Re-thinking Money
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Slipping the Surly Bonds of Economic Convention
by Richard A. Racey
It's something like the Law of Gravity. We almost never think about it, but its existence exerts a profound influence upon us at every turn. No, we seldom think about money; rather, we think with it, using it as an integral part of our thinking processes, making essentially mathematical calculations involving spending, saving, investing, or worrying about. Whereas the Law of Gravity limits us physically, money, or the lack of it, exerts profound limitations upon us psychologically. In Canada as elsewhere, no physical barriers prevent us from grappling successfully with chronic shortfalls in health care, education, housing, defence, employment, etc., etc., because…
The deployment of human effort is not limited by its inherent energy, its skills, or willingness to work, nor is it limited by any shortage of socially, economically, or environmentally worthwhile objectives to which it might be directed; it is limited, rather, by the funds made available to compensate it.
Hard against this limitation, governments at all levels wreak havoc and much suffering among their citizens in pursuit of an accounting abstraction called the “Balanced Budget.” In the devout and much applauded service to this secular concept, the sick await treatment strapped to gurneys in hospital corridors; highly qualified nurses remain unemployed; water and sewage treatment plants deteriorate; environmental infractions go unprosecuted-and the list goes on and on ad nauseam. Pick up any daily newspaper and you can add to the list yourself. While governments are busy cutting and slashing in hot pursuit of the Balanced Budget, businesses contribute to the overall fiscal “sanity” by cutting and slashing in deference to their own secular gods, efficiency and productivity – absolutely essential in “adjusting” to current market conditions.
Why money has become so important to us as individuals and societies is that we have become conditioned to it in much the same way that circus seals are conditioned to fish in the hands of their trainer. Remove the seal from its natural environment, where the necessities of life are immediately available, and make it utterly dependent upon the fishy rewards proffered by the animal trainer, and you have an approximation of the processes undergone by millions of human beings over the past four hundred years.
Prior to that the majority of people lived in agrarian societies, and individuals lived in small villages within which each individual was dependent upon the reciprocal relationship with other villagers. “If I help you till your field today,” it was tacitly understood that “you will help me thatch my roof tomorrow.” Although money existed, very little of it changed hands within the community, and each individual was only minimally dependent, if at all, upon its possession in order to survive.
Then, within the space of a couple of generations, people were forcibly evicted from their villages, from the soil and pasture lands that were their livelihood, and, much more than that, from the reciprocal relationship with their neighbours on which they depended daily. The Enclosure Movement in Great Britain, for example, led to the eviction of hundreds of thousands of villagers. The land-owning classes evicted the peasantry from the land to make room for sheep-whose wool commanded a high price in continental Europe. Having nowhere else to go, the dispossessed gathered in the squalor of the early industrial cities.
In this new life, they became completely reliant upon money in order to secure the basic essentials of life. Their utter dependence upon money was an essential factor in harnessing them to twelve and eighteen-hour days toil in the sweatshops of the Industrial Revolution.
Concurrently, there was a profound and lasting change in the nature of money. For much the same reason that a dead fish in a circus trainer's hand develops almost magical powers of persuasion to a seal forcibly removed from its native habitat, money became a powerful instrument of human control and manipulation to a population of dispossessed villagers. Without this control in the hands of early capitalists, the Industrial Revolution could not have taken place.
Russian writer Leo Tolstoy, writing around the turn of the 20th century, had a much better handle on the manipulative nature of money than any economist. He wrote,
“Money is a new form of slavery, and distinguishable from the old simply by the fact that it is impersonal – that there is no human relation between master and slave.”
The same utter dependence upon money remains with us today-together with the deep, largely unconscious, conditioning that has become a psychological characteristic of individuals belonging to monetized societies. Say, for purposes of illustration, you're walking your dog and you encounter a couple of scraps of coloured paper on the sidewalk, one a $100 bill, and the other a crumpled cover page from Maclean's Magazine (a popular Canadian newsmagazine). Which are you going to pick up? Let's not be silly. If you're like me you'll go for the $100 bill. We're both conditioned to money in that sense-but that conditioning is relative. A primitive hunter-gatherer might pick up the Maclean's cover instead if it promised to be better kindling for his campfire. By the same token, he probably wouldn't panic if he lost it on his way back to his camp. Compare that with the probable reaction of a worker who discovers that a pickpocket has just made off with his wallet and his payday cash – when the rent is due and the fridge is empty..
