Monetary policy and functional income distribution: a Marxist view

This chapter addresses monetary policy and income distribution from a Marxist perspective. It highlights the class nature of central banks as capitalist state institutions and argues that this nature determines an important set of constraints over monetary policy. By sorting out the different approaches to the class nature of the capitalist state and therefore of central banks on the one hand, and the role of for-profit monetary institutions in capitalism on the other, it provides an interpretation of monetary policy likely impacts on distribution. These effects are considered first in terms of intra-capitalist class conflicts (division of surplus between interests and profits) and then inter-capitalist class conflicts (struggles over wages and surplus, considering capital accumulation and employment). It surveys empirical works showing that monetary policy generally favours capitalists’ general class interests, but social struggles prevent mechanical unidirectional causal relations from policy rate movements to functional income distribution.