Many people who advocate equality, democracy and a fair ethically sustainable future believe money is the enemy, they see those in power love money and control vast sums therefore money itself is evil. They think if we abandon markets, trade and money moving to a more collective bartering system the world will be a better place. This is a misguided notion which appeals to the comfortable academic middle classes who blame the tool rather than the person wielding the tool. Would you abandon hammers because one was used to pummel a nail through the hand of Christ? No you would abandon the centurion who wielded the hammer, or better you would rebel against the ruler that commanded the centurion. We should not abandon our greatest tool for change just because our current system puts it into the hands of those most selfish. Money is the greatest medium for communicating human values ever invented and is the obvious facilitator of a cooperative ethical society. It is our only universal belief so it is the best tool for a more inclusive world if only we make better use of its power. We must start thinking about money for what it truly is, let your hatred of money subside for a moment and think afresh about its true ability to reflect human values and as a catalyst for change.
Money is in your head
Imagine being a first year economics student arriving at your first lecture, you are bright eyed energetic and naive, only knowing of the world what you have been taught at school, by your struggling teachers, at play by your still developing teenage friends and at home by your indulgent parents. You are young, inquisitive and full of half formed ideas, but believe you are right about everything. Your lecturer stands behind the lectern and pulls from his pocket a crisp fifty dollar bill, holds it in front of the class and asks “what is this?” The answers come quickly from students eager to impress “cash”, “a piece of plastic”, “money.” “Power!” “What I want from this course“. ”What I paid for this course“ a laugh reverberates around the room for if they could get an economics course for so little it would be a joke. The lecturer smiles and says “It’s none of these, it is a belief”.
And from here on you will find that all the things you are to learn in economics are not so much about reason as belief. It turns out that economies and money are just the culmination of decades, nay millenia of people’s searching for a way to interact with other human beings who may, or may not speak their language, which may not share their customs or religion, that may not even like them. However people want to give something to others and we need the help of other people, we are all dependant.
Money started as a very human concept, a promise. In the cradle of civilization ancient Mesopotamia three and a half thousand years ago people were recording their promises against future harvests in order to produce food today. Clay tokens have been unearthed that were used to record transactions involving produce such as barley or wool, or metals such as silver. What these clay tokens do is promise to the bearer a certain amount of grain or metal on return of the tablet. One from the town of Sippar modern Tell Abu Habbah in Iraq, dates from the reign of King Ammi-ditana (1683-1647BC) and states that its bearer should receive a specific amount of barley at harvest time, another from the same time states the bearer should receive a certain amount of silver at harvest time these ancient Mesopotamian’s were gaining the services of labourers and craftsman with the promise that they could have some of the harvest they had contributed to growing. These promissory tablets could be traded once issued between persons other than the original promisee because the person who presents the tablet gets paid. It is this attribute that made the tablets a means of exchange, currency within the community or with anyone that knew the honour of the issuer. The clay tablets of Sippar are money! Even current notes issued from the Bank of England still state “I promise to pay the bearer on demand the sum of…”.(Niall Ferguson “The Ascent of money”)
These exchangeable promises are only as valuable as the reliability, integrity and wealth of the person who gave them. Money is the honour and capability of a person made tangible, in our current world it represents the efforts and honour of entire nations of people. As you can see from its earliest time money evolved from most human attributes; trust, belief, integrity and a promise. The object that recorded these promises was unimportant it just needed to be transportable, durable and needed to record details of the original promissory, a person. In modern times the most common way of recording this promise is electronically, databases in the world’s banks are the repositories for all the promises we make, who owes us a favour and whom we owe one to. As a bit of a sideline banks may derive a lot of their “to big to fail” biblical type status because they are the holders of our promises, I think it may be better if they were relieved of this unwanted burden and the means of exchange was taken back under the wing of a representative democratic government.
Moneys true power comes from its ability to store value. I always find it odd we use the word value when talking in monetary terms, for we usually equate values with morals. But when you think about it outside the accepted group theory that money is the piercing lance behind human greed, it makes absolute sense. The value being exchanged is the decency of the promissory to fulfil their obligation to the bearer even if they are unknown to them and the price one is willing to pay, the quantity or quality of your own ideas, labour, or property rights in exchange for another’s, is a reflection of your values. Money can be a piercing lance or an open door but we are the ones thrusting and welcoming, money is the medium not the master. This is a very important aspect of money to understand for monetary democracy to have an influence for good. The price you set for what you trade, be it labour or property must reflect your human values. And likewise the price you are willing to pay must reflect your values. Give more to people you value, and less to those you don’t. Now back to the evolution of money from a promise to the dominant universal belief of our time.
