On this episode, we talk with David Freund, associate professor of history at the University of Maryland. David is the author of Colored Property: State Policy and White Racial Politics in Suburban America, an award-winning book that tracks how the language of racial exclusion was re-coded in terms of markets, property, and citizenship in the post-World War II era. Throughout the conversation, David speaks to his research on the history of public policy and economic ideology in the United States, and the role that heterodox economic thinking has played in shaping his research agenda. We talk at length about Colored Property, as well as his current book project, State Money, which offers a history of financial policy and free market ideology that unveils the repressed role of the state in the making of modern America. David Freund recently published a chapter in the edited collection Shaped by the State, titled "State Building for a Free Market: The Great Depression and the Rise of Monetary Orthodoxy" More info here: https://www.press.uchicago.edu/ucp/books/book/chicago/S/bo31043679.html?fbclid=IwAR1oUDodC6uWVbLo_f71OUBqmCcuVRZhlaOGZfdzF9npqaj-mRNz7Ouxlkk Freund also recently publish a piece on the role of money in historical inquiry for The Metropole: https://themetropole.blog/2019/05/21/money-matters/

Speaker 1:

0:05

[inaudible]

Speaker 2:

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were listening to money on the left, the official podcast at the monitor money network humanities division or mmn h d . Today we're chatting with David [inaudible] , associate professor of history at the University of Maryland and author of colored property, state policy and white racial politics in suburban America and award winning book that tracks how the language of racial exclusion was recoded in terms of markets , property and citizenship and the post World War II era. We speak with David about his research on the history of public policy and economic ideology in the United States and the role that heterodox economics thinking has played in shaping his research agenda. We talk at length about colored property as well as his current book project state money, which offers a history of financial policy and free market ideology in the moderate United States. Thanks to David for joining us and to Alex Williams for producing episodes . Okay, David Freind , welcome

Speaker 3:

1:23

the money on the left. Thank you. Very nice to be here. You start us off by giving us a brief summary of your personal and professional background. Sure. I am a child of , um , Los Angeles. In the 1970s, the suburbs of Los Angeles. I went to college at Berkeley. I worked in publishing and journalism for a little bit and food service. And then I , um, started a phd program in history. Um, I started in Europe. I switched to the study, the United States and wound up writing a book about go figure the politics of white suburbanization , um, white flight and racial segregation. And one thing that is , uh, that might be of interest is that I was a , I guess technically trained as a cultural historian. I was studying in the 1990s when the field of what's now called whiteness studies was taking shape. Uh, but I had a really deep interest in political economy, which stemmed in part from my , um, longterm interest in the origins of capitalism. And that has clearly come to the fore in my work. Um, both in my first , uh, uh, book and in the new project on the new project, which is called state money. Okay. So since then , um, I've been working on , um, since writing , um , the book on white suburbanization. I've been working on the history of a financial policy, the history of money and powerful myths about money in the state. That's really kind of the, the anchor of what I'm doing right now. Cool. So you sort of referenced it there, but we're wondering what questions or problems in historical research brought you to the study of money? And two , heterodox economics in particular. Write my first book. It's called colored property. It's centered on a story about the federal government's role in creating a racially segregated housing market in the United States after World War II. Uh , many people might be familiar with the story of the Federal Housing Administration and red lining it sexually in recent years become a to become a public discussion about it, which is actually pretty exciting for those of us who study it. Um, and ultimately that's a story about debt instruments, mortgage lending, mortgage instruments in particular, and how debt is created. So while I'm writing this book, I was really struck by conventional treatments of debt, specifically economists, and most historians described debt and still do as distinct from money. And meanwhile they argued that neither money nor debt were essential to the productive process. In other words, they insisted that growth economic growth was a product of a bunch of real sector variables like access to resources, technology demand and the like. And that money just help people organize those variables by facilitating the exchange. So money in their narrative is a commodity token. And meanwhile, debt help helps people make contractual arrangements to exchange these tokens. And so in this conventional story that I was seeing while writing this book , um , I saw the real action in the economy was coming from individuals choices about what they wanted to make buy and sell. Whereas financial instruments that the mortgage instruments that I was studying, but the mortgage contracts I was studying, those instruments themselves were sort of like props in this story. And if their supply is just right, it makes the, the real sector processes go smoothly. Now, I'm not trained as an economist, nor was I trained as an economic historian. And so as I was encountering those , um, those treatments of it, that story about money and debt, it seemed really odd to me as a student of this subject. The documentary evidence that I was encountering showed me that government policy was creating debt instruments and that those debt instruments were then creating conditions under which new homes were literally being built. So public policy was creating wealth. Meanwhile, I saw how those policies explicitly channeled that new wealth primarily to white people, especially to white men, people of color and single women. We usually denied these new mortgages and this was by federal mandate. So to me that suggested that the government was creating wealth for some and not for others. Again, I'm just , uh , you know , uh, uh , modest historian, I'm not an economist, right? Um, but economists and plenty of were disagreeing with me and they still do. They argue that by ensuring loans, federal policies where merely helping to unleash market forces that produced wealth in housing, and they argue this again because they insist that money and debt are not intrinsically productive. So that's the origin story of my current project. Um , since completing colored property, I become a student of monetary theory , um, 20 century monetary policy and the relationship between financial policy and again and popular ideas about money. And I'm arguing in this new book, it's called state money that are persistent myths about money are deeply intertwined with the politics and policy of finance. One more note on my, on my first book to clarify that. So when colored property, I, I basically argued that myths about housing segregation , um, the myth that it's not about race but rather about economics, right? That those myths have been created in large measure by the very policies and politics that segregated housing in the first place. And so in this new book, I'm exploring as a comparable dynamic now on the larger topic of popular myths about money.

