‘The love of money is the root of all evil’ Paul’s letter to Timothy in The Bible
In our modern society, money plays a major role, not only in the economy, but also in defining people. We are poor or rich, belong to socio-economic groups, have money-dependent lifestyles, may be what banks label ‘high net worth individuals’. We indulge in brand aware conspicuous consumption which defines our ‘image’, or we don’t. Money determines where we can live and what we can do. If we ourselves want to change these things, we have to do it through the means of money. We are amazed at the super rich and accord them celebrity status.
Money also exerts power in controlling society through the economy. An economy need not be monetary. Barter economies have existed and still do in places. The whole Russian economy went through a barter period as recently as the late 1990s. But barter is an inefficient mechanism for trade, as it needs lots of trading posts, and finds it difficult to define a consistent set of prices between all goods and services. Hence money evolved as a homogenous fluid unit to set inter-commodity prices and enable widespread trade.
The monetary price of any commodity in a market economy conveys three important pieces of information – the relative consumer value of the commodity, the efficiency of the technology of its production, and the share of the producer versus the consumer in its value. These are known as the allocative, the efficiency and the distributive element of money prices. The problem is that money merges, hides and obscures these socially important separate bits of information. They are not separately disclosed as they need to be. Money is therefore not the transparent information mechanism it is often taken to be.
Like other institutions, money has become a master to humanity rather than the servant it was initially intended to be. We have become obsessed by its measures and its strictures. We think that it is real. We think that it is like mass and has to obey the laws of thermodynamics so that it can neither be created nor destroyed. We have even until very recently had the strange primitive belief that it has to be linked to the amount of a mineral, usually gold, which we dig out of the ground. From this view, we develop the practice of accounting, a single step away from the more basic concept of counting, and we then allow accounting concepts to rule our lives and societies. Books must be balanced. Income and expenditure, savings and borrowing must all add to zero. These rules are useful and necessary for individual economic living, but we make a huge mistake when we elevate them to the status of controlling the whole economic society. This is a category error with massive adverse consequences.
In a thought experiment, imagine a totally automated economy. A mega machine can be plugged into the earth, and with no labour can produce all the commodities we want. Since there would be no wages, society would then have to distribute vouchers for citizens to ‘purchase’ these goods and services. At the end of each year, the vouchers which have been handed in, in exchange for goods and services, are scrapped, and for the next year another fresh set of vouchers is distributed. In the thought experiment, vouchers represent money, and the process demonstrates clearly that money is virtual, not real. It can be created and destroyed. In this example, the whole economic product (GDP) is deficit financed each year, and it doesn’t matter. The only rule is that the quantity of money in circulation equates to real output.
This understanding helps us see that reality is greater than money, and should not be trumped or usurped by money. It’s crazy for human society to cut its real economy because it claims money constraints force such cuts. Real resources, real people, real output are what counts. Money is virtual and should be circulated in sufficient quantity to service the real economic system, as long as it does not exceed real output. This truth would avoid the austerity policies which are causing such social havoc and economic recession across so many societies today.
At the individual level, real people need to be defined independently of the money measure. This allows a new spirituality where people are valued for their inner qualities rather than their outer quantities. At social level, society needs to operate its real economy in the way it really wants, and regard money as virtual, unreal and servile as it truly is.