It’s after money takes this leap from a means of exchange through a promise, to a store of value that it starts to take on its more ethereal properties of belief or dare I say faith? Once a means of exchange is accepted it can store value across generations, historian Niall Ferguson tells us in The Ascent of Money that “the Roman system of coinage outlived the roman empire itself. Prices were still being quoted in terms of silver denarii in the time of Charlemane, king of the Franks from 768 to 814.” (6) That meant that if you still had Roman coins from 600 AD or even 500 AD four generations after the fall of the Roman Empire you could still trade with them. They were worth keeping, you could hold produce grown or work done for another generation, you could store your excess production for future trade, for future generations because the money had taken on a meaning beyond the life of the original issuer. The Roman Empire had withered to a slow death but its money lived on because there were people still alive that believed in its value.
An individual was now capable of saving their own time and value to others to be used later in their own life. Or even to be passed onto their children after their death. Money granted people a type of eternity. Eternity is a very human concept for to want save for future generations shows an understanding of one’s own mortality. What one accumulated in this life could support your grandchildren long after your passing. And soon we could borrow against our own future.
Borrowing against my future
Christians have a common law with Jews and Islamics; that to lend money at interest is a sin (called usury). We found loopholes though. The greatest lenders of the middle ages were Jewish because to lend money at interest to a non Jew was not considered a sin. But the true renaissance in lending came from Catholic Italians. The Medici family revolutionised banking and the lending of money and in the process became the most powerful family in Europe. People needed to borrow money, mainly the burgeoning traders of Venice and Turin. If one wants to sail abroad for 3 or 6 months, pay for a crew and hire a ship in order to purchase goods to bring back for sale, one needs money to feed the crew and pay the ship owner up front. Traders need a loan. The Medici’s invented forward contracts whereby they would purchase the goods to be bought in advance for a fee. Not interest. And the borrower would agree to buy it back when they returned from their voyage and had sold the goods. This is just a loan, a forward contract that lends money to the borrower without the socially problematic interest, but with security for the Medici’s owned the merchandise even though it was not yet realised, and the fee or higher sale price in the future acted as interest. For those that are not bankers a forward is simply; a traders sells his future good for $100 to the lender now and promises to buy it back from the lender at a future date for more, say $120 in a one year when he returns from his voyage and then sells the goods for $200 to wholesalers, for the lender it equates to interest of 20%. Forwards (or future contracts) are very common even today they are a major tool of the financial markets which turn over billions a day, and are often traded in the interim, most oil prices quoted are those for the future supply of oil not the oil itself, these are derivatives, they are tradeable contracts derived from the trade of real goods.
The Medici’s also played in the rather laborious but profitable game – at that time the Europeans were still using roman numerals for commerce – of foreign exchange trade. Changing coins and promises from other countries for local currency. Those with the time and resources could take an advantage from their knowledge of true value and arbitrage was invented. (Arbitrage is the exploitation of differences in price but not value in differing markets). And the Medici’s had time and wealth so they became the most powerful family in renaissance Europe because they let people borrow against their future. It’s about here we start to see the gambling side of modern economies, borrowing against your own future when it involves travelling to far flung lands to buy spices and silk is a risky business, it’s not surprising another form of gambling also emerged around this time insurance. (see: Why the Rich get Richer)
So now we could save our good fortune and labour, and borrow against future labour and good fortune, soon we could use the same tool to hedge against misfortune and buy insurance, it is starting to become more and more human. All humans have to some degree the opposing elements of the real and the ethereal, the logos and the mythos, the conservative saver and the risk taking gambler, money started to represent more and more of our humanity both good and bad.
Then we added more beliefs to its book, it became an asset, something normally associated with a physical object such as a house or land, the most common asset now is money itself. It can be illiquid or liquid. Illiquid being not quickly exchangeable for another object or person, usually these are long term loans such as home loans or money can be liquid, such as on call cash at the bank that can immediately buy another good or person.
I must make a point here about my use of the term “buy… a person” which sounds like you are buying another human. It sounds a little too much like the American colonial slave owner buying Kunte Kinte at auction. Economists would say you exchange with a person for their labour or other asset. I use “buy a person” deliberately because this is what you are really doing, the asset (the car, house, or tomato) does not believe in money so therefore will not and could not sell itself, it is only other people that understand the concept of money and thus its value comes from people and what they are willing and capable of exchanging for it. And literally all you really own is yourself the rest comes from others by bequeath, gift, exchange, and exclusion by violence or law. However it is not only your labour you can exchange, you can exchange you body, your affection, your knowledge, your talents, your network, and your rights under law. However you are always selling yourself. And when you hand over money you are buying other human beings, and influencing their actions.
Moneys ability to quantify, punish and reward behaviour is the next leap in its evolution. This is how money becomes moral or immoral. Of course money is only as moral as those who control it. Us.
