Money, Sovereignty, Democracy.

Studies on the Tensions of Monetary Sovereignty and Democratic Statehood in the European Context
Start of project: June 2019

Cash is becoming less and less important in our everyday lives. In 2017, for the first time in Germany, more payments were processed electronically than with banknotes and coins. In the Eurozone, cash now accounts for less than ten percent of the total money supply. The public often discusses the retreat of cash with regard to the function of money and possible side effects: some welcome the simplification of payment transactions; others fear a loss of the possibility of anonymous payment. However, the phenomenon also points to a structural connection, since our "modern money is based on the integration of state coins and private bank money" (B. Weber). While cash is provided by the state as legal tender, (electronic) money in savings or current accounts is private money generated by commercial banks.

This private-state hybrid system has led to intensified theoretical and political controversies in the recent past. Should the state only set the regulatory framework or ensure the provision of money as a monopolist? Should private banks have the opportunity to create money (as well) or act as intermediaries only? These questions are controversial because the process of money production has major implications both on the actors’ as well as the systemic level. Creating money means creating solvency. It not only expands one's own scope for action, but also influences the capacity of others to act. Ultimately, the economic performance of a society depends on how its money production is organized.

In view of its constitution and its relevance, it is astonishing that (modern) money has so far hardly been the subject of political-theoretical debates. Yet the hybridity of modern monetary systems raises very fundamental questions, such as the demarcation between the public and the private sphere or the problem of fair distribution, which are traditionally dealt with in political theory. In addition, the design of the monetary order has a decisive influence on collective agency. Whether states can finance expenditures via their own central banks or have to pre- or refinance them via tax revenues or financial markets makes a substantial difference. In democracies, this is followed by questions of democratic self-determination. How sovereign is a demos without direct control over central monetary policy institutions or when public influence in the private-state hybrid monetary system is diminishing? The research project will address such questions.

The aim is to add a political-theoretical dimension to the (academic) discussions on money. On the one hand, fundamental aspects of the legitimacy of monetary orders will be discussed, such as the democratic control of monetary policy. How much control is necessary and are there possibilities of control beyond the state? On the other hand, concrete political processes and institutions will be examined. The focus here is on the European monetary regime. With its complex multi-level architecture, which was repeatedly modified in the course of the Eurozone crisis, it constitutes a particularly interesting and relevant case for the research project. In addition, other monetary orders will be considered in a comparative perspective.