Speaker 4:

7:07

So just to follow up and clarify, is it, is your sense that both , um, um, historians who don't necessarily foreground their politics and more critical or even Marxist historians all fall into this trap of, of seeing the histories that you're tracing in this particular way

Speaker 3:

7:31

a qualify a qualified most I would say , um, there is , there are traditions of historical writing that are very, very attuned to monies , credit function, especially , um , historians of the long 16th century, most famously people like gum, Pernod Bardell . Um, there are economic historians who've written about this and always been kind of held on the margin. People like Charles Kindleberger and um, John Kenneth Galbraith. Um, and there's a new generation of scholars, for example, Chris Desanz making money is essential reading on this subject. And there's a group of early Americanists and historical sociologists who are doing very exciting work on debt markets, banking in popular protests over currency reform. Along the way. There've been people who have documented this story about credit money but not called it that. Um, but those are the exceptions to the rule. And by and large, especially people who are writing about 20th century economic history in the u s and development, they are very much wedded to what I call an orthodox or neoclassical model of money. Yes. It seems like you're pretty convinced that the historians of all stripes can learn from heterodox economics. Do you think they can

Speaker 2:

8:55

learn it, especially from, or, or what do you think they can specifically take away from , um, things like post Keynesianism and modern monetary?

Speaker 3:

9:07

Hmm . That is a big one. Uh , and it is potentially boundless. It is what I think about most of the time when I'm not thinking about other things , um, is a , as you folks probably know. Um , okay. Um, and it's the case because historians, like I said, generally work from Orthodox or neo class , neoclassical assumptions about the economy all the time, even when they're not citing the work of economists are invoking their , um, their, their findings. It's sort of the, you know, it's the pool that most people swimming intellectually. Um, but I, I can't , I think suggests maybe two big takeaways that maybe will be useful to answer that question. Um, did to get historians who recognize why it's important at the very least to consider these challenges. And the first one is my standard appeal to historians, which is that Orthodox economic models are grounded in a story about finance that did not happen and that should really upset them as Dorian's . Um, we cannot document, I'm not telling you folks something here , um, that you don't know, but we cannot document historically the origins story about money and credit that undergirds basic textbook economics. Um, again, economist insists that money has its origins in barter and that credit forms developed later to further facilitate this butter like exchange. Yet we know that this is not true. Archeologist sociologist a core like I mentioned of European historians , um, and a bunch of historically minded economists have persuasively documented this for generations , um, as focused on money . The left, no, it turns out that money has its origin and debt instruments. Uh , basically an IOUs. And when Orthodox economists are presented with this evidence, they say in effect, well , Nah , money must have had his origins and barter because well, that's what all the models are based in. So we're sticking with it. So again , uh , the historian should not pay their, put their trust in an economic, conceptual universe that's grounded in a fiction about money. That just doesn't make sense. So that's my first sort of, that's how I generally try to appeal to historians who've have not been introduced to this. Um, these debates. The second big takeaway , um, hits home I find because so many, because scholars , um, it speaks to so many people's research agendas and that is that economic heterodoxy and you know, we could talk about the , the ranger debates within post Keynesianism and um, but we don't have to. Um, but economic heterodoxy in general explores this very fluid boundary between the so called public and private sectors. It demonstrates, and that's really, that's just so important for scholars in so many subfields. Um , it demonstrates that modern economic systems are inseparable from state structures. Um, again, we can talk later about my current work on American financial policy and maybe I can explore some of that. But the larger point is really in escapable never in the history of capitalism have there been purely free markets for anything that's pretty profound and challenges a lot of conventional wisdom, right. Um, state authority. And Moreover, state resources have always been integral to capitalist growth and the allocation of its benefits. So these heterodox traditions of economic thought , um, have always reckoned with this. And they provide tools, I think with which we can better understand that, that fluidity and expose it. Um, so that's a , that's a way of answering your boundless question in sort of categories rather than with , with specifics. Cause it's really, I mean, seriously, we could just talk for days about that.

Speaker 2:

12:53

Oh, boundless and motivated. I got to say, you know , I'll speak for myself, but, but the, the, the very two points that you've described, I think I've found, you know , uh, irrelevant and considering in my own writing and research on this stuff. Um, and, and another aspect of it , um, you know, in, in the field of rhetoric and another, I'm sure it's true also in , in histories , um , sort of making a compelling case about what heterodox economists can learn in turn from historians and rhetoricians .

Speaker 3:

13:22

Oh, humanists. Well, that one is, yeah. Um, similarly about Julie , do you want me to speak to that please? I'll, I'll again, boundless, I'll answer this one with an anecdote in my pretty extensive discussions with , um, hydrox economists , um, in for now almost nine, 10 years , um, having to read my stuff and certainly studying their stuff and , and especially those who are , who have written about , um, the history of, of central banking and financial markets. I've discovered a few places where they have blind spots because they are more focused on the mechanics of contemporary financial markets. And sometimes they have overlooked what I think are , um, historically really , um, key transitions or formative moments. And for, in my case, it's the question about the , the creation of , um , federal debt. Uh , I'm sorry, the, the, the expansion of federal that during World War One and how this helps to lead to this kind of fundamental transformation in the way the Fed operates. It's not that they don't know about this. It says that they actually haven't devoted that much time to it in their accounts of, of , um, the history and the workings of the Fed in part because they're just focused on a different set of questions. So it's one of the shirt, you know , kind of countless places where , um, heterodox economists can learn from us. And um, there's a really, there's a, there's a huge debate among folks who work on this, about the relate does the other thing that keeps me up at night, so he's hiding , I get no sleep because all these things keep me up. Um, is the relationship between the public and the, and the private, which I already mentioned , um, between public and private money. And I'm still sort of , um, sort of battling that out sometimes in real time , sometimes in my head with MMT years . Um, so I think there's a , there are a lot of , um, there are a lot of places where we can learn from each other. Is that diplomatic? It was, hold on .

