Author: Stefaan Verhulst

John Keane, Professor of Politics, in The Conversation: “The extraordinary bounce-back reveals the most disturbing, but least obvious, largely invisible, feature of the unfinished European crisis: the transformation of democratic taxation states into post-democratic banking states.
What is meant by this mouthful? The Austrian economist Joseph Schumpeter long ago pointed out how modern European states (at first they were monarchies, later most became republics) fed upon taxes extracted from their subject populations. The point is still emphasised by government and politics textbooks. Usually this is done by noting that under democratic conditions elected governments are expected to satisfy the needs and respond to the demands of citizens by providing various goods and services paid for through taxation granted by their consent. Behind this observation stands the presumption that the creation and circulation of money is the prerogative of the state. ‘Money is a creature of the legal order’, wrote Georg Friedrich Knapp in his classic State Theory of Money (1905)….
Slowly but surely, in most European democracies, the power to create and regulate money has effectively been privatised. Without much public commentary or public resistance, governments of recent decades have surrendered their control over a vital resource, with the result that commercial banks and credit institutions now have much more ‘spending power’ than elected governments. In a most interesting new book, the acclaimed historian Harold James has described how this out-flanking of European states by banks and credit institutions was reinforced at the supra-national level, disastrously it turns out, by the formation of the independent European Central Bank….
The principle of no taxation without representation was one of the most important of these innovations. Born of deep tensions between citizen creditors and monarchs in the prosperous Low Countries, it proved to be revolutionary. In late 16th-century cities such as Amsterdam and Bruges, influential men with money to invest demanded, as citizens, that they should only agree to lend money to governments, and to pay their taxes, if in return they were granted the power to decide who governs them. The principle was first formulated in the name of democracy (democratie) in a remarkable Dutch-language pamphlet called The Discourse (it’s analysed in detail in The Life and Death of Democracy. Its author is unknown….
Sure, these political proposals and reforms are better than nothing, but if my short history of banks and democracy is plausible then it suggests that a much tougher and more innovative program of democratisation is needed. If the aim is to ‘throw as many wrenches as possible into the works of haute finance’ (Wolfgang Streeck), then organised pressures from below, from both voters and civil society networks, will be vital.”