Money is one of the hardest things to talk about, because we make it into something concrete, which it isn’t, and hasn’t been for a long time, in most countries. Even gold money wasn’t particularly concrete, because gold has no organic relation to a society’s overall production. Currencies like the Japanese Koku, based on grain, were concrete, and in a rural society had a significant relationship to actual economic productivity. In our society, money is an abstraction.
What we want is not an economy which produces a lot of money (whatever that is, as money is an accounting identity). What we want is an economy which produces a lot of good stuff: good products and services.
By good, I mean “products which make our lives better.” Food which makes us sick, beyond keeping us alive, is not what we should be seeking to produce, no matter how many people it makes rich or how convenient it may be. A suburban lifestyle which discourages walking and social ties is not good for us: It contributes to obesity, depression, and powerlessness, and that powerlessness leads to inequality. Jobs which we hate, but do so we can buy food which makes us sick and live in communities which isolate us and make us fat and unfit, are not what we should be aiming for.
Money is very useful: It provides feedback as to how much demand there is if you live in a functioning market, it provides liquidity so we can trade with people without having to set up barter operations, and it provides an accounting mechanism by which we can turn present effort into future right to consume. But how much money we have, total, as a society, is unimportant. What matters is our actual productive capacity.
Consider someone who works and saves money, then retires. A retiree lives in today’s economy. Their butt gets wiped by people working today, their doctor is working today, their food is produced by people working today. If the economy collapses, all their money is meaningless, and they can only buy what people who are working today want to sell.
Ultimately, what matters is how much and what type of goods and services our society is producing. This doesn’t include just food, housing, and clothing. It includes philosophy, art, music, TV, computer games, and education. Money’s purpose is to facilitate the creation of all those good things; to help create a society which produces art, food, and education which are good for those who consume them. If money stops helping create those things, if money is used to restrict access to good food, housing, and education, then money is actually harmful and creating more of it is harmful.
During the 80s, 90s, and 00s, giving money to rich people through tax cuts increased the rate at which jobs were off-shored. During the post-war period, the more money was spent on food production in the US, the cheaper food became — but also the fatter and sicker Americans became. The feedback loop was “more fat and sugar and carbs = more sales,” so they slathered all of that on.
As I’ve noted before, money is permission. It is the right of people to tell other people what to do. But giving money to someone, especially giving a lot of money to someone, more than the standard return in an economy says “DO THIS. DO MORE OF IT.” So if the most highly-rewarded people in the economy are Wall Street scam artists and people financing building McMansions, well, you’re going to get more of that.
It is right-wing ideology that the government shouldn’t pick winners and losers. They’re right when it comes to individuals, but dead wrong when it comes to groups. We don’t want people winning by polluting, by producing shitty food, by committing fraud. We do want people winning who are doing basic science, educating children well, helping sick people, and creating products and services which make people healthier, fitter, and happier. If we see a large group of people getting more money by doing bad, then we need to shut that down, and fast, because the longer we leave it, the longer we say “whatever, it doesn’t matter,” not only are they doing harm at a faster and faster rate as money and people move into an arena where they earn greater returns, but their money turns into power, allowing them to buy up other people to ensure that they can continue making money doing harm.
Money is permission, money is power, and money goes to the highest returns. If the highest returns are doing harm, our society will become toxic faster than you can say, “I’m getting trickled on.”
So watch where money is going, and make sure the people getting it are doing good, not harm.
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Dan H
Amen.
PDrrano
I was about to say, ‘That [money] sounds like fetishism’, but apparently there is such a thing as ‘commodity fetishism’–maybe not exactly the same thing, but still.
A good and interesting post.
Michael Berger
Okay Ian, since you finally went somewhere I’ve been waiting for you to go for awhile, here’s a question:
Why don’t we move away from an economy – or more precisely a means of exchanging and distributing the commodities and productive capacity that economy generates – which involves “money”?
What precisely prevents us from doing so?
I know one of the acceptable answers, if utilized correctly, can’t handle certain tasks such as performing an operation unassisted.
But what prevents us – the people who want to do that and other useful things (and I mean really want to, as opposed to doing so because it makes them “money”) – being compensated by having all of our material needs – and most of our desires – fulfilled without “money”?
Larry
What a marvelously compelling perspective
Bruce Wilder
Even economists, who ought to know better, get hung up on the quantity of money. In a monetary system dependent on coin or gold, it might make a certain sense as a first hypothesis, to reason from quantity. But, quantity only matters in relation to the unit of account, and managing the stability of the unit of account. But, ultimately, that stable unit of account matters, because it facilitates all the close calculation necessary to do the deals that organize complex economic activity through time, and in particular, the deals through time that organize investment, which can — doesn’t necessarily — improve our collective lot by increasing our productivity.
It isn’t the quantity that matters, it is, in short, the scorekeeping. And what matters about scorekeeping is integrity. All the complex dealmaking, which is banking and finance, depends for its social benefice and efficacy on its integrity.
All kinds of promises are being made about the future. If those promises are lies, . . .
The great failure of monetary policy, and economic policy in general, in the crisis of 2007-8 was a failure to see the value of telling the truth, to see the importance of integrity, and to imagine that a quantity of money in a flood of liquidity could erase the consequences of fraud made manifest as insolvency.
Now, we’re living with the consequences of that flood of liquidity supporting a policy of pretend and extend: a superabundance of money and financial securities, which are seeking a flow of funds to keep them affloat, and finding it in predation and extraction. The result is a continuation of disinvestment, which can only make us collectively poorer, even if it makes a few unimaginably rich.
NickT
Koku wasn’t a currency, but a volume measure of grain, used to assess such things as the value of a fief. Before the Tokugawa reformed the system and created a standardized currency, the various daimyo created their own currency units or used imported Chinese copper coins.
Ian Welsh
Stipends were paid in Koku.