Speaker 5:

15:27

Wait till I give my money. You buy ,

Speaker 6:

15:32

I had a dream. I could fly my way. There had been when I woke with Mitt that on a neck so bad. I'd be back 10 seconds , man. It's so hard. That's act reckless . The home. What's is ? Get the money tested, get arrested, get some silly, get the message off. Throw the precedence on the [inaudible] and what I do, act more stupid. Well , more to leveque more Louie v my mama couldn't get through to me. The drama people still with me. I'm on TV talking like assists you with me. I'm just saying you're happy. Oh Man . I wanted to cause the Zygote to heal, man. I guess the money city chase them. I get to sit up , forget whack .

Speaker 7:

16:18

So to dive in a little bit to your first book, which you've glossed really nicely already , um , call it property, state policy and white racial politics in suburban America. To say it again. Um, I was wondering if you could explain for us and for our listeners how your attention to money and debt instruments in the book complicate our understandings of Mid 20th Century American racism specifically.

Speaker 3:

16:47

Right. Interesting. Um, and this is great. My answer to that question now is far more developed than it was when the book appeared in 2007. Um, at the time I presented it in sort of lay terms, again, arguing that federal programs by ensuring debt created wealth for whites while simultaneously popularizing the narrative that government assistance was not creating wealth, that it was not segregating neighborhoods. Um, and it was not impoverishing people of color. So basically argued that the programs mask to the racial assumptions that structured a new market for housing. Since I have taken the deep dive into the world of , um, financial markets and understanding the mechanics of money, I can now put a lot more analytical meat on those bones. Sorry for that metaphor. Um, you can, you can take that one out if you'd like. Um, basically, and here's how I would describe it now. Um, federal credit policy. These are called selective credit programs. And the FHA, the federal housing administration was the most prominent, the best known these policies, manufactured financial assets, namely home loans that otherwise would not have been created. They enabled private lenders to create checking deposits, right? And that's how money is created by private institutions. Um , and they did that by promising to pay off those loans should the borrower default. So the u s treasury promised to cover bankers losses. And so naturally bankers said, okay, I'll take that risk. Right? It wasn't much of a risk along the way. Bankers obviously made a lot of money. So did home builders. So did all the suppliers and materials that helped construct the modern suburb from oil and plastics through appliances and home furnishings. And finally, millions of Americans got access to home ownership for the first time because the terms of these new mortgages were very generous. They had low down payments, they were amortize the federal government, restructured the mortgage market as it insured it. We don't need to go into the details of that, but that's what made it, made it. So , um, that's what made it viable and so profitable. So again, that happened only because the federal state made a certain kind of home loan on very specific terms, right into a very liquid investment. They asserted state power and they use state resources to secure those investments, value and marketability. So that is the, that is where , um, money is fundamentally changing the way that resources are being distributed by race. And here's, here's the second part of that. Because magically they also, by embracing Orthodox economic ideas about money they described what they were doing is purely market-driven . They insisted and many historians still buy this line, that government mortgage programs did not create wealth because all they did was help money circulate more efficiently. Again, the story is that they unleashed pent up demand and let the real sector of the economy do the heavy lifting. Now again, that story only holds up if you imagine that money and credit are distinct. And if you believe that credit is not economically productive, and if you buy that story, then you can erase the fact that the modern housing market in America is literally hardwired to be racially discriminatory. The housing economy as I write in the book was, I call it racially constructed and we, so we thinking money and debt helps us to see how this was achieved. And it really brings home the larger point that racism is not a sentiment of misplaced belief system, but rather a structure that is embedded in modern life. Clearly you're not the first scholar a and first historian to be telling the story of , uh , 20th century American racism in a systemic way. Oh, no, no, no, no long tradition. Indeed. So my question is how does money and debt as system potentially change or problematize other stories of 20th century systemic racism that have been researched and told and taught? Wait, oh, that's another, that's another huge one. Um, for example, for , let me think about , um, I mean one of the places that I've been , I've been really focused on that is the relationship between the, this , um, story about federal policy and federal sort of debt creation and um , local so much or the work on the structures of racism has, well the , the earth to the degree that I move in so-called urbanist circles. So much of that work is local case studies about local and , um , state level politics. So one of the things that I'm really curious about and I really haven't thought it through yet is how thinking about , um, money as a systemically , uh , as created and distributed in racially kind of discriminatory ways then translates into the circulation of his monetary instruments in local economies. I don't have anything profound to say about that, but I do think and, but there are people doing absolutely stunning at work on things like , um, local real estate markets , um, and , um, like the history of , um, of , um, of uh, slumlords and , um, the politics of local bond financing that ultimately, if we can integrate sort of a heterodox understanding of money as a credit instrument, I think that's going to raise some really important questions about that dynamic. Again, between the kind of, the level of the level of the monetary sovereign and the level of how people , um, use , um, money instruments locally. The other one, and this is again, pretty wide open, is that there's this huge, it's really exciting literature about , uh, discrimination within so-called , um, welfare programs on the one hand and also in , um , federal spending for the allocation of , um, for the creation of , um, um , holy industries in postwar America. I mean , the sunbelt is in large part our creation of federal spending , um , in the military industrial complex. So there are , um, I mean, there's so many, again, that's a pretty big one. There's so many. Um, there's so much literature that extent literature on those structures of discrimination that I think could be , um, warrants to be revisited in light of the idea that again, that money is not , um, is not just a circulating medium, but it's kind of a productive force. That was a less eloquent answer.