As a further result of our complete and utter dependence upon money in order to live, many of us are buffeted almost daily by economic forces beyond our control if not our comprehension. Ask any single mom on social assistance. The prospect of a plant closure or a layoff can fill many of us with dread and foreboding. We are, whether we realize it or not, manipulated by money in the same way circus seals are manipulated by dead fish. We resemble stage puppets, manipulated by strings disappearing into the clouds above, forced to dance to the spasmodic rhythms of an invisible puppeteer gone berserk. When investors panic, and stock prices tumble, the crazy music stops, the strings go slack, and we all collapse in a heap.
In an exercise of wholesale human manipulation, central bankers raise or lower interest rates, in an often futile attempt to adjust the tempo of the music, by either exciting or slaking the greed of investors. These are every bit as manipulated by money as are workers, but in a different way. The prospect of increased dividends or share prices excites them in much the same way a whiff of fresh hamburger excites the salivary glands of bloodhounds. Their current state of glee or gloom is instantly reflected in the latest rise or fall in stock market prices.
Such is the state of society, in which real power is exercised less and less by sovereign states, and more and more by powerful corporations bent on their own further enrichment. The nature of the power they exercise as well as the riches to which they aspire are based on money. The social impact of their activities are largely ignored provided their shareholders are reasonably content.
Most people sense that “something is terribly wrong somewhere,” but, seeing no change their efforts might bring about, they abandon any thoughts of reform in favour of a quiet resignation to the status quo and making the best of it. In the days of the ancient Romans, when “all roads led to Rome,” most people would have felt the same way. Nobody thought the Roman Empire would ever collapse. Yet, collapse it did-more through unsustainable over-extension of its resources than from any external threat. It needed no enemies to bring about its own destruction.
The poor and powerless, nevertheless, have begun to make their voices heard in today's world. However, the “anti-IMF-World Bank-globalization” demonstrations in Seattle, Washington, Prague, Quebec, etc., have been ineffectual in inducing change. The world's institutions of business and finance, while paying lip service to the egregious state of poverty gripping the world's disenfranchised, continue to tower above the affairs of humankind, not a whit impeded by the noisy and sometimes violent protests at their ramparts. But sooner or later, the towers must topple – nothing lasts forever. Whether, like Rome, the mighty structures will collapse less through external attack, or more through internal rot and rampant corruption – or through exhaustion of the planet's resources – is no longer a question of “if,” but rather of “when.” Inundated in a sea of the visceral hatred of those societies it has abused, capitalism will one day follow into oblivion the Greek, Roman and feudal societies which preceded it. The process of self-destruction may happen suddenly and catastrophically, or over several lifetimes. Future archaeologists will have no shortage of remnants to pick through – radiation levels permitting.
What we often forget is that the history of monetarily manipulated society has been very brief. Three or four hundred years are just an eye blink in the history of the human species. For most of our long history, we got along very nicely without banks. Despite their central role in the economies of the world, banks are privately-owned corporations committed to the profit, often obscene, for the few. Except for a little lip service now and then, they remain largely oblivious to the well-being of the many or to the ecological state of the habitat. Since almost all of today's money is created out of thin air in the form of loans payable to banks, these institutions are primary beneficiaries of our monetary system. If individuals, businesses, or governments don't have enough money to do what they want to or need to accomplish, they go to the banks who are only too happy to create some for them. In many instances, the choice is between borrowing from the banks or allowing everything to grind to a halt The limitation to the deployment of human effort indicated in the opening paragraphs of this essay becomes painfully obvious.
As inconceivable as it may seem to many, it remains possible to do without banks once again-replacing them with institutions of exchange that do a far better job of addressing individual and collective need, and of mobilizing human talent and effort to objectives of benefit to all as well as to the preservation of the environment. Money, as we now know and practise it, can one day become obsolete as it is supplanted by far more viable, and far less divisive, instruments of human exchange. Both the technical means and the “Precedents in Principle” already exist.
For Starters: A Familiar Example
Most Canadians are familiar with Canadian Tire “money.” Whenever you make a cash purchase at a branch of Canadian Tire, the store refunds a small percentage of the purchase in its own “money” as a cash discount. You can use this “money” as a substitute for, or in combination with, bank notes the next time you buy merchandise or service from any branch of Canadian Tire. The “money” is printed on high-quality paper – almost like regular bank notes – and the cashier accepts it without question.
In the context of a Canadian Tire store, both types of currency are equally “good” and perform the same function at the checkout counter. one dollar of Canadian Tire Money will buy exactly same amount of merchandise as will a “loonie” [the Canadian $1 dollar coin].
