From time to time I think about money; not "is how much I have enough?" or "where can I get more?" but more abstractly, specifically:
- What is money?
- How do we keep the money machine working?
After considerable reflection I think the answer to the first question, "what is money?", is "faith in motion" but I suspect that this answer is a little too condensed; let me expand a bit.
Were we all completely self-contained, needing nothing from others or from the "outside", money would not be necessary. So the first thing we note about money is that (obviously) it involves a
need or want and that (perhaps less obviously) money is
inherently social, social because it involves an
exchange among, between, persons. This does not immediately follow from the above so it is worth noting that there are other social means of satisfying a need or want without an exchange but these may be addressed under the separate heading of
theft or, if one had nothing to offer in exchange,
mendicancy, begging.
Setting these aside we are left with a social means of satisfying a need or want through an exchange, but an exchange of what? The direct exchange of goods, for example of shoes for ham, ham for clothes, or clothes for shoes, is called
barter and has at least one advantage over other exchange mechanisms; one can see, touch, and feel what one is getting for the exchange. It is also free and fair in the sense, as opposed to theft or robbery, that it is voluntary within circumstances. This final qualification is to address the note that a starving man may give all his goods for a loaf of bread. Is that fair? Voluntary? To both, yes, while noting that it is also extortionate, but that again falls outside our discussion.
I think that it is obvious without a great deal more explication that, as needs and wants become more various and as society, the matrix within which these social events occur, becomes more complex, barter as a system of exchange becomes more problematic. How this concrete barter exchange evolved into an abstract monetary exchange is clear because it persisted until recent times.
In barter, something concrete is exchanged for something concrete. In both cases what is exchanged has
inherent value, a value in and of itself. In the West, in the East, and perhaps everywhere except Yap Island where immovable stones were used as a medium of exchange, concrete objects of
perceived inherent value were used first for immediate exchange which evolved into intermediate exchange. The object of inherent value to be the source of exchange could be beadwork, wampum, but throughout much of the world it became metals which were either incorruptible, gold, or of limited corruptibility, silver. It is important to note that, taking gold as our example, there was a perceived inherent value in the medium of exchange; you could make gold into something and equally importantly it did not rust or corrode, but having inherent value it remained barter. But as opposed to many other bartered exchanges it had persistence; a ham may spoil, shoes may wear, but gold and wampum persist.
This perceived value of gold persisted long after its inherent usefulness became unimportant and it became monetized. What happened is the the
utility value of the medium of exchange evaporated while the
perceived value persisted, it became an abstraction, a representation of value. But the psychological echoes of its utility value persisted to the point where people strongly objected to exchanging the "real" value of gold for paper, an abstraction for an abstraction.
What is important here is that as the utile aspect of this abstraction disappeared while retaining a perceived value, the medium of exchange became an object of
faith. People had faith this abstraction, be it beads, gold, or giant stones, could be exchanged for something of practical use, food, clothing, shelter, etc.
Faith is one half of the essential definition of money.
So now we have an abstract representation of value; is that money? Almost. Let's take two examples, which society is richer?
Let's imagine a village of a few hundred people who include among their number a miser who has accumulated all the gold in the world. Being a miser he is quite satisfied with the state of acquisition and leaves it at that; he doesn't "
spend", exchange for goods, any of it. Is this village rich? Despite having all the gold in the world it can't be rich because no one exchanges anything in this value system; it has no money.
Is it the consolidation into a single hand which is the problem? Make it a village of misers, each having an equal share of the world's gold, each unwilling to exchange it for goods. Either each member of this village must return to a solitary self-provision or become thieves. (Clearly mendicancy wouldn't gain much traction in a village of misers.) Is this village rich? I say not.
Alternatively let's consider a village where a tailor has the village's only gold coin. He takes his coin to the grocer and exchanges it for, buys, some food. The grocer takes it to the cobbler and buys some shoes. The cobbler takes it to the tailor and buys some clothes. And so it continues. Is this village with a single coin which facilitates the exchange of goods and services richer than the village of "wealthy" misers? As everyone is getting through exchange what he or she needs, I would say yes.
The lesson from these two examples is that is not solely the
amount of the medium of exchange which matters, it is the fact of exchange. It is the
movement of this abstract unit of faith that turns it into money.
Movement is the second half of the definition of money. Money is faith in motion.
* * *
We have reached a point in time where the efficiencies created by automation, by globalization, by rationalization of supply have rendered the supply of goods and services to be of vastly greater value than labor value and capital value required to create them. In other words the world is creating more goods and services without creating the wealth required to consume them. This has led to a competitive zero sum game where no value creator, the producer, is willing to (or can) restore the balance with the consumer. The result has been the distortion of the producer/consumer relationship such that vast amounts of productive energy, circulating money, are being withdrawn from the monetary system in the form of vast personal fortunes. This is in effect a global village of misers as described above. True, this capital is "invested" but with effect of increasing production, potentially not needed, rather than returning it to the consumer for recirculation. At present increasingly ephemeral "producer" functions such as Internet influencers and gig workers are keeping the "air" in the inflated balloon but inevitably the decreasing number of consumers as a proportion of the total population will lead to a self-sustaining constriction of production.
What is to be done, an often asked question? First of all, despite the proliferation of jobs reminiscent of Douglas Adams' telephone sanitizers, there is considerable "real" work to be done. This includes restoration and maintenance of the existing national infrastructure such as the ever-popular highways and bridges but also preparing the country for new technologies such as high-speed rail and hydrogen refill stations. And where is the money to come from for this? The money, as in the misers' village, is sitting unproductively in billionaires' accounts. It is essential to note however that as production has become globalized so has ownership. "Claw-backs" of productive resources, of money, may require aggressive actions against international owners; this may include asset seizures. While seemingly counter-intuitive this ultimately is for the greater good of all, most especially the wealthy as the world productive engine will be restarted and reinforced by this restoration of productive capital. As noted at the outset, money is a social function. To the extent that any monetary arrangement disturbs rather than improves society it is flawed.
* * *
In the initial discussion of the purpose of money various alternatives were laid out in addition to the monetary system; these included self-sufficiency, theft, and mendicancy. An alternative ignored was one which I'll call communalism. This is a utopian system whereby producers contribute their excess production to the common good and take what they need from the common supply, all this without the need (necessarily) for money as such. Pure communism and social anarchy all share this approach.
There is a good reason why I skipped over this. That is because all utopian systems ignore one essential fact, human nature. Humans are to the broadest extent lazy, greedy, and selfish. From the largest state Socialism to the most modest hippie commune, all have failed because of this simple fact. There may be many, even the majority, who manfully strive against this fact of nature but inevitably there will be a percentage who take more than they give, if anything, and view those who don't as saps. No matter how many, the "good" productive class harbors resentment and either attempts force "voluntary" contribution or the system collapses.