Speaker 7:

23:49

That's so interesting. Cause it seems like specifically with the example of the local case study along the more urbanist model that your framework in a broader heterodox monetary framework perhaps will open up the question of institutional and structural racism to more Federal Democratic , um, contestations. Is that your sense of perhaps where the integration of this sort of monetary lens is , is pointing towards when you say Federal Democratic contest station? What do you mean by that? So in the sense that for example, local bond holders are a local real estate market is always integrated into the federal federal structures of banking regulation , finance in ways that are more influential and , and perhaps even more causal than some. I mean certainly that I've read have suggested

Speaker 3:

24:50

no, I think that's right. I think that's, I think that's spot on. You answered that question very well. Thank you. No, seriously. I think that that is, that is the , um , that's the place where , um, we're one of the places that people can explore this. I mean, I will say as someone who's written a book that's both about federal policy and local places , um , the second half of colored property is a local case study. Oh boy. It's exhausting. It's really tiny . I mean, it just kind of to end, it takes forever. So I'm hoping that there's , um, that we can create , um, you know, the incentives for people to bring those two stories together. I think there's a , there's a practical reason while people why people have often segregated those two in addition to the important interpretive angle that heterodoxy brings to that.

Speaker 2:

25:35

Even . I'm curious to, to know the extent to which, and you're studying this history and colored property ,

Speaker 1:

25:44

um ,

Speaker 2:

25:45

you got a sense that whether you got a sense that, that, that the very people who are being discriminated against or , or who were most effected negatively or maybe even positively by, by the discriminatory policy that's baked into a policy that was presenting as non-discriminatory, right extent to which those people recognized and , and talked about and, and , uh, you know, tried to do something about what was happening and, and, and, you know. Okay. So I guess my question is, were there people speaking up against this at the time and clearly identifying it and, and were , were their voices suppressed or what happened?

Speaker 3:

26:21

Yeah, that's a huge story. It's a, I'm a subplot of my book, which is really about the way that white people interpreted it, right? I have that very, very brief discussion of the amazing work that was done by , um, by activists and scholars , um, both black and white to challenge programs. And that's a , that's a really well developed , um , story. Um, I can point you to people who've written really , um, uh , brilliant stuff about that. So a lot of people reacting to it , um, and critiquing it. And there are some early critiques of it that if you break it down like Robert Weaver's , um, work before he took over at HUD. Um, and um, and Charles Abrams and a bunch of 'em housing activists and civil rights activists were sort of developing a, what you might say is a kind of heterodox understanding of the role of state power. Um, that is not the center piece of my work. And there are scholars who are doing really amazing stuff. We creating those stories. What I did find, and this is part , um, partly because it was my focus and I really went in and tried to understand why white people didn't understand , um, the origins and dynamics of their own kind of structural privilege. That was the kind of starting point for this project. And you know, the big takeaway that I have, and I've debated this, this with people for a long, long time , um, I continue to , um , is that the vast majority of white people became convinced by and kind of deeply invested in the Mitt this mythology that was spread, that this was not about race, that this was about some kind of pure , um, uh, choice driven market dynamic. So one of the stories I track in there is about how sort of, you know, average folks in the suburbs of , um, of Detroit. That was my local case study, how they responded in the postwar era. Every time someone said, hey, look, we have segregation. This is unfair. The government's involved. And what I was able to reconstruct was that they, they told a narrative about sort of meritocracy and the colorblind narrative in part, in large part by just literally grabbing onto the very tools, the very systems , um, market mechanisms that had been created by the federal government. So they literally turn to the FHA manual and said, look, no, no. Just like the FHA says, this isn't about race. This is what FHA officials were arguing. I believe that they convinced themselves of that. There were certainly some people who I'm certain, you know, on the side we're saying, well, good thing for this because we really don't want to live near those near those folks. But this was the master narrative and this is, I reconstruct reconstructed this not just in, in public statements. I recall, I looked at the correspondence between civil rights activists and FHA officials and the FHA officials always responded to the same line, look , look, we don't shape the market. So, so the, the study to kind of sum that up, I argue here that, you know, in that the abroad swath of the, of people who, who consider themselves white in postwar America , um, uh, drank the Koolaid, right? They bought it. It was, it was really in their interest to believe that they were not complicit in this. Um, and that it , um, shut down. It helps shut down a lot of the great activism and the pushback for , um , the fair housing activism that was , um, that was , um, being driven by these facts of discrimination. I mean, we know that [inaudible] housing activism because sort of a national platform finally during the civil rights movement, but there's, you know , another story to be told about enforcement of the civil rights of the Fair Housing Act. Um, and I would argue that the pushback against that enforcement and eventually the , um, disassembly of those mechanisms which are still underway , um, are fueled by this same kind of willful ignorance that people really want really believe that there are these market forces that are , that operates separately from , um, people's ideas about people, about place, about who should live with who.

Speaker 4:

30:35

So I'd like to shift the discussion to your exciting book in progress state money , uh , where you seem to be unearthing a kind of a definitely more expansive , um, story that encompasses the one you've already been working through in terms of a racialized property. Um, and in the book, as I understand it, you're tracing a pretty fundamental broad shift in the way that American money is structured and the role of the state in, in that restructuration. Um, so I guess to start , uh , I just want to invite you to , to tell us a little bit about that story and then, you know, reflect upon how this , um , puts pressure on the ways we've , um, whether it's in from Orthodox perspectives or even heterodox perspectives, how we've thought about American money.

