Money gets a bad rap. Filthy lucre, to give it its biblical rendering, has long been suspect in human societies. Perhaps with good reason. The default human condition, if we look at the broad sweep of our existence as a species, is one without this bizarre social contrivance. Household provisioning — from where we get the term ‘economics’ (the Greek term for ‘household’ is oikos ) — was for millennia done in smaller, face-to-face communities and by means of social relations of dominance, gift, and reciprocity. Money spoiled the whole party, intervening in people’s direct social relations to create what Marx called a callous cash nexus between us.
As if in reaction to this traumatic sundering of social relations, what the Hungarian intellectual Karl Polanyi called our great transformation, we have developed a deep civilisational discontent around money. This goes beyond the garden-variety gripe at not having enough of it, although no doubt this plays a part. No, there is something fundamentally suspect about money. It seems a violation of some sort, something to be explained away, tolerated, even hidden.
But perhaps our instincts are wrong? Perhaps we need to get over this Jurassic tick and embrace money as a key piece of our civilisation, a critical part of our highly-evolved social technology that we can in fact design for the social good?
In what way then is money a social tool? And how can we democratise this most-reviled social technology?
To a greater or lesser extent, we all live in societies governed by a particular division of labour. None of us farm our own food, sew our own clothes, or build our own dwellings. Other people whom we do not know personally, strangers, do all that for us. In exchange, we pay them, either directly or through intermediaries. Most of us earn this dosh by doing things for other strangers in turn.
Cash therefore is simply a placeholder, the visible expression of very material connective tissue that locks strangers together in one large, organic ‘household,’ an economic community. Money is the visible incarnation of a fundamental social fact: we are all materially dependent on each other for the very fundamentals of our existence.
We cooperate with each other without even knowing the slightest thing about each other save the fact that we have some money. The market system on which we depend is actually an engine of society-wide, indeed worldwide cooperation between strangers. Money is a kind of universal language.
Sadly, this cooperative engine does not appear to us as such. As Marx has taught us, with bits of money flying around between service providers, it appears as if money makes the world go round rather than our mutual dependence. Things appear to us upside down.
So let us not be romantic. This inversion of reality enables our system of cooperation to be massively lopsided, with a small group of people cornering much of the means of subsistence, ring-fenced by “property rights”. Meanwhile, the rest of us are given the freedom to sell our labour bit by bit in exchange for a living. In contemporary capitalism, money is hated because it is a sign of unequal life chances. We might well exist in a state of mutual dependence, but the terms of the cooperation game are not set democratically; far from it.
Money then is, among other things, a sign of social fissure, an upside-down index of mutual dependence, and a tool of exploitation. How could we possibly have anything positive to say about it?
Like most bits of critical technology, it is hard to imagine a world without money. Barring some climate-change induced catastrophe, any moderately modern society with an even halfway developed division of labour between strangers is going to need some kind of common measure that, like an orchestra conductor, keeps the disparate parts on the same page. Even central planning needs a unit of account.
Markets are where different branches of our orchestral divisions of social labour come together. They are ancient places that long predate the rise of capitalism in 16th-century Europe. And the language of markets is money: diverse goods and services are given a common measure. Strangers talk to each other through their bargains. Society’s complex metabolism crackles along by means of markets and their money.
This is the crucial first step in rehabilitating money, by rigorously separating markets from capitalism. Markets are merely human institutions that aid communication between different parts of our collective economic effort. Capitalism is but one iteration of a market system, a formation in which collective effort is undertaken on radically unequal terms. In capitalism, money is the end, not just the means. Capitalist market dynamics sweep everything into the juggernaut of profit, revolutionising the world in drastic and potentially world-ending ways.
But markets as such existed well before the advent of capitalism, and they will continue to exist long after capitalism has past.
So if we can distinguish between markets and capitalism, and money and markets are inextricable, it follows that we can draw a line between capitalism and money. If there is such a thing as a non-capitalist market, there is also such a thing as non-capitalist money. We’ve seen it before in world history and we’ll see it again.
Modern money is also suspect because of its paradoxical nature: how can something so fundamental to life be so insubstantial? How can our lives rest on mere bits of paper? The recent debacle of demonetisation re-emphasised this paradoxical simultaneity of value and fragility of money.
Demonetisation also reminded us exactly how robust paper money is as a technology. In order to replace it, you to revolutionise the entire economy, bringing every economic agent and every transaction into an entirely new relational system. You need to lay down an awful lot of track to make that happen.
In a sense, the hubris of the idea of replacing old notes with new, or indeed replacing paper with electronic ledger entries, is based on the same intellectual error that Marx recognised in the late 19th century. Notwithstanding its fragile social form, money does not simply “grease the wheels” of commerce. It is the economic equivalent of our electrical and plumbing systems rolled into one.
This infrastructure runs deep, but we only notice it when it breaks. Most critically, modern money is a credit note, an IOU from a very special institution called a bank. This credit-ary nature of money lends it an insubstantial air. Indeed, banks are rather fragile entities.
Evolved out of merchant activities over centuries, banks socialise our individual capacities to save by taking in our individual IOUs (what we call ‘bank deposits’), pooling them together and then issuing its own, mega-IOU (‘loans’) to turn a profit. Bank IOUs are better than individual IOUs because they represent a larger pool of liquidity than the individual balance sheets: socialisation achieves robust scale.
Indeed, this socialisation is so robust that the bank’s IOU (“checking accounts”) can function as money. Checking accounts are not themselves money: they are a bank’s promise to pay us money on demand. But this promise is so firm that we routinely mistake our checking accounts to be the same thing as money.
What exactly do banks promise to pay? Banks can “print their own money” in that they can create more checking accounts out of thin air. But these checking accounts can be converted into physical cash at an instant. And physical cash is simply the IOU of another entity, the central bank, which in turn is backed by the State.
This is not a pyramid scheme because at the top of the pyramid of money sits the State. The State, in turn, is simply made up of a set of people who have made another kind of promise stretching into the infinite future: we the people will pay taxes in exchange for running the State. In this way, people are not only at the top of the hierarchy of money, they are also its foundation.
Like a bank, the State has also socialised our savings, only at an even grander scale. This is why the State’s IOU is even better than a bank’s: it literally rests on all of us.
Money is therefore also deeply political: it represents the grandest social contract humans have yet invented: the nation State. Insubstantial paper and ledger entries have real value because they are backed by real human labour, labour that has to be pledged in perpetuity to a legitimate nation State.
Money might appear as something alienated from us, but both economically and politically, it literally holds us together. Democratising money means recognising its intrinsically social credentials.
In particular, it means recognising that banks, whether public or private, are in fact precious public utilities. Like electricity and plumbing systems, they need to be run according to the canons of public welfare rather than private profit. To start thinking about non-capitalist money, we have to separate banking from capitalism.
This is not really as far fetched as it appears: it already happens at certain moments in the business cycle when banks are bailed out precisely due to the recognition that they cannot fail. Their failure would be tantamount to pulling the plug on our collective life-support system.
But if banks are too big to fail, they are simply too big to be private in the first place. State-ownership of banks has many problems to be sure. But this set of issues is by far preferable to having a precious public resource captured by oligarchs.
If the counter-argument is that it happens anyway, just wait until you get full privatisation. You ain’t seen nothing yet.
Anush Kapadia is an assistant professor of sociology at IIT-Bombay