There are, however, very significant differences between Canadian Tire money and bank money. Bank Money enters circulation as a debt to a chartered bank. Canadian Tire money enters circulation as a self-imposed obligation to the public at large. Bank Money starts exacting interest the moment it is issued. Canadian Tire money enters circulation interest-free.
The most important difference between the two currencies, however, is the most subtle. When Canadian Tire sells merchandise for bank notes, it delivers the goods and services in anticipation of reward. When you lay down a $20 bill at the checkout counter, it's an action tantamount to that of an animal trainer flipping a fish to a trained seal as a reward. When Canadian Tire accepts its own notes for goods and services, it delivers the goods and services for an entirely different, but just as compelling, reason: IN FULFILMENT OF SELF-IMPOSED OBLIGATION.
This type of motivation is deeply ingrained in human nature. Earlier non-monetized societies were held together by the reciprocal nature of every day dealings between individuals. “You help me plow my field today, and I'll help you thatch your roof when you're ready to do it.” My reputation among my fellow villagers or tribesmen hinged upon full delivery on my commitment. If I didn't deliver, nobody would come to my assistance when I needed it. The same general principle would be resurrected – in institutionalized form – were the principles underlying Canadian Tire “money” applied universally throughout the economy. The literature of Economic Anthropology on the subject of reciprocal obligation is quite vast.
Canadian Tire money is a prominent application of money based upon the more general principle of Pledged Value. This principle embodies incredible potential for lifting us out of our global morass. Introduced and backed by the appropriate legislation, it would give individuals in society the tools they need to do for themselves and for each other what business or government won't or can't.
Re-Defining Money
If a federal government has the authority to empower chartered banks to create money in the form of loans made payable to themselves, then it also has the power to license individual citizens to issue money on the strength of their skills, labour or goods in much the same way that Canadian Tire issues money on the strength of the goods on its shelves.
The technical and administrative means to put a Pledged Value System into action already exist. An institution similar in scope – but different in function - to a central bank could, for example, administer a Citizen Credit Card system, and run it much like commercial banks run their credit card operations-except that it wouldn't charge interest, but merely keep track of “obligations and fulfilments.” The individual citizen's “money creation rating” would grow in accordance with the individual's record for redeeming the obligations underlying his/her issue of money. The individual could write cheques on his/her account or pay the rent or pay for groceries using the system. With today's photo ID and developments such as iris recognition, fraud would be minimal – and would serve as a check on every individual's record for redeeming obligations.
Credits, or “units of redemption,” would take one of three forms: (a) money created by other individuals – which would serve to redeem one's obligations to society; (b) “state redemptions” – essentially bookkeeping credits for work done in the public sector (federal, provincial, or municipal), i.e., work done for the benefit of everyone but to no one in particular; or (c) “entitlements” for the elderly, seriously ill, or disabled. The system would charge no interest; nor would individuals earn any in the system. Taxes, in the conventional sense, would not be required to operate the system.
Simple? Yes. Simplistic? Not really – if you give any thought to the social and economic upheaval that would inevitably follow its introduction. The technical means to implement the system already exist and might be implemented very quickly. What would probably take much longer would be the achievement of the necessary revolution of understanding, thought, and practice. These might take a couple of generations to percolate through the population, unless hastened by economic catastrophe of one kind or another. People and institutions are highly resistant to change – especially if they perceive any threat to their security or interests. That said, the following changes might be anticipated – if and when the poor, by far the largest segment of the population, organize and eventually prevail:
Unrestricted Deployment of Labour: The fiscal limitations on the deployment of labour would evaporate. No longer would it be necessary to ask 'Where's the money coming from?” Instead, when contemplating any task before it, a federal, provincial, or municipal government would instead be free to ask, “Do we have the committed labour, talent, and manpower to do the job?” These would be the limiting factors–not any lack of tax dollars. Like individual ants or beavers, citizens would contribute their talents and energies when and where needed-on a continuing or sporadic basis as required. The staffing of hospitals, schools, universities, day-care facilities, spousal abuse shelters, libraries or municipal snow-removal departments, etc., etc., would all be “economically feasible.”
The Metamorphosis of Motivation: A profound change in work motivation might be expected-through the transformation of behaviour governed by financial incentive to behaviour motivated by the discharge of self-imposed obligation. When contemplating a new task, instead of, “How much does the job pay?” the average citizen might now ask, “Where, when, and how can I contribute-to reduce my commitment, to “hold up my end of the bargain?” Personal satisfaction, individual reputation, as well as economic security would ultimately depend upon how well the individual's obligation was habitually discharged. (If the individual did not hold up his or her end of the bargain, his or her “credit,” i.e., the power to issue money, would be curtailed or cut off completely. By no means could it or should it ever be allowed to become a “something for nothing” concept.)