Speaker 3:

31:36

Hmm . Yeah. The narrative part of the, I should say, I, you know, I promised myself after writing colored property that my next project would be more, I don't know, modest and contained Taha yeah, exactly. Joke was on me. Um, and then I got this bug and I went deep. I took the deep dive into finance and you know, it's, the rest is the rest is what it is. Um, but so the narrative of this book is about that. Um, I should say briefly, the book is kind of two parts. One is it's trying to introduce historians to the long history of money and heterodoxy. So there's kind of a preparatory section that does that. And then it turns to this case study to show how, if we change the lens through which we , we look at money and finance it reshapes familiar stories . So I look at a familiar story. Um, it's about , um, it works on many scales, on many scales, but the essential transformation is one that's really well documented by standard , um, uh, conventional histories of finance and the state. It's about the creation of the Fed and the transformation of its operations in its first 20, 25 years, culminating in the new deal legislation, which sort of rebooted the Fed and turned it into kind of a different animal. Um, and the story that's kind of the hook here is one that is like, like so, right? It's the kind of thing that makes people's eyes glaze over when you tell them that you're working on it. So it's about the reinvention of treasury debt. Ooh , you get mad. Like they, like the kids in class are like, oh, please tell me more. Um, but , um, but what I mean by, by what I mean by that is, is the following, right? So before World War One, investors did not go out of their way to purchase us treasury bonds and d they were seen as risky investments. Experts counseled bond buyers in, in, in manuals that were published at the time to avoid buying US government bonds like the plague. Stay away from that. You gotta be crazy. Jump ahead to the 1930s and that's ancient history. Treasury bonds by then are an essential component of the American financial system and they are deemed to be as liquid as commercial debts, which are commonly called commercial paper. And this is the, these are the traditional debt debt instruments that banks , um , collected in order to lend money. Now by the 30s. Everyone's like, oh, the treasury bond. That's just as liquid as, you know, a promise of an inventory or future production of goods. So what I'm asking is how did this happen? Um , it's a really complicated story. It takes me on this pretty deep dive into the weeds of finance and policy. But the short version, sort of my Haiku version is that, and this won't be in proper form, sorry, it's not like a five 75 accrue , but it's basically like, you know, the u s government went deep into debt firewall grow one. The Fed helped it market those debts. It's something we know about, but historians have magically kind of erased from the story in part, which means, which means what they love . When you say to market, they literally created the money that people then use to buy that people in banks use to buy the debt. That's why the money supply increase . So it wasn't like people had saved up and bought treasury bonds. Um, this is wonderful. I'm a quote, what James Grant says that , um, the Fed was very generous with sabers who happened to not have money, right? So they literally put the , the created the, the um, the, the keystrokes that allowed banks and individuals to have this really complex series of proxies to by about 2020 some, you know, whatever million billion, I can't remember number of dollars of debt. Um, so the US government goes into debt. The Fed mill helps make it hot possible. And in the twenties and thirties, a series of banking and policy interventions elevate those debts to their new prominence. And they have a version of that prominence ever since. The markets have changed considerably since World War II. We won't get into that, but um, but they , they, they continue to be kind of a centerpiece of the American financial system. The other part, the meanwhile, the other part of my narrative is how experts argued over the meaning of this transformation. And I show how they reached kind of a rough consensus by the 1930s that yeah, it was okay for the nation's banking system to be heavily collateralized by federal debt. Right. They just completely turned the , the conventional wisdom about the value of treasury debt and the nature of, of monies asset base on its head in 30 years. Why do they make that argument? And here's the kind of the punchline because in their view, money's just a commodity token that helps the private sector operate at its full capacity. So they basically embraced and refined this long intellectual tradition of viewing money this way. And by doing so they could explain away the new state capacities and new state power over finance. There's a dissenting view. You're asking about dissenting views and I talk about , um, I think you guys have seen the shorter piece, but I , this is central to the book too. I talk about the dissenting sort of real bill's view that um, that the challenge that, and we can talk about that about that later, but um, that the, the criticism of his transformation was kind of shut down by this kind of reassertion of monetary orthodoxy. Again, it's in this view, money isn't essential to economic growth. And so the federal state's new role in backing the money supply was neither here nor there. It was just kind of a management move that protects banks and the public. So the new trade, it basically portrays this new trade and treasury debt and repeated expansions of that debt burden. Right. The U s government stat has only increased, well is, is increasing decrease, but it is, is it has been steadily been increasing over time, over the long run. Um, they , those become wholly compatible with this supposedly free market for finance in this , um, in this new model. Now once you look at this again familiar story about the transformation of the Fed and the role of federal debt and the role of treasury debt. If you look at it through basically a Heterodox Lens, this raises a bunch of questions about the way that we understand federal policy in the 20th century and it's power to shape economic outcomes, right ? It fundamentally challenges many of the conventional templates that scholars employ to discuss topics such as so-called big government, federal spending, welfare programs, partisan politics , um, because even before the federal government got big in a conventional sense, right during the new deal, even before that it had powers to shape markets that many economists are reluctant to acknowledge. So that's kind of the first big, you know, way that a challenges our conventional views of political economy. And once the Great Depression expands vastly state capacity as we know it did, it means that federal financial and fiscal policy are at the heart of understanding both prosperity and precarity in the modern United States. They're not, it's not a discussion about when should we talk about when, when the government should act or when it shouldn't . The government. It's always there and it's always acting on these two fronts. It's, again, it's really baked into the way that , um, um, the, the modern political economy functions.

