own economy'. As a result of this, ‘the most basic choices about money – what money is used where, the behaviour of international financial institutions, and efforts at cooperation – can only be understood as the outcome of a political contest between states with motivations other than the pursuit of global economic efficiency.'

Overall then, what we learn from Kirshner is that there are no ‘neutral' choices about money. Whilst economic logic might generate a plausible set of choices on some occasions, when it does, the difference between the economic consequences of one choice within this set is often rather modest and dwarfed by its considerable differential and political consequences. In this way, students of money, must not ignore this basic starting point - money is politics.