What central banks owe to Marx

«The centralization of credit in the hands of the State, through a national bank and an exclusive monopoly.» You have recognized this quote from Karl Marx appears in «The Communist Manifesto» (Chapter II, 1848), where the author lists the economic measures aimed at transforming capitalist society into a socialist society. Marx explains there that the centralization of credit would allow the State to control the financing of the economy.

Utopian, Karl Marx? Not really, for his program resonates uncannily with the role of our modern central banks. Visionary – Karl Marx-, for a man living in a time when gold served as a medium of exchange, foresees the construction of a whole new system where this metal will be consigned to oblivion. He knew that, since the quantities of gold and silver metal were by definition limited, the mass of credit could only be multiplied by the favor of a new expedient—necessarily political. He sensed, rightly, that the physical limits of gold would hinder capitalist expansion. Intuitively, he felt that only the State could arrogate to itself the monopoly of money creation through the transmission belt of credit expansion.

I do not know whether, in the 19ᵗʰ century, he was already anticipating a central mechanism of economic control… which today finds a striking echo in the role of modern central banks ! His idea was simple but powerful. Only centralized and monopolistic decision‑making in terms of financing is capable of usefully directing both production and investment. Marx imagined this mechanism within the framework of a «socialist» society, but contemporary central banks embody this mechanism beautifully. Through the setting of interest rates, through the supervision of commercial banks, through the management of the money supply, they directly condition access to credit and the circulation of capital. Their decisions determine which sectors may prosper, which companies may invest, the major economic orientations. Exactly as Marx foresaw, our central banks hold and concentrate “the” Power.

He emphasized that the control of credit is a strategic lever for stabilizing society and reducing economic imbalances. He would be delighted how central banks use their instruments—policy rates, quantitative easing policies, financial regulation measures—to curb crises, to contain inflation, to stimulate growth. In a capitalist world, certainly not a socialist one — but that matters little — the fundamental mechanism identified by Marx is indeed there : it consists in a central decision‑making pole capable of breathing life into the economy — and sometimes resurrecting it — through credit.

Certainly, The Communist Manifesto by Marx and Engels does explain to us in substance that «the hallmark of communist measures is that they imply a radical expropriation of bourgeois property, the centralization of credit, the abolition of inheritance, and other interventions that directly oppose existing property rights.» Nevertheless, it was Richard Nixon — sworn enemy of communism! — who was able to realize one of the fundamental points of the Marxist program, on August 15, 1971, by abolishing the convertibility of the dollar into gold. A coup and a sleight of hand that demonetized gold and established the system of fiat currency, in other words based on «trust», and no longer on a relic that overnight became outdated and barbaric. Unwittingly, Nixon thus made possible the technical condition for the centralization of credit as Marx conceived it. A typical paradox, for capitalism has often — out of pragmatism — borrowed devices from the socialist imagination to ensure its survival (social security, state regulation, temporary nationalizations, etc.).

This monopoly of the central bank created a new form of servitude, for the entire chain of economic actors — consumers, companies, and even states — became dependent on it. From lenders of last resort, they became lenders of first resort as early as 2007, concentrating de facto monetary power in their own hands alone, establishing an omnipotence that even Karl Marx would have admired, though he would of course have exploited it to achieve very different ends. Because he did not see the centralization of credit as a mere technical tool, but as a transitional step in the revolutionary process of abolishing capitalism. While central banks pursue, as we know, quite another objective : namely, to maintain the stability of the capitalist system and not to transcend it. In other words, while he was visionary about the role of credit, Marx would have been dismayed to see this mechanism used to save capitalism — rather than to overthrow it.

He would, however, have been amazed by our European Central Bank, supra‑national, bringing together 20 countries under the aegis of a single currency serving as medium of exchange for 350 million people generating a GDP of 16 trillion euros. May it — our ECB — prove worthy of the path opened by Karl Marx — and make it flourish! — by a Nietzschean reversal of values, contributing actively to easing the fetishism and phobia of public deficits. Rather than merely stabilizing the existing system, to the near‑universal discontent, may central banks become engines of social change.