Speaker 8:

39:03

Wow .

Speaker 1:

39:42

[inaudible]

Speaker 7:

39:43

I was wondering if now , um , perhaps we could take a deeper dive into the , the real bills doctrine to 19th century and perhaps, maybe , um , you could reflect on the limits and possibilities of rebels doctrine versus the later , um , paradigm centered on Treasury debt,

Speaker 3:

39:59

right? Yeah. This is , um , did I mention things that , that keep me from sleeping. Um , add this to that list. Um, this really gets at the most complicated part of the project. At least the, the, if the project is born at the story about the mechanics of finance and want a story about that kind of intellectual and political , um, negotiation of that change. This is really the most complicated part of that intellectual, political side of it. Um, and to be frank, I'm still sorting through it as I'm writing these chapters, but , um , I can sort of see the answer visually, but I'm not, I'm still trying to find a way to articulate it, but it basically goes something like this. Um, real bills was simultaneously , um, regressive and progressive, right? A real bills believed. Um, for those who don't know about rebills real bills was the, the conventional wisdom among bankers and among a lot of monetary theorists that if a bank only issued a loan when the borrower gave it a so called real bill, which was a promise of a commercial good. Again, it could be an inventory that they're going to sell. It could be the promise to build something and sell it. The theory was that then banks wouldn't issue too much money because you know, nine times out of 10 or whatever , um, they were creating monetary instruments that would be used productively in the economy. That's a sort of a short course in real bills. Um, and they believed in what them kind of regressive is that they actually still believed in the commodity theory of money. And in many ways they are very much part of that neoclassical tradition. But what was interesting and makes them relevant for this story is that they , that real bill's model acknowledges the primacy of credit extension to the productive process. They do it and really different terms than Heterodox and post Kansan folks do. But they were at least saying, look, this, that that's really, really central to how things are made and exchanged. Right? That's why real bills advocates freaked out when the Federal Reserve assumed all these new powers over currency between World War One and the Great Depression. They saw that the federal state was assuming the power to basically stand behind monetary issue. Um, a government promise was now standing in for a commercial promise to extend alone . That's again, that's why they, you know, they're , they're sort of on my map and I think they're very interesting historically, but again, they mistakenly insisted, and again, this is where their orthodox, he showed , um , that monetary sovereigns could not create productive capacity without distorting this mythical free market for goods. Uh , and so real bills was wrong to be sure, but it was also kind of a canary in the coal mine, again , at least for students of heterodoxy because it sounded the alarm about the consolidating , um, federal power over finance, the paradigm that won the battle over fed policy by contrast , um , is even more complicated. Um, of course, it helped to validate our current system, right? In which the Fed operates as a true central bank with lender of last resort powers and critically with the authority to finance u s government expenditures, right? It literally injects federal spending into the economy. Um, it manages the treasuries account. Um, and it couldn't do that at least as seamlessly as it does if it had not reinvented itself between World Rwanda , the 1930s. And so in the most practical sense, the existing paradigm allows the federal government , um, explains how the , the federal government can manage and at its best sustain the domestic economy. But the big problem with the, again, the Orthodox treatment of this , um, this , um, new paradigm is that it masks again, that it masks the federal states generative power. And this will sound a little bit like a broken record here, but you know, economic orthodoxy insists that the modern fed helps insulate a market for private financial instruments. And at this private market alone drives economic outcomes. Again, in that model, in this model, money's primary task is to circulate private wealth, which is then represented by money tokens , um, to support this reading. Again, Orthodoxy insists upon these two , you know, overarching myths. Again, one money isn't productive. And so then it's issue by a sovereign is not wealth creating, which I'm sorry, that's just, that's just plain goofy. Um, and to , um, that the existence of all this treasury debt and the active trade in that debt, that that is again , so it becomes so central to American , um, finance and policy that these are just kind of conveniences. It's a convenient instrument that enables monetary authorities to make these necessary adjustments to the supply of currency. Again, in this Orthodox view, it didn't know way distorts or does supposedly private market activity. And , and so I think what the Heterodox , um, challenges introduce and MMT has been especially effective at this, is that it helps people recognize first that finance is essential and economically productive, right? Money literally makes production and trade possible. And second, it highlights the central role of monetary sovereigns in sustaining modern monetary systems. Right? And if you put those two together, you get a result. That's really important for understanding, you know, contemporary politics, which is that both federal monetary management and federal spending are essential to making our marketplaces function.

Speaker 4:

46:02

Can you now connect the dots between your central thesis in your first book and what seems to be a key thesis in this book in Progress of yours? It seems like they are homologous and that the second book is kind of zooming out. Um, and um, yeah, I agree. I'm just kinda curious if you have thoughts

Speaker 3:

46:28

about that. I do. I thought that the second book was going to , um, take up like cast the net wider and show the range of ways in which , um, federal financial and credit policies have fundamentally restructured the American economy, especially since the new deal that was the original plan. Um, it was originally going to be a postwar study. Um, I then learned how much there was to learn and to do on the earlier period of my book now, and it's with World War II , um, in part because the, the, the telling the story for the Post War I think is even harder and I'm, I'm in awe of the people who are doing really stunning work , um, in economics and in policy circles and a handful of historians who trying to actually reconstruct the dynamics of the postwar financial system. Um, so, but what it turned into actually is, is something that's both narrower and broader. Maybe this is the answer your question. It's narrower in that it's really just, it's literally just about, you know, in the, in the , um, in the simplest sense, it's about this transformation of , of the Fed and what it did to American money. So it really, it, it drills down much deeper. Um, and like where's the, the first book was really a case study in, you know, mortgage lending. Although the book also veered off into all these other topics about zoning and property law and good stuff like that. Um, this case study is really about the, you know, you and I , and I struggled, I struggled to get people to get excited about mortgage markets. Whoa. Now I get to get them to like, you know, this , I think, oh look, let's talk about the fit . Let's talk about , um, liquidity and how it , ideas about liquidity have changed over time. Shall We? Like you, you know, people's just literally start walking away. Um, so in a , in a sense it's gotten even more obscure, like in terms of the narrower subject, but the , where it's gotten broader is that, I'm trying to highlight how any of these case studies, the case studies in this case, you know, looking at the transformation of , um, the Fed practices and banking and banking practices in this period. In the first book, the case of looking at a , you know, a discrete set of federal programs that financed , um, housing construction . If you look at any of these case studies in context of this fundamental heterodox challenge, right? And in the context of the fact that actually money is debt, it kind of changes everything. So it , you know, in a, in a way it's , um, it's gotten both narrower in a conventional sense. And , uh , but I'm also trying to , um , link it with these first two chapters of the book. Um, wish me luck, which you're going to like, you know, try to sketch out , um, the broad contours of this debate, introduce historians to this stunning , um , tradition of heterodox work in economics and history and sociology, which have documented , um, monies , you know, real world history. Um, and then say, okay, take a deep breath. Now let's look at a familiar story and how can we, and what it asks, ask the reader, what are some other stories? Kind of like your question before about , um, other ways to think about like structures of racial inequality. What are other stories that we can rethink in light of this? Yeah. And it seems to me that both of the books are about an office location and a naturalization of monies designs , Zack , that and that, that, that law that is behind American processes of unjust racialization that is behind so many other , um, problems and possibilities. And I guess in that way, I see this as one larger evolving. Right. That's really nicely put. I appreciate that. And what you've done is articulated a connection that is there in the work, but one that I couldn't or I didn't , I couldn't articulate it in those terms. When I was writing colored property, I knew that there was an [inaudible] going on. I knew it was broadly about, you know, the federal role and credit markets. But what you, what you've identified is in fact the link, which is the mechanisms of monetary creation and debt creation are really at the center of both projects. And yes, I agree. They are , um , at the center, a lot of our , I think they will help us understand a lot about , um , systemic , um, systemic inequality in the modern world. So thank you for that. I appreciate it. Yeah. So what has

Speaker 2:

51:10

working at the intersections of American history and Heterodox Economics , um, how , how has that changed the way you think about the relationships between empirical research on one hand and theory and speculation on the other

Speaker 3:

51:23

[inaudible] that is very interesting. And I'm , I think, I think that the, the lesson I take away from it really applies to tall interdisciplinary work. I, again, I came , um, I came up at a moment of the, the , uh , aggressive cultural turn in the humanities , um, and I was , uh , swimming in that pool and learned a lot from it. Um , but also it became critical of what I saw as some of its excesses, which was often when it sort of , uh, ignored political economy and ignored the social. Um, and the , you know, the lessons I took away from that is that , um, that I'm one of those historians who thinks that good theory is always grounded in evidence. Um, theory is only speculative in that it suggests [inaudible] fresh or maybe hidden interpretive frameworks for understanding social reality. So I think it helps people take interpretive leaps of faith and us to break out of what you could call a hegemonic intellectual constructs. And so the best theoretical work I think on gender, on sexuality, on race is grounded in lived experience and the documentary record. So I used to write about theories of racial difference and I think the best work on that , um, was informed by scholars and by activists who demonstrated historically that there is no thing called race, but rather that there's this constellation of power structures and practices that have invented and reinvented racial categories. Right? They came up with the supportable theory [inaudible] excuse me, because the theory was fashioned out of a documentable past and present. And I think it's the same with economic theory. Heterodox traditions are, for lack of a better term, fact-based and inherently, inherently inductive. I'm in a lot of ways, there are throwback to the days before the marginal revolution in economics when so-called political economists or institutional economists drew upon real world evidence to draw conclusions about economic processes. So not surprisingly, there are much more attentive to the power of institutions. Um, whereas by contrast, neoclassical economics is for the most part of deductive science. It imagines a world of individual consumers who have perfect information. It posits that this world, if it existed, would or if we could achieve it, would operate efficiently and produce resources fairly. And then explains why we don't have it and how we can use policy hopefully to get closer to it. So let me, let me put that another way really briefly. I think we all have theories of how the world works. I don't think their objective or theory free explanations of social phenomenon . Um, and that the task is to use history to determine if your theory is supportable.

Speaker 1:

54:13

Okay .

Speaker 2:

54:14

Oh , I'm sticking with that. Hmm. Speaking of theory just a bit longer, are there any other historians working with other heterodox economic traditions , um, and sort of recognizing the critique of neoclassicism but coming to different conclusions by different paths than , than you are with your work?

Speaker 1:

54:34

[inaudible]

Speaker 2:

54:35

oh yes. There's so, yes, that is a really, really hard question to answer. I'm asking in part because it , it's , it's, it's true I think also in , in , in other fields as well. Like there are, you know, Marxists are autonomous Marxists, different strands of that. And, and I'll, I'll seem to contain a critique of neo classes .