Economic Stability: A steady flow of purchasing power into the economy, stemming from an economically empowered citizenry would tend to soften any disruption in economic activity. A slowdown in any one industry would not spread to others owing to a reduction in the purchasing power of those now unemployed. A slowdown in an industry might result in some idleness-but not the unremunerated unemployment that is now the rule. Labour could be re-directed to other socially or environmentally useful pursuits free of budgetary restriction – and the average citizen might welcome the change.
By the same token, the capitalist compulsion to produce, produce, and produce yet more would disappear. No longer would it be necessary for industry to stuff warehouses with unsold products and fill parking lots with acre upon acre of unsold automobiles – followed inevitably by cutbacks and layoffs.
Individual Independence: An individual's economic well-being would no longer be dependent upon a single employer, or upon a single industry. That individual would no longer feel compelled by economic circumstance to fight for the right to denude forested slopes indiscriminately or to harvest fish to the brink of extinction.
The individual would enjoy the economic independence to divert his or her labour to environmentally productive pursuits. Obligations to society might be honoured just as easily by helping rejuvenate the environment as by accelerating its destruction. This would spell an end to our vested interest in our own destruction and that of the planet.
“Private” vs. “Public” Spending
The “Private” and “Public” Sectors, and the dividing line separating the two, have their origins in early economic thought. one of the most enduring of economic thinkers is Adam Smith, who wrote The Wealth of Nations in 1776. This is how he perceived the deployment of human labour:
The labour of some of the most respectable orders in the society is, like that of the menial servants, unproductive of any value, and does not fix or realize itself in any permanent subject, or vendible commodity, which endures after that labour is past, and for which an equal quantity of labour could afterwards be procured. The sovereign, for example, with all the officers both of justice and war who serve under him, the whole army and navy, are unproductive labourers. They are the servants of the public, and are maintained by a part of the annual produce of the industry of other people. Their service, how honourable, how useful, of how necessary soever, produces nothing for which an equal quantity of service can afterwards be procured. The protection, security, and defence of the commonwealth, the effect of their labour this year, will not purchase its protection, security, and defence for the year to come. In the same class must be ranked, some of the gravest and most important, some of the most frivolous professions: churchmen, lawyers, physicians, men of letters of all kinds; players, buffoons, musicians, opera-singers, opera-dancers, etc. The labour of the meanest of these has a certain value, regulated by the very same principles which regulate that of every other sort of labour; and that of the noblest and most useful, produces nothing which could afterwards purchase or procure an equal quantity of labour. Like the declamation of the actor, the harangue of the orator, or the tune of the musician, the work of all of them perishes in the very instant of its production. [With a few modifications in the interests of political correctness, this passage might serve as the manifesto of the Fraser Institute, a Canadian right-wing think tank]
What Smith neglects to note, however, is that no dividing line between the “private” and “public” sectors existed in pre-capitalist societies. A nation's economy was viewed as a coherent whole-an extension of the sovereign's household.
In today's society, we have been brainwashed into accepting as inevitable the dividing line between human effort expended in the “private sector” and that expended in the “public sector,” i.e., between the Producers and the Parasites. The producers are those busy slugging it out in the marketplace for pecuniary gain in the form of profits or wages. Typical Producers might include the worker installing automobile transmissions on an assembly line, a logger felling trees for a lumber mill, or a coastal fisherman hauling in his nets.
On the other hand, anybody who is paid out of the public purse is a Parasite. Nurses, teachers, doctors, researchers, air traffic controllers, university professors, military servicemen, firemen, police, to name a few, are all Parasites. It follows that anybody who, for any reason whatsoever, is drawing welfare or disability benefits, is a Double-Parasite–a highly resented burden perched on the back of the Producer.
A Self-Supporting “Public” Sector: The dividing line between the “private” and “public sectors” that attended the early development of capitalism, would disappear. The functions now assigned to the “public” sector would become self -supporting. It would become entirely unnecessary for governments to borrow or levy taxes because the deployment of labour would not longer be dependent upon the funds made available to compensate it. Human effort would no longer have to be set in motion by the reward value of money, but by the same – or more – effort expended in fulfilment of recorded obligation. “Investment,” either “private” or “public,” in their traditional senses, would become hollow concepts.
