Vol. 36, No. 3 (Fall 2011)
Capitalism’s Deepening Crisis: The Imperative of Monetary Reconstruction
Dwight D. Murphey
Wichita State University, retired
At one level, a world consensus has come to favor the market economy, and yet the recurrent economic crises to which such an economy is subject have again come to pose an ever-deepening threat to its legitimacy (i.e., its acceptance within a society). The Great Recession that began in 2007 illustrates, as have many crises before it, the insufficient financial foundation that has long been questioned by thoughtful commentators from both Right and Left. The insufficiency will become increasingly apparent as non-laborintensive technology continues to move the world away from remunerated employment for many millions of people. That is the context in which this article explores the author’s thinking about (1) the crisis just mentioned; (2) the proposals for monetary reconstruction set forth, especially by a number of prominent economists, in “the Chicago Plan” in 1939 and by the American Monetary Institute today, involving a move away from fractional reserve into full reserve banking and shifting money-creation from the banking system to a governmental Monetary Authority; and (3) why it is desirable, indeed vital, that the money that is created be used to establish a “shared market economy” that will both support a vigorous market economy and establish a system of broad income distribution. Such a use would differ substantially from the uses (many of them highly desirable in themselves but geared toward governmental activism) proposed by the American Monetary Institute, which has been leading the way in support of the Plan.