It’s amusing that many people see money as immoral. Many people believe the biblical saying “the love of money is the root of all evil” to be “money is the root of all evil”. Money is the medium of belief. If you love the tool more than the human you would not be very smart let alone moral. To fall in love with the car produced rather than the person who made it is the product of a suppressed or manipulated mind. But because of this misinterpretation associating money with good moral actions is seen as immoral although this is slowly changing and this is the natural evolution that is required to make a new system of monetary democracy work.
Let us first look at how it quantifies, rewards and punishes behaviour. And then how it skips into more moral issues of rights and ethics.
Anyone who has exchanged their time for money will no doubt know how they have modified their own behaviour in order to keep a customer, manager or client happy and therefore ensure their income. We constantly modify our own actions in order to gain income economists love this and believe the best way to control the masses is with financial rewards and penalties, tax and welfare are constantly used to modify behaviour making us set up trust funds or have more children when this is directed from a small group of elites crowds out intrinsic virtue but if used by a broad base of integrated humans it can be a great tool for ethical change.
Money is now used more often as a tool of justice than incarceration, we are fined for speeding, running red lights, talking about football umpires, lying in courts, fraud, assault, breaking corporate legislation. And our civil courts have become a greater source of justice than our criminal courts because they punish the wrong doer whilst compensating the victim making the guilty pay money to the victim. Money punishes the wrongdoer while rewarding the victim for sating their anger in a peaceful manner. Money is our tool for moderating behaviour. It has this role because we believe it should have this role and we see that it is capable of achieving moral goals.
Much money is gained from the exchange of rights over property, most fundamentally land and more recently capital infrastructure the only believable and wanted tool we have for compensation when one individual or group has natural rights over a piece of land at the exception of others is monetary. And the best way to enable access to land and existing infrastructure, and to decide the best use of such is to use monetary compensation and exchange to democratise the land and infrastructure use decision. Here money has become a reflection of what we believe to be human rights again a very intelligent and socially progressive idea, money becomes the complete enactment of our beliefs.
We believe in private space, we want a place that we can exclude others from we generally call it our home. We compensate the previous owner with the price of the property, we compensate others for excluding them from our patch of land with our contribution to society and taxes or the Flow Siphon (FS) redistributes our wealth to those others excluded. And if we feel truly moral we will contribute more to those who cannot or do not have their own homes.
There are limits to moneys desirability as the tool of appropriation, the decision of whether we should use land for private production or conserving it because of its aesthetic beauty or biodiversity benefits is more difficult. It’s not impossible to put a price on a national park, and for those who believe it should be preserved to out bid developers but in our highly lopsided world this is unlikely. Thankfully in many parts of Australia and the world the land is still communally owned by the state, nation or crown and only rights to farm, mine or exclude (freehold) are issued for a leased period or with restrictions. This allows us to change the use as requirements demand and to use our representatives to ensure un-repairable damage is not done.
The corporate goal is profit, to gain the most money for the minimum outlay of money. Other mission statements are bandied around but all fall behind profit. This is because we believe that money is the ultimate moderator. If you the purchaser are willing to give me the seller over and above the cost of producing an item be it a hammer or derivative you must believe what I am providing is good otherwise why would you give more than it’s worth. Therefore I will keep producing that which makes me a profit, that which you will pay a premium for. I don’t need to highlight here that disproportionate wealth and oligopolies and monopolies allow those with wealth to not ask for profit but demand it thus removing any moral consumer motivation. However money is the ultimate controller of actions and this actually frees us to control the corporate world’s morals by the way we support them with our money and theirs. How much or if at all we exchange our knowledge and labour with them, and how much we are willing to pay for their collective efforts will determine a narrow minded profit driven companies actions. These must be decisions made based on morals not just necessity or the herd mentality of populism.
The last great change in money is the electronic one, no longer is your note exchangeable for a real item, no longer can you exchange the promise for grain or silver. The gold standard that was the foundation for all issued currency was abandoned in the 70’s there was no need for it. We now believe in the power of money to communicate ideas, values and human time without an underlying physical replacement for the act, idea, or privilege. Money is a medium of communication, speak nobly and others will listen.
What I am proposing is the evolution of money. It started as a promise, then a possible eternity, then we borrowed against our hope, and then insured against the trivialities of an unpredictable world, now it must evolve with us to reflect our current ideals of equality, freedom and sustainability. You must now realise that it is a belief not the epitome of evil, it is a promise, and it is a hope of future success and a saving of past successes. One can use it to compensate others for their misfortune, or reward them for their ethically decent acts. It is the greatest humanistic tool we ever invented. It is us! But in order for it to be as good as you are; you must think before you spend, you must think before you employ, you must think before you exchange, because every decision you make is encouraging or discouraging a belief, an ethic in others. All decisions to become actions require money and you will have this with the Flat Payment, you will have the greatest tool for human communication ever invented. Use it wisely.
David J Campbell