Widened Range of Employment Choices: Freed of budgetary constraint, the range of possible employments would be vastly expanded–particularly in fields of social and environmental value-which the right-wing market-worshipping mentality dismisses as unnecessary, unproductive, or at best grudgingly accepted as inevitable. Child care, care for the elderly, abused women's shelters, environmental cleanup and rejuvenation, the updating of city sewage and water treatment facilities, etc., would become viable as avenues of “obligation fulfillment.”
Severed Strings: The manipulative character of money would evaporate. No longer would we be subject to the whims and erratic rhythms of “a puppeteer gone berserk.” No longer would the labour of human beings be reduced to that of a “market commodity,” subject to the “law of Supply and Demand”–like potatoes or broiler chickens. Transnational corporations would lose much of their coerçive power to influence events and to recruit workers to environmentally destructive pursuits. When it comes right down to it, corporations, domestic or transnational, might disappear altogether, and be replaced by cooperatives.
A New Wellspring of Economic Activity: “Capital,” i.e., those accumulations of money invested with the objective of accumulating yet more money, would cease to be the main wellspring of economic activity. Labour, both physical and intellectual, committed and honoured cooperatively could serve much the same purpose as conventional capital does now. An enterprise whose main assets were “intellectual,” might well mobilize the commitments of its prospective workforce for “start-up capital.” The corporation, as a legal entity, might be supplanted by the cooperative.
Money Supply: The “money supply,” i.e., “aggregate commitment” (we may as well coin some new terminology as we go) in circulation at any given moment, might be quite stable in comparison with current experience. Individuals might develop substantial “commitment limits,” but these, like unused credit card limits in today's economy, would not become part of the money supply until they were actually spent. “Aggregate commitment” would be reduced as the commitments were honoured by individuals, as purchasing power was created and “extinguished” in a continuous process.
An important factor would be that “money” would be a by-product of trade-not a pre-requisite as at present. Viable exchanges would not be frustrated by a lack of money.
Crime: If the only money that any individual could spend was the money the individual had himself had created, then there wouldn't be much point in holding up a Brink's truck in search of illicit capital. Money would be extremely hard to “launder” if every unit of currency in circulation could be traced to the individual who created it. Armoured trucks wouldn't be needed anyway. In addition, the type of crime that economic deprivation nurtures would wane. In some quarters, it would no longer be easier to get a handgun than to get a job.
Economic Security: If citizens were empowered to create money at will and as necessary, then their sense of security would become more and more vested in their continued right to do so. In other words, their economic security would hinge upon their track record for redeeming their commitments. Since it could be created at will Pledged Value currency would no longer serve as a traditional “storehouse of value.” Saving for old age or a “rainy day” would become unnecessary.
A Frontal Assault on Poverty: Left to the beneficent attention of the market society with its immensely powerful institutions devoted to profit, capital accumulation, and the interests of shareholders, the poor will always be at a disadvantage. The rich will continue to get richer and the poor will continue to get poorer-in a system the central dynamic of which is the race for riches, and the devil take the poor and powerless.
A watershed change in society will begin to develop the moment a system is introduced that permits the translation of human need directly into purchasing power-without the hindrance of governments, business, or the investment community. Give the poor this unequivocal right, and the responsibilities that go with it, and abject poverty will be on the run.
We, the Manipulated
We are held captive and are manipulated by an exchange device that has been handed down to us, and which we've never really questioned: money-as well as by the institutions of vast size and power that have been erected on it. Its pernicious tentacles have gone far beyond the requirements of human exchange, and have enveloped our minds and spirits in an opaque fog of unquestioned economic theory. We have created a situation in which the lack of money frustrates the expression of our energies and talents, and places a giant roadblock in the addressing of genuine human need. The pursuit of money binds us to the most absurd alternatives: we must ravage the environment in order to “survive”-making us part and parcel of a global vested interest in our own destruction and that of the planet's finite resources.. We have become a thoroughly dysfunctional society.
The next time you read about another budget cut or industrial layoff, kids going to school hungry, patients lying unattended in hospital corridors, the numbers of homeless growing each year, thousands dying of hunger each year, banks all the while raking in obscene profits, ask yourself, “Does it really have to be this way?”
Money, by its very nature, is at the root of most evils plaguing us as a species. Let's not forget that it is, after all, a man-made institution which we have the power to change. In changing it, we can transform our relations with one another, and lay the foundations of a new, more humane, and more sustainable world for our children and the generations to follow.
Please feel free to save and distribute copies as you wish, so long as you maintain proper attribution. You don't need my permission to archive the article on a Web site, but please e-mail me if you do so.
Richard A. Racey
rac@vianet.ca
@ May 17, 2004