Speaker 3:

54:54

Oh yeah, absolutely. Yeah. No, I think that, I mean, again, I, I see , um, heterodoxy , um, kind of all over the place. Um, I think that there are , um, long traditions of, again, both activism and scholarship that are basically making the equivalent of , um, hydrox economic analyses . Um, you know, I think back to , um, let me think about that some more, but so there are, there are so many , um, really smart interpretive traditions, some based in Marxist political economy. Some again built in , um , working from institutionalists, the , the kind of institutional economists of the Early 20th in 20 century that have reconstructed some of these stories. Did they, did they put the, did they, you know , um, uh , have a laser focus on, on monetary instruments? No. Um, but I think that they're speaking to , um, the same again, the way that these things are kind of baked in structurally and the way that institutions are basically shaping , um, the allocation of resources. Again, that's a , that's a huge one. It's really, really interesting question. I appreciate it. And I'm afraid I don't have a , a more spot on answer, but there's so many things kind of bounce around in my head about, again, both political and and intellectual traditions that have, that have done that kind of work. So if listeners haven't already recognized,

Speaker 7:

56:24

you've been in dialogue with these largely obstetric obscure schools of heterodox economics for quite a long time now. And um, I was wondering what it , what it's like to see MMT in particular become increasingly relevant and debated in the midst of what seems to us to be a paradigm breakdown specifically for the neoliberal consensus. Right, right .

Speaker 3:

56:48

Yeah. This has been a pretty head spinning time for a lot of us. So I, you know, I began reading , um, explicitly post Kinsey and economists while I was writing colored property. I stumbled upon a book by Robert Gutman . I went to his footnotes and I took it from there. And I've been doing it ever since. Um, and I quickly learned that this was part of a generations old minority report, basically among economists, sociologists and scholars , um, in , in several disciplines. I learned about their runners , the threads. There's some really interesting threads of Hetero, what could be called Heterodox and credit money theory, for example, in classical economics writings. And finally , um, I learned about and became a student of a lot of the posts Kenzie and scholarship that , um, sort of consolidated in the decades after World War II. I have enormous respect for those scholars who stuck with it. And yeah , it goes without saying, I literally could not do this work , um, both without their published work and the fact that they are helping me understand this stuff in real time. Um, and I know both from reading the debates over heterodoxy and from again, discussions with some of its , um, uh , prominent practitioners that they are held in contempt by the mainstream economics profession. I mean, that is not an understatement. Um, but basically they've been keeping alive a tradition of inquiry. And I think recently it made stunning contributions to that tradition, which has the potential to transform the conventional wisdom about the relationship between the public and private sectors. Right. Um, so in some respects, given that long history of sort of, you know, push back and repression of these ideas, it's been a surprise, yes. To see these debates kind of crash into the public sphere in the last year or so . Um, it is fun to be able to tell people who I've bored to tears with discussions on monetary there . Hey, look, why don't you just open a Bloomberg and see this exchange that's going on in there? And this is some of the stuff I've been talking about, but anyway , um, but at the same time it kind of makes sense that it's happened. Um, I think probably for two reasons. First one is a big, a big , uh , sweeping, you know, point about, we know that movements, moments of political and economic crisis have always created openings for dissenting perspectives, right? That's central to understanding progressive victories in US history, for example, right ? You think about the labor movement, racial justice movements, LGBTQ movements, and others. I descending voices are always there and they're usually organizing. All right. Then moments of crisis help those voices gain some leverage. It gives their protest efforts some traction, it creates an opening for more people to rethink. Uh , they're common assumptions, right? It creates that space that I mentioned before, right? When an analytical framework can be challenged and maybe even transformed. And needless to say, we have been in during an economic crisis for a long time and now a crisis of political legitimacy. Um, I think that those things combined has made it possible for a new conversation to about economy, economic and policy alternatives to emerge. The second reason that it's not that much of a surprise is he's , you know, kind of related to that broader story activists and hit her docs . Economists have long been working hard to make these issues a topic of public concern. Right. Um , again, I'm thinking about your other question about, you know, traditions non economists have been exploring what might be called heterodox theory forever, right? Like, it's been central to civil rights organizing. Just take a look at , um, you know, terrain Hamilton's 1967 blind power or the more recently like the mission statements of groups like , um, um, um, uh, uh, BYP, right? Um, is BYP black youth project. Right. Great . I'm sorry, I'm 100 Gabby white people. 100. I mean this , it's so much. It's so, it has always been central to , um , certainly to , um , black organizing. Meanwhile, Hendricks economists especially those associated with APMT have very effectively leveraged the internet and increasingly electoral politics to get people talking about the importance of these supposedly arcane subjects, right. To understanding our contemporary political struggles . So as you know, you know, they, they've been very involved in recent congressional campaigns. Um , Stephanie Kelton's been an advisor to m d was an advisor to , um, uh, Bruni's presidential campaign. So if you put all these ingredients together, right, crisis and all the hard work of descent , it makes sense that Stephanie Kelton and Paul Krugman are duking it out in the pages of bumper. Again, New York Times, or that Randy Ray is being interviewed by major press outlets, which, you know , gives me, you know, so much joy. Um, but it is , it's still very disorienting. Sure. Uh , someone who's been, you know, a student of this for 10 years, those people who've been doing it their entire lives, I'm sure that their like, you know, pinch me. Right. Um, so it's disoriented , disorienting, sure. But I think there's an historical logic to it nonetheless. Well, David, Fran , thank you so much for coming on our show. Thank you so much for having me. It's really a pleasure and I'm , I'm a big fan of your program.

Speaker 1:

1:01:57

[inaudible] I work all day. Pay The deals . Hey Amy . It's sad and steer the nervous seems to be your single penny left for me. Best to bear in my jeans . I have five. The wealthy man [inaudible] around edible [inaudible] .